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, 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 November 3, 2021, Tiptree Inc. (the “Company” or “Tiptree”) issued a press release announcing its results of operations for the quarter ended September 30, 2021. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
| Item 5.02 | Departure of Directors or Certain officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements for Certain Officers. |
|---|
On November 2, 2021, the board of directors (the “Board”) of Tiptree Inc. (“Tiptree”) appointed Randy Maultsby as a Class I director effective immediately, which class will stand for reelection at the 2023 Annual Meeting of stockholders. Pursuant to Tiptree’s Bylaws, as amended, the Board increased the number of authorized directors by one director such that the Board now consists of seven directors, of which four are independent.
Mr. Maultsby is President of Tiptree since July 14, 2021. Previously, Mr. Maultsby held the title of Managing Director of Tiptree since 2010. Mr. Maultsby focuses on corporate strategy and development, overseeing Tiptree’s acquisition, disposition and capital markets activities. Mr. Maultsby is also an independent director of Invesque Inc., a position he has held since 2018. Prior to joining Tiptree in 2010, Mr. Maultsby was a Senior Vice President in the investment banking division of Fox-Pitt, Kelton. During his investment banking career, he focused on providing strategic advice to a broad array of banking, finance, asset management and brokerage clients. Mr. Maultsby has held various positions at JP Morgan, Conning & Company and Citigroup. Mr. Maultsby graduated with a B.A. from Hampton University.
As disclosed in Tiptree’s Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on July 14, 2021 and August 4, 2021, Mr. Maultsby is a party to an employment agreement with Tiptree and also a recipient of performance restricted stock units (“PRSUs”) under the Tiptree Inc. 2017 Omnibus Incentive Plan. A copy of the employment agreement is filed as Exhibit 10.1 to Tiptree’s Form 8-K filed with the SEC on July 14, 2021 and a copy of the form of PRSUs is filed as Exhibit 10.1 to Tiptree’s Form 8-K filed with the SEC on August 4, 2021.
Tiptree is a party to an indemnification agreement with Mr. Maultsby (the “Indemnification Agreement”). The Indemnification Agreement requires Tiptree to indemnify its executive officers and directors to the fullest extent permitted by law and to advance all related expenses, subject to reimbursement if it is subsequently determined that indemnification is not permitted. Although the Indemnification Agreement offers substantially the same scope of coverage afforded by Tiptree’s charter and bylaws and by Maryland law, the agreement provides greater assurance to directors and executive officers that indemnification will be available because, as a contract, the agreement cannot be modified unilaterally in the future by the Board or the stockholders to eliminate the rights it provides. This summary of the Indemnification Agreement is not complete and is qualified in its entirety by Tiptree’s Form of Indemnification Agreement, previously filed as Exhibit 10.9 to Tiptree’s Registration Statement on Form S-11, as amended (File No. 333-141634), filed on June 7, 2007 and herein incorporated 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 22, 2021 and a payment date of November 29, 2021.
On November 3, 2021, the Company posted an investor presentation dated November 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, datedNovember 3, 2021 |
|---|---|
| 99.2 | Tiptree Inc. Investor Presentation - November 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: | November 3, 2021 | By: | /s/ Jonathan Ilany |
| Name: Jonathan Ilany | |||
| Title: Chief Executive Officer |
Document
Exhibit 99.1
TIPTREE REPORTS THIRD QUARTER AND NINE-MONTH 2021 RESULTS
•Revenues for the quarter of $286.6 million, an increase of 27.9% from 2020. Year-to-date revenues of $881.0 million, an increase of 59.3%, driven by growth in insurance, mortgage and shipping operations and investment gains in 2021 compared to losses in 2020. Excluding the impact from investment gains and losses, year-to-date revenues increased 33.7% versus prior year.
•Net income for the quarter was $2.0 million, a decrease from $12.8 million in 2020 driven by mark to market unrealized losses in our equity position in Invesque. Year-to-date net income of $38.6 million, up significantly from a net loss in the prior year, represented an annualized ROAE of 14.8%.
•Adjusted net income of $20.7 million for the quarter, an increase of 16.4% from prior year. Year-to-date adjusted net income of $47.0 million, an increase of 33.4%, driven by improvement in insurance, mortgage and shipping operations. Year-to-date annualized Adjusted ROAE of 16.2%, compared to 12.2% in the prior year period.
•On October 12, 2021, Tiptree announced a $200 million investment in Fortegra from Warburg Pincus, which upon closing will result in an approximate 24% ownership of the business on an as converted basis.
•On November 2, 2021, the Board appointed Randy Maultsby as the seventh member of the Tiptree Board of Directors.
•Declared a dividend of $0.04 per share to stockholders of record on November 22, 2021 with a payment date of November 29, 2021.
New York, New York - November 3, 2021 - Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced its financial results for the three and nine months ended September 30, 2021.
“Our performance in the third quarter reflects the strength and diversification of our underlying operating businesses,” said Tiptree Executive Chairman, Michael Barnes. "Fortegra's revenues have grown 50% this year and with our recently announced strategic partnership, we believe Fortegra will continue to produce best-in-class growth and returns over the long-term."
Barnes added, “Our mortgage and shipping businesses also reported excellent results in the quarter, benefiting from favorable market conditions. Looking ahead, our businesses are well-positioned to drive continued growth in value for shareholders.”
| ($ in thousands, except per share information) | Three Months Ended <br>September 30, | Nine Months Ended<br>September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP: | 2021 | 2020 | 2021 | 2020 | ||||||||
| Total revenues | $ | 286,605 | $ | 224,041 | $ | 880,980 | $ | 552,906 | ||||
| Net income (loss) attributable to common stockholders | $ | 2,008 | $ | 12,763 | $ | 38,558 | $ | (43,428) | ||||
| Diluted earnings per share | $ | 0.06 | $ | 0.35 | $ | 1.11 | $ | (1.27) | ||||
| Cash dividends paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||
| Return on average equity | 3.3 | % | 16.6 | % | 14.8 | % | (14.3) | % | ||||
| Non-GAAP: (1) | ||||||||||||
| Adjusted net income | $ | 20,730 | $ | 17,807 | $ | 47,010 | $ | 35,240 | ||||
| Adjusted return on average equity | 20.5 | % | 20.1 | % | 16.2 | % | 12.2 | % | ||||
| Book value per share | $ | 11.37 | $ | 10.36 | $ | 11.37 | $ | 10.36 |
____________________________
(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, November 4, 2021 at 9:00 a.m. Eastern Time to discuss its third quarter 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.
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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, November 4, 2021 at 1:00 p.m. Eastern Time, until midnight Eastern on Thursday, November 11, 2021. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 13722943.
Segment Financial Highlights - Third Quarter and Year-to-date 2021
Insurance (The Fortegra Group):
•Gross written premiums and premium equivalents (GWPPE) of $613.1 million in the third quarter, an increase of 31.9% from the prior year period. Year-to-date GWPPE of $1,689.6 million, up 43.7%, driven by growth in all business lines.
•Total revenues of $246.7 million, up 41.8% compared to third quarter 2020. Year-to-date revenues of $721.5 million, up 49.6%, driven by growth in domestic admitted and surplus insurance lines, as well as fee-based warranty programs. Excluding the impact of investment gains and losses, revenues increased by 40.6% over the prior year-to-date period.
•The combined ratio for the quarter was 89.6%, compared to 90.6% in third quarter 2020. The year-to-date 2021 combined ratio was 91.0%, compared to 92.1% in the prior year period. Operating and technology efficiencies contributed to an improved expense ratio, while the underwriting ratio remained stable.
•Income before taxes for the quarter of $13.3 million, flat to prior year driven by growth in underwriting and fee income, offset by unrealized investment losses in the period. Year-to-date 2021 income before taxes of $49.6 million compared to $0.4 million in the prior year. Annualized ROAE was 17.3% for year-to-date 2021, as compared to 1.5% in 2020.
•Adjusted net income for the quarter was $19.5 million, up 61.3% from the prior year period. Adjusted net income year-to-date was $46.4 million, up 55.5%, driven by revenue growth and an improved combined ratio. The annualized adjusted ROAE was 20.9% for year-to-date 2021, as compared to 14.2% in 2020.
•The combination of unearned premiums and deferred revenues on the balance sheet of $1,564.4 million grew by $413.1 million, or 35.9%, from September 30, 2020 to September 30, 2021 as a function of Fortegra’s growth in GWPPE.
Tiptree Capital:
•Mortgage income before taxes was $25.1 million in 2021, as compared to $20.8 million in 2020, driven by higher servicing fees and positive fair value adjustments on the mortgage servicing portfolio. Return on average equity was 44.4% in the 2021 period.
•Maritime transportation income before taxes was $7.7 million in 2021, as compared to $1.0 million in 2020, with the increase driven by a rise in dry-bulk charter rates.
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Results by Segment
We classify our business into two reportable segments, Insurance and Mortgage, with the remainder of our operations aggregated into Tiptree Capital - Other. Corporate activities include holding company interest expense, corporate employee compensation and benefits, and other expenses, including, but not limited to, public company expenses. The following table present summary financial data for the three and nine months ended September 30, 2021 and 2020.
| ($ in thousands) | Three Months Ended <br>September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues: | ||||||||
| Insurance | $ | 246,706 | $ | 174,005 | $ | 721,524 | $ | 482,299 |
| Mortgage | 27,425 | 35,879 | 87,191 | 80,911 | ||||
| Tiptree Capital - other | 12,474 | 14,157 | 72,265 | (10,304) | ||||
| Corporate | — | — | — | — | ||||
| Total revenues | $ | 286,605 | $ | 224,041 | $ | 880,980 | $ | 552,906 |
| Income (loss) before taxes: | ||||||||
| Insurance | $ | 13,337 | $ | 13,447 | $ | 49,569 | $ | 418 |
| Mortgage | 6,267 | 14,453 | 25,119 | 20,768 | ||||
| Tiptree Capital - other | (4,700) | (4,978) | 12,914 | (59,407) | ||||
| Corporate | (11,320) | (9,025) | (33,151) | (25,199) | ||||
| Total income (loss) before taxes | $ | 3,584 | $ | 13,897 | $ | 54,451 | $ | (63,420) |
| Non-GAAP - Adjusted net income: | ||||||||
| Insurance | $ | 19,533 | $ | 12,111 | $ | 46,400 | $ | 29,835 |
| Mortgage | 3,961 | 11,865 | 15,485 | 19,488 | ||||
| Tiptree Capital - other | 5,522 | 495 | 8,153 | 3,565 | ||||
| Corporate | (8,286) | (6,664) | (23,028) | (17,648) | ||||
| Total adjusted net income (1) | $ | 20,730 | $ | 17,807 | $ | 47,010 | $ | 35,240 |
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
The table below provides a break down 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 AOCI in stockholders’ equity and do not impact net realized and unrealized gains and losses until they are sold.
| ($ in thousands) | Three Months Ended <br>September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Net realized and unrealized gains (losses)(1) | $ | (4,267) | $ | 2,310 | $ | 9,345 | $ | (16,270) |
| Net realized and unrealized gains (losses) - Invesque | $ | (12,566) | $ | (9,170) | $ | 4,246 | $ | (79,774) |
(1) Excludes Invesque and Mortgage realized and unrealized gains and losses.
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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.
About Tiptree
Tiptree Inc. (NASDAQ: TIPT) is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. Our largest operating business, Fortegra, is a specialty insurance 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.
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Tiptree Inc.
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
| As of | ||||
|---|---|---|---|---|
| September 30,<br>2021 | December 31, 2020 | |||
| Assets: | ||||
| Investments: | ||||
| Available for sale securities, at fair value, net of allowance for credit losses | $ | 541,121 | $ | 377,133 |
| Loans, at fair value | 89,326 | 90,732 | ||
| Equity securities | 139,418 | 123,838 | ||
| Other investments | 168,829 | 219,701 | ||
| Total investments | 938,694 | 811,404 | ||
| Cash and cash equivalents | 150,496 | 136,920 | ||
| Restricted cash | 21,588 | 58,355 | ||
| Notes and accounts receivable, net | 443,150 | 370,452 | ||
| Reinsurance receivables | 827,199 | 728,009 | ||
| Deferred acquisition costs | 352,940 | 229,430 | ||
| Goodwill | 179,103 | 179,236 | ||
| Intangible assets, net | 126,649 | 138,215 | ||
| Other assets | 152,938 | 162,034 | ||
| Assets held for sale | 185,595 | 181,705 | ||
| Total assets | $ | 3,378,352 | $ | 2,995,760 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Debt, net | $ | 374,842 | $ | 366,246 |
| Unearned premiums | 1,053,120 | 860,690 | ||
| Policy liabilities and unpaid claims | 313,614 | 233,438 | ||
| Deferred revenue | 511,273 | 399,211 | ||
| Reinsurance payable | 239,499 | 224,660 | ||
| Other liabilities and accrued expenses | 305,519 | 362,865 | ||
| Liabilities held for sale | 178,343 | 175,112 | ||
| Total liabilities | $ | 2,976,210 | $ | 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, 33,888,810 and 32,682,462 shares issued and outstanding, respectively | 34 | 33 | ||
| Additional paid-in capital | 314,060 | 315,014 | ||
| Accumulated other comprehensive income (loss), net of tax | 1,157 | 5,674 | ||
| Retained earnings | 69,961 | 35,423 | ||
| Total Tiptree Inc. stockholders’ equity | 385,212 | 356,144 | ||
| Non-controlling interests | 16,930 | 17,394 | ||
| Total stockholders’ equity | 402,142 | 373,538 | ||
| Total liabilities and stockholders’ equity | $ | 3,378,352 | $ | 2,995,760 |
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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, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | ||||||
| Revenues: | |||||||||
| Earned premiums, net | $ | 175,026 | $ | 116,418 | $ | 498,903 | $ | 344,994 | |
| Service and administrative fees | 69,664 | 47,701 | 191,414 | 134,290 | |||||
| Ceding commissions | 2,722 | 5,157 | 8,827 | 16,217 | |||||
| Net investment income | 3,330 | 3,023 | 9,331 | 8,803 | |||||
| Net realized and unrealized gains (losses) | 14,805 | 38,959 | 120,268 | 6,628 | |||||
| Other revenue | 21,058 | 12,783 | 52,237 | 41,974 | |||||
| Total revenues | 286,605 | 224,041 | 880,980 | 552,906 | |||||
| Expenses: | |||||||||
| Policy and contract benefits | 80,831 | 57,738 | 237,198 | 167,761 | |||||
| Commission expense | 104,392 | 68,868 | 292,580 | 207,172 | |||||
| Employee compensation and benefits | 48,643 | 45,715 | 147,260 | 124,894 | |||||
| Interest expense | 8,657 | 8,321 | 26,890 | 23,518 | |||||
| Depreciation and amortization | 6,119 | 4,010 | 18,261 | 12,244 | |||||
| Other expenses | 34,379 | 25,492 | 104,340 | 80,737 | |||||
| Total expenses | 283,021 | 210,144 | 826,529 | 616,326 | |||||
| Income (loss) before taxes | 3,584 | 13,897 | 54,451 | (63,420) | |||||
| Less: provision (benefit) for income taxes | 237 | (844) | 11,416 | (22,030) | |||||
| Net income (loss) | 3,347 | 14,741 | 43,035 | (41,390) | |||||
| Less: net income (loss) attributable to non-controlling interests | 1,339 | 1,978 | 4,477 | 2,038 | |||||
| Net income (loss) attributable to common stockholders | $ | 2,008 | $ | 12,763 | $ | 38,558 | $ | (43,428) | |
| Net income (loss) per common share: | |||||||||
| Basic earnings per share | $ | 0.06 | $ | 0.37 | $ | 1.15 | $ | (1.27) | |
| Diluted earnings per share | $ | 0.06 | $ | 0.35 | $ | 1.11 | $ | (1.27) | |
| Weighted average number of common shares: | |||||||||
| Basic | 33,558,106 | 33,684,301 | 32,963,451 | 34,076,837 | |||||
| Diluted | 34,132,182 | 33,684,301 | 35,025,211 | 34,076,837 | |||||
| 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.
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, 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 | (2,115) | (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 | % | |||||
| Three Months Ended September 30, 2020 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tiptree Capital | ||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||
| Income (loss) before taxes | $ | 13,447 | $ | 14,453 | $ | (4,978) | $ | (9,025) | $ | 13,897 | ||||
| Less: Income tax (benefit) expense | (2,167) | (2,830) | 3,011 | 2,830 | 844 | |||||||||
| Less: Net realized and unrealized gains (losses) | (659) | (66) | 7,586 | — | 6,861 | |||||||||
| Plus: Intangibles amortization (1) | 2,256 | — | — | — | 2,256 | |||||||||
| Plus: Stock-based compensation expense | 535 | 1,224 | (3) | 678 | 2,434 | |||||||||
| Plus: Non-recurring expenses | (53) | — | 340 | (93) | 194 | |||||||||
| Plus: Non-cash fair value adjustments | — | — | (2,441) | — | (2,441) | |||||||||
| Less: Tax on adjustments | (1,248) | (916) | (3,020) | (1,054) | (6,238) | |||||||||
| Adjusted net income | $ | 12,111 | $ | 11,865 | $ | 495 | $ | (6,664) | $ | 17,807 | ||||
| Adjusted net income | $ | 12,111 | $ | 11,865 | $ | 495 | $ | (6,664) | $ | 17,807 | ||||
| Average stockholders’ equity | $ | 283,989 | $ | 45,991 | $ | 94,580 | $ | (70,116) | $ | 354,441 | ||||
| Adjusted return on average equity | 17.1 | % | 103.2 | % | 2.1 | % | NM% | 20.1 | % | |||||
| Notes | ||||||||||||||
| --- | --- | |||||||||||||
| (1) | Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions. |
Page 7
| 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 | (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 | % | |||||
| Nine Months Ended September 30, 2020 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Tiptree Capital | ||||||||||||||
| ($ in thousands) | Insurance | Mortgage | Other | Corporate | Total | |||||||||
| Income (loss) before taxes | $ | 418 | $ | 20,768 | $ | (59,407) | $ | (25,199) | $ | (63,420) | ||||
| Less: Income tax (benefit) expense | 2,711 | (4,061) | 14,742 | 8,638 | 22,030 | |||||||||
| Less: Net realized and unrealized gains (losses) | 27,310 | 2,753 | 65,982 | — | 96,045 | |||||||||
| Plus: Intangibles amortization (1) | 6,958 | — | — | — | 6,958 | |||||||||
| Plus: Stock-based compensation expense | 1,378 | 2,120 | 155 | 2,504 | 6,157 | |||||||||
| Plus: Non-recurring expenses | 2,185 | — | 340 | 353 | 2,878 | |||||||||
| Plus: Non-cash fair value adjustments | — | — | (2,961) | — | (2,961) | |||||||||
| Less: Tax on adjustments | (11,125) | (2,092) | (15,286) | (3,944) | (32,447) | |||||||||
| Adjusted net income | $ | 29,835 | $ | 19,488 | $ | 3,565 | $ | (17,648) | $ | 35,240 | ||||
| Adjusted net income | $ | 29,835 | $ | 19,488 | $ | 3,565 | $ | (17,648) | $ | 35,240 | ||||
| Average stockholders’ equity | 279,897 | 43,001 | 122,554 | (58,899) | 386,553 | |||||||||
| Adjusted return on average equity | 14.2 | % | 60.4 | % | 3.9 | % | NM% | 12.2 | % |
___________________________
The footnotes below correspond to the tables above, under “—Adjusted Net Income - Non-GAAP and “—Adjusted Return on Average Equity - Non-GAAP”.
| Notes | |
|---|---|
| (1) | Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions. |
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, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Total stockholders’ equity | $ | 402,142 | $ | 361,691 |
| Less: Non-controlling interests | 16,930 | 13,953 | ||
| Total stockholders’ equity, net of non-controlling interests | $ | 385,212 | $ | 347,738 |
| Total common shares outstanding | 33,889 | 33,563 | ||
| Book value per share | $ | 11.37 | $ | 10.36 |
Page 8
ex992investorpresentatio
Investor Presentation – Third Quarter 2021 November 2021 Financial Information for the three and nine months ended September 30, 2021 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 Year-to-Date Highlights Revenue $881.0 million 59.3% vs. prior year Adjusted Net Income2 $47.0 million 33.4% vs. prior year Book Value per share2,3 $11.37 11.3% vs. 9/30/20 Net income1 $38.6 million vs. prior year net loss of $43.4 million Overall Adjusted net income2 of $47.0 million, with a 16.2% adj ROAE2, driven by improvement in insurance, mortgage and shipping operations. On October 12, 2021, announced a $200 million investment in Fortegra from Warburg Pincus, which upon closing will result in an approximate 24% ownership of Fortegra on an as converted basis. Insurance $1.7 billion of gross written premiums and premium equivalents (GWPPE)4, 44% increase from PY driven by all product lines. Combined ratio of 91.0% improved from 92.1% in PY driven by the continued scalability of Fortegra’s technology and shared service platform, which improved the expense ratio, while the underwriting ratio remained stable. Adjusted net income of $46.4 million, up 56% from PY driven by revenue growth and improved combined ratio. Annualized Adjusted ROAE of 20.9%. Tiptree Capital Mortgage Adjusted net income of $15.5 million and Adjusted ROAE of 33.3% as volumes and margins remain strong Shipping Adjusted net income improved to $8.1 million from $1.5 million in PY due to increased dry-bulk rates ($ 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. 3 Year-over-year total return defined as cumulative dividends paid of $0.16 per share plus book value per share as of September 30, 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.
Q3’20 Q3'21 Q3’20 YTD Q3’21 YTD Total Revenues $224.0 $286.6 $552.9 $881.0 Net income (loss) $12.8 $2.0 $(43.4) $38.6 Diluted EPS $0.35 $0.06 $(1.27) $1.11 Adjusted net income1 $17.8 $20.7 $35.2 $47.0 Adjusted ROAE1 20.1% 20.5% 12.2% 16.2% Total shares outstanding 33.6 33.9 Book Value per share1 $10.36 $11.37 3 Revenues up 31%, excluding the impact of investment gains/losses, and net income decreased by $10.8mm to $2.0mm • Continued growth in Fortegra’s earned premiums, service and administration fees and investment income • Mortgage origination volumes and margins remain strong • Increase in dry-bulk charter rates • Offset by mark-to-market losses related to our investment in Invesque and other equities Adj net income of $20.7mm, increased by 16% versus prior year • Growth in Fortegra’s revenues and improved combined ratio • Improved operating performance in Tiptree Capital • Partially offset by increased performance-based incentive compensation BVPS of $11.37 increased by 11.3% over prior year driven by net income • Decrease of $0.22 from Q2’21 driven by exchange of dilutive securities 1 For a reconciliation of Non-GAAP metrics Adjusted net income, adjusted return on average equity and book value per share to GAAP financials, see the Appendix. ($ in millions, except per share information) $11.8 $12.1 $19.5 $1.9 $11.9 $4.0 $(6.4) $(6.7) $(8.3) $0.5 $0.5 $5.5 $7.8 $17.8 $20.7 Q3'19 Q3'20 Q3'21 $25.3 $29.8 $46.4 $2.2 $19.5 $15.5 $(17.9) $(17.7) $(23.0) $7.3 $3.6 $8.1 $16.9 $35.2 $47.0 Q3'19 YTD Q3'20 YTD Q3'21 YTD Corporate Insurance Mortgage Tiptree Capital - Other Key Highlights – Q3’21 Adjusted Net Income by business Financial Results
4 Tiptree Snapshot ($ in millions) Adjusted Net Income1 1) See the appendix for a reconciliation of Non-GAAP measures including Operating EBITDA 2) Estimated Based on Warburg Pincus valuation multiple of 13.5x Adj. Net Income, multiplied LTM Adjusted Net Income of $60.0 million, multiplied by Tiptree’s 79.5% ownership pro-forma as of closing date. 3) Pro-forma Q3’21 Tiptree holdco book equity of $(72) million plus $140 million of transaction proceeds that will be used to extinguish $110 million of Fortress debt, assumed from Tiptree, and $30 million to repay notes to Tiptree, used for general corporate purposes. Shares outstanding 33.6 33.9 Adj ROAE% 11.9% 16.5% Tiptree Sum of the Parts $45.9 $63.2 Q3'20 LTM Q3'21 LTM $644 million2 (Transaction multiple) $175 million (Book value ex. NCI) Holding Company $68 million2 (Book value) $887 million $19.00 Value/TIPT sharePF SOTP Value $5.16 $2.00 $26.16
Insurance Performance Highlights Q3’21
6 Fortegra – Financial Performance Highlights Continued growth through insurance and warranty program expansion and onboarding new agents, with a focus on stable, improved profitability • Growth in unearned premiums and deferred revenue to $1.6Bn, a 36% increase year-over-year • Underwriting and fee revenues increased to $251mm, up 47% • 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 $66mm, up 50%, driven by growth in all business lines • Combined ratio improved to 89.6% 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 Q3’21 Highlights & Outlook 27 37 15 23 2 5 $44 $66 Q3'20 Q3'21 123 175 41 61 7 15 $170 $251 Q3'20 Q3'21 74.3% 73.8% 16.3% 15.8% 90.6% 89.6% Q3'20 Q3'21 ($ 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. Q3’20 Q3’21 Q3’20 YTD Q3'21 YTD Premiums & equivalents2 $464.7 $613.1 $1,176.0 $1,689.6 Revenue $174.0 $246.7 $482.3 $721.5 Pre-tax income (loss) $13.4 $13.3 $0.4 $49.6 Adjusted net income1 $12.1 $19.5 $29.8 $46.4 Adjusted ROAE1 17.1% 26.8% 14.2% 20.9% Combined ratio 90.6% 89.6% 92.1% 91.0% Unearned premiums & Deferred revenue $1,151.3 $1,564.4
77.0% 74.9% 74.9% 15.8% 17.2% 16.1% 92.8% 92.1% 91.0% Q3'19 YTD Q3'20 YTD Q3'21 YTD $25.3 $29.8 $46.4 Q3'19 YTD Q3'20 YTD Q3'21 YTD 7 Robust growth trajectory while maintaining underwriting profitability ($ in millions) Gross Written Premiums & Equivalents Underwriting & Fee Revenues and Margin1 Adjusted Net Income1 702 742 1095 209 399 525 24 35 70 $935 $1,176 $1,690 Q3'19 YTD Q3'20 YTD Q3'21 YTD Combined Ratio Adj. ROAE%1 Adj. Net Income U/W Ratio Expense Ratio U.S. Insurance U.S. Warranty Solutions Europe Warranty Solutions 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. 10% 14% $454 $501 $707 Q3'19 YTD Q3'20 YTD Q3'21 YTD $104 $126 $177 Q3'19 YTD Q3'20 YTD Q3'21 YTD U/W & Fee Revenues U/W & Fee Margin 21%
Insurance Investment Portfolio Cash & Equivalents 12% Government & Agency 37% Corporate Bonds 22% Fixed Income ETFs 5% Muni & ABS 6% Equities 9% Other Alternatives 9% Cash & Equivalents 15% Government & Agency 45% AAA 4% AA 11% A 18% BBB 1% Fixed Income ETFs 6% $683mm 8 Q3’21 Investment Mix Liquid and Highly-Rated Fixed Income Portfolio ($ in millions) 518 683 133 149 $651 $832 Q3'20 Q3'21 Other investments Fixed Income & Cash Income Statement Metrics $832mm ◼ ~2.8 year duration ◼ $552mm Blackrock managed ◼ AA rating ◼ 1.5% book yield Q3’20 Q3'21 Q3’20 YTD Q3’21 YTD Net investment income $3.0 $3.3) $8.8) $9.3 Net realized and unrealized gains (losses) $0.7 $(7.5) $(27.3) $5.0
Performance Highlights Q3’21
74.4 81.9 52.1 63.7 27.6 29.5 5.5 4.7 $159.6 $179.8 Q3'20 Q3'21 Financial drivers Pre-tax income Adjusted Net Income1 Q3’20 YTD Q3’21 YTD Q3’20 YTD Q3’21 YTD Mortgage $20.8 $25.1 $19.5 $15.5 Senior living (Invesque)2 (63.4) 3.5 2.0 - Maritime transportation 1.0 7.7 1.5 8.1 Other 3.0 1.7 0.1 - Total $(38.6) $38.0 $23.1 $23.6 10 Tiptree Capital – Financial Performance Highlights Mortgage: • Mortgage origination volumes of $1,181mm, flat year-over-year • Pre-tax income increased over PY from higher servicing fees and positive fair value adjustments on the mortgage servicing portfolio • MSR asset of $26mm, including positive MTM of $5.1mm in 2021 Maritime transportation: • Supply/demand imbalance in dry-bulk sector drove improvement in charter rates and revenues • Partially offset by softness in tanker rates Senior living (Invesque – IVQ.U): • Observing positive trends in senior living, skilled nursing and medical office sectors • Year-to-date unrealized gains of $3.5mm 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 - $35.3 million, $29.2 million in Tiptree Capital as of September 30, 2021. Equity Capital Allocation Q3’21 Year-to-date Highlights ($ in millions) Other
$35.2 $47.0 Q3'20 YTD Q3'21 YTD 11 Continued growth and underwriting performance at Fortegra Improvement in long-term, net investment income Focused on long-term shareholder value creation Summary & Outlook ($ in millions, except per share information) Adjusted Net Income1 ✓ Diversification of our underlying operations supported strong results ― Consistent growth and improving profitability at Fortegra ― Strong performance from mortgage & shipping operations ✓ $200 million investment in Fortegra from Warburg Pincus 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 Q3’21 Year-to-date Highlights Looking Ahead 12.2% 16.2% Adjusted ROAE1
Appendix Non-GAAP Reconciliations • Insurance underwriting and fee revenue • Insurance underwriting and fee margin • Book Value per share • Adjusted net income
Q3’21 Capital Allocation & Annual Performance Comparison 131 Total stockholders’ equity shown. Net of other non-controlling interests total stockholders’ equity was $385.2 million as of September 30, 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 $63.2mm, up 37.7% from Q3’20 • Adjusted return on average equity of 16.5%1 Insurance: • 20.7% Adjusted return on average equity • Growth in insurance underwriting and fee revenues • Combined ratio improvement Tiptree Capital: • 22.0% Adjusted return on average equity • Strong mortgage volumes and margins • Positive operating contributions from shipping investments Q3’21 Last Twelve Month Highlights Stockholders’ Equity1 Adjusted Net Income2 Business Lines Q3’21 Q3’20 LTM Q3’21 LTM Insurance $294.5 $37.4 $60.0 - Underwriting & fees $29.2 $51.3 - Investments $8.2 $8.7 Tiptree Capital $179.8 $31.5 $33.6 Corporate $(72.2) $(23.0) $(30.4) Total Tiptree $402.1 $45.9 $63.2 - Total shares outstanding 33.6 33.9 ($ in millions) Operating Performance
14 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.
15 Non-GAAP Reconciliations – Underwriting & 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, September 30, 2021 2020 Total revenues $ 246,706 $ 174,005 Less: Net investment income (3,330) (3,023) Less: Net realized and unrealized gains (losses) 7,492 (659) Underwriting and fee revenues $ 250,868 $ 170,323 Three Months Ended September 30, 2021 2020 Income (loss) before income taxes $ 13,337 $ 13,447 Less: Net investment income (3,330) (3,023) Less: Net realized and unrealized gains (losses) 7,492 (659) Plus: Depreciation and amortization 4,307 2,329 Plus: Interest expense 4,268 3,988 Plus: Employee compensation and benefits 19,526 15,969 Plus: Other expenses 20,045 11,666 Underwriting and fee margin $ 65,645 $ 43,717 As of September 30, 2021 2020 Total stockholders’ equity $ 402,142 $ 361,691 Less: Non-controlling interests 16,930 13,953 Total stockholders’ equity, net of non-controlling interests $ 385,212 $ 347,738 Total common shares outstanding 33,889 33,563 Book value per share $ 11.37 $ 10.36 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 $11.37 as of September 30, 2021 compared with $10.36 as of September 30, 2020. Total stockholders’ equity, net of other non-controlling interests for the Company was $385.2 million as of September 30, 2021, which comprised total stockholders’ equity of $402.1 million adjusted for $16.9 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 $347.7 million as of September 30, 2020, which comprised total stockholders’ equity of $361.7 million adjusted for $14.0 million attributable to non-controlling interest at subsidiaries that are not wholly owned by the Company. Nine Months Ended, September 30, 2021 2020 $ 721,524 $ 482,299 (9,331) (8,803) (5,004) 27,310 $ 707,189 $ 500,806 Nine Months Ended September 30, 2021 2020 $ 49,569 $ 418 (9,331) (8,803) (5,004) 27,310 12,905 7,229 13,097 11,218 57,007 47,927 59,168 40,574 $ 177,411 $ 125,873
16 Non-GAAP Reconciliations – Adjusted Net Income ($ in thousands) Three Months Ended September 30, 2021 Tiptree Capital 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 (2,115) (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% Nine Months Ended September 30, 2021 Tiptree Capital 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 (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% (1) Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions. Three Months Ended September 30, 2020 Tiptree Capital Insurance Mortgage Other Corporate Total $ 13,447 $ 14,453 $ (4,978) $ (9,025) $ 13,897 (2,167) (2,830) 3,011 2,830 844 (659) (66) 7,586 – 6,861 2,256 – – – 2,256 535 1,224 (3) 687 2,434 (53) – 340 (93) 194 – – (2,441) – (2,441) (1,248) (916) (3,020) (1,054) (6,238) $ 12,111 $ 11,865 $ 495 $ (6,664) $ 17,807 $ 12,111 $ 11,865 $ 495 $ (6,664) $ 17,807 283,989 45,991 94,580 (70,116) 354,441 17.1% 103.2% 2.1% NM% 20.1% Nine Months Ended September 30, 2020 Tiptree Capital Insurance Mortgage Other Corporate Total $ 418 $ 20,768 $ (59,407) $ (25,199) $ (63,420) 2,711 (4,061) 14,742 8,638 22,030 27,310 2,753 65,982 – 96,045 6,958 – – – 6,958 1,378 2,120 155 2,504 6,157 2,185 – 340 353 2,878 – – (2,961) – (2,961) (11,125) (2,092) (15,286) (3,944) (32,447) $ 29,835 $ 19,488 $ 3,565 $ (17,648) $ 35,240 $ 29,835 $ 19,488 $ 3,565 $ (17,648) $ 35,241 279,897 43,001 122,554 (58,899) 386,553 14.2% 60.4% 3.9% NM% 12.2% Trailing Twelve Months Ended September 30, 2021 Tiptree Capital Insurance Mortgage Other Corporate Total $ 76,099 $ 35,453 $ 11,079 $ (43,612) $ 79,019 (17,593) (7,453) (2,468) 7,695 (19,819) (18,510) (3,810) (1,826) – (24,146) 13,754 – – – 13,754 2,256 693 228 2,499 5,676 3,309 – 1,013 2,576 6,898 – – (1,347) – (1,347) 673 (308) 2,406 395 3,166 $ 59,988 $ 24,575 $ 9,085 $ (30,447) $ 63,201 $ 59,988 $ 24,575 $ 9,085 $ (30,447) $ 63,201 290,262 57,893 94,765 (61,003) 381,917 20.7% 42.4% 9.6% NM% 16.5%
TiptreeInc. ir@tiptreeinc.com