TIPTREE INC. 2023
Annual percentage change in share price of Tiptree Inc. vs. equity indices as of 12/31/23*:
1 Year | Tiptree | Russell 2000 | S&P 500 |
38.4% | |||
58.5% | 16.9% | 26.3% | |
3 Year | 29.8% | 2.2% | 10.0% |
5 Year | 11.1% | 10.0% | 15.7% |
10 Year | 10.6% | 7.2% | 12.0% |
From Inception (June 2007) | 7.1% | 9.4% | |
*Including dividends | |||
To Our Fellow Shareholders: |
2023 was a year of strong performance for Tiptree. Our businesses continued to build upon their history of growth and profitability, producing an 18% increase in revenues to $1.6 billion for the year, and an adjusted return on equity of 15.2%. Tiptree's share price appreciation and dividends produced a total return of 38.4% for the year, compared to 16.9% for the Russell 2000 and 26.3% for the S&P 500. We are proud of our 2023 results, yet we keep a greater focus on long-term performance, and like to compare our results to other investment strategies. With this in mind, Tiptree's performance over three, five, and ten years (and since inception) are worth noting in the chart above. We are also pleased to have increased our quarterly dividend by 20% to $0.06 per share, payable to shareholders of record as of March 11, 2024.
The Fortegra Group, our specialty insurance business under the leadership of CEO Rick Kahlbaugh, achieved record results for the year, with premium and premium equivalent growth of 21%, and an adjusted return on equity of 29%. Although the recent market environment was unconducive for a public offering, we firmly believe Fortegra is strategically positioned to maintain a trajectory of consistent top- line growth and sustained underwriting profitability over the long-term.
Tiptree Capital, our subsidiary through which we invest opportunistically in a broad range of assets and businesses, finished the year with a book value of $178 million consisting primarily of 1) cash, 2) our mortgage origination and servicing business, Reliance First Capital, and 3) a liquid investment portfolio. At Reliance, led by CEO Hugh Miller, origination volumes remained muted given the interest rate environment, although the income and sustained market value of our retained servicing book allowed the business to remain stable for the year; this performance contrasts significantly with the havoc taking place in the mortgage industry writ large. Given Reliance's proven nimbleness, we maintain a positive outlook for the business. We see greater potential for future profit as mortgage rates stabilize, in addition to the increased potential of finding bolt-on acquisitions.
We are always looking for new investment opportunities, with the objective of generating attractive "all- weather", absolute returns. Having no set holding period and no risk of redemption of our capital gives us a distinct advantage, as we are able to take a long-term view on our outlook for returns.
1
Looking ahead, we see significant opportunities to expand our businesses and remain confident in the long-term outlook for the company. 2023 was a year of strong performance, with our businesses continuing their history of growth and profitability. Once again, we credit these results to the experience and expertise of Tiptree's team of professionals and those of our related companies. We begin 2024 well positioned financially, and we could not be more excited about Tiptree's future.
We welcome any and all questions from our shareholders and look forward to speaking with you.
With best regards, | Jonathan Ilany |
Michael Barnes | |
Executive Chairman | Chief Executive Officer |
2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
- Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2023
OR
- Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 001-33549
Tiptree Inc.
(Exact name of Registrant as Specified in Its Charter)
Maryland | 38-3754322 | ||
(State or Other Jurisdiction of Incorporation) | (I.R.S. 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 |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 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.
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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 762(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).¨
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 June 30, 2023, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the registrant was approximately $368,186,354, based upon the closing sales price of $15.01 per share as reported on the Nasdaq Capital Market. For purposes of this calculation, all of the registrant's directors and executive officers were deemed to be affiliates of the registrant.
As of February 20, 2024, there were 36,761,206 shares, par value $0.001, of the registrant's common stock outstanding.
Documents Incorporated by Reference
Certain information in the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission relating to the registrant's 2024 Annual Meeting of Stockholders is incorporated by reference into Part III.
TIPTREE INC. | |||
Annual Report on Form 10-K | |||
December 31, 2023 | |||
Table of Contents | |||
ITEM | Page Number | ||
PART I | |||
Item 1. Business | 10 | ||
Item 1A. Risk Factors | 26 | ||
Item 1B. Unresolved Staff Comments | 53 | ||
Item 1C. Cybersecurity | 53 | ||
Item 2. Properties | 53 | ||
Item 3. Legal Proceedings | 53 | ||
Item 4. Mine Safety Disclosures | 53 | ||
PART II | 53 | ||
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 54 | ||
Item 6. Reserved. | 54 | ||
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 55 | ||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 81 | ||
Item 8. Financial Statements and Supplementary Data | F- 1 | ||
Report of Independent Registered Public Accounting Firm | F- 2 | ||
Consolidated Balance Sheets for December 31, 2023 and 2022 | F- 5 | ||
Consolidated Statements of Operations for the three years ended December 31, 2023, 2022, and 2021 | F- 6 | ||
Consolidated Statements of Comprehensive Income (Loss) for the three years ended December 31, 2023, 2022, and 2021 | F- 7 | ||
Consolidated Statement of Changes in Stockholders' Equity for the three years ended December 31, 2023, 2022, and 2021 | F- 8 | ||
Consolidated Statements of Cash Flows for the three years ended December 31, 2023, 2022, and 2021 | F- 10 | ||
Notes to Consolidated Financial Statements | F- 12 | ||
(1) Organization | F- 12 | ||
(2) Summary of Significant Accounting Policies | F- 12 | ||
(3) Acquisitions | F- 23 | ||
(4) Dispositions and Assets and Liabilities Held for Sale | F- 24 | ||
(5) Operating Segment Data | F- 24 | ||
(6) Investments | F- 26 | ||
(7) Notes and Accounts Receivable, net | F- 32 | ||
(8) Reinsurance Receivables | F- 32 | ||
(9) Goodwill and Intangible Assets, net | F- 35 | ||
(10) | Derivative Financial Instruments and Hedging | F- 36 | |
(11) | Debt, net | F- 38 | |
(12) | Fair Value of Financial Instruments | F- 40 | |
(13) | Liability for Unpaid Claims and Claim Adjustment Expenses | F- 47 | |
(14) | Revenue from Contracts with Customers | F- 50 | |
(15) | Other Assets and Other Liabilities and Accrued Expenses | F- 51 | |
(16) | Other Revenue and Other Expenses | F- 52 | |
(17) Stockholders' Equity | F- 53 | ||
(18) | Accumulated Other Comprehensive Income (Loss) | F- 56 | |
(19) | Stock Based Compensation | F- 56 | |
(20) | Income Taxes | F- 60 | |
(21) | Commitments and Contingencies | F- 63 | |
(22) | Earnings Per Share | F- 65 | |
(23) | Related Party Transactions | F- 65 | |
(24) | Subsequent Events | F- 66 | |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 67 | ||
Item 9A. Controls and Procedures | 67 | ||
Item 9B. Other Information | 68 | ||
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. | 57 | ||
PART III | 68 | ||
Item 10. Directors, Executive Officers and Corporate Governance | 68 | ||
Item 11. Executive Compensation | 68 |
3
TIPTREE INC.
Annual Report on Form 10-K
December 31, 2023
Table of Contents
ITEM | Page Number | ||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 68 | ||
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 68 | |
Item 14. | Principal Accountant Fees and Services | 68 | |
PART IV | 69 | ||
Item 15. | Exhibits, Financial Statement Schedules | 69 | |
Item 16. Form 10-K Summary | 71 | ||
Signatures | 72 |
4
PART I
Forward-Looking Statements
Except for the historical information included and incorporated by reference in this Annual Report on Form 10-K, 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" and elsewhere in this Annual Report on Form 10-K 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
This Annual Report on Form 10-K includes certain market and industry data and statistics, which are based on publicly available information, industry publications and surveys, reports by market research firms and our own estimates based on our management's knowledge of, and experience in, the insurance industry and market segments in which we compete. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. In addition, certain information contained in this Form 10-K, including information relating to the proportion of new opportunities we pursue, represents management estimates. While we believe our internal estimates to be reasonable, they have not been verified by any independent sources. Such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements and Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
5
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Item 1A. Risk Factors herein. These risks include, but are not limited to, the following:
- A portion of our assets are illiquid or have limited liquidity, which may limit our ability to sell those assets at favorable prices or at all and creates uncertainty in connection with valuing such assets.
- Our investment in Invesque shares is subject to market volatility.
- We operate in highly competitive markets for business opportunities and personnel, which could impede our growth and negatively impact our results of operations.
- The amount of statutory capital and reserve requirements applicable to our insurance subsidiaries can increase due to factors outside of our control.
- Our insurance subsidiaries' actual claims losses may exceed their reserves for claims, which may require them to establish additional reserves.
- Performance of our insurance subsidiaries' investment portfolio is subject to a variety of investment risks.
- Our insurance subsidiaries could be forced to sell investments to meet their liquidity requirements.
- We may need to raise additional capital in the future or may need to refinance existing indebtedness, but there is no assurance that such capital will be available on a timely basis, on acceptable terms or at all.
- Cybersecurity attacks or information system failures could disrupt our businesses, including our insurance businesses.
- Third-partyvendors our insurance subsidiaries rely upon to provide certain business and administrative services on their behalf may not perform as anticipated. These include independent financial institutions, lenders, distribution partners, agents, brokers and retailers for distribution of its products and services, and the loss of these distribution sources, or their failure to sell our insurance business's products and services could be adverse.
- A downgrade in our insurance subsidiaries' claims paying ability or financial strength ratings could increase policy surrenders and withdrawals, adversely affecting relationships with distributors and reducing new policy sales.
- If market conditions cause reinsurance to be more costly or unavailable, our insurance subsidiaries may be required to bear increased risks or reduce the level of their underwriting commitments.
- Our insurance subsidiaries may incur losses if reinsurers are unwilling or unable to meet their obligations under reinsurance contracts.
- New lines of business, new products and services or new geographic markets may subject our insurance subsidiaries to additional risks.
- The effects of emerging claim and coverage issues on our insurance subsidiaries' business are uncertain.
- Our insurance subsidiaries' international operations expose them to investment, political and economic risks, including foreign currency and credit risk.
- Our insurance subsidiaries' continued growth depends partly on the continued growth of their business's customer base.
- Our results of operations have in the past varied quarterly and may not be indicative of our long-term prospects.
- Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity, could result in the sale of fewer policies than expected or an increase in the frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our insurance subsidiaries' growth and profitability.
- Our business's risk management policies and procedures may prove to be ineffective and leave them exposed to unidentified or unanticipated risk.
- Our insurance subsidiaries may not be able to generate sufficient cash to service all of their indebtedness and may be forced to take other actions to satisfy their obligations under their indebtedness, which may not be successful.
- Restrictive covenants in the agreements governing our insurance subsidiaries' indebtedness may restrict their ability to pursue their business strategies.
- Retentions in various lines of business and catastrophic events expose our insurance subsidiaries to potential losses.
- The exit of the United Kingdom from the European Union could adversely affect our insurance subsidiaries' business.
- Due to the structure of some of our insurance business's commissions, it is exposed to risks related to the creditworthiness of some of its independent agents and program partners.
- Our insurance subsidiaries may act based on inaccurate or incomplete information regarding the accounts they underwrite.
6
- The insurance industry is cyclical in nature, competition is intense and our insurance business may lose clients or business as a result of consolidation within the financial services industry or otherwise.
- Any failure to establish, maintain, protect or enforce our insurance subsidiaries' intellectual property rights could impair their intellectual property, technology platform and brand. In addition, they may be sued for alleged infringement, misappropriation or other violation of their proprietary rights.
- Our businesses employ third-party licensed software, and the inability to maintain these licenses, errors in the software they license or the terms of open source licenses could result in increased costs or reduced service levels, which would adversely affect their business.
- Some of our investments are made jointly with other persons or entities, which may limit our flexibility with respect to such jointly owned investments.
- Our mortgage business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our mortgage business.
- Our mortgage business is highly dependent upon programs administered by GSEs to generate revenues through mortgage loan sales to institutional investors. Any changes in existing U.S. government-sponsored mortgage programs could materially and adversely affect our mortgage business, financial condition and results of operations.
- We may be unable to obtain sufficient capital to meet the financing requirements of our mortgage business.
- In our mortgage business, we may sustain losses and/or be required to indemnify or repurchase loans we originated, or will originate, if, among other things, our loans fail to meet certain criteria or characteristics.
- We may be limited in the future in utilizing net operating losses incurred during prior periods to offset taxable income.
- We may leverage certain of our assets and a decline in the fair value of such assets may adversely affect our financial condition and results of operations.
- Certain of our and our subsidiaries' assets are subject to credit risk, market risk, interest rate risk, credit spread risk, call and redemption risk and refinancing risk, and any one of these risks may materially and adversely affect the value of our assets, our results of operations and our financial condition.
- Our risk mitigation or hedging strategies could result in our experiencing significant losses.
- The values we record for certain investments and liabilities are based on estimates of fair value made by our management, which may cause our operating results to fluctuate and may not be indicative of the value we can realize on a sale.
- The accounting rules applicable to certain of our transactions are highly complex and require the application of significant judgment and assumptions by our management. In addition, changes in accounting interpretations or assumptions could impact our financial statements.
- Because we are a holding company, our ability to meet our obligations and pay dividends to stockholders will depend on distributions from our subsidiaries that may be subject to restrictions and income from assets.
- Some provisions of our charter may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests.
- Maryland takeover statutes may prevent a change of our control, which could depress our stock price.
- Our holding company structure with multiple lines of business, may adversely impact the market price of our common stock and our ability to raise equity and debt capital.
- Maintenance of our 1940 Act exemption imposes limits on our operations.
- Increasing regulatory focus on privacy issues and expanding laws could affect our various subsidiaries' business models and expose them to increased liability.
- Our insurance subsidiaries could be adversely affected if their controls to ensure compliance with guidelines, policies and legal and regulatory standards are not effective.
- Our businesses are subject to risks related to litigation and regulatory actions, including increased compliance costs.
- Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the United States, the EU and other jurisdictions.
- We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions.
- Assessments and premium surcharges for state guaranty funds, secondary-injury funds, residual market programs and other mandatory pooling arrangements may reduce our insurance subsidiaries' profitability.
- Operation of dry bulk vessels and product tankers is subject to complex laws and regulations, including environmental laws and regulations that, if any of our vessel owner subsidiaries are found guilty of violation, can result in substantial fines and costs to the Company.
7
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Tiptree Inc. published this content on 19 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 April 2024 21:51:10 UTC.
