Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of KKR & Co. Inc., together with its consolidated subsidiaries, and the related notes included elsewhere in this report and our Annual Report, including the audited consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under "Cautionary Note Regarding Forward-looking Statements" and "Business Environment" in this report and our Annual Report and "Risk Factors" in our Annual Report, and our other filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements.

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

Overview

We are a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. We aim to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in our portfolio companies and communities. We sponsor investment funds that invest in private equity, credit, and real assets and have strategic partners that manage hedge funds. Our insurance subsidiaries offer retirement, life, and reinsurance products under the management of Global Atlantic.

As of March 31, 2023, we manage $510 billion of assets for our clients. Throughout our history, we have consistently been a leader in the private equity industry, having completed approximately 700 private equity investments in portfolio companies with a total transaction value in excess of $700 billion as of March 31, 2023. Since the inception of our firm in 1976, we have expanded our investment strategies and product offerings from traditional private equity to areas such as leveraged credit, alternative credit, infrastructure, energy, real estate, growth equity, core private equity, and impact investments. We also provide capital markets services for our firm, our portfolio companies and third parties. Our balance sheet provides a significant source of capital in the growth and expansion of our business, and it has allowed us to further align our interests with those of our fund investors. Building on these efforts and leveraging our industry expertise and intellectual capital have allowed us to capitalize on a broader range of the opportunities we source.

Our insurance business is operated by Global Atlantic, in which we acquired a majority controlling interest on February 1, 2021. Global Atlantic is a leading U.S. retirement and life insurance company that provides a broad suite of protection, legacy and savings products and reinsurance solutions to clients across individual and institutional markets. Global Atlantic primarily offers individuals fixed-rate annuities, fixed-indexed annuities and targeted life products through a network of banks, broker-dealers and independent marketing organizations. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer reinsurance, as well as funding agreements. Global Atlantic primarily generates income by earning a spread between its investment income and the cost of policyholder benefits. As of March 31, 2023, Global Atlantic served approximately three million policyholders.

Asset Management

Our asset management business offers a broad range of investment management services to fund investors around the world. In our asset management business, we have five business lines: (1) Private Equity, (2) Real Assets, (3) Credit and Liquid Strategies, (4) Capital Markets, and (5) Principal Activities. In addition to the overviews of each of these business lines provided in this report, please also refer to our Annual Report. As an asset management firm, we earn fees, including management fees and incentive fees, and carried interest for providing investment management and other services to our funds, vehicles, CLOs, managed accounts and portfolio companies, and we generate transaction fees from capital markets transactions. We earn additional investment income by investing our own capital alongside that of our fund investors and from other assets on our balance sheet. Carried interest we receive from our funds and certain other investment vehicles entitles us to a specified percentage of investment gains that are generated on third-party capital that is invested.

Private Equity

Through our Private Equity 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 that invest in large and mid-sized companies, we sponsor investment funds that invest in core private equity, growth equity, and impact investments. Our Private Equity business line includes separately managed accounts that invest in multiple strategies, which may include our credit and real assets strategies, as well as our private equity strategies. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser. As of March 31, 2023, our Private Equity business line had $165.8 billion of AUM, consisting of $115.9 billion in traditional private equity, $33.7 billion in core private equity and $16.1 billion in growth equity, which includes $3.9 billion of impact investments.

The table below presents information as of March 31, 2023, relating to our current private equity and other investment vehicles reported in our Private Equity business line for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after March 31, 2023.


	Investment Period		Amount ($ in millions)
	Start Date(1)	End Date (2)	Commitment (3)		Uncalled Commitments		Percentage Committed by General Partner	Invested		Realized		Remaining Cost (4)		Remaining Fair Value		Gross Accrued Carried Interest
Private Equity Business Line
North America Fund XIII	8/2021	8/2027	$	18,400	$	12,250	3%	$	6,150	$	—	$	6,150	$	6,572	$	2
Americas Fund XII	5/2017	5/2021	13,500		1,579		4%	12,419		5,788		11,042		17,941		1,343
North America Fund XI	11/2012	1/2017	8,718		156		3%	10,024		22,643		2,798		3,584		221
2006 Fund (5)	9/2006	9/2012	17,642		247		2%	17,309		37,415		19		19		7
Millennium Fund (5)	12/2002	12/2008	6,000		—		3%	6,000		14,123		—		6		1
European Fund VI	6/2022	6/2028	7,326		7,326		3%	—		—		—		—		—
European Fund V	7/2019	2/2022	6,327		1,025		2%	5,372		917		5,213		6,101		253
European Fund IV	2/2015	3/2019	3,512		5		6%	3,637		5,122		1,848		2,851		196
European Fund III (5)	3/2008	3/2014	5,504		144		5%	5,360		10,625		590		81		(32)
European Fund II (5)	11/2005	10/2008	5,751		—		2%	5,751		8,507		—		34		—
Asian Fund IV	7/2020	7/2026	14,735		9,768		4%	5,008		41		4,940		5,805		8
Asian Fund III	8/2017	7/2020	9,000		1,373		6%	8,057		5,031		6,787		11,043		789
Asian Fund II	10/2013	3/2017	5,825		—		1%	7,316		6,467		3,081		2,156		(346)
Asian Fund (5)	7/2007	4/2013	3,983		—		3%	3,974		8,728		110		5		—
China Growth Fund (5)	11/2010	11/2016	1,010		—		1%	1,010		1,065		322		170		(17)
Next Generation Technology Growth Fund III	11/2022	11/2028	2,524		2,524		8%	—		—		—		—		—
Next Generation Technology Growth Fund II	12/2019	5/2022	2,088		273		7%	2,012		496		1,812		2,417		136
Next Generation Technology Growth Fund	3/2016	12/2019	659		5		22%	668		1,036		322		899		65
Health Care Strategic Growth Fund II	5/2021	5/2027	3,789		3,331		4%	458		—		458		473		—
Health Care Strategic Growth Fund	12/2016	4/2021	1,331		225		11%	1,236		207		1,106		1,633		72
Global Impact Fund II	6/2022	6/2028	2,094		2,094		7%	—		—		—		—		—
Global Impact Fund	2/2019	3/2022	1,242		266		8%	1,150		324		1,010		1,506		94
Co-Investment Vehicles and Other	Various	Various	17,471		5,149		Various	12,593		7,980		8,853		11,012		1,021
Core Investment Vehicles	Various	Various	24,759		12,313		30%	13,070		872		12,712		21,343		114
Unallocated Commitments (6)	N/A	N/A	3,914		3,914		Various	—		—		—		—		—

Total Private Equity			$	187,104	$	63,967		$	128,574	$	137,387	$	69,173	$	95,651	$	3,927

(1)The start date represents the start of the fund's investment period as defined in the fund's governing documents and may or may not be the same as the date upon which management fees begin to accrue. For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.

(2)The end date represents the end of the fund's investment period as defined in the fund's governing documents and is generally not the date upon which management fees cease to be paid. For further information on management fee calculations, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.

(3)The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner. Foreign currency commitments have been converted into U.S. dollars based on the exchange rate that prevailed on March 31, 2023.

(4)The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.

(5)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.

(6)"Unallocated Commitments" represent commitments received from our strategic investor partnerships that have yet to be allocated to a particular investment strategy.

Real Assets

Through our Real Assets business line, we manage and sponsor a group of real assets funds and accounts that invest capital in infrastructure, real estate, or energy. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P. or one of its subsidiaries. As of March 31, 2023, our Real Assets business line had $120.8 billion of AUM, consisting of $65.4 billion in real estate (of which $35.8 billion is real estate credit and $29.6 billion is real estate equity), $52.1 billion in infrastructure, and $3.3 billion in energy.

The table below presents information as of March 31, 2023, relating to our current real asset funds for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after March 31, 2023.


	Investment Period		Amount ($ in millions)
	Start Date (1)	End Date (2)	Commitment (3)		Uncalled Commitments		Percentage Committed by General Partner	Invested		Realized		Remaining Cost (4)		Remaining Fair Value		Gross Accrued Carried Interest
Real Assets Business Line
Energy Income and Growth Fund II	8/2018	8/2022	$	994	$	—	20%	$	1,189	$	229	$	1,003	$	1,586	$	38
Energy Income and Growth Fund	9/2013	6/2018	1,974		—		13%	1,974		1,061		1,001		520		—
Natural Resources Fund (5)	Various	Various	887		—		Various	887		132		171		37		—
Global Energy Opportunities	Various	Various	915		62		Various	520		190		319		185		—
Global Infrastructure Investors IV	8/2021	8/2027	16,564		9,688		2%	6,964		88		6,899		7,226		15
Global Infrastructure Investors III	7/2018	6/2021	7,161		1,197		4%	6,230		1,614		5,432		6,564		263
Global Infrastructure Investors II	12/2014	6/2018	3,039		127		4%	3,164		4,723		1,101		1,605		51
Global Infrastructure Investors	9/2010	10/2014	1,040		—		5%	1,050		2,228		—		—		—
Asia Pacific Infrastructure Investors II	9/2022	9/2028	5,720		5,720		6%	—		—		—		—		—
Asia Pacific Infrastructure Investors	1/2020	9/2022	3,792		1,540		7%	2,536		450		2,275		2,648		87
Diversified Core Infrastructure Fund	12/2020	(6)	8,641		2,065		6%	6,616		244		6,616		6,878		—
Real Estate Partners Americas III	1/2021	1/2025	4,253		1,801		5%	2,529		190		2,431		2,356		—
Real Estate Partners Americas II	5/2017	12/2020	1,921		233		8%	1,924		2,489		606		653		48
Real Estate Partners Americas	5/2013	5/2017	1,229		135		16%	1,023		1,408		94		55		(1)
Real Estate Partners Europe II	3/2020	3/2024	2,055		755		10%	1,444		368		1,277		1,181		—
Real Estate Partners Europe	8/2015	12/2019	706		111		9%	673		707		231		258		4
Asia Real Estate Partners	7/2019	7/2023	1,682		990		15%	699		19		671		805		—
Real Estate Credit Opportunity Partners II	8/2019	6/2023	950		151		5%	821		140		821		804		8
Real Estate Credit Opportunity Partners	2/2017	4/2019	1,130		122		4%	1,008		440		1,008		1,009		5
Property Partners Americas	12/2019	(6)	2,569		46		19%	2,523		159		2,523		2,823		—
Co-Investment Vehicles and Other	Various	Various	6,234		2,045		Various	4,245		1,615		3,788		3,437		14

Total Real Assets			$	73,456	$	26,788		$	48,019	$	18,494	$	38,267	$	40,630	$	532

(4)The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.

(5)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.

(6)Open-ended fund.

Private Equity and Real Asset Performance

The table below presents information as of March 31, 2023, relating to the historical performance of certain of our Private Equity and Real Assets investment vehicles since inception, which we believe illustrates the benefits of our investment approach. This data does not reflect additional capital raised since March 31, 2023, or acquisitions or disposals of investments, changes in investment values, or distributions occurring after that date. The information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below. Past performance is no guarantee of future results.


	Amount				Fair Value of Investments
Private Equity and Real Assets Business Lines Investment Funds	Commitment (2)		Invested		Realized (4)		Unrealized		Total Value		Gross IRR (5)		Net IRR (5)		Gross Multiple of Invested Capital (5)
	($ in millions)
Total Investments
Legacy Funds (1)
1976 Fund	$	31	$	31	$	537	$	—	$	537	39.5	%	35.5	%	17.1
1980 Fund	357		357		1,828		—		1,828		29.0	%	25.8	%	5.1
1982 Fund	328		328		1,291		—		1,291		48.1	%	39.2	%	3.9
1984 Fund	1,000		1,000		5,964		—		5,964		34.5	%	28.9	%	6.0
1986 Fund	672		672		9,081		—		9,081		34.4	%	28.9	%	13.5
1987 Fund	6,130		6,130		14,949		—		14,949		12.1	%	8.9	%	2.4
1993 Fund	1,946		1,946		4,143		—		4,143		23.6	%	16.8	%	2.1
1996 Fund	6,012		6,012		12,477		—		12,477		18.0	%	13.3	%	2.1
Subtotal - Legacy Funds	16,475		16,475		50,269		—		50,269		26.1	%	19.9	%	3.1
Included Funds
European Fund (1999)	3,085		3,085		8,758		—		8,758		26.9	%	20.2	%	2.8
Millennium Fund (2002)	6,000		6,000		14,123		6		14,129		22.0	%	16.1	%	2.4
European Fund II (2005)	5,751		5,751		8,507		34		8,541		6.1	%	4.5	%	1.5
2006 Fund (2006)	17,642		17,309		37,415		19		37,434		11.9	%	9.3	%	2.2
Asian Fund (2007)	3,983		3,974		8,728		5		8,733		18.9	%	13.7	%	2.2
European Fund III (2008)	5,504		5,360		10,625		81		10,706		16.4	%	11.3	%	2.0
E2 Investors (Annex Fund) (2009)	196		196		200		—		200		0.6	%	0.5	%	1.0
China Growth Fund (2010)	1,010		1,010		1,065		170		1,235		5.0	%	1.0	%	1.2
Natural Resources Fund (2010)	887		887		132		37		169		(24.4)	%	(26.2)	%	0.2
Global Infrastructure Investors (2010)	1,040		1,050		2,228		—		2,228		17.6	%	15.6	%	2.1
North America Fund XI (2012)	8,718		10,024		22,643		3,584		26,227		24.1	%	19.6	%	2.6
Asian Fund II (2013)	5,825		7,316		6,467		2,156		8,623		4.9	%	3.3	%	1.2
Real Estate Partners Americas (2013)	1,229		1,023		1,408		55		1,463		16.1	%	11.3	%	1.4
Energy Income and Growth Fund (2013)	1,974		1,974		1,061		520		1,581		(5.8)	%	(8.4)	%	0.8
Global Infrastructure Investors II (2014)	3,039		3,164		4,723		1,605		6,328		19.9	%	17.2	%	2.0
European Fund IV (2015)	3,512		3,637		5,122		2,851		7,973		23.9	%	18.6	%	2.2
Real Estate Partners Europe (2015)	706		673		707		258		965		13.1	%	9.4	%	1.4
Next Generation Technology Growth Fund (2016)	659		668		1,036		899		1,935		31.5	%	26.7	%	2.9
Health Care Strategic Growth Fund (2016)	1,331		1,236		207		1,633		1,840		20.0	%	12.7	%	1.5
Americas Fund XII (2017)	13,500		12,419		5,788		17,941		23,729		23.9	%	19.2	%	1.9
Real Estate Credit Opportunity Partners (2017)	1,130		1,008		440		1,009		1,449		9.3	%	7.9	%	1.4
Core Investment Vehicles (2017)	24,759		13,070		872		21,343		22,215		19.6	%	18.4	%	1.7
Asian Fund III (2017)	9,000		8,057		5,031		11,043		16,074		29.4	%	22.8	%	2.0
Real Estate Partners Americas II (2017)	1,921		1,924		2,489		653		3,142		27.6	%	22.9	%	1.6
Global Infrastructure Investors III (2018)	7,161		6,230		1,614		6,564		8,178		13.5	%	10.1	%	1.3
Global Impact Fund (2019)	1,242		1,150		324		1,506		1,830		28.3	%	20.8	%	1.6
European Fund V (2019)	6,327		5,372		917		6,101		7,018		14.9	%	11.0	%	1.3
Energy Income and Growth Fund II (2018)	994		1,189		229		1,586		1,815		22.9	%	20.5	%	1.5
Asia Real Estate Partners (2019)	1,682		699		19		805		824		15.3	%	5.2	%	1.2
Next Generation Technology Growth Fund II (2019)	2,088		2,012		496		2,417		2,913		23.4	%	17.9	%	1.4
Real Estate Credit Opportunity Partners II (2019)	950		821		140		804		944		10.1	%	7.6	%	1.1
Asia Pacific Infrastructure Investors (2020)	3,792		2,536		450		2,648		3,098		19.4	%	13.0	%	1.2
Asian Fund IV (2020)	14,735		5,008		41		5,805		5,846		13.6	%	6.9	%	1.2
Real Estate Partners Europe II (2020)	2,055		1,444		368		1,181		1,549		6.3	%	2.2	%	1.1
Real Estate Partners Americas III (2021)	4,253		2,529		190		2,356		2,546		0.6	%	(2.4)	%	1.0
Health Care Strategic Growth Fund II (2021) (3)	3,789		458		—		473		473		—		—		—
Global Infrastructure Investors IV (2021) (3)	16,564		6,964		88		7,226		7,314		—		—		—
North America Fund XIII (2021) (3)	18,400		6,150		—		6,572		6,572		—		—		—
European Fund VI (2022) (3)	7,326		—		—		—		—		—		—		—
Global Impact Fund II (2022) (3)	2,094		—		—		—		—		—		—		—
Asia Pacific Infrastructure Investors II (2022) (3)	5,720		—		—		—		—		—		—		—
Next Generation Technology Growth Fund III (2022) (3)	2,524		—		—		—		—		—		—		—
Subtotal - Included Funds	224,097		153,377		154,651		111,946		266,597		16.1	%	12.3	%	1.8

All Funds	$	240,572	$	169,852	$	204,920	$	111,946	$	316,866	25.5	%	18.7	%	1.9

(1)These funds were not contributed to KKR as part of the acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private Equity Investors, L.P.) on October 1, 2009.

(2)Where commitments are not U.S. dollar-denominated, such amounts have been converted into U.S. dollars based on the exchange rate prevailing on March 31, 2023.

(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 March 31, 2023. We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to these funds.

(4)An investment is considered realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by the relevant fund.

(5)IRRs measure the aggregate annual compounded returns generated by a fund's investments over a holding period. Net IRRs are calculated after giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses. Gross IRRs are calculated before giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses.

The gross multiples of invested capital measure the aggregate value generated by a fund's investments in absolute terms. Each multiple of invested capital is calculated by adding together the total realized and unrealized values of a fund's investments and dividing by the total amount of capital invested by the fund. Such amounts do not give effect to the allocation of realized and unrealized carried interest or the payment of any applicable management fees or organizational expenses.

KKR's Private Equity and Real Assets funds may utilize third-party financing facilities to provide liquidity to such funds. The above net and gross IRRs are calculated from the time capital contributions are due from fund investors to the time fund investors receive a related distribution from the fund, and the use of such financing facilities generally decreases the amount of time that would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. KKR's Private Equity and Real Assets funds also generally provide in certain circumstances, which vary depending on the relevant fund documents, for a portion of capital returned to investors to be restored to unused commitments as recycled capital. For KKR's Private Equity and Real Assets funds that have a preferred return, we take into account recycled capital in the calculation of IRRs and multiples of invested capital because the calculation of the preferred return includes the effect of recycled capital. For KKR's Private Equity and Real Assets funds that do not have a preferred return, we do not take recycled capital into account in the calculation of IRRs and multiples of invested capital. The inclusion of recycled capital generally causes invested and realized amounts to be higher and IRRs and multiples of invested capital to be lower than had recycled capital not been included. The inclusion of recycled capital would reduce the composite net IRR of all Included Funds by 0.1% and the composite net IRR of all Legacy Funds by 0.5% and would reduce the composite multiple of invested capital of Included Funds by less than 0.1 and the composite multiple of invested capital of Legacy Funds by 0.4.

For more information, see "Risk Factors—Risks Related to the Assets We Manage—Future results of our funds, our insurance subsidiaries or our balance sheet investments may be different than, and may not achieve the levels of, any of their historical returns" in our Annual Report.

Credit and Liquid Strategies

Through our Credit and Liquid Strategies business line, we report our credit and hedge funds platforms on a combined basis. As of March 31, 2023, our Credit and Liquid Strategies business line had $223.5 billion of AUM, comprised of $111.7 billion of assets managed in our leveraged credit strategies, $75.9 billion of assets managed in our private credit strategy, and $7.8 billion of assets managed in our SIG strategy, $26.4 billion of assets managed through our hedge fund platform, and $1.7 billion of assets managed in other Credit and Liquid Strategies strategies. We manage $108.6 billion of credit investments for our Global Atlantic insurance companies. Our BDC has approximately $16.1 billion in assets under management, which is reflected in the AUM of our leveraged credit and private credit strategies above. We report all of the assets under management of our BDC in our AUM, but we report only a pro rata portion of the assets under management of our hedge fund partnerships based on our percentage ownership in them.

Credit

Our credit platform invests capital in a broad range of corporate debt and collateral-backed investments across asset classes and capital structures. Our credit strategies are primarily managed by KKR Credit Advisors (US) LLC, which is an SEC-registered investment adviser, KKR Credit Advisors (Ireland) Unlimited Company, which is regulated by the Central Bank of Ireland (“CBI”), KKR Credit Advisors (EMEA) LLP, which is regulated by the United Kingdom ("UK") Financial Conduct Authority (the "FCA"), and KKR Credit Advisors (Singapore) Pte. Ltd., which is regulated by the Monetary Authority of Singapore and an SEC-registered investment adviser. We also jointly own with a third party FS/KKR Advisor, LLC, an investment adviser registered with the SEC that provides investment advisory services to FS KKR Capital Corp. (NYSE: FSK), a publicly listed BDC. For further information regarding the legal entities involved in the Credit business and the regulatory and legal requirements that apply to these entities and their activities, see "—Regulation" in our Annual Report.

Our credit business pursues a variety of investment strategies in leveraged credit and alternative credit.

Leveraged Credit. Our leveraged credit strategies seek to primarily invest in leveraged loans (including revolving credit facilities), CLOs, high yield bonds, structured credit, stressed securities and illiquid credits. Within leveraged credit, we manage both single-asset class and multi-asset class pools of capital. Our opportunistic credit strategy seeks to deploy capital across investment themes that seek to take advantage of credit market dislocations, spanning asset types and liquidity profiles. Our multi-asset credit strategy seeks to dynamically allocate across asset types in a broadly diversified strategy. Our revolving credit strategy invests in senior secured revolving credit facilities.

Alternative Credit. Our alternative credit strategy consists of our (i) private credit strategies and (ii) investments overseen by our credit platform’s strategic investments group (“SIG”):

Private Credit.** Our private credit strategies focus on privately or directly originated and negotiated transactions. These strategies include direct lending typically in the senior part of a company’s capital structure, junior mezzanine debt, and asset-based finance. Through our direct lending strategy, we seek to make investments in primarily senior debt financings for middle-market companies. Through our junior mezzanine debt strategy, investments typically consist of subordinated debt, which generates a current yield, coupled with marginal equity exposure for additional upside potential. Our asset-based finance strategy focuses on portfolios of financial loans and loans backed by hard assets.
Strategic Investments Group.** This strategy seeks to provide strategic capital solutions to high quality, mid-to-large cap companies and assets. The strategy pursues investments in corporate credit as well as asset or real estate-backed credit, where we believe market volatility or other investment themes have created the opportunity to invest opportunistically across the capital structure and through market cycles to generate outsized returns with downside-protected securities. These investments may include stressed or distressed investments (including post-restructuring equity), control-oriented opportunities, rescue financing (debt or equity investments made to address covenant, maturity or liquidity issues), debtor-in-possession or exit financing and other event-driven investments in debt or equity.

The table below presents information as of March 31, 2023, relating to our current credit funds in our Credit and Liquid Strategies business line for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after March 31, 2023.


	Investment Period		Amount ($ in millions)
	Start Date (1)	End Date (2)	Commitment (3)		Uncalled Commitments		Percentage Committed by General Partner	Invested		Realized		Remaining Cost (4)		Remaining Fair Value		Gross Accrued Carried Interest
Credit and Liquid Strategies Business Line
Dislocation Opportunities Fund	8/2019	11/2021	$	2,967	$	587	14%	$	2,380	$	898	$	1,842	$	1,907	$	45
Special Situations Fund II	2/2015	3/2019	3,525		284		9%	3,241		2,278		1,449		1,346		—
Special Situations Fund	1/2013	1/2016	2,274		1		12%	2,273		1,775		600		410		—
Mezzanine Partners	7/2010	3/2015	1,023		33		4%	990		1,165		256		142		(20)
Asset-Based Finance Partners	10/2020	7/2025	2,059		1,295		7%	764		41		764		815		14
Private Credit Opportunities Partners II	12/2015	12/2020	2,245		412		2%	1,833		784		1,357		1,260		—
Lending Partners III	4/2017	11/2021	1,498		607		2%	891		611		741		757		36
Lending Partners II	6/2014	6/2017	1,336		157		4%	1,179		1,192		189		86		—
Lending Partners	12/2011	12/2014	460		40		15%	420		458		29		11		—
Lending Partners Europe II	5/2019	9/2023	837		158		7%	679		95		679		685		3
Lending Partners Europe	3/2015	3/2019	848		184		5%	662		391		313		234		—
Asia Credit	1/2021	5/2025	1,084		736		9%	348		2		348		387		5
Other Alternative Credit Vehicles	Various	Various	14,588		7,201		Various	7,541		5,953		3,806		3,898		8

Total Credit and Liquid Strategies			$	34,744	$	11,695		$	23,201	$	15,643	$	12,373	$	11,938	$	91

(4)The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital.

The following table presents information regarding larger leveraged credit strategies managed by KKR from inception to March 31, 2023. 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 Strategy	Inception Date	Gross Returns		Net Returns		Benchmark (1)	Benchmark Gross Returns
Bank Loans Plus High Yield	Jul 2008	6.65	%	6.05	%	65% S&P/LSTA Loan Index, 35% BoAML HY Master II Index (2)	5.32%
Opportunistic Credit (3)	May 2008	10.13	%	8.51	%	50% S&P/LSTA Loan Index, 50% BoAML HY Master II Index (3)	5.48%
Bank Loans	Apr 2011	5.08	%	4.51	%	S&P/LSTA Loan Index (4)	4.03%
High-Yield	Apr 2011	5.57	%	5.00	%	BoAML HY Master II Index (5)	4.89%

European Leveraged Loans (6)	Sep 2009	4.29	%	3.77	%	CS Inst West European Leveraged Loan Index (7)	3.33%

European Credit Opportunities (6)	Sept 2007	5.42	%	4.43	%	S&P European Leveraged Loans (All Loans) (8)	3.84%

(1)The benchmarks referred to herein include the S&P/LSTA Leveraged Loan Index (the "S&P/LSTA Loan Index"), S&P/LSTA U.S. B/BB Ratings Loan Index (the "S&P/LSTA BB-B Loan Index"), the Bank of America Merrill Lynch High Yield Master II Index (the "BoAML HY Master II Index"), the BofA Merrill Lynch BB-B US High Yield Index (the "BoAML HY BB-B Constrained"), the Credit Suisse Institutional Western European Leveraged Loan Index (the "CS Inst West European Leveraged Loan Index"), and S&P European Leveraged Loans (All Loans). The S&P/LSTA Loan Index is a daily tradable index for the U.S. loan market that seeks to mirror the market-weighted performance of the largest institutional loans that meet certain criteria. The BoAML HY Master II Index is an index for high-yield corporate bonds. It is designed to measure the broad high-yield market, including lower-rated securities. The CS Inst West European Leveraged Loan Index contains only institutional loan facilities priced above 90, excluding TL and TLa facilities and loans rated CC, C or are in default. The S&P European Leveraged Loan Index reflects the market-weighted performance of institutional leveraged loan portfolios investing in European credits. While the returns of our leveraged credit strategies reflect the reinvestment of income and dividends, none of the indices presented in the chart above reflect such reinvestment, which has the effect of increasing the reported relative performance of these strategies as compared to the indices. Furthermore, these indices are not subject to management fees, incentive allocations, or expenses.

(2)Performance is based on a blended composite of Bank Loans Plus High Yield strategy accounts. The benchmark used for purposes of comparison for the Bank Loans Plus High Yield strategy is based on 65% S&P/LSTA Loan Index and 35% BoAML HY Master II Index.

(3)The Opportunistic Credit strategy invests in high-yield securities and corporate loans with no preset allocation. The benchmark used for purposes of comparison for the Opportunistic Credit strategy presented herein is based on 50% S&P/LSTA Loan Index and 50% BoAML HY Master II Index. Funds within this strategy may utilize third-party financing facilities to enhance investment returns. In cases where financing facilities are used, the amounts drawn on the facility are deducted from the assets of the fund in the calculation of net asset value, which tends to increase returns when net asset value grows over time and decrease returns when net asset value decreases over time.

(4)Performance is based on a composite of portfolios that primarily invest in leveraged loans. The benchmark used for purposes of comparison for the Bank Loans strategy is based on the S&P/LSTA Loan Index.

(5)Performance is based on a composite of portfolios that primarily invest in high-yield securities. The benchmark used for purposes of comparison for the High Yield strategy is based on the BoAML HY Master II Index.

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

(7)Performance is based on a composite of portfolios that primarily invest in higher quality leveraged loans. The benchmark used for purposes of comparison for the European Leveraged Loans strategy is based on the CS Inst West European Leveraged Loan Index.

(8)Performance is based on a composite of portfolios that primarily invest in European institutional leveraged loans. The benchmark used for purposes of comparison for the European Credit Opportunities strategy is based on the S&P European Leveraged Loans (All Loans) Index.

The following table presents information regarding our alternative credit investment funds where investors have capital commitments from inception to March 31, 2023. 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.


		Amount				Fair Value of Investments
Credit and Liquid Strategies Investment Funds	Investment Period Start Date	Commitment		Invested (1)		Realized (1)		Unrealized		Total Value		Gross IRR (2)		Net IRR (2)		Multiple of Invested Capital (3)
($ in Millions)
Dislocation Opportunities Fund	Aug 2019	$	2,967	$	2,380	$	898	$	1,907	$	2,805	11.5	%	9.0	%	1.2
Special Situations Fund II	Feb 2015	3,525		3,241		2,278		1,346		3,624		3.0	%	1.0	%	1.1
Special Situations Fund	Jan 2013	2,274		2,273		1,775		410		2,185		(0.8)	%	(2.6)	%	1.0
Mezzanine Partners	July 2010	1,023		990		1,165		142		1,307		9.1	%	5.9	%	1.3
Asset-Based Finance Partners	Oct 2020	2,059		764		41		815		856		16.4	%	11.5	%	1.1
Private Credit Opportunities Partners II	Dec 2015	2,245		1,833		784		1,260		2,044		3.6	%	1.9	%	1.1
Lending Partners III	Apr 2017	1,498		891		611		757		1,368		15.3	%	12.5	%	1.5
Lending Partners II	Jun 2014	1,336		1,179		1,192		86		1,278		3.0	%	1.5	%	1.1
Lending Partners	Dec 2011	460		420		458		11		469		3.4	%	1.8	%	1.1
Lending Partners Europe II	May 2019	837		679		95		685		780		15.0	%	11.2	%	1.1
Lending Partners Europe	Mar 2015	848		662		391		234		625		(1.7)	%	(4.1)	%	0.9
Asia Credit	Jan 2021	1,084		348		2		387		389		15.5	%	10.3	%	1.1
Other Alternative Credit Vehicles	Various	14,588		7,541		5,953		3,898		9,851		N/A		N/A		N/A

All Funds		$	34,744	$	23,201	$	15,643	$	11,938	$	27,581

(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 and organizational expenses. Gross IRRs are calculated before giving effect to the allocation of carried interest and the payment of any applicable management fees and organizational expenses.

(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.

For additional information regarding impact of market conditions on the value and performance of our investments, see "Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, which could adversely impact our net income, cash flow, financial condition and prospects." and "Risk Factors—Risks Related to the Assets We Manage—Future results of our funds, our insurance subsidiaries or our balance sheet investments may be different than, and may not achieve the levels of, any of their historical returns" in our Annual Report.

Hedge Fund Platform

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

Capital Markets

Our Capital Markets business line is comprised of our global capital markets business, which is integrated with KKR’s other asset management business lines, and serves our firm, our portfolio companies and third-party customers 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 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. The third-party customers of our capital markets business include multi-national corporations, public and private companies, financial sponsors, mutual funds, pension funds, sovereign wealth funds, and hedge funds globally. Our capital markets business provides these third-party clients with differentiated access to capital through our distribution platform.

Our capital markets business underwrites credit facilities and arranges loan syndications and participations. When we are sole or lead 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 capital structuring, 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").

Principal Activities

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

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

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

We also make opportunistic investments through our Principal Activities business line, which include co-investments alongside our Private Equity, Real Assets, and Credit and Liquid Strategies funds as well as Principal Activities investments that do not involve our Private Equity, Real Assets, or Credit and Liquid Strategies 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 March 31, 2023.

Holdings by Asset Class (1)

2759

(1)General partner funded commitments to 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.

Core Private Equity

As of March 31, 2023, core private equity investments account for over 30% of the investments on our balance sheet. Core private equity consists of investments anticipated to be held for a longer holding period and which possess a lower anticipated risk profile than our traditional private equity investments. Our core private equity investments are made in companies that, among other things, we believe are more stable, and typically with lower leverage over our holding period than those companies in which our traditional private equity investments are made. We believe our core private equity investments should generate earnings that compound over a long period of time. As of March 31, 2023, the fair value of our core private equity investments on the balance sheet was $5.7 billion, resulting in an inception to date gross IRR of 21%. Additionally, our core private equity portfolio is geographically diversified with 65%, 28%, and 7% (based on fair values) invested in North America, Europe, and the Asia-Pacific region, respectively. "Investments" as referenced above is a term used solely for purposes of financial presentation of a portion of our balance sheet and includes majority ownership of subsidiaries that operate our asset management, broker-dealer and other businesses, including the general partner interests of our investment funds.

Insurance

Our insurance business is operated by Global Atlantic, which we acquired on February 1, 2021. As of March 31, 2023, KKR owns a 63.3% economic interest in Global Atlantic with the balance of Global Atlantic owned by third-party investors and Global Atlantic employees. Following the Global Atlantic acquisition, Global Atlantic continues to operate as a separate business with its existing brands and management team. Since the first quarter of 2021, we have presented Global Atlantic's financial results as a separate reportable segment.

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

Global Atlantic primarily offers individual customers fixed-rate annuities, fixed-indexed annuities, and targeted life products through a network of banks, broker-dealers, and insurance agencies. Global Atlantic provides its institutional clients customized reinsurance solutions, including block, flow and pension risk transfer ("PRT") reinsurance, as well as funding agreements. Global Atlantic’s assets generally increase when individual markets sales and reinsurance transactions exceed run-off of in-force policies. Global Atlantic primarily generates income by earning a spread on assets under management, as the difference between its net investment income and the cost of policyholder benefits. Global Atlantic also earns fees paid by policyholders on certain types of contracts and fees paid by third-party investors, which are reported in the asset management segment. As of March 31, 2023, Global Atlantic served approximately three million policyholders.

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

The following table represents Global Atlantic’s new business volumes by business and product for the three months ended March 31, 2023 and 2022:


	Three months ended March 31,
	2023		2022
($ in millions)
Individual market channel:
Fixed-rate annuities	$	2,146	$	1,039
Fixed-indexed annuities	1,065		904
Variable annuities	4		11
Total retirement products(1)	$	3,215	$	1,954

Life insurance products	$	4	$	7

Preneed life	75		65

Institutional market channel:
Block	79		2,777
Flow & pension risk transfer	2,430		1,699
Funding agreements(3)	—		1,100
Total institutional market channel(2)	$	2,509	$	5,576

(1)New business volumes in individual markets are referred to as sales. In Global Atlantic's individual market channel, sales of annuities include all money paid into new and existing contracts. Individual market channel sales of life insurance products are based on commissionable premium and individual market channel sales for preneed life are based on the face amount of insurance. Life insurance product sales do not include the recurring premiums that policyholders may pay over time.

(2)New business volumes from Global Atlantic’s institutional market channel are based on the assets assumed, net of any ceding commission, and is gross of any retrocessions to investment vehicles that participate in qualifying reinsurance transactions sourced by Global Atlantic and to other third party reinsurers.

(3)Funding agreement new business volumes represents funding agreements issued in connection with the FABN program only.

The table below represents a breakdown of Global Atlantic’s policy liabilities by business and product type as of March 31, 2023, separated by reserves originated through its individual and institutional markets.


	Reserves as of March 31, 2023
	Individual market		Institutional market(4)		Total		Ceded		Total, net		Percentage of total
	($ in thousands, except percentages, if applicable)
Fixed-rate annuity(1)	$	23,677,643	$	26,355,768	$	50,033,411	$	(6,673,549)	$	43,359,862	34.5	%
Fixed-indexed annuity(1)	23,520,922		9,524,954		33,045,876		(3,198,904)		29,846,972		22.8	%
Payout annuities(1)	456,206		16,749,610		17,205,816		(8,374,110)		8,831,706		11.8	%
Variable annuities	2,563,513		6,352,811		8,916,324		(2,659,453)		6,256,871		6.1	%
Interest sensitive life(1)	13,782,847		10,006,220		23,789,067		(3,733,171)		20,055,896		16.4	%
Other life insurance(2)	3,488,680		264,313		3,752,993		(229,521)		3,523,472		2.6	%
Funding agreements(3)	1,951,431		5,497,431		7,448,862		—		7,448,862		5.1	%
Closed block and other corporate products	437		1,092,860		1,093,297		(1,045,179)		48,118		0.7	%

Total reserves	$	69,441,679	$	75,843,967	$	145,285,646	$	(25,913,887)	$	119,371,759	100.0	%

Total general account	$	67,159,216	$	73,961,409	$	141,120,625	$	(25,913,887)	$	115,206,738	97.1	%
Total separate account	2,282,463		1,882,558		4,165,021		—		4,165,021		2.9	%
Total reserves	$	69,441,679	$	75,843,967	$	145,285,646	$	(25,913,887)	$	119,371,759	100.0	%

(1)As of March 31, 2023, 75% of the account value in Global Atlantic's general account associated with its fixed-rate and fixed-annuity products, and 44% of account value in its general account associated with universal life products was protected by surrender charges.

(2)"Other life insurance” includes universal life, preneed, term and whole life insurance products.

(3)"Funding agreements” includes funding agreements associated with Federal Home Loan Bank borrowings and under Global Atlantic's funding-agreement backed-notes program .

(4)Institutional market reserves are sourced using customized reinsurance solutions such as block, flow and PRT. As of March 31, 2023, reserves sourced through for block, flow and PRT transactions were $48.5 billion, $14.2 billion, and $4.8 billion, respectively.

Business Environment

Economic and Market Conditions

Our asset management and insurance businesses are materially affected by the economic conditions of, and financial markets in, the United States, the European Union, China, Japan, and other countries. Global and regional economic conditions can each have substantial impact on our business, financial condition and results of operations in various ways, including the valuations of our investments, our ability to exit these investments profitably, our ability to raise capital from investors, and our ability to make new investments.

Economic Conditions

During the first quarter of 2023, many countries and regions, including the United States, showed signs of slowing economic activity similar to what was experienced in the second half of 2022. During and after March 2023, materially adverse developments affected the banking industry, including U.S. regional banks and various global banking institutions based outside of the United States, which triggered market concerns about a larger scale potential banking crisis and a possible recession in the United States and globally. There can be no assurance that there will not be additional bank failures or other issues in the broader U.S. or global financial system that could adversely affect our businesses to the extent the occurrence of these events contribute to a contraction of credit availability, tightening of financial conditions and/or a significant deterioration of consumer confidence.

As in 2022, economic activity continued to be adversely impacted by the effects of monetary and fiscal policy tightening as years of fiscal stimulus from governments and accommodative monetary policy from global central banks began to wane and central banks took measures to combat significant inflationary pressures at multi-decade highs in many major economies around the world. Although inflation began to show signs of slowing in early 2023, inflation has continued to present headwinds for many countries and regional economies in which we operate. The U.S. Federal Reserve Board has continued to raise interest rates and indicated that it is prepared to take decisive action to manage inflation, including raising interest rates further. However, even as the Federal Reserve Board continued its quantitative tightening program designed to shrink its balance sheet, its emergency lending to address banking system stress in 2023 served as an expansionary force on its balance sheet. As a result of these and other actions by central banks, the combination of high rates and more muted, but persistently high, inflation continued to put significant pressure on corporate profits and consumer balance sheets with inflation generally remaining elevated in absolute terms.

Higher interest rates in conjunction with slower growth or weaker currencies in some emerging market economies have caused, and may further cause, the default risk of these countries to increase, and this could impact the operations or value of our investments that operate in these regions. Areas that have central bank quantitative easing or tightening campaigns affecting their interest rates relative to the United States could potentially experience further currency volatility relative to the U.S. dollar. Relatedly, foreign exchange rates are often affected by countries’ monetary and fiscal responses to inflationary trends. 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.

Labor disputes, shortages of material and skilled labor, work stoppages and increasing labor costs can also adversely impact us and the assets we manage. Despite various economic headwinds, several key economic indicators in the U.S., including employment, have demonstrated resilience in the first quarter of 2023. During the first quarter of 2023, growth in economic activity and demand for goods and services contributed to significant inflationary pressures. Short-term significant supply chain complications that were persistent throughout much of 2022 began to ease in the first quarter of 2023. However, various supply bottlenecks, such as those involving Russia-Ukraine supply chains and U.S. domestic and global semiconductor industry output shortages as a result of restrictions on trade with Chinese semiconductor companies, remain a long-term concern that could present inflation risk. These and related concerns, such as rising interest rates and geopolitical uncertainty in countries such as China, Russia, Belarus and the Ukraine, and pressures on labor supply, contributed to market volatility, equity and credit market declines.

In the Eurozone, disruptions to European energy markets and the ongoing Russia-Ukraine conflict continue to adversely affect the Eurozone economy. The ongoing Russia-Ukraine conflict, including the sanctions imposed in response to Russia's invasion of Ukraine and protectionist policies that persisted throughout 2022, have exacerbated and may further exacerbate these issues and trends globally, including by continuing to increase oil and gas prices and price volatility.

Economic conditions continued to vary, and often diverge, by country in Asia. In Japan, concerns of labor shortages, rising inflation, tightening monetary policy, higher energy costs, significant volatility in currency markets and a return of international tourism were points of focus in the first quarter of 2023. In China, inflation growth was more muted, export growth was strong and international travel was more limited.

Several relevant key economic indicators in the U.S. and in other countries and areas in which our business operates include:

Inflation.** The U.S. core consumer price index rose 5.6% on a year-over-year basis as of March 31, 2023, down from 5.7% on a year-over-year basis as of December 31, 2022. Euro Area core inflation was 5.7% as of March 31, 2023, up from 5.2% as of December 31, 2022. Core inflation in China was 0.7% on a year-over-year basis as of March 31, 2023, unchanged from December 31, 2022. In Japan, core inflation rose to 2.3% on a year-over-year basis as of March 31, 2023, up from 1.6% on a year-over-year basis as of December 31, 2022.
Interest Rates.** The effective federal funds rate set by the Federal Reserve Board was 4.83% as of March 31, 2023, up from 4.33% as of December 31, 2022. The Federal Reserve raised interest rates by 25 basis points in February, and 25 basis points in March, leading to increased market volatility. The short-term benchmark interest rate set by the European Central Bank was 3.5% as of March 31, 2023, up from 2.5% as of December 31, 2022. The short-term benchmark interest rate set by The People's Bank of China (PBOC) was 4.35% as of March 31, 2023, unchanged from December 31, 2022. The short-term benchmark interest rate set by the Bank of Japan was -0.1% as of March 31, 2023, unchanged from December 31, 2022.
GDP.** In the United States, real GDP is estimated to have expanded by 1.3% for the quarter ended March 31, 2023, compared to an expansion of 2.6% for the quarter ended December 31, 2022. Euro Area real GDP is estimated to have decreased by 0.2% for the quarter ended March 31, 2023, up from 0.0% for the quarter ended December 31, 2022. Real GDP in China is estimated to have increased by 2.2% for the quarter ended March 31, 2023, compared to growth of 0.6% reported for the quarter ended December 31, 2022. In Japan, real GDP is estimated to have increased by 1.3% for the quarter ended March 31, 2023, up from 0.0% for the quarter ended December 31, 2022.
Unemployment.** The U.S. unemployment rate was 3.5% as of March 31, 2023, unchanged from December 31, 2022. Euro Area unemployment was 6.6% as of March 31, 2023, down from 6.7% as of December 31, 2022. The unemployment rate in China was 5.5% as of March 31, 2023, unchanged from December 31, 2022. In addition, the unemployment rate in Japan was 2.6% as of March 31, 2023, up from 2.5% as of December 31, 2022.

Market Conditions

Equity, credit, commodity and foreign exchange markets in the United States and in other countries and areas in which we have made investments each may have a material effect on our financial condition and results of operations.

In our asset management segment, many of our investments are in equities, so a change in global equity prices or in market volatility directly impacts the value of our investments and our profitability as well as our ability to realize investment gains and the receptiveness of fund investors to our investment products. Volatility across global equity and credit markets, alongside shifting liquidity conditions in new issue activity across equity and non-investment grade credit markets, have adversely impacted (and may continue to adversely impact) our financial results and the volume of capital markets activity, the level of transaction fees that our Capital Markets business line is able to earn, the valuation of our portfolio companies, sale activity and investment proceeds we realize, and our ability or our decision to deploy our and our funds' capital. For our investments that are publicly listed and thus have readily observable market prices, global equity market price declines had (and may continue to have) a direct adverse impact on our investment valuations and the timing of our realization opportunities. For many other of our investments, these markets had an indirect materially adverse impact on many of our investment valuations as we typically utilize market multiples as a critical input to ascertain fair value of our investments that do not have readily observable market prices.

In addition, many of our investments are in both non-investment grade and investment grade credit instruments. Many of our funds invest or have the flexibility to invest a significant portion of their assets in the equity, debt, loans or other securities of issuers that are based outside of the United States. A substantial amount of these investments consist of private equity investments made by our private equity funds. For example, as of March 31, 2023, approximately 50% of the capital invested in those funds was attributable to non-U.S. investments. 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. 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. Tightening liquidity conditions in equity and credit capital markets affect the availability and cost of capital for us and our portfolio companies, and the increased cost of credit or degradation in debt financing terms may adversely impact our ability to identify, execute and exit investments on attractive terms. In addition, during periods of high interest rates, investors may favor certain investments like government debt, which they may view as producing a higher risk-adjusted return over investments in our funds, particularly if the spread between these other investments and investments in our funds declines, which may adversely affect our ability to raise capital for new funds.

In our insurance segment, periods of rising or higher interest rates as we are currently experiencing may result in differing impacts on Global Atlantic’s business. Periods of rising or higher interest rates can benefit Global Atlantic’s results of operations and financial condition because we generally expect the yield on new investment purchases and income from any floating rate investments held in Global Atlantic’s investment portfolio to increase as interest rates rise. Higher interest rates also generally tend to increase the demand for certain of Global Atlantic’s products because the benefits and solutions Global Atlantic can offer to clients may become more attractive, potentially resulting in higher new business volumes. Rising rates are also expected to result in decreases to certain policy liabilities as a result of new accounting guidance which Global Atlantic adopted effective January 1, 2023 (with a transition date of January 1, 2021) for insurance companies that issue or reinsure long-duration contracts such as life insurance and annuities. For a further discussion of this guidance, see Note 2 "Summary of Significant Accounting Policies—Future application of accounting standards" in our financial statements.

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

In addition, commodity prices are generally expected to rise in inflationary environments. Our Real Assets business line portfolio contains energy real asset investments, and certain of our other Private Equity, Real Assets and Credit and Liquid Strategies business line strategies have investments in or related to the energy sector. The value of these investments is heavily influenced by the price of natural gas and oil. Changes in foreign exchange rates, unless hedged, can materially impact various aspects of our business and financial results, including, but not limited to, the valuations of our non-U.S. investments, the success of fundraising from non-U.S. investors, and the attractiveness of investment opportunities in countries outside of the United States.

Several relevant key market indicators in the U.S. and in other countries and areas which constitute our business environment include:

Equity Markets.** For the quarter ended March 31, 2023, global equity markets were positive, with the S&P 500 up 7.5% and the MSCI World Index up 7.9% 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 18.7 as of March 31, 2023, decreasing from 21.7 as of December 31, 2022.
Credit Markets. During the quarter ended March 31, 2023, U.S. investment grade corporate bond spreads (BofA Merrill Lynch US Corporate Index) widened by 7 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) narrowed by 23 basis points. The non-investment grade credit indices were up during the quarter ended March 31, 2023, with the S&P/LSTA Leveraged Loan Index up 3.2% and the BAML US High Yield Index up 3.7%. During the quarter ended March 31, 2023, 10-year government bond yields fell 41 basis points in the United States, fell 18 basis points in the UK, fell 28 basis points in Germany, rose 2 basis points in China, and fell 7 basis points in Japan.
Commodity Markets. During the quarter ended March 31, 2023, the 3-year forward price of WTI crude oil decreased approximately 5.1%, and the 3-year forward price of natural gas decreased from approximately $4.99 per MMBtu as of December 31, 2022 to $4.42 per MMBtu as of March 31, 2023. The Japan spot LNG import price decreased to approximately $18.59 per MMBtu as of March 31, 2023 from approximately $28.46 per MMBtu as of December 31, 2022.
Foreign Exchange Rates. For the quarter ended March 31, 2023, the euro rose 1.3%, the British pound rose 2.1%, the Japanese yen fell 1.3%, and the Chinese renminbi rose 0.4%, respectively, relative to the U.S. dollar.

Other Trends, Uncertainties and Risks Related to Our Business

Please refer to the "Risk Factors" section of our Annual Report for important additional detail regarding the known trends or uncertainties and competitive conditions that have had or that are reasonably likely to have a material favorable or unfavorable impact on our businesses, including the impact of economic and market conditions on valuations of investments. These known trends, uncertainties and competitive conditions should be read in conjunction with this Business Environment section and the entire Risk Factor section.

Basis of Accounting and Key Financial Measures under GAAP

We manage our business using certain financial measures and key operating metrics since we believe these metrics measure the productivity of our operating activities. We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 2 “ Summary of Significant Accounting Policies” in our financial statements and “Critical Accounting Policies and Estimates” contained in this section below. Our key Segment and non-GAAP financial measures and operating metrics are discussed below.

Adoption of New Accounting Standard

Effective January 1, 2023, we adopted new accounting guidance for insurance and reinsurance companies that issue long-duration contracts (“LDTI”) as of February 1, 2021, the date of the GA Acquisition, on a full retrospective basis. For a more detailed discussion of the adoption of the LDTI, see Note 2 "Summary of Significant Accounting Policies" in our financial statements included in this report.

Key Segment and Non-GAAP Performance Measures

The following key segment and non-GAAP performance measures are used by management in making operational and resource deployment decisions as well as assessing the performance of KKR's business. They include certain financial measures that are calculated and presented using methodologies other than in accordance with GAAP. These performance measures as described below are presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and holders of exchangeable securities and as such represent the entire KKR business in total. In addition, these performance measures are presented without giving effect to the consolidation of certain investment funds and collateralized financing entities ("CFEs") that KKR manages.

We believe that providing these segment and non-GAAP performance measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's business. These non-GAAP measures should not be considered as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable are included under "—Analysis of Non-GAAP Performance Measures—Reconciliations to GAAP Measures."

Modification of Segment Information and Non-GAAP Measures

In connection with the adoption of LDTI (see Note 2 in our financial statements), KKR reevaluated the manner in which it makes operational and resource deployment decisions and assesses the overall performance of KKR's business. Effective with the three months ended March 31, 2023, the items detailed below have changed with respect to the preparation of the reports used by KKR's chief operating decision makers. As a result, KKR has modified the presentation of its segment financial information effective as of and for the three months ended March 31, 2023 with retrospective application to all prior periods presented. The most significant changes are as follows:

**(1)**implementation of the accounting changes as a result of LDTI within KKR’s Insurance Segment. KKR excludes (i) changes in the fair value of market risk benefits and other policy liabilities and the associated derivatives, (ii) fees attributed to guaranteed benefits, and (iii) losses at contract issuance on payout annuities from the Insurance Segment Operating Earnings. These items are excluded from Insurance Segment Operating Earnings and we believe these items do not reflect the underlying performance of this business;

(2)Global Atlantic book value includes the impact of LDTI except for the impacts recorded in other comprehensive income, which are excluded from book value; and

(3)reporting on a pre-tax basis Insurance Segment Operating Earnings (which was previously reported on an after-tax basis).

We believe these adjustments and changes reflect how management evaluates the Insurance business. We believe this approach enhances the transparency and visibility of the drivers of Global Atlantic’s underlying operating performance.

Fee Related Earnings, Asset Management Segment Operating Earnings, and Total Asset Management Segment Revenues are not impacted by LDTI or the adjustments and changes noted above.

As discussed in Note 2 "Summary of Significant Accounting Policies" in our financial statements, our historical consolidated GAAP financial results have been recast to reflect the adoption of LDTI on a full retrospective basis. Certain of our historical Non-GAAP measures have been recast to reflect the adoption of LDTI along with the adjustments and changes noted above.

After-tax Distributable Earnings

After-tax distributable earnings is a non-GAAP performance measure of KKR’s earnings, which is derived from KKR’s reported segment results. After-tax distributable earnings is used to assess the performance of KKR’s business operations and measures the earnings potentially available for distribution to its equity holders or reinvestment into its business. After-tax distributable earnings is equal to Distributable Operating Earnings less Interest Expense, Net Income Attributable to Noncontrolling Interests and Income Taxes on Operating Earnings. 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 of KKR & Co. Inc. Income Taxes on Operating Earnings represents the (i) amount of income taxes that would be paid assuming that all pre-tax Asset Management distributable earnings were allocated to KKR & Co. Inc. and taxed at the same effective rate, which assumes that all securities exchangeable into shares of common stock of KKR & Co. Inc. were exchanged and (ii) the amount of income taxes on Insurance Segment Operating Earnings. Income taxes on Insurance Segment Operating Earnings represent the total current and deferred tax expense or benefit on income before taxes adjusted to eliminate the impact of the tax expense or benefit associated with the non-operating adjustments. Income Taxes on Operating Earnings includes the benefit of tax deductions arising from equity-based compensation, which reduces operating income taxes 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 on Operating Earnings, KKR’s After-tax Distributable Earnings would be lower and KKR’s effective tax rate would appear to be higher, even though a lower amount of income taxes would have actually been paid or payable during the period. 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) excludes the net assets that are allocated to investors in KKR’s investment funds and other noncontrolling interest holders, (ii) includes the net assets that are attributable to certain securities exchangeable into shares of common stock of KKR & Co. Inc., and (iii) includes KKR’s ownership of the net assets of Global Atlantic. We believe this measure is useful to stockholders as it provides additional insight into the net assets of KKR excluding those net assets that are allocated to investors in KKR’s investment funds and other noncontrolling interest holders. KKR's book value includes the net impact of KKR's tax assets and liabilities as calculated under GAAP. Series C Mandatory Convertible Preferred Stock has been included in book value, because the definition of adjusted shares used to calculate book value per adjusted share assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of common stock of KKR & Co. Inc. To calculate Global Atlantic book value and to make it more comparable with the corresponding metric presented by other publicly traded companies in Global Atlantic’s industry, Global Atlantic book value excludes (i) accumulated other comprehensive income and (ii) accumulated change in fair value of reinsurance balances and related assets, net of income tax.

Distributable Operating Earnings

Distributable operating earnings is a non-GAAP performance measure that KKR believes is useful to stockholders as it provides a supplemental measure of our operating performance without taking into account items that KKR does not believe arise from or relate directly to KKR's operations. Distributable Operating Earnings excludes: (i) equity-based compensation charges, (ii) amortization of acquired intangibles, (iii) strategic corporate related charges and (iv) non-recurring items, if any. Strategic corporate related charges arise from corporate actions and consist primarily of (i) impairments, (ii) transaction costs from strategic acquisitions, and (iii) 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.

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 the impact of: (i) unrealized gains (losses) on investments, (ii) unrealized carried interest, and (iii) related unrealized carried interest compensation (i.e. the carry pool). Management fees earned by KKR as the adviser, manager or sponsor for its investment funds, vehicles and accounts, including its Global Atlantic insurance companies, 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. This measure is presented before income taxes and is comprised of: (i) Net Investment Income, (ii) Net Cost of Insurance, (iii) General, Administrative, and Other Expenses, and (iv) Net Income Attributable to Noncontrolling Interests. The non-operating adjustments made to derive Insurance Segment Operating Earnings excludes the impact of: (i) investment gains (losses) which include realized gains (losses) related to asset/liability matching investments strategies and unrealized investment gains (losses) and (ii) non-operating changes in policy liabilities and derivatives which includes (a) changes in the fair value of market risk benefits and other policy liabilities measured at fair value and related benefit payments, (b) fees attributed to guaranteed benefits, (c) derivatives used to manage the risks associated with policy liabilities, and (d) losses at contract issuance on payout annuities. Insurance Segment Operating Earnings includes (i) realized gains and losses not related to asset/liability matching investments strategies and (ii) the investment management costs that are earned by KKR as the investment adviser of the Global Atlantic insurance companies.

Fee Related Earnings

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

Fee Related Performance Revenues refers to the realized portion of Incentive Fees from certain AUM that has an indefinite term and for which there is no immediate requirement to return invested capital to investors upon the realization of investments. Fee related performance revenues consists of performance fees (i) to be received from our investment funds, vehicles and accounts on a recurring basis, and (ii) that are not dependent on a realization event involving investments held by the investment fund, vehicle or account.
Fee Related Compensation refers to the compensation expense, excluding equity-based compensation, paid from (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, and (iii) Fee Related Performance Revenues.
Other Operating Expenses represents the sum of (i) occupancy and related charges and (ii) other operating expenses.

Total Asset Management Segment Revenues

Total Asset Management Segment Revenues is a performance measure that represents the realized revenues of the Asset Management segment (which excludes unrealized carried interest and unrealized net gains (losses) on investments) and is the sum of (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, (iii) Fee Related Performance Revenues, (iv) Realized Performance Income, and (v) Realized Investment Income. KKR believes that this performance measure is useful to stockholders as it provides additional insight into the realized revenues generated by KKR's asset management segment.

Other Terms and Capital Metrics

Adjusted Shares

Adjusted shares represents shares of common stock of KKR & Co. Inc. outstanding under GAAP adjusted to include (i) the number of shares of common stock of KKR & Co. Inc. assumed to be issuable upon conversion of the Series C Mandatory Convertible Preferred Stock and (ii) certain securities exchangeable into shares of common stock of KKR & Co. Inc. 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

Assets under management represent the assets managed, advised or sponsored by KKR from which KKR is entitled to receive management fees or performance income (currently or upon a future event), general partner capital, and assets managed, advised or sponsored by our strategic BDC partnership and the hedge fund and other managers in which KKR holds an ownership interest. We believe this measure is useful to stockholders as it provides additional insight into the capital raising activities of KKR and its hedge fund and other managers and the overall activity in their investment funds and other managed or sponsored capital. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds and certain co-investment vehicles; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or performance income; (iii) the asset value of the Global Atlantic insurance companies; (iv) the par value of outstanding CLOs; (v) KKR's pro rata portion of the AUM of hedge fund and other managers in which KKR holds an ownership interest; (vi) all of the AUM of KKR's strategic BDC partnership; (vii) the acquisition cost of invested assets of certain non-US real estate investment trusts and (viii) the value of other assets managed or sponsored by KKR. The pro rata portion of the AUM of hedge fund and other managers is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’s respective AUM. KKR's definition of AUM (i) is not based on any definition of AUM that may be set forth in the governing documents of the investment funds, vehicles, accounts or other entities whose capital is included in this definition, (ii) includes assets for which KKR does not act as an investment adviser, and (iii) is not calculated pursuant to any regulatory definitions.

Capital Invested

Capital invested is the aggregate amount of capital invested by (i) KKR’s investment funds and Global Atlantic insurance companies, (ii) KKR's Principal Activities business line as a co-investment, if any, alongside KKR’s investment funds, and (iii) KKR's Principal Activities business line in connection with a syndication transaction conducted by KKR's Capital Markets business line, if any. Capital invested is used as a measure of investment activity at KKR during a given period. We believe this measure is useful to stockholders as it provides a measure of capital deployment across KKR’s business lines. Capital invested includes investments made using investment financing arrangements like credit facilities, as applicable. Capital invested excludes (i) investments in certain leveraged credit strategies, (ii) capital invested by KKR’s Principal Activities business line that is not a co-investment alongside KKR’s investment funds, and (iii) capital invested by KKR’s Principal Activities business line that is not invested in connection with a syndication transaction by KKR’s Capital Markets business line. Capital syndicated by KKR's Capital Markets business line to third parties other than KKR’s investment funds or Principal Activities business line is not included in capital invested.

Fee Paying AUM

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 and the amount of uncalled commitments is not reduced by capital invested using borrowings under an investment fund’s subscription facility until capital is called from our fund investors. 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.

Condensed Consolidated Results of Operations (GAAP Basis - Unaudited)

The following is a discussion of our consolidated results of operations on a GAAP basis for the three months ended March 31, 2023 and 2022. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors that affected our segment results in these periods, see "—Analysis of Segment Operating Results." See "Business Environment" for more information about factors that may impact our business, financial performance, operating results and valuations.

Effective January 1, 2023, we adopted new accounting guidance for insurance and reinsurance companies that issue long-duration contracts (“LDTI”) as of February 1, 2021, the date of the GA Acquisition, on a full retrospective basis. For a more detailed discussion of the adoption of LDTI, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Revenues
Asset Management
Fees and Other	$	677,016	$	780,511	$	(103,495)
Capital Allocation-Based Income (Loss)	449,018		(945,743)		1,394,761
	1,126,034		(165,232)		1,291,266
Insurance
Net Premiums	473,624		372,144		101,480
Policy Fees	313,802		313,782		20
Net Investment Income	1,300,697		812,605		488,092
Net Investment-Related Gains (Losses)	(123,833)		(368,680)		244,847
Other Income	37,158		34,744		2,414
	2,001,448		1,164,595		836,853
Total Revenues	3,127,482		999,363		2,128,119

Expenses
Asset Management
Compensation and Benefits	575,670		283,672		291,998
Occupancy and Related Charges	22,149		18,149		4,000
General, Administrative and Other	213,689		234,665		(20,976)
	811,508		536,486		275,022
Insurance
Net Policy Benefits and Claims (including market risk benefit loss (gain) of $146,309 and $(195,683), respectively)	1,527,054		513,178		1,013,876
Amortization of Policy Acquisition Costs	44,211		11,422		32,789
Interest Expense	40,261		13,219		27,042
Insurance Expenses	225,318		115,803		109,515
General, Administrative and Other	211,731		167,624		44,107
	2,048,575		821,246		1,227,329
Total Expenses	2,860,083		1,357,732		1,502,351

Investment Income (Loss) - Asset Management
Net Gains (Losses) from Investment Activities	(159,409)		914,261		(1,073,670)
Dividend Income	148,167		662,350		(514,183)
Interest Income	728,616		352,556		376,060
Interest Expense	(576,338)		(281,759)		(294,579)
Total Investment Income (Loss)	141,036		1,647,408		(1,506,372)

Income (Loss) Before Taxes	408,435		1,289,039		(880,604)

Income Tax Expense (Benefit)	148,747		36,651		112,096


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)

Net Income (Loss)	259,688		1,252,388		(992,700)
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests	(7,303)		(63)		(7,240)
Net Income (Loss) Attributable to Noncontrolling Interests	(73,003)		1,244,987		(1,317,990)
Net Income (Loss) Attributable to KKR & Co. Inc.	339,994		7,464		332,530



Series C Mandatory Convertible Preferred Stock Dividends	17,250		17,250		—

Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders	$	322,744	$	(9,786)	$	332,530

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

Revenues

For the three months ended March 31, 2023 and 2022, revenues consisted of the following:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Management Fees	$	453,093	$	398,046	$	55,047
Fee Credits	(57,531)		(187,745)		130,214
Transaction Fees	209,839		466,966		(257,127)
Monitoring Fees	29,853		39,400		(9,547)
Incentive Fees	6,413		7,057		(644)
Expense Reimbursements	15,544		41,303		(25,759)

Consulting Fees	19,805		15,484		4,321
Total Fees and Other	677,016		780,511		(103,495)

Carried Interest	343,070		(783,688)		1,126,758
General Partner Capital Interest	105,948		(162,055)		268,003
Total Capital Allocation-Based Income (Loss)	449,018		(945,743)		1,394,761

Total Revenues - Asset Management	$	1,126,034	$	(165,232)	$	1,291,266

Fees and Other

Total Fees and Other for the three months ended March 31, 2023 decreased compared to the three months ended March 31, 2022 primarily as a result of the decrease in transaction fees, partially offset by the increase in management fees.

For a more detailed discussion of the factors that affected our transaction fees during the period, see "—Analysis of Asset Management Segment Operating Earnings."

The increase in management fees was primarily attributable to (i) management fees earned on new capital raised over the past twelve months at European Fund VI, Next Generation Technology Growth Fund III and Asia Pacific Infrastructure Investors II, and (ii) management fees earned on assets managed by KJRM, which is a Japanese REIT manager that we acquired in 2022. The increase was partially offset by catch-up management fees earned on new capital raised for Global Infrastructure Investors IV and North America Fund XIII in the first quarter of 2022 that was retroactive to the start of the

fund's investment period. There were no catch-up management fees earned in the first quarter of 2023 for Global Infrastructure Investors IV and North America Fund XIII.

Management fees due from consolidated investment funds and other vehicles are eliminated upon consolidation under GAAP. However, because these amounts are funded by, and earned from, noncontrolling interests, upon consolidation under GAAP, KKR's allocated share of the net income from the consolidated investment funds and other vehicles is increased by the amount of fees that are eliminated. Accordingly, net income (loss) attributable to KKR would be unchanged if such investment funds and other vehicles were not consolidated. For a more detailed discussion on the factors that affect our management fees during the period, see "—Analysis of Asset Management Segment Operating Earnings."

Fee credits decreased compared to the prior period as a result of a lower level of transaction fees in our Private Equity, Real Assets and Credit and Liquid Strategies business lines in the current period. Fee credits owed to consolidated investment funds are eliminated upon consolidation under GAAP. However, because these amounts are owed to noncontrolling interests, upon consolidation under GAAP, KKR's allocated share of the net income from the consolidated investment funds is decreased by the amount of fee credits that are eliminated. Accordingly, net income (loss) attributable to KKR would be unchanged if such investment funds and other vehicles were not consolidated. Transaction and monitoring fees earned from KKR portfolio companies are not eliminated upon consolidation because those fees are earned from companies which are not consolidated. Furthermore, transaction fees earned in our capital markets business are not shared with fund investors. Accordingly, certain transaction fees are reflected in our revenues without a corresponding fee credit.

Capital Allocation-Based Income (Loss)

Capital Allocation-Based Income (Loss) for the three months ended March 31, 2023 was positive primarily due to the net appreciation of the underlying investments at many of our unconsolidated carry earning investment funds, most notably Americas Fund XII, Global Infrastructure Investors III, and Asian Pacific Infrastructure Investors. Capital Allocation-Based Income (Loss) for the three months ended March 31, 2022 was negative primarily due to the net depreciation of the underlying investments at certain of our carry earning investment funds, most notably Americas Fund XII and Asian Fund II.

KKR calculates the carried interest that would be due to KKR for each investment fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of the reporting date, irrespective of whether such amounts have been realized. Since the fair value of the underlying investments varies between reporting periods, it is necessary to make adjustments to the amounts recorded as carried interest to reflect either (a) positive performance, resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would cause the amount due to KKR to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated to the general partner. In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and to make the required positive or negative adjustments.

Investment Income (Loss) - Asset Management

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

Net Gains (Losses) from Investment Activities for the three months ended March 31, 2023

The net losses from investment activities for the three months ended March 31, 2023 were comprised of net realized gains of $99.4 million and net unrealized losses of $(258.8) million.

Investment gains and losses relating to our general partner capital interest in our unconsolidated funds are not reflected in our discussion and analysis of Net Gains (Losses) from Investment Activities. Our economics associated with these gains and losses are reflected in Capital Allocation-Based Income (Loss) as described above.

Realized Gains and Losses from Investment Activities

For the three months ended March 31, 2023, net realized gains related primarily to the sale of our investment in KnowBe4, Inc. (NASDAQ: KNBE), Flutter Entertainment PLC (LON: FLTR), and US Foods Holding Corp. (NYSE: USFD). Partially offsetting these realized gains were realized losses primarily relating to a realized loss on our alternative credit investment, Chembulk Group (transportation sector) as well as realized losses on certain foreign exchange forward contracts and losses from the sales of revolving credit facilities.

Unrealized Gains and Losses from Investment Activities

For the three months ended March 31, 2023, net unrealized losses were driven by mark-to-market losses primarily relating to (i) certain investments held by our consolidated real estate and energy funds, (ii) GenesisCare Pty Ltd. (health care sector) and Heartland Dental, LLC (health care sector), each of which are held in our consolidated core private equity funds, and (iii) debt obligations of our consolidated CLOs. These unrealized losses were partially offset by mark-to-market gains primarily relating to (i) BridgeBio Pharma, Inc. (NASDAQ: BBIO), (ii) Viridor Limited (Infrastructure: energy and energy transition sector) and FiberCop S.p.A (Infrastructure: telecommunications infrastructure sector) held in our consolidated core private equity funds and (iii) certain investments held in our consolidated CLOs.

Net Gains (Losses) from Investment Activities for the three months ended March 31, 2022

The net gains from investment activities for the three months ended March 31, 2022 were comprised of net realized gains of $279.6 million and net unrealized gains of $634.6 million.

Realized Gains and Losses from Investment Activities

For the three months ended March 31, 2022, net realized gains related primarily to the sales of our investments in Fiserv Inc. (NASDAQ: FISV) and Söderberg & Partners (financial services sector). Partially offsetting these realized gains were realized losses primarily relating to a real estate equity investment in one of our consolidated US real estate funds and certain investments held in our consolidated SIG funds.

Unrealized Gains and Losses from Investment Activities

For the three months ended March 31, 2022, net unrealized gains were driven primarily by mark-to-market gains from (i) Crescent Energy Company (NYSE: CRGY), (ii) Viridor Limited, and (iii) investments held in our consolidated real estate equity funds. These unrealized gains were partially offset by mark-to-market losses related to (i) certain investments held in our consolidated CLOs and SIG funds, (ii) OutSystems Holdings S.A (technology sector) and (iii) BridgeBio Pharma, Inc.

For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Asset Management Segment Operating Results". For additional information about net gains (losses) from investment activities, see Note 5 "Net Gains (Losses) from Investment Activities - Asset Management" in our financial statements.

Dividend Income

During the three months ended March 31, 2023, the most significant dividends received included (i) $29.6 million from certain investments held in our consolidated open-ended core infrastructure fund, Diversified Core Infrastructure Fund, (ii) $29.3 million from certain investments held in our consolidated real estate equity and credit funds and (iii) $17.4 million from certain investments held in our consolidated SIG funds. During the three months ended March 31, 2022, the most significant dividends received included $299.0 million from certain investments held in our consolidated core plus and opportunistic real estate equity funds and $86.6 million from our investment in Exact Group B.V. (technology sector) held in our consolidated core private equity funds.

Significant dividends from portfolio companies and consolidated funds are generally not recurring quarterly dividends, and while they may occur in the future, their size and frequency are variable. For a discussion of other factors that affected KKR's dividend income, see "—Analysis of Asset Management Segment Operating Results."

Interest Income

The increase in interest income during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to (i) the impact of closing CLOs that were consolidated subsequent to March 31, 2022, (ii) higher interest rates on floating rate investments held in consolidated CLOs, leveraged credit and alternative credit funds, and (ii) a higher level of interest income from certain of our consolidated leveraged credit and private credit funds, 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 March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to (i) the increase in the amount of borrowings outstanding from certain consolidated funds and other vehicles, (ii) impact of closing CLOs that were consolidated subsequent to March 31, 2022, (iii) higher interest rates on floating rate debt obligations held in consolidated CLOs, and (iv) the impact of issuances of our senior notes after March 31, 2022. 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 March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to accrued carried interest compensation in the current period compared to the reversal of previously recognized carried interest compensation in the prior period. Partially offsetting the increase is a lower level of accrued discretionary cash compensation resulting from a lower level of asset management segment revenues in the current period.

General, Administrative and Other

The decrease in general, administrative and other expenses during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to a lower level of (i) expenses reimbursable by our investment funds and (ii) a lower level of placement fees incurred related to capital raising activities, partially offset by a higher level of professional fees, information technology, travel and other administrative costs in connection with the overall growth of the firm.

In reporting periods where there are lower levels of fundraising and, to the extent that we use third parties to assist in our capital raising efforts, our General, Administrative and Other expenses are expected to decrease accordingly. Similarly, our General, Administrative and Other expenses are expected to decrease during any periods where there are lower levels of professional and other fees incurred as part of due diligence related to strategic acquisitions and new product development.

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

Revenues

For the three months ended March 31, 2023 and 2022, revenues consisted of the following:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Net Premiums	$	473,624	$	372,144	$	101,480
Policy Fees	313,802		313,782		20
Net Investment Income	1,300,697		812,605		488,092
Net Investment-Related Losses	(123,833)		(368,680)		244,847
Other Income	37,158		34,744		2,414
Total Insurance Revenues	$	2,001,448	$	1,164,595	$	836,853

Net Premiums

Net premiums increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to higher initial premiums related to a larger number of reinsurance transactions with life contingencies assumed during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was partially offset by higher retrocessions to third party reinsurers during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The initial premiums on assumed reinsurance were offset by a comparable increase in policy reserves reported within net policy benefits and claims (as discussed below).

Net investment income

Net investment-related losses

The components of net investment-related losses were as follows:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Funds withheld payable at interest embedded derivatives	$	(430,235)	$	1,180,435	$	(1,610,670)
Equity futures contracts	(40,825)		79,796		(120,621)
Foreign currency forwards	794		8,557		(7,763)
Credit risk contracts	(75)		(1,532)		1,457
Equity index options	83,887		(223,366)		307,253
Interest rate contracts	68,996		(150,176)		219,172
Funds withheld receivable embedded derivatives	(30,767)		(33,980)		3,213

Net gains on derivative instruments	(348,225)		859,734		(1,207,959)
Net other investment gains (losses)	224,392		(1,228,414)		1,452,806
Net investment-related losses	$	(123,833)	$	(368,680)	$	244,847

Net gains on derivative instruments

The decrease in the fair value of embedded derivatives on funds withheld at interest payable for the three months ended March 31, 2023 was primarily driven by the change in fair value of the underlying investments in the funds withheld at interest payable portfolio, which is primarily comprised of fixed maturity securities (designated as trading for accounting purposes), mortgage and other loan receivables, and other investments. The underlying investments in the funds withheld at interest payable portfolio increased in value in the three months ended March 31, 2023, primarily due to a decrease in market interest rates as compared to a decrease in value in the three months ended March 31, 2022, due to an increase in market interest rates.

The increase in the fair value of equity index options was primarily driven by the performance of the indexes upon which call options are based. Global Atlantic purchases equity index options to hedge the market risk of embedded derivatives in indexed universal life and fixed-indexed annuity products (the change in which is accounted for in net policy benefits and claims). The majority of Global Atlantic's equity index call options are based on the S&P 500 Index, which increased during the three months ended March 31, 2023, as compared to a decrease during the three months ended March 31, 2022.

The decrease in the fair value of equity futures contracts was driven primarily by the performance of equity markets. Global Atlantic purchases equity futures primarily to hedge the market risk in Global Atlantic's variable annuity products which are accounted for in net policy benefits and claims. The majority of Global Atlantic's equity futures are based on the S&P 500 Index, which increased during the three months ended March 31, 2023, as compared to a decrease during the three months ended March 31, 2022, resulting in respectively, a loss, and a gain, on equity futures contracts in the respective periods.

The increase in the fair value of interest rate contracts was driven by a decrease in market interest rates during the three months ended March 31, 2023 and an increase in market interest rates during the three months ended March 31, 2022, resulting in respectively, a gain and a loss, on interest rate contracts.

The increase in the fair value of embedded derivatives on funds withheld at interest receivable was primarily due to widening of credit spreads during both the three months ended March 31, 2023, and the three months ended March 31, 2022.

Net other investment losses

The components of net other investment losses were as follows:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Realized gains (losses) on investments not supporting asset-liability matching strategies	$	—	$	14,964	$	(14,964)

Realized gains (losses) on available-for-sale fixed maturity debt securities	3,432		(243,350)		246,782
Credit loss allowances	(148,429)		(29,897)		(118,532)
Impairment of available-for-sale fixed maturity debt securities due to intent to sell	(26,741)		—		(26,741)
Unrealized gains (losses) on fixed maturity securities classified as trading	376,290		(1,038,446)		1,414,736
Unrealized gains (losses) on investments accounted under a fair-value option	(55,773)		(2,493)		(53,280)
Unrealized gains (losses) on real estate investments recognized at fair value under investment company accounting	63,192		77,692		(14,500)
Realized gains (losses) on funds withheld at interest payable portfolio	3,980		(26,387)		30,367
Realized gains (losses) on funds withheld at interest receivable portfolio	17,733		25,600		(7,867)
Other	(9,292)		(6,097)		(3,195)
Net other investment gains (losses)	$	224,392	$	(1,228,414)	$	1,452,806

The increase in net other investment gains for the three months ended March 31, 2023 as compared to net other investment losses for the three months ended March 31, 2022, were primarily due to (i) a decrease in unrealized losses on fixed maturity securities classified as trading which was primarily due to a decrease in interest rates during the three months ended March 31, 2023 as compared to an increase in interest rates during the three months ended March 31, 2022, (ii) a decrease in realized losses on available-for-sale fixed maturity debt securities which was primarily due to a decrease in portfolio rotation activity, and (iii) realized gains on funds withheld at interest payable portfolio.

Offsetting these gains were (i) an increase in credit loss allowances on fixed maturity securities and mortgage and other loan receivables in the three months ended March 31, 2023, which was primarily due to an increase in the overall credit risk of Global Atlantic's loan portfolio, (ii) impairments of available-for-sale securities in an unrealized loss position due to an intent to sell, and (iii) unrealized losses on investments accounted under a fair-value option during the three months ended March 31, 2023.

Expenses

Net policy benefits and claims

Net policy benefits and claims increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) a loss on market risk benefits due to an decrease in interest rates in the three months ended March 31, 2023, as compared to a gain on market risk benefits during the three months ended March 31, 2022 due to an increase in rates in the three months ended March, 31, 2022, (ii) an increase in net flows from both individual and institutional market channel sales, (iii) higher funding costs on new business, and (iv) higher initial reserves assumed related to an increase in new reinsurance transactions with life contingencies in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, and (v) an increase in the value of embedded derivatives in Global Atlantic's indexed universal life and fixed indexed annuity products, as a result of higher equity market returns (as discussed above under "Revenues–Net investment-related losses–Net gains on derivatives 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 net policy benefits and claims).

Offsetting these increases was an decrease in variable annuity market risk benefit liabilities primarily due to higher equity market returns.

Amortization of policy acquisition costs

Amortization of policy acquisition costs increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to growth in Global Atlantic's individual market and institutional market channels.

Interest expense

Interest expense increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) a net increase in debt outstanding, primarily due to draws on the revolving credit facility after March 31, 2022, and (ii) an increase in interest expense on floating rate debt (Global Atlantic's revolving facility and fixed-to-floating swaps on its fixed rate debt) due to higher market rates.

Insurance expenses

Insurance expenses increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to increased reinsurance transactions and increased commission expense related to increased sales in Global Atlantic's individual markets channel.

General, administrative and other

General, administrative and other expenses increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) increased interest expense due to higher interest rates and debt outstanding, (ii) increased employee compensation and benefits related expenses, (iii) increased professional service fees, and (iv) increased third-party administrator ("TPA”) policy servicing fees, all due to growth of the business.

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

Income Tax Expense (Benefit)

Income tax expense increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022 primarily due to net operating income generated from asset management in the current period as compared to a net operating loss driven by net capital allocation-based losses in the prior period. The net operating income from Global Atlantic in the prior period largely offset the asset management net operating loss. For a discussion of factors that impacted KKR's tax provision, see Note 19 "Income Taxes" in our financial statements included elsewhere in this report. The amount of U.S. federal or state corporate income taxes we pay in future periods may be materially increased if adverse tax laws become enacted.

Net Income (Loss) Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests for the three months ended March 31, 2023 was primarily due to (i) net losses from investment activities primarily at certain of our consolidated real estate and energy investment funds and (ii) a net loss in the current period allocable to interests that third party investors hold in Global Atlantic, partially offset by positive net income from asset management operations allocable to holders of certain securities exchangeable into shares of common stock of KKR & Co. Inc.

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

The net income attributable to KKR & Co. Inc. for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 increased due to net capital allocation-based income, partially offset by a lower level of transaction fees and accrued carried interest compensation, as described above.

Condensed Consolidated Statements of Financial Condition (GAAP Basis)

The following table provides our condensed consolidated statements of financial condition on a GAAP basis as of March 31, 2023 and December 31, 2022.


(Amounts in thousands, except per share amounts)
	As of		As of
	March 31, 2023		December 31, 2022

Assets
Asset Management
Cash and Cash Equivalents	$	5,576,121	$	6,705,325
Investments	97,949,918		92,375,463
Other Assets	7,057,818		7,114,360
	110,583,857		106,195,148
Insurance
Cash and Cash Equivalents	3,713,382		6,118,231
Investments	129,401,394		124,199,176
Other Assets	38,911,956		38,834,081
	172,026,732		169,151,488
Total Assets	$	282,610,589	$	275,346,636

Liabilities and Equity
Asset Management
Debt Obligations	$	42,519,776	$	40,598,613
Other Liabilities	8,228,017		6,937,832
	50,747,793		47,536,445
Insurance
Debt Obligations	2,157,283		2,128,166
Other Liabilities	172,582,137		170,311,335
	174,739,420		172,439,501
Total Liabilities	$	225,487,213	$	219,975,946

Redeemable Noncontrolling Interests	144,126		152,065

Stockholders' Equity

Stockholders' Equity - Series C Mandatory Convertible Preferred Stock	1,115,792		1,115,792
Stockholders' Equity - Common Stock	18,546,889		17,691,975
Noncontrolling Interests	37,316,569		36,410,858
Total Equity	56,979,250		55,218,625
Total Liabilities and Equity	$	282,610,589	$	275,346,636

KKR & Co. Inc. Stockholders' Equity - Common Stock Per Outstanding Share of Common Stock	$	21.54	$	20.55

KKR & Co. Inc. Stockholders’ Equity - Common Stock per Outstanding Share of Common Stock was $21.54 as of March 31, 2023, up from $20.55 as of December 31, 2022. The increase was primarily due to (i) unrealized gains on available-for-sale-securities from Global Atlantic that are recorded in other comprehensive income and (ii) net income attributable to KKR & Co. Inc. common stockholders during the first three months of 2023, partially offset by dividends to common stockholders.

Consolidated Statements of Cash Flows (GAAP Basis)

The following is a discussion of our consolidated cash flows for the three months ended March 31, 2023 and 2022. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report.

The consolidated statements of cash flows include the cash flows of our consolidated entities, which include certain consolidated investment funds, CLOs and certain variable interest entities formed by Global Atlantic notwithstanding the fact that we may hold only a minority economic interest in those investment funds and CFEs. The assets of our consolidated investment funds and CFEs, on a gross basis, can be substantially larger than the assets of our business and, accordingly, could have a substantial effect on the cash flows reflected in our consolidated statements of cash flows. The primary cash flow activities of our consolidated funds and CFEs involve: (i) capital contributions from fund investors; (ii) using the capital of fund investors to make investments; (iii) financing certain investments with indebtedness; (iv) generating cash flows through the realization of investments; and (v) distributing cash flows from the realization of investments to fund investors. Because our consolidated funds are treated as investment companies for accounting purposes, certain of these cash flow amounts are included in our cash flows from operations.

Net Cash Provided (Used) by Operating Activities

Our net cash provided (used) by operating activities was $(1.9) billion and $0.9 billion during the three months ended March 31, 2023 and 2022, respectively. These amounts primarily included: (i) investments purchased (asset management), net of proceeds from investments (asset management) of $(4.7) billion and $(0.6) billion during the three months ended March 31, 2023 and 2022, respectively, (ii) net realized gains (losses) on asset management investments of $0.1 billion and $0.3 billion during the three months ended March 31, 2023 and 2022, respectively, (iii) change in unrealized gains (losses) on investments (asset management) of $(0.3) billion and $0.6 billion during the three months ended March 31, 2023 and 2022, respectively, (iv) capital allocation-based income (loss) of $0.4 billion and $(0.9) billion during the three months ended March 31, 2023 and 2022, respectively, (v) net realized gains (losses) on insurance operations of $(1.0) billion and $0.3 billion during the three months ended March 31, 2023 and 2022, respectively, and (vi) interest credited to policyholder account balances (net of policy fees) (insurance) of $0.6 billion and $0.5 billion during the three months ended March 31, 2023 and 2022, respectively. Investment funds are investment companies under GAAP and reflect their investments and other financial instruments at fair value.

Net Cash Provided (Used) by Investing Activities

Our net cash provided (used) by investing activities was $(3.8) billion and $(2.0) billion during the three months ended March 31, 2023 and 2022, respectively. Our investing activities included: (i) investments purchased (insurance), net of proceeds from investments (insurance), of $(3.8) billion and $(2.0) billion during the three months ended March 31, 2023 and 2022, respectively, and (ii) the purchase of fixed assets of $(23.2) million and $(11.9) million during the three months ended March 31, 2023 and 2022, respectively.

Net Cash Provided (Used) by Financing Activities

Our net cash provided (used) by financing activities was $2.1 billion and $4.1 billion during the three months ended March 31, 2023 and 2022, respectively. Our financing activities primarily included: (i) contributions by, net of distributions to, our noncontrolling and redeemable noncontrolling interests of $0.6 billion and $1.6 billion during the three months ended March 31, 2023 and 2022, respectively, (ii) proceeds received, net of repayment of debt obligations, of $1.5 billion and $31.5 million during the three months ended March 31, 2023 and 2022, respectively, (iii) additions to, net of withdrawals from, contractholder deposit funds of $0.5 billion and $2.4 billion during three months ended March 31, 2023 and 2022, respectively, (iv) common stock dividends of $(133.5) million and $(85.7) million during the three months ended March 31, 2023 and 2022, respectively, (v) repurchases of common stock of $(346.7) million during the three months ended March 31, 2022, and (vi) Series C Mandatory Convertible Preferred Stock dividends of $(17.3) million during each of the three months ended March 31, 2023 and 2022.

Analysis of Segment Operating Results

The following is a discussion of the results of our business on a segment basis for the three months ended March 31, 2023 and 2022. You should read this discussion in conjunction with the information included under "—Key Segment and Non- GAAP Performance Measures" and the financial statements and related notes included elsewhere in this report. See "— Business Environment" for more information about factors that may impact our business, financial performance, operating results and valuations.

Analysis of Asset Management Segment Operating Results

The following tables set forth information regarding KKR's asset management segment operating results and certain key capital metrics for the three months ended March 31, 2023 and 2022:




	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Management Fees	$	738,156	$	624,928	$	113,228
Transaction and Monitoring Fees, Net	142,179		306,038		(163,859)
Fee Related Performance Revenues	21,741		12,051		9,690
Fee Related Compensation	(203,094)		(212,220)		9,126
Other Operating Expenses	(150,404)		(125,875)		(24,529)
Fee Related Earnings	548,578		604,922		(56,344)
Realized Performance Income	175,398		609,207		(433,809)
Realized Performance Income Compensation	(114,009)		(383,635)		269,626
Realized Investment Income	198,094		349,354		(151,260)
Realized Investment Income Compensation	(29,714)		(52,403)		22,689
Asset Management Segment Operating Earnings	$	778,347	$	1,127,445	$	(349,098)

Management Fees

The following table presents management fees by business line:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Management Fees
Private Equity	$	316,341	$	282,184	$	34,157
Real Assets	193,365		153,813		39,552
Credit and Liquid Strategies	228,450		188,931		39,519
Total Management Fees	$	738,156	$	624,928	$	113,228

The increase in Private Equity management fees was primarily attributable to management fees earned on new capital raised over the past twelve months at European Fund VI, Next Generation Technology Growth Fund III, and Global Impact Fund II. The increase was partially offset by (i) catch-up management fees earned on new capital raised for North America Fund XIII in the first quarter of 2022 that was retroactive to the start of the fund's investment period, and (ii) a lower level of management fees from Asian Fund III due to the sale of investments that resulted in a decrease in its fee base, which is capital invested. There were no catch-up management fees earned in the first quarter of 2023 for North America Fund XIII. During the first quarter of 2023, approximately $9.0 million of management fees were earned on new capital raised that is retroactive to the start of the relevant fund's investment period.

The increase in Real Asset management fees was primarily attributable to (i) management fees earned on assets managed by KJRM, which we acquired in the second quarter of 2022, (ii) management fees earned from Asia Pacific Infrastructure Investors II, which entered its investment period in the third quarter of 2022 resulting in management fees now being earned on this capital, and (iii) a higher level of management fees earned from Global Atlantic due to an increase in assets being managed by KKR's Asset Management segment. The increase was partially offset by catch-up management fees earned on new capital raised for Global Infrastructure Investors IV in the first quarter of 2022 that was retroactive to the start of the fund's investment period. There were no catch-up management fees earned in the first quarter of 2023 for Global Infrastructure Investors IV.

The increase in Credit and Liquid Strategies management fees was primarily attributable to (i) a higher level of management fees earned from Global Atlantic due to an increase in assets being managed by KKR's Asset Management segment and the issuance of new CLOs over the past twelve months.

Transaction and Monitoring Fees, Net

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


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Transaction and Monitoring Fees, Net
Private Equity	$	34,274	$	33,056	$	1,218
Real Assets	5,734		7,630		(1,896)
Credit and Liquid Strategies	284		10,096		(9,812)
Capital Markets	101,887		255,256		(153,369)
Total Transaction and Monitoring Fees, Net	$	142,179	$	306,038	$	(163,859)

Our Private Equity, Real Assets and Credit and Liquid Strategies business lines separately earn transaction and monitoring fees from portfolio companies, and under the terms of the management agreements with certain of our investment funds, we are generally required to share all or a portion of such fees with our fund investors. In most funds, transaction and monitoring fees are credited against fund management fees up to 100% of the amount of the transaction and monitoring fees attributable to that fund, which results in a decrease of our monitoring and transaction fee income. Additionally, transaction fees are generally not earned with respect to energy and real estate investments. Our Capital Markets business line earns transaction fees, which are not shared with fund investors.

The decrease in transaction and monitoring fees, net is primarily due to a lower level of transaction fees earned in our Capital Markets business line. The decrease in capital markets transaction fees was primarily due to a decrease in the number of capital markets transactions for the three months ended March 31, 2023, compared to the three months ended March 31, 2022 reflecting reduced issuance levels across global equity and leveraged loan markets. Overall, we completed 42 capital markets transactions for the three months ended March 31, 2023, of which 9 represented equity offerings and 33 represented debt offerings, as compared to 87 transactions for the three months ended March 31, 2022, of which 11 represented equity offerings and 76 represented debt offerings. We earned fees in connection with underwriting, syndication and other capital markets services. While each of the capital markets transactions that we undertake in this business line is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings, and the amount of fees that we earn for similar transactions generally correlates with overall transaction sizes.

Our capital markets fees are generated in connection with activity involving our private equity, real assets and credit funds as well as from third-party companies. For the three months ended March 31, 2023, approximately 14% of our transaction fees in our Capital Markets business line were earned from unaffiliated third parties as compared to approximately 19% for the three months ended March 31, 2022. Our transaction fees are comprised of fees earned in North America, Europe, and the Asia-Pacific region. For the three months ended March 31, 2023, approximately 59% of our transaction fees were generated outside of North America as compared to approximately 37% for the three months ended March 31, 2022. 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.

Fee Related Performance Revenues

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


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Fee Related Performance Revenues
Private Equity	$	—	$	—	$	—
Real Assets	3,704		2,317		1,387
Credit and Liquid Strategies	18,037		9,734		8,303
Total Fee Related Performance Revenues	$	21,741	$	12,051	$	9,690

Fee related performance revenues represent performance fees that are (i) expected to be received from our investment funds, vehicles and accounts on a recurring basis, and (ii) not dependent on a realization event involving investments held by the investment fund, vehicle or account. These performance fees are primarily earned from FS KKR Capital Corp. (NYSE: FSK) ("FSK") (our business development company), KKR Property Partners Americas ("KPPA") (our open-ended core plus real estate fund), KKR Real Estate Select Trust ("KREST") (our registered closed-end real estate equity fund), KKR Real Estate Finance Trust Inc. ("KREF") (our real estate credit investment trust), and KJRM (our Japanese real estate investment trust asset manager). Fee related performance revenues were higher for the three months ended March 31, 2023 compared to the prior period primarily due to an increase in performance revenues earned from FSK in the current period.

Fee Related Compensation

The decrease in fee related compensation for the three months ended March 31, 2023 compared to the prior period was primarily due to a lower level of compensation recorded in connection with the lower level of revenues included within fee related earnings.

Other Operating Expenses

The increase in other operating expenses for the three months ended March 31, 2023 compared to the prior period was primarily due to a higher level of professional fees, information technology, travel and other administrative costs in connection with the overall growth of the firm.

Fee Related Earnings

The decrease in fee related earnings for the three months ended March 31, 2023 compared to the prior period was primarily due to a lower level of transaction fees earned in our Capital Markets business line and higher level of operating expenses partially offset by a higher level of management fees across our Private Equity, Real Assets and Credit and Liquid Strategies business lines, as described above.

Realized Performance Income

The following table presents realized performance income by business line:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Realized Performance Income
Private Equity	$	163,052	$	603,823	$	(440,771)
Real Assets	9,686		—		9,686
Credit and Liquid Strategies	2,660		5,384		(2,724)
Total Realized Performance Income	$	175,398	$	609,207	$	(433,809)


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Private Equity
Core Investment Vehicles	$	103,659	$	262,219	$	(158,560)
Global Impact Fund	20,257		—		20,257
Next Generation Technology Growth Fund	17,810		—		17,810
Americas Fund XII	14,714		83,016		(68,302)
2006 Fund	4,271		33,458		(29,187)
North America Fund XI	—		119,942		(119,942)
Co-Investment Vehicles and Other	2,292		12,444		(10,152)
European Fund IV	—		68,688		(68,688)





Total Realized Carried Interest (1)	163,003		579,767		(416,764)

Incentive Fees	49		24,056		(24,007)
Total Realized Performance Income	$	163,052	$	603,823	$	(440,771)



	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Real Assets
Global Infrastructure Investors II	$	9,686	$	—	$	9,686









Total Realized Carried Interest (1)	9,686		—		9,686

Incentive Fees	—		—		—
Total Realized Performance Income	$	9,686	$	—	$	9,686


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Credit and Liquid Strategies


Total Realized Carried Interest (1)	$	—	$	—	$	—

Incentive Fees	2,660		5,384		(2,724)
Total Realized Performance Income	$	2,660	$	5,384	$	(2,724)

(1)The above tables exclude any funds for which there was no realized carried interest during both of the periods presented.

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

Realized carried interest in our Private Equity business line for the three months ended March 31, 2023 consisted primarily of (i) realized performance income from our core investment vehicles and (ii) realized proceeds from the sale of our investment in KnowBe4, Inc. held by Global Impact Fund and Next Generation Technology Growth Fund.

Realized carried interest in our Private Equity business line for the three months ended March 31, 2022 consisted primarily of (i) realized performance income from our core investment vehicles and (ii) realized proceeds from a dividend received from our investment in Internet Brands, Inc. (technology sector) held by North America Fund XI and Americas Fund XII and the sale of our investment in Hensoldt AG (FRA: HAG) held by European Fund IV.

Realized carried interest in our Real Assets business line for the three months ended March 31, 2023 consisted primarily of realized proceeds from the sale of our investment in Telxius Telecom, S.A.U. (Infrastructure: telecommunications infrastructure sector) held by Global Infrastructure Investors II. During the three months ended March 31, 2022, there was no realized carried interest earned in our Real Assets business line.

During the three months ended March 31, 2023 and 2022, there was no realized carried interest earned in our Credit and Liquid Strategies business line.

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

Incentive fees in our Private Equity business line decreased for the three months ended March 31, 2023 compared to the prior period as a result of incentive fees not being earned from certain levered multi-asset investment vehicles in the current period. Incentive fees in our Credit and Liquid Strategies business line decreased for the three months ended March 31, 2023 compared to the prior period primarily as a result of a lower level of performance fees earned from a UK investment fund manager.

Realized Performance Income Compensation

The decrease in realized performance income compensation for the three months ended March 31, 2023 compared to the prior period was primarily due to a lower level of compensation recorded in connection with the lower level of realized performance income.

Realized Investment Income

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


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Realized Investment Income
Net Realized Gains (Losses)	$	91,907	$	76,136	$	15,771
Interest Income and Dividends	106,187		273,218		(167,031)
Total Realized Investment Income	$	198,094	$	349,354	$	(151,260)

The decrease in realized investment income is primarily due to a lower level of interest income and dividends, partially offset by a higher level of net realized gains. 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 March 31, 2023, net realized gains were comprised of realized gains primarily from the sale of our investments in KnowBe4, Inc. and Flutter Entertainment PLC. Partially offsetting these realized gains were realized losses, the most significant of which was a realized loss on our alternative credit investment, Chembulk Group, and realized losses from the sales of various revolving credit facilities.

For the three months ended March 31, 2022, net realized gains were comprised of realized gains primarily from the sale of our investments in Fiserv, Inc. and Hensoldt AG. Partially offsetting these realized gains were realized losses, the most significant of which was a realized loss of an alternative credit investment and real estate equity investment.

For the three months ended March 31, 2023, interest income and dividends were comprised of (i) $70.7 million of interest income, primarily from our investments in CLOs, and (ii) $35.5 million of dividend distributions primarily from our Americas real estate credit and equity investments, as well as a dividend distribution received from Resolution Life Holdings L.P. (financial services sector).

For the three months ended March 31, 2022, interest income and dividends were comprised of (i) $218.9 million of dividend income primarily from levered multi-asset investment vehicles and our investments in Exact Holdings B.V. and Internet Brands, Inc., and (ii) $54.3 million of interest income, primarily from our investments in CLOs. See "—Analysis of Non-GAAP Performance Measures—Non-GAAP Balance Sheet Measures."

Realized investment income (loss) includes the net income (loss) from KKR Capstone. For the quarter ended March 31, 2023, total fees attributable to KKR Capstone were $19.8 million and total expenses attributable to KKR Capstone were $19.6 million. For KKR Capstone-related adjustments in reconciling asset management segment revenues to GAAP revenues see "—Analysis of Non-GAAP Performance Measures—Reconciliations to GAAP Measures".

Based on information available as of the date of the filing of this report, we expect realized performance income and realized investment income to be approximately $125 million in the second quarter of 2023 relating to realized carried interest and realized investment income from completed, or signed and expected to be completed sales, partial sales or secondary sales subsequent to March 31, 2023 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. The estimate disclosed above is not intended to predict or represent total realized performance income or total realized investment income for the full quarter ending June 30, 2023, because it does not include the results or impact of any other sources of income, including fee income, or expenses, and we may realize further gains or losses relating to total realized performance income and total realized investment income after the date of the filing of this report. Therefore, the actual realized carried interest and realized investment income for the quarter ended June 30, 2023 may be higher or lower than $125 million.

Realized Investment Income Compensation

The decrease in realized investment income compensation for the three months ended March 31, 2023 compared to the prior period is primarily due to a lower level of compensation recorded in connection with the lower level of realized investment income.

Other Operating and Capital Metrics

The following table presents certain key operating and capital metrics as of March 31, 2023 and December 31, 2022:


	As of
	March 31, 2023		December 31, 2022		Change
	($ in millions)
Assets Under Management	$	510,069	$	503,897	$	6,172
Fee Paying Assets Under Management	$	415,871	$	411,923	$	3,948
Uncalled Commitments	$	106,266	$	107,679	$	(1,413)

The following table presents one of our key capital metrics for the three months ended March 31, 2023 and 2022:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in millions)
Capital Invested	$	9,767	$	21,376	$	(11,609)

Assets Under Management

Private Equity

The following table reflects the changes in the AUM of our Private Equity business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	165,147
New Capital Raised	349

Distributions and Other	(1,227)
Change in Value	1,493
March 31, 2023	$	165,762

AUM of our Private Equity business line was $165.8 billion at March 31, 2023, an increase of $0.7 billion, compared to $165.1 billion at December 31, 2022.

The increase was primarily attributable to an appreciation in investment value from Americas Fund XII, Asian Fund IV, and North America Fund XIII. Partially offsetting this increase were distributions to fund investors primarily as a result of realized proceeds, most notably from Americas Fund XII, Next Generation Technology Growth Fund II, and Next Generation Technology Growth Fund.

For the three months ended March 31, 2023, the value of our traditional private equity investment portfolio increased 2%. This was comprised of a 15% increase in share prices of various publicly held investments and a 2% increase in value of our privately held investments. For the three months ended March 31, 2023, the value of our growth equity investment portfolio increased 1% and our core private equity investment portfolio remained flat.

The most significant increases in the value of our publicly held investments were increases in AppLovin Corporation (NASDAQ: APP), BridgeBio Pharma, Inc. and PropertyGuru Group Limited (NYSE: PGRU). These increases were partially offset by decreases in the value of certain publicly held investments, the most significant of which was Brightview Holdings, Inc. (NYSE: BV) and Indus Towers Limited (NSE: INDUSTOWER). The prices of publicly held companies may experience volatile changes following the reporting period. See "—Business Environment" for more information about the factors, such as volatility, that may impact our business, financial performance, operating results and valuations.

The most significant increases in the value of our privately held investments were increases in Cloudera, Inc. (technology sector), Magneti Marelli CK Holdings Co. (industrials sector), and OneStream Software, LLC (technology sector). These increases in value on our privately held investments were partially offset by decreases in the value of certain other privately held investments, the most significant of which were Bytedance Ltd. (technology sector), GenesisCare Pty Ltd., and Heartland Dental, LLC. The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance and (ii) an increase in the value of market comparables. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to an unfavorable business outlook. See "—Business Environment" for more information about the factors, that may impact our business, financial performance, operating results and valuations.

Real Assets

The following table reflects the changes in the AUM of our Real Assets business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	118,592
New Capital Raised	2,613

Distributions and Other	(1,468)
Redemptions	(79)
Change in Value	1,148
March 31, 2023	$	120,806

AUM of our Real Assets business line was $120.8 billion at March 31, 2023, an increase of $2.2 billion, compared to $118.6 billion at December 31, 2022.

The increase was primarily attributable to (i) new capital raised from a real estate credit separately managed account, Asia Real Estate Partners II, and our open-ended core infrastructure fund, Diversified Core Infrastructure Fund and (ii) the appreciation in investment value primarily from Global Infrastructure Investors III. Partially offsetting these increases were payments to Global Atlantic policyholders and distributions to fund investors as a result of realized proceeds, most notably distributions from Global Infrastructure Investors II.

For the three months ended March 31, 2023, the value of our infrastructure investment portfolio increased 6%, the value of our energy investment portfolio decreased by 9%, and the value of our opportunistic real estate equity investment portfolio decreased by 2%.

The most significant increases in value across our Real Asset portfolio were in Atlantic Aviation FBO Inc. (Infrastructure: transportation sector), First Gen Corporation (Infrastructure: power and utilities sector), and X-Elio Energy, S.L. (Infrastructure: power and utilities sector). These increases in value were partially offset by decreases in value relating primarily to various assets held in our energy portfolio, Colonial Enterprises, Inc. (Infrastructure: midstream sector), and various assets held in our real estate equity portfolio across all regions. The increased valuations of individual companies or assets in the aggregate, generally related to individual company or asset performance, and with respect to X-Elio Energy, S.L., an increase in valuation reflecting an agreement to exit this investment. The decreased valuations of individual companies or assets in the aggregate, generally related to an unfavorable business outlook. See "—Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations.

Credit and Liquid Strategies

The following table reflects the changes in the AUM of our Credit and Liquid Strategies business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	220,158
New Capital Raised	8,715



Distributions and Other	(4,025)
Redemptions	(2,533)
Change in Value	1,186
March 31, 2023	$	223,501

AUM of our Credit and Liquid Strategies business line was $223.5 billion at March 31, 2023, an increase of $3.3 billion compared to $220.2 billion at December 31, 2022.

The increase was primarily attributable to (i) new capital raised from Global Atlantic, our hedge fund partnership, Marshall Wace, and the issuance of a new CLO, and to a lesser extent (ii) appreciation in investment value on assets managed across our leveraged and alternative credit investment funds. Partially offsetting these increases were (i) payments to Global Atlantic policyholders, (ii) redemptions at our hedge fund partnership, Marshall Wace, and (iii) distributions to fund investors at certain alternative credit funds.

See also "—Business Environment" for more information about the factors that may impact our business, financial performance, operating results and valuations and "—Credit and Liquid Strategies" for investment performance information for our leveraged and alternative credit strategies.

Fee Paying Assets Under Management

Private Equity

The following table reflects the changes in the FPAUM of our Private Equity business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	102,261
New Capital Raised	1,407

Distributions and Other	(1,401)

Change in Value	56
March 31, 2023	$	102,323

FPAUM of our Private Equity business line was $102.3 billion at March 31, 2023, which remained flat compared to December 31, 2022.

New capital raised from European Fund VI, Next Generation Technology Growth Fund III, and Global Impact Fund II was primarily offset by the (i) reduction in fee base for European Fund III and China Growth Fund, which no longer pay management fees, and (ii) distributions to fund investors, primarily as a result of realized proceeds, most notably distributions from Americas Fund XII and Next Generation Technology Growth Fund II.

Uncalled commitments from private equity and multi-strategy investment funds from which KKR is currently not earning management fees amounted to approximately $17.9 billion at March 31, 2023, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%. The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.

Real Assets

The following table reflects the changes in the FPAUM of our Real Assets business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	103,532
New Capital Raised	3,434

Distributions and Other	(1,271)
Redemptions	(79)

Change in Value	111
March 31, 2023	$	105,727

FPAUM of our Real Assets business line was $105.7 billion at March 31, 2023, an increase of $2.2 billion, compared to $103.5 billion at December 31, 2022.

The increase was primarily attributable to new capital raised from Diversified Core Infrastructure Fund and Asia Pacific Infrastructure Investors II. Partially offsetting this increase were (i) payments to Global Atlantic policyholders, and (ii) distributions to fund investors as a result of realized proceeds, most notably distributions from Global Infrastructure Investors II.

Uncalled commitments from real assets investment funds from which KKR is currently not earning management fees amounted to approximately $8.7 billion at March 31, 2023, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.2%. The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.

Credit and Liquid Strategies

The following table reflects the changes in the FPAUM of our Credit and Liquid Strategies business line from December 31, 2022 to March 31, 2023:


	($ in millions)
December 31, 2022	$	206,130
New Capital Raised	8,496



Distributions and Other	(5,228)
Redemptions	(2,533)
Change in Value	956
March 31, 2023	$	207,821

FPAUM of our Credit and Liquid Strategies business line was $207.8 billion at March 31, 2023, an increase of $1.7 billion, compared to $206.1 billion at December 31, 2022.

Uncalled capital commitments from investment funds in our Credit and Liquid Strategies business line from which KKR is currently not earning management fees amounted to approximately $10.6 billion at March 31, 2023. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 0.7%. The date on which we begin to earn fees (as specified above) is not guaranteed to occur and may not occur for an extended period of time. If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.

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

Uncalled Commitments

Private Equity

As of March 31, 2023, our Private Equity business line had $64.1 billion of remaining uncalled commitments that could be called for investments in new transactions as compared to $65.9 billion as of December 31, 2022. The decrease was primarily attributable to capital called from fund investors to make investments during the period, which was partially offset by new capital commitments from fund investors.

Real Assets

As of March 31, 2023, our Real Assets business line had $27.7 billion of remaining uncalled commitments that could be called for investments in new transactions as compared to $27.5 billion as of December 31, 2022. The increase was primarily attributable to new capital commitments from fund investors, partially offset by capital called from fund investors to make investments during the period.

Credit and Liquid Strategies

As of March 31, 2023, our Credit and Liquid Strategies business line had $14.5 billion of remaining uncalled commitments that could be called for investments in new transactions as compared to $14.3 billion as of December 31, 2022. The increase was primarily attributable to new capital commitments from fund investors, which was partially offset by capital called from fund investors to make investments during the period.

Capital Invested

Private Equity

For the three months ended March 31, 2023, our Private Equity business line had $2.9 billion of capital invested as compared to $4.4 billion for the three months ended March 31, 2022. The decrease was driven primarily by a $2.4 billion decrease in capital invested in our traditional private equity strategy. During the three months ended March 31, 2023, 57% of capital deployed in private equity (including core and growth equity (including impact) investments) was in transactions in Europe, 39% was in North America, and 4% was in the Asia-Pacific region. The number of large private equity investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.

Real Assets

For the three months ended March 31, 2023, our Real Assets business line had $4.7 billion of capital invested as compared to $9.0 billion for the three months ended March 31, 2022. The decrease was driven primarily by a $3.8 billion decrease in capital invested in our real estate strategy and a $1.2 billion decrease in our energy strategy. During the three months ended March 31, 2023, 59% of capital deployed in real assets was in transactions in Europe, 31% was in the Asia-Pacific region, and 10% was in North America. The number of large real asset investments made in any quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods.

Credit and Liquid Strategies

For the three months ended March 31, 2023, our Credit and Liquid Strategies business line had $2.2 billion of capital invested as compared to $8.0 billion for the three months ended March 31, 2022. The decrease was primarily due to a lower level of capital deployed across our various private credit strategies. During the three months ended March 31, 2023, 79% of capital deployed was in transactions in North America, 19% was in Europe, and 2% was in the Asia-Pacific region.

Analysis of Insurance Segment Operating Results

Effective January 1 , 2023, we adopted new accounting guidance for insurance and reinsurance companies that issue long-duration contracts (“LDTI”) as of February 1, 2021, the date of the GA Acquisition, on a full retrospective basis. For a more detailed discussion of the adoption of the LDTI, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.

The following tables set forth information regarding KKR's insurance segment operating results and certain key operating metrics as of and for the three months ended March 31, 2023 and 2022:


	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Net Investment Income	$	1,271,255	$	862,414	$	408,841
Net Cost of Insurance	(750,612)		(481,870)		(268,742)
General, Administrative and Other	(196,714)		(146,412)		(50,302)
Pre-tax Operating Earnings	323,929		234,132		89,797

Pre-tax Operating Earnings Attributable to Noncontrolling Interests	(118,817)		(90,185)		(28,632)
Insurance Segment Operating Earnings	$	205,112	$	143,947	$	61,165

Insurance segment operating earnings

Insurance segment operating earnings increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to higher net investment income resulting from an increase in assets under management due to growth of the business, and higher average yields. The increase was offset in part by (i) higher net cost of insurance, primarily due to the growth in both the individual market and institutional market channels and higher funding cost on new business and (ii) a corresponding increase in general and administrative expenses.

Net investment income

Net investment income increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) increased average assets under management due to growth in assets in the institutional market channel as a result of new reinsurance transactions and individual market channel sales from new business growth, (ii) increases in portfolio yields due to higher market interest rates on floating rate investments, and (iii) rotation into higher yielding assets. Offsetting these increases to net investment income was a decrease in variable investment income, primarily due to the non-recurrence of net realized gains from the sale of investments not related to asset/liability matching strategies.

Net cost of insurance

Net cost of insurance increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) growth in reserves in the institutional market as a result of new reinsurance transactions and in the individual market as a result of new business volumes, and (ii) higher funding costs on new business originated.

General, administrative and other expenses

General and administrative expenses increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to (i) increased interest expense due to higher interest rates and debt outstanding, (ii) increased employee compensation and benefits-related expenses, (iii) increased professional service fees, and (iv) increased third-party administrator policy servicing fees, all due to growth of the business.

Net income attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 in proportion to the increase in insurance segment operating earnings for the comparable period. Net income attributable to noncontrolling interests represents the proportionate interest in the insurance segment operating earnings attributable to third party co-investors in Global Atlantic.

Analysis of Non-GAAP Performance Measures

Effective January 1 , 2023, we adopted new accounting guidance for insurance and reinsurance companies that issue long-duration contracts (“LDTI”) as of February 1, 2021, the date of the GA Acquisition, on a full retrospective basis. For a more detailed discussion of the adoption of the LDTI, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.

The following is a discussion of our Non-GAAP performance measures for the three months ended March 31, 2023 and 2022:



	Three Months Ended
	March 31, 2023		March 31, 2022		Change
	($ in thousands)
Asset Management Segment Operating Earnings	$	778,347	$	1,127,445	$	(349,098)
Insurance Segment Operating Earnings	205,112		143,947		61,165
Distributable Operating Earnings	983,459		1,271,392		(287,933)

Interest Expense	(85,500)		(69,460)		(16,040)

Net Income Attributable to Noncontrolling Interests	(5,626)		(7,616)		1,990
Income Taxes on Operating Earnings	(173,057)		(220,279)		47,222
After-tax Distributable Earnings	$	719,276	$	974,037	$	(254,761)

Distributable Operating Earnings

The decrease in distributable operating earnings for the three months ended March 31, 2023 compared to the prior period is primarily due to a lower level of asset management segment operating earnings, partially offset by a higher level of insurance segment operating earnings. For a discussion of the asset management and insurance segment operating earnings, see "—Analysis of Asset Management Segment Operating Results" and "—Analysis of Insurance Segment Operating Results."

After-tax Distributable Earnings

The decrease in after-tax distributable earnings for the three months ended March 31, 2023 compared to the prior period was primarily due to a lower level of distributable operating earnings and an increase in interest expense, partially offset by a decrease in income taxes on operating earnings, as discussed above.

Interest Expense

The increase in interest expense for the three months ended March 31, 2023 compared to the prior period was primarily due to issuances of debt securities by KKR's financing subsidiaries.

Income Taxes on Operating Earnings

The decrease in income taxes on operating earnings for the three months ended March 31, 2023 compared to the prior period was primarily due to a lower level of asset management segment operating earnings.

For the three months ended March 31, 2023 and 2022, the amount of the tax benefit from equity-based compensation included in income taxes paid was $13.7 million and $11.8 million, respectively. The inclusion of the tax benefit from equity-based compensation in After-tax Distributable Earnings had the effect of increasing this measure by 2% and 1%, respectively, for the three months ended March 31, 2023 and 2022.

Non-GAAP Balance Sheet Measures

Book Value

The following table presents our calculation of book value as of March 31, 2023 and December 31, 2022:



		As of
		March 31, 2023		December 31, 2022
		($ in thousands)

(+)	Cash and Short-term Investments	$	2,766,099	$	3,256,515
(+)	Investments	17,955,482		17,628,327
(+)	Net Unrealized Carried Interest (1)	2,628,693		2,509,589

(+)	Other Assets, Net (2)	7,311,109		6,979,235
(+)	Global Atlantic Book Value	4,391,813		4,409,873

(-)	Debt Obligations - KKR (excluding KFN and Global Atlantic)	6,778,452		6,957,932
(-)	Debt Obligations - KFN	948,517		948,517
(-)	Tax Liabilities, Net	1,771,224		1,648,600
(-)	Other Liabilities	899,868		911,612
(-)	Noncontrolling Interests	29,288		32,843

	Book Value	$	24,625,847	$	24,284,035

	Book Value Per Adjusted Share	$	27.65	$	27.27
	Adjusted Shares	890,621,712		890,628,190

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


	As of
	March 31, 2023		December 31, 2022
	($ in thousands)
Private Equity Business Line	$	2,231,530	$	2,199,869
Real Assets Business Line	296,547		212,974
Credit and Liquid Strategies Business Line	100,616		96,746
Total	$	2,628,693	$	2,509,589

(2)Other Assets, Net include our (i) ownership interest in FS/KKR Advisor, (ii) minority ownership interests in hedge fund partnerships, and (iii) the net assets of KJRM.

Book value increased 1% from December 31, 2022. The increase was primarily attributable to (i) an increase in net unrealized carried interest, most notably from Americas Fund XII, Global Infrastructure Investors III, and Asia Pacific Infrastructure Investors, and (ii) the positive impact of our after-tax distributable earnings recognized in the period. Partially offsetting these increases was the payment of dividends during the period. The value of our asset management segment investments remained flat in the period. For a further discussion, see "—Consolidated Results of Operations (GAAP Basis) - Asset Management—Investment Income (Loss) - Asset Management—Unrealized Gains and Losses from Investment Activities." For a discussion of the changes in our investment portfolio, see "—Analysis of Asset Management Segment Operating Results—Assets Under Management." For a discussion of factors that impacted KKR's after-tax distributable earnings, see "—Analysis of Non-GAAP Performance Measures—After-tax Distributable Earnings" and for more information about the factors that may impact our business, financial performance, operating results and valuations, see "—Business Environment."

The following table presents the holdings of our investments in the asset management segment by asset class as of March 31, 2023. To the extent investments are realized at values below their cost in future periods, after-tax distributable earnings would be adversely affected by the amount of such loss, if any, during the period in which the realization event occurs.


	As of March 31, 2023
	($ in thousands)
Investments (1)	Cost		Fair Value		Fair Value as a Percentage of Total Investments

Traditional Private Equity	$	2,014,797	$	3,391,315	18.9	%
Core Private Equity	2,716,688		5,700,661		31.7	%
Growth Equity	356,578		875,673		4.9	%
Private Equity Total	5,088,063		9,967,649		55.5	%

Energy	849,164		841,978		4.7	%
Real Estate	1,801,180		1,873,726		10.4	%
Infrastructure	1,154,221		1,362,629		7.6	%
Real Assets Total	3,804,565		4,078,333		22.7	%

Leveraged Credit	1,305,853		1,066,071		5.9	%
Alternative Credit	849,719		900,032		5.0	%
Credit Total	2,155,572		1,966,103		10.9	%

Other	2,297,519		1,943,397		10.9	%

Total Investments	$	13,345,719	$	17,955,482	100.0	%

(1)Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority ownership of subsidiaries that operate KKR's asset management and insurance businesses, including the general partner interests of KKR's investment funds. Investments presented are principally the assets measured at fair value that are held by KKR's asset management segment, which, among other things, does not include the underlying investments held by Global Atlantic and Marshall Wace.
























	As of March 31, 2023
	($ in thousands)
Top 20 Investments: (1)	Cost		Fair Value
USI, Inc.	$	531,425	$	1,300,380
PetVet Care Centers, LLC	243,211		1,143,092
Heartland Dental, LLC	320,656		769,574
Exact Group B.V.	213,362		568,585
Arnott's Biscuits Limited	250,841		468,984
1-800 Contacts Inc.	300,178		405,243
Internet Brands, Inc.	340,312		372,628
Barracuda Networks, Inc.	343,092		343,092
ERM Worldwide Group Limited	228,710		343,065
IVIRMA Global SL	321,261		321,083
Teaching Strategies, LLC	307,162		307,162
Crescent Energy Company (NYSE: CRGY)	527,030		286,861
Roompot B.V.	193,578		259,599
Shriram General Insurance Co.	245,470		252,946
Resolution Life Group Holdings, L.P.	262,191		228,659
Atlantic Aviation FBO Inc.	170,274		203,570
BridgeBio Pharma, Inc. (NASDAQ: BBIO)	59,799		198,684
Viridor Limited	132,023		186,878
PortAventura	155,803		174,835
The Bay Clubs Company, LLC	160,127		160,127
Total Top 20 Investments	$	5,306,505	$	8,295,047

(1)This list of investments identifies the twenty largest companies or assets based on their fair values as of March 31, 2023. It does not deduct fund or vehicle level debt, if any, incurred in connection with funding the investment. This list excludes (i) investments expected to be syndicated, (ii) investments expected to be transferred in connection with a new fundraising, (iii) investments in funds and other entities that are owned by one or more third parties and established for the purpose of making investments and (iv) the portion of any investment that may be held through collateralized loan obligations or levered multi-asset investment vehicles, if any. For additional information about the asset classes of the investments held on KKR's balance sheet see "—Our Business—Principal Activities" for the "Holdings by Asset Class" pie chart. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

With respect to KKR's book value relating to its insurance business, KKR includes Global Atlantic's book value, which consists of KKR's pro rata equity interest in Global Atlantic on a GAAP basis, excluding (i) accumulated other comprehensive income and (ii) accumulated change in fair value of reinsurance embedded derivative balances and related assets, net of 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 March 31, 2023, KKR's pro rata interest in Global Atlantic's book value was $4.4 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 March 31, 2023, 95% and 87% of Global Atlantic's available-for-sale ("AFS") fixed maturity securities were considered investment grade under ratings from the Securities Valuation Office of the NAIC and NRSROs, respectively. As of December 31, 2022, 95% and 85% of Global Atlantic's AFS fixed maturity securities were considered investment grade under ratings from NAIC and 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 March 31, 2023 were Corporate, RMBS and CMBS securities, comprising 31%, 5% and 5% of Global Atlantic's investment portfolio, respectively. Within these categories, 94%, 96% and 95% of Global Atlantic's Corporate, RMBS and CMBS securities, respectively, were investment grade according to NAIC ratings and 94%, 52% and 54% of its Corporate, RMBS and CMBS securities, respectively, were investment grade according to NRSRO ratings as of March 31, 2023. The three largest asset categories in Global Atlantic's AFS fixed-maturity security portfolio as of December 31, 2022 were Corporate, RMBS and CMBS securities, comprising 29%, 5% and 5% of Global Atlantic's investment portfolio, respectively. Within these categories, 94%, 95% and 95% of Global Atlantic's Corporate, RMBS and CMBS securities,

respectively, were investment grade according to NAIC ratings and 94%, 45% and 53% of its Corporate, RMBS and CMBS securities, respectively, were investment grade according to NRSRO ratings as of December 31, 2022. NRSRO and NAIC ratings have different methodologies. Global Atlantic believes the NAIC ratings methodology, which considers the likelihood of recovery of amortized cost as opposed to the recovery of all contractual payments including the principal at par, as the more appropriate way to view the ratings quality of its AFS fixed maturity portfolio since a large portion of its holdings were purchased at a significant discount to par value. The portion of Global Atlantic's investment portfolio consisting of floating rate assets was 30% and 29% as of March 31, 2023 and December 31, 2022, respectively.

Within the funds withheld receivable at interest portfolio, 97% of the fixed maturity securities were investment grade by NAIC designation as of both March 31, 2023 and December 31, 2022.

Trading fixed maturity securities back funds withheld payable at interest where the investment performance is ceded to reinsurers under the terms of the respective reinsurance agreements.

Credit quality of AFS fixed maturity securities

The Securities Valuation Office of the NAIC evaluates the AFS fixed maturity security investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called “NAIC designations.” Using an internally developed rating is permitted by the NAIC if no rating is available. These designations are generally similar to the credit quality designations of NRSROs for marketable fixed maturity securities, except for certain structured securities as described below. NAIC designations of “1,” highest quality, and “2,” high quality, include fixed maturity securities generally considered investment grade by NRSROs. NAIC designations “3” through “6” include fixed maturity securities generally considered below investment grade by NRSROs.

Consistent with the NAIC Process and Procedures Manual, an NRSRO rating was assigned based on the following criteria: (i) the equivalent S&P rating where the security is rated by one NRSRO; (ii) the equivalent S&P rating of the lowest NRSRO when the security is rated by two NRSROs; and (iii) the equivalent S&P rating of the second lowest NRSRO if the security is rated by three or more NRSROs. If the lowest two NRSROs’ ratings are equal, then such rating will be the assigned rating. NRSROs’ ratings available for the periods presented were S&P, Fitch, Moody’s, DBRS, Inc. and Kroll Bond Rating Agency, Inc. If no rating is available from a rating agency, then an internally developed rating is used.

Substantially all of the AFS fixed maturity securities portfolio, 95% as of both March 31, 2023 and December 31, 2022 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 5% as of both March 31, 2023 and December 31, 2022. Pursuant to Global Atlantic's investment guidelines, Global Atlantic actively monitors the percentage of its portfolio that is held in investments rated NAIC 3 or lower and must obtain an additional approval from Global Atlantic's management investment committee before making a significant investment in an asset rated NAIC 3 or lower.

Corporate fixed maturity securities

Global Atlantic maintains a diversified portfolio of corporate fixed maturity securities across industries and issuers. As of both March 31, 2023 and December 31, 2022, 59% of the AFS fixed maturity securities portfolio was invested in corporate fixed maturity securities. As of both March 31, 2023 and December 31, 2022, approximately, 5% of the portfolio is denominated in foreign currency.

As of both March 31, 2023 and December 31, 2022, 94% of the total fair value of corporate fixed maturity securities is rated NAIC investment grade and 94% is rated NRSROs investment grade, respectively.

Residential mortgage-backed securities

As of both March 31, 2023 and December 31, 2022, 10% of the AFS fixed maturity securities portfolio was invested in RMBS, respectively. RMBS are securities constructed from pools of residential mortgages and backed by payments from those pools. Excluding limitations on access to lending and other extraordinary economic conditions, Global Atlantic 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 March 31, 2023 and December 31, 2022, 91% and 90%, respectively, of RMBS securities that are below investment grade as rated by the NRSRO, carry an NAIC 1 ("highest quality") designation.

As of March 31, 2023, Alt-A, Option ARM, Re-Performing and Sub-prime represent 27%, 24%, 21% and 10% of the total RMBS portfolio ($7.0 billion), respectively. As of December 31, 2022, Alt-A, Option ARM, Re-Performing and Sub-prime represent 31%, 28%, 14% and 12% of the total RMBS portfolio ($6.4 billion), respectively.

Unrealized gains and losses for AFS fixed maturity securities

Global Atlantic's investments in AFS fixed maturity securities are reported at fair value with changes in fair value recorded in other comprehensive income as unrealized gains or losses, net of taxes and offsets. Unrealized gains and losses can be created by changes in interest rates or by changes in credit spreads.

As of March 31, 2023 and December 31, 2022, Global Atlantic had gross unrealized losses on below investment grade AFS fixed maturity securities of $925.0 million and $917.6 million based on NRSRO rating and $222.0 million and $224.9 million based on NAIC ratings, respectively. During the three months ended March 31, 2023, unrealized losses of $26.7 million were recognized in net income on these debt securities since, as of March 31, 2023, there were specific securities that, as of the balance sheet date, Global Atlantic intended to sell or Global Atlantic believed it was more likely than not that it will be required to sell before recovery of their cost or amortized cost basis. As of March 31, 2022, no loss was recognized as Global Atlantic did not believe there were specific securities that, as of that date, it intended to, or would be required to sell before recovery.

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 March 31, 2023 and December 31, 2022, 27% and 28%, respectively, of Global Atlantic's total investments consisted of mortgage and other loan receivables. Global Atlantic invests in U.S. mortgage loans, comprised of first lien and mezzanine real estate loans, residential mortgage loans, consumer loans, and other loan receivables.

Global Atlantic's commercial mortgage loans may also be rated based on NAIC designations, with designations “CM1” and “CM2” considered to be investment grade. As of March 31, 2023 and December 31, 2022, 89% and 88% of the commercial mortgage loan portfolio was rated investment grade based on NAIC designation, respectively. 99% of the commercial mortgage loan portfolio is in current status.

As of March 31, 2023, 96% of the residential mortgage loan portfolio is in current status, and approximately $221.0 million is 90 days or more past due (representing 2% of the total residential mortgage portfolio).

The loan-to-value ratio is expressed as a percentage of the current amount of the loan relative to the value of the underlying collateral. Approximately 84% of the commercial mortgage loans has a loan-to-value ratio of 70% or less and 2% has loan-to-value ratio over 90%.

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

The weighted average loan-to-value ratio for residential mortgage loans was 65% and 64% as of March 31, 2023 and December 31, 2022, respectively.

Global Atlantic's residential mortgage loan portfolio is comprised mainly of re-performing loans that were purchased at a discount after they were modified and returned to performing status, as well as prime jumbo loans and mortgage loans backed by single family rental properties. Global Atlantic has also extended financing to counterparties in the form of repurchase agreements secured by mortgage loans, including performing and non-performing mortgage loans.

Global Atlantic’s consumer loan portfolio is primarily comprised of home improvement loans, solar panel loans, student loans and auto loans. As of March 31, 2023, 97% of the consumer loan portfolio is in current status and approximately $35.2 million is 90 days or more past due (representing less than 1% of the total consumer loan portfolio).

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 months ended March 31, 2023 and 2022:

Revenues


	Three Months Ended
	March 31, 2023		March 31, 2022
	($ in thousands)
Total GAAP Revenues	$	3,127,482	$	999,363
Impact of Consolidation and Other	209,778		213,400
Asset Management Adjustments:
Capital Allocation-Based Income (Loss) (GAAP)	(449,018)		945,743
Realized Carried Interest	172,689		579,767
Realized Investment Income	198,094		349,354
Capstone Fees	(19,805)		(15,485)
Expense Reimbursements	(15,544)		(41,303)
Insurance Adjustments:
Net Premiums	(473,624)		(372,144)
Policy Fees	(313,802)		(313,782)
Other Income	(37,158)		(34,744)
(Gains) Losses from Investments (1)	260,507		167,102
Non-operating Changes in Policy Liabilities and Derivatives	(112,776)		286,721
Total Segment Revenues (2)	$	2,546,823	$	2,763,992

(1)Includes (gains) losses on funds withheld receivables and payables embedded derivatives.

(2)Total Segment Revenues is comprised of (i) Management Fees, (ii) Transaction and Monitoring Fees, Net, (iii) Fee Related Performance Revenues, (iv) Realized Performance Income, (v) Realized Investment Income, and (vi) Net Investment Income.

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


	Three Months Ended
	March 31, 2023		March 31, 2022
	($ in thousands)
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders (GAAP)	$	322,744	$	(9,786)
Preferred Stock Dividends	17,250		17,250
Net Income (Loss) Attributable to Noncontrolling Interests	(80,306)		1,244,924
Income Tax Expense (Benefit)	148,747		36,651
Income (Loss) Before Tax (GAAP)	$	408,435	$	1,289,039
Impact of Consolidation and Other	93,511		(1,307,942)
Equity-based Compensation - KKR Holdings(1)	—		19,821

Income Taxes on Operating Earnings	(173,057)		(220,279)
Asset Management Adjustments:
Unrealized (Gains) Losses	99,327		322,269
Unrealized Carried Interest	(202,659)		1,290,033
Unrealized Carried Interest Compensation (Carry Pool)	83,830		(513,987)
Strategic Corporate Related Charges	6,807		19,898
Equity-based Compensation	59,017		55,111
Equity-based Compensation - Performance based	67,273		57,953

Insurance Adjustments:(2)
(Gains) Losses from Investments(2)(3)	131,114		129,032
Non-operating Changes in Policy Liabilities and Derivatives(2)	106,491		(192,201)
Strategic Corporate Related Charges(2)	—		3,079
Equity-based and Other Compensation(2)	36,393		19,498
Amortization of Acquired Intangibles(2)	2,794		2,713

After-tax Distributable Earnings	$	719,276	$	974,037
Interest Expense	85,500		69,460

Net Income Attributable to Noncontrolling Interests	5,626		7,616
Income Taxes on Operating Earnings	173,057		220,279
Distributable Operating Earnings	$	983,459	$	1,271,392
Insurance Segment Operating Earnings	(205,112)		(143,947)
Realized Performance Income	(175,398)		(609,207)
Realized Performance Income Compensation	114,009		383,635
Realized Investment Income	(198,094)		(349,354)
Realized Investment Income Compensation	29,714		52,403
Fee Related Earnings	$	548,578	$	604,922
Insurance Segment Operating Earnings	205,112		143,947
Realized Performance Income	175,398		609,207
Realized Performance Income Compensation	(114,009)		(383,635)
Realized Investment Income	198,094		349,354
Realized Investment Income Compensation	(29,714)		(52,403)
Depreciation and Amortization	10,434		7,565
Adjusted EBITDA	$	993,893	$	1,278,957

(1)Represents equity-based compensation expense in connection with the allocation of KKR Holdings Units, which were not dilutive to common stockholders of KKR & Co. Inc.

(2)Amounts represent the portion allocable to KKR & Co. Inc.

(3)Includes (gains) losses on funds withheld receivables and payables embedded derivatives.

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


	As of
	March 31, 2023		December 31, 2022
	($ in thousands)
KKR & Co. Inc. Stockholders' Equity - Common Stock	$	18,546,889	$	17,691,975
Series C Mandatory Convertible Preferred Stock	1,115,792		1,115,792
Impact of Consolidation and Other	398,751		399,318
Exchangeable Securities	205,668		128,850
Accumulated Other Comprehensive Income (AOCI) and Other (Insurance)	4,358,747		4,948,100
Book Value	$	24,625,847	$	24,284,035

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


	As of
	March 31, 2023	December 31, 2022
GAAP Shares of Common Stock Outstanding	861,104,000	861,110,478
Adjustments:

Exchangeable Securities (1)	2,695,142	2,695,142
Common Stock - Series C Mandatory Convertible Preferred Stock (2)	26,822,570	26,822,570
Adjusted Shares (3)	890,621,712	890,628,190




Unvested Equity Awards and Exchangeable Securities (4)	35,317,288	35,457,274

(1)Consists of vested restricted holdings units granted under our 2019 Equity Incentive Plan, which are exchangeable for shares of KKR & Co. Inc. common stock on a one-for-one basis.

(2)Assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted into shares of KKR & Co. Inc. common stock on March 31, 2023 and December 31, 2022.

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

(4)Represents equity awards granted under our Equity Incentive Plans. Excludes market condition awards that did not meet their market-price based vesting conditions as of March 31, 2023 and December 31, 2022.

Liquidity

We manage our liquidity and capital requirements by (a) 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 (b) seeking to maintain access to sufficient liquidity through various sources. The overall liquidity framework and cash management approach of our insurance business are also based on seeking to build an investment portfolio that is cash flow matched, providing cash inflows from insurance assets that meet our insurance companies' expected cash outflows to pay their liabilities. Our primary cash flow activities typically involve: (i) generating cash flow from operations; (ii) generating income from investment activities, by investing in investments that generate yield (namely interest and dividends), as well as through the sale of investments and other assets; (iii) funding capital commitments that we have made to, and advancing capital to, our funds and CLOs; (iv) developing and funding new investment strategies, investment products, and other growth initiatives, including acquisitions of other investments, assets, and businesses; (v) underwriting and funding capital commitments in our capital markets business; (vi) distributing cash flow to our stockholders and holders of our preferred stock; and (vii) paying borrowings, interest payments, and repayments under credit agreements, our senior and subordinated notes, and other borrowing arrangements. See "—Liquidity—Liquidity Needs—Dividends."

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

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, repurchase agreements, and other borrowing arrangements. In addition, we may generate cash proceeds from issuances of our or our subsidiaries' equity securities.

Many of our investment funds like our private equity and real assets funds provide for carried interest. With respect to our carry-paying investment funds, carried interest is eligible to be distributed to the general partner of the fund 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. Even after all of the preceding conditions are met, the general partner of the fund may, in its sole discretion, decide to defer the distribution of carried interest to it to a later date. In addition, these funds generally include what is called a “clawback” provision, which provides that the general partner must return any carried interest that is paid in excess of what the general partner is entitled to receive at the end of the term of the fund, as discussed further below.

As of March 31, 2023, certain of our investment funds had met the first and second criteria, as described above, but did not meet the third criteria. In these cases, carried interest accrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon a realization event. 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.

As of March 31, 2023, netting holes in excess of $50 million only existed at European Fund V and Health Care Growth Fund in the amounts of $86 million and $60 million, respectively. 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. There are also investment funds that are not accruing carried interest and do not have a netting hole although they may be in a clawback position. If the investment fund has distributed carried interest, but subsequently does not have sufficient value to provide for the distribution of carried interest at the end of the life of the investment fund, the general partner is typically required to return previously distributed carried interest to the fund investors. Although our current and former employees who received distributions of carried interest subject to clawback are required to return them to KKR, it is KKR’s obligation to return carried interest subject to clawback to the fund investors. As of March 31, 2023, approximately $520 million of carried interest was subject to this clawback obligation, assuming that all applicable carry-paying funds and their alternative investment vehicles were liquidated at their March 31, 2023 fair values. As of March 31, 2023, Asian Fund II is the only investment fund with a clawback obligation in excess of $50 million. See Note 25 "Commitments and Contingencies—Contingent Repayment Guarantees" in our financial statements included elsewhere in this report for further information. See also the negative amounts included in the Carried Interest column in the table included in this Item 2 in “Asset Management—Private Equity” for further information on clawback obligations.

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

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

Liquidity Needs

We expect that our (including Global Atlantic's) primary liquidity needs will consist of cash required to meet various obligations, including, without limitation, to:

continue to support and grow our Asset Management business lines, including seeding new investment strategies, supporting capital commitments made by our vehicles to existing and future funds, co-investments and any net capital requirements of our capital markets companies and otherwise supporting the investment vehicles that we sponsor;
continue to support and grow our insurance business;
grow and expand our businesses generally, including by acquiring or launching new, complementary or adjacent businesses;
warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, accounts or CLOs or other investment vehicles pending the contribution of committed capital by the fund investors in such vehicles, and advancing capital to them for operational or other needs;
service debt obligations including the payment of obligations at maturity, on interest payment dates or upon redemption, as well as any contingent liabilities, including from litigation, that may give rise to future cash payments, including funding requirements to levered investment vehicles or structured transactions;
fund cash operating expenses and contingencies, including for litigation matters and guarantees;
pay corporate income taxes and other taxes;
pay policyholders and amounts in our insurance business related to investment, reinvestment, reinsurance or funding agreement activity;
pay amounts that may become due under our tax receivable agreement;
pay cash dividends in accordance with our dividend policy for our common stock or the terms of our preferred stock, if any;
underwrite commitments, advance loan proceeds and fund syndication commitments within our capital markets business;
post or return collateral in respect of derivative contracts;
acquire other assets for our Principal Activities business line, including other businesses, investments and assets, some of which may be required to satisfy regulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent they may apply);
address capital needs of regulated subsidiaries as well as non-regulated subsidiaries; and
repurchase shares of our common stock or retire equity awards pursuant to the share repurchase program or repurchase or redeem other securities issued by us.

For a discussion of KKR's share repurchase program, see Note 23 "Equity" in our financial statements.

Capital Commitments

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

The following table presents our uncalled commitments to our active investment funds and other vehicles as of March 31, 2023:


	Uncalled Commitments
Private Equity	($ in millions)
Core Investment Vehicles	$	3,801
Asian Fund IV	367
North America Fund XIII	332
European Fund VI	250
Next Generation Technology Growth Fund III	196
Global Impact Fund II	145
Health Care Strategic Growth Fund II	124












Other Private Equity Vehicles	1,256
Total Private Equity Commitments	6,471

Real Assets
Asia Pacific Infrastructure Investors II	357
Global Infrastructure Investors IV	272
Asia Real Estate Partners	146
Real Estate Partners Americas III	91
Real Estate Partners Europe II	77
Diversified Core Infrastructure Fund	13
Real Estate Credit Opportunity Partners II	8












Other Real Assets Vehicles	1,025
Total Real Assets Commitments	1,989

Credit and Liquid Strategies
Asia Credit	96
Asset-Based Finance Partners	87
Dislocation Opportunities Fund	84
Lending Partners Europe II	11
Lending Partners III	10
Private Credit Opportunities Partners II	8







Other Credit and Liquid Strategies Vehicles	911
Total Credit and Liquid Strategies Commitments	1,207

Total Uncalled Commitments	$	9,667

Other Capital Commitments

In addition to the uncalled commitments to our investment funds as shown above, KKR has entered into contractual capital commitments primarily with respect to underwriting transactions, debt financing, revolving credit facilities, and equity syndications in our Capital Markets business line. As of March 31, 2023, these capital commitments amounted to $0.4 billion.

Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such capital commitments, including the satisfaction or waiver of any conditions to closing or funding. Our capital markets business has arrangements with third parties, which reduce our risk under certain circumstances when underwriting certain debt transactions, and thus our unfunded capital commitments as of March 31, 2023 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. For more information about our Capital Markets business line's risks, see "Risks Related to Our Business—Our capital markets activities expose us to material risks" in our Annual Report.

From time to time, we fund various underwriting, syndication and fronting commitments in our capital markets business in connection with the arranging or underwriting of loans, securities or other financial instruments, for which we may draw all or substantially all of our availability for borrowings under our available credit facilities. We generally expect these borrowings by our Capital Markets business line to be repaid promptly as these commitments are syndicated to third parties or otherwise fulfilled or terminated, although we may in some instances elect to retain a portion of the commitments for our own investment. For more information about our Capital Markets business line's risks, see "Risks Related to Our Business—Our capital markets activities expose us to material risks" in this report.

Tax Receivable Agreement

On May 30, 2022, KKR terminated the tax receivable agreement with KKR Holdings other than with respect to exchanges of KKR Holdings Units completed prior to such date. As of March 31, 2023, an undiscounted payable of $404.6 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 for certain exchanges of KKR Holdings Units that took place prior to the termination of the tax receivable agreement. As of March 31, 2023, approximately $76.7 million of cumulative cash payments have been made under the tax receivable agreement since inception.

Dividends and Stock Repurchases

A dividend of $0.165 per share of our common stock has been declared and will be paid on June 6, 2023 to holders of record of our common stock as of the close of business on May 22, 2023.

A dividend of $0.75 per share of Series C Mandatory Convertible Preferred Stock has been declared and set aside for payment on June 15, 2023 to holders of record of Series C Mandatory Convertible Preferred Stock as of the close of business on June 1, 2023.

When KKR & Co. Inc. receives distributions from KKR Group Partnership, holders of exchangeable securities receive their pro rata share of such distributions from KKR Group Partnership.

The declaration and payment of dividends to our common stockholders will be at the sole discretion of our Board of Directors, and our dividend policy may be changed at any time. We announced on February 7, 2023 that our current dividend policy will be to pay dividends to holders of our common stock in an annual aggregate amount of $0.66 per share (or a quarterly dividend of $0.165 per share) beginning with the dividend that was announced with the results for the first quarter of 2023.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 of Directors 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.

Since 2015, KKR has repurchased, or retired equity awards representing, a total of 86.3 million shares of common stock for $2.2 billion, which equates to an average price of $25.90 per share. For further information, see "Part II—Item 2—Unregistered Sales of Equity Securities and Use of Proceeds."

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. In addition, we may incur contingent liabilities for claims that may be made against us in the future. For more information about these contingent liabilities, please see Note 25 "Commitments and Contingencies" in our financial statements.

Off Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of fees, capital allocation-based income (loss), expenses, investment income, and income taxes. Our management bases these estimates and judgments on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the financial statements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.

For a further discussion about our critical accounting policies, see Note 2 "Summary of Significant Accounting Policies" in our financial statements included in this report.

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 CFEs.

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

The presentation in the financial statements reflect the significant industry diversification of KKR by its acquisition of Global Atlantic. Global Atlantic operates an insurance business, and KKR operates an asset management business, each of which possess distinct characteristics. As a result, KKR developed a two-tiered presentation approach for the financial statements in this Management's Discussion and Analysis. KKR believes that these separate presentations provide a more informative view of the consolidated financial position and results of operations than traditional aggregated presentations. KKR believes that reporting Global Atlantic’s insurance operations separately is appropriate given, among other factors, the relative significance of Global Atlantic’s policy liabilities, which are not obligations of KKR (other than the insurance companies that issued them). If a traditional aggregated presentation were to be used, KKR would expect to eliminate or combine several identical or similar captions, which would condense the presentations but would reduce transparency. KKR also believes that 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.

Consolidation

KKR consolidates all entities that it controls either through a majority voting interest or as the primary beneficiary of variable interest entities (“VIEs”). The following discussion is intended to provide supplemental information about how the application of consolidation principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment. For a detailed description of our accounting policy on consolidation, see Note 2 "Summary of Significant Accounting Policies" in our financial statements included in this report.

As part of its consolidation procedures, KKR evaluates: (1) whether it holds a variable interest in an entity, (2) whether the entity is a VIE, and (3) whether the KKR’s involvement would make it the primary beneficiary. The determination that KKR holds a controlling financial interest in an investment vehicle significantly changes the presentation of our consolidated financial statements.

The assessment of whether we consolidate an investment vehicle we manage requires the application of significant judgment. These judgments are applied both at the time we become involved with an investment vehicle and on an ongoing basis and include, but are not limited to:

Determining whether our management fees, carried interests or incentive fees represent variable interests - We make judgments as to whether the fees we earn are commensurate with the level of effort required for those fees and at market rates. In making this judgment, we consider, among other things, the extent of third party investment in the entity and the terms of any other interests we hold in the VIE.
Determining whether a legal entity qualifies as a VIE - For those entities where KKR holds a variable interest, management determines whether each of these entities qualifies as a VIE and, if so, whether or not KKR is the primary beneficiary. The assessment of whether the entity is a VIE is generally performed qualitatively, which requires judgment. These judgments include: (a) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the economic performance of the entity, (c) determining whether two or more parties’ equity interests should be aggregated, and (d) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity. Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities. Under the voting interest entity model, KKR consolidates those entities it controls through a majority voting interest.
Concluding whether KKR has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE - As there is no explicit threshold in GAAP to define “potentially significant,” we must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.

Changes to these judgments could result in a change in the consolidation conclusion for a legal entity.

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 March 31, 2023 represents management's best estimate of the amounts that we would anticipate realizing on the sale of these investments in an orderly transaction at such date.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. 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 private equity investments), and including investments in both consolidated and unconsolidated investment funds, approximately 55% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis. Less than 2% 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 March 31, 2023, the overall weights ascribed to the market comparables methodology, the discounted cash flow methodology, and a methodology based on pending sales for this portfolio of Level III private equity investments were 38%, 54%, and 8%, respectively.

There is inherent uncertainty involved in the valuation of Level III investments, and there is no assurance that, upon liquidation, KKR will realize the values reflected in our valuations. Our valuations may differ significantly from the values that would have been used had an active market for the investments existed, and it is reasonably possible that the difference could be material. See "—Business Environment" for more information on factors that may impact our business, financial performance, operating results and valuations.

Key unobservable inputs that have a significant impact on our Level III valuations as described above are included in Note 10 "Fair Value Measurements" in our financial statements.

Level III Valuation Process

The valuation process involved for Level III measurements is completed on a quarterly basis and is designed to subject the valuation of Level III investments to an appropriate level of consistency, oversight, and review.

For private equity and real asset investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. KKR begins its procedures to determine the fair values of its Level III assets approximately one month prior to the end of a reporting period, and KKR follows additional procedures to ensure that its determinations of fair value for its Level III assets are appropriate as of the relevant reporting date. These preliminary valuations are reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR's valuations annually for all Level III private equity and real asset investments and quarterly for investments other than certain investments, which have values less than preset value thresholds and which in the aggregate comprise less than 1% of the total value of KKR's Level III private equity and real asset investments. The valuations of certain real asset investments are determined solely by independent valuation firms without the preparation of preliminary valuations by our investment professionals, and instead such independent valuation firms rely on valuation information available to it as a broker or valuation firm. For credit investments, an independent valuation firm is generally engaged by KKR to assist with the valuations of most investments classified as Level III. The valuation firm either provides a value, provides a valuation range from which KKR's investment professionals select a point in the range to determine the valuation, or performs certain procedures in order to assess the reasonableness of KKR's valuations. After reflecting any input from the independent valuation firm, the valuation proposals are submitted for review and approval by KKR's valuation committees. As of March 31, 2023, less than 3% of the total value of our Level III credit investments were not valued with the engagement of an independent valuation firm.

For Level III investments in Asset Management, KKR has a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. The global valuation committee is assisted by the asset class-specific valuation committees that exist for private equity (including core equity investments and certain impact investments), growth equity (including certain impact investments), real estate, energy, infrastructure and credit. The asset class-specific valuation committees are responsible for the review and approval of all preliminary Level III valuations in their respective asset classes on a quarterly basis. The members of these valuation committees are comprised of investment professionals, including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarily responsible for the management of the investments. All Level III valuations for investments in Asset Management are also subject to approval by the global valuation committee, which is comprised of senior employees including investment professionals and professionals from business operations functions, and includes KKR's Co-Chief Executive Officers and its Chief Financial Officer, Chief Legal Officer, General Counsel, and Chief Compliance Officer. When valuations are approved

by the global valuation committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the Audit Committee of the Board of Directors of KKR & Co. Inc. and are then reported to the Board of Directors.

Level III investments held by Global Atlantic are valued on the basis of pricing services, broker-dealers or internal models. Global Atlantic performs a quantitative and qualitative analysis and review of the information and prices received from independent pricing services as well as broker-dealers to verify that it represents a reasonable estimate of fair value. As of March 31, 2023, approximately 89% of these investments were priced via external sources, while approximately 11% were valued on the basis of internal models. For all the internally developed models, Global Atlantic seeks to verify the reasonableness of fair values by analyzing the inputs and other assumptions used. These preliminary valuations are reviewed, based on certain thresholds, by an independent valuation firm engaged by Global Atlantic to perform certain procedures in order to assess the reasonableness of Global Atlantic's valuations. When valuations are approved by Global Atlantic's management, the valuations of its Level III investments, as well as the valuations of Level I and Level II investments, are presented to the Audit Committee of the Board of Directors of KKR & Co. Inc. and are then reported to the Board of Directors.

As of March 31, 2023, upon completion by, where applicable, independent valuation firms of certain limited procedures requested to be performed by them on certain Level III investments, the independent valuation firms concluded that the fair values, as determined by KKR (including Global Atlantic), of those investments reviewed by them were reasonable. 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.

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 March 31, 2023, there were no investments which represented greater than 5% of total investments on a GAAP basis. On a non-GAAP basis, as of March 31, 2023, investments which represented greater than 5% of total non-GAAP investments consisted of USI, Inc. (financial services sector) and PetVet Care Centers, LLC (health care sector) and valued at $1,300 million and $1,143 million, respectively. Our investment income on a GAAP basis and our book value can be impacted by volatility in the public markets related to our holdings of publicly traded securities, including our sizable holdings of Crescent Energy and BridgeBio Pharma, Inc. See "—Business Environment" for a discussion of factors that may impact the valuations of our investments, financial results, operating results and valuations, and "—Non-GAAP Balance Sheet Measures" for additional information regarding our largest holdings on a non-GAAP basis.

Business Combinations

KKR accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date.

Management’s determination of fair value of assets acquired and liabilities assumed at the acquisition date is based on the best information available in the circumstances and may incorporate management’s own assumptions and involve a significant degree of judgment. We use our best estimates and assumptions to accurately assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful life, discount rates and income tax rates. Our estimates for future cash flows are based on historical data, various internal estimates and certain external sources, and are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying assets acquired. We estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual result.

Income Taxes

Significant judgment is required in estimating the provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance), accrued interest or penalties and uncertain tax positions. In evaluating these judgments, we consider, among other items, projections of taxable income (including the character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that KKR uses to manage its business. A portion of the deferred tax assets are not considered to be more likely than not to be realized. For that portion of the deferred tax assets for Global Atlantic, a valuation allowance has been recorded. Revisions in estimates and/or actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any. Please see Note 19 "Income Taxes" in our financial statements in this report for further details.

Critical Accounting Policies and Estimates - Asset Management

Revenues

Fees and Other

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

Transaction fee calculations and management fee calculations based on committed capital or invested capital typically do not require discretion and therefore do not require the use of significant estimates or judgments. Management fee calculations based on net asset value depend on the fair value of the underlying investments within the investment vehicles. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used as well as economic conditions.

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.

Carried interest is recognized upon appreciation of the funds’ investment values above certain return hurdles set forth in their partnership agreement. KKR recognizes revenues attributable to capital allocation-based income based upon the amount that would be due pursuant to the fund partnership agreement at each period end as if the funds were terminated at that date. Accordingly, the amount recognized reflects KKR’s share of the gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair values as of the end of the prior period. Because of the inherent uncertainty in measuring the fair value of investments in the absence of observable market prices as previously discussed, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is reasonably possible that the difference could be material.

Expenses

Compensation and Benefits

Compensation and Benefits expense includes (i) base cash compensation consisting of salaries and wages, (ii) benefits, (iii) carry pool allocations, (iv) equity-based compensation and (v) discretionary cash bonuses.

To supplement base cash compensation, benefits, carry pool allocations, and equity-based compensation, we typically pay discretionary cash bonuses, which are included in Compensation and Benefits expense in the consolidated statements of operations, based principally on the level of (i) management fees and other fee revenues (including incentive fees), (ii) realized carried interest and (iii) realized investment income earned during the year. The amounts paid as discretionary cash bonuses, if any, are at our sole discretion and vary from individual to individual and from period to period, including having no cash bonus. We accrue discretionary cash bonuses when payment becomes probable and reasonably estimable which is generally in the period when we make the decision to pay discretionary cash bonuses and is based upon a number of factors, including the recognition of fee revenues, realized carried interest, realized investment income and other factors determined during the year.

Beginning in 2021, we expect to pay our employees by assigning a percentage range to each component of asset management segment revenues. Based on the current components and blend of our asset management segment revenues on an annual basis, we expect to use approximately: (i) 20‐25% of fee related revenues, (ii) 60‐70% of realized carried interest and incentive fees not included in fee related performance revenues or earned from our hedge fund partnerships, and (iii) 10‐20% of realized investment income and hedge fund partnership incentive fees, to pay our asset management employees. Because these ranges are applied to applicable asset management segment revenue components independently, and on an annual basis, the amount paid as a percentage of total asset management segment revenue will vary and will, for example, likely be higher in a period with relatively higher realized carried interest and lower in a period with relatively lower realized carried interest. We decide whether to pay a discretionary cash bonus and determine the percentage of applicable revenue components to pay compensation only upon the occurrence of the realization event. There is no contractual or other binding obligation that requires us to pay a discretionary cash bonus to the asset management employees, except in limited circumstances.

Assuming that we had accrued compensation of (i) 65% of the unrealized carried interest earned by the funds that allocate 40% and 43% to the carry pool and (ii) 15% of the unrealized net gains in our Principal Activities business line (in each case at the mid-point of the ranges above), KKR & Co. Inc. Stockholders’ Equity – Common Stock as of March 31, 2023 would have been reduced by approximately $1.50 per share, compared to our reported $21.54 per share on such date, and our book value as of March 31, 2023 would have been reduced by approximately $1.45 per adjusted share, compared to our reported book value of $27.65 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 Associates Holdings, 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 Associates Holdings and us, and we do not exercise discretion on whether to make an allocation to the carry pool upon a realization event. These amounts are accounted for as compensatory profit sharing arrangements in Accrued Expenses and Other Liabilities within the accompanying consolidated statements of financial condition in conjunction with the related carried interest income and are recorded as compensation expense. Upon a reversal of carried interest income, the related carry pool allocation, if any, is also reversed. Accordingly, such compensation expense is subject to both positive and negative adjustments.

In February 2021, with the approval of a majority of our independent directors, KKR amended the percentage of carried interest that is allocable to the carry pool to 65% for (i) current investment funds for which no or de minimis amounts of carried interest was accrued as of December 31, 2020 and (ii) all future funds. For all other funds, the percentage of carried interest remains 40% or 43%, as applicable. The percentage of carried interest allocable to the carry pool may be increased above 65% only with the approval of a majority of our independent directors. To account for the difference in the carry pool allocation percentages, we expect to use a portion of realized carried interest from the older funds equal to the difference between 65% and 40% or 43%, as applicable, to supplement the carry pool and to pay amounts as discretionary cash bonus compensation as described above to our asset management employees. The amounts paid as discretionary cash bonuses, if any, are at our discretion and vary from individual to individual and from period to period, including having no cash bonus at all for certain employees. See "—Revenues—Capital Allocation-Based Income (Loss)" and "—Compensation and Benefits" above.

On the Sunset Date (which will not be later than December 31, 2026), KKR will acquire control of Associates Holdings and will commence making decisions regarding the allocation of carry proceeds pursuant to the limited partnership agreement of 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 Associates Holdings, provided that any allocation of carry proceeds to the Co-Founders will be on a percentage basis consistent with past practice. For additional information about the Sunset Date and the Reorganization Agreement, see Note 1 "Organization" in our financial statements included in this report.

Equity-based Compensation

In addition to the cash-based compensation and carry pool allocations as described above, employees receive equity awards under our Equity Incentive Plans, most of which are subject to service-based vesting typically over a three to five-year period from the date of grant, and some of which are also subject to the achievement of market-based conditions. Certain of these awards are subject to post-vesting transfer restrictions and minimum retained ownership requirements.

Compensation expense relating to the issuance of equity-based awards is measured at fair value on the grant date. In determining the aggregate fair value of any award grants, we make judgments as to the grant-date fair value, particularly for certain restricted units with a vesting condition based upon market conditions, whose grant date fair values are based on a probability distributed Monte-Carlo simulation. See Note 20 "Equity Based Compensation,” in our financial statements included in this report for further discussion and activity of these awards.

Investment Income (Loss) -Net Gains (Losses) from Investment Activities

Net gains (losses) from investment activities consist of realized and unrealized gains and losses arising from our investment activities as well as income earned from certain equity method investments. 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 the above "—Critical Accounting Policies and Estimates—Fair Value Measurements."

Critical Accounting Policies and Estimates – 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 Global Atlantic's 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 interest-sensitive life policies and most annuity contracts, the base policy reserve is equal to the account value. For these products, the account value represents Global Atlantic's obligation to repay to the policyholder the amounts held with us 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, interest-sensitive life products (including those with secondary guarantees), and preneed policies.

The critical accounting estimates and related sensitivities, reported below have been updated from those reported in the Annual Report to reflect the impact from the adoption of LDTI (see Note 2 "Summary of Significant Accounting Policies" in our financial statements included in this report.)

Market risk benefits

Market risk benefits are contracts or contract features that both provide protection to the policyholder from other-than-nominal capital market risk and expose Global Atlantic to other-than-nominal capital market risk. Market risk benefits include certain contract features on fixed annuity and variable annuity products, including minimum guarantees to policyholders, such as guaranteed minimum death benefits (GMDBs), guaranteed minimum withdrawal benefits (GMWBs), and long-term care benefits (i.e., capped at the return of account value plus one or two times the account value).

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.

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 Global Atlantic's 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.

See Note 18 — “Policy liabilities” for additional information.

As of March 31, 2023, the net market risk liability balance totaled $740.1 million. As of March 31, 2023, the liability balances for market risk benefits were $611.2 million for fixed-indexed annuities and $128.9 million for variable and other annuities. The increase (decrease) to the net market risk benefit liability balance as a result of hypothetical changes in interest rates, equity market prices, policyholder behavior 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.


	As of March 31, 2023
	Fixed-indexed annuity		Other
($ in thousands)
Balance	$	611,221	$	128,923
Hypothetical change:
+50 bps interest rates	(108,273)		(50,798)
-50 bps interest rates	120,421		59,420
+50 bps credit spreads	(115,572)		(23,006)
-50 bps credit spreads	130,017		25,373
+10% equity market prices	(37,232)		(39,460)
-10% equity market prices	20,904		43,997
95% of expected mortality	38,351		7,007
105% of expected mortality	(36,098)		(6,402)
90% of expected surrenders	14,853		7,667
110% of expected surrenders	(14,190)		(7,220)

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

Policy liabilities accounted for under a fair value option

Variable annuity contracts offered and assumed by Global Atlantic provides the contractholder with a GMDB. The liabilities for these benefits are included in policy liabilities. Global Atlantic elected the fair value option to measure the liability for certain of these variable annuity contracts valued at $378.7 million as March 31, 2023. 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 the U.S. Treasury rates plus an adjustment for instrument-specific credit risk 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 statement of operations.

As of March 31, 2023, variable annuities accounted for using the fair value option totaled $378.7 million. 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.


	As of March 31, 2023
	Variable annuities
($ in thousands)
Balance	$	378,721
Hypothetical change:
+50 bps interest rates	(20,755)
-50 bps interest rates	22,373
+50 bps credit spreads	(14,360)
-50 bps credit spreads	14,857
+10% equity market prices	(18,918)
-10% equity market prices	21,597
95% of expected mortality	(6,603)
105% of expected mortality	6,336
90% of expected surrenders	710
110% of expected surrenders	(716)

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

Liability for future policyholder benefits

A liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. The liability is estimated using current assumptions that include mortality, lapses, and expenses. These current assumptions are based on judgments that consider Global Atlantic’s historical experience, industry data, and other factors, and are updated quarterly and the current period change in the liability is recognized as a separate component of benefit expense in the consolidated income statement.

As of March 31, 2023, the liability for future policy benefits totaled $7.5 billion, net of reinsurance, split between $7.1 billion associated with payout annuity products, and $421.0 million of life and other insurance products. The increase (decrease) as a result of hypothetical changes in projected assessments, interest rates, 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.


	As of March 31, 2023
	Payout annuities		Life and other
($ in thousands)
Balance	$	7,078,616	$	421,026
Hypothetical change:
+50 bps interest rates	(147,770)		(117,418)
-50 bps interest rates	160,188		126,737
+50 bps credit spreads	(150,686)		(119,630)
-50 bps credit spreads	156,886		124,286
95% of expected mortality(1)	56,316		31,005
105% of expected mortality(1)	(53,363)		(27,560)
90% of expected surrenders/lapses	—		(2,435)
110% of expected surrenders/lapses	—		1,917

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

(1)Includes decrements for terminations of disability insurance

Additional liability for annuitization, death, or other insurance benefits: no-lapse guarantees

Global Atlantic has in-force interest-sensitive life contracts where it provides a secondary guarantee to the policyholder. The policy can remain in-force, even if the base policy account value is zero, as long as contractual secondary guarantee requirements have been met. The primary risk is that the premium collected under these policies, together with the investment return Global Atlantic earns on that premium, is ultimately insufficient to pay the policyholder’s benefits and the expenses associated with issuing and administering these policies. Global Atlantic holds an additional reserve in connection with these guarantees.

The additional reserves related to interest-sensitive life products with secondary guarantees are calculated using methods similar to those described above under “Policyholder liabilities— Market risk benefits.” The costs related to these secondary guarantees are recognized over the life of the contracts through the accrual and subsequent release of a reserve which is revalued each period. The reserve is calculated based on assessments, over a range of economic scenarios to incorporate the variability in the obligation that may occur under different environments. The change in the reserve is included in policy benefits and claims in the consolidated statements of operations.

As of March 31, 2023, the interest-sensitive life additional liability balance totaled $4.9 billion. The increase (decrease) to the interest-sensitive life additional liability balance, as a result of hypothetical changes in projected assessments, interest rates, 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 the interest-sensitive life no-lapse guarantee liability balance.


	As of March 31, 2023
	Interest-sensitive life
($ in thousands)
Balance	$	4,909,488
Hypothetical change:
+50 bps interest rates	313
-50 bps interest rates	(187)
+10% equity market prices	1,287
-10% equity market prices	15
1% lower annual equity growth	(5,417)
95% of expected mortality	(69,219)
105% of expected mortality	67,855
90% of expected surrenders	19,041
110% of expected surrenders	(18,183)

Note: Hypothetical changes to the interest-sensitive life additional liability for annuitization, death, or other insurance benefits balance do not reflect the impact of related hedges.

Embedded derivatives in policy liabilities and funds withheld

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.

Global Atlantic calculates the embedded derivative 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 instrument specific credit risk on Global Atlantic's obligation (i.e., Global Atlantic's credit risk).

Changes in interest rates, future index credits, instrument-specific credit risk, projected withdrawal and surrender activity, and mortality on fixed-indexed annuity and interest-sensitive life products 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 instrument-specific credit risk tied to Global Atlantic's own credit rating.

Valuation of embedded derivatives – Interest-sensitive life products

Interest-sensitive 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 increased by instrument-specific credit risk 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 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 funds withheld receivable or payable 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 interest rate and 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 our consolidated statement of financial condition. The change in the fair value of the embedded derivatives is recorded in net investment-related gains (losses) in the consolidated statement of operations.

As of March 31, 2023, the embedded derivative liability balance totaled $2.4 billion for fixed-indexed annuities, and $373.4 million for interest-sensitive life. The increase (decrease) to the embedded derivatives on fixed-indexed annuity and indexed universal life as a result of hypothetical changes in interest rates, own-credit spreads, 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.


	As of March 31, 2023
	Fixed-indexed annuities		Interest sensitive life
($ in thousands)
Balance	$	2,402,427	$	373,391
Hypothetical change:
+50 bps interest rates	(51,449)		(3,564)
-50 bps interest rates	54,840		3,731
+50 bps credit spreads	(63,279)		(3,564)
-50 bps credit spreads	66,314		3,731
+10% equity market prices	431,179		72,447
-10% equity market prices	(270,928)		(61,621)

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

As of March 31, 2023, the embedded derivative balance for modified coinsurance or funds withheld arrangements was a $3.0 billion net asset ($(18.0) million in funds withheld receivables at interest, and $(3.1) billion in funds withheld payable at interest). The increase (decrease) to the embedded derivatives on fixed-indexed annuity and interest-sensitive life products 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.


	As of March 31, 2023
	Embedded derivative on funds withheld receivable at interest		Embedded derivative on funds withheld payable at interest
($ in thousands)
Balance	$	(17,982)	$	(3,057,531)
Hypothetical change:
+50 bps interest rates	(14,367)		(712,731)
-50 bps interest rates	22,164		772,957
+50 bps credit spreads	(40,558)		(743,449)
-50 bps credit spreads	40,558		803,676

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.

Recently Issued Accounting Pronouncements

For a full discussion of recently issued accounting pronouncements, see Note 2 "Summary of Significant Accounting Policies" in our financial statements.

Previous: Item 1. FINANCIAL STATEMENTS · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.