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KKR & Co. Inc. - Quarter Report: 2022 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
 
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2022 
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Transition period from           to           . 
Commission File Number 001-34820
kkr-20220930_g1.jpg
KKR & CO. INC.
(Exact name of Registrant as specified in its charter) 
Delaware 88-1203639
(State or other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification Number)
  30 Hudson Yards
New York, New York 10001
Telephone: (212) 750-8300
(Address, zip code, and telephone number, including
area code, of registrant's principal executive office.)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock
KKRNew York Stock Exchange
6.00% Series C Mandatory Convertible Preferred Stock
KKR PR CNew York Stock Exchange
4.625% Subordinated Notes due 2061 of KKR Group Finance Co. IX LLCKKRSNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of November 7, 2022, there were 861,111,863 shares of common stock of the registrant outstanding.



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KKR & CO. INC.
FORM 10-Q
For the Quarter Ended September 30, 2022
TABLE OF CONTENTS
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Item 1A.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believe," "think," "expect," "potential," "continue," "may," "should," "seek," "approximately," "predict," "intend," "will," "plan," "estimate," "anticipate," the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. Without limiting the foregoing, statements regarding the declaration and payment of dividends on common or preferred stock of KKR & Co. Inc.; the timing, manner and volume of repurchase of common stock pursuant to its repurchase program; expansion and growth opportunities and other synergies resulting from acquisitions, reorganizations or strategic partnerships, including the GA Acquisition (as defined below) and the KJRM Acquisition (as defined below); and the timing and completion of certain transactions contemplated by the Reorganization Agreement (as defined below) may constitute forward-looking statements. Forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements or cause the anticipated benefits and synergies from transactions to not be realized. We believe these factors include those described under the section entitled "Business Environment" in this report and "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2022 (our "Annual Report"). These factors should be read in conjunction with the other cautionary statements that are included in this report and in our other filings with the U.S. Securities and Exchange Commission (the "SEC"). We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.


CERTAIN TERMS USED IN THIS REPORT

In this report, references to "KKR," "we," "us" and "our" refer to KKR & Co. Inc. and its subsidiaries, including The Global Atlantic Financial Group LLC ("TGAFG" and, together with its subsidiaries, "Global Atlantic"), unless the context requires otherwise. On February 1, 2021, KKR completed its acquisition of Global Atlantic. KKR holds all of the voting interests in Global Atlantic and owns 61.5% of the economic equity interests in Global Atlantic.

For periods between July 1, 2018 and December 31, 2019, references to “common stock” refer to Class A common stock of KKR & Co. Inc., and references to “Series I preferred stock” and “Series II preferred stock” refer to Class B common stock and Class C common stock of KKR & Co. Inc., respectively. Prior to July 1, 2018, KKR & Co. Inc. was a limited partnership named KKR & Co. L.P. References to the “Series I preferred stockholder” or “KKR Management” are to KKR Management LLP, the holder of the sole outstanding share of our Series I preferred stock. KKR Management has approved, and may continue to approve in the future, matters requiring the approval of the holder of the Series I Preferred Stock pursuant to Section 13.04 of KKR & Co. Inc.’s Amended and Restated Certificate of Incorporation. References to our “senior principals” are to our senior employees who hold interests in the Series I preferred stockholder, including Mr. Henry Kravis and Mr. George Roberts (our "Co-Founders"). References to “non-employee operating consultants” for periods prior to January 1, 2020 refer to employees of KKR Capstone Americas LLC and its affiliates (“KKR Capstone”), which were then owned and controlled by their senior management and not subsidiaries or affiliates of KKR. KJR Management ("KJRM") is a Japanese real estate asset manager, which KKR acquired on April 28, 2022.

Unless otherwise indicated, references to equity interests in KKR’s business, or to percentage interests in KKR’s business, reflect the aggregate equity interests in KKR Group Partnership L.P. ("KKR Group Partnership"), which is the intermediate holding company that owns the entirety of KKR’s business, and are net of amounts that have been allocated to the holders of certain minority interests, including our principals prior to the completion of the Reorganization Mergers (as defined below) and carry pool participants (who are explained further below). References to “KKR Group Partnership” for periods prior to January 1, 2020 refer to KKR Fund Holdings L.P., KKR Management Holdings L.P. and KKR International Holdings L.P., collectively, which were combined on that date to form KKR Group Partnership. References to a “KKR Group Partnership Unit” refer to (i) one Class A partner interest in each of KKR Fund Holdings L.P., KKR Management Holdings L.P. and KKR International Holdings L.P., collectively, for periods prior to prior to January 1, 2020, and (ii) one Class A partner interest in KKR Group Partnership for periods on and after January 1, 2020.

References to “principals” are to current and former employees who held interests in KKR’s business through KKR Holdings L.P. (“KKR Holdings”) prior to the completion of the Reorganization Mergers. References to “carry pool participants” are to our current and former employees who hold interests in our “carry pool,” which refers to the carried interest
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generated by KKR’s business that is allocated to KKR Associates Holdings L.P. (“KKR Associates Holdings”), in which carry pool participants are limited partners. KKR Associates Holdings is currently not a subsidiary of KKR & Co. Inc.

On October 8, 2021, KKR entered into a Reorganization Agreement (the "Reorganization Agreement") with KKR Holdings, KKR Management, KKR Associates Holdings, and the other parties thereto. Pursuant to the Reorganization Agreement, the parties agreed to undertake a series of integrated transactions to effect a number of transformative structural and governance changes, some of which were completed on May 31, 2022, and others which will be completed in the future. On May 31, 2022, KKR completed the merger transactions ("Reorganization Mergers") contemplated by the Reorganization Agreement pursuant to which KKR acquired KKR Holdings (which changed its name to KKR Group Holdings L.P.) and all of the KKR Group Partnership Units held by it. In the Reorganization Mergers, among other things, (i) KKR Aubergine Inc. ("New Parent"), a newly formed entity to effect the Reorganization Mergers, became the successor to KKR & Co. Inc. ("Old Parent") and the new parent company of KKR's business, and (ii) New Parent changed its name to KKR & Co. Inc., and Old Parent changed its name to KKR Group Co. Inc. In this report, all references to KKR & Co. Inc. prior to the completion of the Reorganization Mergers relate to Old Parent, and all references to KKR & Co. Inc. after the completion of the Reorganization Mergers relate to New Parent. For more information about the Reorganization Agreement, see "Certain Relationships and Related Transactions, and Director Independence—Reorganization Agreement" in our Annual Report. For more information about the Reorganization Mergers, see Note 1 "Organization" to the financial statements included in this Quarterly Report on Form 10-Q.

In this report, the term "GAAP" refers to accounting principles generally accepted in the United States of America.

We disclose certain financial measures in this report that are calculated and presented using methodologies other than in accordance with GAAP, including after-tax distributable earnings, distributable operating earnings, fee related earnings ("FRE"), asset management segment revenues, book value and book value per adjusted share. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's businesses. These non-GAAP financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable, are included under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliations to GAAP Measures." This report also uses the terms assets under management ("AUM"), fee paying assets under management ("FPAUM") and capital invested. You should note that our calculations of these and other operating metrics may differ from the calculations of other investment managers and, as a result, may not be comparable to similar metrics presented by other investment managers. These non-GAAP and operating metrics are defined in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Non-GAAP Performance Measures and Other Operating Measures."

References to our "funds" or our "vehicles" refer to investment funds, vehicles and accounts that are advised, managed or sponsored by one or more subsidiaries of KKR, including collateralized loan obligations ("CLOs") and our business development company ("BDC"), unless the context requires otherwise. They do not include investment funds, vehicles or accounts of any hedge fund or other manager with which we have formed a strategic partnership where we have acquired an ownership interest. References to “strategic investor partnerships” refers to separately managed accounts with certain investors, which typically have investment periods longer than our traditional funds and typically provide for investments across different investment strategies. References to “hedge fund partnerships” refers to strategic partnerships with third-party hedge fund managers in which KKR owns a minority stake.

Unless otherwise indicated, references in this report to our outstanding common stock on a fully exchanged and diluted basis reflect (i) actual shares of common stock outstanding, (ii) shares of common stock into which all outstanding shares of Series C Mandatory Convertible Preferred Stock are convertible, and (iii) shares of common stock issuable pursuant to certain equity awards actually granted pursuant to the Amended and Restated KKR & Co. Inc. 2010 Equity Incentive Plan (the "2010 Equity Incentive Plan") or the Amended and Restated KKR & Co. Inc. 2019 Equity Incentive Plan (the "2019 Equity Incentive Plan" and, together with the 2010 Equity Incentive Plan, our "Equity Incentive Plans"). Our outstanding common stock on a fully exchanged and diluted basis does not include shares of common stock available for issuance pursuant to the Equity Incentive Plans for which equity awards have not yet been granted. 

“Exchangeable securities” refers to securities representing an ownership interest in KKR Group Partnership Units, which may be exchanged for shares of common stock of KKR & Co. Inc. As of the date of this report, our only outstanding exchangeable securities are vested equity awards from our 2019 Equity Incentive Plan called restricted holdings units (“RHUs”), which involve KKR Holdings II L.P. KKR Holdings II L.P. is a subsidiary of KKR & Co. Inc. that owns approximately 0.3% of the outstanding KKR Group Partnership Units as of September 30, 2022. For more information, see Note 19 "Equity Based Compensation—Asset Management—KKR Equity Incentive Plan Awards."
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The use of any defined term in this report to mean more than one entity, person, security or other item collectively is solely for convenience of reference and in no way implies that such entities, persons, securities or other items are one indistinguishable group. For example, notwithstanding the use of the defined terms "KKR," "we" and "our" in this report to refer to KKR & Co. Inc. and its subsidiaries, each subsidiary of KKR & Co. Inc. is a standalone legal entity that is separate and distinct from KKR & Co. Inc. and any of its other subsidiaries. Any KKR entity (including any Global Atlantic entity) referenced herein is responsible for its own financial, contractual and legal obligations.
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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
September 30, 2022December 31, 2021
Assets  
Asset Management
Cash and Cash Equivalents$6,911,691 $6,699,668 
Restricted Cash and Cash Equivalents201,194 134,298 
Investments89,720,859 88,775,514 
Due from Affiliates1,370,693 1,224,283 
Other Assets5,177,042 2,886,313 
103,381,479 99,720,076 
Insurance
Cash and Cash Equivalents$4,147,146 $3,391,934 
Restricted Cash and Cash Equivalents369,834 300,404 
Investments118,772,273 123,763,675 
Reinsurance Recoverable26,163,181 25,062,256 
Insurance Intangible Assets1,632,083 1,407,149 
Other Assets7,730,393 5,053,518 
Separate Account Assets4,052,251 5,586,428 
162,867,161 164,565,364 
Total Assets$266,248,640 $264,285,440 
Liabilities and Equity  
Asset Management
Debt Obligations$38,257,833 $36,669,755 
Due to Affiliates444,872 462,722 
Accrued Expenses and Other Liabilities7,135,124 7,896,897 
45,837,829 45,029,374 
Insurance
Policy Liabilities$135,733,868 $126,520,044 
Debt Obligations1,920,906 1,908,006 
Funds Withheld Payable at Interest21,063,577 23,460,253 
Accrued Expenses and Other Liabilities4,927,883 3,263,566 
Reinsurance Liabilities729,531 378,549 
Separate Account Liabilities4,052,251 5,586,428 
168,428,016 161,116,846 
Total Liabilities214,265,845 206,146,220 
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September 30, 2022December 31, 2021
Commitments and Contingencies (See Note 24)
Redeemable Noncontrolling Interests$82,133 $82,491 
Stockholders' Equity  
Series C Mandatory Convertible Preferred Stock, $0.01 par value. 22,999,974 and 23,000,000 shares, issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.
$1,115,792 $1,115,792 
Series I Preferred Stock, $0.01 par value. 1 share authorized, 1 share issued and outstanding as of September 30, 2022 and December 31, 2021.
— — 
Series II Preferred Stock, $0.01 par value. 499,999,999 shares authorized, 258,726,163 shares issued and outstanding as of December 31, 2021. (See Note 1)
— 2,587 
Common Stock, $0.01 par value. 3,500,000,000 shares authorized, 859,833,444 and 595,663,618 shares, issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.
8,598 5,957 
Additional Paid-In Capital16,015,645 8,997,435 
Retained Earnings6,365,963 7,670,182 
Accumulated Other Comprehensive Income (Loss) ("AOCI")(6,054,953)(209,789)
Total KKR & Co. Inc. Stockholders' Equity17,451,045 17,582,164 
Noncontrolling Interests (See Note 22)34,449,617 40,474,565 
Total Equity51,900,662 58,056,729 
Total Liabilities and Equity$266,248,640 $264,285,440 



See notes to financial statements.
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (Continued)
(Amounts in Thousands)
 
The following presents the portion of the consolidated balances provided in the consolidated statements of financial condition attributable to consolidated variable interest entities ("VIEs"). As of September 30, 2022 and December 31, 2021, KKR's consolidated VIEs consist primarily of (i) certain collateralized financing entities ("CFEs") holding collateralized loan obligations ("CLOs"), (ii) certain investment funds, and (iii) certain VIEs formed by Global Atlantic. The noteholders, creditors and equity holders of these VIEs have no recourse to the assets of any other KKR entity.

With respect to consolidated CLOs and certain investment funds, the following assets may only be used to settle obligations of these consolidated VIEs and the following liabilities are only the obligations of these consolidated VIEs and not generally to KKR. Additionally, KKR has no right to the benefits from, nor does KKR bear the risks associated with, the assets held by these VIEs beyond KKR's beneficial interest therein and any income generated from the VIEs. There are neither explicit arrangements nor does KKR hold implicit variable interests that would require KKR to provide any material ongoing financial support to the consolidated VIEs, beyond amounts previously committed to them, if any.

With respect to certain other VIEs consolidated by Global Atlantic, Global Atlantic has formed certain VIEs to hold investments, including fixed maturity securities, consumer and other loans, renewable energy, transportation and real estate. These VIEs issue beneficial interests primarily to Global Atlantic’s insurance companies.
September 30, 2022
 Consolidated CLOsConsolidated Funds and Other Investment VehiclesOther
VIEs
Total
Assets 
Asset Management
Cash and Cash Equivalents$732,922 $2,324,606 $— $3,057,528 
Restricted Cash and Cash Equivalents— 123,413 — 123,413 
Investments21,500,342 52,481,494 — 73,981,836 
Other Assets144,882 771,333 — 916,215 
22,378,146 55,700,846 — 78,078,992 
Insurance
Cash and Cash Equivalents— — 1,161,874 1,161,874 
Investments— — 24,215,391 24,215,391 
Accrued Investment Income— — 230,324 230,324 
Other Assets— — 2,164,350 2,164,350 
— — 27,771,939 27,771,939 
Total Assets$22,378,146 $55,700,846 $27,771,939 $105,850,931 
  
Liabilities 
Asset Management
Debt Obligations$21,118,566 $6,520,275 $— $27,638,841 
Accrued Expenses and Other Liabilities554,661 601,416 — 1,156,077 
21,673,227 7,121,691 — 28,794,918 
Insurance
Accrued Expenses and Other Liabilities— — 1,124,146 1,124,146 
Total Liabilities$21,673,227 $7,121,691 $1,124,146 $29,919,064 




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December 31, 2021
 Consolidated CLOsConsolidated Funds and Other Investment VehiclesOther
VIEs
Total
Assets 
Asset Management
Cash and Cash Equivalents$1,215,992 $1,085,958 $— $2,301,950 
Restricted Cash and Cash Equivalents— 90,255 — 90,255 
Investments22,076,809 46,780,595 — 68,857,404 
Other Assets173,329 641,946 — 815,275 
23,466,130 48,598,754 — 72,064,884 
Insurance
Cash and Cash Equivalents— — 1,406,974 1,406,974 
Investments— — 20,043,016 20,043,016 
Accrued Investment Income— — 100,693 100,693 
Other Assets— — 506,777 506,777 
— — 22,057,460 22,057,460 
Total Assets$23,466,130 $48,598,754 $22,057,460 $94,122,344 
Liabilities 
Asset Management
Debt Obligations$21,271,084 $6,291,292 $— $27,562,376 
Accrued Expenses and Other Liabilities1,367,778 691,288 — 2,059,066 
22,638,862 6,982,580 — 29,621,442 
Insurance
Accrued Expenses and Other Liabilities— — 594,946 594,946 
Total Liabilities$22,638,862 $6,982,580 $594,946 $30,216,388 

See notes to financial statements.
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenues
Asset Management
Fees and Other $673,929 $718,968 $2,069,704 $1,887,805 
Capital Allocation-Based Income (Loss)(572,863)1,526,667 (2,442,080)5,736,707 
101,066 2,245,635 (372,376)7,624,512 
Insurance
Net Premiums480,462 974,903 627,104 1,698,912 
Policy Fees320,206 310,381 964,349 824,326 
Net Investment Income1,094,877 758,381 2,839,371 1,919,659 
Net Investment-Related Gains (Losses)(173,830)162,127 (968,836)32,983 
Other Income35,632 31,938 102,888 82,160 
1,757,347 2,237,730 3,564,876 4,558,040 
Total Revenues1,858,413 4,483,365 3,192,500 12,182,552 
Expenses
Asset Management
Compensation and Benefits244,502 1,012,837 779,050 3,419,057 
Occupancy and Related Charges18,683 17,438 55,693 51,289 
General, Administrative and Other212,513 203,977 701,010 608,270 
475,698 1,234,252 1,535,753 4,078,616 
Insurance
Net Policy Benefits and Claims1,087,731 1,697,046 1,768,384 3,593,563 
Amortization of Policy Acquisition Costs8,222 (16,900)13,693 (57,409)
Interest Expense26,141 22,437 58,330 44,482 
Insurance Expenses158,280 89,534 406,088 242,591 
General, Administrative and Other178,443 158,873 516,549 371,656 
1,458,817 1,950,990 2,763,044 4,194,883 
Total Expenses1,934,515 3,185,242 4,298,797 8,273,499 
Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities(379,180)2,116,647 (1,350,388)8,032,900 
Dividend Income294,415 121,484 1,104,120 323,051 
Interest Income500,234 402,839 1,244,339 1,151,548 
Interest Expense(391,520)(278,166)(1,002,005)(794,978)
Total Investment Income (Loss)23,949 2,362,804 (3,934)8,712,521 
Income (Loss) Before Taxes(52,153)3,660,927 (1,110,231)12,621,574 
Income Tax Expense (Benefit)27,434 379,282 (128,836)1,161,688 
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Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net Income (Loss)(79,587)3,281,645 (981,395)11,459,886 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests 1,601 1,519 1,546 2,856 
Net Income (Loss) Attributable to Noncontrolling Interests(6,792)2,123,569 (41,341)7,315,362 
Net Income (Loss) Attributable to KKR & Co. Inc.(74,396)1,156,557 (941,600)4,141,668 
Series A Preferred Stock Dividends— — — 23,656 
Series B Preferred Stock Dividends— 7,953 — 12,991 
Series C Mandatory Convertible Preferred Stock Dividends17,250 17,250 51,750 51,750 
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders$(91,646)$1,131,354 $(993,350)$4,053,271 
Net Income (Loss) Attributable to KKR & Co. Inc.
Per Share of Common Stock
Basic$(0.11)$1.94 $(1.40)$6.98 
Diluted$(0.11)$1.80 $(1.40)$6.52 
Weighted Average Shares of Common Stock Outstanding
Basic859,833,444 583,030,506 711,908,107 580,742,033 
Diluted859,833,444 637,416,100 711,908,107 629,620,055 

See notes to financial statements.
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Amounts in Thousands)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net Income (Loss) $(79,587)$3,281,645 $(981,395)$11,459,886 
Other Comprehensive Income (Loss), Net of Tax:
Unrealized Gains (Losses) on Available-For-Sale Securities and Other(2,241,482)(141,762)(9,002,927)(338,067)
Foreign Currency Translation Adjustments(38,396)(12,873)(180,050)(24,365)
Comprehensive Income (Loss)(2,359,465)3,127,010 (10,164,372)11,097,454 
Comprehensive Income (Loss)
Attributable to Redeemable Noncontrolling Interests
1,601 1,519 1,546 2,856 
Comprehensive Income (Loss)
Attributable to Noncontrolling Interests
(822,333)2,037,025 (4,550,095)7,105,634 
Comprehensive Income (Loss) Attributable to KKR & Co. Inc.$(1,538,733)$1,088,466 $(5,615,823)$3,988,964 

 
See notes to financial statements.
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Amounts in Thousands, Except Share and Per Share Data)
Three Months Ended
September 30, 2022
Nine Months Ended
September 30, 2022
AmountsSharesAmountsShares
Series C Mandatory Convertible Preferred Stock
Beginning of Period$1,115,792 22,999,974 $1,115,792 23,000,000 
Conversion of Series C Mandatory Convertible Preferred Stock— — — (26)
End of Period1,115,792 22,999,974 1,115,792 22,999,974 
Series I Preferred Stock
Beginning of Period— — 
End of Period— — 
Series II Preferred Stock
Beginning of Period— — 2,587 258,726,163 
Cancellation of Series II Preferred Stock - Holdings Merger (See Note 1)— — (2,582)(258,259,143)
Cancellation of Series II Preferred Stock— — (5)(467,020)
End of Period— — — — 
Common Stock
Beginning of Period8,598 859,833,444 5,957 595,663,618 
Exchange of KKR Holdings Units— — 467,020 
Holdings Merger (See Note 1)— — 2,667 266,759,143 
Net Delivery of Common Stock— — 21 2,134,807 
     Conversion of Series C Mandatory Convertible Preferred Stock— — — 30 
Repurchases of Common Stock— — (52)(5,191,174)
End of Period8,598 859,833,444 8,598 859,833,444 
Additional Paid-In Capital
Beginning of Period15,948,026 8,997,435 
Exchange of KKR Holdings Units— 14,811 
Holdings Merger (See Note 1)— 8,131,679 
Tax Effects - Holdings Merger and Other (See Note 1)1,180 (1,064,790)
Net Delivery of Common Stock— (34,895)
Repurchases of Common Stock— (346,599)
Equity-Based Compensation66,439 166,167 
Change in KKR & Co. Inc.'s Ownership Interest— 151,837 
End of Period16,015,645 16,015,645 
Retained Earnings
Beginning of Period6,590,883 7,670,182 
Net Income (Loss) Attributable to KKR & Co. Inc.(74,396)(941,600)
Series C Mandatory Convertible Preferred Stock Dividends ($0.75 and $2.25 per share for the three and nine months ended September 30, 2022, respectively)
(17,250)(51,750)
Common Stock Dividends ($0.155 and $0.455 per share for the three and nine months ended September 30, 2022, respectively)
(133,274)(310,869)
End of Period6,365,963 6,365,963 
Accumulated Other Comprehensive Income (Loss) (net of tax)
Beginning of Period(4,590,616)(209,789)
Other Comprehensive Income (Loss)(1,464,337)(4,674,223)
Exchange of KKR Holdings Units— (1,946)
Holdings Merger (See Note 1)— (1,172,442)
Change in KKR & Co. Inc.'s Ownership Interest— 3,447 
End of Period(6,054,953)(6,054,953)
Total KKR & Co. Inc. Stockholders' Equity17,451,045 17,451,045 
Noncontrolling Interests (See Note 22)34,449,617 34,449,617 
Total Equity$51,900,662 $51,900,662 
Redeemable Noncontrolling Interests (See Note 23)$82,133 $82,133 
See notes to financial statements.
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Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
AmountsSharesAmountsShares
Series A and B Preferred Stock
Beginning of Period$149,566 6,200,000 $482,554 20,000,000 
Redemption of Series A Preferred Stock— — (332,988)(13,800,000)
Redemption of Series B Preferred Stock(149,566)(6,200,000)(149,566)(6,200,000)
End of Period— — — — 
Series C Mandatory Convertible Preferred Stock
Beginning of Period1,115,792 23,000,000 1,115,792 23,000,000 
End of Period1,115,792 23,000,000 1,115,792 23,000,000 
Series I Preferred Stock
Beginning of Period— — 
End of Period— — 
Series II Preferred Stock
Beginning of Period2,710 271,027,751 2,756 275,626,493 
Cancellation of Series II Preferred Stock— — (46)(4,598,742)
End of Period2,710 271,027,751 2,710 271,027,751 
Common Stock
Beginning of Period5,830 583,030,973 5,729 572,893,738 
Private Placement Share Issuance— — 964,871 
Exchange of KKR Holdings Units— — 46 4,598,742 
Net Delivery of Common Stock— — 73 7,249,400 
Clawback of Transfer Restricted Shares— (4,294)— (12,077)
Repurchases of Common Stock— — (27)(2,667,995)
End of Period5,830 583,026,679 5,830 583,026,679 
Additional Paid-In Capital
Beginning of Period8,700,224 8,687,817 
Private Placement Share Issuance— 38,454 
Exchange of KKR Holdings Units— 125,188 
Tax Effects - Exchange of KKR Holdings Units and Other(6,038)(1,623)
Net Delivery of Common Stock— (106,987)
Repurchases of Common Stock— (135,903)
Equity-Based Compensation41,491 128,731 
End of Period8,735,677 8,735,677 
Retained Earnings
Beginning of Period6,200,585 3,440,782 
Net Income (Loss) Attributable to KKR & Co. Inc.1,156,557 4,141,668 
Series A Preferred Stock Dividends ($0.00 and $0.843750 per share for the three and nine months ended September 30, 2021, respectively)
— (11,644)
Redemption of Series A Preferred Stock— (12,012)
Series B Preferred Stock Dividends ($0.406250 and $1.218750 per share for the three and nine months ended September 30, 2021, respectively)
(2,519)(7,557)
Redemption of Series B Preferred Stock(5,434)(5,434)
Series C Mandatory Convertible Preferred Stock Dividends ($0.75 and $2.25 per share for the three and nine months ended September 30, 2021, respectively)
(17,250)(51,750)
Common Stock Dividends ($0.145 and $0.425 per share for the three and nine months ended September 30, 2021, respectively)
(84,539)(246,653)
End of Period7,247,400 7,247,400 
Accumulated Other Comprehensive Income (Loss) (net of tax)
Beginning of Period(106,348)(18,612)
Other Comprehensive Income (Loss)(68,091)(152,704)
Exchange of KKR Holdings Units— (3,123)
End of Period(174,439)(174,439)
Total KKR & Co. Inc. Stockholders' Equity16,932,970 16,932,970 
Noncontrolling Interests (See Note 22)40,031,244 40,031,244 
Total Equity$56,964,214 $56,964,214 
Redeemable Noncontrolling Interests (See Note 23)$93,339 $93,339 
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Thousands)
 Nine Months Ended September 30,
20222021
Operating Activities
Net Income (Loss)$(981,395)$11,459,886 
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Equity-Based and Other Non-Cash Compensation559,621 296,323 
Net Realized (Gains) Losses - Asset Management(1,158,582)(1,532,956)
Change in Unrealized (Gains) Losses - Asset Management 2,508,970 (6,499,944)
Capital Allocation-Based (Income) Loss - Asset Management 2,442,080 (5,736,707)
Net Realized (Gains) Losses - Insurance 235,888 642,557 
Net Accretion and Amortization330,781 324,692 
Interest Credited to Policyholder Account Balances (net of Policy Fees) - Insurance1,009,636 938,415 
Other Non-Cash Amounts37,268 101,904 
Cash Flows Due to Changes in Operating Assets and Liabilities:
Reinsurance Transactions and Acquisitions, Net of Cash Provided - Insurance715,716 1,041,130 
Change in Premiums, Notes Receivable and Reinsurance Recoverable, Net of Reinsurance Premiums Payable - Insurance 795,488 435,715 
Change in Deferred Policy Acquisition Costs - Insurance (368,144)(307,031)
Change in Policy Liabilities and Accruals, Net - Insurance (286,072)(583,875)
Change in Consolidation (66,593)(24,183)
Change in Due from / to Affiliates(163,667)(243,120)
Change in Other Assets1,462,938 669,361 
Change in Accrued Expenses and Other Liabilities(2,783,578)2,608,487 
Investments Purchased - Asset Management(32,517,281)(55,435,501)
Proceeds from Investments - Asset Management23,595,202 48,286,348 
Net Cash Provided (Used) by Operating Activities(4,631,724)(3,558,499)
Investing Activities
Acquisition of Global Atlantic, Net of Cash Acquired (See Note 3)— (473,779)
Acquisition of KJRM, Net of Cash Acquired (See Note 3)(1,690,702)— 
Purchases of Fixed Assets(58,584)(82,515)
Investments Purchased - Insurance(37,207,043)(38,215,238)
Proceeds from Investments - Insurance 28,301,478 32,463,286 
Other Investing Activities, Net - Insurance(26,311)(708,992)
Net Cash Provided (Used) by Investing Activities(10,681,162)(7,017,238)
Financing Activities
Series A and B Preferred Stock Dividends— (19,201)
Series C Mandatory Convertible Preferred Stock Dividends(51,750)(51,750)
Common Stock Dividends(310,869)(246,653)
Distributions to Redeemable Noncontrolling Interests(1,905)(1,362)
Distributions to Noncontrolling Interests(5,759,604)(3,975,764)
Contributions from Noncontrolling Interests11,033,195 8,875,106 
Redemption of Series A and B Preferred Stock— (500,000)
Net Delivery of Common Stock (Equity Incentive Plans) (34,874)(106,914)
Repurchases of Common Stock(346,651)(135,930)
Private Placement Share Issuance— 38,463 
Proceeds from Debt Obligations17,191,850 20,615,117 
Repayment of Debt Obligations(12,328,191)(13,881,246)
Financing Costs Paid(32,559)(93,914)
Additions to Contractholder Deposit Funds - Insurance16,629,841 11,331,510 
Withdrawals from Contractholder Deposit Funds - Insurance(9,863,212)(6,264,316)
Reinsurance Transactions, Net of Cash Provided - Insurance54,749 524,724 
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 Nine Months Ended September 30,
20222021
Other Financing Activity, Net - Insurance471,007 18,244 
Net Cash Provided (Used) by Financing Activities16,651,027 16,126,114 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(234,580)(31,022)
Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash$1,103,561 $5,519,355 
Cash, Cash Equivalents and Restricted Cash, Beginning of Period10,526,304 6,993,457 
Cash, Cash Equivalents and Restricted Cash, End of Period$11,629,865 $12,512,812 
Cash, Cash Equivalents and Restricted Cash are comprised of the following:
Beginning of the Period
Asset Management
Cash and Cash Equivalents$6,699,668 $6,507,874 
Restricted Cash and Cash Equivalents134,298 485,583 
Total Asset Management6,833,966 6,993,457 
Insurance
Cash and Cash Equivalents$3,391,934 $— 
Restricted Cash and Cash Equivalents300,404 — 
Total Insurance3,692,338 — 
Cash, Cash Equivalents and Restricted Cash, Beginning of Period$10,526,304 $6,993,457 
End of the Period
Asset Management
Cash and Cash Equivalents$6,911,691 $7,256,382 
Restricted Cash and Cash Equivalents201,194 140,618 
  Total Asset Management7,112,885 7,397,000 
Insurance
Cash and Cash Equivalents$4,147,146 $4,717,240 
Restricted Cash and Cash Equivalents369,834 398,572 
  Total Insurance4,516,980 5,115,812 
Cash, Cash Equivalents and Restricted Cash, End of Period$11,629,865 $12,512,812 
 
See notes to financial statements.
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KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(Amounts in Thousands)
 Nine Months Ended September 30,
 20222021
Supplemental Disclosures of Cash Flow Information  
Payments for Interest$1,112,596 $876,412 
Payments for Income Taxes$556,195 $463,983 
Payments for Operating Lease Liabilities$37,533 $35,124 
Supplemental Disclosures of Non-Cash Investing and Financing Activities 
Equity-Based and Other Non-Cash Contributions$459,327 $235,381 
Non-Cash Contribution from Noncontrolling Interests$84,786 $845,943 
Debt Obligations - Net Gains (Losses), Translation and Other$3,056,342 $272,410 
Holdings Merger (See Note 1)$6,959,322 $— 
Tax Effects - Exchange of KKR Holdings L.P. Units and Other (See Note 1)$(1,064,790)$(1,623)
Right-of-Use Assets obtained in Exchange for new Operating Lease Liabilities$47,032 $44,754 
Investments Acquired through Reinsurance Agreements$2,697,956 $16,133,534 
Policyholder Liabilities and Accruals Acquired through Reinsurance Agreements$965,829 $3,455,904 
Contractholder Deposit Funds Acquired through Reinsurance Agreements$2,544,504 $14,809,751 
Change in Consolidation
Investments$(57,440)$(64,957)
Due From Affiliates$— $(3,735)
Other Assets$(59,675)$(46,352)
Debt Obligations$(50,339)$(26,165)
Due to Affiliates$(174)$(238)
Accrued Expenses and Other Liabilities$(4,162)$(11,626)
Noncontrolling Interests$— $(78,840)
 
See notes to financial statements.

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KKR & CO. INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(All Amounts in Thousands, Except Share and Per Share Data, and Except Where Noted)

1. ORGANIZATION
 
KKR & Co. Inc. (NYSE: KKR), through its subsidiaries (collectively, "KKR"), is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of The Global Atlantic Financial Group LLC ("TGAFG" and, together with its subsidiaries, "Global Atlantic").

KKR & Co. Inc. is the parent company of KKR Group Co. Inc., which in turn owns KKR Group Holdings Corp., which is the general partner of KKR Group Partnership L.P. ("KKR Group Partnership"). KKR & Co. Inc. both indirectly controls KKR Group Partnership and indirectly holds Class A partner interests in KKR Group Partnership ("KKR Group Partnership Units") representing economic interests in KKR's business. As of September 30, 2022, KKR & Co. Inc. held indirectly approximately 99.7% of the KKR Group Partnership Units. The remaining balance is held indirectly by KKR employees through securities representing an ownership interest in KKR Group Partnership Units, which may be exchanged for shares of common stock of KKR & Co. Inc. ("exchangeable securities"). KKR Group Partnership also has outstanding limited partner interests that provide for a carry pool and preferred units with economic terms that mirror the Series C Mandatory Convertible Preferred Stock issued by KKR & Co. Inc.

References to "KKR" in these financial statements refer to KKR & Co. Inc. and its subsidiaries, including Global Atlantic, unless the context requires otherwise, especially in sections where "KKR" is intended to refer to the asset management business only. References in these financial statements to "principals" are to KKR's current and former employees who held interests in KKR's business through KKR Holdings prior to the Reorganization Mergers (as defined below). References to "Global Atlantic" in these financial statements includes the insurance companies of Global Atlantic, which are consolidated by KKR.

Reorganization Agreement

On October 8, 2021, KKR entered into a Reorganization Agreement (the "Reorganization Agreement") with KKR Holdings L.P. ("KKR Holdings"), KKR Management LLP, KKR Associates Holdings L.P., and the other parties thereto. Pursuant to the Reorganization Agreement, the parties agreed to undertake a series of integrated transactions to effect a number of transformative structural and governance changes, some of which were completed on May 31, 2022, and other changes to be completed in the future.

On May 31, 2022, KKR completed the merger transactions ("Reorganization Mergers") contemplated by the Reorganization Agreement pursuant to which KKR acquired KKR Holdings (which changed its name to KKR Group Holdings L.P.) and all of the KKR Group Partnership Units held by it. In addition, pursuant to the Reorganization Mergers, on May 31, 2022:

i.KKR Aubergine Inc. ("New Parent"), a newly formed entity to effect the Reorganization Mergers, became the successor to KKR & Co. Inc. ("Old Parent") and the new parent company of KKR's business,

ii.New Parent changed its name to KKR & Co. Inc., and Old Parent changed its name to KKR Group Co. Inc.,

iii.all holders of common stock of Old Parent and all limited partners of KKR Holdings received shares, on a one-for-one basis, of the same common stock of New Parent, which remain listed on the New York Stock Exchange ("NYSE"),

iv.limited partners of KKR Holdings were issued 8.5 million shares of common stock of New Parent,

v.the Series I Preferred Stock and Series C Mandatory Convertible Preferred Stock were exchanged for identical securities of New Parent, and Old Parent’s Series II Preferred Stock was canceled, and

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vi.KKR's tax receivable agreement with KKR Holdings was terminated other than with respect to exchanges of KKR Holdings units prior to the closing of the Reorganization Mergers.

Pursuant to the Reorganization Agreement, the following transactions will occur in the future on the Sunset Date (as defined below):

i.the control of New Parent by KKR Management LLP and the Series I Preferred Stock held by it will be eliminated,

ii.the voting rights for all common stock, including with respect to the election of directors, will be established on a one vote per share basis, and

iii.KKR will acquire control of KKR Associates Holdings L.P., the entity providing for the allocation of carry proceeds to KKR employees, also known as the carry pool.

The “Sunset Date” will be the earlier of (i) December 31, 2026 and (ii) the six-month anniversary of the first date on which the death or permanent disability of both Mr. Henry Kravis and Mr. George Roberts (collectively, "Co-Founders") has occurred (or any earlier date consented to by KKR Management LLP in its sole discretion). In addition, KKR Management LLP agreed not to transfer its ownership of the sole share of Series I Preferred Stock, and, the changes to occur effective on the Sunset Date are unconditional commitments of the parties to the Reorganization Agreement.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements of KKR & Co. Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to this Quarterly Report on Form 10-Q. The condensed consolidated financial statements (referred to hereafter as the "financial statements"), including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the financial statements are presented fairly and that estimates made in preparing the financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The consolidated balance sheet data as of December 31, 2021 were derived from audited financial statements included in KKR & Co. Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2022 (our "Annual Report"), and the financial statements should be read in conjunction with the audited financial statements included therein. Additionally, in the accompanying financial statements, the condensed consolidated statements of financial condition are referred to hereafter as the "consolidated statements of financial condition" the condensed consolidated statements of operations are referred to hereafter as the "consolidated statements of operations" the condensed consolidated statements of comprehensive income (loss) are referred to hereafter as the "consolidated statements of comprehensive income (loss)" the condensed consolidated statements of changes in equity and redeemable non-controlling interests are referred to hereafter as the "consolidated statements of changes in equity" and the condensed consolidated statements of cash flows are referred to hereafter as the "consolidated statements of cash flows."

KKR consolidates the financial results of KKR Group Partnership and its consolidated entities, which include the accounts of KKR's investment management and capital markets companies, the general partners of certain unconsolidated investment funds, general partners of consolidated investment funds and their respective consolidated investment funds, Global Atlantic’s insurance companies and certain other entities including CFEs.

The presentations in the consolidated statement of financial condition and consolidated statement of operations reflect the significant industry diversification of KKR by its acquisition of Global Atlantic. Global Atlantic operates an insurance business, and KKR operates an asset management business, each of which possess distinct characteristics. As a result, KKR developed a two-tiered approach for the financial statements presentation, where Global Atlantic's insurance operations are presented separately from KKR's asset management business. KKR believes that these separate presentations provide a more informative view of the consolidated financial position and results of operations than traditional aggregated presentations and that reporting Global Atlantic’s insurance operations separately is appropriate given, among other factors, the relative significance of Global Atlantic’s policy liabilities, which are not obligations of KKR (other than the insurance companies that issued them). If a traditional aggregate presentation were to be used, KKR would expect to eliminate or combine several identical or similar captions, which would condense the presentations, but would also reduce the level of information presented. KKR also believes that using a traditional aggregate presentation would result in no new line items compared to the two-tier presentation included in the financial statements in this report.

In the ordinary course of business, KKR’s Asset Management business and Global Atlantic enter into transactions with each other, which may include transactions pursuant to their investment management agreements and financing arrangements. The borrowings from these financing arrangements are non-recourse to KKR beyond the assets pledged to support such borrowings. All the investment management and financing arrangements between KKR's Asset Management business and Global Atlantic are eliminated in consolidation; however, KKR's allocated share of the net income from the consolidation of Global Atlantic is increased by the amount of fees earned from and decreased by the amount of interest expense incurred from noncontrolling interest holders in Global Atlantic. Accordingly, the elimination of these fees and interest impacts the net income (loss) attributable to KKR and KKR stockholders' equity for the pro-rata ownership of the noncontrolling interests in Global Atlantic.

All intercompany transactions and balances have been eliminated.

For a detailed discussion about KKR’s significant accounting policies and for further information on accounting updates adopted in the prior year, see Note 2 to the financial statements in the 2021 Form 10-K. During the nine months ended September 30, 2022, there were no significant updates to KKR’s significant accounting policies.

Use of Estimates
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The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and investment income (loss) during the reporting periods. Such estimates include but are not limited to (i) the valuation of investments and financial instruments, (ii) the determination of the income tax provision, (iii) the impairment of goodwill and intangible assets, (iv) the impairment of available-for-sale investments, (v) the valuation of insurance policy liabilities, (vi) the valuation of embedded derivatives, (vii) the determination of the allowance for loan losses, and (viii) amortization of deferred revenues and expenses associated with the insurance business. Certain events particular to each industry and country in which the portfolio companies conduct their operations, as well as general economic, political, regulatory and public health conditions, may have a significant negative impact on KKR’s investments and profitability. Such events are beyond KKR’s control, and the likelihood that they may occur and the effect on KKR's use of estimates cannot be predicted. Actual results could differ from those estimates, and such differences could be material to the financial statements.

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in connection with an acquisition. Goodwill is assessed for impairment annually in the third quarter of each fiscal year or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets in the accompanying consolidated statements of financial condition.

In accordance with GAAP, KKR has the option to either (i) perform a quantitative impairment test or (ii) first perform a qualitative assessment (commonly known as "step zero") to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, in which case the quantitative test would then be performed. When performing a quantitative impairment test, KKR compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the goodwill impairment loss is equal to the excess of the carrying value over the fair value, limited to the carrying amount of goodwill allocated to that reporting unit. The estimated fair values of the reporting units are derived based on valuation techniques KKR believes market participants would use for each respective reporting unit. The estimated fair values are generally determined by utilizing a discounted cash flow methodology and methodologies that incorporate market multiples of certain comparable companies.

KKR tests goodwill for impairment at the reporting unit level, which is generally at the level of or one level below its reportable segments. Goodwill recorded as a result of the acquisition of Global Atlantic has been allocated to the insurance segment, and goodwill recorded as a result of the acquisition of KJRM has been allocated to the asset management segment.

During the third quarter of 2022, KKR performed its annual impairment analysis for the goodwill recorded at the asset management and insurance reporting units.

KKR elected to perform step zero for the purposes of its impairment analysis for the goodwill recorded at the asset management reporting unit. Based upon this assessment, KKR determined that it is more likely than not that the fair value of the reporting unit exceeds its carrying value. Factors considered in the qualitative assessment included macroeconomic conditions, industry and market considerations, cost factors, current and projected financial performance, changes in management or strategy and market capitalization and the acquisition of KJRM.

Based on the qualitative assessment and given the insurance reporting unit has a negative carrying value as of September 30, 2022, the goodwill recorded at the insurance reporting unit was not subject to impairment because the amount of goodwill impairment is calculated under ASC 350, Intangibles – Goodwill and Other based on the excess of the carrying value of a reporting unit to its fair value. The negative carrying value was primarily due to unrealized losses on Global Atlantic's available-for-sale fixed maturity investment portfolio. Global Atlantic does not expect these unrealized losses to be realized as it intends to hold these investments until recovery of the losses, which may be at maturity, as part of its asset liability cash-flow matching strategy. As of September 30, 2022, the amount of goodwill allocated to the insurance reporting unit was $501.5 million.

Additionally, during the third quarter of 2022, KKR performed its first annual impairment analysis on KJRM’s investment management contracts recorded at KKR’s asset management business, which were determined to have indefinite useful lives and are not subject to amortization. KKR elected to perform a qualitative assessment for the purposes of its impairment analysis. Based upon this assessment, KKR determined that it is more likely than not that the fair value of the KJRM investment management contracts exceeded their carrying value. Factors considered in the qualitative assessment included macroeconomic conditions, industry and market considerations, cost factors, current and projected financial performance.

For additional details on the Global Atlantic and KJRM acquisitions see Note 3 "Acquisitions."
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Adoption of new accounting pronouncements

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and related regulatory actions

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The provisions of the CARES Act, as amended by the Consolidated Appropriations Act, also permit financial institutions to suspend requirements under U.S. GAAP for loan modifications that otherwise would be categorized as troubled debt restructurings ("TDRs") if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan, provided the modifications are made between March 1, 2020 and the earlier of 60 days after the end of the national emergency related to the COVID-19 pandemic or January 1, 2022. Global Atlantic has applied this guidance before the permitted suspension period expired on January 1, 2022 to loan forbearance requests that meet the requirements. The application of this guidance did not have a material impact on the financial statements.

See Note 8 "Investments" for additional information on loan modifications.

Simplifying the accounting for income taxes

On December 18, 2019, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2019-12, which modifies ASC 740 to simplify the accounting for income taxes. This guidance eliminates the exceptions to the incremental approach, to accounting for basis differences when there are changes in ownership of foreign investments, and to interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance also simplifies the application of tax guidance related to franchise taxes, transactions with government entities, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The guidance is effective for public business entities that meet the definition of an SEC filer for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. KKR adopted the standard effective January 1, 2021. The adoption of this new guidance did not have a material impact on the financial statements.

Reference rate reform

In March 2020, the FASB issued new guidance to ease the accounting implications of the transition away from the London Interbank Offering Rate ("LIBOR") and other reference rates which are scheduled to be discontinued, including LIBOR tenors after June 30, 2023. The new guidance offers a variety of optional expedients and exceptions related to accounting for contract modifications and hedging relationships. These expedients and exceptions apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The new guidance is effective for contract modifications made and hedging relationships existing or entered into from January 1, 2020 through December 31, 2022. In the first quarter 2022, KKR elected to adopt the new guidance and, for the modifications that have occurred to date, the adoption of the guidance has not had a material impact on KKR’s consolidated financial statements.

Future application of accounting standards

Targeted improvements to the accounting for long-duration contracts

In August 2018, the FASB issued new guidance for insurance and reinsurance companies that issue long-duration contracts such as life insurance and annuities. The objective of this guidance is to improve, simplify and enhance the financial reporting of long-duration contracts by providing financial statement users with useful information in a timely and transparent manner. The primary changes include:

(1) more timely recognition of assumption changes in the liability for future policy benefits and use of a current rate for the discounting of future cash flows – The assumptions used to calculate the liability for future policy benefits on traditional and limited-payment contracts are required to be reviewed and updated periodically (versus set at inception and not changed under
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the current guidance). Cash flow assumptions are required to be reviewed at least annually with the impact recognized in net income. The guidance also prescribes that the discount rate assumption should be based on a current upper-medium grade (i.e., low credit risk) fixed income instrument yield (e.g., a single A credit-rating) with the impact recognized in other comprehensive income ("OCI").

(2) standardization and improvement in the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts The new guidance creates a new category of benefits referred to as market risk benefits, which are contracts or contract features that provide both protection to the policyholder from capital market risk and expose the insurer to other-than-nominal capital market risk. Market risk benefits are required to be measured at fair value with the change in fair value recognized in net income, except for changes in the entity’s non-performance risk, which is recognized in OCI.

(3) simplification of the amortization of deferred acquisition costs - Deferred policy acquisition costs ("DAC") and other similar actuarial balances (e.g., deferred sales inducements) for life and annuity contracts are required to be amortized on a constant basis over the term of the related contracts.

(4) enhanced disclosures Additional disclosures are required including disaggregated roll-forwards of significant insurance liabilities as well as disclosures about significant inputs, judgments, assumptions and methods used in measurement.

The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. For changes related to the liability for future policy benefits and deferred acquisition costs, the new guidance requires adoption using a modified retrospective approach upon transition with an option to elect a retrospective approach. For changes related to market risk benefits, the new guidance requires a retrospective approach.

KKR intends to implement this guidance using the retrospective approach for the liability for future policy benefits, deferred acquisition costs and market risk benefits with an adoption date of January 1, 2023, and a transition date of January 1, 2021. KKR has completed the design, planning, and build phases of its implementation effort and is performing end-to-end testing activities. KKR has established a governance framework to manage the implementation activities and support timely application of the guidance. KKR has made progress in the following areas:

High level impact assessment;

Identification of key accounting policy decisions;

Evaluation and selection of actuarial system solutions;

Development of detailed business requirements document inclusive of roll-forward disclosures;

Infrastructure build and data mapping;

Actuarial model development for the liability for future policy benefits, deferred acquisition costs and roll forwards; and

Modeling of market risk benefits.

KKR does not expect the adoption of this guidance to have a material effect on retained earnings and accumulated other comprehensive income (loss) as of our transition date (applied retrospectively to the acquisition date of February 1, 2021) due to the purchase accounting associated with KKR's acquisition of Global Atlantic on February 1, 2021. However, KKR continues to evaluate the impact of this guidance on the acquisition date opening balance sheet and periods after the transition date. The new guidance is expected to increase volatility in our financial statements primarily due to the requirement to measure market risk benefits at fair value, which is recorded in net income, except for changes in value attributable to changes in an entity’s non-performance risk, which is recognized in OCI. In addition, the new guidance is expected to have a significant impact on KKR’s systems, processes and controls.

Business combinations - Accounting for contract assets and contract liabilities from contracts with customers

In October 2021, the FASB issued new guidance (ASU 2021-08) to add contract assets and contract liabilities from contracts with customers acquired in a business combination to the list of exceptions to the fair value recognition and measurement principles that apply to business combinations, and instead require them to be accounted for in accordance with revenue recognition guidance. The new guidance is effective for public entities on January 1, 2023 and applied prospectively,
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with early adoption permitted. KKR is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Troubled debt restructurings and vintage disclosures

In March 2022, the FASB issued new guidance regarding the modification of receivables, which affects their recognition and measurement. The guidance eliminates the concept of troubled debt restructurings and instead requires all modifications to be analyzed to determine whether they result in a new receivable or a continuation of an existing receivable. The guidance also makes related updates to the measurement of expected credit losses for receivables. The new guidance requires additional disclosures for receivable modifications involving borrowers experiencing financial difficulty as well as disclosure of loan charge-offs by origination year (vintage). For entities that have already adopted ASC 326 (addressing credit losses on financial instruments), the guidance is effective for fiscal years beginning after December 15, 2022, including interim period within those fiscal years. Early adoption is permitted. KKR is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Fair value measurement of equity security subject to contractual sale restriction

In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. According to ASU 2022-03, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value and an entity is not allowed to recognize a contractual sale restriction as a separate unit of account.
ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. KKR is currently evaluating the impact of this accounting standard update on its consolidated financial statements.


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3. ACQUISITIONS

Acquisition of Mitsubishi Corp-UBS Realty Inc.

On March 17, 2022, KKR entered into an agreement to acquire all of the outstanding shares of Mitsubishi Corp.-UBS Realty Inc. (“MC-UBSR”) from Mitsubishi Corporation and UBS Asset Management in an all-cash transaction valued at ¥227 billion (which was approximately $1.7 billion at such time) (the “KJRM Acquisition”). On April 28, 2022, KKR completed the acquisition of MC-UBSR, which changed its name to KJR Management ("KJRM"). KJRM is a real estate asset manager in Japan that manages two Tokyo Stock Exchange-listed real estate investment trusts ("REITs"): Japan Metropolitan Fund Investment Corporation (“JMF”), which is primarily focused on retail, offices, hotels and other assets located in urban areas in Japan, and Industrial & Infrastructure Fund Investment Corporation (“IIF”), which is primarily focused on industrial and infrastructure properties in Japan. The KJRM Acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations ("Topic 805").

KKR plans to continue the existing strategy and business of KJRM. The acquisition is expected to enhance KJRM’s leading real estate asset management business with potential opportunities for organic and inorganic growth and scale in Japan.

In connection with the acquisition, KKR allocated a provisional amount of $1,733 million to the fair value of KJRM’s investment management contracts and recognized approximately $530 million of deferred tax liabilities resulting from the difference in book and tax basis of such intangible assets as of the acquisition date. Intangibles are based upon third-party valuations using the excess earnings method, which derives value based on the present value of the cash flow attributable to the investment management contracts, less returns for contributory assets. The significant assumptions used in the valuation of the intangible assets acquired are unobservable and include (i) the asset's estimated useful life, (ii) the projected assets under management, (iii) the projected revenue growth rates, and (iv) the discount rate.

KJRM’s investment management contracts were determined to have indefinite useful lives at the time of the KJRM Acquisition and are not subject to amortization. The assignment of indefinite lives to such investment management contracts is primarily based upon (i) the assumption that there is no foreseeable limit on the contract period to manage KJRM’s listed REITs; (ii) KKR expects to have the ability to continue to operate these products indefinitely; (iii) the products have multiple investors and are not reliant on a single investor or small group of investors for their continued operation; (iv) current competitive factors and economic conditions do not indicate a finite life; and (v) there is a high likelihood of continued renewal based on historical experience.

The carrying value of goodwill associated with the KJRM Acquisition was $509 million as of the acquisition date and is entirely allocated to the asset management segment. The goodwill is attributable primarily to the assembled workforce of KJRM and expected synergies. The goodwill recorded is not expected to be deductible for tax purposes.

The fair value of assets acquired and liabilities assumed represent a provisional allocation as our evaluation of facts and circumstances available as of April 28, 2022 is ongoing. Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any changes to the provisional values of assets acquired and liabilities assumed that occur in subsequent periods. Rather, KKR will recognize any adjustments as we obtain information not available as of the completion of this preliminary fair value calculation. KKR will also be required to record, in the same period as the financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. KKR expects to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Revenues and earnings for three and nine months ended September 30, 2022 attributable to KJRM after the completion of the KJRM Acquisition were determined to be immaterial. Pro forma results of operations would not be materially different as a result of the acquisition and therefore are not presented.


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Acquisition of Global Atlantic

On July 7, 2020, indirect subsidiaries of KKR & Co. Inc., namely Magnolia Parent LLC and Magnolia Merger Sub Limited, entered into an Agreement and Plan of Merger (the “GA Merger Agreement”) with Global Atlantic Financial Group Limited ("GAFG"), Global Atlantic Financial Life Limited ("GAFLL"), LAMC LP, and Goldman Sachs & Co. LLC, solely in its capacity as the Equity Representative (as defined in the GA Merger Agreement). Pursuant to the GA Merger Agreement, at the closing of the acquisition of Global Atlantic by KKR (the "GA Acquisition"), among other things, Global Atlantic Financial Group Limited continued as the surviving entity in its merger with Magnolia Merger Sub Limited and became a direct subsidiary of Magnolia Parent LLC, which subsequently changed its name to The Global Atlantic Financial Group LLC (“TGAFG”).

On February 1, 2021 (the “GA Acquisition Date”), the GA Acquisition was completed, and KKR acquired all of the voting interests in Global Atlantic and an economic ownership of 61.1% of Global Atlantic prior to certain post-closing purchase price adjustments discussed below and after taking into account GA Rollover Investors’ and GA Co-Investors’ (each as defined below) equity ownership of Global Atlantic. In addition to entering into the retirement and life insurance business through KKR's indirect ownership of Global Atlantic's insurance companies, KKR's flagship investment management company became the investment adviser for Global Atlantic’s insurance companies, which increases KKR’s presence in the insurance community. Furthermore, the transaction allows Global Atlantic to gain access to KKR’s origination and asset management capabilities.

Under the GA Merger Agreement, KKR agreed to pay former shareholders of Global Atlantic Financial Group Limited an amount in cash equal to 1.0x U.S. GAAP Shareholders’ Equity of Global Atlantic Financial Group Limited, excluding Accumulated Other Comprehensive Income and subject to certain other purchase price adjustments ("GA Book Value," determined as $4.7 billion as of February 1, 2021 for purposes of the purchase price determination). The amount of consideration payable by KKR was reduced by the amount of equity rolled over by certain former shareholders of Global Atlantic Financial Group Limited who elected to continue their equity ownership in Global Atlantic at closing ("GA Rollover Investors"). In addition, KKR syndicated equity interests in Global Atlantic to minority co-investors ("GA Co-Investors"), which also had the effect of reducing the amount of consideration payable by KKR at closing. The purchase price is as follows (in thousands):

Cash consideration paid by KKR$2,914,455 
GA Co-Investors and GA Rollover Investors1,824,239 
Total Purchase Price $4,738,694 

The purchase price paid at closing was subject to certain post-closing adjustments, which were finalized in June 2021, and KKR and certain GA Co-Investors paid incremental amounts of $55 million and $3 million, respectively ($58 million in total). As a result of the post-closing adjustments, KKR's economic ownership of Global Atlantic increased from 61.1% at closing to 61.5%.

The GA Acquisition was accounted for as a business combination under Topic 805. Goodwill of $497.1 million has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired less the amounts attributable to noncontrolling interests. Goodwill is primarily attributable to the scale, skill sets, operations, and synergies that can be achieved subsequent to the GA Acquisition. The goodwill recorded is not expected to be deductible for tax purposes and it has been allocated to the insurance segment.


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The following table summarizes the fair value amounts recognized for the assets acquired and liabilities assumed and resulting goodwill as of the GA Acquisition Date:

February 1, 2021
($ in thousands)
Consideration Transferred
Cash Consideration paid by KKR$2,914,455 
GA Co-Investors978,296 
GA Rollover Investors845,943 
Settlement of pre-existing relationships(1)
(60,200)
Total Consideration Transferred(2)
$4,678,494 
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash, Cash Equivalents and Restricted Cash$3,358,772 
Investments 99,544,755 
Reinsurance Recoverable 15,753,030 
Insurance Intangible Assets1,024,520 
Other Assets(3)
3,325,652 
Separate Account Assets5,371,060 
Policy Liabilities(100,374,765)
Debt Obligations(1,450,920)
Funds Withheld Payable at Interest(13,800,969)
Accrued Expenses and Other Liabilities(2,735,811)
Reinsurance Liabilities(180,573)
Separate Account Liabilities(5,371,060)
Total Identifiable Net Assets 4,463,691 
Redeemable non-controlling interests(4)
(91,845)
Other Noncontrolling interests(4)
(190,405)
Goodwill $497,053 

(1)    Represents KKR debt obligations held by Global Atlantic at the GA Acquisition Date.
(2)    At the GA Acquisition Date, the transaction was funded with a combination of (i) cash on hand by KKR, (ii) cash proceeds from syndication of the equity interests in Global Atlantic to minority co-investors and equity rolled over from certain former Global Atlantic shareholders. The equity held by GA co-investors and rollover investors are presented as noncontrolling interests in the financial statements. Acquisition of Global Atlantic, Net of Cash Acquired in the consolidated statements of cash flows represents the Total Consideration Transferred (excluding GA Rollover Investors) net of acquired Cash and Cash Equivalents and Restricted Cash and Cash Equivalents.
(3)    Includes $1.0 billion of deferred tax assets recognized from the step-up in basis under purchase accounting.
(4)    Represents the fair value of Noncontrolling Interests in consolidated renewable energy entities held by Global Atlantic on the GA Acquisition Date. Such interests do not represent ownership interests held by GA Rollover Investors or GA Co-Investors in Global Atlantic's equity.

Measurement Period Adjustments
KKR finalized the valuation of the acquired assets and assumed liabilities in December 2021. During the second quarter of 2021, KKR recognized measurement period adjustments to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period adjustments also reflected the increase in the total consideration transferred of $58 million as a result of final purchase price adjustments. Measurement period adjustments consist primarily of a $50 million increase in the value of distribution agreements acquired, a $63 million increase in policy liabilities, a $25 million increase in investments, and a $46 million increase in goodwill. The related impact to net income that would have been recognized in previous periods if the adjustments were recognized as of the GA Acquisition Date was not material to the consolidated financial statements.

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KKR performed a valuation of the acquired investments, policy liabilities, value of business acquired ("VOBA"), other identifiable intangibles, and funds withheld at interest payables and receivables. The following is a summary of significant inputs to the valuation:
Investments
Global Atlantic’s investment portfolio primarily consists of fixed maturity securities, mortgage and other loan receivables, equity securities, and investments in real assets such as renewable energy and transportation assets. All of the assets included within the investment portfolio were measured and reported at their fair values on the GA Acquisition Date consistent with the valuation methodologies discussed in Note 2 "Summary of Significant Accounting Policies" in audited financial statements included in KKR & Co. Inc.'s Annual Report. As a result, the cost basis of each respective investment was reset to equal fair value on the GA Acquisition Date.
Policy liabilities
Policy liabilities were remeasured based on generally accepted actuarial methods and reported at their fair values on the GA Acquisition Date. Assumptions for future mortality, persistency, policyholder behavior, expenses, investment return and other actuarial factors were based on an evaluation of Global Atlantic’s recent experience, industry experience, and anticipated future trends. These assumptions are intended to be representative of market assumptions used by buyers and sellers in similar transactions. The approach employed to develop these projection assumptions is described below:
Discount rates used to calculate fair value ranged from 11% to 15%, depending on product;
Mortality and persistency assumptions are based on both Global Atlantic and general industry experience;
Expenses were projected reflecting Global Atlantic’s unit expenses with an allocation of a portion of overhead expenses to in-force business;
Future investment income reflects a runoff of the existing asset portfolios and reinvestment strategies based on Global Atlantic’s assumptions for asset yield, quality, and maturity. The projections are based on forward interest rates implied by the Treasury yield curve. Credit rates reflect Global Atlantic’s target spreads;
Separate account and index account growth rates are based on long-term return expectations for different fund types and on the underlying mix of funds; and
Statutory reserves underlying the valuation reflect Global Atlantic’s current reserving methodologies.
Value of business acquired ("VOBA")
VOBA represents the estimated fair value of future net cash flows from in-force life and annuity insurance contracts acquired at the GA Acquisition Date.
Other identifiable intangible assets
Other identifiable intangible assets represent distribution relationships, trade names and state insurance licenses. The distribution relationships were valued using the excess earnings method, which derives value based on the present value of the cash flow attributable to the distribution relationships, less returns for contributory assets. The trade name intangible asset represents the Global Atlantic trade name, and was valued using the relief-from-royalty method giving consideration to publicly available third-party trade name royalty rates as well as expected premiums generated by the use of the trade name over its anticipated life. The state insurance licenses represent Global Atlantic’s jurisdictional insurance licenses, which include 52 insurance licenses, encompassing all 50 U.S. states, the District of Columbia, and the U.S. Virgin Islands. They were protected through registration and were valued using the market approach based on third-party market transactions from which the prices paid for state insurance licenses could be derived.
Funds withheld at interest receivables and payables
Funds withheld at interest receivables and payables were remeasured at fair value based on the fair value of assets held in the underlying portfolios supporting those receivables or payables.
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The fair value and weighted average estimated useful lives of Value of Business Acquired and Other Identifiable Intangible Assets acquired in the GA Acquisition consist of the following (dollars in thousands):

Fair Value Average Useful Life
($ in thousands)(in years)
VOBA (included within Insurance Intangible Assets)$1,024,520 28.6
Negative VOBA (included within Policy Liabilities)(1,273,414)22.2
Total VOBA$(248,894)
Value of Distribution Agreements Acquired$250,000 
16 to 21
Trade Names 50,000 
15 to 18
State Insurance Licenses10,000 Indefinite
Total Identifiable Other Intangible Assets (included within Other Assets)$310,000 


As of the GA Acquisition Date, Global Atlantic's financial results are reflected in these financial statements. Global Atlantic's revenues and net income of $2.2 billion and $185.8 million, and $4.5 billion and $239.7 million, are included in the consolidated statement of operations for the three and nine months ended September 30, 2021, respectively.

Pro- Forma Financial Information

Unaudited pro-forma financial information for the three and nine months ended September 30, 2021 is presented below. Pro-forma financial information presented does not include adjustments to reflect any potential revenue synergies or cost savings that may be achievable in connection with the GA Acquisition and assume the GA Acquisition occurred as of January 1, 2020. The unaudited pro forma financial information is presented for informational purposes only, and is not necessarily indicative of future operations or results had the GA Acquisition been completed as of January 1, 2020.

Three Months EndedNine Months Ended
September 30, 2021September 30, 2021
Total Revenues $4,483,365 $12,696,730 
Net Income Attributable to KKR & Co. Inc. Common Stockholders$1,131,354 $4,147,132 

Amounts above reflect certain pro forma adjustments that were directly attributable to the GA Acquisition. These adjustments include the following:

adjustment to reflect the elimination of historical amortization of Global Atlantic’s intangibles and the additional amortization of intangibles measured at fair value as of the GA Acquisition Date;
adjustment to reflect the prospective reclassification from accumulated other comprehensive earnings of the unrealized gains on available-for-sale securities to a premium which will be amortized into income based on the expected life of the investment securities;
adjustments to reflect the KKR pro-rata economic ownership as well as financing consummated by KKR to complete the acquisition; and
adjustments to reflect the adoption of ASC 326 "Financial Instruments - Credit Losses" in 2020 by Global Atlantic.


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4. REVENUES - ASSET MANAGEMENT

For the three and nine months ended September 30, 2022 and 2021, respectively, Asset Management revenues consisted of the following:    

 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Management Fees$419,876 $349,249 $1,236,151 $931,624 
Fee Credits(136,996)(164,720)(388,315)(322,402)
Transaction Fees328,483 437,619 973,310 978,399 
Monitoring Fees29,683 29,823 99,605 98,164 
Incentive Fees1,402 6,962 15,600 13,092 
Expense Reimbursements10,733 34,857 77,612 122,642 
Consulting Fees20,748 25,178 55,741 66,286 
Total Fees and Other673,929 718,968 2,069,704 1,887,805 
Carried Interest(477,681)1,216,433 (1,999,678)4,553,527 
General Partner Capital Interest(95,182)310,234 (442,402)1,183,180 
Total Capital Allocation-Based Income (Loss)(572,863)1,526,667 (2,442,080)5,736,707 
Total Revenues - Asset Management$101,066 $2,245,635 $(372,376)$7,624,512 







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5. NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES - ASSET MANAGEMENT

Net Gains (Losses) from Investment Activities in the consolidated statements of operations consist primarily of the realized and unrealized gains and losses on investments (including foreign exchange gains and losses attributable to foreign denominated investments and related activities) and other financial instruments, including those for which the fair value option has been elected. Unrealized gains or losses result from changes in the fair value of these investments and other financial instruments during a period. Upon disposition of an investment or financial instrument, previously recognized unrealized gains or losses are reversed and an offsetting realized gain or loss is recognized in the current period.
The following table summarizes total Net Gains (Losses) from Investment Activities:
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Net Realized Gains (Losses)Net Unrealized Gains (Losses)TotalNet Realized Gains (Losses)Net Unrealized Gains (Losses)Total
Private Equity (1)
$265,176 $(263,720)$1,456 $296,410 $647,448 $943,858 
Credit (1)
(91,950)(131,594)(223,544)74,945 (117,354)(42,409)
Investments of Consolidated CFEs (1)
(29,402)30,765 1,363 23,198 (15,013)8,185 
Real Assets (1)
23,210 (266,029)(242,819)61,807 575,891 637,698 
Equity Method - Other (1)
40,696 (166,024)(125,328)311,420 (137,281)174,139 
Other Investments (1)
(18,159)(332,946)(351,105)(118,844)199,961 81,117 
Foreign Exchange Forward Contracts and Options (2)
190,047 403,719 593,766 (2,777)323,916 321,139 
Securities Sold Short (2)
23,523 78 23,601 (21,031)2,579 (18,452)
Other Derivatives (2)
(13,905)18,687 4,782 (17,687)6,577 (11,110)
Debt Obligations and Other (3)
(60,242)(1,110)(61,352)2,190 20,292 22,482 
Net Gains (Losses) From Investment Activities$328,994 $(708,174)$(379,180)$609,631 $1,507,016 $2,116,647 
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Net Realized Gains (Losses)Net Unrealized Gains (Losses)TotalNet Realized Gains (Losses)Net Unrealized Gains (Losses)Total
Private Equity (1)
$689,141 $(2,192,262)$(1,503,121)$1,322,179 $3,479,827 $4,802,006 
Credit (1)
(145,416)(630,558)(775,974)130,191 (11,864)118,327 
Investments of Consolidated CFEs (1)
(26,248)(1,713,464)(1,739,712)44,954 173,775 218,729 
Real Assets (1)
283,773 958,473 1,242,246 148,581 1,243,725 1,392,306 
Equity Method - Other (1)
94,989 (484,292)(389,303)410,491 305,085 715,576 
Other Investments (1)
18,744 (700,176)(681,432)(354,349)908,906 554,557 
Foreign Exchange Forward Contracts and Options (2)
331,889 485,642 817,531 (29,727)282,030 252,303 
Securities Sold Short (2)
83,075 20,422 103,497 36,517 21,313 57,830 
Other Derivatives (2)
(30,527)61,015 30,488 (125,376)83,805 (41,571)
Debt Obligations and Other (3)
(140,838)1,686,230 1,545,392 (50,505)13,342 (37,163)
Net Gains (Losses) From Investment Activities$1,158,582 $(2,508,970)$(1,350,388)$1,532,956 $6,499,944 $8,032,900 
(1)See Note 8 "Investments."
(2)See Note 9 "Derivatives" and Note 15 "Other Assets and Accrued Expenses and Other Liabilities."
(3)See Note 17 "Debt Obligations."
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6. NET INVESTMENT INCOME - INSURANCE

Net investment income for Global Atlantic is comprised primarily of interest income, including amortization of premiums and accretion of discounts, based on yields that change due to expectations in projected cash flows, dividend income from common and preferred stock, earnings from investments accounted for under equity method accounting, and lease income on other investments.

The components of net investment income were as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Fixed maturity securities – interest and other income$820,530 $632,314 $2,257,169 $1,512,377 
Mortgage and other loan receivables411,215 247,917 1,108,919 617,334 
Investments in transportation and other leased assets73,192 56,317 207,585 146,004 
Investments in renewable energy70,300 62,468 139,937 96,400 
Investments in real estate41,261 4,501 75,118 10,028 
Short-term and other investment income33,669 23,285 84,166 41,349 
Income assumed from funds withheld receivable at interest24,104 24,441 67,206 57,554 
Policy loans7,011 3,203 21,977 22,138 
Equity securities – dividends and other income— 764 — 23 
Income ceded to funds withheld payable at interest(238,817)(160,073)(657,280)(273,611)
Gross investment income1,242,465 895,137 3,304,797 2,229,596 
Less investment expenses:
Investment management and administration87,282 88,789 296,069 190,458 
Transportation and renewable energy asset depreciation and maintenance54,233 47,331 157,042 117,749 
Interest expense on derivative collateral and repurchase agreements6,073 636 12,315 1,730 
Net investment income$1,094,877 $758,381 $2,839,371 $1,919,659 



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7. NET INVESTMENT-RELATED GAINS (LOSSES) - INSURANCE
Net investment-related gains (losses) from insurance operations primarily consists of (i) realized gains and (losses) from the disposal of investments, (ii) unrealized gains and (losses) from investments held for trading, equity securities, real estate investments accounted for under investment company accounting, and investments with fair value remeasurements recognized in earnings as a result of the election of a fair-value option, (iii) unrealized gains and (losses) on funds withheld at interest, (iv) unrealized gains and (losses) from derivatives not designated in an hedging relationship, and (v) allowances for credit losses, and other impairments of investments.

Net investment-related gains (losses) were as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Realized gains (losses) on equity investments$— $51,520 $— $76,645 
Realized gains (losses) on available-for-sale fixed maturity debt securities(8,277)(15,026)(539,000)(88,300)
Credit loss allowances on available-for-sale securities(15,065)(3,809)(32,109)21,287 
Credit loss allowances on mortgage and other loan receivables(12,112)(69,386)(50,495)(250,690)
Allowances on unfunded commitments1,292 (3,677)(2,086)(15,372)
Unrealized gains (losses) on fixed maturity securities classified as trading(720,418)(133,118)(2,748,542)(130,228)
Unrealized gains (losses) on investments recognized under the fair-value option(22,995)303,021 (63,923)350,442 
Unrealized gains (losses) on real estate investments recognized at fair value under investment company accounting(34,479)9,997 88,609 20,264 
Net gains (losses) on derivative instruments655,304 40,792 2,370,404 70,098 
Realized gains (losses) on funds withheld at interest, payable portfolio3,652 (12,272)5,992 (31,384)
Realized gains (losses) on funds withheld at interest, receivable portfolio3,858 2,633 7,296 10,250 
Other realized gains (losses)(24,590)(8,548)(4,982)(29)
Net investment-related gains (losses)$(173,830)$162,127 $(968,836)$32,983 

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Allowance for credit losses

Available-for-sale fixed maturity securities

The table below presents a roll-forward of the allowance for credit losses recognized for fixed maturity securities held by Global Atlantic:

Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
CorporateStructuredTotalCorporateStructuredTotal
Balance, as of beginning of period$7,842 $94,451 $102,293 $3,238 $84,895 $88,133 
Initial impairments for credit losses recognized on securities not previously impaired669 11,903 12,572 791 47,858 48,649 
Initial credit loss allowance recognized on purchased credit deteriorated ("PCD") securities— — — — 707 707 
Accretion of initial credit loss allowance on PCD securities— 581 581 — 1,449 1,449 
Reductions due to sales (or maturities, pay downs or prepayments) during the period of securities previously identified as credit impaired— (3,352)(3,352)— (7,811)(7,811)
Net additions / reductions for securities previously impaired121 2,372 2,493 4,603 (21,143)(16,540)
Write-offs of credit losses previous recognized(7,841)— (7,841)(7,841)— (7,841)
Balance, as of end of period$791 $105,955 $106,746 $791 $105,955 $106,746 

Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
CorporateStructuredTotalCorporateStructuredTotal
Balance, as of beginning of period(1)
$— $91,646 $91,646 $— $120,895 $120,895 
Initial impairments for credit losses recognized on securities not previously impaired— 19,921 19,921 — 47,530 47,530 
Initial credit loss allowance recognized on purchased credit deteriorated ("PCD") securities— 1,576 1,576 — 7,204 7,204 
Accretion of initial credit loss allowance on PCD securities— 1,879 1,879 — 2,200 2,200 
Reductions due to sales (or maturities, pay downs or prepayments) during the period of securities previously identified as credit impaired— (2,510)(2,510)— (12,612)(12,612)
Net additions / reductions for securities previously impaired— (16,112)(16,112)— (68,817)(68,817)
Balance, as of end of period$ $96,400 $96,400 $ $96,400 $96,400 

(1)Includes securities designated as purchased credit impaired as of the time of the acquisition of Global Atlantic.

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Mortgage and other loan receivables

Changes in the allowance for credit losses on mortgage and other loan receivables held by Global Atlantic are summarized below:

Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Commercial Mortgage LoansResidential Mortgage LoansConsumer and Other Loan ReceivablesTotalCommercial Mortgage LoansResidential Mortgage LoansConsumer and Other Loan ReceivablesTotal
Balance, as of beginning of period$103,944 $96,194 $211,747 $411,885 $65,970 $72,082 $236,025 $374,077 
Net provision (release)26,817 (891)(13,814)12,112 64,791 23,221 (37,517)50,495 
Charge-offs— — (671)(671)— — (1,246)(1,246)
Balance, as of end of period$130,761 $95,303 $197,262 $423,326 $130,761 $95,303 $197,262 $423,326 

Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Commercial Mortgage LoansResidential Mortgage LoansConsumer and Other Loan ReceivablesTotalCommercial Mortgage LoansResidential Mortgage LoansConsumer and Other Loan ReceivablesTotal
Balance, as of beginning of period (1)
$58,255 $76,536 $163,135 $297,926 $58,203 $62,056 $— $120,259 
Net provision (release)17,750 (2,793)54,429 69,386 17,802 10,888 222,000 250,690 
Loans purchased with credit deterioration— — — — — 799 838 1,637 
Charge-offs— (3,162)5,274 2,112 — (3,162)— (3,162)
Balance, as of end of period$76,005 $70,581 $222,838 $369,424 $76,005 $70,581 $222,838 $369,424 

(1) Includes loans designated as purchased credit deteriorated as of the time of the acquisition of Global Atlantic.

Proceeds and gross gains and losses from voluntary sales

The proceeds from voluntary sales and the gross gains and losses on those sales of available-for-sale ("AFS") fixed maturity securities were as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
AFS fixed maturity securities:
Proceeds from voluntary sales$807,228 $7,440,645 $10,869,470 $12,766,887 
Gross gains8,007 16,816 18,203 38,061 
Gross losses(14,676)(30,086)(547,123)(103,190)

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8. INVESTMENTS
Investments consist of the following:

 September 30, 2022December 31, 2021
Asset Management
Private Equity$26,542,743 $25,685,750 
Credit7,532,222 7,949,573 
Investments of Consolidated CFEs21,500,342 22,076,809 
Real Assets16,659,585 12,500,749 
Equity Method - Other6,849,902 4,877,592 
Equity Method - Capital Allocation-Based Income7,032,596 11,539,945 
Other Investments3,603,469 4,145,096 
Investments - Asset Management$89,720,859 $88,775,514 
Insurance
Fixed maturity securities, available-for-sale, at fair value(1)
$58,547,851 $68,870,886 
Mortgage and other loan receivables35,420,094 28,876,759 
Fixed maturity securities, trading, at fair value(2)
10,247,034 13,753,573 
Other investments10,830,743 8,208,566 
Funds withheld receivable at interest2,893,785 2,999,448 
Policy loans812,844 765,310 
Equity securities at fair value19,922 289,133 
Investments - Insurance$118,772,273 $123,763,675 
Total Investments$208,493,132 $212,539,189 
 
(1) Amortized cost of $70.5 billion and $69.5 billion, net of credit loss allowances of $106.7 million and $88.1 million, respectively.
(2) Amortized cost of $13.1 billion and $13.9 billion, respectively.


As of September 30, 2022 and December 31, 2021, there were no investments which represented greater than 5% of total investments.


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Fixed maturity securities

The cost or amortized cost and fair value for AFS fixed maturity securities were as follows:

Cost or amortized cost
Allowance for Credit Losses (2)(3)
Gross unrealizedFair value
As of September 30, 2022gainslosses
AFS fixed maturity securities portfolio by type:
U.S. government and agencies$366,638 $— $— $(71,841)$294,797 
U.S. state, municipal and political subdivisions5,298,283 — 138 (1,271,381)4,027,040 
Corporate41,326,728 (791)18,021 (8,538,465)32,805,493 
Residential mortgage-backed securities ("RMBS")7,478,505 (86,208)17,823 (676,064)6,734,056 
Commercial mortgage-backed securities ("CMBS")7,352,398 (10,809)245 (740,518)6,601,316 
Collateralized bond obligations ("CBOs")3,060,155 (35)— (223,969)2,836,151 
Collateralized loan obligations ("CLOs")2,771,874 (4,366)25 (209,329)2,558,204 
All other structured securities(1)
2,884,368 (4,537)6,005 (195,042)2,690,794 
Total AFS fixed maturity securities$70,538,949 $(106,746)$42,257 $(11,926,609)$58,547,851 

(1)    Includes primarily asset-backed securities ("ABS").
(2)    Represents the cumulative amount of credit impairments that have been recognized in the consolidated statements of operations (as net investment (losses) gains) or that were recognized as a gross-up of the purchase price of PCD securities. Amount excludes unrealized losses related to non-credit impairment.
(3)    Includes credit loss allowances on purchase-credit deteriorated fixed-maturity securities of $(33.2) million.

Cost or amortized cost
Allowance for Credit Losses (2)(3)
Gross unrealizedFair value
As of December 31, 2021gainslosses
AFS fixed maturity securities portfolio by type:
U.S. government and agencies$785,144 $— $4,171 $(4,768)$784,547 
U.S. state, municipal and political subdivisions5,122,651 — 42,286 (55,240)5,109,697 
Corporate41,433,757 (3,238)190,516 (688,648)40,932,387 
RMBS7,703,030 (50,975)126,662 (113,359)7,665,358 
CMBS5,952,656 (282)16,332 (56,523)5,912,183 
CBOs3,111,620 (22,160)6,862 (27,466)3,068,856 
CLOs2,985,098 (639)6,554 (5,776)2,985,237 
All other structured securities(1)
2,425,540 (10,839)19,990 (22,070)2,412,621 
Total AFS fixed maturity securities$69,519,496 $(88,133)$413,373 $(973,850)$68,870,886 

(1)    Includes primarily asset-backed securities ("ABS").
(2)    Represents the cumulative amount of credit impairments that have been recognized in the consolidated statements of operations (as net investment (losses) gains) or that were recognized as a gross-up of the purchase price of PCD securities. Amount excludes unrealized losses related to non-credit impairment.
(3)    Includes credit loss allowances on purchase-credit deteriorated fixed-maturity securities of $(46.4) million.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or Global Atlantic may have the right to put or sell the obligations back to the issuers.


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The maturity distribution for AFS fixed maturity securities is as follows:

As of September 30, 2022Cost or
amortized cost (net of allowance)
Fair value
Due in one year or less$551,784 $544,880 
Due after one year through five years9,386,813 8,791,184 
Due after five years through ten years9,487,091 8,504,053 
Due after ten years27,565,170 19,287,213 
Subtotal46,990,858 37,127,330 
RMBS7,392,297 6,734,056 
CMBS7,341,589 6,601,316 
CBOs3,060,120 2,836,151 
CLOs2,767,508 2,558,204 
All other structured securities2,879,831 2,690,794 
Total AFS fixed maturity securities$70,432,203 $58,547,851 

Purchased credit deteriorated securities

Certain securities purchased by Global Atlantic were assessed at acquisition as having experienced a more-than-insignificant deterioration in credit quality since their origination. These securities are identified as PCD, and a reconciliation of the difference between the purchase price and the par value of these PCD securities is below:

Nine Months Ended September 30,
20222021
Purchase price of PCD securities acquired during the current period$24,005 $1,726,900 
Allowance for credit losses at acquisition707 128,099 
Discount (premium) attributable to other factors1,710 308,053 
Par value$26,422 $2,163,052 

Securities in a continuous unrealized loss position

The following tables provide information about AFS fixed maturity securities that have been continuously in an unrealized loss position:

Less than 12 months12 months or moreTotal
As of September 30, 2022Fair
value
Unrealized lossesFair
value
Unrealized lossesFair
value
Unrealized losses
AFS fixed maturity securities portfolio by type:
U.S. government and agencies$190,438 $(53,005)$104,360 $(18,836)$294,798 $(71,841)
U.S. state, municipal and political subdivisions3,326,504 (1,051,622)682,195 (219,759)4,008,699 (1,271,381)
Corporate21,318,062 (5,654,193)9,481,979 (2,884,272)30,800,041 (8,538,465)
RMBS4,664,201 (426,928)1,511,761 (249,136)6,175,962 (676,064)
CBOs1,887,915 (145,811)948,236 (78,158)2,836,151 (223,969)
CMBS5,407,270 (529,159)1,162,325 (211,359)6,569,595 (740,518)
CLOs2,357,254 (185,863)190,452 (23,466)2,547,706 (209,329)
All other structured securities1,891,789 (118,688)539,752 (76,354)2,431,541 (195,042)
Total AFS fixed maturity securities in a continuous loss position$41,043,433 $(8,165,269)$14,621,060 $(3,761,340)$55,664,493 $(11,926,609)

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Less than 12 months12 months or moreTotal
As of December 31, 2021Fair
value
Unrealized lossesFair
value
Unrealized lossesFair
value
Unrealized losses
AFS fixed maturity securities portfolio by type:
U.S. government and agencies$311,096 $(4,768)$— $— $311,096 $(4,768)
U.S. state, municipal and political subdivisions2,802,309 (55,240)— — 2,802,309 (55,240)
Corporate30,385,514 (688,648)— — 30,385,514 (688,648)
RMBS3,196,876 (113,359)— — 3,196,876 (113,359)
CBOs2,152,790 (27,466)— — 2,152,790 (27,466)
CMBS3,405,774 (56,523)— — 3,405,774 (56,523)
CLOs1,172,330 (5,776)— — 1,172,330 (5,776)
All other structured securities1,348,356 (22,070)— — 1,348,356 (22,070)
Total AFS fixed maturity securities in a continuous loss position$44,775,045 $(973,850)$ $ $44,775,045 $(973,850)

Unrealized gains and losses can be created by changing interest rates or several other factors, including changing credit spreads. Global Atlantic had gross unrealized losses on below investment grade AFS fixed maturity securities of $687.7 million and $77.0 million as of September 30, 2022 and December 31, 2021, respectively. The single largest unrealized loss on AFS fixed maturity securities was $61.8 million and $7.3 million as of September 30, 2022 and December 31, 2021, respectively. Global Atlantic had 6,184 and 4,370 securities in an unrealized loss position as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, AFS fixed maturity securities in an unrealized loss position for 12 months or more consisted of 1,947 debt securities. These debt securities primarily relate to Corporate, RMBS, and U.S. state, municipal and political subdivisions fixed maturity securities, which have depressed values due primarily to an increase in interest rates since the purchase of these securities. Unrealized losses were not recognized in net income on these debt securities since Global Atlantic neither intends to sell the securities nor does it believe that it is more likely than not that it will be required to sell these securities before recovery of their cost or amortized cost basis. For securities with significant declines in value, individual security level analysis was performed utilizing underlying collateral default expectations, market data and industry analyst reports.

Mortgage and other loan receivables

Mortgage and other loan receivables consist of the following:

September 30, 2022December 31, 2021
Commercial mortgage loans(1)
$18,479,742 $13,824,772 
Residential mortgage loans(1)
10,955,269 8,724,904 
Consumer loans5,445,370 5,617,925 
Other loan receivables(2)(3)
963,039 1,083,235 
Total mortgage and other loan receivables35,843,420 29,250,836 
Allowance for credit losses(4)
(423,326)(374,077)
Total mortgage and other loan receivables, net of allowance for loan losses$35,420,094 $28,876,759 

(1)    Includes $837.7 million and $805.4 million of loans carried at fair value using the fair value option as of September 30, 2022 and December 31, 2021, respectively. The fair value option was elected for these loans for asset-liability matching purposes. These loans had unpaid principal balances of $894.2 million and $794.1 million as of September 30, 2022 and December 31, 2021, respectively.
(2)    As of September 30, 2022 and December 31, 2021, other loan receivables consisted primarily of loans collateralized by aircraft of $312.7 million and $850.1 million, respectively.
(3)    Includes $33.2 million and $27.3 million of related party loans carried at fair value using the fair value option as of September 30, 2022 and December 31, 2021, respectively. These loans had unpaid principal balances of $33.2 million and $27.3 million as of September 30, 2022 and December 31, 2021, respectively.
(4)    Includes credit loss allowances on purchase-credit deteriorated mortgage and other loan receivables of $(78.6) million and $(77.9) million as of September 30, 2022 and December 31, 2021, respectively.

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The maturity distribution for residential and commercial mortgage loans was as follows as of September 30, 2022:

YearsResidentialCommercialTotal mortgage loans
Remainder of 2022$115,605 $399,377 $514,982 
2023126,160 1,441,199 1,567,359 
2024533,435 2,277,465 2,810,900 
202517,027 3,390,721 3,407,748 
2026890,254 3,259,760 4,150,014 
2027955,188 2,843,765 3,798,953 
2028 and thereafter8,317,600 4,867,455 13,185,055 
Total$10,955,269 $18,479,742 $29,435,011 

Actual maturities could differ from contractual maturities, because borrowers may have the right to prepay (with or without prepayment penalties) and loans may be refinanced.

Global Atlantic diversifies its mortgage loan portfolio by both geographic region and property type to reduce concentration risk. The following tables present the mortgage loans by geographic region and property type:

Mortgage loans - carrying value by geographic regionSeptember 30, 2022December 31, 2021
Pacific$7,252,784 $6,675,064 
West South Central3,594,519 2,675,890 
South Atlantic8,002,247 4,996,043 
Middle Atlantic3,708,296 3,142,973 
East North Central1,262,908 590,911 
Mountain3,151,942 1,957,099 
New England1,298,758 1,099,157 
East South Central740,228 1,035,764 
West North Central363,474 350,546 
Other regions59,855 26,229 
Total by geographic region$29,435,011 $22,549,676 


Mortgage loans - carrying value by property typeSeptember 30, 2022December 31, 2021
Residential$10,955,269 $8,724,904 
Office building4,654,349 4,185,146 
Apartment9,341,546 6,194,819 
Industrial2,938,321 1,981,713 
Retail650,903 780,071 
Other property types705,783 483,560 
Warehouse188,840 199,463 
Total by property type$29,435,011 $22,549,676 

As of September 30, 2022 and December 31, 2021, Global Atlantic had $179.6 million and $202.7 million of mortgage loans that were 90 days or more past due or in the process of foreclosure, respectively. Global Atlantic ceases accrual of interest on loans that are more than 90 days past due and recognizes income as cash is received. As of September 30, 2022 and December 31, 2021, there were $179.6 million and $202.7 million of mortgage loans that were non-income producing, respectively.

As of September 30, 2022 and December 31, 2021, less than 1% and 1%, respectively, of residential mortgage loans have been granted forbearance for reasons including COVID-19. This forbearance, which generally involves a 3-month period in which payments are not required (though must subsequently be made up), is not considered to result in troubled debt restructurings for the three and nine months ended September 30, 2022 and 2021. Interest continues to accrue on loans in temporary forbearance.
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As of September 30, 2022 and December 31, 2021, Global Atlantic had $10.9 million and $5.1 million of consumer loans that were delinquent by more than 120 days or in default, respectively.

Purchased credit deteriorated loans

Certain residential mortgage loans purchased by Global Atlantic were assessed at acquisition as having experienced a more-than-insignificant deterioration in credit quality since their origination. These loans are identified as PCD, and a reconciliation of the difference between the purchase price and the par value of these PCD loans is below:

Nine Months Ended September 30,
2021
Purchase price of PCD loans acquired during the current period$4,231,426 
Allowance for credit losses at acquisition121,895 
Discount (premium) attributable to other factors(136,174)
Par value$4,217,147 

Credit quality indicators

Mortgage and loan receivable performance status

The following table represents the portfolio of mortgage and loan receivables by origination year and performance status:

As of September 30, 2022
Performance status20222021202020192018PriorTotal
Commercial mortgage loans
Current$5,539,353 $6,763,595 $929,246 $1,533,917 $1,294,281 $2,419,350 $18,479,742 
30 to 59 days past due— — — — — — — 
60 to 89 days past due— — — — — — — 
Over 90 days past due— — — — — — — 
Total commercial mortgage loans$5,539,353 $6,763,595 $929,246 $1,533,917 $1,294,281 $2,419,350 $18,479,742 
Residential mortgage loans
Current$1,897,046 $5,002,374 $1,884,802 $278,805 $15,119 $1,530,375 $10,608,521 
30 to 59 days past due9,608 33,064 4,334 1,305 645 77,467 126,423 
60 to 89 days past due1,233 10,727 3,646 752 — 24,391 40,749 
Over 90 days past due1,489 22,399 11,178 8,673 2,587 133,250 179,576 
Total residential mortgage loans$1,909,376 $5,068,564 $1,903,960 $289,535 $18,351 $1,765,483 $10,955,269 
Total mortgage loans$7,448,729 $11,832,159 $2,833,206 $1,823,452 $1,312,632 $4,184,833 $29,435,011 

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As of December 31, 2021
Performance status20212020201920182017PriorTotal
Commercial mortgage loans
Current$6,831,655 $976,369 $1,883,908 $1,373,865 $817,954 $1,941,021 $13,824,772 
30 to 59 days past due— — — — — — — 
60 to 89 days past due— — — — — — — 
Over 90 days past due— — — — — — — 
Total commercial mortgage loans$6,831,655 $976,369 $1,883,908 $1,373,865 $817,954 $1,941,021 $13,824,772 
Residential mortgage loans
Current$4,505,537 $1,576,342 $393,153 $123,995 $65,070 $1,711,156 $8,375,253 
30 to 59 days past due24,955 6,028 5,818 1,155 739 75,104 113,799 
60 to 89 days past due4,247 1,243 607 — — 27,028 33,125 
Over 90 days past due5,305 14,272 21,985 2,686 — 158,479 202,727 
Total residential mortgage loans$4,540,044 $1,597,885 $421,563 $127,836 $65,809 $1,971,767 $8,724,904 
Total mortgage loans$11,371,699 $2,574,254 $2,305,471 $1,501,701 $883,763 $3,912,788 $22,549,676 

The following table represents the portfolio of consumer loan receivables by performance status:

Performance statusSeptember 30, 2022December 31, 2021
Consumer loans
Current$5,347,354 $5,556,923 
30 to 59 days past due54,454 34,048 
60 to 89 days past due27,227 16,817 
Over 90 days past due16,335 10,137 
Total consumer loans$5,445,370 $5,617,925 
Loan-to-value ratio on mortgage loans

The loan-to-value ratio is expressed as a percentage of the current amount of the loan relative to the value of the underlying collateral. The following table summarizes the loan-to-value ratios for commercial mortgage loans as of September 30, 2022 and December 31, 2021:

Loan-to-value as of September 30, 2022, by year of originationCarrying value loan-to-value 70% and lessCarrying value loan-to-value 71% - 90%Carrying value loan-to-value over 90%Total carrying value
2022$5,174,067 $365,286 $— $5,539,353 
20214,744,972 2,018,623 — 6,763,595 
2020771,593 122,593 35,060 929,246 
20191,360,360 173,557 — 1,533,917 
20181,259,505 34,776 — 1,294,281 
2017722,333 44,548 — 766,881 
Prior1,652,469 — — 1,652,469 
Total commercial mortgage loans$15,685,299 $2,759,383 $35,060 $18,479,742 

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Loan-to-value as of December 31, 2021, by year of originationCarrying value loan-to-value 70% and lessCarrying value loan-to-value 71% - 90%Carrying value loan-to-value over 90%Total carrying value
2021$4,910,170 $1,921,485 $— $6,831,655 
2020819,406 121,997 34,966 976,369 
20191,747,656 136,252 — 1,883,908 
20181,324,807 49,058 — 1,373,865 
2017772,989 44,965 — 817,954 
2016425,926 2,440 — 428,366 
Prior1,497,503 15,152 — 1,512,655 
Total commercial mortgage loans$11,498,457 $2,291,349 $34,966 $13,824,772 

Changing economic conditions affect the valuation of commercial mortgage loans. Changing vacancies and rents are incorporated into the discounted cash flow analysis that Global Atlantic performs for monitored loans and may contribute to the establishment of (or increase or decrease in) a commercial mortgage loan valuation allowance for credit losses. In addition, Global Atlantic continuously monitors its commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have exposure to specific geographic events, or have deteriorating credit.

The weighted average loan-to-value ratio for the residential mortgage loans was 62% and 68% as of September 30, 2022 and December 31, 2021, respectively.

Other investments

Other investments consist of the following:

September 30, 2022December 31, 2021
Investments in real estate(1)
$4,202,597 $1,564,853 
Investments in renewable energy(2)
3,420,210 3,573,811 
Investments in transportation and other leased assets(3)
2,767,770 2,663,759 
Other investment partnerships257,905 234,301 
FHLB common stock and other investments182,261 171,842 
Total other investments$10,830,743 $8,208,566 

(1)    Investments in real estate are held in consolidated investment companies that use fair value accounting.
(2)    Net of accumulated depreciation attributed to consolidated renewable energy assets of $220.2 million and $156.8 million as of September 30, 2022 and December 31, 2021, respectively.
(3)    Net of accumulated depreciation of $198.5 million and $105.1 million as of September 30, 2022 and December 31, 2021, respectively.    


The total amount of other investments accounted for using the equity method of accounting was $1.2 billion as of both September 30, 2022 and December 31, 2021. Global Atlantic's maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $21.1 million and $22.4 million as of September 30, 2022 and December 31, 2021, respectively.

In addition, Global Atlantic has investments that would otherwise require the equity method of accounting for which the fair value option has been elected. The carrying amount of these investments was $184.4 million and $147.8 million as of September 30, 2022 and December 31, 2021, respectively.

Funding agreements

Certain Global Atlantic subsidiaries are members of regional banks in the Federal Home Loan Bank ("FHLB") system. These subsidiaries have also entered into funding agreements with their respective FHLB. The funding agreements are issued in exchange for cash. The funding agreements require that Global Atlantic pledge eligible assets, such as commercial mortgage loans, as collateral. With respect to certain classes of eligible assets, the FHLB holds the pledged eligible assets in custody at the respective FHLB. The liabilities for the funding agreements are included in policy liabilities in the consolidated statements of financial condition.

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Information related to the FHLB investment and funding agreements as of September 30, 2022 and December 31, 2021 is as follows:

Investment in common stockFunding agreements issued to FHLB member banksCollateral
September 30, 2022December 31, 2021September 30, 2022December 31, 2021September 30, 2022December 31, 2021
FHLB Indianapolis$80,512 $80,640 $1,610,025 $1,619,765 $2,362,537 $2,577,698 
FHLB Des Moines31,120 34,600 532,467 620,006 838,297 1,004,530 
FHLB Boston17,520 22,520 322,922 326,639 436,645 553,384 
Total$129,152 $137,760 $2,465,414 $2,566,410 $3,637,479 $4,135,612 

In addition, in January 2021, Global Atlantic launched an inaugural funding agreement backed note ("FABN") program, through which GA Global Funding Trust, a special purpose statutory trust, was established to offer its senior secured medium-term notes. Net proceeds from each sale of the aforementioned notes are used to purchase one or more funding agreements from Forethought Life Insurance Company, an insurance subsidiary of Global Atlantic. As of September 30, 2022 and December 31, 2021, Global Atlantic had $5.5 billion and $3.5 billion of such funding agreements outstanding, with $4.5 billion and $6.5 billion of remaining capacity under the program, respectively.

Repurchase agreement transactions

As of September 30, 2022 and December 31, 2021, Global Atlantic participated in third-party repurchase agreements with a notional value of $778.5 million and $300.4 million, respectively. As collateral for these transactions, as of September 30, 2022 and December 31, 2021, Global Atlantic posted fixed maturity securities with a fair value and amortized cost of $810.9 million and $1.1 billion, and $313.0 million and $317.0 million, respectively, which are included in Insurance - Investments in the consolidated statements of financial condition.

The fair value of securities pledged for repurchase agreements by class of collateral and remaining contractual maturity as of September 30, 2022 and December 31, 2021 is presented in the following tables:

As of September 30, 2022Overnight<30 Days30 - 90 Days> 90 DaysTotal
Corporate Securities$— $— $— $810,946 $810,946 
Total borrowing$— $— $— $810,946 $810,946 

As of December 31, 2021Overnight<30 Days30 - 90 Days> 90 DaysTotal
Corporate Securities$— $— $— $312,965 $312,965 
Total borrowing$— $— $— $312,965 $312,965 

Other

As of September 30, 2022 and December 31, 2021, the cost or amortized cost and fair value of the assets on deposit with various state and governmental authorities were $184.8 million and $139.9 million, and $182.6 million and $180.8 million, respectively.



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9. DERIVATIVES

Asset Management

KKR and certain of its consolidated funds have entered into derivative transactions as part of their overall risk management for the asset management business and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include forward, swap and option contracts related to foreign currencies and interest rates to manage foreign exchange risk and interest rate risk arising from certain assets and liabilities. All derivatives are recognized in Other Assets or Accrued Expenses and Other Liabilities and are presented on a gross basis in the consolidated statements of financial condition and measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. KKR's derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. KKR attempts to reduce this risk by limiting its counterparties to major financial institutions with strong credit ratings.

Insurance

Global Atlantic holds derivative instruments that are primarily used in its hedge program. Global Atlantic has established a hedge program that seeks to mitigate economic impacts primarily from interest rate and equity price movements, while taking into consideration accounting and capital impacts.

Global Atlantic hedges interest rate and equity market risks associated with its insurance liabilities including fixed-indexed annuities, indexed universal life policies, variable annuity policies and variable universal life policies, among others. For fixed-indexed annuities and indexed universal life policies, Global Atlantic generally seeks to use static hedges to offset the exposure primarily created by changes in its embedded derivative balances. Global Atlantic generally purchases options which replicate the crediting rate strategies, often in the form of call spreads. Call spreads are the purchase of a call option matched by the sale of a different call option. For variable annuities and variable universal life policies, Global Atlantic generally seeks to dynamically hedge its exposure to changes in the value of the guarantee it provides to policyholders. Doing so requires the active trading of several financial instruments to respond to changes in market conditions. In addition, Global Atlantic enters into inflation swaps to manage inflation risk associated with inflation-indexed preneed policies.

In the context of specific reinsurance transactions in the institutional channel or 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. From time to time, Global Atlantic also enters into hedges designed to mitigate interest rate and credit risk in investment income, interest expense, and fair value of assets and liabilities. In addition, Global Atlantic enters into currency swaps and forwards to manage any foreign exchange rate risks that may arise from investments denominated in foreign currencies.

Global Atlantic attempts to mitigate the risk of loss due to ineffectiveness under these derivative investments through a regular monitoring process which evaluates the program’s effectiveness. Global Atlantic is exposed to risk of loss in the event of non-performance by the counterparties and, accordingly, all option contracts are purchased from counterparties that have been evaluated for creditworthiness. All of these counterparties are nationally recognized financial institutions with a Moody’s or S&P investment-grade credit rating. Global Atlantic monitors its derivative activities by reviewing portfolio activities and risk levels. Global Atlantic also oversees all derivative transactions to ensure that the types of transactions entered into and the results obtained from those transactions are consistent with both Global Atlantic's risk management strategy and its policies and procedures.

The restricted cash which was held in connection with open derivative transactions with exchange brokers was $293.6 million and $151.1 million as of September 30, 2022 and December 31, 2021, respectively.

Global Atlantic also has embedded derivatives related to reinsurance contracts that are accounted for on a modified coinsurance and funds withheld basis. An embedded derivative exists because the arrangement exposes the reinsurer to third-party credit risk. These embedded derivatives are included in funds withheld receivable and payable at interest in the consolidated statements of financial condition.

Derivatives designated as accounting hedges

Where Global Atlantic has derivative instruments that are designated and qualify as accounting hedges, these derivative instruments receive hedge accounting.

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Global Atlantic has designated interest rate swaps to hedge the interest rate risk associated with the $500.0 million senior unsecured notes due 2029, $650.0 million senior unsecured notes due 2031, FHLB and FABN funding agreement liabilities in fair value hedges. The 2029 Senior Notes and 2031 Senior Notes are reported in debt and FHLB and FABN funding agreement liabilities are reported in policy liabilities in the consolidated statements of financial condition and are hedged through their respective maturities. These hedges qualify for the shortcut method of assessing hedge effectiveness.

The following table represents the gains (losses) recognized on derivative instruments and related hedged items in fair value hedging relationship:

Three Months Ended September 30, 2022DerivativesHedged itemsNet
2029 Senior Notes$(25,777)$25,777 $— 
2031 Senior Notes(36,636)36,636 — 
FHLB funding agreement liabilities(12,060)12,060 — 
FABN liabilities(145,075)145,075 — 

Nine Months Ended September 30, 2022DerivativesHedged itemsNet
2029 Senior Notes$(72,001)$72,001 $— 
2031 Senior Notes(108,087)108,087 — 
FHLB funding agreement liabilities(52,326)52,326 — 
FABN liabilities(374,468)374,468 — 

Three Months Ended September 30, 2021DerivativesHedged itemsNet
2029 Senior Notes$(4,016)$4,016 $— 
2031 Senior Notes(7,023)7,023 — 
FHLB funding agreement liabilities1,324 (1,324)— 

Nine Months Ended September 30, 2021DerivativesHedged itemsNet
2029 Senior Notes$(16,364)$16,364 $— 
2031 Senior Notes(3,986)3,986 — 
FHLB funding agreement liabilities(5,954)5,954 — 

The following table represents the carrying values and fair value adjustments for the hedged items:

As of September 30, 2022As of December 31, 2021
Carrying valueFair value of hedge adjustmentsCarrying valueFair value of hedge adjustments
2029 Senior Notes$403,044 $(90,156)$473,890 $(18,808)
2031 Senior Notes534,886 (115,113)644,439 (5,561)
FHLB funding agreement liabilities1,174,359 (67,327)1,070,770 (16,092)
FABN liabilities4,608,996 (372,494)— — 

Global Atlantic has designated bond forwards to hedge the interest rate risk associated with the planned purchase of AFS debt securities in cash flow hedges. Regression analysis is used to assess the effectiveness of these hedges. As of September 30, 2022 and December 31, 2021, there was a cumulative (loss) gain of $(164.3) million and $9.4 million on the bond forwards recorded in accumulated other comprehensive loss, respectively. Amounts deferred in accumulated other comprehensive loss are reclassified to net investment income following the qualifying purchases of AFS securities, as an adjustment to the yield earned over the life of the purchased securities, using the effective interest method. These arrangements are hedging purchases from July 2021 through December 2027 and are expected to affect earnings until 2052. There were $79.4 million and $214.1 million of securities purchased for the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, a cumulative loss of $(23.4) million on the of settlement bond forward derivative hedge instruments, coinciding with the purchase of hedged bonds, began to be reclassified into net investment income. Global Atlantic estimates that the amount of gains/losses in accumulated other comprehensive loss to be reclassified into earnings in the next 12 months will not be material.

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Global Atlantic has designated foreign exchange forward purchase contracts ("FX forwards") to hedge the foreign currency risk associated with foreign currency-denominated bonds in fair value hedges. These foreign currency-denominated bonds are accounted for as AFS fixed maturity securities. Changes in the fair value of the hedged AFS fixed maturity securities due to changes in spot exchange rates are reclassified from AOCI to earnings, which offsets the earnings impact of the spot changes of the FX forwards, both of which are recognized within investment-related gains (losses). The effectiveness of these hedges is assessed using the spot method. Changes in the fair value of the FX forwards related to changes in the spot-forward difference are excluded from the assessment of hedge effectiveness and are deferred in AOCI and recognized in earnings using a systematic and rational method over the life of the FX forwards.

The following table represents the gains (losses) related to the FX forwards hedging instruments:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
FX forward derivative:
Net investment-related gains (losses)$98,263 $12,086 $216,691 $13,768 
AOCI(10,652)766 7,997 399 
Amortization - excluded component11,941 593 17,471 1,206 
Hedged available-for-sale securities:
Net investment-related gains (losses)(105,645)(8,590)(205,746)(11,306)
September 30,
2022
December 31,
2021
Notional value of foreign currency forward$2,403,559 $1,754,555 


The fair value and notional value of the derivative assets and liabilities were as follows:

As of September 30, 2022Notional ValueDerivative
Assets
Derivative
Liabilities
Asset Management
Foreign Exchange Contracts and Options$15,020,028 $1,016,135 $242,117 
Other Derivatives1,247,992 39,887 20,249 
Total Asset Management$1,056,022 $262,366 
Insurance
Equity market contracts$39,471,819 $579,918 $217,106 
Interest rate contracts11,139,171 170,402 935,385 
Foreign currency contracts3,279,137 373,757 95,233 
Credit risk contracts107,754 — 308 
Impact of netting(1)
(273,803)(273,803)
Fair value included within derivative assets and derivative liabilities850,274 974,229 
Embedded derivative – indexed universal life products— 315,889 
Embedded derivative – annuity products— 1,472,814 
Fair value included within policy liabilities— 1,788,703 
Embedded derivative – funds withheld at interest(21,954)(3,419,586)
Total Insurance$828,320 $(656,654)
Fair value included within total assets and liabilities$1,884,342 $(394,288)

(1)     Represents netting of derivative exposures covered by qualifying master netting agreements.

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As of December 31, 2021
Notional Value
Derivative
Assets
Derivative
Liabilities
Asset Management
Foreign Exchange Contracts and Options$12,822,521 $590,637 $319,511 
Other Derivatives505,725 491 45,003 
Total Asset Management$591,128 $364,514 
Insurance
Equity market contracts$31,294,053 $1,216,843 $186,754 
Interest rate contracts16,692,035 198,658 101,245 
Foreign currency contracts1,517,434 32,464 7,639 
Credit risk contracts107,754 — 1,540 
Impact of netting(1)
(152,015)(152,015)
Fair value included within derivative assets and derivative liabilities1,295,950 145,163 
Embedded derivative – indexed universal life products— 557,276 
Embedded derivative – annuity products— 1,983,949 
Fair value included within policy liabilities— 2,541,225 
Embedded derivative – funds withheld at interest31,740 (49,491)
Total Insurance$1,327,690 $2,636,897 
Fair value included within total assets and liabilities$1,918,818 $3,001,411 

(1)     Represents netting of derivative exposures covered by qualifying master netting agreements.

The amounts of derivative gains and losses recognized are reported in the consolidated statements of operations as follows:

Derivative contracts not designated as hedgesThree Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Asset Management
Net Gains (Losses) from Investment Activities:
Foreign Exchange Contracts and Options$593,766 $321,139 817,531 $252,303 
Other Derivatives4,782 (11,110)30,488 (41,571)
   Total included in Net Gains (Losses) from Investment Activities$598,548 $310,029 $848,019 $210,732 
Insurance
Net investment-related gains (losses):
Funds withheld receivable embedded derivatives$3,211 $(10,001)$(64,130)$68,449 
Funds withheld payable embedded derivatives836,395 103,971 3,380,530 48,799 
Equity index options(156,561)(25,854)(884,786)275,035 
Equity future contracts37,247 1,783 199,432 (171,982)
Interest rate contracts and other(107,494)(24,135)(331,395)(149,274)
Credit risk contracts370 (196)705 (254)
Total included in net investment-related gains (losses)$613,168 $45,568 $2,300,356 $70,773 

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Derivative contracts designated as hedgesThree Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Insurance
Revenues
Net investment-related gains (losses):
Foreign currency forwards$42,136 $(4,776)$70,048 $(675)
Total included in net investment-related gains (losses)$42,136 $(4,776)$70,048 $(675)
Expenses
Net policy benefits and claims:
Interest rate swaps$(171,447)$74 $(426,794)$(6,552)
Total included in net policy benefits and claims$(171,447)$74 $(426,794)$(6,552)
Interest expense:
Interest rate swaps$(62,413)$(7,923)$(180,087)$(14,307)
Total included in interest expense$(62,413)$(7,923)$(180,087)$(14,307)

The amount of Global Atlantic's net derivative assets and liabilities after consideration of collateral received or pledged were as follows:
As of September 30, 2022Gross amount recognized
Gross amounts offset in the statements of financial position(1)
Net amounts presented in the statements of financial conditionCollateral (received) / pledgedNet amount after collateral
Derivative assets (excluding embedded derivatives)$1,124,077 $(273,803)$850,274 $(429,796)$420,478 
Derivative liabilities (excluding embedded derivatives)$1,248,032 $(273,803)$974,229 $255,108 $719,121 
(1)Represents netting of derivative exposures covered by qualifying master netting agreements.

As of December 31, 2021Gross amount recognized
Gross amounts offset in the statements of financial position(1)
Net amounts presented in the statements of financial conditionCollateral (received) / pledgedNet amount after collateral
Derivative assets (excluding embedded derivatives)$1,447,965 $(152,015)$1,295,950 $(1,086,061)$209,889 
Derivative liabilities (excluding embedded derivatives)$297,178 $(152,015)$145,163 $49,860 $95,303 

(1) Represents netting of derivative exposures covered by qualifying master netting agreements.
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10. FAIR VALUE MEASUREMENTS
The following tables summarize the valuation of assets and liabilities measured and reported at fair value by the fair value hierarchy. Investments classified as Equity Method - Other, for which the fair value option has not been elected, and Equity Method - Capital Allocation-Based Income have been excluded from the tables below.
Assets, at fair value:
 September 30, 2022
 Level ILevel IILevel IIITotal
Asset Management
Private Equity$1,299,454 $169,993 $25,073,296 $26,542,743 
Credit89,638 1,997,745 5,444,839 7,532,222 
Investments of Consolidated CFEs— 21,500,342 — 21,500,342 
Real Assets— 1,073,537 15,586,048 16,659,585 
Equity Method - Other454,611 891,076 1,561,621 2,907,308 
Other Investments422,335 47,711 3,133,423 3,603,469 
Total Investments$2,266,038 $25,680,404 $50,799,227 $78,745,669 
Foreign Exchange Contracts and Options— 1,016,135 — 1,016,135 
Other Derivatives266 26,371 13,250 39,887 
Total Assets at Fair Value - Asset Management$2,266,304 $26,722,910 $50,812,477 $79,801,691 
Insurance
AFS fixed maturity securities:
U.S. government and agencies$212,032 $82,765 $— $294,797 
U.S. state, municipal and political subdivisions— 4,027,040 — 4,027,040 
Corporate— 24,827,591 7,977,902 32,805,493 
Structured securities— 20,018,218 1,402,303 21,420,521 
Total AFS fixed maturity securities$212,032 $48,955,614 $9,380,205 $58,547,851 
Trading fixed maturity securities:
U.S. government and agencies$157,936 $57,510 $— $215,446 
U.S. state, municipal and political subdivisions— 525,889 — 525,889 
Corporate— 5,568,632 633,147 6,201,779 
Structured securities— 2,760,029 543,891 3,303,920 
Total trading fixed maturity securities$157,936 $8,912,060 $1,177,038 $10,247,034 
Equity securities2,607 — 17,315 19,922 
Mortgage and other loan receivables(2)
— — 870,475 870,475 
Other investments(3)
— — 4,253,873 4,253,873 
Funds withheld receivable at interest— — (21,954)(21,954)
Reinsurance recoverable— — 1,069,497 1,069,497 
Derivative assets:
Equity market contracts90,387 489,531 — 579,918 
Interest rate contracts12,287 158,115 — 170,402 
Foreign currency contracts— 373,757 — 373,757 
Impact of netting(4)
(51,954)(221,849)— (273,803)
Total derivative assets$50,720 $799,554 $— $850,274 
Separate account assets4,052,251 — — 4,052,251 
Total Assets at Fair Value - Insurance$4,475,546 $58,667,228 $16,746,449 $79,889,223 
Total Assets at Fair Value$6,741,850 $85,390,138 $67,558,926 $159,690,914 
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 December 31, 2021
 Level ILevel IILevel IIITotal
Asset Management
Private Equity$2,044,380 $318,736 $23,322,634 $25,685,750 
Credit— 2,122,912 5,826,661 7,949,573 
Investments of Consolidated CFEs— 22,076,809 — 22,076,809 
Real Assets— 1,111,219 11,389,530 12,500,749 
Equity Method - Other482,061 105,647 1,013,807 1,601,515 
Other Investments759,002 146,081 3,240,013 4,145,096 
Total Investments$3,285,443 $25,881,404 $44,792,645 $73,959,492 
Foreign Exchange Contracts and Options— 590,637 — 590,637 
Other Derivatives— 12 479 
(1)
491 
Total Assets at Fair Value - Asset Management$3,285,443 $26,472,053 $44,793,124 $74,550,620 
Insurance
AFS fixed maturity securities:
U.S. government and agencies$500,325 $284,222 $— $784,547 
U.S. state, municipal and political subdivisions— 5,109,697 — 5,109,697 
Corporate— 33,281,727 7,650,660 40,932,387 
Structured securities— 21,215,854 828,401 22,044,255 
Total AFS fixed maturity securities$500,325 $59,891,500 $8,479,061 $68,870,886 
Trading fixed maturity securities:
U.S. government and agencies$371,366 $252,266 $— $623,632 
U.S. state, municipal and political subdivisions— 879,463 — 879,463 
Corporate— 8,486,922 565,025 9,051,947 
Structured securities— 2,779,757 418,774 3,198,531 
Total trading fixed maturity securities$371,366 $12,398,408 $983,799 $13,753,573 
Equity securities256,196 — 32,937 289,133 
Mortgage and other loan receivables(2)
— — 832,674 832,674 
Other investments(3)
— — 1,603,345 1,603,345 
Funds withheld receivable at interest— — 31,740 31,740 
Reinsurance recoverable— — 1,293,791 1,293,791 
Derivative assets:
Equity market contracts66,510 1,150,333 — 1,216,843 
Interest rate contracts44,472 154,186 — 198,658 
Foreign currency contracts— 32,464 — 32,464 
Impact of netting(4)
(25,588)(126,427)— (152,015)
Total derivative assets$85,394 $1,210,556 $— $1,295,950 
Separate account assets5,586,428 — — 5,586,428 
Total Assets at Fair Value - Insurance$6,799,709 $73,500,464 $13,257,347 $93,557,520 
Total Assets at Fair Value$10,085,152 $99,972,517 $58,050,471 $168,108,140 
(1)Includes derivative assets that were valued using a third-party valuation firm. The approach used to estimate the fair value of these derivative assets was generally the discounted cash flow method, which includes consideration of the current portfolio, projected portfolio construction, projected portfolio realizations, portfolio volatility (based on the volatility, correlation, and size of each underlying asset class), and the discounting of future cash flows to the reporting date.
(2)Includes related party balance of $33.2 million and $27.3 million in Level III for mortgage and other loan receivables as of September 30, 2022 and December 31, 2021, respectively.
(3)Other investments excluded from the fair value hierarchy include certain real estate and private equity funds for which fair value is measured at net asset value per share as a practical expedient. As of September 30, 2022 and December 31, 2021, the fair value of these investments was $145.8 million and $108.7 million, respectively.
(4)Represents netting of derivative exposures covered by qualifying master netting agreements.
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Liabilities, at fair value:
 September 30, 2022
 Level ILevel IILevel IIITotal
Asset Management
Securities Sold Short$87,894 $— $— $87,894 
Foreign Exchange Contracts and Options— 242,117 — 242,117 
Unfunded Revolver Commitments— — 108,195 
(1)
108,195 
Other Derivatives — 20,249 — 20,249 
Debt Obligations of Consolidated CFEs— 21,118,566 — 21,118,566 
Total Liabilities at Fair Value - Asset Management$87,894 $21,380,932 $108,195 $21,577,021 
Insurance
Policy liabilities$— $— $417,863 $417,863 
Closed block policy liabilities— — 1,096,478 1,096,478 
Funds withheld payable at interest— — (3,419,586)(3,419,586)
Derivative instruments payable:
Equity market contracts95,111 121,995 — 217,106 
Interest rate contracts18,025 917,360 — 935,385 
Foreign currency contracts— 95,233 — 95,233 
Credit contracts— 308 — 308 
Impact of netting(2)
(51,954)(221,849)— (273,803)
Total derivative instruments payable61,182 913,047 — 974,229 
Embedded derivative – indexed universal life products— — 315,889 315,889 
Embedded derivative – annuity products— — 1,472,814 1,472,814 
Total Liabilities at Fair Value - Insurance$61,182 $913,047 $(116,542)$857,687 
Total Liabilities at Fair Value$149,076 $22,293,979 $(8,347)$22,434,708 
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 December 31, 2021
 Level ILevel IILevel IIITotal
Asset Management
Securities Sold Short$249,383 $— $— $249,383 
Foreign Exchange Contracts and Options— 319,511 — 319,511 
Unfunded Revolver Commitments— — 64,276 
(1)
64,276 
Other Derivatives — 45,003 — 45,003 
Debt Obligations of Consolidated CFEs— 21,271,084 — 21,271,084 
Total Liabilities at Fair Value - Asset Management$249,383 $21,635,598 $64,276 $21,949,257 
Insurance
Policy liabilities$— $— $519,454 $519,454 
Closed block policy liabilities— — 1,350,224 1,350,224 
Funds withheld payable at interest— — (49,491)(49,491)
Derivative instruments payable:
Equity market contracts33,933 152,821 — 186,754 
Interest rate contracts14,009 87,236 — 101,245 
Foreign currency contracts— 7,639 — 7,639 
Credit contracts— 1,540 — 1,540 
Impact of netting(2)
(25,588)(126,427)— (152,015)
Total derivative instruments payable22,354 122,809 — 145,163 
Embedded derivative – indexed universal life products— — 557,276 557,276 
Embedded derivative – annuity products— — 1,983,949 1,983,949 
Total Liabilities at Fair Value - Insurance$22,354 $122,809 $4,361,412 $4,506,575 
Total Liabilities at Fair Value$271,737 $21,758,407 $4,425,688 $26,455,832 
(1)These unfunded revolver commitments are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(2)Represents netting of derivative exposures covered by qualifying master netting agreement.



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The following tables summarize changes in assets and liabilities measured and reported at fair value for which Level III inputs have been used to determine fair value for the three and nine months ended September 30, 2022 and 2021, respectively. For certain insurance disclosures, the beginning of the period represents balances as of the GA Acquisition Date.

Three Months Ended September 30, 2022
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers
In
Transfers OutNet Purchases/Issuances/Sales/SettlementsNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting Date Changes in Net Unrealized Gains (Losses) Included in OCI related to Level III Assets and Liabilities still held as of the Reporting Date
Assets
Asset Management
Private Equity$22,918,721 $(49,000)$— $— $2,251,233 $(47,658)$— $25,073,296 $(180,571)$— 
Credit 4,927,912 34,245 — (554)682,518 (199,282)— 5,444,839 (199,923)— 
Real Assets15,951,741 — — — (14,403)(351,290)— 15,586,048 (452,358)— 
Equity Method - Other1,474,357 156,183 — — (656)(68,263)— 1,561,621 (68,229)— 
Other Investments2,934,772 513,875 — (492)(55,787)(258,945)— 3,133,423 (253,841)— 
Other Derivatives41,939 — — — (33,907)5,218 — 13,250 729 — 
  Total Assets - Asset Management$48,249,442 $655,303 $— $(1,046)$2,828,998 $(920,220)$— $50,812,477 $(1,154,193)$— 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$8,043,069 $— $— $(23,071)$126,232 $(103,994)$(64,334)$7,977,902 $— $(80,146)
Structured securities1,283,879 — — — 150,387 4,007 (35,970)1,402,303 — (35,910)
Total AFS fixed maturity securities9,326,948 — — (23,071)276,619 (99,987)(100,304)9,380,205 — (116,056)
Trading fixed maturity securities:
Corporate fixed maturity securities667,014 — — — (6,766)(27,101)— 633,147 (26,661)— 
Structured securities579,701 — 9,900 (6,521)(9,734)(29,455)— 543,891 (29,185)— 
Total trading fixed maturity securities1,246,715 — 9,900 (6,521)(16,500)(56,556)— 1,177,038 (55,846)— 
Equity securities17,317 — — — — (2)— 17,315 (2)— 
Mortgage and other loan receivables905,663 — — — (17,532)(17,656)— 870,475 (17,258)— 
Other investments4,011,106 — — — 281,471 (38,704)— 4,253,873 (39,632)— 
Funds withheld receivable at interest(25,166)— — — — 3,212 — (21,954)— — 
Reinsurance recoverable1,103,684 — — — (3,626)(30,561)— 1,069,497 — — 
Total Assets - Insurance$16,586,267 $— $9,900 $(29,592)$520,432 $(240,254)$(100,304)$16,746,449 $(112,738)$(116,056)
Total$64,835,709 $655,303 $9,900 $(30,638)$3,349,430 $(1,160,474)$(100,304)$67,558,926 $(1,266,931)$(116,056)
54

Table of Contents
Nine Months Ended September 30, 2022
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers
In
Transfers OutNet Purchases/Issuances/Sales/SettlementsNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting DateChanges in Net Unrealized Gains (Losses) Included in OCI related to Level III Assets and Liabilities still held as of the Reporting Date
Assets
Asset Management
Private Equity$23,322,634 $(49,000)$— $(138,220)$2,929,393 $(991,511)$— $25,073,296 $(1,307,533)$— 
Credit5,826,661 34,245 — (88,646)124,050 (447,003)(4,468)5,444,839 (374,990)— 
Real Assets11,389,530 — — — 3,080,113 1,116,405 — 15,586,048 725,446 — 
Equity Method - Other1,013,807 156,183 — — 605,485 (213,854)— 1,561,621 (215,037)— 
Other Investments3,240,013 513,875 — (839)(125,702)(493,924)— 3,133,423 (468,891)— 
Other Derivatives479 — — — 21,800 (9,029)— 13,250 (8,901)— 
Total Assets - Asset Management$44,793,124 $655,303 $— $(227,705)$6,635,139 $(1,038,916)$(4,468)$50,812,477 $(1,649,906)$— 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$7,652,134 $— $— $(88,076)$874,870 $(168,704)$(292,322)$7,977,902 $— $(271,515)
Structured securities828,381 — 343,338 — 336,316 (5,347)(100,385)1,402,303 — (110,257)
Total AFS fixed maturity securities8,480,515 — 343,338 (88,076)1,211,186 (174,051)(392,707)9,380,205 — (381,772)
Trading fixed maturity securities:
Corporate fixed maturity securities565,354 — — (44,274)187,661 (75,594)— 633,147 (73,050)— 
Structured securities418,774 — 115,882 (31,741)112,313 (71,337)— 543,891 (71,865)— 
Total trading fixed maturity securities984,128 — 115,882 (76,015)299,974 (146,931)— 1,177,038 (144,915)— 
Equity securities32,937 — — — — (15,622)— 17,315 (15,622)— 
Mortgage and other loan receivables832,674 — — — 110,878 (73,077)— 870,475 (62,650)— 
Other investments1,603,345 — — — 2,569,112 81,416 — 4,253,873 32,580 — 
Funds withheld receivable at interest31,740 — — — 10,435 (64,129)— (21,954)— — 
Reinsurance recoverable1,293,791 — — — (16,728)(207,566)— 1,069,497 — — 
Total Assets - Insurance$13,259,130 $— $459,220 $(164,091)$4,184,857 $(599,960)$(392,707)$16,746,449 $(190,607)$(381,772)
Total$58,052,254 $655,303 $459,220 $(391,796)$10,819,996 $(1,638,876)$(397,175)$67,558,926 $(1,840,513)$(381,772)

55

Table of Contents
Three Months Ended September 30, 2021
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Issuances/Sales/SettlementsNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting DateChanges in Net Unrealized Gains (Losses) Included in OCI related to Level III Assets and Liabilities still held as of the Reporting Date
Assets
Asset Management
Private Equity$19,023,638 $— $— $(75,554)$1,636,915 $1,159,950 $— $21,744,949 $1,094,045 $— 
Credit9,931,511 — — — 317,956 (56,665)7,809 10,200,611 (15,427)7,809 
Real Assets8,717,571 (174,658)— — 2,454,477 635,794 — 11,633,184 609,092 — 
Equity Method - Other1,067,844 — — — (75,143)16,167 — 1,008,868 (22,455)— 
Other Investments2,971,242 — — — 105,878 91,797 — 3,168,917 76,256 — 
Other Derivatives1,875 — — — 13,152 (14,984)— 43 (14,984)— 
Total Assets - Asset Management$41,713,681 $(174,658)$— $(75,554)$4,453,235 $1,832,059 $7,809 $47,756,572 $1,726,527 $7,809 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$4,018,174 $— $48,093 $(29,400)$785,992 $— $19,444 $4,842,303 $— $1,236 
Structured securities175,936 — 16,309 — 2,460 — 2,282 196,987 — 1,682 
Total AFS fixed maturity securities4,194,110 — 64,402 (29,400)788,452 — 21,726 5,039,290 — 2,918 
Trading fixed maturity securities:
Corporate fixed maturity securities1,009,357 — — — 368,624 6,984 — 1,384,965 4,926 — 
Structured securities20,939 — 15,744 — 44,233 84 — 81,000 1,131 — 
Total trading fixed maturity securities1,030,296 — 15,744 — 412,857 7,068 — 1,465,965 6,057 — 
Equity securities97,029 — — — (90,855)22,689 — 28,863 (10,074)— 
Mortgage and other loan receivables1,224,789 — — — 58,303 5,386 — 1,288,478 2,047 — 
Other investments491,635 — — — (33,619)337,212 — 795,228 (22,496)— 
Funds withheld receivable at interest78,450 — — — (437)2,480 — 80,493 — — 
Reinsurance recoverable1,288,097 — — — — 37,390 — 1,325,487 — — 
Total Assets - Insurance$8,404,406 $— $80,146 $(29,400)$1,134,701 $412,225 $21,726 $10,023,804 $(24,466)$2,918 
Total$50,118,087 $(174,658)$80,146 $(104,954)$5,587,936 $2,244,284 $29,535 $57,780,376 $1,702,061 $10,727 
56

Table of Contents
Nine Months Ended September 30, 2021
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Issuances/Sales/SettlementsNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting DateChanges in Net Unrealized Gains (Losses) Included in OCI related to Level III Assets and Liabilities still held as of the Reporting Date
Assets
Asset Management
Private Equity$15,234,904 $— $5,034 $(504,112)$1,853,614 $5,155,509 $— $21,744,949 $5,011,447 $— 
Credit9,172,848 (1,021)86,135 — 875,871 59,611 7,167 10,200,611 134,588 7,167 
Real Assets5,924,575 (174,658)17,567 — 4,503,849 1,361,851 — 11,633,184 1,293,618 — 
Equity Method - Other1,014,378 — — (22,601)(237,737)254,828 — 1,008,868 215,103 — 
Other Investments2,341,981 (2,879)— (115,274)380,337 564,752 — 3,168,917 616,584 — 
Other Derivatives6,668 — — — 23,762 (30,387)— 43 (30,387)— 
Total Assets - Asset Management$33,695,354 $(178,558)$108,736 $(641,987)$7,399,696 $7,366,164 $7,167 $47,756,572 $7,240,953 $7,167 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$3,504,578 $— $76,277 $(38,610)$1,298,035 $— $2,023 $4,842,303 $— $(9,447)
Structured securities197,970 — 16,309 — (17,047)— (245)196,987 — 1,652 
Total AFS fixed maturity securities3,702,548 — 92,586 (38,610)1,280,988 — 1,778 5,039,290 — (7,795)
Trading fixed maturity securities:
Corporate fixed maturity securities676,650 — — — 705,027 3,288 — 1,384,965 604 — 
Structured securities14,661 — 15,744 — 50,208 387 — 81,000 1,337 — 
Total trading fixed maturity securities691,311 — 15,744 — 755,235 3,675 — 1,465,965 1,941 — 
Equity securities66,660 — — — (90,855)53,058 — 28,863 20,295 — 
Mortgage and other loan receivables928,673 — — — 348,098 11,707 — 1,288,478 9,814 — 
Other investments437,275 — 5,003 — (20,693)373,643 — 795,228 13,510 — 
Funds withheld receivable at interest— — — — 152 80,341 — 80,493 — — 
Reinsurance recoverable— — — — — 1,325,487 — 1,325,487 — — 
Total Assets - Insurance$5,826,467 $— $113,333 $(38,610)$2,272,925 $1,847,911 $1,778 $10,023,804 $45,560 $(7,795)
Total$39,521,821 $(178,558)$222,069 $(680,597)$9,672,621 $9,214,075 $8,945 $57,780,376 $7,286,513 $(628)


57

Table of Contents
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
PurchasesIssuancesSalesSettlementsNet Purchases/ Issuances/ Sales/ SettlementsPurchasesIssuancesSalesSettlementsNet Purchases/ Issuances/ Sales/ Settlements
Assets
Asset Management
Private Equity$2,387,838 $— $(136,605)$— $2,251,233 $3,444,454 $— $(515,061)$— $2,929,393 
Credit 787,194 — (64,068)(40,608)682,518 1,561,070 — (1,111,399)(325,621)124,050 
Real Assets372,844 — (336,859)(50,388)(14,403)4,750,162 — (1,619,661)(50,388)3,080,113 
Equity Method - Other177 — (833)— (656)612,343 — (6,858)— 605,485 
Other Investments41,445 — (97,232)— (55,787)271,005 — (396,707)— (125,702)
Other Derivatives— — (33,907)— (33,907)55,707 — (33,907)— 21,800 
  Total Assets - Asset Management$3,589,498 $— $(669,504)$(90,996)$2,828,998 $10,694,741 $— $(3,683,593)$(376,009)$6,635,139 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$844,913 $— $(29,842)$(688,839)$126,232 $2,441,634 $— $(158,346)$(1,408,418)$874,870 
Structured securities176,822 — (13)(26,422)150,387 531,082 — (13)(194,753)336,316 
Total AFS fixed maturity securities1,021,735 — (29,855)(715,261)276,619 2,972,716 — (158,359)(1,603,171)1,211,186 
Trading fixed maturity securities:
Corporate fixed maturity securities31,633 — (5)(38,394)(6,766)250,288 — (606)(62,021)187,661 
Structured securities93 — (4,700)(5,127)(9,734)195,887 — (4,700)(78,874)112,313 
Total trading fixed maturity securities31,726 — (4,705)(43,521)(16,500)446,175 — (5,306)(140,895)299,974 
Mortgage and other loan receivables3,456 — — (20,988)(17,532)236,734 — (7,302)(118,554)110,878 
Other investments560,855 — (279,384)— 281,471 3,122,881 — (553,769)— 2,569,112 
Funds withheld receivable at interest— — — — — — 10,435 — — 10,435 
Reinsurance recoverable— — — (3,626)(3,626)— — — (16,728)(16,728)
Total Assets - Insurance$1,617,772 $— $(313,944)$(783,396)$520,432 $6,778,506 $10,435 $(724,736)$(1,879,348)$4,184,857 
Total$5,207,270 $— $(983,448)$(874,392)$3,349,430 $17,473,247 $10,435 $(4,408,329)$(2,255,357)$10,819,996 

58

Table of Contents
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
PurchasesIssuancesSalesSettlementsNet Purchases/Issuances/Sales/SettlementsPurchasesIssuancesSalesSettlementsNet Purchases/ Issuances/ Sales/ Settlements
Assets
Asset Management
Private Equity$1,768,420 $— $(131,505)$— $1,636,915 $2,147,332 $— $(293,718)$— $1,853,614 
Credit 1,895,171 — (1,579,340)2,125 317,956 4,476,350 — (3,440,035)(160,444)875,871 
Real Assets2,983,593 — (529,116)— 2,454,477 5,541,325 — (1,037,476)— 4,503,849 
Equity Method - Other7,201 — (82,344)— (75,143)21,800 — (259,537)— (237,737)
Other Investments257,463 — (151,585)— 105,878 588,865 — (208,528)— 380,337 
Other Derivatives13,152 — — — 13,152 23,762 — — — 23,762 
  Total Assets - Asset Management$6,925,000 $— $(2,473,890)$2,125 $4,453,235 $12,799,434 $— $(5,239,294)$(160,444)$7,399,696 
Insurance
AFS fixed maturity securities:
Corporate fixed maturity securities$2,155,228 $— $(13,846)$(1,355,390)$785,992 $4,072,144 $— $(48,073)$(2,726,036)$1,298,035 
Structured securities4,218 — — (1,758)2,460 4,289 — — (21,336)(17,047)
Total AFS fixed maturity securities2,159,446 — (13,846)(1,357,148)788,452 4,076,433 — (48,073)(2,747,372)1,280,988 
Trading fixed maturity securities:
Corporate fixed maturity securities370,488 — (623)(1,241)368,624 710,446 — (623)(4,796)705,027 
Structured securities44,594 — — (361)44,233 52,735 — — (2,527)50,208 
Total trading fixed maturity securities415,082 — (623)(1,602)412,857 763,181 — (623)(7,323)755,235 
Equity securities— — (83,864)(6,991)(90,855)— — (83,864)(6,991)(90,855)
Mortgage and other loan receivables65,517 — (6,541)(673)58,303 380,555 — (22,200)(10,257)348,098 
Other investments25,000 — (58,619)— (33,619)37,926 — (58,619)— (20,693)
Funds withheld receivable at interest— (437)— — (437)— 152 — — 152 
Total Assets - Insurance$2,665,045 $(437)$(163,493)$(1,366,414)$1,134,701 $5,258,095 $152 $(213,379)$(2,771,943)$2,272,925 
Total$9,590,045 $(437)$(2,637,383)$(1,364,289)$5,587,936 $18,057,529 $152 $(5,452,673)$(2,932,387)$9,672,621 
59

Table of Contents
Three Months Ended September 30, 2022
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Sales/Settlements/IssuancesNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting Date
Liabilities
Asset Management
Unfunded Revolver Commitments$95,798 $— $— $— $— $12,397 $— $108,195 $12,397 
Total Liabilities - Asset Management$95,798 $— $— $— $— $12,397 $— $108,195 $12,397 
Insurance
Policy liabilities$454,034 $— $— $— $— $(36,171)$— $417,863 $— 
Closed block policy liabilities1,135,909 — — — (4,396)(34,741)(294)1,096,478 — 
Funds withheld payable at interest(2,583,191)— — — — (836,395)— (3,419,586)— 
Embedded derivative – indexed universal life products341,846 — — — (25)(25,932)— 315,889 — 
Embedded derivative – annuity products1,429,394 — — — 214,455 (171,035)— 1,472,814 — 
Total Liabilities - Insurance$777,992 $— $— $— $210,034 $(1,104,274)$(294)$(116,542)$— 
Total$873,790 $— $— $— $210,034 $(1,091,877)$(294)$(8,347)$12,397 
60

Table of Contents
Nine Months Ended September 30, 2022
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Sales/Settlements/IssuancesNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting Date
Liabilities
Asset Management
Unfunded Revolver Commitments$64,276 $— $— $— $(4,728)$48,647 $— $108,195 $48,647 
Total Liabilities - Asset Management$64,276 $— $— $— $(4,728)$48,647 $— $108,195 $48,647 
Insurance
Policy liabilities$519,454 $— $— $— $— $(101,591)$— $417,863 $— 
Closed block policy liabilities1,350,224 — — — (17,368)(241,820)5,442 1,096,478 — 
Funds withheld payable at interest(49,491)— — — 10,435 (3,380,530)— (3,419,586)— 
Embedded derivative – indexed universal life products557,276 — — — 2,993 (244,380)— 315,889 — 
Embedded derivative – annuity products1,983,949 — — — 480,121 (991,256)— 1,472,814 — 
Total Liabilities - Insurance$4,361,412 $— $— $— $476,181 $(4,959,577)$5,442 $(116,542)$— 
Total$4,425,688 $— $— $— $471,453 $(4,910,930)$5,442 $(8,347)$48,647 



61

Table of Contents
Three Months Ended September 30, 2021
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Sales/Settlements/IssuancesNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting Date
Liabilities
Asset Management
Unfunded Revolver Commitments$40,050 $— $— $— $— $10,860 $— $50,910 $10,860 
Total Liabilities - Asset Management$40,050 $— $— $— $— $10,860 $— $50,910 $10,860 
Insurance
Policy liabilities$548,377 $— $— $— $— $(3,548)$— $544,829 $— 
Closed block policy liabilities1,341,262 — — — — 32,941 710 1,374,913 — 
Funds withheld payable at interest55,172 — — — — (91,927)— (36,755)— 
Embedded derivative – indexed universal life products495,353 — — — 108 (5,448)— 490,013 — 
Embedded derivative – annuity products1,521,447 — — — 81,926 49,341 — 1,652,714 — 
Total Liabilities - Insurance$3,961,611 $— $— $— $82,034 $(18,641)$710 $4,025,714 $— 
Total$4,001,661 $— $— $— $82,034 $(7,781)$710 $4,076,624 $10,860 
62

Table of Contents
Nine Months Ended September 30, 2021
Balance, Beg. of PeriodTransfers In / (Out) - Changes in ConsolidationTransfers InTransfers OutNet Purchases/Sales/Settlements/IssuancesNet Unrealized and Realized Gains (Losses)Change in OCIBalance, End of PeriodChanges in Net Unrealized Gains (Losses) Included in Earnings related to Level III Assets and Liabilities still held as of the Reporting Date
Liabilities
Asset Management
Unfunded Revolver Commitments$46,340 $— $— $— $628 $3,942 $— $50,910 $3,942 
Total Liabilities - Asset Management$46,340 $— $— $— $628 $3,942 $— $50,910 $3,942 
Insurance
Policy liabilities$637,800 $— $— $— $— $(92,971)$— $544,829 $— 
Closed block policy liabilities1,395,746 — — — — (22,205)1,372 1,374,913 — 
Funds withheld payable at interest59,230 — — — — (95,985)— (36,755)— 
Embedded derivative – indexed universal life products386,746 — — — (393)103,660 — 490,013 — 
Embedded derivative – annuity products1,024,601 — — — 208,027 420,086 — 1,652,714 — 
Total Liabilities - Insurance$3,504,123 $— $— $— $207,634 $312,585 $1,372 $4,025,714 $— 
Total$3,550,463 $— $— $— $208,262 $316,527 $1,372 $4,076,624 $3,942 
63

Table of Contents
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
IssuancesSettlementsNet Issuances/SettlementsIssuancesSettlementsNet Issuances/Settlements
Liabilities
Asset Management
Unfunded Revolver Commitments$9,400 $(9,400)$— $26,490 $(31,218)$(4,728)
Total Liabilities - Asset Management$9,400 $(9,400)$— $26,490 $(31,218)$(4,728)
Insurance
Closed block policy liabilities$— $(4,396)$(4,396)$— $(17,368)$(17,368)
Funds withheld payable at interest— — — 10,435 — 10,435 
Embedded derivative – indexed universal life products5,687 (5,712)(25)18,063 (15,070)2,993 
Embedded derivative – annuity products214,455 — 214,455 480,121 — 480,121 
Total Liabilities - Insurance$220,142 $(10,108)$210,034 $508,619 $(32,438)$476,181 
Total$229,542 $(19,508)$210,034 $535,109 $(63,656)$471,453 
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
IssuancesSettlementsNet Issuances/SettlementsIssuancesSettlementsNet Issuances/Settlements
Liabilities
Asset Management
Unfunded Revolver Commitments$11,319 $(11,319)$— $12,486 $(11,858)$628 
Total Liabilities - Asset Management$11,319 $(11,319)$— $12,486 $(11,858)$628 
Insurance
Embedded derivative – indexed universal life products$4,775 $(4,667)$108 $14,853 $(15,246)$(393)
Embedded derivative – annuity products81,926 — 81,926 208,027 — 208,027 
Total Liabilities - Insurance$86,701 $(4,667)$82,034 $222,880 $(15,246)$207,634 
Total$98,020 $(15,986)$82,034 $235,366 $(27,104)$208,262 
Total realized and unrealized gains and losses recorded for Asset Management - Level III assets and liabilities are reported in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations while Insurance - Level III assets and liabilities are reported in Net Investment Gains and Policy Benefits and Claims in the accompanying consolidated statements of operations.

The following table presents additional information about valuation methodologies and significant unobservable inputs used for financial assets and liabilities that are measured and reported at fair value and categorized within Level III as of September 30, 2022. Because input information includes only those items for which information is reasonably available, balances shown below may not equal total amounts reported for such Level III assets and liabilities:
Level III AssetsFair Value September 30, 2022Valuation
Methodologies
Unobservable Input(s) (1)
Weighted
Average (2)
Range
Impact to
 Valuation
from an
Increase in
Input (3)
ASSET MANAGEMENT      
Private Equity$25,073,296 
Private Equity$22,354,498 Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount6.5%
5.0% - 15.0%
 Decrease
 Weight Ascribed to Market Comparables29.0%
0.0% - 75.0%
 (4)
  Weight Ascribed to Discounted Cash Flow68.2%
0.0% - 100.0%
 (5)
  Weight Ascribed to Transaction Price2.8%
0.0% - 100.0%
 (6)
  Market comparablesEnterprise Value/LTM EBITDA Multiple16.8x
7.6x - 52.8x
 Increase
Enterprise Value/Forward EBITDA Multiple14.9x
6.8x - 30.0x
 Increase
  Discounted cash flowWeighted Average Cost of Capital9.9%
6.3% - 13.9%
 Decrease
  Enterprise Value/LTM EBITDA Exit Multiple14.1x
6.0x - 27.6x
 Increase
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Level III AssetsFair Value September 30, 2022Valuation
Methodologies
Unobservable Input(s) (1)
Weighted
Average (2)
Range
Impact to
 Valuation
from an
Increase in
Input (3)
Growth Equity$2,718,798 Inputs to market comparables, discounted cash flow and milestones Illiquidity Discount8.6%
5.0% - 15.0%
Decrease
Weight Ascribed to Market Comparables28.7%
0.0% - 100.0%
(4)
Weight Ascribed to Discounted Cash Flow0.0%
0.0% - 5.0%
(5)
Weight Ascribed to Milestones 71.3%
0.0% - 100.0%
(6)
Scenario WeightingBase76.0%
60.0% - 80.0%
Increase
Downside4.8%
0.0% - 25.0%
Decrease
Upside19.2%
10.0% - 25.0%
Increase
Credit $5,444,839 Yield AnalysisYield10.8%
7.0% - 48.1%
 Decrease
Net Leverage6.2x
0.1x - 31.5x
Decrease
EBITDA Multiple12.6x
0.3x - 33.0x
Increase
Real Assets$15,586,048       
Energy$1,751,872 Inputs to market comparables and discounted cash flow Weight Ascribed to Market Comparables43.4%
0.0% - 50.0%
(4)
Weight Ascribed to Discounted Cash Flow56.6%
50.0% - 100.0%
(5)
Market comparablesEnterprise Value/LTM EBITDA Multiple4.5x
4.5x - 4.5x
Increase
Enterprise Value/Forward EBITDA Multiple5.1x
3.3x - 5.9x
Increase
Discounted cash flowWeighted Average Cost of Capital12.7%
12.4% - 14.4%
 Decrease
Average Price Per BOE (8)$49.79
$45.69 - $65.78
Increase
Infrastructure
$5,565,903 Inputs to market comparables, discounted cash flow and transaction priceIlliquidity Discount5.7%
5.0% - 10.0%
 Decrease
Weight Ascribed to Market Comparables1.9%
0.0% - 25.0%
(4)
Weight Ascribed to Discounted Cash Flow84.2%
0.0% - 100.0%
 (5)
Weight Ascribed to Transaction Price13.9%
0.0% - 100.0%
 (6)
Market comparablesEnterprise Value/Forward EBITDA Multiple13.4x
10.5x - 17.9x
Increase
Discounted cash flowWeighted Average Cost of Capital7.9%
5.1% - 9.0%
Decrease
Enterprise Value/LTM EBITDA Exit Multiple8.2x
1.4x - 14.6x
Increase
Real Estate$8,268,273 Inputs to direct income capitalization, discounted cash flow and transaction priceWeight Ascribed to Direct Income Capitalization23.3%
0.0% - 100.0%
 (7)
  Weight Ascribed to Discounted Cash Flow74.1%
0.0% - 100.0%
 (5)
Weight Ascribed to Transaction Price2.6%
0.0% - 100.0%
(6)
  Direct income capitalizationCurrent Capitalization Rate4.8%
2.1% - 7.5%
 Decrease
  Discounted cash flowUnlevered Discount Rate6.2%
2.6% - 18.0%
 Decrease
Equity Method - Other$1,561,621 Inputs to market comparables, discounted cash flow and transaction priceIlliquidity Discount6.6%
5.0% - 10.0%
 Decrease
Weight Ascribed to Market Comparables40.5%
0.0% - 100.0%
 (4)
  Weight Ascribed to Discounted Cash Flow18.6%
0.0% - 100.0%
 (5)
  Weight Ascribed to Transaction Price40.9%
0.0% - 100.0%
 (6)
  Market comparablesEnterprise Value/LTM EBITDA Multiple19.1x
4.5x - 42.0x
 Increase
Enterprise Value/Forward EBITDA Multiple16.2x
3.3x - 33.6x
 Increase
  Discounted cash flowWeighted Average Cost of Capital9.8%
6.3% - 17.8%
 Decrease
  Enterprise Value/LTM EBITDA Exit Multiple19.4x
6.0x - 42.0x
 Increase
Other Investments$3,133,423 (9)Inputs to market comparables, discounted cash flow and transaction priceIlliquidity Discount11.0%
9.4% - 20.0%
 Decrease
Weight Ascribed to Market Comparables26.5%
0.0% - 100.0%
 (4)
Weight Ascribed to Discounted Cash Flow48.0%
0.0% - 100.0%
 (5)
Weight Ascribed to Transaction Price25.5%
0.0% - 100.0%
 (6)
Market comparablesEnterprise Value/LTM EBITDA Multiple12.6x
4.8x - 24.0x
 Increase
Enterprise Value/Forward EBITDA Multiple12.8x
7.2x - 21.8x
 Increase
Discounted cash flowWeighted Average Cost of Capital13.3%
6.2% - 44.1%
 Decrease
Enterprise Value/LTM EBITDA Exit Multiple8.4x
5.5x - 18.3x
 Increase
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Level III AssetsFair Value September 30, 2022Valuation
Methodologies
Unobservable Input(s) (1)
Weighted
Average (2)
Range
Impact to
 Valuation
from an
Increase in
Input (3)
INSURANCE
Corporate fixed maturity securities$1,722,501 Discounted cash flowDiscount Spread3.12%
—% - 5.87%
Decrease
Structured securities$103,539 Discounted cash flowDiscount Spread3.53%
3.10% - 6.27%
Decrease
Constant Prepayment Rate7.34%
5.00% - 15.00%
Increase/Decrease
Constant Default Rate1.18%
1.00% - 2.50%
Decrease
Loss Severity
100%
Decrease
Other investments$2,434,881 Direct capitalizationCurrent Capitalization Rate
5.43%
Decrease
Vacancy rate3.32%
—% - 5.00%
Decrease
Discounted cash flowYield8%Decrease
Rate6.42%
5.25% - 6.70%
Decrease
Terminal capitalization rate5.13%
3.95% - 5.50%
Decrease
Funds withheld receivable at interest$(21,954)Discounted cash flowDuration/Weighted Average Life8.43 years
0.0 years - 20.5 years
Increase
Contractholder Persistency7.17%
3.80% - 16.50%
Increase
Nonperformance Risk
0.65% - 1.90%
Decrease
Reinsurance recoverable$1,069,497 Present value of expenses paid from the open block plus the cost of capital held in support of the liabilities.Expense assumption
The average expense assumption is between $8.23 and $78.00 per policy, increased by inflation. The annual inflation rate was increased from 2.00% to 2.50%.
Increase
Unobservable inputs are a market participant’s view of the expenses, a risk margin on the uncertainty of the level of expenses and a cost of capital on the capital held in support of the liabilities.Expense risk margin
9.42%
Decrease
Cost of capital
3.69% - 13.85%
Increase
Discounted cash flowMortality Rate
5.46%
Increase
Surrender Rate
2.01%
Increase
(1)In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. KKR has determined that market participants would take these inputs into account when valuing the investments and debt obligations. "LTM" means last twelve months, and "EBITDA" means earnings before interest, taxes, depreciation and amortization.
(2)Inputs were weighted based on the fair value of the investments included in the range.
(3)Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
(4)The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and transaction price. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price.
(5)The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach, transaction price and direct income capitalization approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach, transaction price and direct income capitalization approach.
(6)The directional change from an increase in the weight ascribed to the transaction price or milestones would increase the fair value of the Level III investments if the transaction price or milestones results in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price or milestones results in a lower valuation than the market comparables approach and discounted cash flow approach.
(7)The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach.
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(8)The total energy fair value amount includes multiple investments (in multiple locations throughout North America) that are held in multiple investment funds and produce varying quantities of oil, condensate, natural gas liquids, and natural gas. Commodity price may be measured using a common volumetric equivalent where one barrel of oil equivalent ("BOE"), is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for the various investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 82% liquids and 18% natural gas.
(9)Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit, equity method - other or investments of consolidated CFEs.

Level III LiabilitiesFair Value September 30, 2022Valuation
Methodologies
Unobservable Input(s) (1)
Weighted
Average (2)
Range
Impact to
 Valuation
from an
Increase in
Input (3)
ASSET MANAGEMENT
Unfunded Revolver Commitments$108,195 Yield AnalysisYield9.6%
6.2% - 12.5%
Decrease
INSURANCE
Policy liabilities$417,863 Present value of best estimate liability cash flows. Unobservable inputs include a market participant view of the risk margin included in the discount rate which reflects the variability of the cash flows.Risk Margin Rate
0.65% - 2.66%
Decrease
Policyholder behavior is also a significant unobservable input, including surrender and mortality.Surrender Rate
3.48% - 6.67%
Increase
Mortality Rate
3.65% - 9.08%
Increase
Closed block policy liabilities$1,096,478 Present value of expenses paid from the open block plus the cost of capital held in support of the liabilities.Expense assumption
The average expense assumption is between $8.23 and $78.00 per policy, increased by inflation. The annual inflation rate was increased from 2.00% to 2.50%.
Increase
Nonperformance Risk
0.65% - 1.90%
Decrease
Unobservable inputs are a market participant’s view of the expenses, a risk margin on the uncertainty of the level of expenses and a cost of capital on the capital held in support of the liabilities.Expense Risk Margin
9.42%
Decrease
Cost of Capital
3.69% - 13.85%
Increase
Discounted cash flowMortality Rate
5.46%
Increase
Surrender Rate
2.01%
Increase
Funds withheld payable at interest$(3,419,586)Discounted cash flowDuration/Weighted Average Life8.5 years
0.0 years - 17.4 years
Decrease
Contractholder Persistency 7.17%
3.80% - 16.50%
Decrease
Nonperformance Risk
0.65% - 1.90%
Decrease
Embedded derivative – indexed universal life products$315,889 Policy persistency is a significant unobservable input.Lapse Rate
3.41%
Decrease
Mortality Rate
0.71%
Decrease
Future costs for options used to hedge the contract obligationsOption Budge Assumption
3.65%
Increase
Nonperformance Risk
0.65% - 1.90%
Decrease
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Level III LiabilitiesFair Value September 30, 2022Valuation
Methodologies
Unobservable Input(s) (1)
Weighted
Average (2)
Range
Impact to
 Valuation
from an
Increase in
Input (3)
Embedded derivative – annuity products$1,472,814 Policyholder behavior is a significant unobservable input, including utilization and lapse.Utilization:
Fixed-indexed annuity4.00%Decrease
Variable annuity4.27%
2.43% - 32.35%
Decrease
Surrender Rate:
Fixed-indexed annuity10.26%Decrease
Variable annuity
3.41% - 42.95%
Decrease
Mortality Rate:
Fixed-indexed annuity2.18%Decrease
Variable annuity
1.43% - 7.68%
Decrease
Future costs for options used to hedge the contract obligationsOption Budge Assumption:
Retail RIA1.58%Increase
Fixed-indexed annuity2.14%Increase
Variable annuityn/a
Nonperformance Risk
0.65% - 1.90%
Decrease
(1)In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. KKR has determined that market participants would take these inputs into account when valuing the investments and debt obligations. "LTM" means last twelve months, and "EBITDA" means earnings before interest, taxes, depreciation and amortization.
(2)Inputs were weighted based on the fair value of the investments included in the range.
(3)Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.


In the table above, certain private equity investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value. In addition, certain valuations of private equity investments may be entirely or partially derived by reference to observable valuation measures for a pending or consummated transaction.
The various unobservable inputs used to determine the Level III valuations may have similar or diverging impacts on valuation. Significant increases and decreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements as noted in the table above.

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Financial Instruments Not Carried At Fair Value
Asset management financial instruments are primarily measured at fair value on a recurring basis, except as disclosed in Note 17 "Debt Obligations."
The following tables present carrying amounts and fair values of Global Atlantic’s financial instruments which are not carried at fair value as of September 30, 2022 and December 31, 2021:

Fair Value Hierarchy
As of September 30, 2022Carrying ValueLevel ILevel IILevel IIIFair Value
($ in thousands)
Financial assets:
Insurance
Mortgage and other loan receivables$34,549,619 $— $— $32,435,175 $32,435,175 
Policy loans812,844 — — 730,492 730,492 
FHLB common stock and other investments171,759 — — 171,759 171,759 
Funds withheld receivables at interest2,915,739 — 2,915,739 — 2,915,739 
Cash and cash equivalents4,147,146 4,147,146 — — 4,147,146 
Restricted cash and cash equivalents369,834 369,834 — — 369,834 
Total financial assets$42,966,941 $4,516,980 $2,915,739 $33,337,426 $40,770,145 
Financial liabilities:
Insurance
Other contractholder deposit funds$37,406,920 $— $35,208,420 $— $35,208,420 
Supplementary contracts without life contingencies
12,326 — — 12,524 12,524 
Funding agreements2,465,414 — — 2,398,436 2,398,436 
Funds withheld payables at interest24,483,163 — 24,483,163 — 24,483,163 
Debt obligations1,920,906 — — 1,488,346 1,488,346 
Securities sold under agreements to repurchase779,469 — 779,469 — 779,469 
Total financial liabilities$67,068,198 $— $60,471,052 $3,899,306 $64,370,358 
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Table of Contents
Fair Value Hierarchy
As of December 31, 2021Carrying ValueLevel ILevel IILevel IIIFair Value
($ in thousands)
Financial assets:
Insurance
Mortgage and other loan receivables$28,044,085 $— $— $28,645,675 $28,645,675 
Policy loans765,310 — — 754,530 754,530 
FHLB common stock and other investments171,842 — — 171,842 171,842 
Funds withheld receivables at interest2,967,708 — 2,967,708 — 2,967,708 
Cash and cash equivalents3,391,934 3,391,934 — — 3,391,934 
Restricted cash and cash equivalents300,404 300,404 — — 300,404 
Total financial assets$35,641,283 $3,692,338 $2,967,708 $29,572,047 $36,232,093 
Financial liabilities:
Insurance
Other contractholder deposit funds$30,295,965 $— $28,419,520 $— $28,419,520 
Supplementary contracts without life contingencies
31,118 — — 31,311 31,311 
Funding agreements2,566,410 — — 2,549,494 2,549,494 
Funds withheld payables at interest23,509,744 — 23,509,744 — 23,509,744 
Debt obligations1,908,006 — — 1,953,631 1,953,631 
Securities sold under agreements to repurchase300,446 — 300,446 — 300,446 
Total financial liabilities$58,611,689 $— $52,229,710 $4,534,436 $56,764,146 

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11. FAIR VALUE OPTION

The following table summarizes the financial instruments for which the fair value option has been elected:

 September 30, 2022December 31, 2021
Assets
Asset Management
Credit$1,012,948 $2,019,229 
Investments of Consolidated CFEs21,500,342 22,076,809 
Real Assets201,989 182,858 
Equity Method - Other2,907,308 1,601,515 
Other Investments87,370 197,675 
  Total Asset Management$25,709,957 $26,078,086 
Insurance
Mortgage and other loan receivables$870,475 $832,674 
Other investments184,410 147,811 
Reinsurance recoverable1,069,497 1,293,791 
  Total Insurance$2,124,382 $2,274,276 
     Total Assets$27,834,339 $28,352,362 
Liabilities
Asset Management
Debt Obligations of Consolidated CFEs$21,118,566 $21,271,084 
  Total Asset Management$21,118,566 $21,271,084 
Insurance
Policy liabilities$1,514,341 $1,869,678 
  Total Insurance$1,514,341 $1,869,678 
     Total Liabilities$22,632,907 $23,140,762 


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The following table presents the net realized and unrealized gains (losses) on financial instruments for which the fair value option was elected:
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Net Realized Gains (Losses)Net Unrealized Gains (Losses)TotalNet Realized
Gains (Losses)
Net Unrealized
Gains (Losses)
Total
Assets
Asset Management
Credit$(33,528)$(8,923)$(42,451)$19,414 $7,639 $27,053 
Investments of Consolidated CFEs(29,402)30,765 1,363 23,198 (15,013)8,185 
Real Assets— (5,084)(5,084)391 7,591 7,982 
Equity Method - Other17,381 (108,899)(91,518)293,819 (263,841)29,978 
Other Investments644 (2,098)(1,454)11,175 1,062 12,237 
   Total Asset Management $(44,905)$(94,239)$(139,144)$347,997 $(262,562)$85,435 
Insurance
Mortgage and other loan receivables$— $(17,086)$(17,086)$— $3,613 $3,613 
Other investments— 1,554 1,554 — 317,542 317,542 
    Total Insurance$ $(15,532)$(15,532)$ $321,155 $321,155 
Total Assets$(44,905)$(109,771)$(154,676)$347,997 $58,593 $406,590 
Liabilities
Asset Management
Debt Obligations of Consolidated CFEs$— $(78,168)$(78,168)$10,278 $(10,437)$(159)
   Total Asset Management$ $(78,168)$(78,168)$10,278 $(10,437)$(159)
Insurance
Policy liabilities$— $43,578 $43,578 $— $(3,463)$(3,463)
   Total Insurance$ $43,578 $43,578 $ $(3,463)$(3,463)
Total Liabilities$ $(34,590)$(34,590)$10,278 $(13,900)$(3,622)
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
 Net Realized
Gains (Losses)
Net Unrealized Gains (Losses)TotalNet Realized
Gains (Losses)
Net Unrealized
Gains (Losses)
Total
Assets
Asset Management
Credit$(95,485)$(24,674)$(120,159)$1,573 $15,543 $17,116 
Investments of Consolidated CFEs(26,248)(1,713,464)(1,739,712)44,954 173,775 218,729 
Real Assets85 19,131 19,216 566 18,448 19,014 
Equity Method - Other19,562 (279,790)(260,228)368,931 (71,179)297,752 
Other Investments6,766 (8,647)(1,881)16,581 17,627 34,208 
   Total Asset Management$(95,320)$(2,007,444)$(2,102,764)$432,605 $154,214 $586,819 
Insurance
Mortgage and other loan receivables$— $(70,881)$(70,881)$— $9,443 $9,443 
Other investments— 39,385 39,385 — 353,112 353,112 
   Total Insurance$ $(31,496)$(31,496)$ $362,555 $362,555 
Total Assets$(95,320)$(2,038,940)$(2,134,260)$432,605 $516,769 $949,374 
Liabilities
Asset Management
Debt Obligations of Consolidated CFEs$(785)$1,477,514 $1,476,729 $9,740 $(82,107)(72,367)
   Total Asset Management$(785)$1,477,514 $1,476,729 $9,740 $(82,107)$(72,367)
Insurance
Policy liabilities$— $87,635 $87,635 $— $(89,184)$(89,184)
   Total Insurance$ $87,635 $87,635 $ $(89,184)$(89,184)
Total Liabilities$(785)$1,565,149 $1,564,364 $9,740 $(171,291)$(161,551)
    


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12. INSURANCE INTANGIBLES, UNEARNED REVENUE RESERVES AND UNEARNED FRONT-END LOADS

The following reflects the changes to the deferred policy acquisition costs ("DAC") asset:

Nine Months Ended September 30,
20222021
Balance, as of beginning of period
$447,886 $— 
Acquisition/reinsurance— 51,322 
Deferrals361,864 259,203 
Amortized to expense during the period(1)
(69,104)(13,016)
Adjustment for unrealized investment-related losses (gains) during the period(17,848)4,907 
Balance, as of end of period$722,798 $302,416 

(1)     These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.

The following reflects the changes to the value of business acquired ("VOBA") asset:

Nine Months Ended September 30,
20222021
Balance, as of beginning of period
$959,263 $1,024,520 
Amortized to expense during the period(1)
(49,978)(47,866)
Balance, as of end of period$909,285 $976,654 

(1)     These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.

The following reflects the changes to the negative VOBA liability:

Nine Months Ended September 30,
20222021
Balance, as of beginning of period
$1,118,716 $1,273,414 
Amortized to expense during the period(1)
(105,389)(118,291)
Balance, as of end of period$1,013,327 $1,155,123 

(1)     These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.

The following reflects the changes to the unearned revenue reserve ("URR") and unearned front-end load ("UFEL):

Nine Months Ended September 30,
20222021
Balance, as of beginning of period
$33,603 $— 
Deferrals52,563 41,000 
Amortized to expense during the period(1)
(17,965)(1,302)
Adjustment for unrealized investment-related gains during the period(68,201)(4,100)
Balance, as of end of period$ $35,598 

(1)     These amounts are reported within policy fees in the consolidated statements of operations.


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13. REINSURANCE

Global Atlantic maintains a number of reinsurance treaties with third parties whereby Global Atlantic assumes fixed annuity, variable annuity, payout annuity, universal life, variable universal life and term life insurance policies on a coinsurance, modified coinsurance and funds withheld basis. Global Atlantic also maintains other reinsurance treaties including the cession of certain fixed annuity, variable annuity, payout annuity, universal life policies, individual disability income policies and discontinued accident and health insurance.

The effects of all reinsurance agreements on the consolidated statements of financial condition were as follows:

September 30, 2022December 31, 2021
Policy liabilities:
Direct$70,525,068 $67,131,818 
Assumed65,208,800 59,388,226 
Total policy liabilities135,733,868 126,520,044 
Ceded(1)
(26,107,505)(25,035,228)
Net policy liabilities$109,626,363 $101,484,816 

(1)Reported within reinsurance recoverable within the consolidated statements of financial condition.

A key credit quality indicator is a counterparty’s A.M. Best financial strength rating. A.M. Best ratings are an independent opinion of a reinsurer’s ability to meet ongoing obligations to policyholders. Global Atlantic mitigates counterparty credit risk by requiring collateral and credit enhancements in various forms including engaging in funds withheld at interest and modified coinsurance transactions. The following shows the amortized cost basis of Global Atlantic’s reinsurance recoverable and funds withheld receivable at interest by credit quality indicator and any associated credit enhancements Global Atlantic has obtained to mitigate counterparty credit risk:

As of September 30, 2022 As of December 31, 2021
A.M. Best Rating(1)
Reinsurance recoverable and funds withheld receivable at interest(2)
Credit enhancements(3)
Net reinsurance credit exposure(4)
Reinsurance recoverable and funds withheld receivable at interest(2)
Credit enhancements(3)
Net reinsurance credit exposure(4)
A++$38,059 $— $38,059 $7,911 $— $7,911 
A+1,813,199 — 1,813,199 1,989,426 — 1,989,426 
A2,581,882 — 2,581,882 2,652,286 — 2,652,286 
A-5,475,628 4,318,794 1,156,834 5,645,633 5,166,559 479,074 
B++51,917 — 51,917 33,410 — 33,410 
B+— — — 1,122 — 1,122 
B— — — 9,227 — 9,227 
B-(207)— — 1,274 — 1,274 
Not rated(5)
19,214,936 16,744,782 2,470,154 17,698,613 18,323,795 — 
Total$29,175,414 $21,063,576 $8,112,045 $28,038,902 $23,490,354 $5,173,730 

(1)Ratings are periodically updated (at least annually) as A.M. Best issues new ratings.
(2)At amortized cost, excluding any associated embedded derivative assets and liabilities.
(3)Includes funds withheld payable at interest and deferred intangible reinsurance assets and liabilities.
(4)Includes credit loss allowance of $115.0 million and $8.4 million as of September 30, 2022 and December 31, 2021, respectively, held against reinsurance recoverable.
(5)Includes $19.2 billion and $17.7 billion as of September 30, 2022 and December 31, 2021, respectively, associated with cessions to Ivy Re Limited and Ivy Re II Limited (the “Ivy Vehicles”), which are co-investment vehicles that participate in qualifying reinsurance transactions sourced by Global Atlantic.

As of September 30, 2022 and December 31, 2021, Global Atlantic had $2.9 billion and $3.0 billion of funds withheld receivable at interest, with six counterparties related to modified coinsurance and funds withheld contracts, respectively. The assets supporting these receivables were held in trusts and not part of the respective counterparty’s general accounts.

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The effects of reinsurance on the consolidated statements of operations were as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net premiums:
Direct$21,236 $28,509 $85,842 $74,959 
Assumed(1)
829,585 1,908,614 1,533,459 3,778,810 
Ceded(370,359)(962,220)(992,197)(2,154,857)
Net premiums$480,462 $974,903 $627,104 $1,698,912 

(1)Includes related party activity of $— million and $8.7 million for the three and nine months ended September 30, 2021, respectively.

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Policy fees:
Direct$237,755 $233,029 $723,590 $614,910 
Assumed(1)
99,204 77,694 268,719 210,411 
Ceded(16,753)(342)(27,960)(995)
Net policy fees$320,206 $310,381 $964,349 $824,326 

(1)Includes related party activity of $— million and $6.2 million for the three and nine months ended September 30, 2021, respectively.

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net policy benefits and claims:
Direct$429,511 $554,134 $695,543 $1,996,642 
Assumed(1)
1,146,895 2,254,670 2,180,471 3,987,189 
Ceded(488,675)(1,111,758)(1,107,630)(2,390,268)
Net policy benefits and claims$1,087,731 $1,697,046 $1,768,384 $3,593,563 

(1)Includes related party activity of $— million and $76.2 million for the three and nine months ended September 30, 2021, respectively.

Global Atlantic holds collateral for and provides collateral to our reinsurance clients. Global Atlantic held $24.3 billion and $23.4 billion of collateral in the form of funds withheld payable on behalf of our reinsurers as of September 30, 2022 and December 31, 2021, respectively. As of both September 30, 2022 and December 31, 2021, reinsurers held collateral of $1.3 billion on behalf of Global Atlantic. A significant portion of the collateral that Global Atlantic provides to its reinsurance clients is provided in the form of assets held in a trust for the benefit of the counterparty. As of September 30, 2022 and December 31, 2021, these trusts held in excess of the $59.7 billion and $55.2 billion of assets it is required to hold in order to support reserves of $61.6 billion and $55.8 billion, respectively. Of the cash held in trust, Global Atlantic classified $76.2 million and $149.3 million as restricted as of September 30, 2022 and December 31, 2021, respectively.

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14. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. INC. PER SHARE OF COMMON STOCK
 
For the three and nine months ended September 30, 2022 and 2021, basic and diluted Net Income (Loss) attributable to KKR & Co. Inc. per share of common stock were calculated as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net Income (Loss) Available to KKR & Co. Inc.
Common Stockholders - Basic
$(91,646)$1,131,354 $(993,350)$4,053,271 
(+) Series C Mandatory Convertible Preferred Dividend (if dilutive) (1)
17,25051,750
Net Income (Loss) Available to KKR & Co. Inc.
Common Stockholders - Diluted
$(91,646)$1,148,604 $(993,350)$4,105,021 

Basic Net Income (Loss) Per Share of Common Stock
Weighted Average Shares of Common Stock Outstanding - Basic859,833,444 583,030,506 711,908,107 580,742,033 
Net Income (Loss) Attributable to KKR & Co. Inc.
Per Share of Common Stock - Basic
$(0.11)$1.94 $(1.40)$6.98 

Diluted Net Income (Loss) Per Share of Common Stock
Weighted Average Shares of Common Stock Outstanding - Basic859,833,444 583,030,506 711,908,107 580,742,033 
Incremental Common Shares:
Assumed vesting of dilutive equity awards (2)
— 27,562,994 — 22,055,422 
Assumed conversion of Series C Mandatory
Convertible Preferred Stock (1)
— 26,822,600 — 26,822,600 
Weighted Average Shares of Common Stock Outstanding - Diluted859,833,444 637,416,100 711,908,107 629,620,055 
Net Income (Loss) Attributable to KKR & Co. Inc.
Per Share of Common Stock - Diluted
$(0.11)$1.80 $(1.40)$6.52 
(1)    For the three and nine months ended September 30, 2022 , the impact of Series C Mandatory Convertible Preferred Stock is excluded from the calculation of Diluted Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock because inclusion of such shares would be anti-dilutive having the effect of decreasing the loss per share of common stock. For the three and nine months ended September 30, 2021, the impact of Series C Mandatory Convertible Preferred Stock calculated under the if-converted method was dilutive, and as such (i) 26.8 million shares of common stock (assuming a conversion ratio based on the average volume weighted average price per share of common stock over each reporting period) were included in the Weighted Average Shares of Common Stock Outstanding - Diluted and (ii) $17.3 million and $51.8 million, respectively, of Series C Mandatory Convertible Preferred dividends were added back to Net Income (Loss) Available to KKR & Co. Inc. Common Stockholders - Diluted.
(2)    For the three and nine months ended September 30, 2022, all unvested equity awards are excluded from the calculation of Diluted Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock because inclusion of such unvested equity awards would be anti-dilutive having the effect of decreasing the loss per share of common stock. For the three and nine months ended September 30, 2021, Weighted Average Shares of Common Stock Outstanding – Diluted includes unvested equity awards, including certain equity awards that have met their market price-based vesting condition but have not satisfied their service-based vesting condition, which have been granted under the Equity Incentive Plans. Vesting of these equity awards dilute equity holders of KKR Group Partnership, including KKR & Co. Inc. and holders of exchangeable securities pro rata in accordance with their respective ownership interests in KKR Group Partnership.

The adoption of ASU 2020-06 in 2022 did not result in a material impact to the calculation of the Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock – Diluted. For three and nine months ended September 30, 2021, the Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock – Diluted was unchanged by the adoption of ASU 2020-06, and there was no impact to previously reported amounts.

Exchangeable Securities

For the three and nine months ended September 30, 2022 and 2021, KKR Holdings units and RHUs (as defined in Note 19—Equity Based Compensation) have been excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock - Diluted since the exchange of these units would not dilute KKR & Co. Inc.'s ownership interests in KKR Group Partnership. As of May 31, 2022, there are no outstanding KKR Holdings units. See Note 1 "Organization".
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Weighted Average KKR Holdings Units— 271,027,751 143,082,708 272,674,225 
Weighted Average RHUs2,465,810 1,222,489 2,102,758 1,128,451 
Total 2,465,810 272,250,240 145,185,466 273,802,676 
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Market Condition Awards
For the three months ended September 30, 2022 and 2021, 17.1 million and 4.7 million, respectively, and for the nine months ended September 30, 2022 and 2021, 17.1 million and 10.4 million, respectively, of unvested equity awards that are subject to market price based and service-based vesting conditions were excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Common Stock - Diluted since the market price based vesting condition was not satisfied. See Note 19 "Equity Based Compensation."
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15. OTHER ASSETS AND ACCRUED EXPENSES AND OTHER LIABILITIES
Other Assets consist of the following:
 September 30, 2022December 31, 2021
Asset Management
Unsettled Investment Sales (1)
$82,121 $182,267 
Receivables54,314 81,133 
Due from Broker (2)
106,228 365,053 
Deferred Tax Assets, net (See Note 18)52,145 85,770 
Interest Receivable170,778 144,221 
Fixed Assets, net (3)
843,630 820,143 
Foreign Exchange Contracts and Options (4)
1,016,135 590,637 
Goodwill (5)
546,144 83,500 
Intangible Assets (6)
1,583,876 5,575 
Derivative Assets39,887 491 
Prepaid Taxes198,575 93,296 
Prepaid Expenses59,839 29,290 
Operating Lease Right of Use Assets (7)
229,339 228,363 
Deferred Financing Costs17,404 17,953 
Other176,627 158,621 
Total Asset Management$5,177,042 $2,886,313 
Insurance
Unsettled Investment Sales(1)
$1,730,201 $941,427 
Deferred Tax Assets, net 2,698,280 755,876 
Derivative Assets850,274 1,295,950 
Accrued Investment Income1,078,161 817,486 
Goodwill (9)
501,496 501,496 
Intangible Assets and Deferred Sales Inducements(8)
280,588 293,824 
Operating Lease Right of Use Assets(7)
177,624 160,888 
Premiums and Other Account Receivables113,700 86,524 
Other109,265 96,093 
Current Income Tax Recoverable190,804 103,954 
Total Insurance$7,730,393 $5,053,518 
Total Other Assets$12,907,435 $7,939,831 
(1)Represents amounts due from third parties for investments sold for which cash settlement has not occurred.
(2)Represents amounts held at clearing brokers resulting from securities transactions.
(3)Net of accumulated depreciation and amortization of $175.4 million and $141.6 million as of September 30, 2022 and December 31, 2021, respectively. Depreciation and amortization expense of $14.2 million and $11.3 million for the three months ended September 30, 2022 and 2021, respectively, and $39.8 million and $33.6 million for the nine months ended September 30, 2022 and 2021, respectively, are included in General, Administrative and Other in the accompanying consolidated statements of operations.
(4)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" for the net changes in fair value associated with these instruments.
(5)As of September 30, 2022, the carrying value of goodwill is recorded and assessed for impairment at the reporting unit. There are approximately $46 million of cumulative foreign currency translation adjustments included in AOCI related to the goodwill recorded as result of the acquisition of KJRM (see Note 3 "Acquisitions").
(6)There are approximately $158 million of cumulative foreign currency translation adjustments included in AOCI related to the intangible assets recorded as result of the acquisition of KJRM (see Note 3 "Acquisitions").
(7)For Asset Management, non-cancelable operating leases consist of leases for office space in North America, Europe, Asia and Australia. KKR is the lessee under the terms of the operating leases. The operating lease cost was $13.9 million and $11.9 million for the three months ended September 30, 2022 and 2021, respectively, and $39.3 million and $37.1 million for the nine months ended September 30, 2022 and 2021, respectively. For Insurance, non-cancelable operating leases consist of leases for office space and land in the U.S. For the three months ended September 30, 2022 and 2021, the operating lease cost was $6.4 million and $3.9 million, respectively, and for the nine months ended September 30, 2022 and 2021, the operating lease cost was $18.2 million and $10.5 million, respectively. Insurance lease right-of-use assets are reported net of $22.5 million and $22.7 million in deferred rent and lease incentives as of September 30, 2022 and December 31, 2021, respectively.
(8)The definite life intangible assets are amortized by using the straight-line method over the useful life of the assets which is an average of 15 years. The indefinite life intangible assets are not subject to amortization. For both the three months ended September 30, 2022 and 2021, the amortization expense of definite life intangible assets was $4.4 million, and for the nine months ended September 30, 2022 and 2021, the amortization expense of definite life intangible assets was $13.2 million and $11.8 million, respectively.
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(9)The amounts include approximately $4.5 million of goodwill related to an immaterial acquisition of a residential mortgage platform, which Global Atlantic acquired in October 2021 for a purchase price consideration of $4.6 million. The insurance segment reported a negative equity carrying amount as of September 30, 2022 primarily due to unrealized losses on available-for-sale fixed maturity investment portfolio. Global Atlantic does not expect these unrealized losses to be realized as it intends to hold these investments until recovery of the losses, which may be at maturity, as part of its asset liability cash-flow matching strategy. KKR evaluated qualitative factors, including market and economic conditions, industry-specific events and company-specific financial results, and determined that it was not more likely than not that goodwill was impaired.


Accrued Expenses and Other Liabilities consist of the following:
 September 30, 2022December 31, 2021
Asset Management
Amounts Payable to Carry Pool (1)
$1,998,211 $3,650,312 
Unsettled Investment Purchases (2)
426,891 1,315,163 
Securities Sold Short (3) 
87,894 249,383 
Derivative Liabilities20,249 45,003 
Accrued Compensation and Benefits950,105 210,789 
Interest Payable275,213 162,801 
Foreign Exchange Contracts and Options (4)
242,117 319,511 
Accounts Payable and Accrued Expenses236,313 187,564 
Taxes Payable50,831 42,745 
Uncertain Tax Positions 57,306 78,226 
Unfunded Revolver Commitments108,195 64,276 
Operating Lease Liabilities (5)
233,953 230,995 
Deferred Tax Liabilities, net (See Note 18)1,923,278 900,436 
Other Liabilities524,568 439,693 
Total Asset Management$7,135,124 $7,896,897 
Insurance
Unsettled Investment Purchases(2)
$1,500,351 $395,722 
Collateral on Derivative Instruments429,796 1,086,061 
Accrued Expenses603,450 747,237 
Securities Sold Under Agreements to Repurchase779,469 300,446 
Derivative Liabilities974,229 145,163 
Accrued Employee Related Expenses316,293 280,668 
Operating Lease Liabilities(5)
198,052 180,574 
Tax Payable to Former Parent Company66,352 74,423 
Interest Payable32,321 12,930 
Accounts and Commissions Payable18,311 26,054 
Other Tax Related Liabilities9,259 14,288 
Total Insurance$4,927,883 $3,263,566 
Total Accrued Expenses and Other Liabilities$12,063,007 $11,160,463 
(1)Represents the amount of carried interest payable to current and former KKR employees arising from KKR's investment funds and co-investment vehicles that provide for carried interest.
(2)Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred.
(3)Represents the obligations of KKR to deliver a specified security at a future point in time. Such securities are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" for the net changes in fair value associated with these instruments.
(4)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" for the net changes in fair value associated with these instruments.
(5)For Asset Management, operating leases for office space have remaining lease terms that range from approximately 1 year to 13 years, some of which include options to extend the leases for up to 5 years. The weighted average remaining lease terms were 8.9 years and 9.5 years as of September 30, 2022 and December 31, 2021, respectively. The weighted average discount rates were 1.3% and 1.2% as of September 30, 2022 and December 31, 2021, respectively. For Insurance, operating leases for office space have remaining lease terms that range from approximately 1 year to 11 years, some of which include options to extend the leases for up to 10 years. The weighted average remaining lease terms was 6.6 years and 7.8 years as of September 30, 2022 and December 31, 2021, respectively. The weighted average discount rate was 3.1% and 2.9% as of September 30, 2022 and December 31, 2021, respectively. The weighted average remaining lease term for land was 26.9 years and 27.9 years as of September 30, 2022 and December 31, 2021, respectively.
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16. VARIABLE INTEREST ENTITIES
Consolidated VIEs
KKR consolidates certain variable interest entities ("VIEs") in which it is determined that KKR is the primary beneficiary. The consolidated VIEs are predominately CLOs and certain investment funds sponsored by KKR. The primary purpose of these VIEs is to provide strategy specific investment opportunities to earn investment gains, current income or both in exchange for management fees and performance income. KKR's investment strategies differ for these VIEs; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and performance income. KKR does not provide performance guarantees and has no other financial obligation to provide funding to these consolidated VIEs, beyond amounts previously committed, if any. Furthermore, KKR consolidates certain VIEs, which are formed by Global Atlantic to hold investments, including investments in transportation, renewable energy, consumer and other loans and fixed maturity securities.
Unconsolidated VIEs
KKR holds variable interests in certain VIEs which are not consolidated as it has been determined that KKR is not the primary beneficiary. VIEs that are not consolidated predominantly include certain investment funds sponsored by KKR as well as certain investment partnerships where Global Atlantic retains an economic interest. KKR's investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and performance income. KKR's maximum exposure to loss as a result of its investments in the unconsolidated investment funds is the carrying value of such investments, including KKR's capital interest and any unrealized carried interest. Accordingly, disaggregation of KKR's involvement by type of unconsolidated investment fund would not provide more useful information. For these unconsolidated investment funds in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such investment funds. As of September 30, 2022, KKR's commitments to these unconsolidated investment funds were $4.7 billion. KKR has not provided any financial support other than its obligated amount as of September 30, 2022. Additionally, Global Atlantic also has unfunded commitments of $24.9 million in relation to other limited partnership interests as of September 30, 2022.
As of September 30, 2022 and December 31, 2021, the maximum exposure to loss, before allocations to the carry pool and noncontrolling interests, if any, for those VIEs in which KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows:
 September 30, 2022December 31, 2021
Investments - Asset Management$7,032,596 $11,539,945 
Due from (to) Affiliates, net1,160,053 1,046,210 
Maximum Exposure to Loss - Asset Management$8,192,649 $12,586,155 
Other Investment in Partnership - Insurance$214,396 $190,106 
Investment in Renewable Partnerships - Insurance30,146 30,760 
Maximum Exposure to Loss - Insurance$244,542 $220,866 
Total Maximum Exposure to Loss$8,437,191 $12,807,021 

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17. DEBT OBLIGATIONS

Asset Management Debt Obligations

In Asset Management, KKR enters into credit agreements and issues debt for its general operating and investment purposes. KKR consolidates and reports debt obligations of KKR Financial Holdings LLC, a KKR subsidiary ("KFN"), which are non-recourse to KKR beyond the assets of KFN. From time to time, KKR may provide credit support for the debt obligations of its subsidiaries.

Certain of KKR's consolidated investment funds have entered into financing arrangements with financial institutions, generally to provide liquidity to such investment funds. These financing arrangements are generally not direct obligations of the general partners of KKR's investment funds (beyond KKR's capital interest) or its management companies. Such borrowings have varying maturities and bear interest at floating rates. Borrowings are generally secured by the investment purchased with the proceeds of the borrowing and/or the uncalled capital commitment of each respective fund. When an investment vehicle borrows, the proceeds are available only for use by that investment vehicle and are not available for the benefit of other investment vehicles or KKR. Collateral within each investment vehicle is also available only against borrowings by that investment vehicle and not against the borrowings of other investment vehicles or KKR.

In certain other cases, investments and other assets held directly by majority-owned consolidated investment vehicles and other entities have been funded with borrowings that are collateralized by the investments and assets they own. These borrowings are non-recourse to KKR beyond the investments or assets serving as collateral or the capital that KKR has committed to fund such investment vehicles. Such borrowings have varying maturities and generally bear interest at fixed rates.

In addition, consolidated CFEs issue debt securities to third-party investors which are collateralized by assets held by the CFE. Debt securities issued by CFEs are supported solely by the assets held at the CFEs and are not collateralized by assets of any other KKR entity. CFEs also may have warehouse facilities with banks to provide liquidity to the CFE. The CFE's debt obligations are non-recourse to KKR beyond the assets of the CFE.


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KKR's Asset Management debt obligations consisted of the following:

 September 30, 2022 December 31, 2021
Financing AvailableBorrowing OutstandingFair Value Financing AvailableBorrowing OutstandingFair Value
Revolving Credit Facilities:
Corporate Credit Agreement$1,500,000 $— $—  $1,000,000 $— $— 
KCM Credit Agreement723,067 — — 728,799 — — 
KCM 364-Day Revolving Credit Agreement750,000 — — 750,000 — — 
Notes Issued: (1)
KKR ¥25 billion (or $173.0 million)
0.509% Notes Due 2023
(4)
— 172,856 172,886 — 216,881 216,818 
KKR ¥5 billion (or $34.6 million)
0.764% Notes Due 2025
(4)
— 34,318 34,487 — 43,082 43,452 
KKR ¥36.4 billion (or $251.9 million)
1.054% Notes Due 2027
(4)
— 250,529 250,550 — — — 
KKR €650 million (or $632.5 million)
1.625% Notes Due 2029
(5)
— 626,547 524,289 — 729,048 776,926 
KKR $750 million 3.750% Notes Due 2029
(4)
— 744,000 669,000 — 743,333 825,540 
KKR ¥4.9 billion (or $33.9 million)
1.244% Notes Due 2029
(4)
— 33,404 33,589 — — — 
KKR $750 million 4.850% Notes Due 2032
(4)
— 741,433 690,090 — — — 
KKR ¥6.2 billion (or $42.9 million)
1.437% Notes Due 2032
(4)
— 42,324 42,236 — — — 
KKR ¥7.5 billion (or $51.9 million)
1.553% Notes Due 2034
(4)
— 51,240 50,743 — — — 
KKR ¥5.5 billion (or $38.1 million)
1.795% Notes Due 2037
(4)
— 37,457 36,893 — — — 
KKR ¥10.3 billion (or $71.3 million)
1.595% Notes Due 2038
(4)
— 70,320 66,127 — 88,505 92,198 
KKR $500 million 5.500% Notes Due 2043 (6)
(4)
— 491,927 451,810 — 491,153 661,351 
KKR $1.0 billion 5.125% Notes Due 2044 (6)
(4)
— 964,785 836,235 — 951,462 1,237,888 
KKR $500 million 3.625% Notes Due 2050
(4)
— 492,686 347,755 — 492,486 535,550 
KKR $750 million 3.500% Notes Due 2050 (6)
(4)
— 736,328 509,665 — 735,905 784,650 
KKR $750 million 3.250% Notes Due 2051
(4)
— 739,745 489,195 — 739,481 747,900 
KKR $500 million 4.625% Notes Due 2061
(5)
— 486,310 365,600 — 486,044 523,200 
KFN $500 million 5.500% Notes Due 2032
(2)
— 495,389 431,939 — 495,025 487,779 
KFN $120 million 5.200% Notes Due 2033
(2)
— 118,743 100,094 — 118,654 115,535 
KFN $70 million 5.400% Notes Due 2033
(2)
— 69,025 59,197 — 68,957 68,532 
KFN Issued Junior Subordinated Notes (3)
(2)
— 237,135 194,404 — 236,138 178,335 
2,973,067 7,636,501 6,356,784 2,478,799 6,636,154 7,295,654 
Other Debt Obligations(6)
5,728,978 30,621,332 30,621,332 4,941,755 30,033,601 30,033,601 
 $8,702,045 $38,257,833 $36,978,116  $7,420,554 $36,669,755 $37,329,255 

(1)Borrowing outstanding includes: (i) unamortized note discount (net of premium), as applicable and (ii) unamortized debt issuance costs, as applicable. Financing costs related to the issuance of the notes have been deducted from the note liability and are being amortized over the life of the notes.
(2)These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(3)KKR consolidates KFN and reports KFN's outstanding $258.5 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 5.3% and 2.6% and the weighted average years to maturity is 14.0 years and 14.8 years as of September 30, 2022 and December 31, 2021, respectively.
(4)The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.
(5)The notes are classified as Level I within the fair value hierarchy and fair value is determined by quoted prices in active markets since the debt is publicly listed.
(6)As of September 30, 2022 and December 31, 2021, the borrowing outstanding reflects the elimination for the portion of these debt obligations that are held by Global Atlantic.

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Asset Management Revolving Credit Facilities

KCM Short-Term Credit Agreement

On April 8, 2022, KKR Capital Markets Holdings L.P. and certain other capital markets subsidiaries (the "KCM Borrowers") entered into a 364-day revolving credit agreement (the "KCM Short-Term Credit Agreement”) with Mizuho Bank, Ltd., as administrative agent, and one or more lenders party thereto. The KCM Short-Term Credit Agreement replaces the prior 364-day revolving credit agreement, dated as of April 9, 2021, between the KCM Borrowers and the administrative agent, and one or more lenders party to the KCM Short-Term Agreement, which was terminated according to its terms on April 8, 2022. The KCM Short-Term Credit Agreement provides for revolving borrowings up to $750 million, expires on April 7, 2023, and ranks pari passu with the existing $750 million revolving credit facility provided by them for KKR's capital markets business (the "KCM Credit Agreement").

If a borrowing is made under the KCM Short-Term Credit Agreement, the interest rate will vary depending on the type of drawdown requested. If the borrowing is (i) denominated in U.S. dollars and a term rate, it will be based on the term Secured Overnight Financing Rate ("SOFR"), (ii) denominated in euros, it will be based on EURIBOR and (iii) denominated in pounds sterling, it will be based on the Sterling Overnight Interbank Average Rate (SONIA), in each case, plus the applicable margin which ranges initially between 1.50% and 2.75%, depending on the duration of the loan. If the borrowing is an ABR Loan, it will be based on the greater of (i) the federal funds rate plus 0.50% and (ii) term SOFR for one-month tenor plus 1.00%, in each case, plus the applicable margin which ranges initially between 0.50% and 1.75% depending on the amount and nature of the loan. Borrowings under the KCM Short-Term Credit Agreement may only be used to facilitate the settlement of debt transactions syndicated by KKR's capital markets business. Obligations under the KCM Short-Term Credit Agreement are limited to the KCM Borrowers, which are solely entities involved in KKR's capital markets business, and liabilities under the KCM Short-Term Credit Agreement are non-recourse to other parts of KKR.

The KCM Short-Term Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including a financial covenant providing for a maximum debt to equity ratio for the KCM Borrowers. The KCM Borrowers' obligations under the KCM Short-Term Credit Agreement are secured by certain assets of the KCM Borrowers, including a pledge of equity interests of certain subsidiaries of the KCM Borrowers.

KKR Issued Yen Senior Notes

On April 26, 2022, KKR Group Finance Co. XI LLC, an indirect subsidiary of KKR & Co. Inc., completed the offering of (i) ¥36.4 billion aggregate principal amount of its 1.054% Senior Notes due 2027 (the “2027 Yen Notes”), (ii) ¥4.9 billion aggregate principal amount of its 1.244% Senior Notes due 2029 (the “2029 Yen Notes”), (iii) ¥6.2 billion aggregate principal amount of its 1.437% Senior Notes due 2032 (the “2032 Yen Notes”), (iv) ¥7.5 billion aggregate principal amount of its 1.553% Senior Notes due 2034 (the “2034 Yen Notes”), and (v) ¥5.5 billion aggregate principal amount of its 1.795% Senior Notes due 2037 (the “2037 Yen Notes” and, together with the 2027 Yen Notes, the 2029 Yen Notes, the 2032 Yen Notes and the 2034 Yen Notes, the “Yen Notes”). The Yen Notes are guaranteed by KKR & Co. Inc. and KKR Group Partnership.

Each of the Yen Notes bear interest at the following rates and will mature on the following dates unless earlier redeemed. The 2027 Yen Notes bear interest at a rate of 1.054% per annum and will mature on April 26, 2027. The 2029 Yen Notes bear interest at a rate of 1.244% per annum and will mature on April 26, 2029. The 2032 Yen Notes bear interest at a rate of 1.437% per annum and will mature on April 26, 2032. The 2034 Yen Notes bear interest at a rate of 1.553% per annum and will mature on April 26, 2034. The 2037 Yen Notes bear interest at a rate of 1.795% per annum and will mature on April 24, 2037. Interest on the Yen Notes accrues from April 26, 2022 and is payable semi-annually in arrears on April 26 and October 26 of each year, commencing on October 26, 2022 and ending on the applicable maturity date. The Yen Notes are unsecured and unsubordinated obligations of KKR Group Finance Co. XI LLC. The Yen Notes are fully and unconditionally guaranteed, jointly and severally, by each of the guarantors. The guarantees are unsecured and unsubordinated obligations of the guarantors.

The indenture governing the Yen Notes includes covenants, including limitations on KKR Group Finance Co. XI LLC’s and the Guarantors’ ability, subject to exceptions, to incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or convey all or substantially all of their assets. The indenture governing the Yen Notes also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Yen Notes may declare the Yen Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the Yen Notes and any accrued and unpaid interest on the Yen Notes automatically become due and payable. KKR Group Finance Co. XI LLC may redeem the Yen Notes at its option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Yen Notes to be redeemed, together with interest accrued and unpaid to, but excluding, the date fixed for redemption, at
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any time, in the event of certain changes affecting taxation as provided in the indenture governing the Yen Notes. If a change of control repurchase event occurs, the Yen Notes are subject to repurchase by KKR Group Finance Co. XI LLC at a repurchase price in cash equal to 101% of the aggregate principal amount of the Yen Notes repurchased plus any accrued and unpaid interest on the Yen Notes repurchased to, but not including, the date of repurchase.

KKR Issued 4.850% Senior Notes Due 2032

On May 17, 2022, KKR Group Finance Co. XII LLC, an indirect subsidiary of KKR & Co. Inc., issued $750 million aggregate principal amount of its 4.850% Senior Notes due 2032 (the “KKR 2032 Senior Notes”). The KKR 2032 Senior Notes are guaranteed by KKR & Co. Inc. and KKR Group Partnership.

The KKR 2032 Senior Notes bear interest at a rate of 4.850% per annum and will mature on May 17, 2032 unless redeemed earlier. Interest on the KKR 2032 Senior Notes accrues from May 17, 2022 and is payable semi-annually in arrears on May 17 and November 17 of each year, commencing on November 17, 2022. The KKR 2032 Senior Notes are unsecured and unsubordinated obligations of the issuer. The KKR 2032 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by each of the guarantors. The guarantees are unsecured and unsubordinated obligations of the guarantors.

The indenture governing the KKR 2032 Senior Notes includes covenants, including limitations on the issuer’s and the guarantors’ ability, subject to exceptions, to incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or convey all or substantially all of their assets. The indenture governing the KKR 2032 Senior Notes also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding KKR 2032 Senior Notes may declare the KKR 2032 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the KKR 2032 Senior Notes and any accrued and unpaid interest on the KKR 2032 Senior Notes automatically become due and payable. Prior to February 17, 2032 (three months prior to the maturity date of the KKR 2032 Senior Notes), all or a portion of the KKR 2032 Senior Notes may be redeemed at the issuer’s option in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the KKR 2032 Senior Notes. On or after February 17, 2032 (three months prior to the maturity date of the KKR 2032 Senior Notes), the KKR 2032 Senior Notes may be redeemed at the issuer’s option in whole or in part, at any time and from time to time, at par plus any accrued and unpaid interest on the KKR 2032 Senior Notes redeemed to, but not including, the date of redemption. If a change of control repurchase event occurs, the KKR 2032 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the KKR 2032 Senior Notes repurchased plus any accrued and unpaid interest on the KKR 2032 Senior Notes repurchased to, but not including, the date of repurchase.

KKR Corporate Credit Agreement

On September 2, 2022, KKR Group Partnership and Kohlberg Kravis Roberts & Co. L.P. (the "Borrowers") entered into a First Amendment and Lender Joinder Agreement to amend and restate the Second Amended and Restated Credit Agreement, dated as of August 4, 2021 (as amended and restated, the “KKR Corporate Credit Agreement”), by and among the Borrowers, the guarantors from time to time party thereto, the lending institutions from time to time party thereto, and HSBC Bank USA, National Association, as administrative agent. The principal amendments made were to: (i) increase the revolving borrowing limit from $1.0 billion to $1.5 billion, (ii) to replace USD LIBOR rate borrowings with SOFR rate borrowings with certain rate adjustments. Beginning on September 2, 2022, interest on any funded balances will accrue at term SOFR plus a spread ranging from .565% to 1.1%.

As of September 30, 2022, there was no revolving borrowings and no letters of credit outstanding under the KKR Corporate Credit Agreement.

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Other Asset Management Debt Obligations

As of September 30, 2022, other debt obligations consisted of the following:      
Financing AvailableBorrowing
Outstanding
Fair ValueWeighted
Average
Interest Rate
Weighted Average Remaining Maturity in Years
Financing Facilities of Consolidated Funds and Other (1)
$5,728,978 $9,502,766 $9,502,766 4.2%5.4
Debt Obligations of Consolidated CLOs — 21,118,566 21,118,566 
(2)
10.1
 $5,728,978 $30,621,332 $30,621,332   

(1)Includes borrowings collateralized by fund investments, fund co-investments and other assets held by levered investment vehicles of $2.2 billion.
(2)The senior notes of the consolidated CLOs had a weighted average interest rate of 3.4%. The subordinated notes of the consolidated CLOs do not have contractual interest rates but instead receive a pro rata amount of the net distributions from the excess cash flows of the respective CLO vehicle. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the period, if any.
Debt obligations of consolidated CLOs are collateralized by assets held by each respective CLO vehicle and assets of one CLO vehicle may not be used to satisfy the liabilities of another. As of September 30, 2022, the fair value of the consolidated CLO assets was $22.4 billion. This collateral consisted of Cash and Cash Equivalents, Investments, and Other Assets.
Insurance Debt Obligations
Global Atlantic's debt obligations consisted of the following:
 September 30, 2022 December 31, 2021
Financing AvailableBorrowing Outstanding
Fair Value(2)
 Financing AvailableBorrowing Outstanding
Fair Value(2)
Revolving Credit Facilities:
Global Atlantic revolving credit facility, due August 2026$800,000 $200,000 $200,000  $1,000,000 $— $— 
Notes Issued and Others:
Global Atlantic senior notes, due October 2029500,000 424,950 500,000 539,350 
Global Atlantic senior notes, due June 2031650,000 476,840 650,000 644,800 
Global Atlantic subordinated debentures, due October 2051750,000 565,650 750,000 761,475 
2,100,000 $1,667,440 1,900,000 $1,945,625 
Purchase accounting adjustments(1)
44,063 51,050 
Debt issuance costs, net of accumulated amortization(17,888)(18,675)
Fair value loss (gain) of hedged debt obligations, recognized in earnings(205,269)(24,369)
 $1,920,906  $1,908,006 

(1)For the three months ended September 30, 2022 and 2021, the amortization of the purchase accounting adjustments was $0.8 million and $0.8 million, respectively, and for the nine months ended September 30, 2022 and 2021, the amortization of the purchase accounting adjustments was $7.0 million and $4.0 million, respectively.
(2)These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.


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Debt Covenants

Borrowings of KKR (including Global Atlantic) contain various debt covenants. These covenants do not, in management's opinion, materially restrict KKR's operating business or investment strategies as of September 30, 2022. KKR (including Global Atlantic) was in compliance with such debt covenants in all material respects as of September 30, 2022.

Global Atlantic Credit Agreement

On September 23, 2022, Global Atlantic (Fin) Company (“GA FinCo”) amended its Credit Agreement (the "GA Credit Agreement") with Wells Fargo Bank, N.A., as administrative agent, and other lenders thereto. The principal amendments made were to replace LIBOR based interest rates with interest rates based on term SOFR with certain rate adjustments. Beginning on September 30, 2022, interest on any funded balances will accrue at term SOFR plus a spread ranging from 1.225% to 2.100%.
As of September 30, 2022, there was $200 million in revolving borrowings outstanding and no letters of credit outstanding under the GA Credit Agreement.
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18. INCOME TAXES
KKR & Co. Inc. is a domestic corporation for U.S. federal income tax purposes and is subject to U.S. federal, state and local income taxes at the entity level on its share of taxable income. In addition, KKR Group Partnership and certain of its subsidiaries operate as partnerships for U.S. federal tax purposes but as taxable entities for certain state, local or non-U.S. tax purposes. Moreover, certain corporate subsidiaries of KKR, including certain Global Atlantic subsidiaries, are domestic corporations for U.S. federal income tax purposes and are subject to U.S. federal, state, and local income taxes. Income taxes reported in these consolidated financial statements include the taxes described in this paragraph.
The effective tax rates were (52.6)% and 10.4% for the three months ended September 30, 2022 and 2021, respectively. The effective tax rates were 11.6% and 9.2% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory rate primarily due to the mix of asset management and insurance income (loss) along with a substantial portion of the reported net income (loss) before taxes is not attributable to KKR but rather is attributable to noncontrolling interests held in KKR’s consolidated entities by KKR's principals or by third parties.
Future realization of deferred tax assets is dependent on KKR generating sufficient taxable income before the tax benefits are expected to expire. KKR considers projections of taxable income in evaluating its ability to utilize those deferred tax assets. In projecting its taxable income, KKR begins with historical results and incorporates assumptions concerning the amount and timing of future pre-tax operating income. Those assumptions require significant judgment and are consistent with the plans and estimates that KKR uses to manage its business. As of September 30, 2022, KKR concluded it is more likely than not that its deferred tax assets will be realized and therefore no valuation allowance had been recorded. In addition, as of September 30, 2022, no valuation allowance was recorded for deferred tax assets related to the unrealized losses on available-for-sale securities held by Global Atlantic. Management intends to hold these securities until the recovery of the losses, which may be at maturity, as part of its asset liability cash-flow matching strategy and will continue to monitor its position and may make changes to the valuation allowance in future periods as circumstances change.

During the three months ended September 30, 2022, there was no change to KKR’s uncertain tax positions. During the nine months ended September 30, 2022, there was a decrease of $21.2 million to KKR’s uncertain tax positions primarily due to the settlement of state tax audits conducted for the years ended 2010 through 2014.
As a result of the Reorganization Mergers (see Note 1 "Organization"), KKR recorded additional deferred tax liabilities of $1,093 million with a corresponding decrease to Additional Paid-in Capital during the nine months ended September 30, 2022.
On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the IRA will be effective beginning with the fiscal year 2023, with certain exceptions. The IRA includes a new 15% corporate minimum tax as well as a 1% excise tax on corporate stock repurchases completed after December 31, 2022. As required under the authoritative guidance of ASC 740, Income Taxes, we reviewed the impact on income taxes due to the change in legislation and concluded there was no impact to the financial statements as of September 30, 2022. KKR is in the process of evaluating the potential future impacts of the IRA, and the Company will continue to review and monitor the issuance of additional guidance from the Internal Revenue Service.
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19. EQUITY BASED COMPENSATION
Asset Management

KKR Equity Incentive Plan Awards
For the three months ended September 30, 2022 and 2021, KKR recorded equity based compensation expense of $111.8 million and $73.4 million, respectively, and for the nine months ended September 30, 2022 and 2021, KKR recorded equity based compensation expense of $339.5 million and $199.6 million, respectively. These amounts include for the three months ended September 30, 2022 and 2021, equity based compensation related to our insurance business of $2.2 million and $10.9 million, respectively, and for the nine months ended September 30, 2022 and 2021, equity based compensation related to our insurance business of $6.5 million and $11.4 million, respectively.
Under KKR's Equity Incentive Plans, KKR is permitted to grant equity awards representing ownership interests in KKR & Co. Inc. common stock. On March 29, 2019, the 2019 Equity Incentive Plan became effective. Following the effectiveness of the 2019 Equity Incentive Plan, KKR no longer makes further grants under the 2010 Equity Incentive Plan, and the 2019 Equity Incentive Plan became KKR's only plan for providing new equity-based awards by KKR & Co. Inc. Outstanding awards under the 2010 Equity Incentive Plan will remain outstanding, unchanged and subject to the terms of the 2010 Equity Incentive Plan and their respective equity award agreements, until the vesting, expiration or lapse of such awards in accordance with their terms. The total number of equity awards representing shares of common stock that may be issued under the 2019 Equity Incentive Plan is equivalent to 15% of the aggregate number of the shares of common stock and KKR Group Partnership Units (excluding KKR Group Partnership Units held by KKR & Co. Inc. or its wholly-owned subsidiaries), subject to annual adjustment. As of September 30, 2022, 73,281,459 shares may be issued under the 2019 Equity Incentive Plan. Equity awards granted pursuant to the Equity Plans generally consist of (i) restricted stock units ("RSUs") that convert into shares of common stock of KKR & Co. Inc. (or cash equivalent) upon vesting and (ii) restricted holdings units ("RHUs") that are exchangeable into shares of common stock of KKR & Co. Inc. upon vesting and certain other conditions.

Service-Vesting Awards
Under the Equity Incentive Plans, KKR grants RSUs and RHUs that are subject to service-based vesting, typically over a three to five-year period from the date of grant (referred to hereafter as "Service-Vesting Awards"). In certain cases, these Service-Vesting Awards may have a percentage of the award that vests immediately upon grant. Additionally, some but not all Service-Vesting Awards are subject to transfer restrictions and/or minimum retained ownership requirements. The transfer restriction period, if applicable, lasts for (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, some but not all of these awards are also subject to minimum retained ownership rules requiring the award recipient to continuously hold shares of common stock equivalents equal to at least 15% of their cumulatively vested awards that have or had the minimum retained ownership requirement. Holders of the Service-Vesting Awards do not participate in dividends until such awards have met their vesting requirements.
Expense associated with the vesting of these Service-Vesting Awards is based on the closing price of KKR & Co. Inc. common stock on the date of grant, discounted for the lack of participation rights in the expected dividends on unvested equity awards. Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based upon expected turnover by class of recipient.
As of September 30, 2022, there was approximately $488.7 million of total estimated unrecognized expense related to unvested Service-Vesting Awards, which is expected to be recognized over the weighted average remaining requisite service period of 1.6 years.


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A summary of the status of unvested Service-Vesting Awards granted under the Equity Incentive Plans from January 1, 2022 through September 30, 2022 is presented below:
 SharesWeighted
Average Grant
Date Fair Value
Balance, January 1, 202219,307,041 $41.21 
Granted847,666 57.10 
Vested(3,846,900)33.51 
Forfeitures(444,554)46.63 
Balance, September 30, 202215,863,253 $43.77 
Market Condition Awards
Under the Equity Incentive Plans, KKR also grants RSUs and RHUs that are subject to both a service-based vesting condition and a market price based vesting condition (referred to hereafter as "Market Condition Awards") for certain employees. The following is a discussion of Market Condition Awards excluding the Co-CEO Awards, except where discussed below.

The number of Market Condition Awards (other than the Co-CEO awards) that will vest depend upon (i) the market price of KKR common stock reaching certain price targets that range from $45.00 to $140.00 and (ii) the employee being employed by KKR on a certain date, which typically is five and a half years from the date of grant (with exceptions for involuntary termination without cause, death and permanent disability). The market price vesting condition is met when the average closing price of KKR common stock during 20 consecutive trading days meets or exceeds the stock price targets. Holders of the Market Condition Awards do not participate in dividends until such awards have met both their service-based and market price based vesting requirements. Additionally, these awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting.

Due to the existence of the service requirement, the vesting period for these Market Condition Awards (other than the Co-CEO awards) is explicit, and as such, compensation expense will be recognized on (i) a straight-line basis over the period from the date of grant through the date the award recipient is required to be employed by KKR and (ii) assumes a forfeiture rate of up to 7% annually based upon expected turnover. The fair value of the awards granted are based on a Monte Carlo simulation valuation model. In addition, the grant date fair value assumes that holders of the Market Condition Awards will not participate in dividends until such awards have met all of their vesting requirements.

Below is a summary of the grant date fair value based on the Monte Carlo simulation valuation model and the significant assumptions used to estimate the grant date fair value of these Market Condition Awards:

Weighted
Average
Range
Grant Date Fair Value$25.70
$19.87 - $66.80
Closing KKR share price as of valuation date$43.04
$37.93 - $76.31
Risk Free Rate0.55%
0.41% - 3.46%
Volatility28.16%
28.00% - 38.00%
Dividend Yield1.41%
0.76% - 1.53%
Expected Cost of Equity10.59%
9.13% - 11.15%
As of September 30, 2022, there was approximately $333.3 million of total estimated unrecognized expense related to these unvested Market Condition Awards, which is expected to be recognized over the weighted average remaining requisite service period of 3.7 years.

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A summary of the status of unvested Market Condition Awards granted under the Equity Incentive Plans from January 1, 2022 through September 30, 2022 is presented below:
 SharesWeighted
Average Grant
Date Fair Value
Balance, January 1, 202221,370,847 $25.03 
Granted550,000 51.74 
Vested(175,000)19.87 
Forfeitures(507,887)21.21 
Balance, September 30, 202221,237,960 $25.85 
As of September 30, 2022, 19.4 million of these Market Condition awards have met their market price based vesting condition.
Co-CEO Awards
On December 9, 2021, the Board of Directors approved grants of 7.5 million RHUs to each of KKR’s Co-Chief Executive Officers that are subject to both a service-based vesting condition and a market price based vesting condition (referred to hereafter as "Co-CEOs Awards"). For both Co-Chief Executive Officers, 20% of the Co-CEOs Awards are eligible to vest at each of the following KKR common stock prices targets: $95.80, $105.80, $115.80, $125.80 and $135.80. The market price based vesting condition is met when the average closing price of KKR common stock during 20 consecutive trading days meets or exceeds the stock price targets. In addition to the market price based vesting conditions, in order for the Co-CEOs Awards to vest, the Co-Chief Executive Officer is required to be employed by KKR on December 31, 2026 (with exceptions for involuntary termination without cause, death and permanent disability).

These awards will be automatically canceled and forfeited upon the earlier of the Co-Chief Executive Officer’s termination of service (except for involuntary termination without cause, death or permanent disability) or the failure to meet the market price based vesting condition by December 31, 2028 (for which continued service is required if the market price vesting condition is met after December 31, 2026). Co-CEO Awards do not participate in dividends until such awards have met both their service-based and market price based vesting requirements. Additionally, these awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting.

Due to the existence of the service requirement, the vesting period for these Co-CEO Awards is explicit, and as such, compensation expense will be recognized on a straight-line basis over the period from the date of grant through December 31, 2026 given the derived service period is less than the explicit service period. The fair value of the awards granted are based on a Monte Carlo simulation valuation model. In addition, the grant date fair value assumes that these Co-CEO Awards will not participate in dividends until such awards have met all of their vesting requirements.

Below is a summary of the grant date fair value based on the Monte Carlo simulation valuation model and the significant assumptions used to estimate the grant date fair value of these Co-CEO Awards:

Grant Date Fair Value$48.91
Closing KKR share price as of valuation date$75.76
Risk Free Rate1.42 %
Volatility28.0 %
Dividend Yield0.77 %
Expected Cost of Equity9.36 %

As of September 30, 2022, there was approximately $616.5 million of total estimated unrecognized expense related to these unvested Co-CEO Awards, which is expected to be recognized ratably from October 1, 2022 to December 31, 2026. As of September 30, 2022, none of these Co-CEO awards have met their market price based vesting condition.

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KKR Holdings Awards

For the three months ended September 30, 2022 and 2021, KKR recorded equity based compensation expense of $19.5 million and $8.7 million, respectively, and for the nine months ended September 30, 2022 and 2021, KKR recorded equity based compensation expense of $119.8 million and $35.2 million, respectively. The $19.5 million expense for the three months ended September 30, 2022 relates to the remaining 30% of KKR Holdings units that were subject to forfeiture if the Co-CEOs were not employed by KKR on October 1, 2022, as discussed below.
On October 8, 2021, as part of the transactions contemplated by the Reorganization Mergers, of the 3.3 million outstanding KKR Holdings units that remained unallocated, KKR Holdings allocated 1,150,000 KKR Holdings units to each of KKR’s Co-CEOs, of which 70% vested immediately, on October 8, 2021, and the remaining 30% were subject to forfeiture if such Co-CEO is not employed by KKR on October 1, 2022 (except in the case of death or permanent disability). These KKR Holdings units were subject to customary one- and two-year transfer restrictions that will apply, as applicable, until October 1, 2023 and October 1, 2024.
In advance of the closing of the Reorganization Mergers, the vesting of KKR Holdings units held by Messrs. Kravis, Roberts, Bae and Nuttall was accelerated, and the forfeiture and transfer restrictions applicable to certain KKR Holdings units were transferred to the common stock received as contemplated by the Reorganization Agreement. In addition, on May 27, 2022, KKR Holdings allocated 535,185 units of KKR Holdings to Mr. Kravis and 535,184 units of KKR Holdings to Mr. Roberts’ trust with no vesting conditions. Please refer to Note 1 "Organization" for further information on the Reorganization Mergers pursuant to which, among other things, KKR acquired KKR Holdings, and all outstanding KKR Holdings units were exchanged for KKR & Co. Inc. common stock.
Prior to the Reorganization Mergers, KKR Holdings awards gave rise to equity-based compensation in the consolidated statements of operations based on the grant-date fair value of the award discounted for the lack of participation rights in the expected distributions on unvested units. This discount is consistent with that noted above for shares issued under the Equity Incentive Plans. Expense was recognized on a straight line basis over the life of the award and assumed a forfeiture rate of up to 7% annually based on expected turnover by class of recipient.
Insurance

Global Atlantic recognized $16.4 million and $27.9 million of expense related to equity-based compensation and long-term incentive awards for the three months ended September 30, 2022 and 2021, respectively, and Global Atlantic recognized $53.1 million and $47.1 million of expense related to equity-based compensation and long-term incentive awards for the nine months ended September 30, 2022 and 2021, respectively.

No equity-based compensation costs were capitalized during the three and nine months ended September 30, 2022 and 2021.

Equity Classified Awards - KKR Equity Incentive Plan Awards

On February 1, 2021, in connection with the GA Acquisition, employees of Global Atlantic were awarded a one-time grant of RSUs under the 2019 Equity Incentive Plan. These awards (i) are subject to service-based vesting conditions and (ii) expense associated with the vesting of these awards is based on the closing price of KKR & Co. Inc. common stock on the date of grant, consistent with other awards granted under the 2019 Equity Incentive Plan as described above.

On July 1, 2021, a grant of a Market Condition Award was made under the 2019 Equity Incentive Plan. This award is subject to meeting certain market price based vesting conditions of KKR common stock but has no service vesting condition. Expense associated with the grant date fair value of this award of $10.5 million was fully recognized in the three months ended September 30, 2021.

Global Atlantic recognized $2.2 million and $10.9 million of total equity-based compensation expense for the three months ended September 30, 2022 and 2021 associated with these awards, respectively, and Global Atlantic recognized $6.5 million and $11.4 million of total equity-based compensation expense for the nine months ended September 30, 2022 and 2021 associated with these awards, respectively.


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Liability Classified Awards - Book Value Awards

On February 1, 2021, Global Atlantic adopted the Global Atlantic Financial Company Book Value Award Plan ("GA Book Value Plan") to enhance the ability of Global Atlantic to attract, motivate and retain its employees and to promote the success of the Global Atlantic business.
The GA Book Value Plan authorizes the grant of cash-settled awards ("book value awards") representing the right to receive one or more payments upon vesting equal to the product of an initial dollar value set by the award multiplied by a pre-determined formula as of each applicable vesting date. The predetermined formula is equal to the quotient determined by dividing the book value of one share of TGAFG on the applicable vesting date by the book value of a share on the original grant date, subject to adjustments. Book value awards generally vest in three equal, annual installments, subject to continued employment.

On February 1, 2021, under the terms of the GA Merger Agreement and in accordance with applicable plan documentation, former Global Atlantic restricted share awards that were unvested immediately prior to the closing of the GA Acquisition converted into the right to receive a number of book value awards under the GA Book Value Plan having the same value and the same vesting schedule as the former Global Atlantic restricted share awards immediately prior to the closing of the GA Acquisition.

An aggregate of 3,020,017 unvested former Global Atlantic restricted share awards having a fair value of $29.47 per share were converted to book value awards at an aggregate grant-date value of $89.0 million. On February 28, 2021, book value awards having an aggregate value of approximately $28.0 million vested as set forth in the former Global Atlantic grant agreements and resulted in a cash payment of $17.0 million to participants, net of applicable tax withholding.

Also in connection with the GA Acquisition, on February 1, 2021, Global Atlantic employees were issued a one-time grant of book value awards having an aggregate initial value of $23.0 million. These one-time book value awards vest over five (5) years, with the first 25% vesting on April 1, 2023 and the remainder vesting 25% annually on April 1 each subsequent year until fully vested, subject to continued employment. Global Atlantic is recording compensation expense over the vesting schedule of the awards, net of an estimated forfeiture rate of 4%.

On March 1, 2021, pursuant to the GA Book Value Plan, book value awards having an aggregate initial value of approximately $32 million were granted. Such book value awards generally vest annually over three years in equal increments, subject to continued employment. Global Atlantic is recording compensation expense over the vesting schedule of the awards, net of an estimated forfeiture rate of 4%.

Global Atlantic began recognizing long-term incentive expense for the book value awards described above at the grant dates, based on their initial value, net of a 4% estimated forfeiture rate. Global Atlantic adjusts expense periodically for changes in book value until the awards are settled or forfeited. Expense recognized on forfeited awards is reversed in the period of forfeiture. The table below presents the activity related to book value awards for the nine months ended September 30, 2022 and 2021:

Nine Months Ended
September 30, 2022September 30, 2021
Outstanding amount as of beginning of period$145,000 $— 
Pre-acquisition awards converted to book-value awards on February 1, 2021— 89,000 
Granted27,191 57,213 
Forfeited(4,647)(5,508)
Impact of change in book value on outstanding awards— 6,597 
Vested and issued(49,405)(31,086)
Outstanding amount as of end of period$118,139 $116,216 
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Global Atlantic recognized $14.2 million and $17.0 million of compensation expense for the three months ended September 30, 2022 and 2021 associated with these awards, respectively, and Global Atlantic recognized $46.6 million and $35.7 million of compensation expense for the nine months ended September 30, 2022 and 2021 associated with these awards, respectively. As of September 30, 2022 and December 31, 2021, the remaining unamortized compensation expenses of $90.0 million and $99.6 million are expected to be recognized over a remaining average period of 2.39 years and 2.67 years, respectively.

GA Equity Incentive Plan Awards

On June 24, 2021, Global Atlantic issued 1,000 non-voting incentive shares to a Bermuda exempted partnership owned by certain Global Atlantic employees, who are eligible to receive incentive units under Global Atlantic's Senior Management Equity Incentive Plan ("GA Equity Incentive Plan"). These incentive units represent an interest in the receipt of certain amounts based on Global Atlantic's book value, market value, and AUM, in each case as derived in part from the value of TGAFG’s fully-diluted equity shares.
On June 24, 2021, Global Atlantic granted approximately 808 incentive units under the GA Equity Incentive Plan. The book value component of the incentive units vests 20% per year on the anniversary of the GA Acquisition Date, as long as the grantee remains then employed, and will be settled in cash. The market value and AUM components of the incentive units cliff vest upon the earlier to occur of (i) the fifth anniversary of the GA Acquisition Date, or (ii) a change of control, and will be settled in a variable number of TGAFG’s non-voting common shares. TGAFG shares issued under the AUM component of the Plan are exchangeable for shares of KKR. Except in the event of termination due to death or disability, generally, unvested market value and AUM amounts are forfeited upon a termination of employment.
The GA Equity Incentive Plan is accounted for as a hybrid compensation plan, consisting of one component most closely aligned with a profit-sharing plan under ASC 710, Compensation - General, as well as other components within scope of ASC 718, Compensation - Stock Compensation, in all cases with obligations liability-classified. Accordingly, with regard to awards within scope of ASC 710, Global Atlantic records expense based on payouts deemed to be probable and reasonably estimable based on the book value growth of Global Atlantic at the grant date and at each reporting period. For award components subject to liability-classification under ASC 718, Global Atlantic records expense, net of a 0% estimated forfeiture rate, based on the fair value of awards granted, with periodic adjustments to expense for changes in fair value, over the requisite 5-year service period.
The aggregate value of the GA Equity Incentive Plan awards at the initial date of grant was $197.0 million, based on the intrinsic value of the book value component at the date of grant ($5.0 million) and the fair value of the market value and AUM components at the date of grant ($192.0 million, collectively), based on the projected growth in value of each component over the 5-year vesting schedule and applying a forfeiture rate of 0%. Expense is remeasured accordingly at each reporting period and adjusted as needed until the awards are forfeited or settled.
During both the three and nine months ended September 30, 2022, 27 incentive units were granted to employees, and 5 and 35 incentive units were forfeited during the three and nine months ended September 30, 2022, respectively. As of September 30, 2022 and December 31, 2021, there were approximately 845 and 831 incentive units outstanding under the Plan, respectively.
Global Atlantic recorded compensation expense of $28.0 million and $54.8 million for the three and nine months ended September 30, 2022 related to the GA Units granted under the GA Equity Incentive Plan, with a corresponding offset to other liabilities, respectively. As of September 30, 2022 and December 31, 2021, there was approximately $98.7 million and $104.1 million of unrecognized expense related to the GA Units granted under the GA Equity Incentive Plan with a weighted average service period remaining of 3.34 years and 4.09 years, respectively.
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20. RELATED PARTY TRANSACTIONS
Due from Affiliates consists of:
 September 30, 2022December 31, 2021
Amounts due from unconsolidated investment funds$1,204,863 $1,109,769 
Amounts due from portfolio companies165,830 114,514 
Due from Affiliates$1,370,693 $1,224,283 
Due to Affiliates consists of:
 September 30, 2022December 31, 2021
Amounts due to current and former employees under the tax receivable agreement (1)
$400,062 $399,163 
Amounts due to unconsolidated investment funds44,810 63,559 
Due to Affiliates$444,872 $462,722 
(1)See Note 1 "Organization."
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21. SEGMENT REPORTING
KKR operates through two reportable segments which are presented below and reflect how its chief operating decision-makers allocate resources and assess performance:
Asset Management - the asset management business offers a broad range of investment management services to investment funds, vehicles and accounts (including Global Atlantic) and provides capital markets services to portfolio companies and third parties. This reportable segment also reflects how its business lines operate collaboratively with predominantly a single expense pool.
Insurance - the insurance business is operated by Global Atlantic, which is a leading U.S. retirement and life insurance company that provides a broad suite of protection, legacy and savings products and reinsurance solutions to clients across individual and institutional markets. Global Atlantic primarily generates income by earning a spread between its investment income and the cost of policyholder benefits.
KKR’s segment profitability measure used to make operating decisions and assess performance across KKR’s reportable segments is presented prior to giving effect to the allocation of income (loss) among KKR & Co. Inc. and holders of any exchangeable securities, and the consolidation of the investment funds, vehicles and accounts that KKR advises, manages or sponsors (including CFEs). KKR's segment profitability measure excludes: (i) equity-based compensation charges, (ii) amortization of acquired intangibles, (iii) strategic transaction-related charges and (iv) non-recurring items, if any. Strategic transaction-related items arise from corporate actions and consist primarily of (i) impairments, (ii) non-monetary gains or losses on divestitures, (iii) transaction costs from strategic acquisitions, and (iv) depreciation on real estate that KKR owns and occupies. Inter-segment transactions are not eliminated from segment results when management considers those transactions in assessing the results of the respective segments. These transactions include (i) management fees earned by KKR as the investment adviser for Global Atlantic insurance companies and (ii) interest income and expense based on lending arrangements where one or more KKR subsidiaries borrow from a Global Atlantic insurance subsidiary. Inter-segment transactions are recorded by each segment based on the definitive documents that contain arms' length terms and comply with applicable regulatory requirements. Segment operating earnings for the asset management and insurance segments is further defined as follows:

Asset Management Segment Operating Earnings is the profitability measure used to make operating decisions and to assess the performance of the asset management segment and is comprised of: (i) Fee Related Earnings, (ii) Realized Performance Income, (iii) Realized Performance Income Compensation, (iv) Realized Investment Income, and (v) Realized Investment Income Compensation. Asset Management Segment Operating Earnings excludes the impact of: (i) unrealized carried interest, (ii) net unrealized gains (losses) on investments, and (iii) related unrealized performance income compensation. Management fees earned by KKR as the adviser, manager, or sponsor for its investment funds, vehicles and accounts, including its Global Atlantic insurance companies and Ivy Vehicles are included in Asset Management Segment Operating Earnings.
Insurance Segment Operating Earnings is the profitability measure used to make operating decisions and to assess the performance of the insurance segment and is comprised of: (i) Net Investment Income, (ii) Net Cost of Insurance, (iii) General, Administrative, and Other Expenses, (iv) Income Taxes, and (v) Net Income Attributable to Noncontrolling Interests. The non-operating adjustments made to derive Insurance Segment Operating Earnings eliminate the impact of: (i) realized (gains) losses related to asset/liability matching investments strategies, (ii) unrealized investment (gains) losses, (iii) changes in the fair value of derivatives, embedded derivatives, and fair value liabilities for fixed-indexed annuities, indexed universal life contracts and variable annuities, and (iv) the associated income tax effects of all exclusions from Insurance Segment Operating Earnings except for equity-based compensation expense. Insurance Segment Operating Earnings includes (i) realized gains and losses not related to asset/liability matching investments strategies and (ii) the investment management fee expenses that are earned by KKR as the investment adviser of the Global Atlantic insurance companies.



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Segment Presentation

The following tables set forth information regarding KKR's segment results:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Asset Management
Management Fees (1)
$670,534 $559,016 $1,950,389 $1,478,878 
Transaction and Monitoring Fees, Net167,455 249,670 580,794 645,108 
Fee Related Performance Revenues49,924 9,897 71,974 34,760 
Fee Related Compensation(199,780)(184,224)(585,748)(485,760)
Other Operating Expenses(146,370)(104,772)(409,489)(309,483)
Fee Related Earnings541,763 529,587 1,607,920 1,363,503 
Realized Performance Income497,860 432,784 1,837,925 1,222,403 
Realized Performance Income Compensation(322,927)(274,955)(1,180,990)(797,965)
Realized Investment Income (2)
284,979 447,565 911,221 1,277,701 
Realized Investment Income Compensation(42,747)(67,142)(136,683)(191,663)
Asset Management Segment Operating Earnings958,928 1,067,839 3,039,393 2,873,979 
Insurance
Net Investment Income (1) (2)
1,054,757 771,982 2,881,567 1,977,383 
Net Cost of Insurance(642,443)(436,415)(1,664,664)(1,076,566)
General, Administrative and Other(161,242)(139,489)(472,795)(338,325)
  Pre-tax Insurance Operating Earnings251,072 196,078 744,108 562,492 
Income Taxes(44,468)(9,046)(125,927)(63,148)
Net Income Attributable to Noncontrolling Interest(79,582)(72,043)(238,118)(193,570)
Insurance Segment Operating Earnings127,022 114,989 380,063 305,774 
Total Segment Operating Earnings$1,085,950 $1,182,828 $3,419,456 $3,179,753 
(1) Includes intersegment management fees of $83.0 million and $46.7 million, for the three months ended September 30, 2022 and 2021, respectively, and $211.3 million and $108.5 million for the nine months ended September 30, 2022 and 2021, respectively.
(2) Includes intersegment interest expense and income of $44.0 million and $10.8 million, for the three months ended September 30, 2022 and 2021, respectively, and $104.3 million and $11.9 million for the nine months ended September 30, 2022 and 2021, respectively.
As of
September 30, 2022September 30, 2021
Segment Assets:
  Asset Management$31,244,274 $31,853,573 
  Insurance165,521,042 164,436,876 
Total Segment Assets$196,765,316 $196,290,449 
Three Months Ended September 30,Nine Months Ended September 30,
Noncash expenses excluded from Segment Operating Earnings2022202120222021
Equity Based Compensation and Other
  Asset Management$109,509 $62,510 $332,986 $188,269 
  Insurance41,102 40,086 94,711 64,061 
Total Non-cash expenses $150,611 $102,596 $427,697 $252,330 
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Reconciliations of Total Segment Amounts
The following tables reconcile the Segment Revenues, Segment Operating Earnings, and Segment Assets to their equivalent GAAP measure:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Total GAAP Revenues$1,858,413 $4,483,365 $3,192,500 $12,182,552 
Impact of Consolidation and Other207,822 134,524 593,340 392,883 
Asset Management Adjustments:
Capital Allocation-Based Income (Loss) (GAAP)572,863 (1,526,667)2,442,080 (5,736,707)
Realized Carried Interest496,494 413,114 1,799,870 1,183,826 
Realized Investment Income284,979 447,565 911,221 1,277,701 
Capstone Fees(20,748)(25,178)(55,743)(66,286)
Expense Reimbursements(10,733)(34,857)(77,612)(122,642)
Insurance Adjustments:
Net Premiums(480,462)(974,903)(627,104)(1,698,912)
Policy Fees(320,206)(310,381)(964,349)(824,326)
Other Income(35,632)(31,938)(102,888)(82,160)
Investment Gains and Losses (11,584)(156,909)176,559 83,153 
Derivative Gains and Losses 184,303 53,179 945,996 47,151 
Total Segment Revenues (1)
$2,725,509 $2,470,914 $8,233,870 $6,636,233 
(1)Total Segment Revenues is comprised of (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, (iii) Fee Related Performance Revenues, (iv) Realized Performance Income, (v) Realized Investment Income, and (vi) Net Investment Income.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Income (Loss) Before Tax (GAAP)$(52,153)$3,660,927 $(1,110,231)$12,621,574 
Impact of Consolidation and Other 97,699 (1,472,312)(168,246)(4,985,859)
Interest Expense83,335 63,446 229,414 185,100 
Equity-based compensation - KKR Holdings(1)
19,500 8,764 119,834 35,734 
Asset Management Adjustments:
Net Unrealized (Gains) Losses233,265 (598,304)1,734,293 (2,890,326)
Unrealized Carried Interest1,094,782 (911,156)3,946,182 (3,872,150)
Unrealized Carried Interest Compensation (Carry Pool)(468,785)397,449 (1,629,011)1,667,447 
Strategic Corporate Transaction-Related Charges(2)
17,925 7,362 88,129 17,497 
Equity-based compensation50,566 44,488 156,259 138,196 
Equity-based compensation - Performance based58,943 18,022 176,727 50,073 
Insurance Adjustments:(3)
Net (Gains) Losses from Investments and Derivatives (54,585)(75,241)(120,033)183,842 
Strategic Corporate Transaction-Related Charges 4,413 3,931 14,120 15,947 
Equity-based and Other Compensation 41,102 40,086 94,711 64,061 
Amortization of Acquired Intangibles 4,411 4,412 13,235 11,765 
Income Taxes(44,468)(9,046)(125,927)(63,148)
Total Segment Operating Earnings$1,085,950 $1,182,828 $3,419,456 $3,179,753 
(1)Represents equity-based compensation expense in connection with the allocation of units of KKR Holdings, which were not dilutive to common stockholders of KKR & Co. Inc.
(2)For the nine months ended September 30, 2022, strategic corporate transaction-related charges include a $40.7 million realized loss from foreign exchange derivatives that were entered in connection with the acquisition of KJRM and that were settled upon closing in the second quarter of 2022.
(3)Amounts include the portion allocable to noncontrolling interests (~39%).
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As of
September 30, 2022September 30, 2021
Total GAAP Assets$266,248,640 $265,799,650 
Impact of Consolidation and Reclassifications(67,485,113)(65,946,515)
Carry Pool Reclassifications(1,998,211)(3,562,686)
Total Segment Assets$196,765,316 $196,290,449 

22. EQUITY

Stockholders' Equity
Common Stock

The common stock of KKR & Co. Inc. is entitled to vote as provided by its certificate of incorporation, Delaware General Corporation Law and the rules of the NYSE. Subject to preferences that apply to shares of Series C Mandatory Convertible Preferred Stock and any other shares of preferred stock outstanding at the time on which dividends are payable, the holders of common stock are entitled to receive dividends out of funds legally available if the board of directors, in its discretion, determines to declare dividends and then only at the times and in the amounts that the board of directors may determine. The common stock is not entitled to preemptive rights and is not subject to conversion, redemption or sinking fund provisions.

Series I and Series II Preferred Stock

Except for any distribution required by Delaware law to be made upon a dissolution event, the holders of Series I preferred stock do not have any economic rights to receive dividends. Series I preferred stock is entitled to vote on various matters that may be submitted to vote of the stockholders and the other matters as set forth in the certificate of incorporation. Upon a dissolution event, each holder of Series I preferred stock will be entitled to a payment equal to $0.01 per share of Series I preferred stock. The Series I preferred stock will be eliminated on the Sunset Date (as defined in the Reorganization Agreement), which is scheduled to occur not later than December 31, 2026.

The Series II preferred stock was eliminated upon the closing of the Reorganization Mergers. Prior to the Reorganization Mergers, for matters on which common stock was entitled to vote, so long as the ratio at which KKR Group Partnership Units was exchangeable for shares of common stock remains on a one-for-one basis, Series II preferred stock was entitled to vote together with common stock as a single class and on an equivalent basis, except Series II preferred stock was entitled to vote separately as a class on any amendment to the certificate of incorporation that changed certain terms, rights or preferences of Series II preferred stock. Prior to the Reorganization Mergers, each holder of Series II preferred stock was entitled to a payment equal to $0.000000001 per share of Series II preferred stock upon a dissolution event.

Series C Mandatory Convertible Preferred Stock

On August 14, 2020, KKR & Co. Inc. issued 23,000,000 shares, or $1.15 billion aggregate liquidation preference, of its 6.00% Series C Mandatory Convertible Preferred Stock (the "Series C Mandatory Convertible Preferred Stock").

Unless converted or redeemed earlier in accordance with the terms of the Series C Mandatory Convertible Preferred Stock, each share of Series C Mandatory Convertible Preferred Stock will automatically convert on the mandatory conversion date, which is expected to be September 15, 2023, into between 1.1662 shares and 1.4285 shares of common stock, in each case, subject to customary anti-dilution adjustments described in the certificate of designations related to the Series C Mandatory Convertible Preferred Stock. The number of shares of common stock issuable upon conversion will be determined based on the average volume weighted average price per share of common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately prior to September 15, 2023.

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Dividends on the Series C Mandatory Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by our board of directors, or an authorized committee thereof, at an annual rate of 6.00% on the liquidation preference of $50.00 per share of Series C Mandatory Convertible Preferred Stock, and may be paid in cash or, subject to certain limitations, in shares of common stock or, subject to certain limitations, any combination of cash and shares of common stock. If declared, dividends on the Series C Mandatory Convertible Preferred Stock will be payable quarterly on March 15, June 15, September 15 and December 15 of each year to, and including, September 15, 2023, commencing on December 15, 2020.

Upon KKR & Co. Inc.’s voluntary or involuntary liquidation, winding-up or dissolution, each holder of the Series C Mandatory Convertible Preferred Stock would be entitled to receive a liquidation preference in the amount of $50.00 per share of Series C Mandatory Convertible Preferred Stock, plus an amount equal to accumulated and unpaid dividends on such shares, whether or not declared, to, but excluding, the date fixed for liquidation, winding-up or dissolution, to be paid out of KKR & Co. Inc.’s assets legally available for distribution to its stockholders after satisfaction of debt and other liabilities owed to KKR & Co. Inc.’s creditors and holders of shares of its stock ranking senior to the Series C Mandatory Convertible Preferred Stock and before any payment or distribution is made to holders of any stock ranking junior to the Series C Mandatory Convertible Preferred Stock, including, without limitation, common stock.

In connection with the issuance of the Series C Mandatory Convertible Preferred Stock, the limited partnership agreement of KKR Group Partnership was amended to provide for preferred units with economic terms designed to mirror those of the Series C Mandatory Convertible Preferred Stock.

Share Repurchase Program
Under KKR's repurchase program, shares of common stock of KKR & Co. Inc. may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any 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. In addition to the repurchases of common stock, the repurchase program will be used for the retirement (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards granted pursuant to our Equity Incentive Plans representing the right to receive common stock. KKR expects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used. The program does not require KKR to repurchase or retire any specific number of shares of common stock or equity awards, respectively, and the program may be suspended, extended, modified or discontinued at any time. As of October 28, 2022, the remaining amount available under the repurchase program was approximately $78 million.
The following table presents KKR & Co. Inc. common stock that has been repurchased or equity awards retired under the repurchase program:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Shares of common stock repurchased— — 5,191,174 2,667,995 
Equity awards for common stock retired — — 596,437 2,366,447 

Noncontrolling Interests
Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings before the closing of the Reorganization Mergers described in Note 1 "Organization".
Noncontrolling Interests in Consolidated Entities and Other
Noncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by:
(i)third party fund investors in KKR's consolidated funds and certain other entities;
(ii)third parties entitled to up to 1% of the carried interest received by certain general partners of KKR's funds that have made investments on or prior to December 31, 2015;
(iii)certain former principals and their designees representing a portion of the carried interest received by the general partners of KKR's private equity funds that was allocated to them with respect to private equity investments made during such former principals' tenure with KKR prior to October 1, 2009;
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(iv)certain former principals representing all of the capital invested by or on behalf of the general partners of KKR's private equity funds prior to October 1, 2009 and any returns thereon;
(v)third parties in KKR's Capital Markets business line;
(vi)certain current and former employees who hold exchangeable securities; and
(vii)third parties in KKR's insurance business including GA Rollover Investors, GA Co-Investors and third party investors in Global Atlantic's consolidated renewable energy entities and certain other entities.

Noncontrolling Interests held by KKR Holdings
Noncontrolling interests held by KKR Holdings prior to the Reorganization Mergers consisted of economic interests held by principals indirectly in KKR Group Partnership Units. Such principals received financial benefits from KKR's business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Units held by KKR Holdings. These financial benefits were not paid by KKR & Co. Inc. and were borne by KKR Holdings. As described in Note 1 "Organization", KKR completed the Reorganization Mergers on May 31, 2022 and acquired KKR Holdings and all of the KKR Group Partnership Units held by it.
The following tables present the calculation of total noncontrolling interests:
 Three Months Ended September 30, 2022
Noncontrolling Interests in Consolidated Entities and OtherNoncontrolling Interests Held by KKR HoldingsTotal Noncontrolling Interests
Balance at the beginning of the period$33,664,541 $— $33,664,541 
Net income (loss) attributable to noncontrolling interests (1)
(6,792)— (6,792)
Other comprehensive income (loss), net of tax (2)
(815,541)— (815,541)
Equity-based and other non-cash compensation65,179 — 65,179 
Capital contributions3,685,933 — 3,685,933 
Capital distributions(2,143,703)— (2,143,703)
Balance at the end of the period$34,449,617 $ $34,449,617 

 Nine Months Ended September 30, 2022
Noncontrolling Interests in Consolidated Entities and OtherNoncontrolling Interests Held by KKR HoldingsTotal Noncontrolling Interests
Balance at the beginning of the period$32,043,699 $8,430,866 $40,474,565 
Net income (loss) attributable to noncontrolling interests (1)
271,678 (313,019)(41,341)
Other comprehensive income (loss), net of tax (2)
(3,434,340)(1,074,414)(4,508,754)
Exchange of KKR Holdings Units to Common Stock (3)  
— (12,865)(12,865)
Equity-based and other non-cash compensation193,907 100,334 294,241 
Capital contributions11,117,981 — 11,117,981 
Capital distributions(5,588,024)(171,580)(5,759,604)
Holdings Merger (4)
— (6,959,322)(6,959,322)
Change in KKR & Co. Inc.'s Ownership Interest(155,284)— (155,284)
Balance at the end of the period$34,449,617 $ $34,449,617 

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 Three Months Ended September 30, 2021
Noncontrolling Interests in Consolidated Entities and OtherNoncontrolling Interests Held by KKR HoldingsTotal Noncontrolling Interests
Balance at the beginning of the period$28,402,888 $7,935,515 $36,338,403 
Net income (loss) attributable to noncontrolling interests (1)
1,452,730 670,839 2,123,569 
Other comprehensive income (loss), net of tax (2)
(54,640)(31,904)(86,544)
Equity-based and other non-cash compensation32,255 8,764 41,019 
Capital contributions3,658,497 — 3,658,497 
Capital distributions(1,981,504)(49,844)(2,031,348)
Changes in consolidation(12,352)— (12,352)
Balance at the end of the period$31,497,874 $8,533,370 $40,031,244 
Nine Months Ended September 30, 2021
Noncontrolling Interests in Consolidated Entities and OtherNoncontrolling Interests Held by KKR HoldingsTotal Noncontrolling Interests
Balance at the beginning of the period$20,570,716 $6,512,382 $27,083,098 
Net income (loss) attributable to noncontrolling interests (1)
4,889,401 2,425,961 7,315,362 
Other comprehensive income (loss), net of tax (2)
(132,351)(77,377)(209,728)
Exchange of KKR Holdings Units to Common Stock(3)  
— (122,065)(122,065)
Equity-based and other non-cash compensation71,993 35,734 107,727 
Capital contributions9,721,024 25 9,721,049 
Capital distributions(3,734,474)(241,290)(3,975,764)
Impact of Acquisition (5)
190,405 — 190,405 
Changes in consolidation(78,840)— (78,840)
Balance at the end of the period$31,497,874 $8,533,370 $40,031,244 
(1)Refer to the table below for calculation of net income (loss) attributable to noncontrolling interests formerly held by KKR Holdings.
(2)With respect to noncontrolling interests formerly held by KKR Holdings, calculated on a pro rata basis based on the weighted average KKR Group Partnership Units formerly held by KKR Holdings during the reporting period. 
(3)Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. Inc. common stock. The exchange agreement with KKR Holdings provided for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. Inc. common stock.
(4)Refer to Note 1 "Organization" for further information on the Reorganization Mergers that closed on May 31, 2022, pursuant to which KKR acquired KKR Holdings and all of the KKR Group Partnership Units held by it, and all outstanding KKR Holdings units were exchanged for KKR & Co. Inc. common stock.
(5)Represents other noncontrolling interests at the GA Acquisition Date.

Net income (loss) attributable to each of KKR & Co. Inc. common stockholders, KKR Holdings prior to the Reorganization Mergers, and holders of exchangeable securities, with the exception of certain tax assets and liabilities that are directly allocable to KKR & Co. Inc., is attributed based on the percentage of the weighted average KKR Group Partnership Units directly or indirectly held by them. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings prior to the Reorganization Mergers and holders of exchangeable securities, (ii) the periodic exchange of KKR Holdings units for KKR & Co. Inc. common stock pursuant to the exchange agreement prior to the Reorganization Mergers and (iii) the contribution of certain expenses borne entirely by KKR associated with the Equity Incentive Plans, equity allocations shown in the consolidated statement of changes in equity differ from their respective pro rata ownership interests in KKR's net assets.
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The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings:

 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net income (loss)$(79,587)$3,281,645 $(981,395)$11,459,886 
(-) Net income (loss) attributable to Redeemable Noncontrolling Interests1,601 1,519 1,546 2,856 
(-) Net income (loss) attributable to Noncontrolling Interests in consolidated entities and other (6,792)1,452,730 271,678 4,889,401 
(-) Series A and B Preferred Stock Dividends— 7,953 — 36,647 
(-) Series C Mandatory Convertible Preferred Stock Dividends17,250 17,250 51,750 51,750 
(+) Income tax expense (benefit) attributable to KKR & Co. Inc.(45,975)311,745 (313,679)1,104,628 
Net income (loss) attributable to KKR & Co. Inc.
Common Stockholders and KKR Holdings
$(137,621)$2,113,938 $(1,620,048)$7,583,860 
Net income (loss) attributable to Noncontrolling Interests held by KKR Holdings$ $670,839 $(313,019)$2,425,961 



23. REDEEMABLE NONCONTROLLING INTERESTS

Global Atlantic has redeemable non-controlling interests related to renewable energy entities of approximately $82.1 million and $82.5 million as of September 30, 2022 and December 31, 2021, respectively, as determined by the hypothetical liquidation book value ("HLBV") method, respectively. The estimated redemption value of redeemable non-controlling interests is calculated as the discounted cash flows subsequent to the expected flip date of the respective renewable energy entity. The flip date represents the date at which the allocation of income and cash flows among the investors in the entity is adjusted, pursuant to the redeemable non-controlling interest investors having achieved an agreed-upon return. The flip date of renewable energy partnerships determines when the redeemable non-controlling interests are eligible to be redeemed. Eligible redemption dates range from January 1, 2028 to June 30, 2028. For the redeemable non-controlling interests outstanding as of both September 30, 2022 and December 31, 2021, the estimated redemption value that would be due at the respective redemption dates is $5.3 million.
24. COMMITMENTS AND CONTINGENCIES
Funding Commitments and Others
As of September 30, 2022, KKR had unfunded commitments consisting of $10.7 billion to its investment funds and vehicles. KKR has also agreed for certain of its investment vehicles to fund or otherwise be liable for a portion of their investment losses (up to a maximum of approximately $116 million) and/or to provide them with liquidity upon certain termination events (the maximum amount of which is unknown until the scheduled termination date of the investment vehicle).
In addition to these uncalled commitments and funding obligations to KKR's investment funds and vehicles, KKR has entered into contractual commitments primarily with respect to underwriting transactions, debt financing, revolving credit facilities, and syndications in KKR's Capital Markets business line. As of September 30, 2022, these commitments amounted to $655.4 million. Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. KKR's capital markets business has arrangements with third parties, which reduce its risk when underwriting certain debt transactions, and thus our unfunded commitments as of September 30, 2022 have been reduced to reflect the amount to be funded by such third parties. In the case of purchases of investments or assets in our Principal Activities business line, the amount to be funded includes amounts that are intended to be syndicated to third parties, and the actual amounts to be funded may be less.
Global Atlantic has commitments to purchase or fund investments of $2.5 billion and $2.0 billion as of September 30, 2022 and December 31, 2021, respectively. These commitments include those related to commercial mortgage loans, other lending facilities and other investments. For those commitments that represent a contractual obligation to extend credit, Global Atlantic has recorded a liability of $23.8 million for current expected credit losses as of September 30, 2022.
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In addition, Global Atlantic has entered into certain forward flow agreements to purchase loans. Global Atlantic's obligations under these agreements are subject to change, curtailment, and cancellation based on various provisions including repricing mechanics, due diligence reviews, and performance or pool quality, among other factors.
Non-cancelable Operating Leases

KKR's non-cancelable operating leases consist of leases of office space around the world. There are no material rent holidays, contingent rent, rent concessions or leasehold improvement incentives associated with any of these property leases. In addition to base rentals, certain lease agreements are subject to escalation provisions and rent expense is recognized on a straight‑line basis over the term of the lease agreement.
Global Atlantic also enters into land leases for its consolidated investments in renewable energy.
Contingent Repayment Guarantees
The partnership documents governing KKR's carry-paying investment funds and vehicles generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds.

As of September 30, 2022, approximately $507 million of carried interest was subject to this clawback obligation, assuming that all applicable carry-paying funds and their alternative investment vehicles were liquidated at their September 30, 2022 fair values. Although KKR would be required to remit the entire amount to fund investors that are entitled to receive the clawback payment, KKR would be entitled to seek reimbursement of approximately $203 million of that amount from KKR Associates Holdings L.P., which is not a KKR subsidiary. As of September 30, 2022, KKR Associates Holdings L.P. had access to cash reserves sufficient to reimburse the full $203 million that would be due to KKR. If the investments in all carry-paying funds were to be liquidated at zero value, the clawback obligation would have been approximately $2.6 billion, and KKR would be entitled to seek reimbursement of approximately $1.1 billion of that amount from KKR Associates Holdings L.P. KKR will acquire control of KKR Associates Holdings L.P. when a subsidiary of KKR becomes its general partner upon the closing of the transactions contemplated to occur on the Sunset Date (as defined in the Reorganization Agreement), which will occur not later than December 31, 2026.

Carried interest is recognized in the consolidated statements of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of KKR's investment balance as this is where carried interest is initially recorded.

Indemnifications and Other Guarantees
KKR may incur contingent liabilities for claims that may be made against it in the future. KKR enters into contracts that contain a variety of representations, warranties and covenants, including indemnifications. For example, KKR (including KFN) and certain of KKR's investment funds have provided and provide certain indemnities relating to environmental and other matters and have provided and provide non-recourse carve-out guarantees for fraud, willful misconduct and other wrongful acts, each in connection with the financing of (i) certain real estate investments that we have made, including KKR's corporate real estate and (ii) certain investment vehicles that KKR manages or sponsors. KKR's maximum exposure under these arrangements is currently unknown and KKR's liabilities for these matters would require a claim to be made against KKR in the future.
KKR provides credit support to certain of its subsidiaries' obligations in connection with a limited number of investment vehicles that KKR manages. For example, KKR has guaranteed the obligations of a general partner to post collateral on behalf
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of its investment vehicle in connection with such vehicle's derivative transactions. KKR has also entered into a contingent guarantee for a subsidiary's loan repayment obligations, which does not become effective unless and until its loan becomes accelerated due to certain specified events of default involving the investment vehicles managed by it. KKR also (i) provides credit support regarding repayment and funding obligations to third-party lenders on behalf of certain employees, excluding its executive officers, in connection with their personal investments in KKR investment funds and a levered multi-asset investment vehicle and (ii) provides credit support to a hedge fund partnership.

KKR may also become liable for certain fees payable to sellers of businesses or assets if a transaction does not close, subject to certain conditions, if any, specified in the acquisition agreements for such businesses or assets.
The Global Atlantic business was formerly owned by The Goldman Sachs Group, Inc. (together with its subsidiaries, "Goldman Sachs"). In connection with the separation of Global Atlantic from Goldman Sachs in 2013, Global Atlantic entered into a tax benefit payment agreement with Goldman Sachs. Under the tax benefit payment agreement, GA FinCo is obligated to make annual payments out of available cash, guaranteed by Global Atlantic Financial Group Limited ("GAFG"), to Goldman Sachs over an approximately 25-year period totaling $214.0 million. As of September 30, 2022, the present value of the remaining amount to be paid is $66.4 million. Although these payments are subordinated and deferrable, deferral of these payments would result in restrictions on distributions by GA FinCo and GAFG.
In lieu of funding certain investments in loan facilities to third party borrowers in cash, Global Atlantic has arranged or participated in letters of credit issued by third-party banks on behalf of the borrowers in the amount of $32.9 million, as of September 30, 2022, with expiration dates between October 2022 to December 2024. Global Atlantic has available lines of credit that would allow for additional letters of credit to be issued on behalf of certain borrowers, up to $232.1 million, as of September 30, 2022. For accounting purposes, these letters of credit are considered guarantees of certain obligations of the borrowers. If a letter of credit were to be drawn, Global Atlantic would be obligated to repay the issuing third-party bank, and Global Atlantic would recognize a loan receivable from the borrowers on the consolidated statements of financial condition. Global Atlantic monitors the likelihood of these letters of credit being drawn, and any related contingent obligation. As of both September 30, 2022 and December 31, 2021, the expected credit loss on the contingent liability associated with these letters of credit was not material.

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Litigation
From time to time, KKR (including Global Atlantic) is involved in various legal proceedings, lawsuits, arbitration and claims incidental to the conduct of KKR's businesses. KKR's asset management and insurance businesses are also subject to extensive regulation, which may result in regulatory proceedings against them.
In December 2017, KKR & Co. L.P. (which is now KKR & Co. Inc.) and its then Co-Chief Executive Officers were named as defendants in a lawsuit filed in Kentucky state court alleging, among other things, the violation of fiduciary and other duties in connection with certain separately managed accounts that Prisma Capital Partners LP, a former subsidiary of KKR, manages for the Kentucky Retirement Systems. Also named as defendants in the lawsuit are certain current and former trustees and officers of the Kentucky Retirement Systems, Prisma Capital Partners LP, and various other service providers to the Kentucky Retirement Systems and their related persons. KKR and other defendants’ motions to dismiss were denied by the trial court in November 2018, but in April 2019 the Kentucky Court of Appeals vacated the trial court's opinion and order denying the motions to dismiss the case for lack of standing. The decision of the Court of Appeals was appealed by plaintiffs to the Supreme Court of Kentucky. On July 9, 2020, the Supreme Court of Kentucky reversed the trial court's order and remanded the case to the trial court with direction to dismiss the complaint for lack of constitutional standing. On July 20, 2020, the Office of the Attorney General, on behalf of the Commonwealth of Kentucky, filed a motion to intervene as a plaintiff in the lawsuit and on July 21, 2020 filed a new lawsuit in the same Kentucky trial court making essentially the same allegations against the defendants, including KKR & Co. Inc. and Messrs. Kravis and Roberts. On July 29, 2020, certain private plaintiffs in the original lawsuit filed a motion to further amend their original complaint and to add new plaintiffs. On July 30, 2020, KKR and other defendants filed objections to the Attorney General’s motion to intervene. On December 28, 2020, the trial court dismissed the complaint filed by the original plaintiffs and denied their motion to amend their original complaint and add new plaintiffs, but granted the Office of the Attorney General’s motion to intervene. In January 2021, some of the attorneys for the private plaintiffs in the original lawsuit filed a new lawsuit, and a motion to intervene in the original lawsuit, on behalf of a new set of plaintiffs, who claim to be "Tier 3" members of Kentucky Retirement Systems, alleging substantially the same allegations as in the original lawsuit. The motion to intervene in the original lawsuit was denied. These "Tier 3" plaintiffs appealed the denial of their motion to intervene but then voluntarily dismissed their appeal on January 31, 2022. In addition, the Kentucky Retirement Systems had commissioned an investigation into certain matters alleged in the Attorney General's complaint. The trial court ordered that this investigation be completed by May 17, 2021, and the Attorney General was permitted to amend its complaint after reviewing the investigation's report within ten days of the Attorney General's receipt of it. On May 24, 2021, the Attorney General filed a First Amended Complaint on behalf of the Commonwealth of Kentucky. This complaint continues to name KKR & Co. L.P. and its then Co-Chief Executive Officers, as defendants, and makes similar allegations against them. KKR and the other defendants moved to dismiss the First Amended Complaint on July 30, 2021. The court held oral argument on these motions to dismiss on December 14, 2021. On July 9, 2021, the individual plaintiffs served an amended complaint, which purports to assert, on behalf of a class of beneficiaries of Kentucky Retirement Systems, direct claims for breach of fiduciary duty and civil violations under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). This complaint was removed to the U.S. District Court for the Eastern District of Kentucky, which has entered an order staying this case until the completion of the Attorney General’s lawsuit on behalf of the Commonwealth. On August 20, 2021, the same and other individual plaintiffs filed a second complaint in Kentucky state court, purportedly on behalf of Kentucky Retirement Systems' funds, alleging the same claims against KKR & Co. Inc. and Messrs. Kravis and Roberts as in the July 9th amended complaint but without the RICO or class action allegations. KKR and the other defendants have moved to dismiss the August 20th complaint. On March 24, 2022, in a separate declaratory judgment action brought by the Commonwealth of Kentucky regarding the enforceability of certain indemnification provisions available to KKR & Co. Inc. and Prisma Capital Partners LP, the Kentucky state court found that it has personal jurisdiction over KKR & Co. Inc., and this finding is currently being appealed by KKR. On May 27, 2022, following a motion by KKR, the judge then adjudicating the lawsuits recused himself from the original 2017 action and the second Tier 3 action, and a new judge was assigned.

KKR (including Global Atlantic) currently is and expects to continue to become, from time to time, subject to examinations, inquiries and investigations by various U.S. and non-U.S. governmental and regulatory agencies, including but not limited to the SEC, U.S. Department of Justice, U.S. state attorney generals, Financial Industry Regulatory Authority ("FINRA"), the U.K. Financial Conduct Authority, Central Bank of Ireland, Monetary Authority of Singapore, U.S. state insurance regulatory authorities, and the Bermuda Monetary Authority. Such examinations, inquiries and investigations may result in the commencement of civil, criminal or administrative proceedings or fines against KKR or its personnel. KKR is presently subject to civil investigations and inquiries by the U.S. Department of Justice related to antitrust matters and by the SEC related to business-related electronic communications. KKR is cooperating with these civil investigations and inquiries, and while their outcomes and any related financial impact cannot yet be predicted or reasonably estimated, KKR does not presently believe that they will have a material adverse effect on KKR's financial condition or results of operations.
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Moreover, in the ordinary course of business, KKR (including Global Atlantic) is and can be both the defendant and the plaintiff in numerous lawsuits with respect to acquisitions, bankruptcy, insolvency and other events. Such lawsuits may involve claims that adversely affect the value of certain investments owned by KKR's funds and Global Atlantic's insurance companies. 
KKR establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. No loss contingency is recorded for matters where such losses are either not probable or reasonably estimable (or both) at the time of determination. Such matters may be subject to many uncertainties, including among others: (i) the proceedings may be in early stages; (ii) damages sought may be unspecified, unsupportable, unexplained or uncertain; (iii) discovery may not have been started or is incomplete; (iv) there may be uncertainty as to the outcome of pending appeals or motions; (v) there may be significant factual issues to be resolved or (vi) there may be novel legal issues or unsettled legal theories to be presented or a large number of parties. Consequently, management is unable to estimate a range of potential loss, if any, related to these matters. In addition, loss contingencies may be, in part or in whole, subject to insurance or other payments such as contributions and/or indemnity, which may reduce any ultimate loss. KKR has included in its financial statements the reserve for regulatory, litigation and related matters that Global Atlantic includes in its financial statements, including with respect to matters arising from the conversion of life insurance policies from systems previously managed by Athene Holdings Limited to the platform of one of Global Atlantic's third party service providers, Alliance-One, a subsidiary of DXC Technology Company.
It is not possible to predict the ultimate outcome of all pending legal proceedings, and some of the matters discussed above seek or may seek potentially large and/or indeterminate amounts. Based on information known by management, management has not concluded that the final resolutions of the matters above will have a material effect upon the financial statements. However, given the potentially large and/or indeterminate amounts sought or may be sought in certain of these matters and the inherent unpredictability of investigations and litigations, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on KKR's financial results in any particular period.
Other Financing Arrangements
Global Atlantic has financing arrangements with unaffiliated third parties to support the reserves of its affiliated special purpose reinsurers. Total fees expensed associated with these financing arrangements were $5.2 million and $3.5 million for the three months ended September 30, 2022 and 2021, respectively, and total fees expensed associated with these financing arrangements were $15.2 million and $11.9 million for the nine months ended September 30, 2022 and 2021, respectively, and are included in insurance expenses in the consolidated statements of operations. As of September 30, 2022 and December 31, 2021, the total capacity of the financing arrangements with third parties was $2.1 billion and $2.0 billion, respectively.
Other than the matters disclosed above, there were no outstanding or unpaid balances from the financing arrangements with unaffiliated third parties as of both September 30, 2022 and December 31, 2021.
25. SUBSEQUENT EVENTS
Common Stock Dividend
A dividend of $0.155 per share of common stock of KKR & Co. Inc. has been declared and was announced on November 1, 2022. This dividend will be paid on November 29, 2022 to common stockholders of record as of the close of business on November 14, 2022. Holders of exchangeable securities will receive their pro rata share of the distribution from KKR Group Partnership.
Preferred Stock Dividends
A dividend of $0.75 per share of Series C Mandatory Convertible Preferred Stock has been declared and was announced on November 1, 2022 and set aside for payment. This dividend will be paid on December 15, 2022 to holders of record of Series C Mandatory Convertible Preferred Stock as of the close of business on December 1, 2022.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of KKR & Co. Inc., together with its consolidated subsidiaries, and the related notes included elsewhere in this report and our Annual Report, including the audited consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under "Cautionary Note Regarding Forward-looking Statements" and "Business Environment" in this report and our Annual Report and "Risk Factors" in our Annual Report, and our other filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements.

The unaudited condensed consolidated financial statements and the related notes included elsewhere in this report are hereafter referred to as the "financial statements." Additionally, the condensed consolidated statements of financial condition are referred to herein as the "consolidated statements of financial condition" the condensed consolidated statements of operations are referred to herein as the "consolidated statements of operations" the condensed consolidated statements of comprehensive income (loss) are referred to herein as the "consolidated statements of comprehensive income (loss)" the condensed consolidated statements of changes in equity are referred to herein as the "consolidated statements of changes in equity" and the condensed consolidated statements of cash flows are referred to herein as the "consolidated statements of cash flows."

Overview
 
    We are a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. We aim to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in our portfolio companies and communities. We sponsor investment funds that invest in private equity, credit and real assets and have strategic partners that manage hedge funds. Our insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic.
    Our asset management business offers a broad range of investment management services to fund investors around the world. As of September 30, 2022, we manage $496 billion of assets for our clients. Throughout our history, we have consistently been a leader in the private equity industry, having completed approximately 685 private equity investments in portfolio companies with a total transaction value in excess of $690 billion as of September 30, 2022. 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. 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 insurance business is operated by Global Atlantic, in which we acquired a majority controlling interest on February 1, 2021. Global Atlantic is a leading U.S. retirement and life insurance company that provides a broad suite of protection, legacy and savings products and reinsurance solutions to clients across individual and institutional markets. Global Atlantic primarily offers individuals fixed-rate annuities, fixed-indexed annuities and targeted life products through a network of banks, broker-dealers and independent marketing organizations. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer reinsurance, as well as funding agreements. Global Atlantic primarily generates income by earning a spread between its investment income and the cost of policyholder benefits. As of September 30, 2022, Global Atlantic served approximately three million policyholders.








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Asset Management

In our asset management business, we have five business lines: (1) Private Equity, (2) Real Assets, (3) Credit and Liquid Strategies, (4) Capital Markets, and (5) Principal Activities.
As an asset management firm, we earn fees, including 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-specific income from capital markets transactions. 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.
Our investment teams have deep industry knowledge and are supported by a substantial and diversified capital base; an integrated global investment platform; the expertise of operating professionals, senior advisors and other advisors; and a worldwide network of business relationships that provide a significant source of investment opportunities, specialized knowledge during due diligence and substantial resources for creating and realizing value for stakeholders. These teams invest capital, a substantial portion of which is of a long duration or not subject to predetermined redemption requirements, which provides us with significant flexibility to grow investments and select exit opportunities. As of September 30, 2022, approximately 91% of our AUM consists of capital that is not subject to redemption for at least 8 years from inception and what we refer to as perpetual capital. For more information about the limitations of perpetual capital, please see "Risks Related to Our Business—AUM referred to as perpetual capital is subject to material reduction, including through withdrawal, redemption, or dividends, and termination" in our Annual Report. We believe that these aspects of our business help us continue to grow our asset management business and deliver strong investment performance in a variety of economic and financial conditions.

Asset Management - Private Equity
Through our Private Equity business line, we manage and sponsor a group of what we call traditional private equity funds that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. 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 and growth equity, which includes our impact investments. Our Private Equity business line includes separately managed accounts that invest in multiple strategies, which may include our credit and real asset strategies in addition to our private equity strategies. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser, or one of its subsidiaries. As of September 30, 2022, our Private Equity business line had $165.5 billion of AUM.    
Asset Management - Real Assets
    Through our Real Assets business line, we manage and sponsor a group of real assets funds that invest capital in infrastructure, real estate, or energy. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser, or one of its subsidiaries. As of September 30, 2022, our Real Assets business line had $117.8 billion of AUM.
    The table below presents information as of September 30, 2022, relating to our current private equity and real asset funds for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after September 30, 2022.



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Investment Period (1)
Amount ($ in millions)
Start
Date
End
Date
Commitment (2)
Uncalled
Commitments
Percentage
Committed
by General
Partner
InvestedRealized
Remaining
Cost (3)
Remaining
Fair Value
Gross Accrued
Carried
Interest
         
Private Equity Business Line         
North America Fund XIII6/20218/2027$18,400 $14,337 3%$4,063 $— $4,063 $4,049 $— 
Americas Fund XII1/20176/202113,500 1,632 4%12,366 4,948 11,293 18,804 1,454 
North America Fund XI9/20121/20178,718 410 3%9,769 22,579 2,556 3,450 236 
2006 Fund (4)
9/20069/201217,642 247 2%17,309 36,207 973 1,189 97 
Millennium Fund (4)
12/200212/20086,000 — 3%6,000 14,123 — 
European Fund VI3/20226/20286,904 6,904 11%— — — — — 
European Fund V3/20192/20226,307 1,004 2%5,372 912 5,213 5,711 211 
European Fund IV12/20143/20193,510 62 6%3,577 5,122 1,798 2,322 117 
European Fund III (4)
3/20083/20145,500 140 5%5,360 10,604 669 91 (28)
European Fund II (4)
11/200510/20085,751 — 2%5,751 8,507 — 34 — 
Asian Fund IV7/20207/202614,735 10,424 4%4,351 41 4,295 4,889 
Asian Fund III4/20177/20209,000 1,616 6%7,813 5,031 6,548 10,880 810 
Asian Fund II4/20134/20175,825 1%7,120 6,246 4,074 2,386 (346)
Asian Fund (4)
7/20074/20133,983 — 3%3,974 8,728 110 16 
China Growth Fund (4)
11/201011/20161,010 — 1%1,010 1,056 330 180 (17)
Next Generation Technology Growth Fund II12/20195/20222,088 360 7%1,925 306 1,779 2,414 121 
Next Generation Technology Growth Fund3/201612/2019659 22%666 863 359 1,108 88 
Health Care Strategic Growth Fund II5/20215/20273,789 3,657 4%132 — 132 150 — 
Health Care Strategic Growth Fund12/20165/20211,331 339 11%1,122 196 1,012 1,552 77 
Global Impact Fund II6/20226/20281,854 1,854 8%— — — — — 
Global Impact Fund2/20193/20221,242 350 8%1,042 174 935 1,462 99 
Co-Investment Vehicles and Other VariousVarious18,843 6,791 Various12,280 7,734 8,614 10,706 1,095 
Core Investment VehiclesVariousVarious24,621 12,148 31%13,289 828 12,931 20,274 138 
Unallocated Commitments (5)
N/AN/A4,383 4,383 Various— — — — — 
Total Private Equity$185,595 $66,667 $124,291 $134,205 $67,684 $91,673 $4,160 
         
Real Assets Business Line
Energy Income and Growth Fund II6/20183/2022$994 $— 20%$1,187 $193 $1,024 $1,702 $43 
Energy Income and Growth Fund9/20136/20181,974 — 13%1,974 1,024 1,030 696 — 
Natural Resources Fund (4)
VariousVarious887 — Various887 131 173 44 — 
Global Energy OpportunitiesVariousVarious915 62 Various520 185 320 216 — 
Global Infrastructure Investors IV8/20218/202716,487 12,163 2%4,385 61 4,369 4,295 
Global Infrastructure Investors III6/20186/20217,151 1,379 4%6,037 1,521 5,253 5,596 73 
Global Infrastructure Investors II10/20146/20183,039 127 4%3,163 4,434 1,206 1,637 46 
Global Infrastructure Investors9/201110/20141,040 — 5%1,050 2,228 — — — 
Asia Pacific Infrastructure Investors II9/20229/20285,492 5,492 7%— — — — — 
Asia Pacific Infrastructure Investors1/20209/20223,792 1,709 7%2,367 396 2,117 2,287 43 
Diversified Core Infrastructure Fund12/2020(6)8,059 3,550 6%4,524 155 4,524 4,602 — 
Real Estate Partners Americas III12/20201/20254,253 1,907 5%2,401 164 2,327 2,576 — 
Real Estate Partners Americas II5/201712/20201,921 255 8%1,901 2,476 585 811 78 
Real Estate Partners Americas5/20135/20171,229 138 16%1,021 1,408 93 60 
Real Estate Partners Europe II12/20193/20242,042 760 10%1,373 254 1,260 1,344 36 
Real Estate Partners Europe9/201512/2019703 119 9%663 613 292 336 12 
Asia Real Estate Partners6/20197/20231,682 1,195 15%490 471 659 14 
Real Estate Credit Opportunity Partners II4/20196/2022950 378 5%595 114 595 599 12 
Real Estate Credit Opportunity Partners2/20174/20191,130 122 4%1,008 394 1,008 1,041 13 
Property Partners Americas12/2019(6)2,569 347 19%2,222 159 2,222 3,083 
Co-Investment Vehicles and OtherVariousVarious5,663 1,402 Various4,322 1,740 3,684 3,803 18 
Total Real Assets$71,972 $31,105 $42,090 $17,659 $32,553 $35,387 $399 

(1)The start date represents a date on or in between the date on which the general partner of the applicable fund commenced investment of the fund's capital and the date of the first closing. The end date represents the approximate date on which the general partner of the applicable fund was or will be required by the fund's governing agreement to cease making investments (other than reserved amounts) on behalf of the fund, unless extended by a vote of the fund investors.
(2)The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner. 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 September 30, 2022, in the case of uncalled commitments.
(3)The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.
(4)The "Invested" and "Realized" columns do not include the amounts of any realized investments that restored the unused capital commitments of the fund investors, if any.
(5)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.
(6)No pre-determined date of termination.

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The table below presents information as of September 30, 2022, relating to the historical performance of certain of our Private Equity and Real Assets business lines investment vehicles since inception, which we believe illustrates the benefits of our investment approach. This data does not reflect additional capital raised since September 30, 2022, or acquisitions or disposals of investments, changes in investment values or distributions occurring after that date. However, 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 future results.
 AmountFair Value of Investments   
Private Equity and Real Assets Business Lines
Investment Funds
Commitment (2)
Invested
Realized (4)
UnrealizedTotal Value
Gross
IRR (5)
Net
IRR (5)
Gross Multiple of Invested
Capital (5)
($ in millions)
Legacy Funds (1)
        
1976 Fund$31 $31 $537 $— $537 39.5 %35.5 %17.1 
1980 Fund357 357 1,828 — 1,828 29.0 %25.8 %5.1 
1982 Fund328 328 1,291 — 1,291 48.1 %39.2 %3.9 
1984 Fund1,000 1,000 5,964 — 5,964 34.5 %28.9 %6.0 
1986 Fund672 672 9,081 — 9,081 34.4 %28.9 %13.5 
1987 Fund6,130 6,130 14,949 — 14,949 12.1 %8.9 %2.4 
1993 Fund1,946 1,946 4,143 — 4,143 23.6 %16.8 %2.1 
1996 Fund6,012 6,012 12,477 — 12,477 18.0 %13.3 %2.1 
Subtotal - Legacy Funds16,475 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 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 36,207 1,189 37,396 11.9 %9.3 %2.2 
Asian Fund (2007)3,983 3,974 8,728 16 8,744 18.9 %13.7 %2.2 
European Fund III (2008) 5,500 5,360 10,604 91 10,695 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 1,056 180 1,236 5.1 %1.1 %1.2 
Natural Resources Fund (2010)887 887 131 44 175 (24.5)%(26.2)%0.2 
Global Infrastructure Investors (2011) 1,040 1,050 2,228 — 2,228 17.6 %15.6 %2.1 
North America Fund XI (2012) 8,718 9,769 22,579 3,450 26,029 24.4 %19.8 %2.7 
Asian Fund II (2013) 5,825 7,120 6,246 2,386 8,632 5.7 %4.1 %1.2 
Real Estate Partners Americas (2013) 1,229 1,021 1,408 60 1,468 16.3 %11.5 %1.4 
Energy Income and Growth Fund (2013) 1,974 1,974 1,024 696 1,720 (4.5)%(7.0)%0.9 
Global Infrastructure Investors II (2014) 3,039 3,163 4,434 1,637 6,071 19.5 %16.8 %1.9 
European Fund IV (2015) 3,510 3,577 5,122 2,322 7,444 23.3 %17.9 %2.1 
Real Estate Partners Europe (2015) 703 663 613 336 949 13.5 %9.5 %1.4 
Next Generation Technology Growth Fund (2016)659 666 863 1,108 1,971 34.1 %29.1 %3.0 
Health Care Strategic Growth Fund (2016) 1,331 1,122 196 1,552 1,748 25.5 %16.5 %1.6 
Americas Fund XII (2017) 13,500 12,366 4,948 18,804 23,752 27.5 %22.2 %1.9 
Real Estate Credit Opportunity Partners (2017) 1,130 1,008 394 1,041 1,435 9.9 %8.6 %1.4 
Core Investment Vehicles (2017) 24,621 13,289 828 20,274 21,102 21.3 %20.0 %1.6 
Asian Fund III (2017)9,000 7,813 5,031 10,880 15,911 33.7 %26.3 %2.0 
Real Estate Partners Americas II (2017)1,921 1,901 2,476 811 3,287 31.4 %26.4 %1.7 
Global Infrastructure Investors III (2018)7,151 6,037 1,521 5,596 7,117 9.7 %7.1 %1.2 
Global Impact Fund (2019)1,242 1,042 174 1,462 1,636 33.4 %24.4 %1.6 
European Fund V (2019)6,307 5,372 912 5,711 6,623 15.1 %10.6 %1.2 
Energy Income and Growth Fund II (2019)994 1,187 193 1,702 1,895 32.3 %29.3 %1.6 
Asia Real Estate Partners (2019)1,682 490 659 668 33.4 %16.1 %1.4 
Next Generation Technology Growth Fund II (2019)2,088 1,925 306 2,414 2,720 28.1 %21.6 %1.4 
Real Estate Credit Opportunity Partners II (2019)950 595 114 599 713 12.7 %11.5 %1.2 
Asia Pacific Infrastructure Investors (2020)3,792 2,367 396 2,287 2,683 17.8 %10.5 %1.1 
Asian Fund IV (2020)14,735 4,351 41 4,889 4,930 16.4 %6.7 %1.1 
Real Estate Partners Europe II (2020)2,042 1,373 254 1,344 1,598 20.4 %11.3 %1.2 
Real Estate Partners Americas III (2021) (3)
4,253 2,401 164 2,576 2,740 — — — 
Health Care Strategic Growth Fund II (2021) (3)
3,789 132 — 150 150 — — — 
Global Infrastructure Investors IV (2021) (3)
16,487 4,385 61 4,295 4,356 — — — 
North America Fund XIII (2021) (3)
18,400 4,063 — 4,049 4,049 — — — 
European Fund VI (2022) (3)
6,904 — — — — — — — 
Global Impact Fund II (2022) (3)
1,854 — — — — — — — 
Asia Pacific Infrastructure Investors II (2022) (3)
5,492 — — — — — — — 
Subtotal - Included Funds220,416 145,794 150,849 104,650 255,499 16.3 %12.5 %1.8 
All Funds$236,891 $162,269 $201,118 $104,650 $305,768 25.6 %18.8 %1.9 
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(1)These funds were not contributed to KKR as part of the acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private Equity Investors, L.P.) on October 1, 2009.
(2)Where commitments are euro-denominated, such amounts 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 prevailing on September 30, 2022, in the case of unfunded commitments.
(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 September 30, 2022. We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to these funds.
(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.
(5)IRRs measure the aggregate annual compounded returns generated by a fund's investments over a holding period. Net IRRs are calculated after giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses. Gross IRRs are calculated before giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses.
The gross multiples of invested capital measure the aggregate value generated by a fund's investments in absolute terms. Each multiple of invested capital is calculated by adding together the total realized and unrealized values of a fund's investments and dividing by the total amount of capital invested by the fund. Such amounts do not give effect to the allocation of realized and unrealized carried interest or the payment of any applicable management fees or organizational expenses.
KKR's private equity and real assets funds may utilize third-party financing facilities to provide liquidity to such funds. The above net and gross IRRs are calculated from the time capital contributions are due from fund investors to the time fund investors receive a related distribution from the fund, and the use of such financing facilities generally decreases the amount of time that would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. KKR's private equity and real assets funds also generally provide in certain circumstances, which vary depending on the relevant fund documents, for a portion of capital returned to investors to be restored to unused commitments as recycled capital. For KKR's private equity and real assets funds that have a preferred return, we take into account recycled capital in the calculation of IRRs and multiples of invested capital because the calculation of the preferred return includes the effect of recycled capital. For KKR's private equity and real assets funds that do not have a preferred return, we do not take recycled capital into account in the calculation of IRRs and multiples of invested capital. The inclusion of recycled capital generally causes invested and realized amounts to be higher and IRRs and multiples of invested capital to be lower than had recycled capital not been included. The inclusion of recycled capital would reduce the composite net IRR of all Included Funds by 0.1% and the composite net IRR of all Legacy Funds by 0.5% and would reduce the composite multiple of invested capital of Included Funds by less than 0.1 and the composite multiple of invested capital of Legacy Funds by 0.4.

Asset Management - Credit and Liquid Strategies
 
Through our Credit and Liquid Strategies business line, we report our credit and hedge funds platforms on a combined basis.
Our credit business invests capital in a broad range of corporate debt and collateral-backed investments across asset classes and capital structures. Our credit strategies are managed by KKR Credit Advisors (US) LLC, which is an SEC-registered investment adviser, KKR Credit Advisors (Ireland) Unlimited Company, which is regulated by the Central Bank of Ireland (“CBI”), KKR Credit Advisors (EMEA) LLP, which is regulated by the Financial Conduct Authority, and KKR Credit Advisors (Singapore) Pte. Ltd., which is regulated by the Monetary Authority of Singapore and also registered with the SEC. We also jointly own with a third party FS/KKR Advisor, LLC, which is the investment adviser for FS KKR Capital Corp. (NYSE: FSK) ("FSK"), a publicly listed business development company (a “BDC”).

Our hedge funds platform consists of strategic partnerships with third-party hedge fund managers in which KKR owns a minority stake. Our hedge fund partnerships offer a range of alternative investment strategies, including long/short equity, hedge fund-of-funds and energy credit investments.
Credit
Our credit business pursues investments in two principal investment strategies: leveraged credit and alternative credit.
Leveraged Credit. Our leveraged credit strategy is principally directed at investing in leveraged loans, high-yield bonds, opportunistic credit, structured credit and revolving credit investments. Our opportunistic credit strategy seeks to deploy capital across investment themes that take advantage of credit market dislocations, spanning asset types and liquidity profiles. Our revolving credit strategy invests in senior secured revolving credit facilities.
Alternative Credit. Our alternative credit strategy consists of our private credit strategies and debt and equity investments sourced by our strategic investments group (“SIG”).
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Private Credit. Our private credit strategies focus on privately or directly originated and negotiated transactions. These strategies include direct lending, mezzanine debt and asset-based finance. Through our direct lending strategy, we seek to make investments in primarily senior debt financings for middle-market companies. Through our mezzanine debt strategy, investments typically consist of subordinated debt, which generates a current yield, coupled with marginal equity exposure for additional upside potential. Our asset-based finance strategy focuses on portfolios of financial loans and loans backed by hard assets.
•    SIG. Our SIG strategy seeks to pursue investments in corporate credit and asset or real estate-backed credit where market volatility or other investment themes have created the opportunity to generate outsized returns with downside-protected securities. These investments may include stressed or distressed investments (including post-restructuring equity), control-oriented opportunities, rescue financing (debt or equity investments made to address covenant, maturity or liquidity issues), debtor-in-possession or exit financing, and other event-driven investments in debt or equity.
Performance
The following table presents information regarding the larger leveraged credit strategies managed by KKR from inception to September 30, 2022. 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.

Leveraged Credit Strategies: Inception-to-Date Annualized Gross Performance vs. Benchmark by Strategy
Leveraged Credit StrategyInception DateGross
Returns
Net
Returns
Benchmark (1)
Benchmark
Gross
Returns
Bank Loans Plus High Yield Jul 20086.41 %5.81 %
65% S&P/LSTA Loan Index, 35% BoAML HY Master II Index (2)
5.04 %
Opportunistic Credit (3)
May 20089.94 %8.29 %
50% S&P/LSTA Loan Index, 50% BoAML HY Master II Index (3)
5.19 %
Bank Loans Apr 20114.74 %4.16 %
S&P/LSTA Loan Index (4)
3.69 %
High-Yield Apr 20115.10 %4.52 %
BoAML HY Master II Index (5)
4.42 %
European Leveraged Loans (6)
Sep 20093.88 %3.37 %
CS Inst West European Leveraged Loan Index (7)
2.98 %
European Credit Opportunities (6)
Sept 20074.56 %3.74 %
S&P European Leveraged Loans (All Loans) (8)
3.49 %
 
(1)The benchmarks referred to herein include the S&P/LSTA Leveraged Loan Index (the "S&P/LSTA Loan Index"), S&P/LSTA U.S. B/BB Ratings Loan Index (the "S&P/LSTA BB-B Loan Index"), the Bank of America Merrill Lynch High Yield Master II Index (the "BoAML HY Master II Index"), the BofA Merrill Lynch BB-B US High Yield Index (the "BoAML HY BB-B Constrained"), the Credit Suisse Institutional Western European Leveraged Loan Index (the "CS Inst West European Leveraged Loan Index"), and S&P European Leveraged Loans (All Loans). The S&P/LSTA Loan Index is a daily tradable index for the U.S. loan market that seeks to mirror the market-weighted performance of the largest institutional loans that meet certain criteria. The BoAML HY Master II Index is an index for high-yield corporate bonds. It is designed to measure the broad high-yield market, including lower-rated securities. The CS Inst West European Leveraged Loan Index contains only institutional loan facilities priced above 90, excluding TL and TLa facilities and loans rated CC, C or are in default. The S&P European Leveraged Loan Index reflects the market-weighted performance of institutional leveraged loan portfolios investing in European credits. While the returns of our leveraged credit strategies reflect the reinvestment of income and dividends, none of the indices presented in the chart above reflect such reinvestment, which has the effect of increasing the reported relative performance of these strategies as compared to the indices. Furthermore, these indices are not subject to management fees, incentive allocations, or expenses.
(2)Performance is based on a blended composite of Bank Loans Plus High Yield strategy accounts. The benchmark used for purposes of comparison for the Bank Loans Plus High Yield strategy is based on 65% S&P/LSTA Loan Index and 35% BoAML HY Master II Index.
(3)The Opportunistic Credit strategy invests in high-yield securities and corporate loans with no preset allocation. The benchmark used for purposes of comparison for the Opportunistic Credit strategy presented herein is based on 50% S&P/LSTA Loan Index and 50% BoAML HY Master II Index. Funds within this strategy may utilize third-party financing facilities to enhance investment returns. In cases where financing facilities are used, the amounts drawn on the facility are deducted from the assets of the fund in the calculation of net asset value, which tends to increase returns when net asset value grows over time and decrease returns when net asset value decreases over time.
(4)Performance is based on a composite of portfolios that primarily invest in leveraged loans. The benchmark used for purposes of comparison for the Bank Loans strategy is based on the S&P/LSTA Loan Index.
(5)Performance is based on a composite of portfolios that primarily invest in high-yield securities. The benchmark used for purposes of comparison for the High Yield strategy is based on the BoAML HY Master II Index.
(6)The returns presented are calculated based on local currency.
(7)Performance is based on a composite of portfolios that primarily invest in higher quality leveraged loans. The benchmark used for purposes of comparison for the European Leveraged Loans strategy is based on the CS Inst West European Leveraged Loan Index.
(8)Performance is based on a composite of portfolios that primarily invest in European institutional leveraged loans. 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.
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The following table presents information regarding our credit investment funds where investors are subject to capital commitments from inception to September 30, 2022. 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.
Alternative Credit Strategies: Fund Performance
  AmountFair Value of Investments   
Credit and Liquid Strategies 
Investment Funds
Inception DateCommitment
Invested (1)
Realized (1)
UnrealizedTotal
Value
Gross
IRR (2)
Net
IRR (2)
Multiple of Invested Capital (3)
Gross
Accrued
Carried Interest
($ in Millions)
Dislocation Opportunities FundMay 2020$2,967 $2,299 $682 $1,950 $2,632 12.1 %9.4 %1.1 $35 
Special Situations Fund IIDec 20143,525 3,241 2,215 1,552 3,767 4.2 %2.2 %1.2 — 
Special Situations FundDec 20122,274 2,273 1,701 388 2,089 (1.9)%(3.8)%0.9 — 
Mezzanine PartnersMar 20101,023 990 1,165 116 1,281 8.7 %5.5 %1.3 (20)
Asset-Based Finance PartnersAug 20202,059 555 14 597 611 11.4 %8.0 %1.1 
Private Credit Opportunities Partners IIDec 20152,245 1,754 696 1,291 1,987 4.5 %2.8 %1.1 — 
Lending Partners IIIApr 20171,498 805 460 775 1,235 15.5 %12.7 %1.5 32 
Lending Partners IIJun 20141,336 1,179 1,149 127 1,276 2.9 %1.5 %1.1 — 
Lending PartnersDec 2011460 420 451 19 470 3.5 %1.8 %1.1 — 
Lending Partners Europe IIJun 2019837 637 66 570 636 14.7 %10.6 %1.0 
Lending Partners EuropeMar 2015848 662 379 248 627 (1.7)%(4.2)%0.9 — 
Asia CreditDec 20201,084 271 — 286 286 N/AN/AN/A— 
Other Alternative Credit VehiclesVarious14,011 7,308 5,648 3,716 9,364 N/AN/AN/A24 
All Funds $34,167 $22,394 $14,626 $11,635 $26,261   $82 
(1)Recycled capital is excluded from the amounts invested and realized.
(2)These credit funds utilize third-party financing facilities to provide liquidity to such funds, and in such event IRRs are calculated from the time capital contributions are due from fund investors to the time fund investors receive a related distribution from the fund. The use of such financing facilities generally decreases the amount of invested capital that would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. IRRs measure the aggregate annual compounded returns generated by a fund's investments over a holding period and are calculated taking into account recycled capital. Net IRRs presented are calculated after giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees. Gross IRRs are calculated before giving effect to the allocation of carried interest and the payment of any applicable management fees.
(3)The multiples of invested capital measure the aggregate value generated by a fund's investments in absolute terms. Each multiple of invested capital is calculated by adding together the total realized and unrealized values of a fund's investments and dividing by the total amount of capital invested by the investors. The use of financing facilities generally decreases the amount of invested capital that would otherwise be used to calculate multiples of invested capital, which tends to increase multiples when fair value grows over time and decrease multiples when fair value decreases over time. Such amounts do not give effect to the allocation of any realized and unrealized returns on a fund's investments to the fund's general partner pursuant to a carried interest or the payment of any applicable management fees and are calculated without taking into account recycled capital.

Hedge Funds
Our hedge fund platform consists of strategic partnerships with third-party hedge fund managers in which KKR owns a minority stake. This principally consists of a 39.6% interest in Marshall Wace LLP (together with its affiliates, "Marshall Wace"), a global alternative investment manager specializing in long/short equity products. We also own (i) a 39.9% interest in PAAMCO Prisma Holdings, LLC ("PAAMCO Prisma"), an investment manager focused on liquid alternative investment solutions, including hedge fund-of-fund portfolios, and (ii) a 24.9% interest in BlackGold Capital Management L.P. ("BlackGold"), a credit-oriented investment manager focused on energy and hard asset investments.

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Credit and Liquid Strategies AUM
    As of September 30, 2022, our Credit and Liquid Strategies business line had $213.0 billion of AUM, comprised of $103.7 billion of assets managed in our leveraged credit strategies, $73.3 billion of assets managed in our private credit strategy, and $7.6 billion of assets managed in our SIG strategy, $26.6 billion of assets managed through our hedge fund platform, and $1.7 billion of assets managed in other credit and liquid strategies. We manage $98.5 billion of credit investments for our Global Atlantic insurance companies, which are included in the amounts described in the preceding sentence. Our BDC has approximately $16.8 billion in assets under management, which is reflected in the AUM of our leveraged credit and private credit strategies above. We report all of the assets under management of our BDC in our AUM, but we report only a pro rata portion of the assets under management of our hedge fund partnerships based on our percentage ownership in them.
($ in millions)AUMFPAUMTypical 
Management
Fee Rate
Incentive Fee /
Carried
Interest
Preferred
Return
Duration
of Capital
Leveraged Credit:      
Leveraged Credit SMAs/Funds$78,256 $75,479 0.15% - 1.10%
Various (1)
Various (1)
Subject to redemptions
CLOs23,951 23,951 0.40% - 0.50%
Various (1)
Various (1)
10-14 Years (2)
Total Leveraged Credit102,207 99,430     
Alternative Credit: (3)
Private Credit59,574 51,361 
0.30% - 1.50% (4)
10.00 - 20.00%5.00 - 8.00%
8-15 Years (2)
SIG7,773 3,959 0.50% - 1.75% 10.00 - 20.00%7.00 - 12.00%
7-15 Years (2)
Total Alternative Credit67,347 55,320 
Hedge Funds (5)
26,624 26,624 0.50% - 2.00%
Various (1)
Various (1)
Subject to redemptions
BDCs (6)
16,800 16,800 0.60%8.00%7.00%Indefinite
Total$212,978 $198,174     
 
(1)Certain funds and CLOs are subject to a performance fee in which the manager or general partner of the funds share up to 20% of the net profits earned by investors in excess of performance hurdles (generally tied to a benchmark or index) and subject to a provision requiring the funds and vehicles to regain prior losses before any performance fee is earned.
(2)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)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.
(4)Lower fees on uninvested capital in certain vehicles.
(5)Hedge Funds represent KKR's pro rata portion of AUM and FPAUM of our hedge fund partnerships.
(6)Consists of FSK. We report all of the assets under management of this BDC in our AUM and FPAUM.

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Asset Management - Capital Markets
 
Our Capital Markets business line is comprised of our global capital markets business, which is integrated with KKR's other asset management business lines, and serves our firm, our funds, our portfolio companies and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing, placing and underwriting securities offerings, and providing other types of capital markets services that may result in the firm receiving fees, including underwriting, placement, transaction and syndication fees, commissions, underwriting discounts, interest payments and other compensation, which may be payable in cash or securities, in respect of the activities described above.

Our capital markets business underwrites credit facilities and arranges loan syndications and participations. When we are sole arrangers of a credit facility, we may advance amounts to the borrower on behalf of other lenders, subject to repayment. When we underwrite an offering of securities on a firm commitment basis, we commit to buy and sell an issue of securities and generate revenue by purchasing the securities at a discount or for a fee. When we act in an agency capacity or best efforts basis, we generate revenue for arranging financing or placing securities with capital markets investors. We may also provide issuers with capital markets advice on security selection, access to markets, marketing considerations, securities pricing, and other aspects of capital markets transactions in exchange for a fee. Our capital markets business also provides syndication services in respect of co-investments in transactions participated in by KKR funds or third-party clients, which may entitle the firm to receive syndication fees, management fees and/or a carried interest.
    
The capital markets business has a global footprint, with local presence and licenses to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific and the Middle East. Our flagship capital markets subsidiary is KKR Capital Markets LLC, an SEC-registered broker-dealer and a member of the Financial Industry Regulatory Authority ("FINRA").

Asset Management - Principal Activities
 
Through our Principal Activities business line, we manage the firm’s own assets on our firm’s balance sheet and deploy capital to support and grow our Private Equity, Real Assets, Credit and Liquid Strategies, and Credit Markets business lines.

Typically, the funds that we manage in our Private Equity, Real Assets and Credit and Liquid Strategies business lines contractually require us, as general partner of the funds, to make sizable capital commitments. We believe making general partner commitments assists us in raising new funds from limited partners by demonstrating our conviction in a given fund’s strategy. Our commitments to fund capital also occur where we are the holder of the subordinated notes or the equity tranche of investment vehicles that we sponsor, including structured transactions. We also use our balance sheet to bridge investment activity during fundraising, for example by funding investments for new funds and acquiring investments to establish a track record for new investment strategies. We also use our own capital to bridge capital selectively for our funds’ investments or finance strategic transactions, although the financial results of an acquired business may be reported in our other business lines.

Our Principal Activities business line also provides the required capital to fund the various commitments of our Capital Markets business line when underwriting or syndicating securities, or when providing term loan commitments for transactions involving our portfolio companies and for third parties. Our Principal Activities business line also holds assets that are utilized to satisfy regulatory requirements for our Capital Markets business line and risk retention requirements for certain investment vehicles.

We also make opportunistic investments through our Principal Activities business line, which include co-investments alongside the funds we manage as well as Principal Activities investments that do not involve our funds.

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.

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The chart below presents the holdings of our Principal Activities business line by asset class as of September 30, 2022.

Holdings by Asset Class (1)
kkr-20220930_g2.jpg
(1)General partner commitments in our funds are included in the various asset classes shown above. Assets and revenues of other asset managers with which KKR has formed strategic partnerships where KKR does not hold more than 50% ownership interest are not included in our Principal Activities business line but are reported in the financial results of our other business lines. Private Equity includes our investments in private equity funds, co-investments alongside such KKR-sponsored private equity funds, certain core equity investments, and other opportunistic investments. Equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes. Other Credit consists of certain leveraged credit and specialty finance strategies.

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Insurance

Our insurance business is operated by Global Atlantic, which we acquired on February 1, 2021. As of September 30, 2022, KKR owns a 61.5% economic interest in Global Atlantic with the balance of Global Atlantic owned by third-party investors and Global Atlantic employees. Following the Global Atlantic acquisition, Global Atlantic continues to operate as a separate business with its existing brands and management team. Since the first quarter of 2021, we have presented Global Atlantic's financial results as a separate reportable segment.

Global Atlantic is a leading U.S. retirement and life insurance company that provides a broad suite of protection, legacy and savings products to customers and reinsurance solutions to clients across individual and institutional markets. Global Atlantic focuses on target markets that it believes supports issuing products that have attractive risk and return characteristics. These markets allow Global Atlantic to leverage its strength in distribution and to deploy capital opportunistically across market conditions.

Global Atlantic primarily offers individual market 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 market clients customized reinsurance solutions, including block, flow and pension risk transfer ("PRT") reinsurance, as well as funding agreements. Subject to changes in asset values, 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 between its investment income and the cost of policyholder benefits. As of September 30, 2022, Global Atlantic served approximately three million policyholders.

Global Atlantic inflows are derived from new business production in its individual and institutional markets channels. Global Atlantic expects new business production from its individual markets channel and certain institutional markets products to be largely consistent quarter over quarter while exhibiting growth over time, subject to market and business risks. In contrast, Global Atlantic expects block reinsurance transactions generated in the institutional markets channel to be episodic rather than steady quarter over quarter. Similarly, funding agreements issued in the funding agreement backed note ("FABN") program are subject to capital markets conditions and are not expected to be consistent quarter over quarter.

The following table represents Global Atlantic’s new business volumes by business and product for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,Nine Months Ended September 30,
202220212022
2021(4)
($ in millions)
Individual market channel:
Fixed-rate annuities$1,206 $854 $3,726 $3,437 
Fixed-indexed annuities1,261 809 3,282 2,305 
Variable annuities12 17 34 40 
Total retirement products(1)
$2,479 $1,680 $7,042 $5,782 
Life insurance products$$11 $26 $28 
Preneed life72 64 210 164 
Institutional market channel:
Block— 16,010 2,782 17,099 
Flow & pension risk transfer2,571 1,050 6,413 3,443 
Funding agreements(3)
— 1,500 2,000 2,200 
Total institutional channel(2)
$2,571 $18,560 $11,195 $22,742 
_________________
(1)New business volumes in individual markets are referred to as sales. In Global Atlantic's individual market channel, sales of annuities include all money paid into new and existing contracts. Individual market channel sales of life insurance products are based on commissionable premium and individual
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market channel sales for preneed life are based on the face amount of insurance. Life insurance product sales do not include the recurring premiums that policyholders may pay over time.
(2)New business volumes from Global Atlantic's institutional market channel are based on the assets assumed, net of any ceding commission, and is gross of any retrocessions to investment vehicles that participate in qualifying reinsurance transactions sourced by Global Atlantic and to other third party reinsurers.
(3)Funding agreement new business volumes represents funding agreements issued in connection with our FABN program only.
(4)For the nine month period ended September 30, 2021, the results of Global Atlantic's insurance operations included in our condensed consolidated results of operations are from February 1, 2021 through September 30, 2021.

The table below represents a breakdown of Global Atlantic’s policy liabilities by business and product type as of September 30, 2022, separated by reserves originated through its individual and institutional markets.

Reserves as of September 30, 2022
Individual market
Institutional market(5)
TotalCededTotal, netPercentage of total
($ in millions, except percentages, if applicable)
Fixed-rate annuity(1)
$22,691 $45,432 $68,123 $(17,465)$50,658 48.7 %
Fixed-indexed annuity(1)
22,514 7,566 30,080 (3,088)26,992 21.5 %
Variable annuity2,538 3,272 5,810 (646)5,164 4.2 %
Indexed universal life(1)
13,521 — 13,521 (167)13,354 9.7 %
Preneed life2,854 — 2,854 — 2,854 2.0 %
Other life insurance(2)
583 10,165 10,748 (3,672)7,076 7.7 %
Funding agreements(3)
2,099 5,406 7,505 — 7,505 5.4 %
Closed block— 1,098 1,098 (1,057)41 0.8 %
Other corporate(4)
— 47 47 (47)— — %
Total reserves$66,800 $72,986 $139,786 $(26,142)$113,644 100.0 %
Total general account$64,491 $71,243 $135,734 $(26,142)$109,592 97.1 %
Total separate account2,309 1,743 4,052 — 4,052 2.9 %
Total reserves$66,800 $72,986 $139,786 $(26,142)$113,644 100.0 %
_________________
(1)As of September 30, 2021, 72% of the account value in its general account associated with its fixed-rate and fixed-annuity products, and 44% of account value in its general account associated with universal life products was protected by surrender charges.
(2)“Other life insurance” includes universal life, term and whole life insurance products.
(3)"Funding agreements” includes funding agreements associated with Federal Home Loan Bank advances and under our FABN program.
(4)“Other corporate” primarily includes accident & health reserves that Global Atlantic assumed as part of a reinsurance transaction in 2009.
(5)Institutional market reserves are sourced using customized reinsurance solutions such as block, flow and PRT. As of September 30, 2022, reserves sourced through for block, flow and PRT transactions were $49.3 billion, $10.7 billion, and $4.6 billion, respectively.

A new accounting standard for targeted improvements to the accounting for long-duration contracts becomes effective on January 1, 2023 with a transition date of January 1, 2021. We do not expect the adoption of this standard to have a material effect on our retained earnings and accumulated other comprehensive income (loss) as of the transition date, due to the purchase accounting associated with the acquisition of Global Atlantic on February 1, 2021. However, we continue to evaluate the impact of this guidance on the acquisition date opening balance sheet and to periods thereafter. The new guidance is expected to increase volatility in our financial statements primarily due to the requirement to measure market risk benefits at fair value, which is recorded in net income, except for changes in value attributable to changes in an entity’s non-performance risk, which is recognized in OCI. In addition, the new guidance is expected to have a significant impact on our systems, processes and controls. See “Risk Factors – Risks Related to Global Atlantic – Changes in accounting standards could adversely impact Global Atlantic's reported results of operations and reported financial condition” in our Annual Report and Note 2 "Summary of Significant Accounting Policies – Future application of accounting standards – Targeted improvements to the accounting for long-duration contracts" in this report.

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Business Environment
Economic and Market Conditions
Impact of COVID-19. The outbreak of COVID-19 continues to impact various countries throughout the world. For a description of the impact that COVID-19 had and may in the future have on our business, see "Risk Factors—Risks Related to Our Business—COVID-19 continues to impact the United States and other countries throughout the world, and it has caused and may further cause disruptions to our business and adversely affect our financial results" and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions and events outside of our control that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" in our Annual Report.

Economic Conditions. As a global investment firm, we are affected by financial and economic conditions globally. Global and regional economic conditions, including those caused by the COVID-19 pandemic, have substantial impact on our financial condition and results of operations, impacting the values of the investments we make, our ability to exit these investments profitably, our ability to raise capital from investors, and our ability to make new investments. Financial and economic conditions in the United States, European Union, China, Japan, and other major economies are significant contributors to the global economy.

During the quarter ended September 30, 2022, the United States continued to show signs of slowing economic activity, potentially indicating the early stages of a recession. Inflation continued to present a headwind for the U.S. economy. In keeping with its stated intention to bring down inflation, the U.S. Federal Reserve pursued a more restrictive monetary policy. The Federal Reserve raised interest rates by 75 basis points in July and 75 basis points in September, leading to increased market volatility. In the United States, real GDP is estimated to have expanded at a 2.6% seasonally-adjusted annualized rate in the quarter ended September 30, 2022, after contracting at a 0.6% seasonally-adjusted annualized rate in the quarter ended June 30, 2022; the U.S. unemployment rate was 3.5% as of September 30, 2022, down from 3.6% as of June 30, 2022; the U.S. consumer price index rose 8.2% year-over-year as of September 30, 2022, down from 9.1% year-over-year as of June 30, 2022; the U.S. core consumer price index rose 6.6% on a year-over-year basis as of September 30, 2022, up from 5.9% on a year-over-year basis as of June 30, 2022; and the effective federal funds rate set by the U.S. Federal Reserve was 3.1% as of September 30, 2022, up from 1.6% as of June 30, 2022.

During the quarter ended September 30, 2022, the Euro Area (also known as the Eurozone) economy also experienced slowing economic activity, and the potential for recession for countries in the Euro Area is generally high amid continued disruptions to European energy markets and Russia’s ongoing invasion of Ukraine. The European Central Bank (ECB) raised interest rates by 50 basis points in July and 75 basis points in September, leading to increased market volatility. Euro Area real GDP is estimated to have been unchanged on a seasonally-adjusted quarter-over-quarter basis in the quarter ended September 30, 2022, compared to a 0.8% increase recorded in the quarter ended June 30, 2022. In addition, Euro Area unemployment was 6.6% as of September 30, 2022, down from 6.7% as of June 30, 2022; Euro Area core inflation was 4.8% as of September 30, 2022, up from 3.7% as of June 30, 2022; and the short-term benchmark interest rate set by the European Central Bank was 1.25% as of September 30, 2022, up from 0.0% as of June 30, 2022. As of September 30, 2022, we have no investments in any portfolio companies whose executive headquarters are located in Russia, Ukraine or Belarus, and we believe that the direct exposure of our investment portfolio to Russia, Ukraine and Belarus is insignificant.

During the quarter ended September 30, 2022, the Chinese economy experienced headwinds related to the ongoing slowdown in China’s property sector and the effects of the government’s zero-COVID policies. Real GDP in China is estimated to have increased 3.9% on a seasonally-adjusted quarter-over-quarter basis in the quarter ended September 30, 2022, compared to contraction of 2.7% reported for the quarter ended June 30, 2022. Core inflation in China was 0.6% on a year-over-year basis as of September 30, 2022, down from 1.0% on a year-over-year basis as of June 30, 2022. After the quarter ended September 30, 2022, President Xi Jinping was confirmed to a third term as the general secretary of the Communist Party and seven new members were appointed to the Politiburo Standing Committee, following which, the MSCI China Index fell 8.2% on October 24, 2022.

In Japan, the economic recovery from COVID-19 has continued, despite higher energy costs and significant volatility in currency markets presenting headwinds to GDP growth. In Japan, real GDP growth for the quarter ended September 30, 2022 is estimated to have been 1.4% on a seasonally-adjusted annualized basis, up from 3.5% in the quarter ended June 30, 2022; core inflation rose to 2.8% on a year-over-year basis as of September 30, 2022, up from 2.2% as of June 30, 2022; and the short-term benchmark interest rate set by the Bank of Japan was -0.1% as of September 30, 2022, unchanged from June 30, 2022.

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These and other key issues could have repercussions across regional and global financial markets, which could adversely affect the valuations of our investments. In particular, in response to persistent inflationary pressure and central bank policy designed to combat inflation, short- and medium-term interest rates may continue to rise, which may adversely impact equity and credit markets with tightening financial conditions and slowing growth. As noted above, the U.S. Federal Reserve has continued to raise interest rates and has indicated that it is prepared to take decisive action to manage inflation, including raising interest rates further and shrinking the size of its balance sheet. In addition, commodity prices are generally expected to rise in inflationary environments, and foreign exchange rates are often affected by countries’ monetary and fiscal responses to inflationary trends. The Russia-Ukraine conflict, including the sanctions imposed in response to Russia's invasion of Ukraine, have exacerbated and may further exacerbate these issues and trends, including with respect to oil and gas prices. See "Commodities Markets" in this report below. Protectionist policies, such as restrictions on exports of food, have also increased globally as a result of Russia's invasion of Ukraine.

Other key issues include (i) further developments regarding infectious diseases, including COVID-19, which may prolong the adverse economic impact of the COVID-19 pandemic on the U.S. and global economies, including supply chain disruptions that promote cost inflation for critical goods and labor shortages, (ii) geopolitical uncertainty such as U.S.-China and U.S.-Russia relations, (iii) political uncertainty caused by, among other things, economic nationalist sentiments, tensions surrounding socioeconomic inequality issues, and partisan sentiments in the United States, all of which have potentially global ramifications with regards to policy, (iv) regulatory changes regarding, for example, taxation, international trade, cross-border investments, immigration, stimulus programs and rising levels of debt, (v) increased volatility and/or downturn in equity or credit markets, (vi) unexpected shifts in central banks' monetary policies, (vii) rising mortgage rates, which affect demand for housing and housing-related related goods and services, (viii) technological advancements and innovations that may disrupt marketplaces and businesses, and (ix) insurance company regulatory changes regarding, for example, capital and investments held by insurance companies. For a further discussion of how market conditions may affect our businesses, see "Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition" in our Annual Report.

In addition, governments have enacted and may further enact significant changes in tax law, including changes in the way U.S. corporations like KKR and many of our U.S. portfolio companies are taxed. The U.S. Federal government has recently signed into law the Inflation Reduction Act of 2022 which, among other things, imposes a corporate minimum “book” tax on certain large corporations, which may apply to KKR. It also creates a new non-deductible 1% excise tax on net stock repurchases made by publicly traded corporations like KKR after December 31, 2022 and allocates additional funds to enhance the frequency and breadth of audits and other enforcement actions. In addition, New York State may propose regulations that could significantly affect the determination of the tax base for New York State tax purposes for corporations that conduct an asset management business like us. These changes could materially increase the amount of taxes and tax-related regulatory and compliance costs we and our portfolio companies are required to pay. See “Risk Factors—Risks Related to Our Business—Changes in relevant tax laws, regulations or treaties or an adverse interpretation of these items by tax authorities could adversely impact our effective tax rate and tax liability” in our Annual Report and Note 18 "Income Taxes" in our financial statements.

Equity and Credit Markets. Global equity and credit markets have a substantial effect on our financial condition and results of operations. Tightening liquidity conditions in equity and credit capital markets affect the availability and cost of capital for KKR and our portfolio companies, and the increased cost of credit or degradation in debt financing terms may impact our ability to identify and execute investments on attractive terms. See "Business Conditions—Our ability to successfully deploy capital" in this report below. In general, a climate of reasonable interest rates and high levels of liquidity in the debt and equity capital markets provide a positive environment for us to generate attractive investment returns, which also impacts our ability to generate incentive fees and carried interest. Periods of volatility and dislocation in the capital markets, as have been observed recently, raise substantial risks, but also can present us with opportunities to invest at reduced valuations that position us for future growth and investment returns. Low interest rates related to monetary stimulus and economic stagnation may negatively impact expected returns on all types of investments. Higher interest rates in conjunction with slower growth or weaker currencies in some emerging market economies have caused, and may further cause, the default risk of these countries to increase, and this could impact the operations or value of our investments that operate in these regions. Areas that have central bank quantitative easing or tightening campaigns affecting their interest rates relative to the United States could potentially experience further currency volatility relative to the U.S. dollar.

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In our asset management segment, many of our investments are in equities, so a change in global equity prices or in market volatility directly impacts the value of our investments and our profitability as well as our ability to realize investment gains and the receptiveness of fund investors to our investment products. Volatility across global equity and credit markets, alongside shifting liquidity conditions in new issue activity across equity and non-investment grade credit markets, have adversely impacted (and may continue to adversely impact) the volume of capital markets activity, and therefore, the level of transaction fees that our capital markets business line is able to earn. For the quarter ended September 30, 2022, global equity markets were negative, with the S&P 500 down 4.9% and the MSCI World Index down 6.1% on a total return basis including dividends. Equity market volatility as evidenced by the Chicago Board Options Exchange Market Volatility Index (VIX), a measure of volatility, ended at 31.6 as of September 30, 2022, increasing from 28.7 as of June 30, 2022. For a discussion of our valuation methods, see “Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions and events outside of our control that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition” and see also “—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies” in our Annual Report. In our insurance business, a change in equity prices also impacts Global Atlantic’s equity-sensitive annuity and life insurance products, including with respect to hedging costs related to and fee-income earned on those products.

In our asset management segment, many of our investments are in non-investment grade credit instruments and investment grade credit instruments. Our funds, our portfolio companies and Global Atlantic also rely on credit financing and the ability to refinance existing debt. Consequently, any decrease in the value of credit instruments that we have invested in or any increase in the cost of credit financing reduces our returns and decreases our net income.

In our insurance segment, periods of rising or higher interest rates as we are currently experiencing may result in differing impacts on Global Atlantic’s business. See "Risk Factors—Risks Related to Global Atlantic— Interest rate fluctuations and sustained periods of low or high interest rates could adversely affect Global Atlantic’s business, financial condition, liquidity, results of operations, cash flows and prospects" in our Annual Report.

Periods of rising or higher interest rates can benefit Global Atlantic’s results of operations and financial condition. We generally expect the yield on new investment purchases and income from any floating rate investments held in Global Atlantic’s investment portfolio to increase as interest rates rise. Higher interest rates also generally tend to increase the demand for certain of Global Atlantic’s products, as the benefits and solutions Global Atlantic can offer to clients may become more attractive, potentially resulting in higher new business volumes. Rising rates are also expected to result in decreases to certain policy liabilities as a result of forthcoming accounting guidance for insurance and reinsurance companies that issue long-duration contracts such as life insurance and annuities. For a further discussion of this guidance, see "—Summary of Significant Accounting Policies—Future application of accounting standards."

On the other hand, higher interest rates can have a negative impact on Global Atlantic. For example, higher policyholder surrenders may occur in response to rising interest rates as more attractive products become available to policyholders in a higher rate environment. The majority of our investments at Global Atlantic are in investment grade credit instruments. Sales of those investments at a loss, for example to raise cash to meet policyholder obligations upon surrender earlier than expected maturity or as we rotate out of investments acquired with new reinsurance transactions to our desired asset mix during a period of rising or higher rates compared to when the investment was acquired, is expected to decrease our net income in that period and such decrease could be significant. We also expect that in a higher rate environment we will generally have a higher cost of insurance on new business, including higher hedging costs, as the benefits to policyholders on new business will be generally higher. If Global Atlantic fails to adequately cash flow match liabilities sold with higher benefits and interest rates fall while Global Atlantic holds that liability, Global Atlantic may not generate its expected earnings on those liabilities. In addition, rising interest rates will decrease the fair value of Global Atlantic’s credit investments and the value of embedded derivatives associated with funds withheld reinsurance transactions. The decrease in the fair value of these credit investments resulted in unrealized losses reported in AOCI and negative carrying value in our insurance segment as of September 30, 2022. We do not expect to incur these unrealized losses as we intend to hold the investments to recovery as part of our asset liability cash flow matching strategy. However, if the market, industry and company-specific factors relating to these investments deteriorate meaningfully, Global Atlantic may be required to recognize an impairment to goodwill and may realize losses as a result of credit defaults or impairments on investments, either of which could have a material adverse effect on our results of operations and financial condition.

Due in part to holdings of credit instruments such as CLOs on our balance sheet, the performance of the credit markets has had an amplified impact on our financial results, as we directly bear the full extent of losses from credit instruments on our balance sheet. Credit markets can also impact valuations because a discounted cash flow analysis is generally used as one of the methodologies to ascertain the fair value of our investments that do not have readily observable market prices. In addition, with respect to our credit instruments, tightening credit spreads are generally expected to lead to an increase, and widening credit
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spreads are generally expected to lead to a decrease, in the value of these credit investments, if not offset by hedging or other factors. In addition, the significant widening of credit spreads is also typically expected to negatively impact equity markets, which in turn would negatively impact our portfolio and us as noted above. Conversely, widening credit spreads may have a positive impact on our insurance business, as the margin Global Atlantic is able to earn between crediting rates offered on its insurance products and the investment income it earns from its credit investments could increase, and tightening credit spreads may negatively impact the pricing and therefore competitiveness of Global Atlantic’s products, adversely impacting sales and growth, or may negatively impact the margins that Global Atlantic earns on sales and transactions.

During the quarter ended September 30, 2022, U.S. investment grade corporate bond spreads (BofA Merrill Lynch US Corporate Index) widened by 42 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) widened by 244 basis points. The non-investment grade credit indices were mixed during the quarter ended September 30, 2022, with the S&P/LSTA Leveraged Loan Index up 1.4% and the BAML US High Yield Index down 0.7%. During the quarter ended September 30, 2022, 10-year government bond yields rose 82 basis points in the United States, rose 186 basis points in the United Kingdom, rose 77 basis points in Germany, fell 7 basis points in China, and rose 1 basis point in Japan. For a further discussion of how market conditions may affect our businesses, see “Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition” and “Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions and events outside of our control that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition” in our Annual Report.

For further discussion of the impact of global credit markets on our financial condition and results of operations, see "Risk Factors—Risks Related to the Assets We Manage—Changes in the debt financing markets may negatively impact the ability of our investment funds, their portfolio companies and strategies pursued with our balance sheet assets to obtain attractive financing for their investments or to refinance existing debt and may increase the cost of such financing or refinancing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income," "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions and events outside of our control that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition," "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our balance sheet may make a limited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent those concentrated assets perform poorly" and "Risk Factors—Risks Related to Global Atlantic—Interest rate fluctuations and sustained periods of low or high interest rates could adversely affect Global Atlantic’s business, financial condition, liquidity, results of operations, cash flows and prospects" in our Annual Report. For a further discussion of our valuation methods, see "—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies."

Foreign Exchange Rates. Foreign exchange rates have a substantial impact on the valuations of our investments that are denominated in currencies other than the U.S. dollar. Currency volatility can also affect our businesses and investments that deal in cross-border trade. The appreciation or depreciation of the U.S. dollar is expected to contribute to a decrease or increase, respectively, in the U.S. dollar value of our non-U.S. investments to the extent unhedged. In addition, an appreciating U.S. dollar would be expected to make the exports of U.S. based companies less competitive, which may lead to a decline in their export revenues, if any, while a depreciating U.S. dollar would be expected to have the opposite effect. Moreover, when selecting investments for our investment funds that are denominated in U.S. dollars, an appreciating U.S. dollar may create opportunities to invest at more attractive U.S. dollar prices in certain countries outside of the United States, while a depreciating U.S. dollar would be expected to have the opposite effect. For our investments denominated in currencies other than the U.S. dollar, the depreciation in such currencies will generally contribute to the decrease in the valuation of such investments, to the extent unhedged, and adversely affect the U.S. dollar equivalent revenues of portfolio companies with substantial revenues denominated in such currencies, while the appreciation in such currencies would be expected to have the opposite effect. For the quarter ended September 30, 2022, the euro fell 6.5%, the British pound fell 8.3%, the Japanese yen fell 6.2%, and the Chinese renminbi fell 5.9%, respectively, relative to the U.S. dollar. For additional information regarding our foreign exchange rate risk, see “Quantitative and Qualitative Disclosure About Market Risk—Exchange Rate Risk” in our Annual Report.

LIBOR Transition. On March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act of 2021, was signed into law in the United States. This legislation establishes a uniform benchmark replacement mechanic for financial contracts that mature after June 30, 2023 which do not contain either clearly defined or practicable fallback provisions or are contractually silent on a benchmark replacement rate. The legislation also creates a safe harbor that shields involved parties from liability if they choose to utilize a replacement rate recommended by the Board of
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Governors of the Federal Reserve. For a discussion of the LIBOR transition that will impact certain debt obligations, see Note 2 "Summary of Significant Accounting Policies – Adoption of new accounting pronouncements—Reference rate reform" in our financial statements and Note 17 "Debt Obligations" in our financial statements. For a discussion of the risks related to the LIBOR transition, see "Risk Factors – Risks Related to Our Business – Transition away from LIBOR as a benchmark reference for interest rates may affect the cost of capital and requires amending or restructuring existing debt instruments and related hedging arrangements for us, our investment funds and our portfolio companies, and may impact the value of floating rate securities or loans based on LIBOR that we or our investment funds have held, all of which may result in additional costs or adversely affect our or our funds’ liquidity, results of results of operations and financial condition" in our Annual Report.

Commodity Markets. Our Real Assets business line portfolio contains energy real asset investments, and certain of our other Private Equity, Real Assets and Credit and Liquid Strategies business line strategies have investments in or related to the energy sector. The value of these investments is heavily influenced by the price of natural gas and oil. As noted above, the actions taken by Russia in the Ukraine starting in February 2022 have also caused volatility in the commodities markets. During the quarter ended September 30, 2022, the 3-year forward price of WTI crude oil decreased approximately 12%, and the 3-year forward price of natural gas increased approximately 5%. The 3-year forward price of WTI crude oil decreased from approximately $73.46 per barrel to $64.37 per barrel, and the 3-year forward price of natural gas increased from approximately $4.36 per mcf to $4.58 per mcf as of June 30, 2022 and September 30, 2022, respectively.

When commodity prices decline or if a decline is not offset by other factors, we would expect the value of our energy real asset investments to be adversely impacted, to the extent unhedged. In general, we expect downward price movements to have a negative impact on the fair value of our energy portfolio, all other things being equal, given those commodity prices are an input in our valuation models. The reverse is true for upward price movements. However, because we typically use near-term commodity derivative transactions to hedge our exposures, we expect long-term oil and natural gas prices to be a more significant driver of the valuation of our energy investments in asset management than spot prices. In addition, to the extent energy real asset investments are directly held by our balance sheet, price movements can have an amplified impact on our financial results, as we would directly bear the full extent of such gains or losses, subject to hedging. However, as of September 30, 2022, energy investments in oil and gas assets made up only approximately 1% of our assets under management, 1% of our total GAAP assets and 1% of our total segment assets. For additional information regarding our energy real assets, see "Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies—Real Asset Investments" and see also "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our balance sheet may make a limited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent those concentrated assets perform poorly" in our Annual Report.

Business Conditions
Our operating revenues consist of fees, performance income, investment income and other operating income.
Our ability to grow our revenues depends in part on our ability to attract new capital and investors, our successful deployment of capital including from our balance sheet and our ability to realize investments at a profit.
Our ability to attract new capital and investors. Our ability to attract new capital and investors in our funds is driven, in part, by the extent to which they continue to see the alternative asset management industry generally, and our investment products specifically, as attractive means for capital appreciation or income. In addition, our ability to attract new capital and investors in our insurance business is driven, in part, by the extent to which they continue to see the life and annuity insurance and reinsurance industry generally, and in certain cases our reinsurance vehicles, as attractive retirement, accumulation, income or business solutions. Since 2010, we have expanded into strategies such as real assets, credit, core, growth, insurance and, through hedge fund partnerships, hedge funds. We have also reached out to new fund investors, including retail and high net worth investors. However, fundraising continues to be competitive. While our Asian Fund IV, European Fund V, North America Fund XIII, Real Estate Partners Americas III, Real Estate Partners Europe II, Global Infrastructure Investors IV, Next Generation Technology Growth Fund II and Health Care Strategic Growth Fund II exceeded the size of their respective predecessor funds, there is no assurance that fundraises for our other flagship investment funds or vehicles or for our newer strategies and their successor funds will experience similar success. If we are unable to successfully raise comparably sized or larger funds, our AUM, FPAUM, and associated fees attributable to new capital raised in future periods may be lower than in prior years. See "Risk Factors—Risks Related to Our Business—Our inability to raise additional or successor funds (or raise successor funds of a comparable size as our predecessor funds) could have a material adverse impact on our business" in our Annual Report.

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Our ability to successfully deploy capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capital available to us as well as our participation in capital markets transactions. Greater competition, high valuations, increased overall cost of credit and other general market conditions may impact our ability to identify and execute attractive investments. Additionally, because we seek to make investments that have an ability to achieve our targeted returns while taking on a reasonable level of risk, we may experience periods of reduced investment activity. We have a long-term investment horizon and the capital deployed in any one quarter may vary significantly from the capital deployed in any other quarter or the quarterly average of capital deployed in any given year. Reduced levels of transaction activity also tends to result in reduced potential future investment gains, lower transaction fees and lower fees for our capital markets business line, which may earn fees in the syndication of equity or debt. In our insurance business, we deploy capital by investing in assets that are anticipated to generate net investment income in excess of the net cost of insurance. If we are unable to originate or source attractive investments, the success and growth in revenues of our insurance business will be adversely impacted. See also “Risk Factors—Risks Related to the Assets We Manage—Changes in the debt financing markets may negatively impact the ability of our investment funds, their portfolio companies and strategies pursued with our balance sheet assets to obtain attractive financing for their investments or to refinance existing debt and may increase the cost of such financing or refinancing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income” in our Annual Report.
Our ability to realize investments. Challenging market and economic conditions may adversely affect our ability to exit and realize value from our investments and result in lower-than-expected returns. Although the equity markets are not the only means by which we exit investments from our funds, the strength and liquidity of the U.S. and relevant global equity markets generally, and the initial public offering market specifically, affect the valuation of, and our ability to successfully exit, our equity positions in the portfolio companies of our funds in a timely manner. We may also realize investments through strategic sales. When financing is not available or becomes too costly, it may be more difficult to find a buyer that can successfully raise sufficient capital to purchase our investments. In addition, volatile debt and equity markets may also make the exit of our investments more difficult to execute. In our insurance business, we depend on the ability of our investments to generate their anticipated returns, through the payment of interest and dividends and interest as well as return of principal, in the amounts and at the times that we expect them to be made in order to manage our obligations to make payments to our policyholders. If policyholder behavior differs from our expectations, we may be forced to sell our investments earlier than we anticipated and during market conditions where we may realize losses on the investment. We also may realize losses on investments to rotate portfolios acquired in reinsurance transactions into our preferred investment mix. In addition, material delays in payments or impairments to our anticipated investment returns could have material adverse effects to our results of operations. For additional information about how business environment and market conditions affect Global Atlantic, see "—Global Atlantic's Investment Portfolio."

Basis of Accounting
 
We consolidate the financial results of KKR Group Partnership and its consolidated entities, which include the accounts of our investment advisers, broker-dealers, Global Atlantic’s insurance companies, the general partners of certain unconsolidated investment funds, general partners of consolidated investment funds and their respective consolidated investment funds and certain other entities including collateralized financing entities ("CFEs").

When an entity is consolidated, we reflect the accounts of the consolidated entity, including its assets, liabilities, revenues, expenses, investment income, cash flows and other amounts, on a gross basis. While the consolidation of an investment fund or entity does not have an effect on the amounts of Net Income Attributable to KKR or KKR's stockholders' equity that KKR reports, the consolidation does significantly impact the financial statement presentation under GAAP. This is due to the fact that the accounts of the consolidated entities are reflected on a gross basis while the allocable share of those amounts that are attributable to third parties are reflected as single line items. The single line items in which the accounts attributable to third parties are recorded are presented as noncontrolling interests on the consolidated statements of financial condition and net income (loss) attributable to noncontrolling interests on the consolidated statements of operations.

The presentation in the financial statements reflect the significant industry diversification of KKR by its acquisition of Global Atlantic. Global Atlantic operates an insurance business, and KKR operates an asset management business, each of which possess distinct characteristics. As a result, KKR developed a two-tiered presentation approach for the financial statements in this Management's Discussion and Analysis. KKR believes that these separate presentations provide a more informative view of the consolidated financial position and results of operations than traditional aggregated presentations. KKR believes that reporting Global Atlantic’s insurance operations separately is appropriate given, among other factors, the relative significance of Global Atlantic’s policy liabilities, which are not obligations of KKR (other than the insurance companies that issued them). If a traditional aggregated presentation were to be used, KKR would expect to eliminate or combine several identical or similar captions, which would condense the presentations but would reduce transparency. KKR also believes that
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using a traditional aggregated presentation would result in no new line items compared to the two-tier presentation included in the financial statements in this report. We acquired Global Atlantic on February 1, 2021; accordingly, the results of Global Atlantic's insurance operations included in our consolidated results of operations for the nine months ended September 30, 2021 are from February 1, 2021 (the closing date of the acquisition) through September 30, 2021.

All the intercompany transactions have been eliminated.

The summary of the significant accounting policies has been organized considering the two-tiered approach described above and includes a section for common accounting policies and an accounting policy section for each of the two tiers when a policy is specific to one of the tiers.

For a further discussion about our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the 2021 Form 10-K and Note 2 "Summary of Significant Accounting Policies" in our financial statements.

Key Financial Measures Under GAAP - Asset Management
 
The following discussion of key financial measures under GAAP is based on KKR's asset management business as of September 30, 2022.

Revenues

Fees and Other
 
Fees and other consist primarily of (i) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles, and separately managed accounts; (ii) transaction fees earned in connection with successful investment transactions and from capital markets activities; (iii) monitoring fees from providing services to portfolio companies; (iv) expense reimbursements from certain investment funds and portfolio companies; and (v) consulting fees. These fees are based on the contractual terms of the governing agreements and are recognized when earned, which coincides with the period during which the related services are performed and in the case of transaction fees, upon closing of the transaction. Monitoring fees may provide for a termination payment following an initial public offering or change of control. These termination payments are recognized in the period when the related transaction closes.

Capital Allocation-Based Income (Loss)
Capital allocation-based income (loss) is earned from those arrangements whereby KKR serves as general partner and includes income or loss from KKR's capital interest as well as "carried interest" which entitles KKR to a disproportionate allocation of investment income or loss from an investment fund's limited partners.
Expenses
Compensation and Benefits
Compensation and Benefits expense includes (i) base cash compensation consisting of salaries and wages, (ii) benefits, (iii) carry pool allocations, (iv) equity-based compensation, and (v) discretionary cash bonuses.

To supplement base cash compensation, benefits, carry pool allocations, and equity-based compensation, we typically pay discretionary cash bonuses, which are included in Compensation and Benefits expense in the consolidated statements of operations, based principally on the level of (i) management fees and other fee revenues (including incentive fees), (ii) realized carried interest and (iii) realized investment income earned during the year. The amounts paid as discretionary cash bonuses, if any, are at our sole discretion and vary from individual to individual and from period to period, including having no cash bonus. We accrue discretionary cash bonuses when payment becomes probable and reasonably estimable which is generally in the period when we make the decision to pay discretionary cash bonuses and is based upon a number of factors, including the recognition of fee revenues, realized carried interest, realized investment income and other factors determined during the year.
Beginning in 2021, we expect to pay our employees by assigning a percentage range to each component of asset management segment revenues. Based on the current components and blend of our asset management segment revenues on an annual basis, we expect to use approximately: (i) 20‐25% of fee related revenues, (ii) 60‐70% of realized carried interest and incentive fees not included in fee related performance revenues or earned from our hedge fund partnerships, and (iii) 10‐20% of realized investment income and hedge fund partnership incentive fees to pay our asset management employees. Because these
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ranges are applied to applicable distributable revenue components independently, and on an annual basis, the amount paid as a percentage of total distributable revenues will vary and will, for example, likely be higher in a period with relatively higher realized carried interest and lower in a period with relatively lower realized carried interest. We decide whether to pay a discretionary cash bonus and determine the percentage of applicable revenue components to pay compensation only upon the occurrence of the realization event. There is no contractual or other binding obligation that requires us to pay a discretionary cash bonus to the asset management employees, except in limited circumstances.
Assuming that we had accrued compensation of (i) 65% of the unrealized carried interest earned by the funds that allocate 40% and 43% to the carry pool and (ii) 15% of the unrealized net gains in our Principal Activities business line (in each case at the mid-point of the ranges above), KKR & Co. Inc. Stockholders’ Equity – Series I Preferred, Common Stock as of September 30, 2022 would have been reduced by approximately $1.52 per share, compared to our reported $19.00 per share on such date, and our book value as of September 30, 2022 would have been reduced by approximately $1.48 per adjusted share, compared to our reported book value of $26.56 per adjusted share on such date.
Carry Pool Allocation
With respect to our funds that provide for carried interest, we allocate a portion of the realized and unrealized carried interest that we earn to a carry pool established at KKR Associates Holdings L.P., which is not a KKR subsidiary, from which our asset management employees and certain other carry pool participants are eligible to receive a carried interest allocation. The allocation is determined based upon a fixed arrangement between KKR Associates Holdings and us, and we do not exercise discretion on whether to make an allocation to the carry pool upon a realization event. These amounts are accounted for as compensatory profit sharing arrangements in Accrued Expenses and Other Liabilities within the accompanying consolidated statements of financial condition in conjunction with the related carried interest income and are recorded as compensation expense. Upon a reversal of carried interest income, the related carry pool allocation, if any, is also reversed. Accordingly, such compensation expense is subject to both positive and negative adjustments.
In February 2021, with the approval of a majority of our independent directors, KKR amended the percentage of carried interest that is allocable to the carry pool to 65% for (i) current investment funds for which no or de minimis amounts of carried interest was accrued as of December 31, 2020 and (ii) all future funds. For all other funds, the percentage of carried interest remains 40% or 43%, as applicable. The percentage of carried interest allocable to the carry pool may be increased above 65% only with the approval of a majority of our independent directors. To account for the difference in the carry pool allocation percentages, we expect to use a portion of realized carried interest from the older funds equal to the difference between 65% and 40% or 43%, as applicable, to supplement the carry pool and to pay amounts as discretionary cash bonus compensation as described above to our asset management employees. The amounts paid as discretionary cash bonuses, if any, are at our discretion and vary from individual to individual and from period to period, including having no cash bonus at all for certain employees. See "—Critical Accounting Policies - Asset Management—Recognition of Carried Interest in the Statement of Operations" and "—Key Financial Measures Under GAAP - Asset Management—Expenses—Compensation and Benefits."
On the Sunset Date (as defined in the Reorganization Agreement), KKR will acquire control of KKR Associates Holdings and will commence making decisions regarding the allocation of carry proceeds pursuant to the limited partnership agreement of KKR Associates Holdings. 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.

Equity-based Compensation
In addition to the cash-based compensation and carry pool allocations as described above, employees receive equity awards under our Equity Incentive Plans, most of which are subject to service-based vesting typically over a three to five-year period from the date of grant, and some of which are also subject to the achievement of market-based conditions. Certain of these awards are subject to post-vesting transfer restrictions and minimum retained ownership requirements.
General, Administrative and Other
General, administrative and other expense consists primarily of professional fees paid to legal advisors, accountants, advisors and consultants, insurance costs, travel and related expenses, communications and information services, depreciation and amortization charges, CLOs and investment funds that were consolidated, costs incurred in connection with pursuing potential investments that do not result in completed transactions ("broken-deal expenses"), expense reimbursements, placement fees and other general operating expenses. A portion of these general administrative and other expenses, in particular broken-deal expenses, are borne by fund investors.
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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. Fluctuations in net gains (losses) from investment activities between reporting periods is driven primarily by changes in the fair value of our investment portfolio as well as the realization of investments. The fair value of, as well as the ability to recognize gains from, our investments is significantly impacted by the global financial markets, which, in turn, affects the net gains (losses) from investment activities recognized in any given period. Upon the disposition of an investment, previously recognized unrealized gains and losses are reversed and an offsetting realized gain or loss is recognized in the current period. Since our investments are carried at fair value, fluctuations between periods could be significant due to changes to the inputs to our valuation process over time. For a further discussion of our fair value measurements and fair value of investments, see "—Critical Accounting Policies - Combined—Fair Value Measurements."
Dividend Income
 
Dividend income consists primarily of distributions that we and our consolidated investment funds receive from portfolio companies or real assets investments in which we and our consolidated investment funds invest. Dividend income is recognized primarily in connection with (i) dispositions of operations by portfolio companies, (ii) distributions of cash generated from operations from portfolio investments or real assets investments, and (iii) other significant refinancings undertaken by portfolio investments.

Interest Income
 
Interest income consists primarily of interest that is received on our credit instruments in which we and our consolidated investment funds, CLOs and other entities invest as well as interest on our cash and other investments.
 
Interest Expense
 
Interest expense is incurred from (i) debt issued by KKR, including debt issued by KFN, (ii) credit facilities entered into by KKR, (iii) debt securities issued by consolidated CFEs, (iv) financing arrangements at our majority owned investment vehicles that have been funded with borrowings that are collateralized by the investments and assets they own and (v) financing arrangements at our consolidated funds entered into primarily with the objective of managing cash flow. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN. Debt securities issued by consolidated CFEs are supported solely by the investments held at the CFE and are not collateralized by assets of any other KKR entity. Our obligations under financing arrangements at our consolidated investment funds are generally limited to our pro rata equity interest in such funds. However, in some circumstances, we may provide limited guarantees of the obligations of our general partners in an amount equal to its pro rata equity interest in such funds. Our management companies bear no obligations with respect to financing arrangements at our consolidated funds. We also may provide other kinds of guarantees. See "—Liquidity."


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Key Financial Measures Under GAAP - Insurance
The following discussion of key financial measures under GAAP is based on KKR's insurance business as conducted by Global Atlantic as of September 30, 2022.

Revenues
Premiums
Premiums primarily relate to payout annuities with life contingencies and whole life and term life insurance policies, recognized when due from the policyholders. Premiums are reported net of premiums ceded under reinsurance agreements.

Policy fees
Policy fees include charges assessed against policyholder account balances for mortality, administration, separate account, benefit rider and surrender fees.

Net investment income
Net investment income reflects the income earned on our investments, net of any associated investment expenses (including management fees charged by the asset management segment) and net of ceded amounts under reinsurance agreements. Net investment income includes, amongst other things (i) interest earned on our fixed income available-for-sale and fixed-income trading investments, (ii) interest income and other related fees from our mortgage and other loan receivables, (iii) interest on funds withheld at interest receivables, (iv) proportional share of income from equity-method investments and (v) income from physical assets, such as renewable energy plants, real estate, railcars, and airplanes (net of depreciation and operating expenses).

Net investment-related gains
Net investment-related gains primarily consists of (i) realized gains and losses from the disposal of investments, including realized gains and losses on the disposal of investments not related to asset/liability matching strategies (“variable investment income”), (ii) unrealized gains and losses from investments held for trading, real estate investments accounted under investment company accounting, and investments with fair value re-measurements recognized in earnings as a result of the election of a fair-value option, (iii) unrealized gains and losses on funds withheld at interest receivable and payable, (iv) unrealized gains and losses from derivatives not designated in an hedging relationship and (v) allowances for credit losses, and other impairments of investments.

Other income

Other income is primarily comprised of expense allowances on ceded reinsurance, administration, management fees and distribution fees.

Expenses

Policy benefits and claims
Policy benefits and claims represent the current period expense associated with providing insurance benefits to policyholders, including claims and benefits paid, interest credited to policyholders, changes in policy liability reserves (including fair value reserves), amortization of cost of reinsurance liabilities, and amortization of deferred sales inducements.

Amortization of policy acquisition costs
Amortization of policy acquisition costs primarily consist of amortization of value of business acquired and deferred policy acquisition costs.

Insurance expense
Insurance expenses are primarily comprised of commissions expense, net of amounts capitalized, reinsurance ceding allowances, premium taxes, amortization of acquired intangibles and captive financing charges.
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Interest expense
Interest expense is incurred from insurance segment debt issued, including related interest rate swaps, credit facilities and other financing agreements.

General, administrative and other
General, administrative and other expenses are primarily comprised of employee compensation and benefit expenses, third-party administrator ("TPA") policy servicing fees, administrative and professional services, and other operating expenses.

Other Key Financial Measures Under GAAP
 
Income Taxes

KKR & Co. Inc. is a domestic corporation for U.S. federal income tax purposes and is subject to U.S. federal, state and local income taxes at the entity level on its share of taxable income. In addition, KKR Group Partnership and certain of its subsidiaries operate as partnerships for U.S. federal tax purposes but as taxable entities for certain state, local or non-U.S. tax purposes. Moreover, certain corporate subsidiaries of KKR, including certain Global Atlantic subsidiaries, are domestic corporations for U.S. federal income tax purposes and are subject to U.S. federal, state, and local income taxes.
Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions including evaluating uncertainties. We review our tax positions quarterly and adjust our tax balances as new information becomes available.
For a further discussion of our income tax policies, see Note 18 "Income Taxes" in our financial statements.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests primarily represents the ownership interests that certain third parties hold in entities that were consolidated in the financial statements as well as the ownership interests in KKR Group Partnership represented by exchangeable securities. The allocable share of income and expense attributable to these interests is accounted for as net income (loss) attributable to noncontrolling interests. Given the consolidation of certain of our investment funds and the significant ownership interests in KKR Group Partnership held by KKR Holdings, we expect a portion of net income (loss) will continue to be attributed to noncontrolling interests in our business.
For a further discussion of our noncontrolling interests policies, see Note 22 "Equity" in the financial statements.
Key Segment and Non-GAAP Performance Measures
The following key segment and non-GAAP performance measures are used by management in making operational and resource deployment decisions as well as assessing the performance of KKR's businesses. They include certain financial measures that are calculated and presented using methodologies other than in accordance with GAAP. These performance measures as described below are presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and holders of exchangeable securities and as such represent the entire KKR business in total. In addition, these performance measures are presented without giving effect to the consolidation of the investment funds and 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. These non-GAAP measures should not be considered as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable are included under "—Reconciliations to GAAP Measures."
After-tax Distributable Earnings
After-tax distributable earnings is a non-GAAP performance measure of KKR’s earnings, which is derived from KKR’s reported segment results. 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. Series C Mandatory Convertible Preferred Stock dividends have been
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excluded from After-tax Distributable Earnings, because the definition of Adjusted Shares used to calculate After-tax Distributable Earnings per Adjusted Share assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of common stock of KKR & Co. Inc. Income Taxes Paid represents the amount of income taxes that would be paid assuming that all pre-tax distributable earnings were allocated to KKR & Co. Inc. and taxed at the same effective rate, which assumes that all exchangeable securities were exchanged for shares of common stock of KKR & Co. Inc. Income Taxes Paid includes the benefit of tax deductions arising from equity-based compensation, which reduces income taxes paid or payable during the period. Equity based compensation expense is excluded from After-tax Distributable Earnings, because (i) KKR believes that the cost of equity awards granted to employees does not contribute to the earnings potentially available for distributions to its equity holders or reinvestment into its business and (ii) excluding this expense makes KKR’s reporting metric more comparable to the corresponding metric presented by other publicly traded companies in KKR’s industry, which KKR believes enhances an investor’s ability to compare KKR’s performance to these other companies. 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. KKR separately discloses the amount of tax deduction from equity-based compensation for the period reported and the effect of its inclusion in After-tax Distributable Earnings for the period. KKR makes these adjustments when calculating After-tax Distributable Earnings in order to more accurately reflect the net realized earnings that are expected to be or become available for distribution to KKR’s equity holders or reinvestment into KKR’s business. However, After-tax Distributable Earnings does not represent and is not used to calculate actual dividends under KKR’s dividend policy, which is a fixed amount per period, and After-tax Distributable Earnings should not be viewed as a measure of KKR’s liquidity.
Book Value
Book Value is a non-GAAP performance measure of the net assets of KKR and is used by management primarily in assessing the unrealized value of KKR’s net assets presented on a basis that (i) deconsolidates KKR’s investment funds and CFEs that KKR manages, (ii) includes the net assets that are attributable to certain securities exchangeable into shares of common stock of KKR & Co. Inc., and (iii) includes KKR’s ownership of the net assets of Global Atlantic. We believe this measure is useful to stockholders as it provides additional insight into the net assets of KKR excluding those net assets that are allocated to investors in KKR’s investment funds and other noncontrolling interest holders. KKR's book value includes the net impact of KKR's tax assets and liabilities as calculated under GAAP. Series C Mandatory Convertible Preferred Stock has been included in book value, because the definition of adjusted shares used to calculate book value per adjusted share assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of common stock of KKR & Co. Inc. To calculate Global Atlantic book value and to make it more comparable with the corresponding metric presented by other publicly traded companies in Global Atlantic’s industry, Global Atlantic book value excludes (i) accumulated other comprehensive income and (ii) accumulated change in fair value of reinsurance balances and related assets, net of deferred acquisition costs and income tax.
Distributable Operating Earnings
    Distributable operating earnings is a non-GAAP performance measure that KKR believes is useful to stockholders as it provides a supplemental measure of our operating performance without taking into account items that KKR does not believe arise from or relate directly to KKR's operations. Distributable Operating Earnings excludes: (i) equity-based compensation charges, (ii) amortization of acquired intangibles, (iii) strategic corporate transaction-related charges and (iv) non-recurring items, if any. Strategic corporate transaction-related items arise from corporate actions and consist primarily of (i) impairments, (ii) non-monetary gains or losses on divestitures, (iii) transaction costs from strategic acquisitions, and (iv) depreciation on real estate that KKR owns and occupies. Inter-segment transactions are not eliminated from segment results when management considers those transactions in assessing the results of the respective segments. These transactions include (i) management fees earned by KKR as the investment adviser for Global Atlantic insurance companies and (ii) interest income and expense based on lending arrangements where one or more KKR subsidiaries borrow from a Global Atlantic insurance subsidiary. Inter-segment transactions are recorded by each segment based on the definitive documents that contain arms' length terms and comply with applicable regulatory requirements. Distributable Operating Earnings represents operating earnings of KKR’s asset management and insurance segments, which are comprised of the following:

Asset Management Segment Operating Earnings is the segment profitability measure used to make operating decisions and to assess the performance of the asset management segment and is comprised of: (i) Fee Related Earnings, (ii) Realized Performance Income, (iii) Realized Performance Income Compensation, (iv) Realized Investment Income, and (v) Realized Investment Income Compensation. Asset Management Segment Operating Earnings excludes (i) unrealized carried interest, (ii) net unrealized gains (losses) on investments, and (iii) related unrealized carried interest. Management fees earned by KKR as the adviser, manager or sponsor for its investment funds, vehicles and accounts,
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including its Global Atlantic insurance companies and co-investment vehicles that participate in qualifying reinsurance transactions sourced by Global Atlantic (Ivy Re Limited and Ivy Re II Limited), which are included in Asset Management Segment Operating Earnings.
Insurance Segment Operating Earnings is the segment profitability measure used to make operating decisions and to assess the performance of the insurance segment and is comprised of: (i) Net Investment Income, (ii) Net Cost of Insurance, (iii) General, Administrative, and Other Expenses, (iv) Income Taxes, and (v) Net Income Attributable to Noncontrolling Interests. The non-operating adjustments made to derive Insurance Segment Operating Earnings eliminate the impact of: (i) realized (gains) losses related to asset/liability matching investments strategies, (ii) unrealized investment (gains) losses, (iii) changes in the fair value of derivatives, embedded derivatives, and fair value liabilities for fixed-indexed annuities, indexed universal life contracts and variable annuities, and (iv) the associated income tax effects of all exclusions from Insurance Segment Operating Earnings except for equity-based compensation expense. Insurance Segment Operating Earnings includes (i) realized gains and losses not related to asset/liability matching investments strategies and (ii) the investment management fee expenses that are earned by KKR as the investment adviser of the Global Atlantic insurance companies.
Fee Related Earnings ("FRE")

Fee related earnings is a performance measure used to assess the asset management segment’s generation of profits from revenues that are measured and received on a recurring basis and are not dependent on future realization events. KKR believes this measure is useful to stockholders as it provides additional insight into the profitability of KKR’s fee generating asset management and capital markets businesses and other recurring revenue streams. FRE equals (i) Management Fees, including fees paid by the insurance segment to the asset management segment and fees paid by certain insurance co-investment vehicles, (ii) Transaction and Monitoring Fees, Net and (iii) Fee Related Performance Revenues, less (x) Fee Related Compensation, and (y) Other Operating Expenses.

Fee Related Performance Revenues refers to the realized portion of Incentive Fees from certain AUM that has an indefinite term and for which there is no immediate requirement to return invested capital to investors upon the realization of investments. Fee-related performance revenues consists of performance fees (i) to be received from our investment funds, vehicles and accounts on a recurring basis, and (ii) that are not dependent on a realization event involving investments held by the investment fund, vehicle or account.
Fee Related Compensation refers to the compensation expense, excluding equity-based compensation, paid from (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, and (iii) Fee Related Performance Revenues.
Other Operating Expenses represents the sum of (i) occupancy and related charges and (ii) other operating expenses.
Total Asset Management Segment Revenues
Total Asset Management Segment Revenues is a performance measure that represents the realized revenues of the asset management segment (which excludes unrealized carried interest and unrealized net gains (losses) on investments) and is the sum of (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, (iii) Fee Related Performance Revenues, (iv) Realized Performance Income, and (v) Realized Investment Income. KKR believes that this performance measure is useful to stockholders as it provides additional insight into the realized revenues generated by KKR's asset management segment.
Other Terms and Capital Metrics

Adjusted Shares

Adjusted shares represents shares of common stock of KKR & Co. Inc. outstanding under GAAP adjusted to include (i) the number of shares of common stock of KKR & Co. Inc. assumed to be issuable upon conversion of the Series C Mandatory Convertible Preferred Stock and (ii) shares of common stock of KKR & Co. Inc. issuable upon exchange of all exchangeable securities. Weighted average adjusted shares is used in the calculation of After-tax Distributable Earnings per Adjusted Share, and Adjusted Shares is used in the calculation of Book Value per Adjusted Share.

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Assets Under Management ("AUM")
    Assets under management represent the assets managed, advised or sponsored by KKR from which KKR is entitled to receive management fees or performance income (currently or upon a future event), general partner capital, and assets managed, advised or sponsored by our strategic BDC partnership and the hedge fund and other managers in which KKR holds an ownership interest. We believe this measure is useful to stockholders as it provides additional insight into the capital raising activities of KKR and its hedge fund and other managers and the overall activity in their investment funds and other managed or sponsored capital. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds and certain co-investment vehicles; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or performance income; (iii) the asset value of the Global Atlantic insurance companies; (iv) the par value of outstanding CLOs; (v) KKR's pro rata portion of the AUM of hedge fund and other managers in which KKR holds an ownership interest; (vi) all of the AUM of KKR's strategic BDC partnership; (vii) the acquisition cost of invested assets of certain non-US real estate investment trusts and (viii) the value of other assets managed or sponsored by KKR. The pro rata portion of the AUM of hedge fund and other managers is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’s respective AUM. KKR's definition of AUM (i) is not based on any definition of AUM that may be set forth in the governing documents of the investment funds, vehicles, accounts or other entities whose capital is included in this definition, (ii) includes assets for which KKR does not act as an investment adviser, and (iii) is not calculated pursuant to any regulatory definitions.
Capital Invested
    Capital invested is the aggregate amount of capital invested by (i) KKR’s investment funds and Global Atlantic insurance companies, (ii) KKR's Principal Activities business line as a co-investment, if any, alongside KKR’s investment funds, and (iii) KKR's Principal Activities business line in connection with a syndication transaction conducted by KKR's Capital Markets business line, if any. Capital invested is used as a measure of investment activity at KKR during a given period. We believe this measure is useful to stockholders as it provides a measure of capital deployment across KKR’s business lines. Capital invested includes investments made using investment financing arrangements like credit facilities, as applicable. Capital invested excludes (i) investments in certain leveraged credit strategies, (ii) capital invested by KKR’s Principal Activities business line that is not a co-investment alongside KKR’s investment funds, and (iii) capital invested by KKR’s Principal Activities business line that is not invested in connection with a syndication transaction by KKR’s Capital Markets business line. Capital syndicated by KKR's Capital Markets business line to third parties other than KKR’s investment funds or Principal Activities business line is not included in capital invested.
Fee Paying AUM ("FPAUM")
    Fee paying AUM represents only the AUM from which KKR is entitled to receive management fees. We believe this measure is useful to stockholders as it provides additional insight into the capital base upon which KKR earns management fees. FPAUM is the sum of all of the individual fee bases that are used to calculate KKR's and its hedge fund and BDC partnership management fees and differs from AUM in the following respects: (i) assets and commitments from which KKR is not entitled to receive a management fee are excluded (e.g., assets and commitments with respect to which it is entitled to receive only performance income or is otherwise not currently entitled to receive a management fee) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
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. We believe this measure is useful to stockholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds and carry paying co-investment vehicles to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements or investments we have committed to make but remain unfunded at the reporting date.
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Condensed Consolidated Results of Operations (GAAP Basis - Unaudited)
 
The following is a discussion of our consolidated results of operations on a GAAP basis for the three months ended September 30, 2022 and 2021. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors that affected our segment results in these periods, see "—Analysis of Segment Operating Results." See "Business Environment" for more information about factors that may impact our business, financial performance, operating results and valuations.

The presentation of our consolidated results of operations that follows reflects the significant industry diversification of KKR by its acquisition of Global Atlantic. Global Atlantic operates an insurance business, and KKR operates an asset management business, each of which possess distinct characteristics. As a result, KKR developed a two-tiered presentation approach, where Global Atlantic's insurance business is presented separately from KKR's asset management business. Additionally, for the nine months ended September 30, 2021, the results of Global Atlantic's insurance operations included in our consolidated results of operations are from February 1, 2021 (closing date of the acquisition) through September 30, 2021.

 Three Months Ended
 September 30, 2022September 30, 2021Change
 ($ in thousands)
Revenues  
Asset Management
Fees and Other$673,929 $718,968 $(45,039)
Capital Allocation-Based Income (Loss)(572,863)1,526,667 (2,099,530)
101,066 2,245,635 (2,144,569)
Insurance
Net Premiums480,462 974,903 (494,441)
Policy Fees320,206 310,381 9,825 
Net Investment Income1,094,877 758,381 336,496 
Net Investment-Related Gains (Losses)(173,830)162,127 (335,957)
Other Income35,632 31,938 3,694 
1,757,347 2,237,730 (480,383)
Total Revenues1,858,413 4,483,365 (2,624,952)
Expenses
Asset Management
Compensation and Benefits244,502 1,012,837 (768,335)
Occupancy and Related Charges18,683 17,438 1,245 
General, Administrative and Other212,513 203,977 8,536 
475,698 1,234,252 (758,554)
Insurance
Net Policy Benefits and Claims1,087,731 1,697,046 (609,315)
Amortization of Policy Acquisition Costs8,222 (16,900)25,122 
Interest Expense26,141 22,437 3,704 
Insurance Expenses158,280 89,534 68,746 
General, Administrative and Other178,443 158,873 19,570 
1,458,817 1,950,990 (492,173)
Total Expenses1,934,515 3,185,242 (1,250,727)
Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities(379,180)2,116,647 (2,495,827)
Dividend Income294,415 121,484 172,931 
Interest Income500,234 402,839 97,395 
Interest Expense(391,520)(278,166)(113,354)
Total Investment Income (Loss)23,949 2,362,804 (2,338,855)
Income (Loss) Before Taxes(52,153)3,660,927 (3,713,080)
Income Tax Expense (Benefit)27,434 379,282 (351,848)
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Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Net Income (Loss)(79,587)3,281,645 (3,361,232)
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests1,601 1,519 82 
Net Income (Loss) Attributable to Noncontrolling Interests(6,792)2,123,569 (2,130,361)
Net Income (Loss) Attributable to KKR & Co. Inc.(74,396)1,156,557 (1,230,953)
Series A Preferred Stock Dividends— — — 
Series B Preferred Stock Dividends— 7,953 (7,953)
Series C Mandatory Convertible Preferred Stock Dividends17,250 17,250 — 
Net Income (Loss) Attributable to KKR & Co. Inc.
Common Stockholders
$(91,646)$1,131,354 $(1,223,000)


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Condensed Consolidated Results of Operations (GAAP Basis - Unaudited) - Asset Management
 
Revenues

For the three months ended September 30, 2022 and 2021, revenues consisted of the following:
 Three Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees$419,876 $349,249 $70,627 
Fee Credits(136,996)(164,720)27,724 
Transaction Fees328,483 437,619 (109,136)
Monitoring Fees29,683 29,823 (140)
Incentive Fees1,402 6,962 (5,560)
Expense Reimbursements10,733 34,857 (24,124)
Consulting Fees20,748 25,178 (4,430)
Total Fees and Other673,929 718,968 (45,039)
Carried Interest(477,681)1,216,433 (1,694,114)
General Partner Capital Interest(95,182)310,234 (405,416)
Total Capital Allocation-Based Income (Loss)(572,863)1,526,667 (2,099,530)
Total Revenues - Asset Management$101,066 $2,245,635 $(2,144,569)

Fees and Other

Total Fees and Other for the three months ended September 30, 2022 decreased compared to the three months ended September 30, 2021 primarily as a result of the decrease in transaction fees, partially offset by the increase in management fees.

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 (i) management fees earned from European Fund VI and Global Impact II Fund and (ii) management fees earned on assets managed by KJRM, which we acquired in 2022. The increase was partially offset by a decrease in management fees earned from Asian Fund III as a result of a decrease in its invested capital following the end of its investment period, which resulted in the calculation of lower fees.

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, 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. Accordingly, the elimination of these fees does not impact the net income (loss) attributable to KKR or KKR stockholders' equity. For a more detailed discussion on the factors that affect our management fees during the period including the fees earned from unconsolidated investment funds and other vehicles see "—Analysis of Asset Management Segment Operating Earnings."

Fee credits decreased compared to the prior period as a result of a lower level of transaction fees in our Private Equity and Credit and Liquid Strategies business lines in the current period. Fee credits owed to consolidated investment funds and other vehicles are eliminated upon consolidation under GAAP. However, because these amounts are owed to noncontrolling interests, KKR's allocated share of the net income from the consolidated investment funds and other vehicles is decreased by the amount of fee credits that are eliminated. Accordingly, the elimination of these fee credits does not impact the net income (loss) attributable to KKR or KKR stockholders' equity.

Transaction and monitoring fees are earned from KKR portfolio companies and are not eliminated upon consolidation because these fees are earned from companies which are not consolidated. Furthermore, transaction fees earned in our Capital Markets business line are not shared with fund investors. Accordingly, certain transaction fees are reflected in revenues without a corresponding fee credit.
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Capital Allocation-Based Income (Loss)

Capital Allocation-Based Income (Loss) for the three months ended September 30, 2022 was negative primarily due to the net depreciation of the underlying investments at many of our carry earning investment funds, most notably Americas Fund XII, Asian Fund III, and North America Fund XI. Capital Allocation-Based Income (Loss) for the three months ended September 30, 2021 was positive primarily due to the net appreciation of the underlying investments at our carry earning investment funds, most notably Asian Fund III, North America Fund XI, and Americas Fund XII.

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 such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to 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.

Investment Income (Loss) - Asset Management

For additional information about net gains (losses) from investment activities, see Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" in our financial statements.

Net Gains (Losses) from Investment Activities for the three months ended September 30, 2022
The net losses from investment activities for the three months ended September 30, 2022 were comprised of net realized gains of $329.0 million and net unrealized losses of $(708.2) million.
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.
Realized Gains and Losses from Investment Activities
For the three months ended September 30, 2022, net realized gains related primarily to the sale of our investment in Fiserv, Inc. (NASDAQ: FISV) and the sale of real estate equity investments held in certain consolidated real estate opportunistic funds. Partially offsetting these realized gains were realized losses primarily relating to certain investments held in our consolidated alternative credit funds and energy funds.

Unrealized Gains and Losses from Investment Activities
For the three months ended September 30, 2022, net unrealized losses were driven primarily by mark-to-market losses from (i) investments held by certain consolidated energy funds, (ii) PetVet Care Centers, LLC (healthcare sector), and (iii) investments held in certain consolidated alternative credit funds. These unrealized losses were partially offset by mark-to-market gains related to (i) USI, Inc. (financial services sector), (ii) foreign exchanged derivative contracts, and (iii) 1-800 Contacts Inc. (healthcare sector).
For a discussion of other factors that affected KKR's realized investment income for the three months ended September 30, 2022, see "—Analysis of Asset Management Segment Operating Results."
Net Gains (Losses) from Investment Activities for the three months ended September 30, 2021
The net gains from investment activities for the three months ended September 30, 2021 were comprised of net realized gains of $609.6 million and net unrealized gains of $1,507.0 million.
Realized Gains and Losses from Investment Activities
For the three months ended September 30, 2021, net realized gains related primarily to the sales of our investments in Mr. Cooper Group Inc. (NASDAQ: COOP), FanDuel Inc. (technology sector), and Darktrace Limited (LON: DARK.L). Partially
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offsetting these realized gains were realized losses primarily relating to certain investments held in our consolidated credit funds.

Unrealized Gains and Losses from Investment Activities
For the three months ended September 30, 2021, net unrealized gains were driven primarily by (i) mark-to-market gains from private equity, growth equity and core investments held by KKR and certain consolidated funds, the most significant of which were PetVet Care Centers, LLC and Heartland Dental, LLC (healthcare sector), and Axel Springer (media sector) and (ii) mark-to-market gains from certain investments held in our consolidated real estate funds. These unrealized gains were partially offset by (i) the reversal of previously recognized unrealized gains relating to the realization activity described above, (ii) mark-to-market losses related to certain investments held in our consolidated credit funds, and (iii) an unrealized loss on BridgeBio Pharma, Inc. (NASDAQ: BBIO).

For a discussion of other factors that affected KKR's realized investment income for the three months ended September 30, 2022, see "—Analysis of Asset Management Segment Operating Results."
Dividend Income
 
During the three months ended September 30, 2022, the most significant dividends received included (i) $54.2 million from investments held in our infrastructure core funds, (ii) $47.5 million from Koki Holdings Co. Ltd. (industrial sector), held in a consolidated multi-strategy fund, and dividends received from certain alternative credit funds. During the three months ended September 30, 2021, the most significant dividends received included $51.3 million from our consolidated real estate and infrastructure funds and $23.5 million from our consolidated energy funds.

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. For a discussion of other factors that affected KKR's dividend income, see "—Analysis of Asset Management Segment Operating Results."

Interest Income
 
The increase in interest income during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to (i) the impact of closing CLOs that were consolidated subsequent to September 30, 2021 and higher interest rates on assets held in consolidated CLOs, and (ii) a higher level of interest income from investments held in certain of our consolidated alternative credit funds, primarily related to an increase in the amount of capital deployed and higher interest rates. Partially offsetting these increases was the deconsolidation of KKR Real Estate Finance Trust Inc. (NYSE: KREF) ("KREF") in the fourth quarter of 2021. For a discussion of other factors that affected KKR's interest income, see "—Analysis of Asset Management Segment Operating Results."

Interest Expense
 
The increase in interest expense during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to (i) the increase in the amount of borrowings outstanding from consolidated funds and other vehicles, (ii) impact of closing CLOs that were consolidated after September 30 2021 and higher interest rates on debt obligations held in consolidated CLOs, and (iii) the impact of issuances of our senior notes after September 30, 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 Expense

The decrease in compensation and benefits expense during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to the reversal of previously recognized accrued carried interest compensation, partially offset by (i) higher equity-based compensation charges and (ii) a higher level of discretionary cash compensation accrued resulting from a higher level of fee revenue and realized performance income in the current period.

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General, Administrative and Other

The increase in general, administrative and other expenses during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to a higher level of (i) professional fees, information technology and other administrative costs in connection with the overall growth of the firm and (ii) travel related expenses as a result of COVID-19 pandemic travel restrictions being reduced.

In periods of significant fundraising and to the extent that we use third parties to assist in our capital raising efforts, our General, Administrative and Other are expected to increase accordingly. Similarly, our General, Administrative and Other expenses are expected to increase as a result of increased levels of professional and other fees incurred as part of due diligence related to strategic acquisitions and new product development.

Condensed Consolidated Results of Operations (GAAP Basis - Unaudited) - Insurance

As discussed above, our insurance segment consists solely of the operations of Global Atlantic, which was acquired on February 1, 2021. Accordingly, prior periods have been excluded for insurance segment results. For the nine month period ended September 30, 2021, the results of Global Atlantic's insurance operations included in our condensed consolidated results of operations are from February 1, 2021 through September 30, 2021.

Assumption review

The assumptions on which reserves, deferred revenue and expenses are based are intended to represent an estimation of the benefits that are expected to be payable to, and fees or premiums that are expected to be collectible from, policyholders in future periods. 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.
The following table reflects the impact on net income by financial statement line item and to insurance segment adjusted operating earnings from Global Atlantic’s assumption review:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Impacts of assumption review, by statement of income line item:
Policy fees$(14)$182 $(196)
Policy benefits and claims(23,079)20,904 (43,983)
Amortization of policy acquisition costs7,686 (2,119)9,805 
Income tax impact3,236 (3,983)7,219 
Total assumption review impact on net income$(12,171)$14,984 $(27,155)
Assumption review impact on adjustments to derive insurance segment adjusted operating earnings(157)(97)(60)
Non-controlling interests' share of assumption review impact4,749 (5,734)10,483 
Total assumption review impact on insurance segment adjusted operating earnings$(7,579)$9,153 $(16,732)

For the three months ended September 30, 2022, the net unfavorable unlocking impact on net income and insurance segment adjusted operating earnings was primarily due to an increase in expected future surrender experience of annuity policies partially as a result of higher interest rates, and a decrease in expected future surrender experience of life insurance policies. For the three months ended September 30, 2021, the net favorable unlocking impact on net income and insurance segment adjusted operating earnings was primarily due to lower expected future mortality rates.
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Revenues

For the three months ended September 30, 2022 and 2021, revenues consisted of the following:

 Three Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Net Premiums$480,462 $974,903 $(494,441)
Policy Fees320,206 310,381 9,825 
Net Investment Income1,094,877 758,381 336,496 
Net Investment-Related Losses(173,830)162,127 (335,957)
Other Income35,632 31,938 3,694 
Total Insurance Revenues$1,757,347 $2,237,730 $(480,383)

Net Premiums
Net premiums decreased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to lower initial reserves related to fewer new reinsurance transactions with life contingencies assumed during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. These lower net premiums are offset by a comparable decrease in policy reserves reported within net policy benefits and claims (as discussed below).
Policy fees
Policy fees increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to higher administrative and rider fees due to growth in the individual market channel.
Net investment income
Net investment income increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) increased average assets under management due to growth in assets in our institutional market channel as a result of new reinsurance transactions and individual market channel sales from new business growth, (ii) growth in portfolio yields due to higher market interest rates on floating rate investments, and (iii) rotation into higher yielding assets.
Net investment-related losses
The components of net investment-related losses were as follows:

 Three Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Funds withheld payable at interest embedded derivatives$836,395 $103,971 $732,424 
Equity futures contracts37,247 1,783 35,464 
Foreign currency forwards42,136 (4,776)46,912 
Credit risk contracts370 (196)566 
Equity index options(156,561)(25,854)(130,707)
Interest rate contracts(107,494)(24,135)(83,359)
Funds withheld receivable embedded derivatives3,211 (10,001)13,212 
Net gains on derivative instruments655,304 40,792 614,512 
Net other investment gains (losses)(829,134)121,335 (950,469)
Net investment-related gains (losses)$(173,830)$162,127 $(335,957)

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Net gains on derivative instruments
The increase in the fair value of embedded derivatives on funds withheld at interest payable was driven primarily by the change in fair value of the underlying investments in the funds withheld payable at interest portfolio, which is primarily comprised of fixed maturity securities (designated as trading for accounting purposes), mortgage and other loan receivables and other investments. The underlying investments in the funds withheld payable at interest portfolio declined in value in the current period primarily due to an increase in market interest rates and wider credit spreads. The underlying investments in the funds withheld payable at interest portfolio declined in value in the prior period primarily due to a smaller increase in market interest rates, as compared to the current period.
The increase in realized gains on foreign currency forward contracts relative to the spot exchange rates was primarily due to strengthening of the U.S. dollar relative to hedged foreign currencies during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.
The increase in the fair value of equity futures contracts was driven primarily by the performance of equity markets. Global Atlantic purchases equity futures primarily to hedge the market risk in our variable annuity products which are accounted for in net policy benefits and claims. The majority of Global Atlantic's equity futures are based on the S&P 500 Index, which decreased during the three months ended September 30, 2022, as compared to the increase during the three months ended September 30, 2021, resulting in a gain on equity futures contracts in both periods.
The decrease in the fair value of equity index options was primarily driven by the performance of the indexes upon which call options are based. 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). The majority of Global Atlantic's equity index call options are based on the S&P 500 index, which decreased during the three months ended September 30, 2022, as compared to the increase during the three months ended September 30, 2021.
The decrease in the fair value of interest rate contracts was primarily driven by an increase in market interest rates during the three months ended September 30, 2022 as compared to a significantly smaller increase in market interest rates during the three months ended September 30, 2021.
Net other investment losses
The components of net other investment losses were as follows:
 Three Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Realized gains (losses) on investments not supporting asset-liability matching strategies$27,634 $51,492 $(23,858)
Realized gains (losses) on equity investments— 51,520 (51,520)
Realized gains (losses) on available-for-sale fixed maturity debt securities(8,277)(15,026)6,749 
Credit loss allowances(25,885)(76,872)50,987 
Unrealized gains (losses) on fixed maturity securities classified as trading(720,418)(133,118)(587,300)
Unrealized gains (losses) on investments classified as trading or accounted under a fair-value option(22,995)303,021 (326,016)
Unrealized gains (losses) on real estate investments recognized at fair value under investment company accounting(34,479)9,997 (44,476)
Realized gains (losses) on funds withheld at interest payable portfolio3,652 (12,272)15,924 
Realized gains (losses) on funds withheld at interest receivable portfolio3,858 2,633 1,225 
Other(52,224)(60,040)7,816 
Net other investment gains (losses)$(829,134)$121,335 $(950,469)
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The decrease in net other investment (losses) gains was primarily due to an increase in unrealized losses on fixed maturity securities classified as trading, and investments classified as trading or accounted under a fair-value option, primarily driven by an increase in interest rates and widening credit spreads in the current period compared to a significantly smaller increase in interest rates in the prior period, and the non-recurrence of an unrealized gain on the valuation of equity interest in our solar facility developers reported in the prior period.
Expenses

Net Policy benefits and claims
Net policy benefits and claims decreased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) lower initial reserves related to fewer new reinsurance transactions with life contingencies in the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, (ii) a decrease in the value of embedded derivatives in our indexed universal life and fixed indexed annuity products, as a result of lower equity market returns (as discussed above under "–Net investment-related losses–Gains on derivatives," 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). These decreases were offset by (i) an increase in net policy benefits and claims due to new business originated from both individual and institutional market channel sales (net of retrocessions), (ii) higher funding costs on new business, and (iii) unfavorable unlocking related to the assumption review described above under “—Notable Items—Assumption Review.”
Amortization of policy acquisition costs
Amortization of policy acquisition costs increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to growth in our individual market channel, which was offset by favorable unlocking related to the assumption review described above under “—Notable Items—Assumption Review.”
Insurance expenses
Insurance expenses increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) increased commission expense related to increased sales in our individual market and (ii) increased reinsurance ceding expense allowances paid for policy administration services as a result of an increase in reinsurance transactions.
General, administrative and other
General, administrative and other expenses increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) increased employee compensation and benefits-related expenses, (ii) increased professional service fees, and (iii) increased third-party administrator ("TPA") policy servicing fees, all due to growth of the business.











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Other Condensed Consolidated Results of Operations (GAAP Basis - Unaudited)
 
Income Tax Expense (Benefit)

For the three months ended September 30, 2022, income tax was an expense of $27.4 million compared to an income tax expense of $379.3 million in the prior period. In the current period, a current tax expense was generated on earnings from the Global Atlantic offset by a deferred tax benefit generated primarily due to pre-tax unrealized losses driven by net capital allocation-based losses and investment losses that are not currently deductible for tax purposes. Our effective tax rate under GAAP for the three months ended September 30, 2022 was (52.6)%. For a discussion of factors that impacted KKR's tax provision, see Note 18 "Income Taxes" to the financial statements included elsewhere in this report. The amount of U.S. federal or state corporate income taxes we pay in future periods may be materially increased if adverse tax laws become enacted. See “—Business Environment— Economic and Market Conditions” in this report.

Net Income (Loss) Attributable to Noncontrolling Interests
 
Net Income (Loss) attributable to noncontrolling interests for the three months ended September 30, 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 loss attributable to noncontrolling interests for the three months ended September 30, 2022 was primarily due to net losses from investment activities at our consolidated investment funds, partially offset by positive income allocable to interests that co-investors and rollover investors hold in Global Atlantic.

Net Income (Loss) Attributable to KKR & Co. Inc.
 
    The net loss attributable to KKR & Co. Inc. for the three months ended September 30, 2022 was primarily due to (i) net capital allocation-based losses and (ii) net losses from investment activities, partially offset by (i) a higher level of management fees and (ii) a reversal of previously recognized accrued carried interest compensation, as described above.
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Consolidated Results of Operations (GAAP Basis)
 
The following is a discussion of our consolidated results of operations on a GAAP basis for the nine months ended September 30, 2022 and 2021. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. See "Business Environment" for more information about factors that may affect our business, financial performance, operating results and valuations.

 Nine Months Ended
 September 30, 2022September 30, 2021Change
 ($ in thousands)
Revenues  
Asset Management
Fees and Other$2,069,704 $1,887,805 $181,899 
Capital Allocation-Based Income (Loss)(2,442,080)5,736,707 (8,178,787)
(372,376)7,624,512 (7,996,888)
Insurance
Net Premiums627,104 1,698,912 (1,071,808)
Policy Fees964,349 824,326 140,023 
Net Investment Income2,839,371 1,919,659 919,712 
Net Investment-Related Gains (Losses)(968,836)32,983 (1,001,819)
Other Income102,888 82,160 20,728 
3,564,876 4,558,040 (993,164)
Total Revenues3,192,500 12,182,552 (8,990,052)
Expenses
Asset Management
Compensation and Benefits779,050 3,419,057 (2,640,007)
Occupancy and Related Charges55,693 51,289 4,404 
General, Administrative and Other701,010 608,270 92,740 
1,535,753 4,078,616 (2,542,863)
Insurance
Net Policy Benefits and Claims1,768,384 3,593,563 (1,825,179)
Amortization of Policy Acquisition Costs13,693 (57,409)71,102 
Interest Expense58,330 44,482 13,848 
Insurance Expenses406,088 242,591 163,497 
General, Administrative and Other516,549 371,656 144,893 
2,763,044 4,194,883 (1,431,839)
Total Expenses4,298,797 8,273,499 (3,974,702)
Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities(1,350,388)8,032,900 (9,383,288)
Dividend Income1,104,120 323,051 781,069 
Interest Income1,244,339 1,151,548 92,791 
Interest Expense(1,002,005)(794,978)(207,027)
Total Investment Income (Loss)(3,934)8,712,521 (8,716,455)
Income (Loss) Before Taxes(1,110,231)12,621,574 (13,731,805)
Income Tax Expense (Benefit)(128,836)1,161,688 (1,290,524)
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Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Net Income (Loss)(981,395)11,459,886 (12,441,281)
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests1,546 2,856 (1,310)
Net Income (Loss) Attributable to Noncontrolling Interests(41,341)7,315,362 (7,356,703)
Net Income (Loss) Attributable to KKR & Co. Inc.(941,600)4,141,668 (5,083,268)
Series A Preferred Stock Dividends— 23,656 (23,656)
Series B Preferred Stock Dividends— 12,991 (12,991)
Series C Mandatory Convertible Preferred Stock Dividends51,750 51,750 — 
Net Income (Loss) Attributable to KKR & Co. Inc.
Common Stockholders
$(993,350)$4,053,271 $(5,046,621)


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Consolidated Results of Operations (GAAP Basis) - Asset Management
 
Revenues

For the nine months ended September 30, 2022 and 2021, revenues consisted of the following:

 Nine Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees$1,236,151 $931,624 $304,527 
Fee Credits(388,315)(322,402)(65,913)
Transaction Fees973,310 978,399 (5,089)
Monitoring Fees99,605 98,164 1,441 
Incentive Fees15,600 13,092 2,508 
Expense Reimbursements77,612 122,642 (45,030)
Consulting Fees55,741 66,286 (10,545)
Total Fees and Other2,069,704 1,887,805 181,899 
Carried Interest(1,999,678)4,553,527 (6,553,205)
General Partner Capital Interest(442,402)1,183,180 (1,625,582)
Total Capital Allocation-Based Income (Loss)(2,442,080)5,736,707 (8,178,787)
Total Revenues - Asset Management$(372,376)$7,624,512 $(7,996,888)

Fees and Other

Total Fees and Other for the nine months ended September 30, 2022 increased compared to the nine months ended September 30, 2021 primarily as a result of the increase in management fees.

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. The increase was partially offset by a decrease in management fees earned from Americas Fund XII and Global Infrastructure Investors III as a result of entering their post-investment period and now earning fees based on capital invested rather than capital committed.

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, 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. Accordingly, the elimination of these fees does not impact the net income (loss) attributable to KKR or KKR stockholders' equity. 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 in our private equity and real asset business lines. Fee credits owed to consolidated investment funds are eliminated upon consolidation under GAAP. However, because these amounts are owed to noncontrolling interests, KKR's allocated share of the net income from the consolidated investment funds is decreased by the amount of fee credits that are eliminated. Accordingly, the elimination of these fee credits does not impact the net income (loss) attributable to KKR or KKR stockholders' equity. Transaction and monitoring fees earned from KKR portfolio companies are not eliminated upon consolidation because those fees are earned from companies which are not consolidated. Furthermore, transaction fees earned in our capital markets business are not shared with fund investors. Accordingly, certain transaction fees are reflected in revenues without a corresponding fee credit.



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Capital Allocation-Based Income (Loss)

Capital Allocation-Based Income (Loss) for the nine months ended September 30, 2022 was negative primarily due to the net depreciation of the underlying investments at many of our carry earning investment funds, most notably Americas Fund XII, Asian Fund II, and Asian Fund III. Capital Allocation-Based Income (Loss) for the nine months ended September 30, 2021 was positive primarily due to the net appreciation of the underlying investments at our carry earning investment funds, most notably Americas Fund XII, Asian Fund III, and North America Fund XI.

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. 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.

Investment Income (Loss) - Asset Management

For additional information about net gains (losses) from investment activities, see Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" in our financial statements.

Net Gains (Losses) from Investment Activities for the nine months ended September 30, 2022
The net losses from investment activities for the nine months ended September 30, 2022 were comprised of net realized gains of $1,158.6 million and net unrealized losses of $(2,509.0) million.
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.
Realized Gains and Losses from Investment Activities
For the nine months ended September 30, 2022, net realized gains related primarily to (i) the sale of our investment in Fiserv, Inc., (ii) the sale of Internet Brands, Inc. (technology sector) held in one of our consolidated funds, and (iii) the sale of real estate equity investments held in certain consolidated real estate opportunistic funds. Partially offsetting these realized gains were realized losses primarily relating to certain investments held in our consolidated alternative credit funds.
Unrealized Gains and Losses from Investment Activities
For the nine months ended September 30, 2022, net unrealized losses were driven primarily by mark-to-market losses from (i) investments held in certain consolidated alternative credit funds, (ii) OutSystems Holdings S.A. (technology sector), 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., (iii) Clarify Health Solutions Inc. (healthcare sector), and (iv) foreign exchanged derivative contracts.
For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Asset Management Segment Operating Results".
Net Gains (Losses) from Investment Activities for the nine months ended September 30, 2021
The net gains from investment activities for the nine months ended September 30, 2021 were comprised of net realized gains of $1,533.0 million and net unrealized gains of $6,499.9 million.
Realized Gains and Losses from Investment Activities
For the nine months ended September 30, 2021, net realized gains related primarily to the sales of our investments in FanDuel Inc., Mr. Cooper Group Inc., and BridgeBio Pharma, Inc. Partially offsetting these realized gains were realized losses
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primarily relating to certain investments held in our consolidated credit funds and realized losses related to certain hedging instruments.

Unrealized Gains and Losses from Investment Activities
For the nine months ended September 30, 2021, net unrealized gains were driven primarily by (i) mark-to-market gains from private equity, growth equity and core investments held by KKR and certain consolidated funds, the most significant of which were PetVet Care Centers, LLC, Heartland Dental, LLC, and OutSystems Holdings S.A. and (ii) mark-to-market gains from certain investments held in our real estate funds. These unrealized gains were partially offset by (i) the reversal of previously recognized unrealized gains relating to the realization activity described above and (ii) an unrealized loss on BridgeBio Pharma, Inc.

For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Asset Management Segment Operating Results".
Dividend Income
 
During the nine months ended September 30, 2022, the most significant dividends received included (i) $406.7 million from investments held in our consolidated real estate core plus and real estate opportunistic equity funds and (ii) $86.6 million from our investment in Exact Group B.V. (technology sector) held in our consolidated core vehicles. During the nine months ended September 30, 2021, the most significant dividends received included (i) $138.0 million from our consolidated real estate and infrastructure funds, (ii) $33.9 million from our consolidated energy funds, and (iii) $26.9 million from our investment in Viridor Limited (infrastructure).

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. For a discussion of other factors that affected KKR's dividend income, see "—Analysis of Asset Management Segment Operating Results."

Interest Income
 
The increase in interest income during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to (i) the impact of closing additional CLOs that were consolidated subsequent to September 30, 2021 and higher interest rates on assets held in consolidated CLOs and (ii) a higher level of interest income from investments held in certain of our consolidated alternative credit funds, primarily related to an increase in the amount of capital deployed and higher interest rates. 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 income, see "—Analysis of Asset Management Segment Operating Results."

Interest Expense
 
The increase in interest expense during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to the (i) increase in the amount of borrowings outstanding from consolidated funds and other vehicles, (ii) impact of closing additional CLOs that were consolidated subsequent to September 30, 2021 and higher interest rates on debt obligations held in consolidated CLOs, and (iii) the impact of issuances of our senior notes after September 30, 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 nine months ended September 30, 2022 compared to the nine months ended September 30, 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 accrued resulting from a higher level of fee revenue and realized performance income in the current period.


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General, Administrative and Other

The increase in general, administrative and other expenses during the nine months ended September 30, 2022 compared to the nine months ended September 30, 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) broken-deal expenses, (iv) professional fees, information technology and other administrative costs, and (v) travel related expenses as a result of COVID-19 pandemic travel restrictions being reduced.

The level of broken-deal expenses can vary significantly period to period based upon a number of factors, the most significant of which are the number of potential investments being pursued for our investment funds, the size and complexity of investments being pursued and the number of investment funds currently in their investment period. Also, in periods of significant fundraising and to the extent that we use third parties to assist in our capital raising efforts, our General, Administrative and Other are expected to increase accordingly. Similarly, our General, Administrative and Other expenses are expected to increase as a result of increased levels of professional and other fees incurred as part of due diligence related to strategic acquisitions and new product development.

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Consolidated Results of Operations (GAAP Basis) - Insurance

For the nine months ended September 30, 2021, the results of Global Atlantic's insurance operations included in our consolidated results of operations are from the acquisition date, February 1, 2021, through September 30, 2021.

Assumption review

The following table reflects the impact on net income by financial statement line item and to insurance segment adjusted operating earnings from Global Atlantic’s annual assumption review completed in the third quarter (which as a result, is identical to the table presented above for the three months ended September 30, 2022 and 2021) :

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Impacts of assumption review, by statement of income line item:
Policy fees$(14)$182 $(196)
Policy benefits and claims(23,079)20,904 (43,983)
Amortization of policy acquisition costs7,686 (2,119)9,805 
Income tax impact3,236 (3,983)7,219 
Total assumption review impact on net income$(12,171)$14,984 $(27,155)
Assumption review impact on adjustments to derive insurance segment adjusted operating earnings(157)(97)(60)
Non-controlling interests' share of assumption review impact4,749 (5,734)10,483 
Total assumption review impact on insurance segment adjusted operating earnings$(7,579)$9,153 $(16,732)

For the nine months ended September 30, 2022, the net unfavorable unlocking impact on net income and insurance segment adjusted operating earnings was primarily due to an increase in expected future surrender experience of annuity policies partially as a result of higher interest rates, and a decrease in expected future surrender experience of life insurance policies. For the nine months ended September 30, 2021, the net favorable unlocking impact on net income and insurance segment adjusted operating earnings was primarily due to lower expected future mortality rates.

Revenues

For the nine months ended September 30, 2022 and 2021, revenues consisted of the following:

 Nine Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Net Premiums$627,104 $1,698,912 $(1,071,808)
Policy Fees964,349 824,326 140,023 
Net Investment Income2,839,371 1,919,659 919,712 
Net Investment-Related Gains(968,836)32,983 (1,001,819)
Other Income102,888 82,160 20,728 
Total Insurance Revenues$3,564,876 $4,558,040 $(993,164)

Net Premiums
Net premiums decreased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to lower initial premiums related to fewer reinsurance transactions with life contingencies assumed during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The decrease was partially offset by lower retrocessions to third party reinsurers during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The initial premiums on assumed reinsurance are offset by a comparable increase in policy reserves reported within net policy benefits and claims (as discussed below).
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Policy fees
Policy fees increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to one less month of activity reported in the prior period as a result of the GA Acquisition on February 1, 2021.
Net investment income
Net investment income increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) increased average assets under management due to growth in assets in our institutional market channel as a result of new reinsurance transactions and individual market channel sales, (iii) higher yields on floating-rate investments due to higher market interest rates and (iv) rotation into higher yielding assets.

Net investment-related losses
The components of net investment-related losses were as follows:
 Nine Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Funds withheld payable embedded derivatives$3,380,530 $48,799 $3,331,731 
Equity futures contracts199,432 (171,982)371,414 
Foreign currency forwards70,048 (675)70,723 
Credit risk contracts705 (254)959 
Equity index options(884,786)275,035 (1,159,821)
Interest rate contracts(331,395)(149,274)(182,121)
Funds withheld receivable embedded derivatives(64,130)68,449 (132,579)
Net gains on derivative instruments2,370,404 70,098 2,300,306 
Net other investment losses(3,339,240)(37,115)(3,302,125)
Net investment-related gains$(968,836)$32,983 $(1,001,819)
Net gains on derivative instruments
The increase in the fair value of embedded derivatives on funds withheld at interest payable was primarily driven by the change in fair value of the underlying investments in the funds withheld payable at interest portfolio, which is primarily comprised of fixed maturity securities (designated as trading for accounting purposes), mortgage and other loan receivables, and other investments. The underlying investments in the funds withheld payable at interest portfolio declined in value in the current period primarily due to an increase in market interest rates and wider credit spreads.
The increase in the fair value of equity futures was driven primarily by the performance of equity markets. Global Atlantic purchases equity futures primarily to hedge the market risk in our variable annuity products which are accounted for in net policy benefits and claims. The majority of Global Atlantic's equity futures are based on the S&P 500 Index, which decreased during the nine months ended September 30, 2022, as compared to an increase during the nine months ended September 30, 2021, resulting in respectively, a gain, and a loss, on equity futures contracts in the respective periods.
The increase in realized gains on foreign currency forward contracts relative to the spot exchange rates were primarily due to strengthening of the U.S. dollar relative to hedged foreign currencies during the nine months ended September 30, 2022, as compared to the prior period.
The decrease in the fair value of equity index options was primarily driven by the performance of the indexes upon which call options are based. 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). The majority of Global Atlantic's equity index call options are based on the S&P 500 index, which decreased during the nine months ended September 30, 2022, as compared to the increase during the nine months ended September 30, 2021.
The decrease in the fair value of interest rate contracts was driven by an increase in market interest rates during both the nine months ended September 30, 2022 and the prior period, resulting in a loss on interest rate contracts.
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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 nine months ended September 30, 2022, as compared to the tightening of credit spreads in the nine months ended September 30, 2021.
Net other investment losses
The components of net other investment losses were as follows:

 Nine Months Ended
 September 30, 2022September 30, 2021Change
($ in thousands)
Realized gains (losses) on investments not supporting asset-liability matching strategies$87,198 $98,933 $(11,735)
Realized gains (losses) on equity investments— 76,645 (76,645)
Realized gains (losses) on available-for-sale fixed maturity debt securities(539,000)(88,300)(450,700)
Credit loss allowances(84,690)(244,775)160,085 
Unrealized gains (losses) on fixed maturity securities classified as trading(2,748,542)(130,228)(2,618,314)
Unrealized gains (losses) on investments classified as trading or fair-value option(63,923)350,442 (414,365)
Unrealized gains (losses) on real estate investments recognized at fair value under investment company accounting88,609 20,264 68,345 
Realized gains (losses) on funds withheld at interest, payable5,992 (31,384)37,376 
Realized gains (losses) on funds withheld at interest, receivable7,296 10,250 (2,954)
Other(92,180)(98,962)6,782 
Net investment-related gains$(3,339,240)$(37,115)$(3,302,125)

The increase in net other investment losses were primarily due to (i) increase in unrealized losses on fixed maturity securities classified as trading primarily due to an increase in interest rates and widening credit spreads in the current period, (ii) the increase in realized losses on available-for-sale fixed maturity debt securities primarily due to portfolio rotation in a higher interest rate environment, and (iii) the non-recurrence of unrealized gains on the valuation of our equity interests in solar facility developers reported in the prior period.

Offsetting these losses were (i) a higher credit loss allowance on mortgage and other loan receivables in the prior period primarily due to 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, and (ii) unrealized gains on real estate investments recognized at fair value under investment company accounting.

Other income

Other income increased for the nine months ended September 30, 2022 as compared to the prior period primarily due to one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021.
Expenses

Net policy benefits and claims
Net policy benefits and claims decreased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) lower initial reserves related to fewer new reinsurance transactions with life contingencies in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, and (ii) a decrease in the value of embedded derivatives in Global Atlantic's indexed universal life and fixed indexed annuity products, as a result of lower equity market returns (as discussed above under "–Net investment related losses–Gains on derivatives," 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). This decrease was offset by (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) an increase in net flows from both individual and institutional market channel sales, (iii) an increase in variable annuity reserves primarily due to lower equity market returns, (iv) higher funding costs on new business, and (v) unfavorable unlocking related to the assumption review described above under “—Notable Items—Assumption Review.”
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Amortization of policy acquisition costs
Amortization of policy acquisition costs increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) a decrease in the net benefit (that is, a reduction to expense) from the amortization of the net negative insurance intangibles recognized as part of purchase accounting of the GA Acquisition, as the underlying business runs off, and (ii) growth in our individual market channel. Offsetting these increases in expense was a decrease in amortization due to realized investment losses, and (ii) favorable unlocking related to the assumption review described above under “—Notable Items—Assumption Review.”
Interest expense
Interest expense increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) a net increase in debt outstanding, including a draw on the revolving credit facility in the quarter ended March 31, 2022, and (ii) the impact of one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021.
Insurance expenses
Insurance expenses increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior 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.
General, administrative and other
General, administrative and other expenses increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) increased employee compensation and benefits related expenses, (iii) increased professional service fees, and (iv) increased TPA policy servicing fees, all due to growth of the business.
Other Consolidated Results of Operations (GAAP Basis)
 
Income Tax Expense (Benefit)

For the nine months ended September 30, 2022, income tax was a benefit of $128.8 million compared to an income tax expense of $1,161.7 million in the prior period. In the current period, a deferred tax benefit was generated primarily due to pre-tax unrealized losses driven by net capital allocation-based losses and investment losses that are not currently deductible for tax purposes. Our effective tax rate under GAAP for the nine months ended September 30, 2022 was 11.6%. For a discussion of factors that impacted KKR's tax provision, see Note 18 "Income Taxes" to the financial statements included elsewhere in this report. The amount of U.S. federal and state corporate income taxes we pay in future periods may be materially increased if adverse tax laws become enacted. See “—Business Environment— Economic and Market Conditions” in this report.

Net Income (Loss) Attributable to Noncontrolling Interests
 
Net Income (Loss) attributable to noncontrolling interests for the nine months ended September 30, 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. The net loss attributable to noncontrolling interests for the nine months ended September 30, 2022 was primarily due to (i) net losses from investment activities at our consolidated investment funds and (ii) a net loss attributable to exchangeable securities in the current period.

Net Income (Loss) Attributable to KKR & Co. Inc.
 
    The net loss attributable to KKR & Co. Inc. for the nine months ended September 30, 2022 was primarily due to (i) net capital allocation-based losses and (ii) net losses from investment activities, partially offset by (i) a higher level of management fees and (ii) a reversal of previously recognized accrued carried interest compensation, as described above.
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Condensed Consolidated Statements of Financial Condition (GAAP Basis - Unaudited)

    The following table provides our condensed consolidated statements of financial condition on a GAAP basis as of September 30, 2022 and December 31, 2021.
(Amounts in thousands, except per share amounts)
As ofAs of
September 30, 2022December 31, 2021
Assets
Asset Management
Cash and Cash Equivalents$6,911,691 $6,699,668 
Investments89,720,859 88,775,514 
Other Assets6,748,929 4,244,894 
103,381,479 99,720,076 
Insurance
Cash and Cash Equivalents4,147,146 3,391,934 
Investments118,772,273 123,763,675 
Other Assets39,947,742 37,409,755 
162,867,161 164,565,364 
Total Assets$266,248,640$264,285,440
Liabilities and Equity
Asset Management
Debt Obligations$38,257,833 $36,669,755 
Other Liabilities7,579,996 8,359,619 
45,837,829 45,029,374 
Insurance
Debt Obligations1,920,906 1,908,006 
Other Liabilities166,507,110 159,208,840 
168,428,016 161,116,846 
Total Liabilities$214,265,845 $206,146,220 
Redeemable Noncontrolling Interests82,133 82,491 
Stockholders' Equity
Stockholders' Equity - Series C Mandatory Convertible Preferred Stock1,115,792 1,115,792 
Stockholders' Equity - Common Stock16,335,253 16,466,372 
Noncontrolling Interests34,449,617 40,474,565 
Total Equity51,900,662 58,056,729 
Total Liabilities and Equity$266,248,640 $264,285,440 
KKR & Co. Inc. Stockholders' Equity - Common Stock
Per Outstanding Share of Common Stock
$19.00 $27.64 
    
KKR & Co. Inc. Stockholders’ Equity - Common Stock per Outstanding Share of Common Stock was $19.00 as of September 30, 2022, down from $27.64 as of December 31, 2021. The decrease was primarily due to the (i) unrealized losses on available-for-sale-securities from Global Atlantic that are recorded in other comprehensive income, (ii) repurchases of common stock, (iii) dividends to common stockholders, and (iv) a net loss attributable to KKR & Co. Inc. common stockholders during the nine months ended September 30, 2022.
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Condensed Consolidated Statements of Cash Flows (GAAP Basis - Unaudited)
 
The following is a discussion of our consolidated cash flows for the nine months ended September 30, 2022 and 2021. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report.

The consolidated statements of cash flows include the cash flows of our consolidated entities, which include certain consolidated investment funds, CLOs and certain variable interest entities formed by Global Atlantic notwithstanding the fact that we may hold only a minority economic interest in those investment funds and CFEs. The assets of our consolidated investment funds and CFEs, on a gross basis, can be substantially larger than the assets of our business and, accordingly, could have a substantial effect on the cash flows reflected in our consolidated statements of cash flows. The primary cash flow activities of our consolidated funds and CFEs involve: (i) capital contributions from fund investors; (ii) using the capital of fund investors to make investments; (iii) financing certain investments with indebtedness; (iv) generating cash flows through the realization of investments; and (v) distributing cash flows from the realization of investments to fund investors. 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 $(4.6) billion and $(3.6) billion during the nine months ended September 30, 2022 and 2021, respectively. These amounts primarily included: (i) investments purchased (asset management), net of proceeds from investments (asset management) of $(8.9) billion and $(7.1) billion during the nine months ended September 30, 2022 and 2021, respectively, (ii) net realized gains (losses) on asset management investments of $1.2 billion and $1.5 billion during the nine months ended September 30, 2022 and 2021, respectively, (iii) change in unrealized gains (losses) on investments (asset management) of $(2.5) billion and $6.5 billion during the nine months ended September 30, 2022 and 2021, respectively, (iv) capital allocation-based income (loss) of $(2.4) billion and $5.7 billion during the nine months ended September 30, 2022 and 2021, respectively, and (v) net realized gains (losses) on insurance operations of $(235.9) million and $(642.6) million during the nine months ended September 30, 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 $(10.7) billion and $(7.0) billion during the nine months ended September 30, 2022 and 2021, respectively. Our investing activities included: (i) investments purchased (insurance), net of proceeds from investments (insurance) of $(8.9) billion and $(5.8) billion during the nine months ended September 30, 2022 and 2021, respectively, (ii) acquisitions, net of cash acquired of $(1.7) billion and $(473.8) million during the nine months ended September 30, 2022 and 2021, respectively, and (iii) the purchase of fixed assets of $(58.6) million and $(82.5) million during the nine months ended September 30, 2022 and 2021, respectively.
 
Net Cash Provided (Used) by Financing Activities
 
Our net cash provided (used) by financing activities was $16.7 billion and $16.1 billion during the nine months ended September 30, 2022 and 2021, respectively. Our financing activities primarily included: (i) contributions by, net of distributions to, our noncontrolling and redeemable noncontrolling interests of $5.3 billion and $4.9 billion during the nine months ended September 30, 2022 and 2021, respectively, (ii) proceeds received net of repayment of debt obligations of $4.9 billion and $6.7 billion during the nine months ended September 30, 2022 and 2021, respectively, (iii) additions to, net of withdrawals from contractholder deposit funds of $6.8 billion and $5.1 billion during nine months ended September 30, 2022 and 2021, respectively, (iv) common stock dividends of $(310.9) million and $(246.7) million during the nine months ended September 30, 2022 and 2021, respectively, (v) net delivery of common stock of $(34.9) million and $(106.9) million during the nine months ended September 30, 2022 and 2021, respectively, (vi) repurchases of common stock of $(346.7) million and $(135.9) million during the nine months ended September 30, 2022 and 2021, respectively, (vii) Series A and B Preferred Stock dividends of $(19.2) million during the nine months ended September 30, 2021, (viii) Series C Mandatory Convertible Preferred Stock dividends of $(51.8) million during the nine months ended September 30, 2022 and 2021, respectively, and (ix) private placement share issuance of $38.5 million during nine months ended September 30, 2021.

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Analysis of Segment Operating Results
 
The following is a discussion of the results of our business on a segment basis for the three months ended September 30, 2022 and 2021. You should read this discussion in conjunction with the information included under "—Key Segment and Non-GAAP Performance Measures and Other Terms and Operating Metrics" and the financial statements and related notes included elsewhere in this report. See "Business Environment" for more information about factors that may impact our business, financial performance, operating results and valuations.

For the nine months ended September 30, 2021, the results of our insurance segment are from February 1, 2021 (closing date of the acquisition) through September 30, 2021.

Analysis of Asset Management Segment Operating Results

The following tables set forth information regarding KKR's asset management segment operating results and certain key capital metrics for the three months ended September 30, 2022 and 2021:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees$670,534 $559,016 $111,518 
Transaction and Monitoring Fees, Net167,455 249,670 (82,215)
Fee Related Performance Revenues49,924 9,897 40,027 
Fee Related Compensation(199,780)(184,224)(15,556)
Other Operating Expenses(146,370)(104,772)(41,598)
Fee Related Earnings541,763 529,587 12,176 
Realized Performance Income497,860 432,784 65,076 
Realized Performance Income Compensation(322,927)(274,955)(47,972)
Realized Investment Income284,979 447,565 (162,586)
Realized Investment Income Compensation(42,747)(67,142)24,395 
Asset Management Segment Operating Earnings$958,928 $1,067,839 $(108,911)

Management Fees

The following table presents management fees by business line:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees
Private Equity$295,234 $261,906 $33,328 
Real Assets178,652 123,786 54,866 
Credit and Liquid Strategies196,648 173,324 23,324 
Total Management Fees$670,534 $559,016 $111,518 

The increase in Private Equity management fees was primarily attributable to management fees earned from European Fund VI and Global Impact Fund II. The increase was partially offset by a decrease in management fees earned from European Fund V as a result of entering its post-investment period in the first quarter of 2022 and, consequently, we now earn fees based on capital invested rather than capital committed and at a lower fee rate.

The increase in Real Asset management fees was primarily due to (i) an increase in management fees earned from Global Atlantic, (ii) management fees earned on assets managed by KJRM, which we acquired in 2022, and (iii) management fees earned from Global Infrastructure Investors IV.

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The increase in Credit and Liquid Strategies management fees was primarily attributable to (i) an increase in management fees earned from Global Atlantic, (ii) new CLO issuances, and (iii) a higher level of invested capital within our alternative credit strategy.

Transaction and Monitoring Fees, Net

The following table presents transaction and monitoring fees, net by business line:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Transaction and Monitoring Fees, Net
Private Equity$41,436 $43,368 $(1,932)
Real Assets6,730 5,843 887 
Credit and Liquid Strategies3,224 4,397 (1,173)
Capital Markets116,065 196,062 (79,997)
Total Transaction and Monitoring Fees, Net$167,455 $249,670 $(82,215)

Our Capital Markets business line earns transaction fees, which are not shared with fund investors. The decrease in capital markets transaction fees was primarily due to a decrease in the number of capital markets transactions for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Overall, we completed 47 capital markets transactions for the three months ended September 30, 2022, of which 6 represented equity offerings and 41 represented debt offerings, as compared to 87 transactions for the three months ended September 30, 2021, of which 15 represented equity offerings and 72 represented debt offerings. We earned fees in connection with underwriting, syndication and other capital markets services. 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.

    Our Capital Markets business line fees are generated in connection with our Private Equity, Real Assets and Credit and Liquid Strategies business lines as well as from third-party companies. For the three months ended September 30, 2022, approximately 3% of our transaction fees in our Capital Markets business line were earned from unaffiliated third parties as compared to approximately 23% for the three months ended September 30, 2021. Our transaction fees are comprised of fees earned in North America, Europe, and the Asia-Pacific region. For the three months ended September 30, 2022, approximately 38% of our transaction fees were generated outside of North America as compared to approximately 23% for the three months ended September 30, 2021. Our Capital Markets business line is dependent on the overall capital markets environment, which is influenced by equity prices, credit spreads, and market volatility. Our Capital Markets business line does not generate monitoring fees.

Our Private Equity, Real Assets and Credit and Liquid Strategies business lines separately earn transaction and monitoring fees from portfolio companies, and under the terms of the management agreements with certain of our investment funds, we are required to share all or a portion of such fees with our fund investors. Additionally, transaction fees are generally not earned with respect to energy and real estate investments.

The decrease in Private Equity business line transaction and monitoring fees, net, was primarily attributable to a lower level of transaction fees. During the three months ended September 30, 2022, there were 16 transaction fee-generating investments that paid an average fee of $7.1 million compared to 16 transaction fee-generating investments that paid an average fee of $8.2 million during the three months ended September 30, 2021. For the three months ended September 30, 2022, approximately 93% were paid from companies in North America, 5% were paid from companies in the Asia-Pacific region, and 2% were paid by companies in Europe. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the particular agreements as to the amount of the fees, the complexity of the transaction, and KKR's role in the transaction.






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Fee Related Performance Revenues

The following table presents fee related performance revenues by business line:
Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Fee Related Performance Revenues
Private Equity$— $— $— 
Real Assets39,284 1,568 37,716 
Credit and Liquid Strategies10,640 8,329 2,311 
Total Fee Related Performance Revenues$49,924 $9,897 $40,027 

Fee related performance revenues represent performance fees that are (i) to be received from our investment funds, vehicles, and accounts on a recurring basis and (ii) not dependent on a realization event involving investments held by the investment fund, vehicle or account. These performance fees are primarily earned from (i) our business development company, FSK in our Credit and Liquid Strategies business line, and (ii) our open-ended core real estate fund, KKR Property Partners Americas ("KPPA"), our registered closed-end real estate equity fund, KKR Real Estate Select Trust Inc. ("KREST"), and our real estate credit investment trust, KKR Real Estate Finance Trust Inc. ("KREF"), all of which are in our Real Assets business line. Fee related performance revenues were higher for the three months ended September 30, 2022 compared to the prior period primarily due to performance revenues earned from KPPA in the current period.

Fee Related Compensation

The increase in fee related compensation for the three months ended September 30, 2022 compared to the prior period was primarily due to a higher level of compensation recorded in connection with the higher level of revenues included within fee related earnings.

Other Operating Expenses

The increase in other operating expenses for the three months ended September 30, 2022 compared to the prior period was primarily due to (i) a higher level of professional fees, information technology and other administrative costs and (ii) an increase in travel related expenses as a result of COVID-19 pandemic travel restrictions being reduced.

Fee Related Earnings

The increase in fee related earnings for the three months ended September 30, 2022 compared to the prior period was primarily due to a higher level of management fees and performance revenues, partially offset by a lower level of transaction fees and a higher level of other operating expenses, as described above.

Realized Performance Income

The following table presents realized performance income by business line:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Realized Performance Income
Private Equity$484,560 $401,902 $82,658 
Real Assets11,934 11,212 722 
Credit and Liquid Strategies1,366 19,670 (18,304)
Total Realized Performance Income$497,860 $432,784 $65,076 

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Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Private Equity
North America Fund XI$363,384 $72,313 $291,071 
2006 Fund64,189 81,356 (17,167)
Asian Fund III53,204 — 53,204 
Co-Investment Vehicles and Other3,783 22,514 (18,731)
Americas Fund XII— 207,559 (207,559)
Next Generation Technology Growth Fund— 18,160 (18,160)
Total Realized Carried Interest (1)
484,560 401,902 82,658 
Incentive Fees— — — 
Total Realized Performance Income$484,560 $401,902 $82,658 

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Real Assets
Global Infrastructure Investors II$8,502 $— $8,502 
Real Estate Partners Americas II3,432 — 3,432 
Real Estate Partners Europe— 11,212 (11,212)
Total Realized Carried Interest (1)
11,934 11,212 722 
Incentive Fees— — — 
Total Realized Performance Income$11,934 $11,212 $722 

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Credit and Liquid Strategies
Alternative Credit Vehicles$— $— $— 
Total Realized Carried Interest (1)
— — — 
Incentive Fees1,366 19,670 (18,304)
Total Realized Performance Income$1,366 $19,670 $(18,304)
(1)The above tables exclude any funds for which there was no realized carried interest during both of the periods presented.

Realized performance income includes (i) realized carried interest from our carry earning funds and (ii) incentive fees not included in Fee Related Performance Revenues.

Realized carried interest in our Private Equity business line for the three months ended September 30, 2022 consisted primarily of realized proceeds from the sales of our investments in CHI Overhead Doors, Inc. (manufacturing sector) held by North America Fund XI, Fiserv, Inc. held by 2006 Fund, and Max Healthcare Institute Limited (NSE:MAXHEALTH) held by Asian Fund III.

Realized carried interest in our Private Equity business line for the three months ended September 30, 2021 consisted primarily of realized proceeds from the sales of our investments in The Bountiful Company (consumer products sector), Ingersoll Rand Inc. (NASDAQ: IR), and Academy Sports & Outdoors Inc. (NASDAQ: ASO).

Realized carried interest in our Real Assets business line for the three months ended September 30, 2022 consisted primarily of realized proceeds from (i) the sale of our investment in Telxius Telecom, S.A. (infrastructure) held by Global Infrastructure Investors II and (ii) dividends received and sales of various investments held by Real Estate Partners Americas II.
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Realized carried interest in our Real Assets business line for the three months ended September 30, 2021 consisted primarily of realized proceeds from dividends received by Real Estate Partners Europe.

During the three months ended September 30, 2022 and September 30, 2021, there was no realized carried interest earned in our Credit and Liquid Strategies business line.

Incentive fees consist of performance fees earned from (i) our hedge fund partnerships, (ii) investment management agreements with KKR's credit vehicles, and (iii) investment management agreements to provide KKR’s investment strategies to funds managed by a third party asset management firm. Incentive fees in our Credit and Liquid Strategies business line decreased for the three months ended September 30, 2022 compared to the prior period as a result of a lower level of performance fees earned from our hedge fund partnerships.

Realized Performance Income Compensation

The increase in realized performance income compensation for the three months ended September 30, 2022 compared to the prior period was primarily due to a higher level of compensation recorded in connection with the higher level of realized performance income.

Realized Investment Income

The following table presents realized investment income in our Principal Activities business line:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Realized Investment Income
Net Realized Gains (Losses)$162,716 $389,837 $(227,121)
Interest Income and Dividends122,263 57,728 64,535 
Total Realized Investment Income$284,979 $447,565 $(162,586)
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. The amount of realized investment income depends on the transaction activity of our funds and balance sheet, which can vary from period to period.
    For the three months ended September 30, 2022, net realized gains were comprised of realized gains primarily from the sale of our investments in Fiserv, Inc., CHI Overhead Doors, Inc., and Viridor Limited. Partially offsetting these realized gains were realized losses, the most significant of which were realized losses from the sale of revolving credit facilities and a realized loss on an underwritten debt offering transaction.
    For the three months ended September 30, 2021, net realized gains were comprised of realized gains primarily from the sale of our Private Equity business line investments in Mr. Cooper Group Inc., FanDuel Inc., and The Bountiful Company. Partially offsetting these realized gains were realized losses related to certain alternative credit investments.
    For the three months ended September 30, 2022, interest income and dividends were comprised of (i) $65.0 million of interest income, primarily from our investments in CLOs, and (ii) $57.3 million of dividend distributions primarily from our real estate investments, as well as a dividend distribution received from our infrastructure investment in Veresen Midstream (infrastructure).
    For the three months ended September 30, 2021, interest income and dividends were comprised of (i) $29.3 million of dividend income primarily from our real asset investments including our investment in KREF and (ii) $28.4 million of interest income from our investments in CLOs. See "—Analysis of Non-GAAP Performance Measures—Non-GAAP Balance Sheet Measures."
    We expect realized performance income and realized investment income to be greater than $350 million in the fourth quarter of 2022 relating to (i) realized incentive fees from Marshall Wace and (ii) realized carried interest and realized investment income from completed, or signed and expected to be completed sales, partial sales or secondary sales subsequent to September 30, 2022 with respect to certain private equity portfolio companies and other investments. Some of these
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transactions are not complete, and are subject to the satisfaction of closing conditions, including but not limited to regulatory approvals; there can be no assurance if or when any of these transactions will be completed.
Prior to the acquisition of KKR Capstone on January 1, 2020, (i) KKR Capstone's financial results were consolidated with KKR's financial results in accordance with GAAP, and as such the fees and expenses attributable to KKR Capstone were included in KKR's consolidated revenues and expenses, and (ii) KKR Capstone's financial results were excluded from KKR's non-GAAP financial measures, because KKR presented its non-GAAP financial measures prior to the effect to the consolidation of certain entities that were not subsidiaries of KKR. Following the acquisition of KKR Capstone on January 1, 2020, after-tax distributable earnings includes the net income (loss) from KKR Capstone within realized investment income (loss).
For the quarter ended September 30, 2022, total fees attributable to KKR Capstone were $20.7 million and total expenses attributable to KKR Capstone were $20.2 million. For KKR Capstone-related adjustments in reconciling asset management segment revenues to GAAP revenues see "—Analysis of Non-GAAP Performance Measures—Reconciliations to GAAP Measures".
Realized Investment Income Compensation
The decrease in realized investment income compensation for the three months ended September 30, 2022 compared to the prior period is primarily due to a lower level of compensation recorded in connection with the lower level of realized investment income.
Other Operating and Capital Measures
The following table presents certain key operating and capital metrics as of September 30, 2022 and June 30, 2022:
As of
September 30, 2022June 30, 2022Change
($ in millions)
Assets Under Management$496,219 $490,692 $5,527 
Fee Paying Assets Under Management$397,627 $384,470 $13,157 
Uncalled Commitments$112,589 $115,300 $(2,711)

The following table presents one of our key capital metrics for the three months ended September 30, 2022 and 2021:
Three Months Ended
September 30, 2022September 30, 2021Change
($ in millions)
Capital Invested$15,683 $24,415 $(8,732)

Assets Under Management

Private Equity

The following table reflects the changes in our Private Equity business line AUM from June 30, 2022 to September 30, 2022:
 ($ in millions)
June 30, 2022$171,541 
New Capital Raised1,006 
Distributions and Other(4,507)
Change in Value(2,570)
September 30, 2022$165,470 

AUM for the Private Equity business line was $165.5 billion at September 30, 2022, a decrease of $6.0 billion, compared to $171.5 billion at June 30, 2022.

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The decrease was primarily attributable to distributions to fund investors, primarily as a result of realized proceeds, most notably from North America Fund XI, Asian Fund III, and 2006 Fund, and to a lesser extent, a decrease in investment value at Americas Fund XII, Asian Fund III, and Asian Fund II. Partially offsetting these decreases was new capital raised for Global Impact Fund II and Next Generation Technology Growth Fund III.

For the three months ended September 30, 2022, the value of our traditional private equity investment portfolio decreased 4%. This was comprised of a 19% decrease in share prices of various publicly held investments and a 2% decrease in value of our privately held investments, as discussed further below. For the three months ended September 30, 2022, the value of our growth equity portfolio increased 2% and our core private equity investment portfolio remained flat. See "Business Environment" for more information about certain factors that impact our business, financial performance, operating results and valuations.
The most significant decreases in share prices of our publicly held private equity investments were decreases in Applovin Corporation (NASDAQ: APP), GoTo Group (IDX: GOTO), and Brightview Holdings, Inc. (NYSE: BV). These decreases were partially offset by increases in share prices of various publicly held investments. The most significant of these were increases in J.B. Chemicals and Pharmaceuticals Ltd. (NYSE: JBCP) and Fiserv, Inc. The prices of publicly held companies may experience volatile changes following the reporting period.

The most significant decreases in the value of our privately held investments related to Kokusai Electric Corporation (manufacturing sector), PetVet Care Centers, LLC, and Global Medical Response, Inc. (health care sector) These decreases in value were partially offset by increases in value relating primarily to OneStream Software, LLC (technology sector), USI, Inc., and Minnesota Rubber and Plastics (industrial sector). The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) a decrease in the value of market comparables and (ii) an unfavorable business outlook, both influenced by economic outlook and market environment. The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance and (ii) with respect to Minnesota Rubber and Plastics, an increase in valuation reflecting an agreement to exit the investment.

For the three months ended September 30, 2021, the value of our traditional private equity investment portfolio increased 9%. This was comprised of a 11% increase in the value of our privately held investments and a 2% increase in share prices of various publicly held investments. For the three months ended September 30, 2021, the value of our growth equity and core equity investment portfolios increased 8% and 7%, respectively.

The most significant increase in the value of our privately held investments related to Kokusai Electric Corporation, PetVet Care Centers, LLC, and Internet Brands, Inc. These increases in value were partially offset by decreases in value relating primarily to Magneti Marelli (industrial sector), Upfield (consumer products), and Monterra Energy (energy sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance, (ii) an increase in the value of market comparables, (iii) transactional activity related to new rounds of funding, and (iv) with respect to Kokusai Electric Corporation, an increase in valuation reflecting an agreement to sell a minority stake in the company. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) an unfavorable business outlook and (ii) a decrease in the value of market comparables, which were influenced by the impact of COVID-19 on the economic outlook and overall market environment.

The most significant increases in share prices of various publicly held investments were increases in Max Healthcare Institute Limited, Darktrace Limited, and ForgeRock, Inc. (NYSE: FORG). These increases were partially offset by decreases in share prices of various publicly held investments. The most significant of these were decreases in AppLovin Corporation, KnowBe4, Inc. (NASDAQ: KNBE), and BridgeBio Pharma, Inc. The prices of publicly held companies may experience volatile changes following the reporting period. See "Business Environment—Equity and Credit Markets" for more information about factors, such as volatility, that may impact our business, financial performance, operating results and valuations.

Certain investments included in our AUM are denominated in currencies other than the U.S. dollar. Those investments expose our AUM to the risk that the value of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in which the investments are made. We generally seek to reduce these risks by employing hedging transactions in connection with certain investments, including using foreign currency options and foreign exchange forward contracts to reduce exposure to 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. We do not, however, hedge our currency exposure in all currencies or for all investments. See "Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk" and "Risk Factors—Risks Related to the Assets We Manage—We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States" in our Annual Report.
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Real Assets
The following table reflects the changes in our Real Assets business line AUM from June 30, 2022 to September 30, 2022:
 ($ in millions)
June 30, 2022$113,789 
New Capital Raised5,721 
Acquisitions and Other(1)
1,049 
Distributions and Other(1,812)
Change in Value(976)
September 30, 2022$117,771 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

AUM for the Real Assets business line was $117.8 billion at September 30, 2022, an increase of $4.0 billion, compared to $113.8 billion at June 30, 2022.

The increase was primarily attributable to (i) new capital raised from Global Atlantic, Asia Pacific Infrastructure Investors II, and Diversified Core Infrastructure Fund, and to a lesser extent (ii) changing the fee base for Global Atlantic's management fees from fair market value to book value. Partially offsetting these increases were payments to Global Atlantic policyholders and distributions to fund investors for Global Infrastructure Investors III, and to a lesser extent, the decrease in value primarily due to the impact of the decline in the value of the Japanese yen associated with assets managed by KJRM.

For the three months ended September 30, 2022, the value of our real estate portfolio decreased 1%, and the value of our infrastructure and energy investment portfolios remained flat. See "Business Environment" for more information about certain factors that impact our business, financial performance, operating results and valuations.

The most significant increase in the value of our privately held investments related to University Partners (real estate), FiberCop S.p.A. (infrastructure), and ADNOC Oil Pipelines (infrastructure). These increases in value were partially offset by decreases in value relating primarily to Telefonica Chile S.A. (infrastructure) and Hyperoptic Ltd. (infrastructure). The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company or asset performance. The decreased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to (i) a decrease in the value of market comparables, (ii) an unfavorable business outlook, both influenced by the economic outlook and market environment, and (iii) changes in foreign exchange rates.

For the three months ended September 30, 2021, the value of our real estate, infrastructure and energy investment portfolios increased 11%, 4%, and 3%, respectively.

The most significant increase in the value of our privately held investments related to KRE AIP LLC (real estate), Rocky Mountain Midstream LLC (infrastructure), and Viridor Limited. These increases in value were partially offset by decreases in value relating primarily to Telefonica Chile S.A. The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company or asset performance. The decreased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to (i) a decrease in the value of market comparables and (ii) an unfavorable business outlook, both influenced by the economic outlook and market environment.


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Credit and Liquid Strategies

The following table reflects the changes in our Credit and Liquid Strategies business line AUM from June 30, 2022 to September 30, 2022: 
 ($ in millions)
June 30, 2022$205,362 
New Capital Raised6,709 
Acquisitions and Other(1)
7,997 
Distributions and Other(3,791)
Redemptions(1,420)
Change in Value(1,879)
September 30, 2022$212,978 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

AUM in our Credit and Liquid Strategies business line totaled $213.0 billion at September 30, 2022, an increase of $7.6 billion compared to $205.4 billion at June 30, 2022.

The increase was primarily attributable to (i) changing the fee base for Global Atlantic's management fees from fair market value to book value and (ii) new capital raised from various alternative credit funds and Global Atlantic. Partially offsetting these increases were (i) distributions to fund investors at certain leveraged and alternative credit funds, (ii) payments to Global Atlantic policyholders, (iii) redemptions at our hedge fund partnerships, and (iv) a decline in investment value on the assets managed across our alternative credit portfolio.

Fee Paying Assets Under Management
 
Private Equity

The following table reflects the changes in our Private Equity business line FPAUM from June 30, 2022 to September 30, 2022:
 ($ in millions)
June 30, 2022$98,316 
New Capital Raised2,135 
Distributions and Other(936)
Change in Value(416)
September 30, 2022$99,099 

FPAUM in our Private Equity business line was $99.1 billion at September 30, 2022, an increase of $0.8 billion, compared to $98.3 billion at June 30, 2022.

The increase was primarily attributable to new capital raised from Global Impact Fund II, our core private equity strategy, and certain multi-strategy investment funds. Partially offsetting this increase were decreases from distributions to fund investors, primarily as a result of realized proceeds, most notably from North America Fund XI and Asian Fund III.

Uncalled capital commitments from private equity and multi-strategy investment funds from which KKR is currently not earning management fees amounted to approximately $19.7 billion at September 30, 2022, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%. The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time.  If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
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Real Assets
The following table reflects the changes in our Real Assets business line FPAUM from June 30, 2022 to September 30, 2022:
 ($ in millions)
June 30, 2022$93,258 
New Capital Raised9,764 
Acquisitions and Other(1)
1,049 
Distributions and Other(1,353)
Net Changes in Fee Base of Certain Funds (1,125)
Change in Value(1,239)
September 30, 2022$100,354 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

FPAUM in our Real Assets business line was $100.4 billion at September 30, 2022, an increase of $7.1 billion, compared to $93.3 billion at June 30, 2022.

The increase was primarily attributable to (i) new capital raised in Asia Pacific Infrastructure Investors II and by Global Atlantic and (ii) changing the fee base for Global Atlantic's management fees from fair market value to book value. Partially offsetting these increases were (i) the decrease in value primarily due to the impact of the decline in the value of the Japanese yen associated with the assets managed by KJRM, (ii) a change in fee base of Asia Pacific Infrastructure Investors as a result of it entering its post investment period, during which we earn fees on invested capital rather than committed capital, and (iii) payments to Global Atlantic policyholders and distributions to fund investors.

Uncalled capital commitments from real assets investment funds from which KKR is currently not earning management fees amounted to approximately $11.9 billion at September 30, 2022, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.2%. The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
Credit and Liquid Strategies
The following table reflects the changes in our Credit and Liquid Strategies business line FPAUM from June 30, 2022 to September 30, 2022: 
 ($ in millions)
June 30, 2022$192,896 
New Capital Raised4,392 
Acquisitions and Other(1)
7,997 
Distributions and Other(4,103)
Redemptions(1,420)
Change in Value(1,588)
September 30, 2022$198,174 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.
 
FPAUM in our Credit and Liquid Strategies business line was $198.2 billion at September 30, 2022, an increase of $5.3 billion, compared to $192.9 billion at June 30, 2022.

The increase was primarily attributable to (i) changing the fee base for Global Atlantic's management fees from fair market value to book value and (ii) new capital raised from Global Atlantic, various alternative credit funds, and our hedge fund partnership, Marshall Wace. Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) distributions to fund investors at certain leveraged and alternative credit funds, (iii) redemptions at our hedge fund partnerships, and (iv) a decline in investment value on the assets managed across our credit portfolio.
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Uncalled capital commitments from investment funds in our Credit and Liquid Strategies business line from which KKR is currently not earning management fees amounted to approximately $11.0 billion at September 30, 2022. 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 0.7%. 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, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.

Uncalled Commitments
 
Private Equity

As of September 30, 2022, our Private Equity business line had $66.7 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $71.0 billion as of June 30, 2022. The decrease was primarily attributable to capital called from fund investors to make investments during the period, which was partially offset by new commitments from fund investors.

Real Assets

As of September 30, 2022, our Real Assets business line had $31.2 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $31.9 billion as of June 30, 2022. The decrease was primarily attributable to capital called from fund investors to make investments during the period, partially offset by new commitments from fund investors.

Credit and Liquid Strategies

As of September 30, 2022, our Credit and Liquid Strategies business line had $14.7 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $12.5 billion as of June 30, 2022. The increase was primarily attributable to new commitments from fund investors, which was partially offset by capital called from fund investors to make investments during the period.

Capital Invested
Private Equity
    For the three months ended September 30, 2022, our Private Equity business line had $4.0 billion of capital invested as compared to $6.3 billion for the three months ended September 30, 2021. The decrease was driven primarily by a $2.4 billion decrease in capital invested in our traditional private equity strategy. During the three months ended September 30, 2022, 85% of capital deployed in private equity (including core and growth equity (including impact) investments) was in transactions in North America, 13% was in the Asia-Pacific region and 2% was in Europe. The number of large private equity investments made in any quarter is volatile and, consequently, a significant amount of capital invested in one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters.
Real Assets
    For the three months ended September 30, 2022, our Real Assets business line had $4.6 billion of capital invested as compared to $8.4 billion for the three months ended September 30, 2021. The decrease was driven primarily by a $2.6 billion decrease in capital invested in our infrastructure strategy and a $1.1 billion decrease in our real estate strategy. During the three months ended September 30, 2022, 61% of capital deployed in real assets was in transactions in North America, 32% was in Europe, and 7% was in the Asia-Pacific region.
Credit and Liquid Strategies
For the three months ended September 30, 2022, our Credit and Liquid Strategies business line had $7.0 billion of capital invested as compared to $9.7 billion for the three months ended September 30, 2021. The decrease was primarily due to a lower level of capital deployed across our direct lending strategies. During the three months ended September 30, 2022, 86% of capital deployed was in transactions in North America, 11% was in Europe, and 3% was in the Asia-Pacific region.
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Analysis of Insurance Segment Operating Results

The following tables set forth information regarding KKR's insurance segment operating results and certain key operating metrics as of and for the three months ended September 30, 2022 and 2021:
Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Net Investment Income$1,054,757 $771,982 $282,775 
Net Cost of Insurance(642,443)(436,415)(206,028)
General, Administrative and Other(161,242)(139,489)(21,753)
Pre-tax Insurance Operating Earnings251,072 196,078 54,994 
Income Taxes(44,468)(9,046)(35,422)
Net Income Attributable to Noncontrolling Interests(79,582)(72,043)(7,539)
Insurance Segment Operating Earnings$127,022 $114,989 $12,033 

Insurance segment operating earnings

Insurance segment operating earnings increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to higher net investment income. Higher net investment income was primarily due to (i) an increase in average assets under management due to growth of the business, (ii) growth in portfolio yields due to higher market interest rates on floating rate investments, and (iii) rotation into higher yielding assets. The increase due to net investment income was offset in part by (i) higher net cost of insurance, primarily due to the growth in both our individual market and institutional market channels and higher funding costs on new business, (ii) a corresponding increase in general and administrative expenses, and (iii) an increase in income tax expense.

Net investment income

Net investment income increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) growth in portfolio yields due to higher market interest rates on floating rate investments, (ii) rotation into higher yielding assets, and (iii) increased average assets under management due to growth in assets in our institutional market channel as a result of new reinsurance transactions and individual market channel sales from new business growth.

Net cost of insurance
Net cost of insurance increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) 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 (ii) higher funding costs on new business originated, and offset by the impact of assumption review (as described in “ –Notable Items–Assumption Review” above).

General, administrative and other expenses

General and administrative expenses increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 primarily due to (i) increased employee compensation and benefits related expenses, (ii) increased professional service fees, and (iii) increased TPA policy servicing fees, all due to growth of the business.
Income taxes

Insurance segment income tax expense reflects the annual estimated effective tax rate for the insurance segment on an operating basis, including the benefit of investment tax credits for the three months ended September 30, 2021.
Net income (loss) attributable to non-controlling interests

Net income (loss) attributable to non-controlling interests increased for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 proportional to the increase in insurance segment operating earnings for the comparable period. Net income (loss) attributable to non-controlling interests represent the proportionate interest in the insurance segment operating earnings attributable to other investors in Global Atlantic.
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Analysis of Non-GAAP Performance Measures

The following is a discussion of our Non-GAAP performance measures for the three months ended September 30, 2022 and 2021:

Three Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Asset Management Segment Operating Earnings$958,928 $1,067,839 $(108,911)
Insurance Segment Operating Earnings127,022 114,989 12,033 
Distributable Operating Earnings1,085,950 1,182,828 (96,878)
Interest Expense(83,335)(63,446)(19,889)
Preferred Dividends— (2,519)2,519 
Net Income Attributable to Noncontrolling Interests(4,932)(6,072)1,140 
Income Taxes Paid(173,949)(185,645)11,696 
After-tax Distributable Earnings$823,734 $925,146 $(101,412)
Distributable Operating Earnings
The decrease in distributable operating earnings for the three months ended September 30, 2022 compared to the prior period is primarily due to a lower level of asset management segment operating earnings partially offset by a higher level of insurance segment operating earnings. For a discussion of the asset management and insurance segment operating earnings, see "—Analysis of Asset Management Segment Operating Results and Analysis of Insurance Segment Operating Results."

Interest Expense
    The increase in interest expense for the three months ended September 30, 2022 compared to the prior period is due primarily to debt issuances by KKR's financing subsidiaries subsequent to September 30, 2021.
Preferred Dividends
    The decrease in preferred dividends for the three months ended September 30, 2022 compared to the prior period was attributable to the redemption of all of our Series A and B preferred stock.
Income Taxes Paid
    The decrease in income taxes paid for the three months ended September 30, 2022 compared to the prior period was primarily due to a lower level of asset management segment operating earnings.
After-tax Distributable Earnings
 
The decrease in after-tax distributable earnings for the three months ended September 30, 2022 compared to the prior period was primarily due to a lower level of distributable operating earnings and an increase in interest expense, partially offset by lower income taxes paid as described above.

The amount of tax benefit from equity-based compensation included in income taxes paid for the three months ended September 30, 2022 and 2021 was $18.3 million and $9.5 million, respectively, and its inclusion in after-tax distributable earnings had the effect of increasing this measure by 2% and 1%, respectively.

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Analysis of Asset Management Segment Operating Results

The following tables set forth information regarding KKR's asset management segment operating results and certain key capital metrics as of and for the nine months ended September 30, 2022 and 2021.

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees$1,950,389 $1,478,878 $471,511 
Transaction and Monitoring Fees, Net580,794 645,108 (64,314)
Fee Related Performance Revenues71,974 34,760 37,214 
Fee Related Compensation(585,748)(485,760)(99,988)
Other Operating Expenses(409,489)(309,483)(100,006)
Fee Related Earnings1,607,920 1,363,503 244,417 
Realized Performance Income1,837,925 1,222,403 615,522 
Realized Performance Income Compensation(1,180,990)(797,965)(383,025)
Realized Investment Income911,221 1,277,701 (366,480)
Realized Investment Income Compensation(136,683)(191,663)54,980 
Asset Management Segment Operating Earnings$3,039,393 $2,873,979 $165,414 

Management Fees

The following table presents management fees by business line:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Management Fees
Private Equity$876,517 $694,924 $181,593 
Real Assets494,172 296,032 198,140 
Credit and Liquid Strategies579,700 487,922 91,778 
Total Management Fees$1,950,389 $1,478,878 $471,511 

The increase in Private Equity business line management fees was primarily attributable to management fees earned from North America Fund XIII and European Fund VI. The increase was partially offset by a decrease in management fees earned from European Fund V and Americas Fund XII as a result of entering their post-investment periods and, consequently, we now earn fees based on capital invested rather than capital committed and at a lower fee rate.

The increase in Real Assets business line management fees was primarily due to (i) management fees earned from Global Infrastructure Investors IV, (ii) an increase in management fees earned from Global Atlantic and (iii) management fees earned on assets managed by KJRM, which we acquired in 2022. These increases were partially offset by a decrease in management fees earned from Global Infrastructure Investors III as a result of entering its post-investment period and, consequently, we now earn fees based on capital invested rather than capital committed.

The increase in Credit and Liquid Strategies business line management fees was primarily attributable to (i) an increase in management fees earned from Global Atlantic and (ii) a higher level of management fees from FSK, our business development company.


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Transaction and Monitoring Fees, Net

The following table presents transaction and monitoring fees, net by business line:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Transaction and Monitoring Fees, Net
Private Equity$91,301 $96,443 $(5,142)
Real Assets15,929 12,896 3,033 
Credit and Liquid Strategies17,642 8,569 9,073 
Capital Markets455,922 527,200 (71,278)
Total Transaction and Monitoring Fees, Net$580,794 $645,108 $(64,314)

Our Capital Markets business line earns transaction fees, which are not shared with fund investors. The decrease in transaction fees was primarily due to a decrease in the number of capital markets transactions for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. Overall, we completed 194 capital markets transactions for the nine months ended September 30, 2022, of which 22 represented equity offerings and 172 represented debt offerings, as compared to 225 transactions for the nine months ended September 30, 2021, of which 41 represented equity offerings and 184 represented debt offerings. We earned fees in connection with underwriting, syndication and other capital markets services. 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.

    Our capital markets fees are generated in connection with activity involving our private equity, real assets and credit funds as well as from third-party companies. For the nine months ended September 30, 2022, approximately 16% of our transaction fees in our Capital Markets business line were earned from unaffiliated third parties as compared to approximately 25% for the nine months ended September 30, 2021. Our transaction fees are comprised of fees earned from North America, Europe, and the Asia-Pacific region. For the nine months ended September 30, 2022, approximately 39% of our transaction fees were generated outside of North America as compared to approximately 36% for the nine months ended September 30, 2021. Our Capital Markets business line is dependent on the overall capital markets environment, which is influenced by equity prices, credit spreads, and volatility. Our Capital Markets business line does not generate monitoring fees.

Our Private Equity, Real Assets and Credit and Liquid Strategies business lines separately earn transaction and monitoring fees from portfolio companies, and under the terms of the management agreements with certain of our investment funds, we are generally required to share all or a portion of such fees with our fund investors. Additionally, transaction fees are generally not earned with respect to energy and real estate investments.

The increase in Credit and Liquid Strategies business line transaction and monitoring fees, net was primarily attributable to a greater portion of transactions fees that were not required to be shared with our fund investors or Global Atlantic in the current period.

The decrease in our Private Equity business line transaction and monitoring fees, net, was primarily attributable to a lower level of transaction fees. During the nine months ended September 30, 2022, there were 55 transaction fee-generating investments that paid an average fee of $5.6 million compared to 56 transaction fee-generating investments that paid an average fee of $4.9 million during the nine months ended September 30, 2021. For the nine months ended September 30, 2022, approximately 50% of Private Equity transaction fees were paid by companies in North America, 26% were paid from companies in Europe, and 24% were paid from companies in the Asia-Pacific region. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the amount of the fees as set forth in the governing agreements, the complexity of the transaction, and KKR's role in the transaction.
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Fee Related Performance Revenues

The following table presents fee related performance revenues by business line:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Fee Related Performance Revenues
Private Equity$— $— $— 
Real Assets42,709 4,821 37,888 
Credit and Liquid Strategies29,265 29,939 (674)
Total Fee Related Performance Revenues$71,974 $34,760 $37,214 

Fee related performance revenues represent performance fees that are (i) to be received from our investment funds, vehicles and accounts on a recurring basis, and (ii) not dependent on a realization event involving investments held by the investment fund, vehicle or account. These performance fees are primarily earned from FSK (our business development company), KPPA (our open-ended core real estate fund), KREST (our registered closed-end real estate equity fund) and KREF (our real estate credit investment trust). Fee related performance revenues were higher for the nine months ended September 30, 2022 compared to the prior period primarily due to performance revenues earned from KPPA in the current period.

Fee Related Compensation
The increase in fee related compensation for the nine months ended September 30, 2022 compared to the prior period was primarily due to a higher level of compensation recorded in connection with the higher level of revenues included within fee related earnings.

Other Operating Expenses

The increase in other operating expenses for the nine months ended September 30, 2022 compared to the prior period was primarily due to (i) a higher level of professional fees, information technology and other administrative costs and (ii) an increase in travel related expenses as a result of COVID-19 pandemic travel restrictions being reduced.

Fee Related Earnings

The increase in fee related earnings for the nine months ended September 30, 2022 compared to the prior period is primarily due to a higher level of management fees from our Private Equity, Real Assets, and Credit and Liquid Strategies business lines and a higher level of fee related performance revenues, partially offset by a higher level of fee related compensation and other operating expenses, as described above.

Realized Performance Income

The following table presents realized performance income by business line:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Realized Performance Income
Private Equity$1,722,529 $1,112,541 $609,988 
Real Assets97,244 57,225 40,019 
Credit and Liquid Strategies18,152 52,637 (34,485)
Total Realized Performance Income$1,837,925 $1,222,403 $615,522 

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Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Private Equity
North America Fund XI$926,496 $365,772 $560,724 
Core Investment Vehicles262,219 80,937 181,282 
2006 Fund144,764 215,741 (70,977)
Americas Fund XII122,277 207,559 (85,282)
Asian Fund III104,601 110,515 (5,914)
European Fund IV86,233 43,976 42,257 
Co-Investment Vehicles and Other51,883 68,252 (16,369)
Next Generation Technology Growth Fund— 18,160 (18,160)
European Fund III— 353 (353)
Total Realized Carried Interest (1)
1,698,473 1,111,265 587,208 
Incentive Fees24,056 1,276 22,780 
Total Realized Performance Income$1,722,529 $1,112,541 $609,988 

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Real Assets
Real Estate Partners Americas II$88,742 $— $88,742 
Global Infrastructure Investors II8,502 36,215 (27,713)
Real Estate Partners Europe— 14,690 (14,690)
Co-Investment Vehicles and Other— 3,283 (3,283)
Global Infrastructure Investors— 3,037 (3,037)
Total Realized Carried Interest (1)
97,244 57,225 40,019 
Incentive Fees— — — 
Total Realized Performance Income$97,244 $57,225 $40,019 

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Credit and Liquid Strategies
Alternative Credit Vehicles$4,153 $15,336 $(11,183)
Total Realized Carried Interest (1)
4,153 15,336 (11,183)
Incentive Fees13,999 37,301 (23,302)
Total Realized Performance Income$18,152 $52,637 $(34,485)
(1)The above tables exclude any funds for which there was no realized carried interest during both of the periods presented.

Realized performance income includes (i) realized carried interest from our carry earning funds and (ii) incentive fees not included in Fee Related Performance Revenues.

Realized carried interest in our Private Equity business line for the nine months ended September 30, 2022 consisted primarily of realized proceeds from the sales of our investments in Internet Brands, Inc. and CHI Overhead Doors, Inc. held by North America Fund XI and performance income from our core investment vehicles.

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Realized carried interest in our Private Equity business line for the nine months ended September 30, 2021 consisted primarily of realized proceeds from the sales of our investments in The Bountiful Company, Ingersoll Rand Inc., Academy Sports & Outdoors Inc. and Endeavor Group Holdings, Inc. (NASDAQ: EDR).

Realized carried interest in our Real Assets business line for the nine months ended September 30, 2022 consisted primarily of realized proceeds from dividends received and sales of various investments held by Real Estate Partners Americas II.

Realized carried interest in our Real Assets business line for the nine months ended September 30, 2021 consisted primarily of realized proceeds from (i) the sale of our infrastructure investment, Calisen PLC (LSE: CLSN LN) and (ii) dividends received from and sales of various investments in our European real estate strategy.

Realized carried interest in our Credit and Liquid Strategies business line decreased for the nine months ended September 30, 2022 compared to the prior period as a result of a lower level of realization activity at certain leveraged credit investment funds from which we are eligible to receive carried interest.

Incentive fees consist of performance fees earned from (i) our hedge fund partnerships, (ii) investment management agreements with KKR sponsored investment vehicles, and (iii) investment management agreements to provide KKR’s investment strategies to funds managed by a third party asset management firm.

Incentive fees in our Private Equity business line increased for the nine months ended September 30, 2022 compared to the prior period as a result of incentive fees being earned from certain levered multi-asset investment vehicles in 2022. Incentive fees in our Credit and Liquid Strategies business line decreased for the nine months ended September 30, 2022 compared to the prior period as a result of a lower level of performance fees earned from our hedge fund partnership, Marshall Wace.

Realized Performance Income Compensation

The increase in realized performance income compensation for the nine months ended September 30, 2022 compared to the prior period is primarily due to a higher level of compensation recorded in connection with the higher level of realized performance income.

Realized Investment Income

The following table presents realized investment income from our Principal Activities business line:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Realized Investment Income
Net Realized Gains (Losses)$435,260 $1,026,310 $(591,050)
Interest Income and Dividends475,961 251,391 224,570 
Total Realized Investment Income$911,221 $1,277,701 $(366,480)
The decrease in realized investment income is due to a lower level of net realized gains partially offset by a higher level of interest income and dividends. The amount of realized investment income depends on the transaction activity of our funds and our subsidiaries, which can vary from period to period.
    For the nine months ended September 30, 2022, net realized gains were comprised of realized gains primarily from the sale of our investments in Fiserv, Inc., Internet Brands, Inc., CHI Overhead Doors, Inc., and Viridor Limited. Partially offsetting these realized gains were realized losses, the most significant of which were (i) a realized loss on an alternative credit investment, (ii) a realized loss on an underwritten debt offering transaction, and (iii) realized losses from the sales of revolving credit facilities.
    For the nine months ended September 30, 2021, net realized gains were comprised of realized gains primarily from the sale of our investments in FanDuel Inc., Mr. Cooper Group Inc., Fiserv, Inc., The Bountiful Company, and BridgeBio Pharma, Inc. Partially offsetting these realized gains were realized losses related to certain hedging instruments.
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    For the nine months ended September 30, 2022, interest income and dividends were comprised of (i) $310.2 million of dividend income primarily from levered multi-asset investment vehicles and our investments in Exact Holdings B.V., Internet Brands, Inc. and Veresen Midstream, and (ii) $165.8 million of interest income primarily from our investments in CLOs.
    For the nine months ended September 30, 2021, interest income and dividends were comprised of (i) $140.3 million of dividend income primarily from distributions received from our real asset investments, including our investment in KREF, as well as dividends received from our investments in Kokusai Electric Corporation, Internet Brands, Inc. and US Foods Holding Corp. (NYSE: USFD) and (ii) $111.1 million of interest income primarily from our investments in CLOs and to a lesser extent our cash balances and other credit investments. See "—Analysis of Non-GAAP Performance Measures—Non-GAAP Balance Sheet Measures."
    For the nine months ended September 30, 2022, total fees attributable to KKR Capstone were $55.7 million and total expenses attributable to KKR Capstone were $59.6 million. For KKR Capstone-related adjustments in reconciling asset management segment revenues to GAAP revenues see "—Analysis of Non-GAAP Performance Measures—Reconciliations to GAAP Measures".
Realized Investment Income Compensation
The decrease in realized investment income compensation for the nine months ended September 30, 2022 compared to the prior period is primarily due to a lower level of compensation recorded in connection with the lower level of realized investment income.
Other Operating and Capital Measures

The following table presents certain key operating and capital metrics as of September 30, 2022 and December 31, 2021:
As of
September 30, 2022December 31, 2021Change
($ in millions)
Assets Under Management$496,219 $470,555 $25,664 
Fee Paying Assets Under Management$397,627 $357,389 $40,238 
Uncalled Commitments$112,589 $111,822 $767 



The following table presents one of our key capital metrics for the nine months ended September 30, 2022 and 2021:
Nine Months Ended
September 30, 2022September 30, 2021Change
($ in millions)
Capital Invested$55,710 $49,833 $5,877 

Assets Under Management

Private Equity

The following table reflects the changes in our Private Equity business line AUM from December 31, 2021 to September 30, 2022:
 ($ in millions)
December 31, 2021$173,745 
New Capital Raised15,894 
Distributions and Other(12,539)
Change in Value(11,630)
September 30, 2022$165,470 


AUM for the Private Equity business line was $165.5 billion at September 30, 2022, a decrease of $8.2 billion, compared to $173.7 billion at December 31, 2021.
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The decrease was primarily attributable to distributions to fund investors primarily as a result of realized proceeds, most notably from North America Fund XI, 2006 Fund, and Asian Fund III, and a decrease in investment value from Americas Fund XII, Asian Fund III, and Asian Fund II. Partially offsetting these decreases was new capital raised from a new strategic investor partnership, European Fund VI, and Global Impact Fund II.
For the nine months ended September 30, 2022, the value of our traditional private equity investment portfolio decreased by 14%. This was comprised of a 51% decrease in share prices of various publicly held investments and a 2% decrease in value of our privately held investments. For the nine months ended September 30, 2022, the value of our growth equity investment portfolio decreased 9% and our core equity investment portfolio increased 1%. See "Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations.
The most significant decreases in share prices of our publicly held investments were decreases in AppLovin Corporation, Max Healthcare Institute Limited, and PHC Holdings Corporation (TYO: 6523). These decreases were partially offset by increases in share prices of other publicly held investments. The most significant of these was an increase in Hensoldt AG (FRA: HAG). The prices of publicly held companies may experience volatile changes following the reporting period. See "Business Environment—Equity and Credit Markets" for more information about factors, such as volatility, that may impact our business, financial performance, operating results and valuations.
The most significant increases in the value of our privately held investments related to CHI Overhead Doors, Inc., Internet Brands, Inc., and Wella Co. (consumer products sector). These increases in value on our privately held investments were partially offset by decreases in value relating primarily to Kokusai Electric Corporation, Koki Holdings Co., Ltd., and Unzer GmbH (financial services sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance, (ii) with respect to CHI Overhead Doors, Inc., an increase in valuation reflecting an agreement to exit the investment and (iii) with respect to Internet Brands, Inc. an increase in valuation driven by a partial sale transaction. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) an unfavorable business outlook and (ii) a decrease in the value of market comparables, both influenced by the economic outlook and overall market environment.
For the nine months ended September 30, 2021, the value of our traditional private equity investment portfolio increased by 38%. This was comprised of a 60% increase in share prices of various publicly held investments and a 31% increase in value of our privately held investments. For the nine months ended September 30, 2021, the value of our growth equity and core equity investment portfolios increased 58% and 33%, respectively.
The most significant increases in share prices of various publicly held or publicly indexed investments were increases in AppLovin Corporation, Max Healthcare Institute Limited, and J.B. Chemicals and Pharmaceuticals Ltd. These increases were partially offset by decreases in share prices of various publicly held investments. The most significant of these was an increase in Fiserv, Inc. The prices of publicly held or publicly indexed companies may experience volatile changes following the reporting period. See "Business Environment—Equity and Credit Markets" for more information about factors, such as volatility, that may impact our business, financial performance, operating results and valuations.
The most significant increases in the value of our privately held investments related to increases in Kokusai Electric Corporation, PetVet Care Centers, LLC, and Internet Brands, Inc. These increases in value on our privately held investments were partially offset by decreases in value relating primarily to Magneti Marelli, Upfield, and Channel Control Merchants (retail sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance, (ii) an increase in the value of market comparables, (iii) transactional activity related to new rounds of funding, and with respect to Kokusai Electric Corporation, an increase in valuation reflecting an agreement to sell a minority stake in the company. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) an unfavorable business outlook and (ii) a decrease in the value of market comparables, both influenced by the impact of COVID-19 on the economic outlook and overall market environment.

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Real Assets
The following table reflects the changes in our Real Assets business line AUM from December 31, 2021 to September 30, 2022:
 ($ in millions)
December 31, 2021$83,303 
New Capital Raised26,947 
Acquisitions and Other(1)
13,779 
Distributions and Other(4,990)
Change in Value(1,268)
September 30, 2022$117,771 
(1)Reflects the AUM of KJRM at closing of $12,730 million and represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

AUM for the Real Assets business line was $117.8 billion at September 30, 2022, an increase of $34.5 billion, compared to $83.3 billion at December 31, 2021.

The increase was primarily attributable to (i) assets managed by KJRM, which we acquired in 2022 and (ii) new capital raised by Global Atlantic and Asia Pacific Infrastructure Investors II. Partially offsetting these increases were payments to Global Atlantic policyholders and distributions to fund investors as a result of realized proceeds, most notably from Global Infrastructure Investors III and Real Estate Partners Americas II.
For the nine months ended September 30, 2022, the value of our energy investment portfolio increased by 22%, the value of our real estate investment portfolio increased by 11%, and the value of our infrastructure investment portfolio increased 4%. See "Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations.
The most significant increases in the value of our privately held investments related to Viridor Limited, Galaxy Investments II Pte. Ltd. (infrastructure), Metronet Holdings, LLC. (infrastructure) and Mirastar Logistics (real estate). These increases in value were partially offset by decreases in value relating primarily to Hyperoptic Ltd. The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company or asset performance. The decreased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to (i) a decrease in the value of market comparables and (ii) an unfavorable business outlook, both influenced by economic outlook and market environment and (iii) changes in foreign exchange rates.
The most significant increases in share prices of our publicly held investments were increases in Crescent Energy Company (NYSE: CRGY). These increases were partially offset by decreases in share prices of other publicly held investments. The most significant of these was a decrease in First Gen Corporation (PM: FGEN). The prices of publicly held companies may experience volatile changes following the reporting period. See "Business Environment—Equity and Credit Markets" for more information about factors, such as volatility, that may impact our business, financial performance, operating results and valuations.
For the nine months ended September 30, 2021, the value of our energy investment portfolio increased by 21%, the value of our real estate investment portfolio increased by 23%, and the value of our infrastructure investment portfolio increased 10%.
The most significant increases in the value of our privately held investments related to Telxius Telecom, S.A., KRE AIP LLC, and Viridor Limited. These increases in value were partially offset by decreases in value relating primarily to Colonial Enterprises, Inc. (infrastructure) and Cascade Senior Living Portfolio (real estate). The increased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to individual company performance. The decreased valuations of individual companies or assets in our privately held investments, in the aggregate, generally related to (i) a decrease in the value of market comparables and (ii) an unfavorable business outlook, both influenced by economic outlook and market environment.
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Credit and Liquid Strategies
The following table reflects the changes in our Credit and Liquid Strategies business line AUM from December 31, 2021 to September 30, 2022: 
 ($ in millions)
December 31, 2021$213,507 
New Capital Raised22,120 
Acquisitions and Other(1)
7,997 
Distributions and Other(11,406)
Redemptions(4,088)
Change in Value(15,152)
September 30, 2022$212,978 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

AUM in our Credit and Liquid Strategies business line totaled $213.0 billion at September 30, 2022, a decrease of $0.5 billion compared to AUM of $213.5 billion at December 31, 2021.

The decrease was primarily attributable to (i) a decline in investment value on the assets managed across our alternative credit portfolio, including for Global Atlantic and our strategic partnerships, (ii) distributions to fund investors at certain alternative credit funds, (iii) payments to Global Atlantic policyholders and (iv) redemptions at our hedge fund partnerships. Partially offsetting these decreases was new capital raised by or from (i) various leveraged and alternative credit funds, (ii) Global Atlantic, (iii) our hedge fund partnerships, (iv) new CLO issuances and (v) the change in fee base for Global Atlantic's management fees from fair market value to book value.

See also "Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations.

Fee Paying Assets Under Management
 
Private Equity

The following table reflects the changes in our Private Equity business line FPAUM from December 31, 2021 to September 30, 2022:
 ($ in millions)
December 31, 2021$87,890 
New Capital Raised17,272 
Distributions and Other(3,405)
Net Changes in Fee Base of Certain Funds (1,573)
Change in Value(1,085)
September 30, 2022$99,099 

FPAUM in our Private Equity business line was $99.1 billion at September 30, 2022, an increase of $11.2 billion, compared to $87.9 billion at December 31, 2021.

The increase was primarily attributable to new capital raised from European Fund VI, Global Impact Fund II, and new investment vehicles for Internet Brands, Inc. Partially offsetting this increase were decreases from (i) distributions to fund investors, primarily as a result of realized proceeds, most notably from North America Fund XI and Asian Fund II, and (ii) a change in fee base for European Fund V as a result of these funds entering its post investment period, during which we earn fees on invested capital rather than committed capital.

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Real Assets

The following table reflects the changes in our Real Assets business line FPAUM from December 31, 2021 to September 30, 2022:
 ($ in millions)
December 31, 2021$66,965 
New Capital Raised28,826 
Acquisitions and Other(1)
13,779 
Distributions and Other(3,626)
Net Changes in Fee Base of Certain Funds (1,125)
Change in Value(4,465)
September 30, 2022$100,354 
(1)Reflects the AUM of KJRM at closing of $12,730 million and represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.

FPAUM in our Real Assets business line was $100.4 billion at September 30, 2022, an increase of $33.4 billion, compared to $67.0 billion at December 31, 2021.

The increase was primarily attributable to (i) assets managed by KJRM, which we acquired in 2022, and (ii) new capital raised by Global Atlantic, Asia Pacific Infrastructure Investors II, and Diversified Core Infrastructure Fund. Partially offsetting these increases were (i) the decrease in value primarily due to the impact of the decline in the value of the Japanese yen associated with the assets managed by KJRM, (ii) payments to Global Atlantic policyholders and our fund investors and (iii) a change in fee base for Asia Pacific Infrastructure Investors as a result of entering its post investment period, during which we earn fees on invested capital rather than committed capital.

Credit and Liquid Strategies

The following table reflects the changes in our Credit and Liquid Strategies business line FPAUM from December 31, 2021 to September 30, 2022: 
 ($ in millions)
December 31, 2021$202,534 
New Capital Raised17,172 
Acquisitions and Other(1)
7,997 
Distributions and Other(11,128)
Redemptions(4,088)
Change in Value(14,313)
September 30, 2022$198,174 
(1)Represents an adjustment reflecting a change in the fee base of Global Atlantic's management fees from market value to book value.
 
FPAUM in our Credit and Liquid Strategies business line was $198.2 billion at September 30, 2022, a decrease of $4.3 billion compared to $202.5 billion at December 31, 2021.

The decrease was primarily attributable to (i) a decline in investment value in assets managed across our credit portfolio, including for Global Atlantic, (ii) distributions to fund investors at certain leveraged and alternative credit funds, (iii) payments to Global Atlantic policyholders and (iv) redemptions at our hedge fund partnerships. Partially offsetting these decreases was (i) new capital raised from Global Atlantic, various leveraged and alternative credit funds and our hedge fund partnerships and (ii) changing the fee base for Global Atlantic's management fees from fair market value to book value.

See "Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations.

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Uncalled Commitments
Private Equity
As of September 30, 2022, our Private Equity business line had $66.7 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $66.3 billion as of December 31, 2021. 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.
Real Assets
As of September 30, 2022, our Real Assets business line had $31.2 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $35.2 billion as of December 31, 2021. The decrease was primarily attributable to capital called from fund investors to make investments during the period, partially offset by new capital commitments from fund investors.
Credit and Liquid Strategies
As of September 30, 2022, our Credit and Liquid Strategies business line had $14.7 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $10.3 billion as of December 31, 2021. The increase was primarily attributable to new commitments from fund investors, which was partially offset by capital called from fund investors to make investments during the period.
Capital Invested
Private Equity
    For the nine months ended September 30, 2022, $14.1 billion of capital was invested by our Private Equity business line, as compared to $11.8 billion for the nine months ended September 30, 2021. The increase was driven primarily by a $2.3 billion increase in capital invested in our traditional private equity strategy. During the nine months ended September 30, 2022, 60% of capital deployed in private equity was in transactions in North America, 20% was in Europe, and 20% was in the Asia-Pacific region. 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.
Real Assets
    For the nine months ended September 30, 2022, $21.7 billion of capital was invested by our Real Assets business line, as compared to $15.2 billion for the nine months ended September 30, 2021. The increase was driven primarily by a $3.7 billion increase in capital invested in our real estate strategy and a $1.9 billion increase in capital invested in our infrastructure strategy. During the nine months ended September 30, 2022, 77% of capital deployed in real assets was in transactions in North America, 14% was in Europe, and 9% was in the Asia-Pacific region.
Credit and Liquid Strategies
    For the nine months ended September 30, 2022, $19.8 billion of capital was invested by our Credit and Liquid Strategies business line, as compared to $22.8 billion for the nine months ended September 30, 2021. The decrease was primarily due to a lower level of capital deployed across our direct lending and SIG strategies. During the nine months ended September 30, 2022, 88% of capital deployed was in transactions in North America, 9% was in Europe, and 3% was in the Asia-Pacific region.
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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. For the nine months ended September 30, 2021, the results of our insurance segment is from the acquisition date, February 1, 2021, through September 30, 2021.

The following tables set forth information regarding KKR's insurance segment operating results and certain key operating metrics as of and for the nine months ended September 30, 2022 and 2021:

Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Net Investment Income$2,881,567 $1,977,383 $904,184 
Net Cost of Insurance(1,664,664)(1,076,566)(588,098)
General, Administrative and Other(472,795)(338,325)(134,470)
Pre-tax Insurance Operating Earnings744,108 562,492 181,616 
Income Taxes(125,927)(63,148)(62,779)
Net Income Attributable to Noncontrolling Interests(238,118)(193,570)(44,548)
Insurance Segment Operating Earnings$380,063 $305,774 $74,289 

Insurance segment operating earnings

Insurance segment operating earnings increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021 and (ii) higher net investment income resulting from an increase in average assets under management due to growth of the business. The increase was offset in part by (i) higher net cost of insurance, primarily due to the growth in both our individual market and institutional market channels, (ii) a corresponding increase in general and administrative expenses, and (iii) an increase in income tax expense.
Net investment income

Net investment income increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) growth in portfolio yields due to higher market interest rates on floating rate investments, (iii) rotation into higher yielding assets, and (iv) increased average assets under management due to growth in assets in our institutional market channel as a result of new reinsurance transactions and individual market channel sales from new business growth.

Net cost of insurance
Net cost of insurance increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior 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 offset by the impact of assumption review (as described in “ –Notable Items–Assumption Review” above).

General, administrative and other expenses

General and administrative expenses increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to (i) one less month of activity reported in the prior period as a result of the GA Acquisition having occurred on February 1, 2021, (ii) increased employee compensation and benefits-related expenses, (iii) increased professional service fees, and (iv) increased TPA policy servicing fees, all due to growth of the business.
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Income taxes

Insurance segment income tax expense reflects the annual estimated effective tax rate for the insurance segment on an operating basis, including the benefit of investment tax credits for the prior year period.
Net Income attributable to non-controlling interests

Net income attributable to non-controlling interests increased for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 is proportional to the increase in insurance segment operating earnings for the comparable period. Net income attributable to non-controlling interests represent the proportionate interest in the insurance segment operating earnings attributable to other investors in Global Atlantic.
Analysis of Non-GAAP Performance Measures

The following is a discussion of our Non-GAAP performance measures for the nine months ended September 30, 2022 and 2021:
Nine Months Ended
September 30, 2022September 30, 2021Change
($ in thousands)
Asset Management Segment Operating Earnings$3,039,393 $2,873,979 $165,414 
Insurance Segment Operating Earnings380,063 305,774 74,289 
Distributable Operating Earnings3,419,456 3,179,753 239,703 
Interest Expense(229,414)(185,100)(44,314)
Preferred Dividends— (19,201)19,201 
Net Income Attributable to Noncontrolling Interests(17,083)(14,678)(2,405)
Income Taxes Paid(540,909)(449,814)(91,095)
After-tax Distributable Earnings$2,632,050 $2,510,960 $121,090 

For the nine months ended September 30, 2021, the results of our insurance segment above are from February 1, 2021 (closing date of the GA Acquisition) through September 30, 2021.

Distributable Operating Earnings
The increase in distributable operating earnings for the nine months ended September 30, 2022 compared to the prior period is primarily due to a higher level of asset management segment operating earnings and insurance segment operating earnings. For a discussion of the asset management and insurance segment operating earnings, see "—Analysis of Asset Management Segment Operating Results and Analysis of Insurance Segment Operating Results."

Interest Expense
The increase in interest expense for the nine months ended September 30, 2022 compared to the prior period is due primarily to debt issuances by KKR's financing subsidiaries subsequent to September 30, 2021.
Preferred Dividends
    The decrease in preferred dividends for the nine months ended September 30, 2022 compared to the prior period was attributable to the redemption of all of our Series A and B preferred stock.
Income Taxes Paid
    The increase in income taxes paid for the nine months ended September 30, 2022 compared to the prior period was primarily due to a higher level of asset management segment operating earnings.
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After-tax Distributable Earnings
 
The increase in after-tax distributable earnings for the nine months ended September 30, 2022 compared to the prior period was primarily due to a higher level of distributable operating earnings, partially offset by an increase in income taxes paid and interest expense, as discussed above.

For the nine months ended September 30, 2022 and 2021, the amount of the tax benefit from equity-based compensation included in income taxes paid was $46.0 million and $89.2 million, respectively. The inclusion of the tax benefit from equity-based compensation in After-tax Distributable Earnings had the effect of increasing this measure by 2% and 4% for the nine months ended September 30, 2022 and 2021.

Non-GAAP Balance Sheet Measures
Book Value
The following table presents our calculation of book value as of September 30, 2022 and December 31, 2021:
As of
 September 30, 2022December 31, 2021
 ($ in thousands)
(+)Cash and Short-term Investments$4,248,213 $4,869,203 
(+)Investments17,685,528 17,763,542 
(+)
Net Unrealized Carried Interest (1)
2,672,647 4,967,401 
(+)
Other Assets, Net (2)
6,637,886 4,706,108 
(+)Global Atlantic Book Value 3,563,911 3,372,498 
(-)Debt Obligations - KKR (excluding KFN and Global Atlantic)6,830,070 5,836,267 
(-)Debt Obligations - KFN948,517 948,517 
(-)Tax Liabilities, Net1,710,896 2,697,317 
(-)Other Liabilities1,671,451 774,711 
(-)Noncontrolling Interests30,759 33,058 
Book Value$23,616,492 $25,388,882 
Book Value Per Adjusted Share$26.56 $28.77 
Adjusted Shares889,121,824 882,589,036 
(1)The following table provides net unrealized carried interest by business line:
As of
September 30, 2022December 31, 2021
($ in thousands)
Private Equity Business Line$2,352,336 $4,697,134 
Real Assets Business Line220,848 159,709 
Credit and Liquid Strategies Business Line99,463 110,558 
Total$2,672,647 $4,967,401 
(2)Other Assets, Net include our (i) ownership interest in FS/KKR Advisor, (ii) minority ownership interests in hedge fund partnerships and (iii) the net assets of KJRM.
Book value per adjusted share decreased 8% from December 31, 2021. The decrease was primarily attributable to (i) a reduction in net unrealized carried interest due to the reversal of previously recognized carried interest from our carried interest eligible investment funds, most notably Americas Fund XII and Asian Fund II, (ii) a reduction in the value of our asset management segment investments of 5% (iii) repurchases of our common stock and (iv) payment of dividends during the period. Partially offsetting these decreases was the positive impact of our after-tax distributable earnings recognized during the period. For a further discussion, see "—Unaudited Consolidated Results of Operations (GAAP Basis) - Asset Management—Unrealized Gains and Losses from Investment Activities." For a discussion of the changes in KKR's investment portfolio, see "—Analysis of Asset Management Segment Operating Results—Assets Under Management." For a discussion of factors that impacted KKR's after-tax distributable earnings, see "—Analysis of Non-GAAP Performance Measures— After-tax
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Distributable Earnings" and for more information about the factors that may impact our business, financial performance, operating results and valuations, see "—Business Environment."
The following table presents the holdings of our investments in the asset management segment by asset class as of September 30, 2022. To the extent investments are realized at values below their cost in future periods, after-tax distributable earnings would be adversely affected by the amount of such loss, if any, during the period in which the realization event occurs.
As of September 30, 2022
($ in thousands)
Investments (1)
CostFair ValueFair Value as a Percentage of
Total Investments
Traditional Private Equity$1,805,833 $3,277,068 18.5 %
Core Private Equity2,685,259 5,436,110 30.7 %
Growth Equity292,429 805,866 4.6 %
Private Equity Total4,783,521 9,519,044 53.8 %
Energy894,614 969,901 5.5 %
Real Estate1,815,588 2,146,540 12.1 %
Infrastructure924,238 1,082,905 6.1 %
Real Assets Total3,634,440 4,199,346 23.7 %
Leveraged Credit1,281,300 1,009,867 5.7 %
Alternative Credit882,023 881,922 5.0 %
Credit Total2,163,323 1,891,789 10.7 %
Other2,410,323 2,075,349 11.8 %
Total Investments$12,991,607 $17,685,528 100.0 %
(1)Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority ownership of subsidiaries that operate KKR's asset management and insurance businesses, including the general partner interests of KKR's investment funds. Investments presented are principally the assets measured at fair value that are held by KKR's asset management segment, which, among other things, does not include the underlying investments held by Global Atlantic and Marshall Wace.
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As of September 30, 2022
($ in thousands)
Top 20 Investments: (1)
CostFair Value
USI, Inc.$531,425 $1,250,310 
PetVet Care Centers, LLC243,211 1,143,092 
Heartland Dental, LLC320,656 833,705 
Exact Group B.V.213,362 468,972 
Arnott's Biscuits Limited250,841 430,578 
1-800 Contacts Inc.300,178 390,217 
Internet Brands, Inc.340,312 373,695 
Barracuda Networks, Inc.344,083 344,083 
Crescent Energy Company (NYSE: CRGY)539,992 341,233 
Teaching Strategies, LLC307,162 307,162 
Fiserv, Inc. (NASDAQ: FISV)127,010 273,049 
ERM Worldwide Group Limited228,710 251,581 
Resolution Life Group Holdings, L.P.262,191 228,659 
Roompot B.V.193,578 212,607 
Atlantic Aviation FBO Inc.170,274 186,672 
Viridor Limited132,023 169,225 
The Bay Clubs Company, LLC160,127 160,127 
Veresen Midstream92,602 152,365 
GenesisCare Pty Ltd.196,104 142,986 
PortAventura155,803 141,831 
Total Top 20 Investments$5,109,644 $7,802,149 
(1)This list of investments identifies the twenty largest companies or assets based on their fair values as of September 30, 2022. It does not deduct fund or vehicle level debt, if any, incurred in connection with funding the investment. This list excludes (i) investments expected to be syndicated, (ii) investments expected to be transferred in connection with a new fundraising, (iii) investments in funds and other entities that are owned by one or more third parties and established for the purpose of making investments and (iv) the portion of any investment that may be held through collateralized loan obligations or levered multi-asset investment vehicles, if any. For additional information about the asset classes of the investments held on KKR's balance sheet see "—Our Business—Principal Activities" for the "Holdings by Asset Class" pie chart. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

With respect to KKR's book value relating to its insurance business, KKR includes Global Atlantic's book value, which consists of KKR's pro rata equity interest in Global Atlantic on a GAAP basis, excluding (i) accumulated other comprehensive income and (ii) accumulated change in fair value of reinsurance embedded derivative balances and related assets, net of deferred acquisition costs and income tax. KKR believes this presentation of Global Atlantic's book value is comparable with the corresponding metric presented by other publicly traded companies in Global Atlantic's industry. As of September 30, 2022, KKR's pro rata interest in Global Atlantic's book value was $3.6 billion. For more information about the composition and credit quality of Global Atlantic's investments on a consolidated basis, please see "—Global Atlantic's Investment Portfolio" below.
Global Atlantic's Investment Portfolio
As of September 30, 2022, 95% and 85% of Global Atlantic's AFS fixed maturity securities were considered investment grade under ratings from the Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC") and nationally recognized statistical rating organizations ("NRSROs"), respectively. As of December 31, 2021, 97% and 87% of Global Atlantic's AFS fixed maturity securities were considered investment grade under ratings from NAIC and nationally recognized statistical rating organizations ("NRSROs"), respectively. Securities where a rating by an NRSRO was not available are considered investment grade if they have an NAIC designation of “1” or “2.” The three largest asset categories in Global Atlantic's AFS fixed-maturity security portfolio as of September 30, 2022 were Corporate, RMBS and CMBS securities, comprising 29%, 6% and 5% of Global Atlantic's investment portfolio, respectively. Within these categories, 94%, 96% and 99% of Global Atlantic's Corporate, RMBS and CMBS securities, respectively, were investment grade according to NAIC ratings and 94%, 44% and 53% of its Corporate, RMBS and CMBS securities, respectively, were investment grade according to NRSRO ratings as of September 30, 2022. The three largest asset categories in Global Atlantic's available-for-sale fixed-maturity security portfolio as of December 31, 2021 were Corporate, RMBS and CMBS securities, comprising 34%, 6% and
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5% of Global Atlantic's investment portfolio, respectively. Within these categories, 95%, 96% and 99% of Global Atlantic's Corporate, RMBS and CMBS securities, respectively, were investment grade according to NAIC ratings and 95%, 38% and 62% of its Corporate, RMBS and CMBS securities, respectively, were investment grade according to NRSRO ratings as of December 31, 2021. NRSRO and NAIC ratings have different methodologies. Global Atlantic believes the NAIC ratings methodology, which considers the likelihood of recovery of amortized cost as opposed to the recovery of all contractual payments including the principal at par, as the more appropriate way to view the ratings quality of its AFS fixed maturity portfolio since a large portion of its holdings were purchased at a significant discount to par value. The portion of Global Atlantic's investment portfolio consisting of floating rate assets was 22% and 20% as of September 30, 2022 and December 31, 2021, respectively.
Within the funds withheld receivable at interest portfolio, 96% and 96% of the fixed maturity securities were investment grade by NAIC designation as of September 30, 2022 and December 31, 2021, respectively    .
Trading fixed maturity securities back funds withheld payable at interest where the investment performance is ceded to reinsurers under the terms of the respective reinsurance agreements.
Credit quality of AFS fixed maturity securities
The Securities Valuation Office of the NAIC evaluates the AFS fixed maturity security investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called “NAIC designations.” Using an internally developed rating is permitted by the NAIC if no rating is available. These designations are generally similar to the credit quality designations of NRSROs for marketable fixed maturity securities, except for certain structured securities as described below. NAIC designations of “1,” highest quality, and “2,” high quality, include fixed maturity securities generally considered investment grade by NRSROs. NAIC designations “3” through “6” include fixed maturity securities generally considered below investment grade by NRSROs.
Consistent with the NAIC Process and Procedures Manual, an NRSRO rating was assigned based on the following criteria: (i) the equivalent S&P rating where the security is rated by one NRSRO; (ii) the equivalent S&P rating of the lowest NRSRO when the security is rated by two NRSROs; and (iii) the equivalent S&P rating of the second lowest NRSRO if the security is rated by three or more NRSROs. If the lowest two NRSROs’ ratings are equal, then such rating will be the assigned rating. NRSROs’ ratings available for the periods presented were S&P, Fitch, Moody’s, DBRS, Inc. and Kroll Bond Rating Agency, Inc. If no rating is available from a rating agency, then an internally developed rating is used.
Substantially all of the AFS fixed maturity securities portfolio, 95% and 97% as of September 30, 2022 and December 31, 2021, respectively, were invested in investment grade assets with a NAIC rating of 1 or 2.
The portion of the AFS fixed maturity securities portfolio that was considered below investment grade by NAIC designation was 5% and 3% as of September 30, 2022 and December 31, 2021, respectively. Pursuant to Global Atlantic's investment guidelines, Global Atlantic actively monitors the percentage of its portfolio that is held in investments rated NAIC 3 or lower and must obtain an additional approval from Global Atlantic's management investment committee before making a significant investment in an asset rated NAIC 3 or lower.
As of September 30, 2022 and December 31, 2021, the non-rated AFS fixed-maturity securities include $227.2 million and $118.8 million, respectively, of private placement securities for which Global Atlantic has not sought individual ratings from the NRSROs.
Corporate fixed maturity securities
Global Atlantic maintains a diversified portfolio of corporate fixed maturity securities across industries and issuers. As of September 30, 2022 and December 31, 2021, 57% and 60%, respectively, of the AFS fixed maturity securities portfolio was invested in corporate fixed maturity securities.
As of September 30, 2022 and December 31, 2021, 94% and 95% of the total fair value of corporate fixed maturity securities is rated NAIC investment grade and 94% and 95% is rated NRSROs investment grade, respectively.         
Residential mortgage-backed securities
As of September 30, 2022 and December 31, 2021, 11% 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. Excluding limitations on access to lending and other extraordinary economic conditions, Global Atlantic
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would expect prepayments of principal on the underlying loans to accelerate with decreases in market interest rates and diminish with increases in market interest rates.
The NAIC designations for RMBS, including prime, sub-prime, alt-A, and adjustable rate mortgages with variable payment options ("Option ARM"), are based upon a comparison of the bond’s amortized cost to the NAIC’s loss expectation for each security. Accordingly, an investment in the same security at a lower cost may result in a higher quality NAIC designation in recognition of the lower likelihood the investment would result in a realized loss. Prime residential mortgage lending includes loans to the most creditworthy borrowers with high quality credit profiles. Alt-A is a classification of mortgage loans where the risk profile of the borrower is between prime and sub-prime. Sub-prime mortgage lending is the origination of residential mortgage loans to borrowers with weak credit profiles.
As of September 30, 2022 and December 31, 2021, 94% and 93%, respectively, of RMBS securities that are below investment grade as rated by the NRSRO, carry an NAIC 1 ("highest quality") designation.
As of September 30, 2022, Alt-A, Option ARM, Re-Performing and Sub-prime represent 31%, 28%, 13% and 11% of the total RMBS portfolio ($6.7 billion), respectively. As of December 31, 2021, Alt-A, Option ARM, Re-Performing and Sub-prime represent 33%, 30%, 14% and 12% of the total RMBS portfolio ($7.7 billion), respectively.
Unrealized gains and losses for AFS fixed maturity securities
Global Atlantic's investments in AFS fixed maturity securities are reported at fair value with changes in fair value recorded in other comprehensive income as unrealized gains or losses, net of taxes and offsets. Unrealized gains and losses can be created by changes in interest rates or by changes in credit spreads.
As of September 30, 2022 and December 31, 2021, Global Atlantic had gross unrealized losses on below investment grade AFS fixed maturity securities of $748.2 million and $80.3 million based on NRSRO rating and $122.1 million and $13.5 million based on NAIC ratings, respectively.        
Mortgage and other loan receivables - Credit quality indicators
Mortgage and other loan receivables consist of commercial and residential mortgage loans, and other loan receivables. As of September 30, 2022 and December 31, 2021, 29% and 23%, respectively, of Global Atlantic's total investments consisted of mortgage and other loan receivables. Global Atlantic invests in U.S. mortgage loans, comprised of first lien and mezzanine real estate loans, residential mortgage loans, consumer loans, and other loan receivables.
Global Atlantic's commercial mortgage loans may also be rated based on NAIC designations, with designations “CM1” and “CM2” considered to be investment grade. As of September 30, 2022 and December 31, 2021, 97% and 96% of the commercial mortgage loan portfolio was rated investment grade based on NAIC designation, respectively. 100% of the commercial mortgage loan portfolio is in current status.
As of September 30, 2022, 97% of the residential mortgage loan portfolio is in current status, and approximately $179.6 million is over 90 days past due (representing 2% of the total residential mortgage portfolio).
The loan-to-value ratio is expressed as a percentage of the current amount of the loan relative to the value of the underlying collateral. Approximately 85% of the commercial mortgage loans has a loan-to-value ratio of 70% or less and 0.2% has loan-to-value ratio over 90%.
Changing economic conditions affect Global Atlantic’s valuation of commercial mortgage loans. Changing vacancies and rents are incorporated into the discounted cash flow analysis that Global Atlantic performs for monitored loans and may contribute to the establishment of (or increase or decrease in) a commercial mortgage loan valuation allowance for losses. In addition, Global Atlantic continuously monitors its commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have exposure to specific geographic events or have deteriorating credit.
The weighted average loan-to-value ratio for residential mortgage loans was 62% and 68% as of September 30, 2022 and December 31, 2021, respectively.
Global Atlantic's residential mortgage loan portfolio is comprised mainly of re-performing loans that were purchased at a discount after they were modified and returned to performing status, as well as prime jumbo loans and mortgage loans backed by single family rental properties. Global Atlantic has also extended financing to counterparties in the form of repurchase agreements secured by mortgage loans, including performing and non-performing mortgage loans.
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Global Atlantic’s consumer loan portfolio is primarily comprised of home improvement loans, solar panel loans, student loans and auto loans.
Reconciliations to GAAP Measures
    The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with GAAP to KKR's non-GAAP financial measures for the three and nine months ended September 30, 2022 and 2021:
Revenues
 Three Months EndedNine Months Ended
 September 30, 2022September 30, 2021September 30, 2022September 30, 2021
 ($ in thousands)
Total GAAP Revenues$1,858,413 $4,483,365 $3,192,500 $12,182,552 
Impact of Consolidation and Other207,822 134,524 593,340 392,883 
Asset Management Adjustments:
Capital Allocation-Based Income (Loss) (GAAP)572,863 (1,526,667)2,442,080 (5,736,707)
Realized Carried Interest496,494 413,114 1,799,870 1,183,826 
Realized Investment Income284,979 447,565 911,221 1,277,701 
Capstone Fees(20,748)(25,178)(55,743)(66,286)
Expense Reimbursements(10,733)(34,857)(77,612)(122,642)
Insurance Adjustments:
Net Premiums(480,462)(974,903)(627,104)(1,698,912)
Policy Fees(320,206)(310,381)(964,349)(824,326)
Other Income(35,632)(31,938)(102,888)(82,160)
Investment Gains and Losses(11,584)(156,909)176,559 83,153 
Derivative Gains and Losses184,303 53,179 945,996 47,151 
Total Segment Revenues (1)
$2,725,509 $2,470,914 $8,233,870 $6,636,233 
(1)Total Segment Revenues is comprised of (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, (iii) Fee Related Performance Revenues, (iv) Realized Performance Income, (v) Realized Investment Income, and (vi) Net Investment Income.
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Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders
Three Months EndedNine Months Ended
 September 30, 2022September 30, 2021September 30, 2022September 30, 2021
 ($ in thousands)
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders (GAAP)$(91,646)$1,131,354 $(993,350)$4,053,271 
Preferred Stock Dividends 17,250 25,203 51,750 88,397 
Net Income (Loss) Attributable to Noncontrolling Interests(5,191)2,125,088 (39,795)7,318,218 
Income Tax Expense (Benefit)27,434 379,282 (128,836)1,161,688 
Income (Loss) Before Tax (GAAP)$(52,153)$3,660,927 $(1,110,231)$12,621,574 
Impact of Consolidation and Other 92,767 (1,478,384)(185,329)(5,000,537)
Equity-based Compensation - KKR Holdings(1)
19,500 8,764 119,834 35,734 
Preferred Stock Dividends— (2,519)— (19,201)
Income Taxes Paid(173,949)(185,645)(540,909)(449,814)
Asset Management Adjustments:
Net Unrealized (Gains) Losses 233,265 (598,304)1,734,293 (2,890,326)
Unrealized Carried Interest1,094,782 (911,156)3,946,182 (3,872,150)
Unrealized Carried Interest Compensation (Carry Pool)(468,785)397,449 (1,629,011)1,667,447 
Strategic Corporate Transaction-Related Charges (2)
17,925 7,362 88,129 17,497 
Equity-based Compensation50,566 44,488 156,259 138,196 
Equity-based Compensation - Performance based58,943 18,022 176,727 50,073 
Insurance Adjustments:(3)
Net (Gains) Losses from Investments and Derivatives(3)
(54,585)(75,241)(120,033)183,842 
Strategic Corporate Transaction-Related Charges(3)
4,413 3,931 14,120 15,947 
Equity-based and Other Compensation(3)
41,102 40,086 94,711 64,061 
Amortization of Acquired Intangibles(3)
4,411 4,412 13,235 11,765 
Income Taxes(3)
(44,468)(9,046)(125,927)(63,148)
After-tax Distributable Earnings$823,734 $925,146 $2,632,050 $2,510,960 
Interest Expense83,335 63,446 229,414 185,100 
Preferred Stock Dividends— 2,519 — 19,201 
Net Income Attributable to Noncontrolling Interests4,932 6,072 17,083 14,678 
Income Taxes Paid173,949 185,645 540,909 449,814 
Distributable Operating Earnings$1,085,950 $1,182,828 $3,419,456 $3,179,753 
Insurance Segment Operating Earnings (127,022)(114,989)(380,063)(305,774)
Realized Performance Income(497,860)(432,784)(1,837,925)(1,222,403)
Realized Performance Income Compensation322,927 274,955 1,180,990 797,965 
Realized Investment Income(284,979)(447,565)(911,221)(1,277,701)
Realized Investment Income Compensation42,747 67,142 136,683 191,663 
Fee Related Earnings$541,763 $529,587 $1,607,920 $1,363,503 
Insurance Segment Operating Earnings127,022 114,989 380,063 305,774 
Realized Performance Income497,860 432,784 1,837,925 1,222,403 
Realized Performance Income Compensation(322,927)(274,955)(1,180,990)(797,965)
Realized Investment Income284,979 447,565 911,221 1,277,701 
Realized Investment Income Compensation(42,747)(67,142)(136,683)(191,663)
Depreciation and Amortization9,045 6,064 24,411 18,257 
Adjusted EBITDA$1,094,995 $1,188,892 $3,443,867 $3,198,010 
(1)Represents equity-based compensation expense in connection with the allocation of units of KKR Holdings, which were not dilutive to common stockholders of KKR & Co. Inc.
(2)For the nine months ended September 30, 2022, strategic corporate transaction-related charges include a $40.7 million realized loss from foreign exchange derivatives that were entered in connection with the acquisition of KJRM and that were settled upon closing.
(3)Amounts include the portion allocable to noncontrolling interests (~39%).

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KKR & Co. Inc. Stockholders' Equity - Common Stock
As of
September 30, 2022December 31, 2021
($ in thousands)
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock$16,335,253 $16,466,372 
Series C Mandatory Convertible Preferred Stock1,115,792 1,115,792 
Impact of Consolidation and Other381,772 (1,048,569)
KKR Holdings and Other Exchangeable Securities181,508 8,595,510 
Accumulated Other Comprehensive Income (AOCI) and Other (Insurance)5,602,167 259,777 
Book Value$23,616,492 $25,388,882 

The following table provides a reconciliation of KKR's GAAP Shares of Common Stock Outstanding to Adjusted Shares:
 As of
 September 30, 2022December 31, 2021
GAAP Shares of Common Stock Outstanding 859,833,444 595,663,618 
Adjustments:
KKR Holdings Units— 258,726,163 
Exchangeable Securities (1)
2,465,810 1,376,655 
Common Stock - Series C Mandatory Convertible Preferred Stock (2)
26,822,570 26,822,600 
Adjusted Shares (3)
889,121,824 882,589,036 
Unvested Equity Awards and Exchangeable Securities (4)
35,300,207 39,000,561 
(1)Consists of vested restricted holdings units granted under our 2019 Equity Incentive Plan, which are exchangeable for shares of KKR & Co. Inc. common stock on a one-for-one basis.
(2)Assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted into shares of KKR & Co. Inc. common stock on September 30, 2022 and December 31, 2021.
(3)Amounts exclude unvested equity awards granted under our Equity Incentive Plans.
(4)Represents equity awards granted under our Equity Incentive Plans. Excludes market condition awards that did not meet their market-price based vesting conditions as of September 30, 2022 and December 31, 2021.

Liquidity
 
We manage our liquidity and capital requirements by (i) focusing on our cash flows before the consolidation of our funds and CFEs and the effect of changes in short term assets and liabilities, which we anticipate will be settled for cash within one year, and (ii) seeking to maintain access to sufficient liquidity through various sources. The overall liquidity framework and cash management approach of our insurance business are also based on seeking to build an investment portfolio that is cash flow matched, providing cash inflows from insurance assets that meet our insurance companies' expected cash outflows to pay their liabilities. 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. See "—Liquidity—Liquidity Needs—Dividends."

See "Business Environment" for more information on factors that may impact our business, financial performance, operating results and valuations.



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Sources of Liquidity
 
Our primary sources of liquidity consist of amounts received from: (i) our operating activities, including the fees earned from our funds, portfolio companies, and capital markets transactions; (ii) realizations on carried interest from our investment funds; (iii) interest and dividends from investments that generate yield, including our investments in CLOs; (iv) in our insurance business, cash inflows in respect of new premiums, policyholder deposits, reinsurance transactions and funding agreements, including through memberships in Federal Home Loan Banks; (v) realizations on and sales of investments and other assets, including the transfers of investments or other assets for fund formations (including CLOs and other investment vehicles); and (vi) borrowings, including advances under our revolving credit facilities, debt offerings, committed repurchase agreements, uncommitted financing, and other borrowing arrangements. In addition, we may generate cash proceeds from issuances of our or our subsidiaries' equity securities.
 
Many of our investment funds provide carried interest. With respect to our private equity funds, carried interest is distributed to the general partner of a private equity fund with a clawback provision only after all of the following are met: (i) a realization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception, in excess of performance hurdles where applicable, and is accruing carried interest; and (iii) with respect to investments with a fair value below cost, cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fair value. As of September 30, 2022, certain of our 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. For a fund that has a fair value above cost, overall, and is otherwise accruing carried interest, but has one or more investments where fair value is below cost, the shortfall between cost and fair value for such investments is referred to as a "netting hole." When netting holes are present, realized gains on individual investments that would otherwise allow the general partner to receive carried interest distributions are instead used to return invested capital to our funds' limited partners in an amount equal to the netting hole. Once netting holes have been filled with either (a) return of capital equal to the netting hole for those investments where fair value is below cost or (b) increases in the fair value of those investments where fair value is below cost, then realized carried interest will be distributed to the general partner upon a realization event. A fund that is in a position to pay cash carry refers to a fund for which carried interest is expected to be paid to the general partner upon the next material realization event, which includes funds with no netting holes as well as funds with a netting hole that is sufficiently small in size such that the next material realization event would be expected to result in the payment of carried interest. Strategic investor partnerships with fund investors may require netting across the various funds in which they invest, which may reduce the carried interest we otherwise would have earned if such fund investors were to have invested in our funds without the existence of the strategic investor partnership. See "Risk Factors—Risks Related to Our Business—Strategic investor partnerships have longer investment periods and invest in multiple strategies, which may increase the possibility of a 'netting hole,' which will result in less carried interest for us, as well as clawback liabilities" in our Annual Report.
 
As of September 30, 2022, netting holes in excess of $50 million existed at none of our private equity, growth, impact, or infrastructure funds. In accordance with the criteria set forth above, other funds currently have and may in the future develop netting holes, and netting holes for those and other funds may otherwise increase or decrease in the future.

We have access to funding under various credit facilities, other borrowing arrangements and other sources of liquidity that we have entered into with major financial institutions or which we receive from the capital markets.

For a discussion of our debt obligations, including our debt securities, revolving credit agreements and loans, see Note 17 "Debt Obligations" in our financial statements.

Liquidity Needs
 
We expect that our primary liquidity needs will consist of cash required to:

continue to support and grow our Asset Management business lines, including funding our capital commitments made to existing and future funds, pay the costs related to fundraising and launching of new strategies, and otherwise supporting investment vehicles which we sponsor;

continue to support and grow our Insurance businesses;

to grow and expand our businesses generally, including by acquiring or launching new, complementary or adjacent businesses;
 
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seed or warehouse investments for the benefit of new strategies or funds, including CLOs, pending the contribution of committed capital by the investors in such funds, and advancing capital to our funds for operational or other needs;

pay interest expense;

service debt obligations, including the payment of obligations upon maturity or redemption, as well as any contingent liabilities 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 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 with KKR Holdings; 

pay cash dividends in accordance with our dividend policy for our common stock or the terms of our preferred stock;  

underwrite commitments, advance loan proceeds and fund syndication commitments within our capital markets business, and fund any net capital or regulatory requirements of our capital markets companies;

post or return collateral in respect of derivative contracts;

support and acquire other assets for our Principal Activities business line, including other businesses, investments and assets, some of which may be required to satisfy risk retention requirements for CLOs (to the extent they may apply); and

repurchase KKR's common stock or retire equity awards pursuant to the share repurchase program or repurchase or redeem other securities issued by KKR.

For a discussion of KKR's share repurchase program, see Note 22 "Equity" in our financial statements.
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Capital Commitments
    The agreements governing our active investment funds generally require the general partners of the funds to make minimum capital commitments to such funds, which generally range from 2% to 8% of a fund's total capital commitments at final closing, but may be greater for certain funds (i) where we are pursuing newer strategies, (ii) where third party investor demand is limited, and (iii) where a larger commitment is consistent with the asset allocation strategy for our Principal Activities business line, including core investments and exposure to the Asia-Pacific region.

The following table presents our uncalled commitments to our active investment funds and other vehicles as of September 30, 2022:
 Uncalled
Commitments
Private Equity($ in millions)
Core Investment Vehicles$3,717 
European Fund VI750 
Asian Fund IV393 
North America Fund XIII389 
Global Impact Fund II145 
Health Care Strategic Growth Fund II137 
Next Generation Technology Growth Fund II26 
Other Private Equity Vehicles1,884 
Total Private Equity Commitments7,441 
 
Real Assets
Asia Pacific Infrastructure Investors II357 
Global Infrastructure Investors IV345 
Asia Real Estate Partners176 
Diversified Core Infrastructure Fund150 
Asia Pacific Infrastructure Investors107 
Real Estate Partners Americas III96 
Real Estate Partners Europe II78 
Real Estate Credit Opportunity Partners II20 
Other Real Assets Vehicles391 
Total Real Assets Commitments1,720 
Credit and Liquid Strategies
Asset-Based Finance Partners101 
Asia Credit97 
Dislocation Opportunities Fund96 
Lending Partners Europe II13 
Lending Partners III12 
Other Credit and Liquid Strategies Vehicles1,184 
Total Credit and Liquid Strategies Commitments1,503 
 
Total Uncalled Commitments$10,664 
Other Commitments
In addition to the uncalled commitments to our investment funds as shown above, KKR has entered into contractual commitments primarily with respect to underwriting transactions, debt financing, revolving credit facilities, and equity syndications in our Capital Markets business line. As of September 30, 2022, these commitments amounted to $0.7 billion.
Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. 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 September 30, 2022 have been reduced to reflect the amount to be funded by such third parties. In the case of purchases of investments or assets in our Principal Activities business line, the amount to be funded includes
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amounts that are intended to be syndicated to third parties, and the actual amounts to be funded may be less. For more information about our capital markets business line's risks, see "Risks Related to Our Business—Our capital markets activities expose us to risks, and our risk management strategy may not be effective or sufficient" in our Annual Report.
Tax Receivable Agreement
On May 31, 2022, KKR terminated the tax receivable agreement with KKR Holdings other than with respect to exchanges of KKR Holdings units prior to the closing of the Reorganization Mergers. As of September 30, 2022, an undiscounted payable of $400.1 million has been recorded in due to affiliates in the financial statements representing management's best estimate of the amounts currently expected to be owed under the tax receivable agreement. As of September 30, 2022, approximately $60.4 million of cumulative cash payments have been made under the tax receivable agreement.

Dividends
A dividend of $0.155 per share of our common stock has been declared and will be paid on November 29, 2022 to holders of record of our common stock as of the close of business on November 14, 2022.
A dividend of $0.75 per share of Series C Mandatory Convertible Preferred Stock has been declared and set aside for payment on December 15, 2022 to holders of record of Series C Mandatory Convertible Preferred Stock as of the close of business on December 1, 2022.
When KKR & Co. Inc. receives distributions from KKR Group Partnership, holders of exchangeable securities receive their pro rata share of such distributions from KKR Group Partnership.
The declaration and payment of dividends to our common stockholders will be at the sole discretion of our board of directors, and our dividend policy may be changed at any time. The declaration of dividends is subject to the discretion of our board of directors based on a number of factors, including KKR’s future financial performance and other considerations that the board deems relevant, and compliance with the terms of KKR & Co. Inc.'s certificate of incorporation and applicable law. For U.S. federal income tax purposes, any dividends we pay (including dividends on our preferred stock) generally will be treated as qualified dividend income for U.S. individual stockholders to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. There can be no assurance that future dividends will be made as intended or at all or that any particular dividend policy for our common stock will be maintained. Furthermore, the declaration and payment of distributions by KKR Group Partnership and our other subsidiaries may also be subject to legal, contractual and regulatory restrictions, including restrictions contained in our debt agreements and the terms of the preferred units of KKR Group Partnership.
Other Liquidity Needs
From time to time, we fund various underwriting, syndication and fronting commitments in our capital markets business in connection with the arranging or underwriting of loans, securities or other financial instruments, for which we may draw all or substantially all of our availability for borrowings under our available credit facilities. 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. For more information about our Capital Markets business line's risks, see "Risks Related to Our Business—Our capital markets activities expose us to risks, and our risk management strategy may not be effective or sufficient" in our Annual Report.
Contractual Obligations, Commitments and Contingencies

In the ordinary course of business, we (including Global Atlantic) and our consolidated funds and CFEs enter into contractual arrangements that may require future cash payments. Contractual arrangements include (1) commitments to fund the purchase of investments or other assets (including obligations to fund capital commitments as the general partner of our investment funds) or to fund collateral for derivative transactions or otherwise, (2) obligations arising under our senior notes, subordinated notes, and other indebtedness, (3) commitments by our capital markets business to underwrite transactions or to lend capital, (4) obligations arising under insurance policies written, (5) other contractual obligations, including servicing agreements with third-party administrators for insurance policy administration, and (6) commitments to fund the business, operations or investments of our subsidiaries.

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We may incur contingent liabilities for claims that may be made against us in the future. We enter into contracts that contain a variety of representations, warranties and covenants, including indemnifications. For example, we and certain of our investment funds have provided certain indemnities relating to environmental and other matters and have provided nonrecourse carve-out guarantees for violations of bankruptcy remoteness restrictions and for fraud, willful misconduct and other wrongful acts, each in connection with the financing of (i) certain real estate investments that we have made, including KKR's corporate real estate, and (ii) certain investment vehicles we manage or sponsor.

We provide credit support to certain subsidiaries' obligations in connection with a limited number of investment vehicles that we manage. For example, we have guaranteed the obligations of a general partner to post collateral on behalf of its investment vehicle in connection with such vehicle's derivative transactions. We have also entered into a contingent guarantee for a subsidiary's loan repayment obligations, which does not become effective unless and until its loan becomes accelerated due to certain specified events of default involving the investment vehicles managed by it. We also (i) provided credit support regarding repayment and funding obligations to third party lenders on behalf of certain employees, excluding executive officers, in connection with their personal investments in KKR investment funds and a levered multi-asset investment vehicle and (ii) provided credit support to one of our hedge fund partnerships.

We expect to continue to guarantee, from time to time, the obligations of our subsidiaries' funding obligations to our investment vehicles. These include KKR's obligations to fund its capital commitments to various levered multi-asset investment vehicles, which are special purpose entities that invest in various funds and co-investments sponsored by KKR. In addition, we have also agreed for certain of our investment vehicles, including certain levered multi-asset investment vehicles, to fund or otherwise be liable for a portion of their investment losses (up to a maximum of approximately $116 million) and/or to provide them with liquidity upon certain termination events (the maximum amount of which is unknown until the scheduled termination date of the investment vehicle).

The partnership documents governing our carry-paying funds generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. In addition, Global Atlantic is obligated to make annual payments out of available cash to its former owner, and Global Atlantic has also arranged or participated in letters of credit in lieu of funding certain loan facilities to third party borrowers. See Note 24 "Commitments and Contingencies—Contingent Repayment Guarantees" to our financial statements included elsewhere in this report for further information.

We have also indemnified employees and non-employees against potential liabilities, in connection with their service as described under "Certain Relationships and Related Transactions, and Director Independence—Indemnification of Directors, Officers and Others" in our Annual Report.

Off Balance Sheet Arrangements
 
We do not have any off-balance sheet financings or liabilities other than contractual commitments and other legal contingencies incurred in the normal course of our business.

Critical Accounting Estimates
The preparation of our financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of fees, expenses and investment income. Our management bases these estimates and judgments on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the financial statements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.
For a further discussion about our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report and Note 2 "Summary of Significant Accounting Policies" in our financial statements included in this report.


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Recently Issued Accounting Pronouncements
For a full discussion of recently issued accounting pronouncements, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.
GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Investments and other financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

Level I
Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
Level II
Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies.
Level III
Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. The valuation of our Level III investments at September 30, 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. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.
 Level III Valuation Methodologies
Our investments and financial instruments are impacted by various economic conditions and events outside of our control that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the carried interest and investment income we realize. Additionally, a change in interest rates could have a significant impact on valuations.
Across the total Level III private equity investment portfolio (including core 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. 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. As of September 30, 2022, the overall weights ascribed to the market comparables methodology, the discounted cash flow methodology, and a methodology based on pending sales for this portfolio of Level III private equity investments were 38%, 54%, and 8%, respectively.
    There is inherent uncertainty involved in the valuation of Level III investments, and there is no assurance that, upon liquidation, KKR will realize the values reflected in our 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 "Business Environment" for more information on factors that may impact our business, financial performance, operating results and valuations.
Key unobservable inputs that have a significant impact on our Level III valuations as described above are included in Note 10 "Fair Value Measurements" in our financial statements.
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Level III Valuation Process
The valuation process involved for Level III measurements is completed on a quarterly basis and is designed to subject the valuation of Level III investments to an appropriate level of consistency, oversight, and review.
For private equity and real asset investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. KKR begins its procedures to determine the fair values of its Level III assets approximately one month prior to the end of a reporting period, and KKR follows additional procedures to ensure that its determinations of fair value for its Level III assets are appropriate as of the relevant reporting date. These preliminary valuations are reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR's valuations annually for all Level III private equity and real asset investments and quarterly for investments other than certain investments, which have values less than preset value thresholds and which in the aggregate comprise less than 1% of the total value of KKR's Level III private equity and real asset investments. The valuations of certain real asset investments are determined solely by independent valuation firms without the preparation of preliminary valuations by our investment professionals, and instead such independent valuation firms rely on valuation information available to it as a broker or valuation firm. For credit investments, an independent valuation firm is generally engaged by KKR to assist with the valuations of most investments classified as Level III. The valuation firm either provides a value, provides a valuation range from which KKR's investment professionals select a point in the range to determine the valuation, or performs certain procedures in order to assess the reasonableness of KKR's valuations. After reflecting any input from the independent valuation firm, the valuation proposals are submitted for review and approval by KKR's valuation committees. As of September 30, 2022, less than 2% of the total value of our Level III credit investments were not valued with the engagement of an independent valuation firm.
For Level III investments in Asset Management, KKR has a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. The global valuation committee is assisted by the asset class-specific valuation committees that exist for private equity (including core equity investments and certain impact investments), growth equity (including certain impact investments), real estate, energy, infrastructure and credit. The asset class-specific valuation committees are responsible for the review and approval of all preliminary Level III valuations in their respective asset classes on a quarterly basis. The members of these valuation committees are comprised of investment professionals, including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarily responsible for the management of the investments. All Level III valuations for investments in Asset Management are also subject to approval by the global valuation committee, which is comprised of senior employees including investment professionals and professionals from business operations functions, and includes one of KKR's Co-Chief Executive Officers and its Chief Financial Officer, General Counsel and Chief Compliance Officer. When valuations are approved by the global valuation committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the Audit Committee of the Board of Directors of KKR & Co. Inc. and are then reported to the Board of Directors.
Level III investments held by Global Atlantic are valued on the basis of pricing services, broker-dealers or internal models. Global Atlantic performs a quantitative and qualitative analysis and review of the information and prices received from independent pricing services as well as broker-dealers to verify that it represents a reasonable estimate of fair value. As of September 30, 2022, approximately 74% of these investments were priced via external sources, while approximately 26% were valued on the basis of internal models. For all the internally developed models, Global Atlantic seeks to verify the reasonableness of fair values by analyzing the inputs and other assumptions used. These preliminary valuations are reviewed, based on certain thresholds, by an independent valuation firm engaged by Global Atlantic to perform certain procedures in order to assess the reasonableness of Global Atlantic's valuations. When valuations are approved by Global Atlantic's management, the valuations of its Level III investments, as well as the valuations of Level I and Level II investments, are presented to the Audit Committee of the Board of Directors of KKR & Co. Inc. and are then reported to the Board of Directors.

As of September 30, 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. The limited procedures did not involve an audit, review, compilation or any other form of examination or attestation under generally accepted auditing standards and were not conducted on all Level III investments. We are responsible for determining the fair value of investments in good faith, and the limited procedures performed by an independent valuation firm are supplementary to the inquiries and procedures that we are required to undertake to determine the fair value of the commensurate investments.
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As described above, Level II and Level III investments were valued using internal models with significant unobservable inputs, and our determinations of the fair values of these investments may differ materially from the values that would have resulted if readily observable inputs had existed. Additional external factors may cause those values, and the values of investments for which readily observable inputs exist, to increase or decrease over time, which may create volatility in our earnings and the amounts of assets and stockholders' equity that we report from time to time.
Changes in the fair value of investments impacts the amount of carried interest that is recognized as well as the amount of investment income that is recognized for investments held directly in Asset Management and through our consolidated funds as described below. We estimate that an immediate 10% decrease in the fair value of investments held directly and through consolidated investment funds generally would result in a commensurate change in the amount of net gains (losses) from investment activities for investments held directly and through investment funds and a more significant impact to the amount of carried interest recognized, regardless of whether the investment was valued using observable market prices or management estimates with significant unobservable pricing inputs. With respect to consolidated investment funds, the impact that the consequential decrease in investment income would have on net income attributable to KKR would generally be significantly less than the amount described above, given that a majority of the change in fair value of our consolidated funds would be attributable to noncontrolling interests and therefore we are only impacted to the extent of our carried interest and our balance sheet investments. 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 September 30, 2022, there were no investments which represented greater than 5% of total investments on a GAAP basis. On a non-GAAP basis, as of September 30, 2022, investments which represented greater than 5% of total non-GAAP investments consisted of USI, Inc. and PetVet Care Centers, LLC and valued at $1,250 million and $1,143 million, respectively. Our investment income on a GAAP basis and our book value can be impacted by volatility in the public markets related to our holdings of publicly traded securities, including our sizable holdings of Fiserv, Inc. and Crescent Energy Company. 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Except for the item disclosed below, there was no material change to our market risks during the three months ended September 30, 2022. For a discussion of our market risks in general, please refer to our Annual Report. In addition, for a discussion of current market conditions and uncertainties, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment."

Insurance Segment Market Risks

Sensitivities

Interest rate risk

Effect of interest rate sensitivity

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 September 30, 2022 to Global Atlantic's AOCI.
September 30, 2022
Hypothetical change(1)
+50 Basis points-50 Basis points
($ in thousands)
Total estimated AOCI sensitivity (point in time)$(1,126,584)$1,211,764 
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. The estimated changes include the impact of related amortization of deferred revenue and expenses and related income tax impacts.
The effect of interest rate sensitivity on AOCI decreased from December 31, 2021 as a result of (i) the overall decrease in market value of the available-for-sale fixed maturity security portfolio, (ii) the positive convexity of the corporate fixed maturity security portfolio which results in lower sensitivity to interest rate moves, and (iii) a smaller portion of the overall investment portfolio consisting of fixed maturity securities that are subject to interest rate sensitivity.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
    We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to management, including the Co-Chief Executive Officers and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives.
We carried out an evaluation, under the supervision and with the participation of our management, including the Co-Chief Executive Officers and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS.
The section entitled "Litigation" appearing in Note 24 "Commitments and Contingencies" to our financial statements included elsewhere in this report is incorporated herein by reference.
ITEM 1A.  RISK FACTORS.
Other than as set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment" in this report, there were no material changes to the risk factors disclosed in our Annual Report.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Share Repurchases in the Third Quarter of 2022
    As of October 28, 2022, there is approximately $78 million remaining under KKR's share repurchase program.
    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. 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. 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.
    In addition to the repurchases of common stock described above, 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. From October 27, 2015 through September 30, 2022, KKR has paid approximately $608 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 23.1 million shares of common stock. 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. 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 third quarter of 2022, no shares of common stock were repurchased, and no equity awards were retired. From inception of the repurchase program in 2015 through September 30, 2022, we have repurchased or retired a total of approximately 74.1 million shares of common stock under the program at an average price of approximately $26.77 per share.
Issuer Purchases of Common Stock
(amounts in thousands, except share and per share amounts)
Total Number of Shares PurchasedAverage Price Paid Per ShareTotal 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
(July 1, 2022 to
July 31, 2022)
— $— — $108,475 
Month #2
(August 1, 2022 to
August 31, 2022)
— $— — $108,475 
Month #3
(September 1, 2022 to
September 30, 2022)
— $— — $108,475 
Total through September 30, 2022 
(1) Amounts have been reduced by retirements of equity awards occurring after May 3, 2018. On May 6, 2020, KKR announced the increase to the total available amount under the repurchase program to $500 million. On December 27, 2021, KKR announced the increase to the total available amount under the repurchase program to $500 million. The repurchase program does not have an expiration date.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
    Not applicable.
ITEM 4.  MINE SAFETY DISCLOSURES.
Not applicable.
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ITEM 5. OTHER INFORMATION.
Not applicable.

ITEM 6. EXHIBITS.
The following is a list of all exhibits filed or furnished as part of this report:
Exhibit No. Description of Exhibit
2.1
2.2
3.1
3.2
10.1
10.2†
31.1 
31.2 
31.3 
32.1 
32.2 
32.3 
101 Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and September 30, 2021, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and September 30, 2021; (iv) the Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2022 and September 30, 2021, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and September 30, 2021, and (vi) the Notes to the Condensed Consolidated Financial Statements.
104Cover page interactive data file, formatted in Inline XBRL and contained in Exhibit 101.

†    Certain information contained in this agreement has been omitted because it is not material and is the type that the registrant treats as private or confidential.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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SIGNATURES 
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 KKR & CO. INC.
  
  
 By:/s/ ROBERT H. LEWIN
  Robert H. Lewin
  Chief Financial Officer
  (principal financial and accounting officer)
   
DATE:November 8, 2022  



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