TIPTREE INC. Q1 FY2023 earnings call

• Fortegra delivered exceptional growth in Q1 2023 with $750 million of gross written premiums, up 25% y-o-y, and an adjusted return on equity of 26%.
• The combined ratio for Fortegra was 91% in Q1, in line with its five-year average.
• Fortegra's investment portfolio grew to $1.3 billion, with a book yield of 3% at quarter end, up from 1.2% prior year.
• In February 2023, Tiptree acquired a majority interest in Premia, a leading auto warranty administrator in the U.K.
• Tiptree Capital had a pretax loss in Q1, but management's cost reductions and appreciation of the servicing book kept the mortgage business near breakeven.
• Tiptree's sum of the parts value, including ownership of Fortegra, is estimated at $26.70 per diluted share or more than $1 billion of value.

Fortegra: Revenues for the quarter were $368 million, up 30% year-over-year. Gross written premiums were $750 million, a 25% increase from the prior year's first quarter, with an adjusted return on equity of 26%. Over the last 12 months, Fortegra posted record premiums of $2.8 billion and record adjusted net income of $85.6 million. Its insurance lines alone had an 18% return on equity, and warranty services contributed an additional eight points to the ROE. The insurance investment portfolio ended the quarter at $1.3 billion, up 42% year-over-year, with a book yield of 3% at quarter end. Tiptree Capital: The pretax loss for the quarter was $1.1 million, driven by a decline in mortgage origination volumes and the loss of income from the sale of five vessels in 2022. Mortgage volumes were down 43% in the first quarter due to rising interest rates and declining affordability, but the mortgage servicing portfolio and cost management measures kept the business near breakeven.

• Management anticipates the hard market environment in the insurance industry to extend, viewing it as an opportunity for Fortegra to grow.
• With mortgage rates stabilizing at higher levels, management maintains a positive outlook for the mortgage business.
• Tiptree continues to look for opportunities to generate long-term absolute returns with significant cash balances on hand.

• Economic uncertainty, market volatility, and capital shortfalls in the insurance industry pose challenges.
• Changes in interest rates can impact the mortgage business, as seen with the 43% decline in mortgage volumes due to rising rates.