ITEM 1A. RISK FACTORS
You should carefully consider the risks described below and the other information contained in this report and other
filings that we make from time to time with the SEC, including our consolidated financial statements and accompanying notes.
Any of the following risks could materially and adversely affect our business, financial condition, results of operations, cash
flows, and prospects. Many risks discussed in this report also impact our investment vehicles, portfolio companies and other
investments, including balance sheet investments, which may, in turn, materially and adversely impact KKR. When discussing
our risks in this report, unless the context requires otherwise, references to (i) our investments include our portfolio
companies, which are typically companies in which we have a controlling equity interest or other investment with significant
influence, (ii) investors refers to the investors in our funds and other investment vehicles, and (iii) investments that we make
or own on our balance sheet include the portfolio companies reported in our Strategic Holdings segment and investments
held by our insurance subsidiaries. We could also be materially and adversely affected by other risks that are not known to us
or that we currently believe to be immaterial. The following risk factors have been organized by category within risks related
to our business, regulatory framework, investment activities, insurance activities, and our organizational structure; however,
many of the risks are interrelated, and as a result, should be read together to fully understand the risks involved with
investing in our securities. See also “Business—Regulation” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for a discussion of certain business, competitive, regulatory, market, economic and
other conditions that may materially and adversely affect us.
Risks Related to Our Business
Difficult market and economic conditions can, and periodically do, materially and adversely affect KKR.
Our business is materially affected by market and economic conditions and events throughout the world, including
conditions relating to interest rates, fiscal and monetary stimulus (and stimulus withdrawal), availability of credit, inflation
rates, economic growth, changes in laws, trade barriers, commodity prices, foreign exchange rates and controls, and liquidity
conditions in equity and debt capital markets. These market and economic conditions are not in our control and are often
difficult, if not impossible, to predict, manage, mitigate, hedge or foresee. Examples of how market and economic conditions
may materially and adversely affect our business and financial results include negative impacts to us from any or all of the
following:
• the performance and value of the investments held by us and our investment vehicles,
• opportunities for us and our investment vehicles to make, exit and realize value from our and their investments,
• our ability to find suitable investments or secure financing for investments on attractive terms, or at all,
• the attractiveness of our investment vehicles and insurance products to investors and policyholders, respectively,
including our ability to raise capital for new or successor funds and other investment vehicles on attractive terms,
• the frequency and size of fees generated from our capital markets business in connection with the issuance and
placement of equity and debt securities, loans and credit facilities,
• the availability and cost of capital for our insurance subsidiaries and our investment vehicles’ portfolio companies,
• policyholder behavior, including policyholders electing to defer paying insurance premiums, stop paying insurance
premiums altogether, or surrender their policies, and
• the cost of providing guaranteed insurance benefits, insurance capital requirements and collateral requirements.
See also “—Risks Related to our Investment Activities—Various conditions and events outside of our control that are
difficult to quantify or predict may have a significant impact on the valuation of our investments” below.
Global, regional and local events outside of our control, including geopolitical events and natural
disasters, could materially and adversely impact KKR.
We are a global financial institution with operations, investors and investments located around the world. Geopolitical
developments, including the imposition of protectionist measures by countries such as sanctions, restrictions on foreign direct
investment, trade barriers, tariffs, export controls and other governmental actions related to international trade agreements
and policies that materially constrain cross-border flows of capital, goods, or data, may impact our investment activities and
investments. In addition, other geopolitical developments such as political instability, civil unrest, and national and
international security events (including the outbreak of war, military action, terrorist acts or other hostilities), can, and
occasionally do, materially and adversely impact our ability to conduct our investment management and insurance
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businesses, in addition to our investments. These risks have increased in both scale and complexity due to intensifying
geopolitical competition and conflicts, including the ongoing Russian invasion of Ukraine, instability in the Middle East,
heightened geopolitical competition between China and other major world economies, heightened levels of political populism
leading to regulatory volatility, growing use of industrial policy globally (including the imposition of tariffs and other trade and
capital barriers), and increased attention to global threats. We are subject to these risks as we own and seek to own
businesses throughout the world, have offices and employees in multiple countries and seek investors throughout the world
for our investment products and certain of our insurance products.
We are also affected by natural disasters or catastrophes, such as public health crises, pandemics, epidemics, security
events, and weather events, any of which could have an adverse impact on our ability to conduct our investment
management and insurance businesses. Potential changes in climatic conditions, together with the response or failure to
respond to these changes, could precipitate the frequency, severity, and impact of natural disasters or catastrophes.
Such events outside of our control could limit or even materially prohibit our ability to conduct any operations or
investment activities in certain locations. In addition, claims arising from the occurrence of such events could have an adverse
effect on our insurance activities, in particular with respect to increases in the number of claims, lapses and surrenders of
existing policies, as well as sales of new policies. These events outside of our control, and actions taken in response to them,
may contribute to significant volatility in the financial markets, resulting in increased volatility in equity prices (including our
common stock), valuation, material interest rate changes, supply chain disruptions, such as simultaneous supply and demand
shock to global, regional and national economies, and an increase in inflationary pressures. These events and the disruptions
that they cause, alone or in combination, also have the potential to strain or deplete our infrastructure and response
capabilities generally, and to increase costs, including costs of insurance, each of which could materially and adversely affect
us. See also “—Risks Related to Our Investment Activities—Investments in real assets may expose us and our investment
vehicles to greater risks, liabilities and operational complexities than investments in operating companies.”
We may have direct investments in a region or a country that is experiencing one of the aforementioned events, and we
may also be materially and adversely affected by the occurrence of such events as a result of indirect exposure that our
portfolio companies or other investments may have through other interconnectivities such as supply chains, commodity
prices and general macroeconomic exposure. These events, including barriers to investment between the U.S. and other
countries or regions, could chill or limit business opportunities, adversely impact the value of our investments, increase costs,
decrease margins, reduce the competitiveness of products and services offered by portfolio companies, and adversely affect
the revenues and profitability of portfolio companies.
The loss of key personnel or their services, or any misconduct by key personnel, could have a material
adverse effect on KKR.
Our Co-Founders, Co-Chief Executive Officers, employees, and other key personnel, including certain consultants and
advisors, possess substantial experience and expertise and have strong business relationships with investors in our
investment funds, other members of the business community and distributors of our investment vehicles and insurance
products. As a result, the loss of key personnel could jeopardize our relationships with these individuals and entities, result in
the reduction of AUM or investment opportunities, or render us unable to maintain operations and support growth of our
businesses. The loss of services of key personnel could also harm our ability to maintain or grow AUM in existing investment
vehicles or raise additional funds in the future. Competition is also intense for the attraction and retention of qualified
employees and consultants, including those with industry-specific expertise. Our ability to continue to compete effectively in
our businesses will depend upon our ability to attract new investment professionals, insurance professionals, other
employees, and consultants and retain them accordingly. In addition, changes in employee compensation as a result of the
modification of our compensation framework or poor investment or financial performance may impact our ability to hire,
retain, and motivate our employees whom we depend.
Furthermore, the agreements governing our committed capital funds generally provide that in the event certain “key
persons” cease to actively manage an investment vehicle or be substantially involved in KKR activities, investors in the
investment vehicle may reduce, in whole or in part, their capital commitments available for further investments on an
investor-by-investor basis, which could indirectly lead to a limitation on the fund’s ability to conduct its business or cause us
to agree to unfavorable terms to continue the affected fund. Although we periodically engage in discussions with the limited
partners of our funds regarding a waiver of such provisions with respect to executives involved in geographically or product
focused funds whose departures have occurred or are anticipated, such waiver is not guaranteed, and our limited partners’
refusal to provide a waiver may have a material adverse effect on our business and financial results.
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If we cannot retain and motivate our employees and other key personnel or recruit, retain and motivate new employees
and other key personnel, our business may be materially and adversely affected. Our ability to recruit, retain and motivate
our employees and other key personnel is dependent on our ability to offer highly attractive incentive opportunities, benefits,
and compensation, which frequently includes allocating a portion of the carried interest that we earn from our investment
vehicles, which we refer to as the carry pool. There can be no assurance that the carry pool will have sufficient cash available
to continue to make cash payments in the future, and fluctuations from the distributions generated from the carry pool could
render the compensation that KKR separately pays to them to be less attractive. In order to retain and motivate our
employees and other key personnel, we may be required to pay them a higher amount of non-carry cash compensation to
retain and motivate them. The loss, or ineffectiveness of any incentive compensation plans, including as a result of any
adverse changes in regulation or tax law that impacts certain forms of incentives or other remuneration that we may typically
offer employees, such as carried interest, may cause us to incur additional expenses to pay competitively with other firms,
which could materially and adversely affect KKR. In addition, legal and regulatory developments outside of our control may
impact our ability to successfully identify, hire, and promote employees and other key personnel and may necessitate changes
to employment compensation practices.
We seek to retain our employees by having them agree to a confidentiality and restrictive covenants agreement.
However, there is no guarantee that the confidentiality and restrictive covenant agreements to which they are subject,
together with our other arrangements with them, will prevent them from leaving us, joining our competitors or otherwise
competing with us. Depending on which entity is a party to these agreements and the laws applicable to them, we may not
be able to, or may choose not to, enforce them or become subject to lawsuits or other claims, and certain of these
agreements might be waived, modified or amended at any time without our consent. Many countries and states within the
U.S. in which we operate have proposed, considered, or have already adopted, laws and rules which significantly limit or ban
noncompete clauses between employers and their employees, which could both limit our ability to enter into such restrictive
covenants and our ability to enforce them. Even where enforceable, these agreements expire after a certain period of time,
at which point our former employees will be free to compete against us.
From time to time, our firm, our investment vehicles, our portfolio companies and other investments, or our employees
may be a focus of public attention or media coverage, and these circumstances, as well as broader social and political
tensions, may increase the risk of harassment, threats, acts of violence or other personal safety and security incidents
directed at our personnel, including our senior executives, both inside and outside the workplace. We have implemented, and
expect to continue to, implement or expand security measures for our senior executives and other key employees, such as
physical security, secure transportation, travel restrictions and monitoring or protective services for them and, in some cases,
their families. Such measures can be costly and may not be effective in preventing all incidents. Any actual or threatened
harm to the personal safety of our employees, or perceived failure to protect them adequately, could materially adversely
affect us, including our ability to attract and retain talent.
Our business could also be damaged by the misconduct of, or allegations of misconduct of, our employees or other key
personnel. Misconduct by our employees or other key personnel could impair our ability to retain and recruit employees, to
attract and retain clients and investors, and may subject us to significant legal liability, regulatory scrutiny, and reputational
harm.
Our reliance on third parties in the operation of our business exposes us to operational, reputational
and other risks.
We rely significantly on third parties whom we do not control for significant support and assistance with various aspects
of our business, including for investment activities, accounting, record keeping, data processing, and other operations. These
third parties include technology service providers, financial intermediaries and advisers, law firms, accountants,
administrators, lenders, broker dealers, distribution agents, consultants, and other vendors. We generally have less control
over the delivery of third-party services and, as a result, may face disruptions to our ability to operate our business as a result
of interruptions of such services. We may also be held liable if those third-party service providers, their employees or their
own third-party service providers are found to have committed negligence, violated laws or engaged in misconduct. For
example, in the past, Global Atlantic was the subject of policyholder and agent class action litigation matters and a number of
regulatory matters stemming from service disruptions caused by a third-party administrator for certain Global Atlantic life
insurance policies. While Global Atlantic outsources policyholder administration to third-party, it is responsible under
insurance regulations and insurance contracts for servicing.
We rely heavily on the systems of third parties who provide technology services to us, including as part of our
information technology infrastructure. Our data processing systems, communication lines and networks are often supported
by third-party service providers, vendors, and intermediaries. A disaster, disruption, error or inability to operate or provide
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any of these services by us or our vendors or third parties with whom we conduct business could have a material adverse
impact on our financial results and our ability to continue to operate our business without interruption. Our business
continuation or disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or
disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all. While we have
endeavored to mitigate the risk of other disruptions in the future, there can be no guarantee these mitigation efforts will be
successful. We may experience material reputational impacts and heightened regulatory scrutiny as a result of these matters.
Any interruption or failure of our information technology infrastructure caused directly or indirectly by third-party service
providers could result in our inability to provide services to our clients, other disruptions of our business, corruption or
modifications to our data and fraudulent transfers or requests for transfers of money or the inability to demonstrate
compliance with regulatory requirements. Our third-party service providers could experience, and have experienced, certain
cyber incidents, and as a result, unauthorized individuals have gained access to our clients’, and could improperly gain access
to our, confidential data through such third parties. Any cybersecurity incidents involving these third parties could impair the
quality of our operations and could impact our reputation and materially and adversely affect us. We may also have
insufficient recourse against such third parties and may have to expend significant resources to mitigate the impact of such an
event, and to develop and implement protections to prevent future events of this nature from occurring. Actions taken by our
third-party service providers may also damage our reputation. We consider our reputation critical to attracting and retaining
investors, maintaining our relationships with regulators and being viewed as an attractive investment partner. As a result, any
negative publicity or negative public perception regarding a third-party service provider’s actions on our behalf may damage
our relationships with existing and potential investors, employees, regulators and other stakeholders, impair our ability to
raise capital, adversely impact the ability of our investment vehicles to make and exit investments, and impair our ability to
carry out investment activities generally.
We also specifically depend on the services of various financial intermediaries (including banks, prime brokers,
custodians, paying agents and escrow agents), counterparties, administrators and other agents, including to carry out certain
credit, securities, derivatives and hedging transactions, subjecting us to the risk that one or more of these counterparties
defaults, either voluntarily or involuntarily, on its performance under the applicable contract. We may enter into financial
arrangements with a limited number of counterparties, which has the effect of concentrating the transaction volume (and
related counterparty default risk) with these counterparties. If such a counterparty defaults, particularly a default by a major
investment bank or a default by a counterparty that has a significant number of our contracts, we may be materially adversely
affected. In the event of the insolvency of a financial intermediary that is holding our assets as collateral (to the extent not
adequately segregated) or that is required to make payments to us, we may not be able to recover equivalent assets or
payment in full as we will rank among the financial intermediary’s unsecured creditors. In addition, the timing of the recovery
of such amounts and assets (including segregated collateral) may also be significantly delayed as part of the administration of
the bankruptcy estate of the financial intermediary. In addition, our risk management processes may not accurately
anticipate the impact of market stress or counterparty financial condition, and as a result, we may not take sufficient action to
reduce effectively our risks to them. The inability to recover assets or payments from financial intermediaries could have a
material adverse impact on us as well as the performance of our investment vehicles. For more information about the risks of
using financial intermediaries to sell investment and insurance products, please see “—Risks Related to Regulatory Matters—
Distribution of financial products to individual investors subjects us to heightened regulatory, litigation, and reputational risks,
which may materially adversely affect our business”.
Disruptions in our technology infrastructure or the occurrence of other operational errors could
materially and adversely affect our business.
Our business depends on the effective execution of operational processes and the reliability of information technology
systems, both those we operate and those provided by third parties. We rely on technology systems, including computer
hardware, software systems, data processing systems, and other technology infrastructure that we own or that are provided
and maintained by third party service providers. See also “—Risks Related to Our Business—Our reliance on third parties in
the operation of our business exposes us to operational, reputational and other risks.” As our reliance on such technology
infrastructure has increased, so have the risks associated with system vulnerabilities, data loss, cybersecurity incidents,
processing failures and operational disruptions. If we are unable to adapt our technology infrastructure to accommodate our
growth, business changes or regulatory compliance needs, or if the cost of maintaining such systems may increase materially
from its current level, it may have a material adverse effect on us. We may need to continue to invest heavily in upgrades and
expansions to our information technology infrastructure to continue to support our business and to avoid disruption of our
operations, including our investment activities. Moreover, the technology systems of third-party providers and technology
infrastructure that we own may contain vulnerabilities or experience disruptions, including those resulting in data loss, that
could materially and adversely impact our business. In addition, certain of our operational processes continue to involve our
employees engaging in manual processes, which are inherently subject to execution risk, including unintentional mistakes,
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processing errors or control failures, which could materially and adversely affect us. Manual processes may be particularly
susceptible to error during periods of high transaction volume, personnel changes, new technology system implementations
or other operational transitions. Although we maintain policies, procedures, and internal controls, and have implemented
technology infrastructure designed to mitigate these risks, such measures may not be effective in preventing or detecting
errors in a timely manner. Failures in our operational processes could result in financial loss, regulatory scrutiny, reputational
harm, and other adverse consequences.
The failure to effectively manage our balance sheet could materially and adversely affect our financial
condition and results of operations.
We have made a strategic decision to have a larger balance sheet than most of our asset management competitors, and
consequently, the management of our balance sheet has a greater impact on our financial condition and results of operations.
We utilize our balance sheet to support our insurance subsidiaries’ business and capital needs, underwrite commitments in
our capital markets transactions, make capital commitments to our investment vehicles, and make acquisitions and other
strategic investments for our Strategic Holdings segment.
A significant portion of our balance sheet is dedicated to the ownership and operation of our insurance business, which is
a capital-intensive, long-duration business. Our insurance subsidiaries are subject to regulatory capital requirements and
rating agency capital expectations that require each entity to maintain significant levels of capital. To support insurance
company capitalization, we may need to contribute additional capital to our insurance subsidiaries, or we may be restricted
from growing and expanding our insurance business. Our insurance obligations to policyholders are contractual, and, in
contrast to our investment products, we must pay these obligations regardless of the investment performance of the assets
backing these obligations. We make significant assumptions to calculate our expected future insurance payment obligations,
including with respect to factors such as policyholder behavior and market or economic conditions that are not in our control.
We hold significant assets on balance sheet to support these insurance obligations. We are subject to the market impacts on
and investment performance of such assets as well as actual policyholder behavior differing from our assumptions. If we are
unsuccessful in our asset-liability management, we will suffer insurance operating losses as we will owe more on our
insurance obligations than we earn on such assets and may be required to hold additional capital. Our insurance balance
sheet requires active risk management and a failure to manage those risks may have a material and adverse effect on us.
We have used our balance sheet in our capital markets business to underwrite loans, securities or other financial
instruments, which we generally expect to syndicate to third parties. We have also entered into arrangements with third
parties that reduce our risk associated with holding unsold securities when underwriting certain debt transactions, which
enables our capital markets business to underwrite a larger amount. To the extent that we are unable to syndicate our
commitments to third parties or our risk reduction arrangements do not fully perform as anticipated, we may be required to
sell such investments at a significant loss or hold them indefinitely, which could impact the performance of such investments
and also impair our capital markets business’ ability to complete additional transactions, either of which could materially and
adversely affect us.
In addition to the investments held in our insurance subsidiaries, which are reported in our Insurance segment, our
balance sheet makes investments and holds strategic assets that are reported in our Asset Management and Strategic
Holdings segments. We bear the full risk of these balance sheet investments. However, our success in generating returns on
this capital, will depend, among other things, on the availability of suitable opportunities for our balance sheet, including for
Strategic Holdings, after giving priority in investment opportunities to our advisory clients, and on our ability to realize the
values that we expect to achieve from acquiring these.
Our balance sheet assets have also been a significant source of capital for new investment strategies and products for
investors. For example, we may acquire investments using our balance sheet capital and warehouse these investments while
fundraising a particular investment vehicle. We expect our balance sheet capital to be returned to us if such investment
vehicle has a successful fundraise. However, if the fundraising is not successful, or if investment vehicle investors are not
willing to pay for these warehoused investments, then we may realize losses on those investments or become limited in our
ability to seed new businesses or support our existing businesses as effectively as contemplated.
We also have made and expect to continue to make significant capital investments in our current and future funds and
other investment vehicles. Contributing capital to these investment vehicles is risky, and we may not realize any significant
profit from them, or we may even lose some or all of the principal amount of our investments. In addition, we have
developed and completed several structured transactions in which our balance sheet provides subordinated or equity
financing and third-party investors provide senior or preferred equity financing to an investment vehicle that invests in our
investment vehicles and certain other investment assets. We have also entered into similarly structured transactions where
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the cash flows of our balance sheet’s capital commitments to our investment vehicles have been effectively pledged as
collateral for such investment vehicles. Because of the subordinated nature of KKR’s interests, we are at risk of losing all of
our interests in these transactions ahead of any third-party if the investments do not perform as expected. For further
information about KKR’s unfunded commitments to its investment vehicles, including funding requirements to levered
investment vehicles and structured transactions, see also Note 24 “Commitments and Contingencies—Funding Commitments
and Others” in our financial statements.
See also “—Risks Related to our Insurance Activities” below.
The failure to manage, or the inability to access, adequate sources of liquidity could materially and
adversely affect KKR.
We require significant liquidity in order to support and grow our asset management and insurance businesses, conduct
our investment activities, meet our capital markets underwriting commitments, satisfy our policyholder obligations and
comply with regulatory requirements. We also have debt securities outstanding and indebtedness outstanding under various
credit facilities.
Depending on market and economic conditions, we may not be able to refinance or renew our debt obligations, or find
alternate sources of financing (including issuing debt or equity capital) on attractive or commercially reasonable terms or at
all. Furthermore, the incurrence of additional debt could result in downgrades of our existing corporate credit ratings, which
could limit the availability of future financing and increase our costs of borrowing. If our liquidity requirements were to
exceed our available liquid assets, we could be forced to sell assets or seek to raise debt or equity capital on unfavorable
terms. Moreover, the failure to comply with covenants contained in any of our debt agreements could trigger prepayment
obligations that could materially and adversely affect us by causing liquidity constraints. Any default under these agreements
(including through defaults on other debt that may result in cross-defaults on these agreements), and any resulting
acceleration of the borrower’s outstanding indebtedness, could have a material adverse effect on us and could also cause a
cross-default under our corporate revolving credit facility, which, if not cured or waived, could have a material adverse effect
on us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity Needs” for
further information regarding our liquidity needs and our capital commitments as of December 31, 2025, and Note 16 “Debt
Obligations” in our financial statements for further information regarding our senior notes, credit facilities and other
outstanding debt obligations.
In addition, we have indebtedness at various subsidiaries, including subsidiaries that hold our asset management,
insurance, and strategic holdings businesses, the terms of which impose limitations on operations and restrict the ability to
make distributions to its direct and indirect parent companies, including KKR Group Partnership L.P. In addition, our
insurance subsidiaries and certain capital markets subsidiaries are also subject to regulatory restrictions that place restrictions
on their ability to make distributions to their parent companies. These restrictions on distributions impose limitations on our
ability to manage liquidity needs for the KKR business.
Certain investment vehicles we manage have liquidity needs that are not entirely in our control. For example, individual
investors in our K-Series vehicles have the right to redeem their interests in the K-Series for cash. There is a risk that our
investment vehicles will lack adequate liquidity to satisfy any unexpected redemption requests, which may occur for a variety
of reasons, including increases in their investors’ liquidity needs, which tend to be more pronounced during periods of market
volatility and which may escalate in any period and be particularly pronounced for investment vehicles. If we are unable to
meet these redemption requests, or if any such redemption requests trigger any caps or limits that legally permit such
vehicles to gate or not honor redemption requests, then we could suffer material reputational harm.
In addition, our insurance companies have various liquidity needs that may be difficult to predict. Many of the insurance
products allow policyholders to withdraw their funds, also referred to as a surrender, under contractually-defined
circumstances. We may be forced to sell investments at a loss in connection with these redemption or withdrawal requests,
which are not always predictable and often driven by market and economic conditions that are not in our control. In addition,
our reinsurance business is subject to potentially significant liquidity requirements. Our reinsurance agreements generally
require Global Atlantic to provide collateral in trust for the benefit of the reinsurance client (the cedant), limiting our insurer’s
access to such assets for liquidity use, and some agreements may require additional collateral to be posted under certain
circumstances. Moreover, reinsurance agreements generally provide the reinsurance client with recapture rights upon the
occurrence of certain contractual triggering events. The exercise of such rights could, if alternate sources of liquidity are
unavailable, require our insurance subsidiaries to dispose of assets on unfavorable terms, including as a result of truncating
expected holdings periods unexpectedly. In addition, our U.S. insurance subsidiaries are members of regional Federal Home
Loan Banks (“FHLB”), which allows those insurance subsidiaries to borrow from the FHLB using certain investments as
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collateral. Access to FHLB loans is an important source of liquidity for our insurance business. If those sources of borrowing
were no longer available, the liquidity of our U.S. insurance subsidiaries could be materially and adversely affected. See “Risks
Related to our Insurance Activities.”
We have also used, and from time to time may continue to use, our balance sheet to provide credit support for our
general partners’ obligations to our investment vehicles, to facilitate certain investment transactions entered into by our
investment vehicles, and to make significant commitments to our investment vehicles. See Note 24 “Commitments and
Contingencies” in our financial statements.
Our capital markets activities expose us to material risks.
We provide a broad range of capital markets services that include acting as an advisor or as an agent, principal,
underwriter, syndicator, arranger or other form of intermediary in connection with securities transactions, debt or equity
syndications, loan transactions, derivative transactions and other types of financings and financial arrangements. However,
we may incur significant losses in connection with our capital markets activities, including to the extent that, for any reason
we are otherwise unable to dispose of any financial exposure that we incur at the prices that we anticipated or at all. We also
may be subject to potential underwriter liability or regulatory consequences for material misstatements or omissions in
prospectuses or other offering documents relating to transactions in which we are involved. We conduct capital markets
activities in connection with transactions in which our investment vehicles or insurance companies may participate as a
sponsor or as a purchaser or a seller of securities, which could constitute a conflict of interest or subject us to regulatory
scrutiny, liabilities or reputational harm. Please also see “—The failure to effectively manage our balance sheet could
materially and adversely affect our financial condition and results of operations.”
The failure to manage our financial and enterprise risks could materially and adversely affect our
financial condition and results of operation.
We seek to identify, monitor and manage certain financial and enterprise risks effectively. If we are not able to
accurately or effectively price, identify and predict, manage or ameliorate these risks, or if our management of risk does not
accurately predict and appropriately respond to future risk exposures, such risks could have a material adverse effect on us.
We use derivative financial instruments and risk management strategies to hedge, manage or otherwise reduce investment
risks, they may not be properly implemented as designed, or otherwise not effectively offset the risks we have identified. We
may not have identified, or may not even be able to identify, all the material risks relevant for our asset management or
insurance businesses (including capital markets activities). We also may choose not to hedge, in whole or in part, any of the
risks that have been identified. In our insurance business, our hedging activities seek to mitigate economic impacts relating to
our insurance products and investments, which may result in additional volatility in financial results, adverse impacts on the
level of statutory capital and the risk-based capital ratios of our insurance subsidiaries, and may not effectively offset any
changes in insurance reserves. In addition, the scope of risk management activities undertaken by us is selective and varies
based on the level and volatility of interest rates, prevailing foreign currency exchange rates, the types of investments that are
made and other changing market conditions. We do not seek to hedge our exposure in all currencies or all investments or
insurance liabilities, which means that our exposure to certain market risks are not limited. We also may use hedging
transactions and other derivative instruments to reduce the effects of a decline in the value of a position, but they do not
eliminate the possibility of fluctuations in the value of the position or prevent losses if the value of the position declines.
These kinds of transactions also generally limit the opportunity for gain if the value of a position increases. On the other hand,
our risk management actions with respect to insurance products with guaranteed benefits may be insufficient for Global
Atlantic to be protected against losses. Unanticipated market changes may result in poorer overall investment performance
than if the hedging or other derivative transaction had not been executed. Moreover, it may not be possible to limit the
exposure to a market development that is so generally anticipated that a hedging or other derivative transaction cannot be
entered into at an acceptable price.
For a discussion of the market risks affecting our business and the strategies employed to mitigate them, including our
hedge program, please see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”
We may suffer material harm as a result of legal claims, litigations, investigations, and negative
publicity.
The activities of our businesses, including the investment decisions we make and the activities of our employees, may
subject us and our employees, officers and directors to the risk of litigation by third parties, as well as various governmental
and regulatory examinations, inquiries, investigations, and enforcement actions. For a description of certain legal matters
involving KKR, see Note 24 “Commitments and Contingencies” in our financial statements.
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We, our investment vehicles, and our employees are each exposed to the risks of litigation relating to our asset
management and insurance businesses. We are also exposed to risks of litigation, investigation or negative publicity in the
event any transactions we undertake are alleged not to have been properly considered and approved under applicable law.
An adverse judgment, order or decree could have a material adverse impact on our ability to conduct our business if it were
to constitute a disqualifying event under the laws and regulations applicable to our firm and could result in material
reputational damage that could adversely affect our ability to successfully fundraise or source or engage in investment
transactions. See also “—Risks Related to Regulation” below.
Although investors in our funds do not have legal remedies against us, the general partners of our funds, our funds, our
employees or our affiliates solely based on their dissatisfaction with the investment performance of those funds, such
investors may have remedies against us, the general partners of our funds, our funds, our employees or our affiliates to the
extent any losses result from fraud, gross negligence, willful misconduct or other similar misconduct. While the general
partners and investment advisers to our investment funds, including their directors, officers, employees and affiliates, are
generally indemnified to the fullest extent permitted by law with respect to their conduct in connection with the management
of the business and affairs of our investment funds, such indemnity generally does not extend to actions determined to have
involved fraud, gross negligence, willful misconduct or other similar misconduct. If any civil or criminal lawsuits brought
against us or the aforementioned entities or individuals results in a finding of substantial legal liability or culpability, the
lawsuit could materially and adversely affect us. Similarly, allegations of improper conduct by private litigants or by
governmental or regulatory authorities, whether the ultimate outcome is favorable or unfavorable to us, as well as negative
publicity and press speculation about us, our investment activities or the private equity industry in general, whether or not
valid, may harm our reputation and cause volatility and speculation in the trading of our common stock. We consider our
reputation critical to attracting and retaining investors, maintaining our relationships with regulators and being viewed as an
attractive investment partner. As a result, any negative publicity or negative public perception regarding our actions,
business, management or industry may damage our relationships with existing and potential investors, employees, regulators
and other stakeholders, impair our ability to raise capital, adversely impact the ability of our investment vehicles to make and
exit investments, and impair our ability to carry out investment activities generally.
See also “—The actions of our portfolio companies may subject us to potential liabilities and cause us reputational harm”
below.
We may pursue new business opportunities, strategic initiatives, or investment opportunities that
involve new or unique business, regulatory or other complexities and risks.
Our organizational documents do not limit our ability to enter into new lines of business, and we may expand into new
investment strategies, geographic markets, businesses, types of investors and investment products. We seek to grow our
businesses by, among other things, increasing AUM in existing businesses, pursuing new investment strategies (including
investment opportunities in new asset classes), developing new types of investment structures and products (such as publicly
listed vehicles, separately managed accounts and structured products), expanding into new geographic markets and
businesses and seeking investments from investor bases we have traditionally not pursued, such as individual investors, which
subject us to additional risk. Introducing new types of investment structures and products could increase the complexities
and conflicts of interest involved in managing such investments, including ensuring compliance with applicable regulatory
requirements and terms of the investment vehicles. There is no assurance that all areas of our business will achieve a
satisfactory level of scale and profitability.
In the first quarter of 2024, we implemented strategic initiatives that included creating our Strategic Holdings business
segment. We continue to believe that we will receive more stable recurring revenues in the future from the growth over time
in dividend payments and earnings from companies included in our Strategic Holdings segment. However, this is our current
expectation and not a guarantee that they will be realized or be as accretive to our earnings as we currently expect. For
example, expectations about dividend amounts and investment returns from companies in our Strategic Holdings segment in
the future and the future growth of such companies, may be materially less than our current expectations or may not
materialize at all, and assumptions, including those relating to free cash flow, future capital structures of such companies,
future capital investments by us in such companies, future market and economic conditions, including interest rates, and
other assumptions, may differ materially from actual outcomes.
In 2025, we announced changes to the management of our insurance business to originate longer-duration liabilities and
assets, including investing more into non-yielding or lower-yield assets classes like private equity and real assets, expanding
outside the United States, and raising more third-party co-investment insurance capital. We believe these changes will
expand Global Atlantic’s competitive advantage and enable the generation of higher and more durable returns over the long
term; however, our financial results could be adversely impacted in the near- and medium- term as we rotate into longer-
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duration liabilities and assets. While it is our current expectation that this strategic initiative will be successful over the long
term, it is not guaranteed that these results will be realized or that these changes will be as accretive to our earnings as we
currently expect, and these changes may result in losses. Additionally, these strategic initiatives may add new business and
regulatory complexities.
In February 2026, we announced an agreement to acquire Arctos Partners, an investment management firm that invests
in professional sports teams and that provides strategic capital to other asset management firms. The acquisition is subject to
the satisfaction or waiver of certain regulatory and specified sports league approvals and other closing conditions. As part of
our proposed acquisition of Arctos, we have applied for approvals by certain sports leagues as indirect owners of sports
teams. Following the closing of the Arctos acquisition, we and our investment vehicles and portfolio companies must comply
with the league rules applicable to owners. These league rules prohibit or restrict certain investments — for example control
investments in gambling businesses or relationships with professional athletes. Complying with these rules may restrict
investment opportunities that our investment vehicles, portfolio companies, or we may have otherwise pursued, raising
potential conflicts of interest. See “—If we fail to effectively manage conflicts of interest that arise from our investment
activities, our reputation, business or financial results could be materially and adversely impacted or we may become subject
to regulatory scrutiny or litigation.” Failure to manage our compliance with these league rules could result in a material
adverse impact to our business, financial condition and results of operations.
To the extent we have made, or make, strategic investments or acquisitions or undertake other strategic initiatives,
expand into new investment strategies or geographic markets, or enter into a new line of business, we will face numerous
risks and uncertainties, including risks associated with:
• the required investment of capital and other resources;
• delays or failure to complete an acquisition or other transaction in a timely manner or at all, which may subject us to
damages or require us to pay significant costs;
• lawsuits challenging an acquisition or unfavorable judgments in such lawsuits, which may prevent the closing of the
transaction, cause delays, or require us to incur substantial costs including in costs associated with the
indemnification of directors;
• the failure to realize the anticipated benefits from an acquired business or strategic partnership in a timely manner, if
at all;
• combining, integrating or developing operational and management systems and controls, including an acquired
business’ internal controls and procedures;
• acquiring an investment that is subject to significant liabilities, including contingent liabilities, which could be
unknown to us or inadequately insured at the time of acquisition;
• integration of the businesses, including the employees of an acquired business;
• disagreements with joint venture partners or other stakeholders in our hedge fund partnerships and our strategic
partnerships;
• the additional business risks of the acquired business and the broadening of our geographic footprint;
• properly managing conflicts of interests;
• complex tax structuring that could be challenged or disregarded, which may result in losing treaty benefits or would
otherwise adversely impact our investments;
• our ability to obtain requisite regulatory approvals and licenses without undue cost or delay and without being
required to comply with material restrictions or material conditions that would be detrimental to us or to the
combined organization;
• incurrence of indemnification obligations or other contingent liabilities;
• increased regulatory scrutiny and our ability to comply with new regulatory regimes; and
• becoming subject to new laws and regulations with which we are not familiar, or from which we are currently
exempt, that may lead to increased litigation and regulatory risk and costs.
We may not realize the expected benefits of such new investments, acquisitions or initiatives.
We operate in a highly competitive industry.
Our asset management business competes with other investment managers for both investors for our investment
vehicles and for investment opportunities, including for our Strategic Holdings segment. We believe that competition for
investors for our investment vehicles is based primarily on investment performance, investor liquidity and willingness to
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invest, investor perception of investment managers' drive, focus and alignment of interest, business reputation, duration of
relationships, quality of services, pricing, fund terms including fees, and the relative attractiveness of the types of investments
that have been or are to be made. We believe that competition for investment opportunities is based primarily on the pricing,
terms, and structure of a proposed investment and certainty of execution. The firm's competitors consist primarily of
alternative and traditional asset manager sponsors of public and private investment vehicles, investment and commercial
banks (including activities conducted by their broker-dealers and investment advisers), commercial finance companies,
sovereign wealth funds, real estate development companies, BDCs, and strategic buyers. In addition, we also face competition
from local and regional investment firms, financial institutions, and other competitors in the various countries in which we
invest, where local firms may have more established relationships with the companies in which we are attempting to invest.
There are numerous funds focused on private equity, real assets, credit, and hedge fund strategies that compete for
investor capital. Fund managers have also increasingly adopted investment strategies outside of their traditional focus. For
example, traditional asset management firms have acquired alternative asset management firms, and hedge funds focused on
credit and equity strategies have taken control positions in companies, while private equity funds have acquired minority
equity or debt positions in publicly listed companies. This convergence heightens competition for investments. Furthermore,
as institutional fund investors increasingly consolidate their relationships for multiple investment products with a few
investment firms, competition for capital from such institutional fund investors have become more acute. We also face
extensive competition from both traditional and alternative asset management firms in connection with our business
initiatives to increase the number and types of investment products and fundraise directly and indirectly from individual
investors, including accredited investors and mass affluent individuals. We may be unable to achieve as quickly as expected,
or at all, our strategic business initiatives to increase the number and types of investment products and vehicles we offer
directly or indirectly to these types of investors as there is extensive competition for such investors and in private wealth
management by our competitors.
Some of our competitors may have greater financial, technical, marketing and other resources, and more personnel than
us. In the case of some asset classes and certain investment products, including those offered to individual investors, our
competitors may, and sometimes do, have longer operating histories, more established relationships, or greater experience.
Several of our competitors have raised, or may raise, significant amounts of capital and have investment objectives that are
similar to the investment objectives of our investment vehicles, which may create additional competition for investment
opportunities. Some of these competitors may also have lower costs of capital and access to funding sources that are not
available to us, which may create competitive advantages for them. In addition, some of these competitors may have higher
risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider range of
investments and to bid more aggressively than us for investments. Strategic buyers may also be able to achieve synergistic
cost savings or revenue enhancements with respect to a targeted portfolio company, which typically provide them with a
competitive advantage in bidding for such investments. Some of our competitors may have agreed to terms on their
investment funds or products that are more favorable to investors than our funds or products and therefore we may be
forced to match or otherwise revise our terms to be less favorable to us than they have been in the past and, further, some of
our competitors may be willing to pay higher placement fees in order to gain distribution of their private wealth products. We
may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by
competitors. Alternatively, we may experience decreased investment returns and increased risks of loss if we match
investment prices, structures and terms offered by competitors.
Our capital markets business competes primarily with investment banks and broker-dealers in North America, Europe,
Asia-Pacific, and the Middle East. We principally focus our capital markets activities on our funds and our portfolio companies,
but we also seek to service other third parties. While we generally target customers with whom we have existing
relationships, those customers may have similar relationships with the firm's competitors, many of whom will have access to
competing securities transactions, greater financial, technical or marketing resources, or more established reputations than
Our insurance business also operates in highly competitive markets. Please see “—Risks Related to Our Insurance
Activities—We operate in a highly competitive industry”.
Additionally, some of our competitors may be subject to less regulation or less regulatory scrutiny and accordingly may
have more flexibility to undertake and execute certain businesses or investments than we do or bear less expense to comply
with such regulations than we do.
Parts of our earnings and cash flow are highly variable due to the nature of our business.
Parts of our earnings are highly variable from quarter to quarter due to volatility of investment valuations, the investment
returns by our funds and other investment vehicles, and the accrual and payment of carried interest and fees earned from our
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investment activities. We recognize earnings on investments in our investment vehicles based on our allocable share of
realized and unrealized gains (or losses) reported by such investment vehicles and for certain of our recent investment
vehicles when a performance hurdle is achieved, which in each case is subject to significant uncertainty and risk. During times
of market volatility, the fair value of the investments we own or manage are more variable, and volatility in the equity
markets may have a significant impact on our reported results. A decline in realized or unrealized gains, a failure to achieve a
performance hurdle, or an increase in realized or unrealized losses, would adversely affect our financial results.
The timing and receipt of carried interest from our investment vehicles are unpredictable and will contribute to the
volatility of our cash flows. With respect to our carry paying funds, subject to the terms of their respective governing
agreements, carried interest is generally eligible to be distributed to the general partner of the fund with a clawback provision
only after meeting certain conditions tied to performance. See “Item 1. Business—Business Segments—Asset Management
— Investment Vehicle Structures, Fee Arrangements and Carried Interest” for a summary of such conditions. Even after all
conditions are met, the general partner of a carry paying fund may decide to defer the distribution of carried interest to it to a
later date. Carried interest payments depend on our investment vehicles’ performance and opportunities for realizing gains,
which may be limited. It typically takes a substantial period of time to: (i) identify attractive investment opportunities, (ii)
raise all the funds needed to make an investment, and (iii) then to realize the cash value of an investment through a sale,
public offering or other exit to generate carried interest proceeds. To the extent an investment is not profitable, no carried
interest will be received from our investment vehicles with respect to that investment and, to the extent such investment
remains unprofitable, we will only be entitled to a management fee on that investment. We cannot predict when, or if, any
realization of investments will occur. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity—Sources of Liquidity” for further information regarding the conditions for carried interest to become
distributable.
The timing and receipt of carried interest also vary with the life cycle of certain of our investment vehicles. For our carry-
paying investment vehicles that have completed their investment periods and are able to realize mature investments,
sometimes referred to as being in a harvesting period, we are more likely to receive larger carried interest distributions than
our carry-paying investment vehicles that are in their fundraising or investment periods.
Fee income, which we recognize when contractually earned, can vary due to fluctuations in AUM, the number of
investment transactions made by our investment vehicles, when such investments are made, the number of portfolio
companies we manage, the fee provisions contained in our investment vehicles and other investment products and
transactions by our capital markets business. In any particular quarter, fee income may vary significantly due to the variances
in size and frequency of transaction fees or fees received by our capital markets business.
Additionally, a decline in the pace, size, or value of investments by our investment vehicles would result in our receiving
less revenue from fees. The transaction, management, and monitoring fees that we earn are driven in part by the pace at
which our investment vehicles make investments and the size of those investments. Any decline in that pace or the size of
investments would reduce our revenue from transaction and management or monitoring fees. Likewise, during an attractive
selling environment, our investment vehicles may capitalize on increased opportunities to exit investments. While this would
generally be expected to increase the timing and receipt of carried interest, any increase in the pace at which our investment
vehicles exit investments, if not offset by new commitments and investments, could reduce future management fees.
Additionally, in certain of our investment vehicles that derive management fees only on the basis of invested capital, the pace
at which we make investments, the length of time we hold such investments, and the timing of disposition will impact our
revenues.
With respect to our insurance business, we have and may experience fluctuations in the new business volumes, and
resulting financial result impacts, of certain products, such as block reinsurance, pension risk transfer and funding
agreements. In addition, aspects of how our insurance business is required to report certain investments and liabilities has
added, and is expected to add, volatility to our financial results from quarter to quarter.
The agreements governing our carry-paying funds have in the past and may in the future give rise to a
contingent obligation that requires us to return or contribute significant cash amounts to our funds
and fund investors.
We have in the past and may in the future be required to return carried interest that we have received from investment
funds. The partnership documents governing our carry-paying funds across our asset classes include what are often called
“clawback” provisions. Under such an obligation, upon the liquidation of a fund or other event as set forth in the terms
governing the fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the
extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by
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the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, after
taking into account the effects of any performance thresholds and hurdles. We would continue to be subject to such
obligation even if carry has been distributed to current or former employees through our carry pool. If such current or former
employees do not satisfy their share of any clawback obligation, we will be responsible for funding the entire obligation and
may need to seek other sources of liquidity to fund such an obligation. To the extent one or more obligations were to occur
for any one or more of our carry-paying funds, we might not have available cash to satisfy such obligation once it is realized,
putting us in breach of the fund’s governing agreements and potentially resulting in a material adverse impact on our ability
to raise additional or successor funds in the future. Even when there is sufficient available cash to satisfy any such obligation,
the realization of any such obligation may materially adversely impact our business and financial results, including by reducing
our realized performance income and realized investment income. See “Management's Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity—Sources of Liquidity” for a discussion of carried interest repayment
obligations, including information about realized carried interest repayment in the fourth quarter 2025 relating to our Asian
Fund II.
The inability to raise capital from third-party investors for our investment vehicles, insurance business
and transactions could materially and adversely affect us.
We raise third party capital for our investment vehicles and insurance business, and we also raise capital for specific
transactions that we may sponsor or that are sponsored by third parties. The failure to continually raise adequate capital
could materially and adversely affect our AUM, revenues, liquidity and overall financial results.
Investment performance is one of the most significant factors in our ability to raise capital. Poor investment performance
for any reason, whether due to market conditions, valuations, pace of realizations, or other factors, including relative to
portfolio benchmarks, fee levels, or our competitors’ performance, may also materially adversely affect our ability to
fundraise. Certain investment vehicles, particularly those that provide investors with redemption rights, may require us to
maintain higher levels of liquidity, which may affect portfolio construction and could impact investment performance.
Our ability to raise capital is also dependent on market and economic conditions and investor perception, including the
general appeal of alternative asset investments or our financial products. Our ability to raise capital depends on numerous
factors, many of which are beyond our control, including economic conditions, financial market volatility, regulatory
developments, investor liquidity and competitive dynamics. Investors in our investment or insurance products may decide to
redeem their capital, or decide to seek financial products other than ours for any number of reasons, such as competitors’
terms or offerings, changes in interest rates that make other financial products more attractive, changes in investor
perception regarding our focus or alignment of interest, reputational concerns, how we manage conflicts of interest, changes
in investors’ views of portfolio construction or asset allocation, concerns about valuations, ability to meet redemption
requests, liquidity, or departures or changes in key personnel.
In connection with raising new investment vehicles or securing additional investments in existing vehicles, we may
negotiate terms for such vehicles that are materially less favorable to us than prior terms or terms of investment vehicles
advised by our competitors. Such terms may include reduced management fees, fee holidays, increased co-investment rights
or other economic or governance concessions, which could materially and adversely affect us in a number of ways, including
by reducing the fee revenues we earn. Competitive pressures and evolving investor expectations may require us to agree to
such unfavorable terms in order to attract or retain capital.
The number of investment vehicles for which we raise capital varies from year to year. Our flagship funds and other
funds have a finite life and a finite amount of commitments from fund investors. Once a fund nears the end of its investment
period, our ability to continue making investments and generating fees and carry depends on our ability to raise additional or
successor funds. Although our funds may continue to earn management fees after the expiration of their investment periods,
such fees are generally at a reduced rate. There is no assurance we would be able to raise successor funds of comparable
size, within similar timeframes, or on comparable terms. If we are unable to do so, or if fundraising is delayed, our revenues
may decrease as predecessor funds mature and associated fees decrease.
The ability to raise capital from institutional investors is critical and may be adversely affected by
factors beyond our control.
Institutional investors are significant investors in our investment funds and the investments syndicated by our capital
markets business. Institutional investors that experience decreasing returns, liquidity pressures, increased volatility, funding
shortfalls or difficulty maintaining target asset allocations may materially decrease or temporarily suspend making new
investments in our investment funds or with alternate asset managers generally. Such concerns could be exhibited, in
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particular, by public pension funds, which have historically been among the largest investors in alternative assets. Pension
funds have had and in the future may have funding problems that will likely be exacerbated by economic downturns.
Concerns with liquidity could cause such public pension funds or other institutional investors to reevaluate the
appropriateness of alternative assets. Reduced distributions from alternative asset investments or declines in other asset
classes may cause investors to exceed target allocations to alternative assets, limiting their ability to make new commitments.
In addition, certain institutional investors, including sovereign wealth funds and public pension funds, continue to
demonstrate an increased preference for alternatives to traditional fund structures, such as separately managed accounts or
specialized investment vehicles and, in some cases, consolidating their capital with fewer alternative asset managers. In order
to try to satisfy the evolving preferences of investors, we have sponsored, and will continue, to sponsor a wide array of
separately managed accounts and investor allocations to these separately managed accounts or specialized investment
vehicles may detract from the allocations potentially available to our funds or other traditional investment vehicles, which
may result in less profitability for us. There can be no assurance that historical or current levels of commitments to our funds
or other traditional investment vehicles from these investors will continue.
Moreover, certain institutional investors are demonstrating a preference to hire their own investment professionals and
to make direct investments in alternative assets without the assistance of large institutional investment advisers like us. Such
institutional investors may become our competitors and could cease to be our clients. Institutional investors may also decide
not to invest with large asset managers like us, for example, because of conflicts of interest arising from the size and
complexity of our business, including the allocation of investment opportunities among different funds and vehicles, including
those offered to individual investors. Given the breadth and complexity of our platform, including the management of
multiple funds, insurance assets and vehicles offered to individual investors, conflicts of interest may arise in the allocation of
investment opportunities, management attention or other resources. Any perception that we do not appropriately manage
such conflicts could adversely affect our relationships with institutional investors and our ability to raise capital from them.
For additional information about conflicts of interest that may impact our ability to raise capital, please see “—Risks Related
to Our Investment Activities—If we fail to effectively manage conflicts of interest that arise from our investment activities, our
reputation, business or financial results could be materially and adversely impacted or we may become subject to regulatory
scrutiny or litigation”. All of these factors could result in a smaller overall pool of available capital in our industry or a smaller
pool of institutional capital for our investment vehicles.
In addition, the asset allocation rules or investment policies to which institutional investors are subject could inhibit or
restrict their ability to make investments in our investment funds. This risk may be heightened at times of poor performance
in other asset classes or even strong performance in the asset classes we manage, as investors may need to rebalance their
portfolios to remain in compliance with these rules and policies. Coupled with any lack of distributions from their existing
investment portfolios, many of these investors may have disproportionately outsized remaining commitments to, and
invested capital in, a number of investment funds, which may significantly limit their ability to make new commitments to the
investment funds we manage, which could materially and adversely affect our financial performance.
The sale of financial products to individual investors exposes us to additional operational complexities,
regulatory requirements and other risks.
We have expanded and may continue to expand the number and types of financial products we offer to individual
investors. Offering financial products, whether investment opportunities in alternative asset strategies or insurance policies
like annuities, to individual investors exposes us to heightened levels of risks. Products offered to individual investors may be
subject to different and, in some cases, more extensive disclosure, marketing, distribution and investor protection
requirements than traditional institutional investment funds. In addition, the distribution of investment products to
individual investors may involve additional intermediaries, platforms or distribution channels and may subject us to evolving
regulatory standards regarding marketing practices, suitability determinations, fee disclosures, valuation methodologies and
redemption features. As a result, these initiatives may increase our exposure to public and regulatory scrutiny, consumer
complaints, private litigation, compliance costs and reputational harm. For additional information about the regulatory risks
relating to individual investors, please see “—Risks Related to Regulatory Matters—Distribution of financial products to
individual investors subjects us to heightened regulatory, litigation, and reputational risks, which may materially adversely
affect our business” and “—Risks Related to our Insurance Activities—The disruption of our third-party distribution network
may have a material adverse effect on us.”
Certain investment vehicles that we manage are publicly traded, which involves heightened risk of litigation, and
additional disclosure and governance obligations. In addition, certain of these and other investment vehicles are registered
under the Investment Company Act as investment companies. These funds and their investment advisers are subject to
extensive regulation, which, among other things, regulate the relationship between a registered investment company and its
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investment adviser and prohibit or severely restrict principal transactions and joint transactions. In addition, we have one or
more affiliates that provide investment advisory services to BDCs, which are also subject to certain restrictions and
prohibitions under the Investment Company Act. If the entity fails to meet applicable regulatory requirements, it may be
regulated as a closed-end investment company under the Investment Company Act and become subject to different
regulatory restrictions, which could limit its operating flexibility and in turn result in decreased profitability for us.
We have also launched U.S. holding company conglomerates, which together with similar non-U.S. investment vehicles
we refer to as K-Series, which are structured and operated in reliance on exclusions from the definition of an investment
company under the Investment Company Act. If any such entity were required to register as an investment company, the
applicable restrictions on capital structure, leverage, transactions with affiliates, governance, and operations would make it
impractical for the entity to operate its business as currently conducted and could materially and adversely affect our financial
results and results of operations. For additional information about certain regulatory risks relating to regulatory exemptions,
please see “—Risks Related to Regulatory Matters— If regulatory exemptions or exclusions on which we rely become
unavailable, we may become subject to additional restrictive and costly regulatory requirements, regulatory action or
liability”.
As we have offered more investment products to individual investors, the operational demands necessary to support
these types of investor products and the related business and operational complexity has also significantly increased.
Insurance products are subject to regulations regarding statements, required disclosures and claims handling and accordingly
require significant operational capabilities. Managing vehicles that offer periodic redemption features or are marketed to
individual investors may require more frequent valuations, additional investor communications, enhanced liquidity
management, more compliance and technology requirements, and more third-party service support. For example, our K-
Series vehicles and certain funds that provide for redemptions to individual investors require that we perform monthly or
daily valuations of net asset value and manage liquidity to satisfy potential redemption requests. For additional information
about valuation risks, please see “—The valuations of illiquid investments are subjective and uncertain, and any realizations of
our illiquid investments may occur at prices which differ from their carrying values” and for more information about liquidity
risks, please see “—The failure to manage, or the inability to access, adequate sources of liquidity could materially and
adversely affect KKR”. If we fail to effectively manage these risks, we could be subject to regulatory action, litigation,
reputational harm, or constraints on our ability to grow these products, any of which could materially and adversely affect our
business.
Even if our investment performance or product terms remain attractive, adverse market conditions or shifts in public
opinion relating to products that we offer could adversely affect our ability to expand or maintain these product offerings.
For example, products offered to individual investors may be more sensitive to negative publicity, whether it is caused by the
level of fees, the existence or improper management conflicts of interests, inability to satisfy redemption requests, service
challenges or others changes in investor sentiment. Negative publicity may also be caused by the activities of third-party
sponsors or insurers that are unaffiliated with us, which nevertheless could cause significant redemptions or surrenders,
result in reduced demand for our products, or cause us to reduce our economics to maintain investor interest in the products
we offer to individual investors.
The portion of our AUM we refer to as perpetual capital is not permanent and is subject to change.
We refer to a significant portion of our AUM as perpetual capital, because this AUM has an indefinite term with no
predetermined requirement to return invested capital to investors upon the realization of investments. This AUM includes
the capital of our evergreen products, which include investment vehicles registered under the Investment Company Act,
certain unregistered investment vehicles like our K-Series offered to individual investors, and listed companies like KREF and
Crescent Energy, as well as the capital of our insurance companies. However, in addition to fluctuations based on the
valuations of the underlying investments of the AUM, this capital is subject to material reduction, including through
withdrawals, redemptions, periodic payments such as dividends or required distributions, and termination of investment
advisory agreements, and these reductions may occur with minimal notice.
Our insurance companies have issued annuities and other life insurance policies that require certain contractual
payments to the policyholder. These policies may permit the policyholder to withdraw their funds or to surrender their policy
for distribution in advance of the policy term. In addition, our insurance companies have entered into reinsurance agreements
with counterparties, which provide for contractually provided payments, including to cover reinsured policyholder
obligations. Unless the inflows from writing new insurance policies and entering into new reinsurance transactions exceeds
outflows to pay contractual obligations, or the valuation of the assets backing our insurance liabilities increases in excess of
any expected appreciation, our permanent capital from our insurance subsidiaries and sponsored insurers would be reduced.
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See also “—The failure to manage, or the inability to access, adequate sources of liquidity could materially and adversely
affect KKR.”
Certain of our registered and unregistered investment vehicles, including our K-Series, permit their investors to redeem
their investments, which would have the effect of reducing our AUM. Substantial redemption requests could be triggered by
a number of events outside of our control, including poor investment performance, changes in market conditions or changes
in their perception of us as a reputable investment manager. A perception of significant redemptions, both with respect to
the investment vehicles we manage as well as investment vehicles that we do not manage but are in similar asset classes, may
also trigger other investors to seek redemptions of their investments as well. See also “—The failure to manage, or the
inability to access, adequate sources of liquidity could materially and adversely affect KKR.”
We have investment management agreements with certain registered and unregistered investment vehicles and listed
companies that we manage as well as with our insurance companies. Perpetual capital from these entities may be removed
completely from our AUM, because our investment management agreement with them may be terminated on little or no
notice for reasons specified in such agreement, including due to poor investment performance or regulatory compliance. See
“—Risks Related to Regulatory Matters.” In the case of any such terminations, the management and incentive fees we earn in
connection with managing such entities would immediately cease, which could result in a material adverse impact on our
revenues.
The actions of our portfolio companies may subject us to potential liabilities and cause us reputational
harm.
We often make controlling investments in companies or hold investments over which we have significant influence over
their management or operations. Although these portfolio companies operate their businesses independently from KKR’s own
businesses and independently from one another, our ownership interests, governance rights or involvement with these
portfolio companies may cause us to be deemed a control person or otherwise subject to theories of successor, aiding-and-
abetting or similar liability under applicable law. Alternative asset managers have in the past been held liable for acts of their
portfolio companies where the manager is alleged to have exercised control or to have authorized, or knowingly failed to
prevent or remediate, impr oper conduct, including with respect to the U.S. Foreign Corrupt Practices Act (the “FCPA”),
European antitrust laws, and financial crime laws. See “—Risks Related to Regulatory Matters—We are subject to substantial
regulatory risks due to our extensive and global investment activities.”
As a result, we may have liability for actions taken by, or failures to take action by, our portfolio companies, which may
subject us to civil or criminal liabilities. Any such liabilities could require our investment vehicles to pay substantial financial
sums, which may not be fully reimbursed for by the relevant portfolio company or covered by insurance. Any criminal
liabilities or other enforcement actions taken by regulators in response to actions or failures to act by our portfolio companies
could also involve our investment vehicles, our subsidiaries that operate such investment vehicles as its general partners or
manager, and our personnel involved with such portfolio company’s business.
In addition, activities by our portfolio companies and other companies in which we invest may be imputed to us. We
believe our reputation is critical to our business, including for attracting and retaining investors, maintaining relationships
with regulators and being viewed as an attractive investment partner. Any legal or regulatory action involving our portfolio
companies, including any settlement, or any negative publicity or adverse public perception regarding a portfolio company’s
actions, business, management or industry, may result in significant reputational harm to us, increased regulatory scrutiny
and additional regulatory exposure or litigation. In addition, we may elect to pay certain amounts or agree to other
consequences, including operational restrictions, to resolve matters involving any of our portfolio companies or investments
in order to mitigate potential reputational, regulatory, or other damage to our business. These developments could damage
our relationships with existing and prospective investors, employees, regulators and other stakeholders, and otherwise could
result in a material and adverse effect on KKR’s business or financial condition.
Changes in tax laws or an adverse interpretation by tax authorities may adversely impact our effective
tax rate and tax liability.
Our effective tax rate and tax liability is based on the application of current income tax laws, regulations and treaties,
which are complex and may be open to interpretation. Significant management judgment is required in determining our
provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. Although we believe our application of current laws, regulations and treaties to be correct and
sustainable upon examination by tax authorities, tax authorities could challenge our interpretation resulting in additional tax
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liability or adjustment to financial results that could increase our effective tax rate or have other unforeseen adverse tax
consequences.
There could be significant changes in U.S. federal, state, local or non-U.S. tax law that may materially affect us, including
by increasing taxes owed in jurisdictions in which we or our portfolio companies operate. The likelihood and nature of any
such legislation is uncertain. For example, on July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill
Act (“OBBBA”), was enacted, which included amendments and extensions to certain provisions of the 2017 Tax Cuts and Jobs
Act. The impact of the OBBBA and other potential changes are uncertain and could materially increase the amount of taxes
we and our portfolio companies are required to pay and tax-related regulatory and compliance costs. In addition, further
rules relating to compensation for certain covered employees under Section 162(m) could reduce the amount of related tax
deductions available to us.
There could be significant changes in U.S. and non-U.S. tax law, regulations or interpretations that adversely affect the
taxation of carried interest and our ability to recruit, retain and motivate employees and key personnel. Investments must be
held for more than three years for carried interest to be treated for U.S. federal income tax purposes as long-term capital
gain. The holding period requirement may result in some of our carried interest being taxed as ordinary income to our U.S.
employees and other key personnel, which could materially increase the amount of taxes that they would be required to pay,
and this could adversely impact our ability to recruit and retain top talent. The incentive to hold investments for long-term
capital gain treatment may create a conflict of interest between investment vehicle investors (whose investments would
receive such capital gain treatment after a holding period of only one year) and KKR on the execution, closing or timing of
sales of investments in connection with the receipt of carried interest.
The Organization for Economic Co-operation and Development (an intergovernmental public policy organization, the
“OECD”) and government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus
on multi-national companies. The OECD has sought to make changes to numerous long-standing tax principles through its
base erosion and profit shifting (“BEPS”) project, which is focused on a number of issues, including profit shifting among
affiliated entities in different jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. The
OECD finalized guidelines that recommend certain multinational enterprises to be subject to a minimum 15% tax rate (“Pillar
Two”).
Various countries have implemented or intend to implement the OECD’s recommended model rules. By way of example,
the Council of the European Union formally adopted Pillar Two and required all 27 EU member states to adopt local legislation
during 2023 to implement Pillar Two rules that apply in respect of the fiscal years beginning from December 31, 2023.
However, the current U.S. administration is not expected to adopt Pillar Two and has been working with the OECD to exempt
U.S. parented groups from certain aspects of Pillar Two, such as the Income Inclusion Rule (the “IRR”) and Undertaxed Profits
Rule (the “UTPR”), creating additional uncertainty as to the application of these rules to multinational enterprises with a U.S.
parent entity. Our business and our sponsored vehicles’ and portfolio companies’ businesses could be significantly impacted
if the model rules, or any future variation, have been or will be implemented in any of the countries in which our business, our
portfolio companies’ businesses, or our investment structures are located. Bermuda’s commitment to the OECD principles
has led it to adopt a corporate income tax that may increase tax expense and compliance costs for us. More generally, our
effective tax rates could increase, including by way of a possible denial of deductions or profits being allocated differently.
The OECD’s proposals may also lead to an increase in the complexity, burden and cost of tax compliance for us and our
portfolio companies. Given ongoing design, implementation, administration, and interpretation of such proposals, the timing,
scope, and impact of any relevant domestic legislation or multilateral conventions remain subject to significant uncertainty.
See Note 18 “Income Taxes” in our financial statements for further information regarding various tax matters.
Artificial intelligence may increase competitive, operational, legal and regulatory risks to our
businesses in ways that we cannot predict.
The use of artificial intelligence by us and others, and the overall adoption of artificial intelligence throughout the world,
may exacerbate or create new and unpredictable competitive, operational, legal and regulatory risks to our businesses. Any
changes from the use of artificial intelligence could potentially disrupt, among other things, our business models, investment
strategies, investment performance, operational processes, and our ability to identify and hire employees. Some of our
competitors may be more successful than us in the development and implementation of new technologies to address investor
demands, making investments or improve operations, including services and platforms based on artificial intelligence.
We use artificial intelligence and other quantitative analysis tools and models, developed by us and third-party service
providers. Such technology, analysis and modeling are highly complex and subject to limitations and risks that have the
potential to adversely impact us to the extent that we rely on artificial intelligence. If the data we, or third parties whose
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services we rely on, use in connection with the development or deployment of artificial intelligence is incomplete, inadequate
or biased in some way, the performance of our products, services, and businesses could suffer. Data in technology that uses
artificial intelligence may contain a degree of inaccuracy and error, which could result in flawed algorithms in various models
used in our businesses. Our personnel or the personnel of our service providers could, without our knowledge, improperly
utilize or misappropriate artificial intelligence and machine-learning technology while carrying out their responsibilities,
including relating to the entry of confidential information into a technology platform that is or becomes accessible by third
parties. The misuse or misappropriation of our data, unavoidable deficiencies in the practices associated with data collection,
training artificial intelligence technology on large data sets, and big data analytics and difficulties validating data, could have
an adverse impact on us.
Regulators are also increasing scrutiny and considering, and in some cases enacting, regulation of the use of artificial
intelligence technologies, including regarding the use of big data, diligence of data sets and oversight of data vendors. The
use of artificial intelligence by us or others may require compliance with legal or regulatory frameworks that are not fully
developed or tested, and we may face increased costs, litigation and regulatory actions related to our use of artificial
intelligence. See also “—Risks Related to Regulatory Matters—Privacy, data protection, cybersecurity and artificial intelligence
laws may increase compliance costs and subject us to enforcement risks and reputational risks”.
In addition, artificial intelligence may materially disrupt the industries in which we invest, the businesses of our portfolio
companies and the valuations of our investments. See also “—Risks Related to Our Investment Activities—Various conditions
and events outside of our control that are difficult to quantify or predict may have a significant impact on the valuation of our
investments”.
Cybersecurity failures and data security breaches could have a material adverse impact on our
businesses.
We are subject to various risks and costs associated with the collection, processing, storage and transmission of
proprietary, sensitive and otherwise confidential information, including personal information of our investors, insurance
policyholders, employees, contractors and other counterparties and third parties, to which we have access to and process
through a variety of media, including information technology systems. Breaches in security could potentially jeopardize our,
our employees’, our investment vehicle investors’, our insurance policyholders’ or our counterparties’ confidential and other
information processed and stored in, and transmitted through, our computer systems and networks. Any inability, or
perceived inability, by us to adequately address privacy concerns, or comply with applicable privacy laws, regulations, policies,
industry standards and guidance, related contractual obligations, or other privacy legal obligations, even if unfounded, could
result in significant regulatory and third-party liability, increased costs, disruption of our business and operations, and a loss of
investor confidence and other reputational damage.
We continuously face various security threats on a regular basis, including ongoing cybersecurity threats to, and attacks
on, our information technology infrastructure that are intended to gain access to our confidential information, destroy data or
disable, degrade or sabotage our systems. The risk of a security breach or disruption has increased as the number, intensity,
and sophistication of attempted attacks and intrusions from around the world have increased. Although we take protective
measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks may be
vulnerable to unauthorized access, theft, misuse, computer viruses or other malicious code, and other events that could have
a security impact (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering,
and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information). Our
employees have been and expect to continue to be the target of fraudulent calls and emails, and the subject of
impersonations and fraudulent requests for money, which we or the services providers we retain, like administrators, paying
agents and escrow agents, may not be able to detect or protect against. These same cybersecurity breaches, cyberattack and
cyber intrusions could also be employed against our various stakeholders or other third parties, including attempts to
impersonate KKR or its employees, which could cause similar security impacts to our stakeholders, including our portfolio
companies, and other third parties and materially and adversely impact us. The costs related to cyber or other security
threats or disruptions may not be fully insured or indemnified by others, including by our service providers.
Our cybersecurity risk management efforts and our investment in information technology may not be successful in
preventing cyber incidents, which could have a material adverse effect upon our reputation, business, operations, or financial
condition. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can
originate from a wide variety of sources. Furthermore, if we experience a cybersecurity incident and fail to comply with the
relevant notification laws and regulations, it could result in regulatory investigations and penalties, which could lead to
negative publicity and may cause our investors and clients to lose confidence in the effectiveness of our security measures.
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See also “—Our reliance on third parties in the operation of our business exposes us to operational, reputational and
other risks”.
We are subject to focus by certain stakeholders on sustainability matters.
Some investors in our investment vehicles, stockholders, regulators and other stakeholders are focused on sustainability
matters, such as climate change and environmental stewardship, human rights, support for local communities, corporate
governance and transparency, or other environmental- or social-related areas. Certain investors and other stakeholder
groups have also increased their activism and scrutiny of asset managers’ approaches to considering sustainability matters as
part of their investment management decision-making, including by urging alternative asset managers to take (or refrain from
taking) certain actions that could adversely impact the value of an investment and at times have conditioned future capital
commitments on such actions. Further, a number of U.S. states and non-U.S. countries have enacted or proposed policies,
legislation, issued related legal opinions and engaged in related litigation regarding sustainability matters. Increased focus
and activism related to sustainability matters may constrain our capital deployment opportunities. There can be no assurance
that we will be able to accomplish any sustainability-related goals or commitments that we have announced or may announce
in the future, as such statements are, or reflect, estimates, aspirations or expectations only at the time of announcement.
More broadly, there can be no assurance that our responsible investment policies and procedures will not change, potentially
materially, or may not be applicable for a particular investment, because we continuously review our approach to these
issues. Growing interest on the part of investors and regulators in sustainability matters and increased demand for, and
scrutiny of, asset managers’ sustainability-related disclosure, have also increased the risk that asset managers could be
perceived as, or accused of, making inaccurate or misleading statements regarding these matters. The occurrence of any of
the foregoing could have a material and adverse impact on us, including on our reputation.
Although we view our sustainable investing approach as a tool for value creation and value protection, different
stakeholder groups and regulators across the jurisdictions and localities where we operate have divergent views on the merits
of integrating sustainability considerations into the investment process and have, as applicable, increasingly expressed
divergent views and investment expectations with respect to sustainability initiatives and, as applicable, pursued divergent
regulatory initiatives. The increased regulatory and legal complexity and heightened risk of public scrutiny could result in
conflicting sustainability-related regulations and legal frameworks that increase our compliance costs and our risk of non-
compliance or impact our reputation and lead to increased inquiries, investigations, challenges by federal or state authorities,
and reactive stakeholder engagements. Moreover, if our practices do not meet evolving stakeholders’ expectations and
standards, or if we are unable to satisfy all stakeholders, our reputation, ability to attract or retain employees and our
business could be negatively impacted.
Risks Related to Regulatory Matters
We are required to comply with numerous laws and regulations applicable to our business in various countries around
the world. Our compliance with these laws and regulations is critical to our ability to operate our business, and the potential
failure to comply subjects us to many material risks and uncertainties as discussed below. For information about the laws and
regulations applicable to our business, please also see “Business—Regulation”. For additional regulatory risks related to
Global Atlantic, please also see “—Risks Related to Our Insurance Activities—Our insurance business is heavily regulated, and
such regulations may have a material and adverse effect on our business, financial condition and results of operations.”
Our business is subject to complex, extensive and evolving laws, and the failure to comply with
applicable laws may materially and adversely affect us.
We are a global financial institution, and our business is subject to complex, extensive and evolving laws and regulations
in the jurisdictions in which we operate around the world. Our asset management and capital markets businesses are
generally governed by securities laws and regulations applicable to investment advisers, broker-dealers, and other financial
services firms, including extensive regulatory requirements relating to registration, fiduciary obligations, disclosure, reporting,
recordkeeping, supervision and compliance. In addition, our insurance business is subject to complex laws and extensive
regulations applicable to insurance companies as well as regulations applicable to investment advisers, broker-dealers, and
other financial services firms, including requirements relating to licensing, capital adequacy, investments, governance, policy
terms, reporting and compliance. Our compliance with these securities and insurance laws and regulations and the other laws
and regulations applicable to our business (which may evolve and change, from time to time) is critical to our ability to
operate our business and is costly, operationally intensive, and requires significant management attention. Any failure to
comply with these laws or regulations, or any changes in the scope, interpretation, application, or enforcement of such laws
and regulations, could materially and adversely affect our business, results of operations, and financial condition.
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Adverse regulatory actions may result in significant sanctions, liabilities, operational restrictions,
litigation, reputational harm and other material and adverse impacts to our business.
Our compliance with securities and insurance laws and regulations, as well as other laws and regulations applicable to
our business, is subject to frequent examinations, inquiries and investigations by U.S. federal and state, as well as non-U.S.,
governmental agencies and regulatory authorities (including self-regulatory organizations) in the jurisdictions in which we
operate. Governmental agencies and regulatory authorities (including self-regulatory organizations) often have broad
discretion to interpret and apply the laws and regulations applicable to our industry and our business and to determine areas
of focus for their examinations, inquiries, and investigations. Moreover, many of these laws and regulations authorize such
entities to conduct enforcement actions and other proceedings that may result in civil or criminal liability, penalties, and fines;
or other sanctions, including censures, cease-and-desist orders, settlements or revocations, suspensions or expulsions of
applicable memberships, licenses, registrations, authorizations or other regulatory approvals that, in any of these cases, may
apply with respect to us or any one or more of our businesses, employees, investments or portfolio companies. In addition,
convictions, injunctions, sanctions or settlements imposed by a governmental authority could form the basis for automatic or
discretionary limitations on our memberships, licenses, registrations, authorizations or other regulatory approvals, or our
ability or the ability of our affiliates to rely on exemptions, that are administered by a different governmental authority. Any
of these actions or consequences could materially and adversely affect us.
Any resolution of claims brought by a governmental agency or regulatory authority (including self-regulatory
organizations) may, in addition to the imposition of significant monetary penalties or other sanctions, require an admission of
wrongdoing or result in adverse limitations or prohibitions on our ability to conduct our business activities, including potential
statutory disqualifications, third-party oversight of various business processes, or the divestiture of investments. Actions by a
governmental agency or regulatory authority in one area of our business could affect other areas of our business, including
our joint venture partners and portfolio companies, which could, in turn, materially and adversely affect our business, results
of operations and financial condition. Even if an investigation or proceeding does not result in a sanction or the sanction
imposed is not material in monetary terms, the investigation, proceeding, action, imposition of sanctions or general
perception of impropriety could still significantly harm our reputation, adversely impact our relationship with our regulators,
result in increased future regulatory scrutiny, result in the loss of investors and investment opportunities, and place us at a
material disadvantage to our competitors.
The suspension, revocation, or limitation of our regulatory registrations or licenses may materially
adversely affect our business.
As a regulated financial institution, we rely on our regulatory registrations and licenses around the world in order to
conduct our business. The suspension, revocation, or limitation of our regulatory registrations or licenses may materially
adversely affect our business and potentially prohibit our ability to conduct our business at all. For example, we operate
registered investment advisers and broker-dealers in the United States and around the world, and the suspension, revocation
or limitation of our registrations as an investment adviser or as a broker-dealer would limit or could even prohibit us from
conducting our asset management and capital markets businesses in the jurisdictions in which we currently operate.
A U.S. investment adviser’s registration under the Investment Advisers Act may be suspended, revoked, or otherwise
limited as a result of, among other things, failure to meet eligibility requirements for registration with the Securities and
Exchange Commission (“SEC”), violations of applicable federal securities laws or fiduciary duties, violations of criminal laws,
materially inaccurate or incomplete regulatory filings, or as the result of disciplinary or enforcement actions by the SEC or
other federal, state or non-U.S. regulators, including actions based on criminal convictions, guilty pleas, or injunctions
involving the adviser or its associated persons. In particular, investment advisers are subject to heightened regulatory
scrutiny with respect to the identification, disclosure and management of conflicts of interest, including conflicts arising from
principal transactions, cross trades or other transactions in which the adviser or its affiliates have a financial or other interest.
See “—Risks Related to Our Business—We may pursue new business opportunities, strategic initiatives, or investment
opportunities that involve new or unique business, regulatory or other complexities and risks” and “—Risks Related to Our
Investment Activities—If we fail to effectively manage conflicts of interest that arise from our investment activities, our
reputation, business or financial results could be materially and adversely impacted or we may become subject to regulatory
scrutiny or litigation”.
A U.S. broker-dealer’s registration under the Securities Exchange Act of 1934 may be suspended, revoked, or otherwise
limited as a result of, among other things, violations of federal securities laws or regulations, failure to comply with the rules
and regulations of the SEC and the Financial Industry Regulatory Authority (“FINRA”), materially inaccurate or incomplete
regulatory filings, failure to maintain required net capital or supervisory systems, insolvency, criminal convictions or
injunctions involving the broker-dealer or its associated persons, or as the result of disciplinary or enforcement actions by the
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SEC, FINRA or other federal, state or non-U.S. regulators, including actions based on the conduct of affiliates or associated
persons. Similarly, the Investment Company Act may disqualify certain persons and their affiliates from acting in various
capacities for U.S. registered funds, including as investment adviser, as a result of certain convictions and injunctions.
We also rely on similar registrations in order to conduct our asset management business outside of the United States .
For example, in Europe, we are an AIFM registered with the Central Bank of Ireland under the AIFMD, and in the United
Kingdom, we are regulated by the FCA under the FSMA. In addition, in Asia, we are a financial instruments business operator
under the Financial Instruments and Exchange Act of Japan and a licensed asset manager and broker-dealer with the
Securities and Futures Commission in Hong Kong, and we conduct fund management activities under license from the
Monetary Authority of Singapore. For more information, see “Business—Regulation”.
In addition, an insurance company’s license or authorization may be suspended, revoked, or otherwise limited as a result
of, among other things, failure to meet applicable solvency, capital, or reserve requirements; deficiencies in risk management,
internal controls, or governance; violations of applicable insurance laws or regulations; inaccurate or incomplete regulatory
filings or disclosures; unsafe or unsound business practices; failures in market conduct or consumer protection compliance; or
as a result of regulatory examinations, supervisory actions, or enforcement proceedings. Insurance regulators have broad
authority to impose corrective actions, restrictions, enhanced oversight, or other regulatory measures, including in
connection with capital adequacy, investment practices, governance, reporting, or market conduct matters, and adverse
regulatory actions affecting our insurance subsidiaries could limit their ability to write new business, require changes to
investment or operating practices, restrict dividend capacity or intercompany arrangements, or otherwise materially
adversely affect our insurance business and the results of our operations. See, generally, “—Risks Related to Our Insurance
Activities”.
Any suspension, revocation, limitation, conditioning, or failure to obtain or renew licenses, registrations, authorizations,
exemptions, or approvals applicable to any of our businesses, in the United States or in any other country in which we
operate around the world, could restrict or prohibit our ability to conduct our business, require restructuring of business lines,
limit products we offer, impede fundraising, restrict transaction activity, or otherwise materially adversely affect our business.
See also “—Adverse regulatory actions may result in significant sanctions, liabilities, operational restrictions, litigation,
reputational harm and other material and adverse impacts to our business”.
Changes in the regulatory framework applicable to our business, including the loss of exemptions or
the application of enhanced group-level regulation, may materially adversely affect us.
Our business operates within regulatory frameworks globally that distinguish among different types of financial activities,
products, organizational structure, and other factors. These regulatory frameworks, including the scope, availability, and
interpretation of exemptions, exclusions, and tailored regulatory requirements, are subject to change. If the regulatory
framework applicable to our business were to change, we could become subject to additional or more comprehensive
regulation in any one or more jurisdictions in which we operate, which may cause material and adverse impacts to our
business. The regulatory framework applicable to our business may change for a number of reasons, including through
amendments to existing laws or regulations; changes in regulatory interpretation or supervisory expectations; changes in
enforcement priorities or activity; evolving regulatory views regarding, among other things, market structure, investor
protection, or financial stability; changes in how our business activities or organizational structure are viewed by regulators;
disqualifying events involving us, our affiliates, or associated persons; or changes in our business activities or organizational
structure or the growth or expansion of our business, including our expansion into new geographies, offering new investment
or insurance products, or changing the way we raise capital from investors.
In particular, regulatory frameworks applicable to our business may evolve over time. For example, our private credit
strategies and insurance-adjacent lending activities operate largely outside the traditional banking system and are subject to a
complex and developing set of regulatory regimes, including securities, insurance, derivatives, banking, and financial stability
laws. Although these activities are conducted through entities that are not regulated as banks, they have increasingly
attracted regulatory attention due to their scale, growth, use of leverage, liquidity characteristics, interconnectedness with
regulated financial institutions and potential relevance to broader financial markets. Regulatory authorities may adopt new or
revised laws, regulations, guidance, or supervisory approaches applicable to these activities. Such developments could include
heightened reporting or disclosure requirements, limitations on leverage, increased liquidity requirements, restrictions on
investment strategies or asset concentrations, or enhanced governance or risk-management expectations. In addition,
regulatory initiatives relating to non-bank financial intermediation or so-called “shadow banking,” as well as financial-stability-
oriented regulation, could result in the recharacterization of certain of our private credit or insurance-adjacent activities or
the imposition of activity-based or group-level regulatory requirements that have historically applied to banks or other
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systemically important financial institutions, which could materially adversely affect our business, financial condition, and
results of operations.
Moreover, given the scale and scope of our business and financial activities, regulators may evaluate our business and
risk profile on a consolidated or group-wide basis rather than solely by reference to individual regulated entities. In the United
States, the Financial Stability Oversight Council has authority to designate certain non-bank financial companies as
systemically important financial institutions, which could subject a designated entity to enhanced supervision and regulation.
Similarly, in the European Union and the United Kingdom, groups that engage in both insurance and investment activities may
be subject to supplementary group-wide supervision under the Financial Conglomerates Directive and its UK equivalent. If we
were to become subject to such enhanced or group-level regulatory regimes, we could face materially increased regulatory
burdens, governance, reporting, capital, liquidity, or risk-management requirements, restrictions on business activities or
intercompany arrangements, or other limitations that could materially adversely affect our business, financial condition, and
results of operations.
For matters that may specifically affect our insurance business, please see “—Risks Related to Our Insurance Activities—
Our insurance business is heavily regulated, and such regulations may have a material and adverse effect on our business,
financial condition and results of operations.”
If regulatory exemptions or exclusions on which we rely become unavailable, we may become subject
to additional restrictive and costly regulatory requirements, regulatory action or liability.
We regularly rely on exemptions, exclusions and other regulatory accommodations under U.S. and non-U.S. laws and
regulations in conducting our asset management, capital markets and insurance businesses. The unavailability of these
exemptions or exclusions for any reason, including changes in law, changes in regulatory interpretation, disqualifying events
involving us, our affiliates, or associated persons, or changes in our business activities or organizational structure, may subject
us or our investment vehicles to additional restrictive and costly regulatory compliance requirements, regulatory action or
third-party claims, or other otherwise materially and adversely affect our business.
In particular, we rely on exemptions from requirements pursuant to the Securities Act of 1933, the Securities Exchange
Act of 1934, the Investment Company Act, the Commodity Exchange Act of 1936, and the Employee Retirement Income
Security Act of 1974 (“ERISA”) in conducting our business activities, as well as exemptions from various foreign regulatory
requirements. These exemptions are often highly complex, subject to evolving interpretation, and may in certain
circumstances depend on compliance by third parties or factual determinations that may be outside of our control.
For example, in raising new funds or other investment vehicles in the United States, we typically rely on private
placement exemptions from registration under the Securities Act, including Rule 506 of Regulation D. If we, our investment
vehicles or any of the covered persons associated with our investment vehicles were to become subject to a disqualifying
event, which includes a variety of criminal, regulatory and civil matters, one or more of our investment vehicles could lose the
ability to raise capital in a Rule 506 private offering, which could materially impair our ability to raise capital for existing and
new investment vehicles. The occurrence of a disqualifying event would also materially and adversely affect our ability to
raise or syndicate capital for our transactions and for third parties and otherwise materially and adversely affect our ability to
conduct our capital markets business, which depends on our ability to participate in unregistered securities offerings. As we
expand the array of vehicles that we offer to individual investors, we may increasingly rely on the Rule 506(c) safe harbor,
which permits general solicitation and advertising but requires enhanced procedures to verify accredited investor status,
increasing compliance complexity and execution risks. Outside of the United States, we also rely on similar private placement
exemptions and marketing registrations, for example under the AIFMD in Europe, the Financial Services and Markets Act 2000
(as amended and supplemented by statutory instruments) and the Alternative Investment Fund Managers Regulations 2013
(as amended) in the United Kingdom, the Financial Instruments and Exchange Act in Japan, and the Securities and Futures Act
in Singapore.
In addition, certain of our investment vehicles, including our K-Series vehicles, are structured and operated in reliance on
exclusions from the definition of an investment company under the Investment Company Act. If any such entity were
required to register as an investment company, the applicable restrictions on capital structure, leverage, transactions with
affiliates, governance, and operations would make it impractical for the entity to operate its business as currently conducted
and could materially and adversely affect our financial results and results of operations.
In the United States, the CFTC and the SEC regulate transactions in futures and swaps as well as entities that enter into
those transactions. We are also subject to similar regulations when we trade derivatives in non-U.S. jurisdictions. These
regulations may limit our trading activities and our ability to implement effective hedging strategies or increase the costs of
compliance. We generally operate our businesses pursuant to exemptions from registration, but certain transactions in
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futures, swaps and other derivatives remain subject to regulatory requirements regardless of our registration status. We and
other asset management firms rely on an exemption from aggregation for portfolio companies that hold positions in the
relevant contracts. Our insurance subsidiaries must also comply with applicable insurance and other regulations with respect
to hedging. Any changes in application or interpretation of the rules applicable to futures, swaps and other derivatives could
result in significant costs for us and our investment vehicles.
Distribution of financial products to individual investors subjects us to heightened regulatory,
litigation, and reputational risks, which may materially adversely affect our business.
As part of our growth strategy, we have distributed and expect to continue distributing certain of our investment and
insurance products to individual investors. In some cases, our financial products are distributed indirectly through third-party
managed vehicles sponsored by brokerage firms, banks, or third-party feeder providers, and in other cases directly to the
clients of banks, independent investment advisers, and broker-dealers. We also create investment products specifically
designed for direct investment by individual investors in the United States and in non-U.S. jurisdictions. Products offered to
individual investors are subject to heightened regulatory scrutiny, prescriptive conduct standards, and increased litigation risk
compared to products offered primarily to institutional investors.
For example, in the United States, the public offering and sale of securities to individual investors is subject to the anti-
fraud and other investor protection provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and, where
applicable, the Investment Company Act, which may subject issuers and their affiliates and control persons to heightened
regulatory scrutiny and to claims by private plaintiffs alleging that such products were inappropriately marketed, inadequately
disclosed, or otherwise offered or sold in violation of applicable securities laws. We have sponsored and advise, or sub-advise,
investment products whose structuring and investments in illiquid assets are novel and untested. In addition, U.S. broker-
dealers and their associated persons are subject to laws and regulations governing the sale of financial products to individual
investors, including Regulation Best Interest, which requires recommendations to retail customers to be made in the
customer’s best interest. These regulations also apply to third-party broker-dealers and any broker-dealers we operate that
distribute our investment or insurance products directly to individual investors. Compliance with such regulations and related
disclosure requirements, conflict-management, supervision, and recordkeeping requirements may impose additional costs,
operational complexity, and supervisory obligations on us, and may impact our ability to distribute our financial products to
individual investors. See also “—Risks Related to Our Insurance Activities—Our insurance business is heavily regulated, and
such regulations may have a material and adverse effect on our business, financial condition and results of operations.”
In addition, various non-U.S. laws and regulations also govern the sale of financial products to individual investors,
including, for example, Directive 2014/65/EU (MiFID II), Directive 2011/61/EU (AIFMD), and Regulation 2015/760/EU (ELTIF
Regulation) which govern the sale of financial products to individual investors in the European Economic Area (the “EEA”).
These EEA directives and regulations contain requirements for, among other things, marketing, investor suitability
assessments, and conflicts of interest management, and certain of these requirements also apply to distributors, placement
agents and other intermediaries that distribute our products to individual investors. Moreover, although the EEA’s directives
and regulations are intended to create an EEA-wide harmonized framework, individual EEA member states may supplement
them with their own national rules, which adds to complexity and compliance risks.
The distribution of our products to individual investors often occurs through third-party channels that we do not control.
Although we conduct due diligence and establish onboarding and contractual arrangements with such distributors, we may
not be able to effectively monitor or control how our products are marketed, recommended, or sold. As a result, we may be
exposed to regulatory inquiries, enforcement actions, litigation, or reputational harm arising from allegations that our
products were sold to investors for whom they were unsuitable or inadequately disclosed, even where such conduct was
undertaken by third parties. Similar risks arise if our employees involved in distribution or oversight of third-party distributors
fail to adhere to applicable compliance or supervisory requirements. Legislative and regulatory developments may affect our
retail strategy. In the United States, initiatives intended to expand access by participants in 401(k) and other defined
contribution plans to alternative investments may create new opportunities but also raise complex regulatory, fiduciary,
disclosure, valuation, liquidity, and operational issues under securities and other applicable laws. We may incur significant
costs to design and implement products and compliance frameworks to access such channels, and those costs may not be
recoverable if regulatory requirements change, are delayed, or do not take effect. At the same time, competitors may pursue
these opportunities more aggressively, potentially placing us at a competitive disadvantage. Expanding our focus on
individual investors may also subject us to increased scrutiny regarding fees, liquidity, valuation, marketing, and disclosures,
increase the risk of private litigation or regulatory enforcement, and could be perceived by our institutional investors as
creating conflicts of interest or a shift in strategic focus, any of which could materially adversely affect our business, results of
operations, and financial condition. See also “—Adverse regulatory actions may result in significant sanctions, liabilities,
operational restrictions, litigation, reputational harm and other material and adverse impacts to our business.”
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Regulations impacting the insurance industry and insurance companies owned by alternative asset
managers may adversely affect our business.
The NAIC and task forces and working groups appointed by it as well as individual U.S. state insurance regulators continue
to consider various initiatives to change and modernize the solvency framework applicable to regulated insurance companies.
These initiatives include enhancing the ability of state insurance regulators to effectively monitor the solvency and risks faced
by an insurer within a larger group and when engaging in reinsurance transactions with other insurers. Although initially the
NAIC’s actions were driven by growing concerns related to companies owned by alternative asset management firms, the
NAIC and individual state insurance regulators have shifted toward an activity-based regulatory approach, signaling continued
potential for additional regulation. The NAIC and state insurance regulators have adopted and continue to evaluate new
regulations relating to affiliates and investment structures (including revisions to the capital charges for asset-backed
securities, in particular CLOs), investment management agreements, governance standards, market conduct practices and use
of third-party administrators. For example, the NAIC and U.S. state insurance regulators have increasingly focused on the
terms, structure, and negotiation of investment management agreements.
As part of their efforts to address potential risks stemming from an insurance company’s relationship with alternative
asset managers that may impact the insurance company’s risk profile, regulators have increased their scrutiny of certain
structured investments held by insurance companies, the appropriateness of investment ratings and potential conflicts of
interest (including affiliated investments), and potential misalignment of incentives. This growing scrutiny may increase the
risk of regulatory actions against our insurance business and could result in new or amended regulations that limit our ability
as an investment adviser, or make it more burdensome or costly, to enter into or amend existing investment management
agreements with insurance companies and thereby grow our insurance strategy. Additionally, the group-wide supervisor for
our insurance business is the Indiana Department of Insurance. The Indiana Department of Insurance has informed us that it
will be part of the International Association of Insurance Supervisors’ Global Monitoring Exercise, a risk assessment
framework to monitor key risks and trends and to detect the potential build-up of systemic risk in the global insurance sector
that also includes all Internationally Active Insurance Groups (“IAIGs”). IAIGs are expected to be subject to group-wide capital
standards once adopted by the United States. At this time, we cannot accurately predict whether we will be named or
designated as an IAIG or the impact, if any, on us.
See also “—Risks Related to Our Insurance Activities—Our insurance business is heavily regulated, and such regulations
may have a material and adverse effect on our business, financial condition and results of operations.”
We are subject to substantial regulatory risks due to our extensive and global investment activities.
As a global alternative asset manager, we regularly engage in transactions involving equity and debt investments,
mergers, acquisitions, financings, restructurings, exits, and other investment activities across numerous jurisdictions. These
transactions are subject to a wide range of complex laws and regulations, including securities, antitrust, foreign investment,
sanctions, export controls, anti-corruption, and other regulations administered by U.S. and non-U.S. governmental
authorities.
In addition to the laws and regulations arising from our investment activities, we also become subject from time to time
to the laws and regulations applicable to the businesses of our portfolio companies, including the regulations related to the
U.S. Federal Energy Regulatory Commission, the U.S. Federal Communications Commission, and the U.S. Defense
Counterintelligence and Security Agency as well as various laws and regulations of non-U.S. jurisdictions, such as those
promulgated by the U.K. Financial Conduct Authority, the Swedish Financial Supervisory Authority, the German Federal
Financial Supervisory Authority, and the Australian Prudential Regulation Authority. Compliance with these laws and
regulations is highly fact-specific, requires significant time, resources, and coordination across multiple jurisdictions, and is
subject to heightened regulatory scrutiny and enforcement. Compliance with these laws and regulations is highly fact-
specific, requires significant time, resources, and coordination across multiple jurisdictions, and is subject to heightened
regulatory scrutiny and enforcement.
Our ability to comply with many of these requirements depends in part on obtaining timely, complete, and accurate
information from portfolio companies, management teams, counterparties, and third-party advisers, including information
relating to operations, ownership structures, counterparties, customers, and historical conduct. We may not always be able to
independently verify such information, and we rely significantly on our portfolio companies to provide such information to us.
In some cases, inaccurate, incomplete, or delayed information may not be identified until after a transaction has closed,
which could result in regulatory investigations, the reopening of prior approval processes, the imposition of remedial
measures or sanctions, or other adverse consequences for us and our portfolio companies. See also “—The actions of our
portfolio companies may subject us to potential liabilities and cause us reputational harm”.
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Compliance with these transactional regulatory requirements is costly and operationally complex, requiring substantial
investment in personnel, systems, controls, and external advisers. These costs may increase as regulatory regimes become
more expansive, enforcement activity intensifies, or new jurisdictions or asset classes are added to our investment activities.
Failure to comply, or errors in assessing or implementing compliance requirements in connection with our transactions, could
subject us or our portfolio companies to civil or criminal penalties, fines, sanctions, judgments, remedial obligations,
transaction delays or prohibitions, reputational harm, or other adverse consequences. In certain circumstances, we or our
personnel could also be subject to civil or criminal investigations or enforcement actions based on the conduct of portfolio
companies, joint venture partners, counterparties, or other third parties, including under theories of control person,
successor, or aiding-and-abetting liability. The failure to effectively manage these risks, or significant increases in compliance
burdens or enforcement exposure, could materially adversely affect our business, results of operations, financial condition,
and reputation. See also “—Our business is subject to complex, extensive and evolving laws, and the failure to comply with
applicable laws may materially and adversely affect us” and “—Adverse regulatory actions may result in significant sanctions,
liabilities, operational restrictions, litigation, reputational harm and other material and adverse impacts to our business”.
Various investment-related and competition laws may limit our investment opportunities and subject
us to adverse regulatory consequences.
As a global alternative asset manager with a broad investment platform, our ability to identify, pursue, and consummate
attractive investment opportunities may be constrained by various investment-related and competition laws, including
antitrust, merger control, foreign direct investment (“FDI”) and similar laws and regulations that aim to control investment
activity in various jurisdictions around the world. These regimes may restrict the types of transactions we can pursue, the
industries or assets in which we can invest, the structures through which we can invest, or the investors that can participate in
them, particularly given our size, global footprint, and ownership of, or relationships with, a wide range of portfolio
companies and affiliates.
In many cases, the potential applicability of investment-related and competition laws may deter us from pursuing certain
investment opportunities, limit our ability to finance existing functions, or require us to structure transactions in ways that are
less attractive or less competitive, including by limiting ownership levels, governance rights, syndication arrangements, co-
investor participation, or exit alternatives. In addition, counterparties, sellers, financing sources, or co-investors may be
unwilling to engage in transactions subject to extended or uncertain regulatory review, or may prefer bidders with simpler
ownership structures or perceived lower regulatory risk, placing us at a competitive disadvantage.
Our transactions are often subject to investment-related and competition laws that require pre-closing or post-closing
notifications, approvals, or clearances in connection with our investment activities, including under U.S. antitrust laws and
national-security-focused regimes such as the U.S. Foreign Investment Risk Review Modernization Act, pursuant to which the
Committee on Foreign Investment in the United States may review, block, or impose conditions on investments by non-U.S.
persons in U.S. businesses or real assets. Many jurisdictions around the world have similar or comparable antitrust and FDI
regimes. Additionally, certain jurisdictions may impose restrictions or prohibitions on businesses making investments in other
countries or otherwise restrict investment activities. For example, the U.S. Outbound Investment Security Program imposes
notification requirements and prohibitions for certain investments in entities engaged in specified technology sectors outside
of the United States. The prospect of review or restrictions under these regimes may narrow the universe of feasible
transactions, delay decision-making, or require significant resources to evaluate regulatory risk before we can determine
whether to pursue an opportunity. Determining which investment-related and competition laws and regulations apply to any
particular transaction, identifying the applicable filing, notice, approval, or other requirements that may be triggered under
such laws and regulations, and ensuring compliance with all applicable requirements can be complex and resource-intensive.
Any of the foregoing could reduce the number or attractiveness of investment opportunities available to us, increase the
time, cost, and complexity associated with evaluating and executing transactions, limit our ability to deploy capital efficiently,
adversely impact our competitive positions or otherwise materially adversely affect our investment activities. Failure to
comply with these laws and regulations, or allegations of non-compliance, could prevent us from completing transactions, and
could subject us, our employees and our portfolio companies to civil or criminal sanctions, fines, penalties, remediation
obligations, restrictions on investment activities, enhanced monitoring or oversight, requirements to divest or restructure
investments, and significant reputational harm. See also “—Adverse regulatory actions may result in significant sanctions,
liabilities, operational restrictions, litigation, reputational harm and other material and adverse impacts to our business”.
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Financial crime laws may limit our investment and capital raising activities and subject us to adverse
regulatory consequences.
Our business is subject to a wide range of laws and regulations relating to the prevention of financial crime, including
anti-corruption, economic sanctions, and anti-money laundering and countering the financing of terrorism ("AML/CFT") and
similar laws and regulations administered by U.S. and non-U.S. governmental authorities. These include, among others, FCPA,
economic sanctions and trade control laws and regulations administered by the U.S. Department of the Treasury’s Office of
Foreign Assets Control, the U.S. Department of Commerce, and the U.S. Department of State, AML/CFT requirements
administered by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, as well as similar laws and
regulations administered by non-U.S. authorities, including EU and UK sanctions regimes and the UK Bribery Act. These laws
and regulations are complex, may in some cases impose liability regardless of intent or knowledge, may be applied
extraterritorially, and may impose overlapping or conflicting requirements, creating significant compliance and enforcement
risk.
Compliance with financial crime laws can be highly fact-specific and often requires collection of and depends on
information regarding counterparties, including ownership structures, business practices, and historical conduct, which may
be incomplete, inaccurate, or difficult to obtain, particularly in connection with cross-border transactions or investments in
jurisdictions with less developed regulatory regimes. These risks are heightened by our ownership of, and investment in,
portfolio companies operating across numerous jurisdictions and industries. In certain circumstances, we or our personnel
could be subject to investigations, enforcement actions, or liability arising from the conduct of portfolio companies, joint
venture partners, or other third parties, including under theories of control person, successor, aiding-and-abetting, or
facilitation liability. In particular, under U.S. economic sanctions, the FCPA and similar laws and regulations, we may be held
liable for conduct engaged in by portfolio companies or their employees, agents, or intermediaries, including conduct that
occurred prior to our investment or without our knowledge.
Compliance with financial crime laws is required throughout the lifecycle of our investments, including when we acquire
investments, and exit or sell investments. In these contexts, we must assess whether funds paid or received in connection
with an acquisition, financing, or disposition could be transferred, directly or indirectly, to persons or entities subject to
sanctions or other restrictions. Limitations on our ability to obtain complete or reliable information regarding sellers, buyers,
beneficial owners, intermediaries, or payment flows, or changes in applicable laws and regulations or sanctions regimes may
require changes to transaction structures, reduce proceeds, or expose us to enforcement risk.
Compliance with financial crime laws can also have a material impact on our fundraising, capital-raising, and syndication
activities, including limitations on the admission of investors into our funds and the participation of co-investors in our
transactions. In these contexts, we may be required to assess the identity, ownership, source of funds, and jurisdictional
nexus of investors, lenders, and co-investors, and applicable restrictions may limit participation, delay or prevent capital
formation or syndication, require enhanced diligence or contractual protections, or otherwise adversely affect our ability to
raise capital or complete transactions.
Compliance with financial crime laws can be costly and resource-intensive, requiring significant investment in personnel,
systems, controls, training, and third-party advisers, and may limit the jurisdictions, industries, counterparties, or investment
opportunities we are able to pursue. Failure to comply with these laws and regulations, or allegations of non-compliance,
could subject us and our portfolio companies to civil or criminal sanctions, remediation obligations, restrictions on business
activities, enhanced monitoring or oversight, requirements to divest or restructure investments, and significant reputational
harm. See also “—Adverse regulatory actions may result in significant sanctions, liabilities, operational restrictions, litigation,
reputational harm and other material and adverse impacts to our business”.
Our investment vehicles and insurance subsidiaries could become subject to the fiduciary responsibility
and prohibited transaction provisions of ERISA and Section 4975 of the Code, which would adversely
affect our businesses.
Our investment vehicles are structured and operated in a manner intended to avoid being treated as holding plan assets
for purposes of ERISA and Section 4975 of the Code, and we seek to conduct our investment management activities in a
manner consistent with applicable exemptions and exceptions. However, if any of our investment vehicles or insurance
subsidiaries were determined to hold plan assets for purposes of ERISA, or if an applicable exemption or exception were
unavailable, we could become subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code, which could materially adversely affect our business.
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We or certain of our investment vehicles could potentially be held liable under ERISA for the pension obligations of one or
more of our portfolio companies if we or the investment vehicle were determined to be a “trade or business” under ERISA
and deemed part of the same controlled group as the portfolio company under such rules, or if we were otherwise to become
jointly and severally responsible for any such pension liabilities. In addition, if a similar rationale were expanded to apply also
for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or
filing obligations in certain contexts. Similar laws and theories that could be applied with similar results also exist outside of
the United States.
Although we do not currently rely on the qualified professional asset manager (“QPAM”) exemption under ERISA in any
material respect, certain of our affiliates and we, in the future, may rely on the QPAM exemption in connection with
managing plan assets. The availability of the QPAM exemption may be lost or rendered unavailable as a result of criminal
convictions, regulatory actions, or other disqualifying events involving the relevant investment adviser or certain affiliated
entities or individuals, including conduct unrelated to the management of plan assets. Any such loss or unavailability could
expose us or our investment vehicles to prohibited transaction liability, restrict our ability to manage plan assets, require
restructuring of affected arrangements, or otherwise materially adversely affect our business. Moreover, if the general
accounts or separate accounts of one or more of our insurance subsidiaries were to constitute plan assets for purposes of
ERISA, in the absence of an exemption we could incur liability under the prohibited transaction provisions of ERISA and the
Code as a result of any our investment management activities with respect to, or transactions involving our insurance
subsidiaries, and we could become prohibited from being compensated for managing our insurance subsidiaries’ assets.
See also “—Adverse regulatory actions may result in significant sanctions, liabilities, operational restrictions, litigation,
reputational harm and other material and adverse impacts to our business”.
Sustainability-related laws and disclosure requirements may increase compliance costs and subject us
to enforcement risks and reputational risks.
We and certain of our investment vehicles and portfolio companies are or may become subject to sustainability-related
laws, regulations, and disclosure requirements. Our business could be adversely affected if we, our investment vehicles or our
portfolio companies fail to comply with applicable sustainability requirements, including as a result of increased compliance
costs, regulatory enforcement activity, litigation, or reputational harm. New or amended sustainability rules, regulations,
enforcement priorities, or interpretations of existing laws may result in enhanced disclosure or other compliance obligations
and could adversely affect our investment activities and ability to raise capital.
In the European Union, we and certain of our investment vehicles and portfolio companies are or may become subject to
sustainability-related rules and guidance, including the Sustainable Finance Disclosure Regulation, the Corporate Sustainability
Reporting Directive, and the Corporate Sustainability Due Diligence Directive, each of which, if applicable, could impose
significant disclosure, reporting, or due diligence requirements. In addition, we, our investment vehicles and portfolio
companies may also become subject to sustainability-related regulations in the United States, including the California Climate-
Related Financial Risk Act (SB 261) (which is temporarily enjoined) and the California Climate Corporate Data Accountability
Act (SB 253) that is contemplated to require certain disclosures about climate-related financial risks and greenhouse gas
emissions data. On the other hand, several U.S. governmental authorities have enacted or proposed legislation and policies,
or pursued investigations and litigation, to restrict or prohibit government entities from doing business with businesses
identified as boycotting or discriminating against particular industries or from considering environmental and social factors in
their investment processes.
Compliance with sustainability-related requirements often depends on collecting, measuring, and reporting information
from portfolio companies and other third parties, which may be incomplete, inconsistent, or difficult to obtain. Sustainability-
related reporting is subject to evolving standards and methodologies and may require the use of assumptions or estimates
that could later be challenged. Collecting, measuring, and reporting sustainability information can be costly, difficult, and
time-consuming and may present operational, legal, and reputational risks.
We expect evolving sustainability-related regulation and investor expectations to require us to devote additional
resources to sustainability matters in connection with our investment activities and the management of our portfolio
companies, which will increase our expenses. Any failure to effectively manage these requirements, or any material increase
in compliance burdens, regulatory action, litigation, or reputational harm, could materially adversely affect our business,
results of operations, and financial condition. See also “—Adverse regulatory actions may result in significant sanctions,
liabilities, operational restrictions, litigation, reputational harm and other material and adverse impacts to our business”.
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Privacy, data protection, cybersecurity and artificial intelligence laws may increase compliance costs
and subject us to enforcement risks and reputational risks.
Data privacy, data protection and cybersecurity have become priorities for regulators around the world, and rapidly
evolving and changing laws and regulations, including with respect to artificial intelligence, may increase compliance and legal
costs and expose us to enforcement risk, litigation, and reputational harm. We and our portfolio companies are subject to U.S.
federal and state privacy and data protection laws and regulations. For example, the California Consumer Privacy Act provides
enhanced consumer rights, a private right of action for certain data breaches, and statutory fines, damages and penalties for
violations. Other U.S. states have passed their own consumer privacy laws and other states are considering doing so. At the
U.S. federal level, we are subject to the Gramm-Leach-Bliley Act of 1999, and implementing regulations, including Regulation
S-P, which governs privacy notices and the safeguarding and disposal of customer information and establishes certain incident
response and notification obligations.
Our insurance business processes sensitive personal information of policyholders, which exposes it to heightened privacy
and cybersecurity risk, and our insurance subsidiaries are subject to additional cybersecurity requirements, including the New
York State Department of Financial Services (“NYSDFS”) cybersecurity regulation, which requires covered entities to maintain
cybersecurity programs, conduct risk assessments, and satisfy certain incident reporting and governance requirements. In
November 2023, the NYSDFS finalized amendments to its cybersecurity regulations that significantly expanded the NYSDFS’
regulation of data privacy matters.
We are also subject to non-U.S. privacy and data protection laws, including the European General Data Protection
Regulation, the Personal Information Protection Law of the People’s Republic of China, the India Digital Personal Data
Protection Act 2023, the UK Data Protection Act, and similar laws in other jurisdictions. Many of these regimes have
extraterritorial reach, impose differing or conflicting requirements, and may apply to data processing activities conducted by
us, our portfolio companies, or third-party service providers. In addition, we are often subject to privacy and data security
obligations arising from contractual commitments with counterparties.
There is also increased regulatory attention about the use of artificial intelligence. For example, the European Union has
adopted Regulation (EU) 2024/1689, which establishes a comprehensive, risk-based regulatory framework governing the
development, marketing, deployment and use of artificial intelligence systems within the European Union.
Failure to comply with applicable data privacy, data protection, cybersecurity, or artificial intelligence laws or related
contractual obligations could result in regulatory investigations or enforcement actions, private litigation, fines, penalties,
claims for damages, or adverse publicity. Even where we are not found liable, responding to investigations or claims may be
costly and time-consuming and could result in reputational harm. Regulatory enforcement activity and private litigation
relating to data privacy and cybersecurity matters have increased in recent years, and any significant enforcement action,
litigation, or reputational harm could materially adversely affect our business, results of operations and financial condition.
See also “—Adverse regulatory actions may result in significant sanctions, liabilities, operational restrictions, litigation,
reputational harm and other material and adverse impacts to our business”.
Risks Related to Our Investment Activities
In our asset management business, we sponsor and manage funds and other investment vehicles that make investments
worldwide on behalf of third-party investors and, in connection with those activities, typically deploy our own capital for a
portion of those investments. These investments are subject to many material risks and uncertainties as discussed below. In
addition, we manage the investments of our insurance subsidiaries and other investments on our balance sheet, including
through our Strategic Holdings business. Because we directly bear the full risk of the investments of our insurance
subsidiaries and those on our balance sheet, including those reported in our Strategic Holdings segment, the risks and
uncertainties discussed below may have a greater impact on our results of operations and financial condition.
Future results of our investments may be different than, and may not achieve the levels of, any of our
historical returns.
We have presented in this report certain information relating to our investment returns, such as net and gross internal
rates of return (“IRR”), multiples of invested capital (“MOIC”) and realized and unrealized investment values for investment
vehicles that we have sponsored, managed or operated. Historical returns of our investment vehicles should not be relied
upon as indicative of the future results that you should expect from our investment vehicles and are not indicative of the
future results of our insurance subsidiaries or our balance sheet assets. The future results may differ significantly from their
historical results for a multitude of reasons, including for timing differences between the reporting of unrealized gains and
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realization events, changes in the asset classes in which our current funds invest in compared to historical asset classes,
market and economic conditions, differences in the duration of holding periods of investments and deployment periods for
investment vehicles, differences in asset mixes, industry exposures, and geographies, and the economic terms and costs
associated with our newer investment vehicles.
Various conditions and events outside of our control that are difficult to quantify or predict may have a
significant impact on the valuation of our investments.
Global equity markets, which have been and are expected to continue to be volatile, significantly impact the valuation of
our equity investments in portfolio companies. For our equity investments that are publicly listed and thus have readily
observable market prices, equity markets around the world have a direct impact on valuation, because their values are
determined by their listed prices in the public markets. For our equity investments that are not publicly listed, equity markets
have an indirect impact on valuation as we often consider market multiples in our valuation of illiquid assets. In our private
equity business, a substantial amount of investments are in equities, so a change in equity prices or equity market volatility
could significantly impact the value of our private equity investments. In our insurance business, a change in equity prices
also impacts our equity-linked annuity and life insurance products, including with respect to hedging costs related to those
products.
The credit markets can also impact the valuations of our equity investments in portfolio companies. For example, we
typically use a discounted cash flow analysis as one of the methodologies in our valuation of illiquid assets process. If interest
rates rise, then the assumed cost of capital for the equity investments in our portfolio companies would be expected to
increase under the discounted cash flow analysis, and this effect would negatively impact their valuations if not offset by
other factors. In our infrastructure business, a substantial amount of investments are valued using the discounted cash flow
analysis, so a change in interest rates could significantly impact the value of our infrastructure investments.
The credit markets directly impact the valuations of the credit investments that we (especially our insurance subsidiaries)
and our investment vehicles own. Interest income earned from debt investments with floating interest rates should increase
if the applicable benchmark interest rate were to rise, and the reverse is true if the applicable benchmark interest rate were
to decline. However, during periods of rising interest rates, the obligor of such floating rate debt may become less able to pay
its debt obligations, which could have the effect of impairing the value of its debt obligations. For debt investments with fixed
interest rates, changes in interest rates generally will also cause the value of the fixed rate debt to vary inversely to such
changes, although any losses or gains would in most cases not be realized if the fixed rate debt is held to maturity. Increased
or unexpected payment delinquencies, foreclosures or losses could adversely affect our or our investment vehicles’ ability to
invest in, sell and securitize loans, which would materially and adversely affect our or our investment vehicles’ results of
operations, financial condition, liquidity and business.
Foreign exchange rates can materially impact the valuations of our investments that are denominated in currencies other
than the U.S. dollar. We make investments and receive capital commitments and have liabilities that are denominated in
currencies other than the U.S. dollar. The appreciation or depreciation of the U.S. dollar is expected to contribute to a
decrease or increase, respectively, in the U.S. dollar value of our non-U.S. investments to the extent unhedged. For our
investments denominated in currencies other than the U.S. dollar, the depreciation in such currencies will generally
contribute to the decrease in the valuation of such investments, to the extent unhedged, and adversely affect the U.S. dollar
equivalent revenues of portfolio companies with substantial revenues denominated in such currencies, while the appreciation
in such currencies would be expected to have the opposite effect.
Conditions in commodity markets can also impact the valuations of our investments in a variety of ways, including
through the direct or indirect impact on the cost of the inputs used in their operations, as well as the pricing and profitability
of the products or services that they sell. The price of commodities has historically been subject to substantial volatility,
which among other things, could be driven by economic, monetary, geopolitical or other factors. Further, if the operating
partners for certain of our investments are unable to raise prices to offset increases in the cost of raw materials or other
inputs, including the cost of energy and transportation, or if customers defer purchases of or seek substitutes for these
products, these investments could experience lower operating income which may in turn reduce their valuation. With respect
to our investments in energy-related companies, when commodity prices decline or if a decline is not offset by other factors,
the revenues, operating results, profitability and liquidity of the businesses related to such energy-related companies may be
adversely affected.
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The market values of real estate assets may be adversely affected by a number of factors, including national, regional and
local economic conditions; construction quality, age and design; demographic factors; tenant demand, market occupancy and
rental rate trends; and capitalization rates. Declining real estate values significantly increase the likelihood that we or our
investment vehicles will incur losses on loans in the event of default because the value of our collateral may be insufficient to
cover the costs on the loan.
Financial markets and economic conditions are outside our control and may affect the level and volatility of securities
prices and liquidity and as a result, the value of our investments and our financial results. In addition, if we are unable to or
choose not to manage our exposure to these conditions and/or events and such impact is not otherwise offset, then declines
in the equity, commodity and debt in the markets would likely cause us to write down our investments and the investments
of our funds. For example, during the global financial crisis in 2008 and 2009, valuations of our private equity funds declined
across all geographies, with investments in private equity funds marked down to as low as 67% of original cost and multiples
of invested capital reaching as low as 0.5x, 0.6x, 0.7x and 0.8x for the European Fund II, European Fund III, 2006 Fund and
Asian Fund, respectively, as of March 31, 2009.
The valuations of our investments can be impacted by many other factors unrelated to market or economic conditions,
including:
• global, regional and local events outside of our control, including geopolitical events, natural disasters, and
catastrophes;
• climate-related risks, including the impacts of changes in the physical climate, such as extreme weather or
temperature changes, which may damage physical assets as well as disrupt connectivity and supply chains, in
addition to climate-related transition risks that may arise from exposure to the transition to a low-carbon economy
through policy, regulatory, technology, market changes, differing perspectives of stakeholders regarding climate
impacts, business trends, and changes in consumer behavior related to climate change and technology; and
• developments in and adoption of artificial intelligence technologies, which may render existing products, services, or
business models of the companies in which we invest to become obsolete, less competitive, or require significant
and unanticipated additional investment to remain viable.
For a discussion of certain recent market or economic conditions, see also “Management's Discussion and Analysis of
Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”.
Many of our investments are illiquid, and it may not be possible to realize any profits from them for a
considerable period of time or at all.
We and our investment vehicles hold investments in securities that are not publicly traded. In many cases, we may be
prohibited by contract or by applicable securities laws from selling such securities at many points in time. Our ability to
dispose of investments also is heavily dependent on the capital markets and, in particular, the public equity markets. For
example, the ability to realize any value from an investment may depend upon the ability to complete an initial public offering
of the portfolio company in which such investment is made. Even if the securities are publicly traded, large holdings of
securities can often be disposed of only over a substantial length of time, exposing our investment returns to risks of
downward movement in market prices during the intended disposition period. In addition, market conditions and the
regulatory environment can also delay and, in certain cases, materially impair, our ability to exit and realize value from these
investments. Although the equity markets are not the only means by which we exit investments from our funds, the strength
and liquidity of the relevant equity for the portfolio company, and the initial public offering market specifically, affect the
valuation of, and our ability to successfully exit, our equity positions in the portfolio companies in a timely manner. Difficult
market and economic conditions could increase the cost of credit or cause a degradation in debt financing terms for potential
buyers, either of which may adversely impact our ability to identify, execute and exit investments on attractive terms.
Government policies regarding certain regulations, such as antitrust law, national security or restrictions on foreign direct
investment in certain of our portfolio companies or assets can also limit our and our investment vehicles’ exit opportunities.
In addition, many of our investment vehicles have a finite term, and we may also be forced to dispose of investments sooner
than otherwise desirable. Accordingly, under certain conditions, our investment vehicles may be forced to either sell their
investments at lower prices than they had expected to realize or defer sales that they had planned to make, potentially for a
considerable period of time.
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The valuations of illiquid investments are subjective and uncertain, and any realizations of our illiquid
investments may occur at prices which differ from their carrying values.
There are no readily ascertainable market prices for a substantial majority of illiquid investments held by us and our
investment vehicles. We generally determine the fair value of the investments of our funds in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”). U.S. GAAP requires the application of accounting
guidance and policies that often involve a significant degree of judgment. These accounting estimates require the use of
assumptions, some of which are highly uncertain at the time of estimation and can be incomplete or inaccurate despite our
engagement of third parties to assist with certain aspects of our valuations.
The amount of judgment and discretion inherent in valuing assets renders valuations uncertain and susceptible to
material fluctuations over possibly short periods of time. Our determination of an investment’s fair value may differ
materially from the value that would have been determined if a ready market for the securities had existed and the valuations
the general partners of other funds or other third parties ascribe to the same investment. In addition, the range of potential
valuation methodologies and the potential exercise of our subjective judgment in determining valuation might cause some of
our investors or regulators to question our valuations or methodologies. There can be no assurance that our policies will
address all necessary valuation factors or completely eliminate potential conflicts of interest in such determinations or that
we will be able to achieve some valuations.
The valuations of and realization opportunities for investments made by us and our investment vehicles could also be
subject to high volatility as a result of uncertainty regarding various risks described in these risk factors. Due to the lapse of
time between valuations, subsequent events that may have a significant impact on valuations will not be reflected until the
next valuation date. Changes in values attributed to investments may result in volatility in our AUM and could materially
affect the results of operations that we report from period to period. In addition, estimates, inputs, assumptions, and other
determinations made in connection with how various valuation methodologies are employed may also change from time to
time. Our valuation of an investment at a measurement date may also differ materially from the value that is obtained upon
the investment’s exit. If the investment values that we record from time to time are not ultimately realized, it could have a
material adverse effect on our results of operations, financial condition and cash flow.
Further, certain of our investment vehicles offered to individual investors calculate net asset value (“NAV”) on a daily or
monthly basis for purposes of establishing the price at which those investment vehicles sell and repurchase their shares. The
methods used to calculate NAV are not prescribed by the rules of the SEC or any other regulatory agency. There are no
accounting rules or standards that prescribe which components should be used in calculating NAV, and the NAV of such
vehicles are not audited by our independent registered public accounting firm. Errors may occur in calculating such NAV,
which could impact the price at which the shares of our investment vehicles offered to individual investors are sold and
repurchased.
Also, if realizations of our investments produce values materially different than the carrying values reflected in an
investment vehicle’s previous valuation, investors in such vehicles may lose confidence in us, which could in turn result in
difficulty in raising capital for future funds or other investment vehicles. Some of our investors and regulators may question
our valuations or methodologies. The SEC has focused on issues related to valuation of private investment vehicles, including
frequency, consistent application of the methodology, disclosure, and conflicts of interest, in its enforcement, examination,
and rulemaking activities. For information about our valuation methodologies and processes, please see Note 2 “Summary of
Significant Accounting Policies—Fair Value Measurements” in our financial statements.
We often pursue investment opportunities that involve unique business, regulatory, legal, tax or other
complexities that entail significant risks.
We often pursue complex investment opportunities, which may often involve substantial business, regulatory or legal
complexities. Our tolerance for complexity presents significant risks, as such transactions can be more difficult, expensive and
time consuming to finance and execute, and it can be more difficult to manage or realize value from these types of
investments. Other risks that are often inherent in these kinds of transactions include:
Our transactions may entail a high level of regulatory scrutiny, and our investment may be subject to complex regulatory
requirements and instances of non-compliance at the investment level may subject us to reputational harm or, in certain
cases, liability;
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• Our transactions may involve complex tax structuring that could be challenged or disregarded, which may result in
losing treaty benefits or otherwise adversely impact our investments; complex tax structures are costly to establish,
monitor and maintain, and as we pursue a larger number of transactions across multiple assets classes and in
multiple jurisdictions, such costs will increase and the risk that a tax matter is overlooked or inadequately or
inconsistently addressed may increase;
• Our transactions may involve an investment that is subject to significant liabilities, including contingent liabilities,
which could be unknown to us at the time of acquisition or, if they are known to us, we may not accurately assess or
protect against the risks that they present, which could result in material unforeseen losses;
• We rely on the management of our portfolio companies or other third-party operators to provide for financial
projections and other information about their companies, businesses or assets, which may not be accurate or
realistic and thus could result in performance that falls short of our expectations or even result in such company’s
bankruptcy; we also rely on the management of our portfolio companies or other third-party operators, and their
systems and processes, for ongoing financial and other information in support of the valuations of our investments in
or with them; and
• Our dispositions of investments may result in the incurrence of contingent liabilities by us or an investment vehicle;
for example, if we or an investment vehicle required to make representations about the investment and are required
to indemnify the purchasers of such investment for misrepresentations.
We also make large private equity and real assets investments, which involve certain complexities and risks that are not
encountered in small- and medium-sized investments. For example, when we enter into large transactions we often seek to
syndicate a portion of our capital commitment to third parties. However, if we are unable to syndicate all or part of such
commitment, or if such co-investors fail to fund their commitments, we may be required to fund the remaining commitment
amount from our balance sheet, and poor performance of such large investment may have a material adverse impact on our
financial results. Furthermore, investments by many of our investment funds will include debt instruments and equity
securities of companies that we do not control. Consortium transactions generally entail a reduced level of control by our
firm over the investment because governance rights must be shared with the other consortium investors. Accordingly, we
may not be able to control decisions, including decisions relating to the management and operation of the company and the
timing and nature of any exit, which could result in the risks described herein.
In addition, our growth equity investment vehicles may make investments in companies which are in a conceptual or
early stage of development. These companies are often characterized by new technologies and products, quickly evolving
markets, management teams that are materially dependent on a founder or key executives or may have limited experience
working together, in many cases, negative cash flow, and dependence on intellectual property rights, as well as other
substantial business and operational risks, all of which pose obstacles to the ultimate success of such investments. In
addition, growth equity companies may be more susceptible to macroeconomic effects and industry downturns, and their
valuations may be more volatile depending on the achievement of milestones, such as receiving a governmental license or
approval.
We use a significant amount of leverage in our investment activities, and our portfolio companies and
investments may have significant credit and liquidity requirements, which may be materially and
adversely affected by changes in financial markets.
We and our investment vehicles typically use a significant amount of leverage as part of our investment strategy and
regularly borrow a substantial amount of capital for operations and investments. With respect to our private equity and real
assets businesses, if we are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an
increased interest rate or on unfavorable terms, we may have difficulty completing otherwise profitable acquisitions or may
generate lower profits, either of which could lead to a decrease in the investment income earned by us. Any failure by
lenders to provide previously committed financing can also expose us to potential claims by sellers of businesses that we may
have contracted to purchase. Our ability to generate returns on these assets would be reduced to the extent that changes in
market conditions, including changes to interest rates, cause the cost of our financing to increase relative to the income that
can be derived from the assets acquired or financed. Significant stress in the credit markets is likely to materially affect our
business. For example, the turmoil in the global financial markets during 2008 and 2009 provoked significant contraction in
the availability of credit and the failure of a number of companies, including leading financial institutions. Our business was
materially and adversely affected by the global financial crisis due to a significant reduction in the availability of credit, less
favorable terms for available credit, and a material reduction in deal activity, which limited our exit and new investment
opportunities.
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We have equity and debt investments in companies that have a significant amount of leverage as well as companies that
are currently experiencing, or in the future may experience, significant financial or business difficulties. Our portfolio
companies often incur debt in connection with our acquisition of it, and our portfolio companies regularly utilize the
corporate debt markets to obtain financing for operations. To the extent that credit markets render such financing difficult to
obtain or more expensive, this may negatively impact our performance (and in particular our insurance business) and the
performance of such portfolio companies. In addition, to the extent that conditions in the credit markets impair the ability of
our portfolio companies to refinance or extend maturities on their outstanding debt, either on favorable terms or at all, the
performance of those portfolio companies may be negatively impacted, which could impair the value of our investment in
those portfolio companies and lead to a decrease in the investment income earned by us. In some cases, the inability of our
portfolio companies to refinance or extend maturities may result in the inability of those companies to repay debt at maturity
or pay interests when due, and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcy
protection, any of which would likely materially impair the value of our investment and lead to a decrease in the investment
income earned by us. Investments in leveraged companies or companies experiencing financial or business difficulties
generally entail greater risk, including relating to contractual restrictions on the operations of its businesses and significantly
higher debt service costs, and such investments are also inherently more sensitive to declines in their company’s revenues,
increases in their company’s expenses, interest rate changes, and other adverse economic, market and industry
developments. As a result, the risk of loss associated with a leveraged company is generally greater than for comparable
companies with comparatively less debt.
In addition, our and our investment vehicles’ exposure to CLO markets may exacerbate risks associated with leverage and
borrowing, as these CLOs generally involve a higher degree of risk than investment grade-rated debt. We have significant
exposure to these markets through our CLO vehicles. In most cases, our CLO holdings are deeply subordinated, representing
the CLO vehicle’s substantial leverage, which increases both the opportunity for higher returns as well as the magnitude of
losses when compared to holders or investors that rank more senior to us in right of payment. During any time that a CLO
issuer exceeds applicable contractual limits on certain obligations it can hold, the ability of the CLO’s manager to sell assets
and reinvest available principal proceeds into substitute assets is restricted. In such circumstances, CLOs may fail certain
over-collateralization tests, which would cause diversions of cash flows away from us as holders of the more junior notes of
our CLOs, which may impact our cash flows. The ability of the CLOs to make interest payments to the holders of the senior
notes of those structures is highly dependent upon the performance of the CLO collateral. If the collateral in those structures
were to experience a significant decrease in cash flow due to an increased default level, payment of all principal and interest
outstanding may be accelerated. If these vehicles are unable to maintain their operating results and access to capital
resources, they could face substantial liquidity problems. These CLO strategies and the value of the assets of such CLO
vehicles are also sensitive to changes in interest rates because these strategies rely on borrowed money and because the
value of the underlying portfolio loans can fall when interest rates rise. As a result of their use of large amounts of leverage,
CLOs are at greater risk of suffering material losses.
The due diligence process that we undertake in connection with our investments may not reveal all
facts that may be relevant in connection with an investment.
Before making our investments, we seek to conduct due diligence that we believe to be reasonable and appropriate
based on the facts and circumstances applicable to each investment. When conducting due diligence, we typically evaluate a
number of important business, financial, accounting, sustainability, technological, tax, regulatory and legal issues and
macroeconomic trends in determining whether or not to proceed with an investment. When conducting due diligence and
making an assessment regarding an investment, we rely on resources available to us, including information provided by the
target of the investment and, in some circumstances, third-party investigations. The due diligence process is often subjective,
and only limited information may be available. For some strategies or investment opportunities, our due diligence may be
limited to only publicly available information. Accordingly, we cannot be certain that the due diligence investigation that we
will carry out with respect to any investment opportunity will reveal or highlight all relevant considerations that may be
necessary or helpful in evaluating such investment opportunity, including the existence of contingent liabilities.
In addition, instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be
difficult to detect, and fraud and other deceptive practices can be widespread in certain jurisdictions. Several of our
investment vehicles invest in emerging market countries that may not have established laws and regulations that are as
stringent as those in more developed nations, or where existing laws and regulations may not be consistently enforced. Due
diligence on investment opportunities in these jurisdictions is frequently more complicated because consistent and uniform
commercial practices in such locations may not have developed. Bribery, fraud, accounting irregularities and corrupt
practices can be especially difficult to detect in such locations.
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Investments in real assets may expose us and our investment vehicles to greater risks, liabilities and
operational complexities than investments in operating companies.
Our investments in real assets, such as real estate, infrastructure and energy, may subject us and our investment vehicles
to risks that are unique to the ownership, development and operation of physical assets. These risks include, among others:
• exposure to environmental laws and regulations that may impose strict or joint and several liability without regard to
fault, including liabilities arising from conditions existing prior to acquisition or arising after disposition, and liabilities
resulting from changes in applicable laws or standards;
• risks of personal injury, property damage, business interruption or catastrophic loss arising from natural disasters,
severe weather events, climate change (including both physical and transition risks), equipment failure, construction
defects, or other force majeure events, which may result in uninsured or underinsured losses, contractual claims,
reputational harm or other material liabilities;
• reliance on third-party operators, property managers, developers, contractors, sub-contractors, and other service
providers, whose failure to perform, misconduct (including fraud, bribery or other violations of law), or non-
compliance with applicable agreements or laws may materially adversely affect the value or operation of an asset
and expose us to liability or reputational damage;
• extensive and evolving federal, state, local and foreign laws and regulations governing land use, zoning, permitting,
labor, health and safety, rate setting, licensing, concessions, public procurement and other matters, including the risk
of delays, cost overruns, loss of permits or licenses, limitations on pricing, fines, sanctions, injunctions or criminal
penalties;
• ongoing arrangements with federal, state, local or foreign governments or regulatory authorities, including
partnerships and joint ventures, which may subject us to additional contractual, regulatory, political or performance-
related obligations and expose us to risks arising from changes in government priorities, financial condition or force
majeure;
• development, construction and redevelopment risks, including entitlement and permitting uncertainties, cost
inflation, supply chain disruptions, labor shortages, delays in completion, defects, the inability to obtain or maintain
financing on acceptable terms (including exposure under “bad boy” guarantees or similar arrangements); and
• asset-specific risks, including heightened political and public scrutiny of institutional ownership of certain asset
classes (such as single family homes or residential housing), exposure to reimbursement regimes and care-related
liabilities in healthcare facilities, and the dependence of infrastructure assets on long-term governmental licenses,
concessions, contracts or rate regulation, which may be modified, terminated, not renewed or subject to increased
regulatory oversight.
We make investments outside of the United States, which may expose us to additional risks, or
materially exacerbate risks, that are not typically associated with investing in the United States.
We invest a significant portion of our AUM in the equity, debt, loans or other securities of issuers and in other assets that
are based outside of the United States. Investing in companies or assets that are based or have significant operations in
countries outside of the United States and, in particular, in emerging markets such as China and India, Eastern Europe, South
and Southeast Asia, Latin America and Africa, involves risks and considerations that are not typically associated with
investments in companies or assets established in the United States. These risks may include, in addition to more volatile or
adverse market and economic conditions than the U.S., the following:
• the imposition of non-U.S. taxes with respect to certain assets and/or changes in tax law;
• limitations on borrowings to be used to fund acquisitions or dividends;
• limitations on the deductibility of interest and other financing costs and expense for income tax purposes in certain
jurisdictions;
• limitations on permissible counterparties in our transactions or consolidation rules that effectively restrict the types
of businesses in which we may invest;
• political risks generally, including political and social instability, nationalization, expropriation of assets or political
hostility to investments by foreign or private equity investors;
• reliance on a more limited number of commodity inputs, service providers or distribution mechanisms;
• fluctuations in foreign exchange rates;
• less government supervision of exchanges, brokers and issuers;
• less developed bankruptcy and other laws;
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• difficulty in enforcing contractual obligations;
• lack of uniform or robust accounting, auditing, financial reporting standards, practices and disclosure requirements,
and less government supervision and regulation;
• less stringent requirements relating to fiduciary duties; and
• risks described under “Risks Related to Regulatory Matters—Financial crime laws may limit our investment and
capital raising activities and subject us to adverse regulatory consequences.”
If we fail to effectively manage conflicts of interest that arise from our investment activities, our
reputation, business or financial results could be materially and adversely impacted or we may become
subject to regulatory scrutiny or litigation.
As we have expanded and as we continue to grow and expand our businesses, we often confront potential conflicts of
interest relating to our investment activities. For example:
• Potential conflicts may arise with respect to allocation of investment opportunities among us, our investment
vehicles and our affiliates, including to the extent that the applicable fund documents do not mandate a specific
investment allocation. For example, we may allocate an investment opportunity that is appropriate for two or more
investment vehicles in a manner that excludes one or more vehicles or results in a disproportionate allocation based
on factors or criteria that we determine. Moreover, the challenge of allocating investment opportunities to certain
vehicles and managing any conflicts of interest may be exacerbated as we expand our business to include more lines
of business, including as we increasingly undertake business initiatives to increase the number and types of
investment products and vehicles we offer to individual investors;
• Conflicts of interest may arise between one or more investment vehicles, on one hand, and our firm or our balance
sheet assets (including through our Strategic Holdings business), on the other, with respect to the purchase or sale of
investments or the allocation of such opportunities, the structuring or exercise of rights with respect to investments,
and the advice we provide to our investment vehicles (including our insurance subsidiaries);
• We or our investment vehicles may invest in a portfolio company that is a competitor, service provider, supplier,
customer, or other kind of counterparty with respect to a portfolio company in which we or another investment
vehicle hold an investment;
• We are required to act in the best interests of our funds, and so we may take actions that favor the interests of our
funds over our own, which could result in less investment or other income for us; e.g., we may structure an
investment in a manner that may be attractive to investment vehicle investors from a tax perspective even though
we would be required to pay corporate taxes;
• We are required to allocate investment opportunities among investment vehicles that may have overlapping
investment objectives, which may result in investments being allocated to investment vehicles that are less
profitable for us;
• A dispute may arise between us and the portfolio companies of the funds we manage, and the investors in the funds
we manage may be dissatisfied with our handling of such dispute;
• A decision to pursue an investment opportunity for a particular investment vehicle (or our own account) may result
in our having to restrict the ability of other investment vehicles (or our own account), e.g., the acquisition of
maternal non-public information about a company may preclude other investment opportunities that could be
available with respect to the securities of such company, or the acquisition of a company could give rise to antitrust
or other regulatory restrictions that prevent, prohibit or restrict similar investment opportunities for other
investment vehicles or portfolio companies;
• Our employees have made personal investments in a variety of our investment vehicles typically on a no-fee, no-
carry basis, which may result in conflicts of interest with the investors of our investment vehicles with respect
investment decisions for these investment vehicles;
• Our entitlement to receive carried interest from many of our investment vehicles may create an incentive for us to
make riskier and more speculative investments on behalf of an investment vehicle than would be the case in the
absence of such an arrangement; in addition, investments must be held for more than three years under U.S. tax
laws for carried interest to be treated for U.S. federal income tax purposes as long-term capital gain, which may
create a conflict of interest between the limited partner investors (whose investments would receive such long-term
capital gain treatment after a holding period of only one year) and us as the general partner on the execution, closing
or timing of sales of investments;
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• From time to time, one of our funds or other investment vehicles (including CLOs) may seek to effect a purchase or
sale of an investment with one or more of our other funds or other investment vehicles in a so-called cross
transaction under U.S. securities laws, or we as a principal may seek to effect a purchase or sale of our investment
with one or more of our funds or other investment vehicles in a so-called principal transaction under U.S. securities
laws;
• We own or control service providers that provide services to our investment vehicles or their investments, which
could give rise to a number of claims of conflicts of interest, including that such service provider is being
unnecessarily engaged or is being engaged at rates or terms that are no on an arms-length arrangement or that
payments by such investment vehicles or investment unfairly benefit us;
• Our investment vehicles invest in a broad range of asset classes throughout the corporate capital structure. In certain
cases, we or our investment vehicles may invest in different parts of the same company’s capital structure, and the
interests of KKR and our investment vehicles may not always be aligned, which could create actual or potential
conflicts of interest or the appearance of such conflicts. We may also cause different funds that we manage to
purchase different classes of securities in the same portfolio company. For example, one of our CLO funds could
acquire a debt security issued by the same company in which one of our private equity funds owns common equity
securities. A direct conflict of interest could arise between the debt holders and the equity holders if such a company
were to become financially distressed; and
• We may also invest, or cause different investment vehicles to invest, in a single portfolio company, for example,
where the investment vehicle that made an initial investment no longer has capital available to invest. We may also
establish other investment vehicles, which we refer to as “continuation vehicles”, for the purpose of purchasing one
or more investments from us or one or more of our other investment vehicles. In such circumstances, we are acting
on behalf of, and making the investment decision for each of the entities involved in the relevant transaction.
Allocating investment opportunities frequently involves significant and subjective judgments. The risk that investors in
our investment vehicles or regulators could challenge allocation decisions as inconsistent with our obligations under
applicable law, governing fund agreements, or our own policies cannot be eliminated. Moreover, the perception of
noncompliance with such requirements or policies could harm our reputation with investors in our investment vehicles. An
investment adviser’s conflicts of interest continue to be a significant area of focus for investors, regulators, and the media.
Because of our size and the variety of businesses and investment strategies that we pursue, we may face a higher degree of
scrutiny compared with investment advisers that are smaller or focus on fewer asset classes. Investors and potential investors
in our different types of investment vehicles, including those designed either primarily for institutional investors or individual
investors, may scrutinize any perceived conflict of interest between allocation decisions for institutional investment vehicles
on the one hand and individual investment vehicles on the other hand and may decide not to invest with us if they do not
agree with how we address potential conflicts of interest and allocation decisions. Any steps taken by a regulator to preclude
or limit certain conflicts of interest could make it more difficult for our investment vehicles to pursue transactions that may
otherwise be attractive to their investors.
While we will try to mitigate these conflicts of interests, we may be unsuccessful in such mitigation efforts, or we may be
obliged to take an action or refrain from taking an action that would be disadvantageous to us as a firm. Certain policies and
procedures implemented to mitigate potential conflicts of interest and address certain regulatory requirements may reduce
the synergies across our various businesses as we have multiple business lines and regulated affiliates subject to different
regulations pertaining to conflicts of interest. As a consequence of such policies and procedures, we may be precluded from
providing such information or other ideas to our other businesses even where it might be of benefit to them. Our failure to
mitigate successfully a conflict of interest could result in a violation of our obligations under applicable governing documents
or applicable law, giving raise to potential challenges or litigation by our fund investors or regulators. In addition, our
regulators may decide to preclude or limit certain conflicts of interest could make it more difficult for our investment vehicles
to pursue transactions that may otherwise be attractive to their investors. To the extent we are unable to effectively manage
these conflicts of interest, our reputation, business and financial results may be adversely affected, including as a result of any
regulatory scrutiny or litigation in connection with any conflicts of interest. For more information about these regulatory risks
and litigation risks, please see “—Risks Related to Regulatory Matters” and “—Risks Related to Our Business—We may suffer
material harm as a result of legal claims, litigations, investigations, and negative publicity”.
If our third-party investors fail to fund their capital calls when requested by us, it may materially and
adversely affect us.
Investors in our funds and certain other investment vehicles make capital commitments that our funds and other
investment vehicles are entitled to call from those investors at any time during prescribed periods. These investors fulfilling
their commitments is necessary in order for such investment vehicles to consummate investments and otherwise pay their
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obligations when due. Although investors that do not fund a capital call would generally be subject to several possible
penalties, the impact of the penalty may not be sufficient to deter investors from defaulting on their commitments, and
investors may in the future negotiate for lesser or reduced penalties at the outset of the investment vehicle, thereby
inhibiting our ability to enforce the funding of a capital call. In addition, an investor may be prohibited from funding capital
commitments for any number of regulatory reasons, including for example, those described in “—Risks Related to Regulatory
Matters—Financial crime laws may limit our investment and capital raising activities and subject us to adverse regulatory
consequences”. The failure to fund capital commitments may have a material adverse effect on our funds or other
investment vehicles’ ability to complete an investment, which in turn could have a material adverse effect on the funds or
other investment vehicles, including becoming potentially subject to contractual or other liabilities for the failure to fund or
lose the investment. In addition, we may choose to, or become obligated to pay, such shortfalls in the capital needed to fund
an investment, which could materially adversely affect our liquidity, or we may sustain reputational harm, which could
negatively impact ability to compete for investment opportunities. In addition, negative impacts to our reputation could
impact our ability to raise successor or other investment funds, which could negatively impact our AUM and ability to grow
our business.
Risks Related to our Insurance Activities
Through Global Atlantic, we operate an insurance business, which is subject to material risks and uncertainties that are
different from, and incremental to, the risks relating to our asset management business or our management of our insurance
subsidiaries’ investments. All the risks discussed below relating to Global Atlantic could materially and adversely impact KKR.
We operate in a highly competitive industry.
Our insurance business operates in highly competitive markets, and in recent years there has been a substantial increase
in competition in the life and annuities business as non-traditional firms, including those owned by or with strategic
partnerships with alternative asset managers, have entered the insurance sector. Traditional insurers and reinsurers have also
been significantly expanding their areas of expertise and product lines, which could have a significant effect on competition in
the insurance industry. These new and traditional competitors may be able to price new business aggressively, with a higher
investment risk tolerance, as part of a strategy to gain market share, or increase assets under management.
Within individual markets, our insurance business faces a variety of large and small industry participants. Large,
established insurers often operate with the benefit of well-known brands, entrenched distribution relationships, or
proprietary distribution. All of these companies compete for individual markets sales. Our flow reinsurance business may also
be impacted by competition among insurers in individual markets. The competitiveness of our insurance product offerings will
depend on the actions of its competitors and our ability to actively manage our insurance product offerings. In institutional
markets, there have been many block reinsurance transactions as many insurers continue to reevaluate their commitment to
business lines and seek reinsurance solutions as a way to de-emphasize or divest non-core businesses, reduce risk, seek
capital relief, or improve profitability. The block reinsurance and pension risk transfer markets are also experiencing
competition due to new entrants, including entrants which have strategic partnerships with alternative asset managers and
entrants based outside of the United States. Increased competition across all of our product offerings may make it more
difficult for us to identify and execute transactions with terms that are commercially acceptable based on our risk tolerance
and target return objectives. Increased competition may also increase regulatory scrutiny of individual or institutional
insurance markets activity.
Additionally, some of our competitors may be subject to less regulation or less regulatory scrutiny and accordingly may
have more flexibility to undertake and execute certain businesses or investments than we do or bear less expense to comply
with such regulations than we do.
We may not be able to identify or manage significant growth opportunities for our insurance business.
While we continue to seek to grow Global Atlantic’s business, particularly overseas, we may not be able to identify
attractive insurance markets, reinsurance opportunities or investments with returns that are as favorable as Global Atlantic’s
historical returns or grow new business volumes at historical levels, or we may face challenges in effectively managing this
growth. To maintain or increase Global Atlantic’s investment returns, it may be necessary to expand the scope of Global
Atlantic’s investing activities to asset classes in which Global Atlantic historically has not invested, which may increase the risk
of Global Atlantic’s investment portfolio. Growth opportunities may also be in new or adjacent product offerings and in new
jurisdictions where Global Atlantic historically has had less or no experience. Pursuing opportunities in these new areas may
subject Global Atlantic to new and complex insurance regulations and business considerations. If Global Atlantic is unable, or
fails, to find or manage profitable growth opportunities, it will be more difficult for it to continue to grow and could materially
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affect us. In addition, if preferences for Global Atlantic’s individual or institutional products change or Global Atlantic is
unable to offer competitive pricing and attractive terms, our revenues and results of operations may be materially and
adversely impacted. Moreover, as an insurance company, Global Atlantic’s ability to grow is dependent on the sufficiency of
its capital base to support that growth. Global Atlantic may need to seek additional capital to manage its growth, and it may
not be able to maintain its current strong capital position as it grows. As Global Atlantic grows, it must invest additional
assets, which poses increased investment risk. Growth may also increase the risk of service problems, and Global Atlantic
may need to expend additional resources to provide consistent service. Any service problems may create potential liability,
including reputational harm or increased scrutiny by regulators.
For more information about management of KKR’s balance sheet and access to sources of liquidity, please see “Risks
Related to Our Business—The failure to effectively manage our balance sheet could materially and adversely affect our
financial condition and results of operations” and “Risks Related to Our Business—The failure to manage, or the inability to
access, adequate sources of liquidity could materially and adversely affect KKR”.
The ability to source successful reinsurance opportunities is not guaranteed.
Global Atlantic’s institutional client business includes block reinsurance transactions, flow reinsurance, pension risk
transfer reinsurance and the issuance of funding agreements. There can be no assurance that these transactions will achieve
the results expected at the time the transactions are executed.
The size and volume of block reinsurance transactions often have and may vary widely quarter-to-quarter and annually.
Similarly, while our insurance business’s flow and PRT transactions, as well as new business volumes relating to these
products, have historically fluctuated less than block transactions, the size and volume of such transactions may also vary
widely period-to-period. Other factors that can cause Global Atlantic’s actual experience to vary from our estimates include
macroeconomic, asset performance, business growth, demographic, policyholder behavior, regulatory and political
conditions. Additionally, to the extent Global Atlantic is unable to consummate suitable reinsurance transaction opportunities
on acceptable terms, its future growth may be negatively impacted. Competition, in particular with respect to transaction
pricing, makes it more difficult to identify transactions with commercially acceptable terms.
Even if Global Atlantic does find suitable opportunities, it may not be able to consummate these transactions because of
the applicable regulatory requirements and approvals, or other considerations, including various insurance regulators
scrutinizing asset-intensive funded reinsurance. For example, the NAIC recently adopted a requirement for life insurers that
engage in certain reserve-financing or asset-intensive reinsurance treaties to perform robust asset adequacy testing on ceded
blocks.
Moreover, there can be no assurance that Global Atlantic will have sufficient capital available, or that such capital will be
available in the necessary entities, to continue growing this part of its business. Global Atlantic sponsors co-invest vehicles
that raise third-party capital to participate alongside Global Atlantic through reinsurance in certain insurance business which
Global Atlantic writes during the co-invest vehicles’ investment periods. Because these co-invest vehicles are commitment-
based structures with third-party investors, Global Atlantic is subject to the risk that certain co-invest vehicles fail or refuse to
fund their portion of a particular transaction, in which case Global Atlantic would have contractual remedies against the
defaulting co-invest vehicles, but not directly against their shareholders or lenders. Global Atlantic is also subject to the risk
that its co-invest vehicles fail to meet their obligations under their reinsurance arrangements with Global Atlantic. Global
Atlantic may seek business or investment opportunities that may not align with the investment mandates of these co-
investment vehicles, requiring Global Atlantic to find alternate sources of capital or not pursue any such opportunities, which
may impact Global Atlantic’s financial results. If Global Atlantic enters into a reinsurance transaction, there can be no
assurance that the transaction will achieve the results expected at the time the transaction is executed. Any transaction’s
terms are likely to be determined by qualitative and quantitative factors, including our estimates. These transactions expose
us to the risk that actual results materially differ from those estimates. Factors that can cause Global Atlantic’s actual
experience to vary from its estimates include macroeconomic, asset performance, business growth, demographic,
policyholder behavior, regulatory and political conditions.
As a result of any of the foregoing risks, Global Atlantic may realize materially less than the anticipated financial benefits
from reinsurance transactions, or Global Atlantic’s reinsurance transactions may be unprofitable or result in losses.
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Volatile market and economic conditions, including sustained increases or decreases in interest rates
and other interest rate fluctuations, may adversely affect our insurance business.
Global Atlantic’s business model depends on the performance of its investments to meet its policyholder liabilities. Global
Atlantic’s policyholder liabilities are sensitive to changing market and economic conditions. Periods of significant and
sustained downturns in securities markets, increased equity volatility, reduced interest rates, or deviations in expected
policyholder behavior could cause a number of different materially adverse impacts to us, including an increase in the
valuation of our liabilities, the cost of providing policy benefits and required capital, and a reduction in the account balances
of certain products, with a resulting reduction in fees earned on and profitability of such products. In times of difficult market
and economic conditions, Global Atlantic’s policyholders may choose to defer paying insurance premiums, stop paying
insurance premiums altogether or surrender their policies, or there could be an elevated rate of defaults within certain of
Global Atlantic’s investments. In addition, actual or perceived difficult conditions in the capital markets may discourage
individuals from making investment decisions and purchasing Global Atlantic’s products. The estimated cost of providing
guaranteed minimum withdrawal and death benefits of certain insurance products requires Global Atlantic to make various
assumptions about the overall performance of equity markets over the life of the product. Therefore, significant declines in
equity markets could cause Global Atlantic to incur significant operating losses and capital increases to the extent our risk
management techniques employed to manage these uncertainties are not adequate.
Interest rate risk is a particularly significant market risk for our insurance business. Fluctuations in market interest rates
can expose Global Atlantic to the risk of reduced income in respect of its investment portfolio, increases in the cost of
acquiring or maintaining its insurance liabilities, increases in the cost of hedging, or other fluctuations in Global Atlantic’s
financial, capital and operating profile. This risk arises from Global Atlantic’s holdings in interest rate-sensitive assets and
liabilities, which include annuity products and long-duration life insurance policies, derivative contracts with payments linked
to the level of interest rates or with market values which fluctuate based on the level of interest rates, as well as the fixed
income assets Global Atlantic owns in its investment portfolio. Global Atlantic seeks to cash-flow match its invested assets to
its policy liabilities and greater market volatility and uncertainty makes matching more difficult. 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 and may face the risk of having to reinvest in lower-
yielding assets, thereby reducing its investment income.
Both rising and declining interest rates can negatively affect our insurance business. This risk is present across most of
Global Atlantic’s insurance products, which can typically be surrendered for the cash value, less any applicable surrender
charge, at any time. Higher interest rates may result in increased surrenders on interest-sensitive products, such as annuity
contracts and certain life insurance policies, as policyholders seek higher investment returns elsewhere. This increase in
surrender outflows may create cash flow mismatches between cash received from Global Atlantic’s investments versus cash
needed to make policyholder liability payments as policyholders may surrender in higher numbers than expected. This
mismatch could result in losses if assets must be liquidated at a loss to meet the increased policyholder obligations, which
could result in potentially significant realized losses and a corresponding reduction in net income. Global Atlantic has and
may from time to time rotate its investment portfolio, including in connection with a new reinsurance transaction or in
connection with its insurance portfolio management, to achieve its desired asset mix. See “—Risks Related to Our Business—
We may pursue new business opportunities, strategic initiatives, or investment opportunities that involve new or unique
business, regulatory or other complexities and risks” for further information pertaining to this strategic initiative of Global
Atlantic. Sales of investments in a higher rate environment than when the investment was made is expected to result in an
investment loss, and such loss may be significant. Sales of investments at a loss in those scenarios has decreased, and would
be expected to decrease, our net income in that period, and such decreases can be significant. Additionally, during a higher
interest rate environment the cost of insurance on new business is generally expected to be elevated, including higher
hedging costs, as benefits to policyholders on new business will generally be higher.
In addition, Global Atlantic expects that substantially all of its unrealized losses will not be realized as it typically intends
to hold investments until recovery of the losses, which may be at maturity, as part of its asset liability cash-flow matching
strategy. However, 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. An increase in surrenders or withdrawals also may cause Global Atlantic to
accelerate the amortization of certain costs and depreciation of certain assets. During periods of falling or lower interest
rates, Global Atlantic may also face cash flow mismatches between interest earned on its investment portfolio and policy
liabilities that may be crediting higher rates. When rates decline more policyholders might hold onto their products with
higher pre-existing crediting rates for longer than expected because those products seem more attractive, and Global
Atlantic’s ability to lower crediting rates is subject to several constraints. Prolonged periods of low interest rates could
challenge product development and attractiveness and may also result in Global Atlantic earning lower margins on new
business volumes than it has historically earned. Lower interest rates may reduce the demand for Global Atlantic’s insurance
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products, leading to lower sales, and may make the reinsurance solutions Global Atlantic is able to offer more expensive to
potential clients. In a period of declining or lower interest rates, Global Atlantic’s investment earnings may decline because
existing investments may prepay or refinance and new investments will likely bear lower interest rates, and Global Atlantic
may not be able to fully offset the decline in investment earnings with lower liability costs on the products these investments
support. In addition, the yield on Global Atlantic’s floating rate assets will decline as interest rates decline, reducing Global
Atlantic’s investment income.
During these periods, existing life insurance and annuity products also may be relatively more attractive to consumers
due to minimum guarantees, resulting in a higher percentage of contracts remaining in force than originally estimated,
causing greater claims costs and asset/liability cash flow mismatches. Conversely, management actions to reduce rates on in-
force contracts in response to declining interest rates may result in greater surrenders than originally estimated, which may
adversely affect Global Atlantic’s earnings related to those products.
Additionally, to the extent that changes in market conditions, including changes to interest rates and net spreads, cause
the cost of our financing to increase relative to the income that can be derived from the assets acquired or financed, our
ability to generate returns on these assets would be reduced and, therefore, we may limit the volume of new originations.
While we hedge certain market risks, hedges will not mitigate all risk, and we do not hedge all risks. Moreover, market
conditions can result in significant variations in margin or collateral posting requirements for our hedges. Increases in
collateral requirements could be material and have an adverse effect on our financial condition, results of operations, liquidity
or cash flows.
The disruption of our third-party distribution network may have a material adverse effect on us.
Global Atlantic uses third-party intermediaries to distribute its retirement and preneed business products to individuals.
Global Atlantic’s distribution partners are not captive and may sell retirement and life insurance products of Global Atlantic’s
competitors. If Global Atlantic’s competitors have more attractive insurance products than Global Atlantic, these
representatives may concentrate their efforts in selling Global Atlantic’s competitors’ products. If Global Atlantic’s products
are not retained on or added to the platforms of its distribution partners, sales of Global Atlantic’s products may be materially
reduced.
Key distribution partners, such as banks and broker-dealers, may change their business models in ways that affect how
Global Atlantic’s products are sold, or terminate their distribution contracts with Global Atlantic, or new distribution channels
could emerge and adversely impact the effectiveness of Global Atlantic’s distribution efforts.
Distribution partners may also stop offering one or more of Global Atlantic’s products for a variety of other reasons.
Some of Global Atlantic’s distribution partners and potential distribution partners use proprietary or third-party scoring
systems in determining which products to sell. If Global Atlantic’s scores fall to levels unacceptable to its distribution
partners, they may no longer distribute Global Atlantic’s products to their customers. If any one of such distribution partners
were to terminate its relationship with Global Atlantic or reduce the amount of sales which it produces, our insurance
business would likely be adversely affected.
In our insurance sales, even though conducted through a distribution partner, Global Atlantic is responsible under
insurance regulations for the sales practices used by the distribution partner. In addition, even when the distribution partner
conducts the review of whether a product is suitable for the individual, if such review is required, Global Atlantic is
responsible under insurance regulations for the suitability review. Any improper practices by such distribution partners will
subject Global Atlantic to reputational harm, regulatory scrutiny, and potential regulatory actions and penalties.
If the assumptions and estimates used for our insurance business differ significantly from our actual
results, we may experience significant losses.
GAAP requires the application of accounting guidance and policies that often involve a significant degree of judgment
when accounting for insurance products. These accounting estimates require the use of assumptions, some of which are
highly uncertain at the time of estimation. These estimates and are based on judgment, current facts and circumstances and,
when applicable, internally developed models. Therefore, actual results could differ from these estimates, possibly in the
near term, and could have a material adverse effect on our financial statements. These include assumptions and estimates
related to, among other things, policyholder behavior, including surrenders, lapses, longevity, mortality and morbidity, and
economic factors, including interest rates and equity markets. Inaccuracies could result in, among other things, an increase in
policyholder benefit reserves which would result in a charge to earnings or other material adjustments to our financial
statements. Additionally, the potential for unforeseen developments, including changes in laws, regulations or accounting
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standards, may result in losses and loss expenses materially different from the reserves initially established, which could also
materially and adversely impact Global Atlantic’s business, financial condition, results of operations and prospects.
In addition, Global Atlantic employs models to price products, calculate reserves and value assets, as well as to evaluate
risk and determine internal capital requirements, among other uses. These models rely on estimates and projections that are
inherently uncertain, may use incomplete, outdated or incorrect data or assumptions and may not operate properly. As we
continue to expand and evolve our insurance business, the number and complexity of models Global Atlantic employs has
grown, increasing exposure to error in the design, implementation or use of models, including the associated data input,
controls and assumptions, and the controls in place to mitigate their risk may not be effective in all cases. While we
periodically review the adequacy of Global Atlantic’s reserves and the assumptions underlying those reserves at least
annually, we cannot precisely determine the amounts that Global Atlantic will pay for, or the timing of payment of, actual
benefits, claims and expenses or whether the assets supporting policy liabilities, together with future premiums, will grow to
the level assumed prior to the payment of benefits or claims. As a result, future experience could deviate significantly from
our assumptions. If actual experience differs significantly from assumptions or estimates, certain balances included in Global
Atlantic’s balance sheet may not be adequate. If we conclude that Global Atlantic’s reserves, together with future premiums,
are insufficient to cover future policy benefits and claims, Global Atlantic would be required to increase its reserves and incur
income statement charges for the period in which it makes the determination, which could have a material adverse effect on
us. Changes in regulations relating to reserves may cause fluctuations to the amount of statutory reserves held and could
adversely impact our insurance business. The NAIC has adopted a new actuarial guideline relating to reinsurance reserves
that could result in a determination that increased reserves are advisable. There can be no guarantee as to the impact of
changes to reserves on Global Atlantic.
Furthermore, significant estimates and assumptions are required to establish and amortize the significant costs our
insurance business incurs in connection with acquiring new and renewal insurance business. Global Atlantic periodically
revises the key assumptions used in the calculation of the amortization of these costs; however, there is a significant level of
discretion exercised in making these determinations. To the extent policy or contract terminations exceed projected levels or
if key assumptions are revised, then the amortization of deferred revenues and expenses will be accelerated in the period of
the change and will result in a charge to income, which could have a material adverse effect on Global Atlantic’s profitability.
Furthermore, the determination of the amount of impairments and allowances for credit losses is based upon our
periodic evaluation and assessment of known and inherent risks associated with the respective asset class and the specific
investment being reviewed. Changes in allowances for credit losses can result in either a charge or credit to earnings. The
assessment of whether impairments have occurred is based on a case-by-case evaluation of the underlying reasons for the
decline in fair value. There can be no assurance that we have accurately assessed the level of impairments taken in our
financial statements and their potential impact on Global Atlantic’s regulatory capital. Furthermore, additional impairments
and allowance provisions may be taken in the future, which could have a material adverse effect on us.
If the ratings of our insurance subsidiaries are downgraded, it may materially and adversely affect our
ability to sell our products, conduct our business, raise equity or issue debt.
Financial strength ratings are published by various nationally recognized statistical rating organizations (“NRSROs”) and
similar entities not formally recognized as NRSROs. Rating organizations periodically review the financial performance, capital
adequacy and condition of insurers, including Global Atlantic’s insurance and reinsurance subsidiaries. Rating agencies also
consider general economic conditions and other circumstances outside the rated company’s control in assigning a rating. The
various rating agencies periodically review and may modify their standards, established guidelines and capital models from
time to time.
Global Atlantic’s clients and counterparties use Global Atlantic’s insurance financial strength ratings as one source to
assess its financial strength and quality. Downgrades in Global Atlantic’s credit ratings or changes to its rating outlook, or
downgrades or changes in outlook to the financial strength ratings of Global Atlantic’s insurance subsidiaries, could have a
material adverse effect on our insurance business in many ways, including by:
• limiting access to distributors;
• limiting or preventing Global Atlantic’s ability to write new insurance policies and generate new business volumes;
• decreasing profitability;
• increasing policy lapse activity;
• limiting access to capital markets and potentially increasing the cost of debt, which could adversely affect liquidity;
• increasing regulatory scrutiny;
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• adversely affecting the pricing terms Global Atlantic can obtain; and
• triggering contractual clauses that permit the counterparty to terminate or require posting of additional collateral.
In addition, failure by Global Atlantic to maintain minimum RBC ratio requirements in certain contracts could permit the
counterparty to terminate the contract, recapture business or require posting of additional collateral.
In order to maintain its current ratings, Global Atlantic could be required to reduce its risk profile by, for example,
reinsuring and/or retroceding some of its business, materially altering its business and sales plans or by raising additional
capital. Any such action could have a material adverse effect on us. There is no guarantee that Global Atlantic will be able to
maintain its ratings in the future or that such ratings will not be withdrawn, and any actions taken by ratings agencies to
downgrade any of our insurance subsidiaries could result in a material adverse effect on us.
Our insurance business faces risks associated with business we cede to other reinsurers as well as
business ceded to us.
As part of Global Atlantic’s overall risk management strategy, it cedes business to other insurance companies through
reinsurance. Global Atlantic’s inability to collect from its reinsurers (including reinsurance clients in transactions where Global
Atlantic reinsures business net of ceded reinsurance) on its reinsurance claims could have a material adverse effect on us.
Although reinsurers are liable to Global Atlantic to the extent of the reinsurance coverage it acquires, Global Atlantic remains
primarily liable as the direct insurer on all risks that it writes. Global Atlantic’s reinsurance agreements do not eliminate its
obligation to pay claims. As a result, Global Atlantic is subject to the risk that it may not recover amounts due from reinsurers.
A reinsurer’s insolvency, or its inability or unwillingness to make payments due to Global Atlantic under the terms of the
relevant reinsurance agreements, could have a material adverse effect on us.
Global Atlantic also bears the risk that the companies that reinsure its mortality risk on a yearly renewable term increase
the premiums they charge to levels Global Atlantic deems unacceptable. If that occurs, Global Atlantic will either need to pay
such increased premiums, or alternatively, Global Atlantic will need to limit or potentially terminate reinsurance, which will
increase the risks that Global Atlantic retains. Conversely, certain of our insurance subsidiaries assume liabilities from other
insurance companies. Changes in the ratings, creditworthiness or market perception of such ceding companies or in the
administration of policies reinsured to Global Atlantic could cause policyholders of contracts reinsured to Global Atlantic to
surrender or lapse their policies in unexpected amounts. In addition, to the extent such ceding companies do not perform
their obligations under the relevant reinsurance agreements, Global Atlantic may not achieve the results intended and could
suffer unexpected losses. Certain reinsurance transactions require additional operational support, administration, regulatory
filings and compliance with jurisdiction-specific laws and regulations, subjecting Global Atlantic to additional scrutiny and
risks. These risks could materially and adversely affect us.
Additionally, certain of Global Atlantic’s reinsurance agreements contain triggers that, if breached, may result in the
ceding company having the right to recapture the reinsured business (i.e., by reassuming under certain circumstances all or a
portion of the risk previously ceded to Global Atlantic) or terminate the reinsurance agreement with respect to new business.
Conversely, for reinsurance transactions in which the ceding company cedes all or a portion of the risk to Global Atlantic,
Global Atlantic’s reinsurance agreements typically include a recapture right that is triggered if, for example, Global Atlantic
fails to maintain certain minimum levels of capitalization or certain minimum levels of reserves to support the business
reinsured. These reinsurance agreements may include provisions that provide for termination of the agreement and
recapture of the business upon the occurrence of insolvency, rehabilitation, reduction in regulatory capital below specified
levels, non-payment of amounts due, material breach of contract provisions or failure to provide the ceding company with the
ability to take reserve credit. Global Atlantic may recapture liabilities it intended to reinsure off its balance sheet and may
require additional capital to back these liabilities. The economic, financial and liquidity impact from the loss of the recaptured
business, in addition to Global Atlantic’s economic hardships at the time of recapture, may have a material adverse effect on
In addition, if Global Atlantic assumes liability for policyholder servicing in reinsurance transactions and the reinsured
polices are not properly serviced, Global Atlantic may experience regulatory intervention, litigation or other adverse impacts.
For example, in the past, Global Atlantic experienced policyholder and agent class action litigation matters and a number of
regulatory matters stemming from service disruptions caused by a third-party administrator for life insurance policies.
Additionally, Global Atlantic holds a significant portion of its reinsurance assets in trust, which may restrict Global
Atlantic’s ability to invest those assets or to use such assets to support our liquidity needs for other purposes and also may
permit the ceding company to withdraw those assets from the trust in certain circumstances.
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Changes in tax laws or an adverse interpretation by tax authorities may adversely impact our
insurance business.
Unless the context otherwise requires, the term “Bermuda insurance subsidiaries” refers to Global Atlantic Assurance
Limited. “GAFL” refers to Global Atlantic Financial Limited, which, before January 2, 2024, was a Bermuda exempted
company. On April 1, 2016, Global Atlantic completed a reorganization of GAFL (the “GAFL Reorganization”). Because of the
GAFL Reorganization, Section 7874 limits the ability of Global Atlantic's U.S. holding company and its U.S. affiliates to utilize
certain U.S. tax attributes to offset, during the ten-year period following the GAFL Reorganization, their U.S. taxable income,
or related income tax liability, resulting from certain transfers of stock or other properties and certain income received or
accrued by reason of a license of any property by Global Atlantic's U.S. holding company and its U.S. affiliates. Effective
January 2, 2024, GAFL continued its corporate existence as a Delaware company, changing its name to Global Atlantic Limited
(Delaware). The IRS may successfully challenge GAFL’s status as a non-U.S. corporation for U.S. federal income tax purposes
before January 2, 2024. Under U.S. federal income tax law, a corporation is generally considered a tax resident of the
jurisdiction of its organization or incorporation. Because GAFL was a Bermuda-incorporated exempted entity before January
2, 2024, it would generally be classified as a non-U.S. corporation and non-U.S. tax resident for periods before 2024. Section
7874 of the Code (“Section 7874”) provides an exception to this rule under which a non-U.S. incorporated entity may, in
certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. Section 7874 is complex with
limited guidance regarding its application. There can be no assurance that the IRS will agree that GAFL should not be treated
as a U.S. corporation for periods before 2024. If for such periods GAFL were to be treated as a U.S. corporation for USFIT
purposes, GAFL would be subject to substantial additional historic USFIT liability, which could adversely affect us. While Global
Atlantic has taken steps to mitigate this risk, there can be no assurance that these steps will be successful.
If Global Atlantic was, or our non-U.S. insurance subsidiaries are or were, engaged in trade or business within the U.S.
(“ETB”) and subject to U.S. federal income tax, we could be materially and adversely affected. Certain Global Atlantic
subsidiaries are non-U.S. companies treated as corporations for USFIT purposes. Prior to 2024, the Bermuda insurance
subsidiaries and GAFL have conducted, and the insurance subsidiaries intend to conduct, substantially all operations outside
the U.S. and to limit their U.S. contacts with the intention that the Bermuda insurance subsidiaries not be treated as ETB.
Considerable uncertainty exists as to when a non-U.S. corporation is ETB. There can be no assurance that the IRS will not
contend that the Bermuda insurance subsidiaries are or were ETB.
There is U.S. federal income tax risk associated with reinsurance transactions, intercompany transactions and
distributions between U.S. companies and their non-U.S. affiliates, including from the Base Erosion and Anti-Abuse Tax (the
“BEAT”) on certain U.S. companies that make deductible payments to related non-U.S. companies. While we have taken steps
to mitigate the BEAT, there can be no assurance that these steps will be successful. Additionally, the Code permits the IRS to
reallocate, recharacterize, or adjust certain tax items related to a reinsurance agreement between related parties to reflect
the proper “amount, source or character” for each item. Further, the tax treatment of certain aspects of reinsurance ceded to
a non-U.S. reinsurer on a funds withheld coinsurance basis is uncertain. If the IRS were successfully to challenge Global
Atlantic's intercompany reinsurance arrangements between its subsidiaries or Global Atlantic's tax treatment of funds
withheld coinsurance with non-U.S. reinsurers (including our Bermuda insurance subsidiaries), we could be materially and
adversely affected. There are cross-border transactions in place among Global Atlantic's affiliates and non-U.S. third parties,
some of which Global Atlantic treats as loans or swaps for tax purposes. Global Atlantic expects to expand the scope of its
cross-border intercompany transactions in the future. If the IRS successfully challenges any of the foregoing items in this
paragraph or the tax treatment of these transactions, or if a change in law alters the expected tax treatment of such
transactions, we could be materially and adversely affected.
U.S. tax law changes could affect the products our insurance subsidiaries sell. Many such products benefit from tax-
favored statuses under current U.S. federal and state income tax regimes. For example, our insurance subsidiaries sell and
reinsure annuity contracts that allow the policyholders to defer the recognition of taxable income earned within the contract.
Additionally, current U.S. federal tax law permits excluding death benefits paid under life insurance contracts from taxation.
U.S. tax law changes altering the tax benefits or treatment of certain products could materially reduce demand for our
products and unpredictably affect policyholder behavior with respect to existing annuity products. Additionally, changes in
corporate or individual tax rates or the estate tax exclusion could impact the competitiveness of Global Atlantic’s product
pricing or demand, which could adversely affect us.
Bermuda enacted legislation in 2023 implementing a corporate tax aimed at certain multinational enterprises effective
for tax years beginning in 2025. Implementation may be delayed for certain groups for up to five years. The Bermuda
corporate income tax is a flat minimum tax on 15% of reported financial profits and provides for various offsets and credits.
There is uncertainty regarding the implementation of the Bermuda corporate income tax and its application to insurance
companies.
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See Note 18 “Income Taxes” in our financial statements for further information regarding tax matters and “—Risks
Related to Our Business—Changes in relevant tax laws, regulations or treaties or an adverse interpretation of these items by
tax authorities could adversely impact our effective tax rate and tax liability” for discussions of the OECD’s BEPS project.
Our insurance business is heavily regulated, and such regulations may have a material and adverse
effect on our business, financial condition and results of operations.
Our insurance and reinsurance subsidiaries are highly regulated by, among others, insurance regulators in the United
States and Bermuda, and changes in regulations affecting our insurance business may reduce Global Atlantic’s profitability
and limit its growth. The laws and regulations of the jurisdictions in which our insurance and reinsurance subsidiaries are
domiciled or may be deemed commercially domiciled may require these companies to, among other things, maintain
minimum levels of statutory capital, surplus and liquidity, meet solvency standards, submit to periodic examinations of their
financial condition, restrict payments of dividends and distributions of capital, restrict our ability, in certain cases, to write
insurance and reinsurance policies, make certain types of investments and distribute funds, and restrict the type and
concentration of investments that can be made. For example, due to regulatory restrictions on the payment of dividends, our
U.S. insurance subsidiaries may not declare a dividend in 2025 to the corporate parent companies of our insurance business
without prior domiciliary state regulatory approval. Offering new products or offering products in additional jurisdictions will
also subject Global Atlantic to additional regulation and compliance requirements.
With respect to investments, our insurance and reinsurance subsidiaries must comply with applicable regulations and
statutes regarding the type and concentration of investments it may make. Investment-related regulations include limits,
regulatory approvals of affiliate investments, permissible asset classes, capital required and limitations with respect to what
assets or portion of assets may back reserves. These restrictions may limit Global Atlantic’s ability to invest in and our ability
to earn fees on those investments. In addition, our insurance and reinsurance subsidiaries are subject to laws and regulations
governing affiliate transactions. The investment management agreements between our investment manager and our
insurance subsidiaries were approved by the applicable U.S. and Bermuda insurance regulators, and any changes to such
agreements, including with respect to fees, must receive applicable regulatory approval. These regulations may materially and
adversely impact our insurance business’ returns and capital requirements.
In addition, our U.S. insurers are required to be members of state guaranty associations. Guaranty associations subject
insurers to assessments to pay policyholders in the event of another insurer’s insolvency. We cannot predict the amount,
nature or timing of any future guaranty assessments. Any such assessment may be material and have an adverse effect on our
financial condition, results of operations, liquidity or cash flows, and any liability we have previously established for these
assessments may be inadequate. See also “—Risks Related to Regulatory Matters” above. Our Bermuda insurance
subsidiaries and sponsored co-investment vehicles that provide third-party capital to support our insurance business are
licensed to conduct insurance business by the BMA. The BMA regulates and supervises each Bermuda insurer on a stand-
alone basis in Bermuda. The Bermuda Insurance Act and the policies of and other codes issued by the BMA require each of
Bermuda insurer to, among other requirements, maintain a minimum level of capital and surplus, satisfy solvency standards,
comply with conduct guidelines, comply with restrictions on dividends, obtain prior approval or provide notification to the
BMA of changes in controlling interests by a shareholder across prescribed thresholds, make financial statement filings,
prepare a financial condition and risk management report, maintain a head office in Bermuda from which each of our
Bermuda insurance subsidiaries’ insurance business will be directed and managed, and allow for the performance of certain
periodic examinations of its financial condition. These statutes and regulations may restrict Global Atlantic’s ability to write
insurance and reinsurance policies, distribute funds, and pursue its investment strategy.
If our relationships, or our reputation with, various regulatory authorities were to deteriorate, we could be materially and
adversely affected, including by making it more difficult, or impossible, for Global Atlantic to obtain necessary consents and
approvals.
Our insurance business may become subject to additional regulations, which may have material and adverse impact on
our business, financial condition and results of operations.
In addition to the regulations of the jurisdictions where our insurance subsidiaries are domiciled or may be deemed
commercially domiciled, Global Atlantic insurers also must obtain licenses to write insurance in other states and jurisdictions.
Our insurers follow operational guidelines designed to prevent conducting insurance business that requires a license in a
jurisdiction where the insurer is not licensed. Our non-U.S. insurance subsidiaries have and may obtain certified reinsurer and
reciprocal jurisdiction reinsurer status in various U.S. states. Most state regulatory authorities are granted broad discretion in
connection with their decisions to grant, renew or revoke licenses and approvals that are subject to state statutes. If Global
Atlantic is unable to renew the requisite licenses and obtain the necessary approvals or otherwise does not comply with
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applicable regulatory requirements, the insurance regulatory authorities could stop, or temporarily suspend, Global Atlantic
from conducting some or all of its operations as well as impose fines. We may also need to seek new licensing, which could
subject our insurers to additional or new regulations. In addition, if one of our non-U.S. insurers does not receive an annual
renewal of its reciprocal jurisdiction reinsurer status, it will be required to post additional collateral, which will have a
negative effect on us and our financial condition.
Furthermore, as Global Atlantic seeks to expand its business outside of the U.S., it may become increasingly exposed to
other applicable regulatory regimes in other jurisdictions, which may be extensive, complex and varied. As a result, any
future overseas expansion of Global Atlantic’s business would subject us to additional regulatory risk, potential litigation, and
increased compliance costs, and creates potential for additional liabilities and penalties.
Insurance regulations are subject to change, and such changes may have a material and adverse impact on our
business, financial condition and results of operations.
Regulators continuously consider changes to insurance regulations. Since insurance regulations apply to many aspects of
an insurer’s business, changes in insurance regulation may have a range of impacts on us. In recent years, state insurance
regulators have undertaken a review of the state-based insurance regulatory framework in the United States to bolster their
ability to address concerns stemming from the increasing usage of offshore reinsurance transactions and expanding
allocations to affiliated assets and alternative assets. In addition, some state legislatures have considered or enacted laws
that alter, and in many cases increase, state authority to regulate insurance holding companies and insurance and reinsurance
companies. Regulatory changes have the ability to impact other areas of Global Atlantic’s business as well, including access to
liquidity or ability to write certain products. For example, there has been regulatory scrutiny of insurance companies’ use of
Federal Home Loan Banks for liquidity, as well as of increased issuances of funding agreement backed notes and pension risk
transfer group annuity contracts. We are unable to predict whether, when or in what form and what impact such regulatory
changes will have on our insurance business.
Regulators also continue to propose or adopt sometimes conflicting or overlapping fiduciary rules, best interest standards
and other similar laws and regulations applicable to the sale of retirement and life insurance products, which would generally
require advisers providing investment recommendations to act in the client’s best interest or put the client’s interest ahead of
their own interest. These new and proposed regulations may fundamentally adversely impact the way in which our insurance
products are marketed and offered by its distribution partners. Regulators in enforcement actions and private litigants in
litigation could also find it easier to attempt to extend fiduciary status to, or to claim fiduciary or contractual breach by,
advisors who would not be deemed fiduciaries under current regulations. Such laws and regulations may have a material
adverse impact on our insurance business, including by increasing compliance costs and burdens and restricting our ability to
conduct and grow our insurance business.
Capital regulations applicable to our insurance subsidiaries impose meaningful limitations on our insurance business,
and any changes to them may have a material and adverse impact on our business, financial condition and results of
operations.
Capital regulations applicable to our insurance subsidiaries impose meaningful limitations on our insurance business and
are subject to change. Insurance companies are subject to minimum capital and surplus requirements that vary by the
jurisdiction where the insurance company is domiciled and are generally subject to change over time. The capital regimes in
the United States and Bermuda are different, and regulatory actions to address such differences may result in Global Atlantic
needing to hold more capital. Any failure to meet applicable requirements or minimum statutory capital requirements could
subject Global Atlantic to examination or corrective action by regulators, including limitations on Global Atlantic’s writing
additional business or engaging in finance activities, supervision, receivership or liquidation. The NAIC has recently adopted
and is currently considering a variety of reforms to its RBC framework, which could increase the capital requirements for our
US insurance subsidiaries. RBC is impacted by factors beyond Global Atlantic’s control, such as the federal tax rates and
changes the NAIC from time to time makes to factors used in calculating RBC. A change in the RBC calculation or an increase
in minimum capital requirements may require Global Atlantic to increase its statutory capital levels, which Global Atlantic may
be unable to meet. In addition, the NAIC has adopted changes related to filing exempt status for certain securities or loans,
which generally allows the use of an NRSRO rating for purposes of capital assessment as opposed to requiring review by the
Securities Valuation Office of the NAIC and continues to consider other changes. This change may result in, among other
things, the capital charge treatment of any such investment being less favorable, increasing required capital, and uncertainty
with respect to NAIC ratings of such investments. We cannot predict the likelihood of changes to the capital requirements to
which Global Atlantic is subject, whether such changes will have an impact on RBC ratios, or whether Global Atlantic will need
to raise and hold additional capital in response to such changes and any such changes may have a material adverse effect on
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us. Moreover, the determination of RBC is based on the NAIC designation of the assets in which Global Atlantic invests. NAIC
designation for certain investments depends on the applicable NRSRO rating. If there are changes in an NRSRO’s
methodology, that impacts the rating of a certain type of asset or changes or clarifications to interpretations of such
methodology or related statutory accounting guidance, Global Atlantic’s ability to invest in such assets may be impacted and
Global Atlantic’s investment results may be adversely impacted, or Global Atlantic may need to increase its required capital.
The NAIC has approved Statutory Accounting Principles (“SAP”) for U.S. insurance companies that have been
implemented by the domiciliary states of our U.S. insurance subsidiaries. The NAIC from time to time considers amendments
to the SAP and is currently considering various amendments that impact investment transactions and actuarial reserve
requirements for reinsurance.
In addition, the NAIC Accounting Practices and Procedures Manual provides that U.S. state insurance departments may
permit insurance companies domiciled therein to depart from the SAP by granting them permitted accounting practices.
Global Atlantic makes use of permitted practices and may seek approval to use additional permitted practices in the future.
There is a risk that Global Atlantic may not be able to continue to use a previously granted permitted practice. In addition, we
cannot predict whether or when the insurance departments of the states of domicile of its competitors may permit Global
Atlantic’s competitors to utilize advantageous accounting practices that depart from the SAP, the use of which is not
permitted by the insurance departments of the states of domicile of Global Atlantic’s U.S. insurance subsidiaries. Any change
in the SAP or permitted practices could have a material adverse impact on Global Atlantic.
The BMA continues to review the Bermuda Solvency Capital Requirements (“BSCR”) on an ongoing basis, including to
maintain its equivalency with Solvency II insurance capital requirements. In 2023 and 2024, the BMA issued a series of
consultation papers exploring updates to its Economic Balance Sheet (“EBS”) framework (“EBS Framework”), which is used as
the basis to determine an insurer’s enhanced capital requirement, including updated requirements for reserves, capital,
investments and governance. The BMA has implemented and is in the process of implementing these requirements and could
propose further updates to certain aspects of the EBS Framework. If any such updates materially increase the ECR, it could
materially increase the amount of capital Global Atlantic is required to hold to meet its BSCR and BMA requirements.
Changes to SAP, the EBS Framework or capital models may be complex, require significant resources to implement and
have an impact on our controls, which may be significant. Failure to implement or take appropriate or effective management
actions in response to such changes may have a material adverse impact on us. We can give no assurances that the impacts
of current, proposed or future changes to SAP, EBS Framework, capital models or any components or interpretation thereof,
the grant of permitted accounting practices to Global Atlantic’s competitors or future changes to legal, accounting, capital or
financial regimes will not have a negative impact or material adverse effect on us.
Our Bermuda insurance business is subject to additional regulatory and reputational considerations, which if we do not
properly manage may have a material and adverse impact on our business, financial condition and results of
operations.
The Bermuda insurance and reinsurance regulatory framework is subject to scrutiny from many jurisdictions. As a result
of such scrutiny, the BMA has implemented and imposed additional requirements on the licensed insurance companies it
regulates to achieve equivalence under Solvency II, the solvency regime applicable to the EU insurance sector. The BMA’s
additional requirements resulting from Solvency II equivalence include enhanced solvency and governance requirements
imposed on commercial insurers and reinsurers, including a group solvency framework that could further enhance the
required capital and solvency requirements if the BMA is deemed to be the group regulator. If Solvency II were amended in
any way, Bermuda may be required to amend its regulatory regime to maintain its equivalence under Solvency II, which could
lead to changes in the regulatory regime administered by the BMA.
We cannot provide any assurances that insurance supervisors in the United States or elsewhere will not review Global
Atlantic’s activities and assert that our Bermuda insurance subsidiaries are subject to a U.S. jurisdiction’s requirements. In
addition, our Bermuda insurance subsidiaries’ ability to write reinsurance may be subject, in certain cases, to arrangements
satisfactory to applicable supervisory bodies, as well as other indirect regulatory requirements. Regulatory scrutiny or
proposed legislation and regulations may have the effect of imposing additional requirements upon, or restricting reinsurance
from, U.S. insurers to non-U.S. insurers, particularly between affiliated insurance companies. Reinsurance between our U.S.
and Bermuda insurance subsidiaries is subject to approval by the applicable U.S. domiciliary state insurance department, and
there can be no guarantee such approval will be obtained. Our insurance business could be significantly and negatively
impacted if Global Atlantic had to recapture any reinsured business. If Global Atlantic attempts to license its Bermuda
insurance entities or its sponsored co-investment vehicles that provide third-party capital to support Global Atlantic’s
business in another jurisdiction, Global Atlantic may not be successful in such attempts and the modification of the conduct of
its business or the noncompliance with insurance statutes and regulations could significantly and negatively affect our
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insurance business. See also “—Risks Related to Regulatory Matters—Changes in the regulatory framework applicable to our
business, including the loss of exemptions or the application of enhanced group-level regulation, may materially adversely
affect us”.
If our insurance business fails to mitigate the reserve strain associated with statutory accounting rules,
it may result in a material adverse impact on our insurance subsidiaries’ capital positions or require
increasing prices or reducing sales of certain insurance products.
The application of certain statutory accounting rules for term life insurance policies with long-term premium guarantees
and universal life policies with secondary guarantees requires Global Atlantic to maintain reserves at a level that exceeds what
our insurance subsidiaries’ actuarial assumptions for the applicable business would otherwise require. Global Atlantic has
special purpose financial captive insurance company subsidiaries (“captives”) that facilitate the financing of the redundant
reserve requirements associated with these statutory accounting rules. These arrangements are subject to review by U.S.
state insurance regulators and rating agencies.
It is unclear what additional actions and regulatory changes will result from the continued scrutiny of captive reinsurers
and reform efforts by the NAIC and other regulatory bodies. The NAIC is evaluating changes to accounting rules regarding
surplus notes with linked assets, a structure used in certain captive reserve financing transactions. Further changes in such
statutory accounting rules will likely make it difficult for Global Atlantic to establish new captive financing arrangements on a
basis consistent with its current captives. As a result, the implementation of new captive structures in the future may be less
capital-efficient, may lead to lower product returns or increased product pricing, or may result in reduced sales of certain
products.
Certain of the reserve financing facilities Global Atlantic has put in place will mature prior to the run-off of the liabilities
they support. As a result, Global Atlantic may be unable to implement actions to mitigate the strain of having redundant
reserves or to maintain collateral support for its captives or existing third-party reinsurance arrangements to which one of our
captive reinsurance subsidiaries is a party. If Global Atlantic is unable to continue to implement those actions or maintain
existing collateral support, it may be required to increase statutory reserves, incur higher operating costs or tax costs, and the
competitiveness, capital and financial position and results of operations of our insurance business may be materially and
adversely affected.
Risks Related to Our Organizational Structure
Until the Sunset Date, the Series I preferred stockholder’s significant voting power limits the ability of
holders of our common stock to influence our business, and conflicts of interest may arise among the
Series I preferred stockholder and the holders of our common stock.
The Series I preferred stockholder has significant voting power until the Sunset Date, which limits the ability of holders of
our common stock to influence our business. Our Co-Executive Chairmen, when acting together, jointly control the Series I
preferred stockholder and thereby the vote of the Series I preferred stock held by it.
Until the Sunset Date, the Series I preferred stockholder has the ability to appoint and remove members of our board of
directors and has the right to approve certain corporate actions as specified in our certificate of incorporation. If the holders
of our common stock are dissatisfied with the performance of our board of directors, they have no ability to remove any of
our directors, with or without cause, until after the Sunset Date. Through the Series I preferred stockholder’s ability to elect
our board of directors and its approval rights over certain corporate transactions, the Series I preferred stockholder may be
deemed to control our business and affairs. Prior to the Sunset Date, the vote of the Series I preferred stockholder will
determine the outcome of all matters subject to a vote by our stockholders, except with respect to certain matters
enumerated in our certificate of incorporation as requiring a vote of our common stockholders or as required under NYSE
rules.
Our certificate of incorporation and bylaws also include limitations on the calling of meetings of the stockholders and
procedures for submitting proposals for business to be considered at meetings of the stockholders. In addition, any person
that beneficially acquires 20% or more of any class of stock then outstanding without the consent of our board of directors
(other than the Series I preferred stockholder) is unable to vote such stock on any matter submitted to such stockholders.
In addition, although the affirmative vote of a majority of our directors is required for any action to be taken by our board
of directors, certain actions that are specified in our certificate of incorporation will also require the approval of the Series I
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preferred stockholder. Accordingly, our board of directors may be prevented from causing us to take certain actions if the
Series I preferred stockholder does not provide its approval to any such action, even if the board of directors believes such
action may be in the best interest of us and our stockholders.
By the Sunset Date, we agreed in the Reorganization Agreement to (i) eliminate our Series I preferred stock and (ii)
establish voting rights for our common stock on a one vote per share basis for all matters subject to a common stockholders’
vote under Delaware corporate law, including with respect to the election of directors. For more information about the
transactions contemplated by the Reorganization Agreement, see Note 1 “Organization—Reorganization Agreement” in our
financial statements. For a more detailed description of our common stock and Series I Preferred Stock, see “Description of
Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934,” which is filed as an exhibit to this report.
As a “controlled company,” we qualify for some exemptions from the corporate governance and other
requirements of the NYSE and are not required to comply with certain provisions of U.S. securities
laws.
Prior to the Sunset Date, we are a “controlled company” within the meaning of the corporate governance standards of
the NYSE. As a “controlled company” we have currently elected not to comply with certain corporate governance
requirements of the NYSE, including the requirements: (i) that the listed company have a nominating and corporate
governance committee that is composed entirely of independent directors, (ii) that the listed company have a compensation
committee that is composed entirely of independent directors and (iii) that the compensation committee be required to
consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers.
Accordingly, holders of our common stock do not currently have the same protections afforded to stockholders of companies
that are subject to all of the corporate governance requirements of the NYSE.
Following the Sunset Date, including after any applicable transition period for compliance with NYSE rules, we will no
longer be exempted from the foregoing corporate governance requirements of the NYSE.
Our certificate of incorporation states that the Series I preferred stockholder is under no obligation to
consider the separate interests of the other stockholders and contains provisions limiting the liability of
the Series I preferred stockholder.
Our certificate of incorporation contains provisions stating that the Series I preferred stockholder is under no obligation
to consider the separate interests of the other stockholders in its decisions and shall not be liable to the other stockholders
for damages or equitable relief for any losses, liabilities or benefits not derived by such stockholders in connection with such
decisions, unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that
the Series I preferred stockholder or its officers and directors acted in bad faith or engaged in fraud or willful misconduct.
These provisions restrict the remedies available to stockholders with respect to actions of the Series I preferred stockholder.
In addition, we have agreed to indemnify the Series I preferred stockholder and its affiliates and any member, partner,
tax matters partner (as defined in Code as in effect prior to 2018), partnership representative (as defined in the Code), officer,
director, employee, agent, fiduciary or trustee of any of KKR or its subsidiaries (which includes KKR Group Partnership), the
Series I preferred stockholder or any of our or the Series I preferred stockholder’s affiliates and certain other indemnitees, to
the fullest extent permitted by law, against any and all losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts incurred by any such
indemnitee, including in connection with criminal proceedings. We have agreed to provide this indemnification unless there
has been a final and non-appealable judgment by a court of competent jurisdiction determining that such indemnitee acted in
bad faith or engaged in fraud or willful misconduct.
The provision of our certificate of incorporation requiring exclusive venue in the state and federal
courts located in the State of Delaware or federal district courts of the United States for certain types
of lawsuits may have the effect of discouraging lawsuits against us and our directors, officers and
stockholders.
Our certificate of incorporation requires that (i) any derivative action, suit or proceeding brought on behalf of KKR, (ii) any
action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer,
employee or stockholder of KKR to KKR or KKR’s stockholders, (iii) any action, suit or proceeding asserting a claim arising
pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws or as to
which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware or (iv)
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any action, suit or proceeding asserting a claim governed by the internal affairs doctrine may only be brought in the Court of
Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court
located in the State of Delaware. In addition, the federal district courts of the United States are the exclusive forum for the
resolution of any action, suit or proceeding asserting a cause of action arising under the Securities Act and the Exchange Act.
Our ability to pay periodic dividends to the holders of our common stock as intended is not
guaranteed.
We intend to pay cash dividends on a quarterly basis. KKR & Co. Inc. is a holding company and has no material assets
other than the KKR Group Partnership Units that we hold indirectly through wholly-owned subsidiaries and has no
independent means of generating income. The declaration and payment of dividends to our stockholders will be at the sole
discretion of our board of directors, and our dividend policy may be changed at any time. The declaration and payment of
dividends is subject to legal, contractual and regulatory restrictions on the payment of dividends by us or our subsidiaries, and
such other factors as the board of directors considers relevant. Our ability to pay dividends is also subject to the availability of
lawful funds therefor as determined in accordance with the Delaware General Corporation Law. Furthermore, by paying cash
dividends rather than investing that cash in our businesses, we risk slowing the pace of our growth, or not having a sufficient
amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.
If we were deemed to be an “investment company” subject to regulation under the Investment
Company Act, applicable restrictions could make it impractical for us to continue our business as
contemplated and could have a material adverse effect on our business.
We are engaged primarily in the business of providing investment management services and an insurance business, and
not in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that we are an “orthodox”
investment company as defined in the Investment Company Act.
In addition, although KKR & Co. Inc. has no material assets other than its indirect ownership of wholly-owned subsidiaries
that in turn own interests in KKR Group Partnership, we do not believe our equity interests in our subsidiaries are investment
securities, and we believe that the capital interests of the general partners of our investment vehicles in their respective
investment vehicles are neither securities nor investment securities. Moreover, we expect that in excess of 65% of Global
Atlantic’s gross income will be derived from our insurance business.
However, a person will generally be deemed to be an investment company for purposes of the Investment Company Act
if (1) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing,
reinvesting or trading in securities, or (2) absent an applicable exemption, it owns or proposes to acquire investment
securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items)
on an unconsolidated basis. If we, or any of our operating subsidiaries, were to be deemed to an investment company under
the Investment Company Act, then we could experience a material adverse effect. Among other things, the Investment
Company Act and the rules and regulations thereunder limit or prohibit transactions with affiliates, impose limitations on the
issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance
requirements. If anything were to happen that would cause us to be deemed to be an investment company under the
Investment Company Act, requirements imposed by the Investment Company Act, including limitations on our capital
structure, ability to transact business with affiliates and ability to compensate key employees, would make it impractical for
us to continue our business as currently conducted, impair the agreements and arrangements between and among us, and
materially and adversely affect us. In addition, we may be required to limit the amount of investments that we make as a
principal, potentially divest of our investments or otherwise conduct our business in a manner that does not subject us to the
registration and other requirements of the Investment Company Act.
Our certificate of incorporation provides that if we are subjected to registration under the provisions of the Investment
Company Act, we may exercise our right to call and purchase all of the then outstanding shares of common stock held by
persons other than the Series I preferred stockholder or its affiliates or assign this right to the Series I preferred stockholder or
any of its affiliates.
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Actions taken to implement the reorganization transactions that must occur by the Sunset Date as part
of the integrated transactions committed to in the Reorganization Agreement may adversely impact
Pursuant to the Reorganization Agreement, we committed to undertake a series of integrated transactions, some of
which were completed in May 2022, and some of which must be completed by the Sunset Date, which will occur not later
than December 31, 2026, whereby our Series I preferred stock will be eliminated. Actions taken to implement the remaining
structural and governance changes required by the Reorganization Agreement by the Sunset Date could be disruptive to our
management, our business or operations, result in significant costs and expenses, fail to receive regulatory approvals, and
may not be successful in achieving their objectives and fail to result in the intended or expected benefits, any of which could
materially and adversely impact us. For a description of the rights of our Series I preferred stock see “—Until the Sunset Date,
the Series I preferred stockholder’s significant voting power limits the ability of holders of our common stock to influence our
business, and conflicts of interest may arise among the Series I preferred stockholder and the holders of our common stock”
and for more information about the Reorganization Agreement, see “Note 1 “Organization—Reorganization Agreement” in
our financial statements.
Anti-takeover provisions in our organizational documents may delay or prevent a change of control.
In addition to the provisions related to our Series I preferred stock and Series I preferred stockholder described in this
report, certain provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or
acquisition that a stockholder may consider favorable by, for example:
• permitting our board of directors to issue one or more series of preferred stock;
• requiring advance notice for stockholder proposals and nominations if at any time stockholders other than the Series
I preferred stockholder are permitted to submit proposals and nominations;
• restricting the ability of any stockholder other than the Series I preferred stockholder that acquires 20% or more of
any class of stock then outstanding to vote such stock without the consent of our board of directors; and
• placing limitations on convening stockholder meetings.
These provisions may also discourage acquisition proposals or delay or prevent a change in control.
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