Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today
announced its financial results for the three and nine months ended
September 30, 2022.
Third Quarter 2022 Summary
- Revenues for the quarter of $363.5 million, an increase of
26.8% from Q3'21, driven by growth in Fortegra’s specialty
insurance lines and increased vessel revenues. Excluding investment
gains and losses, revenues were up 17.7%.
- Net income of $14.2 million compared to net income of $2.0
million in Q3'21, driven by the gain on sale of dry-bulk vessels
and growth in our insurance business.
- Adjusted net income of $19.4 million decreased by 6.4% from
$20.7 million in Q3'21, driven by declines in our mortgage
business. Adjusted return on average equity was 14.8% for the
quarter.
- Completed the sale of two remaining dry bulk vessels for $46.2
million, representing a gain of $14.1 million. Total proceeds from
dry-bulk vessel sales in 2022 were $67.7 million, or a gain of
$21.2 million.
- Signed definitive agreements to sell remaining two product
tankers for an aggregate of $49.0 million, representing an
approximate 44% gain as compared to Q3’22 book value. The two
tankers are expected to close in Q4’22.
- The Company repurchased 158,162 shares for the nine months
ended September 30, 2022 at an average price of $10.43 per
share.
- Declared a dividend of $0.04 per share to stockholders of
record on November 21, 2022 with a payment date of November 28,
2022.
Third Quarter
Nine Months
($ in thousands, except per share
information)
2022
2021
2022
2021
Total revenues
$
363,478
$
286,605
$
1,028,224
$
880,980
Net income (loss) attributable to common
stockholders
$
14,223
$
2,008
$
(9,145
)
$
38,558
Diluted earnings per share
$
0.38
$
0.06
$
(0.26
)
$
1.11
Cash dividends paid per common share
$
0.04
$
0.04
$
0.12
$
0.12
Return on average equity
15.4
%
3.3
%
(0.7
)%
14.8
%
Non-GAAP:
(1)
Adjusted net income
$
19,395
$
20,730
$
48,833
$
47,010
Adjusted return on average equity
14.8
%
20.5
%
14.2
%
16.2
%
Book value per share
$
10.68
$
11.37
$
10.68
$
11.37
(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.
Nine Months 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. For the nine months, Tiptree recognized a $63.2 million
pre-tax gain in stockholders’ equity from the investment in
Fortegra, which was partially offset by an increase in deferred tax
liability associated with the tax deconsolidation of Fortegra. Of
the total deferred tax liability of $38.2 million, $24.1 million
impacted net income with the remainder impacting stockholders’
equity directly.
- In 2022, we sold all three dry bulk vessels for $67.7 million
and signed definitive agreements to sell the remaining two product
tankers for $49.0 million. The gain on the two product tankers is
expected to be approximately 44% as compared to Q3’22 book value
and we expect the sales to close in Q4’22.
- Year-to-date revenues of $1.03 billion, an increase of 16.7%
from 2021 driven by similar factors impacting the quarter.
Excluding investment gains and losses, revenues were up 19.3%.
- Net loss of $9.1 million compared to net income of $38.6
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 $48.8 million increased by 3.9% from
prior year, driven by growth in specialty insurance and shipping
operations. Adjusted return on average equity was 14.2%.
Segment Financial Highlights - Third Quarter 2022
Insurance (The Fortegra Group):
Third Quarter
Nine Months
($ in thousands)
2022
2021
2022
2021
Gross written premiums and premium
equivalents
$
761,446
$
588,063
$
1,956,998
$
1,618,076
Revenues
$
327,028
$
246,706
$
903,388
$
721,524
Income before taxes
$
15,304
$
13,337
$
39,057
$
49,569
Return on average equity
14.4
%
13.7
%
12.1
%
17.3
%
Combined ratio
91.5
%
89.6
%
91.0
%
91.0
%
Non-GAAP:
(1)
Adjusted net income
$
19,831
$
19,533
$
59,893
$
46,400
Adjusted return on average equity
24.8
%
26.8
%
25.8
%
20.9
%
(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.
- Fortegra’s gross written premiums and premium equivalents
increased 29.5% for the quarter and 20.9% 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 $2.0 billion, up $413.8 million, or
26.5%, from September 30, 2021.
- Revenues increased 32.6% for the quarter and 25.2% 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 31.2%
for the quarter and 29.3% for the year.
- The combined ratio for the quarter was 91.5%, compared to 89.6%
in Q3'21 driven by the scalability of Fortegra’s technology and
shared service platform, which improved the expense ratio, while
the underwriting ratio increased due to a shift in business mix
toward lines with higher loss ratios and lower expense ratios.
Year-to-date combined ratio was consistent at 91.0%.
- Income before taxes for the quarter was $15.3 million.
Year-to-date income before taxes of $39.1 million compared to $49.6
million in the prior year. Return on equity for the year-to-date
period was 12.1%, as compared to 17.3% in 2021.
- Adjusted net income for the quarter was $19.8 million, up 1.5%
from Q3'21. Year-to-date adjusted net income was $59.9 million, up
29.1% from prior year driven by revenue growth and the improved
combined ratio. The year-to-date adjusted return on average equity
was 25.8%, as compared to 20.9% in 2021.
- On April 1, 2022, Fortegra acquired ITC Compliance GRP Limited
for net cash consideration of $15.0 million, which further
establishes Fortegra's footprint in Europe and provides a wholly
vertical compliance solution for the U.K. automotive market.
Tiptree Capital:
Third Quarter
Nine Months
($ in thousands)
2022
2021
2022
2021
Revenues
$
36,450
$
39,899
$
124,836
$
159,456
Income before taxes
$
18,136
$
1,567
$
23,817
$
38,033
Return on average equity
40.3
%
6.8
%
17.0
%
24.9
%
Non-GAAP:
(1)
Adjusted net income
$
4,879
$
9,483
$
9,756
$
23,638
Adjusted return on average equity
13.8
%
20.2
%
8.5
%
18.2
%
(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 income before taxes for the quarter was $18.1
million compared to $1.6 million in the prior year driven by
improved dry bulk and tanker charter rates and the gain on sale of
two of our dry bulk vessels.
- Income before taxes for the year was $23.8 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.
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 $8.3
million compared to $11.3 million in Q3'21 and for the year were
$33.9 million compared to $33.2 million. The decrease in the
quarter was driven by lower incentive compensation expense and
interest expense as we repaid our corporate holding company
borrowings in June 2022. Effective November 1, 2022, Tiptree has
relocated its headquarters to 660 Steamboat Road, Greenwich, CT
06830.
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, November 3,
2022 at 9:00 a.m. Eastern Time to discuss its Q3 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 1-855-327-6837 (domestic) or
1-631-891-4304 (international). Please dial in at least five
minutes prior to the start time.
A replay of the call will be available from Thursday, November
3, 2022 at 12:00 p.m. Eastern Time, until midnight Eastern on
Thursday, November 10, 2022. To listen to the replay, please dial
1-844-512-2921 (domestic) or 1-412-317-6671 (international),
Passcode: 10020271.
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
September 30,
2022
December 31,
2021
Assets:
Investments:
Available for sale securities, at fair
value, net of allowance for credit losses
$
584,081
$
577,448
Loans, at fair value
70,784
105,583
Equity securities
85,103
138,483
Other investments
76,535
168,656
Total investments
816,503
990,170
Cash and cash equivalents
503,488
175,718
Restricted cash
10,344
19,368
Notes and accounts receivable, net
481,985
454,369
Reinsurance receivables
1,194,327
880,836
Deferred acquisition costs
485,199
379,373
Goodwill
185,944
179,103
Intangible assets, net
120,340
122,758
Other assets
162,118
146,844
Assets held for sale
33,836
250,608
Total assets
$
3,994,084
$
3,599,147
Liabilities and Stockholders’
Equity
Liabilities:
Debt, net
$
266,255
$
393,349
Unearned premiums
1,349,357
1,123,952
Policy liabilities and unpaid claims
512,924
331,703
Deferred revenue
628,876
534,863
Reinsurance payable
317,199
265,569
Other liabilities and accrued expenses
399,899
306,536
Liabilities held for sale
—
242,994
Total liabilities
$
3,474,510
$
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, 36,247,257 and 34,124,153 shares
issued and outstanding, respectively
36
34
Additional paid-in capital
380,196
317,459
Accumulated other comprehensive income
(loss), net of tax
(47,670
)
(2,685
)
Retained earnings
54,717
68,146
Total Tiptree Inc. stockholders’
equity
387,279
382,954
Non-controlling interests:
Fortegra preferred interests
77,679
—
Common interests
54,616
17,227
Total non-controlling interests
132,295
17,227
Total stockholders’ equity
519,574
400,181
Total liabilities and stockholders’
equity
$
3,994,084
$
3,599,147
Tiptree Inc.
Condensed Consolidated Statements of
Operations
($ in thousands, except share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues:
Earned premiums, net
$
237,877
$
175,026
$
662,234
$
498,903
Service and administrative fees
83,423
69,664
232,883
191,414
Ceding commissions
4,023
2,722
9,886
8,827
Net investment income
3,632
3,330
10,164
9,331
Net realized and unrealized gains
(losses)
17,159
14,805
50,050
120,268
Other revenue
17,364
21,058
63,007
52,237
Total revenues
363,478
286,605
1,028,224
880,980
Expenses:
Policy and contract benefits
121,242
80,831
330,353
237,198
Commission expense
137,559
104,392
382,435
292,580
Employee compensation and benefits
38,210
48,643
142,927
147,260
Interest expense
5,503
8,657
24,837
26,890
Depreciation and amortization
5,549
6,119
17,714
18,261
Other expenses
30,290
34,379
100,978
104,340
Total expenses
338,353
283,021
999,244
826,529
Income (loss) before taxes
25,125
3,584
28,980
54,451
Less: provision (benefit) for income
taxes
5,068
237
31,537
11,416
Net income (loss)
20,057
3,347
(2,557
)
43,035
Less: net income (loss) attributable to
non-controlling interests
5,834
1,339
6,588
4,477
Net income (loss) attributable to
common stockholders
$
14,223
$
2,008
$
(9,145
)
$
38,558
Net income (loss) per common
share:
Basic earnings per share
$
0.39
$
0.06
$
(0.26
)
$
1.15
Diluted earnings per share
$
0.38
$
0.06
$
(0.26
)
$
1.11
Weighted average number of common
shares:
Basic
36,304,385
33,558,106
35,261,659
32,963,451
Diluted
36,783,248
34,132,182
35,261,659
35,025,211
Dividends declared per common share
$
0.04
$
0.04
$
0.12
$
0.12
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 September
30, 2022
Tiptree Capital
($ in thousands)
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)
6,382
(82
)
(12,694
)
—
(6,394
)
Plus: Intangibles amortization (1)
4,115
—
—
—
4,115
Plus: Stock-based compensation expense
33
—
75
1,588
1,696
Plus: Non-recurring expenses
89
—
53
—
142
Plus: Non-cash fair value adjustments
—
—
(130
)
—
(130
)
Less: Tax on adjustments (2)
(2,327
)
153
3,238
(1,155
)
(91
)
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
%
Three Months Ended September
30, 2021
Tiptree Capital
($ in thousands)
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
13,337
$
6,267
$
(4,700
)
$
(11,320
)
$
3,584
Less: Income tax (benefit) expense
(3,394
)
14
1,591
1,552
(237
)
Less: Net realized and unrealized gains
(losses)
7,428
(1,055
)
10,396
—
16,769
Plus: Intangibles amortization (1)
3,830
—
—
—
3,830
Plus: Stock-based compensation expense
475
—
197
832
1,504
Plus: Non-recurring expenses
(28
)
—
448
—
420
Plus: Non-cash fair value adjustments
—
—
(815
)
—
(815
)
Less: Tax on adjustments (2)
(2,115
)
(1,265
)
(1,595
)
650
(4,325
)
Adjusted net income
$
19,533
$
3,961
$
5,522
$
(8,286
)
$
20,730
Adjusted net income
$
19,533
$
3,961
$
5,522
$
(8,286
)
$
20,730
Average stockholders’ equity
$
291,281
$
68,925
$
118,729
$
(75,340
)
$
403,595
Adjusted return on average equity
26.8
%
23.0
%
18.6
%
NM%
20.5
%
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)
23,151
(7,976
)
(8,293
)
—
6,882
Plus: Intangibles amortization (1)
12,146
—
—
—
12,146
Plus: Stock-based compensation expense
2,376
—
98
5,437
7,911
Plus: Non-recurring expenses
1,561
—
(869
)
2,108
2,800
Plus: Non-cash fair value adjustments
—
—
3,554
—
3,554
Less: Tax on adjustments (2)
(7,299
)
1,984
1,783
21,629
18,097
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
%
Nine Months Ended September
30, 2021
Tiptree Capital
($ in thousands)
Insurance
Mortgage
Other
Corporate
Total
Income (loss) before taxes
$
49,569
$
25,119
$
12,914
$
(33,151
)
$
54,451
Less: Income tax (benefit) expense
(11,157
)
(4,448
)
(1,350
)
5,539
(11,416
)
Less: Net realized and unrealized gains
(losses)
(5,004
)
(5,075
)
(3,512
)
—
(13,591
)
Plus: Intangibles amortization (1)
11,499
—
—
—
11,499
Plus: Stock-based compensation expense
1,347
331
209
1,831
3,718
Plus: Non-recurring expenses
2,076
—
729
2,171
4,976
Plus: Non-cash fair value adjustments
—
—
(2,167
)
—
(2,167
)
Less: Tax on adjustments (2)
(1,930
)
(442
)
1,330
582
(460
)
Adjusted net income
$
46,400
$
15,485
$
8,153
$
(23,028
)
$
47,010
Adjusted net income
$
46,400
$
15,485
$
8,153
$
(23,028
)
$
47,010
Average stockholders’ equity
$
296,125
$
62,093
$
110,818
$
(81,196
)
$
387,840
Adjusted return on average equity
20.9
%
33.3
%
9.8
%
NM%
16.2
%
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 September 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 nine
months ended September 30, 2022, included in the adjustment is an
add-back of $(1.4) million and $24.1 million, respectively, related
to deferred tax expense from the WP Transaction.
Non-GAAP Financial Measures — Book
value per share
Management believes the use of this financial measure provides
supplemental information useful to investors as book value is
frequently used by the financial community to analyze company
growth on a relative per share basis. The following table provides
a reconciliation between total stockholders’ equity and total
shares outstanding, net of treasury shares.
($ in thousands, except per share
information)
As of September 30,
2022
2021
Total stockholders’ equity
$
519,574
$
402,142
Less: Non-controlling interests
132,295
16,930
Total stockholders’ equity, net of
non-controlling interests
$
387,279
$
385,212
Total common shares outstanding
36,247
33,889
Book value per share
$
10.68
$
11.37
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221101006312/en/
Tiptree Inc. Investor Relations, 212-446-1400
ir@tiptreeinc.com
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