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): November 2, 2022
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.) | 660 Steamboat Road | 2nd Floor | Greenwich | CT | 06830 | |
| --- | --- | --- | --- | --- | ||||
| (Address of Principal Executive Offices) | (Zip Code) |
(212) 446-1400
(Registrant’s telephone number, including area code)
299 Park Avenue, 13th Floor, New York, NY 10171
(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 November 2, 2022, Tiptree Inc. (the “Company” or “Tiptree”) issued a press release announcing its results of operations for the quarter ended September 30, 2022. 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 November 21, 2022 and a payment date of November 28, 2022.
On November 2, 2022, the Company posted an investor presentation dated November 2022 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 November2, 2022 |
|---|---|
| 99.2 | Tiptree Inc. Investor Presentation - November 2022 |
| 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: | November 2, 2022 | By: | /s/ Jonathan Ilany |
| Name: Jonathan Ilany | |||
| Title: Chief Executive Officer |
Document
Exhibit 99.1
TIPTREE REPORTS THIRD QUARTER 2022 RESULTS
Greenwich, Connecticut - November 2, 2022 - Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced its financial results for the three and nine months ended September 30, 2022.
Third Quarter 2022 Summary
•Revenues for the quarter of $363.5 million, an increase of 26.8% from Q3'21, driven by growth in Fortegra’s specialty insurance lines and increased vessel revenues. Excluding investment gains and losses, revenues were up 17.7%.
•Net income of $14.2 million compared to net income of $2.0 million in Q3'21, driven by the gain on sale of dry-bulk vessels and growth in our insurance business.
•Adjusted net income of $19.4 million decreased by 6.4% from $20.7 million in Q3'21, driven by declines in our mortgage business. Adjusted return on average equity was 14.8% for the quarter.
•Completed the sale of two remaining dry bulk vessels for $46.2 million, representing a gain of $14.1 million. Total proceeds from dry-bulk vessel sales in 2022 were $67.7 million, or a gain of $21.2 million.
•Signed definitive agreements to sell remaining two product tankers for an aggregate of $49.0 million, representing an approximate 44% gain as compared to Q3’22 book value. The two tankers are expected to close in Q4’22.
•The Company repurchased 158,162 shares for the nine months ended September 30, 2022 at an average price of $10.43 per share.
•Declared a dividend of $0.04 per share to stockholders of record on November 21, 2022 with a payment date of November 28, 2022.
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands, except per share information) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Total revenues | $ | 363,478 | $ | 286,605 | $ | 1,028,224 | $ | 880,980 | ||||
| Net income (loss) attributable to common stockholders | $ | 14,223 | $ | 2,008 | $ | (9,145) | $ | 38,558 | ||||
| Diluted earnings per share | $ | 0.38 | $ | 0.06 | $ | (0.26) | $ | 1.11 | ||||
| Cash dividends paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||
| Return on average equity | 15.4 | % | 3.3 | % | (0.7) | % | 14.8 | % | ||||
| Non-GAAP: (1) | ||||||||||||
| Adjusted net income | $ | 19,395 | $ | 20,730 | $ | 48,833 | $ | 47,010 | ||||
| Adjusted return on average equity | 14.8 | % | 20.5 | % | 14.2 | % | 16.2 | % | ||||
| Book value per share | $ | 10.68 | $ | 11.37 | $ | 10.68 | $ | 11.37 |
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.
Nine Months 2022 Summary
•In June 2022, Tiptree closed the previously announced $200 million strategic investment in Fortegra by Warburg Pincus. As part of the closing, $113 million of Tiptree’s corporate debt was repaid in full. For the nine months, Tiptree recognized a $63.2 million pre-tax gain in stockholders’ equity from the investment in Fortegra, which was partially offset by an increase in deferred tax liability associated with the tax deconsolidation of Fortegra. Of the total deferred tax liability of $38.2 million, $24.1 million impacted net income with the remainder impacting stockholders’ equity directly.
•In 2022, we sold all three dry bulk vessels for $67.7 million and signed definitive agreements to sell the remaining two product tankers for $49.0 million. The gain on the two product tankers is expected to be approximately 44% as compared to Q3’22 book value and we expect the sales to close in Q4’22.
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•Year-to-date revenues of $1.03 billion, an increase of 16.7% from 2021 driven by similar factors impacting the quarter. Excluding investment gains and losses, revenues were up 19.3%.
•Net loss of $9.1 million compared to net income of $38.6 million in 2021, driven by the deferred tax liability associated with the tax deconsolidation of Fortegra and unrealized losses on investments as compared to gains in the prior year period, partially offset by growth in insurance and shipping operations.
•Adjusted net income of $48.8 million increased by 3.9% from prior year, driven by growth in specialty insurance and shipping operations. Adjusted return on average equity was 14.2%.
Segment Financial Highlights - Third Quarter 2022
Insurance (The Fortegra Group):
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Gross written premiums and premium equivalents | $ | 761,446 | $ | 588,063 | $ | 1,956,998 | $ | 1,618,076 | ||||
| Revenues | $ | 327,028 | $ | 246,706 | $ | 903,388 | $ | 721,524 | ||||
| Income before taxes | $ | 15,304 | $ | 13,337 | $ | 39,057 | $ | 49,569 | ||||
| Return on average equity | 14.4 | % | 13.7 | % | 12.1 | % | 17.3 | % | ||||
| Combined ratio | 91.5 | % | 89.6 | % | 91.0 | % | 91.0 | % | ||||
| Non-GAAP: (1) | ||||||||||||
| Adjusted net income | $ | 19,831 | $ | 19,533 | $ | 59,893 | $ | 46,400 | ||||
| Adjusted return on average equity | 24.8 | % | 26.8 | % | 25.8 | % | 20.9 | % |
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.
•Fortegra’s gross written premiums and premium equivalents increased 29.5% for the quarter and 20.9% for the year driven by growth in U.S. specialty insurance lines and service contract businesses in U.S. and Europe. As a function of Fortegra’s premium growth, the combination of unearned premiums and deferred revenues on the balance sheet grew to $2.0 billion, up $413.8 million, or 26.5%, from September 30, 2021.
•Revenues increased 32.6% for the quarter and 25.2% for the year driven by premium growth in specialty admitted and E&S lines, partially offset by unrealized investment losses. Excluding the impact of investment gains and losses, revenues increased by 31.2% for the quarter and 29.3% for the year.
•The combined ratio for the quarter was 91.5%, compared to 89.6% in Q3'21 driven by the scalability of Fortegra’s technology and shared service platform, which improved the expense ratio, while the underwriting ratio increased due to a shift in business mix toward lines with higher loss ratios and lower expense ratios. Year-to-date combined ratio was consistent at 91.0%.
•Income before taxes for the quarter was $15.3 million. Year-to-date income before taxes of $39.1 million compared to $49.6 million in the prior year. Return on equity for the year-to-date period was 12.1%, as compared to 17.3% in 2021.
•Adjusted net income for the quarter was $19.8 million, up 1.5% from Q3'21. Year-to-date adjusted net income was $59.9 million, up 29.1% from prior year driven by revenue growth and the improved combined ratio. The year-to-date adjusted return on average equity was 25.8%, as compared to 20.9% in 2021.
•On April 1, 2022, Fortegra acquired ITC Compliance GRP Limited for net cash consideration of $15.0 million, which further establishes Fortegra's footprint in Europe and provides a wholly vertical compliance solution for the U.K. automotive market.
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Tiptree Capital:
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Revenues | $ | 36,450 | $ | 39,899 | $ | 124,836 | $ | 159,456 | ||||
| Income before taxes | $ | 18,136 | $ | 1,567 | $ | 23,817 | $ | 38,033 | ||||
| Return on average equity | 40.3 | % | 6.8 | % | 17.0 | % | 24.9 | % | ||||
| Non-GAAP: (1) | ||||||||||||
| Adjusted net income | $ | 4,879 | $ | 9,483 | $ | 9,756 | $ | 23,638 | ||||
| Adjusted return on average equity | 13.8 | % | 20.2 | % | 8.5 | % | 18.2 | % |
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.
•Tiptree Capital income before taxes for the quarter was $18.1 million compared to $1.6 million in the prior year driven by improved dry bulk and tanker charter rates and the gain on sale of two of our dry bulk vessels.
•Income before taxes for the year was $23.8 million, down substantially from the prior year as declines in origination volumes and gain on sale margins in our mortgage business and unrealized losses on Invesque more than offset the improvements in our shipping business.
Corporate:
Corporate includes expenses of the holding company for interest expense, employee compensation and benefits, and public company and other expenses. For the quarter, corporate expenses were $8.3 million compared to $11.3 million in Q3'21 and for the year were $33.9 million compared to $33.2 million. The decrease in the quarter was driven by lower incentive compensation expense and interest expense as we repaid our corporate holding company borrowings in June 2022. Effective November 1, 2022, Tiptree has relocated its headquarters to 660 Steamboat Road, Greenwich, CT 06830.
Non-GAAP
Management uses Adjusted net income and Adjusted return on average equity 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.
Earnings Conference Call
Tiptree will host a conference call on Thursday, November 3, 2022 at 9:00 a.m. Eastern Time to discuss its Q3 2022 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 1-855-327-6837 (domestic) or 1-631-891-4304 (international). Please dial in at least five minutes prior to the start time.
A replay of the call will be available from Thursday, November 3, 2022 at 12:00 p.m. Eastern Time, until midnight Eastern on Thursday, November 10, 2022. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 10020271.
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About Tiptree
Tiptree Inc. (NASDAQ: TIPT) allocates capital to select small and middle market companies with the mission of building long-term value. Established in 2007, we have a significant track record investing in the insurance sector and across a variety of other industries, including mortgage origination, specialty finance and shipping. With proprietary access and a flexible capital base, we seek to uncover compelling investment opportunities and support management teams in unlocking the full value potential of their businesses. For more information, please visit tiptreeinc.com and follow us on LinkedIn.
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.
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Tiptree Inc.
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
| As of | ||||
|---|---|---|---|---|
| September 30,<br>2022 | December 31,<br>2021 | |||
| Assets: | ||||
| Investments: | ||||
| Available for sale securities, at fair value, net of allowance for credit losses | $ | 584,081 | $ | 577,448 |
| Loans, at fair value | 70,784 | 105,583 | ||
| Equity securities | 85,103 | 138,483 | ||
| Other investments | 76,535 | 168,656 | ||
| Total investments | 816,503 | 990,170 | ||
| Cash and cash equivalents | 503,488 | 175,718 | ||
| Restricted cash | 10,344 | 19,368 | ||
| Notes and accounts receivable, net | 481,985 | 454,369 | ||
| Reinsurance receivables | 1,194,327 | 880,836 | ||
| Deferred acquisition costs | 485,199 | 379,373 | ||
| Goodwill | 185,944 | 179,103 | ||
| Intangible assets, net | 120,340 | 122,758 | ||
| Other assets | 162,118 | 146,844 | ||
| Assets held for sale | 33,836 | 250,608 | ||
| Total assets | $ | 3,994,084 | $ | 3,599,147 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Debt, net | $ | 266,255 | $ | 393,349 |
| Unearned premiums | 1,349,357 | 1,123,952 | ||
| Policy liabilities and unpaid claims | 512,924 | 331,703 | ||
| Deferred revenue | 628,876 | 534,863 | ||
| Reinsurance payable | 317,199 | 265,569 | ||
| Other liabilities and accrued expenses | 399,899 | 306,536 | ||
| Liabilities held for sale | — | 242,994 | ||
| Total liabilities | $ | 3,474,510 | $ | 3,198,966 |
| 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, 36,247,257 and 34,124,153 shares issued and outstanding, respectively | 36 | 34 | ||
| Additional paid-in capital | 380,196 | 317,459 | ||
| Accumulated other comprehensive income (loss), net of tax | (47,670) | (2,685) | ||
| Retained earnings | 54,717 | 68,146 | ||
| Total Tiptree Inc. stockholders’ equity | 387,279 | 382,954 | ||
| Non-controlling interests: | ||||
| Fortegra preferred interests | 77,679 | — | ||
| Common interests | 54,616 | 17,227 | ||
| Total non-controlling interests | 132,295 | 17,227 | ||
| Total stockholders’ equity | 519,574 | 400,181 | ||
| Total liabilities and stockholders’ equity | $ | 3,994,084 | $ | 3,599,147 |
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Tiptree Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
| Three Months Ended <br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Revenues: | ||||||||
| Earned premiums, net | $ | 237,877 | $ | 175,026 | $ | 662,234 | $ | 498,903 |
| Service and administrative fees | 83,423 | 69,664 | 232,883 | 191,414 | ||||
| Ceding commissions | 4,023 | 2,722 | 9,886 | 8,827 | ||||
| Net investment income | 3,632 | 3,330 | 10,164 | 9,331 | ||||
| Net realized and unrealized gains (losses) | 17,159 | 14,805 | 50,050 | 120,268 | ||||
| Other revenue | 17,364 | 21,058 | 63,007 | 52,237 | ||||
| Total revenues | 363,478 | 286,605 | 1,028,224 | 880,980 | ||||
| Expenses: | ||||||||
| Policy and contract benefits | 121,242 | 80,831 | 330,353 | 237,198 | ||||
| Commission expense | 137,559 | 104,392 | 382,435 | 292,580 | ||||
| Employee compensation and benefits | 38,210 | 48,643 | 142,927 | 147,260 | ||||
| Interest expense | 5,503 | 8,657 | 24,837 | 26,890 | ||||
| Depreciation and amortization | 5,549 | 6,119 | 17,714 | 18,261 | ||||
| Other expenses | 30,290 | 34,379 | 100,978 | 104,340 | ||||
| Total expenses | 338,353 | 283,021 | 999,244 | 826,529 | ||||
| Income (loss) before taxes | 25,125 | 3,584 | 28,980 | 54,451 | ||||
| Less: provision (benefit) for income taxes | 5,068 | 237 | 31,537 | 11,416 | ||||
| Net income (loss) | 20,057 | 3,347 | (2,557) | 43,035 | ||||
| Less: net income (loss) attributable to non-controlling interests | 5,834 | 1,339 | 6,588 | 4,477 | ||||
| Net income (loss) attributable to common stockholders | $ | 14,223 | $ | 2,008 | $ | (9,145) | $ | 38,558 |
| Net income (loss) per common share: | ||||||||
| Basic earnings per share | $ | 0.39 | $ | 0.06 | $ | (0.26) | $ | 1.15 |
| Diluted earnings per share | $ | 0.38 | $ | 0.06 | $ | (0.26) | $ | 1.11 |
| Weighted average number of common shares: | ||||||||
| Basic | 36,304,385 | 33,558,106 | 35,261,659 | 32,963,451 | ||||
| Diluted | 36,783,248 | 34,132,182 | 35,261,659 | 35,025,211 | ||||
| Dividends declared per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 |
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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. Adjusted net income is presented before the impacts of non-controlling interests.
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 September 30, 2022 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tiptree Capital | ||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||
| Income (loss) before taxes | $ | 15,304 | $ | (940) | $ | 19,077 | $ | (8,316) | $ | 25,125 | ||||
| Less: Income tax (benefit) expense | (3,765) | 92 | (3,963) | 2,568 | (5,068) | |||||||||
| Less: Net realized and unrealized gains (losses) | 6,382 | (82) | (12,694) | — | (6,394) | |||||||||
| Plus: Intangibles amortization (1) | 4,115 | — | — | — | 4,115 | |||||||||
| Plus: Stock-based compensation expense | 33 | — | 75 | 1,588 | 1,696 | |||||||||
| Plus: Non-recurring expenses | 89 | — | 53 | — | 142 | |||||||||
| Plus: Non-cash fair value adjustments | — | — | (130) | — | (130) | |||||||||
| Less: Tax on adjustments (2) | (2,327) | 153 | 3,238 | (1,155) | (91) | |||||||||
| Adjusted net income | $ | 19,831 | $ | (777) | $ | 5,656 | $ | (5,315) | $ | 19,395 | ||||
| Adjusted net income | $ | 19,831 | $ | (777) | $ | 5,656 | $ | (5,315) | $ | 19,395 | ||||
| Average stockholders’ equity | $ | 319,703 | $ | 57,133 | $ | 84,445 | $ | 61,178 | $ | 522,459 | ||||
| Adjusted return on average equity | 24.8 | % | (5.4) | % | 26.8 | % | NM% | 14.8 | % | |||||
| Three Months Ended September 30, 2021 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tiptree Capital | ||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||
| Income (loss) before taxes | $ | 13,337 | $ | 6,267 | $ | (4,700) | $ | (11,320) | $ | 3,584 | ||||
| Less: Income tax (benefit) expense | (3,394) | 14 | 1,591 | 1,552 | (237) | |||||||||
| Less: Net realized and unrealized gains (losses) | 7,428 | (1,055) | 10,396 | — | 16,769 | |||||||||
| Plus: Intangibles amortization (1) | 3,830 | — | — | — | 3,830 | |||||||||
| Plus: Stock-based compensation expense | 475 | — | 197 | 832 | 1,504 | |||||||||
| Plus: Non-recurring expenses | (28) | — | 448 | — | 420 | |||||||||
| Plus: Non-cash fair value adjustments | — | — | (815) | — | (815) | |||||||||
| Less: Tax on adjustments (2) | (2,115) | (1,265) | (1,595) | 650 | (4,325) | |||||||||
| Adjusted net income | $ | 19,533 | $ | 3,961 | $ | 5,522 | $ | (8,286) | $ | 20,730 | ||||
| Adjusted net income | $ | 19,533 | $ | 3,961 | $ | 5,522 | $ | (8,286) | $ | 20,730 | ||||
| Average stockholders’ equity | $ | 291,281 | $ | 68,925 | $ | 118,729 | $ | (75,340) | $ | 403,595 | ||||
| Adjusted return on average equity | 26.8 | % | 23.0 | % | 18.6 | % | NM% | 20.5 | % |
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| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tiptree Capital | ||||||||||||||||||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) before taxes | $ | 39,057 | $ | 3,350 | $ | 20,468 | $ | (33,895) | $ | 28,980 | ||||||||||||||||||||
| Less: Income tax (benefit) expense | (11,099) | (874) | (3,469) | (16,095) | (31,537) | |||||||||||||||||||||||||
| Less: Net realized and unrealized gains (losses) | 23,151 | (7,976) | (8,293) | — | 6,882 | |||||||||||||||||||||||||
| Plus: Intangibles amortization (1) | 12,146 | — | — | — | 12,146 | |||||||||||||||||||||||||
| Plus: Stock-based compensation expense | 2,376 | — | 98 | 5,437 | 7,911 | |||||||||||||||||||||||||
| Plus: Non-recurring expenses | 1,561 | — | (869) | 2,108 | 2,800 | |||||||||||||||||||||||||
| Plus: Non-cash fair value adjustments | — | — | 3,554 | — | 3,554 | |||||||||||||||||||||||||
| Less: Tax on adjustments (2) | (7,299) | 1,984 | 1,783 | 21,629 | 18,097 | |||||||||||||||||||||||||
| Adjusted net income | $ | 59,893 | $ | (3,516) | $ | 13,272 | $ | (20,816) | $ | 48,833 | ||||||||||||||||||||
| Adjusted net income | $ | 59,893 | $ | (3,516) | $ | 13,272 | $ | (20,816) | $ | 48,833 | ||||||||||||||||||||
| Average stockholders’ equity | $ | 309,042 | $ | 58,558 | $ | 94,169 | $ | (1,891) | $ | 459,878 | ||||||||||||||||||||
| Adjusted return on average equity | 25.8 | % | (8.0) | % | 18.8 | % | NM% | 14.2 | % | Nine Months Ended September 30, 2021 | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||
| Tiptree Capital | ||||||||||||||||||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||||||||||||||||||
| Income (loss) before taxes | $ | 49,569 | $ | 25,119 | $ | 12,914 | $ | (33,151) | $ | 54,451 | ||||||||||||||||||||
| Less: Income tax (benefit) expense | (11,157) | (4,448) | (1,350) | 5,539 | (11,416) | |||||||||||||||||||||||||
| Less: Net realized and unrealized gains (losses) | (5,004) | (5,075) | (3,512) | — | (13,591) | |||||||||||||||||||||||||
| Plus: Intangibles amortization (1) | 11,499 | — | — | — | 11,499 | |||||||||||||||||||||||||
| Plus: Stock-based compensation expense | 1,347 | 331 | 209 | 1,831 | 3,718 | |||||||||||||||||||||||||
| Plus: Non-recurring expenses | 2,076 | — | 729 | 2,171 | 4,976 | |||||||||||||||||||||||||
| Plus: Non-cash fair value adjustments | — | — | (2,167) | — | (2,167) | |||||||||||||||||||||||||
| Less: Tax on adjustments (2) | (1,930) | (442) | 1,330 | 582 | (460) | |||||||||||||||||||||||||
| Adjusted net income | $ | 46,400 | $ | 15,485 | $ | 8,153 | $ | (23,028) | $ | 47,010 | ||||||||||||||||||||
| Adjusted net income | $ | 46,400 | $ | 15,485 | $ | 8,153 | $ | (23,028) | $ | 47,010 | ||||||||||||||||||||
| Average stockholders’ equity | $ | 296,125 | $ | 62,093 | $ | 110,818 | $ | (81,196) | $ | 387,840 | ||||||||||||||||||||
| Adjusted return on average equity | 20.9 | % | 33.3 | % | 9.8 | % | NM% | 16.2 | % | Notes | ||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||||||||
| (1) | Specifically associated with acquisition purchase accounting. See Note (9) Goodwill and Intangible Assets, net, of the Company’s Form 10-Q for the period ended September 30, 2022. | |||||||||||||||||||||||||||||
| (2) | Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three and nine months ended September 30, 2022, included in the adjustment is an add-back of $(1.4) million and $24.1 million, respectively, related to deferred tax expense from the WP Transaction. |
Non-GAAP Financial Measures — Book value per share
Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.
| ($ in thousands, except per share information) | As of September 30, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Total stockholders’ equity | $ | 519,574 | $ | 402,142 |
| Less: Non-controlling interests | 132,295 | 16,930 | ||
| Total stockholders’ equity, net of non-controlling interests | $ | 387,279 | $ | 385,212 |
| Total common shares outstanding | 36,247 | 33,889 | ||
| Book value per share | $ | 10.68 | $ | 11.37 |
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ex992investorpresentatio
Investor Presentation – Third Quarter 2022 November 2022 Financial Information for the three and nine months ended September 30, 2022 EXHIBIT 99.2
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 Q3 2022 Year-to-date Highlights Revenue $1.03 billion 16.7% vs. prior year Adjusted Net Income2 $48.8 million 3.9% vs. prior year Book Value per share2,3 $10.68 (0.3)% vs. 6/30/22 Net Loss1 $(9.1) million vs. prior year net income of $38.6 million Overall Adj. net income2 of $48.8mm, with a 14.2% adj. ROAE2, driven by strong performance in insurance & shipping. Closed the previously announced $200mm strategic investment in Fortegra by Warburg Pincus. Closing of the investment in Fortegra increased Tiptree equity by $63.2mm pre-tax, partially offset by $38.2mm of tax impact related to the tax deconsolidation of Fortegra ($24.1mm impacting Q3’22 YTD earnings). Repaid $112.5mm of corporate debt. Sold all three dry bulk vessels for $67.7mm & signed definitive agreements to sell remaining two product tankers for $49.0mm, a 44% gain compared to Q3’22 book value. We expect sales to close in Q4’22. Repurchased 158,162 shares for the nine months at an average price of $10.43 per share. Insurance $1.96 Bn of gross written premiums & premium equivalents (GWPPE)4, a 21% increase from PY driven by growth in specialty admitted & E&S insurance lines & fee-based service contract offerings. Stable combined ratio at 91.0%, driven by operating efficiencies. Adj. net income of $59.9mm, up 29% from PY driven by revenue growth. Adj. ROAE of 25.8%. Acquired ITC Compliance in April 2022, further expanding its presence in Europe. Tiptree Capital Mortgage & shipping contributed pre-tax income of $23.8mm, partially offset by mark-to-market losses. ($ in millions, except per share information) 1 Net income (loss) attributable to common stockholders. 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. Adjusted net income is presented before the impacts of non-controlling interests. 3 Quarterly total return defined as cumulative dividends paid of $0.04 per share plus change in book value per share as of September 30, 2022. 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.
Financial Results Q3’21 Q3'22 Q3’21 YTD Q3’22 YTD Total Revenues $286.6 $363.5 $881.0 $1,028.2 Net income (loss) $2.0 $14.2 $38.6 $(9.1) Diluted EPS $0.06 $0.38 $1.11 $(0.26) Adjusted net income1 $20.7 $19.4 $47.0 $48.8 Adjusted ROAE1 20.5% 14.8% 16.2% 14.2% Total shares outstanding 33.9 36.2 Book Value per share1 $11.37 $10.68 31 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. Adjusted net income is presented before the impacts of non-controlling interests. 2 Includes dividends paid. Quarterly total return defined as dividends paid of $0.04 per share plus change in book value per share as of September 30, 2022. ($ in millions, except per share information) $12.1 $19.5 $19.8 $12.4 $9.5 $4.9 $(6.7) $(8.3) $(5.3) $17.8 $20.7 $19.4 Q3'20 Q3'21 Q3'22 Corporate Fortegra Tiptree Capital Key Highlights – Q3’22 Adjusted Net Income by business Revenues • 26.8% increase driven by growth in Fortegra’s specialty insurance lines and shipping revenues, including gain on sale of two vessels • Excluding investment gains and losses, revenues were up 17.7% Net income of $14.2mm driven by gain on sale of two dry bulk vessels Adj net income of $19.4mm, decreased by 6.4% from PY; • Continued revenue growth at Fortegra, strong contributions from shipping, more than offset by declines in mortgage business BVPS of $10.68 decreased by 4.7%2 over PY and 0.3%2 from PQ • Rising interest rates drove unrealized losses on fixed income securities of $18.1mm for Q3’22 and $56.5mm for Q3’22 YTD (AOCI impact); expect to hold to maturity • Q2’22 closing of the Warburg investment resulted in $63.2mm pre-tax impact to equity, offset by $38.2mm of tax impact related to the tax deconsolidation of Fortegra $29.8 $46.4 $59.9 $23.1 $23.6 $9.8 $(17.7) $(23.0) $(20.8) $35.2 $47.0 $48.8 Q3'20 YTD Q3'21 YTD Q3'22 YTD
Specialty Insurance Performance Highlights Q3’22
5 Fortegra – Financial Performance Highlights Product & distribution expansion driving continued growth, while maintaining underwriting discipline • Unearned premiums and deferred revenue grew to $2.0Bn, a 26% increase year-over-year • Underwriting & fee revenues increased to $330mm, up 31% from PY • Continued investment in strategic initiatives ✓ Specialty admitted & E&S lines ✓ Capital-light warranty solutions ✓ European expansion Produced stable, growing results from underwriting and fees • Underwriting margin of $71mm, up 8%, driven by growth in U.S. Insurance admitted and E&S lines • Year-to-date combined ratio consistent at 91.0% 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 Financials Insurance products Q3’22 Highlights & Outlook 37 43 23 23 5 5 $66 $71 Q3'21 Q3'22 175 244 61 72 15 15 $251 $330 Q3'21 Q3'22 73.8% 78.5% 15.8% 13.1% 89.6% 91.5% Q3'21 Q3'22 ($ 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 appendix for a reconciliation of Non-GAAP measures including Adjusted Net Income, Adjusted return on average equity, underwriting and fee revenues and underwriting and fee margin. Adjusted net income is presented before the impacts of non-controlling interests. 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. Q3’21 Q3’22 Q3’21 YTD Q3’22 YTD Premiums & equivalents2 $588.1 $761.4 $1,618.1 $1,957.0 Revenue $246.7 $327.0 $721.5 $903.4 Pre-tax income (loss) $13.3 $15.3 $49.6 $39.1 Adjusted net income1 $19.5 $19.8 $46.4 $59.9 Adjusted ROAE1 26.8% 24.8% 20.9% 25.8% Combined ratio 89.6% 91.5% 91.0% 91.0% Unearned Premiums & Deferred Revenues $1,564.4 $1,978.2
Growth oriented while maintaining underwriting profitability 77.0% 74.9% 74.9% 77.8% 15.8% 17.2% 16.1% 13.2% 92.8% 92.1% 91.0% 91.0% Q3'19 Q3'20 Q3'21 Q3'22 $22.2 $29.8 $46.4 $59.9 Q3'19 Q3'20 Q3'21 Q3'22 6 ($ in millions, all figures represent Q3 year-to-date) Gross Written Premiums & Equivalents1 Underwriting & Fee Revenues and Margin2 Adjusted Net Income2 702 742 1,066 1,318 209 399 482 542 24 35 70 98 $935 $1,176 $1,618 $1,957 Q3'19 Q3'20 Q3'21 Q3'22 Combined Ratio Adj. ROAE%1 Adj. Net Income U/W Ratio Expense Ratio U.S. Insurance U.S. Warranty Solutions Europe Warranty Solutions 1 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. 2 See the appendix for a reconciliation of Non-GAAP measures including Adjusted Net Income, Adjusted return on average equity, underwriting and fee revenues and underwriting and fee margin. Adjusted net income is presented before the impacts of non-controlling interests. 10% 21% U/W & Fee Revenues U/W & Fee Margin 26%14% 386 369 504 673 65 116 168 200 3 15 35 43 $454 $501 $707 $916 Q3'19 Q3'20 Q3'21 Q3'22 75 77 102 124 28 43 65 64 1 6 10 16 $104 $126 $177 $204 Q3'19 Q3'20 Q3'21 Q3'22
Investment Portfolio Cash & Equivalents 34% Government & Agency 32% Corporate Bonds 14% Fixed Income ETFs 5% Muni & ABS 6% Equities 2% Other Alternatives 7% Cash & Equivalents 38% Government & Agency 35% AA 5% A 13% BBB 4% Fixed Income ETFs 5% $1,017mm 7 Asset Allocation Liquid and Highly-Rated Fixed Income Portfolio ($ in millions) 683 1,017 149 97 $832 $1,113 Q3'21 Q3'22 Other investments Fixed Income & Cash Return Metrics (Pre-tax) $1,113mm ◼ 2.1 year duration ◼ AA+ rating ◼ 2.0% book yield Q3’21 Q3'22 Q3’21 YTD Q3’22 YTD Net investment income $3.3 $3.6 $9.3) $10.2 Net realized and unrealized gains (losses) $(7.5) $(6.4) $5.0 $(23.2)
Performance Highlights Q3’22
81.9 46.9 63.7 56.7 29.5 16.1 4.7 3.4 $179.8 $123.1 Q3'21 Q3'22 Financial drivers Pre-tax income (loss) Q3’21 Q3’22 Q3’21 YTD Q3’22 YTD Mortgage $6.3 $(0.9) $25.1 $3.3 Senior living (Invesque)2 (10.4) (1.4) 3.5 (12.9) Maritime transportation 5.2 20.0 7.7 36.5 Other 0.5 0.4 1.7 (3.1) Total $1.6 $18.1 $38.0 $23.8 9 Tiptree Capital – Financial Performance Highlights Maritime transportation: • Charter rates remained strong in Q3 for tankers • Favorable valuations led to strategic sales of vessels • Definitive agreement to sell two tankers in Q3’22, expected to close in Q4’22 Mortgage: • Mortgage origination volumes of $941mm, down 20% from PY • Headwinds in volumes and margins partially offset by servicing revenues and active cost management • MSRs of $42mm, including $8.0mm positive MTM in the year Senior living (Invesque – IVQ.U): • Observing positive operating trends in certain healthcare real estate sectors • Unrealized losses of $12.9mm, compared to PY gains of $3.5mm Mortgage Maritime transportation Seniors Housing (Invesque/Care)2 1 See the appendix for a reconciliation of Non-GAAP measures including Adjusted Net Income. 2 17.0m of Invesque common shares, 2.9m shares held in the insurance company investment portfolio. On balance sheet at fair value - $20.9 million, $17.3 million in Tiptree Capital as of September 30, 2022. Capital Allocation Q3’22 Year-to-date Highlights ($ in millions) Other
01 Summary & Outlook
Financial Snapshot 11 ($ in millions) LTM Adjusted Net Income1 1) See the appendix for a reconciliation of Non-GAAP measures including Adjusted Net Income. Adjusted net income is presented before the impacts of non-controlling interests. 2) Estimated based on Warburg Pincus valuation multiple of 13.5x Adj. Net Income, multiplied by LTM Adj. Net Income of $80.3 million, multiplied by Tiptree’s 72.5% as converted ownership as of Q3’22, less deferred tax liability of $38.2 million recorded as of Q3’22. 3) Includes Tiptree Inc. stockholders’ equity of Mortgage, Tiptree Capital – Other and Corporate, excluding the deferred tax liability relating to Tiptree’s investment in Fortegra. 4) Diluted shares as of September 30, 2022, represents basic outstanding shares of 36,247,257 plus dilutive shares of 1,183,350 which includes unvested RSUs and outstanding options (assumed to be exercised cashless). Adj ROAE% 16.5% 14.3% Sum of the Parts $63.2 $65.7 Q3'21 Q3'22 $748 million2 (Transaction multiple) $240 million3 (Book value ex. NCI) $988 million $19.98 Value/TIPT diluted share4 Pro-forma SOTP Value $6.41 $26.39
12 ❑ Significant opportunities to achieve value creation objectives at Fortegra ❑ Capital available to redeploy into long-term value creating opportunities Summary & Outlook ($ in millions) ✓ Strong operating performance from our businesses – Fortegra continues to deliver strong top-line growth and return on equity – Solid contributions from favorable shipping environment both in charter rates and vessel valuations ✓ $200mm investment in Fortegra from Warburg Pincus closed in Jun’22 1 See the appendix for a reconciliation of Non-GAAP measures including Adjusted Net Income and Adjusted return on average equity. Nine Month 2022 Highlights Looking Ahead
Appendix Non-GAAP Reconciliations • Insurance underwriting and fee revenue • Insurance underwriting and fee margin • Book Value per share • Adjusted net income
Q3’22 Capital Allocation & Annual Performance Comparison 141 Represents total stockholders’ equity. Total stockholders’ equity net of non-controlling interests was $387.3 million as of September 30, 2022. 2 See the appendix for a reconciliation of Non-GAAP metrics including Adjusted net income and adjusted return on average equity. Adjusted net income is presented before the impacts of non-controlling interests. Adjusted net income of $65.7mm, up 3.9% from Q3’21 LTM • Adjusted return on average equity of 14.3%1 Fortegra: 26.4% Adj. ROAE • Growth in insurance underwriting and fee revenues • Expect continued growth in specialty and warranty lines • Consistency in combined ratio year-over-year Tiptree Capital: 9.4% Adj. ROAE • Positive operating contributions from shipping • Headwinds in mortgage business partially offset by servicing revenues and active cost management Q3’22 LTM Highlights Stockholders’ Equity1 Adjusted Net Income2 Business Lines Q3’22 Q3’21 LTM Q3’22 LTM Fortegra $314.2 $60.0 $80.3 - Underwriting & fees $51.3 $70.6 - Investments $8.7 $9.7 Tiptree Capital $123.1 $33.6 $14.3 Corporate $82.3 $(30.4) $(28.9) Total Tiptree $519.6 $63.2 $65.7 ($ in millions) LTM Operating Performance
Non-GAAP Reconciliations 15 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. Adjusted net income is presented before the impacts of non-controlling interests. 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 Producer Owned Reinsurance Company (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 non-GAAP metrics of 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 & Fee Revenues & Margin ($ in thousands, except per share information) 2022 2021 2020 2022 2021 Total revenues 327,028$ 246,706$ 174,005$ 903,388$ 721,524$ Less: Net investment income (3,632) (3,330) (3,023) (10,164) (9,331) Less: Net realized and unrealized gains (losses) 6,382 7,492 (659) 23,151 (5,004) Underwriting and fee revenues 329,778$ 250,868$ 170,323$ 916,375$ 707,189$ 2022 2021 2020 2022 2021 Income (loss) before income taxes 15,304$ 13,337$ 13,447$ 39,057$ 49,569$ Less: Net investment income (3,632) (3,330) (3,023) (10,164) (9,331) Less: Net realized and unrealized gains (losses) 6,382 7,492 (659) 23,151 (5,004) Plus: Depreciation and amortization 4,742 4,307 2,329 13,697 12,905 Plus: Interest expense 5,027 4,268 3,988 15,166 13,097 Plus: Employee compensation and benefits 22,071 19,526 15,969 64,159 57,007 Plus: Other expenses 21,083 20,045 11,666 58,521 59,168 Underwriting and fee margin 70,977$ 65,645$ 43,717$ 203,587$ 177,411$ 2022 2021 2020 Total stockholders’ equity 519,574$ 402,142$ 361,691$ Less: Non-controlling interests (132,295) (16,930) (13,953) Total stockholders’ equity, net of non-controlling interests 387,279$ 385,212$ 347,738$ Total common shares outstanding 36,247 33,889 33,563 Book value per share 10.68$ 11.37$ 10.36$ Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 As of September 30,
17 Non-GAAP Reconciliations – Adjusted Net Income ($ in thousands) Insurance Mortgage Other Corporate Total Insurance Mortgage Other Corporate Total Insurance Mortgage Other Corporate Total Income (loss) before taxes 15,304$ (940)$ 19,077 (8,316) 25,125 13,337$ 6,267$ (4,700) (11,320) 3,584 59,345$ 6,638$ 24,763 (50,876) 39,870 Less: Income tax (benefit) expense (3,765) 92 (3,963) 2,568 (5,068) (3,394) 14 1,591 1,552 (237) (18,380) (1,308) (4,111) (17,613) (41,412) Less: Net realized and unrealized gains (losses) 6,382 (82) (12,694) - (6,394) 7,428 (1,055) 10,396 - 16,769 24,423 (8,699) (7,872) - 7,852 Plus: Intangibles amortization (1) 4,115 - - - 4,115 3,830 - - - 3,830 15,976 - - - 15,976 Plus: Stock-based compensation expense 33 - 75 1,588 1,696 475 - 197 832 1,504 3,035 - 102 12,187 15,324 Plus: Non-recurring expenses 89 - 53 - 142 (28) - 448 - 420 1,643 - (660) 2,108 3,091 Plus: Non-cash fair value adjustments 0 - (130) - (130) - - (815) - (815) - - 2,551 - 2,551 Less: Tax on adjustments (2) (2,327) 153 3,238 (1,155) (91) (2,115) (1,265) (1,595) 650 (4,325) (5,767) 1,802 1,108 25,296 22,439 Adjusted net income 19,831$ (777)$ 5,656$ (5,315)$ 19,395$ 19,533$ 3,961$ 5,522$ (8,286)$ 20,730$ 80,275$ (1,567)$ 15,881$ (28,898)$ 65,691$ Average stockholders’ equity $ 319,703 $ 57,133 $ 84,445 $ 61,178 522,459$ $ 291,281 $ 68,925 $ 118,729 $ (75,340) 403,595$ $ 304,347 $ 60,218 $ 91,270 $ 5,024 460,858$ Adjusted return on average equity 24.8% -5.4% 26.8% NM% 14.8% 26.8% 23.0% 18.6% NM% 20.5% 26.4% -2.6% 17.4% NM% 14.3% Insurance Mortgage Other Corporate Total Insurance Mortgage Other Corporate Total Income (loss) before taxes 39,057$ 3,350$ 20,468 (33,895) 28,980 49,569$ 25,119$ 12,914 (33,151) 54,451 Less: Income tax (benefit) expense (11,099) (874) (3,469) (16,095) (31,537) (11,157) (4,448) (1,350) 5,539 (11,416) Less: Net realized and unrealized gains (losses) 23,151 (7,976) (8,293) - 6,882 (5,004) (5,075) (3,512) - (13,591) Plus: Intangibles amortization (1) 12,146 - - - 12,146 11,499 - - - 11,499 Plus: Stock-based compensation expense 2,376 - 98 5,437 7,911 1,347 331 209 1,831 3,718 Plus: Non-recurring expenses 1,561 - (869) 2,108 2,800 2,076 - 729 2,171 4,976 Plus: Non-cash fair value adjustments 0 - 3,554 - 3,554 - - (2,167) - (2,167) Less: Tax on adjustments (2) (7,299) 1,984 1,783 21,629 18,097 (1,930) (442) 1,330 582 (460) Adjusted net income 59,893$ (3,516)$ 13,272$ (20,816)$ 48,833$ 46,400$ 15,485$ 8,153$ (23,028)$ 47,010$ Average stockholders’ equity $ 309,042 $ 58,558 $ 94,169 $ (1,891) 459,878$ $ 296,125 $ 62,093 $ 110,818 $ (81,196) 387,840$ Adjusted return on average equity 25.8% -8.0% 18.8% NM% 14.2% 20.9% 33.3% 9.8% NM% 16.2% Three Months Ended September 30, 2021 Trailing Twelve Months Ended September 30, 2022 Tiptree CapitalTiptree Capital Three Months Ended September 30, 2022 Tiptree Capital Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Tiptree Capital Tiptree Capital The footnotes below correspond to the tables above, under “— Adjusted Net Income - Non-GAAP and “—Adjusted Return on Average Equity - Non-GAAP”. Adjusted net income is presented before the impacts of non- controlling interests. Tiptree’s subsidiary ownership percentage as of September 30, 2022 was Fortegra 79.5%, Tiptree Marine 95%, Reliance (Mortgage) 97%. (1) Specifically associated with acquisition purchase accounting. See Note (9) Goodwill and Intangible Assets, net. (2) Tax on adjustments represents the tax applied to the total non- GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three, six and twelve months ended June 30, 2022, included in the adjustment is an add-back of $25.5 million related to deferred tax expense from the WP Transaction.
TiptreeInc. ir@tiptreeinc.com