TIPT 10-Q Quarterly Report March 31, 2023

TIPTREE INC.

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tipt-20230331

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 March 31, 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 May 1, 2023 , there were 36,742,295 shares, par value $0.001, of the registrant’s common stock outstanding.

Tiptree Inc.

Quarterly Report on Form 10-Q

March 31, 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 o f March 3 1 , 202 3 and December 31, 20 2 2						F- 3
C ondensed C onsolidated Statements of Operations for the three months ended March 3 1 , 202 3 and 20 2 2						F- 4
C ondensed C onsolidated Statements of Comprehensive Income (Loss) for the three months ended March 3 1 , 202 3 and 20 2 2						F- 5
C ondensed C onsolidated Statements of Changes in Stockholders’ Equity for the periods ended March 3 1 , 202 3 and 20 2 2						F- 6
C ondensed C onsolidated Statements of Cash Flows for the three months ended March 3 1 , 202 3 and 20 2 2						F- 7
Notes to C ondensed C onsolidated Financial Statements						F- 9
(1) Organization						F- 9
(2) Summary of Significant Accounting Policies						F- 9
(3) Acquisitions						F- 10

( 4 ) Operating Segment Data						F- 10
( 5 ) Investments						F- 12
( 6 ) Notes and Accounts Receivable, net						F- 18
( 7 ) Reinsurance Receivables						F- 18
( 8 ) Goodwill and Intangible Assets, net						F- 21
( 9 ) Derivative Financial Instruments and Hedging						F- 22
(1 0 ) Debt, net						F- 23
(1 1 ) Fair Value of Financial Instruments						F- 25
(1 2 ) Liability for Unpaid Claims and Claim Adjustment Expenses						F- 31
(1 3 ) Revenue from Contracts with Customers						F- 32
(1 4 ) Other Assets and Other Liabilities and Accrued Expenses						F- 33
(1 5 ) Other Revenue and Other Expenses						F- 34
(1 6 ) Stockholders’ Equity						F- 35
(1 7 ) Accumulated Other Comprehensive Income (Loss)						F- 37
(1 8 ) Stock Based Compensation						F- 37
( 19 ) Income Taxes						F- 41
(2 0 ) Commitments and Contingencies						F- 41
(2 1 ) Earnings Per Share						F- 42
(2 2 ) Related Party Transactions						F- 43
(2 3 ) Subsequent Events						F- 43
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						44
Item 3. Quantitative and Qualitative Disclosures About Market Risk						63
Item 4. Controls and Procedures						64

PART II. Other Information						65
Item 1. Legal Proceedings						65
Item 1A. Risk Factors						65
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						65
Item 3. Defaults Upon Senior Securities						65
Item 4. Mine Safety Disclosures						65
Item 5. Other Information						65
Item 6. Exhibits, Financial Statement Schedules						66
Signatures						67

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.

“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
	March 31, 2023		December 31, 2022


Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	810,445	$	611,980
Loans, at fair value	72,382		64,843
Equity securities	111,089		85,776
Other investments	84,570		73,025
Total investments	1,078,486		835,624
Cash and cash equivalents	412,004		538,065
Restricted cash	13,926		12,782
Notes and accounts receivable, net	502,615		502,311
Reinsurance receivables	1,297,440		1,176,090
Deferred acquisition costs	504,336		498,925
Goodwill	206,636		186,608
Intangible assets, net	130,609		117,015
Other assets	161,906		172,143

Total assets	$	4,307,958	$	4,039,563

Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	347,461	$	259,366
Unearned premiums	1,403,213		1,357,436
Policy liabilities and unpaid claims	639,808		567,193
Deferred revenue	665,513		649,150
Reinsurance payable	345,139		305,097
Other liabilities and accrued expenses	365,267		367,748

Total liabilities	$	3,766,401	$	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, 36,734,948 and 36,385,299 shares issued and outstanding, respectively	37		36
Additional paid-in capital	382,502		382,645
Accumulated other comprehensive income (loss), net of tax	( 33,093 )		( 39,429 )
Retained earnings	51,201		54,113
Total Tiptree Inc. stockholders’ equity	400,647		397,365
Non-controlling interests:
Fortegra preferred interests	77,679		77,679
Common interests	63,231		58,529
Total non-controlling interests	140,910		136,208
Total stockholders’ equity	541,557		533,573
Total liabilities and stockholders’ equity	$	4,307,958	$	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 March 31,
	2023		2022
Revenues:
Earned premiums, net	$	265,330	$	208,416
Service and administrative fees	92,032		71,835
Ceding commissions	3,645		2,537
Net investment income	5,109		3,167
Net realized and unrealized gains (losses)	2,177		17,204
Other revenue	13,332		21,744
Total revenues	381,625		324,903
Expenses:
Policy and contract benefits	141,675		104,446
Commission expense	146,450		117,423
Employee compensation and benefits	40,798		56,455
Interest expense	6,465		10,199
Depreciation and amortization	5,253		6,156
Other expenses	32,811		31,176
Total expenses	373,452		325,855
Income (loss) before taxes	8,173		( 952 )
Less: provision (benefit) for income taxes	5,022		( 86 )
Net income (loss)	3,151		( 866 )
Less: net income (loss) attributable to non-controlling interests	4,213		94
Net income (loss) attributable to common stockholders	$	( 1,062 )	$	( 960 )

Net income (loss) per common share:
Basic earnings per share	$	( 0.03 )	$	( 0.03 )
Diluted earnings per share	$	( 0.03 )	$	( 0.03 )

Weighted average number of common shares:
Basic	36,522,946		34,229,011
Diluted	36,522,946		34,229,011

Dividends declared per common share	$	0.05	$	0.04

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 March 31,
	2023		2022
Net income (loss)	$	3,151	$	( 866 )

Other comprehensive income (loss), net of tax:







Change in unrealized gains (losses) on available for sale securities	9,501		( 26,266 )
Change in unrealized currency translation adjustments	2,932		—
Related (provision) benefit for income taxes	( 4,035 )		5,795
Other comprehensive income (loss), net of tax	8,398		( 20,471 )
Comprehensive income (loss)	11,549		( 21,337 )
Less: comprehensive income (loss) attributable to non-controlling interests	6,275		44
Comprehensive income (loss) attributable to common stockholders	$	5,274	$	( 21,381 )

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	—	—		2,173		—		—		2,173		—		41		2,214
Vesting of share-based incentive compensation	294,642	1		( 565 )		—		—		( 564 )		—		( 470 )		( 1,034 )


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	—	—		—		—				—		—		3,608		3,608
Common stock dividends declared	—	—		—		—		( 1,850 )		( 1,850 )		—		—		( 1,850 )
Other comprehensive income (loss), net of tax	—	—		—		6,336				6,336		—		2,062		8,398
Subsidiary preferred dividends declared	—	—		—		—		( 1,578 )		( 1,578 )		—		—		( 1,578 )
Net income (loss)	—	—		—		—		516		516		—		2,635		3,151
Balance at March 31, 2023	36,734,948	$	37	$	382,502	$	( 33,093 )	$	51,201	$	400,647	$	77,679	$	63,231	$	541,557


	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	—	—		3,162		—		—		3,162		—		576		3,738
Vesting of share-based incentive compensation	261,449	—		( 127 )		—		—		( 127 )		—		( 994 )		( 1,121 )


Shares issued upon exercise of warrants	492,295	1		3,422		—		—		3,423		—		—		3,423
Non-controlling interest contributions	—	—		—		—		—		—		—		250		250
Non-controlling interest distributions	—	—		—		—		—		—		—		( 583 )		( 583 )


Dividends declared	—	—		—		—		( 1,398 )		( 1,398 )		—		—		( 1,398 )
Other comprehensive income (loss), net of tax	—	—		—		( 20,421 )		—		( 20,421 )		—		( 50 )		( 20,471 )
Net income (loss)	—	—		—		—		( 960 )		( 960 )		—		94		( 866 )
Balance at March 31, 2022	34,877,897	$	35	$	323,916	$	( 23,106 )	$	65,788	$	366,633	$	—	$	16,520	$	383,153

See accompanying notes to condensed consolidated financial statements.

F-6

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2023		2022
Operating Activities:
Net income (loss) attributable to common stockholders	$	( 1,062 )	$	( 960 )
Net income (loss) attributable to non-controlling interests	4,213		94
Net income (loss)	3,151		( 866 )
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net realized and unrealized (gains) losses	( 2,177 )		( 17,204 )
Net (gain) loss on held for sale of business	—		( 1,752 )
Non-cash compensation expense	2,214		6,170
Amortization/accretion of premiums and discounts	( 459 )		654
Depreciation and amortization expense	5,253		6,156
Non-cash lease expense	2,069		2,420
Deferred provision (benefit) for income taxes	4,100		( 54 )
Amortization of deferred financing costs	269		407
Change in fair value of liability classified warrants	( 118 )		—

Other	66		69
Changes in operating assets and liabilities:
Mortgage loans originated for sale	( 202,836 )		( 972,051 )
Proceeds from the sale of mortgage loans originated for sale	202,555		1,141,727
(Increase) decrease in notes and accounts receivable	15,662		( 72,105 )
(Increase) decrease in reinsurance receivables	( 121,350 )		( 69,116 )
(Increase) decrease in deferred acquisition costs	( 3,994 )		( 35,379 )
(Increase) decrease in other assets	17,823		4,653
Increase (decrease) in unearned premiums	45,777		64,812
Increase (decrease) in policy liabilities and unpaid claims	72,615		62,174
Increase (decrease) in deferred revenue	7,041		25,453
Increase (decrease) in reinsurance payable	40,042		7,745
Increase (decrease) in other liabilities and accrued expenses	( 44,657 )		( 4,846 )
Net cash provided by (used in) operating activities	43,046		149,067
Investing Activities:
Purchases of investments	( 504,104 )		( 333,311 )
Proceeds from sales and maturities of investments	289,282		322,923
Proceeds from the sale of real estate, businesses and other assets	—		583
Purchases of property, plant and equipment	( 4,947 )		( 535 )

Proceeds from notes receivable	24,833		17,098
Issuance of notes receivable	( 30,057 )		( 25,490 )
Business and asset acquisitions, net of cash and deposits	( 22,530 )		—
Net cash provided by (used in) investing activities	( 247,523 )		( 18,732 )
Financing Activities:
Dividends paid	( 3,446 )		( 1,398 )
Cash received for the exercise of warrants	—		3,423
Net non-controlling interest (redemptions) contributions	( 6,079 )		( 1,566 )





Payment of debt issuance costs	( 183 )		( 5 )
Proceeds from borrowings and mortgage notes payable	370,394		1,020,790
Principal paydowns of borrowings and mortgage notes payable	( 282,384 )		( 1,145,947 )

Net cash provided by (used in) financing activities	78,302		( 124,703 )
Effect of exchange rate changes on cash	1,258		—
Net increase (decrease) in cash, cash equivalents and restricted cash	( 124,917 )		5,632
Cash, cash equivalents and restricted cash – beginning of period	550,847		195,086
Cash, cash equivalents and restricted cash – beginning of period - held for sale	—		9,360
Cash, cash equivalents and restricted cash – end of period	425,930		210,078
Less: Reclassification of cash to held for sale	—		12,549
Cash, cash equivalents and restricted cash – end of period	$	425,930	$	197,529

F-7

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2023		2022
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Right of use asset obtained in exchange for lease liability	$	397	$	5,830
Bonds and trade receivables exchanged for corporate loans and equity securities	$	—	$	19,846



	As of
	March 31, 2023		December 31, 2022
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	412,004	$	538,065
Restricted cash	13,926		12,782
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	425,930	$	550,847

See accompanying notes to condensed consolidated financial statements.

F-8

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(1) Organization

Tiptree Inc. (together with its consolidated subsidiaries, collectively, Tiptree, the Company, or we) is a Maryland Corporation that was incorporated on March 19, 2007. Tiptree’s common stock trades on the Nasdaq Capital Market under the symbol “TIPT”. Tiptree is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. We classify our business into two reportable segments: Insurance and Mortgage. We refer to our non-insurance operations, assets and other investments, which is comprised of our Mortgage reportable segment and our non-reportable segments and other business activities, as Tiptree Capital.

On June 21, 2022, the Company closed the WP Transaction whereby Warburg invested $ 200,000 in Fortegra in exchange for Fortegra Common Stock, Fortegra Preferred Stock, Fortegra Warrants and Fortegra Additional Warrants. See Note (16) Stockholders’ Equity for additional information regarding the terms of the securities issued in connection with the closing of the WP Transaction. As of March 31, 2023, Fortegra was owned approximately 79.4 % by Tiptree Holdings, 17.4 % by Warburg and 3.2 % by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock.

(2) Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of Tiptree have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and include the accounts of the Company and its subsidiaries. The condensed consolidated financial statements are presented in U.S. dollars, the main operating currency of the Company. The unaudited condensed consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, including normal recurring adjustments necessary to present fairly the Company’s financial position, results of operations, comprehensive income and cash flows for each of the interim periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2023.

Non-controlling interests on the condensed consolidated balance sheets represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than Tiptree. Accounts and transactions between consolidated entities have been eliminated.

Recent Accounting Standards

Recently Adopted Accounting Pronouncements

During the three months ended March 31, 2023, there were no accounting standards adopted by the Company.

Recently Issued Accounting Pronouncements, Not Yet Adopted



Standard	Description	Adoption Date	Impact on Financial Statements
2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848	The amendments in these updates provide optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform if certain criteria are met.	The standard is effective for all entities as of March 12, 2020 through December 31, 2024.	The Company is evaluating its option to adopt the guidance when it is applicable.

F-9

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(3) Acquisitions

Acquisition of Premia Solutions Limited

On February 6, 2023, a subsidiary of Fortegra acquired a majority of the equity interests in Premia Solutions Limited (“Premia”) for total cash consideration of approximately $ 22,530 , net of cash acquired of $ 3,873 . Premia is an intermediate provider of automotive protection products in the United Kingdom.

The preliminary purchase price allocation has been developed based on preliminary estimates of fair value using the historical financial statements of Premia as of the acquisition date and is subject to the completion of management’s final analysis. Identifiable assets acquired were primarily made up of goodwill and intangible assets. Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of goodwill and intangible assets of $ 19,735 and $ 17,004 , respectively, which the Company may modify during the one year period allowed for purchase accounting adjustments during the measurement period. See Note (8) Goodwill and Intangible Assets, net.

Acquisition of ITC Compliance GRP Limited

On April 1, 2022, Fortegra Europe Limited, a subsidiary of the Company, acquired all of the equity interests of ITC for total cash consideration of approximately $ 15,000 , net of cash acquired of $ 6,123 , plus earn out payments based on achievement of specific performance metrics. ITC is a provider of regulatory support and compliance services to the retail automotive sector in the United Kingdom.

Identifiable assets acquired were primarily made up of goodwill and intangible assets. Management’s allocation of the purchase price to the net assets acquired resulted in the recording of goodwill and intangible assets of $ 8,044 and $ 10,964 , respectively. See Note (8) Goodwill and Intangible Assets, net.

(4) Operating Segment Data

Tiptree is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. Tiptree’s principal operating subsidiary, Fortegra, is a leading provider of specialty insurance, service contract products and related service solutions. Based on the quantitative analysis performed related to ASC 280, Segment Reporting, our reportable segments are Insurance and Mortgage. We refer to our non-insurance operations, assets and other investments, comprised of our Mortgage reportable segment and our non-reportable operating segments and other business activities, as Tiptree Capital. Corporate activities include holding company interest expense, employee compensation and benefits, and other expenses.

Our reportable segments’ income or loss is reported before income taxes and non-controlling interests. Segment results incorporate the revenues and expenses of these subsidiaries since they commenced operations or were acquired. Intercompany transactions are eliminated.

Descriptions of our Insurance reportable segment and Tiptree Capital, including our Mortgage reportable segment, are as follows:

Insurance operations are conducted through Fortegra, which is a leading provider of specialty insurance products and related services. Fortegra designs, markets and underwrites specialty property and casualty insurance products incorporating value-added coverages and services for select target markets or niches. Fortegra’s products and services include niche commercial and personal lines, service contracts, and other insurance services.

Tiptree Capital:

Mortgage operations are conducted through Reliance. The Company’s mortgage business originates loans for sale to institutional investors, including GSEs and FHA/VA and services loans on behalf of Fannie Mae, Freddie Mac, and Ginnie Mae.

Other includes our maritime shipping operations, asset management, other investments (including our Invesque shares), and Luxury mortgage operations (deconsolidated effective as of July 1, 2022).

F-10

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The tables below present the components of revenue, expense, income (loss) before taxes, and assets for our reportable segments as well as Tiptree Capital - Other for the following periods:


	Three Months Ended March 31, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	368,444	$	11,561	$	1,620	$	381,625
Total expenses	( 348,999 )		( 14,126 )		( 178 )		( 363,303 )
Corporate expenses	—		—		—		( 10,149 )
Income (loss) before taxes	$	19,445	$	( 2,565 )	$	1,442	$	8,173
Less: provision (benefit) for income taxes							5,022
Net income (loss)							$	3,151
Less: net income (loss) attributable to non-controlling interests							4,213
Net income (loss) attributable to common stockholders							$	( 1,062 )


	Three Months Ended March 31, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	282,529	$	25,401	$	16,973	$	324,903
Total expenses	( 267,847 )		( 21,135 )		( 24,624 )		( 313,606 )
Corporate expenses	—		—		—		( 12,249 )
Income (loss) before taxes	$	14,682	$	4,266	$	( 7,651 )	$	( 952 )
Less: provision (benefit) for income taxes							( 86 )
Net income (loss)							$	( 866 )
Less: net income (loss) attributable to non-controlling interests							94
Net income (loss) attributable to common stockholders							$	( 960 )

The Company conducts its operations primarily in the U.S. with 4.0 % and 5.9 % of total revenues generated overseas for the three months ended March 31, 2023 and 2022, respectively.

The following table presents the reportable segments, Tiptree Capital - Other and Corporate assets for the following periods:


	As of March 31, 2023										As of December 31, 2022
			Tiptree Capital										Tiptree Capital
	Insurance		Mortgage		Other		Corporate		Total		Insurance		Mortgage		Other		Corporate		Total
Total assets	$	3,982,362	$	167,038	$	158,398	$	160	$	4,307,958	$	3,702,577	$	156,122	$	86,402	$	94,462	$	4,039,563

F-11

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(5) Investments

The following table presents the Company's investments related to insurance operations and other Tiptree investing activities, measured at fair value as of the following periods:


	As of March 31, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	751,390		—		59,055		$	810,445
Loans, at fair value	12,145		60,237		—		72,382
Equity securities	78,639		—		32,450		111,089
Other investments	77,745		3,991		2,834		84,570
Total investments	$	919,919	$	64,228	$	94,339	$	1,078,486


	As of December 31, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	$	611,980	$	—	$	—	$	611,980
Loans, at fair value	14,312		50,531		—		64,843
Equity securities	72,992		—		12,784		85,776
Other investments	66,163		4,038		2,824		73,025
Total investments	$	765,447	$	54,569	$	15,608	$	835,624

Available for Sale Securities, at fair value

A majority of the Company’s investments in Available for Sale Securities, at fair value, net of allowance for credit losses (AFS securities) as of March 31, 2023 and December 31, 2022 are held by subsidiaries in the insurance segment. The following tables present the Company's investments in AFS securities:


	As of March 31, 2023
	Amortized cost		Allowance for Credit Losses (1)		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. Treasury securities and obligations of U.S. government authorities and agencies	610,031		—		1,073		( 30,549 )		580,555
Obligations of state and political subdivisions	52,989		( 2 )		48		( 3,892 )		49,143
Corporate securities	175,268		( 138 )		117		( 11,758 )		163,489
Asset backed securities	18,358		( 1 )		—		( 3,848 )		14,509
Certificates of deposit	656		—		—		—		656
Obligations of foreign governments	2,315		( 3 )		—		( 219 )		2,093
Total	$	859,617	$	( 144 )	$	1,238	$	( 50,266 )	$	810,445

	As of December 31, 2022
	Amortized cost		Allowance for Credit Losses (1)		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	417,278	$	—	$	844	$	( 36,062 )	$	382,060
Obligations of state and political subdivisions	54,390		( 3 )		4		( 4,937 )		49,454
Corporate securities	176,187		( 183 )		1		( 14,006 )		161,999
Asset backed securities	19,596		( 1 )		—		( 4,246 )		15,349
Certificates of deposit	756		—		—		—		756
Obligations of foreign governments	2,629		( 3 )		—		( 264 )		2,362
Total	$	670,836	$	( 190 )	$	849	$	( 59,515 )	$	611,980

(1) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in net realized and unrealized gains (losses) as a credit loss on AFS securities. Amount excludes unrealized losses relating to non-credit factors.

F-12

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The amortized cost and fair values of AFS securities, by contractual maturity date, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	As of
	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	281,611	$	280,019	$	52,265	$	51,315
Due after one year through five years	263,544		248,179		300,767		280,965
Due after five years through ten years	53,201		49,651		54,419		49,465
Due after ten years	242,903		218,087		243,789		214,887
Asset backed securities	18,358		14,509		19,596		15,348
Total	$	859,617	$	810,445	$	670,836	$	611,980

The following tables present the gross unrealized losses on AFS securities by length of time that individual AFS securities have been in a continuous unrealized loss position for less than twelve months, and twelve months or greater and do not have an allowance for credit losses:


	As of March 31, 2023
	Less Than or Equal to One Year					More Than One Year
	Fair value		Gross unrealized losses		# of Securities (1)	Fair value		Gross unrealized losses		# of Securities (1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	102,026	$	( 1,833 )	110	$	247,414	$	( 28,716 )	633
Obligations of state and political subdivisions	12,243		( 121 )		40	27,898		( 3,771 )		112
Corporate securities	19,039		( 311 )		70	134,389		( 11,447 )		500
Asset backed securities	5,293		( 3,095 )		9	9,216		( 753 )		71

Obligations of foreign governments	—		—		—	2,094		( 219 )		8
Total	$	138,601	$	( 5,360 )	229	$	421,011	$	( 44,906 )	1,324

	As of December 31, 2022
	Less Than or Equal to One Year					More Than One Year
	Fair value		Gross unrealized losses		# of Securities (1)	Fair value		Gross unrealized losses		# of Securities (1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	164,593	$	( 9,357 )	354	$	186,591	$	( 26,705 )	385
Obligations of state and political subdivisions	25,507		( 1,076 )		97	20,219		( 3,861 )		78
Corporate securities	45,016		( 1,446 )		176	114,683		( 12,560 )		417
Asset backed securities	10,298		( 3,642 )		46	5,051		( 604 )		34

Obligations of foreign governments	309		( 1 )		1	2,054		( 263 )		8
Total	$	245,723	$	( 15,522 )	674	$	328,598	$	( 43,993 )	922

(1) Presented in whole numbers.

Management believes that it is more likely than not that the Company will be able to hold the fixed maturity AFS securities that were in an unrealized loss position as of March 31, 2023 until full recovery of their amortized cost basis.

F-13

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The table below presents a roll-forward of the activity in the allowance for credit losses on AFS securities by type as of March 31, 2023:


	Obligations of state and political subdivisions		Corporate securities		Asset backed securities		Obligations of foreign governments		Total
Balance at December 31, 2021	$	—	$	( 241 )	$	—	$	( 4 )	$	( 245 )
(Increase) in allowance for credit losses	( 1 )		( 47 )		—		—		( 48 )

Gains from recoveries of amounts previously written off	—		25		—		1		26
Balance at March 31, 2022	$	( 1 )	$	( 263 )	$	—	$	( 3 )	$	( 267 )

Balance at December 31, 2022	$	( 3 )	$	( 183 )	$	( 1 )	$	( 3 )	$	( 190 )
(Increase) in allowance for credit losses	—		( 34 )		—		—		( 34 )



Gains from recoveries of amounts previously written off	1		79		—		—		80
Balance at March 31, 2023	$	( 2 )	$	( 138 )	$	( 1 )	$	( 3 )	$	( 144 )

The Company applies a discounted cash flow model, based on assumptions and model outputs provided by an investment management company, in determining its lifetime expected credit losses on AFS securities. This includes determining the present value of expected future cash flows discounted at the book yield of the security.

The table below presents the amount of gains from recoveries (credit losses) on AFS securities recorded by the Company for the following period:


	Three Months Ended March 31,
	2023		2022
Net gains from recoveries (credit losses) on AFS securities	$	46	$	( 22 )

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts. The Company cannot remove or replace investments in regulatory deposit accounts without prior approval of the contractual party or regulatory authority, as applicable. The following table presents the Company's restricted investments included in the Company's AFS securities:


	As of
	March 31, 2023		December 31, 2022


Fair value of restricted investments in trust pursuant to reinsurance agreements	$	33,635	$	34,386
Fair value of restricted investments for special deposits required by state insurance departments	17,093		16,816
Total fair value of restricted investments	$	50,728	$	51,202

The following table presents additional information on the Company’s AFS securities:


	Three Months Ended March 31,

	2023		2022
Purchases of AFS securities	$	207,812	$	55,142

Proceeds from maturities, calls and prepayments of AFS securities	$	18,170	$	20,242



Gross proceeds from sales of AFS securities	$	1,557	$	16,970

The following table presents the gross realized gains and gross realized losses from sales and redemptions of AFS securities:

F-14

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)


	Three Months Ended March 31,
	2023		2022
Gross realized gains	$	—	$	74
Gross realized (losses)	( 365 )		( 184 )
Total net realized gains (losses) from investment sales and redemptions	$	( 365 )	$	( 110 )

Loans, at fair value

The following table presents the Company’s investments in loans measured at fair value and the Company’s investments in loans measured at fair value pledged as collateral:


	As of March 31, 2023								As of December 31, 2022
	Fair value		Unpaid principal balance (UPB)		Fair value exceeds / (below) UPB		Pledged as collateral		Fair value		Unpaid principal balance (UPB)		Fair value exceeds / (below) UPB		Pledged as collateral
Insurance:
Corporate loans (1)	$	12,145	$	16,023	$	( 3,878 )	$	—	$	14,312	$	16,032	$	( 1,720 )	$	—

Mortgage:
Mortgage loans held for sale (2)	60,237		58,517		1,720		59,244		50,531		49,361		1,170		50,113
Total loans, at fair value	$	72,382	$	74,540	$	( 2,158 )	$	59,244	$	64,843	$	65,393	$	( 550 )	$	50,113

(1) The cost basis of Corporate loans was approximately $ 16,023 and $ 16,032 at March 31, 2023 and December 31, 2022, respectively.

(2) As of March 31, 2023, there was one mortgage loan held for sale that was 90 days or more past due. As of December 31, 2022, t here were no mortgage loans held for sale that were 90 days or more past due.

Equity Securities

Equity securities consist mainly of publicly traded common and preferred stocks and fixed income exchange traded funds. Included within the equity securities balance are 17.0 million shares of Invesque as of March 31, 2023 and December 31, 2022, for which the Company has elected to apply the fair value option. The following table presents information on the cost and fair value of the Company’s equity securities related to insurance operations and other Tiptree investing activity as of the following periods:


	As of March 31, 2023
	Insurance				Tiptree Capital - Other				Total
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Invesque	$	23,339	$	2,377	$	111,491	$	11,379	$	134,830	$	13,756
Fixed income exchange traded funds	57,876		58,272		—		—		57,876		58,272
Other equity securities	19,534		17,990		19,989		21,071		39,523		39,061
Total equity securities	$	100,749	$	78,639	$	131,480	$	32,450	$	232,229	$	111,089


	As of December 31, 2022
	Insurance				Tiptree Capital - Other				Total
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Invesque	$	23,339	$	2,670	$	111,491	$	12,784	$	134,830	$	15,454
Fixed income exchange traded funds	56,263		56,256		—		—		56,263		56,256
Other equity securities	15,773		14,066		—		—		15,773		14,066
Total equity securities	$	95,375	$	72,992	$	111,491	$	12,784	$	206,866	$	85,776

F-15

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Other Investments

The following table contains information regarding the Company’s other investments as of the following periods:


	As of March 31, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	50,342	$	—	$	—	$	50,342

Debentures	22,153		—		—		22,153

Other	5,250		3,991		2,834		12,075
Total other investments	$	77,745	$	3,991	$	2,834	$	84,570


	As of December 31, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	42,080	$	—	$	—	$	42,080

Debentures	23,853		—		—		23,853

Other	230		4,038		2,824		7,092
Total other investments	$	66,163	$	4,038	$	2,824	$	73,025

(1) The cost basis of corporate bonds was $ 53,397 and $ 45,630 as of March 31, 2023 and December 31, 2022, respectively.

Net Investment Income - Insurance

Net investment income represents investment income and expense from investments related to insurance operations as disclosed within net investment income on the condensed consolidated statements of operations. The following table presents the components of net investment income by source of income:


	Three Months Ended March 31,
	2023		2022
Interest:
AFS securities	$	4,288	$	2,199
Loans, at fair value	125		167
Other investments	2,075		1,340
Dividends from equity securities	42		588

Subtotal	6,530		4,294
Less: investment expenses	1,421		1,127
Net investment income	$	5,109	$	3,167

Other Investment Income - Tiptree Capital

Other investment income represents revenue from non-insurance activities as disclosed within other revenue on the condensed consolidated statements of operations, see Note (15) Other Revenue and Other Expenses. The following tables present the components of other investment income by type:


	Three Months Ended March 31,
	2023		2022

Interest income from Loans, at fair value (1)	$	610	$	2,307

Loan fee income (1)	3,844		5,536
Other	316		8,862
Other investment income	$	4,770	$	16,705

(1) Includes income related to Loans at fair value classified as Held for Sale for the periods prior to July 1, 2022.

F-16

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Net Realized and Unrealized Gains (Losses)

The following table presents the components of net realized and unrealized gains (losses) recorded on the condensed consolidated statements of operations. Net unrealized gains (losses) on AFS securities are included within other comprehensive income (loss) (“OCI”), net of tax, and, as such, are not included in this table. Net realized and unrealized gains (losses) on non-investment related financial assets and liabilities are included below:


	Three Months Ended March 31,
	2023		2022
Net realized gains (losses)
Insurance:
Reclass of unrealized gains (losses) on AFS securities from OCI	$	( 365 )	$	( 110 )
Net gains from recoveries (credit losses) on AFS securities	46		( 22 )
Net realized gains (losses) on loans	2		93
Net realized gains (losses) on equity securities	( 854 )		( 2,483 )
Net realized gains (losses) on corporate bonds	( 975 )		913
Other	( 398 )		( 4,284 )
Tiptree Capital
Mortgage:
Net realized gains (losses) on loans	9,671		13,418
Other	383		4,066
Other:
Net realized gains (losses) on loans (1)	—		14,740

Other	—		441
Total net realized gains (losses)	7,510		26,772

Net unrealized gains (losses)
Insurance:
Net change in unrealized gains (losses) on loans	( 2,158 )		( 268 )
Net unrealized gains (losses) on equity securities held at period end	( 379 )		( 2,161 )
Reclass of unrealized (gains) losses from prior periods for equity securities sold	( 14 )		1,815
Other	488		( 136 )
Tiptree Capital
Mortgage:
Net change in unrealized gains (losses) on loans	548		( 3,117 )
Other	( 3,496 )		6,047
Other:
Net change in unrealized gains (losses) on loans (1)	—		( 3,581 )
Net unrealized gains (losses) on equity securities held at period end	( 322 )		( 8,850 )
Other	—		683
Total net unrealized gains (losses)	( 5,333 )		( 9,568 )
Total net realized and unrealized gains (losses)	$	2,177	$	17,204

(1) Relates to Loans, at fair value classified as Held for Sale for the periods prior to July 1, 2022.

F-17

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(6) Notes and Accounts Receivable, net

The following table presents the total notes and accounts receivable, net:


	As of
	March 31, 2023		December 31, 2022
Accounts and premiums receivable, net	$	124,319	$	142,011
Retrospective commissions receivable	210,611		191,092
Notes receivable, net	126,847		121,419
Trust receivables	12,918		18,455
Other receivables	27,920		29,334
Total notes and accounts receivable, net	$	502,615	$	502,311

The following table presents the total valuation allowance and bad debt expense for the following periods:


	Valuation allowance				Bad Debt Expense


	As of				Three Months Ended March 31,
	March 31, 2023		December 31, 2022		2023		2022
Notes receivable, net - premium financing program (1)	$	97	$	85	$	40	$	62

Accounts and premiums receivable, net	$	108	$	94	$	9	$	8

(1) As of March 31, 2023 and December 31, 2022, there were $ 187 and $ 168 in balances classified as 90 days plus past due, respectively.

(7) Reinsurance Receivables

The following table presents the effect of reinsurance on premiums written and earned by our insurance business for the following periods:


	Direct Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount - Assumed to Net
Three Months Ended March 31, 2023
Premiums written:
Life insurance	$	17,287	$	8,590	$	57	$	8,754	0.7	%
Accident and health insurance	29,244		19,509		5,961		15,696		38.0	%
Property and liability insurance	378,387		222,590		100,899		256,696		39.3	%
Total premiums written	424,918		250,689		106,917		281,146		38.0	%

Premiums earned:
Life insurance	20,697		10,354		81		10,424		0.8	%
Accident and health insurance	34,381		23,274		5,976		17,083		35.0	%
Property and liability insurance	306,769		172,854		103,908		237,823		43.7	%
Total premiums earned	$	361,847	$	206,482	$	109,965	$	265,330	41.4	%

F-18

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)


	Direct Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount - Assumed to Net
Three Months Ended March 31, 2022
Premiums written:
Life insurance	$	20,059	$	8,394	$	49	$	11,714	0.4	%
Accident and health insurance	34,838		23,545		249		11,542		2.2	%
Property and liability insurance	299,164		156,189		98,471		241,446		40.8	%
Total premiums written	354,061		188,128		98,769		264,702		37.3	%

Premiums earned:
Life insurance	19,940		10,126		168		9,982		1.7	%
Accident and health insurance	36,058		24,551		332		11,839		2.8	%
Property and liability insurance	257,480		141,416		70,531		186,595		37.8	%
Total premiums earned	$	313,478	$	176,093	$	71,031	$	208,416	34.1	%

The following table presents the components of policy and contract benefits, including the effect of reinsurance on losses and loss adjustment expenses (LAE) incurred:


	Direct Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount - Assumed to Net
Three Months Ended March 31, 2023
Losses and LAE Incurred
Life insurance	$	13,245	$	7,204	$	38	$	6,079	0.6	%
Accident and health insurance	6,567		4,504		4,505		6,568		68.6	%
Property and liability insurance	133,690		88,932		56,922		101,680		56.0	%
Total losses and LAE incurred	153,502		100,640		61,465		114,327		53.8	%
	Member benefit claims (1)						27,348
	Total policy and contract benefits						$	141,675
Three Months Ended March 31, 2022
Losses and LAE Incurred
Life insurance	$	16,605	$	8,782	$	265	$	8,088	3.3	%
Accident and health insurance	9,988		7,748		1,171		3,411		34.3	%
Property and liability insurance	110,376		76,946		38,347		71,777		53.4	%
Total losses and LAE incurred	136,969		93,476		39,783		83,276		47.8	%
	Member benefit claims (1)						21,170
	Total policy and contract benefits						$	104,446

(1) Member benefit claims are not covered by reinsurance.

F-19

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following table presents the components of the reinsurance receivables:


	As of
	March 31, 2023		December 31, 2022


Prepaid reinsurance premiums:
Life insurance (1)	$	73,641	$	75,553
Accident and health insurance (1)	77,953		81,718
Property and liability insurance	608,632		568,199
Total	760,226		725,470

Ceded claim reserves:
Life insurance	3,903		3,965
Accident and health insurance	20,309		19,408
Property and liability insurance	278,098		243,726
Total ceded claim reserves recoverable	302,310		267,099
Other reinsurance settlements recoverable	234,904		183,521
Reinsurance receivables	$	1,297,440	$	1,176,090

(1) Including policyholder account balances ceded.

The following table presents the aggregate amount included in reinsurance receivables that is comprised of the three largest receivable balances from non-affiliated reinsurers:


	As of
	March 31, 2023
Total of the three largest receivable balances from non-affiliated reinsurers	$	181,979

As of March 31, 2023, the non-affiliated reinsurers from whom our insurance business has the largest receivable balances were: Allianz Global Corporate & Specialty SE (A.M. Best Rating: A+ rated), Canada Life Assurance Company (A.M. Best Rating: A+ rated), and Oil Casualty Insurance, LTD (A.M. Best Rating A- rated). A majority of the related receivables from these reinsurers are collateralized by assets on hand and letters of credit; receivable balances from authorized reinsurers do not require collateral. Allianz Global Corporate & Specialty SE and Canada Life Assurance Company are authorized reinsurers in the states in which Fortegra’s U.S. based insurance entities are domiciled. The Company monitors authorization status and A.M. Best ratings of its reinsurers periodically. As of March 31, 2023, the Company does not believe there is a risk of loss due to the concentration of credit risk in the reinsurance program given the collateralization.

F-20

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(8) Goodwill and Intangible Assets, net

The following table presents identifiable finite and indefinite-lived intangible assets, accumulated amortization, and goodwill by operating segment and/or reporting unit, as appropriate:


	As of March 31, 2023						As of December 31, 2022
Finite-Lived Intangible Assets:	Insurance		Other		Total			Insurance		Other		Total

Customer relationships	$	167,277	$	—	$	167,277		$	149,835	$	—	$	149,835
Accumulated amortization	( 63,803 )		—		( 63,803 )			( 60,401 )		—		( 60,401 )
Trade names	15,034		800		15,834			15,028		800		15,828
Accumulated amortization	( 7,374 )		( 620 )		( 7,994 )			( 7,039 )		( 600 )		( 7,639 )
Software licensing	12,454		640		13,094			12,386		640		13,026
Accumulated amortization	( 9,175 )		( 640 )		( 9,815 )			( 9,084 )		( 640 )		( 9,724 )
Insurance policies and contracts acquired	36,500		—		36,500			36,500		—		36,500
Accumulated amortization	( 36,411 )		—		( 36,411 )			( 36,374 )		—		( 36,374 )
Other	754		—		754			751		—		751
Accumulated amortization	( 316 )		—		( 316 )			( 276 )		—		( 276 )
Total finite-lived intangible assets	114,940		180		115,120			101,326		200		101,526
Indefinite-Lived Intangible Assets: (1)
Insurance licensing agreements	13,761		—		13,761			13,761		—		13,761
Other	—		1,728		1,728			—		1,728		1,728
Total indefinite-lived intangible assets	13,761		1,728		15,489			13,761		1,728		15,489
Total intangible assets, net	$	128,701	$	1,908	$	130,609		$	115,087	$	1,928	$	117,015

Goodwill	204,928		1,708		206,636			184,900		1,708		186,608
Total goodwill and intangible assets, net	$	333,629	$	3,616	$	337,245		$	299,987	$	3,636	$	303,623

(1) Impairment tests are performed at least annually on indefinite-lived intangible assets.

Goodwill

The following table presents the activity in goodwill, by operating segment and/or reporting unit, as appropriate, and includes the adjustments made to the balance of goodwill to reflect the effect of the final valuation adjustments made for acquisitions, as well as the reduction to any goodwill attributable to impairment related charges:



	Insurance		Other		Total



Balance at December 31, 2022	$	184,900	$	1,708	$	186,608
Goodwill acquired (1)	19,735		—		19,735
Foreign currency translation and other	293		—		293
Balance at March 31, 2023	$	204,928	$	1,708	$	206,636

(1) See Note (3) Acquisitions for more information.

The Company conducts annual impairment tests of its goodwill as of October 1. For the three months ended March 31, 2023 and 2022, no impairments were recorded on the Company’s goodwill.

Intangible Assets, net

The following table presents the activity, by operating segment and/or reporting unit, as appropriate, in finite and indefinite-lived other intangible assets and includes the adjustments made to the balance to reflect the effect of any final valuation adjustments made for acquisitions, as well as any reduction attributable to impairment-related charges:


	Insurance		Other		Total








Balance at December 31, 2022	$	115,087	$	1,928	$	117,015
Intangible assets acquired (1)	17,004		—		17,004
Amortization expense	( 3,906 )		( 20 )		( 3,926 )
Foreign currency translation and other	516		—		516
Balance at March 31, 2023	$	128,701	$	1,908	$	130,609

(1) See Note (3) Acquisitions for more information.

F-21

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following table presents the amortization expense on finite-lived intangible assets for the following periods:


	Three Months Ended March 31,
	2023		2022
Amortization expense on intangible assets	$	3,926	$	4,005

For the three months ended March 31, 2023 and 2022, no impairments were recorded on the Company’s intangible assets.

The following table presents the amortization expense on finite-lived intangible assets for the next five years and thereafter by operating segment and/or reporting unit, as appropriate:


	As of March 31, 2023
	Insurance		Other		Total
Remainder of 2023	$	11,688	$	60	$	11,748
2024	13,906		80		13,986
2025	11,792		40		11,832
2026	9,543		—		9,543
2027	8,200		—		8,200
2028 and thereafter	60,212		—		60,212
Total (1)	$	115,341	$	180	$	115,521

(1) Does not include foreign currency translation adjustment of $ 401 as of March 31, 2023.

(9) Derivative Financial Instruments and Hedging

The Company utilizes derivative financial instruments as part of its overall investment and hedging activities. Derivative contracts are subject to additional risk that can result in a loss of all or part of an investment. The Company’s derivative activities are primarily entered into in order to manage underlying credit risk, market risk, interest rate risk and currency exchange rate risk. In addition, the Company is also subject to counterparty risk should its counterparties fail to meet the contract terms. Derivative assets are reported in other investments. Derivative liabilities are reported within other liabilities and accrued expenses .

Interest Rate Lock Commitments

Derivatives for our mortgage business are primarily comprised of interest rate lock commitments (IRLCs), forward delivery contracts, and TBA mortgage-backed securities. The fair value of these instruments is based upon valuation pricing models, which represent the amount the Company would expect to receive or pay at the balance sheet date to exit the position. Our mortgage origination subsidiary issues IRLCs to their customers, which are carried at estimated fair value on the Company’s condensed consolidated balance sheets. The estimated fair values of these commitments are generally calculated by reference to the value of the underlying loan associated with the IRLC net of costs to produce and an expected pull through assumption. The fair values of these commitments generally fall under Level 3 in the fair value hierarchy.

Forward Delivery Contracts and TBA Mortgage-Backed Securities

Our mortgage origination subsidiary manages their exposure by entering into forward delivery commitments with loan investors. For loans not locked with investors under a forward delivery commitment, the Company enters into hedge instruments, primarily TBAs, to protect against movements in interest rates. The fair values of TBA mortgage-backed securities and forward delivery contracts generally fall under Level 2 in the fair value hierarchy.

The remaining derivatives are generally comprised of a combination of swaps and options, which are generally classified as Level 2 in the fair value hierarchy. In addition, the Fortegra Additional Warrant (Warburg) is a derivative liability and classified as Level 3 in the fair value hierarchy. See Note (16) Stockholders’ Equity for additional information regarding the Fortegra Additional Warrant.

F-22

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following table presents the gross notional and fair value amounts of derivatives (on a gross basis) categorized by underlying risk:


	As of March 31, 2023						As of December 31, 2022
	Notional values		Asset derivatives		Liability derivatives		Notional values		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	142,054	$	3,899	$	—	$	147,963	$	3,652	$	—
Forward delivery contracts	21,548		41		32		32,160		112		39
TBA mortgage-backed securities	152,900		51		1,248		133,500		273		141
Fortegra Additional Warrants (Warburg) (1)	—		—		5,173		—		—		5,291
Other	14,752		195		10,202		13,427		230		7,730
Total	$	331,254	$	4,186	$	16,655	$	327,050	$	4,267	$	13,201

(1) See Note (16) Stockholders’ Equity for additional information .

(10) Debt, net

The following table presents the balance of the Company’s debt obligations, net of discounts and deferred financing costs for our corporate and asset based debt. Asset based debt is generally recourse only to specific assets and related cash flows.


	As of March 31, 2023
Corporate debt	Insurance		Mortgage		Total
Secured revolving credit agreements (1)	$	75,000	$	—	$	75,000

Preferred trust securities (LIBOR + 4.10 %)	35,000		—		35,000
8.50 % Junior subordinated notes	125,000		—		125,000
Total corporate debt	235,000		—		235,000

Asset based debt
Asset based revolving financing (SOFR + 2.75 %)	64,818		—		64,818
Residential mortgage warehouse borrowings ( 1.88 % to 2.50 % over SOFR; 2.00 % to 3.00 % over BSBY) (2)(3)	—		56,273		56,273

Total asset based debt	64,818		56,273		121,091
Total debt, face value	299,818		56,273		356,091

Unamortized deferred financing costs	( 8,626 )		( 4 )		( 8,630 )
Total debt, net	$	291,192	$	56,269	$	347,461

	As of December 31, 2022
Corporate debt	Insurance		Mortgage		Total
Secured revolving credit agreements (1)	$	—	$	—	$	—

Preferred trust securities (LIBOR + 4.10 %)	35,000		—		35,000
8.50 % Junior subordinated notes	125,000		—		125,000
Total corporate debt	160,000		—		160,000

Asset based debt
Asset based revolving financing (LIBOR + 2.75 %)	60,628		—		60,628
Residential mortgage warehouse borrowings ( 1.88 % to 2.50 % over SOFR; 2.00 % to 3.00 % over BSBY) (2)(3)	—		47,454		47,454

Total asset based debt	60,628		47,454		108,082
Total debt, face value	220,628		47,454		268,082

Unamortized deferred financing costs	( 8,703 )		( 13 )		( 8,716 )
Total debt, net	$	211,925	$	47,441	$	259,366

(1) The secured credit agreements include separate tranches with multiple rate structures that are adjustable based on Fortegra’s senior leverage ratio, which as of March 31, 2023 was SOFR + 1.50 %.

(2) Includes SOFR floor and BSBY floor o f 0.25 % and 0.50 %, r espectively, as of and March 31, 2023 and December 31, 2022.

(3) The weighted average coupon rate for residential mortgage warehouse borrowings was 6.79 % and 6.31 % at March 31, 2023 and December 31, 2022, respectively.

F-23

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following table presents the amount of interest expense the Company incurred on its debt for the following periods:


	Three Months Ended March 31,
	2023		2022
Total Interest expense - corporate debt	$	4,430	$	5,876
Total Interest expense - asset based debt	2,035		4,198
Interest expense on debt	$	6,465	$	10,074

The following table presents the contractual principal payments and future maturities of the unpaid principal balance on the Company’s debt for the following periods:


	As of March 31, 2023
Remainder of 2023	$	98,838
2024	22,253
2025	—
2026	—
2027	75,000
2028 and thereafter	160,000
Total	$	356,091

The following narrative is a summary of certain terms of our debt agreements for the three months ended March 31, 2023:

Corporate Debt

Secured Revolving Credit Agreements

As of March 31, 2023 and December 31, 2022, a total of $ 75,000 and $ 0 , respectively, was outstanding under the revolving line of credit in our insurance business. The maximum borrowing capacity under the agreements as of March 31, 2023 was $ 200,000 .

Asset Based Debt

Asset Based Revolving Financing

On January 31, 2023, subsidiaries of Fortegra amended the asset based revolving financing to increase the revolving commitment to $ 100,000 and transition to SOFR. As of March 31, 2023 and December 31, 2022, a total of $ 64,818 and $ 60,628 , respectively, was outstanding under the borrowing related to our premium finance and service contract finance offerings in our insurance business.

Residential Mortgage Warehouse Borrowings

In January 2023, the $ 60,000 warehouse line of credit was renewed and the maturity date was extended from January 2023 to January 2024.

As of March 31, 2023 and December 31, 2022, a total of $ 56,273 and $ 47,454 , respectively, was outstanding under such financing agreements.

Debt Covenants

As of March 31, 2023, the Company was in compliance with the representations and covenants for its outstanding debt or obtained waivers for any events of non-compliance.

F-24

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(11) Fair Value of Financial Instruments

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs to the extent possible to measure a financial instrument’s fair value. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability, and are affected by the type of product, whether the product is traded on an active exchange or in the secondary market, as well as current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Fair value is estimated by applying the hierarchy discussed in Note (2) Summary of Significant Accounting Policies of our Annual Report on Form 10-K which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3 of the fair value hierarchy.

The Company’s fair value measurements are based primarily on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable financial instruments. Sources of inputs to the market approach include third-party pricing services, independent broker quotations and pricing matrices. Management analyzes the third-party valuation methodologies and its related inputs to perform assessments to determine the appropriate level within the fair value hierarchy and to assess reliability of values. Further, management has a process in place to review all changes in fair value that occurred during each measurement period. Any discrepancies or unusual observations are followed through to resolution through the source of the pricing as well as utilizing comparisons, if applicable, to alternate pricing sources.

The Company utilizes observable and unobservable inputs within its valuation methodologies. Observable inputs may include: benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. In addition, specific issuer information and other market data is used. Broker quotes are obtained from sources recognized to be market participants. Unobservable inputs may include: expected cash flow streams, default rates, supply and demand considerations and market volatility.

Available for Sale Securities, at fair value

The fair values of AFS securities are based on prices provided by an independent pricing service and a third-party investment manager. The Company obtains an understanding of the methods, models and inputs used by the independent pricing service and the third-party investment manager by analyzing the investment manager-provided pricing report.

The following details the methods and assumptions used to estimate the fair value of each class of AFS securities and the applicable level each security falls within the fair value hierarchy:

U.S. Treasury Securities, Obligations of U.S. Government Authorities and Agencies, Obligations of State and Political Subdivisions, Corporate Securities, Asset Backed Securities, and Obligations of Foreign Governments: Fair values were obtained from an independent pricing service and a third-party investment manager. The prices provided by the independent pricing service and third-party investment manager are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing and fall under Level 2 or Level 3 in the fair value hierarchy.

Certificates of Deposit: The estimated fair value of certificates of deposit approximate carrying value and fall under Level 1 of the fair value hierarchy.

Equity Securities

The fair values of publicly traded common and preferred equity securities and exchange traded funds (“ETFs”) are obtained from market value quotations provided by an independent pricing service and fall under Level 1 in the fair value hierarchy. The fair values of non-publicly traded common and preferred stocks are based on prices derived from multiples of comparable public companies and fall under Level 3 in the fair value hierarchy.

F-25

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Loans, at fair value

Corporate Loans : These loans are comprised of middle market loans and bank loans and are generally classified under either Level 2 or Level 3 in the fair value hierarchy. To determine fair value, the Company uses quoted prices, including those provided from pricing vendors, which provide coverage of secondary market participants, where available. The values represent a composite of mark-to-market bid/offer prices. In certain circumstances, the Company will make its own determination of fair value of loans based on internal models and other unobservable inputs.

Mortgage Loans Held for Sale : Mortgage loans held for sale are generally classified under Level 2 in the fair value hierarchy and fair value is based upon forward sales contracts with third-party investors, including estimated loan costs.

Derivative Assets and Liabilities

Derivatives for our mortgage business are primarily comprised of IRLCs, forward delivery contracts and TBA mortgage-backed securities. The fair value of these instruments is based upon valuation pricing models, which represent the amount the Company would expect to receive or pay at the balance sheet date to exit the position. Our mortgage origination subsidiaries issue IRLCs to their customers, which are carried at estimated fair value on the Company’s condensed consolidated balance sheets. The estimated fair values of these commitments are generally calculated by reference to the value of the underlying loan associated with the IRLC net of costs to produce and an expected pull through assumption. The fair values of these commitments generally fall under Level 3 in the fair value hierarchy. Our mortgage origination subsidiaries manage their exposure by entering into forward delivery commitments with loan investors. For loans not locked with investors under a forward delivery commitment, the Company enters into hedge instruments, primarily TBAs, to protect against movements in interest rates. The fair values of TBA mortgage-backed securities and forward delivery contracts generally fall under Level 2 in the fair value hierarchy.

The remaining derivatives are generally comprised of a combination of swaps and options, which are generally classified as Level 2 in the fair value hierarchy. In addition, the Fortegra Additional Warrants (Warburg) are a derivative liability and classified as Level 3 in the fair value hierarchy. See Note (16) Stockholders’ Equity for additional information regarding the Fortegra Additional Warrant.

Corporate Bonds

Corporate bonds are generally classified under Level 2 in the fair value hierarchy and fair value is provided by a third-party investment manager, based on quoted market prices. We perform internal price verification procedures monthly to ensure that the prices provided are reasonable.

Securities Sold, Not Yet Purchased

Securities sold, not yet purchased are generally classified under Level 1 or Level 2 in the fair value hierarchy, based on the leveling of the securities sold short, and fair value is provided by a third-party investment manager, based on quoted market prices. We perform internal price verification procedures monthly to ensure that the prices provided are reasonable.

Mortgage Servicing Rights

Mortgage servicing rights are classified under Level 3 in the fair value hierarchy and fair value is provided by a third-party valuation service. Various observable and unobservable inputs are used to determine fair value, including discount rate, cost to service and weighted average prepayment speed.

F-26

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following tables present the Company’s fair value hierarchies for financial assets and liabilities, measured on a recurring basis:


	As of March 31, 2023
	Quoted prices in active markets Level 1		Other significant observable inputs Level 2		Significant unobservable inputs Level 3		Fair value
Assets:
Available for sale securities, at fair value:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	—	$	580,555	$	—	$	580,555
Obligations of state and political subdivisions	—		49,143		—		49,143
Obligations of foreign governments	—		2,093		—		2,093
Certificates of deposit	656		—		—		656
Asset backed securities	—		14,509		—		14,509
Corporate securities	—		163,489		—		163,489
Total available for sale securities, at fair value	656		809,789		—		810,445

Loans, at fair value:
Corporate loans	—		2,238		9,907		12,145
Mortgage loans held for sale	—		60,237		—		60,237
Total loans, at fair value	—		62,475		9,907		72,382

Equity securities:
Invesque	13,756		—		—		13,756
Fixed income ETFs	58,272		—		—		58,272
Other equity securities	32,586		—		6,475		39,061
Total equity securities	104,614		—		6,475		111,089

Other investments, at fair value:
Corporate bonds	—		50,342		—		50,342
Derivative assets	8		279		3,899		4,186
Other	—		5,055		324		5,379
Total other investments, at fair value	8		55,676		4,223		59,907

Mortgage servicing rights (1)	—		—		39,874		$	39,874

Total	$	105,278	$	927,940	$	60,479	$	1,093,697

Liabilities: (2)
Securities sold, not yet purchased	$	11,647	$	8,930	$	—	$	20,577
Derivative liabilities	—		11,482		—		11,482
Fortegra Additional Warrants (Warburg)	—		—		5,173		5,173
Contingent consideration payable	—		—		2,968		2,968
Total	$	11,647	$	20,412	$	8,141	$	40,200

(1) Included in other assets. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

(2) Included in other liabilities and accrued expenses. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

F-27

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)


	As of December 31, 2022
	Quoted prices in active markets Level 1		Other significant observable inputs Level 2		Significant unobservable inputs Level 3		Fair value
Assets:
Available for sale securities, at fair value:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	—	$	382,060	$	—	$	382,060
Obligations of state and political subdivisions	—		49,454		—		49,454
Obligations of foreign governments	—		2,362		—		2,362
Certificates of deposit	756		—		—		756
Asset backed securities	—		15,254		95		15,349
Corporate securities	—		161,999		—		161,999
Total available for sale securities, at fair value	756		611,129		95		611,980

Loans, at fair value:
Corporate loans	—		3,104		11,208		14,312
Mortgage loans held for sale	—		50,531		—		50,531
Total loans, at fair value	—		53,635		11,208		64,843

Equity securities:
Invesque	15,454		—		—		15,454
Fixed income ETFs	56,256		—		—		56,256
Other equity securities	7,181		—		6,885		14,066
Total equity securities	78,891		—		6,885		85,776

Other investments, at fair value:
Corporate bonds	—		42,080		—		42,080
Derivative assets	7		608		3,652		4,267
Other	—		—		324		324
Total other investments, at fair value	7		42,688		3,976		46,671

Mortgage servicing rights (1)	—		—		41,426		41,426

Total	$	79,654	$	707,452	$	63,590	$	850,696

Liabilities: (2)
Securities sold, not yet purchased	$	10,263	$	6,312	$	—	$	16,575
Derivative liabilities	—		7,910		—		7,910
Fortegra Additional Warrants (Warburg)	—		—		5,291		5,291
Contingent consideration payable	—		—		2,904		2,904

Total	$	10,263	$	14,222	$	8,195	$	32,680

(1) Included in other assets. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

(2) Included in other liabilities and accrued expenses. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

F-28

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Transfers between Level 2 and 3 were a result of subjecting third-party pricing on assets to various liquidity, depth, bid-ask spread and benchmarking criteria as well as assessing the availability of observable inputs affecting their fair valuation.

The following table presents additional information about assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the following periods:


	Three Months Ended March 31,
	2023		2022
Balance at January 1,	$	63,590	$	61,443
Net realized and unrealized gains or losses included in:
Earnings	( 3,205 )		7,009
OCI	( 33 )		( 173 )
Origination of IRLCs	11,262		15,613

Sales and repayments	( 6 )		( 1,233 )
Conversions to mortgage loans held for sale	( 11,016 )		( 19,558 )
Settlement of trade claims	—		( 18,709 )
Exchange of bonds for term loans	—		12,486
Exchange of trade receivables for equity securities	—		7,360
Transfer out of Level 3	( 113 )		—
Balance at March 31,	$	60,479	$	64,238

Changes in unrealized gains (losses) included in earnings related to assets still held at period end	$	( 3,766 )	$	( 159 )
Changes in unrealized gains (losses) included in OCI related to assets still held at period end	$	( 33 )	$	( 173 )

The following table presents the range and weighted average (WA) used to develop significant unobservable inputs for the fair value measurements of Level 3 assets and liabilities.


	As of							As of
	March 31, 2023		December 31, 2022			Valuation technique	Unobservable input(s)	March 31, 2023				December 31, 2022
Assets	Fair value							Range			WA (1)	Range			WA (1)
IRLCs	$	3,899	$	3,652		Internal model	Pull through rate	50 %	to	95 %	62 %	55 %	to	95 %	65 %
Mortgage servicing rights	39,874		41,426			External model	Discount rate	9 %	to	15 %	10 %	9 %	to	14 %	9 %
							Cost to service	$ 65	to	$ 80	$ 72	$ 65	to	$ 80	$ 72
							Prepayment speed	7 %	to	89 %	8 %	4 %	to	85 %	9 %

Equity securities	6,463		6,837		—	Internal model	Forecast EBITDAR	$ 728,000	to	$ 1,039,000	N/A	$ 728,000	to	$ 1,039,000	N/A
Corporate loans	9,907		11,208			Internal model	EBITDA	$ 153,000			N/A	$ 170,000			N/A
Total	$	60,143	$	63,123

Liabilities
Fortegra Additional Warrants (Warburg)	$	5,173	$	5,291		External Model	Discount rate	3 %	to	5 %	3.6 %	3 %	to	5 %	3.3 %
							Implied Equity Volatility	40 %	to	50 %	45 %	40 %	to	50 %	45 %
Contingent consideration payable	2,968		2,904			Cash Flow model	Forecast Cash EBITDA	$ 2,500	to	$ 4,000	N/A	$ 2,500	to	$ 4,000	N/A
							Forecast Underwriting EBITDA	$ —	to	$ 2,000	N/A	$ —	to	$ 2,000	N/A
Total	$	8,141	$	8,195

F-29

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(1) Unobservable inputs were weighted by the relative fair value of the instruments.

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities that are not recorded at fair value and their respective levels within the fair value hierarchy:


	As of March 31, 2023					As of December 31, 2022
	Level within fair value hierarchy	Fair value		Carrying value		Level within fair value hierarchy	Fair value		Carrying value
Assets:
Debentures (1)	2	$	22,153	$	22,153	2	$	23,853	$	23,853
Notes receivable, net	2	126,847		126,847		2	121,419		121,419
Total assets		$	149,000	$	149,000		$	145,272	$	145,272

Liabilities:
Debt, net	3	$	348,747	$	356,091	3	$	262,932	$	268,082
Total liabilities		$	348,747	$	356,091		$	262,932	$	268,082

(1) Included in other investments.

Debentures: Since interest rates on debentures are at current market rates for similar credit risks, the carrying amount approximates fair value. These values are net of allowance for doubtful accounts.

Notes Receivable, net: To the extent that carrying amounts differ from fair value, fair value is determined based on contractual cash flows discounted at market rates for similar credits. Categorized under Level 2 in the fair value hierarchy. See Note (6) Notes and Accounts Receivable, net.

Debt: The carrying value, which approximates fair value of LIBOR based debt, represents the total debt balance at face value excluding the unamortized discount. The fair value of the Junior subordinated notes is determined based on dealer quotes. Categorized under Level 3 in the fair value hierarchy.

Additionally, the following financial assets and liabilities on the condensed consolidated balance sheets are not carried at fair value, but whose carrying amounts approximate their fair value:

Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents are carried at cost which approximates fair value. Categorized under Level 1 in the fair value hierarchy.

Accounts and Premiums Receivable, net, Retrospective Commissions Receivable and Other Receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets. Categorized under Level 2 in the fair value hierarchy. See Note (6) Notes and Accounts Receivable, net.

Due from Brokers, Dealers, and Trustees and Due to Brokers, Dealers and Trustees: The carrying amounts are included in other assets and other liabilities and accrued expenses and approximate their fair value due to their short term nature. Categorized under Level 2 in the fair value hierarchy.

F-30

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(12) Liability for Unpaid Claims and Claim Adjustment Expenses

Roll forward of Claim Liability

The following table presents the activity in the net liability for unpaid losses and allocated loss adjustment expenses of short duration contracts for the following periods:


	Three Months Ended March 31,
	2023		2022
Policy liabilities and unpaid claims balance as of January 1,	$	567,193	$	331,703
Less: liabilities of policy-holder account balances, gross	( 1,923 )		( 801 )
Less: non-insurance warranty benefit claim liabilities	( 140 )		( 10,785 )
Gross liabilities for unpaid losses and loss adjustment expenses	565,130		320,117
Less: reinsurance recoverable on unpaid losses - short duration	( 266,889 )		( 165,129 )
Less: other lines, gross	( 184 )		( 576 )
Net balance as of January 1, short duration	298,057		154,412

Incurred (short duration) related to:
Current year	113,932		81,563
Prior years	328		1,161
Total incurred	114,260		82,724

Paid (short duration) related to:
Current year	33,742		42,706
Prior years	42,855		6,686
Total paid	76,597		49,392

Net balance as of March 31, short duration	335,720		187,744
Plus: reinsurance recoverable on unpaid losses - short duration	302,103		197,607
Plus: other lines, gross	180		658
Gross liabilities for unpaid losses and loss adjustment expenses	638,003		386,009
Plus: liabilities of policy-holder account balances, gross	1,686		273
Plus: non-insurance warranty benefit claim liabilities	119		7,595
Policy liabilities and unpaid claims balance as of March 31,	$	639,808	$	393,877

The following schedule reconciles the total short duration contracts per the table above to the amount of total losses incurred as presented in the condensed consolidated statements of operations, excluding the amount for member benefit claims:


	Three Months Ended March 31,
	2023		2022
Short duration incurred	$	114,260	$	82,724
Other lines incurred	( 3 )		392
Unallocated loss adjustment expenses	70		160
Total losses incurred	$	114,327	$	83,276

During the three months ended March 31, 2023, the Company experienced unfavorable prior year development of $ 328 , primarily as a result of higher-than-expected claim severity in our personal and commercial lines of business.

During the three months ended March 31, 2022 , the Company experienced unfavorable prior year development of $ 1,161 , primarily as a result of higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business.

Management considers the prior year development for each of these years to be insignificant when considered in the context of our annual earned premiums, net as well as our net losses and loss adjustment expenses and member benefit claims expenses. We analyze our development on a quarterly basis and given the short duration nature of our products, favorable or

F-31

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

adverse development emerges quickly and allows for timely reserve strengthening, if necessary, or modifications to our product pricing or offerings.

The unfavorable prior year development of $ 328 in the three months ended March 31, 2023 represented 1.7 % of our insurance business pre-tax income of $ 19,445 and 0.1 % of the opening net liability for losses and loss adjustment expenses of $ 298,057 , as of January 1, 2023.

The unfavorable prior year development of $ 1,161 in the thre e months ended March 31, 2022 represented 7.9 % of our insurance business pretax income of $ 14,682 , and 0.8 % of the openi ng net liability for losses and loss adjustment expenses of $ 154,412 , as of January 1, 2022.

Based upon our internal analysis and our review of the statement of actuarial opinions provided by our actuarial consultants, we believe that the amounts recorded for policy liabilities and unpaid claims reasonably represent the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

(13) Revenue from Contracts with Customers

The Company’s revenues from insurance and contractual and liability insurance operations are primarily accounted for under Financial Services-Insurance (Topic 944) that are not within the scope of Revenue for Contracts with Customers (Topic 606). The Company’s remaining revenues that are within the scope of Topic 606 are primarily comprised of revenues from contracts with customers for monthly membership dues for motor clubs, monthly administration fees for services provided for premiums, claims and reinsurance processing revenues, vehicle service contracts, vessel related revenue and revenues for household goods and appliances service contracts (collectively, remaining contracts).

The following table presents the disaggregated amounts of revenue from contracts with customers by product type for the following periods:


	Three Months Ended March 31,
	2023		2022
Service and Administrative Fees:
Service contract revenue	$	63,170	$	43,213
Motor club revenue	12,516		12,558

Other	1,503		10,983

Revenue from contracts with customers	$	77,189	$	66,754

Service and Administrative Fees

Service fee revenue is recognized as the services are performed. These services include fulfillment, software development, and claims handling for our customers. Management reviews the financial results under each significant contract on a monthly basis. Any losses that may occur due to a specific contract would be recognized in the period in which the loss is determined probable.

Administrative fee revenue includes the administration of premium associated with our producers and PORCs. In addition, we also earn fee revenue from debt cancellation, motor club, and auto and consumer goods service contracts. Related administrative fee revenue is recognized consistent with the earnings recognition pattern of the underlying insurance policies, debt cancellation contracts and motor club memberships being administered, using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract. Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of March 31, 2023.

The timing of our revenue recognition may differ from the timing of payment by our customers. We record a receivable when revenue is recognized prior to payment and we have an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the performance obligations are satisfied.

F-32

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)


	January 1, 2023						March 31, 2023
	Beginning balance		Additions		Amortization		Ending balance
Deferred acquisition costs
Service and Administrative Fees:
Service contract revenue	$	172,129	$	28,121	$	17,495	$	182,755
Motor club revenue	17,142		7,912		9,674		15,380
Total	$	189,271	$	36,033	$	27,169	$	198,135


Deferred revenue
Service and Administrative Fees:
Service contract revenue	$	581,882	$	79,271	$	63,170	$	597,983
Motor club revenue	22,949		10,052		12,516		20,485
Total	$	604,831	$	89,323	$	75,686	$	618,468

For the periods presented, no write-offs for unrecoverable deferred acquisition costs and deferred revenue were recognized.

(14) Other Assets and Other Liabilities and Accrued Expenses

Other Assets

The following table presents the components of other assets as reported in the condensed consolidated balance sheets:


	As of
	March 31, 2023		December 31, 2022


Loans eligible for repurchase	$	35,049	$	32,136
Mortgage servicing rights	39,874		41,426
Right of use assets - Operating leases	32,735		31,499
Income tax receivable	6,500		19,790
Furniture, fixtures and equipment, net	27,600		21,829
Prepaid expenses	12,926		18,526
Other	7,222		6,937
Total other assets	$	161,906	$	172,143

The following table presents the depreciation expense related to furniture, fixtures and equipment for the following periods:


	Three Months Ended March 31,
	2023		2022
Depreciation expense related to furniture, fixtures and equipment	$	1,069	$	838

F-33

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Other Liabilities and Accrued Expenses

The following table presents the components of other liabilities and accrued expenses as reported in the condensed consolidated balance sheets:


	As of
	March 31, 2023		December 31, 2022



Accounts payable and accrued expenses	$	100,304	$	119,394
Loans eligible for repurchase liability	35,049		32,136
Deferred tax liabilities, net	100,841		90,391
Operating lease liabilities	40,036		38,031

Commissions payable	27,064		42,741
Securities sold, not yet purchased	20,577		16,575
Derivative liabilities	16,655		13,201
Other	24,741		15,279
Total other liabilities and accrued expenses	$	365,267	$	367,748

(15) Other Revenue and Other Expenses

Other Revenue

The following table presents the components of other revenue as reported in the condensed consolidated statement of operations. Other revenue is primarily generated by Tiptree Capital’s non-insurance activities except as noted in the footnote to the table.


	Three Months Ended March 31,
		2023		2022
Other investment income (1)		$	4,770	$	16,705

Other (2)		8,562		5,039
Total other revenue		$	13,332	$	21,744

(1) See Note (5) Investments for the components of Other investment income.

(2) Includes $ 6,935 and $ 3,216 for the three months ended March 31, 2023 and 2022, respectively, related to Insurance.

Other Expenses

The following table presents the components of other expenses as reported in the condensed consolidated statement of operations:


	Three Months Ended March 31,
		2023		2022
General and administrative		$	9,059	$	4,039
Professional fees		7,759		6,283
Premium taxes		5,774		5,057
Mortgage origination expenses		3,192		4,602
Rent and related		4,070		4,359


Other		2,957		6,836
Total other expenses		$	32,811	$	31,176

F-34

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

(16) Stockholders' Equity

Stock Repurchases

The Board of Directors authorized the Company to make repurchases of up to $ 20,000 of shares of the Company’s outstanding common stock in the aggregate, at the discretion of the Company's Executive Committee. There were no shares repurchased during the three months ended March 31, 2023. As of March 31, 2023, the remaining repurchase authorization was $ 11,945 .

Dividends

The Company declared cash dividends per share for the following periods presented below:


	Dividends per share for the
	Three Months Ended March 31,
	2023		2022
First quarter	$	0.05	$	0.04




Total cash dividends declared	$	0.05	$	0.04

Fortegra Non-Controlling Interests

On June 21, 2022, the Company closed the WP Transaction. On that date, Fortegra converted to a Delaware corporation and Warburg made a $ 200,000 investment in Fortegra in exchange for Fortegra Common Stock, Fortegra Preferred Stock, Fortegra Warrants and Fortegra Additional Warrants. Also, in connection with the closing of the Warburg Transaction, Tiptree was issued Fortegra Additional Warrants, and management’s interests in LOTS Intermediate were exchanged for interests in Fortegra. As of March 31, 2023, Fortegra was owned approximately 79.4 % by Tiptree Holdings, 17.4 % by Warburg and 3.2 % by management and directors of Fortegra.

Fortegra Preferred Stock

The face amount of the Fortegra Preferred Stock is $ 80,000 . Dividends are cumulative and accrue at a rate of 8 % per annum, compounding quarterly. Any quarterly dividend may be paid in cash, at Fortegra’s option. For the three months ended March 31, 2023, the Company declared $ 1,578 of cash dividends recorded in other liabilities and accrued expenses.

Warburg has the option to convert, at any time, its shares of Fortegra Preferred Stock into shares of Fortegra Common Stock at an initial conversion premium of 33 % to Warburg’s initial investment valuation (the “Fortegra Preferred Stock Conversion Price”). The Fortegra Preferred Stock Conversion Price is adjusted for any Fortegra Common Stock splits, dividends, extraordinary dividends and similar transactions. All of the Fortegra Preferred Stock will automatically convert into shares of Fortegra Common Stock at the Fortegra Preferred Stock Conversion Price upon the closing of a qualifying initial public offering, subject to a five year make-whole provision. Upon conversion, the Fortegra Preferred Stock would result in Warburg owning an additional 6.6 % interest in Fortegra, for a total as converted ownership of 24.0 % (including its ownership of Fortegra Common Stock).

Fortegra Warrants

The Fortegra Warrants have a seven-year term and an exercise premium of 33 % to Warburg’s initial investment valuation (the “Fortegra Warrant Exercise Price”). The Fortegra Warrant Exercise Price will be reduced by any Fortegra Common Stock cash dividends made by Fortegra and adjusted for stock splits, common stock dividends, extraordinary dividends and similar transactions. The Fortegra Warrants, if exercised with cash, would result in Warburg owning an additional 3.8 % interest in Fortegra.

Fortegra Additional Warrants

The Fortegra Additional Warrants issued to both Warburg and Tiptree have a seven-year term and an exercise price of $ 0.01 per share of Fortegra Common Stock. The Fortegra Additional Warrants issued to Warburg will be forfeited based on Warburg achieving an all-in return on its investment in excess of 23 %, as measured primarily by Fortegra’s Common Stock

F-35

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

price. The Fortegra Additional Warrants issued to Warburg are classified as liabilities, at fair value. The Fortegra Additional Warrants issued to Tiptree will vest based on Warburg achieving an all-in return on its investment in excess of 30 %, as measured primarily by Fortegra’s Common Stock price. The number of shares of Fortegra Common Stock issuable to Warburg or Tiptree with respect to the Fortegra Additional Warrants is subject to adjustment for Fortegra Common Stock splits, stock or cash dividends and similar transactions. The Fortegra Additional Warrants are exercisable from the earlier of a transaction that results in Warburg having sold 50 % of its Fortegra Common Stock or the fifth anniversary of the closing date. The maximum number of shares issued to Warburg or Tiptree, if exercised with cash, would be an additional 1.7 % interest in Fortegra on an as converted basis (including its ownership of Fortegra Common and Preferred Stock).

The following table presents the components of non-controlling interests as reported in the condensed consolidated balance sheets:


	As of
	March 31, 2023		December 31, 2022


Fortegra preferred interests	$	77,679	$	77,679
Fortegra common interests	63,231		55,364
Other third-party common interests	—		3,165
Total non-controlling interests	$	140,910	$	136,208

Statutory Reporting and Insurance Company Subsidiaries Dividend Restrictions

The Company’s U.S. insurance subsidiaries prepare financial statements in accordance with Statutory Accounting Principles (SAP) prescribed or permitted by the insurance departments of their states of domicile. Prescribed SAP includes the Accounting Practices and Procedures Manual of the NAIC as well as state laws, regulations and administrative rules.

Statutory Capital and Surplus

The Company’s insurance company subsidiaries must maintain minimum amounts of statutory capital and surplus as required by regulatory authorities, including the NAIC; their capital and surplus levels exceeded respective minimum requirements as of March 31, 2023 and December 31, 2022.

Under the NAIC Risk-Based Capital Act of 1995, a company's Risk-Based Capital (RBC) is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The Company's U.S. domiciled insurance company subsidiaries' RBC levels, as calculated in accordance with the NAIC’s RBC instructions, exceeded all RBC thresholds as of March 31, 2023 and December 31, 2022.

The Company also has a foreign insurance subsidiary that is not subject to SAP. The statutory capital and surplus amounts and statutory net income presented above do not include the foreign insurance subsidiary in accordance with SAP.

Statutory Dividends

The Company’s U.S. domiciled insurance company subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance department of the applicable state of domicile. The Company eliminates all dividends from its subsidiaries in the condensed consolidated financial statements. There were no dividends paid to the Company by its U.S. domiciled insurance company subsidiaries for the three months ended March 31, 2023 and 2022.

The following table presents the combined amount available for ordinary dividends of the Company's U.S. domiciled insurance company subsidiaries for the following periods:






	As of
	March 31, 2023		December 31, 2022
Amount available for ordinary dividends of the Company's insurance company subsidiaries	$	32,867	$	35,145

F-36

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

At March 31, 2023, the maximum amount of dividends that our U.S. domiciled insurance company subsidiaries could pay under applicable laws and regulations without regulatory approval was approximately $ 32,867 . The Company may seek regulatory approval to pay dividends in excess of this permitted amount, but there can be no assurance that the Company would receive regulatory approval if sought.

(17) Accumulated Other Comprehensive Income (Loss) (AOCI)

The following table presents the activity of AFS securities in AOCI, net of tax, for the following periods:


	Unrealized gains (losses) on available for sale securities		Foreign currency translation adjustment		Total AOCI		Amount attributable to non-controlling interests		Total AOCI to Tiptree Inc.













Balance at December 31, 2021	$	( 2,686 )	$	—	$	( 2,686 )	$	1	$	( 2,685 )
Other comprehensive income (losses) before reclassifications	( 20,557 )		—		( 20,557 )		50		( 20,507 )
Amounts reclassified from AOCI	86		—		86		—		86
OCI	( 20,471 )		—		( 20,471 )		50		( 20,421 )

Balance at March 31, 2022	$	( 23,157 )	$	—	$	( 23,157 )	$	51	$	( 23,106 )

Balance at December 31, 2022	$	( 43,043 )	$	( 7,311 )	$	( 50,354 )	$	10,925	$	( 39,429 )
Other comprehensive income (losses) before reclassifications	5,745		2,932		8,677		( 2,062 )		6,615
Amounts reclassified from AOCI	( 279 )		—		( 279 )		—		( 279 )
OCI	5,466		2,932		8,398		( 2,062 )		6,336

Balance at March 31, 2023	$	( 37,577 )	$	( 4,379 )	$	( 41,956 )	$	8,863	$	( 33,093 )

The following table presents the reclassification adjustments out of AOCI included in net income and the impacted line items on the condensed consolidated statement of operations for the following periods:


	Three Months Ended March 31,			Affected line item in condensed consolidated statements of operations
Components of AOCI		2023				2022
Unrealized gains (losses) on available for sale securities		$	365	$	( 110 )		Net realized and unrealized gains (losses)
Related tax (expense) benefit		( 86 )		24			Provision for income tax
Net of tax		$	279	$	( 86 )

(18) Stock Based Compensation

Equity Plans

2017 Omnibus Incentive Plan

The Company adopted the Tiptree 2017 Omnibus Incentive Plan (2017 Equity Plan) on June 6, 2017, which permits the grant of restricted stock units (RSUs), stock, and stock options up to a maximum o f 6,100,000 sh ares of common stock. The general purpose of the 2017 Equity Plan is to attract, motivate and retain selected employees and directors for the Company and its subsidiaries, to provide them with incentives and rewards for performance and to better align their interests with the interests of the Company’s stockholders. Unless otherwise extended, the 2017 Equity Plan terminates automatically on June 6, 2027. Amendment No. 1 to the 2017 Equity Plan, to increase the aggregate shares issuable under the pl an by 4,000,000 shares, was approved by stockholders on June 7, 2022.

The table below summarizes changes to the issuances under the Company’s 2017 Equity Plan for the periods indicated, excluding awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock:


2017 Equity Plan			Number of shares (1)










Available for issuance as of December 31, 2022			2,371,977
RSU, stock and option awards granted			( 90,188 )




Available for issuance as of March 31, 2023			2,281,789

(1) Excludes awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock.

F-37

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Restricted Stock Units and Stock Awards

Tiptree Corporate Incentive Plans

The Company values RSUs at their grant-date fair value as measured by Tiptree’s common stock price. Generally, the Tiptree RSUs vest and become non-forfeitable either (i) after the third anniversary, or (ii) with respect to one-third of Tiptree shares granted on each of the first, second and third year anniversaries of the date of the grant. RSU awards are expensed using the straight-line method over the requisite service period. The RSUs granted after 2019 include a retirement provision and are amortized over the lesser of the service condition or expected retirement date.

Stock Awards - Directors’ Compensation

The Company values the stock awards at their issuance-date fair value as measured by Tiptree’s common stock price. Upon issuance, the awards are deemed to be granted and immediately vested.

The following table presents changes to the issuances of RSUs and stock awards under the 2017 Equity Plan for the periods indicated:


	Number of shares issuable	Weighted average grant date fair value








Unvested units as of December 31, 2022	501,007	$	9.63
Granted	90,188	16.39
Vested	( 337,964 )	7.97

Unvested units as of March 31, 2023	253,231	$	14.25

The following tables present the detail of the granted and vested RSUs and stock awards for the periods indicated:



	Three Months Ended March 31,		Three Months Ended March 31,
Granted	2023	2022		Vested	2023	2022
Directors	8,314	8,418		Directors	8,314	8,418
Employees (1)	81,874	202,828		Employees	329,650	300,305
Total Granted	90,188	211,246		Total Vested	337,964	308,723
				Taxes	( 43,322 )	( 47,274 )

				Net Vested	294,642	261,449

(1) Includes 62,940 shares that vest ratably over three years and 190,291 shares that cliff vest in 2025 for the three months ended March 31, 2023.

Tiptree Senior Management Incentive Plan

On August 4, 2021, a total of 3,500,000 Performance Restricted Stock Units (PRSUs) were awarded to members of the Company’s senior management. An additional 350,000 PRSUs were awarded on October 14, 2022. The PRSUs have a 10-year term and are subject to the recipient’s continuous service and a market requirement. A portion of the PRSUs will generally vest upon the achievement of each of five Tiptree share price target milestones ranging from $ 15 to $ 60 , adjusted for dividends paid, within five pre-established determination periods (subject to a catch-up vesting mechanism) occurring on the second, fourth, sixth, eighth and tenth anniversaries of the grant date.

In November 2021, the first tranche of the PRSUs vested, resulting in a net issuance of 215,583 shares of Tiptree common stock. As of March 31, 2023, 3,616,667 PRSUs are unvested. The below table illustrates the aggregate number of PRSUs that will vest upon the achievement of each Tiptree share price target. Such price targets are adjusted down for cumulative dividends paid by the Company since grant (e.g., the next share price target is $ 19.71 as adjusted for cumulative dividends paid to date).


Original Tiptree Share Price Target						Number of PRSUs that Vest
$ 20						516,667
$ 30						775,000

F-38

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)


$ 45						1,033,333
$ 60						1,291,667

Upon vesting, the Company will issue shares, or if shares are not available under the 2017 Equity Plan, then the Company may in its sole discretion instead deliver cash equal to the fair market value of the underlying shares. As of December 31, 2021, the Company did not have sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded; as such, the PRSUs were classified as liability awards and were remeasured at each subsequent reporting date, and expensed using the straight-line method over the requisite service period. On June 7, 2022, the Board of Directors authorized additional shares, and the Company now has sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded. As such, the PRSUs were valued on June 7, 2022, and converted to equity awards on that date, and will be expensed using the straight-line method over the remaining derived service period.

The fair value of the PRSUs was estimated using a Black-Scholes-Merton option pricing formula embedded within a Monte Carlo model used to simulate the future stock prices of the Company, which assumes that the market requirement is achieved. The historical volatility was computed based on historical daily returns of the Company’s stock price simulated over the performance period using a lookback period of 10 years. The valuation was done under a risk-neutral framework using the 10-year zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve on the reporting date. The current quarterly dividend rates in effect as of the reporting date are used to calculate a spot dividend yield for use in the model.

The following table presents the assumptions used to remeasure the fair value of the PRSUs issued in 2021 as of June 7, 2022, when they were converted to equity awards.


Valuation Input	Assumption

Historical volatility		38.75 %
Risk-free rate		3.04 %
Dividend yield		1.45 %
Cost of equity		11.72 %
Expected term (years)		6

Subsidiary Incentive Plans

Certain of the Company’s subsidiaries have established incentive plans under which they are authorized to issue equity of those subsidiaries to certain of their employees. Such awards are accounted for as equity. These awards are subject to performance-vesting criteria based on the performance of the subsidiary (performance vesting awards) and time-vesting subject to continued employment (time vesting awards). Following the service period, certain vested awards may be exchanged at fair market value, at the option of the holder, for Tiptree common stock under the 2017 Equity Plan. The service period for certain grants has been achieved and those vested subsidiary awards are currently eligible for exchange. The Company has the option, but not the obligation to settle the exchange right in cash.

The following table presents changes to the issuances of subsidiary awards under the subsidiary incentive plans for the periods indicated:


	Grant date fair value of equity shares issuable
















Unvested balance as of December 31, 2022	$	1,487

Vested	( 808 )

Unvested balance as of March 31, 2023	$	679

The net vested balance of subsidiary awards eligible for exchange as of March 31, 2023 translates to 22,333 shares of Tiptree common stock.

F-39

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Stock Option Awards

Tiptree Corporate Incentive Plans

Option awards have been granted to the Executive Committee with an exercise price equal to the fair market value of our common stock on the date of grant. The option awards have a 10-year term and are subject to the recipient’s continuous service, a market requirement, and vest one third on each of the three , four , and five-year anniversaries of the grant date.

During the three months ended March 31, 2023, the market requirement for all outstanding options was achieved. There were no stock option awards granted in 2023 or 2022.

The following table presents the Company's stock option activity for the current period:


	Options outstanding	Weighted average exercise price (in dollars per stock option)		Weighted average grant date value (in dollars per stock option)		Options exercisable






Balance, December 31, 2022	1,675,514	$	6.50	$	2.30	1,018,805

Balance, March 31, 2023	1,583,873	$	6.51	$	2.25	1,225,083

Weighted average remaining contractual term at March 31, 2023 (in years)	4.9

Fortegra Equity Incentive Plan

Fortegra adopted the 2022 Equity Incentive Plan (“Fortegra Plan”) on June 21, 2022, which permits the grant of RSUs, stock based awards and options up to approximately 7 % of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock), of which the substantial majority is expected to be delivered in options. The general purpose of the Fortegra Plan is to attract, motivate and retain selected employees of Fortegra, to provide them with incentives and rewards for performance and to better align their interests with those of Fortegra’s stockholders. Unless otherwise extended, the Fortegra Plan terminates automatically on June 21, 2032. The awards under the Fortegra Plan are not exchangeable for Tiptree common stock.

As of March 31, 2023, time vesting RSUs and options equal to approximately 0.4 % of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock) have been granted under the Fortegra Plan. The unvested RSUs were exchanged for prior RSUs granted to management of Fortegra under the LOTS Intermediate Co. Restricted Stock Unit Program.

F-40

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Stock Based Compensation Expense

The following table presents total stock based compensation expense and the related income tax benefit recognized on the condensed consolidated statements of operations:


	Three Months Ended March 31,
		2023		2022
Employee compensation and benefits		$	2,214	$	6,041
Director compensation		106		119
Income tax benefit		( 487 )		( 1,294 )
Net stock based compensation expense		$	1,833	$	4,866

Additional information on total non-vested stock based compensation is as follows:


	As of March 31, 2023
	Stock options		Restricted stock awards and RSUs		Performance Restricted Stock Units
Unrecognized compensation cost related to non-vested awards (1)	$	131	$	168	$	7,046
Weighted - average recognition period (in years)	0.50		0.66		1.12

(1) Includes $ 95 of unrecognized compensation cost related to stock options at The Fortegra Group that vest ratably over three years .

(19) Income Taxes

The following table presents the Company’s provision (benefit) for income taxes reflected as a component of income (loss):


	Three Months Ended March 31,
	2023				2022
Total income tax expense (benefit)	$	5,022			$	( 86 )

Effective tax rate (ETR)	61.5		%	(1)	9.0		%	(2)

(1) Higher than the U.S. federal statutory income tax rate of 21% primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra and other discrete items.

(2) Lower than the U.S. federal statutory income tax rate of 21% primarily due to the impact of the effect of foreign operations and discrete items, partially offset by state taxes.

Tiptree owns less than 80% of Fortegra and is required to record deferred taxes on the outside basis on its investment in Fortegra. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell all of its Fortegra stock at its carrying value on Tiptree’s balance sheet. As of March 31, 2023, this deferred tax liability relating to Fortegra was $ 44,114 , which was an increase of $ 4,144 from the year ended December 31, 2022, of which $ 1,808 was recorded in OCI and $ 2,336 was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rate for the quarter ended March 31, 2023 was 32.9 %.

(20) Commitments and Contingencies

The following table presents rent expense for the Company’s office leases recorded on the condensed consolidated statements of operations for the following periods:


	Three Months Ended March 31,
		2023		2022
Rent expense for office leases (1)		$	2,069	$	2,289

(1) Includes lease exp ense o f $ 110 for the three months ended March 31, 2022 for assets classified as held for sale for the periods prior to July 1, 2022.

The Company entered into a sublease of their former corporate office space in December 2022. As a result of the sublease, future lease payments will be offset by $ 1,842 annually beginning July 2023 through and August 2029.

F-41

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

Litigation

The Company is a defendant in Mullins v. Southern Financial Life Insurance Co., a class action filed in February 2006, in Pike County Circuit Court in the Commonwealth of Kentucky on behalf of Kentucky consumers that purchased certain credit life and disability insurance coverage between 1997-2007. The action alleges violations of the Kentucky Consumer Protection Act (“KCPA”) and certain insurance statutes, common law fraud and breach of contract and the covenant of good faith and fair dealing. The plaintiffs seek compensatory and punitive damages, attorneys’ fees and interest.

Two classes were certified in June 2010: Subclass A includes class members who suffered a disability during the coverage period but allegedly received less than full disability benefits; Subclass B includes all class members whose loan termination date extended beyond the termination date of the credit disability coverage period.

In a series of orders issued in October 2022 on competing motions for partial summary judgment, the court found in favor of the plaintiffs as to the Subclass A breach of contract claim (the “Subclass A Order”) and, as to Subclass B, found that the Company was unjustly enriched to the extent the premium it collected exceeded the proportion of the premium for which the Company provided benefits coverage (the “Subclass B Order”). The court found in favor of the Company as to the plaintiffs’ claims for common law fraud and violation of Kentucky’s insurance statutes and ordered the plaintiffs’ Motion for Sanctions for Spoliation of Evidence held in abeyance. The Company has appealed the Subclass A Order and Subclass B Order and all interlocutory orders made final by entry of the Subclass A Order and Subclass B Order.

In December 2022, the court dismissed the plaintiffs’ KCPA claims as to both Subclass A Order and Subclass B Order. The court also dismissed the plaintiffs’ breach of covenant of good faith and fair dealing claim as to Subclass B Order but declined to dismiss such claim as to Subclass A Order pending resolution of the Company’s appeal. A trial has been scheduled for December 2023.

The Company considers such litigation customary in the insurance industry. In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. At this time, the Company cannot estimate a range of loss that is reasonably possible.

The Company and its subsidiaries are parties to other legal proceedings in the ordinary course of business. Although the Company’s legal and financial liability with respect to such proceedings cannot be estimated with certainty, the Company does not believe that these proceedings, either individually or in the aggregate, are likely to have a material adverse effect on the Company’s financial position.

(21) Earnings Per Share

The Company calculates basic net income per share of common stock (common share) based on the weighted average number of common shares outstanding, which includes vested corporate RSUs. Unvested corporate RSUs have a non-forfeitable right to participate in dividends declared and paid on the Company’s common stock on an as vested basis and are therefore considered a participating security. The Company calculates basic earnings per share using the “two-class” method under which the income available to common stockholders is allocated to the unvested corporate RSUs.

Diluted net income attributable to common stockholders includes the effect of unvested subsidiaries’ RSUs, when dilutive. The assumed exercise of all potentially dilutive instruments is included in the diluted net income per common share calculation, if dilutive.

F-42

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023

(in thousands, except share data)

The following table presents a reconciliation of basic and diluted net income per common share for the following periods:


	Three Months Ended March 31,
		2023		2022
Net income (loss)		$	3,151	$	( 866 )
Less:
Net income (loss) attributable to non-controlling interests		4,213		94

Net income (loss) attributable to Tiptree Inc. common shares - basic		( 1,062 )		( 960 )






Effect of Dilutive Securities:
Securities of subsidiaries		—		—

Net income (loss) attributable to Tiptree Inc. common shares - diluted		$	( 1,062 )	$	( 960 )
Weighted average number of shares of common stock outstanding - basic		36,522,946		34,229,011
Weighted average number of incremental shares of common stock issuable from exchangeable interests and contingent considerations		—		—
Weighted average number of shares of common stock outstanding - diluted		36,522,946		34,229,011




Basic net income (loss) attributable to common shares		$	( 0.03 )	$	( 0.03 )




Diluted net income (loss) attributable to common shares		$	( 0.03 )	$	( 0.03 )

(22) Related Party Transactions

Corvid Peak is a related party of the Company because Corvid Peak is deemed to be controlled by Michael Barnes, the Company’s Executive Chairman. The Company is invested in funds managed by Corvid Peak (the “Corvid Peak Funds”) and Corvid Peak manages investment portfolio accounts of Fortegra and certain of its subsidiaries under an investment advisory agreement (the “IAA”). With respect to the Corvid Peak Funds and IAA, the Company incurred $ 1,102 and $ 768 of management and incentive fees for the three months ended March 31, 2023, and 2022, respectively.

Beginning January 1, 2021, Tiptree has been allocated 10.2 % of certain profits interests earned by Corvid Peak with an additional 10.2 % interest for each of the next consecutive four years . Beginning on January 1, 2023, Tiptree’s percentage interest increased to 31.84 % (includi ng interests acquired from former Corvid Peak equity holders).

Pursuant to the Transition Services Agreement, Tiptree and Corvid Peak have mutually agreed to provide certain services to one another. Payments under the Transition Services Agreement in the three months ended March 31, 2023 and 2022 were not material.

Pursuant to a Partner Emeritus Agreement, Tiptree agreed to provide Mr. Inayatullah, a greater than 5 % stockholder of the Company, support services and reimburse Mr. Inayatullah for a portion of benefit expenses in exchange for advice and other consulting services as requested by the Company’s Executive Committee. Transactions related to the Partner Emeritus Agreement in the three months ended March 31, 2023 and 2022 were not material.

(23) Subsequent Events

On May 2, 2023, the Company’s board of directors declared a quarterly cash dividend of $ 0.05 per share to holders of common stock with a record date of May 22, 2023, and a payment date of May 30, 2022.

F-43

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in this section as follows:

• Overview

• Results of Operations

• Non-GAAP Measures and Reconciliations

• Liquidity and Capital Resources

• Critical Accounting Policies and Estimates

OVERVIEW

Tiptree 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, specialty finance and shipping. Our largest operating subsidiary, Fortegra, is a leading provider of specialty insurance products and related services. We also generate earnings from a diverse group of select investments that we refer to as Tiptree Capital, which includes our Mortgage segment and other, non-insurance businesses and assets. We evaluate performance primarily by the comparison of stockholders’ long-term total return on capital, as measured by growth in stock price plus dividends paid, in addition to Adjusted Net Income and Adjusted EBITDA.

Our year-to-date 2023 highlights include:

Overall:

• Tiptree reported a net loss of $1.1 million for the first quarter, compared to a net loss of $1.0 million in the prior year, driven primarily by lower mortgage and shipping revenues, partially offset by growth in insurance operations. Return on average equity was (1.1)%, compared to (0.9)% in 2022.

• Adjusted net income of $17.3 million increased $1.8 million from $15.5 million in 2022, driven by improvement in insurance operations. Adjusted return on average equity was 12.9%, as compared to 15.8% in 2022.

• Tiptree increased its quarterly dividend to $0.05 per share, representing an increase of 25%.

Insurance:

• Gross written premiums and premium equivalents were $750.3 million for the three months ended March 31, 2023, as compared to $600.9 million for the three months ended March 31, 2022, up $149.5 million as a result of growth in specialty insurance lines and fee-based service contract offerings.

• Total revenues increased $85.9 million to $368.4 million, from $282.5 million in 2022, driven by increases in earned premiums, net, service and administrative fees and net investment income.

• Combined ratio of 91.3%, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform.

• Income before taxes of $19.4 million as compared to $14.7 million in 2022. Return on average equity was 16.7% in 2023 as compared to 14.7% in 2022. The increases were driven by growth in underwriting and fee revenues and increased net investment income.

• Adjusted net income increased $1.8 million to $22.9 million, as compared to $21.1 million in 2022. Adjusted return on average equity was 26.1%, as compared to 28.2% in 2022.

• In February 2023, Fortegra acquired Premia Solutions Limited, one of the largest providers of automotive protection products in the United Kingdom, for net cash consideration of approximately $22.5 million.

Tiptree Capital:

• Mortgage loss before taxes was $2.6 million in 2023, as compared to income of $4.3 million in 2022, with the decrease driven by declines in origination volumes and negative marks on the mortgage servicing rights asset in 2023 compared to positive marks in 2022.

• Maritime transportation income before taxes decreased to $0.2 million in 2023, as compared to $2.7 million in 2022, as a result of the sale of all three dry bulk vessels and two product tankers in 2022.

Key Trends:

Our results of operations are affected by a variety of factors including, but not limited to, general economic conditions and GDP growth, market liquidity and volatility, consumer confidence, U.S. demographics, employment and wage growth, business confidence and investment, inflation, interest rates and spreads, the impact of the regulatory environment, and the other factors set forth in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Generally, our businesses are positively affected by a healthy U.S. consumer, stable to gradually rising interest rates, stable markets and business conditions, and global growth and trade flows. Conversely, rising unemployment, volatile markets, rapidly rising interest rates, inflation, changing regulatory requirements and slowing business conditions can have a material adverse effect on our results of operations or financial condition.

Insurance results primarily depend on pricing, underwriting, risk retention and the accuracy of reserves, reinsurance arrangements, returns on invested assets, and policy and contract renewals and run-off. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches. The types of products Fortegra offers tend to have limited aggregation risk and limited exposure to catastrophic and residual risk. The business has historically generated significant fee-based revenues by incorporating value-add coverages and services. Underwriting risk is mitigated through a combination of reinsurance and retrospective commission structures with agents, distribution partners and/or third-party reinsurers. To mitigate counterparty risk, Fortegra ensures its reinsurance receivables are placed with highly rated and appropriately capitalized counterparties or with our distribution partners’ captive insurance vehicles which are collateralized with highly liquid investments, cash or letters of credit. While Fortegra’s insurance operations have historically maintained a relatively stable combined ratio, initiatives to change the business mix along with these economic factors could generate different results than the business has historically experienced. In particular, the current period of rising inflation can have an impact on replacement costs associated with claims from our customers. To the extent we are unable to pass the higher costs of claims through higher premiums, lower underwriting margins could adversely affect our profitability. In addition, fluctuations of the U.S. dollar relative to other currencies, including the British pound and Euro, would have an impact on book value between periods.

Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. In recent periods, the U.S. fixed income markets experienced a significant rise in interest rates. Rising interest rates have and could continue to impact the value of Fortegra’s fixed maturity securities, with any unrealized losses recorded in equity, and if realized, could impact our results of operations. Offsetting the impact of a rising interest rate environment, new investments in fixed rate instruments from both maturities and portfolio growth can result in higher interest income on investments. The weighted average duration of our fixed income available for sale securities is less than three years. While our asset and liability mix is relatively matched, should we need to liquidate any of these investments before maturity to pay claims, any realized losses could materially negatively impact our results of operations. Changes in fair value for loans, credit investment funds, and equity securities in Fortegra’s investment portfolio are reported as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, currency risk, or market risk, including specific company or industry factors. In addition, our equity holdings are relatively concentrated. General equity market trends, along with company and industry specific factors, can impact the fair value which can result in unrealized gains and losses affecting our results.

Rising 10-year treasury yields, and the tapering of the Federal Reserve’s purchases of mortgage-backed securities, has resulted in substantial increases in mortgage interest rates. Low mortgage interest rates driven by the Federal Reserve intervention in mortgage markets, and rising home prices in certain markets, provided tailwinds to the mortgage markets in 2020 and 2021, which benefited our mortgage operations and margins. The substantial rise in rates in recent periods resulted in a sharp reversal of those trends, with volumes and margins declining significantly. Only partially offsetting the declines in our mortgage origination business is an increase in the fair value of our mortgage servicing portfolio as rising rates slow prepayment speeds, with a resulting increase in servicing income. Continued rising or elevated mortgage rates could have a materially negative impact on our mortgage operations, and is likely to be only partially mitigated by the improvement in mortgage servicing revenues. A sustained period of negative profitability in the mortgage industry could also impact the availability of funding sources for our mortgage business.

Rising interest rates can also impact the cost of floating interest rate debt obligations, while declining rates can decrease the cost of debt. Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations. A continuation of rising rates could have a material impact on our costs of floating rate debt.

Common shares of Invesque represent a significant asset on our condensed consolidated balance sheets. Our investment in Invesque, which operates in the seniors housing, skilled nursing and medical office industries, is carried on our condensed consolidated balance sheets at fair value. The combination of the COVID-19 pandemic impacting occupancy rates and other market factors impacting operating costs has resulted in a significant decline in Invesque’s stock price over the past three

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

The following is a summary of our condensed consolidated financial results for the three months ended March 31, 2023 and 2022. In addition to GAAP results, management uses the Non-GAAP measures Adjusted net income, Adjusted return on average equity, Adjusted EBITDA and book value per share 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 EBITDA is also used in determining incentive compensation for the Company’s executive officers. 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. The Company defines Adjusted EBITDA as GAAP net income of the Company plus corporate interest expense, plus income taxes, plus depreciation and amortization expense, less the effects of purchase accounting, plus non-cash fair value adjustments, plus significant non-recurring expenses, and plus unrealized gains (losses) on available for sale securities that are reported in other comprehensive income. Adjusted net income, Adjusted return on average equity and Adjusted EBITDA 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.

Selected Key Metrics


($ in thousands, except per share information)	Three Months Ended March 31,
GAAP:	2023			2022
Total revenues	$	381,625		$	324,903
Net income (loss) attributable to common stockholders	$	(1,062)		$	(960)
Diluted earnings per share	$	(0.03)		$	(0.03)
Cash dividends paid per common share	$	0.05		$	0.04
Return on average equity	(1.1)		%	(0.9)		%

Non-GAAP: (1)
Adjusted net income	$	17,284		$	15,452
Adjusted return on average equity	12.9		%	15.8		%
Adjusted EBITDA	$	23,362		$	(14,905)
Book value per share	$	10.91		$	10.51

(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.

The table below provides a break down between net realized and unrealized gains and losses from Invesque and other securities which impacted our consolidated results on a pre-tax basis. Many investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect earnings related to these investments to be relatively volatile between periods. Fixed income securities are primarily marked to market through AOCI in stockholders’ equity and do not impact net realized and unrealized gains and losses until they are sold.


($ in thousands)	Three Months Ended March 31,
	2023		2022

Net realized and unrealized gains (losses) - Invesque	$	(1,698)	$	(10,698)
Net realized and unrealized gains (losses) (1)	$	(4,675)	$	1,518

(1) Excludes Invesque and Mortgage realized and unrealized gains and losses.

Net Income (Loss) Attributable to common stockholders

For the three months ended March 31, 2023, the net loss attributable to common stockholders was $1.1 million, compared to a net loss of $1.0 million in the prior year period, primarily driven by lower mortgage and shipping revenues and the tax impacts of the WP Transaction, partially offset by growth in Fortegra’s underwriting and fee operations.

Adjusted net income & Adjusted return on average equity - Non-GAAP

Adjusted net income for the three months ended March 31, 2023 was $17.3 million, an increase of $1.8 million, or 11.9%, from the three months ended March 31, 2022, driven by growth in our insurance operations. For the three months ended March 31, 2023, adjusted return on average equity was 12.9%, as compared to 15.8% at March 31, 2022, with the decrease driven by the higher average equity balances as a result of the WP Transaction which closed in June 2022.

Adjusted EBITDA - Non-GAAP

Adjusted EBITDA for the three months ended March 31, 2023 was $23.4 million, an increase of $38.3 million from 2022 driven by improved operating performance in our insurance business and realized and unrealized gains on investments (including impacts to AOCI) compared to losses in the prior year period.

Book Value per share - Non-GAAP

Total stockholders’ equity was $541.6 million as of March 31, 2023 compared to $383.2 million as of March 31, 2022, with the increase driven by the WP Transaction and cash exercise of Tiptree warrants, partially offset by comprehensive loss in 2022 primarily resulting from unrealized losses on Available for Sale (“AFS”) securities and negative impacts from foreign currency translation. In the three months ended March 31, 2023, Tiptree returned $1.8 million to stockholders through dividends paid.

Book value per share for the period ended March 31, 2023 was $10.91, an increase from book value per share of $10.51 as of March 31, 2022 driven by the comprehensive income per share and the net increase to Tiptree Inc. stockholders’ equity from the WP Transaction, partially offset by dividends paid of $0.17 per share, and issuance of shares as a result of the exercise of warrants and vesting of equity awards.

Results by Segment

We classify our business into two reportable segments, Insurance and Mortgage, with the remainder of our operations aggregated into Tiptree Capital - Other. Corporate activities include holding company interest expense, corporate employee compensation and benefits, and other expenses, including public company expenses.

The following tables present the components of Revenue, Income (loss) before taxes and Adjusted net income for the following periods:


($ in thousands)	Three Months Ended March 31,
	2023		2022
Revenues:
Insurance	$	368,444	$	282,529
Mortgage	11,561		25,401
Tiptree Capital - other	1,620		16,973
Corporate	—		—
Total revenues	$	381,625	$	324,903

Income (loss) before taxes:
Insurance	$	19,445	$	14,682
Mortgage	(2,565)		4,266
Tiptree Capital - other	1,442		(7,651)
Corporate	(10,149)		(12,249)
Total income (loss) before taxes	$	8,173	$	(952)

Non-GAAP - Adjusted net income: (1)
Insurance	$	22,939	$	21,124
Mortgage	(853)		(1,556)
Tiptree Capital - other	1,413		2,528
Corporate	(6,215)		(6,644)
Total adjusted net income	$	17,284	$	15,452

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Insurance

Our principal operating subsidiary, Fortegra, is a specialty insurance underwriter and service provider, which focuses on niche lines and fee-oriented services. The combination of specialty insurance underwriting, service contract products, and related service solutions delivered through a vertically integrated business model creates a blend of traditional underwriting revenues, investment income and unregulated fee revenues. The business is an agent-driven model, distributing products through independent insurance agents, consumer finance companies, online retailers, auto dealers, and regional big box retailers to deliver products that complement the consumer transaction.

As of March 31, 2023, Fortegra was owned approximately 79.4% by Tiptree, 17.4% by Warburg and 3.2% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock. The following tables and discussion present the Insurance segment results, including non-controlling interests, for the three months ended March 31, 2023 and 2022.

Results of Operations - Three Months Ended March 31, 2023 compared to 2022


($ in thousands)	Three Months Ended March 31,
	2023			2022			Change		% Change
Revenues:
Earned premiums, net	$	265,330		$	208,416		$	56,914	27.3	%
Service and administrative fees	92,032			71,835			20,197		28.1	%
Ceding commissions	3,645			2,537			1,108		43.7	%
Net investment income	5,109			3,167			1,942		61.3	%
Net realized and unrealized gains (losses)	(4,607)			(6,643)			2,036		(30.6)	%
Other revenue	6,935			3,217			3,718		115.6	%
Total revenues	$	368,444		$	282,529		$	85,915	30.4	%
Expenses:
Net losses and loss adjustment expenses	114,327			$	83,276		$	31,051	37.3	%
Member benefit claims	27,348			21,170			6,178		29.2	%
Commission expense	146,450			117,423			29,027		24.7	%
Employee compensation and benefits	24,613			22,026			2,587		11.7	%
Interest expense	6,081			4,759			1,322		27.8	%
Depreciation and amortization	4,811			4,354			457		10.5	%
Other expenses	25,369			14,839			10,530		71.0	%
Total expenses	$	348,999		$	267,847		$	81,152	30.3	%
Income (loss) before taxes (1)	$	19,445		$	14,682		$	4,763	32.4	%





Key Performance Metrics:
Gross written premiums and premium equivalents	$	750,329		$	600,855		$	149,474	24.9	%
Return on average equity	16.7		%	14.7		%
Underwriting ratio	78.3		%	77.6		%
Expense ratio	13.0		%	12.9		%
Combined ratio	91.3		%	90.5		%

Non-GAAP Financial Measures (2) :
Adjusted net income	$	22,939		$	21,124		$	1,815	8.6	%
Adjusted return on average equity	26.1		%	28.2		%

(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

Earned Premiums, net represents the earned portion of gross written and assumed premiums, less the earned portion that is ceded to third-party reinsurers under reinsurance agreements. Fortegra’s insurance policies generally have a term of six months to seven years depending on the underlying product and premiums are earned pro rata over the term of the policy. At the end of each reporting period, premiums written but not earned are classified as unearned premiums and are earned in subsequent periods over the remaining term of the policy.

Service and Administrative Fees represent the earned portion of gross written premiums and premium equivalents, which is generated from non-insurance products including warranty service contracts, motor club contracts and other services offered as part of Fortegra’s vertically integrated product offerings. Such fees are typically positively correlated with transaction volume and are recognized as revenue when realized and earned. At the end of each reporting period, gross written premiums and premium equivalents written for service contracts not earned are classified as deferred revenue, which are earned in subsequent periods over the remaining term of the policy.

Ceding Commissions and Other Revenue consists of commissions earned on policies written on behalf of third-party insurance companies with no exposure to the insured risk and certain fees earned in conjunction with underwriting policies. Other revenue also includes the interest income earned on the premium finance product offering.

Net Investment Income is earned on the portfolio of invested assets. Invested assets are primarily comprised of fixed maturity securities and may also include cash and cash equivalents and equity securities. The principal factors that influence net investment income are the size of the investment portfolio, the yield on that portfolio and expenses due to external investment managers.

Net Realized and Unrealized Gains (Losses) on investments are a function of the difference between the amount received by us on the sale of a security and the security’s cost-basis, as well as any “other-than-temporary” impairments and allowances for credit losses which are recognized in earnings. In addition, equity securities and certain other investments are carried at fair value with unrealized gains and losses included in this line.

Revenues - Three Months Ended March 31, 2023 compared to 2022

For the three months ended March 31, 2023, total revenues increased 30.4%, to $368.4 million, as compared to $282.5 million for the three months ended March 31, 2022. Earned premiums, net of $265.3 million increased $56.9 million, or 27.3%, driven by growth in specialty admitted and E&S insurance lines. Service and administrative fees of $92.0 million increased by 28.1% driven by growth in auto and consumer goods service contract revenues. Ceding commissions of $3.6 million increased by $1.1 million, or 43.7%, in line with growth in ceded premiums. Other revenues increased by $3.7 million, or 115.6%, driven by growth in premium finance product offerings and interest income on cash and cash equivalents.

For the three months ended March 31, 2023, 28.1% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the three months ended March 31, 2023, 76.3% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

For the three months ended March 31, 2023, net investment income was $5.1 million as compared to $3.2 million in the prior year period, primarily driven by growth in investments and the increase in yields. Net realized and unrealized losses were $4.6 million, an improvement of $2.0 million, as compared to net realized and unrealized losses of $6.6 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments carried at fair value.

The combination of unearned premiums and deferred revenues on Fortegra’s balance sheet grew to $2.1 billion, representing an increase of $319.6 million, or 18.3%, from March 31, 2022 to March 31, 2023 as a result of growth in gross written premiums and premium equivalents, primarily related to admitted and E&S insurance lines as well as auto service contracts.

Expenses

Underwriting and fee expenses under insurance and warranty service contracts include losses and loss adjustment expenses, member benefit claims and commissions expense.

Net Losses and Loss Adjustment Expenses represent actual insurance claims paid, changes in unpaid claim reserves, net of amounts ceded and the costs of administering claims for insurance lines. Incurred claims are impacted by loss frequency, which is a measure of the number of claims per unit of insured exposure, and loss severity, which is based on the average size of claims. Factors affecting loss frequency and loss severity include the volume of underwritten contracts, changes in claims reporting patterns, claims settlement patterns, judicial decisions, economic conditions, morbidity patterns and the attitudes of claimants towards settlements, and original pricing of the product for purposes of the loss ratio in relation to loss emergence over time. Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods.

Member Benefit Claims represent the costs of services and replacement devices incurred in warranty and motor club service contracts. Member benefit claims represent claims paid on behalf of contract holders directly to third-party providers for roadside assistance and for the repair or replacement of covered products. Claims can also be paid directly to contract holders as a reimbursement payment, provided supporting documentation of loss is submitted to the Company. Claims are recognized as expense when incurred.

Commission Expenses reflect commissions paid to retail agents, program administrators and managing general underwriters, net of ceding commissions received on business ceded under certain reinsurance contracts. Commission expenses are deferred and amortized to expense in proportion to the premium earned over the policy life. Commission expense is incurred on most product lines. The majority of commissions are retrospective commissions paid to agents, distributors and retailers selling the Company’s products, including credit insurance policies, warranty service contracts and motor club memberships. When claims increase, in most cases distribution partners bear the risk through a reduction in their retrospective commissions. Commission rates are, in many cases, set by state regulators, such as in credit and collateral protection programs and are also impacted by market conditions and the retention levels of distribution partners.

Operating and Other Expenses represent the general and administrative expenses of insurance operations including employee compensation and benefits and other expenses, including, technology costs, office rent, and professional services fees, such as legal, accounting and actuarial services.

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.

Depreciation Expense is primarily associated with furniture, fixtures and equipment. Amortization Expense is primarily associated with purchase accounting amortization including values associated with acquired customer relationships, trade names and internally developed software and technology.

Expenses - Three Months Ended March 31, 2023 compared to 2022

For the three months ended March 31, 2023, net losses and loss adjustment expenses were $114.3 million, member benefit claims were $27.3 million and commission expense was $146.5 million, as compared to $83.3 million, $21.2 million, and $117.4 million, respectively, for the three months ended March 31, 2022. The increase in net losses and loss adjustment expenses of $31.1 million, or 37.3%, was driven by growth in U.S. and European insurance lines and the shift in business mix toward commercial lines, which tend to have higher loss ratios and lower commission and expense ratios. In addition, the unfavorable prior year development of $0.3 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively, was a result of higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business. The increase in member benefit claims of $6.2 million, or 29.2%, was driven by growth in vehicle service contracts. Commission expense increased by $29.0 million, or 24.7%, generally in line with the growth in earned premiums, net and service and administrative fees.

For the three months ended March 31, 2023, employee compensation and benefits were $24.6 million and other expenses were $25.4 million, as compared to $22.0 million and $14.8 million, respectively, for the three months ended March 31, 2022. Employee compensation and benefits increased by $2.6 million, or 11.7%, driven by investments in human capital associated with growth in admitted, E&S and warranty lines. Other expenses increased by $10.5 million, or 71.0%, driven primarily by premium taxes, marketing expenses and professional fees associated with the acquisition of Premia.

For the three months ended March 31, 2023, interest expense was $6.1 million as compared to $4.8 million for the three months ended March 31, 2022. The increase in interest expense of $1.3 million, or 27.8%, was primarily driven by increased asset based debt for premium finance lines and the rise in short-term interest rates.

For the three months ended March 31, 2023, depreciation and amortization expense was $4.8 million, including $3.9 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto, ITC and Premia, as compared to $4.4 million, including $3.9 million of intangible amortization from purchase accounting in 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

Gross written premiums and premium equivalents represent total gross written premiums from insurance policies and warranty service contracts issued, as well as premium finance volumes during a reporting period. They represent the volume of insurance policies written or assumed and warranty service contracts issued during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. Gross written premiums is a volume measure commonly used in the insurance industry to compare sales performance by period. Premium equivalents are used to compare sales performance of warranty service and administrative contract volumes to gross written premiums. Investors also use these measures to compare sales growth among comparable companies, while management uses these measures to evaluate the relative performance of various sales channels.

The below table shows gross written premiums and premium equivalents by business mix for the three months ended March 31, 2023 and 2022.


($ in thousands)	Three Months Ended March 31,
	2023		2022
U.S. Insurance	$	502,974	$	407,020
U.S. Warranty Solutions	211,947		162,683
Europe	35,408		31,152
Total	$	750,329	$	600,855

Total gross written premiums and premium equivalents for the three months ended March 31, 2023 were $750.3 million, representing an increase of $149.5 million, or 24.9%. The increase was driven by a combination of factors including expanding Fortegra’s distribution partner network, growing specialty admitted and E&S insurance lines, and increasing penetration in the auto and consumer goods service contract sector.

For the three months ended March 31, 2023, U.S. Insurance increased by $96.0 million, or 23.6%, driven by growth in specialty commercial admitted and E&S insurance lines. For the three months ended March 31, 2023, U.S. Warranty Solutions increased by $49.3 million, or 30.3%, driven by growth in auto and roadside assistance service contracts. Europe increased by $4.3 million, or 13.7%, driven by growth in auto warranty lines.

The growth in gross written premiums and premium equivalents, combined with higher retention in select products as of March 31, 2023, has resulted in an increase of $319.6 million, or 18.3% in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to March 31, 2022. As of March 31, 2023, unearned premiums and deferred revenues were $2.1 billion, as compared to $1.7 billion as of March 31, 2022.

Combined Ratio, Underwriting Ratio and Expense Ratio

Combined ratio is an operating measure, which equals the sum of the underwriting ratio and the expense ratio. Underwriting ratio is the ratio of the GAAP line items net losses and loss adjustment expenses, member benefit claims and commission expense to earned premiums, net, service and administrative fees and ceding commissions and other revenue. Expense ratio is the ratio of the GAAP line items employee compensation and benefits and other underwriting, general and administrative expenses to earned premiums, net, service and administrative fees and ceding commissions and other revenue.

A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss. These ratios are commonly used in the insurance industry as a measure of underwriting profitability, excluding earnings on the insurance portfolio. Investors commonly use these measures to compare underwriting performance among companies separate from the performance of the investment portfolio. Management uses these measures to compare the profitability of various products underwritten as well as profitability among programs between various agents and sales channels.

The combined ratio was 91.3% for the three months ended March 31, 2023, which consisted of an underwriting ratio of 78.3% and an expense ratio of 13.0%, as compared to 90.5%, 77.6% and 12.9%, respectively, for the three months ended March 31, 2022. The combined ratio for the three month period increased by 0.8% as compared to 2022, driven by an increase in the underwriting ratio, related to changes in product mix toward lines with higher loss ratios and lower expense ratios.

Return on Average Equity

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)

In order to better explain to investors the underwriting performance of the Company’s programs and the respective retentions between the Company and its agents and reinsurance partners, we use the non-GAAP metrics – underwriting and fee revenues and underwriting and fee margin. Underwritten exposures are managed using both reinsurance (e.g., quota share and excess of loss) and retrospective commission agreements with Fortegra’s agents (e.g., commissions paid are adjusted based on the actual underlying losses incurred). Period-over-period comparisons of revenues and expenses are often impacted by the agents and their PORC’s choice as to their risk retention appetite, specifically earned premiums, net, service and administration fees, ceding commissions, and other revenue, all components of revenue, and losses and loss adjustment expenses, member benefit claims, and commissions paid to Fortegra’s agents and reinsurers. Generally, when losses are incurred, the risk which is retained by Fortegra’s agents and reinsurers is reflected in a reduction in commissions paid.

Underwriting and fee revenues represents total revenues excluding net investment income, net realized and unrealized gains (losses). See “—Non-GAAP Reconciliations” for a reconciliation of underwriting and fee revenues to total revenues in accordance with GAAP.

Underwriting and fee margin represents income before taxes excluding net investment income, net realized and unrealized gains (losses), employee compensation and benefits, other expenses, interest expense and depreciation and amortization. Fortegra’s products and services are delivered on a vertically integrated basis to its agents. As such, underwriting and fee margin exclude general and administrative expenses, interest income, depreciation and amortization and other corporate expenses, including income taxes, as these corporate expenses support the vertically integrated delivery model and are not specifically supporting any individual business line. See “—Non-GAAP Reconciliations” for a reconciliation of underwriting and fee margin to total revenues in accordance with GAAP.

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.


	Three Months Ended March 31,
($ in thousands)	Underwriting and Fee Revenues (1)				Underwriting and Fee Margin (1)
	2023		2022			2023		2022
U.S. Insurance	$	274,237	$	210,988		$	48,985	$	39,879
U.S. Warranty Solutions	79,128		61,049			25,974		19,441
Europe	14,577		13,968			4,858		4,816
Total	$	367,942	$	286,005		$	79,817	$	64,136

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Underwriting and fee revenues were $367.9 million for the three months ended March 31, 2023 as compared to $286.0 million for the three months ended March 31, 2022. Total underwriting and fee revenues increased $81.9 million, or 28.6%, driven by growth in all business lines. The increase in U.S. Insurance was $63.2 million, or 30.0%, driven by growth in specialty commercial insurance lines. The increase in U.S. Warranty Solutions was $18.1 million, or 29.6%, driven by growth in auto service contracts and premium finance offerings. Europe increased by $0.6 million, or 4.4%.

Underwriting and fee margin was $79.8 million for the three months ended March 31, 2023 as compared to $64.1 million for the three months ended March 31, 2022. Total underwriting and fee margin increased $15.7 million, or 24.4%, driven by growth in all product lines. U.S. Insurance grew by $9.1 million, or 22.8%, driven by revenue growth in admitted and E&S lines. U.S. Warranty Solutions increased by $6.5 million, or 33.6%, driven by growth in auto service contracts. Europe increased by 0.9%, driven by growth in auto and consumer goods service contracts.

Adjusted Net Income and Adjusted Return on Average Equity

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, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses), and intangibles amortization associated with purchase accounting.

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 both these measures for executive compensation and as a measure of the on-going performance of our operations. See “—Non-GAAP Reconciliations” for a reconciliation of adjusted net income and adjusted return on average equity to income before taxes and adjusted return on average equity.

For the three months ended March 31, 2023, adjusted net income and adjusted return on average equity were $22.9 million and 26.1%, respectively, as compared to $21.1 million and 28.2%, respectively, for the three months ended March 31, 2022. The improvement of adjusted net income was driven by the growth in underwriting and fee revenues and improved net investment income.

Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments

The insurance investment portfolio includes investments held in statutory insurance companies and in unregulated entities. The portfolios held in statutory insurance companies are subject to different regulatory considerations, including with respect to types of assets, concentration limits, affiliate transactions and the use of leverage. Fortegra’s investment strategy is designed to achieve attractive risk-adjusted returns across select asset classes, sectors and geographies while maintaining adequate liquidity to meet claims payment obligations. As such, volatility from realized and unrealized gains and losses may

impact period-over-period performance. Unrealized gains and losses on equity securities and loans held at fair value impact current period net income, while unrealized gains and losses on AFS securities impact AOCI. Net investment income includes interest and dividends, net of investment expenses, on invested assets. Net realized and unrealized gains and losses on investments are reported separately from net investment income.

For the three months ended March 31, 2023, net investment income was $5.1 million as compared to $3.2 million in the prior year period, driven by growth in investments and increasing yields. Net realized and unrealized losses were $4.6 million, compared to losses of $6.6 million in the prior year period, both driven by realized and unrealized losses on certain equity securities and other investments, including fixed income securities carried at fair value. Unrealized gains on AFS securities impacting OCI for the three months ended March 31, 2023 were $9.5 million, driven by the decline in yields (yields and bonds prices are inversely related) and corresponding impact to the fair value of investments in U.S. Treasuries, obligations of U.S. government agencies, corporate securities, obligations of state and political subdivisions, and asset-backed securities.

Tiptree Capital

Tiptree Capital consists of our Mortgage segment, which includes the operating results of Reliance, our mortgage business, and Tiptree Capital - Other, which consists of our other non-insurance operating businesses and investments. As of March 31, 2023, Tiptree Capital - Other includes our Invesque shares and maritime transportation operations.

Mortgage

Through our Mortgage operating subsidiary, Reliance, we originate, sell, securitize and service one-to-four-family, residential mortgage loans, comprised of conforming mortgage loans, Federal Housing Administration (“FHA”), Veterans Administration (“VA”), United States Department of Agriculture (“USDA”), and to a lesser extent, non-agency jumbo prime.

We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer and servicer for Ginnie Mae. We originate residential mortgage loans through our retail distribution channel (directly to consumers) in 39 states and the District of Columbia as of March 31, 2023.

The following tables present the Mortgage segment results for the following periods:

Results of Operations


($ in thousands)	Three Months Ended March 31,
	2023			2022
Revenues:
Net realized and unrealized gains (losses)	$	7,107		$	20,414
Other revenue	4,454			4,987
Total revenues	$	11,561		$	25,401
Expenses:
Employee compensation and benefits	$	8,220		$	14,425
Interest expense	384			326
Depreciation and amortization	172			214
Other expenses	5,350			6,170
Total expenses	$	14,126		$	21,135
Income (loss) before taxes	$	(2,565)		$	4,266

Key Performance Metrics:
Origination volumes	$	202,835		$	354,413
Gain on sale margins	4.8		%	4.3		%
Return on average equity	(14.5)		%	22.3		%








Adjusted net income (1)	$	(853)		$	(1,556)
Adjusted return on average equity (1)	(6.3)		%	(10.6)		%

(1) See “ — Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Revenues

Net Realized and Unrealized Gains (Losses) include gains on sale of mortgage loans and the fair value adjustment in mortgage servicing rights. Gains on the sale of mortgage loans represent the difference between the selling price and carrying value of loans sold and are recognized upon settlement. Such gains also include the changes in fair value of loans held for sale and loan-related hedges and derivatives. We transfer the risk of loss or default to the loan purchaser, however, in some cases we are required to indemnify purchasers for losses related to non-compliance with borrowers’ creditworthiness and collateral requirements. Because of this, we recognize gains on sale net of required indemnification and premium recapture reserves. The fair value adjustment on mortgage servicing rights represents fair value adjustments considering estimated prepayments and other factors associated with changes in interest rates, plus actual run-off in the servicing portfolio. We report these adjustments separate from servicing income and servicing expense.

Other Revenue includes loan origination fees, interest income, and mortgage servicing income. Loan origination fees are earned as mortgage loans are funded. Servicing fees are earned over the life of the loan. Interest income includes interest earned on loans held for sale and interest income on bank balances and short-term investments.

Revenues - 2023 compared to 2022

For the three months ended March 31, 2023, $202.8 million of loans were funded, compared to $354.4 million for 2022, a decrease of $151.6 million, or 42.8%, driven by increase in mortgage interest rates compared to 2022. Gain on sale margins increased to 4.8% for the three months ended March 31, 2023, up approximately 50 basis points from 4.3% for the three months ended March 31, 2022.

Net realized and unrealized gains for the three months ended March 31, 2023 were $7.1 million, compared to $20.4 million for 2022, a decrease of $13.3 million or 65.2%. The primary driver of decreased gain on sale revenues was the decline in volumes and negative fair value adjustment in mortgage servicing rights of $1.4 million compared to a positive fair value adjustment of $6.3 million in 2022.

Other revenue for the three months ended March 31, 2023 was $4.5 million, compared to $5.0 million for 2022, a decrease of $0.5 million, or 10.7%. The decrease for the three month period was driven primarily by lower loan origination fees, partially offset by higher mortgage servicing fees. As of March 31, 2023, the mortgage servicing asset was $39.9 million, a decrease from $41.4 million as of December 31, 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.

Interest Expense represents borrowing costs under warehouse and other credit facilities used primarily to fund loan originations. Amortization of deferred financing costs, including commitment fees, is included in interest expense.

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, employee compensation and benefits were $8.2 million, compared to $14.4 million in 2022, a decrease of $6.2 million or 43.0%. The decrease was driven primarily by reduced commissions on lower origination volumes.

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

The loss before taxes for the three months ended March 31, 2023 was $2.6 million, compared to income before taxes of $4.3 million in 2022. The decrease was driven by a decline in volumes and negative fair value adjustments on the mortgage servicing rights asset as compared to 2022, partially offset by higher mortgage servicing fees attributable to the larger servicing portfolio.

Tiptree Capital - Other

The following tables present a summary of Tiptree Capital - Other results for the following periods:

Results of Operations


	Three Months Ended March 31,
($ in thousands)	Total revenue				Income (loss) before taxes
	2023		2022			2023		2022
Senior living (Invesque)	$	(1,405)	$	(8,851)		$	(1,405)	$	(8,851)
Maritime transportation (1)	360		8,862			190		2,653
Other (2)	2,665		16,962			2,657		(1,453)
Total	$	1,620	$	16,973		$	1,442	$	(7,651)

(1) Includes $0.2 million and $6.2 million of expenses related to our Maritime transportation operations for the three months ended March 31, 2023 and 2022, respectively.

(2) Includes our formerly held for sale mortgage originator (Luxury), asset management, and certain intercompany elimination transactions.

Revenues

Tiptree Capital - Other earns revenues from the following sources: net interest income; revenues on our formerly held for sale mortgage originator (Luxury); realized and unrealized gains and losses on the Company’s investment holdings (primarily Invesque); and charter revenues from vessels within the Company’s maritime transportation operations. Subsequent to the sale of our dry bulk and tanker vessels, operations include two smaller vessels and other ancillary assets.

Revenues for the three months ended March 31, 2023 were $1.6 million compared to $17.0 million for 2022 with the decline primarily driven by the deconsolidation of Luxury effective July 1, 2022, sale of five vessels, partially offset by investment gains on securities in the Company’s investment holdings and decreased investment losses on Invesque in 2023 compared to 2022.

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)


($ in thousands)	Three Months Ended March 31,
	2023		2022
Senior living (Invesque)	$	—	$	—
Maritime transportation	169		2,480
Other	1,244		48
Total	$	1,413	$	2,528

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Adjusted net income decreased to $1.4 million for the three months ended March 31, 2023 compared to $2.5 million in 2022. The decrease was driven from the sale of five vessels, partially offset by interest income on cash and cash equivalents recorded in other income.

Corporate

The following table presents a summary of corporate results for the following periods:

Results of Operations


($ in thousands)	Three Months Ended March 31,
		2023		2022
Employee compensation and benefits		$	1,955	$	2,368
Employee incentive compensation expense		5,834		4,663
Interest expense		—		2,243
Depreciation and amortization		251		198
Other expenses		2,109		2,777
Total expenses		$	10,149	$	12,249

Corporate expenses include expenses of the holding company for interest expense, employee compensation and benefits, and public company and other expenses. Corporate employee compensation and benefits includes the expense of management, legal and accounting staff. Other expenses primarily consisted of audit and professional fees, insurance, office rent and other related expenses.

Employee compensation and benefits, including incentive compensation expense, were $7.8 million for the three months ended March 31, 2023, compared to $7.0 million for 2022, driven by an increase in accrued bonus expense. Of the incentive compensation expense in the three months ended March 31, 2023, $2.3 million was stock-based compensation expense compared to $3.8 million in 2022. As of March 31, 2023, the Company had no outstanding borrowings at the holding company and therefore incurred no interest expense for the three months ended March 31, 2023 compared to $2.2 million in 2022. Other expenses of $2.1 million decreased by $0.7 million from the three months ended March 31, 2022, primarily driven by decreased consulting and professional fees.

Provision for Income Taxes

The total income tax expense of $5.0 million for the three months ended March 31, 2023 and a benefit of $0.1 million for the three months ended March 31, 2022 is reflected as a component of net income (loss). For the three months ended March 31, 2023, the Company’s effective tax rate was equal to 61.5% . The effective rate for the three months ended March 31, 2023 was significantly higher than the U.S. statutory income tax rate of 21.0%, primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra. For the three months ended March 31, 2022, the Company’s effective tax rate was equal to 9.0%. The effective rate for the three months ended Marc h 31, 2022 was lower than the U.S. statutory income tax rate of 21.0%, primarily due to the impact of the effect of foreign operations and discrete items, partially offset by state taxes.

Tiptree owns less than 80% of Fortegra and is required to record deferred taxes on the outside basis on its investment in Fortegra. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell all of its Fortegra stock at its carrying value on Tiptree’s balance sheet. As of March 31, 2023, this deferred tax liability relating to Fortegra was $44.1 million, which was an increase of $4.1 million from the year ended December 31, 2022, of which $1.8 million was recorded in OCI and $2.3 million was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rate for the quarter ended March 31, 2023 was 32.9%.

On August 16, 2022, the U.S. government enacted Public Law no. 117-169, commonly referred to as the Inflation Reduction Act, which, among other things, establishes a corporate minimum tax on book earnings and an excise tax on stock buybacks. It is not expected that this legislation will have a material financial impact on the Company or its operations.

Balance Sheet Information

Tiptree’s total assets were $4,308.0 million as of March 31, 2023, compared to $4,039.6 million as of December 31, 2022. The $268.4 million increase in assets is primarily attributable to the growth in the Insurance segment.

Total stockholders’ equity was $541.6 million as of March 31, 2023, compared to $533.6 million as of December 31, 2022, with the increase primarily driven by other comprehensive income on AFS securities for the three months ended March 31, 2023. As of March 31, 2023, there were 36,734,948 shares of common stock outstanding as compared to 36,385,299 shares

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:


	As of March 31, 2023
			Tiptree Capital
($ in thousands)	Insurance		Mortgage		Other		Corporate		Total
Total assets	3,982,362		$	167,038	$	158,398	$	160	$	4,307,958

Corporate debt	$	235,000	$	—	$	—	$	—	$	235,000
Asset based debt	64,818		56,273		—		—		121,091

Tiptree Inc. stockholders’ equity (1)	$	224,286	$	52,793	$	153,606	$	(30,038)	$	400,647
Non-controlling interests:
Fortegra preferred interests	77,679		—		—		—		77,679
Common interests	63,231		—		—		—		63,231
Total stockholders’ equity	$	365,196	$	52,793	$	153,606	$	(30,038)	$	541,557

(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

In addition to GAAP results, management uses the non-GAAP financial measures underwriting and fee revenues and underwriting and fee margin in order to better explain to investors the underwriting performance and the respective retentions between the Company and its agents and reinsurance partners. We also use the non-GAAP financial measures adjusted net income, adjusted return on average equity and Adjusted EBITDA as measures of operating performance and as part of our resource and capital allocation process, to assess comparative returns on invested capital. Adjusted EBITDA is also used in determining incentive compensation for the Company’s executive officers. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and to compare relative performance among comparable companies. Adjusted net income, adjusted return on average equity, Adjusted EBITDA, underwriting and fee revenues and underwriting and fee margin are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for earned premiums, net income or any other measure derived in accordance with GAAP.

Underwriting and Fee Revenues and Underwriting and Fee Margin — Non-GAAP (Insurance only)

We generally manage exposure to underwriting risks written by using both reinsurance (e.g., quota share and excess of loss) and retrospective commission agreements with our partners (e.g., commissions paid are adjusted based on the actual underlying losses incurred), which mitigates Fortegra’s risk. Period-over-period comparisons of revenues and expenses are often impacted by the PORCs and distribution partners’ choice as to whether to retain risk, specifically service and administration fees and ceding commissions, both components of revenue, and policy and contract benefits and commissions paid to our partners and reinsurers. Generally, when losses are incurred, the risk which is retained by our partners and reinsurers is reflected in a reduction in commissions paid. In order to better explain to investors the underwriting performance and the respective retentions between the Company and its agents and reinsurance partners, we use the non-GAAP metrics underwriting and fee revenues and underwriting and fee margin.

Underwriting and Fee Revenues — Non-GAAP — We define underwriting and fee revenues as total revenues from the Insurance segment excluding net investment income and net realized and unrealized gains (losses). Underwriting and fee revenues represents revenues generated by underwriting and fee-based operations and allows us to evaluate the Company’s underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting and fee revenues should not be viewed as a substitute for total revenues calculated in accordance with GAAP, and other companies may define underwriting and fee revenues differently.


($ in thousands)	Three Months Ended March 31,
	2023		2022
Total revenues	$	368,444	$	282,529
Less: Net investment income	(5,109)		(3,167)
Less: Net realized and unrealized gains (losses)	4,607		6,643
Underwriting and fee revenues	$	367,942	$	286,005

Underwriting and Fee Margin — Non-GAAP — We define underwriting and fee margin as income before taxes from the Insurance segment, excluding net investment income, net realized and unrealized gains (losses), employee compensation and benefits, other expenses, interest expense and depreciation and amortization. Underwriting and fee margin represents the underwriting performance of our underwriting and fee-based lines. As such, underwriting and fee margin excludes general administrative expenses, interest expense, depreciation and amortization and other corporate expenses as those expenses support the vertically integrated business model and not any individual component of the Company’s business mix. We use this metric as we believe it gives our management and other users of our financial information useful insight into the specific performance of our underlying business mix. Underwriting and fee margin should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define underwriting and fee margin differently.


($ in thousands)	Three Months Ended March 31,
	2023		2022
Income (loss) before income taxes	$	19,445	$	14,682
Less: Net investment income	(5,109)		(3,167)
Less: Net realized and unrealized gains (losses)	4,607		6,643
Plus: Depreciation and amortization	4,811		4,354
Plus: Interest expense	6,081		4,759
Plus: Employee compensation and benefits	24,613		22,026
Plus: Other expenses	25,369		14,839
Underwriting and fee margin	$	79,817	$	64,136

Adjusted Net Income — Non-GAAP

We define 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 present adjustments for amortization associated with acquired intangible assets. The intangible assets were recorded as part of purchase accounting in connection with Tiptree’s acquisition of Fortegra Financial in 2014, Defend in 2019, and Smart AutoCare and Sky Auto in 2020. The intangible assets acquired contribute to overall revenue generation, and the respective purchase accounting adjustments will continue to occur in future periods until such intangible assets are fully amortized in accordance with the respective amortization periods required by GAAP.

Adjusted Return on Average Equity — Non-GAAP

We define adjusted return on average equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “—Adjusted Net Income—Non-GAAP” above. 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 March 31, 2023
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	19,445			(2,565)			1,442			(10,149)		$	8,173
Less: Income tax (benefit) expense	(4,747)			613			(263)			(625)		(5,022)
Less: Net realized and unrealized gains (losses)	4,607			1,443			323			—		6,373
Plus: Intangibles amortization (1)	3,894			—			—			—		3,894
Plus: Stock-based compensation expense	33			—			—			2,282		2,315
Plus: Non-recurring expenses	2,125			—			—			—		2,125
Plus: Non-cash fair value adjustments	(118)			—			—			—		(118)
Less: Tax on adjustments (2)	(2,300)			(344)			(89)			2,277		(456)
Adjusted net income	$	22,939		$	(853)		$	1,413		$	(6,215)	$	17,284

Adjusted net income	$	22,939		$	(853)		$	1,413		$	(6,215)	$	17,284
Average stockholders’ equity	$	351,953		$	53,768		$	114,219		$	17,626	$	537,566
Adjusted return on average equity	26.1		%	(6.3)		%	4.9		%	NM%		12.9		%



	Three Months Ended March 31, 2022
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	14,682		$	4,266		$	(7,651)		$	(12,249)	$	(952)
Less: Income tax (benefit) expense	(3,664)			(978)			1,794			2,934		86
Less: Net realized and unrealized gains (losses)	6,643			(6,314)			8,851			—		9,180
Plus: Intangibles amortization (1)	3,946			—			—			—		3,946
Plus: Stock-based compensation expense	2,319			—			—			3,839		6,158
Plus: Non-recurring expenses	23			—			133			—		156
Plus: Non-cash fair value adjustments	—			—			1,514			—		1,514
Less: Tax on adjustments (2)	(2,825)			1,470			(2,113)			(1,168)		(4,636)
Adjusted net income	$	21,124		$	(1,556)		$	2,528		$	(6,644)	$	15,452

Adjusted net income	$	21,124		$	(1,556)		$	2,528		$	(6,644)	$	15,452
Average stockholders’ equity	$	299,113		$	58,962		$	117,744		$	(84,152)	$	391,667
Adjusted return on average equity	28.2		%	(10.6)		%	8.6		%	NM%		15.8		%

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

(1) Specifically associated with acquisition purchase accounting. See Note (8) Goodwill and Intangible Assets, net.

(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 months ended March 31, 2023, included in the adjustment is an add-back of $2.3 million, respectively, related to deferred tax expense from the WP Transaction.

Adjusted EBITDA - Non-GAAP

The Company defines Adjusted EBITDA as GAAP net income of the Company plus corporate interest expense, plus income taxes, plus depreciation and amortization expense, less the effects of purchase accounting, plus non-cash fair value adjustments, plus significant non-recurring expenses, and plus unrealized gains (losses) on available for sale securities reported in other comprehensive income. Adjusted EBITDA is used to determine incentive compensation for the Company’s executive officers. Adjusted EBITDA is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income.


($ in thousands)	Three Months Ended March 31,
		2023		2022
Net income (loss) attributable to common stockholders		$	(1,062)	$	(960)
Add: net (loss) income attributable to non-controlling interests		4,213		94


Corporate debt related interest expense (1)		4,430		5,877
Consolidated provision (benefit) for income taxes		5,022		(86)
Depreciation and amortization		5,253		6,156
Non-cash fair value adjustments (2)		(137)		124
Non-recurring expenses (3)		2,125		156
Other comprehensive income (loss), pre-tax		12,394		(26,266)

Third party non-controlling interests (4)		(8,876)		—
Adjusted EBITDA		$	23,362	$	(14,905)



(1)			Corporate debt interest expense includes interest expense from secured corporate credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt is not added-back for Adjusted EBITDA.
(2)			For maritime transportation operations, depreciation and amortization is deducted as a reduction in the value of the vessel. From insurance operations, changes in the fair value of the Fortegra Additional Warrant liability is added back.
(3)			Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs.
(4)			Adjusts for the comprehensive income (loss) (including EBITDA and AOCI impacts) for the non-controlling interests of The Fortegra Group.

Book Value per share - Non-GAAP

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 March 31,
	2023		2022
Total stockholders’ equity	$	541,557	$	383,153
Less: Non-controlling interests	140,910		16,520
Total stockholders’ equity, net of non-controlling interests	$	400,647	$	366,633

Total common shares outstanding	36,735		34,878

Book value per share	$	10.91	$	10.51

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are unrestricted cash, cash equivalents and other liquid investments and distributions from operating subsidiaries, including income from our investment portfolio and sales of assets and investments. We intend to use our cash resources to continue to fund our operations and grow our businesses. We may seek additional sources of cash to fund acquisitions or investments. These additional sources of cash may take the form of debt or equity and may be at the parent, subsidiary or asset level. We are a holding company and our liquidity needs are primarily for compensation, professional fees, office rent and insurance costs.

Our subsidiaries’ ability to generate sufficient net income and cash flows to make cash distributions will be subject to numerous business and other factors, including restrictions contained in agreements for the strategic investment by Warburg in Fortegra, our subsidiaries’ financing agreements, regulatory restrictions, availability of sufficient funds at such subsidiaries, general economic and business conditions, tax considerations, strategic plans, financial results and other factors such as target capital ratios and ratio levels anticipated by rating agencies to maintain or improve current ratings. We expect our cash and cash equivalents and distributions from operating subsidiaries, our subsidiaries’ access to financing, and sales of investments to be adequate to fund our operations for at least the next 12 months, as well as the long term.

As of March 31, 2023, cash and cash equivalents, excluding restricted cash, were $412.0 million, compared to $538.1 million at December 31, 2022, a decrease of $126.1 million driven by an increase in investments within Fortegra, primarily U.S. Treasury securities and obligations of U.S. government authorities and agencies.

Our mortgage business relies on short term uncommitted sources of financing as a part of their normal course of operations. To date, we have been able to obtain and renew uncommitted warehouse credit facilities. If we were not able to obtain financing, then we may need to draw on other sources of liquidity to fund our mortgage business. See Note (10) Debt, net in the notes to condensed consolidated financial statements, for additional information regarding our mortgage warehouse borrowings.

We believe that cash flow from operations will provide sufficient capital to continue to grow the business and fund interest on the outstanding debt, capital expenditures and other general corporate needs over the next several years. As we continue to expand our business, including by any acquisitions we may make, we may, in the future, require additional working capital for increased costs.

For purposes of determining enterprise value and Adjusted EBITDA, we consider corporate credit agreements and preferred trust securities, which we refer to as corporate debt, as corporate financing and associated interest expense is added back. The below table outlines this amount by debt outstanding and interest expense at the insurance company and corporate level.

Corporate Debt


($ in thousands)	Corporate Debt Outstanding as of March 31,				Interest Expense for the three months ended March 31,
	2023		2022			2023		2022
Insurance	$	235,000	$	160,000		$	4,430	$	3,446
Corporate	—		112,500			—		2,430
Total	$	235,000	$	272,500		$	4,430	$	5,876

The balance of the corporate credit facility was repaid during June 2022 as part of the WP Transaction. See Note (10) Debt, net in the notes to condensed consolidated financial statements for details for prior periods.

On October 21, 2022, Fortegra entered into a Second Amended and Restated Credit Agreement by and among Fortegra Financial, and its subsidiary, LOTS Intermediate Co., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s subsidiaries, as guarantors, and Fifth Third Bank, National Association, as the administrative agent and issuing lender (the “Fortegra Credit Agreement”). The Fortegra Credit Agreement provides for a $200 million revolving credit

facility, all of which is available for the issuance of letters of credit, with a sub-limit of $25 million for swing loans and matures on October 21, 2027. The increase in corporate debt as of March 31, 2023 was related to the $75 million drawn on Fortegra’s revolving credit facility which was used for the acquisition of Premia and general corporate purposes.

Consolidated Comparison of Cash Flows


($ in thousands)	Three Months Ended March 31,
Total cash provided by (used in):	2023		2022
Net cash (used in) provided by:
Operating activities	$	43,046	$	149,067
Investing activities	(247,523)		(18,732)
Financing activities	78,302		(124,703)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(126,175)	$	5,632

Operating Activities

Cash provided by operating activities was $43.0 million for the three months ended March 31, 2023. In 2023, the primary sources of cash from operating activities included growth in insurance premiums written resulting in increases in unearned premiums, policy liabilities and unpaid claims, deferred revenues and reinsurance payables, which were partially offset by increases in deferred acquisition costs and reinsurance receivables.

Cash provided by operating activities was $149.1 million for the three months ended March 31, 2022. In 2022, the primary sources of cash from operating activities included proceeds from mortgage loans outpacing originations and growth in insurance unearned premiums and deferred revenues, partially offset by increases in deferred acquisition costs and reinsurance receivables.

Investing Activities

Cash used in investing activities was $247.5 million for the three months ended March 31, 2023. In 2023, the primary uses of cash were the purchases of investments outpacing the proceeds from the sale of investments, as well as the acquisition of Premia.

Cash used in investing activities was $18.7 million for the three months ended March 31, 2022. In 2022, the primary use of cash from investing activities was the purchase of investments outpacing proceeds from the sales of investments in our insurance investment portfolio, and the issuance of notes receivable outpacing proceeds.

Financing Activities

Cash provided by financing activities was $78.3 million for the three months ended March 31, 2023. In 2023, the cash provided was primarily proceeds from corporate borrowings and mortgage warehouse facilities which exceeded repayments, partially offset by non-controlling interests distributions and the payment of dividends.

Cash provided by financing activities was $124.7 million for the three months ended March 31, 2022. In 2022, principal repayments on mortgage warehouse facilities exceeded proceeds from borrowings.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ materially from those estimates. There have been no material changes to the critical accounting policies and estimates as discussed in Part II, Item 7A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Recently Adopted and Issued Accounting Standards

For a discussion of recently adopted and issued accounting standards, see the section “ Recent Accounting Standards” in Note (2) Summary of Significant Accounting Policies of the notes to the accompanying condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 described our Quantitative and Qualitative Disclosures About Market Risk. There were no material changes to the assumptions or risks during the three months ended March 31, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act) as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that material information is recorded, processed, summarized and reported accurately and on a timely basis. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d- 15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Our legal proceedings are discussed under the heading “Litigation” in Note (20) Commitments and Contingencies in the Notes to the condensed consolidated financial statements in this report.

Item 1A. Risk Factors

For information regarding factors that could affect our Company, results of operations and financial condition, see the risk factors discussed under Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes in those risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Share repurchase activity for three months ended March 31, 2023 was as follows:


Period	Purchaser	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value ($ in thousands of Shares That May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2023 to January 31, 2023	Tiptree Inc.	—	$	—	—
February 1, 2023 to February 28, 2023	Tiptree Inc.	—	$	—	—
March 1, 2023 to March 31, 2023	Tiptree Inc.	—	$	—	—
	Total	—	$	—	—	$	11,945

(1) On November 2, 2020, the Board of Directors of Tiptree authorized Tiptree’s Executive Committee to repurchase up to $20 million of its outstanding common stock in the aggregate from time to time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits, Financial Statement Schedules


The following documents are filed as a part of this Form 10-Q:

Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022			F- 3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022			F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022			F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended March 31, 2023 and 2022			F- 6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022			F- 7
Notes to Condensed Consolidated Financial Statements			F- 9

Exhibits:
The Exhibits listed in the Index of Exhibits, which appears immediately following the signature page, is incorporated herein by reference and is filed as part of this Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Tiptree Inc. has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Tiptree Inc.

Date:

May 3, 2023

By:/s/ Michael Barnes

Michael Barnes

Executive Chairman

Date:

May 3, 2023

By:/s/ Jonathan Ilany

Jonathan Ilany

Chief Executive Officer

Date:

May 3, 2023

By:/s/ Scott McKinney

Scott McKinney

Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

EXHIBIT INDEX


Exhibit No.			Description
10.1			Second Amendment to Credit Agreement, dated as of January 31, 2023, by and among South Bay Acceptance Corporation, South Bay Funding LLC, the lenders from time to time party thereto and Fifth Third Bank, National Association as the administrative agent (previously filed as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K (File No. 001-33549), filed on March 8, 2023 and herein incorporated by reference).
31.1			Certification of Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.3			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1			Certification of Executive Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.3			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS			XBRL Instance Document*
101.SCH			XBRL Taxonomy Extension Schema Document*
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB			XBRL Taxonomy Extension Label Linkbase Document*
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document*
104			Cover page from Tiptree’s Form 10-Q for the quarter ended March 31, 2023 formatted in iXBRL (included in Exhibit 101).

* Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 and (vi) the Notes to the Condensed Consolidated Financial Statements.

** Denotes a management contract or compensatory plan, contract or arrangement.

TABLE OF CONTENTS

Part I. Financial Information Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits, Financial Statement Schedules

Exhibits

10.1 Second Amendment to Credit Agreement, dated as of January 31, 2023, by and among South Bay Acceptance Corporation, South Bay Funding LLC, the lenders from time to time party thereto and Fifth Third Bank, National Association as the administrative agent (previously filed as Exhibit 10.11 to the Registrants Annual Report on Form 10-K (File No. 001-33549), filed on March 8, 2023 and herein incorporated by reference). 31.1 Certification of Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.3 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certification of Executive Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.2 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.3 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

TIPT 10-Q Quarter ended March 31, 2023

Exhibits