TIPTREE INC. - Quarter Report: 2023 June (Form 10-Q)

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 June 30, 2023


☐			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

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 August 1, 2023, there were 36,749,768 shares, par value $0.001, of the registrant’s common stock outstanding.

Tiptree Inc.

Quarterly Report on Form 10-Q

June 30, 2023

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 June 30 , 2023 and December 31, 2022						F- 3
Condensed Consolidated Statements of Operations for the three and six months ended June 3 0 , 2023 and 2022						F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 3 0 , 2023 and 2022						F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended June 3 0 , 2023 and 2022						F- 6
Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2023 and 2022						F- 8
Notes to Condensed Consolidated Financial Statements						F- 10
(1) Organization						F- 10
(2) Summary of Significant Accounting Policies						F- 10
(3) Acquisitions						F- 11

(4) Operating Segment Data						F- 11
(5) Investments						F- 13
(6) Notes and Accounts Receivable, net						F- 19
(7) Reinsurance Receivables						F- 19
(8) Goodwill and Intangible Assets, net						F- 23
(9) Derivative Financial Instruments and Hedging						F- 24
(10) Debt, net						F- 26
(11) Fair Value of Financial Instruments						F- 28
(12) Liability for Unpaid Claims and Claim Adjustment Expenses						F- 35
(13) Revenue from Contracts with Customers						F- 36
(14) Other Assets and Other Liabilities and Accrued Expenses						F- 37
(15) Other Revenue and Other Expenses						F- 38
(16) Stockholders’ Equity						F- 39
(17) Accumulated Other Comprehensive Income (Loss)						F- 41
(18) Stock Based Compensation						F- 41
(19) Income Taxes						F- 45
(20) Commitments and Contingencies						F- 45
(21) Earnings Per Share						F- 46
(22) Related Party Transactions						F- 47
(23) Subsequent Events						F- 47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						48
Item 3. Quantitative and Qualitative Disclosures About Market Risk						71
Item 4. Controls and Procedures						71

PART II. Other Information						72
Item 1. Legal Proceedings						72
Item 1A. Risk Factors						72
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						72
Item 3. Defaults Upon Senior Securities						72
Item 4. Mine Safety Disclosures						72
Item 5. Other Information						72
Item 6. Exhibits, Financial Statement Schedules						73
Signatures						74

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, 2022, 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.

“Premia” means Premia Solutions Limited.

“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
	June 30, 2023		December 31, 2022


Assets:
Investments:
Available for sale securities, at fair value, net of allowance for credit losses	$	795,556	$	611,980
Loans, at fair value	78,853		64,843
Equity securities	130,881		85,776
Other investments	85,939		73,025
Total investments	1,091,229		835,624
Cash and cash equivalents	372,410		538,065
Restricted cash	25,589		12,782
Notes and accounts receivable, net	687,825		502,311
Reinsurance receivables	1,444,795		1,176,090
Deferred acquisition costs	520,925		498,925
Goodwill	205,674		186,608
Intangible assets, net	128,107		117,015
Other assets	157,895		172,143

Total assets	$	4,634,449	$	4,039,563

Liabilities and Stockholders’ Equity
Liabilities:
Debt, net	$	361,211	$	259,366
Unearned premiums	1,521,320		1,357,436
Policy liabilities and unpaid claims	722,469		567,193
Deferred revenue	681,263		649,150
Reinsurance payable	443,698		305,097
Other liabilities and accrued expenses	358,420		367,748

Total liabilities	$	4,088,381	$	3,505,990

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, 36,742,295 and 36,385,299 shares issued and outstanding, respectively	37		36
Additional paid-in capital	379,741		382,645
Accumulated other comprehensive income (loss), net of tax	(33,226)		(39,429)
Retained earnings	55,340		54,113
Total Tiptree Inc. stockholders’ equity	401,892		397,365
Non-controlling interests:
Fortegra preferred interests	77,679		77,679
Common interests	66,497		58,529
Total non-controlling interests	144,176		136,208
Total stockholders’ equity	546,068		533,573
Total liabilities and stockholders’ equity	$	4,634,449	$	4,039,563

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Earned premiums, net	$	269,795	$	215,941	$	535,125	$	424,357
Service and administrative fees	98,113		77,625		190,145		149,460
Ceding commissions	4,676		3,326		8,321		5,863
Net investment income	9,088		3,365		14,197		6,532
Net realized and unrealized gains (losses)	8,825		15,687		11,002		32,891
Other revenue	14,021		23,899		27,353		45,643
Total revenues	404,518		339,843		786,143		664,746
Expenses:
Policy and contract benefits	147,734		104,665		289,409		209,111
Commission expense	142,699		127,453		289,149		244,876
Employee compensation and benefits	44,383		48,262		85,181		104,717
Interest expense	7,044		9,135		13,509		19,334
Depreciation and amortization	5,875		6,009		11,128		12,165
Other expenses	33,109		39,512		65,920		70,688
Total expenses	380,844		335,036		754,296		660,891
Income (loss) before taxes	23,674		4,807		31,847		3,855
Less: provision (benefit) for income taxes	11,824		26,555		16,846		26,469
Net income (loss)	11,850		(21,748)		15,001		(22,614)
Less: net income (loss) attributable to non-controlling interests	5,861		660		10,074		754
Net income (loss) attributable to common stockholders	$	5,989	$	(22,408)	$	4,927	$	(23,368)

Net income (loss) per common share:
Basic earnings per share	$	0.16	$	(0.64)	$	0.13	$	(0.67)
Diluted earnings per share	$	0.16	$	(0.64)	$	0.13	$	(0.67)

Weighted average number of common shares:
Basic	36,742,295		35,228,775		36,633,226		34,731,655
Diluted	37,585,811		35,228,775		37,509,660		34,731,655

Dividends declared per common share	$	0.05	$	0.04	$	0.10	$	0.08

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	11,850	$	(21,748)	$	15,001	$	(22,614)

Other comprehensive income (loss), net of tax:







Change in unrealized gains (losses) on available for sale securities	(3,576)		(12,118)		5,925		(38,384)
Change in unrealized currency translation adjustments	2,700		(7,065)		5,632		(7,065)
Related (provision) benefit for income taxes	797		3,368		(3,238)		9,163
Other comprehensive income (loss), net of tax	(79)		(15,815)		8,319		(36,286)
Comprehensive income (loss)	11,771		(37,563)		23,320		(58,900)
Less: comprehensive income (loss) attributable to non-controlling interests	5,915		(102)		12,190		(58)
Comprehensive income (loss) attributable to common stockholders	$	5,856	$	(37,461)	$	11,130	$	(58,842)

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, 2022	36,385,299	$	36	$	382,645	$	(39,429)	$	54,113	$	397,365	$	77,679	$	58,529	$	533,573

Amortization of share-based incentive compensation	—	—		3,576		—		—		3,576		—		490		4,066
Vesting of share-based incentive compensation	301,989	1		(462)		—		—		(461)		—		(470)		(931)


Shares issued upon exercise of options	55,007	—		—		—		—		—		—		—		—




Non-controlling interest distributions	—	—		(1,751)		—		—		(1,751)		—		(3,174)		(4,925)
Net change in non-controlling interests and other	—	—		(4,267)		—		—		(4,267)		—		2,106		(2,161)
Common stock dividends declared	—	—		—		—		(3,700)		(3,700)		—		—		(3,700)
Other comprehensive income (loss), net of tax	—	—		—		6,203		—		6,203		—		2,116		8,319
Subsidiary preferred dividends declared	—	—		—		—		(3,174)		(3,174)		—		—		(3,174)
Net income (loss)	—	—		—		—		8,101		8,101		—		6,900		15,001
Balance at June 30, 2023	36,742,295	$	37	$	379,741	$	(33,226)	$	55,340	$	401,892	$	77,679	$	66,497	$	546,068

Balance at March 31, 2023	36,734,948	37		382,502		(33,093)		51,201		400,647		77,679		63,231		541,557

Amortization of share-based incentive compensation	—	—		1,403		—		—		1,403		—		449		1,852
Vesting of share-based incentive compensation	7,347	—		103		—		—		103		—		—		103



Net change in non-controlling interest and other	—	—		(4,267)		—		—		(4,267)		—		(1,502)		(5,769)
Common stock dividends declared	—	—		—		—		(1,850)		(1,850)		—		—		(1,850)
Other comprehensive income (loss), net of tax	—	—		—		(133)		—		(133)		—		54		(79)
Subsidiary preferred dividends declared	—	—		—		—		(1,596)		(1,596)		—		—		(1,596)
Net income (loss)	—	—		—		—		7,585		7,585		—		4,265		11,850
Balance at June 30, 2023	36,742,295	37		379,741		(33,226)		55,340		401,892		77,679		66,497		546,068

F-6

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	—	—		3,600		—		—		3,600		—		620		4,220
Vesting of share-based incentive compensation	270,417	—		(413)		—		—		(413)		—		(1,086)		(1,499)

Shares purchased under stock purchase plan	(89,543)	—		(936)		—		—		(936)		—		—		(936)
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 Transactions	—	—		41,092		7,193		—		48,285		77,679		41,044		167,008
Non-controlling interest contributions	—	—		—		—		—		—		—		250		250
Non-controlling interest distributions	—	—		—		—		—		—		—		(583)		(583)


Common stock dividends declared	—	—		—		—		(2,814)		(2,814)		—		—		(2,814)
Other comprehensive income (loss), net of tax	—	—		—		(35,474)		—		(35,474)		—		(812)		(36,286)
Subsidiary preferred dividends declared	—	—		—		—		(158)		(158)		—		—		(158)
Net income (loss)	—	—		—		—		(23,210)		(23,210)		—		596		(22,614)
Balance at June 30, 2022	36,305,016	$	36	$	379,371	$	(30,966)	$	41,964	$	390,405	$	77,679	$	57,256	$	525,340

Balance at March 31, 2022	34,877,897	$	35	$	323,916	$	(23,106)	$	65,788	$	366,633	$	—	$	16,520	$	383,153
Amortization of share-based incentive compensation	—	—		438		—		—		438		—		44		482
Vesting of share-based incentive compensation	8,968	—		(286)		—		—		(286)		—		(92)		(378)
Transfer of liability awards	—	—		4,847		—		—		4,847		—		—		4,847
Shares purchased under stock purchase plan	(89,543)	—		(936)		—		—		(936)		—		—		(936)
Shares issued upon exercise of warrants	1,507,694	1		10,300		—		—		10,301		—		—		10,301
WP Transaction	—	—		41,092		7,193		—		48,285		77,679		41,044		167,008



Common stock dividends declared	—	—		—		—		(1,416)		(1,416)		—		—		(1,416)
Other comprehensive income (loss), net of tax	—	—		—		(15,053)		—		(15,053)		—		(762)		(15,815)
Subsidiary preferred dividends declared	—	—		—		—		(158)		(158)		—		—		(158)
Net income (loss)	—	—		—		—		(22,250)		(22,250)		—		502		(21,748)
Balance at June 30, 2022	36,305,016	$	36	$	379,371	$	(30,966)	$	41,964	$	390,405	$	77,679	$	57,256	$	525,340

See accompanying notes to condensed consolidated financial statements.

F-7

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Operating Activities:
Net income (loss) attributable to common stockholders	$	4,927	$	(23,368)
Net income (loss) attributable to non-controlling interests	10,074		754
Net income (loss)	15,001		(22,614)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net realized and unrealized (gains) losses	(11,002)		(32,891)
Net (gain) loss on held for sale of business	—		(3,696)
Non-cash compensation expense	4,094		6,215
Amortization/accretion of premiums and discounts	(3,644)		1,089
Depreciation and amortization expense	11,128		12,165
Non-cash lease expense	4,078		4,566
Deferred provision (benefit) for income taxes	15,134		25,570
Amortization of deferred financing costs	542		787
Change in fair value of liability classified warrants	(164)		—

Other	107		1,075
Changes in operating assets and liabilities:
Mortgage loans originated for sale	(430,731)		(1,662,819)
Proceeds from the sale of mortgage loans originated for sale	435,488		1,896,892
(Increase) decrease in notes and accounts receivable	(163,654)		6,863
(Increase) decrease in reinsurance receivables	(268,705)		(149,088)
(Increase) decrease in deferred acquisition costs	(20,584)		(54,241)
(Increase) decrease in other assets	23,284		3,960
Increase (decrease) in unearned premiums	163,884		95,163
Increase (decrease) in policy liabilities and unpaid claims	155,276		109,375
Increase (decrease) in deferred revenue	22,791		57,984
Increase (decrease) in reinsurance payable	138,601		26,786
Increase (decrease) in other liabilities and accrued expenses	(54,556)		(38,628)
Net cash provided by (used in) operating activities	36,368		284,513
Investing Activities:
Purchases of investments	(732,895)		(623,587)
Proceeds from sales and maturities of investments	502,787		632,143

Purchases of property, plant and equipment	(11,581)		(3,083)
Proceeds from the sale of businesses and other assets	—		742
Proceeds from notes receivable	62,214		37,279
Issuance of notes receivable	(73,392)		(52,145)
Business and asset acquisitions, net of cash and deposits	(19,726)		(14,960)
Net cash provided by (used in) investing activities	(272,593)		(23,611)
Financing Activities:
Dividends paid	(6,857)		(2,814)
Cash received for the exercise of warrants	—		13,724
Net non-controlling interest (redemptions) contributions and other	(13,563)		(2,053)
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	—		(11,651)
Payment of debt issuance costs	(184)		(3)
Proceeds from borrowings and mortgage notes payable	738,030		1,812,615
Principal paydowns of borrowings and mortgage notes payable	(636,551)		(2,111,803)
Repurchases of common stock and other changes in additional paid-in capital	—		(936)
Net cash provided by (used in) financing activities	80,875		(101,671)
Effect of exchange rate changes on cash	2,502		(3,192)
Net increase (decrease) in cash, cash equivalents and restricted cash	(152,848)		156,039
Cash, cash equivalents and restricted cash – beginning of period	550,847		195,086
Cash, cash equivalents and restricted cash – beginning of period - held for sale	—		9,360
Cash, cash equivalents and restricted cash – end of period	397,999		360,485
Less: Reclassification of cash to held for sale	—		9,172
Cash, cash equivalents and restricted cash – end of period	$	397,999	$	351,313

F-8

TIPTREE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Right of use asset obtained in exchange for lease liability	$	449	$	12,232
Bonds and trade receivables exchanged for corporate loans and equity securities	$	—	$	19,846



	As of
	June 30, 2023		December 31, 2022
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	372,410	$	538,065
Restricted cash	25,589		12,782
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	397,999	$	550,847

See accompanying notes to condensed consolidated financial statements.

F-9

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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 (16) Stockholders’ Equity for additional information regarding the terms of the securities issued in connection with the closing of the WP Transaction. As of June 30, 2023, Fortegra was owned approximately 79.5% by Tiptree Holdings, 17.5% by Warburg and 3.0% 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, 2022. 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 six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2023.

Non-controlling interests on the condensed consolidated balance sheets represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than Tiptree. Accounts and transactions between consolidated entities have been eliminated.

Recent Accounting Standards

Recently Adopted Accounting Pronouncements

During the six months ended June 30, 2023, there were no accounting standards adopted by the Company.

Recently Issued Accounting Pronouncements, Not Yet Adopted



Standard	Description	Adoption Date	Impact on Financial Statements
2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848	The amendments in these updates provide optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform if certain criteria are met.	The standard is effective for all entities as of March 12, 2020 through December 31, 2024.	The Company is evaluating its option to adopt the guidance when it is applicable.

F-10

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(3) Acquisitions

Acquisition of Premia Solutions Limited

On February 6, 2023, a subsidiary of Fortegra acquired a majority of the equity interests in Premia for total cash consideration of approximately $19,726, net of cash acquired of $3,873. Premia is an intermediate provider of automotive protection products in the United Kingdom.

The preliminary purchase price allocation has been developed based on preliminary estimates of fair value using the historical financial statements of Premia 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 $18,359 and $18,152, respectively, which the Company may modify during the one year period allowed for purchase accounting adjustments during the measurement period. See Note (8) Goodwill and Intangible Assets, net.

Acquisition of ITC Compliance GRP Limited

On April 1, 2022, Fortegra Europe Limited, a subsidiary of the Company, acquired all of the equity interests of 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.

Identifiable assets acquired were primarily made up of goodwill and intangible assets. Management’s 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. See Note (8) Goodwill and Intangible Assets, net.

(4) 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, Fortegra, is a leading provider of specialty insurance, service contract products and related service solutions. Based on the quantitative analysis performed related to ASC 280, Segment Reporting, 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 business originates loans for sale to institutional investors, including GSEs and FHA/VA and services loans on behalf of Fannie Mae, Freddie Mac, and Ginnie Mae.

Other includes our maritime shipping operations, asset management, other investments (including our Invesque shares), and Luxury mortgage operations (deconsolidated effective as of July 1, 2022).

F-11

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

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 June 30, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	384,677	$	17,067	$	2,774	$	404,518
Total expenses	(354,260)		(15,755)		(1,319)		(371,334)
Corporate expenses	—		—		—		(9,510)
Income (loss) before taxes	$	30,417	$	1,312	$	1,455	$	23,674
Less: provision (benefit) for income taxes							11,824
Net income (loss)							$	11,850
Less: net income (loss) attributable to non-controlling interests							5,861
Net income (loss) attributable to common stockholders							$	5,989


	Three Months Ended June 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	293,831	$	18,189	$	27,823	$	339,843
Total expenses	(284,760)		(18,165)		(18,781)		(321,706)
Corporate expenses	—		—		—		(13,330)
Income (loss) before taxes	$	9,071	$	24	$	9,042	$	4,807
Less: provision (benefit) for income taxes							26,555
Net income (loss)							$	(21,748)
Less: net income (loss) attributable to non-controlling interests							660
Net income (loss) attributable to common stockholders							$	(22,408)



	Six Months Ended June 30, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenue	$	753,121	$	28,628	$	4,394	$	786,143
Total expense	(703,259)		(29,881)		(1,497)		(734,637)
Corporate expense	—		—		—		(19,659)
Income (loss) before taxes	$	49,862	$	(1,253)	$	2,897	$	31,847
Less: provision (benefit) for income taxes							16,846

Net income (loss)							$	15,001
Less: net income (loss) attributable to non-controlling interests							10,074
Net income (loss) attributable to common stockholders							$	4,927



	Six Months Ended June 30, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Total revenues	$	576,360	$	43,590	$	44,796	$	664,746
Total expenses	(552,607)		(39,300)		(43,405)		(635,312)
Corporate expenses	—		—		—		(25,579)
Income (loss) before taxes	$	23,753	$	4,290	$	1,391	$	3,855
Less: provision (benefit) for income taxes							26,469
Net income (loss)							$	(22,614)
Less: net income (loss) attributable to non-controlling interests							754
Net income (loss) attributable to common stockholders							$	(23,368)

The Company conducts its operations primarily in the U.S. with 6.8% and 7.5% of total revenues generated overseas for the three months ended June 30, 2023 and 2022, respectively, and 5.4% and 6.7% for the six months ended June 30, 2023 and 2022, respectively.

F-12

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

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


	As of June 30, 2023										As of December 31, 2022
			Tiptree Capital										Tiptree Capital
	Insurance		Mortgage		Other		Corporate		Total		Insurance		Mortgage		Other		Corporate		Total
Total assets	$	4,313,600	$	169,357	$	151,141	$	351	$	4,634,449	$	3,702,577	$	156,122	$	86,402	$	94,462	$	4,039,563

(5) Investments

The following table presents the Company's investments related to insurance operations and other Tiptree investing activities, measured at fair value as of the following periods:


	As of June 30, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	$	735,759	$	—	$	59,797	$	795,556
Loans, at fair value	14,919		63,934		—		78,853
Equity securities	92,058		—		38,823		130,881
Other investments	78,976		4,479		2,484		85,939
Total investments	$	921,712	$	68,413	$	101,104	$	1,091,229


	As of December 31, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Available for sale securities, at fair value, net of allowance for credit losses	$	611,980	$	—	$	—	$	611,980
Loans, at fair value	14,312		50,531		—		64,843
Equity securities	72,992		—		12,784		85,776
Other investments	66,163		4,038		2,824		73,025
Total investments	$	765,447	$	54,569	$	15,608	$	835,624

Available for Sale Securities, at fair value

A majority of the Company’s investments in Available for Sale Securities, at fair value, net of allowance for credit losses (AFS securities) as of June 30, 2023 and December 31, 2022 are held by subsidiaries in the insurance segment. The following tables present the Company's investments in AFS securities:


	As of June 30, 2023
	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	$	578,924	$	—	$	468	$	(32,453)	$	546,939
Obligations of state and political subdivisions	52,245		(2)		8		(3,958)		48,293
Corporate securities	179,732		(273)		63		(12,456)		167,066
Asset backed securities	34,765		(21)		—		(3,761)		30,983
Certificates of deposit	657		—		—		—		657
Obligations of foreign governments	1,811		—		—		(193)		1,618
Total	$	848,134	$	(296)	$	539	$	(52,821)	$	795,556

F-13

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	As of December 31, 2022
	Amortized cost		Allowance for Credit Losses(1)		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	417,278	$	—	$	844	$	(36,062)	$	382,060
Obligations of state and political subdivisions	54,390		(3)		4		(4,937)		49,454
Corporate securities	176,187		(183)		1		(14,006)		161,999
Asset backed securities	19,596		(1)		—		(4,246)		15,349
Certificates of deposit	756		—		—		—		756
Obligations of foreign governments	2,629		(3)		—		(264)		2,362
Total	$	670,836	$	(190)	$	849	$	(59,515)	$	611,980

(1) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in net realized and unrealized gains (losses) as a credit loss on AFS securities. Amount excludes unrealized losses relating to non-credit factors.

The amortized cost and fair values of AFS securities, by contractual maturity date, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	As of
	June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	332,057	$	330,156	$	52,265	$	51,315
Due after one year through five years	227,481		210,234		300,767		280,965
Due after five years through ten years	41,147		37,746		54,419		49,465
Due after ten years	212,684		186,437		243,789		214,887
Asset backed securities	34,765		30,983		19,596		15,348
Total	$	848,134	$	795,556	$	670,836	$	611,980

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 June 30, 2023
	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	$	317,562	$	(10,172)	229	$	143,463	$	(22,281)	455
Obligations of state and political subdivisions	8,440		(211)		15	37,952		(3,747)		146
Corporate securities	147,238		(11,729)		505	11,658		(727)		52
Asset backed securities	2,132		(303)		11	28,851		(3,458)		153

Obligations of foreign governments	—		—		—	1,618		(193)		7
Total	$	475,372	$	(22,415)	760	$	223,542	$	(30,406)	813

F-14

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)



	As of December 31, 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	$	164,593	$	(9,357)	354	$	186,591	$	(26,705)	385
Obligations of state and political subdivisions	25,507		(1,076)		97	20,219		(3,861)		78
Corporate securities	45,016		(1,446)		176	114,683		(12,560)		417
Asset backed securities	10,298		(3,642)		46	5,051		(604)		34

Obligations of foreign governments	309		(1)		1	2,054		(263)		8
Total	$	245,723	$	(15,522)	674	$	328,598	$	(43,993)	922

(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 June 30, 2023 until full recovery of their amortized cost basis.

The table below presents a roll-forward of the activity in the allowance for credit losses on AFS securities by type as of June 30, 2023:


	Obligations of state and political subdivisions		Corporate securities		Asset backed securities		Obligations of foreign governments		Total
Balance at December 31, 2021	$	—	$	(241)	$	—	$	(4)	$	(245)
(Increase) in allowance for credit losses	(2)		(123)		(1)		—		(126)

Gains from recoveries of amounts previously written off	—		49		—		1		50
Balance at June 30, 2022	$	(2)	$	(315)	$	(1)	$	(3)	$	(321)

Balance at December 31, 2022	$	(3)	$	(183)	$	(1)	$	(3)	$	(190)
(Increase) in allowance for credit losses	—		(219)		(21)		—		(240)



Gains from recoveries of amounts previously written off	1		129		1		3		134
Balance at June 30, 2023	$	(2)	$	(273)	$	(21)	$	—	$	(296)

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 June 30,				Six Months Ended June 30,
	2023		2022		2023	2022
Net gains from recoveries (credit losses) on AFS securities	$	(152)	$	(54)	(106)	(76)

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:

F-15

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	As of
	June 30, 2023		December 31, 2022


Fair value of restricted investments in trust pursuant to reinsurance agreements	$	52,333	$	34,386
Fair value of restricted investments for special deposits required by state insurance departments	17,023		16,816
Total fair value of restricted investments	$	69,356	$	51,202

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


	Three Months Ended June 30,				Six Months Ended June 30,

	2023		2022		2023		2022
Purchases of AFS securities	$	94,841	$	71,201	$	302,653	$	126,343

Proceeds from maturities, calls and prepayments of AFS securities	$	69,829	$	17,397	$	87,999	$	37,639



Gross proceeds from sales of AFS securities	$	38,401	$	—	$	39,958	$	16,970

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Gross realized gains	$	—	$	—	$	—	$	74
Gross realized (losses)	(2,591)		—		(2,956)		(184)
Total net realized gains (losses) from investment sales and redemptions	$	(2,591)	$	—	$	(2,956)	$	(110)

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 June 30, 2023								As of December 31, 2022
	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)	$	14,919	$	20,712	$	(5,793)	$	—	$	14,312	$	16,032	$	(1,720)	$	—

Mortgage:
Mortgage loans held for sale (2)	63,934		62,952		982		62,878		50,531		49,361		1,170		50,113
Total loans, at fair value	$	78,853	$	83,664	$	(4,811)	$	62,878	$	64,843	$	65,393	$	(550)	$	50,113

(1) The cost basis of Corporate loans was approximately $20,712 and $16,032 at June 30, 2023 and December 31, 2022, respectively.

(2) As of June 30, 2023, there were two mortgage loan held for sale that was 90 days or more past due. As of December 31, 2022, there were no mortgage loans held for sale that were 90 days or more past due.

Equity Securities

Equity securities consist mainly of publicly traded common and preferred stocks and fixed income exchange traded funds. Included within the equity securities balance are 17.0 million shares of Invesque as of June 30, 2023 and December 31, 2022, 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 and Tiptree Capital as of the following periods:

F-16

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	As of June 30, 2023
	Insurance				Tiptree Capital - Other				Total
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Invesque	$	23,339	$	2,347	$	111,491	$	11,239	$	134,830	$	13,586
Fixed income exchange traded funds	72,370		71,951		—		—		72,370		71,951
Other equity securities	17,046		17,760		24,975		27,584		42,021		45,344
Total equity securities	$	112,755	$	92,058	$	136,466	$	38,823	$	249,221	$	130,881


	As of December 31, 2022
	Insurance				Tiptree Capital - Other				Total
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Invesque	$	23,339	$	2,670	$	111,491	$	12,784	$	134,830	$	15,454
Fixed income exchange traded funds	56,263		56,256		—		—		56,263		56,256
Other equity securities	15,773		14,066		—		—		15,773		14,066
Total equity securities	$	95,375	$	72,992	$	111,491	$	12,784	$	206,866	$	85,776

Other Investments

The following table contains information regarding the Company’s other investments as of the following periods:


	As of June 30, 2023
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	58,035	$	—	$	—	$	58,035

Debentures	20,786		—		—		20,786

Other	155		4,479		2,484		7,118
Total other investments	$	78,976	$	4,479	$	2,484	$	85,939


	As of December 31, 2022
			Tiptree Capital
	Insurance		Mortgage		Other		Total
Corporate bonds, at fair value (1)	$	42,080	$	—	$	—	$	42,080

Debentures	23,853		—		—		23,853

Other	230		4,038		2,824		7,092
Total other investments	$	66,163	$	4,038	$	2,824	$	73,025

(1) The cost basis of corporate bonds was $62,037 and $45,630 as of June 30, 2023 and December 31, 2022, respectively.

F-17

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

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 condensed consolidated statements of operations. The following table presents the components of net investment income by source of income:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest:
AFS securities	$	7,320	$	2,662	$	11,608	$	4,861
Loans, at fair value	129		174		254		341
Other investments	2,004		1,518		4,079		2,858
Dividends from equity securities	1,258		83		1,300		671

Subtotal	10,711		4,437		17,241		8,731
Less: investment expenses	1,623		1,072		3,044		2,199
Net investment income	$	9,088	$	3,365	$	14,197	$	6,532

Other Investment Income - Tiptree Capital

Other investment income represents revenue from non-insurance activities as disclosed within other revenue on the condensed consolidated statements of operations, see Note (15) Other Revenue and Other Expenses. The following tables present the components of other investment income by type:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Interest income from Loans, at fair value (1)	$	777	$	1,579	$	1,387	$	3,886

Loan fee income (1)	4,149		4,960		7,993		10,496
Other	1,070		11,646		1,386		20,508
Other investment income	$	5,996	$	18,185	$	10,766	$	34,890

(1) Includes income related to Loans at fair value classified as Held for Sale for the periods prior to July 1, 2022.

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net realized gains (losses)
Insurance:
Reclass of unrealized gains (losses) on AFS securities from OCI	$	(2,591)	$	—	$	(2,956)	$	(110)
Net gains from recoveries (credit losses) on AFS securities	(152)		(54)		(106)		(76)
Net realized gains (losses) on loans	—		(469)		2		(376)
Net realized gains (losses) on equity securities	7		18		(847)		(2,465)
Net realized gains (losses) on corporate bonds	(249)		(1,025)		(1,224)		(112)
Other	(356)		(2,279)		(754)		(6,563)
Tiptree Capital
Mortgage:
Net realized gains (losses) on loans	11,161		7,155		20,832		20,573
Other	(247)		8,647		136		12,713
Other:
Net realized gains (losses) on loans (1)	—		9,663		—		24,403
Net realized gains on vessel sales	—		7,118		—		7,118

F-18

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


Other	—		321		—		762
Total net realized gains (losses)	7,573		29,095		15,083		55,867

Net unrealized gains (losses)
Insurance:
Net change in unrealized gains (losses) on loans	(1,915)		584		(4,073)		316
Net unrealized gains (losses) on equity securities held at period end	1,199		(2,474)		903		(4,635)
Reclass of unrealized (gains) losses from prior periods for equity securities sold	84		(2,767)		(14)		(952)
Other	(406)		(1,660)		82		(1,796)
Tiptree Capital
Mortgage:
Net change in unrealized gains (losses) on loans	(737)		1,216		(189)		(1,901)
Other	1,964		(3,566)		(1,531)		2,481
Other:
Net change in unrealized gains (losses) on loans (1)	—		(932)		—		(4,513)
Net unrealized gains (losses) on equity securities held at period end	1,385		(2,669)		1,063		(11,519)
Other	(322)		(1,140)		(322)		(457)
Total net unrealized gains (losses)	1,252		(13,408)		(4,081)		(22,976)
Total net realized and unrealized gains (losses)	$	8,825	$	15,687	$	11,002	$	32,891

(1) Relates to Loans, at fair value classified as Held for Sale for the periods prior to July 1, 2022.

(6) Notes and Accounts Receivable, net

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


	As of
	June 30, 2023		December 31, 2022
Accounts and premiums receivable, net	$	277,308	$	142,011
Retrospective commissions receivable	227,191		191,092
Notes receivable, net	133,372		121,419
Trust receivables	18,140		18,455
Other receivables	31,814		29,334
Total notes and accounts receivable, net	$	687,825	$	502,311

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 June 30,				Six Months Ended June 30,
	June 30, 2023		December 31, 2022		2023		2022		2023		2022
Notes receivable, net - premium financing program (1)	$	50	$	85	$	44	$	28	$	84	$	90

Accounts and premiums receivable, net	$	138	$	94	$	3	$	37	$	12	$	45

(1) As of June 30, 2023 and December 31, 2022, there were $127 and $168 in balances classified as 90 days plus past due, respectively.

(7) Reinsurance Receivables

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

F-19

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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 June 30, 2023
Premiums written:
Life insurance	$	20,177	$	10,592	$	60	$	9,645	0.6	%
Accident and health insurance	28,526		19,508		5,931		14,949		39.7	%
Property and liability insurance	452,625		263,820		107,173		295,978		36.2	%
Total premiums written	$	501,328	$	293,920	$	113,164	$	320,572	35.3	%

Premiums earned:
Life insurance	20,380		10,136		71		10,315		0.7	%
Accident and health insurance	33,338		22,679		5,942		16,601		35.8	%
Property and liability insurance	340,601		202,434		104,712		242,879		43.1	%
Total premiums earned	$	394,319	$	235,249	$	110,725	$	269,795	41.0	%

Three Months Ended June 30, 2022
Premiums written:
Life insurance	$	24,036	$	11,428	$	46	$	12,654	0.4	%
Accident and health insurance	33,327		22,779		6,647		17,195		38.7	%
Property and liability insurance	296,251		157,294		66,411		205,368		32.3	%
Total premiums written	$	353,614	$	191,501	$	73,104	$	235,217	31.1	%

Premiums earned:
Life insurance	20,541		10,309		139		10,371		1.3	%
Accident and health insurance	33,316		22,518		6,709		17,507		38.3	%
Property and liability insurance	257,061		135,224		66,226		188,063		35.2	%
Total premiums earned	$	310,918	$	168,051	$	73,074	$	215,941	33.8	%




Six Months Ended June 30, 2023
Premiums written:
Life insurance	$	37,464	$	19,182	$	117	$	18,399	0.6	%
Accident and health insurance	57,770		39,017		11,892		30,645		38.8	%
Property and liability insurance	831,012		486,410		208,072		552,674		37.6	%
Total premiums written	$	926,246	$	544,609	$	220,081	$	601,718	36.6	%

Premiums earned:

F-20

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	Direct Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount - Assumed to Net
Life insurance	$	41,077	$	20,490	$	152	20,739		0.7	%
Accident and health insurance	67,719		45,953		11,918		33,684		35.4	%
Property and liability insurance	647,370		375,288		208,620		480,702		43.4	%
Total premiums earned	$	756,166	$	441,731	$	220,690	$	535,125	41.2	%




Six Months Ended June 30, 2022
Premiums written:
Life insurance	$	44,095	$	19,822	$	95	$	24,368	0.4	%
Accident and health insurance	68,165		46,325		6,896		28,736		24.0	%
Property and liability insurance	595,414		313,483		164,883		446,814		36.9	%
Total premiums written	$	707,674	$	379,630	$	171,874	$	499,918	34.4	%

Premiums earned:
Life insurance	$	40,481	$	20,435	$	307	20,353		1.5	%
Accident and health insurance	69,374		47,069		7,041		29,346		24.0	%
Property and liability insurance	514,541		276,639		136,756		374,658		36.5	%
Total premiums earned	$	624,396	$	344,143	$	144,104	$	424,357	34.0	%

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 June 30, 2023
Losses and LAE Incurred
Life insurance	$	11,338	$	6,218	$	18	$	5,138	0.4	%
Accident and health insurance	6,175		5,091		1,308		2,392		54.7	%
Property and liability insurance	144,238		100,970		64,229		107,497		59.7	%
Total losses and LAE incurred	$	161,751	$	112,279	$	65,555	$	115,027	57.0	%
	Member benefit claims (1)						32,707
	Total policy and contract benefits						$	147,734
Three Months Ended June 30, 2022

F-21

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


Losses and LAE Incurred
Life insurance	$	11,005	$	5,988	$	81	$	5,098	1.6	%
Accident and health insurance	7,983		6,589		4,921		6,315		77.9	%
Property and liability insurance	103,839		69,597		37,298		71,540		52.1	%
Total losses and LAE incurred	$	122,827	$	82,174	$	42,300	$	82,953	51.0	%
	Member benefit claims (1)						21,712
	Total policy and contract benefits						$	104,665

Six Months ended June 30, 2023
Losses and LAE Incurred
Life insurance	$	24,583	$	13,422	$	56	$	11,217	0.5	%
Accident and health insurance	12,742		9,595		5,813		8,960		64.9	%
Property and liability insurance	277,928		189,902		121,151		209,177		57.9	%
Total losses and LAE incurred	$	315,253	$	212,919	$	127,020	$	229,354	55.4	%
	Member benefit claims (1)						60,055
	Total policy and contract benefits						$	289,409

Six Months Ended June 30, 2022
Losses and LAE Incurred
Life insurance	$	27,610	$	14,770	$	346	$	13,186	2.6	%
Accident and health insurance	17,971		14,338		6,093		9,726		62.6	%
Property and liability insurance	214,215		146,544		75,646		143,317		52.8	%
Total losses and LAE incurred	$	259,796	$	175,652	$	82,085	$	166,229	49.4	%
	Member benefit claims (1)						42,882
	Total policy and contract benefits						$	209,111

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

The following table presents the components of the reinsurance receivables:


	As of
	June 30, 2023		December 31, 2022


Prepaid reinsurance premiums:
Life insurance (1)	$	74,056	$	75,553
Accident and health insurance (1)	74,782		81,718
Property and liability insurance	689,384		568,199
Total	838,222		725,470

Ceded claim reserves:
Life insurance	3,808		3,965
Accident and health insurance	20,381		19,408
Property and liability insurance	319,608		243,726
Total ceded claim reserves recoverable	343,797		267,099
Other reinsurance settlements recoverable	262,776		183,521
Reinsurance receivables	$	1,444,795	$	1,176,090

(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
	June 30, 2023
Total of the three largest receivable balances from non-affiliated reinsurers	$	210,000

As of June 30, 2023, 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), Sidecars Reinsurance Company, Inc. (A.M. Best Rating: Not Rated), and Oil Casualty Insurance, LTD (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 is an authorized reinsurer 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

F-22

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

reinsurers periodically. As of June 30, 2023, the Company does not believe there is a risk of loss due to the concentration of credit risk in the reinsurance program given the collateralization.

(8) Goodwill and Intangible Assets, net

The following table presents identifiable finite and indefinite-lived intangible assets, accumulated amortization, and goodwill by operating segment and/or reporting unit, as appropriate:


	As of June 30, 2023						As of December 31, 2022
Finite-Lived Intangible Assets:	Insurance		Other		Total			Insurance		Other		Total

Customer relationships	$	162,554	$	—	$	162,554		$	149,835	$	—	$	149,835
Accumulated amortization	(67,210)		—		(67,210)			(60,401)		—		(60,401)
Trade names	16,173		800		16,973			15,028		800		15,828
Accumulated amortization	(7,709)		(640)		(8,349)			(7,039)		(600)		(7,639)
Software licensing	17,149		640		17,789			12,386		640		13,026
Accumulated amortization	(9,270)		(640)		(9,910)			(9,084)		(640)		(9,724)
Insurance policies and contracts acquired	36,500		—		36,500			36,500		—		36,500
Accumulated amortization	(36,444)		—		(36,444)			(36,374)		—		(36,374)
Other	1,073		—		1,073			751		—		751
Accumulated amortization	(357)		—		(357)			(276)		—		(276)
Total finite-lived intangible assets	112,459		160		112,619			101,326		200		101,526
Indefinite-Lived Intangible Assets: (1)
Insurance licensing agreements	13,761		—		13,761			13,761		—		13,761
Other	—		1,727		1,727			—		1,728		1,728
Total indefinite-lived intangible assets	13,761		1,727		15,488			13,761		1,728		15,489
Total intangible assets, net	$	126,220	$	1,887	$	128,107		$	115,087	$	1,928	$	117,015

Goodwill	203,966		1,708		205,674			184,900		1,708		186,608
Total goodwill and intangible assets, net	$	330,186	$	3,595	$	333,781		$	299,987	$	3,636	$	303,623

(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, 2022	$	184,900	$	1,708	$	186,608
Goodwill acquired (1)	18,359		—		18,359
Foreign currency translation and other	707		—		707
Balance at June 30, 2023	$	203,966	$	1,708	$	205,674

(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 six months ended June 30, 2023 and 2022, no impairments were recorded on the Company’s goodwill.

F-23

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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, 2022	$	115,087	$	1,928	$	117,015
Intangible assets acquired (1)	18,152		—		18,152
Amortization expense	(7,808)		(41)		(7,849)
Foreign currency translation and other	789		—		789
Balance at June 30, 2023	$	126,220	$	1,887	$	128,107

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Amortization expense on intangible assets	$	3,923	$	4,140	$	7,849	$	8,145

For the three and six months ended June 30, 2023 and 2022, 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 June 30, 2023
	Insurance		Other		Total
Remainder of 2023	$	7,785	$	40	$	7,825
2024	13,906		80		13,986
2025	11,792		40		11,832
2026	9,543		—		9,543
2027	8,200		—		8,200
2028 and thereafter	61,361		—		61,361
Total (1)	$	112,587	$	160	$	112,747

(1) Does not include foreign currency translation adjustment of $(128) as of June 30, 2023.

(9) Derivative Financial Instruments and Hedging

The Company utilizes derivative financial instruments as part of its overall investment and hedging activities. Derivative contracts are subject to additional risk that can result in a loss of all or part of an investment. The Company’s derivative activities are primarily entered into in order to manage underlying credit risk, market risk, interest rate risk and currency exchange 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

June 30, 2023

(in thousands, except share data)

Forward Delivery Contracts and TBA Mortgage-Backed Securities

Our mortgage origination subsidiary manages 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, currency forwards and options, 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 (16) 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 June 30, 2023						As of December 31, 2022
	Notional values		Asset derivatives		Liability derivatives		Notional values		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	183,245	$	3,814	$	—	$	147,963	$	3,652	$	—
Forward delivery contracts	26,667		71		33		32,160		112		39
TBA mortgage-backed securities	161,900		514		61		133,500		273		141
Fortegra Additional Warrants (Warburg)(1)	—		—		5,127		—		—		5,291
Other	14,030		155		144		13,427		230		7,730
Total	$	385,842	$	4,554	$	5,365	$	327,050	$	4,267	$	13,201

(1) See Note (16) Stockholders’ Equity for additional information.

F-25

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(10) Debt, net

The following table presents the balance of the Company’s debt obligations, net of discounts and deferred financing costs for our corporate and asset based debt. Asset based debt is generally recourse only to specific assets and related cash flows.


	As of June 30, 2023
Corporate debt	Insurance		Mortgage		Total
Secured revolving credit agreements (1)	$	80,540	$	—	$	80,540

Preferred trust securities (LIBOR + 4.10%)	35,000		—		35,000
8.50% Junior subordinated notes	125,000		—		125,000
Total corporate debt	240,540		—		240,540

Asset based debt
Asset based revolving financing (SOFR + 2.75%)	68,038		—		68,038
Residential mortgage warehouse borrowings (1.88% to 2.50% over SOFR; 2.00% to 3.00% over BSBY) (2)(3)	—		60,982		60,982

Total asset based debt	68,038		60,982		129,020
Total debt, face value	308,578		60,982		369,560

Unamortized deferred financing costs	(8,347)		(2)		(8,349)
Total debt, net	$	300,231	$	60,980	$	361,211

	As of December 31, 2022
Corporate debt	Insurance		Mortgage		Total
Secured revolving credit agreements (1)	$	—	$	—	$	—

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
Asset based revolving financing (LIBOR + 2.75%)	60,628		—		60,628
Residential mortgage warehouse borrowings (1.88% to 2.50% over SOFR; 2.00% to 3.00% over BSBY) (2)(3)	—		47,454		47,454

Total asset based debt	60,628		47,454		108,082
Total debt, face value	220,628		47,454		268,082

Unamortized deferred financing costs	(8,703)		(13)		(8,716)
Total debt, net	$	211,925	$	47,441	$	259,366

(1) The secured credit agreements include separate tranches with multiple rate structures that are adjustable based on Fortegra’s senior leverage ratio, which as of June 30, 2023 was SOFR + 1.50%.

(2) Includes SOFR floor and BSBY floor of 0.25% and 0.50%, respectively, as of and June 30, 2023 and December 31, 2022.

(3) The weighted average coupon rate for residential mortgage warehouse borrowings was 7.12% and 6.31% at June 30, 2023 and December 31, 2022, respectively.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total Interest expense - corporate debt	$	4,896	$	6,091	$	9,326	$	11,967
Total Interest expense - asset based debt	2,148		2,937		4,183		7,135
Interest expense on debt	$	7,044	$	9,028	$	13,509	$	19,102

F-26

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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 June 30, 2023
Remainder of 2023	$	104,414
2024	24,606
2025	—
2026	—
2027	80,540
2028 and thereafter	160,000
Total	$	369,560

The following narrative is a summary of certain terms of our debt agreements for the period ended June 30, 2023:

Corporate Debt

Secured Revolving Credit Agreements

As of June 30, 2023 and December 31, 2022, a total of $80,540 and $0, respectively, was outstanding under the revolving line of credit in our insurance business. The maximum borrowing capacity under the agreements as of June 30, 2023 was $200,000.

Asset Based Debt

Asset Based Revolving Financing

On January 31, 2023, subsidiaries of Fortegra amended the asset based revolving financing to increase the revolving commitment to $100,000 and transition to SOFR. As of June 30, 2023 and December 31, 2022, a total of $68,038 and $60,628, 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 January 2023, a $60,000 warehouse line of credit was renewed and the maturity date was extended from January 2023 to January 2024. In June 2023, the Company received notification that one of its warehouse lending partners was exiting the warehouse lending market which will result in an acceleration of the maturity date of the line of credit to September 30, 2023. The Company is negotiating new warehouse lines with several lenders and expects to replace the maturing line on substantially similar terms prior to September 30, 2023.

As of June 30, 2023 and December 31, 2022, a total of $60,982 and $47,454, respectively, was outstanding under such financing agreements.

Debt Covenants

As of June 30, 2023, the Company was in compliance with the representations and covenants for its outstanding debt or obtained waivers for any events of non-compliance.

F-27

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(11) Fair Value of Financial Instruments

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs to the extent possible to measure a financial instrument’s fair value. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability, and are affected by the type of product, whether the product is traded on an active exchange or in the secondary market, as well as current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based 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

June 30, 2023

(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.

The remaining derivatives are generally comprised of a combination of swaps, currency forwards and options, which are generally classified as Level 2 in the fair value hierarchy. In addition, the Fortegra Additional Warrants (Warburg) are a derivative liability and classified as Level 3 in the fair value hierarchy. See Note (16) Stockholders’ Equity for additional information regarding the Fortegra Additional Warrant.

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.

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

June 30, 2023

(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 June 30, 2023
	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	$	—	$	546,939	$	—	$	546,939
Obligations of state and political subdivisions	—		48,293		—		48,293
Obligations of foreign governments	—		1,618		—		1,618
Certificates of deposit	657		—		—		657
Asset backed securities	—		30,893		90		30,983
Corporate securities	—		167,066		—		167,066
Total available for sale securities, at fair value	657		794,809		90		795,556

Loans, at fair value:
Corporate loans	—		5,117		9,802		14,919
Mortgage loans held for sale	—		63,934		—		63,934
Total loans, at fair value	—		69,051		9,802		78,853

Equity securities:
Invesque	13,586		—		—		13,586
Fixed income ETFs	71,951		—		—		71,951
Other equity securities	37,340		—		8,004		45,344
Total equity securities	122,877		—		8,004		130,881

Other investments, at fair value:
Corporate bonds	—		58,035		—		58,035
Derivative assets	—		709		3,845		4,554
Other	—		—		81		81
Total other investments, at fair value	—		58,744		3,926		62,670

Mortgage servicing rights (1)	—		—		41,933		$	41,933

Total	$	123,534	$	922,604	$	63,755	$	1,109,893

Liabilities: (2)
Securities sold, not yet purchased	$	—	$	21,402	$	—	$	21,402
Derivative liabilities	—		233		5		238
Fortegra Additional Warrants (Warburg)	—		—		5,127		5,127
Contingent consideration payable	—		—		3,050		3,050
Total	$	—	$	21,635	$	8,182	$	29,817

(1) Included in other assets. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

(2) Included in other liabilities and accrued expenses. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

F-30

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	As of December 31, 2022
	Quoted prices in active markets Level 1		Other significant observable inputs Level 2		Significant unobservable inputs Level 3		Fair value
Assets:
Available for sale securities, at fair value:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	—	$	382,060	$	—	$	382,060
Obligations of state and political subdivisions	—		49,454		—		49,454
Obligations of foreign governments	—		2,362		—		2,362
Certificates of deposit	756		—		—		756
Asset backed securities	—		15,254		95		15,349
Corporate securities	—		161,999		—		161,999
Total available for sale securities, at fair value	756		611,129		95		611,980

Loans, at fair value:
Corporate loans	—		3,104		11,208		14,312
Mortgage loans held for sale	—		50,531		—		50,531
Total loans, at fair value	—		53,635		11,208		64,843

Equity securities:
Invesque	15,454		—		—		15,454
Fixed income ETFs	56,256		—		—		56,256
Other equity securities	7,181		—		6,885		14,066
Total equity securities	78,891		—		6,885		85,776

Other investments, at fair value:
Corporate bonds	—		42,080		—		42,080
Derivative assets	7		608		3,652		4,267
Other	—		—		324		324
Total other investments, at fair value	7		42,688		3,976		46,671

Mortgage servicing rights (1)	—		—		41,426		41,426

Total	$	79,654	$	707,452	$	63,590	$	850,696

Liabilities: (2)
Securities sold, not yet purchased	$	10,263	$	6,312	$	—	$	16,575
Derivative liabilities	—		7,910		—		7,910
Fortegra Additional Warrants (Warburg)	—		—		5,291		5,291
Contingent consideration payable	—		—		2,904		2,904

Total	$	10,263	$	14,222	$	8,195	$	32,680

(1) Included in other assets. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

(2) Included in other liabilities and accrued expenses. See Note (14) Other Assets and Other Liabilities and Accrued Expenses.

F-31

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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 Six Months Ended June 30,
	2023		2022
Balance at January 1,	$	63,590	$	61,443
Net realized and unrealized gains or losses included in:
Earnings	(2,706)		10,459
OCI	2,644		(298)
Origination of IRLCs	22,472		29,846
Purchases	31		—
Sales and repayments	(6)		(1,854)
Conversions to mortgage loans held for sale	(22,310)		(31,658)
Settlement of trade claims	—		(18,709)
Exchange of bonds for term loans	—		12,243
Exchange of trade receivables for equity securities	—		7,104
Transfer out of Level 3	(41)		—
Conversions to real estate owned	81		—
Balance at June 30,	$	63,755	$	68,576

Changes in unrealized gains (losses) included in earnings related to assets still held at period end	$	(5,029)	$	1,919
Changes in unrealized gains (losses) included in OCI related to assets still held at period end	$	2,644	$	(298)

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

June 30, 2023

(in thousands, except share data)


	As of						As of
	June 30, 2023		December 31, 2022		Valuation technique	Unobservable input(s)	June 30, 2023				December 31, 2022
Assets	Fair value						Range			WA (1)	Range			WA (1)
IRLCs	$	3,814	$	3,652	Internal model	Pull through rate	45%	to	95%	57%	55%	to	95%	65%
Mortgage servicing rights	41,933		41,426		External model	Discount rate	9%	to	14%	10%	9%	to	14%	9%
						Cost to service	$65	to	$80	$72	$65	to	$80	$72
						Prepayment speed	4%	to	84%	9%	4%	to	85%	9%

Equity securities	8,004		6,837		Internal model	Forecast EBITDAR	$728,000	to	$1,039,000	N/A	$728,000	to	$1,039,000	N/A
Corporate loans	9,802		11,208		Internal model	EBITDA	$164,000			N/A	$170,000			N/A
Total	$	63,553	$	63,123

Liabilities
Fortegra Additional Warrants (Warburg)	$	5,127	$	5,291	External Model	Discount rate	3%	to	5%	4.2%	3%	to	5%	3.3%
						Implied Equity Volatility	40%	to	50%	45%	40%	to	50%	45%
Contingent consideration payable	3,050		2,904		Cash Flow model	Forecast Cash EBITDA	$2,500	to	$4,000	N/A	$2,500	to	$4,000	N/A
						Forecast Underwriting EBITDA	$—	to	$2,000	N/A	$—	to	$2,000	N/A
Total	$	8,177	$	8,195

(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

June 30, 2023

(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 June 30, 2023					As of December 31, 2022
	Level within fair value hierarchy	Fair value		Carrying value		Level within fair value hierarchy	Fair value		Carrying value
Assets:
Debentures (1)	2	$	20,786	$	20,786	2	$	23,853	$	23,853
Notes receivable, net	2	133,372		133,372		2	121,419		121,419
Total assets		$	154,158	$	154,158		$	145,272	$	145,272

Liabilities:
Debt, net	3	$	363,935	$	369,560	3	$	262,932	$	268,082
Total liabilities		$	363,935	$	369,560		$	262,932	$	268,082

(1) Included in other investments.

Debentures: Since interest rates on debentures are at current market rates for similar credit risks, the carrying amount approximates fair value. These values are net of allowance for doubtful accounts.

Notes Receivable, net: To the extent that carrying amounts differ from fair value, fair value is determined based on contractual cash flows discounted at market rates for similar credits. Categorized under Level 2 in the fair value hierarchy. See Note (6) Notes and Accounts Receivable, net.

Debt: The carrying value, which approximates fair value of floating rate debt, represents the total debt balance at face value excluding the unamortized discount. The fair value of the Junior subordinated notes is determined based on dealer quotes. Categorized under Level 3 in the fair value hierarchy.

Additionally, the following financial assets and liabilities on the condensed consolidated balance sheets are not carried at fair value, but whose carrying amounts approximate their fair value:

Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents are carried at cost which approximates fair value. Categorized under Level 1 in the fair value hierarchy.

Accounts and Premiums Receivable, net, Retrospective Commissions Receivable and Other Receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets. Categorized under Level 2 in the fair value hierarchy. See Note (6) Notes and Accounts Receivable, net.

Due from Brokers, Dealers, and Trustees and Due to Brokers, Dealers and Trustees: The carrying amounts are included in other assets and other liabilities and accrued expenses and approximate their fair value due to their short term nature. Categorized under Level 2 in the fair value hierarchy.

F-34

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(12) Liability for Unpaid Claims and Claim Adjustment Expenses

Roll forward of Claim Liability

The following table presents the activity in the net liability for unpaid losses and allocated loss adjustment expenses of short duration contracts for the following periods:


	For the Six Months Ended June 30,
	2023		2022
Policy liabilities and unpaid claims balance as of January 1,	$	567,193	$	331,703
Less: liabilities of policy-holder account balances, gross	(1,923)		(801)
Less: non-insurance warranty benefit claim liabilities	(140)		(10,785)
Gross liabilities for unpaid losses and loss adjustment expenses	565,130		320,117
Less: reinsurance recoverable on unpaid losses - short duration	(266,889)		(165,129)
Less: other lines, gross	(184)		(576)
Net balance as of January 1, short duration	298,057		154,412

Incurred (short duration) related to:
Current year	226,457		164,868
Prior years	2,455		703
Total incurred	228,912		165,571

Paid (short duration) related to:
Current year	93,768		91,245
Prior years	56,437		11,804
Total paid	150,205		103,049

Net balance as of June 30, short duration	376,764		216,934
Plus: reinsurance recoverable on unpaid losses - short duration	343,652		219,349
Plus: other lines, gross	118		496
Gross liabilities for unpaid losses and loss adjustment expenses	720,534		436,779
Plus: liabilities of policy-holder account balances, gross	1,518		42
Plus: non-insurance warranty benefit claim liabilities	417		4,257
Policy liabilities and unpaid claims balance as of June 30,	$	722,469	$	441,078

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Short duration incurred	$	114,652	$	82,846	$	228,912	$	165,571
Other lines incurred	285		(29)		282		362
Unallocated loss adjustment expenses	90		136		160		296
Total losses incurred	$	115,027	$	82,953	$	229,354	$	166,229

During the six months ended June 30, 2023, the Company experienced unfavorable prior year development of $2,455, primarily as a result of higher-than-expected claim severity from business written in our commercial lines.

During the six months ended June 30, 2022, the Company experienced unfavorable prior year development of $703, 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

June 30, 2023

(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.

The unfavorable prior year development of $2,455 in the six months ended June 30, 2023 represented 4.9% of our insurance business pre-tax income of $49,862 and 0.8% of the opening net liability for losses and loss adjustment expenses of $298,057, as of January 1, 2023.

The unfavorable prior year development of $703 in the six months ended June 30, 2022 represented 2.9% of our insurance business pretax income of $23,753, and 0.5% of the opening net liability for losses and loss adjustment expenses of $154,412, as of January 1, 2022.

Based upon our internal analysis and our review of the statement of actuarial opinions provided by our actuarial consultants, we believe that the amounts recorded for policy liabilities and unpaid claims reasonably represent the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

(13) Revenue from Contracts with Customers

The Company’s revenues from insurance and contractual and liability insurance operations are primarily accounted for under Financial Services-Insurance (Topic 944) that are not within the scope of Revenue for Contracts with Customers (Topic 606). The Company’s remaining revenues that are within the scope of Topic 606 are primarily comprised of revenues from contracts with customers for monthly membership dues for motor clubs, monthly administration fees for services provided for premiums, claims and reinsurance processing revenues, vehicle service contracts, vessel related revenue and revenues for household goods and appliances service contracts (collectively, remaining contracts).

The following table presents the disaggregated amounts of revenue from contracts with customers by product type for the following periods:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Service and Administrative Fees:
Service contract revenue	$	73,014	$	50,607	136,184		93,820
Motor club revenue	11,603		13,217		24,119		25,775

Other	1,171		13,664		2,674		24,647

Revenue from contracts with customers	$	85,788	$	77,488	$	162,977	$	144,242

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 June 30, 2023.

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.

F-36

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)


	January 1, 2023						June 30, 2023
	Beginning balance		Additions		Amortization		Ending balance
Deferred acquisition costs
Service and Administrative Fees:
Service contract revenue	$	172,129	$	60,728	$	41,747	$	191,110
Motor club revenue	17,142		16,907		18,842		15,207
Total	$	189,271	$	77,635	$	60,589	$	206,317


Deferred revenue
Service and Administrative Fees:
Service contract revenue	$	581,882	$	169,563	$	136,184	$	615,261
Motor club revenue	22,949		21,265		24,119		20,095
Total	$	604,831	$	190,828	$	160,303	$	635,356

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

(14) Other Assets and Other Liabilities and Accrued Expenses

Other Assets

The following table presents the components of other assets as reported in the condensed consolidated balance sheets:


	As of
	June 30, 2023		December 31, 2022


Loans eligible for repurchase	$	31,966	$	32,136
Mortgage servicing rights	41,933		41,426
Right of use assets - Operating leases	31,309		31,499
Income tax receivable	990		19,790
Furniture, fixtures and equipment, net	30,565		21,829
Prepaid expenses	12,583		18,526
Other	8,549		6,937
Total other assets	$	157,895	$	172,143

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Depreciation expense related to furniture, fixtures and equipment	$	2,170	$	952	$	3,239	$	1,790

F-37

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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
	June 30, 2023		December 31, 2022



Accounts payable and accrued expenses	$	94,765	$	119,394
Loans eligible for repurchase liability	31,966		32,136
Deferred tax liabilities, net	112,234		90,391
Operating lease liabilities	38,471		38,031

Commissions payable	29,858		42,741
Securities sold, not yet purchased	21,402		16,575
Derivative liabilities	5,365		13,201
Other	24,359		15,279
Total other liabilities and accrued expenses	$	358,420	$	367,748

(15) Other Revenue and Other Expenses

Other Revenue

The following table presents the components of other revenue as reported in the condensed consolidated statement of operations. Other revenue is primarily generated by Tiptree Capital’s non-insurance activities except as noted in the footnote to the table.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Other investment income (1)	$	5,996	$	18,185	$	10,766	$	34,890

Other (2)	8,025		5,714		16,587		10,753
Total other revenue	$	14,021	$	23,899	$	27,353	$	45,643

(1) See Note (5) Investments for the components of Other investment income.

(2) Includes $7,384 and $3,702 for the three months ended June 30, 2023 and 2022, respectively, and $14,319 and $6,918 for the six months ended June 30, 2023 and 2022, 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
General and administrative	$	9,977	$	8,052	$	19,036	$	12,091
Professional fees	6,428		8,116		14,187		14,399
Premium taxes	5,379		5,244		11,153		10,301
Mortgage origination expenses	3,028		4,537		6,220		9,139
Rent and related	3,804		4,559		7,874		8,918


Other	4,493		9,004		7,450		15,840
Total other expenses	$	33,109	$	39,512	$	65,920	$	70,688

F-38

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(16) Stockholders' Equity

Stock Repurchases

The Board of Directors authorized the Company to make repurchases of up to $20,000 of shares of the Company’s outstanding common stock in the aggregate, at the discretion of the Company's Executive Committee. There were no shares repurchased during the six months ended June 30, 2023. As of June 30, 2023, the remaining repurchase authorization was $11,945.

Dividends

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


	Dividends per share for the
	Six Months Ended June 30,
	2023		2022
First quarter	$	0.05	$	0.04
Second quarter	0.05		0.04


Total cash dividends declared	$	0.10	$	0.08

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 WP Transaction, Tiptree was issued Fortegra Additional Warrants, and management’s interests in LOTS Intermediate were exchanged for interests in Fortegra. As of June 30, 2023, Fortegra was owned approximately 79.5% by Tiptree Holdings, 17.5% by Warburg and 3.0% by management and directors of Fortegra.

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. During the six months ended June 30, 2023, $3,174 of cash dividends were declared and accrued in other liabilities and accrued expenses.

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).

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

F-39

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

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
	June 30, 2023		December 31, 2022


Fortegra preferred interests	$	77,679	$	77,679
Fortegra common interests	66,497		55,364
Other third-party common interests	—		3,165
Total non-controlling interests	$	144,176	$	136,208

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 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 June 30, 2023 and December 31, 2022.

Under the NAIC Risk-Based Capital Act of 1995, a company's Risk-Based Capital (RBC) is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The Company's U.S. domiciled insurance company subsidiaries' RBC levels, as calculated in accordance with the NAIC’s RBC instructions, exceeded all RBC thresholds as of June 30, 2023 and December 31, 2022.

The Company also has a foreign insurance subsidiary that is not subject to SAP. The statutory capital and surplus amounts and statutory net income presented above do not include the foreign insurance subsidiary in accordance with SAP.

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 June 30, 2023 and 2022.

The following table presents the combined amount available for ordinary dividends of the Company's U.S. domiciled insurance company subsidiaries for the following periods:






	As of
	June 30, 2023		December 31, 2022
Amount available for ordinary dividends of the Company's insurance company subsidiaries	$	32,867	$	35,145

F-40

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

At June 30, 2023, 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 $32,867. 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.

(17) Accumulated Other Comprehensive Income (Loss) (AOCI)

The following table presents the activity of AFS securities in 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, 2021	$	(2,686)	$	—	$	(2,686)	$	1	$	(2,685)
Other comprehensive income (losses) before reclassifications	(29,307)		(7,065)		(36,372)		812		(35,560)
Amounts reclassified from AOCI	86		—		86		—		86
WP Transaction	—		—		—		7,193		7,193
OCI	(29,221)		(7,065)		(36,286)		8,005		(28,281)

Balance at June 30, 2022	$	(31,907)	$	(7,065)	$	(38,972)	$	8,006	$	(30,966)

Balance at December 31, 2022	$	(43,043)	$	(7,311)	$	(50,354)	$	10,925	$	(39,429)
Other comprehensive income (losses) before reclassifications	450		5,632		6,082		(2,116)		3,966
Amounts reclassified from AOCI	2,237		—		2,237		—		2,237
OCI	2,687		5,632		8,319		(2,116)		6,203

Balance at June 30, 2023	$	(40,356)	$	(1,679)	$	(42,035)	$	8,809	$	(33,226)

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 June 30,				Six Months Ended June 30,				Affected line item in condensed consolidated statements of operations
Components of AOCI	2023		2022		2023		2022
Unrealized gains (losses) on available for sale securities	$	(2,591)	$	—	$	(2,956)	$	(110)		Net realized and unrealized gains (losses)
Related tax (expense) benefit	633		—		719		24			Provision for income tax
Net of tax	$	(1,958)	$	—	$	(2,237)	$	(86)

(18) Stock Based Compensation

Tiptree Equity Plans

The table below summarizes changes to the issuances under the Company’s 2017 Omnibus Incentive 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










Available for issuance as of December 31, 2022			2,371,977
Restricted Stock Unit, stock and option awards granted			(97,535)




Available for issuance as of June 30, 2023			2,274,442

F-41

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

Restricted Stock Units (RSUs) and Stock Awards

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 either (i) after the third anniversary, or (ii) with respect to one-third of Tiptree shares granted on each of the first, second and third year anniversaries of the grant date. RSU awards are 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 issued as director compensation are deemed to be granted and immediately vested upon issuance.

The following table presents changes to the issuances of RSUs and stock awards under the 2017 Omnibus Incentive Equity Plan for the periods indicated:


	Number of shares issuable	Weighted average grant date fair value








Unvested units as of December 31, 2022	501,007	$	9.63
Granted	97,535	16.21
Vested	(345,311)	8.10

Unvested units as of June 30, 2023	253,231	$	14.25

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



	Six Months Ended June 30,		Six Months Ended June 30,
Granted	2023	2022		Vested	2023	2022
Directors	15,661	17,386		Directors	15,661	17,386
Employees (1)	81,874	207,576		Employees	329,650	300,305
Total Granted	97,535	224,962		Total Vested	345,311	317,691
				Taxes	(43,322)	(47,274)

				Net Vested	301,989	270,417

(1) Includes 62,940 shares that vest ratably over three years and 190,291 shares that cliff vest in 2025 for the six months ended June 30, 2023.

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. An additional 350,000 PRSUs were awarded on October 14, 2022. The PRSUs have a 10-year term and are subject to the recipient’s continuous service and a market requirement. A portion of the PRSUs will generally vest upon the achievement of each of five Tiptree share price target milestones ranging from $15 to $60, adjusted for dividends paid, within five pre-established determination periods (subject to a catch-up vesting mechanism) occurring on the second, fourth, sixth, eighth and tenth anniversaries of the grant date.

In November 2021, the first tranche of the PRSUs vested, resulting in a net issuance of 215,583 shares of Tiptree common stock. As of June 30, 2023, 3,616,667 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 $19.66 as adjusted for cumulative dividends paid to date).


Original Tiptree Share Price Target						Number of PRSUs that Vest
$20						516,667
$30						775,000
$45						1,033,333
$60						1,291,667

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. The fair value of the PRSUs was 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

F-42

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

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 measure the fair value of the PRSUs as of June 7, 2022, when they were converted to equity awards.


Valuation Input	Assumption

Historical volatility		38.75%
Risk-free rate		3.04%
Dividend yield		1.45%
Cost of equity		11.72%
Expected term (years)		6

Stock Option Awards

Between 2016 and 2020, option awards were 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. As of June 30, 2023, the market requirement for all outstanding options has been achieved. There were no stock option awards granted in 2022 or 2023.

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, 2022	1,675,514	$	6.50	$	2.30	1,018,805

Balance, June 30, 2023	1,583,873	$	6.51	$	2.25	1,225,083

Weighted average remaining contractual term at June 30, 2023 (in years)	4.8

Subsidiary Equity Plans

Certain of the Company’s subsidiaries have established incentive plans under which they are authorized to issue equity of those subsidiaries to certain of their employees. Such awards are accounted for as equity unless otherwise noted. 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). The Company has the option, but not the obligation to settle the exchange right in cash.

Fortegra Equity Incentive Plan

Fortegra adopted the 2022 Equity Incentive Plan (“Fortegra Plan”) on June 21, 2022, which permits the grant of RSUs, stock based awards and options up to 7.2% of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock), of which the substantial majority is expected to be delivered in options. As of June 30, 2023, time vesting RSUs and time and performance vesting options representing approximately 5.0% of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock) have been granted and remain unvested. 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.

In May 2023, Fortegra granted management options with a strike price equal to the per share price on the date of the WP Transaction, delivered in equal portions of time and performance vested grants equal to approximately 4.6% of Fortegra Common Stock (assuming cash exercise and after conversion of the Fortegra Preferred Stock). The time vested options vest in equal parts over five years and expire on the ten year anniversary of the grant date. The performance vested options vest based on specific internal rate of return targets determined at the time of a change of control of Fortegra or sale by Warburg of more than 50% of its Fortegra securities (on an as converted basis) acquired in 2022. The fair value option grants were estimated on the date of grant using a Black-Scholes Merton option pricing formula embedded within a Monte Carlo model

F-43

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

used to simulate the future value of Fortegra Common Stock, which assumes the market requirement is achieved. Key assumptions used in the model were a historical volatility of 45.0%, a risk free rate of 3.6%, no dividend yield and an expected term of 4.2 years.

In May 2023, Fortegra granted time vesting RSUs equal to approximately 0.1% of Fortegra Common Stock (assuming conversion of the Fortegra Preferred Stock). The RSUs include a retirement provision and are amortized over the lesser of the service condition or expected retirement date.

In May 2023, Fortegra granted performance based restricted stock units (Fortegra PRSUs) that vest based on the achievement of specified gross written premium volume targets and underwriting ratios for selected specialty insurance lines written in 2024. Upon vesting, the Fortegra PRSUs entitle recipients to participate in an aggregate pool of between $5,000 and $20,000 payable in shares of Fortegra. The Fortegra PRSUs are accounted for as liability awards and were unvested as of June 30, 2023.

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, 2022	$	1,487
Granted	18,339
Vested	(808)

Unvested balance as of June 30, 2023	$	19,018

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Employee compensation and benefits	$	1,880	$	(55)	$	4,094	$	5,986
Director compensation	103		109		209		228
Income tax benefit	(416)		(11)		(903)		(1,305)
Net stock based compensation expense	$	1,567	$	43	$	3,400	$	4,909

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


	As of June 30, 2023
	Stock options		Restricted stock awards and RSUs		Performance Restricted Stock Units
Unrecognized compensation cost related to non-vested awards (1)	$	16,921	$	2,087	$	6,393
Weighted - average recognition period (in years)	3.6		1.0		1.1

(1) Includes unrecognized compensation cost of $16,914 related to stock options, $1,160 related to RSUs, and $642 related to PRSUs at The Fortegra Group.

F-44

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

(19) Income Taxes

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


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
Total income tax expense (benefit)	$	11,824			$	26,555			$	16,846			$	26,469

Effective tax rate (ETR)	50.0		%	(1)	552.4		%	(2)	52.9		%	(1)	686.9		%	(2)

(1) Higher than the U.S. federal statutory income tax rate of 21% primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra and other discrete items.

(2) Higher than the U.S. federal statutory income tax rate of 21% primarily due to the initial recording of deferred taxes on the outside basis of Tiptree’s investment in Fortegra.

Tiptree owns less than 80% of Fortegra and is required to record deferred taxes on the outside basis on its investment in Fortegra. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell all of its Fortegra stock at its carrying value on Tiptree’s balance sheet.

For the three months ended June 30, 2023, the deferred tax liability relating to Fortegra increased by $2,232, of which $24 of benefit was recorded in OCI, $1,222 benefit was recorded directly in stockholders’ equity, and $3,478 expense was recorded as a provision for income taxes. For the three months ended June 30, 2022, the deferred tax liability increased by $34,874, of which $14,064 was recorded directly in stockholders’ equity and $20,810 was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rates for the three months ended June 30, 2023 and 2022 were 35.3% and 23.4%, respectively.

For the six months ended June 30, 2023, this deferred tax liability relating to Fortegra was $46,346, which was an increase of $6,376 from the year ended December 31, 2022, of which $1,784 expense was recorded in OCI, $1,222 benefit was recorded directly in stockholders’ equity, and $5,814 expense was recorded as a provision for income taxes. For the six months ended June 30, 2022, this deferred tax liability was $34,874, which was an increase of $34,874 from the year ended December 31, 2021, of which $14,064 was recorded directly in stockholders’ equity and $20,810 was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rates for the six months ended June 30, 2023 and 2022 were 34.6% and 24.4%, respectively.

(20) Commitments and Contingencies

The following table presents rent expense for the Company’s office leases recorded on the condensed consolidated statements of operations for the following periods:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rent expense for office leases (1)	$	2,009	$	2,276	$	4,078	$	4,565

(1) Includes lease expense of $0 and $92 for the three months ended June 30, 2023 and 2022, respectively, and $0 and $202 for the six months ended June 30, 2023 and 2022, respectively, for assets classified as held for sale for the periods prior to July 1, 2022.

The Company entered into a sublease of their former corporate office space in December 2022. As a result of the sublease, future lease payments will be offset by $1,842 annually beginning July 2023 through and August 2029.

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. The 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.

F-45

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(in thousands, except share data)

In a series of orders issued in October 2022 on competing motions for partial summary judgment, the court found in favor of the plaintiffs 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 the plaintiffs’ claims for common law fraud and violation of Kentucky’s insurance statutes and ordered the plaintiffs’ 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.

In December 2022, the court dismissed the plaintiffs’ KCPA claims as to both Subclass A Order and Subclass B Order. The court also dismissed the plaintiffs’ breach of covenant of good faith and fair dealing claim as to Subclass B Order but declined to dismiss such claim as to Subclass A Order pending resolution of the Company’s appeal. 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.

(21) Earnings Per Share

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

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

F-46

TIPTREE INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	11,850	$	(21,748)	$	15,001	$	(22,614)
Less:
Net income (loss) attributable to non-controlling interests	5,861		660		10,074		754
Net income allocated to participating securities	41		—		45		—
Net income (loss) attributable to Tiptree Inc. common shares - basic	5,948		(22,408)		4,882		(23,368)






Effect of Dilutive Securities:
Securities of subsidiaries	10		—		95		—
Adjustments to income relating to exchangeable interests and contingent considerations, net of tax	1		—		1		—
Net income (loss) attributable to Tiptree Inc. common shares - diluted	$	5,959	$	(22,408)	$	4,978	$	(23,368)
Weighted average number of shares of common stock outstanding - basic	36,742,295		35,228,775		36,633,226		34,731,655
Weighted average number of incremental shares of common stock issuable from exchangeable interests and contingent considerations	843,516		—		876,434		—
Weighted average number of shares of common stock outstanding - diluted	37,585,811		35,228,775		37,509,660		34,731,655




Basic net income (loss) attributable to common shares	$	0.16	$	(0.64)	$	0.13	$	(0.67)




Diluted net income (loss) attributable to common shares	$	0.16	$	(0.64)	$	0.13	$	(0.67)

(22) Related Party Transactions

Corvid Peak is a related party of the Company because Corvid Peak is deemed to be controlled by Michael Barnes, the 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 $1,267 and $640 of management and incentive fees for the three months ended June 30, 2023 and 2022, respectively. The Company incurred $2,369 and $1,408 of management and incentive fees for the six months ended June 30, 2023 and 2022, 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 on January 1, 2023, Tiptree’s percentage interest increased to 31.84% (including interests acquired from former Corvid Peak equity holders).

Pursuant to the Transition Services Agreement, Tiptree and Corvid Peak have mutually agreed to provide certain services to one another. Payments under the Transition Services Agreement in the six months ended June 30, 2023 and 2022 were not material.

Pursuant to a Partner Emeritus Agreement, Tiptree agreed to provide Mr. Inayatullah, a greater than 5% stockholder of the Company, 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 six months ended June 30, 2023 and 2022 were not material.

(23) Subsequent Events

On August 1, 2023, the Company’s board of directors declared a quarterly cash dividend of $0.05 per share to holders of common stock with a record date of August 21, 2023, and a payment date of August 28, 2023.

F-47

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, 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 2023 highlights include:

Overall:

•Tiptree reported a net income of $4.9 million for the six months ended June 30, 2023, compared to a net loss of $23.4 million in the prior year period, driven by growth in insurance operations, partially offset by lower mortgage and shipping revenues, in addition to the tax expense in the second quarter of 2022 from the tax deconsolidation of Fortegra. Return on average equity was 5.6%, compared to (9.8)% in 2022.

•Adjusted net income of $41.1 million increased $11.7 million from $29.4 million in 2022, driven by growth in insurance operations. Adjusted return on average equity was 15.2%, as compared to 12.7% in 2022.

Insurance:

•Gross written premiums and premium equivalents were $1,605.4 million for the six months ended June 30, 2023, an increase of $409.8 million, or 34.3%, from the prior year period as a result of growth in specialty insurance lines and fee-based service offerings.

•Total revenues were $753.1 million, an increase of $176.8 million, or 30.7%, from 2022, driven by increases in earned premiums, net, service and administrative fees, net investment income and other income.

•Combined ratio of 91.2%, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform.

•Income before taxes of $49.9 million as compared to $23.8 million in 2022. Return on average equity was 20.2% in 2023 as compared to 10.4% in 2022. The increases were driven by growth in underwriting and fee revenues and increased net investment income.

•Adjusted net income was $53.1 million, an increase of $13.0 million, or 32.4%, from 2022. Adjusted return on average equity was 29.6%, as compared to 25.5% in 2022.

•In February 2023, Fortegra acquired Premia, one of the largest providers of automotive protection products in the United Kingdom, for net cash consideration of approximately $19.7 million.

Tiptree Capital:

•Mortgage loss before taxes was $1.3 million in 2023, as compared to income of $4.3 million in 2022, with the decrease driven by declines in origination volumes and lower positive fair value adjustments on the mortgage servicing portfolio.

•Maritime transportation loss before taxes was $0.7 million in 2023, as compared to income of $16.4 million in 2022, as a result of the sale of five vessels 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, 2022. 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.

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. Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches. The types of products Fortegra offers tend to have limited aggregation risk and limited exposure to catastrophic and residual risk. The business has historically generated significant fee-based revenues by incorporating value-add coverages and services. 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 reinsurance receivables are placed with highly rated and appropriately capitalized counterparties or with our distribution partners’ captive insurance vehicles which are collateralized with highly liquid investments, cash or letters of credit. 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, fluctuations of the U.S. dollar relative to other currencies, including the British pound and Euro, would have an impact on book value between periods.

Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. In recent periods, the U.S. fixed income markets 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 have and could continue to result in higher interest income on investments. The weighted average duration of our fixed income available for sale securities is less than three years. 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 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, provided tailwinds to the mortgage markets in 2020 and 2021, which benefited our mortgage operations and margins. The substantial rise in rates in recent periods resulted in a sharp reversal of those trends, with volumes and margins declining significantly. Only partially offsetting the declines in our mortgage 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 or elevated mortgage rates could have a materially negative impact on our mortgage 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.

Common shares of Invesque represent a significant asset on our condensed consolidated balance sheets. 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. The combination of the COVID-19 pandemic impacting occupancy rates and other market factors impacting operating costs has resulted in a significant decline in Invesque’s stock price over the past three

years. 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.

A discussion of our performance for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 appears below.

RESULTS OF OPERATIONS

The following is a summary of our condensed consolidated financial results for the three and six months ended June 30, 2023 and 2022. 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 June 30,						Six Months Ended June 30,
GAAP:	2023			2022			2023			2022
Total revenues	$	404,518		$	339,843		$	786,143		$	664,746
Net income (loss) attributable to common stockholders	$	5,989		$	(22,408)		$	4,927		$	(23,368)
Diluted earnings per share	$	0.16		$	(0.64)		$	0.13		$	(0.67)
Cash dividends paid per common share	$	0.05		$	0.04		$	0.10		$	0.08
Return on average equity	8.7		%	(19.2)		%	5.6		%	(9.8)		%

Non-GAAP: (1)
Adjusted net income	$	23,804		$	13,986		$	41,088		$	29,438
Adjusted return on average equity	17.5		%	12.3		%	15.2		%	12.7		%
Adjusted EBITDA	$	25,622		$	55,416		$	48,984		$	40,511
Book value per share	$	10.94		$	10.75		$	10.94		$	10.75

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

Revenues

For the three months ended June 30, 2023, revenues were $404.5 million, which increased $64.7 million, or 19.0%, compared to the prior year period. For the six months ended June 30, 2023, revenues were $786.1 million, which increased $121.4 million, or 18.3%, 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, partially offset by lower mortgage and shipping revenues compared to the prior year period.

The table below provides a break down between net realized and unrealized gains and losses from Invesque and other securities which impacted our consolidated results on a pre-tax basis. Many investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect earnings 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net realized gains - Maritime transportation	$	—	$	7,117	$	—	$	7,117
Net realized and unrealized gains (losses) - Invesque	$	(170)	$	(3,227)	$	(1,868)	$	(13,925)
Net realized and unrealized gains (losses)(1)	$	(1,558)	$	(7,986)	$	(6,233)	$	(6,468)

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

Net Income (Loss) Attributable to common stockholders

For the three months ended June 30, 2023, the net income attributable to common stockholders was $6.0 million, compared to a net loss of $22.4 million in the prior year period. For the six months ended June 30, 2023, the net income attributable to common stockholders was $4.9 million, compared to a net loss of $23.4 million in the prior year period. The increase in both periods was driven by growth in Fortegra’s underwriting and fee operations, and $25.5 million of tax expense associated with the WP Transaction recorded in the prior year period, partially offset by lower shipping income.

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

Adjusted net income for the three months ended June 30, 2023 was $23.8 million, an increase of $9.8 million, or 70.2%, from the three months ended June 30, 2022, driven by growth in our insurance operations. For the three months ended June 30, 2023, adjusted return on average equity was 17.5%, as compared to 12.3% at June 30, 2022, driven by the increase in adjusted net income.

Adjusted net income for the six months ended June 30, 2023 was $41.1 million, an increase of $11.7 million, or 39.6%, from the six months ended June 30, 2022, driven by growth in our insurance operations. For the six months ended June 30, 2023, adjusted return on average equity was 15.2%, as compared to 12.7% at June 30, 2022, driven by the increase in adjusted net income.

Adjusted EBITDA - Non-GAAP

Adjusted EBITDA for the three months ended June 30, 2023 was $25.6 million, a decrease of $29.8 million from 2022, with a decrease driven by the one-time gain to Tiptree’s equity from the WP Transaction of $54.0 million recorded in the prior year period, partially offset by growth in our insurance business.

Adjusted EBITDA for the six months ended June 30, 2023 was $49.0 million, an increase of $8.5 million from 2022 driven by improved operating performance in our insurance business and realized and unrealized gains on investments (including impacts to AOCI) compared to losses in the prior year period, partially offset by the one-time gain to Tiptree’s equity from the WP Transaction of $54.0 million booked in the prior year period.

Book Value per share - Non-GAAP

Total stockholders’ equity was $546.1 million as of June 30, 2023 compared to $525.3 million as of June 30, 2022, with the increase driven by comprehensive income over the trailing four quarters, partially offset by net changes in non-controlling interests and preferred dividends paid at Fortegra. In the six months ended June 30, 2023, Tiptree returned $3.7 million to stockholders through dividends paid.

Book value per share for the period ended June 30, 2023 was $10.94, an increase from book value per share of $10.75 as of June 30, 2022 driven by the comprehensive income per share, partially offset by dividends paid of $0.18 per share, net changes in non-controlling interests and preferred dividends paid at Fortegra.

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 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Insurance	$	384,677	$	293,831	$	753,121	$	576,360
Mortgage	17,067		18,189		28,628		43,590
Tiptree Capital - other	2,774		27,823		4,394		44,796
Corporate	—		—		—		—
Total revenues	$	404,518	$	339,843	$	786,143	$	664,746

Income (loss) before taxes:
Insurance	$	30,417	$	9,071	$	49,862	$	23,753
Mortgage	1,312		24		(1,253)		4,290
Tiptree Capital - other	1,455		9,042		2,897		1,391
Corporate	(9,510)		(13,330)		(19,659)		(25,579)
Total income (loss) before taxes	$	23,674	$	4,807	$	31,847	$	3,855

Non-GAAP - Adjusted net income: (1)
Insurance	$	30,119	$	18,938	$	53,058	$	40,062
Mortgage	(209)		(1,183)		(1,062)		(2,739)
Tiptree Capital - other	219		5,088		1,632		7,616
Corporate	(6,325)		(8,857)		(12,540)		(15,501)
Total adjusted net income	$	23,804	$	13,986	$	41,088	$	29,438

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

Insurance

Our principal operating subsidiary, Fortegra, is a specialty insurance underwriter and service provider, which focuses on niche lines 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 June 30, 2023, Fortegra was owned approximately 79.5% by Tiptree, 17.5% by Warburg and 3.0% 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 six months ended June 30, 2023 and 2022.

Results of Operations - Three Months Ended June 30, 2023 compared to 2022


($ in thousands)	Three Months Ended June 30,
	2023			2022			Change		% Change
Revenues:
Earned premiums, net	$	269,795		$	215,941		$	53,854	24.9	%
Service and administrative fees	98,113			77,625			20,488		26.4	%
Ceding commissions	4,676			3,326			1,350		40.6	%
Net investment income	9,088			3,365			5,723		170.1	%
Net realized and unrealized gains (losses)	(4,379)			(10,126)			5,747		(56.8)	%
Other revenue	7,384			3,700			3,684		99.6	%
Total revenues	$	384,677		$	293,831		$	90,846	30.9	%
Expenses:
Net losses and loss adjustment expenses	115,027			$	82,953		$	32,074	38.7	%
Member benefit claims	32,707			21,712			10,995		50.6	%
Commission expense	142,699			127,453			15,246		12.0	%
Employee compensation and benefits	27,710			20,062			7,648		38.1	%
Interest expense	6,580			5,380			1,200		22.3	%
Depreciation and amortization	5,321			4,601			720		15.6	%
Other expenses	24,216			22,599			1,617		7.2	%
Total expenses	$	354,260		$	284,760		$	69,500	24.4	%
Income (loss) before taxes (1)	$	30,417		$	9,071		$	21,346	235.3	%





Key Performance Metrics:
Gross written premiums and premium equivalents	$	855,023		$	594,696		$	260,327	43.8	%
Return on average equity	23.1		%	7.0		%
Underwriting ratio	76.8		%	77.2		%
Expense ratio	13.7		%	13.7		%
Combined ratio	90.5		%	90.9		%

Non-GAAP Financial Measures (2):
Adjusted net income	$	30,119		$	18,938		$	11,181	59.0	%
Adjusted return on average equity	32.4		%	24.5		%

(1) Net income was $21.5 million for the three months ended June 30, 2023 compared to $5.4 million for the three months ended June 30, 2022.

(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 and certain other investments are carried at fair value with unrealized gains and losses included in this line.

Revenues - Three Months Ended June 30, 2023 compared to 2022

For the three months ended June 30, 2023, total revenues increased 30.9%, to $384.7 million, as compared to $293.8 million for the three months ended June 30, 2022. Earned premiums, net of $269.8 million increased $53.9 million, or 24.9%, driven by growth in specialty E&S and admitted insurance lines. Service and administrative fees of $98.1 million increased by 26.4% driven by growth in vehicle service contract revenues. Ceding commissions of $4.7 million increased by $1.4 million, or 40.6%, in line with growth in ceded premiums. Other revenues increased by $3.7 million, or 99.6%, driven by growth in premium finance product offerings and interest income on cash and cash equivalents.

For the three months ended June 30, 2023, 28.6% 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 June 30, 2023, 72.3% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

For the three months ended June 30, 2023, net investment income was $9.1 million as compared to $3.4 million in the prior year period, primarily driven by growth in investments and the increase in yields. Net realized and unrealized losses were $4.4 million, an improvement of $5.7 million, as compared to net realized and unrealized losses of $10.1 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments carried at fair value.

The combination of unearned premiums and deferred revenues on Fortegra’s balance sheet grew to $2.2 billion, representing an increase of $390.6 million, or 21.6%, from June 30, 2022 to June 30, 2023 as a result of growth in gross written premiums and premium equivalents, primarily related to E&S and admitted insurance lines as well as vehicle service contracts.

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. 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 June 30, 2023 compared to 2022

For the three months ended June 30, 2023, net losses and loss adjustment expenses were $115.0 million, member benefit claims were $32.7 million and commission expense was $142.7 million, as compared to $83.0 million, $21.7 million, and $127.5 million, respectively, for the three months ended June 30, 2022. The increase in net losses and loss adjustment expenses of $32.1 million, or 38.7%, 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. In addition, the Company experienced unfavorable prior year development of $2.1 million for the three months ended June 30, 2023, driven by higher-than-expected claim severity from business written by a small group of producers of our commercial lines of business. The increase in member benefit claims of $11.0 million, or 50.6%, was driven by growth in vehicle service contracts and the impacts of inflation on replacement costs and labor rates. Commission expense increased by $15.2 million, or 12.0%, generally in line with the growth in earned premiums, net and service and administrative fees.

For the three months ended June 30, 2023, employee compensation and benefits were $27.7 million and other expenses were $24.2 million, as compared to $20.1 million and $22.6 million, respectively, for the three months ended June 30, 2022. Employee compensation and benefits increased by $7.6 million, or 38.1%, driven by investments in human capital associated with growth in E&S, admitted and warranty lines. Other expenses increased by $1.6 million, or 7.2%, driven primarily by investment in data science, technology and marketing expenses.

For the three months ended June 30, 2023, interest expense was $6.6 million as compared to $5.4 million for the three months ended June 30, 2022. The increase in interest expense of $1.2 million, or 22.3%, was primarily driven by the rise in short-term interest rates and increased borrowings on Fortegra’s corporate revolver and asset based debt for premium finance lines.

For the three months ended June 30, 2023, depreciation and amortization expense was $5.3 million, including $3.9 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto, ITC and Premia, as compared to $4.6 million, including $4.1 million of intangible amortization from purchase accounting in 2022.

Results of Operations - Six Months Ended June 30, 2023 compared to 2022



($ in thousands)	Six Months Ended June 30,
	2023			2022			Change		% Change
Revenues:
Earned premiums, net	$	535,125		$	424,357		$	110,768	26.1	%
Service and administrative fees	190,145			149,460			40,685		27.2	%
Ceding commissions	8,321			5,863			2,458		41.9	%
Net investment income	14,197			6,532			7,665		117.3	%
Net realized and unrealized gains (losses)	(8,986)			(16,769)			7,783		NM%
Other revenue	14,319			6,917			7,402		107.0	%
Total revenues	$	753,121		$	576,360		$	176,761	30.7	%
Expenses:
Net losses and loss adjustment expenses	229,354			166,229			63,125		38.0	%
Member benefit claims	60,055			42,882			17,173		40.0	%
Commission expense	289,149			244,876			44,273		18.1	%
Employee compensation and benefits	52,323			42,088			10,235		24.3	%
Interest expense	12,661			10,139			2,522		24.9	%
Depreciation and amortization	10,132			8,955			1,177		13.1	%
Other expenses	49,585			37,438			12,147		32.4	%
Total expenses	$	703,259		$	552,607		$	150,652	27.3	%
Income (loss) before taxes (1)	$	49,862		$	23,753		$	26,109	109.9	%




Key Performance Metrics:
Gross written premiums and premium equivalents	$	1,605,352		$	1,195,551		$	409,801	34.3	%
Return on average equity	20.2		%	10.4		%
Underwriting ratio	77.8		%	77.4		%
Expense ratio	13.4		%	13.3		%
Combined ratio	91.2		%	90.7		%

Non-GAAP Financial Measures (2):
Adjusted net income	$	53,058		$	40,062		$	12,996	32.4	%
Adjusted return on average equity	29.6		%	25.5		%

(1) Net income was $36.2 million for the six months ended June 30, 2023 compared to $16.4 million for the six months ended June 30, 2022.

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

Revenues - Six Months Ended June 30, 2023 compared to 2022

For the six months ended June 30, 2023, total revenues increased 30.7%, to $753.1 million, as compared to $576.4 million for the six months ended June 30, 2022. Earned premiums, net of $535.1 million increased $110.8 million, or 26.1%, driven by growth in specialty E&S and admitted insurance lines. Service and administrative fees of $190.1 million increased by 27.2% driven by growth in vehicle service contract revenues. Ceding commissions of $8.3 million increased by $2.5 million, or 41.9%, in line with growth in ceded premiums. Other revenues increased by $7.4 million, or 107.0%, driven by growth in premium finance product offerings and interest income on cash and cash equivalents.

For the six months ended June 30, 2023, 28.3% 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 six months ended June 30, 2023, 74.6% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

For the six months ended June 30, 2023, net investment income was $14.2 million as compared to $6.5 million in the prior year period, primarily driven by growth in investments and the increase in yields. Net realized and unrealized losses were $9.0 million, an improvement of $7.8 million, as compared to net realized and unrealized losses of $16.8 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 - Six Months Ended June 30, 2023 compared to 2022

For the six months ended June 30, 2023, net losses and loss adjustment expenses were $229.4 million, member benefit claims were $60.1 million and commission expense was $289.1 million, as compared to $166.2 million, $42.9 million, and $244.9 million, respectively, for the six months ended June 30, 2022. The increase in net losses and loss adjustment expenses of $63.1 million, or 38.0%, 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. In addition, the Company experienced unfavorable prior year development of $2.5 million and $0.7 million for the six months ended June 30, 2023 and 2022, respectively, 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 $17.2 million, or 40.0%, was driven by growth in vehicle service contracts and the impacts of inflation on replacement costs and labor rates. Commission expense increased by $44.3 million, or 18.1%, generally in line with the growth in earned premiums, net and service and administrative fees.

For the six months ended June 30, 2023, employee compensation and benefits were $52.3 million and other expenses were $49.6 million, as compared to $42.1 million and $37.4 million, respectively, for the six months ended June 30, 2022. Employee compensation and benefits increased by $10.2 million, or 24.3%, driven by investments in human capital associated with growth in E&S, admitted and warranty lines. Other expenses increased by $12.1 million, or 32.4%, driven primarily by investment in data science, technology and marketing expenses, and professional fees associated with the acquisition of Premia.

For the six months ended June 30, 2023, interest expense was $12.7 million as compared to $10.1 million for the six months ended June 30, 2022. The increase in interest expense of $2.5 million, or 24.9%, was primarily driven by the rise in short-term interest rates and increased borrowings on Fortegra’s corporate revolver and asset based debt for premium finance lines.

For the six months ended June 30, 2023, depreciation and amortization expense was $10.1 million, including $7.8 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto, ITC and Premia, as compared to $9.0 million, including $8.0 million of intangible amortization from purchase accounting in 2022.

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 six months ended June 30, 2023 and 2022:


($ in thousands)	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
U.S. Insurance	577,124	376,370	1,080,098	783,390
U.S. Warranty Solutions	226,445	182,830	438,392	345,513
Europe	51,454	35,496	86,862	66,648
Total	855,023	594,696	1,605,352	1,195,551

Total gross written premiums and premium equivalents for the three months ended June 30, 2023 were $855.0 million, representing an increase of $260.3 million, or 43.8%. Total gross written premiums and premium equivalents for the six months ended June 30, 2023 were $1,605.4 million, representing an increase of $409.8 million, or 34.3%. The increases in both periods were 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 vehicle service contract sector.

For the three months ended June 30, 2023, U.S. Insurance increased by $200.8 million, or 53.3%, driven by growth in specialty E&S and admitted insurance lines. For the three months ended June 30, 2023, U.S. Warranty Solutions increased by

$43.6 million, or 23.9%, driven by growth in vehicle service contracts. Europe increased by $16.0 million, or 45.0%, driven by growth in auto warranty lines, including contributions from the acquisition of Premia in February 2023.

For the six months ended June 30, 2023, U.S. Insurance increased by $296.7 million, or 37.9%, driven by growth in specialty E&S and admitted insurance lines. For the six months ended June 30, 2023, U.S. Warranty Solutions increased by $92.9 million, or 26.9%, driven by growth in vehicle service contracts. Europe increased by $20.2 million, or 30.3%, driven by growth in auto warranty lines, including contributions from the acquisition of Premia in February 2023.

The growth in gross written premiums and premium equivalents, combined with higher retention in select products as of June 30, 2023, has resulted in an increase of $390.6 million, or 21.6%, in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to June 30, 2022. As of June 30, 2023, unearned premiums and deferred revenues were $2.2 billion, as compared to $1.8 billion as of June 30, 2022.

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 (excluding interest income on cash and cash equivalents). 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 (excluding interest income on cash and cash equivalents).

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

The combined ratio was 90.5% for the three months ended June 30, 2023, which consisted of an underwriting ratio of 76.8% and an expense ratio of 13.7%, as compared to 90.9%, 77.2% and 13.7%, respectively, for the three months ended June 30, 2022. The combined ratio for the quarter decreased by 0.4% as compared to the prior year period, driven by the decrease in the underwriting ratio. The combined ratio was 91.2% for the six months ended June 30, 2023, which consisted of an underwriting ratio of 77.8% and an expense ratio of 13.4%, as compared to 90.7%, 77.4% and 13.3%, respectively, for the six months ended June 30, 2022.

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 23.1% for the three months ended June 30, 2023, as compared to 7.0% for the prior year period. Return on average equity was 20.2% for the six months ended June 30, 2023, as compared to 10.4% for the six months ended June 30, 2022. The increase in net income and annualized return on average equity was driven by revenue growth and a consistent 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 six months ended June 30, 2023 and 2022.


	Three Months Ended June 30,
($ in thousands)	Underwriting and Fee Revenues (1)				Underwriting and Fee Margin (1)
	2023		2022			2023		2022
U.S. Insurance	$	273,369	$	218,457		$	58,015	$	40,686
U.S. Warranty Solutions	79,635		67,439			19,010		22,214
Europe	26,964		14,696			12,510		5,574
Total	$	379,968	$	300,592		$	89,535	$	68,474

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

Underwriting and fee revenues were $380.0 million for the three months ended June 30, 2023 as compared to $300.6 million for the three months ended June 30, 2022. Total underwriting and fee revenues increased $79.4 million, or 26.4%, driven by growth in all business lines. The increase in U.S. Insurance was $54.9 million, or 25.1%, driven by growth in specialty E&S and admitted insurance lines. The increase in U.S. Warranty Solutions was $12.2 million, or 18.1%, driven by growth in vehicle service contracts and premium finance offerings. Europe increased by $12.3 million, or 83.5%, driven by growth in auto warranty and the acquisition of Premia.

Underwriting and fee margin was $89.5 million for the three months ended June 30, 2023 as compared to $68.5 million for the three months ended June 30, 2022. Total underwriting and fee margin increased $21.1 million, or 30.8%, driven U.S. Insurance and Europe. U.S. Insurance grew by $17.3 million, or 42.6%, driven by revenue growth in admitted and E&S lines. U.S. Warranty Solutions decreased by $3.2 million, or 14.4%, driven by increased member benefit claims associated with the impacts of inflation on replacement costs and labor rates. Europe increased by 124.4%, driven by growth in vehicle service contracts.


	Six Months Ended June 30,
($ in thousands)	Underwriting and Fee Revenues (1)				Underwriting and Fee Margin (1)
	2023		2022			2023		2022
U.S. Insurance	$	547,606	$	429,445		$	107,000	$	80,565
U.S. Warranty Solutions	158,763		128,488			44,984		41,655
Europe	41,541		28,664			17,368		10,390
Total	$	747,910	$	586,597		$	169,352	$	132,610

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

Underwriting and fee revenues were $747.9 million for the six months ended June 30, 2023 as compared to $586.6 million for the six months ended June 30, 2022. Total underwriting and fee revenues increased $161.3 million, or 27.5%, driven by growth in all business lines. The increase in U.S. Insurance was $118.2 million, or 27.5%, driven by growth in specialty E&S and admitted insurance lines. The increase in U.S. Warranty Solutions was $30.3 million, or 23.6%, driven by growth in vehicle service contracts and premium finance offerings. Europe increased by $12.9 million, or 44.9%, driven by growth in vehicle service contracts and the acquisition of Premia.

Underwriting and fee margin was $169.4 million for the six months ended June 30, 2023 as compared to $132.6 million for the six months ended June 30, 2022. Total underwriting and fee margin increased $36.7 million, or 27.7%, driven by growth in all product lines. U.S. Insurance grew by $26.4 million, or 32.8%, driven by revenue growth in specialty E&S and admitted lines. U.S. Warranty Solutions increased by $3.3 million, or 8.0%, driven by growth in vehicle service contracts, partially offset by increased member benefit claims associated with the impacts of inflation on replacement costs and labor rates. Europe increased by 67.2%, driven by growth in vehicle 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 June 30, 2023, adjusted net income and adjusted return on average equity were $30.1 million and 32.4%, respectively, as compared to $18.9 million and 24.5%, respectively, for the three months ended June 30, 2022. For the six months ended June 30, 2023, adjusted net income and adjusted return on average equity were $53.1 million and 29.6%, respectively, as compared to $40.1 million and 25.5%, respectively, for the six months ended June 30, 2022. The improvement of adjusted net income was driven by the growth in underwriting and fee revenues and improved net investment income in both periods.

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 June 30, 2023, net investment income was $9.1 million as compared to $3.4 million in the prior year period, driven by growth in investments and increasing yields. Net realized and unrealized losses were $4.4 million, compared to losses of $10.1 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 June 30, 2023 were $3.6 million, driven by the increase in yields (yields and bonds prices are inversely related) and corresponding impact to the fair value of investments.

For the six months ended June 30, 2023, net investment income was $14.2 million as compared to $6.5 million in the prior year period, driven by growth in investments and increasing yields. Net realized and unrealized losses were $9.0 million, compared to losses of $16.8 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 gains on AFS securities impacting OCI for the six months ended June 30, 2023 were $5.9 million, driven by positive fair value adjustments on U.S. Treasury securities and other investments.

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 June 30, 2023, Tiptree Capital - Other includes our Invesque shares and other investments.

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 June 30, 2023.

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

Results of Operations


($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
Net realized and unrealized gains (losses)	$	12,141		$	13,450		$	19,248		$	33,864
Other revenue	4,926			4,739			9,380			9,726
Total revenues	$	17,067		$	18,189		$	28,628		$	43,590
Expenses:
Employee compensation and benefits	$	9,733		$	11,195		$	17,953		$	25,620
Interest expense	464			315			848			641
Depreciation and amortization	160			214			332			428
Other expenses	5,398			6,441			10,748			12,611
Total expenses	$	15,755		$	18,165		$	29,881		$	39,300
Income (loss) before taxes	$	1,312		$	24		$	(1,253)		$	4,290

Key Performance Metrics:
Origination volumes	$	227,895		$	306,752		$	430,730		$	661,165
Gain on sale margins	4.8		%	4.7		%	4.8		%	4.5		%
Return on average equity	7.6		%	0.3		%	(3.5)		%	11.3		%







Non-GAAP Financial Measures (1):
Adjusted net income (1)	$	(209)		$	(1,183)		$	(1,062)		$	(2,739)
Adjusted return on average equity (1)	(1.6)		%	(8.2)		%	(3.9)		%	(9.3)		%

(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 Six Months Ended June 30, 2023 compared to 2022

For the three months ended June 30, 2023, $227.9 million of loans were funded, compared to $306.8 million for 2022, a decrease of $78.9 million, or 25.7%, driven by the increase in mortgage interest rates compared to the prior year period. Gain on sale margins increased to 4.8% for the three months ended June 30, 2023, up approximately 10 basis points from 4.7% for the three months ended June 30, 2022. For the six months ended June 30, 2023, $430.7 million of loans were funded, compared to $661.2 million for 2022, a decrease of $230.4 million, or 34.9%, driven by increase in mortgage interest rates compared to the prior year period. Gain on sale margins increased to 4.8% for the six months ended June 30, 2023, up approximately 30 basis points from 4.5% for the six months ended June 30, 2022.

Net realized and unrealized gains for the three months ended June 30, 2023 were $12.1 million, compared to $13.5 million in the prior year period, a decrease of $1.3 million or 9.7%. The primary driver of decreased gain on sale revenues was the decline in volumes. Net realized and unrealized gains for the six months ended June 30, 2023 were $19.2 million, compared to $33.9 million in the prior year period, a decrease of $14.6 million or 43.2%. The primary driver of decreased gain on sale revenues was the decline in volumes and positive fair value adjustment in mortgage servicing rights of $0.1 million in 2023 compared to a positive fair value adjustment of $7.9 million in the prior year period.

Other revenue for the three months ended June 30, 2023 was $4.9 million, compared to $4.7 million in the prior year period, an increase of $0.2 million, or 3.9%. Other revenue for the six months ended June 30, 2023 was $9.4 million, compared to $9.7 million in the prior year period, a decrease of $0.3 million, or 3.6%. As of June 30, 2023, the mortgage servicing asset was $41.9 million, an increase from $41.4 million as of December 31, 2022.

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 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 Six Months Ended June 30, 2023 compared to 2022

For the three months ended June 30, 2023, employee compensation and benefits were $9.7 million, compared to $11.2 million in the prior year period, a decrease of $1.5 million or 13.1%. For the six months ended June 30, 2023, employee compensation and benefits were $18.0 million, compared to $25.6 million in the prior year period, a decrease of $7.7 million or 29.9%. The decrease for both periods was driven primarily by reduced commissions on lower origination volumes.

For the three months ended June 30, 2023, interest expense was at $0.5 million, an increase of $0.1 million, or 47.3%, and for the six months ended June 30, 2023, interest expense was at $0.8 million, an increase of $0.2 million, or 32.3%, with the increases in both periods driven by higher interest rates.

For the three months ended June 30, 2023, other expenses were $5.4 million, compared to $6.4 million in the prior year period, a decrease of $1.0 million and for the six months ended June 30, 2023, other expenses were $10.7 million, compared to $12.6 million in the prior year period, a decrease of $1.9 million, with the decreases driven by a reduction of mortgage operational expenses, including marketing costs.

Income (loss) before taxes

The income before taxes for the three months ended June 30, 2023 was $1.3 million, compared to income before taxes of $24.0 thousand in the prior year period. The loss before taxes for the six months ended June 30, 2023 was $1.3 million, compared to income before taxes of $4.3 million in the prior year period. The decrease was driven by a decline in volumes, partially offset by higher mortgage servicing fees attributable to the larger servicing portfolio.

Tiptree Capital - Other

The following tables present a summary of Tiptree Capital - Other results for the following periods:

Results of Operations


	Three Months Ended June 30,
($ in thousands)	Total revenue				Income (loss) before taxes
	2023		2022			2023		2022
Senior living (Invesque)	$	(140)	$	(2,668)		$	(140)	$	(2,668)
Maritime transportation (1)	351		18,764			(913)		13,760
Other (2)	2,563		11,727			2,508		(2,050)
Total	$	2,774	$	27,823		$	1,455	$	9,042

	Six Months Ended June 30,
($ in thousands)	Total revenue				Income (loss) before taxes
	2023		2022			2023		2022
Senior living (Invesque)	$	(1,545)	$	(11,519)		$	(1,545)	$	(11,519)
Maritime transportation(1)	711		27,626			(723)		16,413
Other (2)	5,228		28,689			5,165		(3,503)
Total	$	4,394	$	44,796		$	2,897	$	1,391

(1) Includes $1.3 million and $5.0 million of expenses related to our Maritime transportation operations for the three months ended June 30, 2023 and 2022, respectively, and $1.4 million and $11.2 million of expenses related to our Maritime transportation operations for the six months ended June 30, 2023 and 2022, respectively.

(2) Includes our formerly held for sale mortgage originator (Luxury) for the six months ended June 30, 2022, 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 (including 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 vessels and other ancillary assets.

Revenues for the three months ended June 30, 2023 were $2.8 million compared to $27.8 million for 2022 with the decline primarily driven by the deconsolidation of Luxury effective July 1, 2022, sale of five vessels, partially offset by investment gains on securities in the Company’s investment holdings and decreased investment losses on Invesque in 2023 compared to the prior year period. Revenues for the six months ended June 30, 2023 were $4.4 million compared to $44.8 million in the prior year period with the decline driven by the same factors that impacted the quarter.

Income (loss) before taxes

The income before taxes from Tiptree Capital - Other for the three months ended June 30, 2023 was $1.5 million, compared to the income before taxes of $9.0 million in the prior year period. The income before taxes from Tiptree Capital - Other for the six months ended June 30, 2023 was $2.9 million, compared to the income before taxes of $1.4 million in the prior year period. The decrease for both periods was driven by the same factors that impacted revenues.

Adjusted net income - Non-GAAP(1)


($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Senior living (Invesque)	$	—	$	—	$	—	$	—
Maritime transportation	(812)		4,992		(643)		7,472
Other	1,031		96		2,275		144
Total	$	219	$	5,088	$	1,632	$	7,616

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

Adjusted net income decreased to $0.2 million for the three months ended June 30, 2023 compared to $5.1 million in 2022 and decreased to $1.6 million for the six months ended June 30, 2023 compared to $7.6 million in 2022. The decrease was

driven from the sale of five vessels, partially offset by interest income on cash and cash equivalents and U.S. Treasury securities recorded in other income.

Corporate

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

Results of Operations


($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Employee compensation and benefits	$	2,489	$	1,576	$	4,444	$	3,944
Employee incentive compensation expense	4,350		4,374		10,184		9,037
Interest expense	—		1,981		—		4,224
Depreciation and amortization	353		201		604		399
Other expenses	2,318		5,198		4,427		7,975
Total expenses	$	9,510	$	13,330	$	19,659	$	25,579

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 $14.6 million for the six months ended June 30, 2023, compared to $13.0 million for the prior year period, driven by an increase in accrued bonus expense. Of the incentive compensation expense in the six months ended June 30, 2023 and 2022, $3.8 million was stock-based compensation expense. As of June 30, 2023, the Company had no outstanding borrowings at the holding company and therefore incurred no interest expense for the six months ended June 30, 2023 compared to $4.2 million in 2022. Other expenses of $4.4 million decreased by $3.5 million from the six months ended June 30, 2022, primarily driven by decreased consulting and professional fees.

Provision for Income Taxes

The total income tax expense of $11.8 million for the three months ended June 30, 2023 and an expense of $26.6 million for the three months ended June 30, 2022 is reflected as a component of net income (loss). For the three months ended June 30, 2023, the Company’s effective tax rate was equal to 50.0%. The effective rates for the three months ended June 30, 2023 and 2022 were significantly higher than the U.S. statutory income tax rate of 21.0%, primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra.

The total income tax expense of $16.8 million for the six months ended June 30, 2023 and an expense of $26.5 million for the six months ended June 30, 2022 is reflected as a component of net income (loss). For the six months ended June 30, 2023, the Company’s effective tax rate was equal to 52.9%. The effective rates for the six months ended June 30, 2023 and 2022 were significantly higher than the U.S. statutory income tax rate of 21.0%, primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra.

As of June 30, 2023, this deferred tax liability relating to Fortegra was $46.3 million, which was an increase of $6.4 million from the year ended December 31, 2022, of which $1.8 million expense was recorded in OCI, $1.2 million benefit was recorded directly in stockholders’ equity, and $5.8 million expense was recorded as a provision for income taxes. As of June 30, 2022, this deferred tax liability was $34.9 million, which was an increase of $34.9 million from the year ended December 31, 2021, of which $14.1 million was recorded directly in stockholders’ equity and $20.8 million was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rates for the six months ended June 30, 2023 and 2022 were 34.6% and 24.4%, respectively.

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 $4,634.4 million as of June 30, 2023, compared to $4,039.6 million as of December 31, 2022. The $594.9 million increase in assets is primarily attributable to the growth in the Insurance segment.

Total stockholders’ equity was $546.1 million as of June 30, 2023, compared to $533.6 million as of December 31, 2022, with the increase primarily driven by comprehensive income for the six months ended June 30, 2023. As of June 30, 2023, there were 36,742,295 shares of common stock outstanding as compared to 36,385,299 shares as of December 31, 2022, with the increase driven by the vesting of share-based incentive compensation and exercise of options.

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


	As of June 30, 2023
			Tiptree Capital
($ in thousands)	Insurance		Mortgage		Other		Corporate		Total
Total assets	4,313,600		$	169,357	$	151,141	$	351	$	4,634,449

Corporate debt	$	240,540	$	—	$	—	$	—	$	240,540
Asset based debt	68,038		60,982		—		—		129,020

Tiptree Inc. stockholders’ equity (1)	$	234,314	$	53,800	$	147,738	$	(33,960)	$	401,892
Non-controlling interests:
Fortegra preferred interests	77,679		—		—		—		77,679
Common interests	66,497		—		—		—		66,497
Total stockholders’ equity	$	378,490	$	53,800	$	147,738	$	(33,960)	$	546,068

(1) Included in Corporate equity is the deferred tax liability on the outside basis on Tiptree’s investment in Fortegra of $46.3 million as of June 30, 2023.

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)

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total revenues	$	384,677	$	293,831	$	753,121	$	576,360
Less: Net investment income	(9,088)		(3,365)		(14,197)		(6,532)
Less: Net realized and unrealized gains (losses)	4,379		10,126		8,986		16,769
Underwriting and fee revenues	$	379,968	$	300,592	$	747,910	$	586,597

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income (loss) before income taxes	$	30,417	$	9,071	$	49,862	$	23,753
Less: Net investment income	(9,088)		(3,365)		(14,197)		(6,532)
Less: Net realized and unrealized gains (losses)	4,379		10,126		8,986		16,769
Plus: Depreciation and amortization	5,321		4,601		10,132		8,955
Plus: Interest expense	6,580		5,380		12,661		10,139
Plus: Employee compensation and benefits	27,710		20,062		52,323		42,088
Plus: Other expenses	24,216		22,599		49,585		37,438
Underwriting and fee margin	$	89,535	$	68,474	$	169,352	$	132,610

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 June 30, 2023
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	30,417			1,312			1,455			(9,510)		$	23,674
Less: Income tax (benefit) expense	(8,928)			(306)			(497)			(2,093)		(11,824)
Less: Net realized and unrealized gains (losses)	4,379			(1,588)			(1,063)			—		1,728
Plus: Intangibles amortization (1)	3,895			—			—			—		3,895
Plus: Stock-based compensation expense	488			—			—			1,504		1,992
Plus: Non-recurring expenses	238			—			—			—		238
Plus: Non-cash fair value adjustments	(46)			—			—			—		(46)
Less: Tax on adjustments (2)	(324)			373			324			3,774		4,147
Adjusted net income	$	30,119		$	(209)		$	219		$	(6,325)	$	23,804

Adjusted net income	$	30,119		$	(209)		$	219		$	(6,325)	$	23,804
Average stockholders’ equity	$	371,843		$	53,297		$	150,672		$	(31,999)	$	543,813
Adjusted return on average equity	32.4		%	(1.6)		%	0.6		%	NM%		17.5		%



	Three Months Ended June 30, 2022
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	9,071		$	24		$	9,042		$	(13,330)	$	4,807
Less: Income tax (benefit) expense	(3,670)			12			(1,300)			(21,597)		(26,555)
Less: Net realized and unrealized gains (losses)	10,126			(1,580)			(4,450)			—		4,096
Plus: Intangibles amortization (1)	4,085			—			—			—		4,085
Plus: Stock-based compensation expense	24			—			23			10		57
Plus: Non-recurring expenses	1,449			—			(1,055)			2,108		2,502
Plus: Non-cash fair value adjustments	—			—			2,170			—		2,170
Less: Tax on adjustments (2)	(2,147)			361			658			23,952		22,824
Adjusted net income	$	18,938		$	(1,183)		$	5,088		$	(8,857)	$	13,986

Adjusted net income	$	18,938		$	(1,183)		$	5,088		$	(8,857)	$	13,986
Average stockholders’ equity	$	309,774		$	57,537		$	108,019		$	(21,082)	$	454,248
Adjusted return on average equity	24.5		%	(8.2)		%	18.8		%	NM%		12.3		%



	Six Months Ended June 30, 2023
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	49,862		$	(1,253)		$	2,897		$	(19,659)	$	31,847
Less: Income tax (benefit) expense	(13,675)			307			(760)			(2,718)		(16,846)
Less: Net realized and unrealized gains (losses)	8,986			(145)			(740)			—		8,101
Plus: Intangibles amortization (1)	7,789			—			—			—		7,789
Plus: Stock-based compensation expense	521			—			—			3,786		4,307
Plus: Non-recurring expenses	2,363			—			—			—		2,363
Plus: Non-cash fair value adjustments	(164)			—			—			—		(164)
Less: Tax on adjustments (2)	(2,624)			29			235			6,051		3,691
Adjusted net income	$	53,058		$	(1,062)		$	1,632		$	(12,540)	$	41,088

Adjusted net income	$	53,058		$	(1,062)		$	1,632		$	(12,540)	$	41,088
Average stockholders’ equity	$	358,600		$	54,272		$	111,285		$	15,665	$	539,822
Adjusted return on average equity	29.6		%	(3.9)		%	2.9		%	NM %		15.2		%



	Six Months Ended June 30, 2022
				Tiptree Capital
($ in thousands)	Insurance			Mortgage			Other			Corporate		Total
Income (loss) before taxes	$	23,753		$	4,290		$	1,391		$	(25,579)	$	3,855
Less: Income tax (benefit) expense	(7,334)			(966)			494			(18,663)		(26,469)
Less: Net realized and unrealized gains (losses)	16,769			(7,894)			4,401			—		13,276
Plus: Intangibles amortization (1)	8,031			—			—			—		8,031
Plus: Stock-based compensation expense	2,343			—			23			3,849		6,215
Plus: Non-recurring expenses	1,472			—			(922)			2,108		2,658
Plus: Non-cash fair value adjustments	—			—			3,684			—		3,684
Less: Tax on adjustments (2)	(4,972)			1,831			(1,455)			22,784		18,188
Adjusted net income	$	40,062		$	(2,739)		$	7,616		$	(15,501)	$	29,438

Adjusted net income	$	40,062		$	(2,739)		$	7,616		$	(15,501)	$	29,438
Average stockholders’ equity	$	314,592		$	58,981		$	112,190		$	(23,001)	$	462,762
Adjusted return on average equity	25.5		%	(9.3)		%	13.6		%	NM%		12.7		%

The footnotes below correspond to the tables above, under “—Adjusted Net Income - Non-GAAP” and “—Adjusted Return on Average Equity - Non-GAAP”.

(1) Specifically associated with acquisition purchase accounting. See Note (8) Goodwill and Intangible Assets, net.

(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 six months ended June 30, 2023, included in the adjustment is an add-back of $3.5 million and $5.8 million, respectively, related to deferred tax expense from the WP Transaction. For the three and six months ended June 30, 2022, included in the adjustment is an add-back of $25.5 million 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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss) attributable to common stockholders	$	5,989	$	(22,408)	$	4,927	$	(23,368)
Plus: net income (loss) attributable to non-controlling interests	5,861		660		10,074		754


Plus: Corporate debt related interest expense(1)	4,896		6,090		9,326		11,967
Plus: Provision (benefit) for income taxes	11,824		26,555		16,846		26,469
Plus: Depreciation and amortization	5,875		6,009		11,128		12,165
Plus: Non-cash fair value adjustments(2)	(87)		1,177		(224)		1,301
Plus: Non-recurring expenses(3)	238		2,502		2,363		2,658
Plus: Other comprehensive income (loss), pre-tax	(815)		(19,182)		11,579		(45,448)

Less: Third party non-controlling interests(4)	(8,159)		54,013		(17,035)		54,013
Adjusted EBITDA	$	25,622	$	55,416	$	48,984	$	40,511



(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. From insurance operations, changes in the fair value of the Fortegra Additional Warrant liability is added back.
(3)			Acquisition, start-up and disposition costs, including debt extinguishment, legal, taxes, banker fees and other costs.
(4)			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 June 30,
	2023		2022
Total stockholders’ equity	$	546,068	$	525,340
Less: Non-controlling interests	144,176		134,935
Total stockholders’ equity, net of non-controlling interests	$	401,892	$	390,405

Total common shares outstanding	36,742		36,305

Book value per share	$	10.94	$	10.75

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 June 30, 2023, cash and cash equivalents, excluding restricted cash, were $372.4 million, compared to $538.1 million at December 31, 2022, a decrease of $165.7 million, primarily driven by an increase in investments, including U.S. Treasury securities and obligations of U.S. government authorities and agencies and equity securities.

Our mortgage business relies on short term uncommitted sources of financing as a part of their normal course of operations. To date, we have been able to obtain and renew uncommitted warehouse credit facilities. If we were not able to obtain financing, then we may need to draw on other sources of liquidity to fund our mortgage business. See Note (10) Debt, net in the notes to condensed consolidated financial statements, for additional information regarding our mortgage warehouse borrowings.

We believe that cash flow from operations will provide sufficient capital to continue to grow the business and fund interest on the outstanding debt, capital expenditures and other general corporate needs over the next several years. As we continue to expand our business, including by any acquisitions we may make, we may, in the future, require additional working capital for increased costs.

For purposes of determining enterprise value and Adjusted EBITDA, we consider corporate credit agreements and preferred trust securities, which we refer to as corporate debt, as corporate financing and associated interest expense is added back. The below table outlines this amount by debt outstanding and interest expense at the insurance company and corporate level.

Corporate Debt


($ in thousands)	Corporate Debt Outstanding as of June 30,				Interest Expense for the three months ended June 30,			Interest Expense for the six months ended June 30,
	2023		2022			2023		2022		2023		2022
Insurance	$	240,540	$	160,000		$	4,896	$	3,906	$	9,326	$	7,352
Corporate	—		—			—		2,185		—		4,615
Total	$	240,540	$	160,000		$	4,896	$	6,091	$	9,326	$	11,967

The balance of the corporate credit facility was repaid during June 2022 as part of the WP Transaction. See Note (10) Debt, net in the notes to condensed consolidated financial statements for details for prior periods.

On October 21, 2022, Fortegra entered into a Second Amended and Restated Credit Agreement by and among Fortegra Financial, and its subsidiary, LOTS Intermediate Co., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s subsidiaries, as guarantors, and Fifth Third Bank, National Association, as the administrative agent and issuing lender (the “Fortegra Credit Agreement”). The Fortegra Credit Agreement provides for a $200 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. The increase in corporate debt as of June 30, 2023 was related to the $80.5 million drawn on Fortegra’s revolving credit facility which was used for the acquisition of Premia and general corporate purposes.

Consolidated Comparison of Cash Flows


($ in thousands)	Six Months Ended June 30,
Total cash provided by (used in):	2023		2022
Net cash (used in) provided by:
Operating activities	$	36,368	$	284,513
Investing activities	(272,593)		(23,611)
Financing activities	80,875		(101,671)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(155,350)	$	159,231

Operating Activities

Cash provided by operating activities was $36.4 million for the six months ended June 30, 2023. In 2023, the primary sources of cash from operating activities included growth in insurance premiums written resulting in increases in deferred revenues, unearned premiums, policy liabilities and unpaid claims, reinsurance payables and other liabilities and accrued expenses which were partially offset by increases in notes and accounts receivable and reinsurance receivables.

Cash provided by operating activities was $284.5 million for the six months ended June 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.

Investing Activities

Cash used in investing activities was $272.6 million for the six months ended June 30, 2023. In 2023, the primary uses of cash were the purchases of investments outpacing the proceeds from the sale of investments, as well as the acquisition of Premia.

Cash used in investing activities was $23.6 million for the six months ended June 30, 2022. In 2022, the primary uses of cash from investing activities were the issuance of notes receivable outpacing proceeds and the acquisition of ITC.

Financing Activities

Cash provided by financing activities was $80.9 million for the six months ended June 30, 2023. In 2023, the cash provided was primarily proceeds from corporate borrowings and mortgage warehouse facilities which exceeded repayments, partially offset by non-controlling interests distributions and the payment of dividends.

Cash provided by financing activities was $101.7 million for the six months ended June 30, 2022. In 2022, principal repayments on mortgage warehouse facilities exceeded proceeds from borrowings, which was partially offset by cash received from the WP Transaction and the exercise of warrants.

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, 2022.

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 condensed 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, 2022 described our Quantitative and Qualitative Disclosures About Market Risk. There were no material changes to the assumptions or risks during the six months ended June 30, 2023.

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 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 (20) Commitments and Contingencies in the Notes to the condensed consolidated financial statements in this report.

Item 1A. Risk Factors

For information regarding factors that could affect our Company, results of operations and financial condition, see the risk factors discussed under Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 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 six months ended June 30, 2023 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 ($ in thousands of Shares That May Yet Be Purchased Under the Plans or Programs(1)
April 1, 2023 to April 30, 2023	Tiptree Inc.	—	$	—	—
May 1, 2023 to May 31, 2023	Tiptree Inc.	—	$	—	—
June 1, 2023 to June 30, 2023	Tiptree Inc.	—	$	—	—
	Total	—	$	—	—	$	11,945

(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

The Company held its 2023 Annual Meeting of Stockholders on June 6, 2023 and with respect to proposal 4, say-on-pay frequency vote, the option of “three years” received the highest vote from our shareholders. Based on these results, and consistent with the recommendation of the Company’s board of directors (the “Board”), the Board has determined that the Company will hold an advisory vote on executive compensation every three years.

None of the Company’s directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended June 30, 2023.

Tiptree Inc. 2023 Deferred Compensation Plan

Effective August 1, 2023, the Board adopted the Tiptree Inc. 2023 Deferred Compensation Plan (the “DCP”). The DCP is intended to be an “unfunded” plan of deferred compensation payable out of the general assets of the Company and is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

The DCP allows our non-employee directors and a select group of senior management or highly compensated employees to defer receipt of certain of their cash and equity-based compensation. Under the DCP, eligible employees may make an irrevocable election to defer up to 100% of their annual base pay and up to 100% of the cash portion of their annual bonuses, non-employee directors may make a similar deferral election with respect to their annual cash retainer and committee fees, and eligible participants may elect to defer certain equity-based awards received under our long-term incentive plans, in each case in accordance with the terms and conditions of the plan.

Participants will be entitled to receive a distribution of vested benefits under the DCP based on the distribution option selected by the participant in his or her compensation deferral agreement, which may be either upon a specified date or upon the participant’s separation from service (including on account of retirement), and the DCP contains additional distribution provisions in the event of a participant’s death or disability or upon a change of control of the Company.

The Company may, at any time, in its sole discretion, terminate, amend or modify the DCP, in whole or in part, except that no such termination, amendment or modification shall, without the participant’s consent, have any adverse effect on a participant’s right to any amounts deemed to be accrued and vested and any plan termination will be undertaken in a manner consistent with Section 409A.

The foregoing description of the DCP is not intended to be complete and is qualified in its entirety by reference to the full text of this document, which is filed as E xhibit 10.1 to this Quarterly Report.

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 June 30, 2023 and December 31, 2022			F- 3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022			F- 4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022			F- 5
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the periods ended June 30, 2023 and 2022			F- 6
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022			F- 8
Notes to Condensed Consolidated Financial Statements			F- 10

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:

August 2, 2023

By:/s/ Michael Barnes

Michael Barnes

Executive Chairman

Date:

August 2, 2023

By:/s/ Jonathan Ilany

Jonathan Ilany

Chief Executive Officer

Date:

August 2, 2023

By:/s/ Scott McKinney

Scott McKinney

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

EXHIBIT INDEX


Exhibit No.			Description
10.1			Tiptree Inc. 2023 Deferred Compensation Plan.**
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 June 30, 2023 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 June 30, 2023 and December 31, 2022, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2023 and 2022, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022, (v) the Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2023 and 2022 and (vi) the Notes to the Condensed Consolidated Financial Statements.

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