TIPTREE INC. [TIPT] Filings

10-Q 1 tipt-20230630.htm 10-Q tipt-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly period ended June 30, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-33549

Tiptree Inc.

(Exact name of Registrant as Specified in Its Charter)

Maryland 38-3754322

(State or Other Jurisdiction of Incorporation of Organization (IRS Employer Identification No.)

660 Steamboat Road, 2nd Floor, Greenwich, Connecticut 06830

(Address of Principal Executive Offices) Zip Code

Registrant’s Telephone Number, Including Area Code: (212) 446-1400

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
common stock, par value $0.001 per share	TIPT	NASDAQ	Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x

Non-accelerated filer ¨ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

As of August 1, 2023, there were 36,749,768 shares, par value $0.001, of the registrant’s common stock outstanding.

Tiptree Inc.

Quarterly Report on Form 10-Q

June 30, 2023

Table of Contents


ITEM						Page Number
PART I. Financial Information						F- 1
Item 1. Financial Statements (Unaudited)						F- 3
Condensed Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022						F- 3
Condensed Consolidated Statements of Operations for the three and six months ended June 3 0 , 2023 and 2022						F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 3 0 , 2023 and 2022						F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended June 3 0 , 2023 and 2022						F- 6
Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2023 and 2022						F- 8
Notes to Condensed Consolidated Financial Statements						F- 10
(1) Organization						F- 10
(2) Summary of Significant Accounting Policies						F- 10
(3) Acquisitions						F- 11

(4) Operating Segment Data						F- 11
(5) Investments						F- 13
(6) Notes and Accounts Receivable, net						F- 19
(7) Reinsurance Receivables						F- 19
(8) Goodwill and Intangible Assets, net						F- 23
(9) Derivative Financial Instruments and Hedging						F- 24
(10) Debt, net						F- 26
(11) Fair Value of Financial Instruments						F- 28
(12) Liability for Unpaid Claims and Claim Adjustment Expenses						F- 35
(13) Revenue from Contracts with Customers						F- 36
(14) Other Assets and Other Liabilities and Accrued Expenses						F- 37
(15) Other Revenue and Other Expenses						F- 38
(16) Stockholders’ Equity						F- 39
(17) Accumulated Other Comprehensive Income (Loss)						F- 41
(18) Stock Based Compensation						F- 41
(19) Income Taxes						F- 45
(20) Commitments and Contingencies						F- 45
(21) Earnings Per Share						F- 46
(22) Related Party Transactions						F- 47
(23) Subsequent Events						F- 47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						48
Item 3. Quantitative and Qualitative Disclosures About Market Risk						71
Item 4. Controls and Procedures						71

PART II. Other Information						72
Item 1. Legal Proceedings						72
Item 1A. Risk Factors						72
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						72
Item 3. Defaults Upon Senior Securities						72
Item 4. Mine Safety Disclosures						72
Item 5. Other Information						72
Item 6. Exhibits, Financial Statement Schedules						73
Signatures						74

PART I. FINANCIAL INFORMATION

Forward-Looking Statements

Except for the historical information included and incorporated by reference in this Quarterly Report on Form 10-Q, the information included and incorporated by reference herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations and our strategic plans and objectives. When we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions, we intend to identify forward-looking statements.

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 forecasted 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, in this Quarterly Report on Form 10-Q and in our other public filings with the SEC.

The factors described herein 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 applicable law, we undertake no obligation to update any forward-looking statements.

Market and Industry Data

Certain market data and industry data included in this Quarterly Report on Form 10-Q were obtained from reports of governmental agencies and industry publications and surveys. We believe the data from third-party sources to be reliable based upon our management’s knowledge of the industry, but have not independently verified such data and as such, make no guarantees as to its accuracy, completeness or timeliness.

Note to Reader

In reading this Quarterly Report on Form 10-Q, references to:

“A.M. Best” means A.M. Best Company, Inc.

“BSBY” means the Bloomberg Short-Term Bank Yield Index.

“Corvid Peak” means collectively: Corvid Peak Holdings, L.P., Corvid Peak Capital Management, LLC, Corvid Peak GP Holdings, LLC and Corvid Peak Holdings GP, LLC.

“Corvid Peak Funds” means Corvid Peak Restructuring Partners Onshore Fund LLC and Albatross CP LLC.

“EBITDA” means earnings before interest, taxes, depreciation and amortization.

“EBITDAR” means earnings before interest, taxes, depreciation and amortization, and restructuring or rent costs.

“E&S” means excess and surplus.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fannie Mae” means Federal National Mortgage Association.

“Fortegra” or “The Fortegra Group” means The Fortegra Group, LLC and its subsidiaries prior to June 21, 2022 and to The Fortegra Group, Inc. on or after June 21, 2022.

“Fortegra Additional Warrants” means the additional warrants issued to Warburg and Tiptree Holdings to acquire Fortegra Common Stock.

“Fortegra Additional Warrants (Warburg)” means the Fortegra Additional Warrants issued to Warburg.

“Fortegra Common Stock” means the common stock of Fortegra.

“Fortegra Plan” means the 2022 Equity Incentive Plan of Fortegra.

“Fortegra Preferred Stock” means the 5,333,333 shares of Series A Preferred Stock of Fortegra issued to Warburg.

“Fortegra Warrants” means the warrants to purchase shares of Fortegra Common Stock.

“Freddie Mac” means Federal Home Loan Mortgage Corporation.

“GAAP” means U.S. generally accepted accounting principles.

“Ginnie Mae” means Government National Mortgage Association.

“GSE” means government-sponsored enterprise.

F - 1

“Invesque” means Invesque Inc.

“ITC” means ITC Compliance GRP Limited.

“Luxury” means Luxury Mortgage Corp.

“NAIC” means the National Association of Insurance Commissioners.

“Premia” means Premia Solutions Limited.

“Reliance” means Reliance First Capital, LLC.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Sky Auto” means Sky Services LLC.

“Smart AutoCare” means the following entities and their subsidiaries operating under the Smart AutoCare brand: SAC Holdings, Inc., Freedom Insurance Company, Ltd., Dealer Motor Services, Inc., Independent Dealer Group, Inc., Ownershield, Inc. and Accelerated Service Enterprise, LLC.

“SOFR” means the Secured Overnight Financing Rate.

“Tiptree”, the “Company”, “we”, “its”, “us” and “our” means, unless otherwise indicated by the context, Tiptree Inc. and its consolidated subsidiaries.

“Tiptree Holdings” means Tiptree Holdings LLC.

“Transition Services Agreement” means the Amended and Restated Transition Services Agreement between Corvid Peak and Tiptree Inc., effective as of January 1, 2019.

“Warburg” means WP Falcon Aggregator, L.P., a Delaware limited partnership affiliated with funds advised or managed by Warburg Pincus LLC.

“WP Transaction” means the $200 million strategic investment in Fortegra by Warburg.

F - 2

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


	As of
	June 30, 2023		December 31, 2022


Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	795,556	$	611,980
Loans, at fair value	78,853		64,843
Equity securities	130,881		85,776
Other investments	85,939		73,025
Total investments	1,091,229		835,624
Cash and cash equivalents	372,410		538,065
Restricted cash	25,589		12,782
Notes and accounts receivable, net	687,825		502,311
Reinsurance receivables	1,444,795		1,176,090
Deferred acquisition costs	520,925		498,925
Goodwill	205,674		186,608
Intangible assets, net	128,107		117,015
Other assets	157,895		172,143

Total assets	$	4,634,449	$	4,039,563

Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	361,211	$	259,366
Unearned premiums	1,521,320		1,357,436
Policy liabilities and unpaid claims	722,469		567,193
Deferred revenue	681,263		649,150
Reinsurance payable	443,698		305,097
Other liabilities and accrued expenses	358,420		367,748

Total liabilities	$	4,088,381	$	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, 36,742,295 and 36,385,299 shares issued and outstanding, respectively	37		36
Additional paid-in capital	379,741		382,645
Accumulated other comprehensive income (loss), net of tax	(33,226)		(39,429)
Retained earnings	55,340		54,113
Total Tiptree Inc. stockholders’ equity	401,892		397,365
Non-controlling interests:
Fortegra preferred interests	77,679		77,679
Common interests	66,497		58,529
Total non-controlling interests	144,176		136,208
Total stockholders’ equity	546,068		533,573
Total liabilities and stockholders’ equity	$	4,634,449	$	4,039,563

See accompanying notes to condensed consolidated financial statements.

F-3

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Earned premiums, net	$	269,795	$	215,941	$	535,125	$	424,357
Service and administrative fees	98,113		77,625		190,145		149,460
Ceding commissions	4,676		3,326		8,321		5,863
Net investment income	9,088		3,365		14,197		6,532
Net realized and unrealized gains (losses)	8,825		15,687		11,002		32,891
Other revenue	14,021		23,899		27,353		45,643
Total revenues	404,518		339,843		786,143		664,746
Expenses:
Policy and contract benefits	147,734		104,665		289,409		209,111
Commission expense	142,699		127,453		289,149		244,876
Employee compensation and benefits	44,383		48,262		85,181		104,717
Interest expense	7,044		9,135		13,509		19,334
Depreciation and amortization	5,875		6,009		11,128		12,165
Other expenses	33,109		39,512		65,920		70,688
Total expenses	380,844		335,036		754,296		660,891
Income (loss) before taxes	23,674		4,807		31,847		3,855
Less: provision (benefit) for income taxes	11,824		26,555		16,846		26,469
Net income (loss)	11,850		(21,748)		15,001		(22,614)
Less: net income (loss) attributable to non-controlling interests	5,861		660		10,074		754
Net income (loss) attributable to common stockholders	$	5,989	$	(22,408)	$	4,927	$	(23,368)

Net income (loss) per common share:
Basic earnings per share	$	0.16	$	(0.64)	$	0.13	$	(0.67)
Diluted earnings per share	$	0.16	$	(0.64)	$	0.13	$	(0.67)

Weighted average number of common shares:
Basic	36,742,295		35,228,775		36,633,226		34,731,655
Diluted	37,585,811		35,228,775		37,509,660		34,731,655

Dividends declared per common share	$	0.05	$	0.04	$	0.10	$	0.08

See accompanying notes to condensed consolidated financial statements.

F-4

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	11,850	$	(21,748)	$	15,001	$	(22,614)

Other comprehensive income (loss), net of tax:







Change in unrealized gains (losses) on available for sale securities	(3,576)		(12,118)		5,925		(38,384)
Change in unrealized currency translation adjustments	2,700		(7,065)		5,632		(7,065)
Related (provision) benefit for income taxes	797		3,368		(3,238)		9,163
Other comprehensive income (loss), net of tax	(79)		(15,815)		8,319		(36,286)
Comprehensive income (loss)	11,771		(37,563)		23,320		(58,900)
Less: comprehensive income (loss) attributable to non-controlling interests	5,915		(102)		12,190		(58)
Comprehensive income (loss) attributable to common stockholders	$	5,856	$	(37,461)	$	11,130	$	(58,842)

See accompanying notes to condensed consolidated financial statements.

F-5

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(in thousands, except shares)


	Common stock											Non-controlling interests
	Number of shares	Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total Tiptree Inc. stockholders’ equity		Fortegra preferred interests		Common interests		Total stockholders' equity
Balance at December 31, 2022	36,385,299	$	36	$	382,645	$	(39,429)	$	54,113	$	397,365	$	77,679	$	58,529	$	533,573

Amortization of share-based incentive compensation	—	—		3,576		—		—		3,576		—		490		4,066
Vesting of share-based incentive compensation	301,989	1		(462)		—		—		(461)		—		(470)		(931)


Shares issued upon exercise of options	55,007	—		—		—		—		—		—		—		—




Non-controlling interest distributions	—	—		(1,751)		—		—		(1,751)		—		(3,174)		(4,925)
Net change in non-controlling interests and other	—	—		(4,267)		—		—		(4,267)		—		2,106		(2,161)
Common stock dividends declared	—	—		—		—		(3,700)		(3,700)		—		—		(3,700)
Other comprehensive income (loss), net of tax	—	—		—		6,203		—		6,203		—		2,116		8,319
Subsidiary preferred dividends declared	—	—		—		—		(3,174)		(3,174)		—		—		(3,174)
Net income (loss)	—	—		—		—		8,101		8,101		—		6,900		15,001
Balance at June 30, 2023	36,742,295	$	37	$	379,741	$	(33,226)	$	55,340	$	401,892	$	77,679	$	66,497	$	546,068

Balance at March 31, 2023	36,734,948	37		382,502		(33,093)		51,201		400,647		77,679		63,231		541,557

Amortization of share-based incentive compensation	—	—		1,403		—		—		1,403		—		449		1,852
Vesting of share-based incentive compensation	7,347	—		103		—		—		103		—		—		103



Net change in non-controlling interest and other	—	—		(4,267)		—		—		(4,267)		—		(1,502)		(5,769)
Common stock dividends declared	—	—		—		—		(1,850)		(1,850)		—		—		(1,850)
Other comprehensive income (loss), net of tax	—	—		—		(133)		—		(133)		—		54		(79)
Subsidiary preferred dividends declared	—	—		—		—		(1,596)		(1,596)		—		—		(1,596)
Net income (loss)	—	—		—		—		7,585		7,585		—		4,265		11,850
Balance at June 30, 2023	36,742,295	37		379,741		(33,226)		55,340		401,892		77,679		66,497		546,068

F-6

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(in thousands, except shares)


	Common stock											Non-controlling interests
	Number of shares	Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total Tiptree Inc. stockholders’ equity		Fortegra preferred interests		Common interests		Total stockholders' equity
Balance at December 31, 2021	34,124,153	$	34	$	317,459	$	(2,685)	$	68,146	$	382,954	$	—	$	17,227	$	400,181

Amortization of share-based incentive compensation	—	—		3,600		—		—		3,600		—		620		4,220
Vesting of share-based incentive compensation	270,417	—		(413)		—		—		(413)		—		(1,086)		(1,499)

Shares purchased under stock purchase plan	(89,543)	—		(936)		—		—		(936)		—		—		(936)
Shares issued upon exercise of warrants	1,999,989	2		13,722		—		—		13,724		—		—		13,724
Transfer of liability awards	—	—		4,847		—		—		4,847		—		—		4,847
WP Transactions	—	—		41,092		7,193		—		48,285		77,679		41,044		167,008
Non-controlling interest contributions	—	—		—		—		—		—		—		250		250
Non-controlling interest distributions	—	—		—		—		—		—		—		(583)		(583)


Common stock dividends declared	—	—		—		—		(2,814)		(2,814)		—		—		(2,814)
Other comprehensive income (loss), net of tax	—	—		—		(35,474)		—		(35,474)		—		(812)		(36,286)
Subsidiary preferred dividends declared	—	—		—		—		(158)		(158)		—		—		(158)
Net income (loss)	—	—		—		—		(23,210)		(23,210)		—		596		(22,614)
Balance at June 30, 2022	36,305,016	$	36	$	379,371	$	(30,966)	$	41,964	$	390,405	$	77,679	$	57,256	$	525,340

Balance at March 31, 2022	34,877,897	$	35	$	323,916	$	(23,106)	$	65,788	$	366,633	$	—	$	16,520	$	383,153
Amortization of share-based incentive compensation	—	—		438		—		—		438		—		44		482
Vesting of share-based incentive compensation	8,968	—		(286)		—		—		(286)		—		(92)		(378)
Transfer of liability awards	—	—		4,847		—		—		4,847		—		—		4,847
Shares purchased under stock purchase plan	(89,543)	—		(936)		—		—		(936)		—		—		(936)
Shares issued upon exercise of warrants	1,507,694	1		10,300		—		—		10,301		—		—		10,301
WP Transaction	—	—		41,092		7,193		—		48,285		77,679		41,044		167,008



Common stock dividends declared	—	—		—		—		(1,416)		(1,416)		—		—		(1,416)
Other comprehensive income (loss), net of tax	—	—		—		(15,053)		—		(15,053)		—		(762)		(15,815)
Subsidiary preferred dividends declared	—	—		—		—		(158)		(158)		—		—		(158)
Net income (loss)	—	—		—		—		(22,250)		(22,250)		—		502		(21,748)
Balance at June 30, 2022	36,305,016	$	36	$	379,371	$	(30,966)	$	41,964	$	390,405	$	77,679	$	57,256	$	525,340	</

TIPTREE INC. [TIPT] Filings
10-Q	[2023-08-02]
10-Q	[2023-05-03]
10-K	[2023-03-08]
10-Q	[2022-11-02]
10-Q	[2022-08-08]
10-Q	[2022-05-05]
10-K	[2022-03-14]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-05]
10-K	[2021-03-11]
10-Q	[2020-11-04]
10-Q	[2020-08-05]
10-Q	[2020-05-07]
10-K	[2020-03-12]
10-Q	[2019-11-06]
10-Q	[2019-08-05]
10-Q	[2019-05-06]
10-K	[2019-03-13]
10-Q	[2018-11-05]
10-Q	[2018-08-06]
10-Q	[2018-05-07]
10-K	[2018-03-14]
10-Q	[2017-11-07]
S-1	[2017-08-14]
10-Q	[2017-08-07]
10-Q	[2017-06-06]
10-K	[2017-03-13]
10-Q	[2016-11-08]
10-Q	[2016-08-05]
10-Q	[2016-05-10]
10-K	[2016-03-15]
10-Q	[2015-11-13]
10-Q	[2015-08-13]
10-Q	[2015-05-15]
10-K	[2015-03-31]
10-Q	[2014-11-12]
10-Q	[2014-08-12]
10-Q	[2014-05-14]
10-K	[2014-03-18]
10-Q	[2013-11-14]
10-Q	[2013-08-13]
10-Q	[2013-05-15]
10-K	[2013-03-25]
10-Q	[2012-11-08]
10-Q	[2012-08-10]
10-Q	[2012-05-15]
10-K	[2012-04-05]