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 on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021 (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."

References herein 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.

Overview

We are a leading global investment firm that offers alternative asset management and 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 our fund investors and provides capital markets services to our firm, our funds, our portfolio companies and third parties. Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 400 private equity investments in portfolio companies with a total transaction value in excess of $650 billion as of September 30, 2021. We have grown our firm by expanding our geographical presence and building businesses in areas such as leveraged credit, alternative credit, capital markets, infrastructure, energy, real estate, growth equity, core and impact investments. Our balance sheet has provided a significant source of capital in the growth and expansion of our business, and 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. Additionally, we have increased our focus on meeting the needs of our existing fund investors and in developing relationships with new investors in our funds.

We seek to work proactively and collaboratively as one firm across business lines, departments, and geographies, as appropriate, to achieve what we believe are the best results for our funds and other clients and the firm. Through our offices around the world, we have a pre-eminent global integrated platform for sourcing transactions, raising capital and carrying out capital markets activities. Our growth has been driven by value that we have created through our operationally focused investment approach, the expansion of our existing businesses, our entry into new lines of business, innovation in the products that we offer investors in our funds, an increased focus on providing tailored solutions to our clients and the integration of capital markets distribution activities.

As an asset management firm, we earn management, monitoring, transaction and incentive fees and carried interest for providing investment management, monitoring 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, from other assets on our balance sheet and from the carried interest we receive from our funds and other investment vehicles. A carried interest entitles the sponsor of a

fund to a specified percentage of investment gains that are generated on third-party capital that is invested. Beginning in the first quarter of 2021, we also earn our share of income generated by Global Atlantic.

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. As of September 30, 2021, 89% of our capital is not subject to redemption for at least 8 years from inception and 45% of our capital is from strategic investor partnerships and investment funds and vehicles that have an indefinite term and for which there is no immediate requirement to return invested capital to investors upon realization of investments. This capital provides us with significant flexibility to increase the value of the investments and select exit opportunities. We believe that these aspects of our business will help us continue to expand and grow our business and deliver strong investment performance in a variety of economic and financial conditions.

Our insurance business is operated by Global Atlantic, in which we acquired a majority controlling interest on February 1, 2021. In connection with the acquisition, KKR also became the investment manager for Global Atlantic's insurance companies. Global Atlantic is a leading U.S. annuity 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, 2021, Global Atlantic served over three million policyholders. As a result of this acquisition, Global Atlantic's assets and operations have been consolidated with our operating results from and after February 1, 2021. Comparability of KKR's results for periods prior and subsequent to the Global Atlantic acquisition may accordingly be limited.

Our Business

In connection with the acquisition of Global Atlantic on February 1, 2021, we organized our business into two segments: Asset Management and Insurance. The Asset Management segment reflects KKR's historical operations, and the Insurance segment represents Global Atlantic's operations. We operate our asset management business in four business lines: (1) Private Markets, (2) Public Markets, (3) Capital Markets and (4) Principal Activities. Our insurance business is operated by Global Atlantic. Information about our asset management business lines below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. KKR became the investment adviser for Global Atlantic's insurance companies on February 1, 2021.

Asset Management - Private Markets

Through our Private Markets business line, we manage and sponsor a group of 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, we sponsor investment funds that invest in growth equity (including impact) and core investments. We also manage and sponsor investment funds that invest capital in real assets, such as real estate, infrastructure and energy. Our Private Markets business line includes separately managed accounts that invest in multiple strategies, which include our credit strategies as well as our private equity and real assets strategies. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser. As of September 30, 2021, our Private Markets business line had $247.6 billion of AUM, consisting of $147.6 billion in private equity (including growth equity, impact and core investments), $79.5 billion in real assets (including real estate, infrastructure and energy) and $20.5 billion in other related strategies.

The table below presents information as of September 30, 2021, relating to our investment vehicles in our Private Markets business line for which we have the ability to earn carried interest. This data does not reflect additional capital raised, acquisitions or disposals of investments, changes in investment values, or distributions occurring after September 30, 2021.

			Investment Period (1)						Amount ($ in millions)
			Start Date			End Date			Commitment (2)			Uncalled Commitments			Percentage Committed by General Partner			Invested			Realized			Remaining Cost (3)			Remaining Fair Value			Gross Accrued Carried Interest
Private Equity and Growth Equity Funds
North America Fund XIII			6/2021			6/2027			$	16,788		$	16,788		7%			$	—		$	—		$	—		$	—		$	—
Americas Fund XII			1/2017			6/2021			13,500			3,959			6%			10,016			3,432			8,910			21,859			2,240
North America Fund XI			9/2012			1/2017			8,718			432			3%			9,733			15,529			3,747			8,373			842
2006 Fund (4)			9/2006			9/2012			17,642			247			2%			17,309			34,287			1,825			3,280			290
Millennium Fund (4)			12/2002			12/2008			6,000			—			3%			6,000			14,123			—			6			1
European Fund V			3/2019			7/2025			6,398			2,695			2%			3,772			350			3,585			5,054			230
European Fund IV			12/2014			3/2019			3,517			67			6%			3,577			3,407			2,279			4,257			362
European Fund III (4)			3/2008			3/2014			5,513			153			5%			5,360			10,602			253			235			(12)
European Fund II (4)			11/2005			10/2008			5,751			—			2%			5,751			8,507			—			34			—
Asian Fund IV			7/2020			7/2026			14,735			12,630			7%			2,105			—			2,105			2,382			11
Asian Fund III			4/2017			7/2020			9,000			2,332			6%			7,059			1,778			6,586			14,565			1,415
Asian Fund II			4/2013			4/2017			5,825			34			1%			6,839			5,680			3,184			5,017			352
Asian Fund (4)			7/2007			4/2013			3,983			—			3%			3,974			8,723			17			30			5
China Growth Fund (4)			11/2010			11/2016			1,010			—			1%			1,010			1,056			330			242			(4)
Next Generation Technology Growth Fund II			12/2019			12/2025			2,088			898			7%			1,272			82			1,242			2,262			172
Next Generation Technology Growth Fund			3/2016			12/2019			659			4			22%			663			652			375			1,854			161
Health Care Strategic Growth Fund II			5/2021			5/2027			3,744			3,744			7%			—			—			—			—			—
Health Care Strategic Growth Fund			12/2016			5/2021			1,331			565			11%			896			196			791			1,352			83
Global Impact Fund			2/2019			2/2025			1,242			416			8%			904			77			851			1,263			72
Private Equity and Growth Equity Funds									127,444			44,964						86,240			108,481			36,080			72,065			6,220
Co-Investment Vehicles and Other			Various			Various			12,470			3,874			Various			8,979			6,791			5,865			8,951			1,504
Core Investment Vehicles			Various			Various			23,384			12,865			32%			10,519			31			10,519			16,944			274
Total Private Equity, Growth Equity and Core Funds									163,298			61,703						105,738			115,303			52,464			97,960			7,998
Real Assets
Energy Income and Growth Fund II			6/2018			8/2022			994			577			20%			598			181			444			621			12
Energy Income and Growth Fund			9/2013			6/2018			1,974			—			13%			1,971			876			1,203			1,137			—
Natural Resources Fund (4)			Various			Various			887			—			Various			887			123			193			84			—
Global Energy Opportunities			Various			Various			915			64			Various			519			163			327			204			—
Global Infrastructure Investors IV			6/2021			6/2027			14,998			14,998			3%			—			—			—			—			—
Global Infrastructure Investors III			6/2018			6/2021			7,186			3,348			4%			4,073			336			3,964			4,314			—
Global Infrastructure Investors II			10/2014			6/2018			3,040			123			4%			3,163			3,394			1,748			2,619			85
Global Infrastructure Investors			9/2011			10/2014			1,040			—			5%			1,050			2,228			—			—			—
Asia Pacific Infrastructure Investors			1/2020			1/2026			3,792			2,954			7%			880			43			853			1,121			41
Diversified Core Infrastructure Fund			12/2020			(5)			6,783			6,073			7%			711			13			711			794			—
Real Estate Partners Americas III			12/2020			1/2025			4,339			4,339			7%			—			—			—			—			—
Real Estate Partners Americas II			5/2017			12/2020			1,921			271			8%			1,886			807			1,449			2,116			123
Real Estate Partners Americas			5/2013			5/2017			1,229			143			16%			1,016			1,397			183			80			3
Real Estate Partners Europe II			12/2019			4/2024			2,106			1,498			9%			608			—			608			746			11
Real Estate Partners Europe			9/2015			12/2019			713			160			10%			632			519			302			405			21
Asia Real Estate Partners			6/2019			6/2023			1,682			1,423			15%			259			—			259			319			1
Real Estate Credit Opportunity Partners II			4/2019			6/2022			950			507			5%			443			56			443			464			6
Real Estate Credit Opportunity Partners			2/2017			4/2019			1,130			122			4%			1,008			301			1,008			974			—
Property Partners Americas			12/2019			(5)			2,413			795			21%			1,618			44			1,618			1,930			13
Co-Investment Vehicles and Other			Various			Various			4,619			494			Various			3,840			1,524			3,401			3,709			12
Total Real Assets									62,711			37,889						25,162			12,005			18,714			21,637			328
Other
Unallocated Commitments (6)									1,460			1,460			Various			—			—			—			—			—
Private Markets Total									$	227,469		$	101,052					$	130,900		$	127,308		$	71,178		$	119,597		$	8,326

(1)The start date represents the date on which the general partner of the applicable fund commenced investment of the fund's capital or the date of the first closing. The end date represents the earlier of (i) the 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 on behalf of the fund, unless extended by a vote of the fund investors, and (ii) the date on which the last investment was made.

(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, 2021, 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, with the limited partners' investment further reduced for any realized gains from which the general partner did not receive a carried interest.

(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)Open ended fund.

(6)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.

The table below presents information as of September 30, 2021, relating to the historical performance of certain of our Private Markets 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, 2021, 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.

			Amount									Fair Value of Investments
Private Markets Investment Funds			Commitment			Invested						Realized (4)			Unrealized						Total 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 Fund			357			357						1,828			—						1,828						29.0		%	25.8		%							5.1
1982 Fund			328			328						1,291			—						1,291						48.1		%	39.2		%							3.9
1984 Fund			1,000			1,000						5,964			—						5,964						34.5		%	28.9		%							6.0
1986 Fund			672			672						9,081			—						9,081						34.4		%	28.9		%							13.5
1987 Fund			6,130			6,130						14,949			—						14,949						12.1		%	8.9		%							2.4
1993 Fund			1,946			1,946						4,143			—						4,143						23.6		%	16.8		%							2.1
1996 Fund			6,012			6,012						12,477			—						12,477						18.0		%	13.3		%							2.1
Subtotal - Legacy Funds			16,475			16,475						50,269			—						50,269						26.1		%	19.9		%							3.1
Included Funds
European Fund (1999) (2)			3,085			3,085						8,758			—						8,758						26.9		%	20.2		%							2.8
Millennium Fund (2002)			6,000			6,000						14,123			6						14,129						22.0		%	16.1		%							2.4
European Fund II (2005) (2)			5,751			5,751						8,507			34						8,541						6.1		%	4.5		%							1.5
2006 Fund (2006)			17,642			17,309						34,287			3,280						37,567						12.0		%	9.4		%							2.2
Asian Fund (2007)			3,983			3,974						8,723			30						8,753						18.9		%	13.7		%							2.2
European Fund III (2008) (2)			5,513			5,360						10,602			235						10,837						16.6		%	11.5		%							2.0
E2 Investors (Annex Fund) (2009) (2)			196			196						200			—						200						0.6		%	0.5		%							1.0
China Growth Fund (2010)			1,010			1,010						1,056			242						1,298						6.3		%	2.1		%							1.3
Natural Resources Fund (2010)			887			887						123			84						207						(22.8)		%	(24.4)		%							0.2
Global Infrastructure Investors (2011) (2)			1,040			1,050						2,228			—						2,228						17.6		%	15.6		%							2.1
North America Fund XI (2012)			8,718			9,733						15,529			8,373						23,902						24.0		%	19.4		%							2.5
Asian Fund II (2013)			5,825			6,839						5,680			5,017						10,697						12.8		%	9.4		%							1.6
Real Estate Partners Americas (2013)			1,229			1,016						1,397			80						1,477						16.8		%	12.0		%							1.5
Energy Income and Growth Fund (2013)			1,974			1,971						876			1,137						2,013						0.5		%	(1.8)		%							1.0
Global Infrastructure Investors II (2014) (2)			3,040			3,163						3,394			2,619						6,013						20.8		%	18.1		%							1.9
European Fund IV (2015) (2)			3,517			3,577						3,407			4,257						7,664						26.5		%	20.9		%							2.1
Real Estate Partners Europe (2015) (2)			713			632						519			405						924						15.7		%	10.9		%							1.5
Next Generation Technology Growth Fund (2016)			659			663						652			1,854						2,506						49.8		%	43.3		%							3.8
Health Care Strategic Growth Fund (2016)			1,331			896						196			1,352						1,548						43.8		%	28.7		%							1.7
Americas Fund XII (2017)			13,500			10,016						3,432			21,859						25,291						48.1		%	39.8		%							2.5
Real Estate Credit Opportunity Partners (2017)			1,130			1,008						301			974						1,275						8.2		%	7.2		%							1.3
Core Investment Vehicles (2017)			23,384			10,519						31			16,944						16,975						27.9		%	26.9		%							1.6
Asian Fund III (2017)			9,000			7,059						1,778			14,565						16,343						53.0		%	42.5		%							2.3
Real Estate Partners Americas II (2017)			1,921			1,886						807			2,116						2,923						30.6		%	25.1		%							1.5
Global Infrastructure Investors III (2018) (2)			7,186			4,073						336			4,314						4,650						9.2		%	6.0		%							1.1
Global Impact Fund (2019)			1,242			904						77			1,263						1,340						59.8		%	42.5		%							1.5
European Fund V (2019) (2)			6,398			3,772						350			5,054						5,404						41.9		%	32.7		%							1.4
Energy Income and Growth Fund II (2019)			994			598						181			621						802						20.3		%	17.7		%							1.3
Asia Real Estate Partners (2019)			1,682			259						—			319						319						25.9		%	7.2		%							1.2
Next Generation Technology Growth Fund II (2019) (3)			2,088			1,272						82			2,262						2,344						—			—									—
Asia Pacific Infrastructure Investors (2019) (3)			3,792			880						43			1,121						1,164						—			—									—
Real Estate Credit Opportunity Partners II (2019) (3)			950			443						56			464						520						—			—									—
Asian Fund IV (2020) (3)			14,735			2,105						—			2,382						2,382						—			—									—
Real Estate Partners Americas III (2021) (3)			4,339			—						—			—						—						—			—									—
Real Estate Partners Europe II (2021) (2)(3)			2,106			608						—			746						746						—			—									—
Health Care Strategic Growth Fund II (2021) (3)			3,744			—						—			—						—						—			—									—
Global Infrastructure Investors IV (2021) (3)			14,998			—						—			—						—						—			—									—
North America Fund XIII (2021) (3)			16,788			—						—			—						—						—			—									—
Subtotal - Included Funds			202,090			118,514						127,730			104,009						231,739						17.2		%	13.3		%							2.0
All Funds			$	218,565		$	134,989					$	178,000		$	104,009					$	282,009					25.6		%	18.9		%							2.1

(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 (the "KPE Transaction").

(2)The following table presents information regarding investment funds with euro-denominated commitments. 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, 2021, in the case of unfunded commitments.

Private Markets Investment Funds			Commitment (€ in millions)
European Fund						€	197
European Fund II						€	2,598
European Fund III						€	2,883
E2 Investors (Annex Fund)						€	56
Global Infrastructure Investors						€	30
Global Infrastructure Investors II						€	244
European Fund IV						€	1,626
Real Estate Partners Europe						€	277
Global Infrastructure Investors III						€	987
European Fund V						€	2,144
Real Estate Partners Europe II						€	768

(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, 2021. None of the Next Generation Technology Growth Fund II, Asia Pacific Infrastructure Investors, Real Estate Credit Opportunities Partners II, Asian Fund IV, Real Estate Partners Americas III, Real Estate Partners Europe II, Health Care Strategic Growth Fund II, Global Infrastructure Investors IV, North America Fund XIII, Diversified Core Infrastructure Fund, or Property Partners Americas, has invested for at least 24 months as of September 30, 2021. We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to those 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. In periods prior to the three months ended September 30, 2015, realized proceeds excluded current income such as dividends and interest.

(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 Markets 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 Markets 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 Markets 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 Markets 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 - Public Markets

Through our Public Markets business line, we operate our credit and hedge funds platforms on a combined basis. Our credit business invests capital in (i) leveraged credit strategies, including leveraged loans, high-yield bonds, opportunistic credit and revolving credit strategies, and (ii) alternative credit strategies, including special situations or dislocation strategies and private credit strategies such as direct lending and private opportunistic credit (including mezzanine and asset-based finance) investment strategies. The funds, CLOs, separately managed accounts, investment companies registered under the Investment Company Act of 1940 (the "Investment Company Act") and alternative investment funds ("AIFs") in our leveraged credit and alternative 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"), and KKR Credit Advisors (Singapore) Pte. Ltd., which is regulated by the Monetary Authority of Singapore and also registered with the SEC. Our business development company ("BDC") platform consists of a BDC advised by FS/KKR Advisor, LLC ("FS/KKR Advisor"), which is an investment adviser jointly owned by KKR and Franklin Square Holdings, L.P. ("FS Investments"). Our

Public Markets business line also includes our hedge funds platform, which consists of strategic partnerships with third-party hedge fund managers in which KKR owns a minority stake (which we refer to as "hedge fund partnerships"). Our hedge fund partnerships offer a variety of investment strategies, including equity hedge funds, hedge fund-of-funds and credit hedge funds.

As of September 30, 2021, our Public Markets business line had $211.5 billion of AUM, comprised of $110.3 billion of assets managed in our leveraged credit strategies (which include $6.2 billion of assets managed in our opportunistic credit strategy and $1.9 billion of assets managed in our revolving credit strategy), $7.8 billion of assets managed in our special situations or dislocation strategies, $65.4 billion of assets managed in our private credit strategies, $26.5 billion of assets managed through our hedge fund platform, and $1.5 billion of assets managed in other strategies. Our private credit strategies include $24.6 billion of assets managed in our direct lending strategy, $30.9 billion of assets managed in our private opportunistic credit strategy and $9.9 billion of assets managed in other private credit strategies. Our BDC has approximately $16.6 billion in combined assets under management, which are reflected in the AUM of our leveraged credit strategies and alternative credit strategies above. We report all of the assets under management of the BDC. We report only a pro rata portion of the AUM in our strategic partnership with third-party hedge fund managers based on KKR's percentage ownership in them.

Credit

Performance

We generally review our performance in our credit business by investment strategy.

Our leveraged credit strategies principally invest through separately managed accounts, a BDC, CLOs and investment funds. In certain cases, these strategies have meaningful track records and may be compared to widely-known indices. The following table presents information regarding larger leveraged credit strategies managed by KKR from inception to September 30, 2021. 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 Strategy						Inception Date												Gross Returns						Net Returns						Benchmark (1)						Benchmark Gross Returns
Bank Loans Plus High Yield						Jul 2008												7.45		%				6.85		%				65% S&P/LSTA Loan Index, 35% BoAML HY Master II Index (2)						5.98		%
Opportunistic Credit (3)						May 2008												11.47		%				9.71		%				50% S&P/LSTA Loan Index, 50% BoAML HY Master II Index (3)						6.27		%
Bank Loans						Apr 2011												5.34		%				4.76		%				S&P/LSTA Loan Index (4)						4.30		%
High-Yield						Apr 2011												7.07		%				6.49		%				BoAML HY Master II Index (5)						6.37		%
Bank Loans Conservative						Apr 2011												4.52		%				3.94		%				S&P/LSTA BB-B Loan Index (6)						4.27		%
European Leveraged Loans (7)						Sep 2009												4.69		%				4.17		%				CS Inst West European Leveraged Loan Index (8)						3.66		%
High-Yield Conservative						Apr 2011												6.32		%				5.74		%				BoAML HY BB-B Constrained (9)						6.32		%
European Credit Opportunities (7)						Sept 2007												6.01		%				5.12		%				S&P European Leveraged Loans (All Loans) (10)						4.18		%
Revolving Credit (11)						May 2015												N/A						N/A						N/A						N/A

(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 S&P/ LSTA BB-B Loan Index is comprised of loans in the S&P/LSTA Loan Index, whose rating is BB+, BB, BB-, B+, B or B-. 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 BoAML HY BB-B Constrained is a subset of the BoAML HY Master II Index including all securities rated BB1 through B3, inclusive. 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)Performance is based on a composite of portfolios that primarily invest in leveraged loans rated B-/Baa3 or higher. The benchmark used for purposes of comparison for the Bank Loans Conservative strategy is based on the S&P/LSTA BB-B Loan Index.

(7)The returns presented are calculated based on local currency.

(8)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.

(9)Performance is based on a composite of portfolios that primarily invest in high-yield securities rated B or higher. The benchmark used for purposes of comparison for the High-Yield Conservative strategy is based on the BoAML HY BB-B Constrained Index.

(10)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.

(11)This strategy has not called any capital as of September 30, 2021. As a result, the gross and net return performance measures are not meaningful and are not included above.

Our alternative credit strategies primarily invest in more illiquid instruments through private investment funds, BDC and separately managed accounts. The following table presents information regarding our Public Markets alternative credit commingled funds where investors are subject to capital commitments from inception to September 30, 2021. Some of these funds have been investing for less than 24 months, and thus their performance is less meaningful and not included below. In addition, 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

												Amount												Fair Value of Investments
Public Markets Investment Funds						Inception Date						Commitment						Invested (1)						Realized (1)						Unrealized						Total Value						Gross IRR (2)						Net IRR (2)												Multiple of Invested Capital (3)						Gross Accrued Carried Interest
($ in Millions)
Dislocation Opportunities Fund						May 2020						$	2,910					$	1,515					$	119					$	1,704					$	1,823					N/A						N/A												N/A						$	37
Special Situations Fund II						Dec 2014						3,525						3,241						1,333						2,690						4,023						6.9		%				4.9		%										1.2						—
Special Situations Fund						Dec 2012						2,274						2,273						1,598						606						2,204						(0.7)		%				(2.6)		%										1.0						—
Mezzanine Partners						Mar 2010						1,023						990						1,097						245						1,342						10.0		%				6.9		%										1.4						(20)
Private Credit Opportunities Partners II						Dec 2015						2,245						1,483						546						1,295						1,841						8.2		%				6.6		%										1.2						—
Lending Partners III						Apr 2017						1,498						741						264						810						1,074						16.3		%				13.5		%										1.4						26
Lending Partners II						Jun 2014						1,336						1,179						1,143						179						1,322						4.3		%				3.0		%										1.1						—
Lending Partners						Dec 2011						460						419						451						21						472						3.6		%				2.0		%										1.1						—
Lending Partners Europe II						Jun 2019						837						346						34						383						417						29.6		%				22.9		%										1.2						2
Lending Partners Europe						Mar 2015						848						664						354						302						656						(0.4)		%				(3.0)		%										1.0						—
Other Alternative Credit Vehicles						Various						11,744						6,147						4,292						4,097						8,389						N/A						N/A												N/A						120
All Funds												$	28,700					$	18,998					$	11,231					$	12,332					$	23,563																													$	165

(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.

Public Markets AUM and Vehicle Structures

The table below presents information as of September 30, 2021, based on the investment funds, vehicles or accounts offered by our Public Markets business line. Our funds, vehicles and accounts have been sorted based upon their primary investment strategies. However, the AUM and FPAUM presented for each line in the table includes certain investments from non-primary investment strategies, which are permitted by their investment mandates, for purposes of presenting the fees and other terms for such funds, vehicles and accounts.

($ in millions)						AUM						FPAUM						Typical Management Fee Rate						Incentive Fee / Carried Interest						Preferred Return						Duration of Capital
Leveraged Credit:
Leveraged Credit SMAs/Funds						$	87,607					$	86,017					0.15% - 1.10%						Various (1)						Various (1)						Subject to redemptions
CLOs						21,020						21,020						0.40% - 0.50%						Various (1)						Various (1)						10-14 Years (2)
Total Leveraged Credit						108,627						107,037
Alternative Credit: (3)
Special Situations						8,101						4,529						0.50% - 1.75% (4)						10.00 - 20.00%						7.00 - 12.00%						7-15 Years (2)
Private Credit						51,666						46,348						0.25% - 1.50%						10.00 - 20.00%						5.00 - 8.00%						8-15 Years (2)
Total Alternative Credit						59,767						50,877
Hedge Funds (5)						26,544						26,544						0.50% - 2.00%						Various (1)						Various (1)						Subject to redemptions
BDCs (6)						16,561						16,561						0.60%						8.00%						7.00%						Indefinite
Total						$	211,499					$	201,019

(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 2021 and for separately managed accounts and funds investing in alternative credit strategies from 2009 through 2021.

(3)Our alternative credit funds generally have investment periods of three to five years and our newer alternative credit funds generally earn fees on invested capital during the investment period.

(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 our BDC advised by FS/KKR Advisor. We report all of the AUM of our BDC in our AUM and FPAUM.

Asset Management - Capital Markets

Our Capital Markets business line is comprised of our global capital markets business, which is integrated with KKR's asset management business lines, and serves our firm, our 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 balance sheet and deploy capital to support and grow our asset management business lines. Typically, the funds in our Private Markets and Public Markets business lines contractually require us, as general partner of the funds, to make sizable capital commitments from time to time. 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. We also use our balance sheet to bridge investment activity during fundraising by seeding investments for new funds and also to acquire investments in order to help establish a track record for fundraising in new strategies. We also use our own capital to bridge capital selectively for our funds' investments or finance strategic acquisitions and partnerships, although the financial results of an acquired business or hedge fund partnership 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 our CLOs.

We also make opportunistic investments through our Principal Activities business line, which include co-investments alongside our Private Markets and Public Markets funds as well as Principal Activities investments that do not involve our Private Markets or Public Markets 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.

The chart below presents the holdings of our Principal Activities business line by asset class as of September 30, 2021:

Holdings by Asset Class (1)

(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 KKR 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.

Insurance - Global Atlantic

Our insurance business is operated by Global Atlantic, which we acquired on February 1, 2021. KKR owns all of the voting interests in Global Atlantic and a 61.1% economic interest in Global Atlantic as of the closing of the acquisition, which economic interest increased to 61.5% following certain post-closing purchase price adjustments in June 2021. The balance of Global Atlantic is 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. Beginning with the first quarter of 2021, we present Global Atlantic's financial results as a separate reportable segment.

Global Atlantic is a leading U.S. annuity 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 has made the strategic decision to focus 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 individuals fixed-rate annuities, fixed-indexed annuities, and targeted life products through a network of banks, broker-dealers, and insurance agencies. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer, 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, 2021, Global Atlantic served over three million policyholders.

Business Environment

Economic and Market Conditions

Impact of COVID-19. The outbreak of COVID-19 continues to impact the United States and other 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, Japan, China, and other major economies are significant contributors to the global economy.

During the period ended September 30, 2021, the United States continued to show signs of economic improvement, primarily driven by substantial government fiscal and monetary support and its vaccine rollout program. Inflation, however, is on the rise, as dislocations in supply chains and pandemic-related labor shortages both contribute to scarcity of some goods and services. In the United States, real GDP is estimated to have expanded by 3.4% at a seasonally adjusted annualized rate in the quarter ended September 30, 2021, compared to an expansion of 6.7% at a seasonally adjusted annualized rate in the quarter ended June 30, 2021; the U.S. unemployment rate was 4.8% as of September 30, 2021, down from 5.9% as of June 30, 2021; the U.S. core consumer price index was 4.0% on a year-over-year basis as of September 30, 2021, down from 4.5% on a year-over-year basis as of June 30, 2021; and the effective federal funds rate set by the U.S. Federal Reserve was 0.1% as of September 30, 2021, flat from 0.1% as of June 30, 2021.

During the period ended September 30, 2021, the Euro Area maintained a second consecutive quarter of expansion, as real GDP is estimated to have risen by 2.2% on a seasonally adjusted quarter-over-quarter basis in the quarter ended September 30, 2021 compared to growth of 2.1% on a seasonally adjusted quarter-over-quarter basis in the quarter ended June 30, 2021; the Euro Area unemployment is estimated to have been 7.5% as of September 30, 2021, down from 7.8% as of June 30, 2021; Euro Area core inflation was 1.9% on a year-over-year basis as of September 30, 2021, up from 0.9% on a year-over-year basis as of June 30, 2021; and the short-term benchmark interest rate set by the European Central Bank was 0.0% as of September 30, 2021, unchanged from June 30, 2021.

During the period ended September 30, 2021, in Asia, Japan's economy continued to struggle with post-pandemic economic recovery. In Japan, real GDP growth for the quarter ended September 30, 2021 is estimated to be 1.0% on a seasonally adjusted quarter-over-quarter basis, down from 1.9% as of June 30, 2021 on a seasonally adjusted quarter-over-quarter basis. Core inflation in Japan remained negative at -0.5% as of September 30, 2021, up slightly from -0.9% as of June 30, 2021. In Japan, the short-term benchmark interest rate set by the Bank of Japan was -0.1% as of September 30, 2021, unchanged from June 30, 2021. In China, policymakers introduced a campaign for "common prosperity" focused on promoting a balance among growth, inclusion, and national security considerations, which could weigh on the outlook for economic growth over the medium term. Reported real GDP in China rose by a modest 0.2% on a seasonally adjusted quarter-over-quarter basis in the quarter ended September 30, 2021, compared to growth of 1.2% reported for the quarter ended June 30, 2021. Reported core inflation in China was 1.2% as of September 30, 2021, up from 0.9% as of June 30, 2021.

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, short- and medium-term interest rates may rise, which may adversely impact equity and credit markets and in turn slow economic growth. In addition, commodity prices are generally expected to rise in inflationary environments, and foreign exchange rates may be affected by countries' monetary and fiscal responses to inflationary trends. Other key issues include (i) further developments regarding COVID-19, including the spread of variants like the Delta variant, which may prolong the adverse economic impact of the 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 relations, (iii) political uncertainty caused by, among other things, economic nationalist sentiments, tensions surrounding socioeconomic inequality issues, and the at-times partisan nature of U.S. government administration, which has 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) volatility or downturn in equity or credit markets, (vi) unexpected shifts in central banks' monetary policies, and (vii) technological advancements and innovations that may disrupt marketplaces and businesses. 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, the U.S. Congress is proposing (and after the date of this report may propose other) various significant changes in tax law, including significant changes in the way U.S. corporations like ourselves and many of our U.S. portfolio companies are taxed. If enacted, these changes could materially increase the amount of taxes 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.

Equity and Credit Markets. Global equity and credit markets have a substantial effect on our financial condition and results of operations. 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 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 ongoing central bank quantitative easing campaigns and comparatively low interest rates relative to the United States could potentially experience further currency volatility and weakness relative to the U.S. dollar.

With respect to our insurance business, fluctuations in market interest rates can expose Global Atlantic to the risk of reduced income in respect of its investment portfolio, increases in the cost of acquiring or maintaining its insurance liabilities, increases in the cost of hedging, or other fluctuations in Global Atlantic's financial, capital and operating profile which materially and adversely affect the business. Higher interest rates, periods of changes in rates and lower rates each 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 asset management business, 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. For the quarter ended September 30, 2021, global equity markets were positive, with the S&P 500 up 0.6% and the MSCI World Index up 0.1% 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 23.1 as of September 30, 2021, increasing from 15.8 as of June 30, 2021. 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" in our Annual Report 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.

Many of our investments, particularly in asset management, are in non-investment grade credit instruments, and, particularly in insurance, in 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.

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 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 should 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, 2021, U.S. investment grade corporate bond spreads (BofA Merrill Lynch US Corporate Index) widened by 3 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) widened by 11 basis points. The non-investment grade credit indices were up during the quarter ended September 30, 2021, with the S&P/LSTA Leveraged Loan Index up 1.1% and the BAML US High Yield Index up 0.9%. During the quarter ended September 30, 2021, 10-year government bond yields rose 2 basis points in the United States, rose 31 basis points in the United Kingdom, rose 1 basis point in Germany, fell 21 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" in our Annual Report 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" in our Annual Report.

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, 2021, the euro fell 2.3%, the British pound fell 2.6%, the Japanese yen fell 0.2%, and the Chinese renminbi rose 0.2%, 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.

Commodity Markets. Our Private Markets portfolio contains energy real asset investments, and certain of our other Private Markets and Public Markets strategies and products, including private equity, direct lending, special situations and CLOs, also have meaningful investments in the energy sector. The value of these investments is heavily influenced by the price of natural gas and oil. During the quarter ended September 30, 2021, the 3-year forward price of WTI crude oil increased approximately 4%, and the 3-year forward price of natural gas increased approximately 17%. The 3-year forward price of WTI crude oil increased from approximately $57 per barrel to $60 per barrel, and the 3-year forward price of natural gas increased from approximately $2.70 per mcf to $3.16 per mcf as of June 30, 2021 and September 30, 2021, 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 addition, because we hold certain energy real asset investments on our balance sheet, price movements can have an amplified impact on our financial results, to the extent unhedged, as we would directly bear the full extent of such gains or losses. 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.

Following the significant volatility experienced in 2020, oil and natural gas prices have continued to recover throughout the course of 2021 alongside improving global demand. 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. However, due to near-term commodity derivative transactions, 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. As of September 30, 2021, energy investments in oil and gas assets make up approximately 1% of our assets under management, 1% of our total GAAP assets and 1% of our total segment assets.

Business Conditions

Our operating revenues consist of fees, performance income and investment 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 industry generally, and in certain cases our re-insurance vehicles, as attractive means for capital appreciation or income. Since 2010, we have expanded into strategies such as real assets, credit, core, impact and, through hedge fund partnerships, hedge funds, and most recently, insurance. In several of our asset management strategies, our first time funds have begun raising successor funds, and we expect the cost of raising such successor funds to be lower. 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 and Next Generation Technology 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.

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 “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 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. 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 certain CLOs and CMBS. We refer to CLOs and CMBS as 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 a consolidated fund or entity does not have an effect on the amounts of Net Income Attributable to KKR or KKR's stockholders' capital 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 presentations 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 approach for the financial statements presentations 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 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 condensed 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.

For a further discussion of our consolidation policies, see Note 2 "Summary of Significant Accounting Policies" to our financial statements included elsewhere in this report. 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.

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, 2021.

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; (v) revenue earned by oil and gas entities that are consolidated; and (vi) 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.

For a further discussion of our revenue policies, see Note 2 "Summary of Significant Accounting Policies" to our financial statements included elsewhere in this report.

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 by 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 distributable revenues. Based on the current components and blend of our distributable revenues on an annual basis, we expect to use approximately 20‐25% of fee revenues, 60‐70% of realized carried interest and 10‐20% of realized investment income and hedge fund partnership incentive fees to pay our asset management employees. Because these 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 determines 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 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 and II Preferred, Common Stock as of September 30, 2021 would have been reduced by approximately $2.69 per share, compared to our reported $27.13 per share on such date, and our book value as of September 30, 2021 would have been reduced by approximately $2.61 per adjusted share, compared to our reported book value of $28.06 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 L.P. 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, 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 L.P., 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 the 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 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, expenses incurred by oil and gas entities, CLOs and investment funds that are 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.

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 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, 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 debt issued by KKR, including debt issued by KFN, credit facilities entered into by KKR, debt securities issued by consolidated CFEs, and financing arrangements at our consolidated investment 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 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."

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, 2021.

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, railcars, and airplanes (net of depreciation and operating expenses).

Net investment gains

Net investment gains primarily consists of (i) realized gains and losses from the disposal of investments, (ii) unrealized gains and losses from investments held for trading, or 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.

Other income

Other income is primarily comprised of 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 on 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.

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, or "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 2 "Summary of Significant Accounting Policies" and Note 17 "Income Taxes" to our financial statements included elsewhere in this report.

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 are consolidated in the financial statements as well as the ownership interests in KKR Group Partnership that are held by KKR Holdings. 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 21 "Equity" to the financial statements included elsewhere in this report.

Key Non-GAAP Performance Measures and Other Operating Measures

The key non-GAAP and other operating and performance measures that follow 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 non-GAAP measures as described below are presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and KKR Holdings L.P. (and holders of other exchangeable securities) and as such represent the entire KKR business in total. In addition, these non-GAAP measures are presented without giving effect to the consolidation of the investment funds and collateralized financing entities (“CFEs”) that KKR manages.

We believe that providing these non-GAAP 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. 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, Series A and B Preferred Stock dividends, Net Income Attributable to Noncontrolling Interests and Income Taxes Paid. Series C Mandatory Convertible Preferred Stock dividends have been 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. Income Taxes Paid represents the implied 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 units in KKR Holdings L.P. and other exchangeable securities were exchanged for common stock of KKR & Co. Inc. Income Taxes Paid includes amounts paid pursuant to the tax receivable agreement and 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 KKR Holdings L.P., 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 the investors of KKR funds and other noncontrolling interest holders and to the holders of Preferred Stock. KKR's book value includes (x) the net impact of KKR's tax assets and liabilities as prepared under GAAP and (y) the implied amount of (1) tax assets and liabilities attributable to KKR Holdings L.P. as if it was subject to corporate income taxes and (2) the recognition of deferred tax liabilities relating to certain assets of KKR Group Partnership L.P. that is expected to occur upon the completion of the mergers contemplated by the previously announced Reorganization Agreement, dated October 8, 2021. 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. 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.

In the second quarter of 2021, the definition of book value was amended to include the implied amount of tax assets and liabilities attributable to KKR Holdings L.P. as if it was subject to corporate income taxes. This change is useful to management and investors in assessing book value because the definition now includes the anticipated impacts that the payment of tax liabilities by KKR would have on book value. Prior periods have not been adjusted for this change, although it is expected to have had the effect of reducing book value reported for prior periods.

Starting in the third quarter of 2021, the definition of book value was amended to include the anticipated recognition of deferred tax liabilities relating to certain assets of KKR Group Partnership L.P. that is expected to occur upon the completion of the mergers contemplated by the Reorganization Agreement. This change is useful to management and investors in assessing book value because the definition now includes the anticipated impacts that the mergers contemplated by the Reorganization Agreement, which are expected to be completed in 2022, would have on book value.

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 is presented prior to giving effect to the allocation of income (loss) among KKR & Co. Inc., KKR Holdings L.P. and holders of other exchangeable securities, and the consolidation of the investment funds, vehicles and accounts that KKR advises, manages or sponsors (including collateralized financing entities). 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 performance income compensation. Management fees earned by KKR as the adviser, manager or sponsor for its investment funds, vehicles and accounts, including management fees paid to KKR by Global Atlantic's insurance companies and management fees paid to Global Atlantic by reinsurance investment vehicles, 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 Global Atlantic's 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, (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.

Adjusted Shares

Adjusted shares represents shares of common stock of KKR & Co. Inc. outstanding under GAAP adjusted to include shares issuable upon exchange of all units of KKR Holdings L.P. and other exchangeable securities and the number of shares of common stock assumed to be issuable upon conversion of the Series C Mandatory Convertible Preferred Stock. 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.

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 Global Atlantic's insurance companies; (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 fair value of investments in KKR's co-investment vehicles; (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 AUM of KKR's strategic BDC partnership; and (vii) the fair 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's 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. 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.

Consolidated Results of Operations (GAAP Basis) (Unaudited)

The following is a discussion of our consolidated results of operations for the three months ended September 30, 2021 and 2020. 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 details on the potential adverse effects of COVID-19 on 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 operations are presented separately from KKR's asset management business. Additionally, 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, 2021						September 30, 2020						Change
			($ in thousands)
Revenues
Asset Management
Fees and Other			$	718,968					$	563,340					$	155,628
Capital Allocation-Based Income (Loss)			1,526,667						1,331,898						194,769
			2,245,635						1,895,238						350,397
Insurance
Net Premiums			974,903						—						974,903
Policy Fees			310,381						—						310,381
Net Investment Income			758,381						—						758,381
Net Investment Gains (Losses)			162,127						—						162,127
Other Income			31,938						—						31,938
			2,237,730						—						2,237,730
Total Revenues			4,483,365						1,895,238						2,588,127
Expenses
Asset Management
Compensation and Benefits			1,012,837						882,339						130,498
Occupancy and Related Charges			17,438						17,321						117
General, Administrative and Other			203,977						194,039						9,938
			1,234,252						1,093,699						140,553
Insurance
Policy Benefits and Claims			1,697,046						—						1,697,046
Amortization of Policy Acquisition Costs			(16,900)						—						(16,900)
Interest Expense			22,437						—						22,437
Insurance Expenses			89,534						—						89,534
General, Administrative and Other			158,873						—						158,873
			1,950,990						—						1,950,990
Total Expenses			3,185,242						1,093,699						2,091,543
Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities			2,116,647						2,284,602						(167,955)
Dividend Income			121,484						116,379						5,105
Interest Income			402,839						354,865						47,974

Interest Expense			(278,166)						(223,709)						(54,457)
Total Investment Income (Loss)			2,362,804						2,532,137						(169,333)
Income (Loss) Before Taxes			3,660,927						3,333,676						327,251
Income Tax Expense (Benefit)			379,282						359,375						19,907
Net Income (Loss)			3,281,645						2,974,301						307,344
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests			1,519						—						1,519
Net Income (Loss) Attributable to Noncontrolling Interests			2,123,569						1,909,458						214,111
Net Income (Loss) Attributable to KKR & Co. Inc.			1,156,557						1,064,843						91,714
Series A Preferred Stock Dividends			—						5,822						(5,822)
Series B Preferred Stock Dividends			7,953						2,519						5,434
Series C Mandatory Convertible Preferred Stock Dividends			17,250						—						17,250
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders			$	1,131,354					$	1,056,502					$	74,852

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

Revenues

For the three months ended September 30, 2021 and 2020, revenues consisted of the following:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees						$	349,249					$	254,467					$	94,782
Fee Credits						(164,720)						(89,487)						(75,233)
Transaction Fees						437,619						300,805						136,814
Monitoring Fees						29,823						28,824						999
Incentive Fees						6,962						63						6,899
Expense Reimbursements						34,857						44,553						(9,696)
Oil and Gas Revenue						—						6,687						(6,687)
Consulting Fees						25,178						17,428						7,750
Total Fees and Other						718,968						563,340						155,628
Carried Interest						1,216,433						1,077,932						138,501
General Partner Capital Interest						310,234						253,966						56,268
Total Capital Allocation-Based Income (Loss)						1,526,667						1,331,898						194,769
Total Revenues - Asset Management						$	2,245,635					$	1,895,238					$	350,397

Fees and Other

Total Fees and Other for the three months ended September 30, 2021 increased compared to the three months ended September 30, 2020 primarily as a result of the increase in transaction fees and 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 due to management fees earned from North America Fund XIII, Global Infrastructure Investors IV, and Health Care Strategic Growth Fund II, each of which entered its investment period in the second quarter of 2021, and Asian Fund IV, which entered its investment period in the third quarter of 2020. These increases were partially offset by a decrease in management fees earned from Americas Fund XII as a result of entering its post-investment period in the second quarter of 2021 and now earns fees based on capital invested rather than capital committed and at a lower fee rate.

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 increased compared to the prior period as a result of a higher level of transaction fees in our Private Markets and Public Markets business lines. 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.

Capital Allocation-Based Income (Loss)

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. Capital Allocation-Based Income (Loss) for the three months ended September 30, 2020 was also positive due to the net appreciation of the underlying investments at our carry earning investment funds most notably Americas Fund XII, North America Fund XI and Asian Fund III.

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. Additionally, unrealized carried interest and general partner capital interest reverse upon a realization, and unrealized carried interest and general partner capital interest can be negative if the amount of realized carried interest exceeds total unrealized carried interest generated in the period.

Investment Income (Loss) - Asset Management

Net Gains (Losses) from Investment Activities

The following is a summary of net gains (losses) from investment activities:

			Three Months Ended
			September 30, 2021						September 30, 2020
			($ in thousands)
Private Equity			$	943,858					$	1,591,134
Credit			(42,409)						315,459
Investments of Consolidated CFEs			8,185						392,287
Real Assets			637,698						251,599
Equity Method - Other			174,139						435,664
Other Investments			81,117						57,808
Debt Obligations and Other			22,482						(336,811)
Other Net Gains (Losses) from Investment Activities			291,577						(422,538)
Net Gains (Losses) from Investment Activities			$	2,116,647					$	2,284,602

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.

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. For a discussion and analysis of the investment gains or losses relating to the investments in our unconsolidated funds, see "—Analysis of Asset Management Segment Operating Results."

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. and Darktrace PLC (LON: DARK.L). Partially 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 (healthcare sector), 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) 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, 2021, see "—Analysis of Asset Management Segment Operating Results."

Net Gains (Losses) from Investment Activities for the three months ended September 30, 2020

The net gains from investment activities for the three months ended September 30, 2020 were comprised of net realized gains of $548.6 million and net unrealized gains of $1,736.0 million.

Realized Gains and Losses from Investment Activities

For the three months ended September 30, 2020, net realized gains related primarily to (i) the sale of our investment in The Hut Group Limited (LSE: THG), (ii) the sale of our investment in Ivalua SAS (technology sector) and (iii) a partial sale of our investment in Fiserv Inc. (NASDAQ: FISV). Partially offsetting these realized gains were realized losses primarily relating to our consolidated CLOs and special situations funds.

Unrealized Gains and Losses from Investment Activities

For the three months ended September 30, 2020, net unrealized gains were driven primarily by (i) mark-to-market gains in our private equity and core investments held by KKR and certain consolidated entities, the most significant of which were Arnott's Biscuits Limited (consumer products sector) and PetVet Care Centers, LLC, and (ii) mark-to-market gains in certain investments held through our consolidated real asset funds and through our consolidated credit funds and CLOs. These unrealized gains were partially offset by the reversal of unrealized gain positions due to the sales of our investments in The Hut Group Limited and Ivalua SAS.

For a discussion of other factors that affected KKR's realized investment income for the three months ended September 30, 2021, see "—Analysis of Asset Management Segment Operating Results."

Dividend Income

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. During the three months ended September 30, 2020, the most significant dividends received included $46.5 million from our consolidated real estate funds and $48.9 million from our investment in Epicor Software Corporation (technology sector).

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, 2021 compared to the three months ended September 30, 2020 was primarily due to (i) the impact of closing additional CLOs that are consolidated subsequent to September 30, 2020 and (ii) a higher level of interest income from certain of our consolidated credit funds, primarily related to

an increase in the amount of capital deployed. 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, 2021 compared to the three months ended September 30, 2020 was primarily due to the (i) impact of issuances of our senior notes, (ii) impact of closing additional CLOs that are consolidated subsequent to September 30, 2020, and (iii) increase in the amount of borrowings outstanding from consolidated funds and other vehicles. 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 increase in compensation and benefits expense during the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily due to (i) a higher level of accrued carried interest compensation resulting from a higher level of carried interest from the appreciation in the value of our investment portfolio in the current period and (ii) a higher level of discretionary compensation accrued resulting from a higher level of fee revenue, realized performance income and realized investment income in the current period.

General, Administrative and Other

The increase in general, administrative and other expenses during the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily due to (i) a higher level of expenses in our consolidated funds and investment vehicles, (ii) placement fees incurred related to capital raising activities for various private markets funds and (iii) a higher level of broken-deal expenses. 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.

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

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												Nine Months Ended
						September 30,												September 30,
						2021												2021
($ in thousands)
Impacts of assumption review, by statement of income line item:
Policy fees						$	182											$	182
Policy benefits and claims						20,904												20,904
Amortization of policy acquisition costs						(2,119)												(2,119)
Income tax impact						(3,983)												(3,983)
Total assumption review impact on net income						$	14,984											$	14,984
Assumption review impact on adjustments to derive insurance segment adjusted operating earnings						(97)												(97)
Total assumption review impact on insurance segment adjusted operating earnings						$	14,887											$	14,887

For the three and nine months ended September 30, 2021, the net favorable unlocking impact on net income and insurance segment adjusted operating earnings was primarily due to favorable mortality experience.

Revenues

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

						Three Months Ended
						September 30, 2021
						($ in thousands)
Net Premiums						$	974,903
Policy Fees						310,381
Net Investment Income						758,381
Net Investment Gains (Losses)						162,127
Other Income						31,938
Total Insurance Revenues						$	2,237,730

Net Premiums

Net premiums were primarily driven by initial premiums related to new reinsurance transactions with life contingencies assumed during the three months ending September 30, 2021. These initial premiums are offset by a comparable increase in policy reserves reported within policy benefits and claims (as discussed below).

Policy fees

Policy fees were primarily driven by cost of insurance, administrative, and rider fees in the individual market channel during the three months ending September 30, 2021.

Net investment income

Net investment income was primarily driven by insurance segment investments and the effective book yield (as determined, in part, by the allocated fair value of the investment portfolio as determined as of the GA Acquisition Date). Average insurance segment investments were primarily driven by new block reinsurance transactions and funding agreements issued. The impact of higher asset balances were offset by lower income primarily due to elevated cash levels during the quarter related to recent reinsurance transactions pending reinvestment.

Net investment gains

The components of net investment gains were as follows:

						Three Months Ended
						September 30, 2021
						($ in thousands)
Embedded derivatives on funds withheld at interest						$	93,970
Equity future contracts						1,783
Equity index options						(25,854)
Interest rate contracts						(24,135)
Foreign currency forwards						(4,776)
Credit risk contracts						(196)
Net losses on derivative instruments						40,792
Net other investment gains						121,335
Net investment gains						$	162,127

Net losses on derivative instruments

The increase in the fair value of embedded derivatives on funds withheld at interest was primarily driven by the decrease in fair value of the underlying investments in the funds withheld portfolio.

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 policy benefits and claims). The majority of Global Atlantic's equity index call options are based on the S&P 500 index, which was essentially unchanged during the three month period ending September 30, 2021.

The decrease in the fair value of interest rate contracts was driven primarily by market interest rate volatility during the three months ended September 30, 2021.

Net other investment gains

Net other investment gains for the three months ended September 30, 2021 were primarily due to unrealized gains on the valuation of equity interests in solar facility developers. Offsetting these gains were (i) net unrealized losses on trading fixed maturity securities underlying a portion of the funds withheld payable at interest portfolio due to an increase in market interest rates, and (ii) an increase of the allowance for credit losses on consumer and commercial mortgage loans due to an increase in loan balances during the three months ending September 30, 2021.

Other income

Other income is mainly driven by administration, management fees and distribution fees, modestly increasing during the three months ending September 30, 2021 driven by higher administration fees earned from an increase in the volume of ceded reinsurance business in the institutional channel.

Expenses

Policy benefits and claims

Policy benefits and claims were primarily driven by (i) initial reserves assumed related to new reinsurance transactions during the three months ending September 30, 2021 and (ii) an increase in net flows from both individual and institutional channel sales.

Amortization of policy acquisition costs

Amortization of policy acquisition costs during the three months ending September 30, 2021 was primarily driven by the amortization of insurance intangibles recognized as part of purchase accounting of the Global Atlantic acquisition. Amortization is negative (that is, a reduction to expense) as a result of the net negative value-of-business-acquired insurance intangible recognized as part of the aforementioned purchase accounting.

Interest expense

Interest expense for the three months ending September 30, 2021 was primarily driven by interest on debt outstanding, including interest on $750 million of subordinated debentures issued in July 2021.

Insurance expenses

Insurance expenses were primarily driven by (i) commission expense related to sales, and (ii) reinsurance ceding expense allowances paid for policy administration services during the three months ending September 30, 2021.

General, administrative and other

General, administrative and other expenses were driven primarily by (i) employee compensation and benefits related expenses, (ii) third-party administrator ("TPA") policy servicing fees, and (iii) technology hardware and software related charges during the three months ending September 30, 2021.

Other Unaudited Consolidated Results of Operations (GAAP Basis)

Income Tax Expense (Benefit)

For the three months ended September 30, 2021, income tax expense was $379.3 million compared to $359.4 million in the prior period. The increase in the income tax expense was primarily due to (i) a higher level of fees and capital allocation-based income as described above earned from asset management and (ii) the inclusion of income taxes relating to Global Atlantic's insurance operations. Our effective tax rate under GAAP for the three months ended September 30, 2021 was 10.4%. For a discussion of factors that impacted KKR's tax provision, see Note 17 "Income Taxes" to the financial statements included elsewhere in this report. The amount of U.S. 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, 2021 relates primarily to net income (loss) attributable to (i) interests of KKR Holdings and other exchangeable securities representing ownership interests in KKR Group Partnership, (ii) third-party limited partner interests in consolidated investment funds and (iii) interests that co-investors and rollover investors hold in Global Atlantic. Net income (loss) attributable to noncontrolling interests for the three months ended September 30, 2021 increased compared to the prior period primarily due to a higher level of net income generated during the three months ended September 30, 2021, allocable to the holders of the noncontrolling interests.

Net Income (Loss) Attributable to KKR & Co. Inc.

Net income (loss) attributable to KKR & Co. Inc. for the three months ended September 30, 2021 increased compared to the prior period primarily due to the inclusion of Global Atlantic's net income for the three months ended September 30, 2021 and the increase in net income from asset management described above.

Consolidated Results of Operations (GAAP Basis) (Unaudited)

The following is a discussion of our consolidated results of operations for the nine months ended September 30, 2021 and 2020. 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 details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

			Nine Months Ended
			September 30, 2021						September 30, 2020						Change
			($ in thousands)
Revenues
Asset Management
Fees and Other			$	1,887,805					$	1,337,385					$	550,420
Capital Allocation-Based Income (Loss)			5,736,707						888,342						4,848,365
			7,624,512						2,225,727						5,398,785
Insurance
Net Premiums			1,698,912						—						1,698,912
Policy Fees			824,326						—						824,326
Net Investment Income			1,919,659						—						1,919,659
Net Investment Gains (Losses)			32,983						—						32,983
Other Income			82,160						—						82,160
			4,558,040						—						4,558,040
Total Revenues			12,182,552						2,225,727						9,956,825
Expenses
Asset Management
Compensation and Benefits			3,419,057						1,211,526						2,207,531
Occupancy and Related Charges			51,289						51,222						67
General, Administrative and Other			608,270						491,327						116,943
			4,078,616						1,754,075						2,324,541
Insurance
Policy Benefits and Claims			3,593,563						—						3,593,563
Amortization of Policy Acquisition Costs			(57,409)						—						(57,409)
Interest Expense			44,482						—						44,482
Insurance Expenses			242,591						—						242,591
General, Administrative and Other			371,656						—						371,656
			4,194,883						—						4,194,883
Total Expenses			8,273,499						1,754,075						6,519,424
Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities			8,032,900						(179,033)						8,211,933
Dividend Income			323,051						295,047						28,004
Interest Income			1,151,548						1,040,052						111,496
Interest Expense			(794,978)						(725,245)						(69,733)
Total Investment Income (Loss)			8,712,521						430,821						8,281,700
Income (Loss) Before Taxes			12,621,574						902,473						11,719,101

Income Tax Expense (Benefit)			1,161,688						204,960						956,728
Net Income (Loss)			11,459,886						697,513						10,762,373
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests			2,856						—						2,856
Net Income (Loss) Attributable to Noncontrolling Interests			7,315,362						206,225						7,109,137
Net Income (Loss) Attributable to KKR & Co. Inc.			4,141,668						491,288						3,650,380
Series A Preferred Stock Dividends			23,656						17,466						6,190
Series B Preferred Stock Dividends			12,991						7,557						5,434
Series C Mandatory Convertible Preferred Stock Dividends			51,750						—						51,750
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders			$	4,053,271					$	466,265					$	3,587,006

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

Revenues

For the nine months ended September 30, 2021 and 2020, revenues consisted of the following:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees						$	931,624					$	696,892					$	234,732
Fee Credits						(322,402)						(185,746)						(136,656)
Transaction Fees						978,399						561,259						417,140
Monitoring Fees						98,164						86,875						11,289
Incentive Fees						13,092						731						12,361
Expense Reimbursements						122,642						100,779						21,863
Oil and Gas Revenue						—						21,054						(21,054)
Consulting Fees						66,286						55,541						10,745
Total Fees and Other						1,887,805						1,337,385						550,420
Carried Interest						4,553,527						626,338						3,927,189
General Partner Capital Interest						1,183,180						262,004						921,176
Total Capital Allocation-Based Income (Loss)						5,736,707						888,342						4,848,365
Total Revenues - Asset Management						$	7,624,512					$	2,225,727					$	5,398,785

Fees and Other

Total Fees and Other for the nine months ended September 30, 2021 increased compared to the nine months ended September 30, 2020 primarily as a result of the increase in transaction fees and 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 due to management fees earned from Asian Fund IV, which entered its investment period in the third quarter of 2020, and North America Fund XIII, Health Care Strategic Growth Fund II, and Global Infrastructure Investors IV, all of which entered their investment periods in the second quarter of 2021. These increases were partially offset by a decrease in management fees earned from Asian Fund III and Americas Fund XII as a result of entering their post-investment periods in the third quarter of 2020 and second quarter of 2021, respectively, and both now earn fees based on capital invested rather than capital committed and at a lower fee rate.

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 increased compared to the prior period as a result of a higher level of transaction fees in our Private Markets and Public Markets 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 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 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 line are not shared with fund investors. Accordingly, certain transaction fees are reflected in revenues without a corresponding fee credit.

Capital Allocation-Based Income (Loss)

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. Capital Allocation-Based Income (Loss) for the nine months ended September 30, 2020 was positive 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 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. Additionally, unrealized carried interest and general partner capital interest reverse upon a realization, and unrealized carried interest and general partner capital interest can be negative if the amount of realized carried interest exceeds total unrealized carried interest generated in the period.

Investment Income (Loss) - Asset Management

Net Gains (Losses) from Investment Activities

The following is a summary of net gains (losses) from investment activities:

			Nine Months Ended
			September 30, 2021						September 30, 2020
			($ in thousands)
Private Equity			$	4,802,006					$	1,456,254
Credit			118,327						(541,388)
Investments of Consolidated CFEs			218,729						(552,093)
Real Assets			1,392,306						(221,562)
Equity Method - Other			715,576						244,193
Other Investments			554,557						(597,787)
Debt Obligations and Other			(37,163)						303,261
Other Net Gains (Losses) from Investment Activities			268,562						(269,911)
Net Gains (Losses) from Investment Activities			$	8,032,900					$	(179,033)

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.

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. For a discussion and analysis of the investment gains or losses relating to the investments in our unconsolidated funds, see "—Analysis of Asset Management Segment Operating Results."

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. (NASDAQ: BBIO). Partially offsetting these realized gains were realized losses 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) unrealized loss on BridgeBio Pharma, Inc. (NASDAQ: BBIO)..

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, 2020

The net losses from investment activities for the nine months ended September 30, 2020 were comprised of net realized gains of $281.4 million and net unrealized losses of $(460.4) million.

Realized Gains and Losses from Investment Activities

For the nine months ended September 30, 2020, net realized gains related primarily to (i) the sale of our investment in Hut Group Limited, (ii) the sale of our investment in Ivalua SAS, (iii) a partial sale of our investment in BridgeBio Pharma, Inc. and (iv) a partial sale of our investment in Fiserv Inc. Partially offsetting these realized gains were realized losses primarily relating to (i) an $88.3 million impairment charge taken on one of our investments that is accounted for under the equity method of accounting, (ii) a realized loss on the partial sale of our investment in LCI Helicopters Limited (financial services sector) and (iii) realization of losses on certain investments held through consolidated CLOs.

Unrealized Gains and Losses from Investment Activities

For the nine months ended September 30, 2020, net unrealized losses were driven primarily by (i) the reversal of previously recognized unrealized gains relating to the realization activity described above, (ii) mark-to-market losses on our investment in Fiserv, Inc., which is held in our funds and as a co-investment by KKR, (iii) mark-to-market losses on investments held in consolidated credit, real estate and energy funds, and (iv) mark-to-market losses on certain investments held through consolidated CLOs. Partially offsetting these unrealized losses were unrealized gains relating to mark-to-market gains in our private equity, growth equity, and core investments held by KKR and certain consolidated entities, the most significant of which were FanDuel Inc. (technology sector), Arnott's Biscuits Limited and PetVet Care Centers, LLC.

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, 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. During the nine months ended September 30, 2020, the most significant dividends received included $128.8 million from our consolidated real estate funds, $62.5 million from our investment in Fiserv, Inc. and $48.9 million from our investment in Epicor Software Corporation.

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, 2021 compared to the nine months ended September 30, 2020 was primarily due to (i) a higher level of interest income from certain of our consolidated credit funds, primarily related to an increase in the amount of capital deployed and (ii) the impact of closing additional CLOs that are consolidated subsequent to September 30, 2020. Partially offsetting these increases was a lower level of interest income earned from our consolidated special situations funds, due to an overall decrease in (i) interest rates and (ii) outstanding balance of interest-earning investments since these consolidated funds are in their post investment periods compared to the nine months ended September 30, 2020. 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, 2021 compared to the nine months ended September 30, 2020 was primarily due to (i) the impact of issuances of our senior notes, (ii) an increase in the amount of borrowings outstanding from the financing arrangements of consolidated investment funds and other vehicles and (iii) impact of closing additional CLOs that are consolidated subsequent to September 30, 2020. These increases were partially offset by a lower level of interest expense on debt obligations of KREF as a result of a decrease in interest rates compared to the prior period. For a discussion of other factors that affected KKR's interest expense, see "—Analysis of Non-GAAP Performance Measures."

Expenses - Asset Management

Compensation and Benefits Expenses

The increase in compensation and benefits expenses during the nine months ended September 30, 2021 compared to the prior period was primarily due to (i) a higher level of accrued carried interest compensation resulting from a higher level of carried interest from the appreciation in the value of our investment portfolio in the current period and (ii) a higher level of accrued discretionary compensation and benefits resulting from a higher level of fee revenue, realized performance income and realized investment income in the current period.

General, Administrative and Other

The increase in general, administrative and other expenses during the nine months ended September 30, 2021 compared to the prior period was primarily due to (i) a higher level of expenses reimbursable by our investment funds, (ii) a higher level of expenses in our consolidated investment funds and other vehicles, (iii) placement fees incurred related to capital raising activities for various private markets investment funds and (iv) a higher level of broken-deal expenses. 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.

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

Revenues

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

						Nine Months Ended
						September 30, 2021
						($ in thousands)
Net Premiums						$	1,698,912
Policy Fees						824,326
Net Investment Income						1,919,659
Net Investment Gains (Losses)						32,983
Other Income						82,160
Total Insurance Revenues						$	4,558,040

Net Premiums

Net premiums were primarily driven by initial premiums related to new reinsurance transactions with life contingencies assumed during the nine months ending September 30, 2021. These initial premiums are offset by a comparable increase in policy reserves reported within policy benefits and claims (as discussed below).

Policy fees

Policy fees were primarily driven by cost of insurance, administrative, and rider fees in the individual market channel during the nine months ending September 30, 2021.

Net investment income

Net investment income was primarily driven by insurance segment investments and the effective book yield (as determined, in part, by the allocated fair value of the investment portfolio as determined as of the GA Acquisition Date). Average insurance segment investments were primarily driven by net inflows of assets from the individual markets and institutional channels. The impact of higher asset balances was partially offset by lower income primarily due to elevated cash levels during the quarter related to recent reinsurance transactions pending reinvestment.

Net investment gains

The components of net investment gains were as follows:

						Nine Months Ended
						September 30, 2021
						($ in thousands)
Equity index options						$	275,035
Embedded derivatives on funds withheld at interest						117,248
Equity future contracts						(171,982)
Interest rate contracts						(149,274)
Foreign currency forwards						(675)
Credit risk contracts						(254)
Net gains on derivative instruments						70,098
Net other investment losses						(37,115)
Net investment gains						$	32,983

Net gains on derivative instruments

The increase in the fair value of equity index options were 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 for which is accounted for in policy benefits and claims). The majority of Global Atlantic's equity index call options are based on the S&P 500 index, which increased during the nine months ended September 30, 2021.

The increase in the fair value of embedded derivatives on funds withheld at interest were primarily driven by the decrease in fair value of the underlying investments in the funds withheld payable portfolio.

The decrease in the fair value of equity futures and interest rate contracts were driven primarily by the performance of equity markets and credit markets. Global Atlantic purchases equity futures primarily to hedge the market risk in our variable annuity products which are accounted for in policy benefits and claims. The majority of Global Atlantic's equity futures are based on the S&P 500 Index, which increased during the nine months ended September 30, 2021, resulting in a loss on equity futures contracts. Market interest rates increased during the nine months ended September 30, 2021, resulting in a loss on interest rate contracts.

Net other investment losses

Net other investment losses for the nine months ended September 30, 2021 were primarily due to (i) the recognition of an initial credit loan loss allowance as a result of the adoption of the current expected credit loss accounting standard concurrent with the GA Acquisition, (ii) net unrealized losses on trading fixed maturity securities underlying a portion of the funds withheld payable at interest portfolio due to an increase in market interest rates, and (iii) losses on the sale of AFS securities. Offsetting these losses were unrealized gains on the valuation of equity investments in solar facility developers.

Other income

Other income is mainly driven by administration, management fees and distribution fees, modestly increasing during the nine months ended September 30, 2021 driven by higher administration fees earned from an increase in the volume of ceded reinsured business in the institutional channel.

Expenses

Policy benefits and claims

Policy benefits and claims were primarily driven by (i) initial reserves related to new reinsurance transactions, during the eight months ended September 30, 2021, (ii) an increase in the value of embedded derivatives in Global Atlantic's indexed universal life and fixed indexed annuity products, as a result of higher equity market returns (as discussed above under "Revenues—Total Insurance Revenues—Net gains on derivative instruments," Global Atlantic purchases equity index options in order to hedge this risk, the fair value changes of which are accounted for in gains on derivative instruments, and generally offsetting the change in embedded derivative fair value reported in policy benefits and claims), and (iii) an increase in net flows in the institutional and individual channels, all offset by a decrease in variable annuity reserves primarily due to higher equity market returns and market interest rates.

Amortization of policy acquisition costs

Amortization of policy acquisition costs during the nine months ended September 30, 2021 was primarily driven by the amortization of insurance intangibles recognized as part of purchase accounting of the Global Atlantic acquisition. Amortization is negative (that is, a reduction to expense) as a result of the net negative value-of-business-acquired insurance intangible recognized as part of the aforementioned purchase accounting.

Interest expense

Interest expense for the nine month period ended September 30, 2021 primarily reflects (i) a net increase in debt outstanding due to the issuance of new senior and subordinated notes, partially offset by the pay-down of other debt and (ii) the impact of the decrease in interest rates on interest rate swaps.

Insurance expenses

Insurance expenses were primarily driven by (i) commission expense related to sales, and (ii) reinsurance ceding expense allowances paid for policy administration services during the nine month period ended September 30, 2021.

General, administrative and other

General, administrative and other expenses were driven primarily by (i) employee compensation and benefits related expenses, (ii) third-party administrator policy servicing fees, and (iii) technology hardware and software related charges during the nine months ended September 30, 2021.

Other Unaudited Consolidated Results of Operations (GAAP Basis)

Income Tax Expense (Benefit)

For the nine months ended September 30, 2021, income tax expense was $1,161.7 million compared to $205.0 million in the prior period. The increase in the income tax expense was primarily due to (i) a higher level of fees, capital allocation-based income and investment income as described above earned from asset management operations and (ii) the inclusion of income taxes relating to Global Atlantic's insurance operations. Our effective tax rate under GAAP for the nine months ended September 30, 2021 was 9.2%. For a discussion of factors that impacted KKR's tax provision, see Note 17 "Income Taxes" to the financial statements included elsewhere in this report. The amount of U.S. 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, 2021 relates primarily to net income (loss) attributable to (i) interests of KKR Holdings and other exchangeable securities representing ownership interests in KKR Group Partnership, (ii) third-party limited partner interests in consolidated investment funds and (iii) interests that co-investors and rollover investors hold in Global Atlantic. Net income (loss) attributable to noncontrolling interests for the nine months ended September 30, 2021 increased compared to the prior period primarily due to a higher level of net income generated during the nine months ended September 30, 2021, allocable to the holders of the noncontrolling interests.

Net Income (Loss) Attributable to KKR & Co. Inc.

Net income (loss) attributable to KKR & Co. Inc. for the nine months ended September 30, 2021 increased compared to the prior period due primarily to (i) a higher level of net gains from investment activities, capital allocation-based income, and fees earned from the asset management operations during the nine months ended September 30, 2021 as described above and (ii) the acquisition of Global Atlantic, which was completed in February 2021. These increases were partially offset by accrued carried interest compensation and income tax expense, each as described above.

Condensed Consolidated Statements of Financial Condition (GAAP Basis) (Unaudited)

The following table provides the Unaudited Condensed Consolidated Statements of Financial Condition on a GAAP basis as of September 30, 2021 and December 31, 2020.

(Amounts in thousands, except per share amounts)
						As of						As of
						September 30, 2021						December 31, 2020
Assets
Asset Management
Cash and Cash Equivalents						$	7,256,382					$	6,507,874
Investments						89,908,570						69,274,715
Other Assets						4,197,822						4,023,913
						101,362,774						79,806,502
Insurance
Cash and Cash Equivalents						4,717,240						—
Investments						121,214,570						—
Other Assets						38,505,066						—
						164,436,876						—
Total Assets						$	265,799,650					$	79,806,502
Liabilities and Equity
Asset Management
Debt Obligations						$	38,988,544					$	33,423,596
Other Liabilities						9,214,442						5,582,990
						48,202,986						39,006,586
Insurance
Debt Obligations						2,162,591						—
Other Liabilities						158,376,520						—
						160,539,111						—
Total Liabilities						$	208,742,097					$	39,006,586
Redeemable Noncontrolling Interests						93,339						—
Stockholders' Equity
KKR & Co. Inc. Stockholders' Equity - Series A and B Preferred Stock						—						482,554
KKR & Co. Inc. Stockholders' Equity - Series C Mandatory Convertible Preferred Stock						1,115,792						1,115,792
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock						15,817,178						12,118,472
Noncontrolling Interests						40,031,244						27,083,098
Total Equity						56,964,214						40,799,916
Total Liabilities and Equity						$	265,799,650					$	79,806,502
KKR & Co. Inc. Stockholders' Equity - Common Stock Per Outstanding Share of Common Stock						$	27.13					$	21.15

KKR & Co. Inc. Stockholders’ Equity - Common Stock per Outstanding Share of Common Stock was $27.13 as of September 30, 2021, up from $21.15 as of December 31, 2020. The increase was primarily due to the net income attributable to KKR & Co. Inc. common stockholders during the nine months of 2021, partially offset by (i) unrealized losses on available-for-sale-securities from Global Atlantic that are recorded in other comprehensive income, (ii) dividends to common stockholders, and (iii) repurchases of common stock.

Consolidated Statements of Cash Flows (GAAP Basis)

The accompanying 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 $(3.6) billion and $(4.1) billion during the nine months ended September 30, 2021 and 2020, respectively. These amounts primarily included: (i) investments purchased (asset management), net of proceeds from investments of $(7.1) billion and $(4.4) billion during the nine months ended September 30, 2021 and 2020, respectively, (ii) net realized gains (losses) on asset management investments of $1,533.0 million and $281.4 million during the nine months ended September 30, 2021 and 2020, respectively, (iii) change in unrealized gains (losses) on investments of $6.5 billion and $(0.5) billion during the nine months ended September 30, 2021 and 2020, respectively, (iv) capital allocation-based income (loss) of $5.7 billion and $0.9 billion during the nine months ended September 30, 2021 and 2020, respectively and (v) net realized gains (losses) on insurance operations of $(642.6) million during the nine months ended September 30, 2021. 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 $(7.0) billion and $(0.1) billion during the nine months ended September 30, 2021 and 2020, respectively. Our investing activities included: (i) investments purchased (insurance), net of proceeds from investments of $(5.8) billion during the nine months ended September 30, 2021, (ii) acquisitions, net of cash acquired of $(473.8) million during the nine months ended September 30, 2021, (iii) the purchase of fixed assets of $(82.5) million and $(100.3) million during the nine months ended September 30, 2021 and 2020, respectively and (iv) development of oil and natural gas properties of $(11.1) million for the nine months ended September 30, 2020.

Net Cash Provided (Used) by Financing Activities

Our net cash provided (used) by financing activities was $16.1 billion and $6.9 billion during the nine months ended September 30, 2021 and 2020, respectively. Our financing activities primarily included: (i) contributions by, net of distributions to, our noncontrolling and redeemable noncontrolling interests of $4.9 billion and $2.2 billion during the nine months ended September 30, 2021 and 2020, respectively, (ii) proceeds received net of repayment of debt obligations of $6.7 billion and $4.2 billion during the nine months ended September 30, 2021 and 2020, respectively, (iii) additions to, net of withdrawals from contractholder deposit funds of $5.1 billion during the nine months ended September 30, 2021, (iv) common stock dividends of $(246.7) million and $(220.5) million during the nine months ended September 30, 2021 and 2020, respectively; (v) net delivery of common stock of $(106.9) million and $(40.6) million during the nine months ended September 30, 2021 and 2020, respectively; (vi) repurchases of common stock of $(135.9) million and $(246.2) million during the nine months ended September 30, 2021 and 2020, respectively; (vii) Series A and B Preferred Stock dividends of $(19.2) million and $(25.0) million during the nine months ended September 30, 2021 and 2020, respectively; (viii) Series C Mandatory Convertible Preferred Stock dividends of $(51.8) million during the nine months ended September 30, 2021; (ix) private placement share issuance of $38.5 million during the nine months ended September 30, 2021 and (x) redemption of Series A and B Preferred Stock of $(500.0) million during the nine months ended September 30, 2021.

Analysis of Segment Operating Results

The following is a discussion of the results of our business on a segment basis for the three and nine months ended September 30, 2021 and 2020. You should read this discussion in conjunction with the information included under "—Key Non-GAAP Performance Measures and Other Operating Measures" and the financial statements and related notes included elsewhere in this report. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

In connection with our acquisition of Global Atlantic on February 1, 2021, management reevaluated the manner in which we manage and assess the performance of our business and allocate resources. As a result, we have introduced a new Insurance segment and report segment results for two operating and reportable segments: Asset Management and Insurance. See Note 20 “Segment Reporting” to our financial statements included elsewhere in this report.

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 three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees						$	559,016					$	369,442					$	189,574
Transaction and Monitoring Fees, Net						249,670						201,086						48,584
Fee Related Performance Revenues						9,897						10,181						(284)
Fee Related Compensation						(184,224)						(170,220)						(14,004)
Other Operating Expenses						(104,772)						(86,472)						(18,300)
Fee Related Earnings						529,587						324,017						205,570
Realized Performance Income						432,784						224,020						208,764
Realized Performance Income Compensation						(274,955)						(157,885)						(117,070)
Realized Investment Income						447,565						260,415						187,150
Realized Investment Income Compensation						(67,142)						(56,803)						(10,339)
Asset Management Segment Operating Earnings						$	1,067,839					$	593,764					$	474,075

Management Fees

The following table presents management fees by business line for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees
Private Markets						$	385,692					$	250,124					$	135,568
Public Markets						173,324						119,318						54,006
Total Management Fees						$	559,016					$	369,442					$	189,574

The increase in Private Markets management fees was primarily due to management fees earned from (i) North America Fund XIII, Global Infrastructure Investors IV, Health Care Strategic Growth Fund II, and Real Estate Partners Americas III, each of which entered their investment period in 2021 and (ii) Asian Fund IV, which entered its investment period in the third quarter of 2020. These increases were partially offset by a decrease in management fees earned by Americas Fund XII as a result of entering its post-investment period in the second quarter of 2021, and now earning fees based on capital invested rather than capital committed and at a lower fee rate.

The increase in Public Markets management fees was primarily attributable to (i) management fees earned from Global Atlantic, (ii) the issuance of new CLOs subsequent to September 30, 2020 and (iii) greater overall FPAUM at our opportunistic credit, direct lending, and dislocation opportunities strategies.

Transaction and Monitoring Fees, Net

The following table presents transaction and monitoring fees, net by business line for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Transaction and Monitoring Fees, Net
Private Markets						$	49,211					$	42,566					$	6,645
Public Markets						4,397						254						4,143
Capital Markets						196,062						158,266						37,796
Total Transaction and Monitoring Fees, Net						$	249,670					$	201,086					$	48,584

Our Capital Markets business line earns transaction fees, which are not shared with fund investors. The increase in transaction fees was primarily due to an increase in the number and average size of capital markets transactions for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. Overall, we completed 87 capital markets transactions for the three months ended September 30, 2021, of which 15 represented equity offerings and 72 represented debt offerings, as compared to 47 transactions for the three months ended September 30, 2020, of which 12 represented equity offerings and 35 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 our Private Markets and Public Markets business lines as well as from third-party companies. For the three months ended September 30, 2021, approximately 23% of our transaction fees in our Capital Markets business line were earned from unaffiliated third parties as compared to approximately 10% for the three months ended September 30, 2020. Our transaction fees are comprised of fees earned from North America, Europe, and the Asia-Pacific region. For the three months ended September 30, 2021, approximately 23% of our transaction fees were generated outside of North America as compared to approximately 78% for the three months ended September 30, 2020. 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 Markets and Public Markets 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.

The increase in Private Markets transaction and monitoring fees, net was primarily attributable to an increase in net transaction fees. During the three months ended September 30, 2021, there were 20 transaction fee-generating investments that paid an average fee of $10.4 million compared to 19 transaction fee-generating investments that paid an average fee of $7.0 million during the three months ended September 30, 2020. For the three months ended September 30, 2021, approximately 78% of these transaction fees were paid by companies in North America, 13% were paid from companies in Europe, and 9% of these transaction fees 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 particular agreements as to the amount of the fees, the complexity of the transaction, and KKR's role in the transaction. Additionally, transaction fees are generally not earned with respect to energy and real estate investments.

Fee Related Performance Revenues

The following table presents fee related performance revenues by business line for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Fee Related Performance Revenues
Private Markets						$	1,568					$	701					$	867
Public Markets						8,329						9,480						(1,151)
Total Fee Related Performance Revenues						$	9,897					$	10,181					$	(284)

Fee related performance revenues earned in our Private Markets and Public Markets business lines represent realized incentive fees that (i) are measured and received from an investment fund, vehicle or account on a recurring basis, and (ii) do not require the realization of the investments held by the investment fund, vehicle or account. These incentive fees are primarily earned from our BDC and our investment in KREF. Fee related performance revenues were slightly lower for the three months ended September 30, 2021 compared to the prior period.

Fee Related Compensation

The increase in fee related compensation for the three months ended September 30, 2021 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, 2021 compared to the prior period was primarily due to a higher level of (i) placement fees related to capital raising activities and (ii) professional fees, information technology and other administrative costs in connection with the overall growth of the firm.

Fee Related Earnings

The increase in fee related earnings for the three months ended September 30, 2021 compared to the prior period was primarily due to a higher level of management fees and transaction fees, 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 for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Realized Performance Income
Private Markets						$	413,114					$	217,978					$	195,136
Public Markets						19,670						6,042						13,628
Total Realized Performance Income						$	432,784					$	224,020					$	208,764

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Private Markets
Americas Fund XII						$	207,559					$	—					$	207,559
2006 Fund						81,356						55,846						25,510
North America Fund XI						72,313						42,807						29,506
Co-Investment Vehicles and Other						22,514						76,950						(54,436)
Next Generation Technology Growth Fund						18,160						13,964						4,196
Real Estate Partners Europe						11,212						—						11,212
European Fund IV						—						27,980						(27,980)
Asian Fund						—						431						(431)
Total Realized Carried Interest (1)						413,114						217,978						195,136
Incentive Fees						—						—						—
Total Realized Performance Income						$	413,114					$	217,978					$	195,136

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Public Markets
Total Realized Carried Interest (1)						—						—						—
Incentive Fees						19,670						6,042						13,628
Total Realized Performance Income						$	19,670					$	6,042					$	13,628

(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 Markets 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 Private Markets business line for the three months ended September 30, 2020 consisted primarily of realized proceeds from the (i) sales of our investments in The Hut Group Limited and SoftwareOne Holding AG (technology sector) and (ii) dividends received from our investment in Epicor Software Corporation.

During the three months ended September 30, 2021 and September 30, 2020, there was no realized carried interest earned in our Public Markets business line.

Incentive fees earned in our Public Markets business line consist primarily of incentive fees earned from our hedge fund partnerships and certain incentive fee eligible leveraged credit accounts. The increase in incentive fees for the three months ended September 30, 2021 compared to the prior period was primarily attributable to a higher level of incentives earned from (i) certain incentive fee eligible leveraged credit accounts and (ii) our hedge fund partnerships as a result of investor redemptions.

Realized Performance Income Compensation

The increase in realized performance income compensation for the three months ended September 30, 2021 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 for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Realized Investment Income
Net Realized Gains (Losses)						$	389,837					$	172,224					$	217,613
Interest Income and Dividends						57,728						88,191						(30,463)
Total Realized Investment Income						$	447,565					$	260,415					$	187,150

The increase in realized investment income is due to a higher level of net realized gains partially offset by a lower 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, 2021, net realized gains were comprised of realized gains primarily from the sale of our Private Markets 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, 2020, net realized gains were comprised of realized gains primarily from the sale of our Private Markets investments in The Hut Group Limited, Ivalua SAS, and Fiserv, Inc. Partially offsetting these realized gains were realized losses, the most significant of which was a realized loss on our investment in Yorktown Center (real estate).

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 Public Markets investments in CLOs.

For the three months ended September 30, 2020, interest income and dividends were comprised of (i) $57.1 million of dividend income from our investment in Epicor Software Corporation and distributions received through our real estate investments including our investment in KREF and (ii) $31.1 million of interest income from our investments held at our Capital Markets business line, investments in CLOs and our cash balances. 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 $1.0 billion in the fourth quarter of 2021 relating to realized incentive fees from Marshall Wace, 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, 2021 with respect to certain private equity portfolio companies and other investments. Some of these 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, 2021, total fees attributable to KKR Capstone were $25.2 million, total expenses attributable to KKR Capstone were $18.5 million and income taxes and other income attributable to Capstone were $(0.3) 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 increase in realized investment income compensation for the three months ended September 30, 2021 compared to the prior period is primarily due to a higher level of compensation recorded in connection with the higher level of realized investment income.

Other Operating and Capital Measures

The following table presents certain key operating and capital metrics as of September 30, 2021 and June 30, 2021:

						As of
						September 30, 2021						June 30, 2021						Change
						($ in millions)
Assets Under Management						$	459,081					$	428,948					$	30,134
Fee Paying Assets Under Management						$	349,079					$	319,344					$	29,735
Uncalled Commitments						$	110,992					$	112,130					$	(1,138)

The following table presents one of our key capital metrics for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in millions)
Capital Invested						$	24,415					$	7,940					$	16,475

Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets AUM from June 30, 2021 to September 30, 2021:

			($ in millions)
June 30, 2021			$	233,575
New Capital Raised			10,616
Distributions and Other			(5,411)
Change in Value			8,802
September 30, 2021			$	247,582

AUM for the Private Markets business line was $247.6 billion at September 30, 2021, an increase of $14.0 billion, compared to $233.6 billion at June 30, 2021.

The increase was primarily attributable to new capital raised by Global Atlantic, North America Fund XIII, and Real Estate Partners Americas III, and to a lesser extent, an increase in investment value from Asian Fund III, North America Fund XI and our core investment strategy. Partially offsetting these increases were distributions to fund investors, primarily as a result of realized proceeds, most notably from Americas Fund XII, North America Fund XI and 2006 Fund.

For the three months ended September 30, 2021, the value of our private equity investment portfolio increased 9%. This was comprised of an 11% increase in value of our privately held investments and a 2% increase in share prices of various publicly held or publicly indexed investments. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

The most significant increase in value of our privately held investments related to Kokusai Electric Company (manufacturing), 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 with respect to Kokusai Electric Company 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 from the impact of COVID-19 on the economic outlook and overall market environment.

The most significant increases in share prices of various publicly held or publicly indexed investments were increases in Max Healthcare Institute Limited (NSE: MAXHEALTH), 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 which was a decrease in AppLovin Corporation (NASDAQ: APP), KnowBe4, Inc, (NASDAQ: KNBE) and BridgeBio Pharma, Inc. The prices of publicly held or publicly indexed companies may experience volatile changes following the reporting period.

For the three months ended September 30, 2020, the value of our private equity investment portfolio increased 12%. This was comprised of a 14% increase in value of our privately held investments and a 7% increase in share prices of various publicly held or publicly indexed investments. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

The most significant increase in value of our privately held investments related to AppLovin Corporation, The Nature's Bounty Co., and Inkling Holdings LLC (media sector). These increases in value were partially offset by decreases in value relating primarily to Ticket Monster Inc. (technology sector), Novaria Group (industrial sector), and The Bay Clubs Company, LLC (hotels/leisure sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to an increase in the value of market comparables and individual company performance. 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 from the impact of COVID-19 on the economic outlook and overall market environment.

The most significant increases in share prices of various publicly held or publicly indexed investments were increases in Fiserv, Inc., Ingersoll Rand Inc., and Max Healthcare Institute Limited. These increases were partially offset by decreases in share prices of various publicly held investments, the most significant of which were decreases in Fujian Sunner Development Co. Ltd. (SZ: 002299) and Bharti Infratel (BHIN:IN).

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.

Public Markets

The following table reflects the changes in our Public Markets AUM from June 30, 2021 to September 30, 2021:

			($ in millions)
June 30, 2021			$	195,372
New Capital Raised			17,655
Distributions and Other			(2,171)
Redemptions			(1,646)
Change in Value			2,289
September 30, 2021			$	211,499

AUM in our Public Markets business line totaled $211.5 billion at September 30, 2021, an increase of $16.1 billion compared to $195.4 billion at June 30, 2021.

The increase was primarily attributable to new capital raised by Global Atlantic, certain leveraged credit investment funds and our hedge fund partnerships, and to a lesser extent, an increase in investment value across our credit portfolio and our hedge fund partnerships. Partially offsetting these increases were (i) distributions to fund investors as a result of realized proceeds at certain liquid and alternative credit funds, (ii) payments to Global Atlantic policyholders, and (iii) redemptions at our hedge fund partnerships.

Fee Paying Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets FPAUM from June 30, 2021 to September 30, 2021:

			($ in millions)
June 30, 2021			$	134,936
New Capital Raised			15,008
Distributions and Other			(1,924)
Change in Value			39
September 30, 2021			$	148,060

FPAUM in our Private Markets business line was $148.1 billion at September 30, 2021, an increase of $13.2 billion, compared to $134.9 billion at June 30, 2021.

The increase was primarily attributable to new capital raised by Global Atlantic, North America Fund XIII, and Real Estate Partners Americas III. Partially offsetting this increase were distributions to fund investors, primarily as a result of realized proceeds, most notably from Americas Fund XII and 2006 Fund.

Uncalled capital commitments from Private Markets investment funds from which KKR is currently not earning management fees amounted to approximately $31.5 billion at September 30, 2021, 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%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed to occur and which 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.

Public Markets

The following table reflects the changes in our Public Markets FPAUM from June 30, 2021 to September 30, 2021:

			($ in millions)
June 30, 2021			$	184,408
New Capital Raised			19,096
Distributions and Other			(2,827)
Redemptions			(1,646)
Change in Value			1,988
September 30, 2021			$	201,019

FPAUM in our Public Markets business line was $201.0 billion at September 30, 2021, an increase of $16.6 billion, compared to $184.4 billion at June 30, 2021.

The increase was primarily attributable to new capital raised from Global Atlantic, certain alternative credit investment funds and our hedge fund partnerships, and to a lesser extent, an increase in investment value across our credit portfolio and our hedge fund partnerships. Partially offsetting these increases were (i) distributions to fund investors as a result of realized proceeds at certain alternative credit funds, (ii) payments to Global Atlantic policyholders, and (iii) redemptions at our hedge fund partnerships.

Uncalled capital commitments from Public Markets investment funds from which KKR is currently not earning management fees amounted to approximately $6.6 billion at September 30, 2021. 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 0.9%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed to occur. 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 Markets

As of September 30, 2021, our Private Markets business line had $101.3 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $102.1 billion as of June 30, 2021. 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.

Public Markets

As of September 30, 2021, our Public Markets business line had $9.7 billion of remaining uncalled capital commitments that could be called for investments in new transactions, as compared to $10.0 billion as of June 30, 2021. 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.

Capital Invested

Private Markets Capital Invested

For the three months ended September 30, 2021, Private Markets had $14.7 billion of capital invested as compared to $6.2 billion for the three months ended September 30, 2020. The increase was driven primarily by a $6.6 billion increase in capital invested in our real assets strategies and a $0.7 billion increase in capital invested in our private equity strategies (including core and growth equity (including impact) investments). Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in higher capital invested relative to transactions in our real assets funds. 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. During the three months ended September 30, 2021, 75% 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 12% was in Europe.

Public Markets Capital Invested

For the three months ended September 30, 2021, Public Markets had $9.7 billion of capital invested as compared to $1.7 billion for the three months ended September 30, 2020. The increase was primarily due to (i) capital deployed under our investment management agreements with Global Atlantic's insurance companies and (ii) a higher level of capital deployed across our direct lending and dislocation opportunities strategies. During the three months ended September 30, 2021, 94% of capital deployed was in transactions in North America, 5% was in Europe, and 1% was in the Asia-Pacific region.

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 September 30, 2021:

						Three Months Ended
						September 30, 2021
($ in thousands)
Net Investment Income						$	771,982
Net Cost of Insurance						(436,415)
General, Administrative and Other						(139,489)
Pre-tax Insurance Operating Earnings						196,078
Income Taxes						(9,046)
Net Income Attributable to Noncontrolling Interests						(72,043)
Insurance Segment Operating Earnings						$	114,989

Insurance segment operating earnings

Insurance segment operating earnings were primarily driven by net investment income and stable net cost of insurance.

Net investment income

Net investment income was primarily driven by (i) insurance segment investments and the effective book yield (as determined, in part, by the allocated fair value of the investment portfolio as of the GA Acquisition Date), and (ii) variable investment income from net realized gains from the sale of equity investments. Average insurance segment investments were primarily driven by net inflows of assets from block reinsurance transactions and funding agreement issuances. The impact of higher asset balances were partially offset by lower income primarily due to elevated cash levels during the quarter related to recent reinsurance transactions pending reinvestment.

Net cost of insurance

Net cost of insurance was driven primarily by stable liability performance across in-force and new business, including favorable adjustments to reserves and policy acquisition costs resulting from higher reserves and insurance intangibles established as part of the purchase accounting for the GA Acquisition, and the favorable impact of assumption review (as described in “ –Consolidated Results of Operations (GAAP Basis) – Insurance (Unaudited)” above).

General, administrative and other expenses

General and administrative expenses were driven by (i) employee compensation and benefits related expenses, (ii) policy servicing fees, and (iii) technology-related charges.

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 recognized in the three months ended September 30, 2021.

Net Income attributable to non-controlling interests

Income attributable to non-controlling interests represent the portion of the insurance segment adjusted operating earnings held by rollover and co-investors in Global Atlantic.

Analysis of Non-GAAP Performance Measures

The following is a discussion of our Non-GAAP performance measures for the three months ended September 30, 2021 and 2020:

						Three Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Asset Management Segment Operating Earnings						$	1,067,839					$	593,764					$	474,075
Insurance Segment Operating Earnings						114,989						—						114,989
Distributable Operating Earnings						1,182,828						593,764						589,064
Interest Expense						(63,446)						(54,458)						(8,988)
Preferred Dividends						(2,519)						(8,341)						5,822
Net Income Attributable to Noncontrolling Interests						(6,072)						(2,709)						(3,363)
Income Taxes Paid						(185,645)						(75,413)						(110,232)
After-tax Distributable Earnings						$	925,146					$	452,843					$	472,303

Distributable Operating Earnings

The increase in distributable operating earnings for the three months ended September 30, 2021 compared to the prior period is primarily due to a higher level of Asset Management segment operating earnings and the addition of our Insurance segment operating earnings in connection with the Global Atlantic acquisition. 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

For the three months ended September 30, 2021 and 2020, interest expense relates primarily to the senior notes outstanding for KKR and KFN.

The increase in interest expense for the three months ended September 30, 2021 compared to the prior period is due primarily to note issuances subsequent to September 30, 2020.

Income Taxes Paid

The increase in income taxes paid for the three months ended September 30, 2021 compared to the prior period was primarily due to the higher level of total distributable operating earnings.

After-tax Distributable Earnings

The increase in after-tax distributable earnings for the three months ended September 30, 2021 compared to the prior period was due primarily to a higher level of distributable operating earnings, partially offset by an increase in income taxes paid and interest expense, as described above.

The amount of the tax benefit from equity-based compensation included in income taxes paid for the three months ended September 30, 2021 and 2020 was $9.5 million and $9.7 million, respectively, and its inclusion in After-tax Distributable Earnings had the effect of increasing this measure by 1% and 2%, respectively.

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, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees						$	1,478,878					$	1,042,634					$	436,244
Transaction and Monitoring Fees, Net						645,108						380,415						264,693
Fee Related Performance Revenues						34,760						27,869						6,891
Fee Related Compensation						(485,760)						(342,417)						(143,343)
Other Operating Expenses						(309,483)						(247,046)						(62,437)
Fee Related Earnings						1,363,503						861,455						502,048
Realized Performance Income						1,222,403						934,018						288,385
Realized Performance Income Compensation						(797,965)						(599,753)						(198,212)
Realized Investment Income						1,277,701						495,904						781,797
Realized Investment Income Compensation						(191,663)						(85,646)						(106,017)
Asset Management Segment Operating Earnings						$	2,873,979					$	1,605,978					$	1,268,001

Management Fees

The following table presents management fees by business line for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Management Fees
Private Markets						$	990,956					$	696,076					$	294,880
Public Markets						487,922						346,558						141,364
Total Management Fees						$	1,478,878					$	1,042,634					$	436,244

The increase in Private Markets management fees was primarily due to management fees earned from (i) North America Fund XIII, Global Infrastructure Investors IV, and Health Care Strategic Growth Fund II, each of which entered its investment period in 2021 and (ii) Asian Fund IV, which entered its investment period in the third quarter of 2020. These increases were partially offset by a decrease in management fees earned from Asian Fund III and Americas Fund XII as a result of entering their post-investment periods in the third quarter of 2020 and second quarter of 2021, respectively, with both now earning fees based on capital invested rather than capital committed and at a lower fee rate.

The increase in Public Markets management fees was primarily attributable to (i) management fees earned from Global Atlantic during the period February 1, 2021 through September 30, 2021, (ii) the issuance of new CLOs subsequent to September 30, 2020 and (iii) greater overall FPAUM at our opportunistic credit, direct lending and dislocation opportunities strategies.

Transaction and Monitoring Fees, Net

The following table presents transaction and monitoring fees, net by business line for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Transaction and Monitoring Fees, Net
Private Markets						$	109,339					$	90,473					$	18,866
Public Markets						8,569						2,055						6,514
Capital Markets						527,200						287,887						239,313
Total Transaction and Monitoring Fees, Net						$	645,108					$	380,415					$	264,693

Our Capital Markets business line earns transaction fees, which are not shared with fund investors. The increase in transaction fees was primarily due to an increase in the number and average size of capital markets transactions for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. Overall, we completed 225 capital markets transactions for the nine months ended September 30, 2021, of which 41 represented equity offerings and 184 represented debt offerings, as compared to 125 transactions for the nine months ended September 30, 2020, of which 21 represented equity offerings and 104 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 our Private Markets and Public Markets business lines as well as from third-party companies. For the nine months ended September 30, 2021, approximately 25% of our transaction fees in our Capital Markets business line were earned from unaffiliated third parties as compared to approximately 22% for the nine months ended September 30, 2020. Our transaction fees are comprised of fees earned from North America, Europe, and the Asia-Pacific region. For the nine months ended September 30, 2021, approximately 36% of our transaction fees were generated outside of North America as compared to approximately 59% for the nine months ended September 30, 2020. 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 Markets and Public Markets 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.

The increase in Private Markets transaction and monitoring fees, net was primarily attributable to an increase in net transaction fees. During the nine months ended September 30, 2021, there were 69 transaction fee-generating investments that paid an average fee of $5.5 million compared to 48 transaction fee-generating investments that paid an average fee of $4.9 million during the nine months ended September 30, 2020. For the nine months ended September 30, 2021, approximately 63% of these transaction fees were paid by companies in North America, 19% were paid from companies in the Asia-Pacific region, and 18% of these transaction fees were paid from 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. Additionally, transaction fees are generally not earned with respect to energy and real estate investments.

Fee Related Performance Revenues

The following table presents fee related performance revenues by business line for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Fee Related Performance Revenues
Private Markets						$	4,821					$	2,723					$	2,098
Public Markets						29,939						25,146						4,793
Total Fee Related Performance Revenues						$	34,760					$	27,869					$	6,891

Fee related performance revenues earned in our Private Markets and Public Markets business lines represent realized incentive fees that (i) are measured and received from an investment fund, vehicle or account on a recurring basis, and (ii) do not require the realization of the investments held by the investment fund, vehicle or account. These incentive fees are primarily earned from our BDC and our investment in KREF. The increase was primarily due to a higher level of investment income at these incentive fee earning investment funds during the nine months ended September 30, 2021 as compared to the prior period.

Fee Related Compensation

The increase in fee related compensation for the nine months ended September 30, 2021 compared to the prior period is 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, 2021 compared to the prior period is primarily due to a higher level of (i) placement fees related to capital raising activities and (ii) professional fees and other administrative costs in connection with the overall growth of the firm.

Fee Related Earnings

The increase in fee related earnings for the nine months ended September 30, 2021 compared to the prior period is primarily due to a higher level of management fees and transaction fees, partially offset by a higher level of fee related compensation and operating expenses, as described above.

Realized Performance Income

The following table presents realized performance income by business line for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Realized Performance Income
Private Markets						$	1,169,766					$	889,334					$	280,432
Public Markets						52,637						44,684						7,953
Total Realized Performance Income						$	1,222,403					$	934,018					$	288,385

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Private Markets
North America Fund XI						$	365,772					$	165,202					$	200,570
2006 Fund						215,741						113,555						102,186
Americas Fund XII						207,559						—						207,559
Asian Fund III						110,515						46,347						64,168
Core Investment Vehicles						80,937						57,484						23,453
Co-Investment Vehicles and Other						71,535						88,263						(16,728)
European Fund IV						43,976						134,853						(90,877)
Global Infrastructure Investors II						36,215						148,882						(112,667)
Next Generation Technology Growth Fund						18,160						13,964						4,196
Real Estate Partners Europe						14,690						—						14,690
Global Infrastructure Investors						3,037						54,729						(51,692)
European Fund III						353						—						353
Asian Fund II						—						60,647						(60,647)
Real Estate Partners Americas						—						4,977						(4,977)
Asian Fund						—						431						(431)
Total Realized Carried Interest (1)						1,168,490						889,334						279,156
Incentive Fees						1,276						—						1,276
Total Realized Performance Income						$	1,169,766					$	889,334					$	280,432

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Public Markets
Other Alternative Credit Vehicles						$	15,336					$	25,740					$	(10,404)
Mezzanine Partners						—						9,900						(9,900)
Total Realized Carried Interest (1)						15,336						35,640						(20,304)
Incentive Fees						37,301						9,044						28,257
Total Realized Performance Income						$	52,637					$	44,684					$	7,953

(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 Markets 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 Private Markets business line for the nine months ended September 30, 2020 consisted primarily of realized proceeds from the sales of our investments in Deutsche Glasfaser (telecom sector), Privilege Underwriters, Inc. (financial services sector), LGC Science Group Limited (health care sector), The Hut Group Limited and SoftwareOne Holding AG.

Realized carried interest in our Public Markets business line decreased for the nine months ended September 30, 2021 compared to the prior period as a result of a lower level of realization activity at our alternative credit investment funds that are eligible to pay carry.

Incentive fees earned in our Public Markets business line consist primarily of incentive fees earned from our hedge fund partnerships and certain incentive fee eligible leveraged credit accounts. The increase in incentive fees for the nine months ended September 30, 2021 compared to the prior period was primarily attributable to a higher level of incentive fees earned from (i) our hedge fund partnerships due to investor redemptions and (ii) certain incentive fee eligible leveraged credit accounts.

Realized Performance Income Compensation

The increase in realized performance income compensation for the nine months ended September 30, 2021 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 in our Principal Activities business line for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Realized Investment Income
Net Realized Gains (Losses)						$	1,026,310					$	215,430					$	810,880
Interest Income and Dividends						251,391						280,474						(29,083)
Total Realized Investment Income						$	1,277,701					$	495,904					$	781,797

The increase in realized investment income is due to a higher level of net realized gains partially offset by a lower 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, 2021, net realized gains were comprised of realized gains primarily from the sale of our Private Markets 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.

For the nine months ended September 30, 2020, net realized gains were comprised of realized gains primarily from the sale of our Private Markets investments in The Hut Group Limited, Deutsche Glasfaser, Ivalua SAS, Fiserv, Inc. and BridgeBio Pharma, Inc. Partially offsetting these realized gains were realized losses, the most significant of which were realized losses on our investment in LCI Helicopters Limited, Yorktown Center and various alternative credit strategy investments.

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 estate investments, including our investment in KREF, as well as dividends received from our Private Markets investments in Kokusai Electric Corporation, Internet Brands, Inc. (technology sector) and US Foods Holding Corp. (NYSE: USFD) and (ii) $111.1 million of interest income primarily from our Public Markets investments in CLOs and to a lesser extent our cash balances and other credit investments.

For the nine months ended September 30, 2020, interest income and dividends were comprised of (i) $178.8 million of dividend income primarily from our investments in Fiserv, Inc. and Epicor Software Corporation along with distributions received from our real assets investments and (ii) $101.7 million of interest income from our investments in CLOs and other credit investments. See "—Analysis of Non-GAAP Performance Measures—Non-GAAP Balance Sheet Measures."

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 nine months ended September 30, 2021, total fees attributable to KKR Capstone were $66.3 million, total expenses attributable to KKR Capstone were $53.7 million, and income taxes and other income attributable to Capstone were $(1.2) 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 increase in realized investment income compensation for the nine months ended September 30, 2021 compared to the prior period is primarily due to a higher level of compensation recorded in connection with the higher level of realized investment income.

Other Operating and Capital Measures

The following table presents certain key operating and capital metrics as of September 30, 2021 and December 31, 2020:

						As of
						September 30, 2021						December 31, 2020						Change
						($ in millions)
Assets Under Management						$	459,081					$	251,679					$	207,402
Fee Paying Assets Under Management						$	349,079					$	186,217					$	162,862
Uncalled Commitments						$	110,992					$	66,960					$	44,032

The following table presents one of our key capital metrics for the nine months ended September 30, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in millions)
Capital Invested						$	49,833					$	19,681					$	30,151

Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets AUM from December 31, 2020 to September 30, 2021:

			($ in millions)
December 31, 2020			$	148,689
New Capital Raised			69,932
Acquisition of Global Atlantic (1)			12,012
Distributions and Other			(14,218)
Change in Value			31,167
September 30, 2021			$	247,582

(1)Reflects the AUM of Global Atlantic at February 1, 2021.

AUM for the Private Markets business line was $247.6 billion at September 30, 2021, an increase of $98.9 billion, compared to $148.7 billion at December 31, 2020.

The increase was primarily attributable to (i) new capital raised from North America Fund XIII, Global Infrastructure Investors IV, and our core investment strategy, (ii) assets we now manage under our investment management agreements with Global Atlantic's insurance companies and (iii) an increase in investment value from Americas Fund XII, Asian Fund III and our core investment strategy. Partially offsetting these increases were distributions to fund investors, primarily as a result of realized proceeds, most notably from Americas Fund XII, North America Fund XI, and 2006 Fund.

For the nine months ended September 30, 2021, the value of our private equity investment portfolio increased by 38%. This was comprised of a 60% increase in share prices of various publicly held or publicly indexed investments and a 31% increase in value of our privately held investments. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

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 Limited (NSE: JBCP). These increases were partially offset by decreases in share prices of various publicly held investments, the most significant of which was Fiserv, Inc. The prices of publicly held or publicly indexed companies may experience volatile changes following the reporting period.

The most significant increases in 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.

For the nine months ended September 30, 2020, the value of our private equity investment portfolio increased 7%. This was comprised of a 13% increase in value of our privately held investments and a 10% decrease in share prices of various publicly held or publicly indexed investments. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

The most significant increases in value of our privately held investments related to increases in AppLovin Corporation, Internet Brands, Inc., and Inkling Holdings LLC. These increases in value on our privately held investments were partially offset by decreases in value relating primarily to Magneti Marelli, Ramky Enviro Engineers Limited (industrial sector), and Envision Healthcare Corporation (healthcare sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to an increase in the value of market comparables and individual company performance. 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.

The most significant decreases in share prices of various publicly held or publicly indexed investments were decreases in Fiserv, Inc., Ingersoll Rand Inc., and BrightView Holdings Inc. These decreases were partially offset by increases in share prices of various publicly held investments, the most significant of which was Focus Financial Partners, LLC (NASDAQ: FOCS).

Public Markets

The following table reflects the changes in our Public Markets AUM from December 31, 2020 to September 30, 2021:

			($ in millions)
December 31, 2020			$	102,990
New Capital Raised			31,767
Acquisition of Global Atlantic (1)			85,491
Distributions and Other			(7,802)
Redemptions			(7,114)
Change in Value			6,168
September 30, 2021			$	211,499

(1)Reflects the AUM of Global Atlantic at February 1, 2021.

AUM in our Public Markets business line totaled $211.5 billion at September 30, 2021, an increase of $108.5 billion compared to AUM of $103.0 billion at December 31, 2020.

The increase was primarily attributable to (i) assets we now manage under our investment management agreements with Global Atlantic's insurance companies, (ii) new capital raised from Global Atlantic since February 1, 2021, CLO issuances, and our hedge fund partnerships and (iii) to a lesser extent, an increase in investment value across our credit portfolio and our hedge fund partnerships. Partially offsetting these increases were (i) distributions to fund investors as a result of realized proceeds at

certain liquid and alternative credit funds, (ii) payments made to Global Atlantic policyholders, and (iii) redemptions at our hedge fund partnerships.

See also "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

Fee Paying Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets FPAUM from December 31, 2020 to September 30, 2021:

			($ in millions)
December 31, 2020			$	94,196
New Capital Raised			52,442
Acquisition of Global Atlantic (1)			12,012
Distributions and Other			(5,659)
Net Changes in Fee Base of Certain Funds			(5,398)
Change in Value			467
September 30, 2021			$	148,060

(1)Reflects the FPAUM of Global Atlantic at February 1, 2021.

FPAUM in our Private Markets business line was $148.1 billion at September 30, 2021, an increase of $53.9 billion, compared to $94.2 billion at December 31, 2020.

The increase was primarily attributable to (i) new capital raised from North America Fund XIII, Global Infrastructure Investors IV, and Global Atlantic since February 1, 2021 and (ii) assets we now manage under our investment management agreements with Global Atlantic. These increases were partially offset by (i) net changes in the fee base of Global Infrastructure Investors III, Americas Fund XII and Health Care Strategic Growth Fund I as a result of these funds entering their post-investment periods, during which we earn fees on invested capital rather than committed capital, and (ii) distributions to fund investors, primarily as a result of realized proceeds, most notably from 2006 Fund, Americas Fund XII, and Global Infrastructure Investors II.

Public Markets

The following table reflects the changes in our Public Markets FPAUM from December 31, 2020 to September 30, 2021:

			($ in millions)
December 31, 2020			$	92,021
New Capital Raised			33,572
Acquisition of Global Atlantic (1)			85,491
Distributions and Other			(9,104)
Redemptions			(5,515)
Change in Value			4,554
September 30, 2021			$	201,019

(1)Reflects the FPAUM of Global Atlantic at February 1, 2021.

FPAUM in our Public Markets business line was $201.0 billion at September 30, 2021, an increase of $109.0 billion compared to $92.0 billion at December 31, 2020.

The increase was primarily due to (i) assets we now manage under our investment management agreements with Global Atlantic's insurance companies, (ii) new capital raised from Global Atlantic since February 1, 2021, CLO issuances, and our alternative credit funds and (iii) to a lesser extent, an increase in investment value as a whole in our credit portfolio and our hedge fund partnerships. Partially offsetting these increases were (i) distributions to fund investors as a result of realized proceeds at certain liquid and alternative credit funds and (ii) payments made to Global Atlantic policyholders.

See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

Uncalled Commitments

Private Markets

As of September 30, 2021, our Private Markets business line had $101.3 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $56.6 billion as of December 31, 2020. 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.

Public Markets

As of September 30, 2021, our Public Markets business line had $9.7 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, 2020. The decrease was primarily attributable to capital called from fund investors to make investments, which was partially offset by new commitments from fund investors.

Capital Invested

Private Markets Capital Invested

For the nine months ended September 30, 2021, Private Markets had $27.0 billion of capital invested as compared to $13.2 billion for the nine months ended September 30, 2020. The increase was driven primarily by a $11.7 billion increase in capital invested in our real assets strategies, and a $0.9 billion increase in capital invested in our private equity strategies (including core and growth equity (including impact) investments). Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in higher capital invested relative to transactions in our real assets funds. 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. During the nine months ended September 30, 2021, 64% of capital deployed in private equity (including core and growth equity (including impact) investments) was in transactions in North America, 24% was in the Asia-Pacific region, and 12% was in Europe.

Public Markets Capital Invested

For the nine months ended September 30, 2021, Public Markets had $22.8 billion of capital invested as compared to $6.5 billion for the nine months ended September 30, 2020. The increase was primarily due to (i) capital deployed under our investment management agreements with Global Atlantic's insurance companies and (ii) a higher level of capital deployed across our direct lending and dislocation opportunities strategies. During the nine months ended September 30, 2021, 90% of capital deployed was in transactions in North America, 9% was in Europe and 1% was in the Asia-Pacific region.

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 nine months ended September 30, 2021:

						Nine Months Ended
						September 30, 2021
($ in thousands)
Net Investment Income						$	1,977,383
Net Cost of Insurance						(1,076,566)
General, Administrative and Other						(338,325)
Pre-tax Insurance Operating Earnings						562,492
Income Taxes						(63,148)
Net Income Attributable to Noncontrolling Interests						(193,570)
Insurance Segment Operating Earnings						$	305,774

Insurance segment operating earnings

Insurance segment operating earnings were primarily driven by net investment income and stable net cost of insurance.

Net investment income

Net investment income was primarily driven by (i) insurance segment investments and the effective book yield (as determined, in part, by the allocated fair value of the investment portfolio as of the closing date of the Global Atlantic acquisition), and (ii) variable investment income from net realized gains primarily from the sale of equity investments and a partnership interest in Talcott Resolution, an insurance holding company. Average insurance segment investments were primarily driven by net inflows of assets from the individual markets and institutional channels. The impact of higher asset balances were partially offset by lower income primarily due to elevated cash levels during the quarter related to recent reinsurance transactions pending reinvestment.

Net cost of insurance

Net cost of insurance was driven primarily by stable liability performance across in-force and new business, including favorable adjustments to reserves and policy acquisition costs resulting from higher reserves and insurance intangibles established as part of the purchase accounting for the GA Acquisition and the impact of assumption review (as described in “ –Consolidated Results of Operations (GAAP Basis) – Insurance (Unaudited)” above).

General, administrative and other expenses

General and administrative expenses were driven by (i) employee compensation and benefits related expenses, (ii) policy servicing fees, and (iii) technology-related charges.

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.

Net Income attributable to non-controlling interests

Income attributable to non-controlling interests represent the portion of the insurance segment adjusted operating earnings held by rollover and co-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, 2021 and 2020:

						Nine Months Ended
						September 30, 2021						September 30, 2020						Change
						($ in thousands)
Asset Management Segment Operating Earnings						$	2,873,979					$	1,605,978					$	1,268,001
Insurance Segment Operating Earnings						305,774						—						305,774
Distributable Operating Earnings						3,179,753						1,605,978						1,573,775
Interest Expense						(185,100)						(152,676)						(32,424)
Preferred Dividends						(19,201)						(25,023)						5,822
Net Income Attributable to Noncontrolling Interests						(14,678)						(4,800)						(9,878)
Income Taxes Paid						(449,814)						(198,763)						(251,051)
After-tax Distributable Earnings						$	2,510,960					$	1,224,716					$	1,286,244

Distributable Operating Earnings

The increase in distributable operating earnings for the nine months ended September 30, 2021 compared to the prior period is primarily due to a higher level of Asset Management segment operating earnings and the addition of our Insurance segment operating earnings in connection with the Global Atlantic acquisition. 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

For the nine months ended September 30, 2021 and 2020, interest expense relates primarily to the senior notes outstanding for KKR and KFN.

The increase in interest expense for the nine months ended September 30, 2021 compared to the prior period is due primarily to new note issuances subsequent to September 30, 2020.

Income Taxes Paid

The increase in income taxes paid for the nine months ended September 30, 2021 compared to the prior period was primarily due to a higher level of distributable operating earnings.

After-tax Distributable Earnings

The increase in after-tax distributable earnings for the nine months ended September 30, 2021 compared to the prior period was due primarily to a higher level of distributable operating earnings, partially offset by an increase in income taxes paid and interest expense, as discussed above.

The amount of the tax benefit from equity-based compensation included in income taxes paid for nine months ended September 30, 2021 and 2020 was $89.2 million and $36.2 million, respectively, and its inclusion in After-tax Distributable Earnings had the effect of increasing this measure by 4% and 3%, respectively.

Book Value

The following table presents information of our calculation of book value as of September 30, 2021 and December 31, 2020:

									As of
									September 30, 2021						December 31, 2020
									($ in thousands)
(+)			Cash and Short-term Investments						$	4,863,093					$	5,961,083
(+)			Investments						17,550,055						14,991,914
(+)			Net Unrealized Carried Interest (1)						4,865,719						2,625,935
(+)			Other Assets (2)						4,574,706						4,198,641
(+)			Global Atlantic Book Value						3,260,464						—
(-)			Debt Obligations - KKR (excluding KFN and Global Atlantic)						5,117,799						4,688,460
(-)			Debt Obligations - KFN						948,517						948,517
(-)			Tax Liabilities, Net						2,831,305						485,966
(-)			Other Liabilities						1,433,365						857,764
(-)			Noncontrolling Interests						28,568						29,510
(-)			Preferred Stock						—						500,000
			Book Value						$	24,754,483					$	20,267,356
			Book Value Per Adjusted Share						$	28.06					$	23.09
			Adjusted Shares						882,099,519						877,613,164

(1)The following table provides net unrealized carried interest by business line:

						As of
						September 30, 2021						December 31, 2020
						($ in thousands)
Private Markets Business Line						$	4,769,184					$	2,560,101
Public Markets Business Line						96,535						65,834
Total						$	4,865,719					$	2,625,935

(2)Other Assets include KKR's ownership interest in FS/KKR Advisor and minority ownership interests in hedge fund partnerships.

Book value per adjusted share increased 22% from December 31, 2020. The increase was primarily attributable to (i) the net appreciation in the value of our investment portfolio, including investment income from investments held by KKR as well as carried interest from investments held through investment funds, including KKR's private equity, real assets and alternative credit funds, where KKR is entitled to earn carried interest and (ii) after-tax distributable earnings during the period. Partially offsetting this increase was (i) the payment of dividends and the repurchases of our common stock during the period and (ii) an adjustment to book value to reflect the implied amount of (1) tax assets and liabilities attributable to KKR Holdings L.P. as if it was subject to corporate income taxes (this adjustment was not applied to prior periods, but had this adjustment been made as of December 31, 2020, book value would have been reduced by $459 million as of such date) and (2) the recognition of deferred tax liabilities relating to certain assets of KKR Group Partnership L.P. that is expected to occur upon the completion of the mergers contemplated by the previously announced Reorganization Agreement. The impact of this adjustment was a reduction to book value of $1,508 million as of September 30, 2021.

With respect to book value relating to the Asset Management business, for the nine months ended September 30, 2021, the value of the Asset Management segment balance sheet portfolio increased 28% and KKR's overall private equity portfolio increased by 38%. The increases in KKR's Asset Management segment balance sheet portfolio and net unrealized carried interest was primarily due to mark-to-market net investment gains. 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 private equity 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 Distributable Earnings" and for more details on factors that impact our business, financial performance, operating results and valuations, see "—Business Environment."

The following table presents the holdings of our investments in Asset Management by asset class as of September 30, 2021 on a segment basis. 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. For example, we have recognized certain net unrealized losses in our credit investment portfolio held at our India debt finance company, of which we own 50.3% of its equity as of September 30, 2021. As of September 30, 2021, KKR’s 50.3% interest in our India debt finance company had a cost basis of approximately $164 million, comprised of invested capital of $100 million plus reinvested earnings. If the value of our investment is ultimately realized at the current carrying value of $56 million, future realized investment losses of approximately $108 million would be recognized on a segment basis based on valuations as of September 30, 2021, which would reduce after-tax distributable earnings in future periods.

						As of September 30, 2021
						($ in thousands)
Investments (1)						Cost						Fair Value						Fair Value as a Percentage of Total Investments
Private Equity						$	1,860,504					$	4,591,380					26.2		%
Core Private Equity						2,356,636						4,847,983						27.6		%
Growth						228,460						1,416,671						8.1		%
Private Equity, Core & Growth Total						4,445,600						10,856,034						61.9		%
Energy						787,750						897,941						5.1		%
Real Estate						1,414,660						1,767,321						10.1		%
Infrastructure						587,560						742,372						4.2		%
Real Assets Total						2,789,970						3,407,634						19.4		%
Leveraged Credit						980,528						997,977						5.7		%
Alternative Credit						738,854						847,157						4.8		%
Credit Total						1,719,382						1,845,134						10.5		%
Other						1,501,077						1,441,253						8.2		%
Total Investments						$	10,456,029					$	17,550,055					100.0		%
						September 30, 2021
						($ in thousands)
Significant Investments: (2)						Cost						Fair Value						Fair Value as a Percentage of Total Investments
PetVet Care Centers, LLC						$	243,188					$	1,094,448					6.2		%
USI, Inc.						531,425						1,094,058						6.2		%
Fiserv, Inc. (NASDAQ: FISV)						448,516						992,459						5.7		%
Heartland Dental, LLC						320,626						769,573						4.4		%
BridgeBio Pharma, Inc. (NASDAQ: BBIO)						42,580						561,661						3.2		%
Total Significant Investments						1,586,335						4,512,199						25.7		%
Other Investments						8,869,694						13,037,856						74.3		%
Total Investments						$	10,456,029					$	17,550,055					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, broker-dealer and other businesses, including the general partner interests of KKR's investment funds and the Global Atlantic insurance companies. 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.

(2)Significant Investments include the top five investments based on their fair values as of September 30, 2021. Significant Investments exclude (i) investments expected to be syndicated, (ii) investments expected to be transferred in connection with a new fundraising, and (iii) investments in funds and other entities that are owned by one or more third parties and established for the purpose of making investments. Accordingly, this list of Significant Investments should not be relied upon as a substitute for information about the asset class exposure of KKR's balance sheet. For information about the asset class exposure of 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, 2021, Global Atlantic Book Value was $3.3 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, 2021, 98% and 90% of Global Atlantic's available-for-sale ("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. 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, 2021 were Corporate, RMBS and U.S. state, municipal and political subdivisions securities, comprising 34%, 7% and 4% of Global Atlantic's investment portfolio, respectively. Within these categories, 97%, 95% and 100% of Global Atlantic's Corporate, RMBS and U.S. state, municipal and political subdivisions securities, respectively, were investment grade according to NAIC ratings and 97%, 39% and 100% of its Corporate, RMBS and U.S. state, municipal and political subdivisions securities, respectively, were investment grade according to NRSRO ratings as of September 30, 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 AFS fixed maturity portfolio consisting of floating rate assets was 33% as of September 30, 2021.

Within the funds withheld receivable at interest portfolio 97% of the fixed maturity securities were investment grade by NAIC designation as of September 30, 2021.

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, 98% as of September 30, 2021, was 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 2% as of September 30, 2021. Pursuant to Global Atlantic's investment guidelines, it 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, 2021, the non-rated AFS fixed-maturity securities include $31.9 million 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, 2021, 61% of the AFS fixed maturity securities portfolio was invested in corporate fixed maturity securities.

As of September 30, 2021, 97% of the total fair value of corporate fixed maturity securities is rated NAIC investment grade, and 97% is rated NRSROs investment grade.

Residential mortgage-backed securities

As of September 30, 2021, 12% of the AFS fixed maturity securities portfolio was invested in RMBS. 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, we 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, 2021, 93% of RMBS securities that are below investment grade as rated by the NRSRO, carry an NAIC 1 designation. As of September 30, 2021, Alt-A, Option ARM, Re-Performing and Sub-prime represent 39%, 25%, 14% and 11% of the total RMBS portfolio ($8.1 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. Certain of the AFS fixed maturity securities have experienced changes in fair value that Global Atlantic considers to be temporary in nature. Unrealized gains and losses can be created by changes in interest rates or by changes in credit spreads.

As of September 30, 2021, Global Atlantic had gross unrealized losses on below investment grade AFS fixed maturity securities of $50.0 million based on NRSRO rating and $13.6 million based on NAIC ratings.

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, 2021, 21% 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, 2021, 95% of the commercial mortgage loan portfolio was rated investment grade based on NAIC designation. 100% of the commercial mortgage loan portfolio is in current status.

As of September 30, 2021, 95% of the residential mortgage loan portfolio is in current status, and approximately $197.7 million is over 90 days past due (representing 3% 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 86% of the commercial mortgage loans has a loan-to-value ratio of 70% or less, and a nominal amount 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 73% as of September 30, 2021.

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.

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, 2021 and 2020:

Revenues

			Three Months Ended												Nine Months Ended
			September 30, 2021						September 30, 2020						September 30, 2021						September 30, 2020
			($ in thousands)
Total GAAP Revenues			$	4,483,365					$	1,895,238					$	12,182,552					$	2,225,727
Insurance GAAP Revenues			(2,237,730)						—						(4,558,040)						—
Impact of Consolidation and Other			132,658						85,393						389,946						278,898
Capital Allocation-Based Income (GAAP)			(1,526,667)						(1,331,898)						(5,736,707)						(888,342)
Realized Carried Interest			413,114						217,978						1,183,826						924,974
Realized Investment Income			447,565						260,415						1,277,701						495,904
Insurance Segment Management Fees			46,662						—						108,500						—
Capstone Fees			(25,178)						(17,429)						(66,286)						(55,542)
Expense Reimbursements			(34,857)						(44,553)						(122,642)						(100,779)
Total Asset Management Segment Revenues			$	1,698,932					$	1,065,144					$	4,658,850					$	2,880,840

Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders

			Three Months Ended												Nine Months Ended
			September 30, 2021						September 30, 2020						September 30, 2021						September 30, 2020
			($ in thousands)
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders (GAAP)			$	1,131,354					$	1,056,502					$	4,053,271					$	466,265
Preferred Stock Dividends			25,203						8,341						88,397						25,023
Net Income (Loss) Attributable to Noncontrolling Interests			2,125,088						1,909,458						7,318,218						206,225
Income Tax Expense (Benefit)			379,282						359,375						1,161,688						204,960
Income (Loss) Before Tax (GAAP)			$	3,660,927					$	3,333,676					$	12,621,574					$	902,473
Impact of Consolidation and Other			(1,478,384)						(1,206,517)						(5,000,537)						191,497
Equity-based Compensation - KKR Holdings			8,764						21,802						35,734						63,596
Preferred Stock Dividends			(2,519)						(8,341)						(19,201)						(25,023)
Income Taxes Paid			(185,645)						(75,413)						(449,814)						(198,763)
Asset Management Adjustments:
Unrealized Carried Interest			(911,156)						(995,376)						(3,872,150)						186,537
Net Unrealized Gains (Losses)			(598,304)						(1,088,901)						(2,890,326)						18,049
Unrealized Carried Interest Compensation			397,449						418,728						1,667,447						(57,771)
Strategic Corporate Transaction-Related Charges			7,362						10,697						17,497						10,697
Equity-based Compensation			44,488						40,801						138,196						128,399
Equity-based Compensation - Performance based			18,022						1,687						50,073						5,025
Insurance Adjustments:
Net Gains (Losses) from Investments and Derivatives			(75,241)						—						183,842						—
Strategic Corporate Transaction-Related Charges			3,931						—						15,947						—
Equity-based and Other Compensation			40,086						—						64,061						—
Amortization of Acquired Intangibles			4,412						—						11,765						—
Income Taxes			(9,046)						—						(63,148)						—
After-tax Distributable Earnings			$	925,146					$	452,843					$	2,510,960					$	1,224,716
Interest Expense			63,446						54,458						185,100						152,676
Preferred Stock Dividends			2,519						8,341						19,201						25,023
Net Income Attributable to Noncontrolling Interests			6,072						2,709						14,678						4,800
Income Taxes Paid			185,645						75,413						449,814						198,763
Distributable Operating Earnings			$	1,182,828					$	593,764					$	3,179,753					$	1,605,978
Insurance Segment Operating Earnings			(114,989)						—						(305,774)						—
Realized Performance Income			(432,784)						(224,020)						(1,222,403)						(934,018)
Realized Performance Income Compensation			274,955						157,885						797,965						599,753
Realized Investment Income			(447,565)						(260,415)						(1,277,701)						(495,904)
Realized Investment Income Compensation			67,142						56,803						191,663						85,646
Fee Related Earnings			$	529,587					$	324,017					$	1,363,503					$	861,455
Insurance Segment Operating Earnings			114,989						—						305,774						—
Realized Performance Income			432,784						224,020						1,222,403						934,018
Realized Performance Income Compensation			(274,955)						(157,885)						(797,965)						(599,753)
Realized Investment Income			447,565						260,415						1,277,701						495,904
Realized Investment Income Compensation			(67,142)						(56,803)						(191,663)						(85,646)
Depreciation and Amortization			6,064						4,568						18,257						14,189
Adjusted EBITDA			$	1,188,892					$	598,332					$	3,198,010					$	1,620,167

KKR & Co. Inc. Stockholders' Equity - Common Stock

			As of
			September 30, 2021						December 31, 2020
			($ in thousands)
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock			$	15,817,178					$	12,118,472
Series C Mandatory Convertible Preferred Stock			1,115,792						1,115,792
Impact of Consolidation and Other (1)			(1,058,182)						520,710
KKR Holdings and Other Exchangeable Securities			8,665,693						6,512,382
Accumulated Other Comprehensive Income (AOCI) and Other (Insurance)			214,002						—
Book Value			$	24,754,483					$	20,267,356

(1) Includes an adjustment to book value to reflect the implied amount of (1) tax assets and liabilities attributable to KKR Holdings L.P. as if it was subject to corporate income taxes and (2) the recognition of deferred tax liabilities relating to certain assets of KKR Group Partnership L.P. that is expected to occur upon the completion of the mergers contemplated by the Reorganization Agreement. The impact of this adjustment was a reduction to book value of $1,508 million as of September 30, 2021.

The following table provides reconciliations of KKR's GAAP Shares of Common Stock Outstanding to Adjusted Shares:

			As of
			September 30, 2021						December 31, 2020
GAAP Shares of Common Stock Outstanding			583,026,679						572,893,738
Adjustments:
KKR Holdings Units			271,027,751						275,626,493
Other Exchangeable Securities (1)			1,222,489						—
Common Stock - Series C Mandatory Convertible Preferred Stock (2)			26,822,600						29,092,933
Adjusted Shares (3)			882,099,519						877,613,164
Unvested Shares of Common Stock and Other Exchangeable Securities (4)			36,140,502						23,892,201

(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.

(2)Assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of KKR & Co. Inc. common stock on September 30, 2021 and December 31, 2020.

(3)Amounts exclude unvested equity awards granted under our Equity Incentive Plans.

(4)Represents equity awards granted under our Equity Incentive Plans. The issuance of common stock of KKR & Co. Inc. pursuant to equity awards under our Equity Incentive Plans dilutes KKR common stockholders and KKR Holdings pro rata in accordance with their respective ownership interests in the KKR business. Excludes market condition awards that did not met their market-price based vesting conditions as of September 30, 2021 and December 31, 2020.

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) maintaining access to sufficient liquidity through various sources. The overall liquidity framework and cash management approach of our insurance business are also based on building 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 details on factors that impact our business, financial performance, operating results and valuations.

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 sales of our 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, 2021, 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, 2021, netting holes in excess of $50 million existed at two of our private equity funds, which were Asian Fund II of $250 million and Americas Fund XII of $132 million. 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 10 "Debt Obligations" in our Annual Report and Note 16 "Debt Obligations" to the financial statements included elsewhere in this report.

Liquidity Needs

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

• continue to support and grow our 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;

• 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;

• 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 other securities issued by KKR.

For a discussion of KKR's share repurchase program, see "Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds — Share Repurchases in the First Quarter of 2021."

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.

The following table presents our uncalled commitments to our active investment funds and other vehicles as of September 30, 2021:

			Uncalled Commitments
Private Markets			($ in millions)
Core Investment Vehicles			$	4,254
North America Fund XIII			1,115
Asian Fund IV			857
Real Estate Partners Americas III			800
Global Infrastructure Investors IV			523
Health Care Strategic Growth Fund II			262
Diversified Core Infrastructure Fund			250
Americas Fund XII			231
Asia Real Estate Partners			210
Asia Pacific Infrastructure Investors			192
Asian Fund III			167
Real Estate Partners Europe II			141
Global Infrastructure Investors III			155
Energy Income and Growth Fund II			116
Property Partners Americas			88
Next Generation Technology Growth II			86
European Fund V			69
Health Care Strategic Growth Fund			64
Global Impact Fund			33
Real Estate Credit Opportunity Partners II			27
Real Estate Partners Americas II			26
Other Private Markets Vehicles			497
Total Private Markets Commitments			10,163
Public Markets
Dislocation Opportunities Fund			200
Lending Partners Europe II			33
Special Situations Fund II			25
Private Credit Opportunities Partners II			16
Lending Partners III			13
Lending Partners Europe			12
Other Public Markets Vehicles			487
Total Public Markets Commitments			786
Total Uncalled Commitments			$	10,949

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 syndications in our capital markets business line. As of September 30, 2021, these commitments amounted to $1.2 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 when underwriting certain debt transactions, and thus our unfunded commitments as of September 30, 2021 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 than shown.

On January 14, 2020, KKR committed to invest up to an additional $150 million in our India debt finance company to support its alternative credit business in India. No amounts have been contributed by KKR, and on September 8, 2021, the commitment was terminated. During the third quarter of 2021, our India debt finance company entered into a transaction to merge with Incred Finance.

Tax Receivable Agreement

We are required to acquire KKR Group Partnership Units from time to time pursuant to our exchange agreement with KKR Holdings, which is expected to result in an increase in our tax basis of the assets of KKR Group Partnership at the time of an exchange of KKR Group Partnership Units. We have entered into a tax receivable agreement with KKR Holdings, which requires us to pay to KKR Holdings, or to current and former limited partners who have exchanged KKR Holdings units for KKR's common stock as transferees of KKR Group Partnership Units, 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we realize as a result of the increase in tax basis described above, as well as 85% of the amount of any such savings we realize as a result of increases in tax basis that arise due to future payments under the agreement. As of September 30, 2021, an undiscounted payable of $237.8 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, 2021, approximately $50.2 million of cumulative cash payments have been made under the tax receivable agreement.

Following the consummation of the final exchange of KKR Group Partnership Units that occurs prior to the closing of the mergers contemplated by the Reorganization Agreement, the tax receivable agreement will terminate, except that the obligations of KKR to make payments under the tax receivable agreement with respect to the final exchange and any prior exchanges will remain outstanding until fully paid.

Dividends

A dividend of $0.145 per share of our common stock has been declared for the quarter ended September 30, 2021, which will be paid on November 30, 2021 to holders of record of our common stock as of the close of business on November 15, 2021.

On September 15, 2021, KKR redeemed all of its Series B Preferred Stock at a redemption price per share equal to the $25.00 liquidation preference plus declared and unpaid dividends, which amounted to $157.5 million.

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, 2021 to holders of record of Series C Mandatory Convertible Preferred Stock as of the close of business on December 1, 2021.

When KKR & Co. Inc. receives distributions from KKR Group Partnership, other equityholders in KKR Group Partnership including KKR Holdings 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. Our current dividend policy is to pay dividends to holders of our common stock in an annual aggregate amount of $0.58 per share (or a quarterly dividend of $0.145 per share) beginning with the dividend announced with respect to the results for the first quarter of 2021. 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.

Preferred Stock

For a discussion of KKR's equity, including our preferred stock, see Financial Statements and Supplementary Data—Note 21 "Equity" to the financial statements included elsewhere in this report.

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 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.

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.

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, certain of our investment funds and KKR 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. KKR has 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 investment vehicle and (ii) provided credit support to one of our hedge fund partnerships. 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. In addition, we have also provided credit support to certain of our subsidiaries' obligations in connection with certain investment vehicles or partnerships that we manage. For example, KKR has guaranteed the obligations of a general partner to post collateral on behalf of its investment vehicle in connection with such vehicle's derivative transactions. KKR has also agreed to cause various of its general partners to fund their capital commitments to their funds and to be liable for such general partners' compliance with certain covenants, including limitations on their incurrence of certain kinds of indebtedness. In addition, we have also agreed for certain of our 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. See Note 23 "Commitments and Contingencies—Contingent Repayment Guarantees" to our financial statements included elsewhere in this report for further information on KKR's potential clawback obligations.

Off Balance Sheet Arrangements

Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.

Critical Accounting Policies

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.

The following discusses certain aspects of our critical accounting policies. For a full discussion of these and all critical accounting policies, see Note 2 "Summary of Significant Accounting Policies" to the financial statements included elsewhere in this report.

Critical Accounting Policies - Asset Management

Recognition of Investment Income

Investment income consists primarily of the net impact of: (i) realized and unrealized gains and losses on investments; (ii) dividends; (iii) interest income; (iv) interest expense and (v) foreign exchange gains and losses relating to mark-to-market activity on foreign exchange forward contracts, foreign currency options, foreign denominated debt and debt securities issued by consolidated CFEs.

Certain of our investment funds are consolidated. When a fund is consolidated, the portion of our funds' investment income that is allocable to our carried interests and capital investments is not shown in the consolidated statements of operations. For funds that are consolidated, all investment income (loss), including the portion of a funds' investment income (loss) that is allocable to KKR's carried interest, is included in investment income (loss) on the consolidated statements of operations. The carried interest that KKR retains in net income (loss) attributable to KKR & Co. Inc. is reflected as an adjustment to net income (loss) attributable to noncontrolling interests. However, because certain of our funds remain consolidated and because we hold a minority economic interest in these funds' investments, our share of the investment income is less than the total amount of investment income presented in the consolidated statements of operations for these consolidated funds.

Recognition of Carried Interest in the Statement of Operations

Carried interest entitles the general partner of a fund to a greater allocable share of the fund's earnings from investments relative to the capital contributed by the general partner and correspondingly reduces noncontrolling interests' attributable share of those earnings. Carried interest is 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 returns decrease or turn negative in subsequent periods, recognized carried interest will be reversed and reflected as losses in the statement of operations. For funds that are not consolidated, amounts earned pursuant to carried interest are included in capital allocation-based income (loss) in the consolidated statements of operations. Amounts earned pursuant to carried interest at consolidated funds are eliminated upon consolidation of the fund and are included as investment income (loss) in net gains (losses) from investment activities along with all of the other investment gains and losses at the consolidated fund.

Carried interest is recognized in the statement 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. Due to the extended durations of our private equity funds, we believe that this approach results in income recognition that best reflects our periodic performance in the management of those funds. 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 not consolidated, this clawback obligation, if any, is reflected as a reduction of our investment balance as this is where carried interest is initially 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.

Prior to 2012, most of our historical private equity funds that provide for carried interest do not have a preferred return. For these funds, the management company is required to refund up to 20% of any management fees earned from its limited partners in the event that the fund recognizes carried interest. At such time as the fund recognizes carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, a liability due to the fund's limited partners is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the management fees earned. The refunds to the limited partners are paid, and liabilities relieved, at such time that the underlying investment is sold and the associated carried interest is realized. In the event that a fund's carried interest is not sufficient to cover all or a portion of the amount that represents 20% of the earned management fees, such management fees would be retained and not returned to the funds' limited partners.

Most of our investment funds that provide for carried interest and were launched after 2012, however, have a preferred return. In this case, the management company does not refund the management fees earned from the limited partners of the fund as described above. Instead, the management fee is effectively returned to the limited partners through a reduction of the realized gain on which carried interest is calculated. To calculate the carried interest, KKR calculates whether a preferred return has been achieved based on an amount that includes all of the management fees paid by the limited partners as well as the other capital contributions and expenses paid by them to date. To the extent the fund has exceeded the preferred return at the time of a realization event, and subject to any other conditions for the payment of carried interest like netting holes, carried interest is distributed to the general partner. Until the preferred return is achieved, no carried interest is recorded. Thereafter, the general partner is entitled to a catch up allocation such that the general partner's carried interest is paid in respect of all of the fund's net gains, including the net gains used to pay the preferred return, until the general partner has received the full percentage amount of carried interest that the general partner is entitled to under the terms of the fund. In general, investment funds that entitle the management company to receive an incentive fee have a preferred return and are calculated on a similar basis that takes into account management fees paid.

Critical Accounting Policies - Insurance

Policy liabilities

Policy liabilities, or collectively, "reserves," are the portion of past premiums or assessments received that are set aside to meet future policy and contract obligations as they become due. Interest accrues on the reserves and on future premiums, which may also be available to pay for future obligations. Global Atlantic establishes reserves to pay future policy benefits, claims, and certain expenses for its life policies and annuity contracts.

Global Atlantic's reserves are estimated based on models that include many actuarial assumptions and projections. These assumptions and projections, which are inherently uncertain, involve significant judgment, including assumptions as to the levels and/or timing of premiums, benefits, claims, expenses, interest credits, investment results (including equity market returns), mortality, longevity, and persistency.

The assumptions on which reserves are based are intended to represent an estimation of experience for the period that policy benefits are payable. Global Atlantic reviews the adequacy of its reserves and the assumptions underlying those reserves at least annually. Global Atlantic cannot, however, determine with precision the amount or the timing of actual benefit payments. If actual experience is better than or equal to the assumptions, then reserves would be adequate to provide for future benefits and expenses. If experience is worse than the assumptions, additional reserves may be required to meet future policy and contract obligations. This would result in a charge to our net income during the period in which excess benefits are paid or an increase in reserves occurs.

For a majority of Global Atlantic's in-force policies, including its universal life policies and most annuity contracts, the base policy reserve is equal to the account value. For these products, the account value represents its obligation to repay to the policyholder the amounts held on deposit. However, there are several significant blocks of business where policy reserves, in addition to the account value, are explicitly calculated, including variable annuities, fixed-indexed annuities, universal life products with secondary guarantees, indexed universal life and preneed policies.

Guaranteed minimum death benefits ("GMDB")

Some of Global Atlantic's variable annuity and fixed-indexed annuity contracts contain a GMDB feature that provides a guarantee that the benefit received at death will be no less than a prescribed minimum amount, even if the account balance is reduced to zero. This amount is based on either the net deposits paid into the contract, the net deposits accumulated at a specified rate, the highest historical account value on a contract anniversary, or sometimes a combination of these values. If the GMDB is higher than the current account value at the time of death, Global Atlantic incurs a cost equal to the difference.

Guaranteed minimum withdrawal benefits ("GMWB")

Global Atlantic issues fixed-indexed annuity and variable annuity contracts with a guaranteed minimum withdrawal feature. GMWB are an optional benefit where the contract owner is entitled to withdraw a maximum amount of their benefit base each year.

Once exercised, living benefit features provide annuity policyholders with a minimum guaranteed stream of income for life. A policyholder’s annual income benefit is generally based on an annual withdrawal percentage multiplied by the benefit base. The benefit base is defined in the policy and is generally the initial premium, reduced by any partial withdrawals and increased by a defined percentage, formula or index credits. Any living benefit payments are first deducted from the account value. Global Atlantic is responsible for paying any excess guaranteed living benefits still owed after the account value has reached zero.

The ultimate cost of these benefits will depend on the level of market returns and the level of contractual guarantees, as well as policyholder behavior, including surrenders, withdrawals, and benefit utilization. For fixed-indexed annuity products, costs also include certain non-guaranteed terms that impact the ultimate cost, such as caps on crediting rates that Global Atlantic can, in its discretion, reset annually.

GMDB and GMWB sensitivities

As of September 30, 2021, the GMDB and GMWB liability balance totaled $1,025.2 million. As of September 30, 2021, the liability balances for GMDB were $24.2 million for fixed-indexed annuities and $25.3 million for variable annuities. As of September 30, 2021, the liability balances for GMWB were $975.7 million for fixed-indexed annuities. The increase (decrease) to the GMDB and GMWB liability balance as a result of hypothetical changes in projected assessments, equity market prices, and annual equity growth is summarized in the table below. This sensitivity considers the direct effect of such changes only and not changes in any other assumptions used in or items considered in the measurement of such balances.

						September 30, 2021
($ in thousands)
Balance						$	1,025,202
Hypothetical change:
'+10% future assessments(1)						(16,099)
'-10% future assessments(1)						17,710
+10% equity market prices						(14,650)
-10% equity market prices						12,102
1% lower annual equity growth						5,492

*______________*

Note: Hypothetical changes to the liability balance do not reflect the impact of related hedges.

*(1)*The assessments used to accrue liabilities are generally based on investment yields, realized gains and losses, rider charges, surrender charges, and asset-based fees, such as mortality and expense fees.

Embedded derivatives

Global Atlantic's fixed-indexed annuity, variable annuity and indexed universal life products contain equity-indexed features, which are considered embedded derivatives and are required to be measured at fair value.

The embedded derivative is calculated as the present value of future projected benefits in excess of the projected guaranteed benefits, using an option budget as the indexed account value growth rate. In addition, the fair value of the embedded derivative is reduced to reflect the risk of non-performance on Global Atlantic's obligations (i.e., own credit risk).

Changes in interest rates, future index credits, Global Atlantic's own credit risk, projected withdrawal and surrender activity, and mortality on fixed-indexed annuity and indexed universal life contracts can have a significant impact on the value of the embedded derivative.

Valuation of embedded derivatives – Fixed-indexed annuities

Fixed-indexed annuity contracts allow the policyholder to elect a fixed interest rate of return or a market indexed strategy where interest credited is based on the performance of an index, such as the S&P 500 Index, or other indexes. The market indexed strategy is an embedded derivative, similar to a call option. The fair value of the embedded derivative is computed as the present value of benefits attributable to the excess of the projected policy contract values over the projected minimum guaranteed contract values. The projections of policy contract values are based on assumptions for future policy growth, which include assumptions for expected index credits, future equity option costs, volatility, interest rates, and policyholder behavior. The projections of minimum guaranteed contract values include the same assumptions for policyholder behavior as are used to project policy contract values. The embedded derivative cash flows are discounted using a risk-free interest rate increased by a non-performance risk spread tied to Global Atlantic's own credit rating.

Valuation of embedded derivatives – Indexed universal life

Indexed universal life products allow a policyholder’s account value to grow based on the performance of certain equity indexes, which result in an embedded derivative similar to a call option. The embedded derivative related to the index is bifurcated from the host contract and measured at fair value. The valuation of the embedded derivative is the present value of future projected benefits in excess of the projected guaranteed benefits, using the option budget as the indexed account value growth rate and the guaranteed interest rate as the guaranteed account value growth rate. Present values are based on discount rate curves determined at the valuation date/issue date as well as assumed lapse and mortality rates. The discount rate equals the forecast treasury rate plus a non-performance risk spread tied to Global Atlantic’s own credit rating. Changes in discount rates and other assumptions such as spreads and/or option budgets can have a substantial impact on the embedded derivative.

Valuation of embedded derivatives – Variable annuities

Variable annuity contracts offered and assumed by Global Atlantic provide the contractholder with GMDB and/or GMWB. The liabilities for these benefits are included in policy liabilities in the consolidated statement of financial condition. The change in the liabilities for these benefits is included in policy benefits and claims in the consolidated statements of operation.

Global Atlantic has issued variable annuity contracts with GMDB features. Global Atlantic elected the fair value option to measure the liability for certain of these variable annuity contracts, valued at $544.8 million as September 30, 2021. Fair value is calculated as the present value of the estimated death benefits less the present value of the GMDB fees, using 1,000 risk neutral scenarios. Global Atlantic discounts the cash flows using U.S. Treasury rates plus an adjustment for its own company credit risk.

Global Atlantic also issues variable annuity contracts with a GMWB. The GMWB feature represents an embedded derivative. The embedded derivative is required to be bifurcated and measured at fair value. This liability is calculated as the present value of the excess GMWB claims less the present value of GMWB fees, using 1,000 risk neutral scenarios. Global Atlantic discounts the cash flows using U.S. Treasury rates plus an adjustment for its own company credit risk.

As of September 30, 2021, the embedded derivative liability balance totaled $1,513.9 million for fixed-indexed annuities, $490.0 million for indexed universal life and $138.8 million for variable annuities. As of September 30, 2021, variable annuities accounted for using the fair value option was $544.8 million. The increase (decrease) to the embedded derivatives on fixed-indexed annuity, indexed universal life, and variable annuity products and the increase (decrease) in the reserves for variable annuities accounted for using the fair value option as a result of hypothetical changes in interest rates, non-performance risk premium, and equity market prices is summarized in the table below. This sensitivity considers the direct effect of such changes only and not changes in any other assumptions used in or items considered in the measurement of such balances.

						September 30, 2021
						FIA						IUL						VA						VA (FVO)
($ in thousands)
Balance						$	1,513,888					$	490,013					$	138,826					$	544,829
Hypothetical change:
+50 bps interest rates						(34,126)						(2,428)						(70,403)						(33,443)
-50 bps interest rates						40,806						2,306						81,305						33,554
'+50bps non-performance risk premium						(31,200)						(6,264)						(30,412)						(23,418)
'-50bps non-performance risk premium						35,818						6,264						44,780						26,630
+10% equity market prices						364,088						34,126						(55,315)						(22,967)
-10% equity market prices						(249,490)						(64,473)						71,062						27,421

________________

Note: Hypothetical changes to the liability balances do not reflect the impact of related hedges.

Valuation of embedded derivatives in modified coinsurance or funds withheld

Global Atlantic's reinsurance agreements include modified coinsurance and coinsurance with funds withheld arrangements that include terms that require payment by the ceding company of a principal amount plus a return that is based on a proportion of the ceding company’s return on a designated portfolio of assets. Because the return on the receivable held by the assuming company is not clearly and closely related to the host insurance contract, these contracts are deemed to contain embedded derivatives, which are measured at fair value. Global Atlantic is exposed to both the market risk and the credit risk of the assets. Changes in discount rates and other assumptions can have a significant impact on this embedded derivative. The fair value of the embedded derivatives is included in the funds withheld receivable at interest and funds withheld payable at interest line items on the consolidated statement of financial condition. The change in the fair value of the embedded derivatives is recorded in net investment gains (losses) in the consolidated statement of operations.

As of September 30, 2021, the embedded derivative balance for modified coinsurance or funds withheld arrangements was a $117.2 million net asset ($80.5 million in funds withheld receivables at interest, and $(36.8) million in funds withheld payable at interest). The increase (decrease) to the balance as a result of hypothetical changes in credit spreads and interest rates is summarized in the table below. This sensitivity considers the direct effect of such changes only and not changes in any other factors that impact the embedded derivative balance for modified coinsurance or funds withheld arrangements.

						September 30, 2021
						Embedded derivative on funds withheld receivable at interest						Embedded derivative on funds withheld payable at interest
($ in thousands)
Balance						$	80,493					$	(36,755)
Hypothetical change:
+50 bps credit spreads						(68,200)						(860,342)
-50 bps credit spreads						68,200						860,342
+50 bps interest rates						(26,545)						(779,962)
-50 bps interest rates						35,444						779,962

________________

Note: Hypothetical changes to the funds withheld receivable and payable embedded derivative balances do not reflect the impact of related hedges or trading assets which back the funds withheld at interest.

Critical Accounting Policies - Combined

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, 2021 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 investments), and including investments in both consolidated and unconsolidated investment funds, approximately 50% 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, 2021, 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 36%, 46%, and 18%, 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 details on factors that 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 9 "Fair Value Measurements" to our financial statements included elsewhere in this report.

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 Markets 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 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 investments in Private Markets 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 Markets 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 in Public Markets, 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, 2021, less than 5% 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 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, reputable 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. For all the internally developed models, Global Atlantic seeks to verify the reasonableness of fair values by analyzing the inputs and other assumptions used. As of September 30, 2021, approximately 53% of these investments were priced via external sources, while approximately 47% were valued on the basis of internal models. 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, 2021, 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.

There were no changes made to our Level III valuation process as a result of COVID-19.

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, 2021, 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, 2021, investments which represented greater than 5% of total non-GAAP investments consisted of PetVet Care Centers, LLC, USI, Inc. and Fiserv, Inc. valued at $1,094.4 million, $1,094.1 million, and $992.5 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 BridgeBio Pharma Inc. See "—Business Environment" for a discussion on the impact of global equity markets on our financial condition and "—Non-GAAP Balance Sheet Measures" for additional information regarding our largest holdings on a non-GAAP basis.

Recently Issued Accounting Pronouncements

For a full discussion of recently issued accounting pronouncements, see Note 2 "Summary of Significant Accounting Policies" to the financial statements included elsewhere in this report.