Tiptree Reports Fourth Quarter and 2021 Results

NEW YORK--(BUSINESS WIRE)--Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced its financial results for the quarter and year ended December 31, 2021.

“2021 was one of Tiptree’s best years since its founding in June 2007. Tiptree’s revenues, earnings and total return to shareholders all set records. More specifically, our specialty insurer, Fortegra also produced record results, with adjusted return on equity of 22% while growing premiums and equivalents at 32%. Importantly, we believe Fortegra is well positioned to continue their history of producing best-in-class returns over the long-term. In addition, our mortgage and shipping businesses also reported excellent results for the year, benefiting from favorable market conditions”, said Tiptree’s Executive Chairman, Michael Barnes.

Barnes added, “As we enter our 15^th year of operations, we see a clear path to continuing to grow our businesses and to achieving superior results for our shareholders. Having our share price move higher to properly reflect Tiptree’s true intrinsic value remains our highest priority, and we believe significant progress toward that end will be made in this coming year.”

($ in thousands, except per share information)	Q4’21			Q4’20			FY’21			FY’20
Total revenues	$	319,534		$	257,395		$	1,200,514		$	810,301
Net income (loss) attributable to common stockholders	$	(426	)	$	14,270		$	38,132		$	(29,158	)
Diluted earnings per share	$	(0.01	)	$	0.40		$	1.09		$	(0.86	)
Cash dividends paid per common share	$	0.04		$	0.04		$	0.16		$	0.16
Return on average equity		(0.4	) %		17.6	%		11.4	%		(6.4	) %
Non-GAAP: ^(1)
Adjusted net income	$	16,859		$	16,191		$	63,869		$	51,431
Adjusted return on average equity		16.8	%		17.6	%		16.5	%		13.1	%
Book value per share	$	11.22		$	10.90		$	11.22		$	10.90
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Full-Year 2021 Summary

• Revenues of $1.2 billion, increased 48.2%, driven by growth in insurance and shipping operations and investment gains in 2021 compared to losses in 2020. Excluding the impact from investment gains and losses, revenues increased 32.9% versus prior year.

• Net income of $38.1 million, increased significantly from a net loss in 2020, represented an annualized return on average equity of 11.4%.

• Adjusted net income of $63.9 million, increased 24.2%, reflecting higher earnings in insurance and shipping operations. Adjusted return on average equity of 16.5%, compared to 13.1% in 2020.

• On October 12, 2021, Tiptree announced a $200 million investment in Fortegra from Warburg Pincus, which is expected to close in Q2’22 and will result in an approximate 24% ownership of the business on an as converted basis.

• Declared a dividend of $0.04 per share to stockholders of record on March 21, 2022 with a payment date of March 28, 2022.

Fourth Quarter 2021 Summary

• Revenues for the quarter of $319.5 million, an increase of 24.1% from Q4’20.

• Net loss for the quarter was $0.4 million, compared to net income of $14.3 million in Q4’20 driven by improved operating performance in our insurance and shipping businesses, more than offset by declines in mortgage income, lower investment performance compared to prior year investment gains, and higher stock-based compensation expense (and related tax impacts) driven by Tiptree’s Q4’21 stock price performance.

• Adjusted net income of $16.9 million for the quarter, an increase of 4.1% from Q4’20 driven by growth in insurance and shipping operations. Q4’21 Adjusted return on average equity of 16.8%, compared to 17.6% in Q4’20.

Segment Financial Highlights - Fourth Quarter and Total Year 2021
Insurance (The Fortegra Group):
($ in thousands)	Q4’21			Q4’20			FY’21			FY’20
Gross written premiums and premium equivalents	$	575,948		$	490,920		$	2,194,024		$	1,666,942
Revenues	$	262,606		$	208,762		$	984,130		$	691,061
Income before taxes	$	20,288		$	26,530		$	69,857		$	26,948
Return on average equity		17.4	%		27.5	%		17.1	%		8.1	%
Combined ratio		89.4	%		90.0	%		90.6	%		91.5	%
Non-GAAP:^(1)
Adjusted net income	$	20,382		$	13,588		$	66,782		$	43,423
Adjusted return on average equity		27.2	%		18.6	%		22.2	%		15.2	%
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

• Fortegra’s gross written premiums and premium equivalents increased 17.3% for the quarter and 31.6% 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 $1,658.8 million, up $399.1 million, or 31.7%, from December 31, 2020.

• Revenues increased 25.8% for the quarter and 42.4% for the year driven by premium growth and investment gains in 2021 compared to losses in 2020. Excluding the impact of investment gains and losses, revenues increased by 39.5% over 2020.

• The combined ratio for the quarter was 89.4%, compared to 90.0% in Q4’20. For total year 2021, the combined ratio was 90.6%, compared to 91.5% in 2020. Operating and technology efficiencies contributed to an improved expense ratio, while the underwriting ratio remained stable.

• Income before taxes for the quarter of $20.3 million. Total year 2021 income before taxes of $69.9 million compared to $26.9 million in the prior year. Return on equity was 17.1% for 2021, as compared to 8.1% in 2020.

• Adjusted net income for the quarter was $20.4 million, up 50.0% from Q4’20. Adjusted net income for 2021 was $66.8 million, up 53.8%, driven by revenue growth and an improved combined ratio. The adjusted return on average equity was 22.2% for 2021, as compared to 15.2% in 2020.

Tiptree Capital:
($ in thousands)	Q4’21			Q4’20			FY’21			FY’20
Revenues	$	56,928		$	48,633		$	216,384		$	119,240
Income before taxes	$	7,584		$	7,794		$	45,617		$	(30,140	)
Return on average equity		3.6	%		8.8	%		22.2	%		(12.7	) %
Non-GAAP:^(1)
Adjusted net income	$	4,559		$	10,021		$	28,197		$	33,075
Adjusted return on average equity		10.1	%		24.1	%		16.2	%		17.8	%
(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

• Mortgage income before taxes was $28.4 million in 2021, as compared to $31.1 million in 2020, with the decrease driven by a decline in gain on sale margins, partially offset by higher servicing fees and positive fair value adjustments on the mortgage servicing portfolio. Adjusted return on average equity was 28.8% in 2021.

• Maritime transportation income before taxes was $11.6 million in 2021, as compared to $1.5 million in 2020, with the increase driven by cyclically high dry-bulk charter rates.

• Within Tiptree Capital, our investment in Invesque contributed unrealized gains of $3.1 million in 2021 compared to a loss of $67.7 million in 2020.

Corporate:

Corporate expenses include expenses of the holding company for interest expense, employee compensation and benefits, and public company and other expenses. For the quarter, corporate expenses were $17.0 million compared to $9.8 million in Q4’20 and for the year were $50.1 million, up from $35.7 million in 2020. The increase in both periods was primarily driven by increased stock-based compensation expense related to improved earnings and stock price performance.

Non-GAAP

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

Earnings Conference Call

Tiptree will host a conference call on Thursday, March 10, 2022 at 9:00 a.m. Eastern Time to discuss its Q4 and full year 2021 financial results. A copy of our investor presentation, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreeinc.com.

The conference call will be available via live or archived webcast at 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, March 10, 2022 at 12:00 p.m. Eastern Time, until midnight Eastern on Thursday, March 17, 2022. To listen to the replay, please dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international), Passcode: 13727150.

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.
Consolidated Balance Sheets
($ in thousands, except share data)
	As of December 31,
		2021			2020
Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	577,448		$	377,133
Loans, at fair value		105,583			90,732
Equity securities		138,483			123,838
Other investments		168,656			219,701
Total investments		990,170			811,404
Cash and cash equivalents		175,718			136,920
Restricted cash		19,368			58,355
Notes and accounts receivable, net		454,369			370,452
Reinsurance receivables		880,836			728,009
Deferred acquisition costs		379,373			229,430
Goodwill		179,103			179,236
Intangible assets, net		122,758			138,215
Other assets		146,844			162,034
Assets held for sale		250,608			181,705
Total assets	$	3,599,147		$	2,995,760
Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	393,349		$	366,246
Unearned premiums		1,123,952			860,690
Policy liabilities and unpaid claims		331,703			233,438
Deferred revenue		534,863			399,211
Reinsurance payable		265,569			224,660
Other liabilities and accrued expenses		306,536			362,865
Liabilities held for sale		242,994			175,112
Total liabilities	$	3,198,966		$	2,622,222
Stockholders’ Equity:
Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding	$	—		$	—
Common stock: $0.001 par value, 200,000,000 shares authorized, 34,124,153 and 32,682,462 shares issued and outstanding, respectively		34			33
Additional paid-in capital		317,459			315,014
Accumulated other comprehensive income (loss), net of tax		(2,685	)		5,674
Retained earnings		68,146			35,423
Total Tiptree Inc. stockholders’ equity		382,954			356,144
Non-controlling interests		17,227			17,394
Total stockholders’ equity		400,181			373,538
Total liabilities and stockholders’ equity	$	3,599,147		$	2,995,760

Tiptree Inc.
Consolidated Statements of Operations
($ in thousands, except share data)
	Three Months Ended December 31,					Year Ended December 31,
		2021			2020		2021		2020
Revenues:
Earned premiums, net	$	186,649		$	132,997	$	685,552	$	477,991
Service and administrative fees		69,111			52,683		260,525		186,973
Ceding commissions		2,957			4,884		11,784		21,101
Net investment income		8,565			1,113		17,896		9,916
Net realized and unrealized gains (losses)		31,082			55,782		151,350		62,410
Other revenue		21,170			9,936		73,407		51,910
Total revenues		319,534			257,395		1,200,514		810,301
Expenses:
Policy and contract benefits		89,814			69,137		327,012		236,898
Commission expense		104,103			73,038		396,683		280,210
Employee compensation and benefits		60,062			47,843		207,322		172,737
Interest expense		10,784			9,064		37,674		32,582
Depreciation and amortization		6,176			5,334		24,437		17,578
Other expenses		37,704			28,411		142,044		109,148
Total expenses		308,643			232,827		1,135,172		849,153
Income (loss) before taxes		10,891			24,568		65,342		(38,852	)
Less: provision (benefit) for income taxes		9,875			8,403		21,291		(13,627	)
Net income (loss)		1,016			16,165		44,051		(25,225	)
Less: net income (loss) attributable to non-controlling interests		1,442			1,895		5,919		3,933
Net income (loss) attributable to common stockholders	$	(426	)	$	14,270	$	38,132	$	(29,158	)
Net income (loss) per common share:
Basic earnings per share	$	(0.01	)	$	0.42	$	1.13	$	(0.86	)
Diluted earnings per share	$	(0.01	)	$	0.40	$	1.09	$	(0.86	)
Weighted average number of common shares:
Basic		33,996,324			33,213,307		33,223,792		33,859,775
Diluted		33,996,324			33,213,307		33,688,256		33,859,775
Dividends declared per common share	$	0.04		$	0.04	$	0.16	$	0.16

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 December 31, 2021
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate			Total
Income (loss) before taxes	$	20,288		$	3,288		$	4,296		$	(16,981	)	$	10,891
Less: Income tax (benefit) expense		(7,281	)		(434	)		(642	)		(1,518	)		(9,875	)
Less: Net realized and unrealized gains (losses)		1,272			(723	)		421			—			970
Plus: Intangibles amortization^(1)		3,830			—			—			—			3,830
Plus: Stock-based compensation expense		659			—			4			6,750			7,413
Plus: Non-recurring expenses		82			—			209			—			291
Plus: Non-cash fair value adjustments		—			—			(1,003	)		—			(1,003	)
Less: Tax on adjustments		1,532			(182	)		(675	)		3,667			4,342
Adjusted net income	$	20,382		$	1,949		$	2,610		$	(8,082	)	$	16,859
Adjusted net income	$	20,382		$	1,949		$	2,610		$	(8,082	)	$	16,859
Average stockholders’ equity	$	299,236		$	62,065		$	119,016		$	(79,155	)	$	401,162
Adjusted return on average equity		27.2	%		12.6	%		8.8	%	NM%				16.8	%

	Three Months Ended December 31, 2020
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate			Total
Income (loss) before taxes	$	26,530		$	9,627		$	(1,833	)	$	(9,756	)	$	24,568
Less: Income tax (benefit) expense		(6,436	)		(3,005	)		(1,118	)		2,156			(8,403	)
Less: Net realized and unrealized gains (losses)		(13,505	)		1,265			1,686			—			(10,554	)
Plus: Intangibles amortization^(1)		2,255			—			—			—			2,255
Plus: Stock-based compensation expense		909			1,069			19			(39	)		1,958
Plus: Non-recurring expenses		1,232			—			284			405			1,921
Plus: Non-cash fair value adjustments		—			—			820			—			820
Less: Tax on adjustments		2,603			134			1,073			(184	)		3,626
Adjusted net income	$	13,588		$	9,090		$	931		$	(7,418	)	$	16,191
Adjusted net income	$	13,588		$	9,090		$	931		$	(7,418	)	$	16,191
Average stockholders’ equity	$	291,845		$	55,254		$	111,248		$	(90,732	)	$	367,615
Adjusted return on average equity		18.6	%		65.8	%		3.3	%	NM%				17.6	%

Notes
(1)	Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions.

	Year Ended December 31, 2021
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate			Total
Income (loss) before taxes	$	69,857		$	28,407		$	17,210		$	(50,132	)	$	65,342
Less: Income tax (benefit) expense		(18,438	)		(4,882	)		(1,992	)		4,021			(21,291	)
Less: Net realized and unrealized gains (losses)		(3,732	)		(5,798	)		(3,091	)		—			(12,621	)
Plus: Intangibles amortization^(1)		15,329			—			—			—			15,329
Plus: Stock-based compensation expense		2,006			331			213			8,581			11,131
Plus: Non-recurring expenses		2,158			—			938			2,171			5,267
Plus: Non-cash fair value adjustments		—			—			(3,170	)		—			(3,170	)
Less: Tax on adjustments		(398	)		(624	)		655			4,249			3,882
Adjusted net income	$	66,782		$	17,434		$	10,763		$	(31,110	)	$	63,869
Adjusted net income	$	66,782		$	17,434		$	10,763		$	(31,110	)	$	63,869
Average stockholders’ equity	$	300,820		$	60,433		$	113,717		$	(88,111	)	$	386,859
Adjusted return on average equity		22.2	%		28.8	%		9.5	%	NM%				16.5	%

	Year Ended December 31, 2020
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate			Total
Income (loss) before taxes	$	26,948		$	31,102		$	(61,242	)	$	(35,660	)	$	(38,852	)
Less: Income tax (benefit) expense		(3,725	)		(7,066	)		13,624			10,794			13,627
Less: Net realized and unrealized gains (losses)		13,804			4,018			67,668			—			85,490
Plus: Intangibles amortization^(1)		9,213			—			—			—			9,213
Plus: Stock-based compensation expense		2,287			2,482			174			3,172			8,115
Plus: Non-recurring expenses		3,418			—			624			758			4,800
Plus: Non-cash fair value adjustments		—			—			(2,141	)		—			(2,141	)
Less: Tax on adjustments		(8,522	)		(1,958	)		(14,210	)		(4,131	)		(28,821	)
Adjusted net income	$	43,423		$	28,578		$	4,497		$	(25,067	)	$	51,431
Adjusted net income	$	43,423		$	28,578		$	4,497		$	(25,067	)	$	51,431
Average stockholders’ equity		285,760			47,202			138,606			(79,092	)		392,476
Adjusted return on average equity		15.2	%		60.5	%		3.2	%	NM%				13.1	%

___________________________
The footnote below corresponds to the tables above, under “—Adjusted Net Income - Non-GAAP” and “—Adjusted Return on Average Equity - Non-GAAP”.

Notes
(1)	Specifically associated with acquisition purchase accounting. See Note (3) Acquisitions.

Non-GAAP Financial Measures — Book value per share

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

($ in thousands, except per share information)	As of December 31,
		2021		2020
Total stockholders’ equity	$	400,181	$	373,538
Less: Non-controlling interests		17,227		17,394
Total stockholders’ equity, net of non-controlling interests	$	382,954	$	356,144
Total common shares outstanding		34,124		32,682
Book value per share	$	11.22	$	10.90