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 4, 2020
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 4, 2020, Tiptree Inc. (the “Company” or “Tiptree”) issued a press release announcing its results of operations for the quarter ended September 30, 2020. 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 23, 2020 and a payment date of November 30, 2020.
On November 4, 2020, the Company posted an investor presentation dated November 2020 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, 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 November4, 2020 |
|---|---|
| 99.2 | Tiptree Inc. Investor Presentation - November 2020 |
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 4, 2020 | By: | /s/ Jonathan Ilany |
| Name: Jonathan Ilany | |||
| Title: Chief Executive Officer |
Document
Exhibit 99.1
TIPTREE REPORTS Q3 2020 RESULTS
•Revenues of $224.0 million for the quarter, up $34.8 million or 18.4% from the prior year period. Year-to-date revenues of $552.9 million, down 2% from the prior year period, driven by unrealized investment mark-to-market losses. Excluding marks, year-to-date revenues up 16.9% versus 2019.
•Operating EBITDA(1) of $31.9 million increased 84.4% from the prior year period. Year-to-date Operating EBITDA of $69.9 million, increased 64.1% from prior year period. Improvements versus prior year driven by growth in insurance premiums and mortgage volumes, and improving margins in both businesses.
•Book value per share of $10.36 as of September 30, 2020, an increase of 4.3% (including dividends paid of $0.04) from prior quarter driven by strong underlying operations and year-to-date repurchases of 1.477 million shares at an average 37% discount to book value.
•Declared a dividend of $0.04 per share to stockholders of record on November 23, 2020 with a payment date of November 30, 2020.
New York, New York - November 4, 2020 - Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), a holding company that combines specialty insurance operations with investment management, today announced its financial results for the three and nine months ended September 30, 2020.
| ($ in millions, except per share information) | Three Months Ended September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| GAAP: | 2020 | 2019 | 2020 | 2019 | ||||
| Total revenues | $ | 224.0 | $ | 189.2 | $ | 552.9 | $ | 564.2 |
| Net income (loss) attributable to common stockholders | $ | 12.8 | $ | (1.5) | $ | (43.4) | $ | 14.2 |
| Diluted earnings per share | $ | 0.35 | $ | (0.04) | $ | (1.27) | $ | 0.39 |
| Cash dividends paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.115 |
| Non-GAAP: (1) | ||||||||
| Operating EBITDA | $ | 31.9 | $ | 17.3 | $ | 69.9 | $ | 42.6 |
| Book value per share | $ | 10.36 | $ | 11.43 | $ | 10.36 | $ | 11.43 |
____________________________
(1) For further information relating to the Company’s Operating EBITDA 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 5, 2020 at 9:00 a.m. Eastern Time to discuss its Q3 2020 financial results. A copy of our investor presentation, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreeinc.com.
The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). Please dial in at least five minutes prior to the start time.
A replay of the call will be available from Thursday, November 5, 2020 at 1:00 p.m. Eastern Time, until midnight Eastern on Thursday, November 12, 2020. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 13708726.
Financial Overview
Overall:
Page 1
•Net income was $12.8 million for the quarter, an increase of $14.3 million over prior year driven by increases in operational performance.
•Operating EBITDA of $31.9 million for the quarter, up $14.6 million, from growth in insurance and mortgage operations.
•Book value per share of $10.36 as of September 30, 2020, when combined with dividends paid, increased 4.3% from the prior quarter, driven by a combination of earnings and share repurchases in the quarter. Book value per share as of September 30, 2020, when combined with dividends paid, represents a decrease of 8.0% from September 30, 2019, primarily driven by unrealized mark-to-market losses on our investment in Invesque.
•Year-to-date, we purchased and retired 1,477,302 shares of our common stock for $9.2 million, at an average 37% discount to book.
•Cash and cash equivalents of $103.5 million as of September 30, 2020, of which $72.4 million resides outside our statutory insurance subsidiaries.
Insurance:
•Gross written premiums and premium equivalents for the quarter were $464.6 million, up 25.0% versus the prior year period, driven by growth in warranty service contracts and specialty programs. Year-to-date premiums and equivalents of $1,175.6 million, up 25.5% from prior year driven by growth in warranty and specialty programs, and premium finance volumes. Excluding the incremental premium equivalents from our acquisition of Smart AutoCare, premiums and equivalents increased 7.4% for the quarter and 9.7% for the year-to-date period.
•Operating EBITDA was $19.1 million for the quarter, up $3.1 million, or 19.4%, from growth in warranty and specialty programs and improved margins. Year-to-date Operating EBITDA of $48.1 million, up 8.0% from increases in premium and equivalents.
•Quarterly combined ratio of 90.4% declined from 92.1% in the prior year period driven by improved underwriting performance and the overall shift in product mix.
•In September 2020, we announced the formation of a new excess and surplus lines subsidiary, Fortegra Specialty Insurance Company, which we expect will broaden our product reach and scope within the U.S.
•In October 2020, we refinanced and increased our premium finance asset-based facility as we continue to expand our vertically integrated product offerings.
Tiptree Capital:
•For the quarter, Operating EBITDA improved year over year by $11.2 million. Year-to-date Operating EBITDA was $36.1 million, up from $15.3 million in the prior year period driven by higher loan origination volume and margins in our mortgage business.
•Low mortgage rates due to the Federal Reserve intervention in mortgage markets, combined with limitations on operating capacity driven by COVID-19, and rising home prices in certain markets has resulted in higher refinance mortgage volumes and margins.
Consolidated Results of Operations
Revenues
For the three months ended September 30, 2020, revenues were $224.0 million, which increased $34.8 million, or 18.4% compared to the prior year period primarily due to a combination of growth in service and administrative fees related to our warranty programs and gains on mortgage loans sold in our mortgage business. For the nine months ended September 30, 2020, revenues were $552.9 million, which decreased $11.3 million, or 2.0% compared to the prior year period, primarily due to net realized and unrealized losses on Invesque and other securities held at fair value. Earned premiums and service and administrative fees were $164.1 million for the three months ended September 30, 2020, up $8.8 million, or 5.7%, and $479.3 million for the nine months ended September 30, 2020, up $35.9 million, or 8.1%, driven by growth in warranty service contracts from our acquisition of Smart AutoCare and light commercial specialty programs. Also contributing to higher revenues in the quarter and the year to date were increases in net realized and unrealized gains on mortgage loans, which were up $21.7 million and $41.6 million, respectively. Offsetting all of these increases were net realized and unrealized losses of $7.7 million and $97.9 million for the three and nine month periods ended September 30, 2020, on Invesque and other equity holdings.
The combination of unearned premiums and deferred revenues on the balance sheet grew by $361.5 million, or 45.8%, from September 30, 2019 to September 30, 2020 as a result of increased written premiums and premium equivalents, primarily in warranty programs, including the acquisition of Smart AutoCare, which contributed $205.9 million of growth in deferred revenues, and in light commercial specialty programs.
The table below provides a break down between net realized and unrealized gains and losses from Invesque and from other securities which impacted our consolidated results on a pre-tax basis. Many of our investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect our earnings relating to these investments to be relatively
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volatile between periods, which was highlighted by the market volatility in the first half of the year caused by uncertainly regarding the impact of COVID-19. Our fixed income securities are primarily marked to market through accumulated other comprehensive income (AOCI) in stockholders’ equity and do not impact net realized and unrealized gains and losses until they are sold.
| ($ in millions) | Three Months Ended September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Net realized and unrealized gains (losses)(1) | $ | 1.5 | $ | (8.9) | $ | (18.1) | $ | 1.3 |
| Net realized and unrealized gains (losses) - Invesque | $ | (9.2) | $ | — | $ | (79.8) | $ | 6.2 |
____________________________
(1) Excludes Invesque, Mortgage realized and unrealized gains and losses and NPLs.
Net Income (Loss) Attributable to Common Stockholders
For the three months ended September 30, 2020, net income available to common stockholders was $12.8 million, an increase of $14.3 million. For the nine months ended September 30, 2020, net loss available to common stockholders was $43.4 million, a decrease of $57.6 million. The increase in the quarter and the decrease year to date were primarily driven by the same factors that impacted revenues in the respective periods.
Non-GAAP
Management uses Operating EBITDA and book value per share as measurements of operating performance which are non-GAAP measures. Management believes the use of Operating EBITDA provides supplemental information useful to investors as it is frequently used by the financial community to analyze financial performance, and to analyze a company’s ability to service its debt and to facilitate comparison among companies. Management uses Operating EBITDA as part of its capital allocation process and to assess comparative returns on invested capital amongst our businesses and investments. Operating EBITDA is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. 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.
Operating EBITDA for the three months ended September 30, 2020 was $31.9 million, an increase of $14.6 million, or 84.4% from the prior year period, and $69.9 million for the nine months ended September 30, 2020, an increase of $27.3 million, or 64.1%. For the three and nine months ended September 30, 2020, the key drivers of the increases were growth in warranty and specialty programs in our insurance business, and increases in volumes and margins in our mortgage business in Tiptree Capital.
Total stockholders’ equity was $361.7 million as of September 30, 2020 compared to $407.4 million as of September 30, 2019. Over the past twelve months, Tiptree returned $14.6 million to shareholders through share repurchases and dividends paid. Book value per share for the period ended September 30, 2020 was $10.36, a decrease from book value per share of $11.43 as of September 30, 2019, but up $0.39 per share versus the second quarter. The key drivers of the reduction from the year earlier period were losses per share and dividends paid of $0.16 per share. The decrease was partially offset by the purchase of 1.477 million shares at an average 37% discount to book value. The key driver of the improvement versus the prior quarter was positive net income, as our business operations showed positive momentum relative to the impact from COVID-19 in the first half of 2020.
Results by Segment
We classify our business into one reportable segment, Tiptree Insurance, with the remainder of our non-insurance operations aggregated into Tiptree Capital. Corporate activities include holding company interest expense, corporate employee compensation and benefits, and other expenses, including, but not limited to, public company expenses. The following table presents the components of total pre-tax income.
Pre-tax Income
| ($ in millions) | Three Months Ended September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Tiptree Insurance | $ | 13.4 | $ | 8.3 | $ | 0.4 | $ | 28.4 |
| Tiptree Capital | 9.5 | (1.4) | (38.6) | 16.2 | ||||
| Corporate | (9.0) | (8.6) | (25.2) | (25.4) | ||||
| Pre-tax income (loss) | $ | 13.9 | $ | (1.7) | $ | (63.4) | $ | 19.2 |
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Operating EBITDA - Non-GAAP (1)
The following tables present the components of Operating EBITDA.
| ($ in millions) | Three Months Ended September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Tiptree Insurance | $ | 19.1 | $ | 16.0 | $ | 48.1 | $ | 44.5 |
| Tiptree Capital | 18.2 | 7.0 | 36.1 | 15.3 | ||||
| Corporate | (5.4) | (5.7) | (14.3) | (17.2) | ||||
| Operating EBITDA (1) | $ | 31.9 | $ | 17.3 | $ | 69.9 | $ | 42.6 |
____________________________
(1) For further information relating to the Company’s Operating EBITDA, including a reconciliation to pre-tax income, see “—Non-GAAP Reconciliations.”
About Tiptree
Tiptree Inc. (NASDAQ: TIPT) is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. Our principal operating business, Fortegra Financial, along with its subsidiaries, is a leading provider of specialty insurance, warranty products and related administration services. We also allocate capital to a diverse group of select 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 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 Sheet
($ in thousands, except share data)
| As of | ||||
|---|---|---|---|---|
| September 30,<br>2020 | December 31, 2019 | |||
| Assets: | ||||
| Investments: | ||||
| Available for sale securities, at fair value, net of allowance for credit losses | $ | 369,914 | $ | 335,192 |
| Loans, at fair value | 115,472 | 108,894 | ||
| Equity securities | 111,659 | 155,378 | ||
| Other investments | 214,192 | 137,472 | ||
| Total investments | 811,237 | 736,936 | ||
| Cash and cash equivalents | 103,502 | 133,117 | ||
| Restricted cash | 78,095 | 11,473 | ||
| Notes and accounts receivable, net | 361,747 | 286,968 | ||
| Reinsurance receivables | 646,571 | 539,833 | ||
| Deferred acquisition costs | 204,396 | 166,493 | ||
| Goodwill | 163,366 | 99,147 | ||
| Intangible assets, net | 134,199 | 47,974 | ||
| Other assets | 151,175 | 68,510 | ||
| Assets held for sale | 140,578 | 107,835 | ||
| Total assets | $ | 2,794,866 | $ | 2,198,286 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Debt, net | $ | 397,764 | $ | 374,454 |
| Unearned premiums | 792,533 | 754,993 | ||
| Policy liabilities and unpaid claims | 211,198 | 144,384 | ||
| Deferred revenue | 358,734 | 94,601 | ||
| Reinsurance payable | 189,500 | 143,869 | ||
| Other liabilities and accrued expenses | 351,234 | 172,140 | ||
| Liabilities held for sale | 132,212 | 102,430 | ||
| Total liabilities | $ | 2,433,175 | $ | 1,786,871 |
| 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, 33,563,019 and 34,562,553 shares issued and outstanding, respectively | 34 | 35 | ||
| Additional paid-in capital | 319,522 | 326,140 | ||
| Accumulated other comprehensive income (loss), net of tax | 5,662 | 1,698 | ||
| Retained earnings | 22,520 | 70,189 | ||
| Total Tiptree Inc. stockholders’ equity | 347,738 | 398,062 | ||
| Non-controlling interests | 13,953 | 13,353 | ||
| Total stockholders’ equity | 361,691 | 411,415 | ||
| Total liabilities and stockholders’ equity | $ | 2,794,866 | $ | 2,198,286 |
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Tiptree Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
| Three Months Ended September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues: | ||||||||
| Earned premiums, net | $ | 116,418 | $ | 129,163 | $ | 344,994 | $ | 364,712 |
| Service and administrative fees | 47,701 | 26,058 | 134,290 | 78,681 | ||||
| Ceding commissions | 5,157 | 1,598 | 16,217 | 7,150 | ||||
| Net investment income | 3,023 | 2,984 | 8,803 | 10,713 | ||||
| Net realized and unrealized gains (losses) | 38,959 | 15,302 | 6,628 | 58,746 | ||||
| Other revenue | 12,783 | 14,080 | 41,974 | 44,158 | ||||
| Total revenues | 224,041 | 189,185 | 552,906 | 564,160 | ||||
| Expenses: | ||||||||
| Policy and contract benefits | 57,738 | 43,993 | 167,761 | 124,256 | ||||
| Commission expense | 68,868 | 77,430 | 207,172 | 225,070 | ||||
| Employee compensation and benefits | 45,715 | 34,176 | 124,894 | 94,298 | ||||
| Interest expense | 8,321 | 6,731 | 23,518 | 20,183 | ||||
| Depreciation and amortization | 4,010 | 3,523 | 12,244 | 9,908 | ||||
| Other expenses | 25,492 | 24,930 | 80,737 | 71,183 | ||||
| Total expenses | 210,144 | 190,783 | 616,326 | 544,898 | ||||
| Income (loss) before taxes | 13,897 | (1,598) | (63,420) | 19,262 | ||||
| Less: provision (benefit) for income taxes | (844) | (649) | (22,030) | 3,706 | ||||
| Net income (loss) before non-controlling interests | 14,741 | (949) | (41,390) | 15,556 | ||||
| Less: net income (loss) attributable to non-controlling interests | 1,978 | 508 | 2,038 | 1,342 | ||||
| Net income (loss) attributable to common stockholders | $ | 12,763 | $ | (1,457) | $ | (43,428) | $ | 14,214 |
| Net income (loss) per common share: | ||||||||
| Basic earnings per share | $ | 0.37 | $ | (0.04) | $ | (1.27) | $ | 0.40 |
| Diluted earnings per share | $ | 0.35 | $ | (0.04) | $ | (1.27) | $ | 0.39 |
| Weighted average number of common shares: | ||||||||
| Basic | 33,684,301 | 34,552,171 | 34,076,837 | 34,583,709 | ||||
| Diluted | 33,684,301 | 34,552,171 | 34,076,837 | 34,583,709 | ||||
| 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 — Operating EBITDA
The Company defines Operating EBITDA as GAAP net income of the Company adjusted to add (i) corporate interest expense, consolidated income taxes and consolidated depreciation and amortization expense, (ii) adjust for the effect of purchase accounting, (iii) adjust for non-cash fair value adjustments, (iv) any significant non-recurring expenses, (v) stock based compensation expense, (vi) less realized and unrealized gains and losses, and (vii) less third party non-controlling interests. Operating EBITDA is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income.
| ($ in millions) | Three Months Ended September 30, | Nine Months Ended<br>September 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Net income (loss) attributable to common stockholders | $ | 12.8 | $ | (1.5) | $ | (43.4) | $ | 14.2 |
| Add: net (loss) income attributable to non-controlling interests | 1.9 | 0.5 | 2.0 | 1.3 | ||||
| Income (loss) | $ | 14.7 | $ | (1.0) | $ | (41.4) | $ | 15.5 |
| Corporate debt related interest expense(1) | 6.1 | 5.0 | 17.3 | 14.9 | ||||
| Consolidated income tax expense (benefit) | (0.8) | (0.7) | (22.0) | 3.7 | ||||
| Depreciation and amortization expense(2) | 3.9 | 3.4 | 12.0 | 9.5 | ||||
| Non-cash fair value adjustments | (2.5) | (0.3) | (3.1) | (0.5) | ||||
| Non-recurring expenses(3) | 0.2 | 0.5 | 2.9 | 2.5 | ||||
| Stock based compensation expense | 2.6 | 1.5 | 6.2 | 4.5 | ||||
| Realized and unrealized (gain) loss(4) | 7.7 | 8.9 | 97.9 | (7.5) | ||||
| Third party non-controlling interests(5) | — | — | 0.1 | — | ||||
| Operating EBITDA | $ | 31.9 | $ | 17.3 | $ | 69.9 | $ | 42.6 |
_______________________________
| (1) | Corporate debt interest expense includes interest expense from secured corporate credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt in Tiptree Insurance and Tiptree Capital is not added-back for Operating EBITDA. |
|---|---|
| (2) | Represents total depreciation and amortization expense less purchase accounting amortization related adjustments at our insurance companies. Following the purchase accounting adjustments, current period expenses associated with deferred costs were more favorably stated and current period income associated with deferred revenues were less favorably stated. Thus, the purchase accounting effect related to our insurance companies increased EBITDA above what the historical basis of accounting would have generated. |
| (3) | Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs. |
| (4) | Adjustment excludes Mortgage realized and unrealized gains and losses - Performing and NPLs, as those are recurring in nature and align with those business models. |
| (5) | Removes the Operating EBITDA associated with third party non-controlling interests. Does not remove the non-controlling interests related to employee-based shares. |
Non-GAAP Financial Measures — Operating EBITDA
The tables below present Operating EBITDA by business component.
| Three Months Ended September 30, 2020 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | Specialty Insurance | Tiptree Capital | Corporate Expenses | Total | ||||
| Pre-tax income/(loss) from continuing operations | $ | 13.4 | $ | 9.5 | $ | (9.0) | $ | 13.9 |
| Adjustments: | ||||||||
| Corporate debt related interest expense(1) | 3.4 | — | 2.7 | 6.1 | ||||
| Depreciation and amortization expenses(2) | 2.2 | 1.5 | 0.2 | 3.9 | ||||
| Non-cash fair value adjustments | — | (2.5) | — | (2.5) | ||||
| Non-recurring expenses(3) | (0.1) | 0.3 | — | 0.2 | ||||
| Stock-based compensation expense | 0.6 | 1.3 | 0.7 | 2.6 | ||||
| Realized and unrealized (gain) loss(4) | (0.4) | 8.1 | — | 7.7 | ||||
| Third party non-controlling interests(5) | — | — | — | — | ||||
| Operating EBITDA | $ | 19.1 | $ | 18.2 | $ | (5.4) | $ | 31.9 |
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| Nine Months Ended September 30, 2020 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions) | Tiptree Insurance | Tiptree Capital | Corporate Expenses | Total | ||||||||||||||
| Pre-tax income/(loss) from continuing operations | $ | 0.4 | $ | (38.6) | $ | (25.2) | $ | (63.4) | ||||||||||
| Adjustments: | ||||||||||||||||||
| Corporate debt related interest expense(1) | 9.9 | — | 7.4 | 17.3 | ||||||||||||||
| Depreciation and amortization expenses(2) | 7.0 | 4.4 | 0.6 | 12.0 | ||||||||||||||
| Non-cash fair value adjustments | — | (3.1) | — | (3.1) | ||||||||||||||
| Non-recurring expenses(3) | 2.2 | 0.3 | 0.4 | 2.9 | ||||||||||||||
| Stock-based compensation expense | 1.4 | 2.3 | 2.5 | 6.2 | ||||||||||||||
| Realized and unrealized (gain) loss(4) | 27.2 | 70.7 | — | 97.9 | ||||||||||||||
| Third party non-controlling interests(5) | — | 0.1 | — | 0.1 | ||||||||||||||
| Operating EBITDA | $ | 48.1 | $ | 36.1 | $ | (14.3) | $ | 69.9 | Three Months Ended September 30, 2019 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| ($ in millions) | Specialty Insurance | Tiptree Capital | Corporate Expenses | Total | ||||||||||||||
| Pre-tax income/(loss) from continuing operations | $ | 8.3 | $ | (1.4) | $ | (8.6) | $ | (1.7) | ||||||||||
| Adjustments: | ||||||||||||||||||
| Corporate debt related interest expense(1) | 3.4 | — | 1.6 | 5.0 | ||||||||||||||
| Depreciation and amortization expenses(2) | 2.2 | 0.9 | 0.3 | 3.4 | ||||||||||||||
| Non-cash fair value adjustments | — | (0.3) | — | (0.3) | ||||||||||||||
| Non-recurring expenses(3) | 0.3 | — | 0.2 | 0.5 | ||||||||||||||
| Stock-based compensation expense | 0.7 | — | 0.8 | 1.5 | ||||||||||||||
| Realized and unrealized (gain) loss(4) | 1.1 | 7.8 | — | 8.9 | ||||||||||||||
| Third party non-controlling interests(5) | — | — | — | — | ||||||||||||||
| Operating EBITDA | $ | 16.0 | $ | 7.0 | $ | (5.7) | $ | 17.3 | Nine Months Ended September 30, 2019 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| ($ in millions) | Tiptree Insurance | Tiptree Capital | Corporate Expenses | Total | ||||||||||||||
| Pre-tax income/(loss) from continuing operations | $ | 28.4 | $ | 16.2 | $ | (25.4) | $ | 19.2 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Corporate debt related interest expense(1) | 10.1 | — | 4.8 | 14.9 | ||||||||||||||
| Depreciation and amortization expenses(2) | 6.5 | 2.5 | 0.5 | 9.5 | ||||||||||||||
| Non-cash fair value adjustments | — | (0.5) | — | (0.5) | ||||||||||||||
| Non-recurring expenses(3) | 1.7 | 0.2 | 0.6 | 2.5 | ||||||||||||||
| Stock-based compensation expense | 2.0 | 0.2 | 2.3 | 4.5 | ||||||||||||||
| Realized and unrealized (gain) loss(4) | (4.2) | (3.3) | — | (7.5) | ||||||||||||||
| Third party non-controlling interests(5) | — | — | — | — | ||||||||||||||
| Operating EBITDA | $ | 44.5 | $ | 15.3 | $ | (17.2) | $ | 42.6 |
_______________________________
The footnotes below correspond to the tables above, under “Non-GAAP Financial Measures — Operating EBITDA”
| (1) | Corporate debt interest expense includes interest expense from secured corporate credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt in Tiptree Insurance and Tiptree Capital is not added-back for Operating EBITDA. |
|---|---|
| (2) | Represents total depreciation and amortization expense less purchase accounting amortization related adjustments at our insurance companies. Following the purchase accounting adjustments, current period expenses associated with deferred costs were more favorably stated and current period income associated with deferred revenues were less favorably stated. Thus, the purchase accounting effect related to our insurance companies increased EBITDA above what the historical basis of accounting would have generated. |
| (3) | Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs. |
| (4) | Adjustment excludes Mortgage realized and unrealized gains and losses - Performing and NPLs, as those are recurring in nature and align with those business models. |
| (5) | Removes the Operating EBITDA associated with third party non-controlling interests. Does not remove the non-controlling interests related to employee-based shares. |
Page 8
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 millions, except per share information) | As of September 30, 2020 | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Total stockholders’ equity | $ | 361.7 | $ | 407.4 |
| Less: Non-controlling interests | 14.0 | 12.6 | ||
| Total stockholders’ equity, net of non-controlling interests | $ | 347.7 | $ | 394.8 |
| Total common shares outstanding | 33.6 | 34.6 | ||
| Book value per share | $ | 10.36 | $ | 11.43 |
Page 9
ex992investorpresentatio
Exhibit 99.2 Investor Presentation – Third Quarter 2020 November 2020 Financial Information for the three and nine months ended September 30, 2020
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," 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. 1
Overview & Financial Highlights
Q3’20 Highlights ($ in millions, except per share information) Overall Revenue Operating EBITDA of $31.9 million, up substantially driven by growth in insurance and mortgage operations $224.0 million 3 18.4% vs. prior year Quarterly total return of 4.3% driven by strong underlying operations; Year-over-year total return of (8.0)% , driven by unrealized mark-to-market losses, primarily related to our investment in Invesque and other equities Cash and cash equivalents of $103.5 million as of September 30, 2020, of which $72.4 million resides outside our Net income1 statutory insurance companies $12.8 million vs. prior year loss of $1.5 million Insurance Gross written premiums and premium equivalents4 for the quarter were $465 million, up 25.0% versus the prior year period, driven by growth in warranty and specialty programs. Operating EBITDA2 Combined ratio of 90.4% declined from 92.1% driven by improved underwriting performance and the overall shift in product mix $31.9 million In September 2020, we announced the formation of a new excess and surplus lines subsidiary, Fortegra Specialty Insurance 84.4% vs. prior year Company, which we expect will broaden our product reach and scope within the U.S. Tiptree Capital Book Value per share2,3 Strong operating performance driven by substantial increases in mortgage volumes and margins $10.36 Low mortgage rates due to the Federal Reserve intervention in mortgage markets, combined with limitations on operating capacity (8.0)% vs. 9/30/19 driven by COVID-19, and rising home prices in certain markets has resulted in higher refinance mortgage volumes and margins 1 Net income before non-controlling interests which Includes continuing and discontinued operations. 2 For a reconciliation of Non-GAAP metrics Operating EBITDA and book value per share to GAAP financials, see the Appendix. 3 Year-over-year total return defined as cumulative dividends paid of $0.16 per share plus book value per share as of September 30, 2020 3 4 Premium equivalents are the base used to calculate the service fee income for non-insurance products. This base includes the amount charged to end consumers for a warranty or a car club membership.
Financial Results ($ in millions, except per share information) Q3'19 Q3'20 Q3'19 Q3'20 YTD YTD Key Highlights: Total Revenues $189.2 $224.0 $564.2 $552.9 YTD revenues up 16.9% (excluding investment gains and losses), driven by: Net income (loss) b/f NCI $(0.9) $14.7 $15.6 $(41.4) • Stable growth in insurance underwriting & fee income Diluted EPS $(0.04) $0.35 $0.39 $(1.27) • Strong growth in volumes and margins in our mortgage operations Operating EBITDA1 $17.3 $31.9 $42.6 $69.9 Challenges: Total shares outstanding 34.6 33.6 Negative mark-to-market in our equity holdings (primarily Invesque) Book Value per share1 $11.43 $10.36 Operating EBITDA to Pre-tax Income Bridge Year-to-date $69.9 $(79.8) $(18.1) $(12.0) $(17.3) $(6.2) $0.1 $(63.4) (Q3'20 YTD) Quarterly (Q3'20) Operating Invesque Unrealized & Depreciation & Corporate Stock-based Non-cash fair value Total Pre-tax EBITDA Unrealized Gains Realized Gains Amortization Interest Expense Compensation adjustments & Other Income (Losses) (Losses)2 Expense 1 See the appendix for a reconciliation of Non-GAAP metrics including Operating EBITDA and Book Value per share. 4 2 Excludes Mortgage realized and unrealized gains and losses - Performing and NPLs.
KPIs - Underlying Operations Remain Resilient ($ in millions) Tiptree Operating EBITDA1 Insurance Premiums & Equivalents2 Q3'20 up 25% Q3'20 YTD up 26% over PY, 7% $465 over PY, 10% ex. $1,176 ex. acquisition acquisition Quarterly Year-to-date 30 93 $372 82 $937 188 33 $787 61 $295 104 Up 84% over Up 64% over $69.9 44 30 10 139 PY, 80% $31.9 PY, 59% 49 186 268 446 ex. acquisition ex. acquisition 104 65 176 $42.6 $36.1 171 191 442 504 449 $18.2 $38.3 167 $17.3 $11.4 $15.3 $14.4 Q3'18 Q3'19 Q3'20 Q3'18 Q3'19 Q3'20 $7.0 YTD YTD YTD Tiptree $4.4 Capital Insurance Unearned Premiums & Deferred Revenues $45.1 $44.5 $48.1 $19.1 Insurance $15.6 $16.0 Credit protection $1,151 Warranty Q3'20 up 46% Specialty 109 over PY, 20% Services Corporate $790 ex. acquisition $(5.6) $(5.7) $(5.4) $627 62 579 $(18.2) $(17.2) $(14.3) 56 278 Q3'18 Q3'19 Q3'20 188 Q3'18 Q3'19 Q3'20 450 463 YTD YTD YTD 383 Q3'18 Q3'19 Q3'20 1 See the appendix for a reconciliation of Non-GAAP measures including Operating EBITDA. 5 2 Premium equivalents are the base used to calculate the service fee income for non-insurance products. This base includes the amount charged to end consumers for a warranty or a car club membership.
Operating Performance ($ in millions) Q3'20 Capital Allocation & Annual Performance Comparison Q3'20 Last Twelve Month Highlights Tiptree Invested 1 Equity Capital1,2 Operating EBITDA Operating EBITDA of $90.8m, up 53.4% from Q3 2019 • Return on average invested capital (ROAIC%) of 16.5%3 Q3'20 Q3'20 Q3'19 Q3'20 Business Lines LTM LTM Insurance: 16.6% Operating ROAIC% Insurance $281.0 $339.9 $63.9 $66.9 • Growth in insurance underwriting income and fee revenue - Underwriting $47.7 $55.2 Reduced by $54.9m of acquisition • Continued growth in unearned premiums and deferred - Investments purchase price amortization $1 6.2 $11.7 revenue (an indicator of future revenues) (or $1.63 per share after-tax) • Acquisition of Smart Auto to accelerate auto warranty growth Tiptree Capital $148.9 $148.9 $17.7 $43.5 Tiptree Capital: 25.8% Operating ROAIC% Corporate $(82.2) $(82.2) $(22.4) $(19.6) • Strong mortgage volumes and margins - Corporate expenses $(16.4) $(15.8) • Positive operating contributions from shipping investments - Corporate incentive comp expense $(6.0) $(3.8) Total Tiptree $347.7 $406.6 $59.2 $90.8 Corporate: - Corporate interest expense2 $19.8 $22.1 • Stable corporate operating expenses - Total shares outstanding 34.6 33.6 1 See the appendix for a reconciliation of Non-GAAP metrics including Invested Capital and Operating EBITDA. 2 Invested Capital adds-back $54.9m of purchase price amortization, net of tax. LTM Corporate Debt related interest expense includes $13.2m in Insurance business and $8.9m interest expense In Corporate 6 3 Return on Average Invested Capital % (ROAIC%) equals LTM Operating EBITDA of $90.8m less LTM Corporate Interest expense of $22.1m over five-point average invested capital of $417.3m.
Insurance Highlights
Insurance – Financial Performance Highlights ($ in millions) Summary Financials1 Q3’20 Highlights & Outlook Q3'19 Q3'20 Q3'19 Q3'20 YTD YTD 1 Continuing growth through insurance and warranty program expansion Premiums & equivalents $371.7 $464.6 $936.7 $1,175.6 and onboarding new clients, with a focus on stable, improving profitability Revenue $160.1 $173.9 $469.1 $482.3 Pre-tax income (loss) $8.3 $13.4 $28.4 $0.4 • $1,151m of unearned premiums & deferred revenue, representing 46% year-over-year growth (20% growth, ex. Smart AutoCare acquisition) Net portfolio income (loss)1 $2.2 $2.9 $20.9 $(14.0) Operating EBITDA1 $16.0 $19.1 $44.5 $48.1 • Continued investment in strategic growth initiatives, including Fortegra Combined ratio1 92.1% 90.4% 92.8% 91.8% Warranty Solutions, Fortegra Specialty and premium finance Unearned premiums & Deferred revenue $789.8 $1,151.3 Insurance products 2 Produced stable, growing underwriting results Operating Net Written Underwriting • Underwriting margin of $126m, up 21%, driven by strong performance EBITDA1 Premiums Margin1 in warranty and specialty programs $435 • Improving profitability with year-to-date combined ratio of 91.8% $48 $126 $45 44 $379 8 Services/other $104 8 11 Specialty 88 73 Specialty 8 Investments 11 7 44 90 Warranty 25 Warranty 3 Capital and liquidity remain strong and continue to support growth Insurance 40 303 objectives underwriting 33 Credit Credit & fees 217 65 63 protection protection Q3'19 Q3'20 Q3'19 Q3'20 Q3'19 Q3'20 YTD YTD YTD YTD YTD YTD 8 1 See the appendix for a reconciliation of Non-GAAP measures underwriting margin, combined ratio, Operating EBITDA and Investment Net portfolio income to GAAP financials.
Insurance Investment Portfolio ($ in millions) $611 Fixed Income Diversification 22 28 Other Fixed Income ETFs - $514 29 5 BBB and below - 1% 11% Cash & Equivalents - 27 Equities 19% $438 30 101 17 2 29 Corporate Bonds A - 12% 33 99 56 • $527 million, AA rating 3 • ~1.7 year duration 85 25 Loans $527m AA - 12% • $360 million Blackrock Managed 36 Cash 4 370 Fixed Income ETFs Government & 315 Agency - 36% 256 AAA - 9% Available for Sale Securities Financial highlights Q3'18 Q3'19 Q3'20 ◼ Net investments grew $97m, or 18.9%, from Q3’19 driven by growth Income Statement Metrics in premiums and the acquisition of Smart AutoCare Q3'19 Q3'20 Q3'19 Q3'20 QTD QTD YTD YTD ◼ QTD net portfolio income of $2.9m, up $0.7m from prior year driven by growth in net investments Net Portfolio Income1 $2.2 $2.9 $20.9 $(14.0) Portfolio Return %5 0.5% 0.5% 4.4% (2.5)% ◼ YTD net portfolio loss of $14.0m, driven by realized and unrealized Operating EBITDA $3.4 $2.6 $11.4 $8.1 losses of $22.2m, primarily on equities (including Invesque) 1 See the appendix for a reconciliation of Net Investments and Net Portfolio Income. 2 Corporate bonds net of $67.1 million of securities sold, not yet purchased. 3 Net of non-recourse asset-based financing for 2018 period. 4 Cash and cash equivalents, plus restricted cash, net of due to/due from brokers, cash pledged for securities sold but not yet purchased, and borrowings under the revolving line of credit. See appendix for reconciliation to GAAP financials. 9 5 Total Portfolio Return % represents the ratio of annualized net investment income, realized and unrealized gains (losses) (including on AFS securities which is included in AOCI) less investment portfolio interest expense to the average of the prior four quarters Net Investments.
Performance Highlights
Tiptree Capital – Financial Performance Highlights ($ in millions) Invested Capital1 Q3’20 Performance & Outlook1 $198.3 Seniors Housing (Invesque): • Quarterly unrealized losses of $7.6m from negative share $173.3 29.4 price movement $148.9 35.7 • Invesque using excess liquidity from dividend suspension to Specialty finance & reduce leverage levels 95.0 47.5 Other 102.4 27.6 Seniors Housing (Invesque/Care)2 Maritime transportation: Maritime transportation 73.9 73.8 • Improving demand in dry-bulk sector as global economies re- 35.2 open, while tanker rates have normalized from first half 2020 Q3'18 Q3'19 Q3'20 1 Return on Invested Capital Specialty finance/other: Pre-tax income Operating EBITDA • Mortgage pre-tax income up substantially year-over-year Q3'19 Q3'20 Q3'19 Q3'20 driven by improved volumes and margins, YTD YTD YTD YTD • Year-to-date mortgage origination volumes of $1.2B, up 54% Senior living (Invesque)2 6.2 (63.5) 7.6 2.5 year-over-year Maritime transportation 1.0 1.2 2.9 5.4 Specialty finance/other 9.0 23.7 4.8 28.2 Total $16.2 $(38.6) $15.3 $36.1 1 See the appendix for a reconciliation of Operating EBITDA and Invested Capital to GAAP financials. 11 2 17.0m of Invesque common shares, 2.9m shares held in the insurance company investment portfolio. On balance sheet at fair value - $33.1 million, $27.4 million in Tiptree Capital as of September 30, 2020.
Summary & Outlook ($ in millions, except per share information) Q3’20 year-to-date highlights Operating EBITDA1 ✓ Resilient underlying operational performance in 2020 ✓ Continued execution on growth initiatives in our insurance operations $69.9 $42.6 ✓ Despite unrealized marks, capital and liquidity remain strong ✓ Successfully refinanced all major debt facilities to support growth Q3'19 Q3'20 YTD YTD BVPS & Dividends Paid1 Looking ahead Dividends $0.115 1• Continue growth in insurance paid (YTD) $0.12 – Growth in written premiums while maintaining underwriting standards – Focused on growth in warranty and specialty lines Book value per share $11.43 $10.36 2 Maintain focus on business execution while navigating current market conditions 3• Focus on growing and improving long-term, net investment income Q3'19 Q3'20 12 1 See the appendix for a reconciliation of Operating EBITDA and Book value per share to GAAP financials.
Non-GAAP Reconciliations • Operating EBITDA • Book Value per share Appendix • Invested and Total Capital • Insurance Underwriting Margin • Insurance Combined Ratio • Insurance Net Investments & Net Portfolio Income
Non-GAAP Reconciliations Operating EBITDA Management uses Operating EBITDA and book value per share as measurements of operating performance which are non-GAAP measures. Management believes the use of Operating EBITDA provides supplemental information useful to investors as it is frequently used by the financial community to analyze financial performance, and to analyze a company’s ability to service its debt and to facilitate comparison among companies. Management uses Operating EBITDA as part of its capital allocation process and to assess comparative returns on invested capital amongst our businesses and investments. The Company defines EBITDA as GAAP net income of the Company adjusted to add consolidated interest expense, consolidated income taxes and consolidated depreciation and amortization expense as presented in its financial statements. Operating EBITDA represents EBITDA adjusted to (i) subtract interest expense on asset-specific debt incurred in the ordinary course of its subsidiaries’ business operations, (ii) adjust for the effect of purchase accounting, (iii) adjust for certain non-cash fair value adjustments, (iv) any significant non-recurring expenses, (v) stock based compensation expense, (vi) less realized and unrealized gains and losses, and (vii) less third party non-controlling interests. Operating EBITDA is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. 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. Invested Capital and Total Capital Management evaluates the return on Invested Capital and Total Capital, which are non-GAAP financial measures, when making capital investment decisions. Invested Capital represents its total equity investment, including any re- investment of earnings, and acquisition costs, net of tax. Total Capital represents Invested Capital plus Corporate Debt. Management believes the use of these financial measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze how the Company has allocated capital over-time and provide a basis for determining the return on capital to shareholders. Management uses both of these measures when making capital investment decisions, including reinvesting cash, and evaluating the relative performance of its businesses and investments. Insurance - Underwriting Margin We generally limit the underwriting risk we assume through the use of both reinsurance (e.g., quota share and excess of loss) and retrospective commission agreements with our partners (e.g., commissions paid adjust based on the actual underlying losses incurred), which manage and mitigate our risk. Period-over-period comparisons of revenues are often impacted by the PORCs and clients’ choice as to whether to retain risk, specifically with respect to the relationship between service and administration expenses and ceding commissions, both components of revenue, and the offsetting 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 net financial impact of the risk retained by the Company of the insurance contracts written and the impact on profitability, we use the Non-GAAP metric - Underwriting Margin. Insurance - Combined Ratio Expressed as a percentage, the combined ratio represents the relationship of policy and contract benefits, commission expense (net of ceding commissions), employee compensation and benefits, and other expenses to net earned premiums, service and administrative fees, and other income. Investors use this ratio to evaluate our ability to profitably underwrite the risks we assume over time and manage our operating costs. As such, we believe that presenting underwriting margin and the combined ratio provides useful information to investors and aligns more closely to how management measures the underwriting performance of the business. Insurance Investment Portfolio - Net Investments and Net Portfolio Income In managing our investment portfolio we analyze net investments and net portfolio income, which are non-GAAP measures. Our presentation of net investments equals total investments plus cash and cash equivalents minus asset based financing of investments. Our presentation of net portfolio income equals net investment income plus realized and unrealized gains and losses and minus interest expense associated with asset based financing of investments. Net investments and net portfolio income are used to calculate average annualized yield, which management uses to analyze the profitability of our investment portfolio. Management believes this information is useful since it allows investors to evaluate the performance of our investment portfolio based on the capital at risk and on a non-consolidated basis. Our calculation of net investments and net portfolio income may differ from similarly titled non-GAAP financial measures used by other companies. Net investments and net portfolio income are not measures of financial performance or liquidity under GAAP and should not be considered a substitute for total investments or net investment income. 14
Non-GAAP Reconciliations – Operating EBITDA ($ in millions) Three Months Ended September30, Nine Months Ended September 30, 2020 2019 2020 2019 (1) Corporate debt interest expense includes interest expense from secured corporate Net income (loss) attributable to common stockholders $ 12.8 $ (1.5) $ (43.4) $ 14.2 credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt in Tiptree Insurance and Tiptree Capital Add: net (loss) income attributable to non-controlling interests 1.9 0.5 2.0 1.3 is not added-back for Operating EBITDA. Income (loss) $ 14.7 $ (1.0) $ (41.4) $ 15.5 (2) Represents total depreciation and amortization expense less purchase accounting Corporate debt related interest expense(1) 6.1 5.0 17.3 14.9 amortization related adjustments at our insurance companies. Following the purchase accounting adjustments, current period expenses associated with deferred Consolidated income tax expense (benefit) (0.8) (0.7) (22.0) 3.7 costs were more favorably stated and current period income associated with (2) deferred revenues were less favorably stated. Thus, the purchase accounting effect Depreciation and amortization expense 3.9 3.4 12.0 9.5 related to our insurance companies increased EBITDA above what the historical basis Non-cash fair value adjustments (2.5) (0.3) (3.1) (0.5) of accounting would have generated. Non-recurring expenses(3) 0.2 0.5 2.9 2.5 (3) Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs. Stock based compensation expense 2.6 1.5 6.2 4.5 (4) (4) Adjustment excludes Mortgage realized and unrealized gains and losses - Performing Realized and unrealized (gain) loss 7.7 8.9 97.9 (7.5) and NPLs, as those are recurring in nature and align with those business models. (5) Third party non-controlling interests — — 0.1 — (5) Removes the Operating EBITDA associated with third party non-controlling interests. Operating EBITDA $ 31.9 $ 17.3 $ 69.9 $ 42.6 Does not remove the non-controlling interests related to employee-based shares. 15
Non-GAAP Reconciliations – Operating EBITDA Trailing Twelve Months Ended September 30, 2020 Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Specialty Tiptree Corporate Specialty Tiptree Corporate Specialty Tiptree Corporate ($ in millions) Insurance Capital Expenses Total Insurance Capital Expenses Total Insurance Capital Expenses Total Pre-tax income (loss) $ 13.0 $ (33.8) $ (32.7) $ (53.5) $ 13.4 $ 9.5 $ (9.0) $ 13.9 $ 8.3 $ (1.4) $ (8.6) $ (1.7) (1) Corporate debt interest expense includes interest expense from secured corporate Adjustments: credit agreements, junior subordinated Corporate debt related interest expense(1) 13.2 — 8.9 22.1 3.4 — 2.7 6.1 3.4 — 1.6 5.0 notes and preferred trust securities. Depreciation and amortization expenses(2) 9.1 5.7 0.8 15.6 2.2 1.5 0.2 3.9 2.2 0.9 0.3 3.4 Interest expense associated with asset- specific debt in Tiptree Insurance and Non-cash fair value adjustments — (2.8) — (2.8) — (2.5) — (2.5) — (0.3) — (0.3) Tiptree Capital is not added-back for Non-recurring expenses(3) 4.2 0.2 0.1 4.5 (0.1) 0.3 — 0.2 0.3 — 0.2 0.5 Operating EBITDA. Stock-based compensation expense 2.5 2.3 3.3 8.1 0.6 1.3 0.7 2.6 0.7 — 0.8 1.5 (2) Represents total depreciation and amortization expense less purchase Realized and unrealized (gain) loss(4) 24.9 71.9 — 96.8 (0.4) 8.1 — 7.7 1.1 7.8 — 8.9 accounting amortization related Third party non-controlling interests(5) — — — — — — — — — — — — adjustments at our insurance companies. Following the purchase accounting Operating EBITDA $ 66.9 $ 43.5 $ (19.6) $ 90.8 $ 19.1 $ 18.2 $ (5.4) $ 31.9 $ 16.0 $ 7.0 $ (5.7) $ 17.3 adjustments, current period expenses associated with deferred costs were more favorably stated and current period income associated with deferred revenues were less favorably stated. Thus, the purchase accounting effect Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 related to our insurance companies increased EBITDA above what the Specialty Tiptree Corporate Specialty Tiptree Corporate historical basis of accounting would have ($ in millions) Insurance Capital Expenses Total Insurance Capital Expenses Total generated. Pre-tax income (loss) $ 0.4 $ (38.6) $ (25.2) $ (63.4) $ 28.4 $ 16.2 $ (25.4) $ 19.2 (3) Acquisition, start-up and disposition Adjustments: costs, including debt extinguishment, Corporate debt related interest expense(1) 9.9 — 7.4 17.3 10.1 — 4.8 14.9 legal, taxes, banker fees and other costs. Depreciation and amortization expenses(2) 7.0 4.4 0.6 12.0 6.5 2.5 0.5 9.5 (4) Adjustment excludes Mortgage realized and unrealized gains and losses - Non-cash fair value adjustments — (3.1) — (3.1) — (0.5) — (0.5) Performing and NPLs, as those are Non-recurring expenses(3) 2.2 0.3 0.4 2.9 1.7 0.2 0.6 2.5 recurring in nature and align with those business models. Stock-based compensation expense 1.4 2.3 2.5 6.2 2.0 0.2 2.3 4.5 (4) (5) Removes the Operating EBITDA Realized and unrealized (gain) loss 27.2 70.7 — 97.9 (4.2) (3.3) — (7.5) associated with third party non- Third party non-controlling interests(5) — 0.1 — 0.1 — — — — controlling interests. Does not remove Operating EBITDA $ 48.1 $ 36.1 $ (14.3) $ 69.9 $ 44.5 $ 15.3 $ (17.2) $ 42.6 the non-controlling interests related to employee-based shares. 16
Non-GAAP Reconciliations – BVPS, Invested & Total Capital, Investment Portfolio ($ in millions, except per share information) As of September 30, 2020 2019 Management uses Book value per share, which is a non-GAAP financial measure. Management believes the use of this financial Total stockholders’ equity $ 361.7 $ 407.4 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 $10.36 as of September 30, 2020 compared with $11.43 as of Less: Non-controlling interests 14.0 12.6 September 30, 2019. Total stockholders’ equity, net of other non-controlling interests for the Company was $347.7 million as of Total stockholders’ equity, net of non-controlling interests $ 347.7 $ 394.8 September 30, 2020, which comprised total stockholders’ equity of $361.7 million adjusted for $14.0 million attributable to non- controlling interest at certain operating subsidiaries that are not wholly owned by the Company, such as Luxury and management Total shares outstanding 33.6 34.6 interests in subsidiaries. Total stockholders’ equity, net of other non-controlling interests for the Company was $394.8 million as of Book value per share $ 10.36 $ 11.43 September 30, 2019, which comprised total stockholders’ equity of $407.4 million adjusted for $12.6 million attributable to non- controlling interest at subsidiaries that are not wholly owned by the Company. ($ in millions) As of September 30, 2020 2019 Management evaluates the return on Invested Capital and Total Capital, which are non-GAAP financial measures, when making capital Total stockholders’ equity $ 361.7 $ 407.4 investment decisions. Invested capital represents its total cash investment, including any re-investment of earnings, and acquisition Less: Non-controlling interests 14.0 12.6 costs, net of tax. Total Capital represents Invested Capital plus Corporate Debt. Management believes the use of these financial Total stockholders’ equity, net of non-controlling interests - other $ 347.7 $ 394.8 measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze how Plus Insurance accumulated depreciation and amortization, net of tax(1) 54.9 47.9 the Company has allocated capital over-time and provide a basis for determining the return on capital to shareholders. Management uses both of these measures when making capital investment decisions, including reinvesting distributable cash flow, and evaluating Plus: Acquisition costs 4.0 4.2 the relative performance of its businesses and investments. Invested Capital $ 406.6 $ 446.9 Plus corporate debt(2) 281.9 229.2 (1) As of September 30, 2020, add-back of $79.3 million of accumulated intangible amortization at our insurance companies. On as Total Capital $ 688.5 $ 676.1 exchanged basis, assumes 35% tax rate on total accumulated amortization before 2018 and 21% post 2018. (2) Corporate debt consists of Secured Corporate Credit Agreements, plus preferred trust securities. ($ in millions) As of September 30, 2020 2019 2018 Total Investments $ 577.2 $ 414.3 $ 495.7 Investment portfolio debt (1) — — (93.4) The insurance investment portfolio consists of insurance premiums written, cash generated from operations, and assets contributed by Securities sold, not yet purchased (67.1) — — Tiptree. The investment portfolio of our regulated insurance companies, captive reinsurance company and warranty business are Cash and cash equivalents 74.0 117.8 31.1 subject to different regulatory considerations, including with respect to types of assets, concentration limits, affiliate transactions and the use of leverage. Our investment strategy is designed to achieve attractive risk-adjusted returns across select asset classes, sectors Restricted cash (2) 64.6 — 3.0 and geographies while maintaining adequate liquidity to meet our claims payment obligations. Receivable due from brokers (3) 4.4 3.1 2.3 Liability due to brokers (3) (41.9) (21.5) (0.4) (1) For 2019 and 2020, consists of borrowings under the revolving line of credit at our insurance company. For the 2018 period, consists of asset-based financing on loans, at fair value including certain credit investments, net of deferred financing costs, see Note 11 - Net investments - Non-GAAP $ 611.2 $ 513.7 $ 438.3 Debt, net for further details. ($ in millions) Nine Months Ended September 30, (2) Restricted cash available to invest within certain credit investment funds which are consolidated under GAAP. 2020 2019 2018 (3) Receivable due from and Liability due to brokers for unsettled trades within certain credit investment funds which are consolidated under GAAP. Net investment income $ 8.8 $ 10.7 $ 13.7 (4) Average Annualized Yield % represents the ratio of annualized net investment income, other income, realized and unrealized gains Other income (0.6) 0.8 0.4 (losses) less investment portfolio interest expense to the average of the prior four quarters total investments less investment Realized gains (losses) (14.9) 5.8 5.2 portfolio debt plus cash. Unrealized gains (losses) (12.4) (1.1) (8.3) Unrealized gains (losses) on AFS securities 5.1 5.3 (3.3) Interest expense — (0.6) (3.6) Net portfolio income (loss) $ (14.0) $ 20.9 $ 4.1 (4) Average Annualized Yield % (2.5)% 4.4% 1.0% 17
Non-GAAP Reconciliations – Combined Ratio, Underwriting Revenues & Margin ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, The following table provides a reconciliation between underwriting margin and pre-tax income. Revenues: 2020 2019 2020 2019 We generally limit the underwriting risk we assume through the use of both reinsurance (e.g., Net earned premiums $ 116.4 $ 129.2 $ 345.0 $ 364.7 quota share and excess of loss) and retrospective commission agreements with our partners (e.g., commissions paid adjust based on the actual underlying losses incurred), which manage and Service and administrative fees 47.7 26.1 134.3 78.7 mitigate our risk. Period-over-period comparisons of revenues are often impacted by the PORCs Ceding commissions 5.1 1.6 16.2 7.2 and clients’ choice as to whether to retain risk, specifically with respect to the relationship Other income 1.0 1.3 5.3 3.1 between service and administration expenses and ceding commissions, both components of revenue, and the offsetting policy and contract benefits and commissions paid to our partners Underwriting revenues - Non-GAAP $ 170.2 $ 158.2 $ 500.8 $ 453.7 and reinsurers. Generally, when losses are incurred, the risk which is retained by our partners and Less underwriting expenses: reinsurers is reflected in a reduction in commissions paid. In order to better explain to investors Policy and contract benefits 57.8 44.0 167.8 124.3 the net financial impact of the risk retained by the Company of the insurance contracts written Commission expense 68.9 77.5 207.2 225.1 and the impact on profitability, we use the Non-GAAP metric - Underwriting Margin. Underwriting margin - Non-GAAP $ 43.5 $ 36.7 $ 125.8 $ 104.3 Expressed as a percentage, the combined ratio represents the relationship of policy and contract Less operating expenses: benefits, commission expense (net of ceding commissions), employee compensation and Employee compensation and benefits 15.9 12.6 47.9 36.7 benefits, and other expenses to net earned premiums, service and administrative fees, and other income. Investors use this ratio to evaluate our ability to profitably underwrite the risks we Other expenses (excluding non-recurring expenses) 11.7 11.8 38.4 35.3 assume over time and manage our operating costs. As such, we believe that presenting Combined Ratio 90.4% 92.1% 91.8% 92.8% underwriting margin and the combined ratio provides useful information to investors and aligns Plus investment revenues: more closely to how management measures the underwriting performance of the business. Net investment income 3.0 3.0 8.8 10.7 Net realized and unrealized gains 0.7 (1.1) (27.3) 4.7 Less other expenses: Interest expense 4.0 3.6 11.2 11.2 Non-recurring expenses (0.1) — 2.2 1.2 Depreciation and amortization expense 2.3 2.3 7.2 6.9 Pre-tax income (loss) $ 13.4 $ 8.3 $ 0.4 $ 28.4 18
TiptreeInc. ir@tiptreeinc.com