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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, 2022
OR
 ☐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.)

299 Park Avenue, 13th Floor, New York, New York                10171
(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 classTrading Symbol(s)Name of each exchange on which registered
common stock, par value $0.001 per shareTIPTNASDAQCapital 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 3, 2022, there were 34,899,103 shares, par value $0.001, of the registrant’s common stock outstanding.


Tiptree Inc.
Quarterly Report on Form 10-Q
March 31, 2022

Table of Contents
ITEM
Page Number
F- 1
Item 1. Financial Statements (Unaudited)
F- 3
F- 3
F- 4
F- 5
F- 6
F- 7
F- 8
F- 8
F- 8
F- 9
F- 9
F- 11
F- 17
F- 17
F- 19
F- 20
F- 22
F- 23
F- 30
F- 31
F- 32
F- 33
F- 34
F- 35
F- 35
F- 39
F- 39
F- 40
F- 40
F- 41
Item 4. Controls and Procedures



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, 2021, 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.
“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
“EBITDA” means earnings before interest, taxes, depreciation and amortization.
“E&S” means excess and surplus.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fannie Mae” means Federal National Mortgage Association.
“Fortress” means Fortress Credit Corp., as administrative agent, collateral agent and lead arranger, and affiliates of Fortress that are lenders under the Credit Agreement among the Company, Fortress and the lenders party thereto.
“Fortegra” or “The Fortegra Group” means The Fortegra Group, LLC.
“Fortegra Warranty” means Fortegra Warranty Holdings, LLC.
“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.
“Invesque” means Invesque Inc.
“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.
F - 1

“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.
“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.
“WP Transaction” means the $200 million strategic investment in Fortegra by Warburg Pincus pursuant to the Securities Purchase Agreement between and among Tiptree, Fortegra and WP Falcon Aggregator, L.P. dated October 11, 2021.



F - 2
TIPTREE INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
As of
March 31,
2022		December 31, 2021
Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses$568,460 $577,448 
Loans, at fair value96,244 105,583 
Equity securities120,895 138,483 
Other investments132,305 168,656 
Total investments917,904 990,170 
Cash and cash equivalents 177,962 175,718 
Restricted cash19,567 19,368 
Notes and accounts receivable, net536,133 454,369 
Reinsurance receivables949,952 880,836 
Deferred acquisition costs414,752 379,373 
Goodwill179,103 179,103 
Intangible assets, net119,357 122,758 
Other assets147,217 146,844 
Assets held for sale138,251 250,608 
Total assets$3,600,198 $3,599,147 
Liabilities and Stockholders’ Equity
Liabilities:
Debt, net$391,326 $393,349 
Unearned premiums1,188,764 1,123,952 
Policy liabilities and unpaid claims393,877 331,703 
Deferred revenue560,316 534,863 
Reinsurance payable273,314 265,569 
Other liabilities and accrued expenses292,115 306,536 
Liabilities held for sale117,333 242,994 
Total liabilities$3,217,045 $3,198,966 
Stockholders’ Equity:
Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding
$— $— 
Common stock: $0.001 par value, 200,000,000 shares authorized, 34,877,897 and 34,124,153 shares issued and outstanding, respectively
35 34 
Additional paid-in capital323,916 317,459 
Accumulated other comprehensive income (loss), net of tax(23,106)(2,685)
Retained earnings65,788 68,146 
Total Tiptree Inc. stockholders’ equity366,633 382,954 
Non-controlling interests16,520 17,227 
Total stockholders’ equity383,153 400,181 
Total liabilities and stockholders’ equity$3,600,198 $3,599,147 


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,
20222021
Revenues:
Earned premiums, net$208,416 $146,919 
Service and administrative fees71,835 58,050 
Ceding commissions2,537 3,025 
Net investment income3,167 2,767 
Net realized and unrealized gains (losses)17,204 69,371 
Other revenue21,744 14,556 
Total revenues324,903 294,688 
Expenses:
Policy and contract benefits104,446 67,174 
Commission expense117,423 88,645 
Employee compensation and benefits56,455 52,924 
Interest expense10,199 9,252 
Depreciation and amortization6,156 5,934 
Other expenses31,176 31,367 
Total expenses325,855 255,296 
Income (loss) before taxes(952)39,392 
Less: provision (benefit) for income taxes(86)8,752 
Net income (loss)(866)30,640 
Less: net income (loss) attributable to non-controlling interests94 2,059 
Net income (loss) attributable to common stockholders$(960)$28,581 
Net income (loss) per common share:
Basic earnings per share$(0.03)$0.86 
Diluted earnings per share$(0.03)$0.81 
Weighted average number of common shares:
Basic34,229,011 32,420,982 
Diluted34,229,011 36,184,019 
Dividends declared per common share$0.04 $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,
20222021
Net income (loss)$(866)$30,640 
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available for sale securities:
Unrealized holding gains (losses) arising during the period(26,376)(3,870)
Related (provision) benefit for income taxes5,819 875 
Reclassification of (gains) losses included in net income (loss)110 (128)
Related (provision) benefit for income taxes(24)30 
Unrealized gains (losses) on available for sale securities, net of tax(20,471)(3,093)
Other comprehensive income (loss), net of tax(20,471)(3,093)
Comprehensive income (loss)(21,337)27,547 
Less: comprehensive income (loss) attributable to non-controlling interests44 2,048 
Comprehensive income (loss) attributable to common stockholders$(21,381)$25,499 


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
Number of sharesPar value Additional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTotal
Tiptree Inc. stockholders’ equity		Non-controlling interestsTotal stockholders' equity
Balance at December 31, 202134,124,153 $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 compensation261,449 — (127)— — (127)(994)(1,121)
Shares issued upon exercise of warrants492,295 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, 202234,877,897 $35 $323,916 $(23,106)$65,788 $366,633 $16,520 $383,153 
    

Common stock
Number of sharesPar value Additional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTotal
Tiptree Inc. stockholders’ equity		Non-controlling interestsTotal stockholders' equity
Balance at December 31, 202032,682,462 $33 $315,014 $5,674 $35,423 $356,144 $17,394 $373,538 
Amortization of share-based incentive compensation— — 627 — — 627 328 955 
Vesting of share-based incentive compensation344,686 — (51)— — (51)(914)(965)
Shares purchased under stock purchase plan(488,662)— (2,450)— — (2,450)— (2,450)
Non-controlling interest contributions— — — — — — 100 100 
Dividends declared— — — — (1,326)(1,326)— (1,326)
Other comprehensive income (loss), net of tax— — — (3,082)— (3,082)(11)(3,093)
Net income (loss)— — — — 28,581 28,581 2,059 30,640 
Balance at March 31, 202132,538,486 $33 $313,140 $2,592 $62,678 $378,443 $18,956 $397,399 


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,
20222021
Operating Activities:
Net income (loss) attributable to common stockholders$(960)$28,581 
Net income (loss) attributable to non-controlling interests94 2,059 
Net income (loss)(866)30,640 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net realized and unrealized (gains) losses (17,204)(69,371)
Net (gain) loss on held for sale of business(1,752)431 
Non-cash compensation expense6,170 1,065 
Amortization/accretion of premiums and discounts654 670 
Depreciation and amortization expense6,156 5,934 
Non-cash lease expense2,420 2,195 
Deferred provision (benefit) for income taxes(54)7,788 
Amortization of deferred financing costs407 394 
Other69 80 
Changes in operating assets and liabilities:
Mortgage loans originated for sale(972,051)(911,193)
Proceeds from the sale of mortgage loans originated for sale1,141,727 956,609 
(Increase) decrease in notes and accounts receivable(72,105)24,507 
(Increase) decrease in reinsurance receivables(69,116)14,279 
(Increase) decrease in deferred acquisition costs(35,379)(43,494)
(Increase) decrease in other assets4,653 (4,101)
Increase (decrease) in unearned premiums64,812 31,319 
Increase (decrease) in policy liabilities and unpaid claims62,174 17,885 
Increase (decrease) in deferred revenue25,453 25,397 
Increase (decrease) in reinsurance payable7,745 (23,329)
Increase (decrease) in other liabilities and accrued expenses(4,846)(40,375)
Net cash provided by (used in) operating activities149,067 27,330 
Investing Activities:
Purchases of investments(333,311)(413,159)
Proceeds from sales and maturities of investments322,923 372,015 
Proceeds from the sale of real estate and other assets583 — 
Purchases of property, plant and equipment(535)(397)
Proceeds from the sale of businesses— 125 
Proceeds from notes receivable17,098 14,762 
Issuance of notes receivable(25,490)(15,710)
Net cash provided by (used in) investing activities(18,732)(42,364)
Financing Activities:
Dividends paid(1,398)(1,326)
Cash received for the exercise of warrants3,423 — 
Net non-controlling interest (redemptions) contributions(1,566)100 
Payment of debt issuance costs(5)— 
Proceeds from borrowings and mortgage notes payable1,020,790 955,306 
Principal paydowns of borrowings and mortgage notes payable(1,145,947)(952,260)
Repurchases of common stock and other changes in additional paid-in capital— (2,450)
Net cash provided by (used in) financing activities(124,703)(630)
Net increase (decrease) in cash, cash equivalents and restricted cash5,632 (15,664)
Cash, cash equivalents and restricted cash – beginning of period195,086 195,275 
Cash, cash equivalents and restricted cash – beginning of period - held for sale9,360 4,879 
Cash, cash equivalents and restricted cash – end of period210,078 184,490 
Less: Reclassification of cash to assets held for sale12,549 7,317 
Cash, cash equivalents and restricted cash – end of period$197,529 $177,173 
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Right of use asset obtained in exchange for lease liability$5,830 $1,413 
Corporate loans and equity securities exchanged for trade receivables$19,846 $— 
As of
Reconciliation of cash, cash equivalents and restricted cashMarch 31,
2022		December 31, 2021
Cash and cash equivalents $177,962 $175,718 
Restricted cash19,567 19,368 
Total cash, cash equivalents and restricted cash shown in the statements of cash flows$197,529 $195,086 


See accompanying notes to condensed consolidated financial statements.
F - 7
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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.

(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, 2021. 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, 2022 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2022.

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

StandardDescriptionAdoption DateImpact on Financial Statements
Accounting Standard Updates (ASU) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)
The standard simplifies the accounting for certain financial instruments. The guidance reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. The ASU amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. Either a full or modified retrospective method of transition is permissible for the adoption of this standard.
January 1, 2022The standard makes changes to the accounting for convertible instruments, which the Company does not currently issue, so the adoption of the standard does not currently impact the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements, Not Yet Adopted

During the three months ended March 31, 2022, there were no accounting standards issued applicable to the Company.

F - 8
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


(3) Assets and Liabilities Held for Sale

Luxury

The Company has entered into a definitive agreement to sell Luxury, and it is classified as held for sale at March 31, 2022 and December 31, 2021. We have noted no change to our intention to sell and consider the sale to be probable pending regulatory approval. The agreement did not meet the requirements to be classified as a discontinued operation. The following table presents detail of Luxury’s assets and liabilities held for sale in the condensed consolidated balance sheets for the following periods:
As of
March 31,
2022		December 31, 2021
Assets:
Investments:
Loans, at fair value$106,429 $236,810 
Other investments2,835 2,071 
Total investments109,264 238,881 
Cash, cash equivalents and restricted cash12,549 9,360 
Notes and accounts receivable, net336 157 
Other assets2,037 2,210 
Assets held for sale$124,186 $250,608 
Liabilities:
Debt, net$105,376 $227,973 
Other liabilities and accrued expenses (1)
11,957 15,021 
Liabilities held for sale$117,333 $242,994 
(1)    Includes deferred tax liabilities of $430 and $659 as of March 31, 2022 and December 31, 2021, respectively.

Luxury’s earnings had no impact to net income (loss) attributable to common stockholders for the three months ended March 31, 2022 and 2021.

Marine

In March 2022, the Company entered into a definitive agreement to sell a vessel from its maritime shipping operations for a price of $21,500, and the vessel and related assets are classified as held for sale at March 31, 2022. There are no related liabilities. The agreement did not meet the requirements to be classified as a discontinued operation. We expect the sale to be completed in the second quarter of 2022. The following table presents detail of the assets held for sale in the condensed consolidated balance sheets for March 31, 2022:
As of
March 31,
2022
Assets:
Investments:
Other investments$13,364 
Total investments13,364 
Other assets701 
Assets held for sale$14,065 

(4) 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, The Fortegra Group, LLC and its subsidiaries (Fortegra), is a leading provider of specialty insurance, service contract products and related service solutions. Based on the ASC 280 quantitative analysis performed as of December 31, 2021, our reportable segments are 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
F - 9
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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 includes Fortegra Financial Corporation and Fortegra Warranty. Fortegra is a leading provider of specialty insurance products and related services. Fortegra designs, markets and underwrites specialty commercial and personal 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 origination 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 our held-for-sale mortgage operations (Luxury).

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, 2022
Tiptree Capital
InsuranceMortgageOtherTotal
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)$(866)
Less: net income (loss) attributable to non-controlling interests94 
Net income (loss) attributable to common stockholders$(960)

Three Months Ended March 31, 2021
Tiptree Capital
InsuranceMortgageOtherTotal
Total revenues$222,563 $34,494 $37,631 $294,688 
Total expenses(201,035)(21,417)(22,637)(245,089)
Corporate expenses— — — (10,207)
Income (loss) before taxes$21,528 $13,077 $14,994 $39,392 
Less: provision (benefit) for income taxes8,752 
Net income (loss)$30,640 
Less: net income (loss) attributable to non-controlling interests2,059 
Net income (loss) attributable to common stockholders$28,581 
The Company conducts its operations primarily in the U.S. with 5.9% and 4.9% of total revenues generated overseas for the three months ended March 31, 2022 and 2021, respectively.
F - 10
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)



The following table presents the reportable segments and Tiptree Capital - Other assets for the following periods:
As of March 31, 2022As of December 31, 2021
Tiptree CapitalTiptree Capital
InsuranceMortgageOtherCorporateTotalInsuranceMortgageOtherCorporateTotal
Total assets$3,168,813 $182,828 $248,852 $(295)$3,600,198 $3,002,152 $201,134 $384,564 $11,297 $3,599,147 

(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, 2022
Tiptree Capital
InsuranceMortgageOtherTotal
Available for sale securities, at fair value, net of allowance for credit losses$568,460 $— $— $568,460 
Loans, at fair value19,113 77,131 — 96,244 
Equity securities100,946 — 19,949 120,895 
Other investments56,523 9,156 66,626 132,305 
Total investments$745,042 $86,287 $86,575 $917,904 
As of December 31, 2021
Tiptree Capital
InsuranceMortgageOtherTotal
Available for sale securities, at fair value, net of allowance for credit losses$577,448 $— $— $577,448 
Loans, at fair value7,099 98,484 — 105,583 
Equity securities109,684 — 28,799 138,483 
Other investments79,975 7,981 80,700 168,656 
Total investments$774,206 $106,465 $109,499 $990,170 

Available for Sale Securities, at fair value

All 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, 2022 and December 31, 2021 are held by subsidiaries in the insurance segment. The following tables present the Company's investments in AFS securities:

As of March 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$355,764 $— $74 $(16,657)$339,181 
Obligations of state and political subdivisions55,460 (1)171 (2,459)53,171 
Corporate securities161,568 (263)80 (7,972)153,413 
Asset backed securities20,231 — 4 (2,711)17,524 
Certificates of deposit2,696 — — — 2,696 
Obligations of foreign governments2,645 (3)— (167)2,475 
Total$598,364 $(267)$329 $(29,966)$568,460 
As of December 31, 2021
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$352,288 $— $2,087 $(3,197)$351,178 
F - 11
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Obligations of state and political subdivisions57,923 — 1,050 (313)58,660 
Corporate securities145,997 (241)517 (1,396)144,877 
Asset backed securities19,511 — 82 (2,146)17,447 
Certificates of deposit2,696 — — — 2,696 
Obligations of foreign governments2,649 (4)3 (58)2,590 
Total$581,064 $(245)$3,739 $(7,110)$577,448 
(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.

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, 2022December 31, 2021
Amortized CostFair ValueAmortized CostFair Value
Due in one year or less $40,298 $40,331 $41,033 $41,150 
Due after one year through five years284,784 272,909 269,487 268,537 
Due after five years through ten years50,081 46,659 52,561 52,000 
Due after ten years202,970 191,037 198,472 198,314 
Asset backed securities20,231 17,524 19,511 17,447 
Total$598,364 $568,460 $581,064 $577,448 

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, 2022
Less Than or Equal to One YearMore Than One Year
Fair valueGross
unrealized losses
# of Securities(1)
Fair valueGross unrealized losses
# of Securities(1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$276,483 $(13,589)524 $35,661 $(3,068)119 
Obligations of state and political subdivisions26,377 (2,227)93 2,828 (232)18 
Corporate securities123,495 (6,572)430 17,396 (1,400)72 
Asset backed securities11,066 (414)67 3,800 (2,297)7 
Certificates of deposit1,339 — 2 — — — 
Obligations of foreign governments1,344 (71)5 1,131 (96)4 
Total
$440,104 $(22,873)1,121 $60,816 $(7,093)220 
As of December 31, 2021
Less Than or Equal to One YearMore Than One Year
Fair valueGross
unrealized losses
# of Securities(1)
Fair valueGross unrealized losses
# of Securities(1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$216,378 $(2,827)324 $11,920 $(370)47 
Obligations of state and political subdivisions17,190 (275)64 1,152 (38)5 
Corporate securities99,434 (1,159)326 9,722 (237)45 
Asset backed securities7,454 (84)38 2,316 (2,062)5 
Certificates of deposit1,339 — 2 — — — 
Obligations of foreign governments2,278 (58)8 — — — 
Total
$344,073 $(4,403)762 $25,110 $(2,707)102 
F - 12
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


(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, 2022 until full recovery of their amortized cost basis.

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, 2022:
Obligations of state and political subdivisionsCorporate securitiesAsset backed securitiesObligations of foreign governmentsTotal
Balance at December 31, 2020$— $— $— $— $— 
(Increase) in allowance for credit losses— (101)— (5)(106)
Balance at March 31, 2021$— $(101)$— $(5)$(106)
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)

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,
20222021
Net gains from recoveries (credit losses) on AFS securities(22)(106)

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,
2022		December 31, 2021
Fair value of restricted investments in trust pursuant to reinsurance agreements$40,099 $42,471 
Fair value of restricted investments for special deposits required by state insurance departments9,754 7,189 
Total fair value of restricted investments$49,853 $49,660 


The following table presents additional information on the Company’s AFS securities:
Three Months Ended
March 31,
20222021
Purchases of AFS securities$55,142 $68,702 
Proceeds from maturities, calls and prepayments of AFS securities$20,242 $17,740 
Gross proceeds from sales of AFS securities$16,970 $13,645 
F - 13
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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

Three Months Ended
March 31,
20222021
Gross realized gains$74 $128 
Gross realized (losses)(184)— 
Total net realized gains (losses) from investment sales and redemptions$(110)$128 

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, 2022As of December 31, 2021
Fair valueUnpaid principal balance (UPB)Fair value exceeds / (below) UPBPledged as collateralFair valueUnpaid principal balance (UPB)Fair value exceeds / (below) UPBPledged as collateral
Insurance:
Corporate loans (1)
$19,113 $21,292 $(2,179)$— $7,099 $10,156 $(3,057)$— 
Mortgage:
Mortgage loans held for sale (2)
77,131 77,028 103 74,768 98,484 95,264 3,220 95,542 
Total loans, at fair value$96,244 $98,320 $(2,076)$74,768 $105,583 $105,420 $163 $95,542 
(1)    The cost basis of Corporate loans was approximately $21,283 and $9,094 at March 31, 2022 and December 31, 2021, respectively.
(2)    As of December 31, 2021, there was one mortgage loan held for sale that was 90 days or more past due, with a fair value of $136. As of March 31, 2022, there 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, 2022 and December 31, 2021, 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, 2022
InsuranceTiptree Capital - OtherTotal
CostFair ValueCostFair ValueCostFair Value
Invesque$23,339 $4,167 $111,491 $19,949 $134,830 $24,116 
Fixed income exchange traded fund52,176 51,718 — — 52,176 51,718 
Other equity securities40,845 45,061 — — 40,845 45,061 
Total equity securities$116,360 $100,946 $111,491 $19,949 $227,851 $120,895 

As of December 31, 2021
InsuranceTiptree Capital - OtherTotal
CostFair ValueCostFair ValueCostFair Value
Invesque$23,339 $6,015 $111,491 $28,799 $134,830 $34,814 
Fixed income exchange traded fund52,176 53,154 — — 52,176 53,154 
Other equity securities49,664 50,515 — — 49,664 50,515 
Total equity securities$125,179 $109,684 $111,491 $28,799 $236,670 $138,483 


F - 14
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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, 2022
Tiptree Capital
InsuranceMortgageOtherTotal
Corporate bonds, at fair value (1)
$34,700 $— $— $34,700 
Vessels, net (2)
— — 65,307 65,307 
Debentures21,783 — — 21,783 
Other40 9,156 1,319 10,515 
Total other investments$56,523 $9,156 $66,626 $132,305 

As of December 31, 2021
Tiptree Capital
InsuranceMortgageOtherTotal
Corporate bonds, at fair value (1)
$38,965 $— $— $38,965 
Vessels, net (2)
— — 79,368 79,368 
Debentures21,057 — — 21,057 
Trade claims19,737 — — 19,737 
Other216 7,981 1,332 9,529 
Total other investments$79,975 $7,981 $80,700 $168,656 

(1)    The cost basis of corporate bonds was $33,729 and $36,436 as of March 31, 2022 and December 31, 2021, respectively.
(2)     Net of accumulated depreciation of $11,556 and $13,059 as of March 31, 2022 and December 31, 2021, 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 consolidated statements of operations. The following table presents the components of net investment income by source of income:
Three Months Ended
March 31,
20222021
Interest:
AFS securities$2,199 $1,724 
Loans, at fair value167 205 
Other investments1,340 1,282 
Dividends from equity securities588 89 
Other— 20 
Subtotal4,294 3,320 
Less: investment expenses1,127 553 
Net investment income$3,167 $2,767 

F - 15
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Other Investment Income - Tiptree Capital

Other investment income represents other revenue from other Tiptree 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,
20222021
Interest:
Loans, at fair value (1)
$2,307 $1,672 
Loan fee income5,536 5,362 
Vessel related revenue8,862 5,699 
Other investment income$16,705 $12,733 
(1)    Primarily relates to Loans, at fair value classified as Held for Sale. See Note (3) Assets and Liabilities Held for Sale.

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,
20222021
Net realized gains (losses)
Insurance:
Reclass of unrealized gains (losses) on AFS securities from OCI $(110)$128 
Net gains from recoveries (credit losses) on AFS securities(22)(106)
Net realized gains (losses) on loans 93 — 
Net realized gains (losses) on equity securities (2,483)(1,853)
Net realized gains (losses) on corporate bonds913 1,816 
Other (4,284)2,577 
Tiptree Capital
Mortgage:
Net realized gains (losses) on loans13,418 24,733 
Other4,066 965 
Other:
Net realized gains (losses) on loans (1)
14,740 13,887 
Other 441 669 
Total net realized gains (losses)26,772 42,816 
Net unrealized gains (losses)
Insurance:
Net change in unrealized gains (losses) on loans (268)856 
Net unrealized gains (losses) on equity securities held at period end(2,161)11,087 
Reclass of unrealized (gains) losses from prior periods for equity securities sold 1,815 (1,211)
Other (136)(3,622)
Tiptree Capital
Mortgage:
Net change in unrealized gains (losses) on loans(3,117)(1,642)
Other6,047 6,023 
F - 16
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Other:
Net change in unrealized gains (losses) on loans (1)
(3,581)(1,900)
Net unrealized gains (losses) on equity securities held at period end(8,850)13,767 
Other 683 3,197 
Total net unrealized gains (losses)(9,568)26,555 
Total net realized and unrealized gains (losses)$17,204 $69,371 
(1)    Relates to Loans, at fair value classified as Held for Sale. See Note (3) Assets and Liabilities Held for Sale.


(6) Notes and Accounts Receivable, net

The following table presents the total notes and accounts receivable, net:
As of
March 31,
2022		December 31, 2021
Accounts and premiums receivable, net$179,002 $137,082 
Retrospective commissions receivable167,657 157,853 
Notes receivable, net - premium financing program99,264 89,788 
Trust receivables45,503 41,889 
Other receivables44,707 27,757 
Total notes and accounts receivable, net$536,133 $454,369 

The following table presents the total valuation allowance and bad debt expense for the following periods:
Valuation allowanceBad Debt Expense
As ofThree Months Ended
March 31,
March 31, 2022December 31,
2021
20222021
Notes receivable, net - premium financing program (1)
$95 $123 $62 $80 
Accounts and premiums receivable, net$116 $120 $8 $4 
(1)    As of March 31, 2022 and December 31, 2021, there were $169 and $1,311 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 amountCeded to other companiesAssumed from other companiesNet amountPercentage 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 %
F - 17
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Direct amountCeded to other companiesAssumed from other companiesNet amountPercentage of amount - assumed to net
Three Months Ended March 31, 2021
Premiums written:
Life insurance                   $18,573 $11,027 $410 $7,956 5.2 %
Accident and health insurance    32,163 22,667 4,861 14,357 33.9 %
Property and liability insurance 270,157 136,353 42,888 176,692 24.3 %
Total premiums written             320,893 170,047 48,159 199,005 24.2 %
Premiums earned:
Life insurance                   17,493 9,766 340 8,067 4.2 %
Accident and health insurance    30,179 20,476 3,791 13,494 28.1 %
Property and liability insurance 241,829 160,395 43,924 125,358 35.0 %
Total premiums earned$289,501 $190,637 $48,055 $146,919 32.7 %

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 amountCeded to other companiesAssumed from other companiesNet amountPercentage of amount - assumed to net
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 
Three Months Ended March 31, 2021
Losses and LAE Incurred
Life insurance                   $15,596 $9,332 $153 $6,417 2.4 %
Accident and health insurance    4,818 3,814 660 1,664 39.7 %
Property and liability insurance 75,917 51,996 18,249 42,170 43.3 %
Total losses and LAE incurred 96,331 65,142 19,062 50,251 37.9 %
Member benefit claims (1)
16,923 
Total policy and contract benefits$67,174 
(1)    Member benefit claims are not covered by reinsurance.

The following table presents the components of the reinsurance receivables:
As of
March 31,
2022		December 31, 2021
Prepaid reinsurance premiums:
Life insurance (1)
$71,398 $73,478 
Accident and health insurance (1)
80,515 81,521 
Property and liability insurance498,074 479,091 
Total649,987 634,090 
Ceded claim reserves:
Life insurance3,935 3,928 
Accident and health insurance15,813 12,239 
Property and liability insurance178,490 148,962 
Total ceded claim reserves recoverable198,238 165,129 
Other reinsurance settlements recoverable101,727 81,617 
Reinsurance receivables$949,952 $880,836 
(1)    Including policyholder account balances ceded.
F - 18
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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, 2022
Total of the three largest receivable balances from non-affiliated reinsurers$126,831 

As of March 31, 2022, 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 International Reinsurance (Bermuda) Corporation (A. M. Best Rating: A+ rated), and Canada Life Assurance Company (A. M. Best Rating: A+ rated). The related receivables of these reinsurers are collateralized by assets on hand, assets held in trust accounts and letters of credit. As of March 31, 2022, 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.


(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, 2022As of December 31, 2021
Finite-Lived Intangible Assets:InsuranceOtherTotalInsuranceOtherTotal
Customer relationships$143,300 $— $143,300 $143,300 $— $143,300 
Accumulated amortization(49,552)— (49,552)(45,997)— (45,997)
Trade names14,750 800 15,550 14,750 800 15,550 
Accumulated amortization(6,033)(540)(6,573)(5,633)(520)(6,153)
Software licensing9,300 640 9,940 9,300 640 9,940 
Accumulated amortization(8,825)(617)(9,442)(8,790)(594)(9,384)
Insurance policies and contracts acquired36,500 — 36,500 36,500 — 36,500 
Accumulated amortization(36,335)— (36,335)(36,320)— (36,320)
Other640 — 640 640 — 640 
Accumulated amortization(160)— (160)(203)— (203)
Total finite-lived intangible assets103,585 283 103,868 107,547 326 107,873 
Indefinite-Lived Intangible Assets: (1)
Insurance licensing agreements13,761 — 13,761 13,761 — 13,761 
Other— 1,728 1,728 — 1,124 1,124 
Total indefinite-lived intangible assets13,761 1,728 15,489 13,761 1,124 14,885 
Total intangible assets, net$117,346 $2,011 $119,357 $121,308 $1,450 $122,758 
Goodwill 177,395 1,708 179,103 177,395 1,708 179,103 
Total goodwill and intangible assets, net$294,741 $3,719 $298,460 $298,703 $3,158 $301,861 
(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:
Tiptree Capital
InsuranceOtherTotal
Balance at December 31, 2021$177,395 $1,708 $179,103 
Balance at March 31, 2022$177,395 $1,708 $179,103 
Accumulated impairments (1)
$— $699 $699 
(1)    Relates to Luxury, which is classified as Held for Sale. See Note (3) Assets and Liabilities Held for Sale.

F - 19
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


The Company conducts annual impairment tests of its goodwill as of October 1. For the three months ended March 31, 2022 and 2021, 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:
InsuranceOtherTotal
Balance at December 31, 2021$121,308 $1,450 $122,758 
Intangibles acquired— 604 604 
Less: amortization expense (3,962)(43)(4,005)
Balance at March 31, 2022$117,346 $2,011 $119,357 

The following table presents the amortization expense on finite-lived intangible assets for the following periods:
Three Months Ended
March 31,
20222021
Amortization expense on intangible assets$4,005 $3,900 

For the three months ended March 31, 2022 and 2021, 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, 2022
InsuranceOtherTotal
Remainder of 2022$11,886 $83 $11,969 
202315,031 80 15,111 
202413,344 80 13,424 
202511,229 40 11,269 
20269,003 — 9,003 
2027 and thereafter43,092 — 43,092 
Total$103,585 $283 $103,868 


(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 classified by underlying credit risk and interest rate risk. In addition, the Company is also subject to additional counterparty risk should its counterparties fail to meet the contract terms. The derivative financial instruments are reported in other investments. Derivative liabilities are reported within other liabilities and accrued expenses.

Derivatives, at fair value
Interest Rate Lock Commitments

The Company enters into interest rate lock commitments (“IRLCs”) with customers in connection with its mortgage banking activities to fund residential mortgage loans with certain terms at specified times in the future. IRLCs that relate to the origination of mortgage loans that will be classified as held-for-sale are considered derivative instruments under applicable accounting guidance. As such, these IRLCs are recorded at fair value with changes in fair value typically resulting in recognition of a gain when the Company enters into IRLCs. In estimating the fair value of an IRLC, the Company assigns a probability that the loan commitment will be exercised and the loan will be funded (“pull through”). The fair value of the commitments is derived from the fair value of related mortgage loans, net of estimated costs to complete. Outstanding IRLCs
F - 20
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


expose the Company to the risk that the price of the loans underlying the commitments might decline from inception of the rate lock to funding of the loan. To manage this risk, the Company utilizes forward delivery contracts and to be announced (“TBA”) mortgage backed securities to economically hedge the risk of potential changes in the value of the loans that would result from the commitments.

Forward Delivery Contracts and TBA Mortgage Backed Securities
The Company enters into forward delivery contracts with loan aggregators and other investors as one of the tools to manage the interest rate risk associated with IRLCs and loans held for sale. In addition, the Company enters into TBA mortgage backed securities which facilitate hedging and funding by allowing the Company to prearrange prices for mortgages that are in the process of originating. The Company utilizes these hedging instruments for Agency (Fannie Mae and Freddie Mac) and FHA/VA (Ginnie Mae) eligible IRLCs.

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, 2022As of December 31, 2021
Notional
values		Asset
derivatives		Liability
derivatives		Notional
values		Asset
derivatives		Liability
derivatives
Interest rate lock commitments$275,196 $3,569 $— $268,878 $7,514 $— 
Forward delivery contracts54,328 563 14 56,593 204 59 
TBA mortgage backed securities325,000 5,024 415 316,000 262 425 
Other49,664 41 1,998 9,232 216 1,657 
Total$704,188 $9,197 $2,427 $650,703 $8,196 $2,141 


F - 21
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


(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, 2022
Corporate debtInsuranceOtherCorporateTotal
Secured term credit agreements (LIBOR + 6.75%)(2)
$— $— $112,500 $112,500 
Preferred trust securities (LIBOR + 4.10%)
35,000 — — 35,000 
8.50% Junior subordinated notes
125,000 — — 125,000 
Total corporate debt160,000 — 112,500 272,500 
Asset based debt (3)
Asset based revolving financing (LIBOR + 2.75%)
48,551 — — 48,551 
Residential mortgage warehouse borrowings (LIBOR + 1.88% to 3.00%) (2)(3)
— 67,990 — 67,990 
Vessel backed term loan (LIBOR + 4.75%)
— 13,050 — 13,050 
Total asset based debt48,551 81,040 — 129,591 
Total debt, face value208,551 81,040 112,500 402,091 
Unamortized discount, net— — (1,323)(1,323)
Unamortized deferred financing costs(8,180)(983)(279)(9,442)
Total debt, net$200,371 $80,057 $110,898 $391,326 
As of December 31, 2021
Corporate debtInsuranceOtherCorporateTotal
Secured revolving credit agreements (1)
$2,160 $— $— $2,160 
Secured term credit agreements (LIBOR + 6.75%)(2)
— — 114,063 114,063 
Preferred trust securities (LIBOR + 4.10%)
35,000 — — 35,000 
8.50% Junior subordinated notes
125,000 — — 125,000 
Total corporate debt162,160 — 114,063 276,223 
Asset based debt (3)
Asset based revolving financing (LIBOR + 2.75%)
42,310 — — 42,310 
Residential mortgage warehouse borrowings (LIBOR + 1.88% to 3.00%) (2)(3)
— 72,518 — 72,518 
Vessel backed term loan (LIBOR + 4.75%)
— 13,600 — 13,600 
Total asset based debt42,310 86,118 — 128,428 
Total debt, face value204,470 86,118 114,063 404,651 
Unamortized discount, net— — (1,458)(1,458)
Unamortized deferred financing costs(8,474)(1,069)(301)(9,844)
Total debt, net$195,996 $85,049 $112,304 $393,349 
(1)    The secured revolving credit agreements provide a two rate structure at the Company’s discretion; Prime +1.25% for swing loans and LIBOR + 2.25%.
(2)    Includes LIBOR floor of 1.00%.
(3)    The weighted average coupon rate for residential mortgage warehouse borrowings was 2.72% and 2.76% at March 31, 2022 and December 31, 2021, respectively. Includes LIBOR floor ranging from 0.50% to 1.00%.

The following table presents the amount of interest expense the Company incurred on its debt for the following periods:
Three Months Ended
March 31,
20222021
Total Interest expense - corporate debt$5,876 $6,063 
Total Interest expense - asset based debt4,198 3,082 
Interest expense on debt$10,074 $9,145 

F - 22
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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, 2022
Remainder of 2022$74,327 
202357,001 
202415,450 
202595,313 
2026
2027 and thereafter160,000 
Total$402,091 

The following narrative is a summary of certain terms of our debt agreements for the period ended March 31, 2022:
Corporate Debt

Secured Revolving Credit Agreements

As of March 31, 2022 and December 31, 2021, a total of $0 and $2,160, respectively, was outstanding under the revolving line of credit in our insurance business. The maximum borrowing capacity under the agreements as of March 31, 2022 was $200,000.

Asset Based Debt

Asset Backed Revolving Financing

As of March 31, 2022, a total of $48,551 was outstanding under the under the borrowing related to our premium finance and service contract finance businesses in our insurance business.

Residential Mortgage Warehouse Borrowings

In April 2022, subsequent to the end of the quarter, the $60,000 warehouse line of credit was renewed and the maturity date was extended from April 2022 to April 2023.

As of March 31, 2022 and December 31, 2021, a total of $67,990 and $72,518, respectively, was outstanding under such financing agreements.

Vessel Backed Term Loan

As of March 31, 2022 and December 31, 2021, the maximum borrowing capacity and borrowings outstanding were $13,050 and $13,600, respectively.

As of March 31, 2022, the Company was in compliance with the representations and covenants for its outstanding debt or obtained waivers for any events of non-compliance.

(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
F - 23
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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 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 obtained from an independent pricing service using unobservable inputs and fall under Level 3 in the fair value hierarchy.

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.
F - 24
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)



Derivative Assets and Liabilities

Derivatives 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.

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.

Trade Claims

Trade claims represent unsecured claims of bankrupt companies and are generally classified under Level 3 in the fair value hierarchy. The fair value is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs are intended to reflect the assumptions a market participant would use in pricing the asset or liability.

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 - 25
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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, 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$— $339,181 $— $339,181 
Obligations of state and political subdivisions— 53,171 — 53,171 
Obligations of foreign governments— 2,475 — 2,475 
Certificates of deposit2,696 — — 2,696 
Asset backed securities— 17,082 442 17,524 
Corporate securities— 153,413 — 153,413 
Total available for sale securities, at fair value2,696 565,322 442 568,460 
Loans, at fair value:
Corporate loans— 5,060 14,053 19,113 
Mortgage loans held for sale— 77,131 — 77,131 
Total loans, at fair value— 82,191 14,053 96,244 
Equity securities:
Invesque24,116 — — 24,116 
Fixed income ETFs51,718 — — 51,718 
Other equity securities37,653 — 7,408 45,061 
Total equity securities113,487 — 7,408 120,895 
Other investments, at fair value:
Corporate bonds— 34,700 — 34,700 
Derivative assets41 5,587 3,569 9,197 
Other— — 896 896 
Total other investments, at fair value41 40,287 4,465 44,793 
Mortgage servicing rights (1)
— — 37,870 37,870 
Total$116,224 $687,800 $64,238 $868,262 
Liabilities: (2)
Securities sold, not yet purchased$3,199 $— $— $3,199 
Derivative liabilities— 2,427 — 2,427 
Contingent consideration payable— — 200 200 
Total$3,199 $2,427 $200 $5,826 
(1)    Included in other assets.
(2)    Included in other liabilities and accrued expenses.

F - 26
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


As of December 31, 2021
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$— $351,178 $— $351,178 
Obligations of state and political subdivisions— 58,660 — 58,660 
Obligations of foreign governments— 2,590 — 2,590 
Certificates of deposit2,696 — — 2,696 
Asset backed securities— 16,832 615 17,447 
Corporate securities— 144,877 — 144,877 
Total available for sale securities, at fair value2,696 574,137 615 577,448 
Loans, at fair value:
Corporate loans— 5,002 2,097 7,099 
Mortgage loans held for sale— 98,484 — 98,484 
Total loans, at fair value— 103,486 2,097 105,583 
Equity securities:
Invesque34,814 — — 34,814 
Fixed income ETFs53,154 — — 53,154 
Other equity securities49,309 — 1,206 50,515 
Total equity securities137,277 — 1,206 138,483 
Other investments, at fair value:
Corporate bonds— 38,965 — 38,965 
Derivative assets113 569 7,514 8,196 
Trade claims— — 19,737 19,737 
Other— — 441 441 
Total other investments, at fair value113 39,534 27,692 67,339 
Mortgage servicing rights (1)
— — 29,833 29,833 
Total$140,086 $717,157 $61,443 $918,686 
Liabilities: (2)
Securities sold, not yet purchased$242 $— $— $242 
Derivative liabilities — 2,141 — 2,141 
Contingent consideration payable— — 200 200 
Total$242 $2,141 $200 $2,583 
(1) Included in other assets.
(2) Included in other liabilities and accrued expenses.

F - 27
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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:    
For the Three Months Ended
March 31,
20222021
Balance at January 1,$61,443 $33,455 
 Net realized and unrealized gains or losses included in:
Earnings7,009 7,015 
OCI(173)20 
Origination of IRLCs15,613 26,347 
Purchases— 568 
Sales and repayments(1,233)(1,743)
Conversions to mortgage loans held for sale(19,558)(27,270)
Settlement of trade claims(18,709)— 
Issuance of term loans12,486 — 
Issuance of equity securities7,360 — 
Balance at March 31,
$64,238 $38,392 
Changes in unrealized gains (losses) included in earnings related to assets still held at period end$(159)$2,390 
Changes in unrealized gains (losses) included in OCI related to assets still held at period end$(173)$20 

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 ofAs of
March 31,
2022		December 31,
2021		Valuation technique
Unobservable input(s) (1)
March 31,
2022		December 31,
2021
AssetsFair ValueRangeWARangeWA
IRLCs$3,569 $7,514 Internal modelPull through rate55%to95%65%55%to95%66%
Mortgage servicing rights37,870 29,833 External modelDiscount rate9%to12%9%10%to12%9%
Cost to service$65to$80$71$65to$80$71
Prepayment speed 5%to80%10%5%to100%15%
Trade claims— 19,737 Internal modelPlan projected recovery rateN/A15%to18%17%
Equity securities7,360 — Internal modelProjected recovery rate15%to17%16%N/A
Corporate loans and related receivables12,486 — Internal modelDiscount rate18%to20%19%N/A
Total$61,285 $57,084 
Liabilities
Contingent consideration payable - Smart AutoCare$200 $200  Cash Flow ModelForecast Cash EBITDA$20,000to$30,000N/A$20,000to$30,000N/A
Actuarial AnalysisAssumed Claim Liabilities $55,000$55,000
Total$200 $200 
(1)    Unobservable inputs were weighted by the relative fair value of the instruments.

F - 28
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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, 2022As of December 31, 2021
Level within
fair value
hierarchy		Fair valueCarrying valueLevel within
fair value
hierarchy		Fair valueCarrying value
Assets:
Debentures (1)
2$21,783 $21,783 2$21,057 $21,057 
Notes receivable, net299,264 99,264 289,788 89,788 
Total assets$121,047 $121,047 $110,845 $110,845 
Liabilities:
Debt, net3$409,518 $400,768 3$419,599 $403,193 
Total liabilities$409,518 $400,768 $419,599 $403,193 
(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 - 29
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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:
For the Three Months Ended
March 31,
20222021
Policy liabilities and unpaid claims balance as of January 1,$331,703 $233,438 
     Less: liabilities of policy-holder account balances, gross(801)(5,419)
     Less: non-insurance warranty benefit claim liabilities(10,785)(30,664)
Gross liabilities for unpaid losses and loss adjustment expenses320,117 197,355 
     Less: reinsurance recoverable on unpaid losses - short duration(165,129)(113,163)
     Less: other lines, gross(576)(247)
Net balance as of January 1, short duration154,412 83,945 
Incurred (short duration) related to:
     Current year81,563 50,013 
     Prior years1,161 (36)
Total incurred82,724 49,977 
Paid (short duration) related to:
     Current year42,706 36,498 
     Prior years6,686 1,914 
Total paid49,392 38,412 
Net balance as of March 31, short duration
187,744 95,510 
     Plus: reinsurance recoverable on unpaid losses - short duration197,607 124,375 
     Plus: other lines, gross658 786 
Gross liabilities for unpaid losses and loss adjustment expenses386,009 220,671 
     Plus: liabilities of policy-holder account balances, gross273 5,120 
     Plus: non-insurance warranty benefit claim liabilities7,595 25,532 
Policy liabilities and unpaid claims balance as of March 31,
$393,877 $251,323 

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,
20222021
Short duration incurred$82,724 $49,977 
Other lines incurred392 1 
Unallocated loss adjustment expenses160 273 
Total losses incurred$83,276 $50,251 
During the three months ended March 31, 2022, the Company experienced an increase in 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.

During the three months ended March 31, 2021, the Company experienced a decrease in prior year development of $36.

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 adverse development emerges quickly and allows for timely reserve strengthening, if necessary, or modifications to our product pricing or offerings.
F - 30
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)



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,
20222021
Service and Administrative Fees:
Service contract revenue$43,213 $33,068 
Motor club revenue12,558 9,184 
Vessel related revenue8,862 5,699 
Other2,121 5,364 
Revenue from contracts with customers$66,754 $53,315 

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 at March 31, 2022.

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.

Vessel Related Revenue
The Company generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered under time or voyage charters, where a contract is entered into for the use of a vessel for a specific voyage or a specific period of time and at a specified daily charter rate. Charter revenues are recognized as earned on the straight-line basis over the term of the charter as service is provided.
 
F - 31
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Revenue is recognized when a charter agreement exists, the vessel is made available to the charterer and collection of the related revenue is reasonably assured. Unearned revenue includes revenue received prior to the balance sheet date relating to services to be rendered after the balance sheet date.

The following table presents the activity in the significant deferred assets and liabilities related to revenue from contracts with customers for the following period:
January 1, 2022March 31, 2022
Beginning balanceAdditionsAmortizationEnding balance
Deferred acquisition costs
Service and Administrative Fees:
Service contract revenue$110,220 $28,906 $9,762 $129,364 
Motor club revenue19,424 9,416 9,997 18,843 
Total$129,644 $38,322 $19,759 $148,207 
Deferred revenue
Service and Administrative Fees:
Service contract revenue$470,399 $68,305 $43,213 $495,491 
Motor club revenue24,870 12,386 12,558 24,698 
Total$495,269 $80,691 $55,771 $520,189 

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,
2022		December 31, 2021
Loans eligible for repurchase$27,686 $36,732 
Mortgage servicing rights37,870 29,833 
Right of use asset - Operating leases25,102 23,870 
Income tax receivable19,492 19,824 
Furniture, fixtures and equipment, net14,650 14,878 
Prepaid expenses9,697 10,722 
Other12,720 10,985 
Total other assets$147,217 $146,844 

The following table presents the depreciation expense related to furniture, fixtures and equipment for the following periods:
Three Months Ended
March 31,
20222021
Depreciation expense related to furniture, fixtures and equipment$838 $777 

F - 32
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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,
2022		December 31, 2021
Accounts payable and accrued expenses$154,131 $149,816 
Loans eligible for repurchase liability27,686 36,732 
Deferred tax liabilities, net34,335 40,049 
Operating lease liability33,185 29,396 
Due to brokers44 10,763 
Commissions payable16,788 20,412 
Securities sold, not yet purchased3,199 242 
Other22,747 19,126 
Total other liabilities and accrued expenses$292,115 $306,536 

(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,
20222021
Other investment income (1)
$16,705 $12,733 
Other (2)
5,039 1,823 
Total other revenue$21,744 $14,556 
(1)    See Note (5) Investments for the components of Other investment income.
(2)    Includes $3,216 and $2,129 for the three months ended March 31, 2022 and 2021, 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,
20222021
General and administrative$4,039 $8,003 
Professional fees6,283 5,440 
Premium taxes5,057 4,936 
Mortgage origination expenses4,602 4,195 
Rent and related4,359 4,136 
Operating expenses from vessels3,602 2,781 
Other3,234 1,876 
Total other expenses$31,176 $31,367 

F - 33
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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 repurchases made during the three months ended March 31, 2022. As of March 31, 2022, the remaining repurchase authorization was $13,669.
Warrants

In March 2022, warrants were exercised for 492,295 shares of Tiptree common stock. As of March 31, 2022, there were warrants for 1,535,109 shares of Tiptree common stock outstanding at an exercise price of $6.95.

Dividends

The Company declared cash dividends per share for the following periods presented below:
Dividends per share for the
Three Months Ended
March 31,
20222021
First quarter(1)
$0.04 $0.04 
(1)    See Note (23) Subsequent Events for when the dividend was declared.

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 National Association of Insurance Commissioners (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, 2022 and December 31, 2021.
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 years ended March 31, 2022 and 2021.

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,
2022		December 31, 2021
Amount available for ordinary dividends of the Company's insurance company subsidiaries$35,145 $18,519 

At March 31, 2022, 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 $35,145. The Company may seek
F - 34
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


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)

The following table presents the activity of AFS securities in accumulated other comprehensive income (loss) (AOCI), net of tax, for the following periods:
Total AOCI
Amount attributable to non-controlling interestsTotal AOCI to Tiptree Inc.
Balance at December 31, 2020$5,702 $(28)$5,674 
Other comprehensive income (losses) before reclassifications(2,995)11 (2,984)
Amounts reclassified from AOCI(98)— (98)
OCI(3,093)11 (3,082)
Balance at March 31, 2021$2,609 $(17)$2,592 
Balance at December 31, 2021$(2,686)$1 $(2,685)
Other comprehensive income (losses) before reclassifications(20,557)50 (20,507)
Amounts reclassified from AOCI86 — 86 
OCI(20,471)50 (20,421)
Balance at March 31, 2022$(23,157)$51 $(23,106)


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 consolidated statements of operations
Components of AOCI20222021
Unrealized gains (losses) on available for sale securities$(110)$128 Net realized and unrealized gains (losses)
Related tax (expense) benefit24 (30)Provision for income tax
Net of tax$(86)$98 


(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 of 6,100,000 shares 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.

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, 20212,344,814 
RSU, stock and option awards granted(211,246)
Forfeited528 
Available for issuance as of March 31, 2022
2,134,096 
(1)    Excludes awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock.
F - 35
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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 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, and 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 issuableWeighted average grant date fair value
Unvested units as of December 31, 2021599,012 $6.59 
Granted
211,246 13.01 
Vested(308,723)6.72 
Forfeited(528)6.26 
Unvested units as of March 31, 2022
501,007 $9.63 

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

For the Three Months Ended March 31,
For the Three Months Ended March 31,
Granted20222021Vested20222021
Directors8,418 25,381 Directors8,418 25,381 
Employees (1)
202,828 — Employees300,305 354,133 
Total Granted211,246 25,381 Total Vested308,723 379,514 
Taxes(47,274)(34,828)
Net Vested261,449 344,686 
(1)    Includes 94,410 shares that vest ratably over three years and 108,418 shares that cliff vest in February 2025 for the three months ended March 31, 2022.

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. 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, 2022, 3,266,667 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 $19.88 as adjusted for cumulative dividends paid to date).

Original Tiptree Share Price TargetNumber of PRSUs that Vest
$20466,667
F - 36
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


$30700,000
$45933,333
$601,166,667

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 March 31, 2022, the Company does not have sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded; as such, the PRSUs are classified as liability awards and will be remeasured at each reporting date until the date of settlement, and expensed using the straight-line method over the requisite service period.

The fair value of the PRSUs are estimated on the date of grant and at each subsequent reporting date 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 is 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 is 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 as of March 31, 2022, which were granted in 2021 and classified as liability awards.

Valuation Input
For the Three Months Ended
March 31, 2022
Assumption
Historical volatility38.29%
Risk-free rate2.40%
Dividend yield1.21%
Cost of equity10.64%
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, such vested awards may be exchanged based on a formula which approximates 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, 2021$2,234 
Granted160 
Vested(935)
Performance assumption adjustment80 
Unvested balance as of March 31, 2022
$1,539 

The net vested balance of subsidiary awards eligible for exchange as of March 31, 2022 translates to 1,778,134 shares of Tiptree common stock.

F - 37
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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. The market requirement is the Company's 20-day volume weighted average per share trading price plus actual cash dividends paid following issuance of the option that exceeds the book value on the option grant date. If the service condition is met, the full amount of the compensation expense will be recognized over the appropriate vesting period whether the market requirement is met or not. The options granted after 2017 include a retirement provision and are amortized over the lesser of the service condition or expected retirement date. There were no options granted during the three months ended March 31, 2022. Book value targets for grants in 2020, 2019, 2018, 2017 and 2016 are $11.52, $10.79, $9.97, $10.14 and $8.96, respectively.

During the year ended December 31, 2021, book value targets for all outstanding options were achieved.

The fair value option grants are estimated on the date of grant 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. Historical volatility was computed based on historical daily returns of the Company’s stock between the grant date and July 1, 2013, the date of the business combination through which Tiptree became a public company. The valuation is 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 grant date. The current quarterly dividend rates in effect as of the date of the grant are used to calculate a spot dividend yield as of the date of grant for use in the model.

There were no stock option awards granted in 2022 or 2021. The following table presents the assumptions used to estimate the fair values of the stock options granted in 2020.

Valuation Input (1)
For the Year Ended
December 31, 2020
AssumptionAverage
Historical volatility27.60%N/A
Risk-free rate1.51%N/A
Dividend yield2.20%N/A
Expected term (years)7.0
(1) Not applicable for the three months ended March 31, 2022 as there were no new grants during the period.

The following table presents the Company's stock option activity for the current period:
Options outstandingWeighted average exercise price (in dollars per stock option)Weighted average grant date value (in dollars per stock option)Options exercisable
Balance, December 31, 20211,715,619 $6.49 $2.29 712,542 
Balance, March 31, 2022
1,715,619 $6.49 $2.29 712,542 
Weighted average remaining contractual term at March 31, 2022 (in years)
5.9

F - 38
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(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,
20222021
Employee compensation and benefits (1)
$6,041 $955 
Director compensation119 110 
Income tax benefit(1,294)(224)
Net stock based compensation expense$4,866 $841 
(1)    Includes $2,303 related to liability awards recorded in other liabilities as of March 31, 2022.

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

As of March 31, 2022
Stock optionsRestricted stock awards and RSUs
Performance Restricted Stock Units
Unrecognized compensation cost related to non-vested awards$64 $1,141 $14,859 
Weighted - average recognition period (in years)0.620.921.2


(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,
20222021
Total income tax expense (benefit)$(86)$8,752 
Effective tax rate (ETR)9.0 %
(1)
22.2 %
(2)
(1)    Lower than the U.S. federal statutory income tax rate of 21%, primarily from the impact of non-deductible expenses and other discrete items.
(2)    Higher than the U.S. federal statutory income tax rate of 21%, due to the effect of state taxes and other discrete items.

(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,
20222021
Rent expense for office leases (1)
$2,289 $2,195 
(1)     Includes lease expense of $110 and $153 for the three months ended March 31, 2022 and 2021, respectively, for assets held for sale.


Litigation
The Company is a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed in February 2006, in the Pike County Circuit Court, in the Commonwealth of Kentucky. A class was certified in June 2010. At issue is whether the coverage period of certain credit disability and life insurance policies issued in Kentucky were limited by the term of the associated loan. The action alleges violations of the Kentucky Consumer Protection Act and certain insurance statutes, common law fraud and breach of contract and the covenant of good faith and fair dealing. Plaintiffs seek compensatory and punitive damages, attorneys’ fees and interest.

F - 39
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


In July 2021, the court entered an Order granting Plaintiffs’ Motion for Partial Summary Judgment as to certain disability policies, ruling that if a class member became disabled during the coverage period, benefits could extend beyond the coverage period until the associated loan was paid off. The Company intends to challenge the court’s ruling. In February 2022, a hearing was held on competing motions for partial summary judgment on the principal claims. A hearing for Plaintiffs’ Motion for Sanctions for Spoliation of Evidence is scheduled for June 9, 2022. The court has not yet ruled on the pending motions. No additional hearings are scheduled and a trial date has not been set.

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.

The following table presents a reconciliation of basic and diluted net income per common share for the following periods:
Three Months Ended
March 31,
20222021
Net income (loss)$(866)$30,640 
Less:
Net income (loss) attributable to non-controlling interests94 2,059 
Net income allocated to participating securities— 602 
Net income (loss) attributable to Tiptree Inc. common shares - basic(960)27,979 
Effect of Dilutive Securities:
Securities of subsidiaries— (574)
Adjustments to income relating to exchangeable interests, net of tax— 1,961 
Net income (loss) attributable to Tiptree Inc. common shares - diluted$(960)$29,366 
Weighted average number of shares of common stock outstanding - basic34,229,011 32,420,982 
Weighted average number of incremental shares of common stock issuable from exchangeable interests and contingent considerations— 3,763,037 
Weighted average number of shares of common stock outstanding - diluted
34,229,011 36,184,019 
Basic net income (loss) attributable to common shares$(0.03)$0.86 
Diluted net income (loss) attributable to common shares$(0.03)$0.81 

(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
F - 40
TIPTREE INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2022
(in thousands, except share data)


Company’s Executive Chairman. The Company is invested in a fund managed by Corvid Peak (the “Corvid Peak Fund”) 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 Fund and IAA, the Company incurred $768 and $308 of management and incentive fees for the three months ended March 31, 2022 and 2021, 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 January 1, 2022, Tiptree’s percentage interest increased to 21.95% (including 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, 2022 and 2021 were not material.

Pursuant to a Partner Emeritus Agreement, Tiptree agreed to provide Mr. Inayatullah, a greater than 5% stockholder of the Company, office space and 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, 2022 and 2021 were not material.

(23) Subsequent Events

On May 3, 2022, the Company’s board of directors declared a quarterly cash dividend of $0.04 per share to holders of common stock with a record date of May 23, 2022, and a payment date of May 31, 2022.




F - 41

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 origination, 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 shareholders’ 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 first quarter 2022 highlights include:

Overall:
•Net loss of $1.0 million compared to net income of $28.6 million for the three months ended March 31, 2021, resulting from growth in insurance and shipping operations, more than offset by declines in mortgage volumes and margins and realized and unrealized losses on investments as compared to gains in 2021.
•Adjusted net income of $15.5 million increased 17.5% from $13.2 million in 2021, driven by improvement in insurance and shipping operations. Adjusted return on average equity was 15.8%, as compared to 13.7% in 2021.
•In October 2021, Tiptree announced a $200 million strategic investment in its insurance subsidiary, Fortegra, by Warburg Pincus, a leading global growth investor. The investment will give Warburg Pincus an approximate 24% ownership in Fortegra on an as converted basis and is expected to close in the second quarter 2022, subject to regulatory approvals.

Insurance:
•Gross written premiums and premium equivalents were $600.9 million for the three months ended March 31, 2022, as compared to $477.2 million for the three months ended March 31, 2021, up 25.9% as a result of growth in admitted and E&S insurance lines as well as growth in fee-based service contract offerings.
•Total revenues increased 26.9% to $282.5 million, from $222.6 million in 2021, driven by increases in earned premiums, net and service and administrative fees.
•The combined ratio improved to 90.5%, as compared to 91.5% in 2021, driven by the continued scalability of Fortegra’s technology and shared service platform, which improved the expense ratio, while the underwriting ratio remained consistent.
•Income before taxes of $14.7 million decreased by $6.8 million as compared to $21.5 million in 2021. Return on average equity was 14.7% in 2022 as compared to 23.9% in 2021. The decrease in both metrics resulted from a combination of revenue growth and an improved combined ratio, more than offset by losses on investments in 2022 compared to gains in 2021.
•Adjusted net income increased 65.3% to $21.1 million, as compared to $12.8 million in 2021. Adjusted return on average equity was 28.2%, as compared to 17.9% in 2021. The increase in both metrics was driven by revenue growth and an improved combined ratio.
•In April 2022, Fortegra acquired all of the equity interests of ITC Compliance GRP Limited for net cash consideration of approximately $15.6 million.

42

Tiptree Capital:
•Mortgage income before taxes was $4.3 million in 2022, as compared to $13.1 million in 2021, with the decrease driven by declines in origination volumes and gain on sale margins, partially offset by higher servicing fees and positive fair value adjustments on the mortgage servicing portfolio. Return on average equity was 22.3% in 2022.
•Maritime transportation income before taxes was $2.7 million in 2022, as compared to $0.5 million in 2021, with the increase driven by a rise in both dry-bulk and tanker charter rates.
•In March 2022, we signed a definitive agreement to sell one of our three dry-bulk vessels for $21.5 million, representing an approximate 50% gain as compared to March 31, 2022 book value, which is expected to close in June 2022.
•In May 2022, $13.1 million of asset based debt associated with tanker investments was prepaid, at a discount of 10% to the outstanding principal balance.

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, 2021. 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, changing regulatory requirements and slowing business conditions can have a material adverse effect on our results of operations or financial condition.

Fortegra generally offers products which have low severity but high frequency loss experiences and are short duration. As a result, the business has historically generated significant fee-based revenues. In general, the types of products Fortegra offers tend to have limited aggregation risk and limited exposure to catastrophic and residual risk. 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 distribution partners’ captive reinsurance entities are over-collateralized with highly liquid investments, primarily cash and cash equivalents. 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. 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. We believe there will continue to be growth opportunities to expand Fortegra’s specialty insurance offerings to other niche products and markets.

Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. During the first quarter of 2022, the U.S. fixed income markets have 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 over time. The average duration of our fixed income available for sale securities is less than three years. During the first quarter of 2022, 2-year treasury yields increased significantly, which resulted in a negative impact on Fortegra’s fixed income portfolio and our book value, as the substantially majority was unrealized. While our asset and liability mix is relatively matched, and we generally have the ability to hold these securities to maturity, 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 quarterly as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, or market risk, including specific company or industry factors. 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 increases in mortgage interest rates. Low mortgage rates driven by the Federal Reserve intervention in mortgage
43

markets, and rising home prices in certain markets, had provided tailwinds to the mortgage markets beginning in the second quarter of 2020 and continuing through 2021, which had benefited our mortgage operations and margins. While current mortgage rates still remain at relative historic lows, the recent rise in rates has resulted in a reversal of those trends, with volumes and margins declining. Offsetting the declines in earnings in our 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 mortgage rates could have a materially negative impact on our mortgage business results of operations, and may only be partially mitigated by the improvement in mortgage servicing revenues.

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. While the majority of our floating rate debt has LIBOR floors that are either at or above current LIBOR rates, a continuation of rising rates could have a material impact on our costs of floating rate debt.

In addition, authorities that regulate LIBOR have announced plans to phase out LIBOR, such that LIBOR is expected to cease to exist as a benchmark for floating interest rates. The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative rate for USD-LIBOR. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR or other alternative markets as replacement reference rates. Such uncertainty may result in a sudden or prolonged increase or decrease in reported LIBOR and/or its replacement rate. To address the phase out of LIBOR, the agreements for our debt facilities include a mechanism to replace LIBOR with an alternative reference rate under specified circumstances, whether that replacement is SOFR or another benchmark. If future rates based upon the successor reference rate are higher than LIBOR rates as currently determined due to illiquidity or other factors, our interest expense could increase.
Common shares of Invesque represent a significant asset on our condensed consolidated balance sheets, both as part of insurance investments and separately in Tiptree Capital. 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. 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.

The maritime transportation industry is highly competitive and fragmented. Demand for shipping capacity is a function of global economic conditions and the related demand for commodities, production and consumption patterns, and is affected by events which interrupt production, trade routes, and consumption. Should rising interest rates and global inflationary factors drive a global recession, both charter rates and utilization rates could be negatively impacted. The shipping industry is cyclical with significant volatility in charter hire rates and profitability, which can change rapidly. General global economic conditions, along with company and industry specific factors, are expected to continue to impact the fair value of our vessels and associated operating results. While there is a current imbalance in supply and demand for shipping capacity, which led to a cyclical high in dry-bulk charter rates, a change in those factors and/or changes in global economic conditions could result in substantially lower charter rates, which could negatively impact our results of operations and the carrying value of our vessels.

RESULTS OF OPERATIONS
The following is a summary of our consolidated financial results for the three months ended March 31, 2022 and 2021. 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.
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Selected Key Metrics
($ in thousands, except per share information)Three Months Ended
March 31,
GAAP:20222021
Total revenues$324,903 $294,688 
Net income (loss) attributable to common stockholders$(960)$28,581 
Diluted earnings per share$(0.03)$0.81 
Cash dividends paid per common share$0.04 $0.04 
Return on average equity(0.9)%31.8 %
Non-GAAP: (1)
Adjusted net income
$15,452 $13,155 
Adjusted return on average equity15.8 %13.7 %
Adjusted EBITDA $(14,905)$45,683 
Book value per share$10.51 $11.63 
(1)    See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Revenues

For the three months ended March 31, 2022, revenues were $324.9 million, which increased $30.2 million, or 10.3%, compared to the prior year period, primarily driven by growth in earned premiums, net, and service and administrative fees in the insurance business, increased revenues from vessels and our mortgage servicing portfolio, partially offset by lower mortgage volumes and margins and net realized and unrealized losses on Invesque and other investments in 2022 compared to gains in 2021.

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 relating 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,
20222021
Net realized and unrealized gains (losses)(1)
$1,518 $10,215 
Net realized and unrealized gains (losses) - Invesque$(10,698)$16,643 
(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, 2022, net loss attributable to common stockholders was $1.0 million, a decrease of $29.5 million from net income of $28.6 million for the three months ended March 31, 2021, primarily driven by net realized and unrealized losses on Invesque and other investments in 2022 compared to gains in 2021, and lower mortgage origination revenues, partially offset by growth in Fortegra’s underwriting and fee operations, increased revenues from our mortgage servicing portfolio and improvement in dry-bulk and tanker shipping rates.

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

Adjusted net income for the three months ended March 31, 2022 was $15.5 million, an increase of $2.3 million, or 17.5%, from the three months ended March 31, 2021. For the three months ended March 31, 2022, adjusted return on average equity was 15.8%, as compared to 13.7% at March 31, 2021, with the increase in both metrics driven by improved performance in our insurance and shipping operations.

Adjusted EBITDA - Non-GAAP

Adjusted EBITDA for the three months ended March 31, 2022 was a loss of $14.9 million, a decrease of $60.6 million from 2021, driven by realized and unrealized losses in 2022 (including impacts to AOCI) compared to gains in 2021, partially
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offset by the improved operating performance noted above.

Book Value per share - Non-GAAP

Total stockholders’ equity was $383.2 million as of March 31, 2022 compared to $397.4 million as of March 31, 2021. In the three months ended March 31, 2022, Tiptree returned $1.4 million to stockholders through dividends paid. Book value per share for the period ended March 31, 2022 was $10.51, a decrease from book value per share of $11.63 as of March 31, 2021. The key drivers of the decrease over the past four quarters were income per share, partially offset by other comprehensive losses, dividends paid of $0.16 per share, and issuance of shares on exercise of warrants and in exchange for vested subsidiary 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, but not limited to, 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,
20222021
Revenues:
Insurance$282,529 $222,563 
Mortgage25,401 34,494 
Tiptree Capital - other16,973 37,631 
Corporate— — 
Total revenues$324,903 $294,688 
Income (loss) before taxes:
Insurance$14,682 $21,528 
Mortgage4,266 13,077 
Tiptree Capital - other(7,651)14,994 
Corporate(12,249)(10,207)
Total income (loss) before taxes$(952)$39,392 
Non-GAAP - Adjusted net income (1):
Insurance$21,124 $12,776 
Mortgage(1,556)7,465 
Tiptree Capital - other2,528 567 
Corporate(6,644)(7,653)
Total adjusted net income$15,452 $13,155 
(1)    See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.


Insurance

Fortegra is a specialty insurance underwriter and service provider, which focuses on niche programs 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.

The following tables present the Insurance segment results for the three months ended March 31, 2022 and 2021.

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Results of Operations - Three Months Ended March 31, 2022 compared to 2021

($ in thousands)Three Months Ended March 31,
20222021Change% Change
Revenues:
Earned premiums, net$208,416 $146,919 $61,497 41.9 %
Service and administrative fees71,835 58,050 13,785 23.7 %
Ceding commissions2,537 3,025 (488)(16.1)%
Net investment income3,167 2,767 400 14.5 %
Net realized and unrealized gains (losses)(6,643)9,672 (16,315)NM%
Other revenue3,217 2,130 1,087 51.0 %
Total revenues$282,529 $222,563 $59,966 26.9 %
Expenses:
Net losses and loss adjustment expenses$83,276 $50,251 $33,025 65.7 %
Member benefit claims21,170 16,923 4,247 25.1 %
Commission expense117,423 88,645 28,778 32.5 %
Employee compensation and benefits22,026 19,089 2,937 15.4 %
Interest expense4,759 4,304 455 10.6 %
Depreciation and amortization4,354 4,191 163 3.9 %
Other expenses14,839 17,632 (2,793)(15.8)%
Total expenses$267,847 $201,035 $66,812 33.2 %
Income (loss) before taxes (1)
$14,682 $21,528 $(6,846)(31.8)%
Key Performance Metrics:
Gross written premiums and premium equivalents
$600,855 $477,233 $123,622 25.9 %
Return on average equity14.7 %23.9 %
Underwriting ratio
77.6 %74.2 %
Expense ratio12.9 %17.3 %
Combined ratio90.5 %91.5 %
Non-GAAP Financial Measures (2):
Adjusted net income
$21,124 $12,776 $8,348 65.3 %
Adjusted return on average equity28.2 %17.9 %
(1)    Net income was $11,018 for the three months ended March 31, 2022 compared to $17,099 for the three months ended March 31, 2021.
(2)    See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Revenues

Earned Premiums, net

Earned premiums, net represent 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

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.

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Ceding Commissions and Other Revenue

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

We earn investment income 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)

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 are carried at fair value with unrealized gains and losses included in this line.

Revenues - Three Months Ended March 31, 2022 compared to 2021

For the three months ended March 31, 2022, total revenues increased 26.9%, to $282.5 million, as compared to $222.6 million for the three months ended March 31, 2021. Earned premiums, net of $208.4 million increased $61.5 million, or 41.9%, driven by growth in commercial, credit and warranty insurance offerings. Service and administrative fees of $71.8 million increased by 23.7% driven by growth in warranty and consumer goods service contract revenues. Ceding commissions of $2.5 million decreased by $0.5 million, or 16.1%, driven by lower ceding fees as less business was ceded in certain credit insurance and collateral protection programs. Other revenues increased by $1.1 million, or 51.0%, driven by growth in premium finance product offerings.

For the three months ended March 31, 2022, 27.5% 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, 2022, 78.7% 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, 2022, net investment income was $3.2 million as compared to $2.8 million in the prior year period, primarily driven by growth in investments. Net realized and unrealized losses were $6.6 million, a decrease of $16.3 million, as compared to net realized and unrealized gains of $9.7 million in the prior year period, primarily driven by the change in fair value of certain equity and fixed income securities carried at fair value.

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

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. Loss occurrences in insurance products are characterized by low severity and high frequency. 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.

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Member Benefit Claims

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 Expense

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

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

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 and Amortization

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, 2022 compared to 2021

For the three months ended March 31, 2022, net losses and loss adjustment expenses were $83.3 million, member benefit claims were $21.2 million and commission expense was $117.4 million, as compared to $50.3 million, $16.9 million and $88.6 million, respectively, for the three months ended March 31, 2021. The increase in net losses and loss adjustment expenses of $33.0 million, or 65.7%, was driven by growth in U.S. and European Insurance lines and the shift in business mix toward commercial lines, which tend to have a higher loss ratios and lower commission ratios. In addition, the impact of prior year development of $1.2 million 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 $4.2 million, or 25.1%, was driven by growth in vehicle service contracts. Commission expense increased by $28.8 million, or 32.5%, in line with the growth in earned premiums, net and service and administrative fees.

For the three months ended March 31, 2022, employee compensation and benefits were $22.0 million and other expenses were $14.8 million, as compared to $19.1 million and $17.6 million, respectively, for the three months ended March 31, 2021. Employee compensation and benefits increased by $2.9 million, or 15.4%, driven by investments in human capital associated with growth in admitted, E&S and warranty lines. Other expenses decreased by $2.8 million, or 15.8%, driven primarily by the deferral of current and certain prior year marketing and advertising costs aligned with the deferral of revenues from Sky Auto, partially offset by increases in premium taxes, which grew in line with earned premiums.

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For the three months ended March 31, 2022, interest expense was $4.8 million as compared to $4.3 million for the three months ended March 31, 2021. The increase in interest expense of $0.5 million, or 10.6%, was primarily driven by increased asset based debt for premium finance lines.

For the three months ended March 31, 2022, depreciation and amortization expense was $4.4 million, including $3.9 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare and Sky Auto, as compared to $4.2 million, including $3.8 million of intangible amortization from purchase accounting in 2021.
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 and three months ended March 31, 2022 and 2021.
($ in thousands)Three Months Ended
March 31,
20222021
U.S. Insurance$407,020 $335,848 
U.S. Warranty Solutions162,683 125,329 
Europe Warranty Solutions31,152 16,056 
Total$600,855 $477,233 

Total gross written premiums and premium equivalents for the three months ended March 31, 2022 were $600.9 million as compared to $477.2 million in 2021. The growth of $123.6 million, or 25.9%, is driven by a combination of factors including growing Fortegra’s distribution partner network, expanding 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, 2022, U.S. Insurance increased by $71.2 million, or 21.2%, driven by growth in commercial, E&S, and warranty insurance lines. For the three months ended March 31, 2022, U.S. Warranty Solutions increased by $37.4 million, or 29.8%, driven by growth in auto and roadside assistance service contracts. Europe Warranty Solutions increased by $15.1 million, or 94.0%, driven by growth in auto and consumer goods warranty programs.

The growth in gross written premiums and premium equivalents, combined with higher retention in select products for the three months ended March 31, 2022, has resulted in an increase of $432.5 million, or 32.8%, in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to March 31, 2021. As of March 31, 2022, unearned premiums and deferred revenues were $1,749.1 million, as compared to $1,316.6 million as of March 31, 2021.

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.

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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 90.5% for the three months ended March 31, 2022, which consisted of an underwriting ratio of 77.6% and an expense ratio of 12.9%, as compared to 91.5%, 74.2% and 17.3%, respectively, for the three months ended March 31, 2021. The improvement in the combined ratio year over year is primarily driven by the continued scalability of the technology and shared service platform, decreasing the expense ratio.

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 14.7% for the three months ended March 31, 2022, as compared to 23.9% for the three months ended March 31, 2021, with the decrease in net income and annualized return on average equity driven by net realized and unrealized losses in the 2022 period compared to net realized and unrealized gains in the 2021 period, partially offset by revenue growth and an improved 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 table shows underwriting and fee revenues and underwriting and fee margin by business mix for the three months ended March 31, 2022 and 2021.
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Three Months Ended March 31,
($ in thousands)
Underwriting and Fee Revenues (1)
Underwriting and Fee Margin (1)
2022202120222021
U.S. Insurance$210,988 $149,813 $39,879 $30,190 
U.S. Warranty Solutions61,049 51,119 19,441 20,638 
Europe Warranty Solutions13,968 9,192 4,816 3,477 
Total$286,005 $210,124 $64,136 $54,305 
(1)    See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.


Underwriting and fee revenues were $286.0 million for the three months ended March 31, 2022 as compared to $210.1 million for the three months ended March 31, 2021. Total underwriting and fee revenues increased $75.9 million, or 36.1%, driven by growth in all business lines. The increase in U.S. Insurance was $61.2 million, or 40.8%, driven by growth in commercial, E&S, and credit insurance lines. The increase in U.S. Warranty Solutions was $9.9 million, or 19.4%, driven by growth in auto, roadside assistance, and premium finance offerings. Europe Warranty Solutions increased by $4.8 million, or 52.0%, driven by growth in auto and consumer goods service contracts.

Underwriting and fee margin was $64.1 million for the three months ended March 31, 2022 as compared to $54.3 million for the three months ended March 31, 2021. Total underwriting and fee margin increased $9.8 million, or 18.1%, driven by growth in U.S. Insurance and Europe Warranty Solutions. U.S. Insurance grew by $9.7 million, or 32.1%, as the underwriting ratio was consistent year-over-year at 81.1% while revenues increased from growth in admitted and E&S lines. U.S. Warranty Solutions decreased by $1.2 million, or 5.8%, primarily driven by the deferral of revenues associated with contracts acquired by Sky Auto. This current period revenue deferral for Sky Auto was offset by the deferral of direct marketing costs in other expenses and therefore had minimal impact on the combined ratio or income before taxes. Europe Warranty Solutions increased by $1.3 million, or 38.5%, driven by growth in auto and consumer goods service contracts in those markets.

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, 2022, adjusted net income and adjusted return on average equity were $21.1 million and 28.2%, respectively, as compared to $12.8 million and 17.9%, respectively, for the three months ended March 31, 2021. The improvement in both metrics was driven by the growth in underwriting and fee revenues in addition to a 1.0 percentage point improvement in the combined ratio.

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.

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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, 2022, net investment income was $3.2 million as compared to $2.8 million in the prior year period, driven by growth in investments. Net realized and unrealized losses were $6.6 million, a decrease of $16.3 million, driven by realized and unrealized losses on certain equity securities and other investments, including fixed income securities carried at fair value, in the 2022 period as compared to gains in the 2021 period.

Unrealized losses impacting OCI for the three months ended March 31, 2022 were $26.4 million, driven by the rise in interest rates 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, 2022, Tiptree Capital - Other includes our Invesque shares, maritime transportation operations, and the mortgage operations of Luxury, which is classified as held for sale on the condensed consolidated balance sheets.

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. The Company is also an approved issuer and servicer for Ginnie Mae. The Company originates residential mortgage loans through its retail distribution channel (directly to consumers) in 39 states and the District of Columbia as of March 31, 2022.

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

Results of Operations
($ in thousands)Three Months Ended
March 31,
20222021
Revenues:
Net realized and unrealized gains (losses)$20,414 $30,077 
Other revenue4,987 4,417 
Total revenues$25,401 $34,494 
Expenses:
Employee compensation and benefits$14,425 $15,342 
Interest expense326 298 
Depreciation and amortization214 225 
Other expenses6,170 5,552 
Total expenses$21,135 $21,417 
Income (loss) before taxes$4,266 $13,077 
Key Performance Metrics:
Origination volumes$354,413 $419,879 
Gain on sale margins4.3 %6.0 %
Return on average equity22.3 %60.9 %
Non-GAAP Financial Measures (1):
Adjusted net income
$(1,556)$7,465 
Adjusted return on average equity(10.6)%45.6 %
(1)    See “Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Revenues
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Net Realized and Unrealized Gains (Losses)

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

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 - Three Months Ended March 31, 2022 compared to 2021

For the three months ended March 31, 2022, $354.4 million of loans were funded, compared to $419.9 million for 2021, a decrease of $65.5 million, or 15.6%. Origination volumes in 2022 declined given the rise in mortgage interest rates, partially offset by home price appreciation and cash-out refinancing activity in the United States. Gain on sale margins decreased to 4.3% for the three months ended March 31, 2022, down approximately 170 basis points from 6.0% for the three months ended March 31, 2021.

Net realized and unrealized gains for the three months ended March 31, 2022 were $20.4 million, compared to $30.1 million for 2021, a decrease of $9.7 million or 32.1%. The primary driver of decreased gain on sale revenues was the decline in volumes and gain on sale margins, partially offset by positive fair value adjustments in mortgage servicing rights of $6.3 million as interest rates increased from the year ended December 31, 2021.

Other revenue for the three months ended March 31, 2022 was $5.0 million, compared to $4.4 million for 2021, an increase of $0.6 million, or 12.9%, driven primarily by higher servicing fees from an increase in loans serviced. As of March 31, 2022, the mortgage servicing asset recorded in other assets on the balance sheet was $37.9 million, an increase from $29.8 million as of December 31, 2021.

Expenses

Employee Compensation and Benefits

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

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 and Amortization

Depreciation expense is mainly associated with furniture, fixtures and equipment while amortization expense is primarily associated with a trade name and internally developed software.

Other Expenses

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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 - Three Months Ended March 31, 2022 compared to 2021
For the three months ended March 31, 2022, employee compensation and benefits were $14.4 million, compared to $15.3 million in 2021, a decrease of $0.9 million or 6.0%. This decrease was driven primarily by reduced commissions on lower origination volumes.

For the three months ended March 31, 2022 and 2021, interest expense and depreciation and amortization expense were both flat, at $0.3 million and $0.2 million, respectively.

For the three months ended March 31, 2022, other expenses were $6.2 million, compared to $5.6 million in 2021, with the $0.6 million increase driven by increased loan origination expenses, including marketing costs.

Income (loss) before taxes

Income before taxes for the three months ended March 31, 2022 was $4.3 million, compared to income before taxes of $13.1 million in 2021. The primary driver of the decrease was a decline in volumes and margins, partially offset by higher servicing fees attributable to the larger servicing portfolio, in addition to positive fair value adjustments on the mortgage servicing rights asset, as compared to 2021.

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 revenueIncome (loss) before taxes
2022202120222021
Senior living (Invesque)$(8,851)$13,766 $(8,851)$13,766 
Maritime transportation8,862 5,699 2,653 513 
Other (1)
16,962 18,166 (1,453)715 
Total$16,973 $37,631 $(7,651)$14,994 
(1)    Includes our 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 held for sale mortgage originator; realized and unrealized gains and losses on the Company’s investment holdings (primarily Invesque); and charter revenue from vessels within the Company’s maritime transportation operations.

Revenues for the three months ended March 31, 2022 were $17.0 million compared to $37.6 million for 2021. The primary driver of the decrease in revenues for the three months ended March 31, 2022 was unrealized losses on our investment in Invesque in 2022 compared to unrealized gains in 2021, partially offset by increased dry-bulk and tanker charter rates earned by the maritime transportation business.

Income (loss) before taxes

The loss before taxes from Tiptree Capital - Other for the three months ended March 31, 2022 was $7.7 million, compared to income before taxes of $15.0 million in 2021. The primary driver of the decrease was unrealized losses in 2022 compared to gains in 2021 on our investment in Invesque, partially offset by increased income before taxes in our maritime transportation business due to the same factors that had a positive impact on maritime transportation revenues.

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Adjusted net income - Non-GAAP(1)
($ in thousands)Three Months Ended
March 31,
20222021
Senior living (Invesque)$— $— 
Maritime transportation2,480 521 
Other48 46 
Total $2,528 $567 
(1)    See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Adjusted net income increased to $2.5 million for the three months ended March 31, 2022 compared to $0.6 million in 2021. The increase was driven by the improvement in maritime transportation operations.

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

Results of Operations
($ in thousands)Three Months Ended
March 31,
20222021
Employee compensation and benefits$2,368 $2,067 
Employee incentive compensation expense4,663 3,553 
Interest expense2,243 2,564 
Depreciation and amortization198 198 
Other expenses2,777 1,825 
Total expenses$12,249 $10,207 
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, was $7.0 million for the three months ended March 31, 2022, compared to $5.6 million for 2021, driven by an increase in performance related employee incentive compensation. Of the incentive compensation expense in the three months ended March 31, 2022, $3.8 million was stock-based compensation expense primarily related to awards tied to the increase in Tiptree’s stock price over the past twelve months. Interest expense for the three months ended March 31, 2022 and 2021 was $2.2 million and $2.6 million, respectively. As of March 31, 2022, the outstanding borrowing on the facility was $112.5 million, compared to $114.1 million at December 31, 2021. Other expenses of $2.8 million increased by $1.0 million from the three months ended March 31, 2021, primarily driven by increased consulting, legal and professional fees.

Provision for Income Taxes

The total income tax benefit of $0.1 million for the three months ended March 31, 2022, and the total income tax expense of $8.8 million for the three months ended March 31, 2021 are reflected as components of net income (loss).

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 March 31, 2022 was lower than the U.S. statutory income tax rate of 21.0%, primarily from the impact of non-deductible compensation and other discrete items. For the three months ended March 31, 2021, the Company’s effective tax rate was equal to 22.2%. The effective rate for the three months ended March 31, 2021 was higher than the U.S. federal statutory income tax rate of 21.0%, primarily from the impact of state taxes, partially offset by discrete items.

Balance Sheet Information

Tiptree’s total assets were $3,600.2 million as of March 31, 2022, compared to $3,599.1 million as of December 31, 2021. The $1.1 million increase in assets is primarily attributable to the growth in the Insurance segment, partially offset by unrealized losses on investments.
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Total stockholders’ equity was $383.2 million as of March 31, 2022, compared to $400.2 million as of December 31, 2021, primarily driven by the comprehensive loss on available for sale securities attributable to common stockholders for three months ended March 31, 2022. As of March 31, 2022, there were 34,877,897 shares of common stock outstanding as compared to 34,124,153 as of December 31, 2021, with the increase driven by the exercise of warrants and the vesting of share-based incentive compensation.

The following table is a summary of certain balance sheet information:
As of March 31, 2022
Tiptree Capital
($ in thousands)InsuranceMortgageOtherCorporateTotal
Total assets$3,168,813 $182,828 $248,852 $(295)$3,600,198 
Corporate debt$160,000 $— $— $112,500 $272,500 
Asset based debt48,551 67,990 13,050 — 129,591 
Tiptree Inc. stockholders’ equity$282,875 $56,431 $110,620 $(83,293)$366,633 
Non-controlling interests11,419 1,087 2,952 1,062 16,520 
Total stockholders’ equity$294,294 $57,518 $113,572 $(82,231)$383,153 

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.

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

The following tables present revenue and expenses by business mix. 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,
20222021
Total revenues$282,529 $222,563 
Less: Net investment income(3,167)(2,767)
Less: Net realized and unrealized gains (losses)6,643 (9,672)
Underwriting and fee revenues$286,005 $210,124 

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,
20222021
Income (loss) before income taxes$14,682 $21,528 
Less: Net investment income(3,167)(2,767)
Less: Net realized and unrealized gains (losses)6,643 (9,672)
Plus: Depreciation and amortization4,354 4,191 
Plus: Interest expense4,759 4,304 
Plus: Employee compensation and benefits22,026 19,089 
Plus: Other expenses14,839 17,632 
Underwriting and fee margin$64,136 $54,305 

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
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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.

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, 2022
Tiptree Capital
($ in thousands)InsuranceMortgageOtherCorporateTotal
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 expense2,319 — — 3,839 6,158 
Plus: Non-recurring expenses23 — 133 — 156 
Plus: Non-cash fair value adjustments— — 1,514 — 1,514 
Less: Tax on adjustments(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 equity28.2 %(10.6)%8.6 %NM%15.8 %

Three Months Ended March 31, 2021
Tiptree Capital
($ in thousands)InsuranceMortgageOtherCorporateTotal
Income (loss) before taxes$21,528 $13,077 $14,994 $(10,207)$39,392 
Less: Income tax (benefit) expense(4,429)(3,096)(2,907)1,680 (8,752)
Less: Net realized and unrealized gains (losses)(9,624)(3,420)(13,766)— (26,810)
Plus: Intangibles amortization (1)
3,834 — — — 3,834 
Plus: Stock-based compensation expense372 165 8 520 1,065 
Plus: Non-recurring expenses270 — — — 270 
Plus: Non-cash fair value adjustments— — (657)— (657)
Less: Tax on adjustments825 739 2,895 354 4,813 
Adjusted net income$12,776 $7,465 $567 $(7,653)$13,155 
Adjusted net income$12,776 $7,465 $567 $(7,653)$13,155 
Average stockholders’ equity$285,885 $65,533 $113,218 $(79,166)$385,470 
Adjusted return on average equity17.9 %45.6 %2.0 %NM%13.7 %
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.
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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,
20222021
Net income (loss) attributable to common stockholders$(960)$28,581 
Add: net (loss) income attributable to non-controlling interests 94 2,059 
Corporate debt related interest expense(1)
5,877 6,064 
Consolidated provision (benefit) for income taxes(86)8,752 
Depreciation and amortization6,156 5,934 
Non-cash fair value adjustments(2)
124 (1,980)
Non-recurring expenses(3)
156 270 
Unrealized gains (losses) on AFS securities(26,266)(3,997)
Adjusted EBITDA$(14,905)$45,683 
(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.
(3)
Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs.
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,
20222021
Total stockholders’ equity$383,153 $397,399 
Less: Non-controlling interests16,520 18,956 
Total stockholders’ equity, net of non-controlling interests$366,633 $378,443 
Total common shares outstanding34,878 32,538 
Book value per share$10.51 $11.63 


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 interest payments on the Fortress credit facility, compensation, professional fees, office rent and insurance costs. In February 2020, we refinanced our existing facility with Fortress, extending the maturity to February 2025 and increasing the principal amount to $125 million, generating approximately $53 million of cash after repaying the existing facility and expenses. A portion of those funds were invested in Fortegra to fund growth, with the remainder used to provide additional liquidity. As a condition to the closing of the WP Transaction, the Company is required to assign the Fortress credit facility to Fortegra, which would use proceeds from the WP Transaction to pay the unpaid principal balance of the Fortress credit facility. In addition, on or prior to the closing of the WP Transaction, Fortegra would have certain of its subsidiaries repay $30.0 million principal balance of aggregate intercompany promissory notes to Tiptree Holdings LLC, plus accrued interest.

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
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Pincus 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, 2022, cash and cash equivalents, excluding restricted cash, were $178.0 million, compared to $175.7 million at December 31, 2021, an increase of $2.2 million primarily as a result of additional gross written premium and premium equivalents at Fortegra.

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,
2022202120222021
Insurance$160,000 $180,380 $3,446 $3,500 
Corporate112,500 118,750 2,430 2,563 
Total $272,500 $299,130 $5,876 $6,063 

As of March 31, 2022, the credit facility with Fortress carries a rate of LIBOR (with a minimum LIBOR rate of 1.0%), plus a margin of 6.75% per annum. The agreement requires quarterly principal payments of approximately $1.56 million. See Note (10) Debt, net in the notes to condensed consolidated financial statements for details.

On August 4, 2020, Fortegra entered into an Amended and Restated Credit Agreement by and among Fortegra and its wholly-owned 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 $200.0 million revolving credit facility, all of which is available for the issuance of letters of credit, with a sub-limit of $17.5 million for swing loans, and matures on August 4, 2023. As of March 31, 2022, we had no outstanding borrowings under this facility.

Consolidated Comparison of Cash Flows
($ in thousands)Three Months Ended
March 31,
Total cash provided by (used in):20222021
Net cash (used in) provided by:
Operating activities$149,067 $27,330 
Investing activities(18,732)(42,364)
Financing activities(124,703)(630)
Net increase (decrease) in cash, cash equivalents and restricted cash$5,632 $(15,664)

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Operating Activities

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.

Cash provided by operating activities was $27.3 million for the three months ended March 31, 2021. In 2021, the primary sources of cash from operating activities included consolidated net income (excluding unrealized gains and losses), proceeds from mortgage loans outpacing originations and growth in unearned premiums and net deferred revenues, partially offset by increases in deferred acquisition costs and other assets in addition to decreases in other liabilities and accrued expenses and reinsurance payables.

Investing Activities

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.

Cash used in investing activities was $42.4 million for the three months ended March 31, 2021. In 2021, 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 used in 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.

Cash used in financing activities was $0.6 million for the three months ended March 31, 2021. In 2021, the primary use of cash from financing activities was the repurchase of $2.5 million of the Company’s common stock and the payment of $1.3 million in dividends, which was partially offset by proceeds from borrowings in excess of principal repayments in our mortgage operations.

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, 2021.

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 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, 2021 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, 2022.

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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.

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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, 2021. There have been no material changes in those risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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, 2022 and December 31, 2021
F- 3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021
F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021
F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended March 21, 2022 and 2021
F- 6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021
F- 7
F- 8
  
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.
64

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 5, 2022By:/s/ Michael Barnes
Michael Barnes
Executive Chairman
Date: May 5, 2022By:/s/ Jonathan Ilany
Jonathan Ilany
Chief Executive Officer
Date:May 5, 2022By:/s/ Sandra Bell
Sandra Bell
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)


65

EXHIBIT INDEX
Exhibit No.
Description
10.1
10.2
31.1
31.2
31.3
32.1
32.2
32.3
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, 2022 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, 2022 and December 31, 2021, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 and (vi) the Notes to the Condensed Consolidated Financial Statements.





66

EXHIBIT 10.2

AMENDMENT #3 TO EMERITUS AGREEMENT

This Amendment, effective as of February 17, 2022 (this “Amendment”), amends the Emeritus Agreement, dated as of December 20, 2019, as amended by Amendment No. 1, dated January 1, 2021 and Amendment No. 2, dated January 1, 2022 (together, the “Emeritus Agreement”), between Tiptree Inc. (the “Company”) and Arif Inayatullah (“Inayatullah” and together with the Company, the “Parties”). Unless context requires otherwise, capitalized terms used herein but not defined herein shall have the meanings given to them in the Emeritus Agreement.
WHEREAS, pursuant to paragraph 6 of the Emeritus Agreement, the Emeritus Agreement may only be amended by a written instrument executed by each of the Parties.
NOW, THEREFORE, in consideration of the mutual promises and agreements made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Emeritus Agreement as follows:
Section 1.Amendment.
(a)Paragraph 2, subsection b. of the Emeritus Agreement is hereby amended to amend and restate in full with the following:
b. Reimbursement of 85% of the actual cost of the annual base compensation and healthcare costs of the Holdings Employee and 100% of healthcare costs for Inayatullah for periods prior to January 1, 2021.
Section 2.Continuance of Emeritus Agreement; Binding Effect; Governing Law. All provisions of the Emeritus Agreement, as amended hereby, shall remain in full force and effect and unchanged, except as provided herein. From and after the date hereof, all references to the Emeritus Agreement shall refer to the Emeritus Agreement, as amended by this Amendment. If any provision of this Amendment conflicts with the Emeritus Agreement, the provisions of this Amendment shall control. This Amendment is binding upon and shall inure to the benefit of the Parties, and their respective successors and permitted assigns. Except to the extent preempted by federal law, this Amendment shall be construed in accordance with the laws of the state of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with the laws of the state of New York, without regard to the conflicts of laws provisions of New York or any other jurisdiction.
Section 3.Waivers. No term or provision of this Amendment may be waived or modified unless such waiver or modification is in writing and signed by the party against whom such waiver or modification is sought to be enforced.
Section 4.Execution in Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to each of the parties hereto. Delivery of an executed counterpart of a signature page to this Amendment by facsimile, .pdf or other electronic means shall be as effective as delivery of a manually executed counterpart of this Amendment.



IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment effective as of the date first written above.
TIPTREE INC.
By:/s/Jonathan Ilany
Title: Chief Executive Officer
/s/Arif Inayatullah
By: Arif Inayatullah
EXHIBIT 31.1


CERTIFICATIONS
I, Michael Barnes, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Tiptree Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2022
/s/ Michael Barnes
Michael Barnes
Executive Chairman
EXHIBIT 31.2


CERTIFICATIONS
I, Jonathan Ilany, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Tiptree Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2022
/s/ Jonathan Ilany
Jonathan Ilany
Chief Executive Officer
EXHIBIT 31.3


CERTIFICATIONS
I, Sandra Bell, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Tiptree Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2022
/s/ Sandra Bell
Sandra Bell
Chief Financial Officer
EXHIBIT 32.1


Certification Pursuant to Section 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Tiptree Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Barnes, the Executive Chairman of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that;
(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael Barnes
Michael Barnes
Executive Chairman
Date: May 5, 2022


EXHIBIT 32.2


Certification Pursuant to Section 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Tiptree Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan Ilany, the Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that;
(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Jonathan Ilany
Jonathan Ilany
Chief Executive Officer
Date: May 5, 2022


EXHIBIT 32.3


Certification Pursuant to Section 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    In connection with the Quarterly Report of Tiptree Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sandra Bell, the Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that;
(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Sandra Bell
Sandra Bell
Chief Financial Officer
Date: May 5, 2022