Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today
announced its financial results for the third quarter 2023 and the
intent to take our specialty insurance subsidiary, Fortegra,
public. Tiptree expects the Fortegra IPO to be a primary offering
with the proceeds used to support Fortegra’s growth. Tiptree
expects to maintain majority ownership of Fortegra and believes a
Fortegra IPO will create a platform to serve the future capital
needs of the business.
Financial results for the three and nine months ended September
30, 2023 and 2022 are as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
($ in thousands, except per share
information)
2023
2022
2023
2022
Total revenues
$
416,514
$
363,478
$
1,202,657
$
1,028,224
Net income (loss) attributable to common
stockholders
$
2,153
$
14,223
$
7,080
$
(9,145)
Diluted earnings per share
$
0.04
$
0.38
$
0.18
$
(0.26)
Cash dividends paid per common share
$
0.05
$
0.04
$
0.15
$
0.12
Return on average equity
2.2 %
15.4 %
2.4 %
(0.7) %
Non-GAAP: (1)
Adjusted net income
$
24,033
$
19,395
$
65,121
$
48,833
Adjusted return on average equity
17.6 %
14.8 %
16.1 %
14.2 %
(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.
Third Quarter 2023 Summary
- Revenues of $416.5 million for the quarter, an increase of
14.6% from Q3'22, driven by growth in Fortegra’s specialty
insurance lines. Excluding investment gains and losses, revenues
were up 18.7%.
- Net income of $2.2 million compared to $14.2 million in Q3'22,
driven by growth in our insurance business, more than offset by
unrealized losses on investments in Q3’23 and lower shipping income
as a result of the sale of our vessels in 2022.
- Adjusted net income of $24.0 million increased by 23.9% from
$19.4 million in Q3'22, driven by growth in our insurance
operations. Adjusted return on average equity was 17.6% for the
quarter, as compared to 14.8% in Q3'22.
- Declared a dividend of $0.05 per share to stockholders of
record on November 20, 2023 with a payment date of November 27,
2023.
Year-to-date 2023 Summary
- Year-to-date revenues of $1.2 billion, an increase of 17.0%
from 2022, driven by growth in Fortegra’s specialty insurance
lines. Excluding investment gains and losses, revenues were up
17.7%.
- Net income of $7.1 million compared to net loss of $9.1 million
in 2022, driven by growth in our insurance business, and the
non-repeat of a $25.5 million deferred tax charge associated with
the investment in Fortegra in the prior year period, partially
offset by the sale of our vessels in 2022.
- Adjusted net income of $65.1 million increased by 33.4% from
$48.8 million in 2022, driven by revenue growth in our insurance
operations while maintaining a consistent combined ratio. Adjusted
return on average equity was 16.1% for the year, as compared to
14.2% in 2022.
Segment Financial Highlights - Third Quarter 2023
Insurance (The Fortegra Group):
Three Months Ended September
30,
Nine Months Ended September
30,
($ in thousands)
2023
2022
2023
2022
Gross written premiums and premium
equivalents
$
834,532
$
761,446
$
2,439,883
$
1,956,998
Revenues
$
406,779
$
327,028
$
1,159,900
$
903,388
Income before taxes
$
35,722
$
15,304
$
85,584
$
39,057
Return on average equity
27.5 %
14.4 %
22.9 %
12.1 %
Combined ratio
90.2 %
91.3 %
90.5 %
90.7 %
Non-GAAP: (1)
Adjusted net income
$
30,043
$
19,831
$
83,101
$
59,893
Adjusted return on average equity
31.2 %
24.8 %
30.3 %
25.8 %
(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 grew 9.6% for
the quarter and 24.7% for the year, driven by specialty insurance
lines and services businesses in the U.S. and Europe. Unearned
premiums and deferred revenues grew to $2.3 billion, up $307.0
million, or 15.5%, from Q3’22.
- Record revenues increased 24.4% for the quarter and 28.4% for
the year 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
22.5% for the quarter and 26.3% for the year.
- The combined ratio for the quarter was 90.2%, compared to 91.3%
in Q3'22. Year-to-date combined ratio was 90.5%, as compared to
90.7% in 2022, reflecting the consistent underwriting performance
and scalability of the Company’s operating platform.
- Record income before taxes for the quarter was $35.7 million,
up $20.4 million. Year-to-date income before the taxes was $85.6
million, up $46.5 million. Return on equity for the year was 22.9%,
compared to 12.1% in 2022. The increases were driven by growth in
underwriting and fee revenues, the consistent combined ratio and
increased net investment income.
- Adjusted net income for the quarter of $30.0 million, up 51.5%
from Q3'22. Year-to-date adjusted net income was $83.1 million, up
38.7% from prior year. Adjusted return on average equity for the
year was 30.3%, compared to 25.8% in 2022.
Tiptree Capital:
Three Months Ended September
30,
Nine Months Ended September
30,
($ in thousands)
2023
2022
2023
2022
Revenues
$
9,735
$
36,450
$
42,757
$
124,836
Income before taxes
$
(6,135)
$
18,136
$
(4,491)
$
23,817
Return on average equity
(10.4) %
40.3 %
(3.2) %
17.0 %
Non-GAAP:
(1)
Adjusted net income
$
(322)
$
4,879
$
248
$
9,756
Adjusted return on average equity
(0.7) %
13.8 %
0.2 %
8.5 %
(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 $6.1 million for the
quarter, compared to income of $18.1 million in Q3’22, driven by
unrealized losses on investments in Q3’23 and declines in shipping
operations as a result of the sale of five vessels in 2022.
- Loss before taxes was $4.5 million for the year, down from the
prior year driven by declines in our mortgage business and shipping
operations as a result of the sale of five vessels in 2022,
partially offset by improved performance in the Company’s other
investment holdings.
- Total Tiptree Capital book value was $185.9 million as of
Q3’23.
Corporate:
Corporate includes expenses of the holding company for employee
compensation and benefits, audit and professional fees, and public
company and other expenses. For the quarter, corporate expenses
were $8.4 million compared to $8.3 million in Q3'22.
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, November 2,
2023 at 10:30 a.m. Eastern Time to discuss its Q3 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, November
2, 2023 at 12:00 p.m. Eastern Time, until midnight Eastern on
Thursday, November 9, 2023. To listen to the replay, please dial
1-844-512-2921 (domestic) or 1-412-317-6671 (international),
Passcode: 13740778.
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.
No Offer or Solicitation
A registration statement relating to the common stock to be sold
in the Fortegra IPO is expected to be filed with the U.S.
Securities and Exchange Commission, but has not been filed or
become effective. The common stock may not be sold and offers may
not be accepted prior to the time the registration statement
becomes effective. This release does not constitute an offer to
sell or the solicitation of any offer to buy, and there shall not
be any sale of the common stock in any state in which such offer,
solicitation or sale would be unlawful prior the registration or
qualification under the securities laws of any such state.
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.
In addition, we make certain forward-looking statements regarding
the Company’s plans to take Fortegra public. Any initial public
offering by Fortegra would be subject to a variety of factors,
including market conditions, and may not be consummated. 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
September 30,
2023
December 31,
2022
Assets:
Investments:
Available for sale securities, at fair
value, net of allowance for credit losses
$
701,238
$
611,980
Loans, at fair value
75,975
64,843
Equity securities
63,456
85,776
Other investments
92,835
73,025
Total investments
933,504
835,624
Cash and cash equivalents
514,692
538,065
Restricted cash
22,670
12,782
Notes and accounts receivable, net
664,917
502,311
Reinsurance recoverable
742,032
450,620
Prepaid reinsurance premiums
894,272
725,470
Deferred acquisition costs
539,278
498,925
Goodwill
205,023
186,608
Intangible assets, net
122,609
117,015
Other assets
188,394
172,143
Total assets
$
4,827,391
$
4,039,563
Liabilities and Stockholders’
Equity
Liabilities:
Debt, net
$
323,642
$
259,366
Unearned premiums
1,607,022
1,357,436
Policy liabilities and unpaid claims
813,214
567,193
Deferred revenue
678,204
649,150
Reinsurance payable
471,241
305,097
Other liabilities and accrued expenses
390,495
367,748
Total liabilities
$
4,283,818
$
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, 36,749,768 and 36,385,299 shares
issued and outstanding, respectively
37
36
Additional paid-in capital
380,988
382,645
Accumulated other comprehensive income
(loss), net of tax
(40,577)
(39,429)
Retained earnings
55,643
54,113
Total Tiptree Inc. stockholders’
equity
396,091
397,365
Non-controlling interests:
Fortegra preferred interests
77,679
77,679
Common interests
69,803
58,529
Total non-controlling interests
147,482
136,208
Total stockholders’ equity
543,573
533,573
Total liabilities and stockholders’
equity
$
4,827,391
$
4,039,563
Tiptree Inc.
Condensed Consolidated Statements of
Operations
($ in thousands, except share data)
Three Months Ended
September 30,
2023
2022
Revenues:
Earned premiums, net
$
291,293
$
237,877
Service and administrative fees
100,146
83,423
Ceding commissions
2,440
4,023
Net investment income
5,416
3,632
Net realized and unrealized gains
(losses)
1,457
17,159
Other revenue
15,762
17,364
Total revenues
416,514
363,478
Expenses:
Policy and contract benefits
153,966
121,242
Commission expense
153,744
137,559
Employee compensation and benefits
45,663
38,210
Interest expense
6,716
5,503
Depreciation and amortization
6,347
5,549
Other expenses
28,937
30,290
Total expenses
395,373
338,353
Income (loss) before taxes
21,141
25,125
Less: provision (benefit) for income
taxes
12,273
5,068
Net income (loss)
8,868
20,057
Less: net income (loss) attributable to
non-controlling interests
6,715
5,834
Net income (loss) attributable to
common stockholders
$
2,153
$
14,223
Net income (loss) per common
share:
Basic earnings per share
$
0.06
$
0.39
Diluted earnings per share
$
0.04
$
0.38
Weighted average number of common
shares:
Basic
36,749,199
36,304,385
Diluted
37,684,131
36,783,248
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
Adjusted net income is defined 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. The calculation of adjusted net income
excludes net realized and unrealized gains (losses) that relate to
investments or assets rather than business operations. Adjusted net
income is presented before the impacts of non-controlling
interests. Adjusted return on average equity represents adjusted
net income expressed on an annualized basis as a percentage of
average beginning and ending stockholders’ equity during the
period. 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. We believe adjusted
net income provides additional clarity on the results of the
Company’s underlying business operations as a whole for the periods
presented by excluding distortions created by the unpredictability
and volatility of realized and unrealized gains (losses). We also
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.
Three Months Ended September
30, 2023
Tiptree Capital
($ in thousands)
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
35,722
$
359
$
(6,494)
$
(8,446)
$
21,141
Less: Income tax (benefit) expense
(9,261)
(76)
1,179
(4,115)
(12,273)
Less: Net realized and unrealized gains
(losses) (1)
1,616
(788)
6,625
—
7,453
Plus: Intangibles amortization (2)
4,878
—
—
—
4,878
Plus: Stock-based compensation expense
717
—
—
1,246
1,963
Plus: Non-recurring expenses (3)
113
—
—
—
113
Plus: Non-cash fair value adjustments
(4)
(2,447)
—
—
—
(2,447)
Plus: Impact of tax deconsolidation of
Fortegra (5)
—
4,396
4,396
Less: Tax on adjustments (6)
(1,295)
178
(1,305)
1,231
(1,191)
Adjusted net income
$
30,043
$
(327)
$
5
$
(5,688)
$
24,033
Adjusted net income
$
30,043
$
(327)
$
5
$
(5,688)
$
24,033
Average stockholders’ equity
$
385,266
$
53,939
$
139,786
$
(34,169)
$
544,822
Adjusted return on average equity
31.2 %
(2.4) %
— %
NM%
17.6 %
Three Months Ended September
30, 2022
($ in thousands)
Tiptree Capital
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
15,304
$
(940)
$
19,077
$
(8,316)
$
25,125
Less: Income tax (benefit) expense
(3,765)
92
(3,963)
2,568
(5,068)
Less: Net realized and unrealized gains
(losses) (1)
6,382
(82)
(12,694)
—
(6,394)
Plus: Intangibles amortization (2)
4,115
—
—
—
4,115
Plus: Stock-based compensation expense
33
—
75
1,588
1,696
Plus: Non-recurring expenses (3)
89
—
53
—
142
Plus: Non-cash fair value adjustments
(4)
—
—
(130)
—
(130)
Plus: Impact of tax deconsolidation of
Fortegra (5)
(1,425)
(1,425)
Less: Tax on adjustments (6)
(2,327)
153
3,238
270
1,334
Adjusted net income
$
19,831
$
(777)
$
5,656
$
(5,315)
$
19,395
Adjusted net income
$
19,831
$
(777)
$
5,656
$
(5,315)
$
19,395
Average stockholders’ equity
$
319,703
$
57,133
$
84,445
$
61,178
$
522,459
Adjusted return on average equity
24.8 %
(5.4) %
26.8 %
NM%
14.8 %
Nine Months Ended September
30, 2023
Tiptree Capital
($ in thousands)
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
85,584
$
(894)
$
(3,597)
$
(28,105)
$
52,988
Less: Income tax (benefit) expense
(22,936)
231
419
(6,833)
(29,119)
Less: Net realized and unrealized gains
(losses) (1)
10,602
(933)
5,885
—
15,554
Plus: Intangibles amortization (2)
12,667
—
—
—
12,667
Plus: Stock-based compensation expense
1,238
—
—
5,032
6,270
Plus: Non-recurring expenses (3)
2,476
—
—
—
2,476
Plus: Non-cash fair value adjustments
(4)
(2,611)
—
—
—
(2,611)
Plus: Impact of tax deconsolidation of
Fortegra (5)
10,210
10,210
Less: Tax on adjustments (6)
(3,919)
207
(1,070)
1,468
(3,314)
Adjusted net income
$
83,101
$
(1,389)
$
1,637
$
(18,228)
$
65,121
Adjusted net income
$
83,101
$
(1,389)
$
1,637
$
(18,228)
65,121
Average stockholders’ equity
$
365,375
$
54,411
$
103,332
$
15,456
538,574
Adjusted return on average equity
30.3 %
(3.4) %
2.1 %
NM%
16.1 %
Nine Months Ended September
30, 2022
Tiptree Capital
($ in thousands)
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
39,057
$
3,350
$
20,468
$
(33,895)
$
28,980
Less: Income tax (benefit) expense
(11,099)
(874)
(3,469)
(16,095)
(31,537)
Less: Net realized and unrealized gains
(losses) (1)
23,151
(7,976)
(8,293)
—
6,882
Plus: Intangibles amortization (2)
12,146
—
—
—
12,146
Plus: Stock-based compensation expense
2,376
—
98
5,437
7,911
Plus: Non-recurring expenses (3)
1,561
—
(869)
2,108
2,800
Plus: Non-cash fair value adjustments
(4)
—
—
3,554
—
3,554
Plus: Impact of tax deconsolidation of
Fortegra (5)
1,560
22,544
24,104
Less: Tax on adjustments (6)
(8,859)
1,984
1,783
(915)
(6,007)
Adjusted net income
$
59,893
$
(3,516)
$
13,272
$
(20,816)
$
48,833
Adjusted net income
$
59,893
$
(3,516)
$
13,272
$
(20,816)
$
48,833
Average stockholders’ equity
$
309,042
$
58,558
$
94,169
$
(1,891)
$
459,878
Adjusted return on average equity
25.8 %
(8.0) %
18.8 %
NM%
14.2 %
Notes
(1)
Net realized and unrealized gains (losses)
added back in Adjusted net income excludes net realized and
unrealized gains (losses) from the mortgage segment, those relating
to our held-for-sale mortgage originator (Luxury), and unrealized
gains (losses) on mortgage servicing rights.
(2)
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 September 30,
2023.
(3)
For the three and nine months ended
September 30, 2023, included in other expenses were expenses
related to banker and legal fees associated with the acquisitions
of Premia and ITC.
(4)
For the three and nine months ended
September 30, 2023, non-cash fair-value adjustments represent a
decrease in fair value of the Fortegra Additional Warrant liability
which are added-back to adjusted net income. For the 2022 periods,
maritime transportation depreciation and amortization was deducted
as a reduction in the value of the vessel.
(5)
For the three and nine months ended
September 30, 2023, included in the adjustment is an add-back of
$4.4 million and $10.2 million, respectively, related to deferred
tax expense from the WP Transaction. For the three and nine months
ended September 30, 2022, included in the adjustment is an add-back
of $(1.4) million and $24.1 million, respectively, related to
deferred tax expense from the WP Transaction.
(6)
Tax on adjustments represents the tax
applied to the total non-GAAP adjustments and includes adjustments
for non-recurring or discrete tax impacts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101785866/en/
Tiptree Inc. Investor Relations, 212-446-1400
ir@tiptreeinc.com
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