KKR(KKR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported fee-related earnings per share of $1.08, total operating earnings per share of $1.42, and adjusted net income per share of $1.12, with the adjusted net income excluding carried interest repayment obligation being $1.30 for Q4 [4] - Management fees for the quarter were $1.1 billion, up 24% year-over-year, driven by fundraising initiatives and deployment across the firm [4] - Total transaction and monitoring fees were $269 million in the quarter, while capital markets fees reached $225 million [5] - Fee-related earnings were $972 million, reflecting a 15% year-over-year increase, with an ROI margin of 68% for the quarter [5] Business Line Data and Key Metrics Changes - Insurance segment operating earnings in Q4 were $268 million, with potential earnings being approximately $320 million if marks on investments were included [6][7] - Strategic Holdings operating earnings were $44 million in Q4, more than doubling compared to 2024 [8] - Realized performance income within the asset management segment was $528 million, excluding carried interest repayment obligation [9] Market Data and Key Metrics Changes - The company raised $28 billion of new capital in Q4, bringing the full-year total to $129 billion, the highest in its history [11] - The North America Private Equity Fund has over $19 billion of committed capital, while the Global Infrastructure Fund is nearing $16 billion in commitments [12][13] - The K Series suite of products raised $4.5 billion in Q4 and over $16 billion for the full year, nearly double the amount raised in 2024 [15] Company Strategy and Development Direction - The company aims to leverage its three growth engines: asset management, insurance, and strategic holdings, to position itself well for the long term [18] - The acquisition of Arctos, valued at $1.4 billion, is expected to enhance the company's position in sports investments and GP solutions, with a goal of building a $100 billion AUM solutions franchise [24][27] - The company is focused on maintaining a collaborative culture to maximize business impact and attract top talent [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding fundraising and fee-related earnings targets for 2026, with a focus on long-term performance rather than short-term market conditions [29] - The company is well-positioned with $118 billion of dry powder for future investments, indicating a strong pipeline of opportunities despite market volatility [21][46] - Management noted that the current economic environment presents opportunities for strong returns, emphasizing the importance of disciplined portfolio construction [33][46] Other Important Information - The company plans to increase its annual dividend from $0.74 to $0.78 per share, marking the seventh consecutive year of dividend increases since its C-Corp conversion [16] - Total embedded gains reached a record $19 billion, up 19% year-over-year, indicating strong performance across asset classes [10] Q&A Session Summary Question: How has the company reunderwritten its private portfolios in light of tariffs and AI? - Management indicated that they have minimal exposure to tariffs and have been proactive in addressing AI-related risks, focusing on portfolio construction and linear pacing to mitigate potential disruptions [41][42][44] Question: Is the strong 2025 result a level to build off of, given the linear deployment model? - Management confirmed that 2025 was a record deployment year and expects to deploy more in the coming year, highlighting broad-based activity across strategies and geographies [51][58] Question: What are the expectations for management fee growth in 2026? - Management expressed confidence in exceeding the $450 million FRE target for 2026, citing strong capital raising momentum and operational efficiency [61][65] Question: What is the potential for realized investment income moving forward? - Management anticipates an increase in realized investment income over the next few years, although it will be relatively decreasing compared to recurring earnings as capital is reinvested for growth [69] Question: What are the recent trends at Global Atlantic? - Management expects to maintain a quarterly target of $250 million for Global Atlantic, with potential for growth in accrued income over the next few years [72][75]