8-K
TIPTREE INC. (TIPT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 2021
TIPTREE INC.
(Exact Name of Registrant as Specified in Charter)
| Maryland | 001-33549 | 38-3754322 | ||||||
|---|---|---|---|---|---|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission<br>File Number) | (I.R.S. Employer<br>Identification No.) | 299 Park Avenue | 13th Floor | New York | NY | 10171 | |
| --- | --- | --- | --- | --- | ||||
| (Address of Principal Executive Offices) | (Zip Code) |
(212) 446-1400
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
|---|---|---|---|
| Common Stock, par value $0.001 per share | TIPT | NASDAQ | Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On May 5, 2021, Tiptree Inc. (the “Company” or “Tiptree”) issued a press release announcing its results of operations for the quarter ended March 31, 2021. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
| Item 7.01 | Regulation FD Disclosure. |
|---|
Included in the press release furnished as Exhibit 99.1 was an announcement that the board of directors of the Company has declared a cash dividend of $0.04 per share to Tiptree’s stockholders, with a record date of May 24, 2021 and a payment date of June 1, 2021.
On May 5, 2021, the Company posted an investor presentation dated May 2021 on the Investor Resources section of www.tiptreeinc.com. The investor presentation is furnished as Exhibit 99.2 to this Form 8-K and incorporated herein by reference. Tiptree’s website is not intended to function as a hyperlink, and the information contained on such website is not a part of this Form 8-K.
The information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including the information contained in Exhibits 99.1 and 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. Furthermore, the information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including the information contained in Exhibits 99.1 and 99.2, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) List of Exhibits:
| 99.1 | Tiptree Inc. press release, dated May 5, 2021 |
|---|---|
| 99.2 | Tiptree Inc. Investor Presentation - May 2021 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TIPTREE INC. | |||
|---|---|---|---|
| Date: | May 5, 2021 | By: | /s/ Jonathan Ilany |
| Name: Jonathan Ilany | |||
| Title: Chief Executive Officer |
Document
Exhibit 99.1
TIPTREE REPORTS Q1 2021 RESULTS WITH RECORD REVENUES AND NET INCOME
•Revenues of $294.7 million, up 127.3% from Q1’20, driven by growth in insurance and mortgage operations and net realized and unrealized gains in Q1’21 compared to losses in Q1’20. Excluding realized and unrealized gains and losses, revenues increased 25.6% versus prior year.
•Net income of $28.6 million for the first quarter 2021.
•Adjusted net income of $13.2 million, up 90.5% from Q1’20, driven by improvement in insurance and mortgage operations. Annualized Adjusted ROAE of 13.7%, compared to 7.3% in the prior year period.
•Book value per share of $11.63 as of March 31, 2021, when combined with dividends paid of $0.16 per share, increased 21.2% from the prior year, driven by a combination of net income and 2.3 million of share repurchases over the past four quarters at an average 49% discount to book value per share.
•Declared a dividend of $0.04 per share to stockholders of record on May 24, 2021 with a payment date of June 1, 2021.
New York, New York - May 5, 2021 - Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), a holding company that combines specialty insurance operations with investment management, today announced its financial results for the three months ended March 31, 2021.
| ($ in thousands, except per share information) | Three Months Ended March 31, | |||||
|---|---|---|---|---|---|---|
| GAAP: | 2021 | 2020 | ||||
| Total revenues | $ | 294,688 | $ | 129,671 | ||
| Net income (loss) attributable to common stockholders | $ | 28,581 | $ | (60,007) | ||
| Diluted earnings per share | $ | 0.81 | $ | (1.74) | ||
| Cash dividends paid per common share | $ | 0.04 | $ | 0.04 | ||
| Return on average equity | 31.8 | % | (64.1) | % | ||
| Non-GAAP: (1) | ||||||
| Adjusted net income | $ | 13,155 | $ | 6,907 | ||
| Adjusted return on average equity | 13.7 | % | 7.3 | % | ||
| Book value per share | $ | 11.63 | $ | 9.73 |
____________________________
(1) For information relating to Adjusted net income, Adjusted return on average equity and book value per share, including a reconciliation to GAAP financials, see “—Non-GAAP Reconciliations” below.
Earnings Conference Call
Tiptree will host a conference call on Thursday, May 6, 2021 at 9:00 a.m. Eastern Time to discuss its Q1 2021 financial results. A copy of our investor presentation, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreeinc.com.
The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). Please dial in at least five minutes prior to the start time.
A replay of the call will be available from Thursday, May 6, 2021 at 1:00 p.m. Eastern Time, until midnight Eastern on Thursday, May 13, 2021. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 13717974.
Page 1
Financial Highlights
Overall:
•Net income for Q1’21 of $28.6 million, up from a net loss of $60.0 million in Q1’20 driven by improved performance in insurance and mortgage operations, in addition to realized and unrealized gains on investments in Q1’21 as compared to unrealized losses in Q1’20.
•Adjusted net income increased 90.5% to $13.2 million, from $6.9 million in Q1’20, driven by growth and improved margins in insurance and mortgage operations.
•Adjusted return on average equity was 13.7% in Q1’21, as compared to 7.3% in Q1’20.
•Book value per share of $11.63 as of March 31, 2021, when combined with dividends paid, increased 21.2% from the prior year, driven by a combination of net income and share repurchases at discounts to book value per share.
•In Q1’21, Tiptree purchased and retired 488,662 shares of common stock for $2.5 million in aggregate, at an average 57% discount to book value. Over the past four quarters, $17.8 million of capital returned to shareholders including 2,289,817 share repurchases at an average 49% discount to book value per share.
Insurance (Fortegra Group):
•Gross written premiums and premium equivalents of $505.0 million, up 28.7% versus prior year driven by robust 27.9% organic growth with all lines of business and regions contributing.
•Total revenues increased 55.3% to $222.6 million, from $143.3 million in Q1’20, driven by increases in earned premiums, net, service and administrative fees, and net realized and unrealized gains in Q1’21 as compared to losses in Q1’20. Excluding the impact of realized and unrealized gains and losses, revenues increased by 20.3% over the prior year period.
•The combined ratio improved to 91.5%, as compared to 93.6% in the prior year period driven by the shift in business mix toward warranty and commercial programs improving the underwriting ratio along with continued scalability of the technology and shared service platform improving the expense ratio.
•Income before taxes of $21.5 million in Q1’21, increased $48.6 million as compared to a loss before taxes of $27.1 million in 2020. Return on average equity was 23.9% in Q1’21 as compared to (28.3)% in Q1’20.
•Adjusted net income increased 46.3% to $12.8 million, as compared to $8.7 million in Q1’20. Adjusted return on average equity was 17.9%, as compared to 12.7% in Q1’20. The increase in both metrics was driven by growth in revenues and the improved combined ratio.
Mortgage:
•Income before taxes of $13.1 million compared to loss before taxes of $1.1 million in prior year period. Return on average equity of 60.9%, compared to (6.8)%.
•Adjusted net income of $7.5 million in Q1’21, an increase of $7.3 million from Q1’20. Adjusted return on average equity of 45.6% compared to 2.3% in Q1’20. The increase in both metrics was driven by growth in volumes and margins resulting from reduced interest rates and home price appreciation.
Results of Operations
Revenues
For the three months ended March 31, 2021, revenues were $294.7 million, which increased $165.0 million or 127.3% compared to the prior year period, primarily due to net realized and unrealized gains in the 2021 period compared to losses in the 2020 period. Additionally, growth in Fortegra’s commercial, credit and warranty programs resulted in increases to earned premiums, net, and service and administrative fees, and improvements in mortgage volumes and margins led to increased realized gains.
The combination of unearned premiums and deferred revenues of $1,316.6 million on the balance sheet grew by $283.5 million, or 27.4%, from March 31, 2020 to March 31, 2021 as a result of Fortegra’s growth in gross written premiums and premium equivalents, primarily related to commercial, credit and warranty programs.
The table below provides a breakdown between net realized and unrealized gains and losses from Invesque and other securities, which impacted our consolidated results on a pre-tax basis. Many of our investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect our earnings relating to these investments to be relatively volatile between periods. Our fixed income securities are primarily marked to market through accumulated other comprehensive income (AOCI) in stockholders’ equity and do not impact net realized and unrealized gains and losses until they are sold.
Page 2
| ($ in thousands) | Three Months Ended March 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Net realized and unrealized gains (losses)(1) | $ | 10,215 | $ | (24,791) |
| Net realized and unrealized gains (losses) - Invesque | $ | 16,643 | $ | (58,713) |
(1) Excludes Invesque and Mortgage realized and unrealized gains and losses.
Net Income (Loss) Attributable to Common Stockholders
For the three months ended March 31, 2021, net income attributable to common stockholders was $28.6 million, an increase of $88.6 million from a net loss of $60.0 million for the three months ended March 31, 2020. The increase for the three months ended March 31, 2021 was primarily driven by the same factors that impacted revenues in the respective periods.
Non-GAAP
Management uses Adjusted net income and book value per share as measurements of operating performance. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and comparison among companies. Management uses Adjusted net income and adjusted return on average equity as part of its capital allocation process and to assess comparative returns on invested capital. Adjusted net income represents income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, stock-based compensation, net realized and unrealized gains (losses), and intangibles amortization associated with purchase accounting. Adjusted net income and Adjusted return on average equity are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. See “Non-GAAP Reconciliations” for a reconciliation of these measures to their GAAP equivalents.
Adjusted net income for the three months ended March 31, 2021 was $13.2 million, an increase of $6.2 million from the prior year period. For March 31, 2021, adjusted return on average equity was 13.7%, as compared to 7.3% at March 31, 2020, with the increase in both metrics driven by improved performance in our insurance and mortgage operations.
Total stockholders’ equity was $397.4 million as of March 31, 2021 compared to $344.3 million as of March 31, 2020. In the four quarters ended March 31, 2021, Tiptree returned $17.8 million to shareholders through share repurchases and dividends paid. Book value per share for the period ended March 31, 2021 was $11.63, an increase from book value per share of $9.73 as of March 31, 2020. The key drivers of the increase from the prior year were income per share and the purchase of 2.3 million shares at an average 49% discount to book value over the past four quarters. The increase was partially offset by dividends paid of $0.16 per share.
Results by Segment
We classify our business into two reportable segments, Insurance and Mortgage, with the remainder of our operations aggregated into Tiptree Capital - Other. Corporate activities include holding company interest expense, corporate employee compensation and benefits, and other expenses, including, but not limited to, public company expenses.
Pre-tax Income
| ($ in thousands) | Three Months Ended March 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Insurance | $ | 21,528 | $ | (27,117) |
| Mortgage | 13,077 | (1,090) | ||
| Tiptree Capital - other | 14,994 | (45,241) | ||
| Corporate | (10,207) | (8,303) | ||
| Income (loss) before taxes | $ | 39,392 | $ | (81,751) |
Page 3
Adjusted net income - Non-GAAP (1)
The following tables present the components of Adjusted net income.
| ($ in thousands) | Three Months Ended March 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Insurance | $ | 12,776 | $ | 8,734 |
| Mortgage | 7,465 | 196 | ||
| Tiptree Capital - other | 567 | 3,291 | ||
| Corporate | (7,653) | (5,314) | ||
| Adjusted net income (1) | $ | 13,155 | $ | 6,907 |
(1) For further information relating to the Company’s Adjusted net income, including a reconciliation to GAAP income (loss) before taxes, see “—Non-GAAP Reconciliations.”
About Tiptree
Tiptree Inc. (NASDAQ: TIPT) is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. Our principal operating business, Fortegra, is a specialty insurance program underwriter and service provider, which focuses on niche business lines and fee-oriented services. We also allocate capital to a diverse group of businesses and investments that we refer to as Tiptree Capital. For more information, please visit www.tiptreeinc.com.
Forward-Looking Statements
This release contains “forward-looking statements” which involve risks, uncertainties and contingencies, many of which are beyond the Company’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the Company’s plans, objectives, expectations for our businesses and intentions. The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, and as described in the Company’s other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this release. The factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to update any forward-looking statements.
Page 4
Tiptree Inc.
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
| As of | ||||
|---|---|---|---|---|
| March 31,<br>2021 | December 31, 2020 | |||
| Assets: | ||||
| Investments: | ||||
| Available for sale securities, at fair value, net of allowance for credit losses | $ | 409,947 | $ | 377,133 |
| Loans, at fair value | 110,458 | 90,732 | ||
| Equity securities | 145,022 | 123,838 | ||
| Other investments | 218,471 | 219,701 | ||
| Total investments | 883,898 | 811,404 | ||
| Cash and cash equivalents | 123,879 | 136,920 | ||
| Restricted cash | 53,294 | 58,355 | ||
| Notes and accounts receivable, net | 348,314 | 370,452 | ||
| Reinsurance receivables | 713,730 | 728,009 | ||
| Deferred acquisition costs | 272,924 | 229,430 | ||
| Goodwill | 179,236 | 179,236 | ||
| Intangible assets, net | 134,315 | 138,215 | ||
| Other assets | 179,688 | 162,034 | ||
| Assets held for sale | 159,335 | 181,705 | ||
| Total assets | $ | 3,048,613 | $ | 2,995,760 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Debt, net | $ | 393,959 | $ | 366,246 |
| Unearned premiums | 892,009 | 860,690 | ||
| Policy liabilities and unpaid claims | 251,323 | 233,438 | ||
| Deferred revenue | 424,608 | 399,211 | ||
| Reinsurance payable | 201,331 | 224,660 | ||
| Other liabilities and accrued expenses | 335,523 | 362,865 | ||
| Liabilities held for sale | 152,461 | 175,112 | ||
| Total liabilities | $ | 2,651,214 | $ | 2,622,222 |
| Stockholders’ Equity: | ||||
| Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding | $ | — | $ | — |
| Common stock: $0.001 par value, 200,000,000 shares authorized, 32,538,486 and 32,682,462 shares issued and outstanding, respectively | 33 | 33 | ||
| Additional paid-in capital | 313,140 | 315,014 | ||
| Accumulated other comprehensive income (loss), net of tax | 2,592 | 5,674 | ||
| Retained earnings | 62,678 | 35,423 | ||
| Total Tiptree Inc. stockholders’ equity | 378,443 | 356,144 | ||
| Non-controlling interests | 18,956 | 17,394 | ||
| Total stockholders’ equity | 397,399 | 373,538 | ||
| Total liabilities and stockholders’ equity | $ | 3,048,613 | $ | 2,995,760 |
Page 5
Tiptree Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Revenues: | ||||
| Earned premiums, net | $ | 146,919 | $ | 121,321 |
| Service and administrative fees | 58,050 | 43,724 | ||
| Ceding commissions | 3,025 | 6,525 | ||
| Net investment income | 2,767 | 3,488 | ||
| Net realized and unrealized gains (losses) | 69,371 | (62,441) | ||
| Other revenue | 14,556 | 17,054 | ||
| Total revenues | 294,688 | 129,671 | ||
| Expenses: | ||||
| Policy and contract benefits | 67,174 | 60,876 | ||
| Commission expense | 88,645 | 70,401 | ||
| Employee compensation and benefits | 52,924 | 38,501 | ||
| Interest expense | 9,252 | 7,551 | ||
| Depreciation and amortization | 5,934 | 3,863 | ||
| Other expenses | 31,367 | 30,230 | ||
| Total expenses | 255,296 | 211,422 | ||
| Income (loss) before taxes | 39,392 | (81,751) | ||
| Less: provision (benefit) for income taxes | 8,752 | (21,181) | ||
| Net income (loss) | 30,640 | (60,570) | ||
| Less: net income (loss) attributable to non-controlling interests | 2,059 | (563) | ||
| Net income (loss) attributable to common stockholders | $ | 28,581 | $ | (60,007) |
| Net income (loss) per common share: | ||||
| Basic earnings per share | $ | 0.86 | $ | (1.74) |
| Diluted earnings per share | $ | 0.81 | $ | (1.74) |
| Weighted average number of common shares: | ||||
| Basic | 32,420,982 | 34,566,330 | ||
| Diluted | 36,184,019 | 34,566,330 | ||
| Dividends declared per common share | $ | 0.04 | $ | 0.04 |
Page 6
Tiptree Inc.
Non-GAAP Reconciliations (Unaudited)
Non-GAAP Financial Measures — Adjusted net income and Adjusted return on average equity
The Company defines Adjusted net income as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting. We use adjusted net income as an internal operating performance measure in the management of business as part of our capital allocation process. We believe adjusted net income provides useful supplemental information to investors as it is frequently used by the financial community to analyze financial performance between periods and for comparison among companies. Adjusted net income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define adjusted net income differently.
We define Adjusted return on average equity as Adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholder’s equity during the period. We use Adjusted return on average equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on average equity should not be viewed as a substitute for return on average equity calculated in accordance with GAAP, and other companies may define adjusted return on average equity differently.
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tiptree Capital | ||||||||||||||||||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate Expenses | Total | |||||||||||||||||||||||||
| Income (loss) before taxes | $ | 21,528 | $ | 13,077 | $ | 14,994 | $ | (10,207) | $ | 39,392 | ||||||||||||||||||||
| Less: Income tax (benefit) expense | (4,429) | (3,096) | (2,907) | 1,680 | (8,752) | |||||||||||||||||||||||||
| Less: Net realized and unrealized gains (losses) (1) | (9,624) | (3,420) | (13,766) | — | (26,810) | |||||||||||||||||||||||||
| Plus: Intangibles amortization (2) | 3,834 | — | — | — | 3,834 | |||||||||||||||||||||||||
| Plus: Stock-based compensation expense | 372 | 165 | 8 | 520 | 1,065 | |||||||||||||||||||||||||
| Plus: Non-recurring expenses | 270 | — | — | — | 270 | |||||||||||||||||||||||||
| Plus: Non-cash fair value adjustments | — | — | (657) | — | (657) | |||||||||||||||||||||||||
| Less: Tax on adjustments | 825 | 739 | 2,895 | 354 | 4,813 | |||||||||||||||||||||||||
| Adjusted net income | $ | 12,776 | $ | 7,465 | $ | 567 | $ | (7,653) | $ | 13,155 | ||||||||||||||||||||
| Adjusted net income | $ | 12,776 | $ | 7,465 | $ | 567 | $ | (7,653) | $ | 13,155 | ||||||||||||||||||||
| Average stockholders’ equity | 285,885 | 65,533 | 113,218 | (79,166) | 385,470 | |||||||||||||||||||||||||
| Adjusted return on average equity | 17.9 | % | 45.6 | % | 2.0 | % | NM% | 13.7 | % | Three Months Ended March 31, 2020 | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||
| Tiptree Capital | ||||||||||||||||||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate Expenses | Total | |||||||||||||||||||||||||
| Income (loss) before taxes | $ | (27,117) | $ | (1,090) | $ | (45,241) | $ | (8,303) | $ | (81,751) | ||||||||||||||||||||
| Less: Income tax (benefit) expense | 7,663 | 515 | 9,672 | 3,331 | 21,181 | |||||||||||||||||||||||||
| Less: Net realized and unrealized gains (losses) | 33,601 | 1,348 | 48,555 | — | 83,504 | |||||||||||||||||||||||||
| Plus: Intangibles amortization (2) | 2,168 | — | — | — | 2,168 | |||||||||||||||||||||||||
| Plus: Stock-based compensation expense | 351 | — | 151 | 1,169 | 1,671 | |||||||||||||||||||||||||
| Plus: Non-recurring expenses | 2,195 | — | — | 407 | 2,602 | |||||||||||||||||||||||||
| Plus: Non-cash fair value adjustments | — | — | 351 | — | 351 | |||||||||||||||||||||||||
| Less: Tax on adjustments | (10,127) | (577) | (10,197) | (1,918) | (22,819) | |||||||||||||||||||||||||
| Adjusted net income | $ | 8,734 | $ | 196 | $ | 3,291 | $ | (5,314) | $ | 6,907 | ||||||||||||||||||||
| Adjusted net income | $ | 8,734 | $ | 196 | $ | 3,291 | $ | (5,314) | $ | 6,907 | ||||||||||||||||||||
| Average stockholders’ equity | 274,922 | 33,656 | 147,480 | (78,182) | 377,876 | |||||||||||||||||||||||||
| Adjusted return on average equity | 12.7 | % | 2.3 | % | 8.9 | % | NM% | 7.3 | % | (1) | Results for the three months ended March 31, 2021 included $48 of incentive fees paid with respect to specific unrealized and realized gains that are added-back to Adjusted net income. | |||||||||||||||||||
| --- | --- | |||||||||||||||||||||||||||||
| (2) | Specifically associated with acquisition purchase accounting. |
Page 7
Non-GAAP Financial Measures — Book value per share
Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.
| ($ in thousands, except per share information) | As of March 31, 2021 | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Total stockholders’ equity | $ | 397,399 | $ | 344,336 |
| Less: Non-controlling interests | 18,956 | 10,483 | ||
| Total stockholders’ equity, net of non-controlling interests | $ | 378,443 | $ | 333,853 |
| Total common shares outstanding | 32,538 | 34,302 | ||
| Book value per share | $ | 11.63 | $ | 9.73 |
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ex992investorpresentatio
Investor Presentation – First Quarter 2021 May 2021 Financial Information for the three months ended March 31, 2021
1 Disclaimers LIMITATIONS ON THE USE OF INFORMATION This presentation has been prepared by Tiptree Inc. and its consolidated subsidiaries (“Tiptree", "the Company" or "we”) solely for informational purposes, and not for the purpose of updating any information or forecast with respect to Tiptree, its subsidiaries or any of its affiliates or any other purpose. Tiptree reports a non-controlling interest in certain operating subsidiaries that are not wholly owned. Unless otherwise noted, all information is of Tiptree on a consolidated basis before non-controlling interest. Neither Tiptree nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and no such party shall have any liability for such information. These materials and any related oral statements are not all-inclusive and shall not be construed as legal, tax, investment or any other advice. You should consult your own counsel, accountant or business advisors. Performance information is historical and is not indicative of, nor does it guarantee future results. There can be no assurance that similar performance may be experienced in the future. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" which involve risks, uncertainties and contingencies, many of which are beyond Tiptree's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained herein that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "estimate," "expect,“ “intend,” “may,” “might,” "plan," “project,” “should,” "target,“ “will,” "view," “confident,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about Tiptree's plans, objectives, expectations and intentions. The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in Tiptree’s Annual Report on Form 10-K, and as described in the Tiptree’s other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this release. The factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to update any forward- looking statements. MARKET AND INDUSTRY DATA Certain market data and industry data used in this presentation were obtained from reports of governmental agencies and industry publications and surveys. We believe the data from third-party sources to be reliable based upon our management’s knowledge of the industry, but have not independently verified such data and as such, make no guarantees as to its accuracy, completeness or timeliness. NOT AN OFFER OR A SOLICIATION This document does not constitute an offer or invitation for the sale or purchase of securities or to engage in any other transaction with Tiptree, its subsidiaries or its affiliates. The information in this document is not targeted at the residents of any particular country or jurisdiction and is not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. NON-GAAP MEASURES In this document, we sometimes use financial measures derived from consolidated financial data but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Certain of these data are considered “non-GAAP financial measures” under the SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Management's reasons for using these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are posted in the Appendix.
2 Q1’21 Highlights Revenue $294.7 million 127.3% vs. prior year Adjusted Net Income2 $13.2 million 90.5% vs. prior year Book Value per share2,3 $11.63 21.2% vs. 3/31/20 Net income1 $30.6 million vs. prior year net loss of $60.6 million Overall Adjusted net income2 of $13.2m, with a 13.7% adj ROAE2, driven by growth in insurance and mortgage operations. Book value per share of $11.63, when combined with dividends of $0.16 per share, increased 21.2% versus PY. Share repurchases of 2.3 million over the past four quarters at an average 49% discount to book value per share. Insurance Gross written premiums and premium equivalents4 of $505m, up 29% versus the prior year driven by robust 28% organic growth with all lines of business and regions contributing. Adjusted net income of $12.8m, up 46% from PY driven by 20% revenue growth (ex. investment gains/losses) and improved combined ratio. Annualized Adjusted ROAE of 17.9%, compared to 12.7% in PY Combined ratio of 91.5% improved from 93.6% in PY driven by shift in mix toward more profitable lines and continued scalability of technology and shares service platforms. Mortgage Adjusted net income of $7.5m, an increase of $7.3m from PY, driven by growth in volumes and margins from low interest rate environment and continued home price appreciation. ($ in millions, except per share information) 1 Net income before non-controlling interests. 2 For a reconciliation of Non-GAAP metrics Adjusted net income, adjusted return on average equity and book value per share to GAAP financials, see the Appendix. 3 Year-over-year total return defined as cumulative dividends paid of $0.16 per share plus book value per share as of March 31, 2021 4 Gross written premium and premium equivalents are the base used to calculate the service fee income for non-insurance products. This base includes the amount charged to end consumers for a warranty or a car club membership.
3 Q1’20 Q1’21 V% Total Revenues $129.7 $294.7 127.3% Net income (loss) b/f NCI $(60.6) $30.6 NM% Diluted EPS $(1.74) $0.81 NM% Adjusted net income1 $6.9 $13.2 90.5% Adjusted ROAE1 7.3% 13.7% 6.4% Total shares outstanding 34.3 32.5 Book Value per share1 $9.73 $11.63 Financial Results Key Highlights: Revenues up 127.3% over PY (25.6% ex. investment gains/losses) driven by: • Continued growth in insurance underwriting & fee revenues • Improved volumes and margins in our mortgage operations Net income of $30.6 million versus PY loss due to: • Net realized and unrealized gains in Q1’21 compared to losses in Q1’20 Adjusted Net Income Income before taxes Unrealized & Realized Gains (Losses)2 Income tax & tax on adjustments Stock-based Compensation Expense Non-recurring expense & Non- cash fair value adjustments Intangibles Amortization Q1'21 Invesque Unrealized Gains (Losses) Adjusted Net Income to Income before taxes Bridge 1 For a reconciliation of Non-GAAP metrics Adjusted net income, adjusted return on average equity and book value per share to GAAP financials, see the Appendix. 2 Excludes Mortgage realized and unrealized gains and losses. ($ in millions, except per share information)
4 KPIs – Underlying Operations Remain Resilient 1 For a reconciliation of the Non-GAAP metric, Adjusted net income to GAAP financials, see the Appendix. 2 Gross written premiums and premium equivalents are the base used to calculate the service fee income for non-insurance products. This base includes the amount charged to end consumers for a warranty or a car club membership. $6.1 $8.7 $12.8 $0.3 $0.2 $7.5 $(5.5) $(5.3) $(7.7) $4.1 $3.3 $0.6 $5.0 $6.9 $13.2 Q1'19 Q1'20 Q1'21 191 246 338 56 133 151 3 13 16 $250 $392 $505 Q1'19 Q1'20 Q1'21 Quarterly 728 695 854 91 301 391 30 37 72 $849 $1,033 $1,317 2019 Q1'20 Q1'21 Consolidated Adjusted Net Income1 Insurance Gross Written Premiums & Equivalents2 Insurance Unearned Premiums & Deferred Revenues U.S. Insurance U.S. Warranty Solutions Europe Warranty Solutions ($ in millions) Corporate Insurance Mortgage Tiptree Capital - Other ‘21 v ‘20 29% growth 28% organic growth ‘21 v ‘20 27% total & organic growth
Q1’21 Capital Allocation & Annual Performance Comparison 5 Operating Performance 1 Total stockholders’ equity shown. Net of other non-controlling interests total stockholders’ equity was $378.4 million as of March 31, 2021. 2 See the appendix for a reconciliation of Non-GAAP metrics including Adjusted net income and adjusted return on average equity. Adjusted net income of $57.7m, up 95.3% from Q1’20 • Adjusted return on average equity of 15.6%1 Insurance: 17.3% Adjusted return on average equity • Growth in insurance underwriting and fee revenues • Combined ratio improvement • Continued growth in unearned premiums and deferred revenue (an indicator of future revenues) Tiptree Capital: 21.6% Adjusted return on average equity • Strong mortgage volumes and margins • Positive operating contributions from shipping investments Corporate: • Increased interest expense due to upsized credit agreement Q1’21 Last Twelve Month Highlights Stockholders’ Equity1 Adjusted Net Income2 Business Lines Q1’21 Q1’20 LTM Q1’21 LTM Insurance $274.1 $35.5 $47.5 - Underwriting & fees $27.7 $39.8 - Investments $7.8 $7.7 Tiptree Capital $191.5 $17.0 $37.6 - Mortgage $70.6 $3.8 $35.8 - Tiptree Capital – Other $120.9 $13.2 $1.8 Corporate $(68.2) $(23.0) $(27.4) Total Tiptree $397.4 $29.5 $57.7 - Total shares outstanding 34.3 32.5 ($ in millions)
Insurance Performance Highlights Q1’21
7 Insurance – Financial Performance Highlights Q1’20 Q1'21 V% Premiums & equivalents2 $392.4 $505.0 28.7% Revenue $143.3 $222.6 55.3% Pre-tax income (loss) $(27.1) $21.5 NM% Adjusted net income1 $8.7 $12.8 46.3% Adjusted ROAE1 12.7% 17.9% 5.2% Combined ratio 93.6% 91.5% (2.1)% Unearned premiums & Deferred revenue $1,033.1 $1,316.6 27.4% Continued growth through insurance and warranty program expansion and onboarding new clients, with a focus on stable, improved profitability • $1,317m of unearned premiums & deferred revenue, representing 27% year-over-year organic growth • Continued investment in strategic growth initiatives ✓ U.S. Insurance admitted and E&S programs ✓ Capital-light warranty solutions ✓ European expansion Produced stable, growing results from underwriting and fees • Underwriting margin of $54m, up 29%, driven by strong performance in warranty and specialty commercial programs • Consistent profitability improvements with combined ratio of 91.5%, 210 bps improvement from Q1’20 driven by shift in product mix to warranty and specialty commercial programs Capital and liquidity remain strong and continue to support growth objectives Underwriting and Fee Margin1 Underwriting and Fee Revenues1 Combined Ratio 1 2 3 Summary Financials1 Insurance products Q1’21 Highlights & Outlook 24 29 16 222 3 $42 $54 Q1'20 Q1'21 129 148 40 525 10 $173 $210 Q1'20 Q1'21 75.7% 74.2% 17.9% 17.3% 93.6% 91.5% Q1'20 Q1'21 ($ in millions) U.S. Warranty Solutions U.S Insurance Europe Warranty Solutions Expense Ratio Underwriting Ratio Europe Warranty Solutions U.S. Warranty Solutions U.S. Insurance 1 See the appendix for a reconciliation of Non-GAAP measures Adjusted net income, adjusted return on average equity, underwriting and fee revenues and underwriting and fee margin to GAAP financials. 2 Gross written premiums and premium equivalents are the base used to calculate the service fee income for non-insurance products. This base includes the amount charged to end consumers for a warranty or a car club membership.
Earned Premiums, Net 68% Service and Administrative Fees 27% Other Income(2) 5% U.S. Insurance 65% U.S. Warranty Solutions 32% Europe Warranty Solutions 3% Diverse Portfolio of Insurance & Fee-Generating Services 1 Gross written premiums & premium equivalents 2 Includes ceding commissions, net investment income & other revenue, excluding net realized & unrealized gains (losses). Credit Insurance 9% Collateral Protection 14% Niche Personal Lines 8% Warranty Insurance 12% Commercial 22% Auto Warranty 20% Consumer Goods Warranty 3% Premium and Warranty Finance 6% Warranty Services 3% Europe Warranty Solutions 3% Diversified product mix with emphasis on small premium-per-risk ecosystems & short-tail liabilities Products & services distributed through independent & retail agents, managing general underwriters (MGUs), consumer lenders, third-party administrators (TPAs) & retailers Strategy of blending multiple revenue streams with traditional premiums providing higher earnings stability A significant portion of our premiums & cash flow are generated in non-regulated service companies Q1’21 LTM Total Revenues $739mm Q1’21 LTM GWPPE(1) $1.8Bn Key Highlights Revenue MixProduct Mix Q1’21 LTM GWPPE(1) $1.8Bn Line of Business 8
9 Compelling Growth Story 1 NAIC, 2020. 2 NAIC, 2019. 3 Allied Market Research, 2019 Extended Warranty Report, North America. We are well-positioned to capitalize on a substantial opportunity in the insurance industry. New & Renewal Programs ◼ Excess & Surplus Insurance — Fortegra Specialty formed Q4’20 ◼ Admitted Insurance — Growth in new & renewal programs ◼ Warranty Solutions — Capital-light business model Continued Geographic Expansion ◼ Entered Europe in 2018 (56% growth in 2020) ◼ Central & Western Europe Maintain & Expand Existing Programs ◼ $1.3Bn UEP & Deferred Revenue ◼ ~95% persistency with insurance agents ◼ Recent acquisitions to accelerate growth A B C $56bn¹ $627bn² $53bn³ $31bn³ Addressable Market 503 599 728 807 854 57 74 91 386 391 1 30 67 72 $560 $674 $849 $1,260 $1,317 2017 2018 2019 2020 Q1'21 U.S. Insurance U.S. Warranty Solutions Europe Warranty Solutions Unearned Premiums & Deferred Revenues
Cash & Equivalents 10% Government & Agency 29% Corporate Bonds 17% Fixed Income ETFs 9% Muni & ABS 12% Equities 6% Other Alternatives 17% Cash & Equivalents 13% Government & Agency 38% AAA 6% AA 13% A 16% BBB 2% Fixed Income ETFs 12% $556m 10 Insurance Investment Portfolio Q1’21 Investment Mix Liquid and Highly-Rated Fixed Income Portfolio ($ in millions) 499 556 89 167 $588 $723 Q1'20 Q1'21 Other investments Fixed Income & Cash Income Statement Metrics $723m Q1’20 Q1’21 Net investment income $3.5 $2.8 Net realized and unrealized gains (losses) $(33.6) $9.7 ◼ ~2.4 year duration ◼ $402m Blackrock managed ◼ AA rating ◼ 1.6% book yield
Performance Highlights Q1’21
51.4 75.7 75.7 31.8 33.4 70.6 97.5 44.3 39.7 3.8 3.2 5.5 $184.5 $156.6 $191.5 Q1'19 Q1'20 Q1'21 Financial drivers Pre-tax income Adjusted Net Income1 Q1’20 Q1’21 Q1’20 Q1’21 Mortgage $(1.1) $13.1 $0.2 $7.5 Senior living (Invesque)2 (46.0) 13.8 2.0 - Maritime transportation 1.2 0.5 1.3 0.5 Other (0.4) 0.7 - - Total $(46.3) $28.1 $3.5 $8.0 12 Tiptree Capital – Financial Performance Highlights Mortgage: • Pre-tax income increased substantially over PY as a result of improved volumes and margins driven by low interest rates and home price improvement • Mortgage origination volumes of $420m, up 34% over Q1’20 • MSR asset of $20.9m, including positive MTM of $3.4m in Q1’21 Senior living (Invesque – IVQ.U): • Unrealized gains of $13.8m in Q1’21 from increase in share price • Invesque using excess liquidity from Apr’20 dividend suspension to reduce leverage levels Maritime transportation: • Strong demand in dry-bulk sector, offset by year-over-year decline in tanker rates • One of five vessels in dry dock for portion of Q1, undergoing five- year maintenance requirements Mortgage Maritime transportation Seniors Housing (Invesque/Care)2 1 See the appendix for a reconciliation of Adjusted net income to GAAP financials. 2 17.0m of Invesque common shares, 2.9m shares held in the insurance company investment portfolio. On balance sheet at fair value - $47.7 million, $39.5 million in Tiptree Capital as of March 31, 2021. Tiptree Capital Equity Q1’21 Performance & Outlook ($ in millions) Other
$6.9 $13.2 Q1'20 Q1'21 13 Continued growth and underwriting performance at Fortegra Maintain focus on business execution Focus on growing and improving long-term, net investment income Summary & Outlook ($ in millions, except per share information) BVPS & Dividends Paid1 Adjusted Net Income1 ✓ Record quarter for Tiptree revenues and net income ✓ Strong growth in underlying operations in Q1’21 ✓ Continued execution on growth initiatives at insurance and mortgage businesses 1 See the appendix for a reconciliation of Adjusted net income, adjusted return on average equity and Book value per share to GAAP financials. 1 2 3 Book value per share Dividends paid $9.73 $11.63 $0.04 $0.04 Q1'20 Q1'21 Q1’21 Highlights Looking ahead 7.3% 13.7%Adjusted ROAE1
14 Appendix Non-GAAP Reconciliations • Insurance underwriting and fee revenue • Insurance underwriting and fee margin • Book Value per share • Adjusted net income
15 Non-GAAP Reconciliations Adjusted Net Income We define adjusted net income as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting. We use adjusted net income as an internal operating performance measure in the management of business as part of our capital allocation process. We believe adjusted net income provides useful supplemental information to investors as it is frequently used by the financial community to analyze financial performance between periods and for comparison among companies. Adjusted net income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define adjusted net income differently. We present adjustments for amortization associated with acquired intangible assets. The intangible assets were recorded as part of purchase accounting in connection with Tiptree’s acquisition of FFC in 2014, Defend in 2019, and Smart AutoCare and Sky Auto in 2020. The intangible assets acquired contribute to overall revenue generation, and the respective purchase accounting adjustments will continue to occur in future periods until such intangible assets are fully amortized in accordance with the respective amortization periods required by GAAP. We define adjusted return on average equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholder’s equity during the period. We use adjusted return on average equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on average equity should not be viewed as a substitute for return on average equity calculated in accordance with GAAP, and other companies may define adjusted return on average equity differently. Book value per share Management believes the use of book value per share provides supplemental information useful to investors as it is frequently used by the financial community to analyze company growth on a relative per share basis. Insurance – Underwriting and Fee Revenues We generally manage our exposure to the underwriting risk we assume using both reinsurance (e.g., quota share and excess of loss) and retrospective commission agreements with our partners (e.g., commissions paid are adjusted based on the actual underlying losses incurred), which mitigate our risk. Period-over-period comparisons of revenues and expenses are often impacted by the PORCs and distribution partners’ choice as to whether to retain risk, specifically service and administration fees and ceding commissions, both components of revenue, and policy and contract benefits and commissions paid to our partners and reinsurers. Generally, when losses are incurred, the risk which is retained by our partners and reinsurers is reflected in a reduction in commissions paid. In order to better explain to investors the underwriting performance of the Company’s programs and the respective retentions between the Company and its agents and reinsurance partners, we use the non-GAAP metrics underwriting and fee revenues and underwriting and fee margin. We define underwriting and fee revenues as total revenues from our Insurance segment excluding net investment income, net realized and unrealized gains (losses). Underwriting and fee revenues represents revenues generated by our underwriting and fee-based operations and allows us to evaluate our underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting and fee revenues should not be viewed as a substitute for total revenues calculated in accordance with GAAP, and other companies may define underwriting and fee revenues differently. Insurance - Underwriting and Fee Margin We define underwriting and fee margin as income before taxes from our Insurance segment, excluding net investment income, net realized and unrealized gains (losses), employee compensation and benefits, other expenses, interest expense and depreciation and amortization. Underwriting and fee margin represents the underwriting performance of our underwriting and fee-based programs. As such, underwriting and fee margin excludes general administrative expenses, interest expense, depreciation and amortization and other corporate expenses as those expenses support the vertically integrated business model and not any individual component of our business mix. We use this metric as we believe it gives our management and other users of our financial information useful insight into the specific performance of our underlying underwriting and fee program. Underwriting and fee income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define underwriting and fee margin differently.
16 Non-GAAP Reconciliations – Underwriting and Fee Revenues & Margin We define underwriting and fee revenues as total revenues from our Insurance segment excluding net investment income, net realized and unrealized gains (losses). Underwriting and fee revenues represents revenues generated by our underwriting and fee-based operations and allows us to evaluate our underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting and fee revenues should not be viewed as a substitute for total revenues calculated in accordance with GAAP, and other companies may define underwriting and fee revenues differently. We define underwriting and fee margin as income before taxes from our Insurance segment, excluding net investment income, net realized and unrealized gains (losses), employee compensation and benefits, other expenses, interest expense and depreciation and amortization. Underwriting and fee margin represents the underwriting performance of our underwriting and fee-based programs. As such, underwriting and fee margin excludes general administrative expenses, interest expense, depreciation and amortization and other corporate expenses as those expenses support the vertically integrated business model and not any individual component of our business mix. We use this metric as we believe it gives our management and other users of our financial information useful insight into the specific performance of our underlying underwriting and fee program. Underwriting and fee income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define underwriting and fee margin differently. ($ in thousands) Three Months Ended, March 31, 2021 2020 Total revenues $ 222,563 $ 143,340 Less: Net investment income (2,767) (3,488) Less: Net realized and unrealized gains (losses) (9,672) 33,601 Underwriting and fee revenues $ 210,124 $ 173,453 Three Months Ended March 31, 2021 2020 Income (loss) before income taxes $ 21,528 $ (27,117) Less: Net investment income (2,767) (3,488) Less: Net realized and unrealized gains (losses) (9,672) 33,601 Plus: Depreciation and amortization 4,191 2,270 Plus: Interest expense 4,304 3,648 Plus: Employee compensation and benefits 19,089 17,042 Plus: Other expenses 17,632 16,220 Underwriting and fee margin $ 54,305 $ 42,176 As of March 31, 2021 2020 Total stockholders’ equity $ 397,399 $ 344,336 Less: Non-controlling interests 18,956 10,483 Total stockholders’ equity, net of non-controlling interests $ 378,443 $ 333,853 Total common shares outstanding 32,538 34,302 Book value per share $ 11.63 $ 9.73 Management uses Book value per share, which is a non-GAAP financial measure. Management believes the use of this financial measure provides supplemental information useful to investors as it is frequently used by the financial community to analyze company growth on a relative per share basis. Tiptree’s book value per share was $11.63 as of March 31, 2021 compared with $9.73 as of March 31, 2020. Total stockholders’ equity, net of other non-controlling interests for the Company was $378.4 million as of March 31, 2021, which comprised total stockholders’ equity of $397.4 million adjusted for $19.0 million attributable to non-controlling interest at certain operating subsidiaries that are not wholly owned by the Company, such as Luxury and management interests in subsidiaries. Total stockholders’ equity, net of other non-controlling interests for the Company was $333.9 million as of March 31, 2020, which comprised total stockholders’ equity of $344.3 million adjusted for $10.4 million attributable to non-controlling interest at subsidiaries that are not wholly owned by the Company.
17 Non-GAAP Reconciliations – Adjusted Net Income ($ in thousands) Three Months Ended March 31, 2021 Tiptree Capital Insurance Mortgage Other Corporate Expenses Total Income (loss) before taxes $ 21,528 $ 13,077 $ 14,994 $ (10,207) $ 39,392 Less: Income tax (benefit) expense (4,429) (3,096) (2,907) 1,680 (8,752) Less: Net realized and unrealized gains (losses) (1) (9,624) (3,420) (13,766) – (26,810) Plus: Intangibles amortization (2) 3,834 – – – 3,834 Plus: Stock-based compensation 372 165 8 520 1,065 Plus: Non-recurring expenses 270 – – – 270 Plus: Non-cash fair value adjustments – – (657) – (657) Less: Tax on adjustments 825 739 2,895 354 4,813 Adjusted net income $ 12,776 $ 7,465 $ 567 $ (7,653) $ 13,155 Adjusted net income $ 12,776 $ 7,465 $ 567 $ (7,653) $ 13,155 Average stockholders’ equity 285,885 65,533 113,218 (79,166) 385,470 Adjusted return on average equity 17.9% 45.6% 2.0% NM% 13.7% Three Months Ended March 31, 2020 Tiptree Capital Insurance Mortgage Other Corporate Expenses Total $ (27,117) $ (1,090) $ (45,241) $ (8,303) $ (81,751) 7,663 515 9,672 3,331 21,181 33,601 1,348 48,555 – 83,504 2,168 – – – 2,168 351 – 151 1,169 1,671 2,195 – – 407 2,602 – – 351 – 351 (10,127) (577) (10,197) (1,918) (22,819) $ 8,734 $ 196 $ 3,291 $ (5,314) $ 6,907 $ 8,734 $ 196 $ 3,291 $ (5,314) $ 6,907 274,922 33,656 147,480 (78,182) 377,876 12.7% 2.3% 8.9% NM% 7.3% Trailing Twelve Months Ended March 31, 2021 Tiptree Capital Insurance Mortgage Other Corporate Expenses Total Income (loss) before taxes $ 75,593 $ 45,269 $ (1,007) $ (37,564) $ 82,291 Less: Income tax (benefit) expense (15,817) (10,677) 1,045 9,413 (16,306) Less: Net realized and unrealized gains (losses) (29,421) (750) 5,347 – (24,824) Plus: Intangibles amortization 10,879 – – – 10,879 Plus: Stock-based compensation 2,308 2,647 31 2,523 7,509 Plus: Non-recurring expenses 1,493 – 624 351 2,468 Plus: Non-cash fair value adjustments – – (3,149) – (3,149) Less: Tax on adjustments 2,430 (642) (1,118) (1,859) (1,189) Adjusted net income $ 47,465 $ 35,847 $ 1,773 $ (27,406) $ 57,679 Adjusted net income $ 47,465 $ 35,847 $ 1,773 $ (27,406) $ 57,679 Average stockholders’ equity 275,047 51,986 122,091 (78,256) 370,868 Adjusted return on average equity 17.3% 69.0% 1.5% NM% 15.6% (1) For the three months ended March 31, 2021, included $48 of incentive fees paid with respect to specific unrealized and realized gains that are added-back to Adjusted net income. (2) Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions.
TiptreeInc. ir@tiptreeinc.com