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What changed in KKR & Co. Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KKR & Co. Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+1762 added−1899 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in KKR & Co. Inc.'s 2023 10-K

1762 paragraphs added · 1899 removed · 1370 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

162 edited+25 added−22 removed243 unchanged
Biggest changePast performance is no guarantee of future results. 18 Table of Contents Amount Fair Value of Investments Private Equity and Real Assets Business Lines Investment Funds Commitment (2) Invested Realized (4) Unrealized Total Value Gross IRR (5) Net IRR (5) Gross Multiple of Invested Capital (5) ($ in millions) Total Investments Legacy Funds (1) 1976 Fund $ 31 $ 31 $ 537 $ — $ 537 39.5 % 35.5 % 17.1 1980 Fund 357 357 1,828 — 1,828 29.0 % 25.8 % 5.1 1982 Fund 328 328 1,291 — 1,291 48.1 % 39.2 % 3.9 1984 Fund 1,000 1,000 5,964 — 5,964 34.5 % 28.9 % 6.0 1986 Fund 672 672 9,081 — 9,081 34.4 % 28.9 % 13.5 1987 Fund 6,130 6,130 14,949 — 14,949 12.1 % 8.9 % 2.4 1993 Fund 1,946 1,946 4,143 — 4,143 23.6 % 16.8 % 2.1 1996 Fund 6,012 6,012 12,477 — 12,477 18.0 % 13.3 % 2.1 Subtotal - Legacy Funds 16,475 16,475 50,269 — 50,269 26.1 % 19.9 % 3.1 Included Funds European Fund (1999) 3,085 3,085 8,758 — 8,758 26.9 % 20.2 % 2.8 Millennium Fund (2002) 6,000 6,000 14,123 6 14,129 22.0 % 16.1 % 2.4 European Fund II (2005) 5,751 5,751 8,507 34 8,541 6.1 % 4.5 % 1.5 2006 Fund (2006) 17,642 17,309 37,336 93 37,429 11.9 % 9.3 % 2.2 Asian Fund (2007) 3,983 3,974 8,728 10 8,738 18.9 % 13.7 % 2.2 European Fund III (2008) 5,503 5,360 10,604 97 10,701 16.4 % 11.3 % 2.0 E2 Investors (Annex Fund) (2009) 196 196 200 — 200 0.6 % 0.5 % 1.0 China Growth Fund (2010) 1,010 1,010 1,065 169 1,234 5.0 % 1.0 % 1.2 Natural Resources Fund (2010) 887 887 132 40 172 (24.7) % (26.5) % 0.2 Global Infrastructure Investors (2010) 1,040 1,050 2,228 — 2,228 17.6 % 15.6 % 2.1 North America Fund XI (2012) 8,718 10,024 22,643 3,722 26,365 24.3 % 19.7 % 2.6 Asian Fund II (2013) 5,825 7,185 6,337 2,164 8,501 5.0 % 3.4 % 1.2 Real Estate Partners Americas (2013) 1,229 1,023 1,408 53 1,461 16.2 % 11.3 % 1.4 Energy Income and Growth Fund (2013) 1,974 1,974 1,050 612 1,662 (5.2) % (7.8) % 0.8 Global Infrastructure Investors II (2014) 3,039 3,163 4,515 1,627 6,142 19.5 % 16.8 % 1.9 European Fund IV (2015) 3,511 3,637 5,122 2,742 7,864 24.0 % 18.7 % 2.2 Real Estate Partners Europe (2015) 705 671 685 276 961 13.3 % 9.5 % 1.4 Next Generation Technology Growth Fund (2016) 659 666 870 1,055 1,925 32.3 % 27.5 % 2.9 Health Care Strategic Growth Fund (2016) 1,331 1,169 196 1,550 1,746 21.4 % 13.5 % 1.5 Americas Fund XII (2017) 13,500 12,419 5,591 17,439 23,030 24.3 % 19.5 % 1.9 Real Estate Credit Opportunity Partners (2017) 1,130 1,008 418 1,041 1,459 9.9 % 8.6 % 1.4 Core Investment Vehicles (2017) 24,753 13,293 872 21,359 22,231 21.2 % 19.9 % 1.7 Asian Fund III (2017) 9,000 7,909 5,031 10,826 15,857 31.1 % 24.2 % 2.0 Real Estate Partners Americas II (2017) 1,921 1,901 2,489 645 3,134 28.4 % 23.6 % 1.6 Global Infrastructure Investors III (2018) 7,159 6,144 1,582 5,921 7,503 10.8 % 7.8 % 1.2 Global Impact Fund (2019) 1,242 1,142 215 1,610 1,825 32.4 % 23.9 % 1.6 European Fund V (2019) 6,322 5,372 917 5,951 6,868 15.5 % 11.3 % 1.3 Energy Income and Growth Fund II (2018) 994 1,187 193 1,769 1,962 30.5 % 27.7 % 1.7 Asia Real Estate Partners (2019) 1,682 585 10 726 736 22.8 % 9.5 % 1.3 Next Generation Technology Growth Fund II (2019) 2,088 2,008 306 2,499 2,805 24.0 % 18.3 % 1.4 Real Estate Credit Opportunity Partners II (2019) 950 656 126 654 780 11.8 % 10.6 % 1.2 Asia Pacific Infrastructure Investors (2020) 3,792 2,374 424 2,254 2,678 13.2 % 7.8 % 1.1 Asian Fund IV (2020) 14,735 5,008 41 5,561 5,602 12.4 % 4.4 % 1.1 Real Estate Partners Europe II (2020) 2,052 1,404 365 1,173 1,538 9.5 % 4.7 % 1.1 Real Estate Partners Americas III (2021) (3) 4,253 2,500 167 2,428 2,595 — — — Health Care Strategic Growth Fund II (2021) (3) 3,789 375 — 392 392 — — — Global Infrastructure Investors IV (2021) (3) 16,545 6,964 88 6,946 7,034 — — — North America Fund XIII (2021) (3) 18,400 5,169 — 5,349 5,349 — — — European Fund VI (2022) (3) 7,449 — — — — — — — Global Impact Fund II (2022) (3) 1,981 — — — — — — — Asia Pacific Infrastructure Investors II (2022) (3) 5,645 — — — — — — — Next Generation Technology Growth Fund III (2022) (3) 2,358 — — — — — — — Subtotal - Included Funds 223,828 151,552 153,342 108,793 262,135 16.2 % 12.4 % 1.8 All Funds $ 240,303 $ 168,027 $ 203,611 $ 108,793 $ 312,404 25.6 % 18.7 % 1.9 (1) These funds were not contributed to KKR as part of the acquisition of the assets and liabilities of KKR & Co.
Biggest changePast performance is no guarantee of future results. 19 Table of Contents Amount Fair Value of Investments Private Equity and Real Assets Business Lines Investment Funds and Other Vehicles Commitment (2) Invested Realized (4) Unrealized Total Value Gross IRR (5) Net IRR (5) Gross Multiple of Invested Capital (5) ($ in millions) Total Investments Legacy Funds (1) 1976 Fund $ 31 $ 31 $ 537 $ — $ 537 39.5 % 35.5 % 17.1 1980 Fund 357 357 1,828 — 1,828 29.0 % 25.8 % 5.1 1982 Fund 328 328 1,291 — 1,291 48.1 % 39.2 % 3.9 1984 Fund 1,000 1,000 5,964 — 5,964 34.5 % 28.9 % 6.0 1986 Fund 672 672 9,081 — 9,081 34.4 % 28.9 % 13.5 1987 Fund 6,130 6,130 14,949 — 14,949 12.1 % 8.9 % 2.4 1993 Fund 1,946 1,946 4,143 — 4,143 23.6 % 16.8 % 2.1 1996 Fund 6,012 6,012 12,477 — 12,477 18.0 % 13.3 % 2.1 Subtotal - Legacy Funds 16,475 16,475 50,269 — 50,269 26.1 % 19.9 % 3.1 Included Funds European Fund (1999) 3,085 3,085 8,758 — 8,758 26.9 % 20.2 % 2.8 Millennium Fund (2002) 6,000 6,000 14,123 4 14,127 22.0 % 16.1 % 2.4 European Fund II (2005) 5,751 5,751 8,507 25 8,532 6.1 % 4.5 % 1.5 2006 Fund (2006) 17,642 17,309 37,416 8 37,424 11.9 % 9.3 % 2.2 Asian Fund (2007) 3,983 3,974 8,728 — 8,728 18.9 % 13.6 % 2.2 European Fund III (2008) 5,506 5,360 10,625 39 10,664 16.4 % 11.2 % 2.0 E2 Investors (Annex Fund) (2009) 196 196 200 — 200 0.6 % 0.5 % 1.0 China Growth Fund (2010) 1,010 1,010 1,150 22 1,172 3.8 % 0.1 % 1.2 Natural Resources Fund (2010) 887 887 168 — 168 (24.3) % (25.9) % 0.2 Global Infrastructure Investors (2010) 1,040 1,050 2,228 — 2,228 17.6 % 15.6 % 2.1 North America Fund XI (2012) 8,718 10,044 22,833 3,269 26,102 23.8 % 19.2 % 2.6 Asian Fund II (2013) 5,825 7,357 6,509 2,124 8,633 4.6 % 3.0 % 1.2 Real Estate Partners Americas (2013) 1,229 1,024 1,416 32 1,448 15.8 % 11.0 % 1.4 Energy Income and Growth Fund (2013) 1,589 1,589 1,221 — 1,221 (6.1) % (8.8) % 0.8 Global Infrastructure Investors II (2014) 3,040 3,166 5,330 1,135 6,465 19.7 % 17.0 % 2.0 European Fund IV (2015) 3,512 3,642 5,726 2,625 8,351 23.7 % 18.4 % 2.3 Real Estate Partners Europe (2015) 707 687 763 208 971 12.2 % 9.0 % 1.4 Next Generation Technology Growth Fund (2016) 659 668 1,148 934 2,082 31.0 % 26.4 % 3.1 Health Care Strategic Growth Fund (2016) 1,331 1,317 283 1,863 2,146 19.6 % 13.2 % 1.6 Americas Fund XII (2017) 13,500 12,432 8,722 18,767 27,489 24.9 % 20.4 % 2.2 Real Estate Credit Opportunity Partners (2017) 1,130 1,008 508 991 1,499 9.0 % 7.7 % 1.5 Core Investment Vehicles (2017) 25,444 15,768 2,366 24,323 26,689 18.0 % 16.9 % 1.7 Asian Fund III (2017) 9,000 8,189 6,295 12,018 18,313 29.1 % 22.8 % 2.2 Real Estate Partners Americas II (2017) 1,921 1,951 2,688 428 3,116 25.6 % 21.0 % 1.6 Global Infrastructure Investors III (2018) 7,165 6,335 1,910 7,612 9,522 16.0 % 12.5 % 1.5 Global Impact Fund (2019) 1,242 1,194 471 1,562 2,033 24.9 % 18.5 % 1.7 European Fund V (2019) 6,338 5,670 917 6,947 7,864 14.1 % 10.7 % 1.4 Energy Income and Growth Fund II (2018) 994 1,191 305 1,503 1,808 17.1 % 15.1 % 1.5 Asia Real Estate Partners (2019) 1,682 1,238 22 1,383 1,405 10.3 % 4.6 % 1.1 Next Generation Technology Growth Fund II (2019) 2,088 2,131 496 2,894 3,390 22.3 % 17.4 % 1.6 Real Estate Credit Opportunity Partners II (2019) 950 976 226 928 1,154 9.6 % 7.4 % 1.2 Asia Pacific Infrastructure Investors (2020) 3,792 3,375 738 3,347 4,085 14.4 % 9.9 % 1.2 Asian Fund IV (2020) 14,735 6,554 348 8,324 8,672 18.5 % 11.5 % 1.3 Real Estate Partners Europe II (2020) 2,061 1,656 431 1,313 1,744 3.5 % 0.2 % 1.1 Real Estate Partners Americas III (2021) 4,253 2,771 228 2,584 2,812 0.9 % (1.7) % 1.0 Health Care Strategic Growth Fund II (2021) 3,789 933 — 1,045 1,045 14.6 % (4.9) % 1.1 North America Fund XIII (2021) 18,400 7,837 — 8,830 8,830 10.7 % 6.1 % 1.1 Global Infrastructure Investors IV (2021) (3) 16,589 9,672 328 10,598 10,926 — — — European Fund VI (2022) (3) 7,426 1,574 — 1,263 1,263 — — — Global Impact Fund II (2022) (3) 2,704 815 — 753 753 — — — Asia Pacific Infrastructure Investors II (2022) (3) 6,368 — — — — — — — Next Generation Technology Growth Fund III (2022) (3) 2,745 414 — 417 417 — — — Ascendant Fund (2022) (3) 3,003 — — — — — — — Subtotal - Included Funds 229,029 167,800 164,131 130,118 294,249 16.1 % 12.3 % 1.8 All Funds $ 245,504 $ 184,275 $ 214,400 $ 130,118 $ 344,518 25.5 % 18.7 % 1.9 (1) These funds were not contributed to KKR as part of the acquisition of the assets and liabilities of KKR & Co.
Since the inception of our firm in 1976, we have expanded our investment strategies and product offerings from traditional private equity to areas such as leveraged credit, alternative credit, infrastructure, energy, real estate, growth equity, core, and impact investments. We also provide capital markets services for our firm, our portfolio companies and third parties.
Since the inception of our firm in 1976, we have expanded our investment strategies and product offerings from traditional private equity to areas such as leveraged credit, alternative credit, infrastructure, energy, real estate, growth equity, core private equity, and impact investments. We also provide capital markets services for our firm, our portfolio companies and third parties.
We are a world leader in private equity, having raised over 30 private equity funds (including core, growth equity and impact investments). We invest in industry-leading franchises and attract world-class management teams. Our investment approach leverages our capital base, sourcing advantage, global network and industry knowledge.
We are a world leader in private equity, having raised over 30 private equity funds (including core private equity, growth equity and impact investments). We invest in industry-leading franchises and attract world-class management teams. Our investment approach leverages our capital base, sourcing advantage, global network and industry knowledge.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (2) The end date represents the end of the fund's investment period as defined in the fund's governing documents and is generally not the date upon which management fees cease to be paid.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (2) The end date represents the end of the fund's investment period as defined in the fund's governing documents and is generally not the date upon which management fees cease to be paid.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (3) The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (3) The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner.
In addition to leveraging the resources of the firm, our energy, infrastructure and real estate investment teams typically partner with technical experts and operators to manage our Real Asset investments.
In addition to leveraging the resources of the firm, our infrastructure, real estate, and energy investment teams typically partner with technical experts and operators to manage our Real Asset investments.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (2) The end date represents the end of the fund's investment period as defined in the fund's governing documents and is generally not the date upon which management fees cease to be paid.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (2) The end date represents the end of the fund's investment period as defined in the fund's governing documents and is generally not the date upon which management fees cease to be paid.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (3) The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner.
For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements. (3) The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner.
The information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below. Past performance is no guarantee of any future result.
The information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below. Past performance is no guarantee of any future result.
A substantial portion of our Principal Activities business line has been dedicated to support our core private equity strategy, where we have committed to fund investors to invest a significant amount of our own capital alongside their core private equity investments.
Core Private Equity A substantial portion of our Principal Activities business line has been dedicated to support our core private equity strategy, where we have committed to fund investors to invest a significant amount of our own capital alongside their core private equity investments.
Global Atlantic primarily offers individual customers fixed-rate annuities, fixed-indexed annuities, and targeted life products through a network of banks, broker-dealers, and insurance agencies. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer ("PRT") reinsurance, as well as funding agreements.
Global Atlantic offers individual customers fixed-rate annuities, fixed-indexed annuities, and targeted life products primarily through a network of banks, broker-dealers, and insurance agencies. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer ("PRT") reinsurance, as well as funding agreements.
For further information regarding potential risks relating to these and other regulatory and legal requirements that could significantly affect our business, see the "Risk Factors" section of this report, including "—Risks Related to Our Business—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect our business." United States Regulation as an Investment Adviser We conduct our advisory business through our investment adviser subsidiaries, including Kohlberg Kravis Roberts & Co.
For further information regarding potential risks relating to these and other regulatory and legal requirements that could significantly affect our business, see the "Risk Factors" section of this report, including "—Risks Related to Our Business—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect KKR." United States Regulation as an Investment Adviser We conduct our advisory business through our investment adviser subsidiaries, including Kohlberg Kravis Roberts & Co.
The general partners of such funds are also entitled to incentive fees ranging generally from 5% to 10% of cash flow or net asset value appreciation, subject to performance hurdles. We also provide investment management services to the publicly available entities in our real assets strategy, including KREF, KREST and Crescent Energy.
The general partners of such funds are also entitled to incentive fees ranging generally from 5% to 10% of cash flow or net asset value appreciation, subject to performance hurdles. We also provide investment management services to the publicly available entities in our real assets strategy, including KREF, KREST and Crescent.
Many of these companies are leading franchises with global operations, strong management teams and attractive growth prospects, which we believe will provide benefits through a broad range of business conditions. 11 Table of Contents Private Equity Investment Process and Fund Characteristics Investment Approach Our approach to making private equity investments focuses on achieving multiples of invested capital and attractive risk-adjusted IRRs by selecting high-quality investments that may be made at attractive prices, applying rigorous standards of due diligence when making investment decisions, implementing strategic and operational changes that drive growth and value creation in acquired businesses, carefully monitoring investments, and making informed decisions when developing investment exit strategies.
Many of these companies are leading franchises with global operations, strong management teams and attractive growth prospects, which we believe will provide benefits through a broad range of business conditions. 12 Table of Contents Private Equity Investment Process and Fund Characteristics Investment Approach Our approach to making private equity investments focuses on achieving multiples of invested capital and attractive risk-adjusted IRRs by selecting high-quality investments that may be made at attractive prices, applying rigorous standards of due diligence when making investment decisions, implementing strategic and operational changes that drive growth and value creation in acquired businesses, carefully monitoring investments, and making informed decisions when developing investment exit strategies.
In addition to our traditional private equity funds that invest in large and mid-sized companies, we sponsor investment funds that invest in core equity, growth equity, and impact investments. Our Private Equity business line includes separately managed accounts that invest in multiple strategies, which may include our credit and real assets strategies, as well as our private equity strategies.
In addition to our traditional private equity funds that invest in large and mid-sized companies, we sponsor funds that invest in core private equity, growth equity, and impact investments. Our Private Equity business line includes separately managed accounts that invest in multiple strategies, which may include our credit and real assets strategies, as well as our private equity strategies.
Our diversified core infrastructure strategy seeks core infrastructure and infrastructure-related investment opportunities with a focus on investments with predominantly contracted or regulated cash flows in securities, properties and other assets principally located in North America and Western Europe. 14 Table of Contents Real Estate Our real estate platform seeks to be a global solutions provider across the capital structure in the real estate industry, focusing on opportunities in the United States, Western Europe and Asia-Pacific including property-level equity, debt and special situations transactions and businesses with significant real estate holdings that can benefit from KKR’s operational expertise.
Our diversified core infrastructure strategy seeks core infrastructure and infrastructure-related investment opportunities with a focus on investments with predominantly contracted or regulated cash flows in securities, properties and other assets principally located in North America and Western Europe. 15 Table of Contents Real Estate Our real estate platform seeks to be a global solutions provider across the capital structure in the real estate industry, focusing on opportunities in the United States, Western Europe and Asia-Pacific, including property-level equity, debt and special situations transactions and businesses with significant real estate holdings that can benefit from KKR’s operational expertise.
L.P. are also subject to regulation as investment advisers to RICs under the Investment Company Act. Each of KKR Income Opportunities Fund, KKR Credit Opportunities Portfolio and KKR Real Estate Select Trust is a closed-end RIC.
L.P. are also subject to regulation as investment advisers to RICs under the Investment Company Act. Each of KKR Income Opportunities Fund, KKR Credit Opportunities Portfolio and KKR Real Estate Select Trust Inc. is a closed-end RIC.
Global Atlantic also participates in the funding agreement market, including through membership in Federal Home Loan Banks and as a provider of funding agreements in connection with a funding agreement backed notes ("FABN") program established in 2021. • Block Reinsurance.
Global Atlantic also participates in the funding agreement market, including through membership in Federal Home Loan Banks ("FHLBs") and as a provider of funding agreements in connection with a funding agreement backed notes ("FABN") program established in 2021. • Block Reinsurance.
The management fees we are paid for managing RICs are generally subject to contractual rights that require their board of directors to provide prior notice in order to terminate our investment management services . 26 Table of Contents Capital Markets Our Capital Markets business line is comprised of our global capital markets business, which is integrated with KKR’s asset management business lines, and serves our firm, our portfolio companies and third-party customers by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing.
The management fees we are paid for managing RICs are generally subject to contractual rights that require their board of directors to provide prior notice in order to terminate our investment management services . 27 Table of Contents Capital Markets Our Capital Markets business line is comprised of our global capital markets business, which is integrated with KKR’s asset management business lines, and serves our firm, our portfolio companies and third-party customers by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing.
Global Atlantic primarily generates income from annuity products by earning a spread between net investment income and the cost of providing benefits under the annuity contract. • Targeted Life Products. Global Atlantic’s targeted life products primarily consist of indexed universal life and preneed life insurance.
Global Atlantic primarily generates income from annuity products by earning a spread between net investment income and the cost of providing benefits under the annuity contract. • Life Products. Global Atlantic’s targeted life products primarily consist of universal life and preneed life insurance.
Our private equity funds generally require that the amount of management fees be subtracted from gains allocable to fund investors before a carried interest may be paid. 13 Table of Contents We also enter into monitoring agreements with our portfolio companies pursuant to which we receive periodic monitoring fees in exchange for providing them with management, consulting and other services, and we typically receive transaction fees for providing portfolio companies with financial, advisory and other services in connection with specific transactions.
Our private equity funds generally require that the amount of management fees be subtracted from gains allocable to fund investors before a carried interest may be paid. 14 Table of Contents We also enter into monitoring agreements with our portfolio companies pursuant to which we receive periodic monitoring fees in exchange for providing them with management, consulting and other services, and we typically receive transaction fees for providing portfolio companies with financial, advisory and other services in connection with specific transactions.
(6) Open-ended fund. 17 Table of Contents Real Asset Investment Process and Fund Characteristics Real Asset Investment Process Our infrastructure, real estate, and energy vehicles have a similar investment process as that described under "—Private Equity Investment Process and Fund Characteristics." Investment teams for a particular real asset strategy formally present potential investments to the applicable strategy oriented investment committee or the portfolio manager, as applicable, which monitors our due diligence practices and approves an investment before it is made.
(6) Open-ended fund. 18 Table of Contents Real Asset Investment Process and Fund Characteristics Real Asset Investment Process Our infrastructure, real estate, and energy vehicles have a similar investment process as that described under "—Private Equity Investment Process and Fund Characteristics." Investment teams for a particular real asset strategy formally present potential investments to the applicable strategy oriented investment committee or the portfolio manager, as applicable, which monitors our due diligence practices and approves an investment before it is made.
We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to these funds. 19 Table of Contents (4) An investment is considered realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by the relevant fund.
We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to these funds. 20 Table of Contents (4) An investment is considered realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by the relevant fund.
This data does not reflect additional capital raised since December 31, 2022, or acquisitions or disposals of investments, changes in investment values, or distributions occurring after that date. The information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below.
This data does not reflect additional capital raised since December 31, 2023, or acquisitions or disposals of investments, changes in investment values, or distributions occurring after that date. The information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below.
We earn additional investment income by investing our own capital alongside that of our fund investors and from other assets on our balance sheet. Carried interest we receive from our funds and certain other investment vehicles entitles us to a specified percentage of investment gains that are generated on third-party capital that is invested.
We earn additional investment income by investing our own capital alongside investors in our investment vehicles and from other assets on our balance sheet. Carried interest we receive from our funds and certain other investment vehicles entitles us to a specified percentage of investment gains that are generated on third-party capital that is invested.
Our opportunistic credit strategy seeks to deploy capital across investment themes that seek to take advantage of credit market dislocations, spanning asset types and liquidity profiles. Our multi-asset credit strategy seeks to dynamically allocate across asset types in a broadly diversified strategy. Our revolving credit strategy invests in senior secured revolving credit facilities. 20 Table of Contents Alternative Credit.
Our opportunistic credit strategy seeks to deploy capital across investment themes that seek to take advantage of credit market dislocations, spanning asset types and liquidity profiles. Our multi-asset credit strategy seeks to dynamically allocate across asset types in a broadly diversified strategy. Our revolving credit strategy invests in senior secured revolving credit facilities. 21 Table of Contents Alternative Credit.
The benchmark used for purposes of comparison for the European Credit Opportunities strategy is based on the S&P European Leveraged Loans (All Loans) Index. The following table presents information regarding our alternative credit investment funds where investors have capital commitments from inception to December 31, 2022.
The benchmark used for purposes of comparison for the European Credit Opportunities strategy is based on the S&P European Leveraged Loans (All Loans) Index. The following table presents information regarding our alternative credit investment funds where investors have capital commitments from inception to December 31, 2023.
Global Atlantic’s assets generally increase when individual markets sales and reinsurance transactions exceed run-off of in-force policies. Global Atlantic primarily generates income by earning a spread on assets under management, as the difference between its net investment income and the cost of policyholder benefits.
Global Atlantic’s assets generally increase when individual market sales and reinsurance transactions exceed run-off of in-force policies. Global Atlantic primarily generates income by earning a spread on assets under management, as the difference between its net investment income and the cost of policyholder benefits.
Holdings by Asset Class (1) (1) General partner commitments in our funds are included in the various asset classes shown above.
Holdings by Asset Class (1) (1) General partner commitments to our funds are included in the various asset classes shown above.
This category does not include Senior Advisors and Other Advisors. Asset Management Investment Professionals and KKR Capstone Our investment professionals come from diverse professional backgrounds in private equity, real assets, credit and other asset classes and include executives with operations, strategic consulting, risk management, liability management and finance experience.
This category does not include Senior Advisors and Other Advisors. Asset Management Investment Professionals and KKR Capstone Our investment professionals come from diverse professional backgrounds in private equity, real assets, credit and other asset classes and include employees with operations, strategic consulting, risk management, liability management and finance experience.
We seek to emphasize efficient capital management, top-line growth, R&D spending, geographical expansion, cost optimization and investment for the long-term. 12 Table of Contents Realizing Investments We have developed substantial expertise for realizing private equity investments.
We seek to emphasize efficient capital management, top-line growth, R&D spending, geographical expansion, cost optimization and investment for the long-term. 13 Table of Contents Realizing Investments We have developed substantial expertise for realizing private equity investments.
As an asset management firm, we earn fees, including management fees and incentive fees, and carried interest for providing investment management and other services to our funds, vehicles, CLOs, managed accounts and portfolio companies, and we generate transaction fees from capital markets transactions.
As an asset management firm, we earn fees, including management fees and incentive fees, and carried interest for providing investment management and other services to our investment vehicles (including our funds), CLOs, managed accounts, portfolio companies and certain operating companies, and we generate transaction fees from capital markets transactions.
KKR Credit Advisors (Ireland) Unlimited Company is also subject to limited regulatory supervision in Germany through KKR Credit Advisors Ireland Germany Branch, France through KKR Credit Advisors Ireland Paris Branch, and Denmark through KKR Credit Advisors Ireland Denmark Branch, where these entities operate under the MiFID Freedom of Establishment rules.
KKR Credit Advisors (Ireland) Unlimited Company is also subject to limited regulatory supervision in Germany through KKR Credit Advisors Ireland Frankfurt Branch, France through KKR Credit Advisors Ireland Paris Branch, and Denmark through KKR Credit Advisors Ireland Copenhagen Branch, where these entities operate under the MiFID Freedom of Establishment rules.
The block reinsurance and 35 Table of Contents pension risk transfer markets are also experiencing competition due to new entrants, including entrants based outside of the United States. Increased competition may make it more difficult for Global Atlantic to identify transactions with terms that are commercially acceptable based on its risk tolerance and target return objectives.
The block reinsurance and pension risk transfer markets are also experiencing competition due to new entrants, including entrants based outside of the United States. Increased competition may make it more difficult for Global Atlantic to identify transactions with terms that are commercially acceptable based on its risk tolerance and target return objectives.
A broker-dealer is subject to legal requirements covering all aspects of its securities business, including sales and trading practices, public and private securities offerings, the suitability of investments, use and 39 Table of Contents safekeeping of customers' funds and securities, capital structure, record-keeping and retention and the conduct and qualifications of directors, officers, employees and other associated persons.
A broker-dealer is subject to legal requirements covering all aspects of its securities business, including sales and trading practices, public and private securities offerings, the suitability of investments, use and safekeeping of customers' funds and securities, capital structure, record-keeping and retention and the conduct and qualifications of directors, officers, employees and other associated persons.
(3) The gross IRR, net IRR and gross multiple of invested capital are calculated for our investment funds that made their first investment at least 24 months prior to December 31, 2022.
(3) The gross IRR, net IRR and gross multiple of invested capital are calculated for our investment funds that made their first investment at least 24 months prior to December 31, 2023.
(4) Our alternative credit funds generally have investment periods of two to five years and our newer alternative credit funds generally earn management fees on invested capital throughout their lifecycle. (5) Lower fees on uninvested capital in certain vehicles. (6) Hedge Funds represent KKR's pro rata portion of AUM and FPAUM of our hedge fund partnerships. (7) Represents FSK.
(4) Our alternative credit funds generally have investment periods of two to five years and our newer alternative credit funds generally earn management fees on invested capital throughout their lifecycle. (5) Lower fees on uninvested capital in certain vehicles. (6) Hedge Funds represent KKR's pro rata portion of AUM and FPAUM of our hedge fund partnerships.
In Australia, KKR Australia Pty Limited and KKR Australia Investment Management Pty Limited are Australian financial services licensed and are authorized to provide advice on and deal in financial products for wholesale clients, and are regulated by the Australian Securities and Investments Commission.
In Australia, KKR Australia Pty Limited and KKR Australia Investment Management Pty Limited are Australian financial services licensees and are authorized to provide advice on and deal in financial products for wholesale clients, and are regulated by the Australian Securities and Investments Commission.
Our balance sheet provides a significant source of capital in the growth and expansion of our business, and it has allowed us to further align our interests with those of our fund investors. Building on these efforts and leveraging our industry expertise and intellectual capital have allowed us to capitalize on a broader range of the opportunities we source.
Our balance sheet provides a significant source of capital in the growth and expansion of our business, and it has allowed us to further align our interests with those of our investment vehicle investors. Building on these efforts and leveraging our industry expertise and intellectual capital have allowed us to capitalize on a broader range of the opportunities we source.
(3) Duration of capital is measured from inception. Inception dates for CLOs were between 2013 and 2022 and for separately managed accounts and funds investing in alternative credit strategies from 2009 through 2022.
(3) Duration of capital is measured from inception. Inception dates for CLOs were between 2013 and 2023 and for separately managed accounts and funds investing in alternative credit strategies from 2009 through 2023.
We endeavor to use our balance sheet strategically and opportunistically to generate an attractive risk-adjusted return on equity in a manner that is consistent with our fiduciary duties, in compliance with applicable laws, and consistent with our one-firm approach. 27 Table of Contents The chart below presents the holdings of our Principal Activities business line by asset class as of December 31, 2022.
We endeavor to use our balance sheet strategically and opportunistically to generate an attractive risk-adjusted return on equity in a manner that is consistent with our fiduciary duties, in compliance with applicable laws, and consistent with our one-firm approach. 28 Table of Contents The chart below presents the holdings of our Principal Activities business line by asset class as of December 31, 2023.
We report all of the assets under management of our BDC in our AUM, but we report only a pro rata portion of the assets under management of our hedge fund partnerships based on our percentage ownership in them.
We report all of the assets under management of our BDCs in our AUM, but we report only a pro rata portion of the assets under management of our hedge fund partnerships based on our percentage ownership in them.
Strategic buyers may also be able to achieve synergistic cost savings or revenue enhancements with respect to a targeted portfolio company, which may provide them with a competitive advantage in bidding for such investments. Our capital markets business competes primarily with investment banks and independent broker-dealers in North America, Europe, Asia-Pacific and the Middle East.
Strategic buyers may also be able to achieve synergistic cost savings or revenue enhancements with respect to a targeted portfolio company, which may provide them with a competitive advantage in bidding for such investments. 36 Table of Contents Our capital markets business competes primarily with investment banks and independent broker-dealers in North America, Europe, Asia-Pacific and the Middle East.
Global Atlantic's distribution of insurance products that are regulated as securities is conducted by Global Atlantic Distributors, LLC, which is also registered as a broker-dealer with the SEC under the Exchange Act and in all 50 U.S. States and U.S. territories, and is also a member of the FINRA.
Global Atlantic's distribution of insurance products that are regulated as securities is conducted by Global Atlantic Distributors, LLC, which is also registered as a broker-dealer with the SEC under the Exchange Act and in 52 U.S. states and territories, and is also a member of the FINRA.
From time to time, one or more of our investment funds or their related investment vehicles may be regulated as a mutual fund by the Cayman Islands Monetary Authority, regulated as an investment limited partnership by CBI, listed on the Irish Stock Exchange, notified with the Financial Services Agency of Japan for sale pursuant to certain private placement exemptions and/or for investment pursuant to certain exemption, registered with the Financial Supervisory Service of the Republic of Korea, licensed by or granted in principal approval from SEBI, subject to the regulatory supervision of the Commission de Surveillance du Secteur Financier of Luxembourg, notified with the Netherlands Authority for Financial Markets for sale pursuant to certain private placement exemptions, or registered under the Investment Company Act.
From time to time, one or more of our investment funds or their related investment vehicles or management companies may be regulated as a mutual fund by the Cayman Islands Monetary Authority, regulated as an investment limited partnership by CBI, listed on the Irish Stock Exchange, notified with the Financial Services Agency of Japan for sale pursuant to certain private placement exemptions and/or for investment pursuant to certain exemption, registered with the Financial Supervisory Service of the Republic of Korea, licensed or regulated by SEBI, subject to the regulatory supervision of the Commission de Surveillance du Secteur Financier of Luxembourg, notified with the Netherlands Authority for Financial Markets for sale pursuant to certain private placement exemptions, or registered under the Investment Company Act.
(2) Carried interest earned from our investment funds is allocated to KKR Associates Holdings L.P., which we refer to as the carry pool, from which carried interest that is earned from our investment funds is allocable to our employees and other persons. This entity and the carry pool are not reflected in the organizational structure chart.
(2) Carried interest earned from our investment funds is allocated to Associates Holdings, which we refer to as the carry pool, from which carried interest that is earned from our investment funds is allocable to our employees and other persons. This entity and the carry pool are not reflected in the organizational structure chart.
It also leverages a sizable team of operating professionals, as well as senior advisors and other advisors, many of whom are former chief executive officers and leaders of the business community. Our Private Equity business line consists of the following strategies: 8 Table of Contents Traditional Private Equity.
It also leverages a sizable team of operating professionals, as well as senior advisors and other advisors, many of whom are former chief executive officers and leaders of the business community. Our Private Equity business line consists of the following strategies: Traditional Private Equity.
Both Commonwealth Annuity and Life Insurance Company ("CwA") and First Allmerica Financial Life Insurance Company ("FAFLIC") are organized and domiciled in the Commonwealth of Massachusetts; Accordia Life and Annuity Company ("Accordia") is organized and domiciled in the State of Iowa; and Forethought Life Insurance Company ("FLIC") is organized and domiciled in the State of Indiana (together, these four companies constitute Global Atlantic's "U.S. insurance subsidiaries").
Both Commonwealth Annuity and Life Insurance Company ("CwA") and First Allmerica Financial Life Insurance Company ("FAFLIC") are organized and domiciled in the Commonwealth of Massachusetts; Accordia Life and Annuity Company ("Accordia") is organized and domiciled in the State of Iowa; and Forethought Life Insurance Company ("FLIC") is organized and domiciled in the State of Indiana (together, these four companies constitute our "U.S. insurance subsidiaries").
We also provide customized solutions for investors seeking diversified portfolios of investment funds and direct co-investments in privately negotiated investments. From time to time, we also provide fundraising services to certain third-party fund managers in our hedge fund partnerships. As of December 31, 2022, we had over 1,600 investors in privately offered funds across all our strategies.
We also provide customized solutions for investors seeking diversified portfolios of investment funds and direct co-investments in privately negotiated investments. From time to time, we also provide fundraising services to certain third-party fund managers in our hedge fund partnerships. As of December 31, 2023, we had over 1,800 investors in privately offered funds across all our strategies.
None of Global Atlantic’s special purpose financial captive insurance company subsidiaries may declare or pay dividends or distributions in any form to us other than in accordance with its transaction agreements and governing licensing order.
None of our special purpose financial captive insurance company subsidiaries may declare or pay dividends or distributions in any form to us other than in accordance with its transaction agreements and governing licensing order.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2022.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2023.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2022.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2023.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2022.
This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after December 31, 2023.
Global Atlantic also earns fees paid by policyholders on certain types of contracts and fees paid by third-party investors, which are reported in the asset management segment. As of December 31, 2022, Global Atlantic served approximately three million policyholders. Global Atlantic operates in the following two complementary markets: individual and institutional. Individual Markets.
Global Atlantic also earns fees paid by policyholders on certain types of contracts and fees paid by third-party investors, which are reported in the asset management segment. As of December 31, 2023, Global Atlantic served over three million policyholders. Global Atlantic operates in the following two complementary markets: individual and institutional. Individual Markets.
FS/KKR Advisor serves as investment adviser to FS KKR Capital Corp., which is subject to regulations applicable to BDCs under the Investment Company Act, including portfolio construction requirements and limitations on transactions with affiliates. Certain subsidiaries of Kohlberg Kravis Roberts & Co.
FS/KKR Advisor serves as investment adviser to FS KKR Capital Corp. and KKR FS Income Trust, which are subject to regulations applicable to BDCs under the Investment Company Act, including portfolio construction requirements and limitations on transactions with affiliates. Certain subsidiaries of Kohlberg Kravis Roberts & Co.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Critical Accounting Policies and Estimates - Asset Management—Revenues—Capital Allocation-Based Income (Loss)" and "Risk Factors—The 'clawback' provisions in our governing agreements may give rise to a contingent obligation that may require us to return or contribute amounts to our funds and fund investors." We enter into management agreements with our private equity funds pursuant to which we receive management fees in exchange for providing the funds with management and other services.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Critical Accounting Policies and Estimates - Asset Management—Revenues—Capital Allocation-Based Income (Loss)" and "Risk Factors—Risks Related to Our Business—The "clawback" provisions in the agreements governing our carry-paying funds may give rise to a contingent obligation that may require us to return or contribute amounts to our funds and fund investors." We enter into management agreements with our private equity funds pursuant to which we receive management fees in exchange for providing the funds with management and other services.
Credit and Liquid Strategies Assets Under Management (1) ($ in billions) (1) AUM of acquired businesses and pro rata AUM of hedge fund partnerships in which KKR has made an investment are included in the years on and after the completion of the respective acquisitions or transactions, as applicable. 22 Table of Contents The table below presents information as of December 31, 2022, relating to our current credit funds in our Credit and Liquid Strategies business line for which we have the ability to earn carried interest.
Credit and Liquid Strategies Assets Under Management (1) ($ in billions) (1) AUM of acquired businesses and pro rata AUM of hedge fund partnerships in which KKR has made an investment are included in the years on and after the completion of the respective acquisitions or transactions, as applicable. 23 Table of Contents The table below presents information as of December 31, 2023, relating to our current credit vehicles reported in our Credit and Liquid Strategies business line for which we have the ability to earn carried interest.
Global Atlantic also has special purpose financial captive insurance company subsidiaries domiciled in Vermont and Iowa that provide reinsurance to Accordia in order to facilitate the financing of redundant reserve requirements associated with the application of the NAIC Model Regulation entitled "Valuation of Life Insurance Policies Model Regulation" ("Regulation XXX") and NAIC Actuarial Guideline XXXVIII ("AG38").
We also have special purpose financial captive insurance company subsidiaries domiciled in Vermont and Iowa that provide reinsurance to Accordia in order to facilitate the financing of redundant reserve requirements associated with the application of the NAIC Model Regulation entitled "Valuation of Life Insurance Policies Model Regulation" ("Regulation XXX") and NAIC Actuarial Guideline XXXVIII ("AG38").
From our inception in 1976 through December 31, 2022, our Private Equity and Real Assets investment funds with at least 24 months of investment activity generated a cumulative gross IRR of 25.6%, compared to the 11.7% and 8.9% gross IRR achieved by the S&P 500 Index and MSCI World Index, respectively, over the same period, despite the cyclical and sometimes challenging environments in which we have operated.
From our inception in 1976 through December 31, 2023, our Private Equity and Real Assets investment funds with at least 24 months of investment activity generated a cumulative gross IRR of 25.5%, compared to the 11.9% and 9.2% gross IRR achieved by the S&P 500 Index and MSCI World Index, respectively, over the same period, despite the cyclical and sometimes challenging environments in which we have operated.
L.P. also serve as investment advisers to publicly listed companies, including KKR Real Estate Finance Trust and Crescent Energy. Regulation as a Broker-Dealer KKR Capital Markets LLC, one of our subsidiaries, is registered as a broker-dealer with the SEC under the Exchange Act and in all 50 U.S. States and U.S. territories, and is a member of the FINRA.
L.P. also serve as investment advisers to publicly listed companies, including KKR Real Estate Finance Trust and Crescent Energy. 41 Table of Contents Regulation as a Broker-Dealer KKR Capital Markets, LLC, one of our subsidiaries, is registered as a broker-dealer with the SEC under the Exchange Act and in 53 U.S. states and territories, and is a member of FINRA.
Global Atlantic seeks to reach individuals in the United States who are planning for, or are already in, retirement. Global Atlantic’s annuity products are distributed primarily through a network of distribution partners, including over 200 banks, broker-dealers and independent marketing organizations. Global Atlantic generated $9.8 billion of sales for the year ended December 31, 2022.
Global Atlantic seeks to reach individuals in the United States who are planning for, or are already in, retirement. Global Atlantic’s annuity products are distributed primarily through a network of distribution partners, including over 200 banks and broker-dealers and over 200 independent marketing organizations. Global Atlantic generated $11.4 billion of sales for the year ended December 31, 2023.
In Hong Kong, KKR Capital Markets Asia Limited is licensed by the Securities and Futures Commission in Hong Kong to carry on dealing in securities, advising on securities and asset management regulated activities. In Singapore, KKR Singapore Pte. Ltd. and KKR Credit Advisors (Singapore) Pte.
In Hong Kong, KKR Capital Markets Asia Limited is licensed by the Securities and Futures Commission in Hong Kong to carry on dealing in securities, advising on securities and asset management regulated activities. 44 Table of Contents In Singapore, KKR Singapore Pte. Ltd. and KKR Credit Advisors (Singapore) Pte.
As of December 31, 2022, approximately 91% of our AUM consists of capital that is either not subject to redemption for at least 8 years from inception or what we refer to as perpetual capital.
As of December 31, 2023, approximately 92% of our AUM consists of capital that is either not subject to redemption for at least 8 years from inception or what we refer to as perpetual capital.
Private Equity Assets Under Management ($ in billions) 10 Table of Contents The table below presents information as of December 31, 2022, relating to our current private equity and other investment vehicles reported in our Private Equity business line for which we have the ability to earn carried interest.
Private Equity Assets Under Management ($ in billions) 11 Table of Contents The table below presents information as of December 31, 2023, relating to our current private equity and other vehicles reported in our Private Equity business line for which we have the ability to earn carried interest.
We believe that the ability to draw on the local cultural fluency of our investment professionals while maintaining a centralized and integrated global infrastructure distinguishes us from other investment firms and has been a substantial contributing factor to our ability to raise funds, invest internationally and expand our businesses. 7 Table of Contents Our Business We operate in two segments: our asset management business and our insurance business.
We believe that the ability to draw on the local cultural fluency of our investment professionals while maintaining a centralized and integrated global infrastructure distinguishes us from other investment firms and has been a substantial contributing factor to our ability to raise funds, invest internationally and expand our businesses. 8 Table of Contents Our Business Through December 31, 2023, we operated in two segments: our asset management business and our insurance business.
From time to time, we refer to our growth equity strategy to include the investments from our impact strategy. 9 Table of Contents Private Equity Assets Under Management and Select Fund Performance Information The following chart presents the growth in the AUM of our Private Equity business line from December 31, 2018 through December 31, 2022.
From time to time, we refer to our growth equity strategy to include the investments from our impact strategy. 10 Table of Contents Private Equity Assets Under Management and Select Fund Performance Information The following chart presents the growth in the AUM of our Private Equity business line from December 31, 2019 through December 31, 2023.
Traditional Private Equity Portfolio As of December 31, 2022, our traditional private equity portfolio consisted of over 125 companies with approximately $290 billion of annual revenues. These companies are headquartered in over 20 countries and operate in approximately 20 general industries, which take advantage of our broad and deep industry and operating expertise.
Traditional Private Equity Portfolio As of December 31, 2023, our traditional private equity portfolio consisted of over 130 companies with approximately $285 billion of annual revenues. These companies are headquartered in over 20 countries and operate in approximately 20 general industries, which take advantage of our broad and deep industry and operating expertise.
However, the AUM and FPAUM presented for each line in the table includes certain investments from non-primary investment strategies, which are permitted by their investment mandates, for purposes of presenting the fees and other terms for such funds, vehicles and accounts.
Our funds, vehicles and accounts have been sorted based upon their primary investment strategies. However, the AUM and FPAUM presented for each line in the table includes certain investments from non-primary investment strategies, which are permitted by their investment mandates, for purposes of presenting the fees and other terms for such funds, vehicles and accounts.
Our leveraged credit strategies seek to primarily invest in leveraged loans (including revolving credit facilities), CLOs, high yield bonds, structured credit, stressed securities and illiquid credits. Within leveraged credit, we manage both single-asset class and multi-asset class pools of capital.
Our credit business pursues a variety of investment strategies in leveraged credit and alternative credit. Leveraged Credit. Our leveraged credit strategies seek to primarily invest in leveraged loans (including revolving credit facilities), CLOs, high yield bonds, structured credit, stressed securities and illiquid credits. Within leveraged credit, we manage both single-asset class and multi-asset class pools of capital.
From our inception through December 31, 2022, the firm has generated approximately $187.7 billion of cash proceeds from the sale of our Private Equity portfolio companies in initial public offerings and secondary offerings, dividends, and sales to strategic and financial buyers.
From our inception through December 31, 2023, the firm has generated approximately $195.9 billion of cash proceeds from the sale of our Private Equity portfolio companies in initial public offerings and secondary offerings, dividends, and sales to strategic and financial buyers.
Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 690 private equity investments in portfolio companies with a total transaction value in excess of $700 billion as of December 31, 2022.
Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 730 private equity investments in portfolio companies with a total transaction value in excess of $710 billion as of December 31, 2023.
In Mauritius, KKR Holdings Mauritius, Ltd. and KKR Account Adviser (Mauritius), Ltd. are unrestricted investment advisers authorized to manage portfolios of securities and give advice on securities transactions, and are regulated by the Financial Services Commission, Mauritius.
In Mauritius, KKR Holdings Mauritius, Ltd. is an unrestricted investment adviser authorized to manage portfolios of securities and give advice on securities transactions and is regulated by the Financial Services Commission, Mauritius.
Investment Company Act of 1940 (the "Investment Company Act," and such registered investment companies, "RICs"), including KKR Income Opportunities Fund (NYSE: KIO), KKR Credit Opportunities Portfolio (an interval fund), as well as FS KKR Capital Corp. (NYSE: FSK) through our joint ownership of its investment adviser.
Investment Company Act of 1940 (the "Investment Company Act," and such registered investment companies, "RICs"), including KKR Income Opportunities Fund (NYSE: KIO), KKR Credit Opportunities Portfolio (an interval fund), as well as FS KKR Capital Corp. (NYSE: FSK) and KKR FS Income Trust (a privately offered BDC) through our joint ownership of their investment adviser.
Real Assets Assets Under Management (1) ($ in billions) (1) AUM of acquired businesses are included in the years on and after the completion of the respective acquisitions or transactions, as applicable. 16 Table of Contents The table below presents information as of December 31, 2022, relating to our current real asset funds for which we have the ability to earn carried interest.
Real Assets Assets Under Management (1) ($ in billions) (1) AUM of acquired businesses are included in the years on and after the completion of the respective acquisitions or transactions, as applicable. 17 Table of Contents The table below presents information as of December 31, 2023, relating to our current real asset and other vehicles reported in our Real Assets business line for which we have the ability to earn carried interest.
Ltd., which is regulated by the Monetary Authority of Singapore and an SEC-registered investment adviser. We also jointly own with a third party FS/KKR Advisor, LLC, an investment adviser registered with the SEC that provides investment advisory services to FS KKR Capital Corp. (NYSE: FSK), a publicly listed BDC.
Ltd., which is regulated by the Monetary Authority of Singapore and an SEC-registered investment adviser. We also jointly own with a third party FS/KKR Advisor, LLC, an investment adviser registered with the SEC that provides investment advisory services to certain registered investment companies, including FS KKR Capital Corp.
For more information, see "Risk Factors—Risks Related to the Assets We Manage—Future results of our funds, our insurance subsidiaries or our balance sheet investments may be different than, and may not achieve the levels of, any of their historical returns." Credit and Liquid Strategies Overview Through our Credit and Liquid Strategies business line, we report our credit and hedge funds platforms on a combined basis.
For more information, see "Risk Factors—Risks Related to Our Investment Activities—Future results of our investments may be different than, and may not achieve the levels of, any of our historical returns." Credit and Liquid Strategies Overview Through our Credit and Liquid Strategies business line, we report our credit and hedge funds platforms on a combined basis.
As of December 31, 2022, 47% of its reserves were in its individual market and 53% were in its institutional market. 32 Table of Contents The table below represents a breakdown of Global Atlantic’s policy liabilities by business and product type as of December 31, 2022, separated by reserves originated through its individual and institutional markets.
As of December 31, 2023, 44% of its reserves were in its individual market and 56% were in its institutional market. 33 Table of Contents The table below represents a breakdown of Global Atlantic’s policy liabilities by business and product type as of December 31, 2023, separated by reserves originated through its individual and institutional markets.
Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the date of purchase for each investment and (ii) the exchange rate that prevailed on December 31, 2022, in the case of commitments. (4) The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.
Foreign currency commitments have been converted into U.S. dollars based on the exchange rate that prevailed on December 31, 2023. (4) The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.
Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the date of purchase for each investment and (ii) the exchange rate that prevailed on December 31, 2022, in the case of commitments. (4) The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.
Foreign currency commitments have been converted into U.S. dollars based on the exchange rate that prevailed on December 31, 2023. (4) The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.
A wholly-owned subsidiary of KKR & Co. Inc. will become the general partner of KKR Associates Holdings L.P. and thereby acquire control of the carry pool on the "Sunset Date" (which will be no later than December 31, 2026 as provided in the Reorganization Agreement; see "Certain Relationships and Related Transactions, and Director Independence" in this report..
Inc. will become the general partner of Associates Holdings and thereby acquire control of the carry pool on the "Sunset Date" (which will be no later than December 31, 2026 as provided in the Reorganization Agreement; see "Certain Relationships and Related Transactions, and Director Independence" in this report). (3) Includes Kohlberg Kravis Roberts & Co.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeInvestments made by our different business lines involve a number of significant risks, including the following: 87 Table of Contents • companies in which investments are made may have limited financial resources and may be unable to meet their obligations under their securities, which may be accompanied by a deterioration in the value of their equity securities or any collateral or guarantees provided with respect to their debt; • companies or assets in which investments are made are more likely to depend on the management talents and efforts of a small group of persons and, as a result, the death, disability, resignation or termination of one or more of those persons could have a material adverse impact on their business and prospects; • companies in which private equity investments are made may be businesses or divisions acquired from larger operating entities that may require a rebuilding or replacement of financial reporting, information technology, operational and other functions; • companies or assets in which investments are made may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; • instances of bribery, fraud and other deceptive practices committed by senior management of portfolio companies in which our funds or we invest may undermine our due diligence efforts with respect to such companies, and if such bribery, fraud or other deceptive practices are discovered, negatively affect the valuation of a fund's investments as well as contribute to overall market volatility that can negatively impact a fund's or our investment's program; • our funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of such fund's term or otherwise, resulting in a lower than expected return on the investments and, potentially, on the fund itself; • our portfolio companies generally have capital structures established on the basis of financial projections based primarily on management's judgments and assumptions, and general economic conditions and other factors may cause actual performance to fall short of these financial projections, which could cause a substantial decrease in the value of our equity holdings in the portfolio company and cause our funds' or our performance to fall short of our expectations; • executive officers, directors and employees of an equity sponsor may be named as defendants in litigation involving a company or asset in which an investment is made or is being made, and we or our funds may indemnify such executive officers, directors or employees for liability relating to such litigation; • we advise funds that invest in businesses that operate in a variety of industries that are subject to extensive domestic and foreign regulation (including companies that supply services to governmental agencies), such as the financial services industry, telecommunications industry, the defense and government services industry, the healthcare industry, oil and gas industry, the waste management industry and the food industry, which may involve greater risk due to rapidly changing market and governmental conditions in those sectors; • our transactions involve complex tax structuring that could be challenged or disregarded, which may result in losing treaty benefits or would otherwise adversely impact our investments; and • significant failures of our investments to comply with laws and regulations applicable to them could affect the ability of our funds or us to invest in other companies in certain industries in the future and could harm our reputation.
Biggest changeWe often make investments in companies, businesses and assets that, in of themselves, involve a high degree of risk, including those: (1) that have limited financial resources and may be unable to meet their obligations under their outstanding indebtedness, which may be accompanied by a significant deterioration in the value of their equity securities or any collateral or guarantees provided with respect to their debt, (2) that significantly depend on their founders and other key persons, the loss of whom could materially and adversely impact the investment, (3) that are businesses or divisions acquired from larger operating entities that require significant and costly rebuilding or replacement of business operations functions, (4) that are subject to litigation or regulatory scrutiny or may be at risk of having significant failures to comply with law (including practices or issues which may not be discovered through due diligence), (5) that are engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and require substantial additional capital to support their operations, finance expansion or maintain their competitive position, and (6) that operate in an industry that is subject to extensive domestic and foreign regulation (including companies that supply services to governmental agencies), such as the financial services industry, telecommunications industry, defense and government services industry, healthcare industry, oil and gas industry, waste management industry and food industry. 92 Tabl e of Contents In addition, as we depend on the efforts, skills, reputations, business contacts, and conduct of individuals affiliated with our portfolio companies (including employees of such portfolio companies), we may be adversely affected, including our reputation, if there is misconduct by senior management or other employees of portfolio companies in which we invest, including through successor liability, and we may be unable to control or mitigate such misconduct.
In some cases, the inability of our portfolio companies to refinance or extend maturities may result in the inability of those companies to repay debt at maturity or pay interests when due, and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcy protection, any of which would also likely impair the value of our investment and lead to a decrease in investment income earned by us.
In some cases, the inability of our portfolio companies to refinance or extend maturities may result in the inability of those companies to repay debt at maturity or pay interests when due, and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcy protection, any of which would also likely impair the value of our investment and lead to a decrease in the investment income earned by us.
There is no assurance that fundraises for new strategies or successor funds will experience similar success as our existing or predecessor funds in the future. Our current private equity funds and certain other funds and investment vehicles have a finite life and a finite amount of commitments from fund investors.
There is no assurance that fundraises for new strategies, successor funds or other investment vehicles will experience similar success as our existing or predecessor funds or other investment vehicles in the future. Our current private equity funds and certain other funds and investment vehicles have a finite life and a finite amount of commitments from fund investors.
We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by competitors. Our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment.
We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by competitors. Our competitors for investment opportunities that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment.
The private equity industry has been and continues to be under intense regulatory and news media scrutiny with governmental officials and regulators, focusing on the private equity industry's fees, the taxation of its investments, the business practices, antitrust compliance and operations of its portfolio companies, conflicts of interest, and other issues.
The private equity industry has been and continues to be under intense regulatory and news media scrutiny with governmental officials and regulators focusing on the private equity industry's fees, the taxation of its investments, business practices, antitrust compliance and operations of its portfolio companies, conflicts of interest, and other issues.
If enacted, any new law, regulation, initiatives or regulatory guidance could negatively impact our funds and us in a number of ways, including: increasing our costs and the cost for our funds of investing, borrowing, hedging or operating; increasing the funds' or our regulatory operating costs; imposing additional burdens on the funds' or our staff; and potentially requiring the disclosure of sensitive information.
If enacted, any new law, regulation, initiatives or regulatory guidance could negatively impact our funds and us in a number of ways, including: increasing our costs and the cost for our funds of investing, borrowing, hedging or operating; increasing the funds' or our regulatory operating costs; imposing additional burdens on our funds' or our staff; and potentially requiring the disclosure of sensitive information.
The use of derivative financial instruments and these other risk management strategies may not be properly designed to hedge, manage or other reduce the risks as intended, may not be properly implemented as designed, or otherwise not effectively offset the risks we have identified.
The use of derivative financial instruments and these risk management strategies may not be properly designed to hedge, manage or other reduce the risks as intended, may not be properly implemented as designed, or otherwise not effectively offset the risks we have identified.
Unlike investors in our traditional real estate and infrastructure funds, which in general do not permit redemptions of their fund interests until the liquidation of the funds upon their scheduled dates to terminate, our core real estate and infrastructure funds permit their investors to redeem their funds interests from time to time.
Unlike investors in our traditional real estate and infrastructure funds, which in general do not permit redemptions of their fund interests until the liquidation of the funds upon their scheduled dates to terminate, our core real estate and infrastructure funds permit their investors to redeem their fund interests from time to time.
These actions consist of the following: • the entry into a debt financing arrangement by us in an amount in excess of 10% of our then existing long-term indebtedness (other than the entry into certain intercompany debt financing arrangements); • the issuance by us or our subsidiaries of any securities that would (i) represent, after such issuance, or upon conversion, exchange or exercise, as the case may be, at least 5% on a fully diluted, as converted, exchanged or exercised basis, of any class of our or their equity securities or (ii) have designations, preferences, rights, priorities or powers that are more favorable than those of our common stock; • the adoption by us of a shareholder rights plan; • the amendment of our certificate of incorporation, certain provisions of our bylaws relating to our board of directors and officers or the operating agreement of KKR Group Partnership; • the exchange or disposition of all or substantially all of our assets or the assets of KKR Group Partnership; • the merger, sale or other combination of our company or KKR Group Partnership with or into any other person; • the transfer, mortgage, pledge, hypothecation or grant of a security interest in all or substantially all of the assets of KKR Group Partnership; • the appointment or removal of our Chief Executive Officer or a Co-Chief Executive Officer; • the termination of our employment of any of our officers or the officers of any of our subsidiaries or the termination of the association of a partner with any of our subsidiaries, in each case, without cause; • the liquidation or dissolution of us or KKR Group Partnership; and • the withdrawal, removal or substitution of any person as the general partner of KKR Group Partnership or the transfer of beneficial ownership of all or any part of a general partner interest in KKR Group Partnership to any person other than a wholly-owned subsidiary.
These actions consist of the following: • the entry into a debt financing arrangement by us in an amount in excess of 10% of our then existing long-term indebtedness (other than the entry into certain intercompany debt financing arrangements); • the issuance by us or our subsidiaries of any securities that would (i) represent, after such issuance, or upon conversion, exchange or exercise, as the case may be, at least 5% on a fully diluted, as converted, exchanged or exercised basis, of any class of our or their equity securities or (ii) have designations, preferences, rights, priorities or powers that are more favorable than those of our common stock; • the adoption by us of a shareholder rights plan; • the amendment of our certificate of incorporation, certain provisions of our bylaws relating to our board of directors and officers or the operating agreement of KKR Group Partnership; • the exchange or disposition of all or substantially all of our assets or the assets of KKR Group Partnership; • the merger, sale or other combination of our company or KKR Group Partnership with or into any other person; • the transfer, mortgage, pledge, hypothecation or grant of a security interest in all or substantially all of the assets of KKR Group Partnership; • the appointment or removal of a Chief Executive Officer or a Co-Chief Executive Officer; • the termination of our employment of any of our officers or the officers of any of our subsidiaries or the termination of the association of a partner with any of our subsidiaries, in each case, without cause; • the liquidation or dissolution of us or KKR Group Partnership; and • the withdrawal, removal or substitution of any person as the general partner of KKR Group Partnership or the transfer of beneficial ownership of all or any part of a general partner interest in KKR Group Partnership to any person other than a wholly-owned subsidiary.
Global Atlantic's actual or perceived financial strength impacts its ability to sell its products, and a downgrade in Global Atlantic's ratings or in the ratings of its insurance subsidiaries could materially adversely affect Global Atlantic's ability to compete, raise equity or issue debt.
Global Atlantic's actual or perceived financial strength impacts its ability to sell its products, and a downgrade in Global Atlantic's ratings or in the ratings of its insurance subsidiaries could materially and adversely affect Global Atlantic's ability to compete, raise equity or issue debt.
If an independent rating agency downgrades or withdraws any of Global Atlantic's ratings, Global Atlantic could be limited in, or prevented from, writing any new insurance and reinsurance contracts; some existing contracts may be terminated or may require Global Atlantic to enhance certain credit terms; the pricing terms Global Atlantic can obtain may be adversely affected; and Global Atlantic's borrowing costs or ability to access the capital markets could be materially adversely impacted.
If an independent rating agency downgrades or withdraws any of Global Atlantic's ratings, Global Atlantic could be limited in, or prevented from, writing any new insurance and reinsurance contracts; some existing contracts may be terminated or may require Global Atlantic to enhance certain credit terms; the pricing terms Global Atlantic can obtain may be adversely affected; and Global Atlantic's borrowing costs or ability to access the capital markets could be materially and adversely impacted.
The evolving preferences of our fund investors, including sovereign wealth funds and public pension funds, may necessitate that alternatives to the traditional investment fund structure become a larger part of our business going forward, such as separately managed accounts, specialized funds and co-investment vehicles, and strategic investor partnerships whereby we manage certain investors' capital across a variety of our products on separately negotiated terms, which could increase our cost of raising capital at the scale we have historically achieved.
The evolving preferences of our fund investors, including sovereign wealth funds and public pension funds, may necessitate that alternatives to the traditional investment fund structure become a larger part of our business going forward, such as separately managed accounts, democratized investment vehicles, specialized funds and co-investment vehicles, and strategic investor partnerships whereby we manage certain investors' capital across a variety of our products on separately negotiated terms, which could increase our cost of raising capital at the scale we have historically achieved.
Higher interest rates may result in increased surrenders on interest-sensitive products, such as annuity contracts and certain life insurance policies, which may adversely affect Global Atlantic's earnings related to those products. This risk is present across most of Global Atlantic's insurance products, which can typically be surrendered for the cash value, less any applicable surrender charge, at any time.
However, higher interest rates may result in increased surrenders on interest-sensitive products, such as annuity contracts and certain life insurance policies, which may adversely affect Global Atlantic's earnings related to those products. This risk is present across most of Global Atlantic's insurance products, which can typically be surrendered for the cash value, less any applicable surrender charge, at any time.
By no later than December 31, 2026, we agreed in the Reorganization Agreement to (i) eliminate our Series I preferred stock and (ii) establish voting rights for our common stock on a one vote per share basis for all matters subject to a common stockholders' vote under Delaware corporate law, including with respect to the election of directors.
In addition, by no later than December 31, 2026, we agreed in the Reorganization Agreement to (i) eliminate our Series I preferred stock and (ii) establish voting rights for our common stock on a one vote per share basis for all matters subject to a common stockholders’ vote under Delaware corporate law, including with respect to the election of directors.
Our ability to recruit, retain and motivate our employees is dependent on our ability to offer highly attractive incentive opportunities, compensation and benefits, some of which could be adversely impacted by any changes in regulation or tax law that impacts certain forms of compensation or other remuneration that we may typically offer employees, such as carried interest.
Our ability to recruit, retain and motivate our employees is dependent on our ability to offer highly attractive incentive opportunities, compensation and benefits, some of which could be adversely impacted by any changes in regulation or tax law that impacts certain forms of incentives or other remuneration that we may typically offer employees, such as carried interest.
An inability of such vehicles to continue to raise or utilize leverage, to refinance or extend the maturities of their outstanding indebtedness or to maintain adequate levels of collateral under the terms of their CLOs could limit their ability to grow their business, reinvest principal cash, distribute cash to us or fully execute their business strategy, and our results of operations may be materially and adversely affected.
An inability of such vehicles to continue to raise or utilize leverage, to refinance or extend the maturities of their outstanding indebtedness or to maintain adequate levels of collateral under the terms of their CLOs limit their ability to grow their business, reinvest principal cash, distribute cash to us or fully execute their business strategy, and our results of operations may be materially and adversely affected.
Accordingly, based on our determination, less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are comprised of assets that could be considered investment securities. However, our subsidiaries have a significant number of investment securities, and we expect to make investments in other investment securities from time to time.
Accordingly, based on our determination, less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are comprised of assets that could be considered investment securities. However, certain of our subsidiaries have a significant number of investment securities, and we expect to make investments in other investment securities from time to time.
Global Atlantic's holding companies do not own or propose to own investment securities in excess of the 40% test. Global Atlantic's insurance company subsidiaries intend to operate so that in excess of 65% of their business is derived from insurance business, meaning such entities are exempt from designation as an investment company under Section 3(c)(6) of the Investment Company Act.
Global Atlantic's holding companies do not own or propose to own investment securities in excess of the 40% test. Global Atlantic's insurance companies intend to operate so that in excess of 65% of their business is derived from insurance business, meaning such entities are exempt from designation as an investment company under Section 3(c)(6) of the Investment Company Act.
We are subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictions imposed by the Foreign" Corrupt Practices Act ("FCPA"), as well as trade sanctions and trade control laws administered by the Office of Foreign Assets Control ("OFAC"), the U.S. Department of Commerce and the U.S. Department of State.
We are subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictions imposed by the Foreign Corrupt Practices Act ("FCPA"), as well as trade sanctions and trade control laws administered by the Office of Foreign Assets Control ("OFAC"), the U.S. Department of Commerce and the U.S.
Although investors in our funds do not have legal remedies against us, the general partners of our funds, our funds, our employees or our affiliates solely based on their dissatisfaction with the investment performance of those funds, such investors may have remedies against us, the general partners of our funds, our funds, our employees or our affiliates to the extent any losses result from fraud, negligence, willful misconduct or other similar misconduct.
Although investors in our funds do not have legal remedies against us, the general partners of our funds, our funds, our employees or our affiliates solely based on their dissatisfaction with the investment performance of those funds, such investors may have remedies against us, the general partners of our funds, our funds, our employees or our affiliates to the extent any losses result from fraud, gross negligence, willful misconduct or other similar misconduct.
Investing in companies that are based or have significant operations in countries outside of the United States and, in particular, in emerging markets such as China and India, Eastern Europe, South and Southeast Asia, Latin America and Africa, involves risks and considerations that are not typically associated with investments in companies established in the United States.
Investing in companies or assets that are based or have significant operations in countries outside of the United States and, in particular, in emerging markets such as China and India, Eastern Europe, South and Southeast Asia, Latin America and Africa, involves risks and considerations that are not typically associated with investments in companies or assets established in the United States.
In a declining market or period of economic disruption or uncertainty, the pace of redemptions and consequent reduction in our AUM could accelerate. The decrease in revenues that would result from significant redemptions from our funds or other similar investment vehicles could have a material adverse effect on our business, revenues, net income and cash flows.
In a declining market or period of economic disruption or uncertainty, the pace of redemptions and consequent reduction in our AUM could accelerate. The decrease in revenues that would result from significant redemptions from our investment vehicles or other similar investment vehicles could have a material adverse effect on our business, revenues, net income and cash flows.
Under the 2019 Equity Incentive Plan, on the first day of each fiscal year, the number of shares of common stock available for issuance of future awards under our 2019 Equity Incentive Plan will be adjusted upwards to 15% of the aggregate number of shares of common stock outstanding and KKR Group Partnership Unites (excluding KKR Group Partnership Units held by KKR & Co.
Under the 2019 Equity Incentive Plan, on the first day of each fiscal year, the number of shares of common stock available for issuance of future awards under our 2019 Equity Incentive Plan will be adjusted upwards to 15% of the aggregate number of shares of common stock outstanding and KKR Group Partnership Units (excluding KKR Group Partnership Units held by KKR & Co.
These risks may include the following: • the possibility of restrictions on foreign direct investment and exchange control regulations; • restrictions on repatriation of profit on investments or of capital invested; • the imposition of non-U.S. taxes or withholding taxes on income or gain with respect to certain assets and/or changes in tax law; • differences in the legal and regulatory environment, such as the recognition of information barriers, or enhanced legal and regulatory compliance; • greater levels of corruption and potential exposure to the FCPA and other laws that prohibit improper payments or offers of payments to foreign governments, their officials and other third parties; • violations of trade sanctions or trade control regimes and the potential for the imposition of new or additional tariffs; • limitations on borrowings to be used to fund acquisitions or dividends; • limitations on the deductibility of interest and other financing costs and expense for income tax purposes in certain jurisdictions; • limitations on permissible counterparties in our transactions or consolidation rules that effectively restrict the types of businesses in which we may invest; • political risks generally, including political and social instability, nationalization, expropriation of assets or political hostility to investments by foreign or private equity investors; • less liquid markets; 93 Table of Contents • reliance on a more limited number of commodity inputs, service providers or distribution mechanisms; • adverse fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another; • higher rates of inflation; • less available current information about an issuer; • higher transaction costs; • less government supervision of exchanges, brokers and issuers; • less developed bankruptcy and other laws; • greater application of concepts like equitable subordination, which may, in bankruptcy or insolvency, result in the subordination of debt or other senior interests held by our investment funds, vehicles or accounts in companies in which our investment funds, vehicles or accounts also hold equity interests; • difficulty in enforcing contractual obligations; • lack of uniform or robust accounting, auditing, financial reporting standards, practices and disclosure requirements and less government supervision and regulation; • less stringent requirements relating to fiduciary duties; • fewer investor protections; and • greater price volatility.
These risks may include the following: • the possibility of restrictions on foreign direct investment and exchange control regulations; • restrictions on repatriation of profit on investments or of capital invested; • the imposition of non-U.S. taxes or withholding taxes on income or gain with respect to certain assets and/or changes in tax law; • differences in the legal and regulatory environment, such as the recognition of information barriers, or enhanced legal and regulatory compliance; • greater levels of corruption and potential exposure to the FCPA and other laws that prohibit improper payments or offers of payments to foreign governments, their officials and other third parties; • violations of trade sanctions or trade control regimes and the potential for the imposition of new or additional tariffs; • limitations on borrowings to be used to fund acquisitions or dividends; • limitations on the deductibility of interest and other financing costs and expense for income tax purposes in certain jurisdictions; • limitations on permissible counterparties in our transactions or consolidation rules that effectively restrict the types of businesses in which we may invest; 98 Tabl e of Contents • political risks generally, including political and social instability, nationalization, expropriation of assets or political hostility to investments by foreign or private equity investors; • less liquid markets; • reliance on a more limited number of commodity inputs, service providers or distribution mechanisms; • adverse fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another; • higher rates of inflation; • less available current information about an issuer; • higher transaction costs; • less government supervision of exchanges, brokers and issuers; • less developed bankruptcy and other laws; • greater application of concepts like equitable subordination, which may, in bankruptcy or insolvency, result in the subordination of debt or other senior interests held by our investment funds, vehicles or accounts in companies in which our investment funds, vehicles or accounts also hold equity interests; • difficulty in enforcing contractual obligations; • lack of uniform or robust accounting, auditing, financial reporting standards, practices and disclosure requirements, and less government supervision and regulation; • less stringent requirements relating to fiduciary duties; • fewer investor protections; and • greater price volatility.
If we fail to comply with these laws and regulations, we could be exposed to claims for damages, civil or criminal financial penalties, reputational harm, incarceration of our employees, restrictions on our operations and other liabilities, which could materially and adversely affect our business, results of operations and financial condition.
If we fail to comply with these laws and regulations, we could be exposed to claims for damages, civil or criminal financial penalties, reputational harm, incarceration of our employees, restrictions on our operations and other liabilities, any of which could materially and adversely affect our business, results of operations and financial condition.
Increased risk of legislative and regulatory action could adversely limit and affect our efforts to seek, or to manage vehicles that have investments from, individual investors. We plan to enter into investment management agreements with other similar investment vehicle types and other vehicle types in the future.
Increased risk of legislative and regulatory action could adversely limit and affect our efforts to seek, or to manage vehicles that have investments from, individual investors. We have entered into and plan to enter into investment management agreements with other similar investment vehicle types and other vehicle types in the future.
Reinsurance between Global Atlantic's U.S. and Bermuda insurance subsidiaries is subject to approval by the applicable U.S. domiciliary state insurance department, and there can be no guarantee such approval will be obtained. Furthermore, Global Atlantic Re Limited reinsures substantially all of Global Atlantic's variable annuity business.
Reinsurance between our U.S. and Bermuda insurance subsidiaries is subject to approval by the applicable U.S. domiciliary state insurance department, and there can be no guarantee such approval will be obtained. Furthermore, Global Atlantic Re Limited reinsures substantially all of Global Atlantic's variable annuity business.
A loss of or inability to obtain reciprocal or certified reinsurer status for Global Atlantic's non-U.S. insurance companies may result in requiring additional collateral to be posted with respect to Global Atlantic's existing reinsurance agreements, which may have a material adverse effect on Global Atlantic's business.
A loss of or inability to obtain reciprocal or certified reinsurer status for Global Atlantic's non-U.S. insurance companies may result in requiring additional collateral to be posted with respect to Global Atlantic's existing reinsurance agreements, which may have a material adverse effect on our insurance business.
The risk of a security breach or disruption, particularly through accidental actions or omissions by trusted insiders, cyber-attacks or cyber intrusions, including by computer hackers, viruses, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a security breach or disruption, particularly through accidental actions or omissions by trusted insiders, cyber-attacks or cyber intrusions, including by computer hackers, viruses, foreign governments, and cyber terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
For example, in the past, heightened governmental scrutiny of the healthcare and educational industries has resulted in requests by a U.S. Congressional committee and members of Congress for information from us about our investments in portfolio companies that operate in these industries.
For example, in the past, heightened governmental scrutiny of the healthcare, educational and other industries has resulted in requests by a U.S. Congressional committee and members of Congress for information from us about our investments in portfolio companies that operate in these industries.
If these counterparties or other derivative counterparties or clearinghouses fail or refuse to meet their obligations, then our efforts to mitigate risks may prove to be ineffective or ineffective, and we may experience a materially adverse impact to our results of operations, financial condition or liquidity.
If these counterparties or other derivative counterparties or clearinghouses fail or refuse to meet their obligations, then our efforts to mitigate risks may prove to be ineffective or inefficient, and we may experience a materially adverse impact to our results of operations, financial condition or liquidity.
Cyber-criminals may attempt to redirect payments required to be paid at the closings of our investments to unauthorized accounts, which we or the services providers we retain, like paying agents and escrow agents, may not be able to detect or protect against.
Cyber-criminals may attempt to redirect payments required to be paid at the closings of our investments to unauthorized accounts, which we or the services providers we retain, like administrators, paying agents and escrow agents, may not be able to detect or protect against.
Global Atlantic cannot determine with precision the amounts that Global Atlantic will pay for, or the timing of payment of, actual benefits, claims and expenses or whether the assets supporting policy liabilities, together with future premiums, will grow to the level assumed prior to the payment of benefits or claims.
We cannot determine with precision the amounts that Global Atlantic will pay for, or the timing of payment of, actual benefits, claims and expenses or whether the assets supporting policy liabilities, together with future premiums, will grow to the level assumed prior to the payment of benefits or claims.
There is a risk that such vehicles will lack adequate liquidity to satisfy any unexpected redemption requests, which may occur for a variety of reasons, including, in addition to the ones identified above, compliance obligations of their investors and increases in their investors' liquidity needs, which tend to be more pronounced during periods of market volatility and which may escalate in any period and be particularly pronounced for investment vehicles whose governing agreements permit fund investors, up to certain limits or caps, to submit redemption requests periodically, including potentially as frequently as monthly.
There is a risk that such vehicles will lack adequate liquidity to satisfy any unexpected redemption requests, which may occur for a variety of reasons, including, in addition to the ones identified above, compliance obligations of their investors and increases in their investors’ liquidity needs, which tend to be more pronounced during periods of market volatility and which may escalate in any period and be particularly pronounced for investment vehicles whose governing agreements permit investment vehicle investors, up to certain limits or caps, to submit redemption requests periodically, including potentially as frequently as monthly.
For example, because we may indirectly hold voting securities in public utilities subject to regulation by the Federal Energy Regulatory Commission ("FERC"), including entities that may hold FERC authorization to charge market-based rates for sales of wholesale power and energy, we may be subject to certain FERC regulations, including regulations requiring us and our portfolio companies to collect, report and keep updated substantial information concerning our ownership of such voting interests and voting interests in other related energy companies, corporate officers, and our direct and indirect investment in such utilities and related companies.
For example, because we may indirectly control voting securities in public utilities subject to regulation by the Federal Energy Regulatory Commission ("FERC"), including entities that may hold FERC authorization to charge market-based rates for sales of wholesale power and energy, we may be subject to certain FERC regulations, including regulations requiring us and our portfolio companies to collect, report and keep updated substantial information concerning our control of such voting interests and voting interests in other related energy companies, corporate officers, and our direct and indirect investment in such utilities and related companies.
These restrictions may limit Global Atlantic's ability to invest and KKR's ability to earn fees on those investments. In addition, Global Atlantic's insurance and reinsurance subsidiaries are subject to laws and regulations governing affiliate transactions.
These restrictions may limit Global Atlantic's ability to invest and KKR's ability to earn fees on those investments. In addition, our insurance and reinsurance subsidiaries are subject to laws and regulations governing affiliate transactions.
While terms such as caps or limits on redemption amounts may potentially reduce some of the risks around liquidity, decreased AUM and revenues and other concerns, there could still be significant and materially adverse reputational harm caused by redemption requests that in the aggregate trigger any caps or limits that legally permit our vehicles to "gate" or not honor redemption requests, and this could also cause materially adverse harm to the respective investment vehicle.
While terms such as caps or limits on redemption amounts may potentially reduce some of the risks around liquidity, decreased AUM and revenues and other concerns, there could still be significant and materially adverse reputational harm caused by redemption requests that in the aggregate trigger any caps or limits that legally permit our vehicles to “gate” or not honor redemption requests, and this could also cause materially adverse harm to the respective investment vehicle.
The distribution of products suitable for individual investors, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the U.S. with respect to, among other things, product suitability, investor classification, compliance with securities laws, conflicts of interest regarding investment allocations, the adequacy of disclosure to customers to whom our products are distributed through those channels, including with respect to frequency and complexity 77 Table of Contents of the valuation process for private assets and liquidity and execution of timely processes, such as ongoing general management and satisfying investor redemption requests in accordance with organization documents.
The distribution of products suitable for individual investors, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the U.S. with respect to, among other things, product suitability, investor classification, compliance with securities laws, conflicts of interest regarding investment allocations, the adequacy of disclosure to customers to whom our products are distributed through those channels, including with respect to frequency and complexity of the valuation process for private assets and liquidity and execution of timely processes, such as ongoing general management and satisfying investor redemption requests in accordance with organization documents.
This would result in a lower than expected return on the investments and, perhaps, on the fund itself; • Hedge funds may rely on computer programs, internal infrastructure and services, quantitative models (both proprietary models and those supplied by third parties) and information and data provided by third parties to trade, clear and settle securities and other transactions, among other activities, that are critical to the oversight of certain funds' activities.
This would result in a lower than expected return on the investments and, perhaps, on the fund itself; • Hedge funds may rely on computer programs, internal infrastructure and services, quantitative models (both proprietary models and those supplied by third parties) and information and data provided by third parties to trade, clear and settle securities and other transactions, among other activities, which are critical to the oversight of certain funds’ activities.
While the general partner of such funds has no obligation to take any actions to satisfy redemption requests other than out of available cash in the fund, actions taken to meet substantial redemption requests could result in material adverse effect to the fund's investments, ability to make new investments, or otherwise be able to achieve its investment objects, which could negatively impact our financial results.
While the general partner of such funds has no obligation to take any actions to satisfy redemption requests other than out of available cash in the investment vehicle, actions taken to meet substantial redemption requests could result in material adverse effect to the fund’s investments, ability to make new investments, or otherwise be able to achieve its investment objects, which could negatively impact our financial results.
Our certificate of incorporation requires that (i) any derivative action, suit or proceeding brought on behalf of KKR, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, 102 Table of Contents employee or stockholder of KKR to KKR or KKR's stockholders, (iii) any action, suit or proceeding asserting a claim arising pursuant to any provision of the Delaware General Corporation Law ("DGCL"), our certificate of incorporation or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine may only be brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court located in the State of Delaware.
Our certificate of incorporation requires that (i) any derivative action, suit or proceeding brought on behalf of KKR, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of KKR to KKR or KKR's stockholders, (iii) any action, suit or proceeding asserting a claim arising pursuant to any provision of the Delaware General Corporation Law ("DGCL"), our certificate of incorporation or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine may only be brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court located in the State of Delaware.
A disaster, disruption, error or inability to operate or provide any of these services by us or our vendors or third parties with whom we conduct business, including a disruption involving electronic communications or other services used by us, our vendors or third parties with whom we conduct business, including paying agents and escrow agents, or directly affecting our principal offices, could have a material adverse impact on our ability to continue to operate our business without interruption.
A disaster, disruption, error or inability to operate or provide any of these services by us or our vendors or third parties with whom we conduct business, including a disruption involving electronic communications or other services used by us, our vendors or third parties with whom we conduct business, including paying agents and escrow agents, or directly affecting our principal offices, could have a material adverse impact on our financial results and our ability to continue to operate our business without interruption.
Accordingly, holders of our common stock do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
Accordingly, holders of our common stock do not currently have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
There is no guarantee we would be able to raise comparably sized or larger funds as those described in "Business—Our Business." Institutional investors that have suffered from decreasing returns, liquidity pressure, increased volatility or difficulty maintaining target asset allocations may materially decrease or temporarily suspend making new investments in our investment funds.
There is no guarantee we would be able to raise comparably sized or larger funds as those described in “Business—Our Business.” Institutional investors that have suffered from decreasing returns, liquidity pressure, increased volatility or difficulty maintaining target asset allocations may materially decrease or temporarily suspend making new investments in our investment funds.
However, these vehicles may be subject to the heightened regulatory requirements applicable to certain semi-liquid or democratized access vehicles, including compliance with the laws and regulations of the SEC, the Investment Company Act (or the requirements for exclusion from regulation thereunder), the Exchange Act, the Sarbanes-Oxley Act of 2002 and any national securities exchanges on which their securities are listed, among others.
However, these vehicles may be subject to the heightened regulatory requirements applicable to certain semi-liquid vehicles, including compliance with the laws and regulations of the SEC, the Investment Company Act (or the requirements for exclusion from regulation thereunder), the Exchange Act, the Sarbanes-Oxley Act of 2002 and any national securities exchanges on which their securities are listed, among others.
When conducting due diligence, we typically evaluate a number of important business, financial, tax, accounting, ESG, technological, cyber-security, regulatory and legal issues in determining whether or not to proceed with an investment. Outside consultants, legal advisors, accountants and investment banks are involved in the due diligence process in varying degrees depending on the type of investment.
When conducting due diligence, we typically evaluate a number of important business, financial, tax, accounting, ESG, technological, cyber-security, data privacy, regulatory and legal issues in determining whether or not to proceed with an investment. Outside consultants, legal advisors, accountants and investment banks are involved in the due diligence process in varying degrees depending on the type of investment.
The Bermuda Insurance Act and the policies of and/or other codes issued by the BMA relevant to insurers require each of Global Atlantic's Bermuda reinsurance subsidiaries to, among other requirements, maintain a minimum level of capital and surplus; satisfy solvency standards; comply with restrictions on dividends; obtain prior approval or provide notification to the BMA of changes in shareholder controller shares; make financial statement filings; prepare a financial condition report; maintain a head office in Bermuda from which each of Global Atlantic's Bermuda insurance subsidiaries' insurance business will be directed and managed; and allow for the performance of certain periodic examinations of its financial condition.
The Bermuda Insurance Act and the policies of and/or other codes issued by the BMA relevant to insurers require each of our Bermuda reinsurance subsidiaries to, among other requirements, maintain a minimum level of capital and surplus; satisfy solvency standards; comply with restrictions on dividends; obtain prior approval or provide notification to the BMA of changes in shareholder controller shares; make financial statement filings; prepare a financial condition report; maintain a head office in Bermuda from which each of our Bermuda insurance subsidiaries' insurance business will be directed and managed; and allow for the performance of certain periodic examinations of its financial condition.
(as well as other major economies) and China, the inability of the U.S. and China to reach further trade agreements, the continued use of reciprocal sanctions by each country, or broadening implementation of investment restriction regimes in or related to China, may contribute to a slowing of global economic growth and adversely affect the revenues and profitability of our funds' portfolio companies.
(as well as other major economies) and China, the inability of the U.S. and China to reach further trade agreements, the continued use of reciprocal sanctions by each country, or broadening implementation of investment restriction regimes in or related to China, may contribute to a slowing of global economic growth and adversely affect the revenues and profitability of our portfolio companies and other investments.
To the extent opportunities to invest in these types of vehicles are made available to individual (non-institutional) investors (including investors often described as high net worth individuals, family offices, mass affluent individuals or accredited investors), this expansion of our investor base may enhance the level of risks applicable to us and also may introduce new types of risks.
To the extent opportunities to invest in these types of vehicles are made available to individual (non-institutional) investors (including public investors as well as investors often described as high net worth individuals, family offices, mass affluent individuals or accredited investors), this expansion of our investor base may enhance the level of risks applicable to us and also may introduce new types of risks.
Interest rate risk is a significant market risk for Global Atlantic, as fluctuations in market interest rates can expose Global Atlantic to the risk of reduced income in respect of its investment portfolio, increases in the cost of acquiring or maintaining its insurance liabilities, increases in the cost of hedging, or other fluctuations in Global Atlantic's financial, capital and operating profile which materially and adversely affect its business.
Interest rate risk in particular is a significant market risk for our insurance business, as fluctuations in market interest rates can expose Global Atlantic to the risk of reduced income in respect of its investment portfolio, increases in the cost of acquiring or maintaining its insurance liabilities, increases in the cost of hedging, or other fluctuations in Global Atlantic's financial, capital and operating profile which materially and adversely affect its business.
We believe that competition for fund investors in our investment vehicles is based primarily on: (i) investment performance; (ii) investor liquidity and willingness to invest; (iii) investor perception of investment managers' drive, focus and alignment of interest; (iv) business reputation; (v) the duration of relationships with fund investors; (vi) the quality of services provided to fund investors; (vii) pricing (including fund terms, fees and expense reimbursement); (viii) the relative attractiveness of the types of investments that have been or will be made; and (ix) consideration for environmental, social and governance issues.
We believe that competition for investors in our investment vehicles is based primarily on: (i) investment performance; (ii) investor liquidity and willingness to invest; (iii) investor perception of investment managers’' drive, focus and alignment of interest; (iv) business reputation; (v) the duration of relationships with investors; (vi) the quality of services provided to investors; (vii) pricing (including investment terms, fees and expense reimbursement); (viii) the relative attractiveness of the types of investments that have been or will be made; and (ix) consideration for environmental, social and governance issues.
A portion of assets invested in our funds in the Credit and Liquid Strategies business line are managed through separately managed accounts or entities structured for investment by one investor or related investors whereby we earn management and incentive fees, and we intend to continue to seek additional separately managed account or single entity mandates.
A portion of assets invested in our investment vehicles in the Credit and Liquid Strategies business line are managed through separately managed accounts or entities structured for investment by one investor or related investors whereby we earn management and incentive fees, and we intend to continue to seek additional separately managed account or single entity mandates.
In addition, if the rationale of this decision were expanded to apply also for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or filing obligations in certain contexts. Similar laws that could be applied with similar results also exist outside of the United States.
In addition, if this same rationale were expanded to apply also for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or filing obligations in certain contexts. Similar laws that could be applied with similar results also exist outside of the United States.
Upon the closing of the acquisition of Global Atlantic by KKR, Global Atlantic established a new accounting basis for purchase accounting, under which all identifiable assets acquired and liabilities assumed were measured and recorded at fair value as of the date of the closing. In addition, certain accounting standards applicable to public entities became applicable to Global Atlantic.
Upon the February 2021 closing of the acquisition of Global Atlantic by KKR, Global Atlantic established a new accounting basis for purchase accounting, under which all identifiable assets acquired, and liabilities assumed were measured and recorded at fair value as of the date of the closing. In addition, certain accounting standards applicable to public entities became applicable to Global Atlantic.
Because we hold interests in some of our portfolio companies both through our balance sheet investments in our private equity funds and direct co-investments, fluctuation in the fair values of these portfolio companies may have a disproportionate impact on the investment income earned by us as compared to other portfolio companies.
Because we hold interests in some of our portfolio companies both through our balance sheet investments in our private equity investment vehicles and direct co-investments, fluctuation in the fair values of these portfolio companies may have a disproportionate impact on the investment income earned by us as compared to other portfolio companies.
In addition, the federal district courts of the United States is the exclusive forum for the resolution of any action, suit or proceeding asserting a cause of action arising under the Securities Act and the Exchange Act. This provision may have the effect of discouraging lawsuits against us and our directors, officers and stockholders.
In addition, the federal district courts of the United States are the exclusive forum for the resolution of any action, suit or proceeding asserting a cause of action arising under the Securities Act and the Exchange Act. This provision may have the effect of discouraging lawsuits against us and our directors, officers and stockholders.
From time to time, Global Atlantic participates in repurchase and reverse repurchase transactions that subject Global Atlantic to liquidity risks. Global Atlantic currently has a committed repurchase facility and from time to time participates in a repurchase transaction.
From time to time, Global Atlantic participates in repurchase and reverse repurchase transactions that subject Global Atlantic to liquidity risks. Global Atlantic currently has a committed repurchase facility and from time to time participates in repurchase transactions.
As a result of the GAFL Reorganization, Section 7874 will limit the ability of Global Atlantic's U.S. holding company and its U.S. affiliates to utilize certain U.S. tax attributes (including net operating losses and certain tax credits) to offset, during the ten-year period following the GAFL Reorganization, their U.S. taxable income, or related income tax liability, resulting from certain (1) transfers to related foreign persons of stock or other properties of Global Atlantic's U.S. holding company and its U.S. affiliates, and (2) income received or accrued from related foreign persons during such period by reason of a license of any property by Global Atlantic's U.S. holding company and its U.S. affiliates.
As a result of the GAFL Reorganization, Section 7874 limits the ability of Global Atlantic's U.S. holding company and its U.S. affiliates to utilize certain U.S. tax attributes (including net operating losses and certain tax credits) to offset, during the ten-year period following the GAFL Reorganization, their U.S. taxable income, or related income tax liability, resulting from certain (1) transfers to related foreign persons of stock or other properties of Global Atlantic's U.S. holding company and its U.S. affiliates, and (2) income received or accrued from related foreign persons during such period by reason of a license of any property by Global Atlantic's U.S. holding company and its U.S. affiliates.
If that occurs, Global Atlantic will either need to pay such increased premiums, which will affect margins and financial results, or alternatively, Global Atlantic will need to limit or potentially terminate reinsurance, which will increase the risks that Global Atlantic retains. Conversely, certain of Global Atlantic's insurance subsidiaries assume liabilities from other insurance companies.
If that occurs, Global Atlantic will either need to pay such increased premiums, which will affect margins and financial results, or alternatively, Global Atlantic will need to limit or potentially terminate reinsurance, which will increase the risks that Global Atlantic retains. Conversely, certain of our insurance subsidiaries assume liabilities from other insurance companies.
Any change in the Statutory Accounting Principles or permitted practices could have a material adverse impact on the capital Global Atlantic is required to hold in its business and consequently on its profitability and ability to grow. Global Atlantic's Bermuda insurance subsidiaries are licensed to conduct insurance business by the BMA.
Any change in the Statutory Accounting Principles or permitted practices could have a material adverse impact on the capital Global Atlantic is required to hold in its business and consequently on its profitability and ability to grow. Our Bermuda insurance subsidiaries are licensed to conduct insurance business by the BMA.
If GAFL, or any of its Bermuda insurance subsidiaries, were considered to be engaged in trade or business within the United States, such company could be subject to U.S. corporate income taxes and branch profits taxes on the portion of its earnings and profits that is or was effectively connected to such trade or business within the United States.
If the Bermuda insurance subsidiaries were considered to be engaged in trade or business within the United States, such company could be subject to U.S. corporate income taxes and branch profits taxes on the portion of its earnings and profits that is or was effectively connected to such trade or business within the United States.
The application of certain statutory accounting rules for term life insurance policies with long-term premium guarantees and universal life policies with secondary guarantees requires Global Atlantic to maintain reserves at a level that exceeds what Global Atlantic's insurance subsidiaries' actuarial assumptions for the applicable business would otherwise require.
The application of certain statutory accounting rules for term life insurance policies with long-term premium guarantees and universal life policies with secondary guarantees requires Global Atlantic to maintain reserves at a level that exceeds what our insurance subsidiaries' actuarial assumptions for the applicable business would otherwise require.
In addition to the provisions related to our Series I preferred stock and Series I preferred stockholder described in this report, certain provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable by, for example: • permitting our board of directors to issue one or more series of preferred stock; 108 Table of Contents • requiring advance notice for stockholder proposals and nominations if they are ever permitted by applicable law; and • placing limitations on convening stockholder meetings.
In addition to the provisions related to our Series I preferred stock and Series I preferred stockholder described in this report, certain provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable by, for example: • permitting our board of directors to issue one or more series of preferred stock; • requiring advance notice for stockholder proposals and nominations if they are ever permitted by applicable law; and • placing limitations on convening stockholder meetings.
For example, in certain cases, we may be viewed by responsible for the content of materials prepared by third-party distributors.
For example, in certain cases, we may be viewed as responsible for the content of materials prepared by third-party distributors.
For example, one of our private equity funds could have an interest in pursuing an acquisition, divestiture or other transaction that, in its judgment, could enhance the value of the private equity investment, even though the proposed transaction would subject one of our credit fund's debt investments to additional or increased risks.
For example, one of our private equity funds could have an interest in pursuing an acquisition, divestiture or other transaction that, in its judgment, could enhance the value of the private equity investment, even though the proposed transaction would subject one of our credit investment vehicle's debt investments to additional or increased risks.
Although the affirmative vote of a majority of our directors is required for any action to be taken by our board of directors, certain specified actions will also require the approval of the Series I preferred stockholder, which is controlled by our Co-Executive Chairmen when acting together.
In addition, although the affirmative vote of a majority of our directors is required for any action to be taken by our board of directors, certain specified actions will also require the approval of the Series I preferred stockholder, which is controlled by our Co-Executive Chairmen when acting together.
In addition, Global Atlantic cannot predict whether or when the insurance departments of the states of domicile of its competitors may permit Global Atlantic's competitors to utilize advantageous accounting practices that depart from the Statutory Accounting Principles, the use of which is not permitted by the insurance departments of the states of domicile of Global Atlantic's U.S. insurance subsidiaries.
In addition, we cannot predict whether or when the insurance departments of the states of domicile of its competitors may permit Global Atlantic's competitors to utilize advantageous accounting practices that depart from the Statutory Accounting Principles, the use of which is not permitted by the insurance departments of the states of domicile of Global Atlantic's U.S. insurance subsidiaries.
Our funds or we will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available, and then only at such times when we do not possess material nonpublic information.
We will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available, and then only at such times when we do not possess material nonpublic information.
In addition, debt investments made by us or our funds in our portfolio companies may be equitably subordinated to the debt investments made by third parties in our portfolio companies. After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our investment.
In addition, debt investments made by us or our investment vehicles in our portfolio companies may be equitably subordinated to the debt investments made by third parties in our portfolio companies. After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our investment.
The governing agreements of our funds contain only limited investment restrictions and only limited requirements as to diversification of fund investments, either by geographic region or asset type. Our private equity funds generally permit up to 20% of the fund to be invested in a single company.
The governing agreements of our funds and other investment vehicles contain only limited investment restrictions and only limited requirements as to diversification of investments, either by geographic region or asset type. Our private equity funds generally permit up to 20% of the fund to be invested in a single company.
However, there is considerable uncertainty as to when a non-U.S. corporation is engaged in trade or business within the United States, and there can be no assurance that the IRS will not contend that GAFL or its Bermuda insurance subsidiaries, are or were engaged in trade or business within the United States.
However, there is considerable uncertainty as to when a non-U.S. corporation is engaged in trade or business within the United States, and there can be no assurance that the IRS will not contend that the Bermuda insurance subsidiaries are or were engaged in trade or business within the United States.
We and our portfolio companies are subject to various risks and costs associated with the collection, processing, storage and transmission of personal information and other sensitive and confidential information. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties.
We and our portfolio companies are subject to various risks and costs associated with the collection, processing, storage and transmission of personal information and other sensitive and confidential information. This data is wide ranging and relates to our investors, employees, insurance policyholders, contractors and other counterparties and third parties.
The Financial Services and Markets Bill contains measures to, among other things: (i) establish a framework for the revocation of EU financial services law that was retained in 68 Table of Contents English law following Brexit; (ii) reform the legislative framework governing the UK's capital markets; (iii) reform the financial promotion framework; and (iv) give the FCA and the Prudential Regulation Authority ("PRA") a new secondary objective to advance long-term economic growth and international competitiveness of the UK.
The Financial Services and Markets Bill contains measures to, among other things: (i) establish a framework for the revocation of EU financial services law that was retained in English law following Brexit; (ii) reform the legislative framework governing the UK's capital markets; (iii) reform the financial promotion framework; and (iv) give the FCA and the Prudential Regulation Authority ("PRA") a new secondary objective to advance long-term economic growth and international competitiveness of the UK.
Substantial redemptions could be triggered by a number of events, including fund performance, events in the markets, significant change in our personnel, our removal or replacement as the investment manager of the fund, legal or regulatory issues that investors perceive to have a bearing on the fund, or other events.
Substantial redemptions could be triggered by a number of events, including investment performance, events in the markets, significant change in our personnel, our removal or replacement as the investment manager of the investment vehicle, legal or regulatory issues that investors perceive to have a bearing on the investment vehicle, or other events.
Our board of directors is authorized to issue series of shares of preferred stock without any action on the part of our stockholders and, with respect to each such series, fix, without stockholder approval (except as may be required by our certificate of incorporation or any certificate of designation relating to any outstanding series of preferred stock), the designation of such series, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of preferred stock and the number of shares of such series.
Our board of directors is authorized to issue series of shares of preferred stock (including preferred stock convertible into common stock) without any action on the part of our stockholders and, with respect to each such series, fix, without stockholder approval (except as may be required by our certificate of incorporation or any certificate of designation relating to any outstanding series of preferred stock), the designation of such series, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of preferred stock and the number of shares of such series.
Any inability, or perceived inability, by us or our portfolio companies to adequately address privacy concerns, or comply with applicable privacy laws, regulations, policies, industry standards and guidance, related contractual obligations, or other privacy legal obligations, even if unfounded, could result in significant regulatory and third party liability, increased costs, disruption of our and our portfolio companies' business and operations, and a loss of fund investor confidence and other reputational damage.
Any inability, or perceived inability, by us or our portfolio companies to adequately address privacy concerns, or comply with applicable privacy laws, regulations, policies, industry standards and guidance, related contractual obligations, or other privacy legal obligations, even if unfounded, could result in significant regulatory and third party liability, increased costs, disruption of our and our portfolio companies’ business and operations, and a loss of investment vehicle investor confidence and other reputational damage.
In some cases, our democratized access vehicles are distributed to individual investors indirectly through third party managed vehicles sponsored by brokerage firms, banks or third-party feeder providers, and in other cases, directly to the qualified clients of banks, independent investment advisors and broker-dealers.
In some cases, our investment vehicles are distributed to individual investors indirectly through third party managed vehicles sponsored by brokerage firms, banks or third-party feeder providers, and in other cases, directly to the qualified clients of banks, independent investment advisors and broker-dealers.
Fee income, which we recognize when contractually earned, can vary due to fluctuations in AUM, the number of investment transactions made by our funds, the number of portfolio companies we manage, the fee provisions contained in our funds and other investment products and transactions by our capital markets business.
Fee income, which we recognize when contractually earned, can vary due to fluctuations in AUM, the number of investment transactions made by our investment vehicles, the number of portfolio companies we manage, the fee provisions contained in our investment vehicles and other investment products and transactions by our capital markets business.
Although individual investors have not constituted a substantial amount of our historic investment vehicle investor base, it is likely that we will increasingly undertake business initiatives to increase the number and type of democratized access vehicles we offer to individual investors.
Although individual investors have not constituted a substantial amount of our historic investment vehicle investor base, it is likely that we will increasingly undertake business initiatives to increase the number and type of vehicles we offer to individual investors.
We also committed to undertake another reorganization by the Sunset Date (as defined in the Reorganization Agreement), which will occur not later than December 31, 2026, whereby control of KKR by our Series I preferred stock will be eliminates.
We also committed to undertake another reorganization by the Sunset Date (as defined in the Reorganization Agreement), which will occur not later than December 31, 2026, whereby control of KKR by our Series I preferred stock will be eliminated.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our principal executive office is located at 30 Hudson Yards, New York, New York. We also lease space for our other offices in North America, Europe, Asia and Australia. We consider these facilities to be suitable and adequate for the management and operations of our business.
Biggest changeITEM 2. PROPERTIES Our principal executive office is located at 30 Hudson Yards, New York, New York. We also lease space for our other offices in North America, Europe, Middle East, and Asia-Pacific. We consider these facilities to be suitable and adequate for the management and operations of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of KKR's legal proceedings, see the section entitled "Litigation" appearing in Note 25 "Commitments and Contingencies" in our financial statements included elsewhere in this report, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 129 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. For a discussion of KKR's legal proceedings, see the section entitled "Litigation" appearing in Note 24 "Commitments and Contingencies" in our financial statements included elsewhere in this report, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 128 Tabl e of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBecause we make our investment in our business through a holding company structure and the applicable holding companies do not own any material cash-generating assets other than their direct and indirect holdings in KKR Group Partnership Units, dividends are expected to be funded in the following manner: • First, KKR Group Partnership will make distributions to holders of KKR Group Partnership Units, which consists of our wholly-owned corporate subsidiaries (one of which acts as the general partner of KKR Group Partnership) and KKR Holdings II L.P.
Biggest changeBecause we make our investment in our business through a holding company structure and the applicable holding companies do not own any material cash-generating assets other than their direct and indirect holdings in KKR Group Partnership Units, dividends are expected to be funded in the following manner: • KKR Group Partnership will make distributions to holders of KKR Group Partnership Units, which consists of our wholly-owned corporate subsidiaries (one of which acts as the general partner of KKR Group Partnership), KKR Holdings II and KKR Holdings III, in proportion to their percentage interests in KKR Group Partnership; • Second, our wholly-owned corporate subsidiaries will distribute to us the amount of any distributions that they receive from KKR Group Partnership, after deducting any applicable taxes; and • Third, we will distribute to holders of our common stock the amount of dividends declared by our Board of Directors from the distributions that we receive from our wholly-owned corporate subsidiaries.
The limited partnership agreement of KKR Group Partnership provides for cash distributions, which are referred to as "tax distributions," to the partners of the partnership if we determine that the taxable income of the partnership will give rise to taxable income for its partners, including holders of restricted holdings units who are limited partners of KKR Holdings II.
The limited partnership agreement of KKR Group Partnership provides for cash distributions, which are referred to as "tax distributions," to the partners of the partnership if we determine that the taxable income of the partnership will give rise to taxable income for its partners, including holders of restricted holdings units who are limited partners of KKR Holdings II and KKR Holdings III.
KKR Group Partnership may make tax distributions in the future, from time to time, to provide distributions to pay for any U.S. or non-U.S. tax liabilities of the partners of KKR Holdings II.
KKR Group Partnership may make tax distributions in the future, from time to time, to provide distributions to pay for any U.S. or non-U.S. tax liabilities of the partners of KKR Holdings II and KKR Holdings III.
Issuer Purchases of Common stock (amounts in thousands, except share and per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) Month #1 (October 1, 2022 to October 31, 2022) — $ — — $ 77,856 Month #2 (November 1, 2022 to November 30, 2022) — $ — — $ 77,856 Month #3 (December 1, 2022 to December 31, 2022) — $ — — $ 77,856 Total through December 31, 2022 — (1) On February 7, 2023, KKR announced the increase to the total available amount under the repurchase program to $500 million.
Issuer Purchases of Common stock (amounts in thousands, except share and per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) Month #1 (October 1, 2023 to October 31, 2023) — $ — — $ 193,999 Month #2 (November 1, 2023 to November 30, 2023) — $ — — $ 193,999 Month #3 (December 1, 2023 to December 31, 2023) — $ — — $ 193,999 Total through December 31, 2023 — (1) On February 7, 2023, KKR announced the increase to the total available amount under the repurchase program to $500 million.
We expect that the program, which has no expiration date, will continue to be in effect until the maximum approved dollar amount has been used. The program does not require us to repurchase any specific number of shares of common stock, and the program may be suspended, extended, modified or discontinued at any time.
KKR expects that the program, which has no expiration date, will continue to be in effect until the maximum approved dollar amount has been used. The program does not require KKR to repurchase any specific number of shares of common stock, and the program may be suspended, extended, modified or discontinued at any time.
The timing, manner, price and amount of any common stock repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions.
The timing, manner, price and amount of any common stock repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock are listed on the NYSE under the symbol "KKR." The number of holders of record of our common stock as of February 24, 2023 was 213.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock are listed on the NYSE under the symbol "KKR." The number of holders of record of our common stock as of February 27, 2024 was 43.
Dividend Policy Under our current dividend policy for common stock that we announced on February 7, 2023, we expect to pay our common stockholders an annualized dividend of $0.66 per share of common stock, equal to a quarterly dividend of $0.165 per share of common stock, beginning with the dividend to be declared with respect to the first quarter of 2023.
Dividend Policy Under our current dividend policy for common stock that we announced on February 6, 2024, we expect to pay our common stockholders an annualized dividend of $0.70 per share of common stock, equal to a quarterly dividend of $0.175 per share of common stock, beginning with the dividend to be declared with respect to the first quarter of 2024.
In addition to the repurchases of common stock described below, subsequent to May 3, 2018, the repurchase program has been used for the retirement (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plans representing the right to receive shares of common stock.
In addition to the repurchases of common stock described above, the repurchase program is used for the retirement (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plans representing the right to receive shares of common stock.
The declaration and payment of any dividends to holders of our common stock or Series C Mandatory Convertible Preferred Stock are subject to the discretion of our Board of Directors, which may change our dividend policy at any time or from time to time, and the terms of our certificate of incorporation.
The declaration and payment of any dividends to holders of our common stock or holders of any preferred stock which may be issued in the future are subject to the discretion of our Board of Directors, which may change our dividend policy at any time or from time to time, and the terms of our certificate of incorporation.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Sources of Liquidity." In addition, under Section 170 of the DGCL, our Board of Directors may only declare and pay dividends either out of our surplus (as defined in DGCL) or in case there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. 130 Table of Contents Share Repurchases in the Fourth Quarter of 2022 Under our current repurchase program, we are authorized to repurchase our common stock from time to time in open market transactions, in privately negotiated transactions or otherwise.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Sources of Liquidity." In addition, under Section 170 of the DGCL, our Board of Directors may only declare and pay dividends either out of our surplus (as defined in DGCL) or in case there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. 129 Tabl e of Contents Share Repurchases in the Fourth Quarter of 2023 As of February 6, 2024, there was approximately $194 million remaining for further repurchases under KKR's current share repurchase program.
On February 7, 2023, we declared a regular dividend of $0.155 per share of common stock under our prior dividend policy for the quarter ended December 31, 2022.
On February 6, 2024, we declared a regular dividend of $0.165 per share of common stock under our prior dividend policy for the quarter ended December 31, 2023, payable on March 1, 2024 to common stockholders of record as of the close of business on February 16, 2024.
Inc. or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock for the periods presented. During the fourth quarter of 2022, no shares of common stock were repurchased and 0.7 million equity awards were retired.
The table below sets forth the information with respect to repurchases made by or on behalf of KKR & Co. Inc. or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock for the periods presented.
Removed
("KKR Holdings II," which is the entity that provides for restricted holdings units under our 2019 Equity Incentive Plan), in proportion to their percentage interests in KKR Group Partnership; • Second, our wholly-owned corporate subsidiaries will distribute to us the amount of any distributions that they receive from KKR Group Partnership, after deducting any applicable taxes; and • Third, we will distribute to holders of our common stock and Series C Mandatory Convertible Preferred Stock the amount of dividends declared by our Board of Directors from the distributions that we receive from our wholly-owned corporate subsidiaries.
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Under our current repurchase program, KKR is authorized to repurchase its common stock from time to time in open market transactions, in privately negotiated transactions or otherwise.
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From October 27, 2015 through December 31, 2022, we paid approximately $638 million in cash to satisfy tax withholding and cash settlement obligations in lieu of issuing shares of common stock or its equivalent upon the vesting of equity awards representing 23.8 million shares of common stock.
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During the fourth quarter of 2023, no shares of common stock were repurchased and 160,718 equity awards were retired.
Removed
Of these amounts, equity awards representing 11.0 million shares of common stock or its equivalent were retired for $190 million prior to May 3, 2018 and did not count against the amounts remaining under the repurchase program. The table below sets forth the information with respect to repurchases made by or on behalf of KKR & Co.
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The repurchase program does not have an expiration date. ITEM 6. [Reserved] 130 Table of Contents
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From inception of the repurchase program in 2015 through December 31, 2022, we have repurchased or retired a total of approximately 74.8 million shares of common stock under the program at an average price of approximately $26.92 per share.
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The repurchase program does not have an expiration date. Prior to this increase, there was approximately $78 million remaining under the program as of December 31, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeExpenses Policy benefits and claims Policy benefits and claims were primarily driven by (i) initial reserves related to new reinsurance transactions with life contingencies during the year ended December 31, 2021, (ii) an increase in the value of embedded derivatives in Global Atlantic's indexed universal life and fixed indexed annuity products, as a result of higher equity market returns (as discussed above under "Revenues—Net gains on derivative instruments," Global Atlantic purchases equity index options in order to hedge this risk, the fair value changes of which are accounted for in gains on derivative instruments, and generally offsetting the change in embedded derivative fair value reported in policy benefits and claims), and (iii) an increase in net flows in the institutional and individual channels, all offset by a decrease in variable annuity reserves primarily due to higher equity market returns and market interest rates. 156 Table of Co n tents Amortization of policy acquisition costs Amortization of policy acquisition costs during the year ended December 31, 2021 was primarily driven by the amortization of insurance intangibles recognized as part of purchase accounting of the Global Atlantic acquisition.
Biggest changeOffsetting these increases in net other investment gains were (i) an increase in unrealized losses on investments accounted under a fair-value option, (ii) an increase in unrealized losses on real estate investments at fair-value under investment company accounting due to higher interest and capitalization rates during the year ended December 31, 2023 and (iii) a decrease in realized gains on investments not supporting asset-liability matching strategies. 145 Table of Contents Expenses Net policy benefits and claims Net policy benefits and claims increased for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to (i) an increase in the value of embedded derivatives in Global Atlantic's indexed universal life and fixed indexed annuity products, as a result of higher equity market returns (as discussed above under "—Consolidated Results of Operations (GAAP Basis)—Revenues—Net investment-related gains (losses)," Global Atlantic purchases equity index options in order to hedge this risk, the fair value changes of which are accounted for in gains on derivative instruments, and generally offsetting the change in embedded derivative fair value reported in net policy benefits and claims), (ii) an increase in losses on market risk benefits due to market interest rates generally ending the year relatively flat after being volatile during the year ended December 31, 2023, as compared to a significant increase in market interest rates during the year ended December 31, 2022, (iii) an increase in net flows from both individual and institutional market channel sales, (iv) higher average funding costs due to higher crediting rates and the ordinary-course run-off of older business originated in a lower interest rate environment, (v) higher initial reserves assumed related to new reinsurance transactions with life contingencies in the year ended December 31, 2023 as compared to the year ended December 31, 2022, and (vi) an increase in unfavorable assumption review impacts as discussed above.
Uncalled Commitments Uncalled commitments is the aggregate amount of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. The amount of uncalled commitments is not reduced by capital invested using borrowings under an investment fund’s subscription facility until capital is called from our fund investors.
Uncalled Commitments Uncalled commitments is the aggregate amount of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments, and the amount of uncalled commitments is not reduced by capital invested using borrowings under an investment fund’s subscription facility until capital is called from our fund investors.
Partially offsetting these increases was the deconsolidation of KREF in the fourth quarter of 2021.
Partially offsetting these increases was the deconsolidation of KREF in the fourth quarter of 2021.
For a discussion of other factors that affected KKR's interest expense, see "—Analysis of Non-GAAP Performance Measures." Expenses - Asset Management Compensation and Benefits Expenses The decrease in compensation and benefits expense during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the reversal of previously recognized accrued carried interest, partially offset by (i) higher equity-based compensation charges and (ii) a higher level of discretionary cash compensation resulting from a higher level of segment fee related revenue and realized performance income in the current period.
For a discussion of other factors that affected KKR's interest expense, see "—Analysis of Non-GAAP Performance Measures." Expenses - Asset Management Compensation and Benefits The decrease in compensation and benefits during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the reversal of previously recognized accrued carried interest, partially offset by (i) higher equity-based compensation charges and (ii) a higher level of discretionary cash compensation resulting from a higher level of segment fee related revenue and realized performance income in the current period.
General, Administrative and Other The increase in general, administrative and other expenses during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to a higher level of (i) expenses at our consolidated funds and investment vehicles, (ii) strategic corporate transaction-related charges, (iii) professional fees, information technology and other administrative costs in connection with the growth of the firm, and (iv) travel related expenses as a result of a return of travel activity to pre-COVID-19 pandemic levels.
General, Administrative and Other The increase in general, administrative and other during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to a higher level of (i) expenses at our consolidated funds and investment vehicles, (ii) strategic corporate transaction-related charges, (iii) professional fees, information technology and other administrative costs in connection with the growth of the firm, and (iv) travel related expenses as a result of a return of travel activity to pre- COVID-19 pandemic levels.
Accordingly, net income (loss) attributable to KKR would be unchanged if such investment funds and other vehicles were not consolidated.
Accordingly, net income (loss) attributable to KKR would be unchanged if such investment funds and other vehicles were not consolidated.
Since the fair value of the underlying investments varies between reporting periods, it is necessary to make adjustments to the amounts recorded as carried interest to reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would cause the amount due to KKR to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated to the general partner.
Since the fair value of the underlying investments varies between reporting periods, it is necessary to make adjustments to the amounts recorded as carried interest to reflect either (a) positive performance, resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would cause the amount due to KKR to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated to the general partner.
In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and to make the required positive or negative adjustments.
In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and to make the required positive or negative adjustments.
Investment gains and losses relating to our general partner capital interest in our unconsolidated funds are not reflected in our discussion and analysis of Net Gains (Losses) from Investment Activities. Our economics associated with these gains and losses are reflected in Capital Allocation-Based Income (Loss) as described above.
Investment gains and losses relating to our general partner capital interest in our unconsolidated funds are not reflected in our discussion and analysis of Net Gains (Losses) from Investment Activities. Our economics associated with these gains and losses are reflected in Capital Allocation-Based Income (Loss) as described above.
Significant dividends from portfolio companies and consolidated funds are generally not recurring quarterly dividends, and while they may occur in the future, their size and frequency are variable.
Significant dividends from portfolio companies and consolidated funds are generally not recurring quarterly dividends, and while they may occur in the future, their size and frequency are variable.
Global Atlantic reviews the adequacy of its reserves, deferred revenue and expenses and the assumptions underlying those items at least annually, usually in the third quarter. As Global Atlantic analyzes its assumptions, to the extent Global Atlantic chooses to update one or more of those assumptions, there may be an “unlocking” impact.
Global Atlantic reviews the adequacy of its reserves, deferred revenue and expenses and the assumptions underlying those items at least annually, usually in the third quarter. As Global Atlantic analyzes its assumptions, to the extent Global Atlantic chooses to update one or more of those assumptions, there may be an “unlocking” impact.
Generally, favorable unlocking means the change in assumptions required a reduction in reserves, or in deferred revenue liabilities or an increase in deferred expenses, and unfavorable unlocking means the change in assumptions required an increase in reserves or in deferred revenue liabilities, or a reduction in deferred expenses.
Generally, favorable unlocking means the change in assumptions required a reduction in reserves, or in deferred revenue liabilities, and unfavorable unlocking means the change in assumptions required an increase in reserves or in deferred revenue liabilities, or a reduction in deferred expenses.
The decrease in capital markets transaction fees was primarily due to a decrease in the number of capital markets transactions for the year ended December 31, 2022, compared to the year ended December 31, 2021.
The decrease in transaction fees was primarily due to a decrease in the number of capital markets transactions for the year ended December 31, 2022, compared to the year ended December 31, 2021.
The increase was primarily attributable to (i) new capital raised from Global Atlantic and various alternative and leveraged credit investment vehicles and (ii) the change in fee base for Global Atlantic's management fees from fair market value to book value.
The increase was primarily attributable to (i) new capital raised from Global Atlantic and various alternative and leveraged credit investment vehicles and (ii) the change in fee base for Global Atlantic's management fees from fair market value to book value.
The decrease was primarily attributable to capital called from fund investors to make investments during the period, which was partially offset by new capital commitments from fund investors.
The decrease was primarily attributable to capital called from fund investors to make investments during the period, which was partially offset by new capital commitments from fund investors.
While each of the capital markets transactions that we undertake in this business line is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings, and the amount of fees that we earn for similar transactions generally correlates with overall transaction sizes.
While each of the capital markets transactions that we undertake in this business line is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings, and the amount of fees that we earn for similar transactions generally correlates with overall transaction sizes.
This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%.
This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%.
The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time . If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time . If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
The number of large private equity investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.
The number of large private equity investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.
Because capital contributions are due on demand, the above commitments have been presented as falling due within one year. However, given the size of such commitments and the pace at which our investment funds make investments, we expect that the capital commitments presented above will be called over a period of several years.
Because capital contributions are due on demand, the above commitments have been presented as falling due within one year. However, given the size of such commitments and the pace at which our investment funds make investments, we expect that the capital commitments presented above will be called over a period of several years.
Net investment-related losses The components of net investment-related losses were as follows: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Funds withheld payable embedded derivatives $ 3,448,710 $ 49,491 $ 3,399,219 Equity futures contracts 167,924 (263,637) 431,561 Foreign currency forwards 18,929 2,484 16,445 Credit risk contracts (108) (400) 292 Equity index options (895,602) 549,987 (1,445,589) Interest rate contracts (333,937) (146,920) (187,017) Funds withheld receivable embedded derivatives (29,390) 31,740 (61,130) Other (29,779) — (29,779) Net gains on derivative instruments 2,346,747 222,745 2,124,002 Net other investment losses (3,665,237) (18,992) (3,646,245) Net investment-related losses $ (1,318,490) $ 203,753 $ (1,522,243) Net gains on derivative instruments The increase in the fair value of embedded derivatives on funds withheld at interest payable for the year ended December 31, 2022 was primarily driven by the change in fair value of the underlying investments in the funds withheld at interest payable portfolio, which is primarily comprised of fixed maturity securities (designated as trading for accounting purposes), mortgage and other loan receivables, and other investments.
Net investment-related (losses) gains The components of net investment-related (losses) gains were as follows: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Funds withheld payable embedded derivatives $ 3,448,710 $ 49,491 $ 3,399,219 Equity futures contracts 167,924 (263,637) 431,561 Foreign currency forwards 18,929 2,484 16,445 Credit risk contracts (108) (400) 292 Equity index options (895,602) 549,987 (1,445,589) Interest rate and foreign exchange contracts (333,937) (146,920) (187,017) Funds withheld receivable embedded derivatives (29,390) 31,740 (61,130) Other (29,779) — (29,779) Net gains on derivative instruments 2,346,747 222,745 2,124,002 Net other investment losses (3,665,237) (18,992) (3,646,245) Net investment-related (losses) gains $ (1,318,490) $ 203,753 $ (1,522,243) Net gains on derivative instruments The increase in the fair value of embedded derivatives on funds withheld at interest payable for the year ended December 31, 2022 was primarily driven by the change in fair value of the underlying investments in the funds withheld at interest payable portfolio, which is primarily comprised of fixed maturity securities (designated as trading for accounting purposes), mortgage and other loan receivables, and other investments.
Net cost of insurance Net cost of insurance increased for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to (i) one less month of activity reported in the prior financial reporting period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) growth in reserves in the institutional market as a result of new reinsurance transactions and in the individual market as a result of new business volumes, and (iii) higher funding costs on new business originated, and (iv) the impact of assumption review (as described in “—Consolidated Results of Operations (GAAP Basis)—Insurance (Unaudited)—Assumption Review” above).
Net Cost of Insurance Net cost of insurance increased for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to (i) one less month of activity reported in the prior financial reporting period as a result of the 2021 GA Acquisition having occurred on February 1, 2021, (ii) growth in reserves in the institutional market as a result of new reinsurance transactions and in the individual market as a result of new business volumes, and (iii) higher funding costs on new business originated, and (iv) the impact of assumption review (as described in “—Consolidated Results of Operations (GAAP Basis)—Insurance—Assumption Review” above).
Realized Investment Income The following table presents realized investment income from our Principal Activities business line: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized Investment Income Net Realized Gains (Losses) $ 530,284 $ 1,199,414 $ (669,130) Interest Income and Dividends 604,135 413,830 190,305 Total Realized Investment Income $ 1,134,419 $ 1,613,244 $ (478,825) The decrease in realized investment income is primarily due to a lower level of net realized gains, partially offset by a higher level of interest income and dividends.
Realized Investment Income The following table presents realized investment income from our Principal Activities business line for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized Investment Income Net Realized Gains (Losses) $ 530,284 $ 1,199,414 $ (669,130) Interest Income and Dividends, Net 604,135 413,830 190,305 Total Realized Investment Income $ 1,134,419 $ 1,613,244 $ (478,825) The decrease in realized investment income is primarily due to a lower level of net realized gains, partially offset by a higher level of interest income and dividends, net.
Under the voting interest entity model, the Company consolidates those entities it controls through a majority voting interest. • Concluding whether KKR has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE - As there is no explicit threshold in GAAP to define “potentially significant,” we must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.
Under the voting interest entity model, KKR consolidates those entities it controls through a majority voting interest. • Concluding whether KKR has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE - As there is no explicit threshold in GAAP to define “potentially significant,” we must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.
Liquidity Needs We expect that our (including Global Atlantic's) primary liquidity needs will consist of cash required to meet various obligations, including, without limitation, to: • continue to support and grow our Asset Management business lines, including seeding new investment strategies, supporting capital commitments made by our vehicles to existing and future funds, co-investments and any net capital requirements of our capital markets companies and otherwise supporting the investment vehicles that we sponsor; • continue to support and grow our insurance business; • grow and expand our businesses generally, including by acquiring or launching new, complementary or adjacent businesses; • warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, accounts or CLOs or other investment vehicles pending the contribution of committed capital by the fund investors in such vehicles, and advancing capital to them for operational or other needs; • service debt obligations including the payment of obligations at maturity, on interest payment dates or upon redemption, as well as any contingent liabilities, including from litigation, that may give rise to future cash payments, including funding requirements to levered investment vehicles or structured transactions; • fund cash operating expenses and contingencies, including for litigation matters and guarantees; • pay corporate income taxes and other taxes; • pay policyholders and amounts in our insurance business related to investment, reinvestment, reinsurance or funding agreement activity; • pay amounts that may become due under our tax receivable agreement; • pay cash dividends in accordance with our dividend policy for our common stock or the terms of our preferred stock, if any; • underwrite commitments, advance loan proceeds and fund syndication commitments within our capital markets business; • post or return collateral in respect of derivative contracts; • acquire other assets for our Principal Activities business line, including other businesses, investments and assets, some of which may be required to satisfy regulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent they may apply); • address capital needs of regulated subsidiaries as well as non-regulated subsidiaries; and • repurchase shares of our common stock or retire equity awards pursuant to the share repurchase program or repurchase or redeem other securities issued by us.
Liquidity Needs We expect that our (including Global Atlantic's) primary liquidity needs will consist of cash required to meet various obligations, including, without limitation, to: • continue to support and grow our asset management business, including seeding new investment strategies, supporting capital commitments made by our vehicles to existing and future funds, co-investments and any net capital requirements of our capital markets companies and otherwise supporting the investment vehicles that we sponsor; • continue to support and grow our insurance business; • grow and expand our businesses generally, including by acquiring or launching new, complementary or adjacent businesses; • warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, accounts or CLOs or other investment vehicles pending the contribution of committed capital by the fund investors in such vehicles, and advancing capital to them for operational or other needs; • service debt obligations including the payment of obligations at maturity, on interest payment dates or upon redemption, as well as any contingent liabilities, including from litigation, that may give rise to future cash payments, including funding requirements to levered investment vehicles or structured transactions; • fund cash operating expenses and contingencies, including for litigation matters and guarantees; • pay corporate income taxes and other taxes; • pay policyholders and amounts in our insurance business related to investment, reinvestment, reinsurance or funding agreement activity; • pay amounts that may become due under our tax receivable agreement; • pay cash dividends in accordance with our dividend policy for our common stock or the terms of our preferred stock, if any; • underwrite commitments, advance loan proceeds and fund syndication commitments within our capital markets business; • post or return collateral in respect of derivative contracts; • acquire other assets (including businesses, investments and other assets) for our businesses, some of which may be required to satisfy regulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent they may apply); • address capital needs of regulated subsidiaries as well as non-regulated subsidiaries; and • repurchase shares of our common stock or retire equity awards pursuant to the share repurchase program or repurchase or redeem other securities issued by us.
In addition, these performance measures are presented without giving effect to the consolidation of the investment funds and collateralized financing entities ("CFEs") that KKR manages. We believe that providing these segment and non-GAAP performance measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's business.
In addition, these performance measures are presented without giving effect to the consolidation of certain investment funds and collateralized financing entities ("CFEs") that KKR manages. We believe that providing these segment and non-GAAP performance measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's business.
See "—Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations. The most significant decrease in share prices of our publicly held investments was a decrease in First Gen Corporation (PM: FGEN). The prices of publicly held companies may experience volatile changes following the reporting period.
See "Risk Factors" and "—Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations. The most significant decrease in share prices of our publicly held investments was a decrease in First Gen Corporation (PM: FGEN). The prices of publicly held companies may experience volatile changes following the reporting period.
(technology sector) held in certain consolidated funds and (iii) the reversal of previously recognized unrealized gains relating to the realization activity described above. These unrealized losses were partially offset by mark-to-market gains related to (i) investments held in certain consolidated energy funds, (ii) USI, Inc. (financial services sector), and (iii) ERM Worldwide Group Limited (services sector).
(technology sector) held in certain consolidated funds and (iii) the reversal of previously recognized unrealized gains relating to the realization activity described above. These unrealized losses were partially offset by mark-to-market gains related to (i) energy investments held in certain consolidated energy funds, (ii) USI, Inc., and (iii) ERM Worldwide Group Limited (services sector).
Our valuations may differ significantly from the values that would have been used had an active market for the investments existed, and it is reasonably possible that the difference could be material. See "—Business Environment" for more information on factors that may impact our business, financial performance, operating results and valuations.
Our valuations may differ significantly from the values that would have been used had an active market for the investments existed, and it is reasonably possible that the difference could be material. See "Risk Factors" and "—Business Environment" for more information on factors that may impact our business, financial performance, operating results and valuations.
Our primary cash flow activities typically involve: (i) generating cash flow from operations; (ii) generating income from investment activities, by investing in investments that generate yield (namely interest and dividends), as well as through the sale of investments and other assets; (iii) funding capital commitments that we have made to, and advancing capital to, our funds and CLOs; (iv) developing and funding new investment strategies, investment products, and other growth initiatives, including acquisitions of other investments, assets, and businesses; (v) underwriting and funding commitments in our capital markets business; (vi) distributing cash flow to our stockholders and holders of our preferred stock; and (vii) paying borrowings, interest payments, and repayments under credit agreements, our senior and subordinated notes, and other borrowing arrangements.
Our primary cash flow activities typically involve: (i) generating cash flow from operations; (ii) generating income from investment activities, by investing in investments that generate yield (namely interest and dividends), as well as through the sale of investments and other assets; (iii) funding capital commitments that we have made to, and advancing capital to, our funds and CLOs; (iv) developing and funding new investment strategies, investment products, and other growth initiatives, including acquisitions of other investments, assets, and businesses; (v) underwriting and funding capital commitments in our capital markets business; (vi) distributing cash flow to our stockholders and any holders of our preferred stock, if any; and (vii) paying borrowings, interest payments, and repayments under credit agreements, our senior and subordinated notes, and other borrowing arrangements.
Unrealized Gains and Losses from Investment Activities For the year ended December 31, 2022, net unrealized losses were driven primarily by mark-to-market losses from (i) investments held in our consolidated CLOs and in certain consolidated alternative credit funds, (ii) OutSystems Holdings S.A.
Unrealized Gains and Losses from Investment Activities For the year ended December 31, 2022, net unrealized losses were driven primarily by mark-to-market losses from (i) certain debt investments held in our consolidated CLOs and consolidated alternative credit funds, (ii) OutSystems Holdings S.A.
We generally expect these borrowings by our Capital Markets business line to be repaid promptly as these commitments are syndicated to third parties or otherwise fulfilled or terminated, although we may in some instances elect to retain a portion of the commitments for our own investment.
We generally expect these borrowings by our capital markets business to be repaid promptly as these commitments are syndicated to third parties or otherwise fulfilled or terminated, although we may in some instances elect to retain a portion of the commitments for our own investment.
Until the Sunset Date, our Co-Founders will continue to make decisions regarding the allocation of carry proceeds to themselves and others, pursuant to the limited partnership agreement of KKR Associates Holdings, provided that any allocation of carry proceeds to the Co-Founders will be on a percentage basis consistent with past practice.
Until the Sunset Date, our Co-Founders will continue to make decisions regarding the allocation of the carry proceeds to themselves and others, pursuant to the limited partnership agreement of Associates Holdings, provided that any allocation of carry proceeds to the Co-Founders will be on a percentage basis consistent with past practice.
Realized Performance Income The following table presents realized performance income by business line: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized Performance Income Private Equity $ 1,903,580 $ 1,678,753 $ 224,827 Real Assets 113,465 97,312 16,153 Credit and Liquid Strategies 159,613 365,531 (205,918) Total Realized Performance Income $ 2,176,658 $ 2,141,596 $ 35,062 162 Table of Co n tents Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Private Equity North America Fund XI $ 932,428 $ 433,708 $ 498,720 Core Investment Vehicles 262,219 80,937 181,282 2006 Fund 231,689 219,737 11,952 Americas Fund XII 197,023 207,559 (10,536) Asian Fund III 104,601 387,863 (283,262) European Fund IV 86,233 186,476 (100,243) Co-Investment Vehicles and Other 55,868 90,305 (34,437) Next Generation Technology Growth Fund — 32,544 (32,544) European Fund III — 353 (353) Total Realized Carried Interest (1) 1,870,061 1,639,482 230,579 Incentive Fees 33,519 39,271 (5,752) Total Realized Performance Income $ 1,903,580 $ 1,678,753 $ 224,827 Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Real Assets Real Estate Partners Americas II $ 95,772 $ — $ 95,772 Global Infrastructure Investors II 17,693 72,862 (55,169) Real Estate Partners Europe — 18,200 (18,200) Co-Investment Vehicles and Other — 3,283 (3,283) Global Infrastructure Investors — 2,967 (2,967) Total Realized Carried Interest (1) 113,465 97,312 16,153 Incentive Fees — — — Total Realized Performance Income $ 113,465 $ 97,312 $ 16,153 Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Credit and Liquid Strategies Alternative Credit and Other Funds $ 10,334 $ 15,336 $ (5,002) Total Realized Carried Interest (1) 10,334 15,336 (5,002) Incentive Fees 149,279 350,195 (200,916) Total Realized Performance Income $ 159,613 $ 365,531 $ (205,918) (1) The above tables exclude any funds for which there was no realized carried interest during both of the periods presented.
Realized Performance Income The following table presents realized performance income by business line: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized Performance Income Private Equity $ 1,903,580 $ 1,678,753 $ 224,827 Real Assets 113,465 97,312 16,153 Credit and Liquid Strategies 159,613 365,531 (205,918) Total Realized Performance Income $ 2,176,658 $ 2,141,596 $ 35,062 176 Table of Contents Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Private Equity North America Fund XI $ 932,428 $ 433,708 $ 498,720 Core Investment Vehicles 262,219 80,937 181,282 2006 Fund 231,689 219,737 11,952 Americas Fund XII 197,023 207,559 (10,536) Asian Fund III 104,601 387,863 (283,262) European Fund IV 86,233 186,476 (100,243) Co-Investment Vehicles and Other 55,868 90,305 (34,437) Next Generation Technology Growth Fund — 32,544 (32,544) European Fund III — 353 (353) Total Realized Carried Interest (1) 1,870,061 1,639,482 230,579 Incentive Fees 33,519 39,271 (5,752) Total Realized Performance Income $ 1,903,580 $ 1,678,753 $ 224,827 Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Real Assets Real Estate Partners Americas II $ 95,772 $ — $ 95,772 Global Infrastructure Investors II 17,693 72,862 (55,169) Real Estate Partners Europe — 18,200 (18,200) Co-Investment Vehicles and Other — 3,283 (3,283) Global Infrastructure Investors — 2,967 (2,967) Total Realized Carried Interest (1) 113,465 97,312 16,153 Incentive Fees — — — Total Realized Performance Income $ 113,465 $ 97,312 $ 16,153 Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Credit and Liquid Strategies Alternative Credit and Other Funds $ 10,334 $ 15,336 $ (5,002) Total Realized Carried Interest (1) 10,334 15,336 (5,002) Incentive Fees 149,279 350,195 (200,916) Total Realized Performance Income $ 159,613 $ 365,531 $ (205,918) (1) The above tables exclude any funds for which there was no realized carried interest during the periods presented.
Changes in discount rates and other assumptions can have a significant impact on this embedded derivative. The fair value of the embedded derivatives is included in the funds withheld receivable at interest and funds withheld payable at interest line items on the consolidated statement of financial condition.
Changes in discount rates and other assumptions can have a significant impact on this embedded derivative. The fair value of the embedded derivatives is included in the funds withheld receivable at interest and funds withheld payable at interest line items on our consolidated statement of financial condition.
You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. See also "—Business Environment" for more information about factors that may affect our business, financial performance, operating results and valuations.
You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. See also "Risk Factors" and "—Business Environment" for more information about factors that may affect our business, financial performance, operating results and valuations.
KKR calculates the carried interest that would be due to KKR for each investment fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of the reporting date, irrespective of whether such amounts have been realized.
KKR generally calculates the carried interest that would be due to KKR for each investment fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of the reporting date, irrespective of whether such amounts have been realized.
Partially offsetting these unrealized gains were unrealized losses, the most significant of which are (i) the reversal of previously recognized unrealized gains relating to the realization activity described above and (ii) an unrealized loss on BridgeBio Pharma, Inc.
Partially offsetting these unrealized gains were unrealized losses, the most significant of which were (i) the reversal of previously recognized unrealized gains relating to the realization activity described above and (ii) an unrealized loss on BridgeBio Pharma, Inc.
Global Atlantic purchases equity index options to hedge the market risk of embedded derivatives in indexed universal life and fixed-indexed annuity products (the change for which is accounted for in policy benefits and claims).
Global Atlantic purchases equity index options to hedge the market risk of embedded derivatives in indexed universal life and fixed-indexed annuity products (the change in which is accounted for in net policy benefits and claims).
(midstream sector) and various assets held in our opportunistic real estate equity investment portfolio. The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company or asset performance.
(infrastructure: midstream sector) and various assets held in our opportunistic real estate equity investment portfolio. The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company or asset performance.
This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.1%.
This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.2%.
Preferred Dividends The decrease in preferred dividends for the year ended December 31, 2022 compared to the prior period was attributable to the redemption of all of our Series A and B preferred stock.
Preferred Dividends The decrease in preferred dividends for the year ended December 31, 2022 compared to the prior period was attributable to the redemption of all of our Series A and B preferred.
With respect to Insurance, a decrease in investment income for certain assets where investment gains and losses are recognized through the statement of operations would impact KKR only to the extent of our economic ownership interest in Global Atlantic. As of December 31, 2022, there were no investments which represented greater than 5% of total investments on a GAAP basis.
With respect to Insurance, a decrease in investment income for certain assets where investment gains and losses are recognized through the statement of operations would impact KKR only to the extent of our economic ownership interest in Global Atlantic. As of December 31, 2023, there were no investments which represented greater than 5% of total investments on a GAAP basis.
Realized carried interest in our Real Assets business line for the year ended December 31, 2021 consisted primarily of realized proceeds from (i) the sale of our infrastructure investments, Calisen PLC (LSE: CLSN LN) and Telxius Telecom S.A.U. (Infrastructure: telecommunications infrastructure sector) and (ii) dividends received from and sales of various investments held by Real Estate Partners Europe.
Realized carried interest in our Real Assets business line for the year ended December 31, 2021 consisted primarily of realized proceeds from (i) the sale of our infrastructure investments, Calisen PLC (LSE: CLSN LN) and Telxius Telecom S.A.U. and (ii) dividends received from and sales of various investments held by Real Estate Partners Europe.
As of December 31, 2022, certain of our investment funds had met the first and second criteria, as described above, but did not meet the third criteria. In these cases, carried interest accrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon a realization event.
As of December 31, 2023, certain of our investment funds had met the first and second criteria, as described above, but did not meet the third criteria. In these cases, carried interest accrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon a realization event.
Because our consolidated funds are treated as investment companies for accounting purposes, certain of these cash flow amounts are included in our cash flows from operations. Net Cash Provided (Used) by Operating Activities Our net cash provided (used) by operating activities was $(5.3) billion and $(7.2) billion during the years ended December 31, 2022 and 2021, respectively.
Because our consolidated funds are treated as investment companies for accounting purposes, certain of these cash flow amounts are included in our cash flows from operations. Net Cash Provided (Used) by Operating Activities Our net cash provided (used) by operating activities was $(1.5) billion, $(5.3) billion, and $(7.2) billion during the years ended December 31, 2023, 2022, and 2021, respectively.
Unrealized Gains and Losses from Investment Activities For the year ended December 31, 2021, net unrealized gains related primarily to mark-to-market gains from investments held by KKR and certain consolidated funds, the most significant of which were PetVet Care Centers, LLC (health care sector), Heartland Dental LLC (health care sector) and OutSystems Holdings S.A.
Unrealized Gains and Losses from Investment Activities For the year ended December 31, 2021, net unrealized gains related primarily to mark-to-market gains from investments held by KKR and certain consolidated funds, the most significant of which were PetVet Care Centers, LLC, Heartland Dental LLC (healthcare sector) and OutSystems Holdings S.A.
The valuation of our Level III investments at December 31, 2022 represents management's best estimate of the amounts that we would anticipate realizing on the sale of these investments in an orderly transaction at such date. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
The valuation of our Level III investments at December 31, 2023 represents management's best estimate of the amounts that we would anticipate realizing on the sale of these investments in an orderly transaction at such date. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
The increase was primarily attributable to new capital commitments from fund investors, which were partially offset by capital called from fund investors to make investments during the period.
The increase was primarily attributable to new capital commitments from fund investors, which was partially offset by capital called from fund investors to make investments during the period.
The decrease in the fair value of embedded derivatives on funds withheld at interest receivable was primarily due to widening of credit spreads during the year ended December 31, 2022, as compared to the tightening of credit spreads in the year ended December 31, 2021. 146 Table of Co n tents Net other investment losses The components of net other investment losses were as follows: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized gains on investments not supporting asset-liability matching strategies $ 87,198 $ 527,788 $ (440,590) Realized losses on available-for-sale fixed maturity debt securities (559,987) (201,411) (358,576) Credit loss allowances (456,176) (249,338) (206,838) Unrealized losses on fixed maturity securities classified as trading (2,603,874) (118,714) (2,485,160) Unrealized gains on investments classified as trading or fair-value option 60,237 39,758 20,479 Unrealized (losses) gains on real estate investments recognized at fair value under investment company accounting (42,870) 35,418 (78,288) Realized gains (losses) on funds withheld at interest, payable portfolio 38,074 (30,015) 68,089 Realized gains (losses) on funds withheld at interest, receivable portfolio (3,176) 12,418 (15,594) Other (184,663) (34,896) (149,767) Net investment-related gains $ (3,665,237) $ (18,992) $ (3,646,245) The increase in net other investment losses for the year ended December 31, 2022 were primarily due to (i) an increase in unrealized losses on fixed maturity securities classified as trading was primarily due to an increase in interest rates and widening credit spreads in the current period, (ii) a decrease in realized gains on investments not supporting asset-liability matching strategies primarily due to the non-recurrence of a gain from the disposition of Origis USA, LLC (Infrastructure: energy and energy transition sector) in the prior financial reporting period, (iii) the increase in realized losses on available-for-sale fixed maturity debt securities primarily due to portfolio rotation in a higher interest rate environment, (iv) an increase in credit loss allowances on mortgage and other loan receivables in the current period primarily due to an increase in credit risk of our loan portfolio, offset in part by the recognition of an initial credit loan loss allowance upon the adoption of the current expected credit loss accounting standard concurrent with the GA Acquisition in the prior financial reporting period, and (v) realized losses on renewable energy investments in the current period.
The decrease in the fair value of embedded derivatives on funds withheld at interest receivable was primarily due to widening of credit spreads during the year ended December 31, 2022, as compared to the tightening of credit spreads in the year ended December 31, 2021. 155 Table of Contents Net investment-related losses The components of net other investment losses were as follows: Years Ended December 31, 2022 December 31, 2021 Change ($ in thousands) Realized gains on investments not supporting asset-liability matching strategies $ 87,198 $ 527,788 $ (440,590) Realized losses on available-for-sale fixed maturity debt securities (559,987) (201,411) (358,576) Credit loss allowances (456,176) (249,338) (206,838) Unrealized losses on fixed maturity securities classified as trading (2,603,874) (118,714) (2,485,160) Unrealized gains on investments classified as trading or fair-value option 60,237 39,758 20,479 Unrealized (losses) gains on real estate investments recognized at fair value under investment company accounting (42,870) 35,418 (78,288) Realized gains (losses) on funds withheld at interest, payable portfolio 38,074 (30,015) 68,089 Realized (losses) gains on funds withheld at interest, receivable portfolio (3,176) 12,418 (15,594) Other (184,663) (34,896) (149,767) Net other investment-related losses $ (3,665,237) $ (18,992) $ (3,646,245) The increase in net other investment losses for the year ended December 31, 2022 were primarily due to (i) an increase in unrealized losses on fixed maturity securities classified as trading was primarily due to an increase in interest rates and widening credit spreads in the current period, (ii) a decrease in realized gains on investments not supporting asset-liability matching strategies primarily due to the non-recurrence of a gain from the disposition of Origis USA, LLC (infrastructure: energy and energy transition sector) in the prior financial reporting period, (iii) the increase in realized losses on available-for-sale fixed maturity debt securities primarily due to portfolio rotation in a higher interest rate environment, (iv) an increase in credit loss allowances on mortgage and other loan receivables in the current period primarily due to an increase in credit risk of Global Atlantic's loan portfolio, offset in part by the recognition of an initial credit loan loss allowance upon the adoption of the current expected credit loss accounting standard concurrent with the 2021 GA Acquisition in the prior financial reporting period, and (v) realized losses on renewable energy investments in the current period.
For a more detailed discussion of the factors that affected our transaction fees during the period, see "—Analysis of Asset Management Segment Operating Earnings." The increase in management fees was primarily attributable to management fees earned from North America Fund XIII, Global Infrastructure Investors IV and European Fund VI.
For a more detailed discussion of the factors that affected our transaction fees during the period, see "—Analysis of Asset Management Segment Operating Results." The increase in management fees was primarily attributable to management fees earned from North America Fund XIII, Global Infrastructure Investors IV and European Fund VI.
For a more detailed discussion on the factors that affect our management fees during the period, see "—Analysis of Asset Management Segment Operating Earnings." Fee credits increased compared to the prior period as a result of a higher level of transaction fees from infrastructure transaction fee-generating investments in our Real Asset business line.
For a more detailed discussion on the factors that affect our management fees during the period, see "—Analysis of Asset Management Segment Operating Results." Fee credits increased compared to the prior period as a result of a higher level of transaction fees from infrastructure transaction fee-generating investments in our Real Asset business line.
Net Income (Loss) Attributable to Noncontrolling Interests Net Income (Loss) attributable to noncontrolling interests for the year ended December 31, 2022 relates primarily to net income (loss) attributable to (i) exchangeable securities representing ownership interests in KKR Group Partnership, (ii) third-party limited partner interests in consolidated investment funds, and (iii) interests that co-investors and rollover investors hold in Global Atlantic.
Net Income (Loss) Attributable to Noncontrolling Interests Net Income (Loss) attributable to noncontrolling interests for the year ended December 31, 2022 relates primarily to net income (loss) attributable to (i) exchangeable securities representing ownership interests in KKR Group Partnership, (ii) third party limited partner interests in consolidated investment funds, and (iii) interests that third party investors hold in Global Atlantic.
Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) redemptions at our hedge fund partnership, Marshall Wace, (iii) distributions to fund investors at certain alternative credit funds and (iv) a decline in investment value on the assets managed across our leveraged credit portfolio.
Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) redemptions at Marshall Wace, (iii) distributions to fund investors at certain alternative credit funds and (iv) a decline in investment value on the assets managed across our leveraged credit portfolio.
Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) redemptions at our hedge fund partnership, Marshall Wace, (iii) distributions to fund investors at certain alternative credit funds and (iv) a decline in investment value on the assets managed across our leveraged credit portfolio.
Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) redemptions at Marshall Wace, (iii) distributions to fund investors at certain alternative credit funds and (iv) a decline in investment value on the assets managed across our leveraged credit portfolio.
Across the total Level III private equity investment portfolio (including core private equity investments), and including investments in both consolidated and unconsolidated investment funds, approximately 55% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis.
Across the total Level III private equity investment portfolio (including core private equity investments), and including investments in both consolidated and unconsolidated investment funds, approximately 60% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis.
See Note 20 "Equity Based Compensation,” in our financial statements included in this report for further discussion and activity of these awards. Investment Income (Loss) -Net Gains (Losses) from Investment Activities Net gains (losses) from investment activities consist of realized and unrealized gains and losses arising from our investment activities as well as income earned from certain equity method investments.
See Note 19 "Equity Based Compensation,” in our financial statements included in this report for further discussion and activity of these awards. Investment Income (Loss) -Net Gains (Losses) from Investment Activities Net gains (losses) from investment activities consist of realized and unrealized gains and losses arising from our investment activities as well as income earned from certain equity method investments.
If tax deductions from equity-based compensation were to be excluded from Income Taxes Paid, KKR’s After-tax Distributable Earnings would be lower and KKR’s effective tax rate would appear to be higher, even though a lower amount of income taxes would have actually been paid or payable during the period.
If tax deductions from equity-based compensation were to be excluded from Income Taxes on Operating Earnings, KKR’s After-tax Distributable Earnings would be lower and KKR’s effective tax rate would appear to be higher, even though a lower amount of income taxes would have actually been paid or payable during the period.
Investment funds are investment companies under GAAP and reflect their investments and other financial instruments at fair value. Net Cash Provided (Used) by Investing Activities Our net cash provided (used) by investing activities was $(13.6) billion and $(9.6) billion during the years ended December 31, 2022 and 2021, respectively.
Investment funds are investment companies under GAAP and reflect their investments and other financial instruments at fair value. Net Cash Provided (Used) by Investing Activities Our net cash provided (used) by investing activities was $(3.9) billion, $(13.6) billion, and $(9.6) billion during the years ended December 31, 2023, 2022, and 2021, respectively.
Our capital markets business has arrangements with third parties, which reduce our risk under certain circumstances when underwriting certain debt transactions, and thus our unfunded commitments as of December 31, 2022 have been reduced to reflect the amount to be funded by such third parties.
Our capital markets business has arrangements with third parties, which reduce our risk under certain circumstances when underwriting certain debt transactions, and thus our unfunded commitments as of December 31, 2023 have been reduced to reflect the amount to be funded by such third parties.
As of December 31, 2022, upon completion by, where applicable, independent valuation firms of certain limited procedures requested to be performed by them on certain Level III investments, the independent valuation firms concluded that the fair values, as determined by KKR (including Global Atlantic), of those investments reviewed by them were reasonable.
As of December 31, 2023, upon completion by, where applicable, independent valuation firms of certain limited procedures requested to be performed by them on certain Level III investments, the independent valuation firms concluded that the fair values, as determined by KKR (including Global Atlantic), of those investments reviewed by them were reasonable.
Guaranteed minimum death benefits ("GMDB") Some of Global Atlantic's variable annuity and fixed-indexed annuity contracts contain a GMDB feature that provides a guarantee that the benefit received at death will be no less than a prescribed minimum amount, even if the account balance is reduced to zero.
Some of Global Atlantic's variable annuity and fixed-indexed annuity contracts contain a GMDB feature that provides a guarantee that the benefit received at death will be no less than a prescribed minimum amount, even if the account balance is reduced to zero.
Insurance expenses Insurance expenses increased for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to (i) one less month of activity reported in the prior financial reporting period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) increased commission expense related to increased sales in our individual market and increased reinsurance transactions, and (iii) increased reinsurance ceding expense allowances paid for policy administration services as a result of an increase in reinsurance transactions.
Insurance expenses Insurance expenses increased for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to (i) one less month of activity reported in the prior financial reporting period as a result of the 2021 GA Acquisition having occurred on February 1, 2021, (ii) increased commission expense related to increased sales in Global Atlantic's individual market and increased reinsurance transactions, and (iii) increased reinsurance ceding expense allowances paid for policy administration services as a result of an increase in reinsurance transactions.
After-tax distributable earnings is used to assess the performance of KKR’s business operations and measures the earnings potentially available for distribution to its equity holders or reinvestment into its business. After-tax distributable earnings is equal to Distributable Operating Earnings less Interest Expense, Net Income Attributable to Noncontrolling Interests and Income Taxes Paid.
After-tax distributable earnings is used to assess the performance of KKR’s business operations and measures the earnings potentially available for distribution to its equity holders or reinvestment into its business. After-tax distributable earnings is equal to Distributable Operating Earnings less Interest Expense, Net Income Attributable to Noncontrolling Interests and Income Taxes on Operating Earnings.
The extent and the factors that affect each investment strategy vary depending on the nature of the asset class and the valuation methodology employed.
The factors that affect each investment strategy vary depending on the nature of the asset class and the valuation methodology employed.
(9) The payments due by period for debt obligations reflects the contractual maturities of principal. (10) Reflects estimated future interest payments.
(9) The payments due by period for debt obligations reflect the contractual maturities of principal. (10) Reflects estimated future interest payments.
(15) The interest obligations on debt of our CFEs and other borrowings represent estimated interest to be paid over the term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2022 is not repaid until its maturity.
(15) The interest obligations on debt of our CFEs and other borrowings represent estimated interest to be paid over the term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2023 is not repaid until its maturity.
The number of large Real Asset investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.
The number of large real assets investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.
Future interest rates are assumed to be those in effect as of December 31, 2022, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.
Future interest rates are assumed to be those in effect as of December 31, 2023, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.
Future interest rates are assumed to be those in effect as of December 31, 2022, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.
Future interest rates are assumed to be those in effect as of December 31, 2023, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.
Management fees due from consolidated investment funds and other vehicles are eliminated upon consolidation under GAAP. However, because these amounts are funded by, and earned from, noncontrolling interests, upon consolidation under GAAP, KKR's allocated share of the net income from the consolidated investment funds and other vehicles is increased by the amount of fees that are eliminated.
However, because these amounts are funded by, and earned from, noncontrolling interests, upon consolidation under GAAP, KKR's allocated share of the net income from the consolidated investment funds and other vehicles is increased by the amount of fees that are eliminated.
If the GMDB is higher than the current account value at the time of death, Global Atlantic incurs a cost equal to the difference. Guaranteed minimum withdrawal benefits ("GMWB") Global Atlantic issues fixed-indexed annuity and variable annuity contracts with a guaranteed minimum withdrawal feature.
If the GMDB is higher than the current account value at the time of death, Global Atlantic incurs a cost equal to the difference. Global Atlantic issues fixed-indexed annuity and variable annuity contracts with a guaranteed minimum withdrawal feature.
See "—Liquidity Needs" and Note 17 "Debt Obligations" in our financial statements. (2) Amounts include senior notes and subordinated notes issued by KKR and its subsidiaries. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN.
See "—Liquidity Needs" and Note 16 "Debt Obligations" in our financial statements. (2) Amounts include senior notes and subordinated notes issued by KKR and its subsidiaries. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN.
(3) These interest obligations on debt represent estimated interest to be paid over the term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2022 is not repaid until its maturity.
(3) These interest obligations on debt represent estimated interest to be paid over the term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2023 is not repaid until its maturity.
Less than 5% of the fair value of this Level III private equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis.
Less than 1% of the fair value of this Level III private equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis.
See "—Business Environment" for a discussion of factors that may impact the valuations of our investments, financial results, operating results and valuations, and "—Non-GAAP Balance Sheet Measures" for additional information regarding our largest holdings on a non-GAAP basis.
See "Risk Factors" and "—Business Environment" for a discussion of factors that may impact the valuations of our investments, financial results, operating results and valuations, and "—Non-GAAP Balance Sheet Measures" for additional information regarding our largest holdings on a segment basis.
For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Asset Management Segment Operating Results" and Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" in our financial statements.
For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Asset Management Segment Operating Results" and Note 4 "Net Gains (Losses) from Investment Activities - Asset Management" in our financial statements.
Residential mortgage-backed securities As of December 31, 2022 and 2021, 10% and 11% of the AFS fixed maturity securities portfolio was invested in RMBS, respectively. RMBS are securities constructed from pools of residential mortgages and backed by payments from those pools.
Residential mortgage-backed securities As of December 31, 2023 and December 31, 2022, 11% and 10% of the AFS fixed maturity securities portfolio was invested in RMBS, respectively. RMBS are securities constructed from pools of residential mortgages and backed by payments from those pools.
During the year ended December 31, 2022, 87% of capital deployed was in transactions in North America, 9% was in Europe, and 4% was in the Asia-Pacific region. Analysis of Insurance Segment Operating Results As discussed above, our insurance segment consists solely of the operations of Global Atlantic, which was acquired on February 1, 2021.
During the year ended December 31, 2022, 87% of capital deployed was in transactions in North America, 9% was in Europe, and 4% was in the Asia-Pacific region. 184 Table of Contents Analysis of Insurance Segment Operating Results As discussed above, our insurance segment consists solely of the operations of Global Atlantic, which was acquired on February 1, 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDecember 31, 2022 Hypothetical change +50 Basis points -50 Basis points ($ in thousands) Total estimated AOCI sensitivity (point in time) $ (1,276,273) $ 1,351,119 The estimated point in time impact is driven by a net (decrease)/increase in the value of Global Atlantic's available-for-sale fixed maturity securities which are carried at fair value with unrealized gains and losses, net of certain offsets, reported in AOCI.
Biggest changeDecember 31, 2023 Hypothetical change +50 Basis points -50 Basis points ($ in thousands) Total estimated AOCI sensitivity (point in time) $ (1,338,318) $ 1,379,943 The estimated point in time impact is primarily driven by a (i) net (decrease)/increase in the value of Global Atlantic's available-for-sale fixed maturity securities which are carried at fair value with unrealized gains and losses, (ii) the effect of changes in the discount rates used to measure traditional and limited-payment long duration insurance contracts, and (iii) the effect on additional insurance liabilities when unrealized gains and losses are included in the investment margin while calculating the present value of expected assessments for the benefit ratio; all of which are reported in AOCI.
KKR has a global conflicts and compliance committee comprised of senior employees from across our Asset Management business and operations, and it includes, among others, our Chief Financial Officer, Chief Legal Officer, General Counsel and Chief Compliance Officer.
KKR has a global conflicts and compliance committee comprised of senior employees from across our asset management business and operations, and it includes, among others, our Chief Financial Officer, Chief Legal Officer and General Counsel, and Chief Compliance Officer.
(2) Excludes point in time impact. Estimated sensitivity to a hypothetical change over 12 months does not take into account any management actions that may be taken to mitigate actual impacts.
(2) Excludes point in time impact. Estimated sensitivity to a hypothetical change over 12 months does not take into account any management actions that may be taken to mitigate actual impacts.
Our policy is to reduce these risks by employing hedging techniques, including using foreign currency options and foreign exchange forward contracts to reduce exposure to future changes in exchange rates when a meaningful amount of capital has been invested in currencies other than the currencies in which the investments are denominated.
Our policy is to generally reduce these risks by employing hedging techniques, including using foreign currency options and foreign exchange forward contracts to reduce exposure to future changes in exchange rates when a meaningful amount of capital has been invested in currencies other than the currencies in which the investments are denominated.
Based on investments held as of December 31, 2022, we estimate that an immediate 10% decrease in the fair value of investments generally would result in a commensurate change in the amount of net gains (losses) from investment activities (except that carried interest would likely be more significantly impacted), regardless of whether the investment was valued using observable market prices or management estimates with significant unobservable pricing inputs.
Based on investments held as of December 31, 2023, we estimate that an immediate 10% decrease in the fair value of investments generally would result in a commensurate change in the amount of net gains (losses) from investment activities (except that carried interest would likely be more significantly impacted), regardless of whether the investment was valued using observable market prices or management estimates with significant unobservable pricing inputs.
Inc. before income taxes in 2023 from reductions in the following items, net of the impact of foreign exchange hedging strategies, if not offset by other factors: Carried Interest, Net of Carry Pool Allocation Net Gains/(Losses) From Investment Activities Including General Partner Capital Interest ($ in thousands) Hypothetical 10% Decline in Foreign Currencies Against the U.S.
Inc. before income taxes in 2023 from reductions in the following items, net of the impact of foreign exchange hedging strategies, if not offset by other factors: December 31, 2023 Carried Interest, Net of Carry Pool Allocation Net Gains/(Losses) From Investment Activities Including General Partner Capital Interest ($ in thousands) Hypothetical 10% Decline in Foreign Currencies Against the U.S.
Changes in fair value of the foregoing are recorded as gains or losses in our consolidated statements of operations. In addition, certain of the fees Global Atlantic earns, and benefits Global Atlantic pays in its variable annuity and variable universal life blocks are calculated on the account values, which are exposed to equity price risk.
Changes in fair value of the foregoing are recorded as gains or losses in our consolidated statements of operations. In addition, certain of the fees Global Atlantic earns in its variable annuity and variable universal life blocks are calculated on the account values, which are exposed to equity price risk.
Effect of interest rate sensitivity In the table below, Global Atlantic estimates the impact of a 50 basis point increase/(decrease) in interest rates, from a parallel shift in the yield curve, from levels as of December 31, 2022 to its net income and shareholders’ equity, excluding AOCI.
Effect of interest rate sensitivity In the table below, Global Atlantic estimates the impact of a 50 basis point increase/(decrease) in interest rates, from a parallel shift in the yield curve, from levels as of December 31, 2023 to its net income and shareholders’ equity, excluding AOCI.
Effect of credit spread sensitivity In the table below, Global Atlantic estimates the impact of a 50 basis points increase/(decrease) in credit spreads from levels as of December 31, 2022 to its net income and shareholders’ equity, excluding AOCI.
Effect of credit spread sensitivity In the table below, Global Atlantic estimates the impact of a 50 basis points increase/(decrease) in credit spreads from levels as of December 31, 2023 to its net income and shareholders’ equity, excluding AOCI.
In the context of specific reinsurance or other transactions in Global Atlantic's institutional channel or strategic acquisitions, Global Atlantic may also enters into hedges which are designed to limit short-term market risks to the economic value of the target assets.
In the context of specific reinsurance or other transactions in Global Atlantic's institutional channel or strategic acquisitions, Global Atlantic may also enter into hedges which are designed to limit short-term market risks to the economic value of the target assets.
The proportion of our management fees that are based on NAV depends on the number and type of funds in existence. For the year ended December 31, 2022, the fund management fees that were recognized based on the NAV of the applicable funds was approximately 17%.
The proportion of our management fees that are based on NAV depends on the number and type of funds in existence. For the year ended December 31, 2023, the fund management fees that were recognized based on the NAV of the applicable funds was approximately 17%.
If an investment is made, a portfolio management committee (or other designated senior employees) is responsible for working with our investment professionals to monitor the investment on an ongoing basis. Insurance The board of directors of TGAFG, which is the holding company for Global Atlantic, has established a risk committee that has primary oversight of market risk at Global Atlantic.
If an investment is made, a portfolio management committee (or other designated senior employees) is responsible for working with our investment professionals to monitor the investment on an ongoing basis. 214 Table of Contents Insurance The board of directors of TGAFG, which is the holding company for Global Atlantic, has established a risk committee that has primary oversight of market risk at Global Atlantic.
To assist with its oversight of Global Atlantic, the TGAFG board of directors has established an audit, risk, investment, operations & technology, nominating & governance, compensation and special transaction review committee. Asset Management Segment Market Risks The following is a discussion of the significant market risk exposures for KKR's Asset Management business.
To assist with its oversight of Global Atlantic, the TGAFG board of directors has established an audit, risk, investment, operations & technology, nominating & governance, compensation and special transaction review committee. 215 Table of Contents Asset Management Segment Market Risks The following is a discussion of the significant market risk exposures for KKR's asset management business.
We are exposed to interest rate risk relating to investments that generate yield since a meaningful portion of credit investments held by us and our consolidated funds, including CLOs, earn income based on variable interest rates. The impact on net income attributable to KKR & Co.
We are exposed to interest rate risk relating to investments that generate yield since a meaningful portion of credit investments held by us and our consolidated investment vehicles, including CLOs, earn income based on variable interest rates. The impact on net income attributable to KKR & Co.
Changes in Fair Value The majority of our investments as of December 31, 2022, are reported at fair value. Net changes in the fair value of investments impact the net gains (losses) from investment activities in our consolidated statements of operations.
Changes in Fair Value The majority of our investments as of December 31, 2023, are reported at fair value. Net changes in the fair value of investments impact the net gains (losses) from investment activities in our consolidated statements of operations.
For Global Atlantic's fixed-indexed annuity and indexed universal life policies, Global Atlantic generally seeks to use static hedges to offset the exposure primarily created by changes in embedded derivative balances. For Global Atlantic's variable annuity policies, Global Atlantic generally seeks to dynamically hedge its exposure to changes in the value of the guarantee Global Atlantic provides to policyholders.
For Global Atlantic's fixed-indexed annuity and interest-sensitive life policies, Global Atlantic generally seeks to use static hedges to offset the exposure primarily created by changes in embedded derivative balances. For Global Atlantic's variable annuity policies, Global Atlantic generally seeks to dynamically hedge its exposure to changes in the value of the guarantee Global Atlantic provides to policyholders.
With respect to debt obligations held by KKR and not in the consolidated funds or CLOs, as of December 31, 2022, KKR had debt obligations outstanding with an aggregate principal amount of approximately $258.5 million that accrues interest at a variable rate. Our policy is to reduce these risks by employing hedging techniques, including using interest rate swaps.
With respect to debt obligations held by KKR and not in the consolidated investment vehicles or CLOs, as of December 31, 2023, KKR had debt obligations outstanding with an aggregate principal amount of approximately $258.5 million that accrues interest at a variable rate. Our policy is to reduce these risks by employing hedging techniques, including using interest rate swaps.
Management of Market Risk Asset Management When we commit capital from our Principal Activities business line to investments or transactions, a balance sheet committee of senior employees, including our Co-Executive Chairmen, one of our Co-Chief Executive Officers, and the Chief Financial Officer, must approve the investment or transaction before it may be made.
Directors, Executive Officers and Corporate Governance—Board Committees.” Management of Market Risk Asset Management When we commit capital from our Principal Activities business line to investments or transactions, a balance sheet committee of senior employees, including our Co-Executive Chairmen, one of our Co-Chief Executive Officers, and the Chief Financial Officer, must approve the investment or transaction before it may be made.
The actual impact to individual line items within the statements of operations would differ from the amounts shown below as a result of (i) the elimination of carried interest as a result of the consolidation of certain investment funds and (ii) the gross-up of net gains (losses) from investment activities, in each case as a result of the consolidation of certain investment funds and CLO vehicles.
The actual impact to individual line items within the consolidated statements of operations would differ from the amounts shown below as a result of (i) the elimination of management fees and carried interest as a result of the consolidation of certain investment funds and CFEs and (ii) the gross-up of net gains (losses) from investment activities, in each case as a result of the consolidation of certain investment funds and CFEs.
These changes impact our net income over the periods following equity price moves. 218 Table of Co n tents Effect of equity price sensitivity In the table below, Global Atlantic estimates the impact of a 10% increase/(decrease) in equity prices from levels as of December 31, 2022 to its net income and shareholders’ equity, excluding AOCI.
These changes impact our net income over the periods following equity price moves. Effect of equity price sensitivity In the table below, Global Atlantic estimates the impact of a 10% increase/(decrease) in equity prices from levels as of December 31, 2023 to its net income and shareholders’ equity, excluding AOCI.
There is additional credit spread risk exposure inherent in Global Atlantic's own credit spread used in valuing embedded derivative liabilities, which serves to mitigate net credit exposure. Global Atlantic may choose to enter into hedge positions to manage credit spread risk. As of December 31, 2022, Global Atlantic had a $929 thousand credit derivative position.
There is additional instrument-specific credit spread risk exposure inherent in Global Atlantic's credit spread used in valuing embedded derivative liabilities, which serves to mitigate net credit exposure. Global Atlantic may choose to enter into hedge positions to manage credit spread risk. As of December 31, 2023, Global Atlantic had a $600 thousand credit derivative position.
Changes in the level and volatility of interest rates primarily impacts the fair value reported in our consolidated financial statements of the following: 216 Table of Co n tents • embedded derivatives associated with modified coinsurance and coinsurance with funds withheld payables or receivables; • embedded derivatives associated with variable annuities, fixed-indexed annuities and indexed universal life products; • policy liabilities accounted under the fair value option, and • financial instruments held in Global Atlantic's investment portfolio and used in its hedge program.
Changes in the level and volatility of interest rates primarily impacts the fair value reported in our consolidated financial statements of the following: • embedded derivatives associated with modified coinsurance and coinsurance with funds withheld payables or receivables; • embedded derivatives associated with variable annuities, fixed-indexed annuities and interest sensitive life products; • policy liabilities accounted under the fair value option, • market risk benefits, and • financial instruments held in Global Atlantic's investment portfolio and used in its hedge program.
Finally, low interest rates related to monetary stimulus and economic stagnation may also negatively impact expected returns on all investments, as the demand for relatively higher return assets increases and supply decreases. 214 Table of Co n tents Interest Income We and certain consolidated funds, including CLOs, hold credit investments that generate interest income based on variable interest rates.
Finally, low interest rates related to monetary stimulus and economic stagnation may also negatively impact expected returns on all investments, as the demand for relatively higher return assets increases and supply decreases. Interest Income We and certain consolidated investment vehicles, including CLOs, hold credit investments that generate interest income based on variable interest rates.
Dollar (1) $ 110,914 (2) $ 231,732 (2) (1) An immediate, hypothetical 10% decline in exchange rates between the U.S. dollar and all of the major foreign currencies in which our investments were denominated would not be expected to materially impact our management fees or incentive fees.
Dollar (1) $ 188,785 (2) $ 379,599 (2) (1) An immediate, hypothetical 10% decline in exchange rates between the U.S. dollar and all of the major foreign currencies in which our investments were denominated would not be expected to materially impact our management fees or incentive fees.
Changes in the level and volatility of equity prices primarily impacts the fair value reported in the consolidated financial statements of the following: • embedded derivatives and policy liabilities associated with Global Atlantic's variable annuities, fixed-indexed annuities and indexed universal life products; • financial instruments held in Global Atlantic's investment portfolio and used in its hedge program; and • certain of Global Atlantic's alternative assets.
Changes in the level and volatility of equity prices primarily impacts the fair value reported in the consolidated financial statements of the following: • embedded derivatives and market risk benefits associated with Global Atlantic's variable annuities, fixed-indexed annuities and interest sensitive products; • financial instruments held in Global Atlantic's investment portfolio and used in its hedge program; and • certain of Global Atlantic's alternative assets.
For a discussion of Global Atlantic's hedge program, see "—Insurance Segment Market Risks—Hedge Program." 211 Table of Co n tents Management of General Business Risk Asset Management KKR has a risk and operations committee comprised of senior employees from across our Asset Management business and operations, and it includes our Chief Operating Officer, Chief Financial Officer, Chief Legal Officer, General Counsel, and Chief Compliance Officer.
For a discussion of Global Atlantic's hedge program, see "—Insurance Segment Market Risks—Hedge Program." Management of General Business Risk Asset Management KKR has a risk and operations committee comprised of senior employees from across our asset management business and operating functions, and it includes our Chief Financial Officer, Chief Operating Officer, Chief Legal Officer and General Counsel, Chief Compliance Officer, and other senior employees from KKR's asset management business and Global Atlantic.
These estimated changes include the impact of related amortization of deferred revenue and expenses and related income tax impacts. For a discussion of current market conditions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment." 219 Table of Co n tents
These estimated changes include the impact of related amortization of deferred revenue and expenses and related income tax impacts. For a discussion of current market conditions, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment." 223 Table of Contents
Inc. before income taxes in 2023 from reductions in the following items, if not offset by other factors: Management Fees Carried Interest, Net of Carry Pool Allocation Net Gains/(Losses) From Investment Activities Including General Partner Capital Interest ($ in thousands) Hypothetical 10% Decline in Fair Value of Investments (1) $ 43,743 (2) $ 714,236 (3) $ 1,757,368 (3) (1) An immediate, hypothetical 10% decline in the fair value of investments would also impact our ability to earn incentive fees.
Inc. before income taxes in 2023 from reductions in the following items, if not offset by other factors: December 31, 2023 Management Fees Carried Interest, Net of Carry Pool Allocation Net Gains/(Losses) From Investment Activities Including General Partner Capital Interest ($ in thousands) Hypothetical 10% Decline in Fair Value of Investments (1) $ 50,011 (2) $ 902,575 (3) $ 1,831,293 (3) (1) An immediate, hypothetical 10% decline in the fair value of investments would also impact our ability to earn incentive fees.
In addition, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets. 215 Table of Co n tents Insurance Segment Market Risks The following is a discussion of the significant market risk exposures for Global Atlantic.
In addition, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets. 219 Table of Contents Insurance Segment Market Risks The following is a discussion of the significant market risk exposures for our insurance business conducted through Global Atlantic.
December 31, 2022 Hypothetical change (1) +50 Basis points -50 Basis points ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ 214,931 $ (225,368) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (over 12 months) (2) 54,215 (54,215) (1) The point in time and over 12 months total estimated impacts reflect the impact of hedges within Global Atlantic's liability hedging program, as well as hedges designed to limit surplus volatility resulting from interest rate movements.
December 31, 2023 Hypothetical change (1) +50 Basis points -50 Basis points ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ 163,003 $ (165,739) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (over 12 months) (2) 47,454 (47,454) (1) The point in time and over 12 months total estimated impacts reflect the impact of hedges within Global Atlantic's liability hedging program, as well as hedges designed to limit surplus volatility resulting from interest rate movements.
The estimated changes include the impact of related amortization of deferred revenue and expenses and related income tax impacts. Credit spread risk Global Atlantic is exposed to credit spread risk as a result of changes in the spread between the yields on its funds withheld payables and receivables at interest and yields on comparable U.S. Treasury securities.
The estimated changes include the related income tax impacts. Credit spread risk Global Atlantic is exposed to credit spread risk as a result of changes in the spread between the yields on its funds withheld payables and receivables at interest and yields on comparable U.S. Treasury securities. Global Atlantic's reinsurance agreements include modified coinsurance and funds withheld coinsurance arrangements.
Global Atlantic's reinsurance agreements include modified coinsurance and funds withheld coinsurance arrangements. Such arrangements are deemed to contain embedded derivatives, which are measured at fair value, and are therefore impacted by the mark-to-market value of the related assets. Changes in the credit spreads associated with the assets impact the mark-to-market value of the assets.
Such arrangements are deemed to contain embedded derivatives, which are measured at fair value, and are therefore impacted by the mark-to-market value of the related assets. Changes in the credit spreads associated with the assets impact the mark-to-market value of the assets.
To the extent that management fees are calculated based on the NAV of the fund's investments, the amount of fees that we may charge will increase or decrease in direct proportion to the effect of changes in the fair value of the fund's investments.
The collateral is based on the par value of the investments and cash on hand. 216 Table of Contents To the extent that management fees are calculated based on the NAV of the fund's investments, the amount of fees that we may charge will increase or decrease in direct proportion to the effect of changes in the fair value of the fund's investments.
Publicly Traded Securities Our investment funds and KKR's balance sheet hold certain investments in portfolio companies whose securities are publicly traded. The market prices of securities may be volatile and are likely to fluctuate due to a number of factors beyond our control.
Publicly Traded Securities Our investment vehicles and KKR's balance sheet, including through its principal activities business line, hold certain investments in companies whose securities are publicly traded. The market prices of securities may be volatile and are likely to fluctuate due to a number of factors beyond our control.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment." 213 Table of Co n tents Exchange Rate Risk Our investment funds, CLO vehicles, and KKR's balance sheet hold investments denominated in currencies other than the U.S. dollar.
See the "Risk Factors" section of this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment." Exchange Rate Risk Our investment vehicles and KKR's balance sheet hold investments denominated in currencies other than the U.S. dollar.
December 31, 2022 Hypothetical change (1) +10% Equity Prices -10% Equity Prices ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ (24,425) $ 40,929 Total estimated net income and shareholders’ equity excluding AOCI sensitivity (over 12 months) (2) 4,442 (4,834) (1) From time to time, Global Atlantic may choose to enter into additional hedges to mitigate economic exposure to equity markets.
December 31, 2023 Hypothetical change (1) +10% Equity Prices -10% Equity Prices ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ (14.861) $ 10,129 Total estimated net income and shareholders’ equity excluding AOCI sensitivity (over 12 months) (2) $ 4,660 $ (5.161) (1) From time to time, Global Atlantic may choose to enter into additional hedges to mitigate economic exposure to equity markets.
In the case of our CLO vehicles, management fees are calculated based on the collateral of the vehicle. The collateral is based on the par value of the investments and cash on hand.
In the case of our CLO vehicles, management fees are calculated based on the collateral of the vehicle.
Changes in fair value of the foregoing are generally recorded as gains or losses in the consolidated statement of operations, or in the statement of comprehensive income for unrealized gains and losses on available for sale securities.
Changes in fair value of the foregoing are generally recorded as gains or losses in the consolidated statement of operations.
The estimated point-in-time impact is driven by an increase/(decrease) in the value of the embedded derivatives associated with Global Atlantic's fixed-indexed annuity and indexed universal life products, and largely offset by a decrease / (increase) in Global Atlantic's variable annuity embedded derivatives and policy benefits, and gains or losses on financial instruments used in Global Atlantic's hedging program.
The estimated point-in-time impact is driven by an increase/(decrease) in the value of (i) the embedded derivatives associated with Global Atlantic's fixed-indexed annuity and interest sensitive life products, (ii) its variable annuity embedded derivatives, (iii) market risk benefits, and (iv) a gains (losses) in financial instruments used in its hedging program based on balances in place at year-end.
The actual impact to individual line items within the consolidated statements of operations would differ from the amounts shown below as a result of (i) the elimination of management fees and carried interest as a result of the consolidation of certain investment funds and CFEs and (ii) the gross-up of net gains (losses) from investment activities, in each case as a result of the consolidation of certain investment funds and CFEs. 212 Table of Co n tents Based on the fair value of investments as of December 31, 2022, we estimate that an immediate, hypothetical 10% decline in the fair value of investments would result in declines in net income attributable to KKR & Co.
The actual impact to individual line items within the statements of operations would differ from the amounts shown below as a result of (i) the elimination of carried interest as a result of the consolidation of certain investment funds and (ii) the gross-up of net gains (losses) from investment activities, in each case as a result of the consolidation of certain investment funds and CLO vehicles. 217 Table of Contents We estimate that an immediate, hypothetical 10% decline in the exchange rates between the U.S. dollar and all of the major foreign currencies in which our investments were denominated as of December 31, 2023 (i.e., an increase in the value of the U.S. dollar against these foreign currencies) would result in declines in net income attributable to KKR & Co.
Sensitivities Global Atlantic evaluates the sensitivity of net income to specific changes in interest rates, credit spreads and equity prices projected using internal models. All of the estimated sensitivities assume that all other factors remain constant and reflect the impact of related hedges assuming no hedge rebalancing in Global Atlantic's dynamic program, as explained further below.
All of the estimated sensitivities assume that all other factors remain constant and reflect the impact of related hedges assuming no hedge rebalancing in Global Atlantic's dynamic program, as explained further below.
These estimated changes include the impact of related amortization of deferred revenues and expenses and related income tax impacts and include impacts on our own credit spread used in valuing embedded derivative liabilities.
These estimated changes include the related income tax impacts and include impacts on instrument-specific credit risk used in valuing embedded derivative liabilities.
Before making an investment, investment professionals identify risks in due diligence, evaluating, among other things, business, financial, legal and regulatory issues, financial data, and other information relevant to a particular investment. An investment team presents the investment and its identified risks to an investment committee or a portfolio manager, which must approve each investment before it may be made.
Before making an investment, investment professionals endeavor to identify risks in due diligence, evaluating, among other things, business, financial, legal and regulatory issues, financial data, and other information relevant to a particular investment.
Inc. resulting from a decrease of a hypothetical 100 basis points in variable interest rates used in the recognition of interest income would not be expected to be material since a substantial portion of this decrease would be attributable to noncontrolling interests and CLO third party noteholders.
Inc. resulting from a decrease of a hypothetical 100 basis points in variable interest rates used in the recognition of interest income would not be expected to be material since a substantial portion of this decrease would be attributable to noncontrolling interests and CLO third party noteholders. 218 Table of Contents Interest Expense We and certain consolidated investment vehicles, including CLOs, have debt obligations that include revolving credit agreements, certain investment financing arrangements and debt securities issued by CLO vehicles that accrue interest at variable rates.
Following our acquisition of Global Atlantic, we expect to be affected by market risks arising from Global Atlantic’s business. Global Atlantic has material exposure to market volatility in interest rates, credit spreads, and equity prices through its insurance liabilities, many of which are structured to have exposure to market level changes, its investment portfolio and its hedge program.
Global Atlantic has material exposure to market volatility in interest rates, credit spreads, and equity prices through its insurance liabilities, many of which are structured to have exposure to market level changes, its investment portfolio and its hedge program. The quantitative information provided in this section was prepared using estimates and assumptions that management believes are appropriate.
The estimated point in time impact is driven by a net decrease/(increase) in the value of the embedded derivatives associated with Global Atlantic's modified coinsurance and coinsurance with funds withheld payables and receivables and the embedded derivatives associated with its variable annuity, fixed-indexed annuity and indexed universal life products, and largely offset by a loss/(gain) in financial instruments used in its hedging program, investments classified as trading, and loans designated under the fair value option, based on balances in place at quarter end.
The estimated point in time impact is driven by a net decrease/(increase) in the value of (i) the embedded derivatives associated with Global Atlantic's modified coinsurance and coinsurance with funds withheld payables and receivables, (ii) the embedded derivatives associated with its fixed-indexed annuity, interest sensitive life products, and variable annuities accounted for under the fair value option, (iii) market risk benefits, and (iv) the remeasurement gain/loss of the liability for future policy benefits.
Interest rate risk Global Atlantic is exposed to interest rate risk as a result of changes in the level and volatility of interest rates.
The estimated changes include the related income tax impacts. 222 Table of Contents Equity price risk Global Atlantic is exposed to equity price risk as a result of changes in the level and volatility of equity prices.
We estimate that an immediate, hypothetical 10% decline in the exchange rates between the U.S. dollar and all of the major foreign currencies in which our investments were denominated as of December 31, 2022 (i.e., an increase in the value of the U.S. dollar against these foreign currencies) would result in declines in net income attributable to KKR & Co.
Based on the fair value of investments as of December 31, 2023, we estimate that an immediate, hypothetical 10% decline in the fair value of investments would result in declines in net income attributable to KKR & Co.
In addition, certain of the underlying variable annuity separate account funds are managed volatility funds, so Global Atlantic's market exposures may change substantially after sharp market moves. The point-in-time estimates provided in this section assume no hedge rebalancing and, as such, the impact on Global Atlantic's consolidated net income may be different from what is shown below.
In addition, certain of the underlying variable annuity separate account funds are managed volatility funds, so Global Atlantic's market exposures may change substantially after sharp market moves.
The impact over 12 months is driven by an increase/(decrease) in the income earned on Global Atlantic's floating rate assets, and partially offset by an increase/(decrease) in the cost of its floating-rate liabilities. 217 Table of Co n tents In the table below we estimate the impact of a 50 basis point increase/(decrease) in interest rates, for a parallel shift in the yield curve, from levels as of December 31, 2022 to Global Atlantic's AOCI.
In the table below Global Atlantic estimates the impact of a 50 basis point increase/(decrease) in interest rates, for a parallel shift in the yield curve, from levels as of December 31, 2023 to Global Atlantic's AOCI.
KKR's technology and information security committee is responsible for reviewing and monitoring global technology risks including information security, business disruption and fraud related risks. In addition, KKR has other committees comprised of senior employees across our Asset Management business and operations that consider potential risks to our business.
For further information about this committee’s role with respect to oversight of cybersecurity risks, see "Item 1C-Cybersecurity." In addition, KKR has other committees comprised of senior employees across our asset management business and operations that consider potential risks to our business.
The quantitative information provided in this section was prepared using estimates and assumptions that management believes are appropriate. The actual impact of a hypothetical adverse movement in these risks could be materially different from the amounts shown below.
The actual impact of a hypothetical adverse movement in these risks could be materially different from the amounts shown below. The Board of Directors is responsible for oversight and the overall governance of KKR.
Interest Expense We and certain consolidated funds, including CLOs, have debt obligations that include revolving credit agreements, certain investment financing arrangements and debt securities issued by CLO vehicles that accrue interest at variable rates. Changes in these rates would affect the amount of interest payments that our consolidated funds, including CLOs, would have to make.
Changes in these rates would affect the amount of interest payments that our consolidated investment vehicles, including CLOs, would have to make. With respect to consolidated investment vehicles and CLOs, the impact on net income attributable to KKR & Co.
December 31, 2022 Hypothetical change +50 Basis points -50 Basis points ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ 236,276 $ (250,355) Equity price risk Global Atlantic is exposed to equity price risk as a result of changes in the level and volatility of equity prices.
December 31, 2023 Hypothetical change +50 Basis points -50 Basis points ($ in thousands) Total estimated net income and shareholders’ equity excluding AOCI sensitivity (point in time) $ 181,690 $ (187,903) In the table below Global Atlantic estimates the impact of a 50 basis point increase/(decrease) in instrument-specific credit risk on market risk benefits, for a parallel shift in the yield curve, from levels as of December 31, 2023 to its AOCI.
Removed
With respect to consolidated funds and CLOs, the impact on net income attributable to KKR & Co.
Added
Our Board of Directors has five standing committees: an Audit Committee, a Risk Committee, a Conflicts Committee, a Nominating and Corporate Governance Committee and an Executive Committee. For further information about KKR & Co. Inc.'s Board of Directors or its committees, see “Part III—Item 10.
Removed
See "Risk Factors—Risks Related to Global Atlantic—Business Risks Related to Global Atlantic—Global Atlantic's use of derivative financial instruments within its risk management strategy may not be effective or sufficient." and "Risk Factors—Risks Related to Global Atlantic—Business Risks Related to Global Atlantic—Global Atlantic may experience volatility in its net income under GAAP due to its funds withheld coinsurance transactions" in this report.
Added
An investment team presents the investment and its identified risks to an investment committee or a portfolio manager, which must approve each investment before it may be made.
Removed
These estimated changes include the impact of related amortization of deferred revenue and expenses and related income tax impacts. In addition, the point in time impact includes a decrease/(increase) in the value of the reserve and (decrease)/increase in the deferred acquisition cost balance of certain fixed annuity blocks of business due to the dynamic lapse sensitivities within Global Atlantic's models.
Added
KKR's technology and information security committee is responsible for reviewing and monitoring global technology risks including information security, business disruption and fraud related risks.
Added
See "Risk Factors—Risks Related to Our Insurance Activities—Volatile market and economic conditions, including sustained periods of low interest rates, a sustained increase in interest rates and other interest rate fluctuations, may adversely affect our insurance business" and "Risk Factors—Risks Related to Our Business—Risk management activities may not be effective and, consequently, may adversely affect us." Sensitivities Global Atlantic evaluates the sensitivity of net income to specific changes in interest rates, credit spreads and equity prices projected using internal models.
Added
The point-in-time estimates provided in this section assume no hedge rebalancing and, as such, the impact on Global Atlantic's consolidated net income may be different from what is shown below. 220 Table of Contents Interest rate risk Global Atlantic is exposed to interest rate risk as a result of changes in the level and volatility of interest rates.
Added
These are largely offset by a loss/(gain) in financial instruments used in Global Atlantic's hedging program, investments classified as trading, and loans designated under the fair value option, based on balances in place as of year end.
Added
These estimated changes include the related income tax impacts. 221 Table of Contents The impact over 12 months is driven by an increase/(decrease) in the income earned on Global Atlantic's floating rate assets, and partially offset by an increase/(decrease) in the cost of its floating-rate liabilities.
Added
December 31, 2023 Hypothetical change +50 Basis points -50 Basis points ($ in thousands) Total estimated AOCI sensitivity (point in time) $ 123,692 $ (137,731) The estimated point in time impact is driven primarily by the effect of changes in the fair value of a market risk benefit attributable to a change in the instrument-specific credit risk.

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