TIPTREE INC. (Form: 10-Q, Received: 11/02/2022 16:17:36)

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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 September 30, 2022


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

For the transition period from to

Commission File Number: 001-33549

Tiptree Inc.

(Exact name of Registrant as Specified in Its Charter)

Maryland 38-3754322

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

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

(Address of Principal Executive Offices) Zip Code

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

Former address: 299 Park Avenue, 13th Floor, New York, New York 10171

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


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

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

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

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

Large accelerated filer ¨ Accelerated filer x

Non-accelerated filer ¨ Smaller reporting company ☐

Emerging growth company ☐

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

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

As of November 1, 2022, there were 36,252,621 shares, par value $0.001, of the registrant’s common stock outstanding.

Tiptree Inc.

Quarterly Report on Form 10-Q

September 30, 2022

Table of Contents


ITEM						Page Number
PART I. Financial Information						F- 1
Item 1. Financial Statements (Unaudited)						F- 3
Condensed Consolidated Balance Sheets as of Sept ember 30, 2022 and December 31, 2021						F- 3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021						F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021						F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended September 30, 2022 and 2021						F- 6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021						F- 8
Notes to Condensed Consolidated Financial Statements						F- 9
(1) Organization						F- 9
(2) Summary of Significant Accounting Policies						F- 9
(3) Acquisitions						F- 10
(4) Assets and Liabilities Held for Sale						F- 11
(5) Operating Segment Data						F- 11
(6) Investments						F- 14
(7) Notes and Accounts Receivable, net						F- 19
(8) Reinsurance Receivables						F- 20
(9) Goodwill and Intangible Assets, net						F- 23
(10) Derivative Financial Instruments and Hedging						F- 24
(11) Debt, net						F- 26
(12) Fair Value of Financial Instruments						F- 27
(13) Liability for Unpaid Claims and Claim Adjustment Expenses						F- 35
(14) Revenue from Contracts with Customers						F- 36
(15) Other Assets and Other Liabilities and Accrued Expenses						F- 37
(16) Other Revenue and Other Expenses						F- 38
(17) Stockholders’ Equity						F- 39
(18) Accumulated Other Comprehensive Income (Loss)						F- 41
(19) Stock Based Compensation						F- 41
(20) Income Taxes						F- 45
(21) Commitments and Contingencies						F- 45
(22) Earnings Per Share						F- 46
(23) Related Party Transactions						F- 47
(24) Subsequent Events						F- 47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						49
Item 3. Quantitative and Qualitative Disclosures About Market Risk						72
Item 4. Controls and Procedures						72

PART II. Other Information						74
Item 1. Legal Proceedings						74
Item 1A. Risk Factors						74
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						74
Item 3. Defaults Upon Senior Securities						74
Item 4. Mine Safety Disclosures						74
Item 5. Other Information						74
Item 6. Exhibits, Financial Statement Schedules						75
Signatures						76

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.

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

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

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

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

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

“E&S” means excess and surplus.

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

“Fannie Mae” means Federal National Mortgage Association.

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

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

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

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

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

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

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

“Freddie Mac” means Federal Home Loan Mortgage Corporation.

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

“Ginnie Mae” means Government National Mortgage Association.

“GSE” means government-sponsored enterprise.

F - 1

“Invesque” means Invesque Inc.

“ITC” means ITC Compliance GRP Limited

“Luxury” means Luxury Mortgage Corp.

“NAIC” means the National Association of Insurance Commissioners.

“Reliance” means Reliance First Capital, LLC.

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

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

“Sky Auto” means Sky Services LLC.

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

“SOFR” means the Secured Overnight Financing Rate.

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

“Tiptree Holdings” means Tiptree Holdings LLC.

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

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

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

F - 2

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


	As of
	September 30, 2022		December 31, 2021


Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	584,081	$	577,448
Loans, at fair value	70,784		105,583
Equity securities	85,103		138,483
Other investments	76,535		168,656
Total investments	816,503		990,170
Cash and cash equivalents	503,488		175,718
Restricted cash	10,344		19,368
Notes and accounts receivable, net	481,985		454,369
Reinsurance receivables	1,194,327		880,836
Deferred acquisition costs	485,199		379,373
Goodwill	185,944		179,103
Intangible assets, net	120,340		122,758
Other assets	162,118		146,844
Assets held for sale	33,836		250,608
Total assets	$	3,994,084	$	3,599,147

Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	266,255	$	393,349
Unearned premiums	1,349,357		1,123,952
Policy liabilities and unpaid claims	512,924		331,703
Deferred revenue	628,876		534,863
Reinsurance payable	317,199		265,569
Other liabilities and accrued expenses	399,899		306,536
Liabilities held for sale	—		242,994
Total liabilities	$	3,474,510	$	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, 36,247,257 and 34,124,153 shares issued and outstanding, respectively	36		34
Additional paid-in capital	380,196		317,459
Accumulated other comprehensive income (loss), net of tax	(47,670)		(2,685)
Retained earnings	54,717		68,146
Total Tiptree Inc. stockholders’ equity	387,279		382,954
Non-controlling interests:
Fortegra preferred interests	77,679		—
Common interests	54,616		17,227
Total non-controlling interests	132,295		17,227
Total stockholders’ equity	519,574		400,181
Total liabilities and stockholders’ equity	$	3,994,084	$	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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Earned premiums, net	$	237,877	$	175,026	$	662,234	$	498,903
Service and administrative fees	83,423		69,664		232,883		191,414
Ceding commissions	4,023		2,722		9,886		8,827
Net investment income	3,632		3,330		10,164		9,331
Net realized and unrealized gains (losses)	17,159		14,805		50,050		120,268
Other revenue	17,364		21,058		63,007		52,237
Total revenues	363,478		286,605		1,028,224		880,980
Expenses:
Policy and contract benefits	121,242		80,831		330,353		237,198
Commission expense	137,559		104,392		382,435		292,580
Employee compensation and benefits	38,210		48,643		142,927		147,260
Interest expense	5,503		8,657		24,837		26,890
Depreciation and amortization	5,549		6,119		17,714		18,261
Other expenses	30,290		34,379		100,978		104,340
Total expenses	338,353		283,021		999,244		826,529
Income (loss) before taxes	25,125		3,584		28,980		54,451
Less: provision (benefit) for income taxes	5,068		237		31,537		11,416
Net income (loss)	20,057		3,347		(2,557)		43,035
Less: net income (loss) attributable to non-controlling interests	5,834		1,339		6,588		4,477
Net income (loss) attributable to common stockholders	$	14,223	$	2,008	$	(9,145)	$	38,558

Net income (loss) per common share:
Basic earnings per share	$	0.39	$	0.06	$	(0.26)	$	1.15
Diluted earnings per share	$	0.38	$	0.06	$	(0.26)	$	1.11

Weighted average number of common shares:
Basic	36,304,385		33,558,106		35,261,659		32,963,451
Diluted	36,783,248		34,132,182		35,261,659		35,025,211

Dividends declared per common share	$	0.04	$	0.04	$	0.12	$	0.12

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	20,057	$	3,347	(2,557)		$	43,035

Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available for sale securities:






Change in unrealized gains (losses) on available for sale securities	(18,125)		(1,970)		(56,509)		(5,845)
Change in unrealized currency translation adjustments	(7,191)		—		(14,256)		—
Related (provision) benefit for income taxes	4,257		432		13,420		1,310
Other comprehensive income (loss), net of tax	(21,059)		(1,538)		(57,345)		(4,535)
Comprehensive income (loss)	(1,002)		1,809		(59,902)		38,500
Less: comprehensive income (loss) attributable to non-controlling interests	1,479		1,333		1,421		4,459
Comprehensive income (loss) attributable to common stockholders	$	(2,481)	$	476	$	(61,323)	$	34,041

See accompanying notes to condensed consolidated financial statements.

F - 5

TIPTREE INC. AND SUBSIDIARIES

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

(in thousands, except shares)


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

Amortization of share-based incentive compensation	—	—		5,086		—		—		5,086		—		728		5,814
Vesting of share-based incentive compensation	281,277	—		(293)		—		—		(293)		—		(1,086)		(1,379)

Shares purchased under stock purchase plan	(158,162)	—		(1,654)		—		—		(1,654)		—		—		(1,654)
Shares issued upon exercise of warrants	1,999,989	2		13,722		—		—		13,724		—		—		13,724
Transfer of liability awards	—	—		4,847		—		—		4,847		—		—		4,847
WP Transaction	—	—		41,092		7,193		—		48,285		77,679		41,044		167,008
Non-controlling interest contributions	—	—		—		—		—		—		—		250		250

Non-controlling interest distributions	—	—		—		—		—		—		—		(3,611)		(3,611)
Net change in non-controlling interests and other	—	—		(63)		—		—		(63)		—		414		351
Common stock dividends declared	—	—		—		—		(4,284)		(4,284)		—		—		(4,284)
Other comprehensive income (loss), net of tax	—	—		—		(52,178)		—		(52,178)		—		(5,167)		(57,345)
Subsidiary preferred dividends declared	—	—		—		—		(1,771)		(1,771)		—		—		(1,771)
Net income (loss)	—	—		—		—		(7,374)		(7,374)		—		4,817		(2,557)
Balance at September 30, 2022	36,247,257	$	36	$	380,196	$	(47,670)	$	54,717	$	387,279	$	77,679	$	54,616	$	519,574












Balance at June 30, 2022	36,305,016	$	36	$	379,371	$	(30,966)	$	41,964	$	390,405	$	77,679	$	57,256	$	525,340
Amortization of share-based incentive compensation	—	—		1,486		—		—		1,486		—		108		1,594
Vesting of share-based incentive compensation	10,860	—		120		—		—		120		—		—		120

Shares purchased under stock purchase plan	(68,619)	—		(718)		—		—		(718)		—		—		(718)




Non-controlling interest distributions	—	—		—		—		—		—		—		(3,028)		(3,028)
Net change in non-controlling interests and other	—	—		(63)		—		—		(63)		—		414		351
Common stock dividends declared	—	—		—		—		(1,470)		(1,470)		—		—		(1,470)
Other comprehensive income (loss), net of tax	—	—		—		(16,704)		—		(16,704)		—		(4,355)		(21,059)
Subsidiary preferred dividends declared	—	—		—		—		(1,613)		(1,613)		—		—		(1,613)
Net income (loss)	—	—		—		—		15,836		15,836		—		4,221		20,057
Balance at September 30, 2022	36,247,257	$	36	$	380,196	$	(47,670)	$	54,717	$	387,279	$	77,679	$	54,616	$	519,574

F - 6

TIPTREE INC. AND SUBSIDIARIES

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

(in thousands, except shares)



	Common stock
	Number of shares	Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total Tiptree Inc. stockholders’ equity		Non-controlling interests		Total stockholders' equity
Balance at December 31, 2020	32,682,462	$	33	$	315,014	$	5,674	$	35,423	$	356,144	$	17,394	$	373,538

Amortization of share-based incentive compensation	—	—		1,759		—		—		1,759		1,263		3,022
Vesting of share-based incentive compensation	369,556	—		184		—		—		184		(4,816)		(4,632)
Shares issued in exchange for vested subsidiary awards (1)	1,158,009	2		657		—		—		659		(709)		(50)
Shares purchased under stock purchase plan	(528,662)	(1)		(2,881)		—		—		(2,882)		—		(2,882)
Shares issued upon exercise of warrants	207,445	—		—		—		—		—		—		—
Non-controlling interest contributions	—	—		—		—		—		—		100		100
Non-controlling interest distributions	—	—		—		—		—		—		(355)		(355)
Repurchase of vested subsidiary awards	—	—		(770)		—		—		(770)		(309)		(1,079)
Net change in non-controlling interests and other	—	—		97		—		—		97		(97)		—
Dividends declared	—	—		—		—		(4,020)		(4,020)		—		(4,020)
Other comprehensive income (loss), net of tax	—	—		—		(4,517)		—		(4,517)		(18)		(4,535)
Net income (loss)	—	—		—		—		38,558		38,558		4,477		43,035
Balance at September 30, 2021	33,888,810	$	34	$	314,060	$	1,157	$	69,961	$	385,212	$	16,930	$	402,142

Balance at June 30, 2021	33,395,395	$	33	$	314,983	$	2,689	$	69,313	$	387,018	$	18,031	$	405,049
Amortization of share-based incentive compensation	—	—		570		—		—		570		481		1,051
Vesting of share-based incentive compensation	11,586	—		103		—		—		103		(4,132)		(4,029)
Shares issued in exchange for vested subsidiary awards (1)	481,829	1		(1,634)		—		—		(1,633)		1,633		—
Repurchase of vested subsidiary awards	—	—		10		—		—		10		(33)		(23)
Non-controlling interest distributions	—	—		—		—		—		—		(355)		(355)
Net change in non-controlling interests and other	—	—		28		—		—		28		(28)		—
Dividends declared	—	—		—		—		(1,360)		(1,360)		—		(1,360)
Other comprehensive income (loss), net of tax	—	—		—		(1,532)		—		(1,532)		(6)		(1,538)
Net income (loss)	—	—		—		—		2,008		2,008		1,339		3,347
Balance at September 30, 2021	33,888,810	$	34	$	314,060	$	1,157	$	69,961	$	385,212	$	16,930	$	402,142

(1) Exchange included $50 in cash.

See accompanying notes to condensed consolidated financial statements.

F - 7

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
Operating Activities:
Net income (loss) attributable to common stockholders	$	(9,145)	$	38,558
Net income (loss) attributable to non-controlling interests	6,588		4,477
Net income (loss)	(2,557)		43,035
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net realized and unrealized (gains) losses	(50,050)		(120,268)
Net (gain) loss on held for sale of business	(3,825)		1,175
Non-cash compensation expense	7,911		3,717
Amortization/accretion of premiums and discounts	1,017		2,134
Depreciation and amortization expense	17,714		18,261
Non-cash lease expense	6,508		6,520
Deferred provision (benefit) for income taxes	29,339		10,777
Amortization of deferred financing costs	1,081		1,176
Other	1,123		133
Changes in operating assets and liabilities:
Mortgage loans originated for sale	(1,942,612)		(2,100,276)
Proceeds from the sale of mortgage loans originated for sale	2,195,612		2,184,852
(Increase) decrease in notes and accounts receivable	2,313		(57,859)
(Increase) decrease in reinsurance receivables	(313,491)		(99,190)
(Increase) decrease in deferred acquisition costs	(105,826)		(123,510)
(Increase) decrease in other assets	5,224		337
Increase (decrease) in unearned premiums	225,405		192,430
Increase (decrease) in policy liabilities and unpaid claims	181,221		80,176
Increase (decrease) in deferred revenue	93,625		112,062
Increase (decrease) in reinsurance payable	51,630		14,839
Increase (decrease) in other liabilities and accrued expenses	(505)		15,518
Net cash provided by (used in) operating activities	400,857		186,039
Investing Activities:
Purchases of investments	(872,037)		(1,251,741)
Proceeds from sales and maturities of investments	944,531		1,064,915

Purchases of property, plant and equipment	(5,314)		(2,103)
Proceeds from the sale of businesses and other assets	742		125
Proceeds from notes receivable	59,657		40,337
Issuance of notes receivable	(83,761)		(52,957)
Business and asset acquisitions, net of cash and deposits	(14,960)		133
Net cash provided by (used in) investing activities	28,858		(201,291)
Financing Activities:
Dividends paid	(4,705)		(4,020)
Cash received for the exercise of warrants	13,724		—
Net non-controlling interest (redemptions) contributions	(5,081)		(1,384)
Issuance of Fortegra Common Stock	98,433		—
Issuance of Fortegra Warrants	13,101		—
Issuance of Fortegra Additional Warrants (Warburg)	6,230		—
Issuance of Fortegra Preferred Stock	83,486		—
Payment of WP Transaction costs	(12,848)		—
Payment of debt issuance costs	(6)		(62)
Proceeds from borrowings and mortgage notes payable	2,114,394		2,265,796
Principal paydowns of borrowings and mortgage notes payable	(2,409,398)		(2,257,947)
Repurchases of common stock and other changes in additional paid-in capital	(1,654)		(2,882)
Net cash provided by (used in) financing activities	(104,324)		(499)
Effect of exchange rate changes on cash	(6,833)		—
Net increase (decrease) in cash, cash equivalents and restricted cash	318,558		(15,751)
Cash, cash equivalents and restricted cash – beginning of period	195,086		195,275
Cash, cash equivalents and restricted cash – beginning of period - held for sale	9,360		4,879
Cash, cash equivalents and restricted cash – end of period	523,004		184,403
Less: Reclassification of cash to held for sale / deconsolidation of cash previously held for sale	9,172		12,319
Cash, cash equivalents and restricted cash – end of period	$	513,832	$	172,084






Supplemental Schedule of Non-Cash Investing and Financing Activities:
Right of use asset obtained in exchange for lease liability	$	12,232	$	3,046
Bonds and trade receivables exchanged for corporate loans and equity securities	$	19,846	$	—
Shares issued in exchange for vested subsidiary awards			$	659

	As of
Reconciliation of cash, cash equivalents and restricted cash	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	503,488	$	175,718
Restricted cash	10,344		19,368
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	513,832	$	195,086

See accompanying notes to condensed consolidated financial statements.

F - 8

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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.

On June 21, 2022, the Company closed the WP Transaction whereby Warburg invested $200,000 in Fortegra in exchange for Fortegra Common Stock, Fortegra Preferred Stock, Fortegra Warrants and Fortegra Additional Warrants. See Note (17) Stockholders’ Equity for additional information regarding the terms of the securities issued in connection with the closing of the WP Transaction. As of September 30, 2022, Fortegra was owned approximately 79.5% by Tiptree Holdings, 17.4% by Warburg and 3.1% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock.

(2) Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements of Tiptree have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and include the accounts of the Company and its subsidiaries. The condensed consolidated financial statements are presented in U.S. dollars, the main operating currency of the Company. The unaudited condensed consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 and nine months ended September 30, 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.

F - 9

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Recent Accounting Standards

Recently Adopted Accounting Pronouncements


Standard	Description	Adoption Date	Impact on Financial Statements

Accounting Standard Update (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, 2022	The adoption of the standard does not currently impact the Company’s condensed consolidated financial statements.
Accounting Standard Update (ASU) 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	This standard addresses diversity in practice and inconsistency related to recognition of an acquired contract liability, and payment terms and their effect on subsequent revenue recognized by the acquirer. This standard is effective for annual periods beginning after December 15, 2023, including interim periods within those fiscal years. Entities should apply the provisions of the new standard prospectively to business combinations occurring on or after the effective date of the standard. Early adoption is permitted, including in an interim period. We early adopted this standard and applied it to all 2022 business combinations.	January 1, 2022	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 nine months ended September 30, 2022, there were no accounting standards issued applicable to the Company.

(3) Acquisitions

Acquisition of ITC Compliance GRP Limited

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

The preliminary purchase price allocation below has been developed based on preliminary estimates of fair value using the historical financial statements of ITC as of the acquisition date and is subject to the completion of management’s final analysis. Identifiable assets acquired were primarily made up of goodwill and intangible assets. Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of goodwill and intangible assets of $8,044 and $10,964, respectively, which the Company may modify during the one year period allowed for purchase accounting adjustments during the measurement period.

F - 10

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(4) Assets and Liabilities Held for Sale

Luxury

The Company has entered into a definitive agreement to sell Luxury, which was classified as held for sale at December 31, 2021. The Company has deconsolidated Luxury effective as of July 1, 2022 due to the execution of an amendment to the definitive agreement to sell Luxury on that date. As of that date, Tiptree no longer had a variable interest in Luxury and all of the risks and rewards associated with Luxury were transferred to the buyer. The transaction 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
	September 30, 2022		December 31, 2021
Assets:
Investments:
Loans, at fair value	$	—	$	236,810
Other investments	—		2,071
Total investments	—		238,881
Cash, cash equivalents and restricted cash	—		9,360
Notes and accounts receivable, net	—		157
Other assets	—		2,210
Assets held for sale	$	—	$	250,608

Liabilities:
Debt, net	$	—	$	227,973
Other liabilities and accrued expenses	—		15,021
Liabilities held for sale	$	—	$	242,994

Luxury’s earnings had no impact to net income (loss) attributable to common stockholders for the three or nine months ended September 30, 2022 and 2021.

Marine

In the three months ended September 30, 2022, the Company completed the sale of two dry bulk vessels from its maritime shipping operations, which had previously been held for sale. The Company recognized a net gain of $14,100, based on proceeds of $46,200 plus final settlement of assets, for the three months ended September 30, 2022, and a net gain of $21,217, based on proceeds of $67,700 plus final settlement of assets, for the nine months ended September 30, 2022. Also in the three months ended September 30, 2022, we entered into definitive agreements to sell the remaining two product tankers for approximately $49,000. As of September 30, 2022, these two product tankers are classified as held for sale. We expect the remaining sales to be completed in the fourth quarter of 2022. The following table presents detail of the assets held for sale in the condensed consolidated balance sheet as of September 30, 2022:


	As of
	September 30, 2022
Assets:
Investments:
Other investments	$	33,113
Total investments	33,113
Other assets	724
Assets held for sale	$	33,837

(5) Operating Segment Data

Tiptree is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments. Tiptree’s principal operating subsidiary, The Fortegra Group, is a leading provider of specialty insurance, service contract

F - 11

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

products and related service solutions. Based on the ASC 280, Segment Reporting, quantitative analysis performed, our reportable segments are Insurance and Mortgage. We refer to our non-insurance operations, assets and other investments, comprised of our Mortgage reportable segment and our non-reportable operating segments and other business activities, as Tiptree Capital. Corporate activities include holding company interest expense, employee compensation and benefits, and other expenses.

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

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

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

Tiptree Capital:

Mortgage operations are conducted through Reliance. The Company’s mortgage 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 (including our two held for sale product tankers), asset management, other investments (including our Invesque shares), and Luxury mortgage operations (held for sale as of June 30, 2022 and deconsolidated effective as of July 1, 2022).

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 September 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	327,028	$	15,611	$	20,839	$	363,478
Total expenses	(311,724)		(16,551)		(1,762)		(330,037)
Corporate expenses	—		—		—		(8,316)
Income (loss) before taxes	$	15,304	$	(940)	$	19,077	$	25,125
Less: provision (benefit) for income taxes							5,068
Net income (loss)							$	20,057
Less: net income (loss) attributable to non-controlling interests							5,834
Net income (loss) attributable to common stockholders							$	14,223



	Three Months Ended September 30, 2021
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	246,706	$	27,425	$	12,474	$	286,605
Total expenses	(233,369)		(21,158)		(17,174)		(271,701)
Corporate expenses	—		—		—		(11,320)
Income (loss) before taxes	$	13,337	$	6,267	$	(4,700)	$	3,584
Less: provision (benefit) for income taxes							237
Net income (loss)							$	3,347
Less: net income (loss) attributable to non-controlling interests							1,339
Net income (loss) attributable to common stockholders							$	2,008

F - 12

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	Nine Months Ended September 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	903,388	$	59,201	$	65,635	$	1,028,224
Total expenses	(864,331)		(55,851)		(45,167)		(965,349)
Corporate expenses	—		—		—		(33,895)
Income (loss) before taxes	$	39,057	$	3,350	$	20,468	$	28,980
Less: provision (benefit) for income taxes							31,537
Net income (loss)							$	(2,557)
Less: net income (loss) attributable to non-controlling interests							6,588
Net income (loss) attributable to common stockholders							$	(9,145)


	Nine Months Ended September 30, 2021
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	721,524	$	87,191	$	72,265	$	880,980
Total expenses	(671,955)		(62,072)		(59,351)		(793,378)
Corporate expenses	—		—		—		(33,151)
Income (loss) before taxes	$	49,569	$	25,119	$	12,914	$	54,451
Less: provision (benefit) for income taxes							11,416
Net income (loss)							$	43,035
Less: net income (loss) attributable to non-controlling interests							4,477
Net income (loss) attributable to common stockholders							$	38,558

The Company conducts its operations primarily in the U.S. with 7.3% and 9.0% of total revenues generated overseas for the three months ended September 30, 2022 and 2021, respectively, and 8.4% and 7.1% for the nine months ended September 30, 2022 and 2021, respectively.

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


	As of September 30, 2022										As of December 31, 2021
			Tiptree Capital										Tiptree Capital
	Insurance		Mortgage		Other		Corporate		Total		Insurance		Mortgage		Other		Corporate		Total
Total assets	$	3,648,191	$	167,015	$	73,311	$	105,567	$	3,994,084	$	3,002,152	$	201,134	$	384,564	$	11,297	$	3,599,147

F - 13

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(6) 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 September 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	$	584,081	$	—	$	—	$	584,081
Loans, at fair value	12,584		58,200		—		70,784
Equity securities	69,229		—		15,874		85,103
Other investments	66,805		7,404		2,326		76,535
Total investments	$	732,699	$	65,604	$	18,200	$	816,503


	As of December 31, 2021
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	$	577,448	$	—	$	—	$	577,448
Loans, at fair value	7,099		98,484		—		105,583
Equity securities	109,684		—		28,799		138,483
Other investments	79,975		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 September 30, 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 September 30, 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	$	391,358	$	—	$	3,209	$	(37,808)	$	356,759
Obligations of state and political subdivisions	54,472		(3)		6		(5,174)		49,301
Corporate securities	174,076		(280)		8		(15,691)		158,113
Asset backed securities	20,431		(1)		—		(4,228)		16,202
Certificates of deposit	1,357		—		—		—		1,357
Obligations of foreign governments	2,635		(2)		—		(284)		2,349
Total	$	644,329	$	(286)	$	3,223	$	(63,185)	$	584,081

	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
Obligations of state and political subdivisions	57,923		—		1,050		(313)		58,660
Corporate securities	145,997		(241)		517		(1,396)		144,877
Asset backed securities	19,511		—		82		(2,146)		17,447
Certificates of deposit	2,696		—		—		—		2,696
Obligations of foreign governments	2,649		(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

F - 14

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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
	September 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	58,860	$	58,211	$	41,033	$	41,150
Due after one year through five years	318,249		297,378		269,487		268,537
Due after five years through ten years	58,443		53,134		52,561		52,000
Due after ten years	188,346		159,156		198,472		198,314
Asset backed securities	20,431		16,202		19,511		17,447
Total	$	644,329	$	584,081	$	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 September 30, 2022
	Less Than or Equal to One Year					More Than One Year
	Fair value		Gross unrealized losses		# of Securities(1)	Fair value		Gross unrealized losses		# of Securities(1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	167,192	$	(14,219)	407	$	134,796	$	(23,589)	307
Obligations of state and political subdivisions	36,638		(2,908)		123	12,508		(2,266)		56
Corporate securities	69,448		(4,258)		267	86,417		(11,433)		326
Asset backed securities	9,670		(477)		54	6,532		(3,751)		33
Certificates of deposit	—		—		—	—		—		—
Obligations of foreign governments	307		(1)		1	2,042		(283)		8
Total	$	283,255	$	(21,863)	852	$	242,295	$	(41,322)	730

	As of December 31, 2021
	Less Than or Equal to One Year					More Than One Year
	Fair value		Gross unrealized losses		# of Securities(1)	Fair value		Gross unrealized losses		# of Securities(1)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	216,378	$	(2,827)	324	$	11,920	$	(370)	47
Obligations of state and political subdivisions	17,190		(275)		64	1,152		(38)		5
Corporate securities	99,434		(1,159)		326	9,722		(237)		45
Asset backed securities	7,454		(84)		38	2,316		(2,062)		5
Certificates of deposit	1,339		—		2	—		—		—
Obligations of foreign governments	2,278		(58)		8	—		—		—
Total	$	344,073	$	(4,403)	762	$	25,110	$	(2,707)	102

(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 September 30, 2022 until full recovery of their amortized cost basis.

F - 15

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

The table below presents a roll-forward of the activity in the allowance for credit losses on AFS securities by type as of September 30, 2022:


	Obligations of state and political subdivisions		Corporate securities		Asset backed securities		Obligations of foreign governments		Total
Balance at December 31, 2020	$	—	$	—	$	—	$	—	$	—
(Increase) in allowance for credit losses	—		(129)		—		(6)		(135)
Reduction in credit losses due to AFS securities sold during the year	—		3		—		1		4
Gains from recoveries of amounts previously written off	—		46		—		1		47
Balance at September 30, 2021	$	—	$	(80)	$	—	$	(4)	$	(84)

Balance at December 31, 2021	$	—	$	(241)	$	—	$	(4)	$	(245)
(Increase) in allowance for credit losses	(3)		(109)		(1)		—		(113)



Gains from recoveries of amounts previously written off	—		70		—		2		72
Balance at September 30, 2022	$	(3)	$	(280)	$	(1)	$	(2)	$	(286)

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 September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Net gains from recoveries (credit losses) on AFS securities	35	(1)	(41)	(84)

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
	September 30, 2022		December 31, 2021


Fair value of restricted investments in trust pursuant to reinsurance agreements	$	34,686	$	42,471
Fair value of restricted investments for special deposits required by state insurance departments	15,602		7,189
Total fair value of restricted investments	$	50,288	$	49,660

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


	Three Months Ended September 30,				Nine Months Ended September 30,

	2022		2021		2022		2021
Purchases of AFS securities	$	12,395	$	142,420	$	138,738	$	285,151

Proceeds from maturities, calls and prepayments of AFS securities	$	13,689	$	16,616	$	51,328	$	51,245



Gross proceeds from sales of AFS securities	$	—	$	29,713	$	16,970	$	62,902

F - 16

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Gross realized gains	$	—	$	303	$	74	$	625
Gross realized (losses)	—		(7)		(184)		(9)
Total net realized gains (losses) from investment sales and redemptions	$	—	$	296	$	(110)	616

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 September 30, 2022								As of December 31, 2021
	Fair value		Unpaid principal balance (UPB)		Fair value exceeds / (below) UPB		Pledged as collateral		Fair value		Unpaid principal balance (UPB)		Fair value exceeds / (below) UPB		Pledged as collateral
Insurance:
Corporate loans (1)	$	12,584	$	14,888	$	(2,304)	$	—	$	7,099	$	10,156	$	(3,057)	$	—

Mortgage:
Mortgage loans held for sale (2)	58,200		58,985		(785)		57,165		98,484		95,264		3,220		95,542
Total loans, at fair value	$	70,784	$	73,873	$	(3,089)	$	57,165	$	105,583	$	105,420	$	163	$	95,542

(1) The cost basis of Corporate loans was approximately $14,888 and $9,094 at September 30, 2022 and December 31, 2021, respectively.

(2) As of September 30, 2022, there were no mortgage loans held for sale that were 90 days or more past due. 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.

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 September 30, 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 September 30, 2022
	Insurance				Tiptree Capital - Other				Total
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Invesque	$	23,339	$	3,316	$	111,491	$	15,874	$	134,830	$	19,190
Fixed income exchange traded fund	52,245		52,078		—		—		52,245		52,078
Other equity securities	15,773		13,835		—		—		15,773		13,835
Total equity securities	$	91,357	$	69,229	$	111,491	$	15,874	$	202,848	$	85,103


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

F - 17

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 September 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	41,494	$	—	$	—	$	41,494
Vessels, net (2)	—		—		949		949
Debentures	24,961		—		—		24,961

Other	350		7,404		1,377		9,131
Total other investments	$	66,805	$	7,404	$	2,326	$	76,535


	As of December 31, 2021
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	38,965	$	—	$	—	$	38,965
Vessels, net (2)	—		—		79,368		79,368
Debentures	21,057		—		—		21,057
Trade claims	19,737		—		—		19,737
Other	216		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 $47,906 and $36,436 as of September 30, 2022 and December 31, 2021, respectively.

(2) Net of accumulated depreciation of $99 and $13,059 as of September 30, 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Interest:
AFS securities	$	3,094	$	1,840	$	7,955	$	5,246
Loans, at fair value	173		181		514		680
Other investments	1,382		1,597		4,240		4,593
Dividends from equity securities	212		276		883		480

Subtotal	4,861		3,894		13,592		10,999
Less: investment expenses	1,229		564		3,428		1,668
Net investment income	$	3,632	$	3,330	$	10,164	$	9,331

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 (16) Other Revenue and Other Expenses. The following tables present the components of other investment income by type:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Interest:
Loans, at fair value (1)	$	766	$	1,450	$	4,652	$	4,506


Loan fee income	3,998		5,014		14,494		15,511
Vessel related revenue	7,829		11,426		28,337		25,043
Other investment income	$	12,593	$	17,890	$	47,483	$	45,060

F - 18

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(1) Includes income related to loans at fair value classified as Held for Sale for the periods prior to July 1, 2022. See Note (4) 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net realized gains (losses)
Insurance:
Reclass of unrealized gains (losses) on AFS securities from OCI	$	—	$	296	$	(110)	$	616
Net gains from recoveries (credit losses) on AFS securities	35		(1)		(41)		(84)
Net realized gains (losses) on loans	(1,241)		90		(1,617)		(389)
Net realized gains (losses) on equity securities	(1,639)		(310)		(4,104)		(4,874)
Net realized gains (losses) on corporate bonds	(2,937)		1,676		(3,049)		3,174
Other	3,951		(509)		(2,612)		1,401
Tiptree Capital
Mortgage:
Net realized gains (losses) on loans	11,902		23,992		32,475		70,306
Other	663		(1,652)		13,376		596
Other:
Net realized gains (losses) on loans (1)	—		16,644		24,403		42,232
Net realized gains on vessel sales	14,099		—		21,217		—
Other	—		(231)		762		1,523
Total net realized gains (losses)	24,833		39,995		80,700		114,501

Net unrealized gains (losses)
Insurance:
Net change in unrealized gains (losses) on loans	(783)		(174)		(467)		1,313
Net unrealized gains (losses) on equity securities held at period end	(452)		(779)		(5,087)		14,511
Reclass of unrealized (gains) losses from prior periods for equity securities sold	(1)		(1,766)		(953)		(1,362)
Other	(3,316)		(6,015)		(5,112)		(9,302)
Tiptree Capital
Mortgage:
Net change in unrealized gains (losses) on loans	(2,104)		(255)		(4,005)		(1,080)
Other	385		566		2,866		3,632
Other:
Net change in unrealized gains (losses) on loans (1)	—		1,801		(4,513)		(314)
Net unrealized gains (losses) on equity securities held at period end	(1,405)		(10,396)		(12,924)		3,512
Other	2		(8,172)		(455)		(5,143)
Total net unrealized gains (losses)	(7,674)		(25,190)		(30,650)		5,767
Total net realized and unrealized gains (losses)	$	17,159	$	14,805	$	50,050	$	120,268

(1) Relates to Loans, at fair value classified as Held for Sale. See Note (4) Assets and Liabilities Held for Sale.

(7) Notes and Accounts Receivable, net

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

F - 19

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	As of
	September 30, 2022		December 31, 2021


Accounts and premiums receivable, net	$	141,251	$	137,082
Retrospective commissions receivable	178,263		157,853
Notes receivable, net - premium financing program	114,091		89,788
Trust receivables	15,256		41,889
Other receivables	33,124		27,757
Total notes and accounts receivable, net	$	481,985	$	454,369

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


	Valuation allowance				Bad Debt Expense


	As of				Three Months Ended September 30,				Nine Months Ended September 30,
	September 30, 2022		December 31, 2021
					2022		2021		2022		2021
Notes receivable, net - premium financing program (1)	$	95	$	123	$	39	$	68	$	129	$	210

Accounts and premiums receivable, net	$	81	$	120	$	9	$	10	$	54	$	20

(1) As of September 30, 2022 and December 31, 2021, there were $239 and $1,311 in balances classified as 90 days plus past due, respectively.

(8) Reinsurance Receivables

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


	Direct amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount - assumed to net
Three Months Ended September 30, 2022
Premiums written:
Life insurance	$	24,658	$	12,230	$	32	$	12,460	0.3	%
Accident and health insurance	40,433		27,905		187		12,715		1.5	%
Property and liability insurance	340,593		193,181		171,707		319,119		53.8	%
Total premiums written	405,684		233,316		171,926		344,294		49.9	%

Premiums earned:
Life insurance	21,176		10,514		115		10,777		1.1	%
Accident and health insurance	36,453		25,088		233		11,598		2.0	%
Property and liability insurance	284,119		151,756		83,139		215,502		38.6	%
Total premiums earned	$	341,748	$	187,358	$	83,487	$	237,877	35.1	%

F - 20

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	Direct amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount - assumed to net
Three Months Ended September 30, 2021
Premiums written:
Life insurance	$	26,805	$	12,640	$	70	$	14,235	0.5	%
Accident and health insurance	41,735		28,701		81		13,115		0.6	%
Property and liability insurance	312,988		150,761		35,774		198,001		18.1	%
Total premiums written	381,528		192,102		35,925		225,351		15.9	%

Premiums earned:
Life insurance	19,268		9,994		295		9,569		3.1	%
Accident and health insurance	32,292		21,655		1,329		11,966		11.1	%
Property and liability insurance	226,446		121,349		48,394		153,491		31.5	%
Total premiums earned	$	278,006	$	152,998	$	50,018	$	175,026	28.6	%



Nine Months Ended September 30, 2022
Premiums written:
Life insurance	$	68,753	$	32,052	$	127	$	36,828	0.3	%
Accident and health insurance	108,598		74,230		7,083		41,451		17.1	%
Property and liability insurance	936,007		506,664		336,590		765,933		43.9	%
Total premiums written	$	1,113,358	$	612,946	$	343,800	$	844,212	40.7	%

Premiums earned:
Life insurance	$	61,657	$	30,949	$	422	$	31,130	1.4	%
Accident and health insurance	105,827		72,157		7,274		40,944		17.8	%
Property and liability insurance	798,660		428,395		219,895		590,160		37.3	%
Total premiums earned	$	966,144	$	531,501	$	227,591	$	662,234	34.4	%



Nine Months Ended September 30, 2021
Premiums written:
Life insurance	$	66,109	$	34,218	$	757	$	32,648	2.3	%
Accident and health insurance	103,321		71,384		5,509		37,446		14.7	%
Property and liability insurance	839,271		416,048		167,726		590,949		28.4	%
Total premiums written	$	1,008,701	$	521,650	$	173,992	$	661,043	26.3	%

Premiums earned:
Life insurance	$	54,242	$	29,405	$	970	$	25,807	3.8	%
Accident and health insurance	91,793		61,755		6,803		36,841		18.5	%
Property and liability insurance	670,077		387,047		153,225		436,255		35.1	%
Total premiums earned	$	816,112	$	478,207	$	160,998	$	498,903	32.3	%

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


	Direct amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount - assumed to net
Three Months Ended September 30, 2022
Losses and LAE Incurred
Life insurance	$	13,383	$	7,388	$	78	$	6,073	1.3	%
Accident and health insurance	6,855		4,966		488		2,377		20.5	%
Property and liability insurance	119,369		87,898		57,906		89,377		64.8	%
Total losses and LAE incurred	139,607		100,252		58,472		97,827		59.8	%
	Member benefit claims (1)						23,415
	Total policy and contract benefits						$	121,242

F - 21

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	Direct amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount - assumed to net
Three Months Ended September 30, 2021
Losses and LAE Incurred
Life insurance	$	13,398	$	7,610	$	116	$	5,904	2.0	%
Accident and health insurance	6,689		5,691		913		1,911		47.8	%
Property and liability insurance	90,094		57,568		20,911		53,437		39.1	%
Total losses and LAE incurred	110,181		70,869		21,940		61,252		35.8	%
	Member benefit claims (1)						19,579
	Total policy and contract benefits						$	80,831

Nine Months Ended September 30, 2022
Losses and LAE Incurred
Life insurance	$	40,993	$	22,158	$	424	$	19,259	2.2	%
Accident and health insurance	24,826		19,304		6,581		12,103		54.4	%
Property and liability insurance	333,582		234,440		133,552		232,694		57.4	%
Total losses and LAE incurred	399,401		275,902		140,557		264,056		53.2	%
	Member benefit claims (1)						66,297
	Total policy and contract benefits						$	330,353

Nine Months Ended September 30, 2021
Losses and LAE Incurred
Life insurance	$	40,940	$	23,987	$	481	$	17,434	2.8	%
Accident and health insurance	16,608		13,607		2,232		5,233		42.7	%
Property and liability insurance	262,447		180,991		77,121		158,577		48.6	%
Total losses and LAE incurred	319,995		218,585		79,834		181,244		44.0	%
	Member benefit claims (1)						55,954
	Total policy and contract benefits						$	237,198

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

The following table presents the components of the reinsurance receivables:


	As of
	September 30, 2022		December 31, 2021


Prepaid reinsurance premiums:
Life insurance (1)	$	76,898	$	73,478
Accident and health insurance (1)	83,594		81,521
Property and liability insurance	566,682		479,091
Total	727,174		634,090

Ceded claim reserves:
Life insurance	3,681		3,928
Accident and health insurance	17,808		12,239
Property and liability insurance	227,087		148,962
Total ceded claim reserves recoverable	248,576		165,129
Other reinsurance settlements recoverable	218,577		81,617
Reinsurance receivables	$	1,194,327	$	880,836

(1) Including policyholder account balances ceded.

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


	As of
	September 30, 2022
Total of the three largest receivable balances from non-affiliated reinsurers	$	193,533

F - 22

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

As of September 30, 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), Accelerant Insurance Limited (A.M. Best Rating: A- rated), and Canada Life Assurance Company (A.M. Best Rating: A+ rated). A majority of the related receivables from these reinsurers are collateralized by assets on hand and letters of credit; receivable balances from authorized reinsurers do not require collateral. Allianz Global Corporate & Specialty SE and Canada Life Assurance Company are authorized reinsurers in the states in which Fortegra’s U.S. based insurance entities are domiciled. The Company monitors authorization status and A.M. Best ratings of its reinsurers periodically. As of September 30, 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.

(9) 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 September 30, 2022						As of December 31, 2021
Finite-Lived Intangible Assets:	Insurance		Other		Total			Insurance		Other		Total

Customer relationships	$	149,310	$	—	$	149,310		$	143,300	$	—	$	143,300
Accumulated amortization	(56,775)		—		(56,775)			(45,997)		—		(45,997)
Trade names	15,006		800		15,806			14,750		800		15,550
Accumulated amortization	(6,702)		(580)		(7,282)			(5,633)		(520)		(6,153)
Software licensing	12,138		640		12,778			9,300		640		9,940
Accumulated amortization	(8,990)		(640)		(9,630)			(8,790)		(594)		(9,384)
Insurance policies and contracts acquired	36,500		—		36,500			36,500		—		36,500
Accumulated amortization	(36,362)		—		(36,362)			(36,320)		—		(36,320)
Other	743		—		743			640		—		640
Accumulated amortization	(237)		—		(237)			(203)		—		(203)
Total finite-lived intangible assets	104,631		220		104,851			107,547		326		107,873
Indefinite-Lived Intangible Assets: (1)
Insurance licensing agreements	13,761		—		13,761			13,761		—		13,761
Other	—		1,728		1,728			—		1,124		1,124
Total indefinite-lived intangible assets	13,761		1,728		15,489			13,761		1,124		14,885

Total intangible assets, net	$	118,392	$	1,948	$	120,340		$	121,308	$	1,450	$	122,758

Goodwill	184,236		1,708		185,944			177,395		1,708		179,103
Total goodwill and intangible assets, net	$	302,628	$	3,656	$	306,284		$	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:



	Insurance		Other		Total


Balance at December 31, 2021	$	177,395	$	1,708	$	179,103
Goodwill acquired (1)	8,044		—		8,044
Foreign currency translation and other	(1,203)		—		(1,203)
Balance at September 30, 2022	$	184,236	$	1,708	$	185,944

Accumulated impairments	$	—	$	—	$	—

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

The Company conducts annual impairment tests of its goodwill as of October 1. For the three and nine months ended September 30, 2022 and 2021, no impairments were recorded on the Company’s goodwill.

F - 23

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Intangible Assets, net

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


	Insurance		Other		Total








Balance at December 31, 2021	$	121,308	$	1,450	$	122,758
Intangibles acquired (1)	10,964		604		11,568
Amortization expense	(12,168)		(106)		(12,274)
Foreign currency translation and other	(1,712)		—		(1,712)
Balance at September 30, 2022	$	118,392	$	1,948	$	120,340

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Amortization expense on intangible assets	$	4,129	$	3,892	$	12,274	$	11,690

For the three and nine months ended September 30, 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 September 30, 2022
	Insurance		Other		Total
Remainder of 2022	$	4,100	$	20	$	4,120
2023	15,594		80		15,674
2024	13,906		80		13,986
2025	11,792		40		11,832
2026	9,543		—		9,543
2027 and thereafter	51,408		—		51,408
Total (1)	$	106,343	$	220	$	106,563

(1) Does not include foreign currency translation adjustment of ($1,712) as of September 30, 2022.

(10) Derivative Financial Instruments and Hedging

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

Interest Rate Lock Commitments

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

F - 24

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Forward Delivery Contracts and TBA Mortgage Backed Securities

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

The remaining derivatives are generally comprised of a combination of swaps, options and short positions, which are generally classified as Level 2 in the fair value hierarchy. In addition, the Fortegra Additional Warrant (Warburg) is a derivative liability and classified as Level 3 in the fair value hierarchy. See Note (17) Stockholders’ Equity for additional information regarding the Fortegra Additional Warrant.

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


	As of September 30, 2022						As of December 31, 2021
	Notional values		Asset derivatives		Liability derivatives		Notional values		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	189,046	$	1,505	$	—	$	268,878	$	7,514	$	—
Forward delivery contracts	28,644		287		1		56,593		204		59
TBA mortgage backed securities	220,000		5,612		550		316,000		262		425
Fortegra Additional Warrants (Warburg)(1)	—		—		6,230		—		—		—
Other	22,943		350		7,164		9,232		216		1,657
Total	$	460,633	$	7,754	$	13,945	$	650,703	$	8,196	$	2,141

(1) See Note (17) Stockholders’ Equity for additional information.

F - 25

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(11) 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 September 30, 2022
Corporate debt	Insurance		Other		Corporate		Total
Secured revolving credit agreements (1)	$	—	$	—	$	—	$	—
Secured term credit agreements (LIBOR + 6.75%)(4)	—		—		—		—
Preferred trust securities (LIBOR + 4.10%)	35,000		—		—		35,000
8.50% Junior subordinated notes	125,000		—		—		125,000
Total corporate debt	160,000		—		—		160,000

Asset based debt (3)
Asset based revolving financing (LIBOR + 2.75%)	58,568		—		—		58,568
Residential mortgage warehouse borrowings (1.88% to 2.50% over SOFR; 2.00% to 3.00% over BSBY) (2)(3)	—		55,288		—		55,288

Total asset based debt	58,568		55,288		—		113,856
Total debt, face value	218,568		55,288		—		273,856
Unamortized discount, net	—		—		—		—
Unamortized deferred financing costs	(7,592)		(9)		—		(7,601)
Total debt, net	$	210,976	$	55,279	$	—	$	266,255

	As of December 31, 2021
Corporate debt	Insurance		Other		Corporate		Total
Secured revolving credit agreements (1)	$	2,160	$	—	$	—	$	2,160
Secured term credit agreements (LIBOR + 6.75%)(4)	—		—		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 debt	162,160		—		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 debt	42,310		86,118		—		128,428
Total debt, face value	204,470		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 SOFR floor and BSBY floor of 0.25% and 0.50%, respectively, as of September 30, 2022.

(3) The weighted average coupon rate for residential mortgage warehouse borrowings was 5.01% and 2.76% at September 30, 2022 and December 31, 2021, respectively.

(4) Includes LIBOR floor of 1%.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Total Interest expense - corporate debt	$	3,592	$	6,038	$	15,559	$	18,402
Total Interest expense - asset based debt	1,857		2,573		8,992		8,262
Interest expense on debt	$	5,449	$	8,611	$	24,551	$	26,664

F - 26

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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
	September 30, 2022
Remainder of 2022	$	—
2023	113,856
2024	—
2025	—
2026	—
2027 and thereafter	160,000
Total	$	273,856

The following narrative is a summary of certain terms of our debt agreements for the period ended September 30, 2022:

Corporate Debt

Secured Revolving Credit Agreements

As of September 30, 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 September 30, 2022 was $200,000.

Secured Term Credit Agreements

The remaining balance of the corporate secured term credit agreement was fully repaid during June 2022 in connection with the WP Transaction. As of December 31, 2021, a total of $114,063 was outstanding under the corporate secured term credit agreement.

Asset Based Debt

Asset Based Revolving Financing

As of September 30, 2022 and December 31, 2021, a total of $58,568 and $42,310, respectively, was outstanding under the borrowing related to our premium finance and service contract finance offerings in our insurance business.

Residential Mortgage Warehouse Borrowings

In April 2022, the $60,000 warehouse line of credit was renewed and the maturity date was extended from April 2022 to April 2023. In August 2022, the $50,000 warehouse line of credit was renewed and the maturity date was extended from August 2022 to August 2023. As of September 30, 2022 and December 31, 2021, a total of $55,288 and $72,518, respectively, was outstanding under such financing agreements.

Vessel-Backed Term Loan

The remaining balance of the vessel backed term loan was fully repaid at a discount during May 2022, for a net gain of $1,168. As of December 31, 2021, the maximum borrowing capacity and borrowings outstanding was $13,600.

Debt Covenants

As of September 30, 2022, the Company was in compliance with the representations and covenants for its outstanding debt or obtained waivers for any events of non-compliance.

(12) 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

F - 27

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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

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

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

Available for Sale Securities, at fair value

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

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

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

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

Equity Securities

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

F - 28

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Loans, at fair value

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

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

Derivative Assets and Liabilities

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

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 - 29

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 September 30, 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	$	—	$	356,759	$	—	$	356,759
Obligations of state and political subdivisions	—		49,301		—		49,301
Obligations of foreign governments	—		2,349		—		2,349
Certificates of deposit	1,357		—		—		1,357
Asset backed securities	—		15,982		220		16,202
Corporate securities	—		158,113		—		158,113
Total available for sale securities, at fair value	1,357		582,504		220		584,081

Loans, at fair value:
Corporate loans	—		2,455		10,129		12,584
Mortgage loans held for sale	—		58,200		—		58,200
Total loans, at fair value	—		60,655		10,129		70,784

Equity securities:
Invesque	19,190		—		—		19,190
Fixed income ETFs	52,078		—		—		52,078
Other equity securities	7,238		—		6,597		13,835
Total equity securities	78,506		—		6,597		85,103

Other investments, at fair value:
Corporate bonds	—		41,494		—		41,494
Derivative assets	17		6,232		1,505		7,754

Other	—		—		324		324
Total other investments, at fair value	17		47,726		1,829		49,572

Mortgage servicing rights (1)	—		—		41,912		41,912

Total	$	79,880	$	690,885	$	60,687	$	831,452

Liabilities: (2)
Securities sold, not yet purchased	$	14,578	$	36,660	$	—	$	51,238
Derivative liabilities	—		7,715		—		7,715
Fortegra Additional Warrants (Warburg)	—		—		6,230		6,230
Contingent consideration payable	—		—		2,871		2,871
Total	$	14,578	$	44,375	$	9,101	$	68,054

(1) Included in other assets.

(2) Included in other liabilities and accrued expenses.

F - 30

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 deposit	2,696		—		—		2,696
Asset backed securities	—		16,832		615		17,447
Corporate securities	—		144,877		—		144,877
Total available for sale securities, at fair value	2,696		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:
Invesque	34,814		—		—		34,814
Fixed income ETFs	53,154		—		—		53,154
Other equity securities	49,309		—		1,206		50,515
Total equity securities	137,277		—		1,206		138,483

Other investments, at fair value:
Corporate bonds	—		38,965		—		38,965
Derivative assets	113		569		7,514		8,196
Trade claims	—		—		19,737		19,737
Other	—		—		441		441
Total other investments, at fair value	113		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 - 31

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 Nine Months Ended September 30,
	2022		2021
Balance at January 1,	$	61,443	$	33,455
Net realized and unrealized gains or losses included in:
Earnings	8,572		12,664
OCI	305		(178)
Origination of IRLCs	42,722		84,034
Purchases	—		15,336
Sales and repayments	(3,802)		(11,382)
Conversions to mortgage loans held for sale	(48,731)		(83,976)
Settlement of trade claims	(19,169)		—
Exchange of bonds for term loans	12,243		—
Exchange of trade receivables for equity securities	7,104		—


Balance at September 30,	$	60,687	$	49,953

Changes in unrealized gains (losses) included in earnings related to assets still held at period end	(5,171)		$	2,298
Changes in unrealized gains (losses) included in OCI related to assets still held at period end	$	(395)	$	(178)

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.

F - 32

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	As of						As of
	September 30, 2022		December 31, 2021		Valuation technique	Unobservable input(s)	September 30, 2022				December 31, 2021
Assets	Fair value						Range			WA (1)	Range			WA (1)
IRLCs	$	1,505	$	7,514	Internal model	Pull through rate	55%	to	95%	66%	55%	to	95%	66%
Mortgage servicing rights	41,912		29,833		External model	Discount rate	9%	to	14%	9%	10%	to	12%	9%
						Cost to service	$65	to	$80	$71	$65	to	$80	$71
						Prepayment speed	5%	to	84%	9%	5%	to	100%	15%
Trade claims	—		19,737		Internal model	Plan projected recovery rate	N/A				15%	to	18%	17%
Equity securities	6,549		—		Internal model	Forecast EBITDAR	$728,000	to	$1,039,000	N/A	N/A
Corporate loans and related receivables	10,129		—		Internal model	EBITDA	$188,000			N/A	N/A
Total	$	60,095	$	57,084

Liabilities
Fortegra Additional Warrants (Warburg)	$	6,230	$	—	External model	Discount rate	3%	to	5%	3.3%	N/A
						Implied Equity Volatility	40%	to	50%	45%
Contingent consideration payable - ITC	2,671		—		Cash Flow model	Forecast Cash EBITDA	$2,500	to	$4,000	N/A	N/A
					Cash Flow model	Forecast Underwriting EBITDA	$—	to	$2,000	N/A	N/A
Contingent consideration payable - Smart AutoCare	200		200		Cash Flow model	Forecast Cash EBITDA	$20,000	to	$30,000	N/A	$20,000	to	$30,000	N/A
					Actuarial analysis	Assumed Claim Liabilities	$55,000				$55,000
Total	$	9,101	$	200

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

F - 33

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 September 30, 2022					As of December 31, 2021
	Level within fair value hierarchy	Fair value		Carrying value		Level within fair value hierarchy	Fair value		Carrying value
Assets:
Debentures (1)	2	$	24,961	$	24,961	2	$	21,057	$	21,057
Notes receivable, net	2	114,091		114,091		2	89,788		89,788
Total assets		$	139,052	$	139,052		$	110,845	$	110,845

Liabilities:
Debt, net	3	$	270,731	$	273,856	3	$	419,599	$	403,193
Total liabilities		$	270,731	$	273,856		$	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 (7) 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 (7) 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 - 34

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(13) 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 Nine Months Ended September 30,
	2022		2021
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 expenses	320,117		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 duration	154,412		83,945

Incurred (short duration) related to:
Current year	265,277		176,644
Prior years	(2,205)		3,866
Total incurred	263,072		180,510

Paid (short duration) related to:
Current year	138,274		116,175
Prior years	18,436		6,379
Total paid	156,710		122,554

Net balance as of September 30, short duration	260,774		141,901
Plus: reinsurance recoverable on unpaid losses - short duration	248,418		154,513
Plus: other lines, gross	157		397
Gross liabilities for unpaid losses and loss adjustment expenses	509,349		296,811
Plus: liabilities of policy-holder account balances, gross	2,715		1,690
Plus: non-insurance warranty benefit claim liabilities	860		15,113
Policy liabilities and unpaid claims balance as of September 30,	$	512,924	$	313,614

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Short duration incurred	$	97,501	$	61,061	$	263,072	$	180,510
Other lines incurred	(36)		10		327		55
Unallocated loss adjustment expenses	362		181		657		679
Total losses incurred	$	97,827	$	61,252	$	264,056	$	181,244

During the nine months ended September 30, 2022, and 2021, the Company experienced a decrease in prior year development of $2,205, primarily as a result of lower-than-expected claim severity in its commercial lines business.

During the nine months ended September 30, 2021, the Company experienced an increase in prior year development of $3,866, primarily as a result of higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business.

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

F - 35

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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

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.

(14) 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Service and Administrative Fees:
Service contract revenue	$	56,968	$	43,094	$	150,788	$	111,970
Motor club revenue	13,949		11,038		39,724		29,694
Vessel related revenue	7,829		11,426		28,337		25,043

Other	997		3,256		5,136		15,589
Revenue from contracts with customers	$	79,743	$	68,814	$	223,985	$	182,296

Service and Administrative Fees

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

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

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of September 30, 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 - 36

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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, 2022						September 30, 2022
	Beginning balance		Additions		Amortization		Ending balance
Deferred acquisition costs
Service and Administrative Fees:
Service contract revenue	$	110,220	$	87,621	$	37,388	$	160,453
Motor club revenue	19,424		31,052		31,364		19,112
Total	$	129,644	$	118,673	$	68,752	$	179,565


Deferred revenue
Service and Administrative Fees:
Service contract revenue	$	470,399	$	239,037	$	150,788	$	558,648
Motor club revenue	24,870		40,375		39,724		25,521
Total	$	495,269	$	279,412	$	190,512	$	584,169

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

(15) 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
	September 30, 2022		December 31, 2021


Loans eligible for repurchase	$	29,016	$	36,732
Mortgage servicing rights	41,912		29,833
Right of use asset - Operating leases	31,161		23,870
Income tax receivable	19,463		19,824
Furniture, fixtures and equipment, net	17,504		14,878
Prepaid expenses	8,871		10,722
Other	14,191		10,985
Total other assets	$	162,118	$	146,844

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Depreciation expense related to furniture, fixtures and equipment	$	1,032	$	893	$	2,822	$	2,666

F - 37

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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
	September 30, 2022		December 31, 2021


Accounts payable and accrued expenses	$	139,173	$	149,816
Loans eligible for repurchase liability	29,016		36,732
Deferred tax liabilities, net	73,359		40,049
Operating lease liability	39,826		29,396
Due to brokers	4,985		10,763
Commissions payable	30,291		20,412
Securities sold, not yet purchased	51,238		242
Other	32,011		19,126
Total other liabilities and accrued expenses	$	399,899	$	306,536

(16) 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Other investment income (1)	$	12,593	$	17,890	$	47,483	$	45,060

Other (2)	4,771		3,168		15,524		7,177
Total other revenue	$	17,364	$	21,058	$	63,007	$	52,237

(1) See Note (6) Investments for the components of Other investment income.

(2) Includes $4,454 and $3,458 for the three months ended September 30, 2022 and 2021, respectively, and $11,371 and $8,045 for the nine months ended September 30, 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
General and administrative	$	6,677	$	9,334	$	18,768	$	27,397
Professional fees	6,678		5,656		21,077		20,649
Premium taxes	5,873		4,892		16,174		14,754
Mortgage origination expenses	4,130		4,366		13,269		12,821
Rent and related	4,384		4,170		13,302		12,556
Operating expenses from vessels	(518)		3,444		5,852		9,770
Loss on extinguishment of debt	—		—		940		—
Other	3,066		2,517		11,596		6,393
Total other expenses	$	30,290	$	34,379	$	100,978	$	104,340

F - 38

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(17) 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. During the nine months ended September 30, 2022, 158,162 shares were repurchased for a weighted average price per share of $10.43. As of September 30, 2022, the remaining repurchase authorization was $12,018.

Tiptree Warrants

In the six months ended June 30, 2022, warrants were exercised for 1,999,989 shares of Tiptree common stock, with 1,979,325 warrants exercised for $13,724 in cash, and 20,664 exercised cashless. As of September 30, 2022, there were no warrants for shares of Tiptree common stock outstanding.

Dividends

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


	Dividends per share for the
	Nine Months Ended September 30,
	2022		2021
First quarter	$	0.04	$	0.04
Second quarter	0.04		0.04
Third quarter(1)	0.04		0.04


Total cash dividends declared	$	0.12	$	0.12

(1) See Note (24) Subsequent Events for when the dividend was declared.

Fortegra Non-Controlling Interests

On June 21, 2022, the Company closed the WP Transaction. On that date, Fortegra converted to a Delaware corporation and Warburg made a $200,000 investment in Fortegra in exchange for Fortegra Common Stock, Fortegra Preferred Stock, Fortegra Warrants and Fortegra Additional Warrants. Also, in connection with the closing of the Warburg Transaction, Tiptree was issued Fortegra Additional Warrants, and management’s interests in LOTS Intermediate were exchanged for interests in Fortegra. As of September 30, 2022, Fortegra was owned approximately 79.5% by Tiptree Holdings, 17.4% by Warburg and 3.1% by management and directors of Fortegra. As a result of the WP Transaction, the Company recorded an increase of $167,008 to total stockholders’ equity of which $48,285 impacted Tiptree Inc. stockholders’ equity and $118,723 impacted non-controlling interests. Of the increase to Tiptree Inc. stockholders’ equity, $41,092 impacted additional paid in capital and $7,193 impacted accumulated other comprehensive income (loss). Additionally, the Company recognized $3,597 and $3,776 of net income attributable to non-controlling interests during the three months and nine months ended September 30, 2022, respectively, due to the increase in non-controlling interest.

Fortegra Preferred Stock

The face amount of the Fortegra Preferred Stock is $80,000. Dividends are cumulative and accrue at a rate of 8% per annum, compounding quarterly. Any quarterly dividend may be paid in cash, at Fortegra’s option. As of September 30, 2022, the Company had accrued $1,350 of cash dividends payable for the period.

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

F - 39

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Fortegra Warrants

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

Fortegra Additional Warrants

The Fortegra Additional Warrants issued to both Warburg and Tiptree have a seven-year term and an exercise price of $0.01 per share of Fortegra Common Stock. The Fortegra Additional Warrants issued to Warburg will be forfeited based on Warburg achieving an all-in return on its investment in excess of 23%, as measured primarily by Fortegra’s Common Stock price. The Fortegra Additional Warrants issued to Warburg are classified as liabilities, at fair value. The Fortegra Additional Warrants issued to Tiptree will vest based on Warburg achieving an all-in return on its investment in excess of 30%, as measured primarily by Fortegra’s Common Stock price. The number of shares of Fortegra Common Stock issuable to Warburg or Tiptree with respect to the Fortegra Additional Warrants is subject to adjustment for Fortegra Common Stock splits, stock or cash dividends and similar transactions. The Fortegra Additional Warrants are exercisable from the earlier of a transaction that results in Warburg having sold 50% of its Fortegra Common Stock or the fifth anniversary of the closing date. The maximum number of shares issued to Warburg or Tiptree, if exercised with cash, would be an additional 1.7% interest in Fortegra on an as converted basis (including its ownership of Fortegra Common and Preferred Stock).

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


	As of
	September 30, 2022		December 31, 2021


Fortegra preferred interests	$	77,679	$	—
Fortegra common interests	50,794		11,066
Other third-party common interests	3,822		6,161
Total non-controlling interests	$	132,295	$	17,227

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 September 30, 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 periods ended September 30, 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:

F - 40

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)


	As of
	September 30, 2022		December 31, 2021




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

At September 30, 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 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.

(18) 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:


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













Balance at December 31, 2020	$	5,702	$	—	$	5,702	$	(28)	$	5,674
Other comprehensive income (losses) before reclassifications	(4,054)		—		(4,054)		18		(4,036)
Amounts reclassified from AOCI	(481)		—		(481)		—		(481)
OCI	(4,535)		—		(4,535)		18		(4,517)

Balance at September 30, 2021	$	1,167	$	—	$	1,167	$	(10)	$	1,157

Balance at December 31, 2021	$	(2,686)	$	—	$	(2,686)	$	1	$	(2,685)
Other comprehensive income (losses) before reclassifications	(43,175)		(14,256)		(57,431)		5,167		(52,264)
Amounts reclassified from AOCI	86		—		86		—		86
WP Transaction	—		—		—		7,193		7,193
OCI	(43,089)		(14,256)		(57,345)		12,360		(44,985)

Balance at September 30, 2022	$	(45,775)	$	(14,256)	$	(60,031)	$	12,361	$	(47,670)

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 September 30,				Nine Months Ended September 30,				Affected line item in consolidated statements of operations
Components of AOCI	2022		2021		2022		2021
Unrealized gains (losses) on available for sale securities	$	—	$	296	$	(110)	$	616		Net realized and unrealized gains (losses)
Related tax (expense) benefit	—		(62)		24		(135)			Provision for income tax
Net of tax	$	—	$	234	$	(86)	$	481

(19) 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. Amendment No. 1 to the 2017 Equity Plan, to increase the aggregate shares issuable under the Plan by 4,000,000 shares, was approved by stockholders on June 7, 2022.

F - 41

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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, 2021			2,344,814
RSU, stock and option awards granted			(235,822)
Forfeited			528
Amendment to plan			4,000,000


Available for issuance as of September 30, 2022			6,109,520

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

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 after the third anniversary or 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 issuable	Weighted average grant date fair value








Unvested units as of December 31, 2021	599,012	$	6.59
Granted	235,822	12.93
Vested	(328,551)	7.00
Forfeited	(528)	6.26
Unvested units as of September 30, 2022	505,755	$	9.64

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


	For the				For the
	Nine Months Ended September 30,		Nine Months Ended September 30,
Granted	2022	2021		Vested	2022	2021
Directors	28,246	50,251		Directors	28,246	50,251
Employees (1)	207,576	—		Employees	300,305	354,133
Total Granted	235,822	50,251		Total Vested	328,551	404,384
				Taxes	(47,274)	(34,828)

				Net Vested	281,277	369,556

(1) Includes 94,410 shares that vest ratably over three years and 113,166 shares that cliff vest in 2025 for the nine months ended September 30, 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

F - 42

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

(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 September 30, 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 $19.80 as adjusted for cumulative dividends paid to date).


Original Tiptree Share Price Target						Number of PRSUs that Vest
$20						466,667
$30						700,000
$45						933,333
$60						1,166,667

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 December 31, 2021, the Company did not have sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded; as such, the PRSUs were classified as liability awards and were remeasured at each reporting date, and expensed using the straight-line method over the requisite service period. On June 7, 2022, the Board of Directors authorized additional shares, and the Company now has sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded. As such, the PRSUs were valued on June 7, 2022, and converted to equity awards on that date, and will be expensed using the straight-line method over the remaining service period.

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

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

Valuation Input

As of June 7, 2022

Assumption

Historical volatility

38.70%

Risk-free rate

2.95%

Dividend yield

1.45%

Cost of equity

11.47%

Expected term (years)

Stock Option Awards

Tiptree Corporate Incentive Plans

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

During the year ended December 31, 2021, the market requirement for all outstanding options was achieved. There were no stock option awards granted in 2022 or 2021.

F - 43

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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


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






Balance, December 31, 2021	1,715,619	$	6.49	$	2.29	712,542

Balance, September 30, 2022	1,707,476	$	6.49	$	2.29	1,050,767

Weighted average remaining contractual term at September 30, 2022 (in years)	5.4

Fortegra Equity Incentive Plan

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

As of September 30, 2022, time vesting RSUs and options equal to approximately 0.3% of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock) have been granted under the Fortegra Plan. The unvested RSUs were exchanged for prior RSUs granted to management of Fortegra under the LOTS Intermediate Co. Restricted Stock Unit Program.

Other Subsidiary Incentive Plans

Certain of the Company’s other 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
Granted	282
Vested	(935)
Performance assumption adjustment	80
Unvested balance as of September 30, 2022	$	1,661

The net vested balance of subsidiary awards eligible for exchange as of September 30, 2022 translates to 285,181 shares of Tiptree common stock.

F - 44

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Employee compensation and benefits	$	1,573	$	1,401	$	7,559	$	3,372
Director compensation	122		103		350		345
Income tax benefit	(355)		(316)		(1,660)		(781)
Net stock based compensation expense	$	1,340	$	1,188	$	6,249	$	2,936

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


	As of September 30, 2022
	Stock options		Restricted stock awards and RSUs		Performance Restricted Stock Units
Unrecognized compensation cost related to non-vested awards (1)	$	146	$	806	$	8,386
Weighted - average recognition period (in years)	1.38		0.87		1.03

(1) Includes $122 of unrecognized compensation cost related to stock options at The Fortegra Group that vest ratably over three years..

(20) Income Taxes

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


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Total income tax expense (benefit)	$	5,068			$	237			$	31,537			$	11,416

Effective tax rate (ETR)	20.2		%	(1)	6.6		%	(2)	108.9		%	(3)	21.0		%	(4)

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

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

(3) Higher than the U.S. federal statutory income tax rate of 21%, primarily due to the impact of deconsolidation of insurance subsidiaries for tax as a result of the WP Transaction.

(4) Equal to the U.S. federal statutory income tax rate of 21% due to the impact of state taxes offset by other discrete items.

On June 21, 2022, the WP Transaction was completed, in which Warburg invested $200,000 in Tiptree’s insurance subsidiary, Fortegra. The WP Transaction, along with Fortegra management’s ownership, reduced Tiptree’s ownership in Fortegra below 80% such that, while still consolidated for GAAP financial reporting purposes, Fortegra will no longer be included in the consolidated tax return group with Tiptree. Tiptree has recorded deferred tax liabilities related to the basis difference in Tiptree’s investment in Fortegra as of September 30, 2022. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell any of its Fortegra stock at its carrying value on Tiptree’s balance sheet. The deferred tax liability as of September 30, 2022 relating to the WP Transaction was $38,168, of which $14,064 was recorded directly in Tiptree Inc. stockholders’ equity with respect to the gain component and $24,104 was recorded as a provision for income taxes in the condensed consolidated statements of operations for the nine months ended September 30, 2022.

(21) 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Rent expense for office leases (1)	$	1,942	$	2,074	$	6,508	$	6,520

(1) Includes lease expense of $0 and $134 for the three months ended September 30, 2022 and 2021, respectively, and $202 and $306 for the nine months ended September 30, 2022 and 2021, respectively, for assets held for sale.

F - 45

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

Litigation

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

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

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

The parties’ competing motions for partial summary judgment as to Plaintiff’s breach of the covenant of good faith and fair dealing and KCPA claims remain pending and a trial has been scheduled for December 2023.

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

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

(22) Earnings Per Share

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

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

F - 46

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	20,057	$	3,347	$	(2,557)	$	43,035
Less:
Net income (loss) attributable to non-controlling interests	5,834		1,339		6,588		4,477
Net income allocated to participating securities	195		35		—		725
Net income (loss) attributable to Tiptree Inc. common shares - basic	14,028		1,973		(9,145)		37,833






Effect of Dilutive Securities:
Securities of subsidiaries	(47)		(73)		—		(905)
Adjustments to income relating to exchangeable interests and contingent considerations, net of tax	3		1		—		1,820
Net income (loss) attributable to Tiptree Inc. common shares - diluted	$	13,984	$	1,901	$	(9,145)	$	38,748
Weighted average number of shares of common stock outstanding - basic	36,304,385		33,558,106		35,261,659		32,963,451
Weighted average number of incremental shares of common stock issuable from exchangeable interests and contingent considerations	478,863		574,076		—		2,061,760
Weighted average number of shares of common stock outstanding - diluted	36,783,248		34,132,182		35,261,659		35,025,211




Basic net income (loss) attributable to common shares	$	0.39	$	0.06	$	(0.26)	$	1.15




Diluted net income (loss) attributable to common shares	$	0.38	$	0.06	$	(0.26)	$	1.11

(23) Related Party Transactions

Corvid Peak is a related party of the Company because Corvid Peak is deemed to be controlled by Michael Barnes, the Company’s Executive Chairman. The Company is invested in funds managed by Corvid Peak (the “Corvid Peak Funds”) and Corvid Peak manages investment portfolio accounts of Fortegra and certain of its subsidiaries under an investment advisory agreement (the “IAA”). With respect to the Corvid Peak Funds and IAA, the Company incurred $847 and $185 of management and incentive fees for the three months ended September 30, 2022 and 2021, respectively. The Company incurred $2,255 and $769 of management and incentive fees for the nine months ended September 30, 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 equityholders).

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 nine months ended September 30, 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 nine months ended September 30, 2022 and 2021 were not material.

In 2022, Michael Barnes, the Company’s Executive Chairman, exercised warrants for 979,146 shares of Tiptree common stock for $6,783 and Mr. Inayatullah exercised warrants for 440,318 shares of Tiptree common stock for $3,050.

(24) Subsequent Events

On November 1, 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 November 21, 2022, and a payment date of November 28, 2022.

F - 47

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2022

(in thousands, except share data)

from time to time party thereto, certain of Fortegra’s affiliates 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 $200,000 revolving credit facility, all of which is available for the issuance of letters of credit, with a sub-limit of $25,000 for swing loans and matures on October 21, 2027.

F - 48

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 stockholders’ long-term total return on capital, as measured by growth in stock price plus dividends paid, in addition to Adjusted Net Income and Adjusted EBITDA.

Our year-to-date 2022 highlights include:

Overall:

•Tiptree reported net income of $14.2 million for the third quarter, up from $2.0 million in the prior year, driven primarily by the gain on sale of dry bulk vessels and improved performance in our insurance business.

•Net loss was $9.1 million for the nine months, compared to net income of $38.6 million in 2021, driven by the deferred tax liability associated with the WP Transaction and unrealized losses on investments as compared to gains in the prior year, partially offset by improved performance in insurance and shipping operations.

•Adjusted net income of $48.8 million increased 3.9% from $47.0 million in 2021, driven by improvement in insurance and shipping operations. Adjusted return on average equity was 14.2%, as compared to 16.2% in 2021.

•In the quarter, we sold the remaining two dry bulk vessels for $46.2 million, representing a net gain of $14.1 million. Total proceeds from dry bulk vessel sales in 2022 were $67.7 million, or a net gain of $21.2 million.

•In the quarter, we signed definitive agreements to sell our two product tankers for an aggregate of $49.0 million, representing an approximate 44% gain as compared to the September 30, 2022 book value. The sale of the two tankers is expected to close in the fourth quarter 2022.

•In June 2022, Tiptree closed the previously announced $200 million investment in Fortegra, by Warburg. The investment gives Warburg an approximate 24% ownership in Fortegra on an as converted basis.

•As a result of the WP Transaction, Tiptree recognized a $63.2 million pre-tax gain in stockholders’ equity in the nine months ended September 30, 2022, which was partially offset by increased deferred tax liabilities resulting from the tax deconsolidation as Tiptree’s ownership of Fortegra was reduced to below 80%. The deferred tax liability was $38.2 million, with $14.1 million impacting stockholders’ equity directly and $24.1 million impacting net income for the nine months ended September 30, 2022.

Insurance:

•Gross written premiums and premium equivalents were $1.96 billion for the nine months ended September 30, 2022, as compared to $1.62 billion for the nine months ended September 30, 2021, up 20.9% as a result of growth in specialty insurance lines and fee-based service contract offerings.

•Total revenues increased 25.2% to $903.4 million, from $721.5 million in 2021, driven by increases in earned premiums, net and service and administrative fees.

•The combined ratio remained consistent at 91.0%, driven by the scalability of Fortegra’s technology and shared service platform, which improved the expense ratio, while the underwriting ratio increased due to a shift in business mix toward lines with higher loss ratios and lower expense ratios.

•Income before taxes of $39.1 million decreased by $10.5 million as compared to $49.6 million in 2021. Return on average equity was 12.1% in 2022 as compared to 17.3% in 2021. The decreases resulted from investment losses in 2022 compared to gains in 2021, offset by growth in underwriting and fee revenues.

•Adjusted net income increased 29.1% to $59.9 million, as compared to $46.4 million in 2021. Adjusted return on average equity was 25.8%, as compared to 20.9% in 2021.

•In April 2022, Fortegra acquired ITC Compliance GRP Limited, a provider of regulatory and compliance services to the retail automotive sector in the United Kingdom, for net cash consideration of approximately $15.0 million, plus an earn-out.

Tiptree Capital:

•Maritime transportation income before taxes was $36.5 million in 2022, as compared to $7.7 million in 2021, driven by a rise in dry bulk and tanker charter rates and the gain on sale of three dry bulk vessels.

•Mortgage income before taxes was $3.4 million in 2022, as compared to $25.1 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 5.6% in 2022.

Key Trends:

Our results of operations are affected by a variety of factors including, but not limited to, general economic conditions and GDP growth, market liquidity and volatility, consumer confidence, U.S. demographics, employment and wage growth, business confidence and investment, inflation, interest rates and spreads, the impact of the regulatory environment, and the other factors set forth in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 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, inflation, 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. In addition, 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. In particular, the current period of rising inflation can have an impact on replacement costs associated with claims from our customers. To the extent we are unable to pass the higher costs of claims through higher premiums, lower underwriting margins could adversely affect our profitability. In addition, the current impact of the strengthening U.S. dollar relative to other currencies, including the British pound and Euro, may have a negative impact on book value between periods, associated with the timing of the recognition of revenues and expenses related to multi-year insurance contracts.

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 nine months 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 weighted average duration of our fixed income available for sale securities is less than three years. During the nine months 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 substantial majority was unrealized. While our asset and liability mix is relatively matched, should we need to liquidate any of these investments before maturity to pay claims, any realized losses could materially negatively impact our results of operations.

Changes in fair value for loans, credit investment funds, and equity securities in Fortegra’s investment portfolio are reported quarterly as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, currency risk, or market risk, including specific company or industry factors. In addition, our equity holdings are relatively concentrated. General equity market trends, along with company and industry specific factors, can impact the fair value which can result in unrealized gains and losses affecting our results.

Rising 10-year treasury yields, and the tapering of the Federal Reserve’s purchases of mortgage-backed securities, has resulted in substantial increases in mortgage interest rates. Low mortgage interest rates driven by the Federal Reserve intervention in mortgage markets, and rising home prices in certain markets, had provided tailwinds to the mortgage markets beginning in the second quarter of 2020 and through 2021, which had benefited our mortgage operations and margins. The substantial rise in rates starting in 2022 have resulted in a sharp reversal of those trends, with volumes and margins declining

significantly. Only partially 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 is likely to be only partially mitigated by the improvement in mortgage servicing revenues. A sustained period of negative profitability in the mortgage industry could also impact the availability of funding sources for our mortgage business.

Rising interest rates can also impact the cost of floating interest rate debt obligations, while declining rates can decrease the cost of debt. Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations. A continuation of rising rates could have a material impact on our costs of floating rate debt. 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. Specifically, the ICE Benchmark Administration Limited announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative; (a) immediately after December 31, 2021, in the case of the 1-week and 2-month U.S. dollar LIBOR settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. 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. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2023. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. 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 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 currently affected by events, such as the war in Ukraine, which interrupt production, trade routes, and consumption. The shipping industry is cyclical with significant volatility in charter hire rates and profitability, which can change rapidly. If rising interest rates and global inflationary factors drive a global recession, both charter rates and utilization rates could be negatively impacted.

RESULTS OF OPERATIONS

The following is a summary of our condensed consolidated financial results for the three and nine months ended September 30, 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.

Selected Key Metrics


($ in thousands, except per share information)	Three Months Ended September 30,				Nine Months Ended September 30,
GAAP:	2022		2021		2022		2021
Total revenues	$	363,478	$	286,605	$	1,028,224	$	880,980
Net income (loss) attributable to common stockholders	$	14,223	$	2,008	$	(9,145)	$	38,558


($ in thousands, except per share information)	Three Months Ended September 30,						Nine Months Ended September 30,
GAAP:	2022			2021			2022			2021
Diluted earnings per share	$	0.38		$	0.06		$	(0.26)		$	1.11
Cash dividends paid per common share	$	0.04		$	0.04		$	0.12		$	0.12
Return on average equity	15.4		%	3.3		%	(0.7)		%	14.8		%

Non-GAAP: (1)
Adjusted net income	$	19,395		$	20,730		$	48,833		$	47,010
Adjusted return on average equity	14.8		%	20.5		%	14.2		%	16.2		%
Adjusted EBITDA	$	8,904		$	12,356		$	49,415		$	84,594
Book value per share	$	10.68		$	11.37		$	10.68		$	11.37

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

Revenues

For the three months ended September 30, 2022, revenues were $363.5 million, which increased $76.9 million, or 26.8%, compared to the prior year period. For the nine months ended September 30, 2022, revenues were $1.03 billion, which increased $147.2 million, or 16.7%, compared to the prior year period. The changes for both periods were primarily driven by growth in earned premiums, net, and service and administrative fees in our insurance business, increased revenues from charter hires of our vessels and our mortgage servicing portfolio, partially offset by lower mortgage volumes and margins. The nine month comparison was impacted by net realized and unrealized losses on Invesque and other investments in 2022 compared to gains in the 2021 period.

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


($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net realized gains - Maritime transportation	$	14,100	$	—	$	21,217	$	—
Net realized and unrealized gains (losses) - Invesque	$	(1,698)	$	(12,566)	$	(15,624)	$	4,246
Net realized and unrealized gains (losses)(1)	$	(6,007)	$	(4,267)	$	(12,475)	$	9,345

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

Net Income (Loss) Attributable to common stockholders

For the three months ended September 30, 2022, net income attributable to common stockholders was $14.2 million, an increase of $12.2 million, primarily driven by the sale of our two dry bulk vesselsa and growth in Fortegra’s underwriting and fee operations, partially offset by lower mortgage profitability.

For the nine months ended September 30, 2022, net loss attributable to common stockholders was $9.1 million, a decrease of $47.7 million from net income of $38.6 million for the nine months ended September 30, 2021, primarily driven by net realized and unrealized losses on Invesque and other investments in 2022 compared to gains in 2021, lower mortgage origination revenues and the tax impacts of the WP Transaction, 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 charter rates, including the gain on sale of three dry bulk vessels.

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

Adjusted net income for the three months ended September 30, 2022 was $19.4 million, a decrease of $1.3 million, or 6.4%, from the three months ended September 30, 2021, driven by declines in our mortgage business. For the three months ended September 30, 2022, adjusted return on average equity was 14.8%, as compared to 20.5% at September 30, 2021, with the decrease driven by lower adjusted net income and the higher average equity balances as a result of the WP Transaction.

Adjusted net income for the nine months ended September 30, 2022 was $48.8 million, an increase of $1.8 million, or 3.9%, from the nine months ended September 30, 2021, with the increase driven by improved performance in our insurance and shipping operations, partially offset by declines in our mortgage business. For the nine months ended September 30, 2022,

adjusted return on average equity was 14.2%, as compared to 16.2% at September 30, 2021, with the decrease primarily driven by the higher average equity balances as a result of the WP Transaction.

Adjusted EBITDA - Non-GAAP

Adjusted EBITDA for the three months ended September 30, 2022 was $8.9 million, a decrease of $3.5 million from 2021 driven by realized and unrealized losses on investments (including impacts to AOCI) and foreign currency translation in 2022.

Adjusted EBITDA for the nine months ended September 30, 2022 was $49.4 million, a decrease of $35.2 million from 2021, driven by realized and unrealized losses in 2022 (including impacts to AOCI) compared to gains in 2021, partially offset by the WP Transaction gain and improved operating performance noted above.

Book Value per share - Non-GAAP

Total stockholders’ equity was $519.6 million as of September 30, 2022 compared to $402.1 million as of September 30, 2021, with the increase driven by the WP Transaction and cash exercise of Tiptree warrants, partially offset by comprehensive losses over the trailing four quarters primarily resulting from unrealized losses on AFS securities and negative impacts from foreign currency translation. In the nine months ended September 30, 2022, Tiptree returned $5.9 million to stockholders through dividends paid and shares repurchased.

Book value per share for the period ended September 30, 2022 was $10.68, a decrease from book value per share of $11.37 as of September 30, 2021. The key drivers of the decrease over the past four quarters were the comprehensive loss per share primarily associated with unrealized losses on AFS securities, dividends paid of $0.16 per share, and issuance of shares as a result of the exercise of warrants and exchanges of vested subsidiary equity awards, partially offset by the net increase to Tiptree Inc. stockholders’ equity from the WP transaction.

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Insurance	$	327,028	$	246,706	$	903,388	$	721,524
Mortgage	15,611		27,425		59,201		87,191
Tiptree Capital - other	20,839		12,474		65,635		72,265
Corporate	—		—		—		—
Total revenues	$	363,478	$	286,605	$	1,028,224	$	880,980

Income (loss) before taxes:
Insurance	$	15,304	$	13,337	$	39,057	$	49,569
Mortgage	(940)		6,267		3,350		25,119
Tiptree Capital - other	19,077		(4,700)		20,468		12,914
Corporate	(8,316)		(11,320)		(33,895)		(33,151)
Total income (loss) before taxes	$	25,125	$	3,584	$	28,980	$	54,451

Non-GAAP - Adjusted net income (1):
Insurance	$	19,831	$	19,533	$	59,893	$	46,400
Mortgage	(777)		3,961		(3,516)		15,485
Tiptree Capital - other	5,656		5,522		13,272		8,153
Corporate	(5,315)		(8,286)		(20,816)		(23,028)
Total adjusted net income	$	19,395	$	20,730	$	48,833	$	47,010

(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. As of September 30, 2022, Fortegra was owned approximately 79.5% by Tiptree Holdings, 17.4% by Warburg and 3.1% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock.

The following tables and discussion present the Insurance segment results, including non-controlling interests, for the three and nine months ended September 30, 2022 and 2021.

Results of Operations - Three Months Ended September 30, 2022 compared to 2021


($ in thousands)	Three Months Ended September 30,
	2022			2021			Change		% Change
Revenues:
Earned premiums, net	$	237,877		$	175,026		$	62,851	35.9	%
Service and administrative fees	83,423			69,664			13,759		19.8	%
Ceding commissions	4,023			2,722			1,301		47.8	%
Net investment income	3,632			3,330			302		9.1	%
Net realized and unrealized gains (losses)	(6,382)			(7,492)			1,110		NM%
Other revenue	4,455			3,456			999		28.9	%
Total revenues	$	327,028		$	246,706		$	80,322	32.6	%
Expenses:
Net losses and loss adjustment expenses	97,827			$	61,252		$	36,575	59.7	%
Member benefit claims	23,415			19,579			3,836		19.6	%
Commission expense	137,559			104,392			33,167		31.8	%
Employee compensation and benefits	22,071			19,526			2,545		13.0	%
Interest expense	5,027			4,268			759		17.8	%
Depreciation and amortization	4,742			4,307			435		10.1	%
Other expenses	21,083			20,045			1,038		5.2	%
Total expenses	$	311,724		$	233,369		$	78,355	33.6	%
Income (loss) before taxes (1)	$	15,304		$	13,337		$	1,967	14.7	%





Key Performance Metrics:
Gross written premiums and premium equivalents	$	761,446		$	588,063		$	173,383	29.5	%
Return on average equity	14.4		%	13.7		%
Underwriting ratio	78.4		%	73.8		%
Expense ratio	13.1		%	15.8		%
Combined ratio	91.5		%	89.6		%

Non-GAAP Financial Measures (2):
Adjusted net income	$	19,831		$	19,533		$	298	1.5	%
Adjusted return on average equity	24.8		%	26.8		%

(1) Net income was $11,539 for the three months ended September 30, 2022 compared to $9,943 for the three months ended September 30, 2021.

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

Revenues

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

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

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

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

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

Revenues - Three Months Ended September 30, 2022 compared to 2021

For the three months ended September 30, 2022, total revenues increased 32.6%, to $327.0 million, as compared to $246.7 million for the three months ended September 30, 2021. Earned premiums, net of $237.9 million increased $62.9 million, or 35.9%, driven by growth in specialty admitted and E&S insurance lines. Service and administrative fees of $83.4 million increased by 19.8% driven by growth in warranty and consumer goods service contract revenues. Ceding commissions of $4.0 million increased by $1.3 million, or 47.8%, in line with growth in ceded premiums. Other revenues increased by $1.0 million, or 28.9%, driven by growth in premium finance product offerings.

For the three months ended September 30, 2022, 28.1% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the three months ended September 30, 2022, 77.6% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

For the three months ended September 30, 2022, net investment income was $3.6 million as compared to $3.3 million in the prior year period, primarily driven by growth in investments. Net realized and unrealized losses were $6.4 million, an improvement of $1.1 million, as compared to net realized and unrealized losses of $7.5 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments 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 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.

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

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

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

Interest Expense consists primarily of interest expense on corporate revolving debt, notes, preferred trust securities due June 15, 2037 (Preferred Trust Securities) and asset based debt for premium finance and warranty service contract financing, which is non-recourse to Fortegra.

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

Expenses - Three Months Ended September 30, 2022 compared to 2021

For the three months ended September 30, 2022, net losses and loss adjustment expenses were $97.8 million, member benefit claims were $23.4 million and commission expense was $137.6 million, as compared to $61.3 million, $19.6 million and $104.4 million, respectively, for the three months ended September 30, 2021. The increase in net losses and loss adjustment expenses of $36.6 million, or 59.7%, was driven by growth in U.S. and European Insurance lines and the shift in business mix toward commercial lines, which tend to have higher loss ratios and lower commission and expense ratios. The increase in member benefit claims of $3.8 million, or 19.6%, was driven by growth in vehicle service contracts. Commission expense increased by $33.2 million, or 31.8%, generally in line with the growth in earned premiums, net and service and administrative fees.

For the three months ended September 30, 2022, employee compensation and benefits were $22.1 million and other expenses were $21.1 million, as compared to $19.5 million and $20.0 million, respectively, for the three months ended September 30, 2021. Employee compensation and benefits increased by $2.5 million, or 13.0%, driven by investments in human capital associated with growth in admitted, E&S and warranty lines. Other expenses increased by $1.0 million, or 5.2%, driven primarily by premium taxes.

For the three months ended September 30, 2022, interest expense was $5.0 million as compared to $4.3 million for the three months ended September 30, 2021. The increase in interest expense of $0.8 million, or 17.8%, was primarily driven by increased asset based debt for premium finance lines and the rise in short-term interest rates.

For the three months ended September 30, 2022, depreciation and amortization expense was $4.7 million, including $4.1 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto and ITC, as compared to $4.3 million, including $3.8 million of intangible amortization from purchase accounting in 2021.

Results of Operations - Nine Months Ended September 30, 2022 compared to 2021


($ in thousands)	Nine Months Ended September 30,
	2022			2021			Change		% Change
Revenues:
Earned premiums, net	$	662,234		$	498,903		$	163,331	32.7	%
Service and administrative fees	232,883			191,414			41,469		21.7	%
Ceding commissions	9,886			8,827			1,059		12.0	%
Net investment income	10,164			9,331			833		8.9	%
Net realized and unrealized gains (losses)	(23,151)			5,004			(28,155)		NM%
Other revenue	11,372			8,045			3,327		41.4	%
Total revenues	$	903,388		$	721,524		$	181,864	25.2	%
Expenses:
Net losses and loss adjustment expenses	$	264,056		$	181,244		$	82,812	45.7	%
Member benefit claims	66,297			55,954			10,343		18.5	%
Commission expense	382,435			292,580			89,855		30.7	%
Employee compensation and benefits	64,159			57,007			7,152		12.5	%
Interest expense	15,166			13,097			2,069		15.8	%
Depreciation and amortization	13,697			12,905			792		6.1	%
Other expenses	58,521			59,168			(647)		(1.1)	%
Total expenses	$	864,331		$	671,955		$	192,376	28.6	%
Income (loss) before taxes (1)	$	39,057		$	49,569		$	(10,512)	NM%

Key Performance Metrics:
Gross written premiums and premium equivalents	$	1,956,998		$	1,618,076		$	338,922	20.9	%
Return on average equity	12.1		%	17.3		%
Underwriting ratio	77.8		%	74.9		%
Expense ratio	13.2		%	16.1		%
Combined ratio	91.0		%	91.0		%

Non-GAAP Financial Measures (2):
Adjusted net income	$	59,893		$	46,400		$	13,493	29.1	%
Adjusted return on average equity	25.8		%	20.9		%

(1) Net income was $27,958 for the nine months ended September 30, 2022 compared to $38,412 for the nine months ended September 30, 2021.

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

Revenues - Nine Months Ended September 30, 2022 compared to 2021

For the nine months ended September 30, 2022, total revenues increased 25.2%, to $903.4 million, as compared to $721.5 million for the nine months ended September 30, 2021. Earned premiums, net of $662.2 million increased $163.3 million, or 32.7%, driven by growth in admitted and E&S commercial lines. Service and administrative fees of $232.9 million increased by 21.7% driven by growth in warranty and consumer goods service contract revenues. Ceding commissions of $9.9 million increased by $1.1 million, or 12.0%, driven by higher ceding fees. Other revenues increased by $3.3 million, or 41.4%, driven by growth in premium finance product offerings.

For the nine months ended September 30, 2022, 28.1% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the nine months ended September 30, 2022, 78.6% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

For the nine months ended September 30, 2022, net investment income was $10.2 million as compared to $9.3 million in the prior year period, primarily driven by growth in investments. Net realized and unrealized losses were $23.2 million, compared to net realized and unrealized gains of $5.0 million in the prior year period, primarily driven by the change in fair value of equity securities and other investments carried at fair value.

Expenses - Nine Months Ended September 30, 2022 compared to 2021

For the nine months ended September 30, 2022, net losses and loss adjustment expenses were $264.1 million, member benefit claims were $66.3 million and commission expense was $382.4 million, as compared to $181.2 million, $56.0 million and $292.6 million, respectively, for the nine months ended September 30, 2021. The increase in net losses and loss adjustment expenses of $82.8 million, or 45.7%, 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. During the nine months ended September 30, 2022, the Company experienced a decrease in prior year development of $2.2 million primarily as a result of lower than expected claim severity in its commercial lines of business. In the nine months ended September 30, 2021 the Company experienced an increase in prior year development of $3.9 million primarily driven by 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 $10.3 million, or 18.5%, was driven by growth in vehicle service contracts. Commission expense increased by $89.9 million, or 30.7%, in line with the growth in earned premiums, net and service and administrative fees.

For the nine months ended September 30, 2022, employee compensation and benefits were $64.2 million and other expenses were $58.5 million, as compared to $57.0 million and $59.2 million, respectively, for the nine months ended September 30, 2021. Employee compensation and benefits increased by $7.2 million, or 12.5%, driven by investments in human capital associated with growth in admitted, E&S and warranty lines. Other expenses decreased by $0.6 million, or 1.1%, 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.

For the nine months ended September 30, 2022, interest expense was $15.2 million as compared to $13.1 million for the nine months ended September 30, 2021. The increase in interest expense of $2.1 million, or 15.8%, was primarily driven by increased asset based debt for premium finance lines and the rise in short-term interest rates.

For the nine months ended September 30, 2022, depreciation and amortization expense was $13.7 million, including $12.1 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto and ITC, as compared to $12.9 million, including $11.5 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 nine months ended September 30, 2022 and 2021.


($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
U.S. Insurance	$	534,272	$	376,437	$	1,317,662	$	1,065,735
U.S. Warranty Solutions	196,302		181,506		541,815		482,454
Europe Warranty Solutions	30,872		30,120		97,521		69,887
Total	$	761,446	$	588,063	$	1,956,998	$	1,618,076

Total gross written premiums and premium equivalents for the three months ended September 30, 2022 were $761.4 million, representing an increase of $173.4 million, or 29.5%. Total gross written premiums and premium equivalents for the nine months ended September 30, 2022 were $1,957.0 million, representing an increase of $338.9 million, or 20.9%. The increase

in both periods was driven by a combination of factors including expanding Fortegra’s distribution partner network, growing specialty admitted and E&S insurance lines, and increasing penetration in the auto and consumer goods service contract sector.

For the three months ended September 30, 2022, U.S. Insurance increased by $157.8 million, or 41.9%, driven by growth in specialty commercial insurance lines. For the three months ended September 30, 2022, U.S. Warranty Solutions increased by $14.8 million, or 8.2%, driven by growth in auto and roadside assistance service contracts. Europe Warranty Solutions increased by $0.8 million, or 2.5%, driven by growth in auto warranty lines.

For the nine months ended September 30, 2022, U.S. Insurance increased by $251.9 million, or 23.6%, driven by growth in commercial, E&S, and warranty insurance lines. For the nine months ended September 30, 2022, U.S. Warranty Solutions increased by $59.4 million, or 12.3%, driven by growth in auto and roadside assistance service contracts. Europe Warranty Solutions increased by $27.6 million, or 39.5%, driven by growth in auto warranty lines.

The growth in gross written premiums and premium equivalents, combined with higher retention in select products as of September 30, 2022, has resulted in an increase of $413.8 million, or 26.5%, in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to September 30, 2021. As of September 30, 2022, unearned premiums and deferred revenues were $1,978.2 million, as compared to $1,564.4 million as of September 30, 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.

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

The combined ratio was 91.5% for the three months ended September 30, 2022, which consisted of an underwriting ratio of 78.4% and an expense ratio of 13.1%, as compared to 89.6%, 73.8% and 15.8%, respectively, for the three months ended September 30, 2021. The combined ratio for the three month period increased by 1.9%, driven by an increase in the underwriting ratio, offset by a decrease in the expense ratio, both related to changes in product mix toward lines with higher loss ratios and lower expense ratios.

The combined ratio was 91.0% for the nine months ended September 30, 2022, which consisted of an underwriting ratio of 77.8% and an expense ratio of 13.2%, as compared to 91.0%, 74.9% and 16.1%, respectively, for the nine months ended September 30, 2021. The combined ratio remained consistent for the nine month period, driven by the scalability of Fortegra’s technology and shared service platform, which improved the expense ratio, while the underwriting ratio increased due to a shift in business mix toward lines with higher loss ratios and lower expense ratios.

Return on Average Equity

Return on average equity is expressed as the ratio of net income to average stockholders’ equity during the period. Management uses this ratio as a measure of the on-going performance of the totality of the Company’s operations.

Return on average equity was 14.4% for the three months ended September 30, 2022, as compared to 13.7% for the prior year period. The increase in net income and annualized return on average equity was driven by revenue growth and a consistent combined ratio.

Return on average equity was 12.1% for the nine months ended September 30, 2022, as compared to 17.3% for the nine months ended September 30, 2021. The decrease in net income and annualized return on average equity was driven by net realized and unrealized losses in the 2022 period compared to net realized and unrealized gains in the 2021 periods as well as higher average equity balances, 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 tables show underwriting and fee revenues and underwriting and fee margin by business mix for the three and nine months ended September 30, 2022 and 2021.


	Three Months Ended September 30,
($ in thousands)	Underwriting and Fee Revenues (1)				Underwriting and Fee Margin (1)
	2022		2021			2022		2021
U.S. Insurance	$	243,564	$	174,995		$	42,981	$	37,005
U.S. Warranty Solutions	71,557		61,342			22,542		23,455
Europe Warranty Solutions	14,657		14,531			5,454		5,185
Total	$	329,778	$	250,868		$	70,977	$	65,645

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

Underwriting and fee revenues were $329.8 million for the three months ended September 30, 2022 as compared to $250.9 million for the three months ended September 30, 2021. Total underwriting and fee revenues increased $78.9 million, or 31.5%, driven by growth in U.S. Insurance and U.S. Warranty Solutions. The increase in U.S. Insurance was $68.6 million, or 39.2%, driven by growth in specialty commercial insurance lines. The increase in U.S. Warranty Solutions was $10.2 million, or 16.7%, driven by growth in auto, roadside assistance, and premium finance offerings. Europe Warranty Solutions increased by $0.1 million, or 0.9%.

Underwriting and fee margin was $71.0 million for the three months ended September 30, 2022 as compared to $65.6 million for the three months ended September 30, 2021. Total underwriting and fee margin increased $5.3 million, or 8.1%, driven by growth in U.S. Insurance. U.S. Insurance grew by $6.0 million, or 16.1%, driven by revenue growth in admitted and E&S lines. U.S. Warranty Solutions decreased by $0.9 million, or 3.9%, 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 $0.3 million, or 5.2%, driven by growth in auto and consumer goods service contracts.


	Nine Months Ended September 30,
($ in thousands)	Underwriting and Fee Revenues (1)				Underwriting and Fee Margin (1)
	2022		2021			2022		2021
U.S. Insurance	$	673,009	$	504,038		$	123,546	$	101,812
U.S. Warranty Solutions	200,045		168,476			64,197		65,453
Europe Warranty Solutions	43,321		34,675			15,844		10,146
Total	$	916,375	$	707,189		$	203,587	$	177,411

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

Underwriting and fee revenues were $916.4 million for the nine months ended September 30, 2022 as compared to $707.2 million for the nine months ended September 30, 2021. Total underwriting and fee revenues increased $209.2 million, or 29.6%, driven by growth in all business lines. The increase in U.S. Insurance was $169.0 million, or 33.5%, driven by growth in commercial, E&S, and credit insurance lines. The increase in U.S. Warranty Solutions was $31.6 million, or 18.7%, driven by growth in auto, roadside assistance, and premium finance offerings. Europe Warranty Solutions increased by $8.6 million, or 24.9%, driven by growth in auto and consumer goods service contracts.

Underwriting and fee margin was $203.6 million for the nine months ended September 30, 2022 as compared to $177.4 million for the nine months ended September 30, 2021. Total underwriting and fee margin increased $26.2 million, or 14.8%, driven by growth in U.S. Insurance and Europe Warranty Solutions. U.S. Insurance grew by $21.7 million, or 21.3%, from growth in specialty admitted and E&S lines. U.S. Warranty Solutions decreased by $1.3 million, or 1.9%, 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 $5.7 million, or 56.2%, driven by growth in auto and consumer goods service contracts.

Adjusted Net Income and Adjusted Return on Average Equity

Adjusted net income represents income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses), and intangibles amortization associated with purchase accounting.

Adjusted return on average equity represents adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

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

For the three months ended September 30, 2022, adjusted net income and adjusted return on average equity were $19.8 million and 24.8%, respectively, as compared to $19.5 million and 26.8%, respectively, for the three months ended September 30, 2021. For the nine months ended September 30, 2022, adjusted net income and adjusted return on average equity were $59.9 million and 25.8%, respectively, as compared to $46.4 million and 20.9%, respectively, for the nine months ended September 30, 2021. The improvement of adjusted net income in both periods was driven by the growth in underwriting and fee revenues.

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

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

Net investment income includes interest and dividends, net of investment expenses, on invested assets. Net realized and unrealized gains and losses on investments are reported separately from net investment income.

For the three months ended September 30, 2022, net investment income was $3.6 million as compared to $3.3 million in the prior year period, driven by growth in investments. Net realized and unrealized losses were $6.4 million, compared to losses of $7.5 million in the prior year period, both driven by realized and unrealized losses on certain equity securities and other investments, including fixed income securities carried at fair value. Unrealized losses on AFS securities impacting OCI for the three months ended September 30, 2022 were $18.1 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.

For the nine months ended September 30, 2022, net investment income was $10.2 million as compared to $9.3 million in the prior year period, driven by growth in investments. Net realized and unrealized losses were $23.2 million, compared to gains

of $5.0 million in the prior year period, 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 on AFS securities impacting OCI for the nine months ended September 30, 2022 were $56.5 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 September 30, 2022, Tiptree Capital - Other includes our Invesque shares and maritime transportation operations (including two product tankers).

Mortgage

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

We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer and servicer for Ginnie Mae. We originate residential mortgage loans through our retail distribution channel (directly to consumers) in 39 states and the District of Columbia as of September 30, 2022.

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

Results of Operations


($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues:
Net realized and unrealized gains (losses)	$	10,847		$	22,651		$	44,711		$	73,454
Other revenue	4,764			4,774			14,490			13,737
Total revenues	$	15,611		$	27,425		$	59,201		$	87,191
Expenses:
Employee compensation and benefits	$	9,517		$	14,382		$	35,137		$	42,849
Interest expense	475			276			1,116			837
Depreciation and amortization	190			218			618			670
Other expenses	6,369			6,282			18,980			17,716
Total expenses	$	16,551		$	21,158		$	55,851		$	62,072
Income (loss) before taxes	$	(940)		$	6,267		$	3,350		$	25,119

Key Performance Metrics:
Origination volumes	$	279,793		$	384,958		$	940,958		$	1,180,772
Gain on sale margins	4.9		%	5.5		%	4.6		%	5.7		%
Return on average equity	(5.9)		%	36.5		%	5.6		%	44.4		%







Non-GAAP Financial Measures (1):
Adjusted net income	$	(777)		$	3,961		$	(3,516)		$	15,485
Adjusted return on average equity	(5.4)		%	23.0		%	(8.0)		%	33.3		%

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

Revenues

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

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

Revenues - Three and Nine Months Ended September 30, 2022 compared to 2021

For the three months ended September 30, 2022, $279.8 million of loans were funded, compared to $385.0 million for 2021, a decrease of $105.2 million, or 27.3%. Gain on sale margins decreased to 4.9% for the three months ended September 30, 2022, down approximately 60 basis points from 5.5% for the three months ended September 30, 2021. For the nine months ended September 30, 2022, $941.0 million of loans were funded, compared to $1.18 billion for 2021, a decrease of $239.8 million, or 20.3%. Origination volumes for both periods in 2022 declined given the rise in mortgage interest rates. Gain on sale margins decreased to 4.6% for the nine months ended September 30, 2022, down approximately 110 basis points from 5.7% for the nine months ended September 30, 2021.

Net realized and unrealized gains for the three months ended September 30, 2022 were $10.8 million, compared to $22.7 million for 2021, a decrease of $11.8 million or 52.1%. 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 $82 thousand as prepayment speeds declined from December 31, 2021. Net realized and unrealized gains for the nine months ended September 30, 2022 were $44.7 million, compared to $73.5 million for 2021, a decrease of $28.7 million or 39.1%. 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 $8.0 million as prepayment speeds declined from December 31, 2021.

Other revenue for the three months ended September 30, 2022 remained flat at $4.8 million. Other revenue for the nine months ended September 30, 2022 was $14.5 million, compared to $13.7 million for 2021, an increase of $0.8 million, or 5.5%. The increase for the nine month period is driven primarily by higher servicing fees from an increase in loans serviced. As of September 30, 2022, the mortgage servicing asset was valued at $41.9 million, an increase from $29.8 million as of December 31, 2021.

Expenses

Employee Compensation and Benefits includes salaries, commissions, benefits, bonuses, other incentive compensation and related taxes for employees. Commissions expense for sales staff generally varies with loan origination volumes.

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

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

Other Expenses include loan origination expenses, namely, leads, appraisals, credit reporting and licensing fees, general and administrative expenses, including office rent, insurance, legal, consulting and payroll processing expenses, and servicing expense.

Expenses - Three and Nine Months Ended September 30, 2022 compared to 2021

For the three months ended September 30, 2022, employee compensation and benefits were $9.5 million, compared to $14.4 million in 2021, a decrease of $4.9 million or 33.8%. For the nine months ended September 30, 2022, employee compensation and benefits were $35.1 million, compared to $42.8 million in 2021, a decrease of $7.7 million or 18.0%. The decrease in both periods was driven primarily by reduced commissions on lower origination volumes.

For the three months ended September 30, 2022 and 2021, interest expense was at $0.5 million, an increase of $0.2 million or 72.1% driven by higher interest rates. For the nine months ended September 30, 2022 and 2021, interest expense was at $1.1 million, an increase of $0.3 million or 33.3% driven by higher interest rates.

For the three months ended September 30, 2022, other expenses were $6.4 million, compared to $6.3 million in 2021, with the $0.1 million increase driven by increased loan origination expenses, including marketing costs. For the nine months ended September 30, 2022, other expenses were $19.0 million, compared to $17.7 million in 2021, with the $1.3 million increase driven by the same factors that impacted the three months.

Income (loss) before taxes

Loss before taxes for the three months ended September 30, 2022 was $0.9 million, compared to $6.3 million of income in 2021. Income before taxes for the nine months ended September 30, 2022 was $3.4 million, compared to $25.1 million in 2021. The decrease in both periods was driven by 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 September 30,
($ in thousands)	Total revenue				Income (loss) before taxes
	2022		2021			2022		2021
Senior living (Invesque)	$	(1,405)	$	(10,396)		$	(1,405)	$	(10,396)
Maritime transportation	21,928		11,424			20,124		5,231
Other (1)	316		11,446			358		465
Total	$	20,839	$	12,474		$	19,077	$	(4,700)

	Nine Months Ended September 30,
($ in thousands)	Total revenue				Income (loss) before taxes
	2022		2021			2022		2021
Senior living (Invesque)	$	(12,924)	$	3,512		$	(12,924)	$	3,512
Maritime transportation	49,554		25,041			36,537		7,738
Other (1)	29,005		43,712			(3,145)		1,664
Total	$	65,635	$	72,265		$	20,468	$	12,914

(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 formerly held for sale mortgage originator (Luxury); realized and unrealized gains and losses on the Company’s investment holdings (primarily Invesque); and charter revenues from vessels within the Company’s maritime transportation operations. Subsequent to the sale of our dry bulk and tanker vessels, operations include two smaller seaborne vessels and other ancillary assets.

Revenues for the three months ended September 30, 2022 were $20.8 million compared to $12.5 million for 2021. The primary drivers of the increase in revenues were the gain of $14.1 million related to the sale of two dry bulk vessels and increased dry bulk and tanker charter rates earned by the maritime transportation business, partially offset by unrealized losses on our investment in Invesque. Revenues for the nine months ended September 30, 2022 were $65.6 million compared to $72.3 million for 2021 with the decline primarily driven by unrealized losses on our investment in Invesque in the 2022 period compared to gains in the 2021 period and the deconsolidation of Luxury effective July 1, 2022, offset by higher charter rates and gain on sale of three dry bulk vessels in our maritime transportation business.

Income (loss) before taxes

The income before taxes from Tiptree Capital - Other for the three months ended September 30, 2022 was $19.1 million,

compared to the loss before taxes of $4.7 million in 2021. The income before taxes from Tiptree Capital - Other for the nine months ended September 30, 2022 was $20.5 million, compared to income before taxes of $12.9 million in 2021, with the increase for both periods driven by the same factors that impacted revenues.

Adjusted net income - Non-GAAP(1)


($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Senior living (Invesque)	$	—	$	—	$	—	$	—
Maritime transportation	5,477		5,503		12,949		8,074
Other	180		19		324		79
Total	$	5,657	$	5,522	$	13,273	$	8,153

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

Adjusted net income increased to $13.3 million for the nine months ended September 30, 2022 compared to $8.2 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Employee compensation and benefits	$	1,880	$	1,785	$	5,824	$	5,621
Employee incentive compensation expense	3,032		4,835		12,069		10,760
Interest expense	—		2,553		4,224		7,675
Depreciation and amortization	205		203		604		602
Other expenses	3,199		1,944		11,174		8,493
Total expenses	$	8,316	$	11,320	$	33,895	$	33,151

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

Employee compensation and benefits, including incentive compensation expense, were $17.9 million for the nine months ended September 30, 2022, compared to $16.4 million for 2021, driven by an increase in performance related employee incentive compensation. Of the incentive compensation expense in the nine months ended September 30, 2022, $5.4 million was stock-based compensation expense primarily related to awards granted in third quarter 2021. Interest expense for the nine months ended September 30, 2022 and 2021 was $4.2 million and $7.7 million, respectively. As of September 30, 2022, the Company had no outstanding borrowings at the holding company, compared to $114.1 million at December 31, 2021. Other expenses of $11.2 million increased by $2.7 million from the nine months ended September 30, 2021, primarily driven by a $2.1 million loss on extinguishment of debt and increased consulting and professional fees.

Provision for Income Taxes

On June 21, 2022, the WP Transaction was completed, in which Warburg invested $200.0 million in Tiptree’s insurance subsidiary, Fortegra. The WP Transaction, along with Fortegra management’s ownership, reduced Tiptree’s equity ownership in Fortegra below 80% such that, while still consolidated for GAAP financial reporting purposes, Fortegra will no longer be included in the consolidated tax return group with Tiptree. Tiptree has recorded deferred tax liabilities related to the basis difference in Tiptree’s investment in Fortegra as of September 30, 2022. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell any of its Fortegra stock at its carrying value on Tiptree’s balance sheet. The deferred tax liability as of September 30, 2022 relating to the WP Transaction was $38.2 million, of which $14.1 million was recorded directly in Tiptree Inc. stockholders’ equity with respect to the gain component and $24.1 million was recorded as a provision for income taxes in the condensed consolidated statements of operations for the nine months ended September 30, 2022.

The total income tax expense of $5.1 million for the three months ended September 30, 2022 and $0.2 million for the three months ended September 30, 2021 are reflected as components of net income (loss). For the three months ended September 30, 2022, the Company’s effective tax rate was equal to 20.2%. The effective rate for the three months ended September 30, 2022 was slightly lower than the U.S. statutory income tax rate of 21.0%, primarily from the impact of discrete items, partially offset by state taxes. For the three months ended September 30, 2021, the Company’s effective tax rate was equal to 6.6%. The effective rate for the three months ended September 30, 2021 was lower than the U.S. federal statutory income tax rate of 21.0%, primarily from the impact of foreign operations and discrete items, partially offset by state taxes.

The total income tax expense of $31.5 million for the nine months ended September 30, 2022 and $11.4 million for the nine months ended September 30, 2021 are reflected as components of net income (loss). For the nine months ended September 30, 2022, the Company’s effective tax rate was equal to 108.9%. The effective rate for the nine months ended September 30, 2022 was significantly higher than the U.S. statutory income tax rate of 21.0%, primarily from the impact of recording deferred taxes relating to the tax deconsolidation of Fortegra. For the nine months ended September 30, 2021, the Company’s effective tax rate was equal to 21.0%. The effective rate for the nine months ended September 30, 2021 was equal to the U.S. federal statutory income tax rate of 21.0%, due to the impact of state taxes offset by other discrete items.

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

Balance Sheet Information

Tiptree’s total assets were $3,994.1 million as of September 30, 2022, compared to $3,599.1 million as of December 31, 2021. The $394.9 million increase in assets is primarily attributable to the growth in the Insurance segment, proceeds from the WP Transaction and the increase in cash and equivalents from the sale of our dry bulk vessels.

Total stockholders’ equity was $519.6 million as of September 30, 2022, compared to $400.2 million as of December 31, 2021, with the increase primarily driven by the WP Transaction, partially offset by other comprehensive losses on available for sale securities for nine months ended September 30, 2022. As of September 30, 2022, there were 36,247,257 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, partially offset by stock repurchases.

The following table is a summary of certain balance sheet information:


	As of September 30, 2022
			Tiptree Capital
($ in thousands)	Insurance		Mortgage		Other		Corporate		Total
Total assets	$	3,648,191	$	167,015	$	73,311	$	105,567	$	3,994,084

Corporate debt	$	160,000	$	—	$	—	$	—	$	160,000
Asset based debt	58,568		55,288		—		—		113,856

Tiptree Inc. stockholders’ equity	$	185,679	$	55,644	$	63,668	$	82,288	$	387,279
Non-controlling interests:
Fortegra preferred interests	77,679		—		—		—		$	77,679
Common interests	50,795		1,065		2,756		—		54,616
Total stockholders’ equity	$	314,153	$	56,709	$	66,424	$	82,288	$	519,574

NON-GAAP MEASURES AND RECONCILIATIONS

Non-GAAP Reconciliations

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

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

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Total revenues	$	327,028	$	246,706	$	903,388	$	721,524
Less: Net investment income	(3,632)		(3,330)		(10,164)		(9,331)
Less: Net realized and unrealized gains (losses)	6,382		7,492		23,151		(5,004)
Underwriting and fee revenues	$	329,778	$	250,868	$	916,375	$	707,189

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income (loss) before income taxes	$	15,304	$	13,337	$	39,057	$	49,569
Less: Net investment income	(3,632)		(3,330)		(10,164)		(9,331)
Less: Net realized and unrealized gains (losses)	6,382		7,492		23,151		(5,004)
Plus: Depreciation and amortization	4,742		4,307		13,697		12,905
Plus: Interest expense	5,027		4,268		15,166		13,097
Plus: Employee compensation and benefits	22,071		19,526		64,159		57,007
Plus: Other expenses	21,083		20,045		58,521		59,168
Underwriting and fee margin	$	70,977	$	65,645	$	203,587	$	177,411

Adjusted Net Income — Non-GAAP

We define adjusted net income as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting. We use adjusted net income as an internal operating performance measure in the management of business as part of our capital allocation process. We believe adjusted net income provides useful supplemental information to investors as it is frequently used by the financial community to analyze financial performance between periods and for comparison among companies. Adjusted net income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define adjusted net income differently. Adjusted net income is presented before the impacts of non-controlling interests.

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

Adjusted Return on Average Equity — Non-GAAP

We define adjusted return on average equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “—Adjusted Net Income—Non-GAAP” above. We use adjusted return on average equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on average equity should not be viewed as a substitute for return on average equity calculated in accordance with GAAP, and other companies may define adjusted return on average equity differently.



	Three Months Ended September 30, 2022
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	15,304		$	(940)		$	19,077		$	(8,316)	$	25,125
Less: Income tax (benefit) expense	(3,765)			92			(3,963)			2,568		(5,068)
Less: Net realized and unrealized gains (losses)	6,382			(82)			(12,694)			—		(6,394)
Plus: Intangibles amortization (1)	4,115			—			—			—		4,115
Plus: Stock-based compensation expense	33			—			75			1,588		1,696
Plus: Non-recurring expenses	89			—			53			—		142
Plus: Non-cash fair value adjustments	—			—			(130)			—		(130)
Less: Tax on adjustments (2)	(2,327)			153			3,238			(1,155)		(91)
Adjusted net income	$	19,831		$	(777)		$	5,656		$	(5,315)	$	19,395

Adjusted net income	$	19,831		$	(777)		$	5,656		$	(5,315)	$	19,395
Average stockholders’ equity	$	319,703		$	57,133		$	84,445		$	61,178	$	522,459
Adjusted return on average equity	24.8		%	(5.4)		%	26.8		%	NM%		14.8		%



	Three Months Ended September 30, 2021
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	13,337		$	6,267		$	(4,700)		$	(11,320)	$	3,584
Less: Income tax (benefit) expense	(3,394)			14			1,591			1,552		(237)
Less: Net realized and unrealized gains (losses)	7,428			(1,055)			10,396			—		16,769
Plus: Intangibles amortization (1)	3,830			—			—			—		3,830
Plus: Stock-based compensation expense	475			—			197			832		1,504
Plus: Non-recurring expenses	(28)			—			448			—		420
Plus: Non-cash fair value adjustments	—			—			(815)			—		(815)
Less: Tax on adjustments (2)	(2,115)			(1,265)			(1,595)			650		(4,325)
Adjusted net income	$	19,533		$	3,961		$	5,522		$	(8,286)	$	20,730

Adjusted net income	$	19,533		$	3,961		$	5,522		$	(8,286)	$	20,730
Average stockholders’ equity	$	291,281		$	68,925		$	118,729		$	(75,340)	$	403,595
Adjusted return on average equity	26.8		%	23.0		%	18.6		%	NM%		20.5		%


	Nine Months Ended September 30, 2022
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	39,057		$	3,350		$	20,468		$	(33,895)	$	28,980
Less: Income tax (benefit) expense	(11,099)			(874)			(3,469)			(16,095)		(31,537)
Less: Net realized and unrealized gains (losses)	23,151			(7,976)			(8,293)			—		6,882
Plus: Intangibles amortization (1)	12,146			—			—			—		12,146
Plus: Stock-based compensation expense	2,376			—			98			5,437		7,911
Plus: Non-recurring expenses	1,561			—			(869)			2,108		2,800
Plus: Non-cash fair value adjustments	—			—			3,554			—		3,554
Less: Tax on adjustments (2)	(7,299)			1,984			1,783			21,629		18,097
Adjusted net income	$	59,893		$	(3,516)		$	13,272		$	(20,816)	$	48,833

Adjusted net income	$	59,893		$	(3,516)		$	13,272		$	(20,816)	$	48,833
Average stockholders’ equity	$	309,042		$	58,558		$	94,169		$	(1,891)	$	459,878
Adjusted return on average equity	25.8		%	(8.0)		%	18.8		%	NM%		14.2		%



	Nine Months Ended September 30, 2021
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	49,569		$	25,119		$	12,914		$	(33,151)	$	54,451
Less: Income tax (benefit) expense	(11,157)			(4,448)			(1,350)			5,539		(11,416)
Less: Net realized and unrealized gains (losses)	(5,004)			(5,075)			(3,512)			—		(13,591)
Plus: Intangibles amortization (1)	11,499			—			—			—		11,499
Plus: Stock-based compensation expense	1,347			331			209			1,831		3,718
Plus: Non-recurring expenses	2,076			—			729			2,171		4,976
Plus: Non-cash fair value adjustments	—			—			(2,167)			—		(2,167)
Less: Tax on adjustments (2)	(1,930)			(442)			1,330			582		(460)
Adjusted net income	$	46,400		$	15,485		$	8,153		$	(23,028)	$	47,010

Adjusted net income	$	46,400		$	15,485		$	8,153		$	(23,028)	$	47,010
Average stockholders’ equity	$	296,125		$	62,093		$	110,818		$	(81,196)	$	387,840
Adjusted return on average equity	20.9		%	33.3		%	9.8		%	NM%		16.2		%

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 (9) Goodwill and Intangible Assets, net.

(2) Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. For the three and nine months ended September 30, 2022, included in the adjustment is an add-back of $(1.4) million and $24.1 million, respectively, related to deferred tax expense from the WP Transaction.

Adjusted EBITDA - Non-GAAP

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


($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss) attributable to common stockholders	$	14,223	$	2,008	$	(9,145)	$	38,558
Add: net (loss) income attributable to non-controlling interests	5,834		1,339		6,588		4,477


Corporate debt related interest expense(1)	3,592		6,038		15,559		18,402
Consolidated provision (benefit) for income taxes	5,068		237		31,537		11,416
Depreciation and amortization	5,549		6,119		17,714		18,261
Non-cash fair value adjustments(2)	(542)		(1,835)		759		(5,651)
Non-recurring expenses(3)	142		420		2,800		4,976
Other comprehensive income (loss), pre-tax	(25,279)		(1,970)		(70,727)		(5,845)
Warburg gain to book value(4)	—		—		54,013		—
Third party non-controlling interests(5)	317				317
Adjusted EBITDA	$	8,904	$	12,356	$	49,415	$	84,594



(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.
(4)			The pre-tax gain recorded directly to Tiptree Inc. stockholders’ equity was included in Adjusted EBITDA, net of add-backs included in prior period Adjusted EBITDA.
(5)			Adjusts for the comprehensive income (loss) (including EBITDA and AOCI impacts) for the non-controlling interests of The Fortegra Group.

Book Value per share - Non-GAAP

Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.




($ in thousands, except per share information)	As of September 30,
	2022		2021
Total stockholders’ equity	$	519,574	$	402,142
Less: Non-controlling interests	132,295		16,930
Total stockholders’ equity, net of non-controlling interests	$	387,279	$	385,212

Total common shares outstanding	36,247		33,889

Book value per share	$	10.68	$	11.37

LIQUIDITY AND CAPITAL RESOURCES

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

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

our cash and cash equivalents and distributions from operating subsidiaries, our subsidiaries’ access to financing, and sales of investments to be adequate to fund our operations for at least the next 12 months, as well as the long term.

As of September 30, 2022, cash and cash equivalents, excluding restricted cash, were $503.5 million, compared to $175.7 million at December 31, 2021, an increase of $327.8 million primarily as a result of the WP Transaction, growth in gross written premium and premium equivalents at Fortegra, sales and maturities of investments within Fortegra and the sale of three dry bulk vessels in our maritime transportation business.

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 (11) 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 September 30,				Interest Expense for the three months ended September 30,			Interest Expense for the nine months ended September 30,
	2022		2021			2022		2021		2022		2021
Insurance	$	160,000	$	161,740		$	3,592	$	3,485	$	10,944	$	10,727
Corporate	—		115,625			—		2,553		4,615		7,675
Total	$	160,000	$	277,365		$	3,592	$	6,038	$	15,559	$	18,402

The balance of the corporate credit facility was repaid during June 2022 as part of the WP Transaction. See Note (11) Debt, net in the notes to condensed consolidated financial statements for details for prior periods.

On October 21, 2022, Fortegra Financial Corporation (“FFC”) entered into a Second Amended and Restated Credit Agreement by and among FFC, its parent, Fortegra, and its subsidiary, LOTS Intermediate Co., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s affiliates as guarantors, and Fifth Third Bank, National Association, as the administrative agent and issuing lender (the “Fortegra Credit Agreement”). The Fortegra Credit Agreement provides for a $200 million revolving credit facility, all of which is available for the issuance of letters of credit, with a sub-limit of $25 million for swing loans and matures on October 21, 2027.

Consolidated Comparison of Cash Flows


($ in thousands)	Nine Months Ended September 30,
Total cash provided by (used in):	2022		2021
Net cash (used in) provided by:
Operating activities	$	400,857	$	186,039
Investing activities	28,858		(201,291)
Financing activities	(104,324)		(499)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	325,391	$	(15,751)

Operating Activities

Cash provided by operating activities was $400.9 million for the nine months ended September 30, 2022. In 2022, the primary sources of cash from operating activities included proceeds from mortgage loans outpacing originations and growth in insurance premiums written resulting in increases in unearned premiums, policy liabilities and unpaid claims and deferred revenues, which were partially offset by increases in deferred acquisition costs and reinsurance receivables.

Cash provided by operating activities was $186.0 million for the nine months ended September 30, 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.

Investing Activities

Cash provided by investing activities was $28.9 million for the nine months ended September 30, 2022. In 2022, the primary sources of cash were proceeds from the sale of investments outpacing the purchases of investments. The primary uses of cash from investing activities were the issuance of notes receivable outpacing proceeds and the acquisition of ITC.

Cash used in investing activities was $201.3 million for the nine months ended September 30, 2021. In 2021, the primary uses of cash from investing activities were 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 $104.3 million for the nine months ended September 30, 2022. In 2022, principal repayments on corporate borrowings and mortgage warehouse facilities exceeded proceeds from borrowings, which was partially offset by cash received from the WP Transaction and the exercise of warrants.

Cash used in financing activities was $0.5 million for the nine months ended September 30, 2021. In 2021, the primary uses of cash from financing activities was the repurchase of $2.9 million of the Company’s common stock, repurchase of $1.1 million of vested subsidiary awards, the payment of dividends, and principal repayments in excess of proceeds from borrowings 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 nine months ended September 30, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Our legal proceedings are discussed under the heading “Litigation” in Note (21) 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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Share repurchase activity for the three months ended September 30, 2022 was as follows:


Period	Purchaser	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
July 1, 2022 to July 31, 2022	Tiptree Inc.	7,946	$	10.48	7,946
August 1, 2022 to August 31, 2022	Tiptree Inc.	—	$	—	—
September 1, 2022 to September 30, 2022	Tiptree Inc.	60,673	$	10.41	60,673
	Total	68,619	$	10.41	68,619	$	12,018

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

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits, Financial Statement Schedules


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

Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			F- 3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021			F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021			F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended September 30, 2022 and 2021			F- 6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			F- 8
Notes to Condensed Consolidated Financial Statements			F- 9

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

SIGNATURES

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

Tiptree Inc.

Date:

November 2, 2022

By:/s/ Michael Barnes

Michael Barnes

Executive Chairman

Date:

November 2, 2022

By:/s/ Jonathan Ilany

Jonathan Ilany

Chief Executive Officer

Date:

November 2, 2022

By:/s/ Sandra Bell

Sandra Bell

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

EXHIBIT INDEX


Exhibit No.			Description
10.1			Amendment No. 4 to Partner Emeritus Agreement, by and between Tiptree Inc. and Arif Inayatullah effective November 1, 2022 (filed herewith).
10.2			Separation and Transition Agreement between Tiptree Inc. and Sandra Bell, dated as of October 14, 2022 (previously filed as Exhibit 10.1 to the Registrant ’s Current Repor t on Form 8-K (File No. 001-33549) filed on October 17, 2022 and herein incorporated by reference).**
10.3			Executive Employment Agreement between Tiptree Inc. and Scott McKinney, dated as of October 14, 2022 (previously filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-33549) filed on October 17, 2022 and herein incorporated by reference).**
10.4			Second A mended and Restated Credit Agreement dated as of October 21, 2022 by and among Fortegra Financial Corporation, LOTS Intermediate Co. and The Fortegra Group, Inc., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s subsidiaries as guarantors and Fifth Third Bank, N .A . as administra t ive agent and issuing lender (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33549) filed on October 25 , 2022 and herein incorporated by reference ).
31.1			Certification of Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.3			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1			Certification of Executive Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.3			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS			XBRL Instance Document*
101.SCH			XBRL Taxonomy Extension Schema Document*
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB			XBRL Taxonomy Extension Label Linkbase Document*
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document*
104			Cover page from Tiptree’s Form 10-Q for the quarter ended September 30, 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 September 30, 2022 and December 31, 2021, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 and (vi) the Notes to the Condensed Consolidated Financial Statements.

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

EXHIBIT 10.1

AMENDMENT #4 TO EMERITUS AGREEMENT

This Amendment, effective as of November 1, 2022 (this “Amendment”), amends the Emeritus Agreement, dated as of December 20, 2019, as amended by Amendment No. 1, dated January 1, 2021, Amendment No. 2, dated January 1, 2022 and Amendment No. 3, dated February 17, 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 1, subsection a. of the Emeritus Agreement is hereby stricken in its entirety.

(b)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.”

(c)Paragraph 5 of the Emeritus Agreement is hereby amended to amend and restate in full with the following:

“This Agreement shall be effective until December 31, 2023.”

Section 2.Any and all healthcare costs of Inayatullah that is reimbursable to the Company pursuant to the Agreement are hereby forgiven and discharged.

Section 3.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 4.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 5.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 November 1, 2022.

TIPTREE INC.

By:/s/Jonathan Ilany

Name: 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:	November 2, 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:	November 2, 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:	November 2, 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 September 30, 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: November 2, 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 September 30, 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: November 2, 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 September 30, 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: November 2, 2022