Tiptree Inc. Q4 FY2023 earnings call

• 2023 was a year of exceptional performance for Tiptree with 18% revenue increase to $1.6 billion and adjusted return on equity of 15%. Dividend increased by 20% to $0.06 per share.
• Fortegra Group, specialty insurance business, had record results in 2023 with 21% premium and premium equivalent growth and 29% adjusted return on equity. Combined ratio was 90%.
• Tiptree Capital had $178 million of capital deployed, mortgage origination volumes muted due to high rates but retained servicing book remained stable. Positive outlook with mortgage rate stabilization.
• Fourth quarter revenues up 24% excluding unrealized gains/losses, driven by insurance underwriting and fee-based service revenues. Consolidated net income $6.9 million, adjusted net income $13.9 million (+43% y-o-y).
• Insurance results: Gross written premiums and equivalents Q4 2023 up 38% to $724 million, net written premiums $384 million (+57%), revenues $433 million (+25%), combined ratio 89.8%.
• Investment results: Net investment income + interest on cash/cash equivalents $38 million in 2023 vs $15 million prior year. Portfolio ended at $1.3 billion, 90% in high credit quality securities, average S&P rating AA, embedded book yield 3.3% at year end.

Insurance Segment:

• Fourth Quarter: Gross written premiums and equivalents increased 38% year-over-year to $724 million, driven by robust growth in specialty E&S and admitted insurance lines. Net written premiums were $384 million for the quarter, an increase of 57%. Revenues grew by 25% to $433 million and the combined ratio remained consistent at 89.8%. For the year, Fortegra Group achieved record results with premium and premium equivalent growth of 21% and an adjusted return on equity of 29%. Excess and surplus lines represented 30% of 2023 written premiums and equivalents.
• Revenue Contribution: Insurance operations contributed significantly, with fourth quarter revenues up 24% excluding unrealized gains and losses, driven by growth in insurance underwriting and fee-based service revenues.

Tiptree Capital:

• Fourth Quarter: Pre-tax loss was $2.1 million, driven primarily by losses on invest and mortgage servicing asset, partially offset by gains on other investments. Absolute Terms: Mortgage originations for the year were $877 million, down 23% from the prior year. Revenue Contribution: Tiptree Capital's results significantly underperformed the broader mortgage industry for 2023 but is expected to normalize with mortgage rate stabilization.

• Anticipate greater potential for future profit at Tiptree Capital as mortgage rates stabilize.
• Expect continued hard market environment, along with adding new agents and distribution partners, to extend Fortegra’s growth profile.
• Anticipate origination volumes and margins of Tiptree Capital to normalize throughout 2024 as mortgage rates stabilize.

• Recent market environment has been unconducive for a public offering of Fortegra.
• Deferred tax expense of $9 million related to deconsolidation of Fortegra for tax purposes in 2023 and 2022 quarters, which is only crystallized on a sale of Fortegra.

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