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Tiptree Reports First Quarter 2023 Results

Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced its financial results for the three months ended March 31, 2023.

 

First Quarter

 

($ in thousands, except per share information)

2023

 

2022

 

Total revenues

$

381,625

 

 

$

324,903

 

 

Net income (loss) attributable to common stockholders

$

(1,062

)

 

$

(960

)

 

Diluted earnings per share

$

(0.03

)

 

$

(0.03

)

 

Cash dividends paid per common share

$

0.05

 

 

$

0.04

 

 

Return on average equity

 

(1.1

)%

 

 

(0.9

)%

 

 

 

 

 

 

Non-GAAP: (1)

 

 

 

 

Adjusted net income

$

17,284

 

 

$

15,452

 

 

Adjusted return on average equity

 

12.9

%

 

 

15.8

%

 

Book value per share

$

10.91

 

 

$

10.51

 

 

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.

First Quarter 2023 Summary

  • Revenues for the quarter of $381.6 million, an increase of 17.5% from Q1'22, driven by growth in Fortegra’s specialty insurance lines. Excluding investment gains and losses, revenues were up 16.1%.
  • Net loss of $1.1 million compared to net loss of $1.0 million in Q1'22, driven by growth in our insurance business, offset by declines in our mortgage and shipping revenues.
  • Adjusted net income of $17.3 million increased by 11.9% from $15.5 million in Q1'22, driven by improvement in our insurance operations. Adjusted return on average equity was 12.9% for the quarter, with the year-over-year comparison impacted by the investment in Fortegra in June 2022 from Warburg Pincus.
  • Declared a dividend of $0.05 per share to stockholders of record on May 22, 2023 with a payment date of May 30, 2023.

Segment Financial Highlights - First Quarter 2023

Insurance (The Fortegra Group):

 

First Quarter

 

($ in thousands)

2023

 

2022

 

Gross written premiums and premium equivalents

$

750,329

 

 

$

600,855

 

 

Revenues

$

368,444

 

 

$

282,529

 

 

Income before taxes

$

19,445

 

 

$

14,682

 

 

Return on average equity

 

16.7

%

 

 

14.7

%

 

Combined ratio

 

91.3

%

 

 

90.5

%

 

 

 

 

 

 

Non-GAAP: (1)

 

 

 

 

Adjusted net income

$

22,939

 

 

$

21,124

 

 

Adjusted return on average equity

 

26.1

%

 

 

28.2

%

 

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.

  • Gross written premiums and premium equivalents of $750.3 million, increased 24.9% for the quarter driven by growth in U.S. specialty insurance lines and services businesses in U.S. and Europe.
  • Unearned premiums and deferred revenues grew to $2.1 billion, up $319.6 million, or 18.3%, from Q1’22.
  • Revenues increased 30.4% for the quarter driven by premium growth in specialty E&S and admitted lines, and services businesses in the U.S. and Europe. Excluding the impact of investment gains and losses, revenues increased by 29.0% from Q1’22.
  • The combined ratio for the quarter was 91.3%, compared to 90.5% in Q1'22, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform.
  • Income before taxes for the quarter was $19.4 million, up $4.8 million. Return on equity of 16.7%, compared to 14.7% in Q1'22. The increases were driven by growth in underwriting and fee revenues and increased net investment income.
  • Adjusted net income for the quarter was $22.9 million, up 8.6% from Q1'22 with the improvement driven by revenue growth. Adjusted return on average equity was 26.1%, compared to 28.2% in Q1’22.
  • In February 2023, Fortegra acquired Premia Solutions Limited, one of the largest providers of automotive protection products in the United Kingdom, for net cash consideration of approximately $22.5 million.

Tiptree Capital:

 

First Quarter

 

($ in thousands)

2023

 

2022

 

Revenues

$

13,181

 

 

$

42,374

 

 

Income before taxes

$

(1,123

)

 

$

(3,385

)

 

Return on average equity

 

(1.8

)%

 

 

(5.8

)%

 

 

 

 

 

 

Non-GAAP: (1)

 

 

 

 

Adjusted net income

$

560

 

 

$

972

 

 

Adjusted return on average equity

 

1.3

%

 

 

2.2

%

 

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented before the impacts of non-controlling interests.

  • Tiptree Capital loss before taxes was $1.1 million compared to loss of $3.4 million in Q1’22, driven by a reduction in unrealized investment losses, partially offset by declines in mortgage operations and the sale of five vessels in 2022.
  • Mortgage loss before taxes was $2.6 million, as compared to income of $4.3 million in Q1'22, with the decrease driven by declines in origination volumes and negative marks on the MSR asset in 2023 compared to positive marks in 2022.
  • Total Tiptree Capital book value, including corporate net assets, was $220.5 million as of Q1’23.

Corporate:

Corporate includes expenses of the holding company for interest expense, employee compensation and benefits, audit and professional fees, and public company and other expenses. For the quarter, corporate expenses were $10.1 million compared to $12.2 million in Q1'22. The decrease was driven by lower interest expense as we repaid our corporate holding company borrowings in June 2022.

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 presented before the impacts of non-controlling interests. Adjusted net income and Adjusted return on average equity are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. See “Non-GAAP Reconciliations” for a reconciliation of these measures to their GAAP equivalents.

Earnings Conference Call

Tiptree will host a conference call on Thursday, May 4, 2023 at 9:00 a.m. Eastern Time to discuss its Q1 2023 financial results. A copy of our investor presentation, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreeinc.com.

The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). Please dial in at least five minutes prior to the start time.

A replay of the call will be available from Thursday, May 4, 2023 at 12:00 p.m. Eastern Time, until midnight Eastern on Thursday, May 11, 2023. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 13737264.

About Tiptree

Tiptree Inc. (NASDAQ: TIPT) allocates capital to select small and middle market companies with the mission of building long-term value. Established in 2007, we have a significant track record investing in the insurance sector and across a variety of other industries, including mortgage origination, specialty finance and shipping. With proprietary access and a flexible capital base, we seek to uncover compelling investment opportunities and support management teams in unlocking the full value potential of their businesses. For more information, please visit tiptreeinc.com and follow us on LinkedIn.

Forward-Looking Statements

This release contains “forward-looking statements” which involve risks, uncertainties and contingencies, many of which are beyond the Company’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the Company’s plans, objectives, expectations for our businesses and intentions. The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, and as described in the Company’s other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this release. The factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to update any forward-looking statements.

Tiptree Inc.

Condensed Consolidated Balance Sheets

($ in thousands, except share data)

 

As of

 

March 31,

2023

 

December 31,

2022

Assets:

 

 

 

Investments:

 

 

 

Available for sale securities, at fair value, net of allowance for credit losses

$

810,445

 

 

$

611,980

 

Loans, at fair value

 

72,382

 

 

 

64,843

 

Equity securities

 

111,089

 

 

 

85,776

 

Other investments

 

84,570

 

 

 

73,025

 

Total investments

 

1,078,486

 

 

 

835,624

 

Cash and cash equivalents

 

412,004

 

 

 

538,065

 

Restricted cash

 

13,926

 

 

 

12,782

 

Notes and accounts receivable, net

 

502,615

 

 

 

502,311

 

Reinsurance receivables

 

1,297,440

 

 

 

1,176,090

 

Deferred acquisition costs

 

504,336

 

 

 

498,925

 

Goodwill

 

206,636

 

 

 

186,608

 

Intangible assets, net

 

130,609

 

 

 

117,015

 

Other assets

 

161,906

 

 

 

172,143

 

Total assets

$

4,307,958

 

 

$

4,039,563

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Liabilities:

 

 

 

Debt, net

$

347,461

 

 

$

259,366

 

Unearned premiums

 

1,403,213

 

 

 

1,357,436

 

Policy liabilities and unpaid claims

 

639,808

 

 

 

567,193

 

Deferred revenue

 

665,513

 

 

 

649,150

 

Reinsurance payable

 

345,139

 

 

 

305,097

 

Other liabilities and accrued expenses

 

365,267

 

 

 

367,748

 

Total liabilities

$

3,766,401

 

 

$

3,505,990

 

 

 

 

 

Stockholders’ Equity:

 

 

 

Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding

$

 

 

$

 

Common stock: $0.001 par value, 200,000,000 shares authorized, 36,734,948 and 36,385,299 shares issued and outstanding, respectively

 

37

 

 

 

36

 

Additional paid-in capital

 

382,502

 

 

 

382,645

 

Accumulated other comprehensive income (loss), net of tax

 

(33,093

)

 

 

(39,429

)

Retained earnings

 

51,201

 

 

 

54,113

 

Total Tiptree Inc. stockholders’ equity

 

400,647

 

 

 

397,365

 

Non-controlling interests:

 

 

 

Fortegra preferred interests

 

77,679

 

 

 

77,679

 

Common interests

 

63,231

 

 

 

58,529

 

Total non-controlling interests

 

140,910

 

 

 

136,208

 

Total stockholders’ equity

 

541,557

 

 

 

533,573

 

Total liabilities and stockholders’ equity

$

4,307,958

 

 

$

4,039,563

 

Tiptree Inc.

Condensed Consolidated Statements of Operations

($ in thousands, except share data)

 

Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

Earned premiums, net

$

265,330

 

 

$

208,416

 

Service and administrative fees

 

92,032

 

 

 

71,835

 

Ceding commissions

 

3,645

 

 

 

2,537

 

Net investment income

 

5,109

 

 

 

3,167

 

Net realized and unrealized gains (losses)

 

2,177

 

 

 

17,204

 

Other revenue

 

13,332

 

 

 

21,744

 

Total revenues

 

381,625

 

 

 

324,903

 

Expenses:

 

 

 

Policy and contract benefits

 

141,675

 

 

 

104,446

 

Commission expense

 

146,450

 

 

 

117,423

 

Employee compensation and benefits

 

40,798

 

 

 

56,455

 

Interest expense

 

6,465

 

 

 

10,199

 

Depreciation and amortization

 

5,253

 

 

 

6,156

 

Other expenses

 

32,811

 

 

 

31,176

 

Total expenses

 

373,452

 

 

 

325,855

 

Income (loss) before taxes

 

8,173

 

 

 

(952

)

Less: provision (benefit) for income taxes

 

5,022

 

 

 

(86

)

Net income (loss)

 

3,151

 

 

 

(866

)

Less: net income (loss) attributable to non-controlling interests

 

4,213

 

 

 

94

 

Net income (loss) attributable to common stockholders

$

(1,062

)

 

$

(960

)

 

 

 

 

Net income (loss) per common share:

 

 

 

Basic earnings per share

$

(0.03

)

 

$

(0.03

)

Diluted earnings per share

$

(0.03

)

 

$

(0.03

)

 

 

 

 

Weighted average number of common shares:

 

 

 

Basic

 

36,522,946

 

 

 

34,229,011

 

Diluted

 

36,522,946

 

 

 

34,229,011

 

 

 

 

 

Dividends declared per common share

$

0.05

 

 

$

0.04

 

Tiptree Inc.

Non-GAAP Reconciliations (Unaudited)

Non-GAAP Financial Measures — Adjusted net income and Adjusted return on average equity

The Company defines Adjusted net income as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting. We use adjusted net income as an internal operating performance measure in the management of business as part of our capital allocation process. We believe adjusted net income provides useful supplemental information to investors as it is frequently used by the financial community to analyze financial performance between periods and for comparison among companies. Adjusted net income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define adjusted net income differently. Adjusted net income is presented before the impacts of non-controlling interests.

We define Adjusted return on average equity as Adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholder’s equity during the period. We use Adjusted return on average equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on average equity should not be viewed as a substitute for return on average equity calculated in accordance with GAAP, and other companies may define adjusted return on average equity differently.

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

 

 

 

Tiptree Capital

 

 

 

 

($ in thousands)

Insurance

 

Mortgage

 

Other

 

Corporate

 

Total

Income (loss) before taxes

 

19,445

 

 

 

(2,565

)

 

 

1,442

 

 

 

(10,149

)

 

$

8,173

 

Less: Income tax (benefit) expense

 

(4,747

)

 

 

613

 

 

 

(263

)

 

 

(625

)

 

 

(5,022

)

Less: Net realized and unrealized gains (losses)

 

4,607

 

 

 

1,443

 

 

 

323

 

 

 

 

 

 

6,373

 

Plus: Intangibles amortization (1)

 

3,894

 

 

 

 

 

 

 

 

 

 

 

 

3,894

 

Plus: Stock-based compensation expense

 

33

 

 

 

 

 

 

 

 

 

2,282

 

 

 

2,315

 

Plus: Non-recurring expenses

 

2,125

 

 

 

 

 

 

 

 

 

 

 

 

2,125

 

Plus: Non-cash fair value adjustments

 

(118

)

 

 

 

 

 

 

 

 

 

 

 

(118

)

Less: Tax on adjustments (2)

 

(2,300

)

 

 

(344

)

 

 

(89

)

 

 

2,277

 

 

 

(456

)

Adjusted net income

$

22,939

 

 

$

(853

)

 

$

1,413

 

 

$

(6,215

)

 

$

17,284

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income

$

22,939

 

 

$

(853

)

 

$

1,413

 

 

$

(6,215

)

 

 

17,284

 

Average stockholders’ equity

$

351,953

 

 

$

53,768

 

 

$

114,219

 

 

$

17,626

 

 

 

537,566

 

Adjusted return on average equity

 

26.1

%

 

 

(6.3

)%

 

 

4.9

%

 

NM%

 

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Tiptree Capital

 

 

 

 

($ in thousands)

Insurance

 

Mortgage

 

Other

 

Corporate

 

Total

Income (loss) before taxes

$

14,682

 

 

$

4,266

 

 

$

(7,651

)

 

$

(12,249

)

 

$

(952

)

Less: Income tax (benefit) expense

 

(3,664

)

 

 

(978

)

 

 

1,794

 

 

 

2,934

 

 

 

86

 

Less: Net realized and unrealized gains (losses)

 

6,643

 

 

 

(6,314

)

 

 

8,851

 

 

 

 

 

 

9,180

 

Plus: Intangibles amortization (1)

 

3,946

 

 

 

 

 

 

 

 

 

 

3,946

 

Plus: Stock-based compensation expense

 

2,319

 

 

 

 

 

 

 

 

3,839

 

 

 

6,158

 

Plus: Non-recurring expenses

 

23

 

 

 

 

 

133

 

 

 

 

 

156

 

Plus: Non-cash fair value adjustments

 

 

 

 

 

1,514

 

 

 

 

 

1,514

 

Less: Tax on adjustments (2)

 

(2,825

)

 

 

1,470

 

 

 

(2,113

)

 

 

(1,168

)

 

 

(4,636

)

Adjusted net income

$

21,124

 

 

$

(1,556

)

 

$

2,528

 

 

$

(6,644

)

 

$

15,452

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income

$

21,124

 

 

$

(1,556

)

 

$

2,528

 

 

$

(6,644

)

 

$

15,452

 

Average stockholders’ equity

$

299,113

 

 

$

58,962

 

 

$

117,744

 

 

$

(84,152

)

 

$

391,667

 

Adjusted return on average equity

 

28.2

%

 

 

(10.6

)%

 

 

8.6

%

 

NM%

 

 

15.8

%

Notes

(1)

 

Specifically associated with acquisition purchase accounting. See Note (8) Goodwill and Intangible Assets, net, of the Company’s Form 10-Q for the period ended March 31, 2023.

(2)

 

Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three months ended March 31, 2023, included in the adjustment is an add-back of $2.3 million related to deferred tax expense from the WP Transaction.

Non-GAAP Financial Measures — Book value per share

Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.

($ in thousands, except per share information)

As of March 31,

 

2023

 

2022

Total stockholders’ equity

$

541,557

 

$

383,153

Less: Non-controlling interests

 

140,910

 

 

16,520

Total stockholders’ equity, net of non-controlling interests

$

400,647

 

$

366,633

 

 

 

 

Total common shares outstanding

 

36,735

 

 

34,878

 

 

 

 

Book value per share

$

10.91

 

$

10.51

 

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