KKR’s Bizarro Berkshire Plan
Happy Friday,
Bernstein Strategic Decisions Conference this week that offered some of the latest insurance and risk modeling insights that industry players were thinking about.
On the radar: Catastrophe models have become foundational to pricing and managing risk, but their effectiveness hinges on expert interpretation, writes Dr Paul Wilson and Richard Godfrey of Barclay's Securis in a note out today.
📰 KKR Isn’t Copying Berkshire—It’s Flipping It
KKR Co-CEO Scott Nuttall says the firm continues to build an insurance and capital accumulation strategy similar to Berkshire Hathaway—just with significantly more volatility and a much greater risk appetite, all hyper-focused on monetizing its asset management platform.
Like Bizarro’s unstable version of Superman, KKR is replicating Berkshire’s model but with an inverted version of its essential features.
At the Bernstein Strategic Decisions Conference this week, Nuttall downplayed the 2024 performance of KKR’s Global Atlantic insurance arm—which reported a net loss of $608 million, compared to net income of $251 million the prior year—by emphasizing the broader value of the firm's integrated model.
“We don’t look at it just as that one segment of earnings,” Nuttall said, referring to the firm’s insurance unit. “We look at the totality of the impact that Global Atlantic has on KKR.”
That impact includes more than just the income from Global Atlantic’s $200 billion in assets. It also encompasses management fees, sidecar carry, and capital markets revenue tied to investment activity—all contributing to KKR’s broader asset management segment.
“The return on capital that we look at on that basis is approaching 20% already,” Nuttall added, noting that KKR’s full ownership of Global Atlantic would further enhance those returns. “There’s upside to that approaching-20% combined number.”
KKR’s long-term plan is to shift more of its insurance exposure to third-party capital. Since acquiring Global Atlantic, third-party insurance AUM has tripled—from $25 billion to $75 billion. That capital contributes both fees and carry, central to KKR’s monetization strategy.
“If you want to keep it simple,” Nuttall said, “today we probably have roughly $9 to $10 billion of equity in the business itself and probably 5% or so of third-party. I think that’s going to go from roughly one-third to more than half.”
📈 Moody’s Bets On Climate and Credit Convergence
Moody’s CEO Rob Fauber used the Bernstein Strategic Decisions Conference to underline the company’s growing influence in insurance and financial markets— by becoming the “Cadillac of catastrophe models” and a leading platform for integrated risk modeling.