TIPTREE INC. Management's Discussion and Analysis of Financial … – Marketscreener.com

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in this section as follows:
•Overview
OVERVIEW
Our year-to-date 2023 highlights include:
Overall:
Insurance:
Key Trends:
years. Any additional declines in the fair value of Invesque’s common stock could continue to have a significant impact on our results of operations and the value of the investment.
A discussion of our performance for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 appears below.
RESULTS OF OPERATIONS
Selected Key Metrics
Months Ended
Net income (loss) attributable to common stockholders $ (1,062) $ (960)
$ (0.03)
(1) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Revenues
For the three months ended March 31, 2023, revenues were $381.6 million, which increased $56.7 million, or 17.5%, compared to the prior year period. The increase was driven by growth in earned premiums, net, and service and administrative fees in our insurance business, partially offset by lower mortgage and shipping revenues compared to 2022.
Net realized and unrealized gains (losses) – Invesque $ (1,698) $ (10,698) Net realized and unrealized gains (losses)(1)
1,518
(1) Excludes Invesque and Mortgage realized and unrealized gains and losses.
Net Income (Loss) Attributable to common stockholders
Adjusted net income & Adjusted return on average equity – Non-GAAP
Adjusted EBITDA – Non-GAAP
Book Value per share – Non-GAAP
Results by Segment
The following tables present the components of Revenue, Income (loss) before taxes and Adjusted net income for the following periods:
Total income (loss) before taxes $ 8,173 $ (952)
(1) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Results of Operations – Three Months Ended March 31, 2023 compared to 2022
Net losses and loss adjustment expenses 114,327 $ 83,276
%
(1) Net income was $14,698 for the three months ended March 31, 2023 compared to $11,018 for the three months ended March 31, 2022.
(2) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Revenues – Three Months Ended March 31, 2023 compared to 2022
Expenses
Underwriting and fee expenses under insurance and warranty service contracts include losses and loss adjustment expenses, member benefit claims and commissions expense.
Interest Expense consists primarily of interest expense on corporate revolving debt, notes, preferred trust securities due June 15, 2037 (Preferred Trust Securities) and asset based debt for premium finance and warranty service contract financing, which is non-recourse to Fortegra.
Expenses – Three Months Ended March 31, 2023 compared to 2022
Key Performance Metrics
We discuss certain key performance metrics, described below, which provide useful information about our business and the operational factors underlying its financial performance.
Gross Written Premiums and Premium Equivalents
The below table shows gross written premiums and premium equivalents by business mix for the three months ended March 31, 2023 and 2022.
Combined Ratio, Underwriting Ratio and Expense Ratio
Return on average equity is expressed as the ratio of net income to average stockholders’ equity during the period. Management uses this ratio as a measure of the on-going performance of the totality of the Company’s operations.
Return on average equity was 16.7% for the three months ended March 31, 2023, as compared to 14.7% for the prior year period. The increase in net income and annualized return on average equity was driven by revenue growth and a consistent combined ratio.
Non-GAAP Financial Measures
Underwriting and Fee Revenues and Underwriting and Fee Margin – Non-GAAP(1)
The below tables show underwriting and fee revenues and underwriting and fee margin by business mix for the three months ended March 31, 2023 and 2022.
Ended March 31,
(1) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Adjusted Net Income and Adjusted Return on Average Equity
Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments
Tiptree Capital
Mortgage
Net realized and unrealized gains (losses) $ 7,107 $ 20,414 Other revenue
Expenses:
(1) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Revenues
Revenues – 2023 compared to 2022
Expenses
Employee Compensation and Benefits includes salaries, commissions, benefits, bonuses, other incentive compensation and related taxes for employees. Commissions expense for sales staff generally varies with loan origination volumes.
Depreciation is mainly associated with furniture, fixtures and equipment. Amortization is primarily associated with a trade name and internally developed software.
Other Expenses include loan origination expenses, namely, leads, appraisals, credit reporting and licensing fees, general and administrative expenses, including office rent, insurance, legal, consulting and payroll processing expenses, and servicing expense.
Expenses – 2023 compared to 2022
For the three months ended March 31, 2023, interest expense was at $0.4 million, an increase of $0.1 million or 17.8% driven by higher interest rates.
For the three months ended March 31, 2023, other expenses were $5.4 million, compared to $6.2 million in 2022, with the $0.8 million decrease driven by decreased mortgage operational expense, including marketing costs.
Income (loss) before taxes
Tiptree Capital – Other
Three Months Ended March 31,
Revenues
Income (loss) before taxes
The income before taxes from Tiptree Capital – Other for the three months ended March 31, 2023 was $1.4 million, compared to the loss before taxes of $7.7 million in 2022, with the increase driven by the same factors that impacted revenues.
Adjusted net income – Non-GAAP(1)
(1) See “-Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.
Corporate
Provision for Income Taxes
Balance Sheet Information
as of December 31, 2022, with the increase driven by the exercise of options and the vesting of share-based incentive compensation.
The following table is a summary of certain balance sheet information:
(1) Included in Corporate equity is the deferred tax liability on the outside basis on Tiptree’s investment in Fortegra of $44.1 million as of March 31, 2023.
NON-GAAP MEASURES AND RECONCILIATIONS
Non-GAAP Reconciliations
Underwriting and Fee Revenues and Underwriting and Fee Margin – Non-GAAP (Insurance only)
Less: Net realized and unrealized gains (losses) 4,607 6,643 Underwriting and fee revenues
(3,167)
Less: Net realized and unrealized gains (losses) 4,607 6,643 Plus: Depreciation and amortization
Adjusted Net Income – Non-GAAP
Adjusted Return on Average Equity – Non-GAAP
Income (loss) before taxes $ 14,682 $ 4,266 $ (7,651) $ (12,249) $ (952) Less: Income tax (benefit) expense (3,664)
The footnotes below correspond to the tables above, under “-Adjusted Net Income – Non-GAAP” and “-Adjusted Return on Average Equity – Non-GAAP”.
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