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EQUITY BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
EQUITY BASED COMPENSATION | EQUITY BASED COMPENSATION
|  |  | For the Years Ended December 31, |  |
|  |  |  |  | 2022 |  | 2021 |  | 2020 |  |  |  |
KKR Equity Incentive Plan Awards(1) |  |  |  |  | $ | 458,659 |  |  | $ | 272,994 |  |  | $ | 246,395 |  |  |  |  |
KKR Holdings Awards(2) |  |  |  |  | 119,834 |  |  | 160,722 |  |  | 80,007 |  |  |  |  |
Total |  |  |  |  | $ | 578,493 |  |  | $ | 433,716 |  |  | $ | 326,402 |  |  |  |  |
(1)Includes $9.0 million and $11.7 million of equity based compensation related to our insurance business for the years ended December 31, 2022 and 2021, respectively. (2)Represents equity-based compensation expense in connection with the allocation of units of KKR Holdings, which were not dilutive to common stockholders of KKR & Co. Inc. Asset Management KKR Equity Incentive Plan Awards Under KKR's Equity Incentive Plans, KKR is permitted to grant equity awards representing ownership interests in KKR & Co. Inc. common stock. On March 29, 2019, the 2019 Equity Incentive Plan became effective. Following the effectiveness of the 2019 Equity Incentive Plan, KKR no longer makes further grants under the 2010 Equity Incentive Plan, and the 2019 Equity Incentive Plan became KKR's only plan for providing new equity-based awards by KKR & Co. Inc. Outstanding awards under the 2010 Equity Incentive Plan will remain outstanding, unchanged and subject to the terms of the 2010 Equity Incentive Plan and their respective equity award agreements, until the vesting, expiration or lapse of such awards in accordance with their terms. The total number of equity awards representing shares of common stock that may be issued under the 2019 Equity Incentive Plan is equivalent to 15% of the aggregate number of the shares of common stock and KKR Group Partnership Units (excluding KKR Group Partnership Units held by KKR & Co. Inc. or its wholly-owned subsidiaries), subject to annual adjustment. As of December 31, 2022, 65,305,996 shares may be issued under the 2019 Equity Incentive Plan. Equity awards granted pursuant to the Equity Plans generally consist of (i) restricted stock units that convert into shares of common stock of KKR & Co. Inc. (or cash equivalent) upon vesting and (ii) restricted holdings units that are exchangeable into shares of common stock of KKR & Co. Inc. upon vesting and certain other conditions. Service-Vesting Awards Under the Equity Incentive Plans, KKR grants restricted stock units and restricted holdings units that are subject to service-based vesting, typically over a three to five-year period from the date of grant (referred to hereafter as "Service-Vesting Awards"). In certain cases, these Service-Vesting Awards may have a percentage of the award that vests immediately upon grant. Additionally, some but not all Service-Vesting Awards are subject to transfer restrictions and/or minimum retained ownership requirements. The transfer restriction period, if applicable, lasts for (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, some but not all of these awards are also subject to minimum retained ownership rules requiring the award recipient to continuously hold shares of common stock equivalents equal to at least 15% of their cumulatively vested awards that have or had the minimum retained ownership requirement. Holders of the Service-Vesting Awards do not participate in dividends until such awards have met their vesting requirements. Expense associated with the vesting of these Service-Vesting Awards is based on the closing price of KKR & Co. Inc. common stock on the date of grant, discounted for the lack of participation rights in the expected dividends on unvested equity awards. Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based upon expected turnover by class of recipient. As of December 31, 2022, there was approximately $550.6 million of total estimated unrecognized expense related to unvested Service-Vesting Awards, which is expected to be recognized over the weighted average remaining requisite service period of 1.7 years. A summary of the status of unvested Service-Vesting Awards granted under the Equity Incentive Plans from January 1, 2022 through December 31, 2022 is presented below:
| Shares |  | Weighted Average Grant Date Fair Value
Balance, January 1, 2022 | 19,307,041 |  |  | $ | 41.21 |
Granted | 3,456,984 |  |  | 50.47 |
Vested | (6,067,099) |  |  | 33.61 |
Forfeitures | (526,862) |  |  | 47.92 |
Balance, December 31, 2022 | 16,170,064 |  |  | $ | 45.82 |
Market Condition Awards Under the Equity Incentive Plans, KKR also grants restricted stock units and restricted holdings units that are subject to both a service-based vesting condition and a market price based vesting condition (referred to hereafter as "Market Condition Awards") for certain employees. The following is a discussion of Market Condition Awards excluding the Co-CEO Awards, except where discussed below. The number of Market Condition Awards (other than the Co-CEO awards) that will vest depend upon (i) the market price of KKR common stock reaching certain price targets that range from $45.00 to $140.00 and (ii) the employee being employed by KKR on a certain date, which typically is five and a half years from the date of grant (with exceptions for involuntary termination without cause, death and permanent disability). The market price vesting condition is met when the average closing price of KKR common stock during 20 consecutive trading days meets or exceeds the stock price targets. Holders of the Market Condition Awards do not participate in dividends until such awards have met both their service-based and market price based vesting requirements. Additionally, these awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting. Due to the existence of the service requirement, the vesting period for these Market Condition Awards (other than the Co-CEO awards) is explicit, and as such, compensation expense will be recognized on (i) a straight-line basis over the period from the date of grant through the date the award recipient is required to be employed by KKR and (ii) assumes a forfeiture rate of up to 7% annually based upon expected turnover. The fair value of the awards granted are based on a Monte Carlo simulation valuation model. In addition, the grant date fair value assumes that holders of the Market Condition Awards will not participate in dividends until such awards have met all of their vesting requirements. Below is a summary of the grant date fair value based on the Monte Carlo simulation valuation model and the significant assumptions used to estimate the grant date fair value of these Market Condition Awards:
| Weighted Average |  | Range |
Grant Date Fair Value | $25.29 |  | $19.87 - $66.80 |
Closing KKR share price as of valuation date | $43.89 |  | $37.93 - $76.31 |
Risk Free Rate | 1.14% |  | 0.41% - 3.86% |
Volatility | 30.07% |  | 28.00% - 38.00% |
Dividend Yield | 1.39% |  | 0.76% - 1.53% |
Expected Cost of Equity | 10.83% |  | 9.13% - 11.80% |
As of December 31, 2022, there was approximately $417.5 million of total estimated unrecognized expense related to these unvested Market Condition Awards, which is expected to be recognized over the weighted average remaining requisite service period of 3.6 years. A summary of the status of unvested Market Condition Awards granted under the Equity Incentive Plans from January 1, 2022 through December 31, 2022 is presented below:
| Shares |  | Weighted Average Grant Date Fair Value
Balance, January 1, 2022 | 21,370,847 |  |  | $ | 25.03 |
Granted | 5,816,242 |  |  | 26.28 |
Vested | (325,000) |  |  | 26.44 |
Forfeitures | (663,558) |  |  | 24.35 |
Balance, December 31, 2022 | 26,198,531 |  |  | $ | 25.30 |
As of December 31, 2022, 19.2 million of these Market Condition awards have met their market price based vesting condition. Co-CEO Awards On December 9, 2021, the Board of Directors approved grants of 7.5 million restricted holdings units to each of KKR’s Co-Chief Executive Officers that are subject to both a service-based vesting condition and a market price based vesting condition (referred to hereafter as "Co-CEOs Awards"). For both Co-Chief Executive Officers, 20% of the Co-CEOs Awards are eligible to vest at each of the following KKR common stock prices targets: $95.80, $105.80, $115.80, $125.80 and $135.80. The market price based vesting condition is met when the average closing price of KKR common stock during 20 consecutive trading days meets or exceeds the stock price targets. In addition to the market price based vesting conditions, in order for the award to vest, the Co-Chief Executive Officer is required to be employed by KKR on December 31, 2026 (with exceptions for involuntary termination without cause, death and permanent disability). These awards will be automatically canceled and forfeited upon the earlier of a Co-Chief Executive Officer’s termination of service (except for involuntary termination without cause, death or permanent disability) or the failure to meet the market price based vesting condition by December 31, 2028 (for which continued service is required if the market price vesting condition is met after December 31, 2026). Co-CEO Awards do not participate in dividends until such awards have met both their service-based and market price based vesting requirements. Additionally, these awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting. Due to the existence of the service requirement, the vesting period for these Co-CEO Awards is explicit, and as such, compensation expense will be recognized on a straight-line basis over the period from the date of grant through December 31, 2026 given the derived service period is less than the explicit service period. The fair value of the awards granted are based on a Monte Carlo simulation valuation model. In addition, the grant date fair value assumes that these Co-CEO Awards will not participate in dividends until such awards have met all of their vesting requirements. Below is a summary of the grant date fair value based on the Monte Carlo simulation valuation model and the significant assumptions used to estimate the grant date fair value of these Co-CEO Awards:
Grant Date Fair Value |  | $48.91 |
Closing KKR share price as of valuation date |  | $75.76 |
Risk Free Rate |  | 1.42 | % |
Volatility |  | 28.0 | % |
Dividend Yield |  | 0.77 | % |
Expected Cost of Equity |  | 9.36 | % |
As of December 31, 2022, there was approximately $580.0 million of total estimated unrecognized expense related to these unvested Co-CEO Awards, which is expected to be recognized ratably from January 1, 2023 to December 31, 2026. As of December 31, 2022, none of these Co-CEO awards have met their market price based vesting condition. KKR Holdings Awards On October 8, 2021, as part of the transactions contemplated by the Reorganization Mergers, of the 3.3 million outstanding KKR Holdings Units that remained unallocated, KKR Holdings allocated 1,150,000 KKR Holdings Units to each of KKR’s Co-CEOs, of which 70% vested immediately, on October 8, 2021, and the remaining 30% were subject to forfeiture if such Co-CEO was not employed by KKR on October 1, 2022 (except in the case of death or permanent disability). These KKR Holdings Units were subject to customary one- and two-year transfer restrictions that will apply, as applicable, until October 1, 2023 and October 1, 2024. In advance of the closing of the Reorganization Mergers, the vesting of KKR Holdings Units held by Messrs. Kravis, Roberts, Bae and Nuttall was accelerated, and the forfeiture and transfer restrictions applicable to certain KKR Holdings Units were transferred to the common stock received as contemplated by the Reorganization Agreement. In addition, on May 27, 2022, KKR Holdings allocated 535,185 units of KKR Holdings to Mr. Kravis and 535,184 units of KKR Holdings to Mr. Roberts’ trust with no vesting conditions. Please refer to Note 1 "Organization" for further information on the Reorganization Mergers pursuant to which, among other things, KKR acquired KKR Holdings, and all outstanding KKR Holdings Units were exchanged for KKR & Co. Inc. common stock. Prior to the Reorganization Mergers, KKR Holdings awards gave rise to equity-based compensation in the consolidated statements of operations based on the grant-date fair value of the award discounted for the lack of participation rights in the expected distributions on unvested units. This discount is consistent with that noted above for shares issued under the Equity Incentive Plans. Expense was recognized on a straight line basis over the life of the award and assumed a forfeiture rate of up to 7% annually based on expected turnover by class of recipient. Insurance Global Atlantic recognized $72.0 million and $63.9 million of expense related to equity-based compensation and long-term incentive awards for the years ended December 31, 2022 and 2021, respectively. The income tax benefit recognized by Global Atlantic with respect to the equity-based compensation and long-term incentive plans for the years ended December 31, 2022 and 2021 was $11.5 million and $11.0 million, respectively, and was recognized as income tax benefit in the consolidated statements of operations. No equity-based compensation costs were capitalized during the years ended December 31, 2022 and 2021. Equity Classified Awards - KKR Equity Incentive Plan Awards On February 1, 2021, in connection with the GA Acquisition, employees of Global Atlantic were awarded a one-time grant of restricted stock units under the 2019 Equity Incentive Plan. These awards (i) are subject to service-based vesting conditions and (ii) expense associated with the vesting of these awards is based on the closing price of KKR & Co. Inc. common stock on the date of grant, consistent with other awards granted under the 2019 Equity Incentive Plan as described above. On July 1, 2021, a grant of a Market Condition Award was made under the 2019 Equity Incentive Plan. This award is subject to meeting certain market price based vesting conditions of KKR common stock but has no service vesting condition. Expense associated with the grant date fair value of this award of $10.5 million was fully recognized in the three months ended September 30, 2021. Global Atlantic recognized $9.0 million and $11.7 million of total equity-based compensation expense for the years ended December 31, 2022 and 2021 associated with these awards, respectively. Liability Classified Awards - Book Value Awards On February 1, 2021, Global Atlantic adopted the Global Atlantic Financial Company Book Value Award Plan ("GA Book Value Plan") to enhance the ability of Global Atlantic to attract, motivate and retain its employees and to promote the success of the Global Atlantic business. The GA Book Value Plan authorizes the grant of cash-settled awards ("book value awards") representing the right to receive one or more payments upon vesting equal to the product of an initial dollar value set by the award multiplied by a pre-determined formula as of each applicable vesting date. The predetermined formula is equal to the quotient determined by dividing the book value of one share of TGAFG on the applicable vesting date by the book value of a share on the original grant date, subject to adjustments. Book value awards generally vest in three equal, annual installments, subject to continued employment. On February 1, 2021, under the terms of the GA Merger Agreement and in accordance with applicable plan documentation, former Global Atlantic restricted share awards that were unvested immediately prior to the closing of the GA Acquisition converted into the right to receive a number of book value awards under the GA Book Value Plan having the same value and the same vesting schedule as the former Global Atlantic restricted share awards immediately prior to the closing of the GA Acquisition. An aggregate of 3,020,017 unvested former Global Atlantic restricted share awards having a fair value of $29.47 per share were converted to book value awards at an aggregate grant-date value of $89.0 million. On February 28, 2021, book value awards having an aggregate value of approximately $28.0 million vested as set forth in the former Global Atlantic grant agreements and resulted in a cash payment of $17.0 million to participants, net of applicable tax withholding. Also in connection with the GA Acquisition, on February 1, 2021, Global Atlantic employees were issued a one-time grant of book value awards having an aggregate initial value of $23.0 million. These one-time book value awards vest over five (5) years, with the first 25% vesting on April 1, 2023 and the remainder vesting 25% annually on April 1 each subsequent year until fully vested, subject to continued employment. Global Atlantic is recording compensation expense over the vesting schedule of the awards, net of an estimated forfeiture rate of 4%. On March 1, 2021, pursuant to the GA Book Value Plan, book value awards having an aggregate initial value of approximately $32 million were granted. Such book value awards generally vest annually over three years in equal increments, subject to continued employment. Global Atlantic is recording compensation expense over the vesting schedule of the awards, net of an estimated forfeiture rate of 4%. Global Atlantic began recognizing long-term incentive expense for the book value awards described above at the grant dates, based on their initial value, net of a 4% estimated forfeiture rate. Global Atlantic adjusts expense periodically for changes in book value until the awards are settled or forfeited. Expense recognized on forfeited awards is reversed in the period of forfeiture. The table below presents the activity related to book value awards for the years ended December 31, 2022 and 2021:
| Years Ended
| December 31, 2022 |  | December 31, 2021
Outstanding amount as of beginning of period | $ | 145,000 |  |  | $ | — |
Pre-acquisition awards converted to book-value awards on February 1, 2021 | — |  |  | 89,000 |
Granted | 48,700 |  |  | 88,195 |
Forfeited | (5,527) |  |  | (7,677) |
Impact of change in book value on outstanding awards | — |  |  | 6,597 |
Vested and issued | (49,577) |  |  | (31,115) |
Outstanding amount as of end of period | $ | 138,596 |  |  | $ | 145,000 |
Global Atlantic recognized $63.0 million and $52.2 million of compensation expense for the years ended December 31, 2022 and 2021 associated with these awards, respectively. As of December 31, 2022 and December 31, 2021, the remaining unamortized compensation expenses of $98.1 million and $99.6 million are expected to be recognized over a remaining average period of 2.45 years and 2.67 years, respectively. GA Equity Incentive Plan Awards On June 24, 2021, Global Atlantic issued 1,000 non-voting incentive shares to a Bermuda exempted partnership owned by certain Global Atlantic employees, who are eligible to receive incentive units under Global Atlantic's Senior Management Equity Incentive Plan ("GA Equity Incentive Plan"). These incentive units represent an interest in the receipt of certain amounts based on Global Atlantic's book value, market value, and AUM, in each case as derived in part from the value of TGAFG’s fully-diluted equity shares. On June 24, 2021, Global Atlantic granted approximately 808 incentive units under the GA Equity Incentive Plan. The book value component of the incentive units vests 20% per year on the anniversary of the GA Acquisition Date, as long as the grantee remains then employed, and will be settled in cash. The market value and AUM components of the incentive units cliff vest upon the earlier to occur of (i) the fifth anniversary of the GA Acquisition Date, or (ii) a change of control, and will be settled in a variable number of TGAFG’s non-voting common shares. TGAFG shares issued under the AUM component of the Plan are exchangeable for shares of KKR. Except in the event of termination due to death or disability, generally, unvested market value and AUM amounts are forfeited upon a termination of employment. The GA Equity Incentive Plan is accounted for as a hybrid compensation plan, consisting of one component most closely aligned with a profit-sharing plan under ASC 710, Compensation - General, as well as other components within scope of ASC 718, Compensation - Stock Compensation, in all cases with obligations liability-classified. Accordingly, with regard to awards within scope of ASC 710, Global Atlantic records expense based on payouts deemed to be probable and reasonably estimable based on the book value growth of Global Atlantic at the grant date and at each reporting period. For award components subject to liability-classification under ASC 718, Global Atlantic records expense, net of a 0% estimated forfeiture rate, based on the fair value of awards granted, with periodic adjustments to expense for changes in fair value, over the requisite 5-year service period. The aggregate value of the GA Equity Incentive Plan awards at the initial date of grant was $197.0 million, based on the intrinsic value of the book value component at the date of grant ($5.0 million) and the fair value of the market value and AUM components at the date of grant ($192.0 million, collectively), based on the projected growth in value of each component over the 5-year vesting schedule and applying a forfeiture rate of 0%. Expense is remeasured accordingly at each reporting period and adjusted as needed until the awards are forfeited or settled. During the years ended December 31, 2022 and 2021, 27 and 841 incentive units were granted to employees, and 13 and 10 incentive units were forfeited, respectively. As of December 31, 2022 and 2021, there were approximately 845 and 831 incentive units outstanding under the Plan, respectively. Global Atlantic recorded compensation expense of $89.1 million and $43.3 million for the years ended December 31, 2022 and 2021 related to the GA Units granted under the GA Equity Incentive Plan, with a corresponding offset to other liabilities, respectively. As of December 31, 2022 and 2021, there was approximately $118.3 million and $104.1 million of unrecognized expense related to the GA Units granted under the GA Equity Incentive Plan with a weighted average service period remaining of 3.09 years and 4.09 years, respectively.

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