Affiliated Managers (AMG) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the unaudited consolidated financial information for the quarterly period, including statements and detailed notes Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements of Affiliated Managers Group, Inc. (AMG) for the quarterly period ended September 30, 2024, including statements of income, comprehensive income, balance sheets, changes in equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial line items CONSOLIDATED STATEMENTS OF INCOME Provides a summary of the company's revenues, expenses, and net income for the three and nine months ended September 30, 2024 and 2023 | Metric (in millions, except per share data) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:--------------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Consolidated revenue | $525.2 | $516.4 | $1,555.2 | $1,516.6 | | Total consolidated expenses | $357.4 | $374.7 | $1,112.5 | $1,115.4 | | Net income | $286.0 | $185.8 | $661.9 | $519.5 | | Net income (controlling interest) | $217.0 | $123.6 | $476.8 | $349.5 | | Earnings per share (diluted) | $5.48 | $3.78 | $12.28 | $10.25 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Details the company's net income and other comprehensive income components, leading to total comprehensive income | Metric (in millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:---------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Net income | $286.0 | $185.8 | $661.9 | $519.5 | | Other comprehensive income (loss), net of tax | $(30.3) | $40.2 | $21.5 | $44.4 | | Comprehensive income | $255.7 | $226.0 | $683.4 | $563.9 | | Comprehensive income (controlling interest) | $198.3 | $148.1 | $500.3 | $377.9 | CONSOLIDATED BALANCE SHEETS Presents the company's financial position, including assets, liabilities, and equity, as of December 31, 2023, and September 30, 2024 | Metric (in millions) | December 31, 2023 | September 30, 2024 | |:---------------------|:------------------|:-------------------| | Total assets | $9,059.6 | $8,903.0 | | Total liabilities | $4,096.1 | $4,231.9 | | Total equity | $4,570.1 | $4,274.0 | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Outlines the changes in total equity, reflecting net income, share repurchases, and distributions to non-controlling interests - Total equity decreased from $4,570.1 million as of December 31, 2023, to $4,274.0 million as of September 30, 2024, primarily due to share repurchases and distributions to non-controlling interests, partially offset by net income and other comprehensive income[13][17][18] CONSOLIDATED STATEMENTS OF CASH FLOWS Summarizes cash inflows and outflows from operating, investing, and financing activities for the nine-month periods | Metric (in millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:---------------------|:-------------------------------|:-------------------------------| | Operating cash flow | $619.4 | $719.6 | | Investing cash flow | $477.9 | $370.6 | | Financing cash flow | $(524.0) | $(904.1) | | Net increase in cash and cash equivalents | $573.1 | $191.8 | | Cash and cash equivalents at end of period | $999.2 | $1,010.7 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Provides detailed explanations of accounting policies, estimates, and specific line items within the financial statements 1. Basis of Presentation and Use of Estimates Explains the accounting principles used and the role of management's estimates in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim financial information, and management's estimates and assumptions are integral to the reported amounts[19] 2. Accounting Standards and Policies Details the adoption of new accounting standards and the expected impact of upcoming pronouncements - The Company adopted ASU 2022-03 (Fair Value Measurement) effective January 1, 2024, with no material impact[20] - Upcoming ASUs (2023-07 Segment Reporting, 2023-09 Income Taxes, 2024-01 Stock Compensation) are not expected to have a material impact[21] 3. Investments in Marketable Securities Discusses the company's holdings in equity and debt securities, including fair value changes and proceeds from maturities Equity Securities Fair Value | Metric (in millions) | December 31, 2023 | September 30, 2024 | |:---------------------|:------------------|:-------------------| | Cost | $35.3 | $37.6 | | Fair value | $37.9 | $42.0 | - Net unrealized gains on equity securities held increased to $2.0 million for the three months ended September 30, 2024, and $3.5 million for the nine months ended September 30, 2024[24] - All U.S. Treasury securities classified as available-for-sale matured during the nine months ended September 30, 2024, generating $825.2 million in proceeds[25] 4. Other Investments Covers investments in Affiliate-advised funds and private corporations, detailing fair value and balance changes - Other investments primarily consist of investments in Affiliate-advised funds measured at NAV and private corporation investments measured at cost[27] - Fair value of private equity funds increased from $424.4 million (Dec 31, 2023) to $477.5 million (Sep 30, 2024)[28] Other Investments Balance Changes (Three Months Ended Sep 30, 2024) | Metric (in millions) | Measured at NAV | Without Readily Determinable Fair Values | Total | |:---------------------|:----------------|:-----------------------------------------|:------| | Balance, beginning of period | $479.9 | $50.4 | $530.3| | Purchases and commitments | $13.6 | — | $13.6 | | Sales and distributions | $(20.4) | — | $(20.4)| | Net realized and unrealized gains | $9.3 | — | $9.3 | | Balance, end of period | $482.4 | $50.4 | $532.8| 5. Fair Value Measurements Categorizes financial assets and liabilities measured at fair value, highlighting Level 3 liabilities and their valuation sensitivities Financial Assets and Liabilities Measured at Fair Value (Sep 30, 2024) | Metric (in millions) | Fair Value | Level 1 | Level 2 | Level 3 | |:---------------------|:-----------|:--------|:--------|:--------| | Investments in equity securities | $42.0 | $42.0 | — | — | | Investments in debt securities | $24.1 | — | $24.1 | — | | Contingent payment obligations | $6.5 | — | — | $6.5 | | Affiliate equity purchase obligations | $58.9 | — | — | $58.9 | - Contingent payment obligations and Affiliate equity purchase obligations are classified as Level 3 liabilities, with fair values sensitive to assumed volatility, growth rates, and discount rates[37][38] 6. Investments in Affiliates and Affiliate Sponsored Investment Products Explains the consolidation policies for Affiliates and presents net assets and exposure to loss for unconsolidated VIEs - The Company consolidates Voting Rights Entities (VREs) where it has control and Variable Interest Entities (VIEs) where it is the primary beneficiary[39][40] - Otherwise, investments are accounted for using the equity method or at fair value[40] Unconsolidated VIE Net Assets and Maximum Exposure to Loss | Category (in millions) | Dec 31, 2023 VIE Net Assets | Sep 30, 2024 VIE Net Assets | |:-----------------------|:----------------------------|:----------------------------| | Affiliates accounted for under the equity method | $1,492.4 | $1,173.6 | | Affiliate sponsored investment products | $5,788.3 | $5,332.2 | 7. Debt Provides a summary of outstanding debt, including new issuances, repayments, and maturity profiles Summary of Debt (in millions) | Debt Type | December 31, 2023 | September 30, 2024 | |:--------------------------|:------------------|:-------------------| | Senior bank debt | $349.9 | $0 | | Senior notes | $1,096.9 | $1,091.7 | | Junior subordinated notes | $751.8 | $1,189.0 | | Junior convertible securities | $338.9 | $339.0 | | Total Debt | $2,537.5 | $2,619.7 | - The Company repaid its $350.0 million senior unsecured term loan facility during the nine months ended September 30, 2024[50] - A $1.25 billion revolver matures on October 25, 2027, with no outstanding borrowings as of September 30, 2024[50] - In August 2024, the Company issued $400.0 million of 5.50% senior unsecured notes due August 2034[52] - In March 2024, $450.0 million of 6.75% junior subordinated notes due March 2064 were issued[53] 8. Commitments and Contingencies Details unfunded commitments, deferred payment obligations, and contingent payment obligations - As of September 30, 2024, unfunded commitments to co-invest in Affiliate sponsored investment products totaled $215.7 million[56] - Deferred payment obligations were $43.3 million, and contingent payment obligations were $6.5 million (fair value), with maximum potential payments up to $110.0 million[57][58] 9. Goodwill and Acquired Client Relationships Presents the balances of goodwill and acquired client relationships, noting changes from amortization and transactions Goodwill and Acquired Client Relationships (in millions) | Metric | December 31, 2023 | September 30, 2024 | |:-------|:------------------|:-------------------| | Goodwill | $2,523.6 | $2,532.0 | | Acquired client relationships (net) | $1,812.4 | $1,807.1 | - Intangible amortization and impairments decreased by 42% for both the three and nine months ended September 30, 2024, primarily due to certain definite-lived assets being fully amortized and the Veritable Transaction[60] - In Q3 2023, the Company completed the sale of its equity interest in Veritable, LP, resulting in a $133.1 million pre-tax gain[61][62] 10. Equity Method Investments in Affiliates Details the components of equity method investments in Affiliates, including goodwill and impairment expenses Equity Method Investments in Affiliates (Net) (in millions) | Metric | December 31, 2023 | September 30, 2024 | |:-------|:------------------|:-------------------| | Goodwill | $1,323.3 | $1,348.1 | | Definite-lived acquired client relationships (net) | $652.5 | $568.1 | | Indefinite-lived acquired client relationships (net) | $122.6 | $122.4 | | Undistributed earnings and tangible capital | $190.1 | $109.8 | | Total Equity method investments in Affiliates (net) | $2,288.5 | $2,148.4 | - In Q2 2024, the Company made a minority investment in Suma Capital[63] - A $39.9 million impairment expense was recorded in Q2 2024 to reduce the carrying value of an Affiliate to fair value due to an anticipated decline in assets under management[65] 11. Related Party Transactions Describes transactions with related parties, including interests held by prior owners and investments in Affiliate-advised funds - Related party transactions include interests held by a prior owner of a consolidated Affiliate ($15.0 million as of Sep 30, 2024), investments in Affiliate-advised funds, and various services provided between the Company and its Affiliates[68] 12. Share-Based Compensation Reports share-based compensation expense and unrecognized expense, with details on stock option grants Share-Based Compensation Expense (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Share-based compensation expense | $14.5 | $10.2 | $43.9 | $42.1 | - Unrecognized share-based compensation expense was $48.7 million as of September 30, 2024, to be recognized over approximately two years[69] - No stock options were granted in the nine months ended September 30, 2023 or 2024[73] 13. Redeemable Non-Controlling Interests Explains the nature and total value of redeemable non-controlling interests, including put rights - Redeemable non-controlling interests represent Affiliate equity interests with conditional put rights to the Company[74] - As of September 30, 2024, these interests totaled $397.1 million, including $13.3 million from consolidated Affiliate sponsored investment products[75][76] 14. Affiliate Equity Discusses distributions to non-controlling interests and cash paid for Affiliate equity purchases and compensation expense - Distributions paid to non-controlling interest Affiliate equity holders decreased from $216.4 million (9M 2023) to $206.5 million (9M 2024)[77] - Cash paid for Affiliate equity purchases increased from $41.7 million (9M 2023) to $60.4 million (9M 2024)[77] Affiliate Equity Compensation Expense (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Total | $11.5 | $12.1 | $39.5 | $46.5 | 15. Income Taxes Provides the consolidated provision for income taxes and explains the effective tax rate fluctuations Consolidated Provision for Income Taxes (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Income tax expense | $77.7 | $31.3 | $155.4 | $130.0 | | Effective tax rate (controlling interest) | 25.9% | 19.3% | 23.9% | 26.1% | - The effective tax rate for the three months ended September 30, 2024, was lower (19.3% vs 25.9% YoY) primarily due to tax windfalls from share-based compensation[83] - For the nine months, the rate was higher (26.1% vs 23.9% YoY) due to an impairment expense with no tax benefit, partially offset by share-based compensation windfalls[83] 16. Earnings Per Share Reconciles net income to earnings per share, including details on share repurchases and average shares outstanding Earnings Per Share Reconciliation | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Net income (controlling interest) | $217.0 | $123.6 | $476.8 | $349.5 | | Average shares outstanding (basic) | 34.9 | 30.1 | 35.6 | 31.4 | | Average shares outstanding (diluted) | 43.4 | 35.0 | 42.9 | 35.2 | - The Company repurchased 0.6 million shares (3M 2024) and 3.6 million shares (9M 2024) of common stock at average prices of $163.23 and $158.62, respectively[86] 17. Comprehensive Income Details the components of other comprehensive income, including foreign currency translation and derivative gains/losses Other Comprehensive Income (Loss), Net of Tax (in millions) | Component | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:----------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Foreign currency translation gain (loss) | $(30.6) | $39.2 | $20.6 | $42.6 | | Change in net realized and unrealized gain (loss) on derivative financial instruments | $(0.3) | $1.0 | $0.5 | $1.4 | | Change in net unrealized gain (loss) on available-for-sale debt securities | $0.6 | $0.0 | $0.4 | $0.4 | | Total Other comprehensive income (loss) | $(30.3) | $40.2 | $21.5 | $44.4 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on AMG's financial condition, results of operations, and liquidity, highlighting key performance drivers, strategic investments, and market trends. It includes discussions of both GAAP and non-GAAP financial measures Executive Overview Provides a high-level summary of AMG's business model, strategic focus, and aggregate assets under management - AMG is a strategic partner to independent investment firms globally, focusing on generating long-term value through diverse investments and resource allocation to high-growth areas[91] - As of September 30, 2024, aggregate assets under management were approximately $728 billion[91] - In Q2 2024, AMG completed a minority investment in Suma Capital, a pan-European private markets firm focused on the transition to a lower carbon economy[91] Operating Performance Measures Presents key metrics related to assets under management and aggregate fees, reflecting the company's operational performance Assets Under Management Details changes in assets under management by strategy, including net client cash flows and market changes Key Aggregate Operating Performance Measures (in billions) | Metric | As of Sep 30, 2023 | As of Sep 30, 2024 | % Change | |:-------|:-------------------|:-------------------|:---------| | Assets under management | $635.8 | $728.4 | 15% | | Average assets under management | $663.8 | $711.7 | 7% | - Alternatives strategies saw net inflows for the three and nine months ended September 30, 2024, while equity strategies experienced outflows[96] - Private markets strategies accounted for 18% of AUM as of September 30, 2024[97] Changes in Assets Under Management by Strategy (Quarter to Date, in billions) | Metric | Alternatives | Global Equities | U.S. Equities | Multi-Asset & Income | Total | |:-------|:-------------|:----------------|:--------------|:---------------------|:------| | June 30, 2024 | $256.6 | $186.4 | $146.6 | $111.4 | $701.0| | Net client cash flows | $7.4 | $(6.3) | $(3.7) | $(0.2) | $(2.8)| | Market changes | $1.1 | $11.2 | $8.3 | $3.6 | $24.2 | | September 30, 2024 | $266.5 | $194.3 | $151.6 | $116.0 | $728.4| - As of September 30, 2024, 72% of liquid alternatives AUM, 36% of global equity AUM, and 40% of U.S. equity AUM outperformed their benchmarks over a 3-year period[103] - For private markets, 82% of the latest vintage AUM outperformed benchmarks on a since-inception IRR basis[103] Aggregate Fees Analyzes the drivers of aggregate fee changes, distinguishing between asset-based and performance-based fees Aggregate Fees (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Aggregate fees | $997.5 | $1,157.1 | 16% | | Asset-based fees | | +$97.2 | 10% | | Performance-based fees | | +$62.4 | 6% | - The 16% increase in aggregate fees for the three months ended September 30, 2024, was driven by a 10% increase in asset-based fees (due to higher average AUM and portfolio composition changes) and a 6% increase in performance-based fees, primarily from liquid alternatives[106] - Approximately 27% of total AUM could potentially earn performance-based fees as of September 30, 2024, with 12% from consolidated Affiliates and 46% from equity method Affiliates[106] Financial and Supplemental Financial Performance Measures Compares GAAP and non-GAAP financial measures, including net income, Adjusted EBITDA, and Economic Net Income Key Financial and Supplemental Financial Performance Measures (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Net income (controlling interest) | $217.0 | $123.6 | (43)% | | Adjusted EBITDA (controlling interest) | $208.4 | $214.1 | 3% | | Economic net income (controlling interest) | $149.5 | $153.2 | 2% | - Net income (controlling interest) decreased by 43% for the three months and 27% for the nine months ended September 30, 2024, primarily due to a $133.1 million pre-tax gain from the Veritable Transaction in Q3 2023, partially offset by lower income tax expense[107] - Adjusted EBITDA (controlling interest) increased by 3% for the three months and 8% for the nine months ended September 30, 2024, driven by higher aggregate fees and investments in new Affiliates[107] Results of Operations Provides a detailed analysis of consolidated revenue, expenses, equity method income, and other income components Consolidated Revenue Examines the factors influencing consolidated revenue changes, including asset-based fees and AUM composition Consolidated Revenue (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Consolidated revenue | $525.2 | $516.4 | (2)% | | Consolidated Affiliate average assets under management (in billions) | $397.7 | $404.0 | 2% | - Consolidated revenue decreased by 2% for both the three and nine months ended September 30, 2024, primarily due to a decrease in asset-based fees resulting from changes in the composition of AUM driven by the Veritable Transaction, despite an increase in consolidated Affiliate average AUM[111] Consolidated Expenses Breaks down consolidated expenses, explaining changes in compensation, amortization, and interest Consolidated Expenses (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Compensation and related expenses | $211.8 | $220.8 | 4% | | Selling, general and administrative | $91.1 | $97.0 | 6% | | Intangible amortization and impairments | $12.5 | $7.3 | (42)% | | Interest expense | $31.1 | $34.7 | 12% | | Other expenses (net) | $7.9 | $11.6 | 47% | | Total consolidated expenses | $357.4 | $374.7 | 5% | - Compensation and related expenses increased by 4% (3M 2024) due to higher compensation accruals at Affiliates[112] - Intangible amortization and impairments decreased by 42% (3M 2024) due to fully amortized assets and the Veritable Transaction[114] - Interest expense increased by 12% (3M 2024) due to new junior subordinated notes and senior notes issued in 2024, partially offset by the maturity of 2024 senior notes and repayment of the term loan[114] Equity Method Income (Net) Discusses the drivers of equity method income, including AUM, fees, and intangible impairments Equity Method Income (Net) (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Equity method Affiliate average assets under management (in billions) | $266.1 | $307.7 | 16% | | Equity method revenue | $472.3 | $640.7 | 36% | | Equity method earnings | $61.0 | $75.3 | 23% | | Equity method intangible amortization | $(21.2) | $(22.7) | 7% | | Equity method intangible impairments | — | $(39.9) | N.M. | | Equity method income (net) | $39.8 | $52.6 | 32% | - Equity method revenue increased by 36% (3M 2024) and 13% (9M 2024), driven by higher asset-based fees from increased average AUM in alternatives strategies and new Affiliate investments, as well as increased performance-based fees in liquid alternatives[116][119] - Equity method intangible impairments increased by $39.9 million for the nine months ended September 30, 2024, due to an impairment charge related to an Affiliate's decline in fair value[120] Affiliate Transaction Gain Reports the pre-tax gain recognized from the sale of an equity interest in Veritable, LP - A pre-tax gain of $133.1 million was recorded for the three and nine months ended September 30, 2023, related to the Veritable Transaction (sale of equity interest in Veritable, LP)[120] Investment and Other Income Analyzes changes in investment and other income, including realized and unrealized gains on securities Investment and Other Income (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Investment and other income | $23.0 | $22.8 | (1)% | - Investment and other income decreased by 1% (3M 2024) due to lower realized gains on marketable securities, offset by higher unrealized gains on other investments[121] - For the nine months, it decreased by 31% due to lower net realized and unrealized gains on marketable securities[121] Income Tax Expense Details the income tax expense and effective tax rate, highlighting influencing factors like share-based compensation Income Tax Expense (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Income tax expense | $77.7 | $31.3 | (60)% | - Income tax expense decreased by 60% (3M 2024) and 16% (9M 2024)[122] - The effective tax rate for controlling interest was 19.3% (3M 2024) and 26.1% (9M 2024), influenced by share-based compensation windfalls and the non-deductible Affiliate impairment[122] Net Income Summarizes the changes in net income, attributing them to transaction gains and tax expenses Net Income (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | % Change | |:-------|:--------------------------------|:--------------------------------|:---------| | Net income | $286.0 | $185.8 | (35)% | | Net income (controlling interest) | $217.0 | $123.6 | (43)% | - Net income (controlling interest) decreased by 43% (3M 2024) and 27% (9M 2024), primarily due to the absence of the Veritable Transaction gain recognized in Q3 2023, partially offset by lower income tax expense[123] Supplemental Financial Performance Measures Reconciles and explains non-GAAP financial metrics like Adjusted EBITDA and Economic Net Income Adjusted EBITDA (controlling interest) Reconciles net income to Adjusted EBITDA, explaining the drivers of its change Adjusted EBITDA (controlling interest) Reconciliation (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Net income (controlling interest) | $217.0 | $123.6 | $476.8 | $349.5 | | Adjusted EBITDA (controlling interest) | $208.4 | $214.1 | $639.6 | $691.4 | - Adjusted EBITDA (controlling interest) increased by 3% (3M 2024) and 8% (9M 2024), primarily due to higher aggregate fees and investments in new Affiliates, partially offset by performance-based fees earned by Affiliates with lesser economic interest[107] Economic Net Income (controlling interest) and Economic Earnings Per Share Reconciles and explains the changes in Economic Net Income and Economic Earnings Per Share Economic Net Income and EPS Reconciliation (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | |:-------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Economic net income (controlling interest) | $149.5 | $153.2 | $474.9 | $495.8 | | Economic earnings per share | $4.08 | $4.82 | $12.72 | $14.90 | - Economic net income (controlling interest) increased by 2% (3M 2024) and 4% (9M 2024), driven by increased Adjusted EBITDA, partially offset by higher interest expense and current/deferred taxes[107][110] - Economic earnings per share increased to $4.82 (3M 2024) and $14.90 (9M 2024), reflecting the increase in economic net income and adjustments to average shares outstanding[129] Liquidity and Capital Resources Discusses the company's cash flows, debt, share repurchases, and other commitments related to its financial flexibility Operating Cash Flow Details the sources of operating cash flows, primarily from net income and equity method distributions - Operating cash flows for the nine months ended September 30, 2024, were $719.6 million, primarily from net income ($519.5 million) and distributions from equity method investments ($357.3 million)[132] Investing Cash Flow Explains investing cash flows, including maturities, sales, and purchases of investment securities - Investing cash flows for the nine months ended September 30, 2024, were $370.6 million, mainly from $875.2 million in maturities and sales of investment securities, partially offset by $496.4 million in purchases[133] Financing Cash Flow Outlines cash flows used in financing activities, such as debt repayments, share repurchases, and new debt issuances - Cash flows used in financing activities for the nine months ended September 30, 2024, were $904.1 million, primarily due to $589.5 million in common stock repurchases, $750.0 million in debt repayments, and $206.5 million in distributions to non-controlling interests, partially offset by $847.6 million in new debt issuances[134] Affiliate Equity Provides the current redemption value of Affiliate equity interests and expected future purchases - The current redemption value of Affiliate equity interests was $456.0 million as of September 30, 2024[135] - Net purchases of Affiliate equity are expected to be approximately $60 million for the remainder of 2024[135] Share Repurchases Details common stock repurchases and the remaining authorization under repurchase programs - During the nine months ended September 30, 2024, the Company repurchased 3.6 million shares of common stock at an average price of $158.62[136] - As of September 30, 2024, 5.9 million shares remained available for repurchase under authorized programs[137][149] Debt Summarizes outstanding indebtedness, weighted average maturity, and the use of proceeds from new debt Outstanding Indebtedness (in millions) | Debt Type | December 31, 2023 | September 30, 2024 | |:--------------------------|:------------------|:-------------------| | Senior bank debt | $350.0 | $0 | | Senior notes | $1,099.4 | $1,097.3 | | Junior subordinated notes | $765.9 | $1,216.0 | | Junior convertible securities | $341.7 | $341.7 | - The weighted average maturity of outstanding debt is 21 years, with 87% maturing in 2030 and beyond[137] - The $350.0 million senior notes due August 2025 are the nearest term maturity[137] - Proceeds from the $400.0 million 2034 senior notes and $450.0 million 2064 junior subordinated notes issued in 2024 were used for debt repayment/refinancing, share repurchases, and investments in Affiliates[141][143] Equity Distribution Program Describes the authorized equity distribution program and its current status - The Company has an equity distribution program allowing for the issuance and sale of up to $500.0 million in common stock, with no sales having occurred as of September 30, 2024[144] Commitments Details the company's various contractual commitments Other Contingent Commitments Outlines additional contingent obligations and potential liabilities Leases Presents the total lease obligations for various future periods - Total lease obligations were $10.2 million for the remainder of 2024, $62.4 million for 2025-2026, $45.0 million for 2027-2028, and $70.4 million thereafter[145] Recent Accounting Developments Summarizes new accounting standards and their impact on the financial statements Critical Accounting Estimates and Judgments Highlights key accounting estimates and judgments that significantly affect the financial statements Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, particularly interest rate risk, and any material changes since the last annual report Interest Rate Risk Quantifies the estimated impact of interest rate changes on the fair value of fixed-rate securities - A 1% change in interest rates would result in an estimated $204.7 million net change in the fair value of fixed-rate securities as of September 30, 2024, an increase of $59.0 million from December 31, 2023, due to new debt issuances[147] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2024, providing reasonable assurance of achieving their stated objectives. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were deemed effective as of September 30, 2024, ensuring timely and accurate reporting[148] - No material changes to internal control over financial reporting occurred during the quarter[148] PART II—OTHER INFORMATION Contains additional information not covered in the financial statements, including equity security sales and exhibits Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's repurchases of equity securities during the quarter and the remaining authorization under its share repurchase programs Purchases of Equity Securities by the Issuer (July 1 - Sep 30, 2024) | Period | Total Number of Shares Purchased | Average Price Per Share | |:-------|:---------------------------------|:------------------------| | July 1-31, 2024 | 572,663 | $163.19 | | August 1-31, 2024 | 60,182 | $163.56 | | September 1-30, 2024 | — | — | | Total | 632,845 | $163.23 | - As of September 30, 2024, there were 5.9 million shares available for repurchase under the Company's authorized share repurchase programs[149] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including supplemental indentures, certifications, and XBRL financial statements - Exhibits include the Second Supplemental Indenture, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and XBRL formatted financial statements[152]