Tiptree Reports Second Quarter 2022 Results

Rhea-AI Summary

Tiptree reported its Q2 2022 results, showing revenues of $339.8 million, a 13.4% increase year-over-year. However, the company faced a net loss of $22.4 million, compared to a net income of $8.0 million in Q2 2021, due to a $39.6 million tax expense associated with the Warburg Pincus investment. Adjusted net income rose 6.6% to $14.0 million. The company also repurchased 89,543 shares and declared a $0.04 dividend per share. Despite challenges, Fortegra's gross written premiums grew 7.6% in Q2.

Positive

• Revenues increased 13.4% year-over-year to $339.8 million.
• Adjusted net income rose 6.6% to $14.0 million.
• Sold dry bulk vessels for an aggregate gain of approximately 45%.
• Fortegra's gross written premiums grew 7.6% in the quarter.

Negative

• Net loss of $22.4 million compared to net income of $8.0 million in Q2 2021.
• Deferred tax liability of $39.6 million impacted financial results.
• Return on average equity declined sharply to -19.2%.

NEW YORK--(BUSINESS WIRE)-- Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced its financial results for the three and six months ended June 30, 2022.

Second Quarter 2022 Summary

• In June 2022, Tiptree closed the previously announced $200 million strategic investment in Fortegra by Warburg Pincus. As part of the closing, $113 million of Tiptree’s corporate debt was repaid in full.
• Tiptree recognized a $63.2 million pre-tax gain in stockholders’ equity from the investment in Fortegra, which was partially offset by $39.6 million of tax expense associated with the tax deconsolidation of Fortegra. Of the total deferred tax liability, $25.5 million impacted net income with the remainder impacting stockholders’ equity directly.
• In the second quarter, we sold one dry bulk vessel for $21.5 million and signed definitive agreements to sell the remaining two dry bulk vessels for an aggregate of $46.2 million, representing an approximate 45% gain as compared to Q2’22 book value. The two dry bulk vessels under contract to sell are expected to close in Q3’22.
• Revenues for the quarter of $339.8 million, an increase of 13.4% from Q2'21 driven by growth in Fortegra’s specialty insurance lines and increased vessel revenues, partially offset by investment losses in 2022 compared to gains in 2021. Excluding investment gains and losses, revenues were up 16.1%.
• Net loss of $22.4 million compared to net income of $8.0 million in Q2'21, driven by the deferred tax liability associated with the Warburg Pincus investment and unrealized losses on investments as compared to gains in the prior year period, partially offset by growth in insurance and shipping operations.
• Adjusted net income of $14.0 million increased by 6.6% from $13.1 million in Q2'21, driven by growth in specialty insurance and shipping operations. Adjusted return on average equity was 12.3% for the quarter.
• The Company repurchased 89,543 shares in the quarter at an average price of $10.45 per share.
• Declared a dividend of $0.04 per share to stockholders of record on August 22, 2022 with a payment date of August 29, 2022.

	Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands, except per share information)	2022				2021				2022				2021
Total revenues	$	339,843			$	299,687			$	664,746			$	594,375
Net income (loss) attributable to common stockholders	$	(22,408	)		$	7,969			$	(23,368	)		$	36,550
Diluted earnings per share	$	(0.64	)		$	0.22			$	(0.67	)		$	1.05
Cash dividends paid per common share	$	0.04			$	0.04			$	0.08			$	0.08
Return on average equity		(19.2	) %			9.0	%			(9.8	) %			20.4	%
Non-GAAP: (1)
Adjusted net income	$	13,986			$	13,125			$	29,438			$	26,280
Adjusted return on average equity		12.3	%			13.1	%			12.7	%			13.5	%
Book value per share	$	10.75			$	11.59			$	10.75			$	11.59

(1)

See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Year-to-date 2022 Summary

• Year-to-date revenues of $664.7 million, an increase of 11.8% from 2021 driven by similar factors impacting the quarter. Excluding investment gains and losses, revenues were up 20.2%.
• Net loss of $23.4 million compared to net income of $36.6 million in 2021, driven by the deferred tax liability associated with the tax deconsolidation of Fortegra and unrealized losses on investments as compared to gains in the prior year period, partially offset by growth in insurance and shipping operations.
• Adjusted net income of $29.4 million increased by 12.0% from prior year, driven by growth in specialty insurance and shipping operations. Adjusted return on average equity was 12.7%.

Segment Financial Highlights - Second Quarter 2022

Insurance (The Fortegra Group):

	Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands)	2022				2021				2022				2021
Gross written premiums and premium equivalents	$	594,696			$	552,780			$	1,195,551			$	1,030,013
Revenues	$	293,831			$	252,255			$	576,360			$	474,818
Income before taxes	$	9,071			$	14,704			$	23,753			$	36,232
Return on average equity		7.0	%			16.2	%			10.4	%			19.4	%
Combined ratio		90.9	%			92.1	%			90.7	%			91.8	%
Non-GAAP: (1)
Adjusted net income	$	18,938			$	14,091			$	40,062			$	26,867
Adjusted return on average equity		24.5	%			20.1	%			25.5	%			18.3	%

(1)

See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

• Fortegra’s gross written premiums and premium equivalents increased 7.6% for the quarter and 16.1% for the year driven by growth in U.S. specialty insurance lines and service contract businesses in U.S. and Europe. As a function of Fortegra’s premium growth, the combination of unearned premiums and deferred revenues on the balance sheet grew to $1.8 billion, up $0.4 billion, or 25.7%, from June 30, 2021.
• Revenues increased 16.5% for the quarter and 21.4% for the year driven by premium growth in specialty admitted and E&S lines, partially offset by unrealized investment losses. Excluding the impact of investment gains and losses, revenues increased by 21.9% for the quarter and 28.3% for the year.
• The combined ratio for the quarter was 90.9%, compared to 92.1% in Q2'21. Year-to-date combined ratio was 90.7%, an improvement of 110 basis points from 2021. Operating efficiencies contributed to an improved expense ratio, while the underwriting ratio increased modestly due to changes in business mix.
• Income before taxes for the quarter was $9.1 million. Year-to-date income before taxes of $23.8 million compared to $36.2 million in the prior year. Return on equity for the year was 10.4%, as compared to 19.4% in 2021.
• Adjusted net income for the quarter was $18.9 million, up 34.4% from Q2'21. Year-to-date adjusted net income was $40.1 million, up 49.1% from prior year driven by revenue growth and the improved combined ratio. The adjusted return on average equity was 25.5%, as compared to 18.3% in 2021.
• On April 1, 2022, Fortegra acquired ITC Compliance GRP Limited for net cash consideration of $15.0 million, which further establishes Fortegra's footprint in Europe and provides a wholly vertical compliance solution for the U.K. automotive market.

Tiptree Capital:

	Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands)	2022				2021				2022				2021
Revenues	$	46,012			$	47,432			$	88,386			$	119,557
Income before taxes	$	9,065			$	8,395			$	5,680			$	36,466
Return on average equity		18.8	%			15.5	%			6.1	%			32.2	%
Non-GAAP: (1)
Adjusted net income	$	3,904			$	6,123			$	4,877			$	14,155
Adjusted return on average equity		9.4	%			13.6	%			5.7	%			15.7	%

(1)

See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

• Tiptree Capital income before taxes for the quarter was $9.1 million compared to $8.4 million in the prior year driven by improved dry bulk and tanker charter rates and the gain on sale of one of our dry bulk vessels.
• Income before taxes for the year was $5.7 million, down substantially from the prior year as declines in origination volumes and gain on sale margins in our mortgage business and unrealized losses on Invesque more than offset the improvements in our shipping business.
• In May 2022, $13.1 million of asset-based debt associated with tanker investments was prepaid at a discount of 10% to the outstanding principal balance.

Corporate:

Corporate includes expenses of the holding company for interest expense, employee compensation and benefits, and public company and other expenses. For the quarter, corporate expenses were $13.3 million compared to $11.6 million in Q2'21 and for the year were $25.6 million compared to $21.8 million. The increase in both periods was primarily the result of increased stock-based compensation expense.

Non-GAAP

Management uses Adjusted net income and Adjusted return on average equity as measurements of operating performance. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and comparison among companies. Management uses Adjusted net income and adjusted return on average equity as part of its capital allocation process and to assess comparative returns on invested capital. Adjusted net income represents income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, stock-based compensation, net realized and unrealized gains (losses), and intangibles amortization associated with purchase accounting. Adjusted net income and Adjusted return on average equity are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. See “Non-GAAP Reconciliations” for a reconciliation of these measures to their GAAP equivalents.

Earnings Conference Call

Tiptree will host a conference call on Tuesday, August 9, 2022 at 9:00 a.m. Eastern Time to discuss its Q2 2022 financial results. A copy of our investor presentation, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreeinc.com.

The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, please dial 1-866-652-5200 (domestic) or 1-412-317-6060 (international). Please dial in at least five minutes prior to the start time.

A replay of the call will be available from Tuesday, August 9, 2022 at 12:00 p.m. Eastern Time, until midnight Eastern on Tuesday, August 16, 2022. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 10168261.

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
	June 30, 2022				December 31, 2021
Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	606,462			$	577,448
Loans, at fair value		91,387				105,583
Equity securities		96,876				138,483
Other investments		81,690				168,656
Total investments		876,415				990,170
Cash and cash equivalents		337,916				175,718
Restricted cash		13,397				19,368
Notes and accounts receivable, net		471,462				454,369
Reinsurance receivables		1,029,924				880,836
Deferred acquisition costs		433,614				379,373
Goodwill		186,567				179,103
Intangible assets, net		125,265				122,758
Other assets		151,867				146,844
Assets held for sale		106,282				250,608
Total assets	$	3,732,709			$	3,599,147
Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	261,781			$	393,349
Unearned premiums		1,219,115				1,123,952
Policy liabilities and unpaid claims		441,078				331,703
Deferred revenue		593,235				534,863
Reinsurance payable		292,355				265,569
Other liabilities and accrued expenses		330,659				306,536
Liabilities held for sale		69,146				242,994
Total liabilities	$	3,207,369			$	3,198,966
Stockholders’ Equity:
Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding	$	—			$	—
Common stock: $0.001 par value, 200,000,000 shares authorized, 36,305,016 and 34,124,153 shares issued and outstanding, respectively		36				34
Additional paid-in capital		379,371				317,459
Accumulated other comprehensive income (loss), net of tax		(30,966	)			(2,685	)
Retained earnings		41,964				68,146
Total Tiptree Inc. stockholders’ equity		390,405				382,954
Non-controlling interests:
Fortegra preferred interests		77,679				—
Common interests		57,256				17,227
Total non-controlling interests		134,935				17,227
Total stockholders’ equity		525,340				400,181
Total liabilities and stockholders’ equity	$	3,732,709			$	3,599,147

Tiptree Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
	Three Months Ended June 30,							Six Months Ended June 30,
	2022				2021			2022				2021
Revenues:
Earned premiums, net	$	215,941			$	176,958		$	424,357			$	323,877
Service and administrative fees		77,625				63,700			149,460				121,750
Ceding commissions		3,326				3,080			5,863				6,105
Net investment income		3,365				3,234			6,532				6,001
Net realized and unrealized gains (losses)		15,687				36,092			32,891				105,463
Other revenue		23,899				16,623			45,643				31,179
Total revenues		339,843				299,687			664,746				594,375
Expenses:
Policy and contract benefits		104,665				89,193			209,111				156,367
Commission expense		127,453				99,543			244,876				188,188
Employee compensation and benefits		48,262				45,693			104,717				98,617
Interest expense		9,135				8,981			19,334				18,233
Depreciation and amortization		6,009				6,208			12,165				12,142
Other expenses		39,512				38,594			70,688				69,961
Total expenses		335,036				288,212			660,891				543,508
Income (loss) before taxes		4,807				11,475			3,855				50,867
Less: provision (benefit) for income taxes		26,555				2,427			26,469				11,179
Net income (loss)		(21,748	)			9,048			(22,614	)			39,688
Less: net income (loss) attributable to non-controlling interests		660				1,079			754				3,138
Net income (loss) attributable to common stockholders	$	(22,408	)		$	7,969		$	(23,368	)		$	36,550
Net income (loss) per common share:
Basic earnings per share	$	(0.64	)		$	0.24		$	(0.67	)		$	1.10
Diluted earnings per share	$	(0.64	)		$	0.22		$	(0.67	)		$	1.05
Weighted average number of common shares:
Basic		35,228,775				32,898,769			34,731,655				32,661,195
Diluted		35,228,775				33,567,897			34,731,655				34,842,812
Dividends declared per common share	$	0.04			$	0.04		$	0.08			$	0.08

Tiptree Inc.
Non-GAAP Reconciliations (Unaudited)

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

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

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

	Three Months Ended June 30, 2022
					Tiptree Capital
($ in thousands)	Insurance				Mortgage				Other				Corporate				Total
Income (loss) before taxes	$	9,071			$	24			$	9,042			$	(13,330	)		$	4,807
Less: Income tax (benefit) expense		(3,670	)			12				(1,300	)			(21,597	)			(26,555	)
Less: Net realized and unrealized gains (losses)		10,126				(1,580	)			(4,450	)			—				4,096
Plus: Intangibles amortization (1)		4,085				—				—				—				4,085
Plus: Stock-based compensation expense		24				—				23				10				57
Plus: Non-recurring expenses		1,449				—				(1,055	)			2,108				2,502
Plus: Non-cash fair value adjustments		—				—				2,170				—				2,170
Less: Tax on adjustments (2)		(2,147	)			361				658				23,952				22,824
Adjusted net income	$	18,938			$	(1,183	)		$	5,088			$	(8,857	)		$	13,986
Adjusted net income	$	18,938			$	(1,183	)		$	5,088			$	(8,857	)		$	13,986
Average stockholders’ equity	$	309,774			$	57,537			$	108,019			$	(21,082	)		$	454,248
Adjusted return on average equity		24.5	%			(8.2	) %			18.8	%		NM%					12.3	%

	Three Months Ended June 30, 2021
					Tiptree Capital
($ in thousands)	Insurance				Mortgage				Other				Corporate				Total
Income (loss) before taxes	$	14,704			$	5,775			$	2,620			$	(11,624	)		$	11,475
Less: Income tax (benefit) expense		(3,334	)			(1,366	)			(34	)			2,307				(2,427	)
Less: Net realized and unrealized gains (losses)		(2,808	)			(600	)			(142	)			—				(3,550	)
Plus: Intangibles amortization (1)		3,835				—				—				—				3,835
Plus: Stock-based compensation expense		500				166				4				479				1,149
Plus: Non-recurring expenses		1,834				—				281				2,171				4,286
Plus: Non-cash fair value adjustments		—				—				(695	)			—				(695	)
Less: Tax on adjustments (2)		(640	)			84				30				(422	)			(948	)
Adjusted net income	$	14,091			$	4,059			$	2,064			$	(7,089	)		$	13,125
Adjusted net income	$	14,091			$	4,059			$	2,064			$	(7,089	)		$	13,125
Average stockholders’ equity	$	281,041			$	72,364			$	121,129			$	(73,310	)		$	401,224
Adjusted return on average equity		20.1	%			22.4	%			6.8	%		NM%					13.1	%

Notes
(1)		Specifically associated with acquisition purchase accounting. See Note (9) Goodwill and Intangible Assets, net, of the Company's Form 10-Q for the period ended June 30, 2022.
(2)		Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three and six months ended June 30, 2022, included in the adjustment is an add-back of $25.5 million related to deferred tax expense from the WP Transaction.

	Six Months Ended June 30, 2022
					Tiptree Capital
($ in thousands)	Insurance				Mortgage				Other				Corporate				Total
Income (loss) before taxes	$	23,753			$	4,290			$	1,391			$	(25,579	)		$	3,855
Less: Income tax (benefit) expense		(7,334	)			(966	)			494				(18,663	)			(26,469	)
Less: Net realized and unrealized gains (losses)		16,769				(7,894	)			4,401				—				13,276
Plus: Intangibles amortization (1)		8,031				—				—				—				8,031
Plus: Stock-based compensation expense		2,343				—				23				3,849				6,215
Plus: Non-recurring expenses		1,472				—				(922	)			2,108				2,658
Plus: Non-cash fair value adjustments		—				—				3,684				—				3,684
Less: Tax on adjustments (2)		(4,972	)			1,831				(1,455	)			22,784				18,188
Adjusted net income	$	40,062			$	(2,739	)		$	7,616			$	(15,501	)		$	29,438
Adjusted net income	$	40,062			$	(2,739	)		$	7,616			$	(15,501	)		$	29,438
Average stockholders’ equity	$	314,592			$	58,981			$	112,190			$	(23,001	)		$	462,762
Adjusted return on average equity		25.5	%			(9.3	) %			13.6	%		NM%					12.7	%

	Six Months Ended June 30, 2021
					Tiptree Capital
($ in thousands)	Insurance				Mortgage				Other				Corporate				Total
Income (loss) before taxes	$	36,232			$	18,852			$	17,614			$	(21,831	)		$	50,867
Less: Income tax (benefit) expense		(7,763	)			(4,462	)			(2,941	)			3,987				(11,179	)
Less: Net realized and unrealized gains (losses)		(12,432	)			(4,020	)			(13,908	)			—				(30,360	)
Plus: Intangibles amortization (1)		7,669				—				—				—				7,669
Plus: Stock-based compensation expense		872				331				12				999				2,214
Plus: Non-recurring expenses		2,104				—				281				2,171				4,556
Plus: Non-cash fair value adjustments		—				—				(1,352	)			—				(1,352	)
Less: Tax on adjustments (2)		185				823				2,925				(68	)			3,865
Adjusted net income	$	26,867			$	11,524			$	2,631			$	(14,742	)		$	26,280
Adjusted net income	$	26,867			$	11,524			$	2,631			$	(14,742	)		$	26,280
Average stockholders’ equity	$	292,865			$	67,292			$	113,430			$	(84,295	)		$	389,292
Adjusted return on average equity		18.3	%			34.3	%			4.6	%		NM%					13.5	%

Notes
(1)		Specifically associated with acquisition purchase accounting. See Note (9) Goodwill and Intangible Assets, net, of the Company's Form 10-Q for the period ended June 30, 2022.
(2)		Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three and six months ended June 30, 2022, included in the adjustment is an add-back of $25.5 million related to deferred tax expense from the tax deconsolidation of Fortegra.

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 June 30,
	2022			2021
Total stockholders’ equity	$	525,340		$	405,049
Less: Non-controlling interests		134,935			18,031
Total stockholders’ equity, net of non-controlling interests	$	390,405		$	387,018
Total common shares outstanding		36,305			33,395
Book value per share	$	10.75		$	11.59

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005798/en/

Tiptree Inc.

Investor Relations, 212-446-1400

ir@tiptreeinc.com

Source: Tiptree Inc.

FAQ

What were Tiptree's Q2 2022 revenues and how do they compare to Q2 2021?

Tiptree's Q2 2022 revenues were $339.8 million, representing a 13.4% increase from Q2 2021.

What is Tiptree's net loss for Q2 2022?

Tiptree reported a net loss of $22.4 million for Q2 2022.

How much adjusted net income did Tiptree report for Q2 2022?

Tiptree's adjusted net income for Q2 2022 was $14.0 million, up 6.6% from the previous year.

What dividend did Tiptree declare for August 2022?

Tiptree declared a dividend of $0.04 per share, payable on August 29, 2022.

How did Fortegra perform in Q2 2022?

Fortegra's gross written premiums rose 7.6% in Q2 2022.