Tiptree Reports 2016 Results

  • Revenues of $567.2 million for 2016, up 29.4% from $438.5 million
    for 2015.
  • Income from continuing operations of $32.3 million for 2016, an
    increase of $46.1 million from 2015.
  • Net income attributable to Class A stockholders of $25.3 million
    for 2016, an increase of $19.5 million from 2015.
  • Adjusted EBITDA1 of $78.9 million for
    2016, up 35.1% from $58.4 million for 2015.
  • Book value per share, as exchanged1 of
    $10.14, up 13.9% compared to $8.90
    as of December 31, 2015.
  • Declared dividend of $0.03 per share to Class A stockholders of
    record on March 27, 2017 with a payment date of April 3, 2017.

NEW YORK–(BUSINESS WIRE)–Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), which operates
in the specialty insurance, asset management, senior living and
specialty finance industries, today announced its financial results for
the year ended December 31, 2016.

Summary Consolidated Statements of Operations (2)

($ in millions, except for per share information)         Year Ended December 31,

GAAP:

2016   2015
Total revenues $ 567.2 $ 438.5
Income (loss) from continuing operations $ 32.3 $ (13.8 )
Net income attributable to Class A common stockholders $ 25.3 $ 5.8
Diluted earnings per share $ 0.78 $ 0.17
Cash dividends paid per common share $ 0.10 $ 0.10

Non-GAAP: (1)

Adjusted EBITDA $ 78.9 $ 58.4
Book Value per share, as exchanged         $ 10.14     $ 8.90  
(1)     For a reconciliation to U.S. GAAP, see “Non-GAAP Financial Measures”
below.
(2)

Revenues of $40.5 million, net income of $7.0 million and gain on
sale of $15.6 million attributable to PFG for the year ended
December 31, 2015 are included in Discontinued operations, net.

 

Earnings Conference Call

Tiptree will host a conference call on Tuesday, March 14, 2017 at 10:00
a.m. Eastern Time to discuss its full year 2016 financial results. A
copy of our investor presentation, to be used during the conference
call, as well as this press release, will be available in the Investor
Relations section of the Company’s website, located at www.tiptreeinc.com.

The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com.
To listen to a live broadcast, go to the site at least 15 minutes prior
to the scheduled start time in order to register, download and install
any necessary audio software. To participate in the telephone conference
call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471
(international). Please dial in at least five minutes prior to the start
time.

A replay of the call will be available from Tuesday, March 14, 2017 at
1:00 p.m. Eastern Time, until midnight Eastern on Tuesday, March 21,
2017. To listen to the replay, please dial 1-844-512-2921 (domestic) or
1-412-317-6671 (international), Passcode: 13656479.

2016 Financial Overview

Consolidated Highlights

  • Specialty insurance operations produced gross written premiums of $708
    million, up 3.3%, while maintaining strong underwriting performance.
    The investment portfolio grew to $352.3 million of net investments(1)
    and yielded a 8.0% average annualized return(1).
  • Our asset management operations contributed $25.3 million of pre-tax
    profits, up from a loss of $6.8 million in 2015, with fee-earning AUM
    remaining steady at $1.9 billion.
  • Senior living operations completed five acquisitions for $106 million,
    bringing total aggregate purchase price of Care’s portfolio to $338.4
    million. Revenues were $60.7 million in 2016, up 31.7% from prior year
    while expanding margins at existing properties.
  • Mortgage originations in the specialty finance sector were $1.9
    billion, a 49.1% increase from 2015.
  • The Company returned $47.8 million to shareholders through $43.8
    million of share buy-backs and $4.0 million of dividends.
(1)     For a reconciliation to U.S. GAAP, see “Non-GAAP Financial Measures”
below.
 

Consolidated Results

For the year ended December 31, 2016, the Company reported revenues of
$567.2 million, an increase of $128.7 million or 29.4% from the year
ended December 31, 2015. The primary drivers of the increase in revenues
were improvements in earned premiums, service and administrative fees
and investment income in our specialty insurance segment, increases in
management incentive fees and returns on associated investments in our
asset management segment, improvement in rental income attributable to
acquisitions of senior housing properties and increased mortgage volume.

For the year ended December 31, 2016, income from continuing operations
was $32.3 million compared to a loss of $13.8 million in 2015. The key
drivers of the $46.2 million increase were improved profitability in our
specialty insurance segment driven by higher revenues and investment
income, increased profits from our asset management segment as a result
of incentive fees and CLO subordinated note returns, increased rental
income in our senior living operations, and increases in mortgage volume
and margins due to improving market conditions. This increased income
was partially offset by higher corporate expenses from increased
performance related incentive compensation and costs associated with our
effort to improve our controls and financial reporting infrastructure.
Additionally, a tax benefit of $4.0 million was recognized in the first
quarter 2016, which was driven by the tax reorganization effective
January 1, 2016. A discussion of the changes in revenues, expenses and
net income is presented below and in more detail in our segment analysis.

For the year ended December 31, 2016 net income available to Class A
common shareholders was $25.3 million, an increase of $19.5 million, or
338.1% from the prior year period. The key drivers of net income
available to Class A common shareholders were the same factors which
impacted the positive year-over-year change in income from continuing
operations, and which were partially offset by the loss of the $22.6
million of earnings from discontinued operations recorded in the year
ended December 31, 2015, which included the one-time net gain on the
sale of PFG of $15.6 million.

Adjusted EBITDA – Non-GAAP

Management uses Adjusted EBITDA and book value per share, as exchanged
as measurements of operating performance which are non-GAAP measures.
Management believes that use of Adjusted EBITDA provides supplemental
information useful to investors as it is frequently used by the
financial community to analyze financial performance, and to analyze a
company’s ability to service its debt and to facilitate comparison among
companies. Adjusted EBITDA is also used in determining 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. Book value per share, as exchanged assumes full exchange of the
limited partners units of TFP for Tiptree Class A common stock.
Management believes that use of this financial measure provides
supplemental information useful to investors as it is frequently used by
the financial community to analyze company growth on a relative per
share basis.

Total Adjusted EBITDA for the year ended December 31, 2016 was $78.9
million compared to $58.4 million for 2015, an increase of $20.5 million
or 35.1%. The key drivers of the change in Adjusted EBITDA were the same
as those which impacted our income from continuing operations, and which
were partially offset by the loss of $32.5 million of Adjusted EBITDA in
the year ended December 31, 2015 related to discontinued operations. See
“Non-GAAP Reconciliations” below for a reconciliation to GAAP net income.

Results by Segment

      Year Ended December 31,
($ in thousands, unaudited) Revenues     Pre-tax income (loss)
2016   2015 2016   2015
Specialty insurance $ 394,170 $ 330,888 $ 46,804 $ 32,012
Asset management 13,114 6,770 25,264 (6,753 )
Senior living 60,731 46,128 (5,824 ) (9,535 )
Specialty finance 95,431 54,999 8,170 6,265
Corporate and other 3,708   (326 ) (31,098 ) (34,428 )
Total $ 567,154   $ 438,459   $ 43,316   $ (12,439 )
 

Effective December 31, 2016, Tiptree realigned the principal investments
formerly reported in the corporate and other segment into their new
reportable segments to align with the Company’s operating strategy. The
table above reflects the credit and equity investments contributed to
our insurance subsidiary in the specialty insurance segment and the CLO
subordinated notes and related warehouse income in the asset management
segment for the years ended December 31, 2016 and 2015.

Adjusted EBITDA by Segment – Non-GAAP (1)

($ in thousands, unaudited)         Year Ended December 31,
2016   2015
Specialty insurance $ 60,526 $ 43,349
Asset management 25,264 (6,753 )
Senior living 10,469 6,590
Specialty finance 10,513 5,895
Corporate and other (27,856 ) (23,164 )
Adjusted EBITDA from Continuing Operations $ 78,916 $ 25,917
Discontinued Operations   32,502  
Total Adjusted EBITDA $ 78,916   $ 58,419  
(1)     For further information relating to the Company’s segment Adjusted
EBITDA, including a reconciliation to GAAP pre-tax income,
see“—Non-GAAP Reconciliations” below.
 

About Tiptree

Tiptree Inc. (NASDAQ:TIPT) is focused on enhancing shareholder value by
generating consistent growth and profitability at its operating
companies. The Company’s consolidated subsidiaries currently operate in
the following businesses – specialty insurance, asset management, senior
living and specialty finance. For more information about Tiptree visit www.tiptreeinc.com.

Forward-Looking Statements

This release contains “forward-looking statements” which involve risks,
uncertainties and contingencies, many of which are beyond the Company’s
control, which may cause actual results, performance, or achievements to
differ materially from anticipated results, performance, or
achievements. All statements contained in this release that are not
clearly historical in nature are forward-looking, and the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,”
“plan,” “project,” “should,” “target,” “will,” or similar expressions
are intended to identify forward-looking statements. Such
forward-looking statements include, but are not limited to, statements
about the Company’s plans, objectives, expectations and intentions. The
forward-looking statements are not guarantees of future performance and
are subject to risks, uncertainties and other factors, many of which are
beyond our control, are difficult to predict and could cause actual
results to differ materially from those expressed or forecast in the
forward-looking statements. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result
of various factors, including, but not limited to those described in the
section entitled “Risk Factors” in the Company’s Annual Report on Form
10-K, and as described in the Company’s other filings with the
Securities and Exchange Commission. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
to the date of this release. The factors described therein are not
necessarily all of the important factors that could cause actual results
or developments to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors also
could affect our forward-looking statements. Consequently, our actual
performance could be materially different from the results described or
anticipated by our forward-looking statements. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. Except as required by the federal securities
laws, we undertake no obligation to update any forward-looking
statements.

 

Tiptree Inc.

Consolidated Balance Sheet

      As of December 31,
2016   2015
Assets
Investments:
Available for sale securities, at fair value $ 146,171 $ 184,703
Loans, at fair value 373,089 394,395
Loans at amortized cost, net 113,838 52,531
Equity securities, trading, at fair value 48,612 12,727
Real estate, net 309,423 206,158
Other investments 25,467   31,524  
Total investments 1,016,600 882,038
Cash and cash equivalents 63,010 69,400
Restricted cash 24,472 18,778
Notes and accounts receivable, net 157,500 136,808
Reinsurance receivables 296,234 352,926
Deferred acquisition costs 126,608 57,858
Goodwill and intangible assets, net 178,245 186,107
Other assets 37,886 62,243
Assets of consolidated CLOs 989,495   728,812  
Total assets $ 2,890,050   $ 2,494,970  
 
Liabilities and Stockholders’ Equity

Liabilities

Debt, net $ 793,009 $ 666,952
Unearned premiums 414,960 389,699
Policy liabilities and unpaid claims 103,391 80,663
Deferred revenue 52,254 63,081
Reinsurance payable 70,588 65,840
Other liabilities and accrued expenses 133,735 132,725
Liabilities of consolidated CLOs 931,969   698,316  
Total liabilities $ 2,499,906   $ 2,097,276  
Commitments and contingencies (see Note 22)
 

Stockholders’ Equity

Preferred stock: $0.001 par value, 100,000,000 shares authorized,
none issued or outstanding
$ $
Common stock – Class A: $0.001 par value, 200,000,000 shares
authorized, 34,983,616 and 34,899,833 shares issued and outstanding,
respectively
35 35
Common stock – Class B: $0.001 par value, 50,000,000 shares
authorized, 8,049,029 and 8,049,029 shares issued and outstanding,
respectively
8 8
Additional paid-in capital 297,391 297,063
Accumulated other comprehensive income (loss), net of tax 555 (111 )
Retained earnings 37,974 15,845
Class A common stock held by subsidiaries, 6,596,000 and 0 shares,
respectively
(42,524 )
Class B common stock held by subsidiaries, 8,049,029 and 0 shares,
respectively
(8 )  
Total Tiptree Inc. stockholders’ equity 293,431 312,840
Non-controlling interests (including $76,077 and $69,278
attributable to Tiptree Financial Partners, L.P., respectively)
96,713   84,854  
Total stockholders’ equity 390,144   397,694  
Total liabilities and stockholders’ equity $ 2,890,050   $ 2,494,970  
 
 

Tiptree Inc.

Consolidated Statements of Operations

     
Year Ended December 31,
2016   2015   2014
Revenues:
Earned premiums, net 229,436 166,265 12,827
Service and administrative fees 109,348 106,525 8,657
Ceding commissions 24,784 43,217 3,737
Net investment income 12,981 5,455 279
Net realized and unrealized gains (losses) 87,300 31,275 14,509
Rental and related revenue 59,636 45,372 20,242
Other income 43,669   40,350   20,062  
Total revenues 567,154   438,459   80,313  
 
Expenses:
Policy and contract benefits 106,784 86,312 5,829
Commission expense 147,253 105,751 4,287
Employee compensation and benefits 139,612 107,810 32,540
Interest expense 29,701 23,491 12,541
Depreciation and amortization 28,468 45,124 11,945
Other expenses 92,274   75,521   31,908  
Total expenses 544,092   444,009   99,050  
 
Results of consolidated CLOs:
Income attributable to consolidated CLOs 53,577 23,613 64,681
Expenses attributable to consolidated CLOs 33,323   30,502   45,156  
Net income (loss) attributable to consolidated CLOs 20,254   (6,889 ) 19,525  
Income (loss) before taxes from continuing operations 43,316 (12,439 ) 788
Less: provision (benefit) for income taxes 10,978   1,377   4,141  
Income (loss) from continuing operations 32,338 (13,816 ) (3,353 )
 
Discontinued operations:
Income from discontinued operations, net 6,999 7,937
Gain on sale of discontinued operations, net   15,619    
Discontinued operations, net   22,618   7,937  
Net income (loss) before non-controlling interests 32,338 8,802 4,584
Less: net income (loss) attributable to non-controlling interests –
Tiptree Financial Partners, L.P.
6,432 2,630 6,790
Less: net income (loss) attributable to non-controlling interests –
Other
586   393   (496 )
Net income (loss) attributable to Tiptree Inc. Class A common
stockholders
$ 25,320   $ 5,779   $ (1,710 )
 

Net income (loss) per Class A common
share:

Basic, continuing operations, net $ 0.79 $ (0.26 ) $ (0.31 )
Basic, discontinued operations, net   0.43   0.21  
Basic earnings per share 0.79   0.17   (0.10 )
 
Diluted, continuing operations, net 0.78 (0.26 ) (0.31 )
Diluted, discontinued operations, net   0.43   0.21  
Diluted earnings per share $ 0.78   $ 0.17   $ (0.10 )
 
Weighted average number of Class A common shares:
Basic 31,721,449 33,202,681 16,771,980
Diluted 31,766,674 33,202,681 16,771,980
 

Tiptree Inc.

Non-GAAP Financial Measures

(Unaudited, in thousands)

 

Non-GAAP Financial Measures – EBITDA and
Adjusted EBITDA

 

The Company defines EBITDA as GAAP net income of the Company
adjusted to add consolidated interest expense, consolidated income
taxes and consolidated depreciation and amortization expense as
presented in its financial statements and Adjusted EBITDA as
EBITDA adjusted to (i) subtract interest expense on asset-specific
debt incurred in the ordinary course of its subsidiaries’ business
operations, (ii) adjust for the effect of purchase accounting,
(iii) add back significant acquisition related costs, (iv) adjust
for significant relocation costs and (v) any significant one-time
expenses.

 
Reconciliation from GAAP net income to Non-GAAP financial
measures – EBITDA and Adjusted EBITDA
($ in thousands, unaudited)       Year Ended December 31,
2016   2015
Net income (loss) available to Class A common stockholders $ 25,320 $ 5,779
Add: net (loss) income attributable to noncontrolling interests 7,018 3,023
Less: net income from discontinued operations           22,618  
Income (loss) from Continuing Operations of the Company $ 32,338 $ (13,816 )
Consolidated interest expense 29,701 23,491
Consolidated income taxes 10,978 1,377
Consolidated depreciation and amortization expense       28,468     45,124  
EBITDA from Continuing Operations $ 101,485 $ 56,176
Consolidated non-corporate and non-acquisition related interest
expense(1)
(19,183 ) (11,861 )
Effects of Purchase Accounting (2) (5,054 ) (24,166 )
Non-cash fair value adjustments (3) 2,693 (1,300 )
Significant acquisition expenses (4) 711 1,859
Separation expense adjustments (5)       (1,736 )   5,209  
Adjusted EBITDA from Continuing Operations of the Company       $ 78,916     $ 25,917  
 
Income from Discontinued Operations of the Company $ $ 22,618
Consolidated interest expense 5,226
Consolidated income taxes 3,796
Consolidated depreciation and amortization expense           862  
Adjusted EBITDA from Discontinued Operations of the Company       $     $ 32,502  
             
Adjusted EBITDA of the Company $ 78,916 $ 58,419
(1)   The consolidated non-corporate and non-acquisition related interest
expense is subtracted from EBITDA to arrive at Adjusted EBITDA. This
includes interest expense associated with asset-specific debt at
subsidiaries in the specialty insurance, asset management, senior
living and specialty finance segments.
(2) Following the purchase accounting adjustments, current period
expenses associated with deferred costs were more favorably stated
and current period income associated with deferred revenues were
less favorably stated. Thus, the purchase accounting effect related
to Fortegra increased EBITDA above what the historical basis of
accounting would have generated. The impact of this purchase
accounting adjustments have been reversed to reflect an adjusted
EBITDA without such purchase accounting effect.
(3) For our senior living segment, Adjusted EBITDA excludes the impact
of the change of fair value of interest rate swaps hedging the debt
at the property level. For Reliance, Adjusted EBITDA excludes the
impact of changes in contingent earn-outs.
(4) Acquisition costs include legal, taxes, banker fees and other costs
associated with senior living acquisitions in 2016 and 2015 and the
Fortegra acquisition in 2014.
(5) Consists of payments pursuant to a separation agreement, dated as of
November 10, 2015.
             

Segment EBITDA and Adjusted EBITDA from continuing operations

 
($ in thousands) Specialty insurance Asset management Senior living Specialty finance Corporate and other Total
2016   2015 2016   2015 2016   2015 2016   2015 2016   2015 2016   2015
Pre-tax income/(loss) $ 46,804   $ 32,012 $ 25,264   $ (6,753 ) $ (5,824 )   $ (9,535 ) $ 8,170   $ 6,265 $ (31,098 )   $ (34,428 ) $ 43,316   $ (12,439 )

Add back:

Interest expense 9,244 6,968 746 539 8,691 6,796 6,290 3,558 4,730 5,630 29,701 23,491
Depreciation and amortization expenses   13,184       29,673               14,166       14,546     870       760     248       145     28,468       45,124  
Segment EBITDA $ 69,232     $ 68,653  

$

26,010

    $ (6,214 )

$

17,033

    $ 11,807  

$

15,330

    $ 10,583  

$

(26,120

)

  $ (28,653 )

$

101,485

    $ 56,176  
 

EBITDA adjustments:

Asset-specific debt interest (3,652 ) (1,138 ) (746 ) (539 ) (8,691 ) (6,796 ) (6,094 ) (3,388 ) (19,183 ) (11,861 )
Effects of purchase accounting (5,054 ) (24,166 ) (5,054 ) (24,166 )
Non-cash fair value adjustments 1,416 1,277 (1,300 ) 2,693 (1,300 )
Significant acquisition expenses 711 1,579 280 711 1,859
Separation expenses                                          

(1,736

)

    5,209     (1,736 )     5,209  
Segment Adjusted EBITDA $ 60,526     $ 43,349   $ 25,264     $ (6,753 ) $ 10,469     $ 6,590   $ 10,513     $ 5,895   $ (27,856 )   $ (23,164 ) $ 78,916     $ 25,917  
 

Non-GAAP Financial Measures – Book value per
share, as exchanged

Book value per share, as exchanged assumes full exchange of the limited
partners units of TFP for Tiptree Class A common stock. Management
believes the use of this financial measure provides supplemental
information useful to investors as it 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, for the fiscal years ended December 31, 2016 and 2015.

      Year ended December 31,
($ in thousands, unaudited, except per share information) 2016   2015
Total stockholders’ equity $ 390,144 $ 397,694
Less non-controlling interest – other 20,636 15,576
Total stockholders equity, net of non-controlling interests – other $ 369,508 $ 382,118
Total Class A shares outstanding (1) 28,388 34,900
Total Class B shares outstanding 8,049 8,049
Total shares outstanding 36,437 42,949
Book value per share, as exchanged $ 10.14 $ 8.90
(1)  

As of December 31, 2016, excludes 6,596,000 shares of Class A
common stock held by subsidiaries of the Company. See Note
24—Earnings per Share, in the Form 10-K for December 31, 2016, for
further discussion of potential dilution from warrants.

 

Non-GAAP Financial Measures – Specialty
Insurance Investment Portfolio

In managing our investment portfolio we analyze net investments and net
portfolio income, which are non-GAAP measures. Our presentation of net
investments equals total investments plus cash and cash equivalents
minus asset based financing of investments. Our presentation of net
portfolio income equals net investment income plus realized and
unrealized gains and losses and minus interest expense associated with
asset based financing of investments. Net investments and net portfolio
income are used to calculate average annualized yield, which management
uses to analyze the profitability of our investment portfolio.
Management believes this information is useful since it allows investors
to evaluate the performance of our investment portfolio based on the
capital at risk and on a non-consolidated basis.

Contacts

Tiptree Inc.
Investor Relations, 212-446-1400
ir@tiptreeinc.com

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