TIPTREE INC. – 10-Q – 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
•Off-Balance Sheet Arrangements

OVERVIEW

Tiptree is a holding company that allocates capital across a broad spectrum of
businesses, assets and other investments. Our largest operating subsidiary,
Fortegra, along with its subsidiaries, is a leading provider of specialty
insurance underwriting, warranty and service contract products, and related
service solutions. 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 shareholders' 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.

Highlights for the first nine months of 2021 include:

Overall:

•Net income of $38.6 million increased from a net loss of $43.4 million in 2020,
which was driven by growth in insurance, mortgage and shipping operations, in
addition to realized and unrealized gains on investments as compared to losses
in 2020.
•Adjusted net income increased 33.4% to $47.0 million, from $35.2 million in
2020, driven by improvement in insurance, mortgage and shipping operations.
Adjusted return on average equity was 16.2%, as compared to 12.2% in 2020.
•On October 12, 2021, Tiptree announced a $200 million strategic investment in
its insurance subsidiary, Fortegra, by Warburg Pincus, a leading global growth
investor. The investment will give Warburg Pincus an approximate 24% ownership
in Fortegra on an as converted basis and is expected to close in the first
quarter 2022, subject to regulatory approvals.

Insurance:

•Gross written premiums and premium equivalents were $1,689.6 million for the
nine months ended September 30, 2021, as compared to $1,176.0 million for the
nine months ended September 30, 2020, up 43.7% as a result of growth in admitted
and surplus insurance lines as well as growth in fee-based warranty programs.
•Total revenues increased 49.6% to $721.5 million, from $482.3 million in 2020,
driven by increases in earned premiums, net, service and administrative fees,
and net realized and unrealized gains as compared to losses in the prior year
period.
•The combined ratio improved to 91.0%, as compared to 92.1% in 2020, driven by
the continued scalability of Fortegra's technology and shared service platform,
which improved the expense ratio, while the underwriting ratio remained stable.
•Income before taxes of $49.6 million increased by $49.2 million as compared to
$0.4 million in 2020. Return on average equity was 17.3% in 2021 as compared to
1.5% in 2020. The increase in both metrics was driven by revenue growth and an
improved combined ratio, in addition to net realized and unrealized gains on
investments as compared to losses in the prior year.
•Adjusted net income increased 55.5% to $46.4 million, as compared to $29.8
million in 2020. Adjusted return on average equity was 20.9%, as compared to
14.2% in 2020. The increase in both metrics was driven by revenue growth and the
improved combined ratio.
•As of September 30, 2021, total investments combined with cash and cash
equivalents were $832.1 million, as compared to $651.2 million as of
September 30, 2020. As of September 30, 2021, 82% of the portfolio was invested
in high-credit quality fixed income securities with an average S&P rating of AA
and a weighted average duration of 2.8 years.

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Tiptree Capital:
•Mortgage income before taxes was $25.1 million in 2021, as compared to $20.8
million in 2020, with the increase driven by higher servicing fees and positive
fair value adjustments on the mortgage servicing portfolio. Return on average
equity was 44.4% in the 2021 period.
•Maritime transportation income before taxes was $7.7 million in 2021, as
compared to $1.0 million in 2020, with the increase driven by a rise in dry-bulk
charter rates.

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,
2020. 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, changing regulatory
requirements and slowing business conditions can have a material adverse effect
on our results of operations or financial condition.

Fortegra generally offers products which have low severity but high frequency
loss experiences and are short duration. As a result, the business has
historically generated significant fee-based revenues. In general, the types of
products Fortegra offers tend to have limited aggregation risk and, thus,
limited exposure to catastrophic and residual risk. Underwriting risk is
mitigated through a combination of reinsurance and retrospective commission
structures with agents, distribution partners and/or third-party reinsurers. To
mitigate counterparty risk, Fortegra ensures its distribution partners' captive
reinsurance entities are over-collateralized with highly liquid investments,
primarily cash and cash equivalents. Insurance results primarily depend on
pricing, underwriting, risk retention and the accuracy of reserves, reinsurance
arrangements, returns on invested assets, and policy and contract renewals and
run-off. While Fortegra's insurance operations have historically maintained a
relatively stable combined ratio which support steady earnings, initiatives to
change the business mix along with economic factors could generate different
results than the business has historically experienced. We believe there will
continue to be growth opportunities to expand Fortegra's specialty insurance and
warranty business model to other niche products and markets.

Fortegra's investment portfolio primarily serves as a source to pay claims and
secondarily as a source of income for operations. Investments include fixed
maturity securities, loans, credit investment funds, and equity securities. Many
investments are held at fair value. Changes in fair value for loans, credit
investment funds, and equity securities are reported quarterly as unrealized
gains or losses in revenues and can be impacted by changes in interest rates,
credit risk, or market risk, including specific company or industry factors. 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.

Our businesses can also be impacted in various ways by changes in interest
rates, which can result in fluctuations in the fair value of investments,
revenues associated with floating rate investments, volume and revenues in
mortgage operations and interest expense associated with floating rate debt used
to fund operations. Rising interest rates could impact the value of certain
fixed income securities, with any unrealized losses recorded in equity, and if
realized, could impact our results of operations. Offsetting the impact of a
rising interest rate environment, new investments in fixed rate instruments from
both maturities and portfolio growth can result in higher interest income on
investments over time. In declining interest rate environments, the opposite
impacts could occur. In addition, certain investments are LIBOR based, which has
resulted in lower investment income during the recent period of extended low
rates. Rising interest rates can also impact the cost of LIBOR based 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.

Authorities that regulate LIBOR have announced plans to phase out LIBOR by the
end of 2021, such that LIBOR may cease to exist as a benchmark for floating
interest rates. The Federal Reserve Board and the Federal Reserve Bank of New
York organized the Alternative Reference Rates Committee, which identified the
Secured Overnight Financing Rate (SOFR) as its preferred alternative rate for
USD-LIBOR. We are not able to predict when LIBOR will cease to be available or
when there will be sufficient liquidity in the SOFR markets as a replacement
reference rate. Such uncertainty may result in a sudden or prolonged increase or
decrease in reported LIBOR and/or its replacement rate. To address the phase out
of LIBOR, the agreements for substantially all of our debt facilities include a
mechanism to replace LIBOR with an alternative reference rate under specified
circumstances, whether that replacement is SOFR or another benchmark. If future
rates based upon the
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successor reference rate are higher than LIBOR rates as currently determined due
to illiquidity or other factors, our interest expense could increase.

Low mortgage rates due to the Federal Reserve intervention in mortgage markets
and rising home prices in certain markets, has resulted in a combination of
higher mortgage volumes and margins beginning in the second quarter of 2020 and
continuing into the first nine months of 2021, which has been a benefit to
mortgage operations. The recent low interest rate environment also benefits
interest cost on debt, although corporate debt remains above current LIBOR
rates. There can be no assurance that these positive trends will continue, the
reversal of which could have a materially negative impact on our results of
operations, and which may only be partially mitigated by the benefit to LIBOR
based investments.

Common shares of Invesque represent a significant asset on our condensed
consolidated balance sheet, both as part of insurance investments and separately
in Tiptree Capital. Our investment in Invesque, which operates in the seniors
housing, skilled nursing and medical office industries, is carried on our
condensed consolidated balance sheet at fair value. In April 2020, in response
to the uncertainty in the industry, Invesque suspended its dividend to conserve
liquidity. In combination with the impact of the COVID-19 pandemic on occupancy
rates, Invesque's stock declined significantly, which had a material impact on
the carrying value of the investment and results of operations. While their
stock price and the value of the investment increased in the first nine months
of 2021, any additional declines in the fair value of Invesque's common stock
could have a significant impact on our results of operations and the value of
the investment.

The maritime transportation industry is highly competitive and fragmented.
Demand for shipping capacity is a function of global economic conditions and the
related demand for commodities, production and consumption patterns, and is
affected by events which interrupt production, trade routes, and consumption.
The shipping industry is cyclical with high volatility in charter hire rates and
profitability, which can change rapidly. General global economic conditions,
along with company and industry specific factors, are expected to continue to
impact the fair value of our vessels and associated operating results. While
there is a current imbalance in supply and demand for shipping capacity, which
has led to a cyclical high in dry-bulk charter rates, a change in those factors
and/or changes in global economic conditions could result in substantially lower
charter rates, which could negatively impact our results of operations and the
carrying value of our vessels.


RESULTS OF OPERATIONS
The following is a summary of our condensed consolidated financial results for
the three and nine months ended September 30, 2021 and 2020. 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                  Three Months Ended                     Nine Months Ended
information)                                          September 30,                         September 30,
GAAP:                                            2021               2020               2021               2020
Total revenues                               $ 286,605          $ 224,041          $ 880,980          $ 552,906
Net income (loss) attributable to common
stockholders                                 $   2,008          $  12,763          $  38,558          $ (43,428)
Diluted earnings per share                   $    0.06          $    0.35          $    1.11          $   (1.27)
Cash dividends paid per common share         $    0.04          $    0.04          $    0.12          $    0.12
Return on average equity                           3.3  %            16.6  %            14.8  %           (14.3) %


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($ in thousands, except per share                 Three Months Ended                   Nine Months Ended
information)                                         September 30,                       September 30,
GAAP:                                           2021              2020              2021               2020
Non-GAAP: (1)
Adjusted net income                          $ 20,730          $ 17,807          $ 47,010          $  35,240
Adjusted return on average equity                20.5  %           20.1  %           16.2  %            12.2  %

Adjusted EBITDA                              $ 12,356          $ 20,317          $ 84,594          $ (32,789)
Book value per share                         $  11.37          $  10.36          $  11.37          $   10.36

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

Revenues

For the three months ended September 30, 2021, revenues were $286.6 million,
which increased $62.6 million or 27.9% compared to the prior year period,
primarily driven by growth in earned premiums, net, and service and
administrative fees in the insurance business, partially offset by increased net
realized and unrealized losses on Invesque and other investments in the 2021
period compared to the 2020 period.

For the nine months ended September 30, 2021, revenues were $881.0 million,
which increased $328.1 million, or 59.3% compared to the prior year period,
primarily driven by growth in earned premiums, net, and service and
administrative fees in the insurance business, increased revenues from our
mortgage servicing portfolio, and net realized and unrealized gains on Invesque
and other investments in the 2021 period compared to losses in the 2020 period.

The combination of unearned premiums and deferred revenues on the condensed
consolidated balance sheet grew to $1,564.4 million, representing an increase of
$413.1 million, or 35.9%, from September 30, 2020 to September 30, 2021 as a
result of Fortegra's growth in gross written premiums and premium equivalents,
primarily related to admitted and excess and surplus (E&S) insurance lines as
well as warranty service contracts.

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 relating 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.
                                                   Three Months Ended                     Nine Months Ended
($ in thousands)                                      September 30,                         September 30,
                                                 2021               2020               2021               2020
Net realized and unrealized gains
(losses)(1)                                  $   (4,267)         $  2,310          $   9,345          $ (16,270)
Net realized and unrealized gains (losses) -
Invesque                                     $  (12,566)         $ (9,170)  

$ 4,246 $ (79,774)

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

Net Income (Loss) Attributable to common stockholders

For the three months ended September 30, 2021, net income attributable to common
stockholders was $2.0 million, a decrease of $10.8 million, driven by increased
net realized and unrealized losses in the current period, partially offset by
improvement in insurance and shipping revenues. For the nine months ended
September 30, 2021, net income attributable to common stockholders was $38.6
million, an increase of $82.0 million from a net loss of $43.4 million for the
nine months ended September 30, 2020, primarily driven by net realized and
unrealized gains on Invesque and other investments in the 2021 period compared
to losses in the 2020 period, in addition to growth in Fortegra's underwriting
and fee operations, increased revenues from our mortgage servicing portfolio and
improvement in dry-bulk shipping rates.

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

Adjusted net income for the three months ended September 30, 2021 was $20.7
million, an increase of $2.9 million, or 16.4%, from the three months ended
September 30, 2020. For the three months ended September 30, 2021, adjusted
return on average equity was 20.5%, as compared to 20.1% at September 30, 2020,
with the increase in both metrics driven by improved performance in our
insurance and shipping operations.

Adjusted net income for the nine months ended September 30, 2021 was $47.0
million, an increase of $11.8 million, or 33.4%, from the nine months ended
September 30, 2020. For the nine months ended September 30, 2021, adjusted
return on

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average equity was 16.2%, as compared to 12.2% at September 30, 2020, with the
increase in both metrics driven by improved performance in our insurance,
mortgage and shipping operations.

Adjusted EBITDA - Non-GAAP

Adjusted EBITDA for the three months ended September 30, 2021 was $12.4 million,
a decrease of $8.0 million from 2020, driven by net realized and unrealized
losses on Invesque and other investments. Adjusted EBITDA for the nine months
ended September 30, 2021 was $84.6 million, an increase of $117.4 million from
2020, driven by realized and unrealized gains in the 2021 period compared to
losses in the 2020 period, in addition to the improved operating performance
noted above.

Book Value per share - Non-GAAP

Total stockholders' equity was $402.1 million as of September 30, 2021 compared
to $373.5 million as of December 31, 2020. In the nine months ended September
30, 2021, Tiptree returned $6.8 million to stockholders through share
repurchases and dividends paid. Book value per share for the period ended
September 30, 2021 was $11.37, an increase from book value per share of $10.36
as of September 30, 2020. The key drivers of the increase over the past four
quarters were net income per share and the purchase of 1.4 million shares at a
discount to book value partially offset by dividends paid of $0.16 per share,
and issuance of shares related to warrants and vested subsidiary awards.

Results by Segment
We classify our business into two reportable segments, Insurance and Mortgage,
with the remainder of our operations aggregated into Tiptree Capital - Other.
Corporate activities include holding company interest expense, corporate
employee compensation and benefits, and other expenses, including, but not
limited to, public company expenses. For the three and nine months ended
September 30, 2021, Mortgage has been broken out of Tiptree Capital as a
reportable segment because for the year ended December 31, 2020 it met the
quantitative threshold for disclosure. Prior year segments have been conformed
to the current year presentation.

The following tables present the components of Revenue, Income (loss) before
taxes and Adjusted net income.

                                        Three Months Ended            Nine Months Ended
($ in thousands)                          September 30,                 September 30,
                                       2021           2020                2021                  2020
Revenues:
Insurance                           $ 246,706      $ 174,005      $          721,524         $ 482,299
Mortgage                               27,425         35,879                  87,191            80,911
Tiptree Capital - other                12,474         14,157                  72,265           (10,304)
Corporate                                   -              -                       -                 -
Total revenues                      $ 286,605      $ 224,041      $          880,980         $ 552,906

Income (loss) before taxes:
Insurance                           $  13,337      $  13,447      $           49,569         $     418
Mortgage                                6,267         14,453                  25,119            20,768
Tiptree Capital - other                (4,700)        (4,978)                 12,914           (59,407)
Corporate                             (11,320)        (9,025)                (33,151)          (25,199)
Total income (loss) before taxes    $   3,584      $  13,897      $         

54,451 $ (63,420)

Non-GAAP - Adjusted net income:
Insurance                           $  19,533      $  12,111      $           46,400         $  29,835
Mortgage                                3,961         11,865                  15,485            19,488
Tiptree Capital - other                 5,522            495                   8,153             3,565
Corporate                              (8,286)        (6,664)                (23,028)          (17,648)
Total adjusted net income (1)       $  20,730      $  17,807      $           47,010         $  35,240

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

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Insurance

Fortegra is a specialty insurance underwriter and service provider, which
focuses on niche programs and fee-oriented services. The combination of
specialty insurance underwriting, warranty and 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.

The following tables present the Insurance segment results for the three and
nine months ended September 30, 2021 and 2020.

Results of Operations - Three Months Ended September 30, 2021 compared to 2020

($ in thousands)                                                     Three Months Ended September 30,
                                                    2021                2020              Change              % Change
Revenues:
Earned premiums, net                           $   175,026          $ 116,418          $  58,608                    50.3  %
Service and administrative fees                     69,664             47,701             21,963                    46.0  %
Ceding commissions                                   2,722              5,157             (2,435)                  (47.2) %
Net investment income                                3,330              3,023                307                    10.2  %
Net realized and unrealized gains (losses)          (7,492)               659             (8,151)                       NM%
Other revenue                                        3,456              1,047              2,409                   230.1  %
Total revenues                                 $   246,706          $ 174,005          $  72,701                    41.8  %
Expenses:
Net losses and loss adjustment expenses        $    61,252          $  42,920          $  18,332                    42.7  %
Member benefit claims                               19,579             14,818              4,761                    32.1  %
Commission expense                                 104,392             68,868             35,524                    51.6  %
Employee compensation and benefits                  19,526             15,969              3,557                    22.3  %
Interest expense                                     4,268              3,988                280                     7.0  %
Depreciation and amortization                        4,307              2,329              1,978                    84.9  %
Other expenses                                      20,045             11,666              8,379                    71.8  %
Total expenses                                 $   233,369          $ 160,558          $  72,811                    45.3  %
Income (loss) before taxes (1)                 $    13,337          $  13,447          $    (110)                   (0.8) %

Key Performance Metrics:
Gross written premiums and premium equivalents $   613,113          $ 464,669          $ 148,444                    31.9  %
Return on average equity                              13.7  %            15.9  %
Underwriting ratio                                    73.8  %            74.3  %
Expense ratio                                         15.8  %            16.3  %
Combined ratio                                        89.6  %            90.6  %

Non-GAAP Financial Measures (2):
Adjusted net income                            $    19,533          $  12,111          $   7,422                    61.3  %
Adjusted return on average equity                     26.8  %            

17.1 %

(1) Net income was $9,943 for the three months ended September 30, 2021
compared to $11,280 for the three months ended September 30, 2020.
(2) See "-Non-GAAP Reconciliations" for a discussion of non-GAAP financial
measures.

Revenues

Earned Premiums, net

Earned premiums, net represent 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.

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Service and Administrative Fees

Service and administrative fees represent the earned portion of gross written
premiums and premium equivalents, which is generated from non-insurance programs
including warranty service contracts, motor club programs 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

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

We earn investment income 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)

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

Revenues - Three Months Ended September 30, 2021 compared to 2020

For the three months ended September 30, 2021, total revenues increased 41.8%,
to $246.7 million, as compared to $174.0 million for the three months ended
September 30, 2020. Earned premiums, net of $175.0 million increased $58.6
million, or 50.3%, driven by growth in commercial, credit and warranty insurance
programs. Service and administrative fees of $69.7 million increased by 46.0%
driven by growth in warranty and consumer goods service contract revenues.
Ceding commissions of $2.7 million decreased by $2.4 million, or 47.2%, driven
by lower ceding fees as less business was ceded in certain credit insurance and
collateral protection programs. Other revenues increased by $2.4 million, or
230.1%, driven by growth in premium and warranty finance product offerings.

For the three months ended September 30, 2021, 30.7% of revenues were derived
from fees that were not solely dependent upon the underwriting performance of
Fortegra's insurance products, resulting in more diversified earnings. For the
three months ended September 30, 2021, 80.9% of fee-based revenues were
generated in non-regulated service companies, with the remainder in regulated
insurance companies.

For the three months ended September 30, 2021, net investment income was $3.3
million as compared to $3.0 million in the prior year period, primarily driven
by growth in investments. Net realized and unrealized losses were $7.5 million,
a decrease of $8.2 million, as compared to net realized and unrealized gains of
$0.7 million in the prior year period.

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

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,
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which is a measure of the number of claims per unit of insured exposure, and
loss severity, which is based on the average size of claims. Loss occurrences in
insurance products are characterized by low severity and high frequency. Factors
affecting loss frequency and loss severity include the volume of underwritten
contracts, changes in claims reporting patterns, claims settlement patterns,
judicial decisions, economic conditions, morbidity patterns and the attitudes of
claimants towards settlements, and original pricing of the product for purposes
of the loss ratio in relation to loss emergence over time. Losses and loss
adjustment expenses are based on an actuarial analysis of the estimated losses,
including losses incurred during the period and changes in estimates from prior
periods.

Member Benefit Claims

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 Expense

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

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

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 and Amortization

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

Expenses - Three Months Ended September 30, 2021 compared to 2020

For the three months ended September 30, 2021, net losses and loss adjustment
expenses were $61.3 million, member benefit claims were $19.6 million and
commission expense was $104.4 million, as compared to $42.9 million, $14.8
million and $68.9 million, respectively, for the three months ended September
30, 2020. The increases in net losses and loss adjustment expenses of $18.3
million, or 42.7%, and member benefit claims of $4.8 million, or 32.1%, were
driven by growth in U.S. Insurance and U.S. Warranty Solutions programs.
Commission expense increased by $35.5 million, or 51.6%, driven by growth in
revenues and an increase in retrospective commission payments, which were
partially offset by lower proportional increases in net losses and loss
adjustment expenses.

For the three months ended September 30, 2021, employee compensation and
benefits were $19.5 million and other expenses were $20.0 million, as compared
to $16.0 million and $11.7 million, respectively, for the three months ended
September 30,
                                       8
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2020. Employee compensation and benefits increased by $3.6 million, or 22.3%,
driven by the acquisition of Sky Auto in December 2020 and investments in human
capital associated with growth in admitted, E&S and warranty programs. Other
expenses increased by $8.4 million, or 71.8%, driven primarily by increased
marketing and advertising costs aligned with growth in revenues from Sky Auto,
and increases in premium taxes, which grew in line with earned premiums.

For the three months ended September 30, 2021, interest expense was $4.3 million
as compared to $4.0 million for the three months ended September 30, 2020. The
increase in interest expense of $0.3 million, or 7.0%, was primarily driven by
increased asset-based debt for premium and warranty finance programs.

For the three months ended September 30, 2021, depreciation and amortization
expense was $4.3 million, including $3.8 million of intangible amortization
related to purchase accounting associated with the acquisitions of Fortegra,
Smart AutoCare and Sky Auto, as compared to $2.3 million, including $2.3 million
of intangible amortization from purchase accounting related to Fortegra and
Smart AutoCare for 2020.

Results of Operations - Nine Months Ended September 30, 2021 compared to 2020

($ in thousands)                                                         

Nine Months Ended September 30,

                                                       2021                 2020               Change              % Change
Revenues:
Earned premiums, net                              $   498,903          $   344,994          $ 153,909                    44.6  %
Service and administrative fees                       191,414              134,290             57,124                    42.5  %
Ceding commissions                                      8,827               16,217             (7,390)                  (45.6) %
Net investment income                                   9,331                8,803                528                     6.0  %
Net realized and unrealized gains (losses)              5,004              (27,310)            32,314                        NM%
Other revenue                                           8,045                5,305              2,740                    51.6  %
Total revenues                                    $   721,524          $   482,299          $ 239,225                    49.6  %
Expenses:
Net losses and loss adjustment expenses           $   181,244          $   125,354          $  55,890                    44.6  %
Member benefit claims                                  55,954               42,407             13,547                    31.9  %
Commission expense                                    292,580              207,172             85,408                    41.2  %
Employee compensation and benefits                     57,007               47,927              9,080                    18.9  %
Interest expense                                       13,097               11,218              1,879                    16.7  %
Depreciation and amortization                          12,905                7,229              5,676                    78.5  %
Other expenses                                         59,168               40,574             18,594                    45.8  %
Total expenses                                    $   671,955          $   481,881          $ 190,074                    39.4  %
Income (loss) before taxes (1)                    $    49,569          $       418          $  49,151                        NM%

Key Performance Metrics:
Gross written premiums and premium equivalents    $ 1,689,592          $ 1,176,022          $ 513,570                    43.7  %
Return on average equity                                 17.3  %               1.5  %
Underwriting ratio                                       74.9  %              74.9  %
Expense ratio                                            16.1  %              17.2  %
Combined ratio                                           91.0  %              92.1  %

Non-GAAP Financial Measures (2):
Adjusted net income                               $    46,400          $    29,835          $  16,565                    55.5  %
Adjusted return on average equity                        20.9  %            

14.2 %

(1) Net income was $38,412 for the nine months ended September 30, 2021
compared to a net loss of $3,129 for the nine months ended September 30, 2020.
(2) See "-Non-GAAP Reconciliations" for a discussion of non-GAAP financial
measures.

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Revenues - Nine Months Ended September 30, 2021 compared to 2020

For the nine months ended September 30, 2021, total revenues increased 49.6%, to
$721.5 million, as compared to $482.3 million for the nine months ended
September 30, 2020. Earned premiums, net of $498.9 million increased $153.9
million, or 44.6%, driven by growth in commercial, credit and warranty insurance
programs. Service and administrative fees of $191.4 million increased by 42.5%
driven by growth in warranty and consumer goods service contract revenues.
Ceding commissions of $8.8 million decreased by $7.4 million, or 45.6%, driven
by lower ceding fees as less business was ceded in certain credit insurance and
collateral protection programs. Other revenues increased by $2.7 million, or
51.6%, driven by growth in premium and warranty finance product offerings.

For the nine months ended September 30, 2021, 28.9% of revenues were derived
from fees that were not solely dependent upon the underwriting performance of
Fortegra's insurance products, resulting in more diversified earnings. For the
nine months ended September 30, 2021, 80.9% of fee-based revenues were generated
in non-regulated service companies, with the remainder in regulated insurance
companies.

For the nine months ended September 30, 2021, net investment income was $9.3
million as compared to $8.8 million in the prior year period, driven by growth
in investments, partially offset by lower interest rates. Net realized and
unrealized gains were $5.0 million, an increase of $32.3 million, driven
primarily by realized and unrealized gains on equity securities in the 2021
period, as compared to losses on equity securities and other investments in the
2020 period.

Expenses - Nine Months Ended September 30, 2021 compared to 2020

For the nine months ended September 30, 2021, net losses and loss adjustment
expenses were $181.2 million, member benefit claims were $56.0 million and
commission expense was $292.6 million, as compared to $125.4 million, $42.4
million and $207.2 million, respectively, for the nine months ended September
30, 2020. The increases in net losses and loss adjustment expenses of $55.9
million, or 44.6%, and member benefit claims of $13.5 million, or 31.9%, were
driven by growth in U.S. Insurance, U.S. Warranty Solutions and Europe Warranty
Solutions programs. Commission expense increased by $85.4 million, or 41.2%, in
line with the growth in earned premiums, net and service and administrative
fees.

For the nine months ended September 30, 2021, employee compensation and benefits
were $57.0 million and other expenses were $59.2 million, as compared to $47.9
million and $40.6 million, respectively, for the nine months ended September 30,
2020. Employee compensation and benefits increased by $9.1 million, or 18.9%,
driven by the acquisition of Sky Auto and investments in human capital
associated with growth objectives in admitted, E&S and warranty programs. Other
expenses increased by $18.6 million, or 45.8%, driven primarily by increased
marketing and advertising costs aligned with growth in revenues from Sky Auto,
and increases in premium taxes, which grew in line with earned premiums. Other
expenses were elevated by $2.1 million and $2.2 million for the nine months
ended September 30, 2021 and 2020, respectively, related to non-recurring
professional and audit fees associated with preparation of the registration
statement for the potential Fortegra initial public offering which was withdrawn
in April 2021, and investment banking and legal expenses associated with the
acquisition of Smart AutoCare in January 2020.

For the nine months ended September 30, 2021, interest expense was $13.1 million
as compared to $11.2 million for the nine months ended September 30, 2020. The
increase in interest expense of $1.9 million, or 16.7%, was primarily driven by
higher average outstanding revolving credit borrowings and increased asset-based
debt for premium and warranty finance programs.

For the nine months ended September 30, 2021, depreciation and amortization
expense was $12.9 million, including $11.5 million of intangible amortization
related to purchase accounting associated with the acquisitions of Fortegra,
Smart AutoCare and Sky Auto, as compared to $7.2 million, including $7.0 million
of intangible amortization from purchase accounting related to Fortegra and
Smart AutoCare for 2020.



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.

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Gross Written Premiums and Premium Equivalents

Gross written premiums and premium equivalents represent total gross written
premiums from insurance policies and warranty service contracts issued, as well
as premium finance volumes during a reporting period. They represent the volume
of insurance policies written or assumed and warranty service contracts issued
during a specific period of time without reduction for policy acquisition costs,
reinsurance costs or other deductions. Gross written premiums is a volume
measure commonly used in the insurance industry to compare sales performance by
period. Premium equivalents are used to compare sales performance of warranty
service and administrative contract volumes to gross written premiums. Investors
also use these measures to compare sales growth among comparable companies,
while management uses these measures to evaluate the relative performance of
various sales channels.

The below table shows gross written premiums and premium equivalents by business
mix for the three and nine months ended September 30, 2021 and 2020.

                                Three Months Ended              Nine Months Ended
($ in thousands)                  September 30,                   September 30,

                               2021           2020            2021             2020
U.S. Insurance              $ 392,119      $ 301,847      $ 1,095,137      $   741,521
U.S. Warranty Solutions       190,874        149,269          524,568          399,373
Europe Warranty Solutions      30,120         13,553           69,887           35,128
Total                       $ 613,113      $ 464,669      $ 1,689,592      $ 1,176,022



Total gross written premiums and premium equivalents for the nine months ended
September 30, 2021 were $1,689.6 million as compared to $1,176.0 million in
2020. The growth of $513.6 million, or 43.7%, is driven by a combination of
factors including growing Fortegra's distribution partner network, expanding
admitted and E&S insurance lines, and increasing penetration through the
warranty acquisitions of Smart AutoCare (January 2020) and Sky Auto (December
2020). Additionally, certain distribution partners were impacted by COVID-19
shutdowns in the second and third quarters 2020, providing for a more favorable
period over period comparison.

For the nine months ended September 30, 2021, U.S. Insurance increased by $353.6
million, or 47.7%, driven by growth in commercial, credit, collateral protection
and warranty insurance lines. For the nine months ended September 30, 2021, U.S.
Warranty Solutions increased by $125.2 million, or 31.3%, driven by growth in
auto and consumer goods service contracts, including the acquisition of Sky
Auto. Europe Warranty Solutions increased by $34.8 million, or 98.9%, driven by
growth in auto and consumer goods warranty programs.

The growth in gross written premiums and premium equivalents, combined with
higher retention in select products for the nine months ended September 30,
2021, has resulted in an increase of $413.1 million, or 35.9%, in unearned
premiums and deferred revenue on the condensed consolidated balance sheets as
compared to September 30, 2020. As of September 30, 2021, unearned premiums and
deferred revenues were $1,564.4 million, as compared to $1,151.3 million as of
September 30, 2020.

Combined Ratio, Underwriting Ratio and Expense Ratio

Combined ratio is an operating measure, which equals the sum of the underwriting
ratio and the expense ratio. Underwriting ratio is the ratio of the GAAP line
items net losses and loss adjustment expenses, member benefit claims and
commission expense to earned premiums, net, service and administrative fees and
ceding commissions and other revenue. Expense ratio is the ratio of the GAAP
line items employee compensation and benefits and other underwriting, general
and administrative expenses to earned premiums, net, service and administrative
fees and ceding commissions and other revenue.

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

The combined ratio was 91.0% for the nine months ended September 30, 2021, which
consisted of an underwriting ratio of 74.9% and an expense ratio of 16.1%, as
compared to 92.1%, 74.9% and 17.2%, respectively, for the nine months ended
                                       11
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September 30, 2020. The improvement in the combined ratio year over year is
primarily driven by the continued scalability of the technology and shared
service platform, decreasing the expense ratio.

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 17.3% for the nine months ended September 30, 2021,
as compared to 1.5% for the nine months ended September 30, 2020, with the
increase in net income and annualized return on average equity driven by revenue
growth and an improved combined ratio, in addition to net realized and
unrealized gains in the 2021 period compared to net realized and unrealized
losses in the 2020 period.

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 table shows underwriting and fee revenues and underwriting and fee
margin by business mix for the three and nine months ended September 30, 2021
and 2020.
                                                                      Three Months Ended September 30,
                                                                                                 Underwriting and Fee
($ in thousands)                                       Underwriting and Fee Revenues (1)              Margin (1)
                                                            2021                   2020                        2021              2020
U.S. Insurance                                       $        174,995          $ 122,540                    $ 37,003          $ 26,868
U.S. Warranty Solutions                                        61,342             41,250                      23,455            15,007
Europe Warranty Solutions                                      14,531              6,533                       5,185             1,842
Total                                                $        250,868          $ 170,323                    $ 65,643          $ 43,717

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

Underwriting and fee revenues were $250.9 million for the three months ended
September 30, 2021 as compared to $170.3 million for the three months ended
September 30, 2020. Total underwriting and fee revenues increased $80.5 million,
or 47.3%, driven by growth in all business lines. The increase in U.S. Insurance
was $52.5 million, or 42.8%, driven by growth in commercial, credit and warranty
insurance programs. The increase in U.S. Warranty Solutions was $20.1 million,
or 48.7%, driven by growth in auto, consumer goods, and premium and warranty
finance programs, including the acquisition of
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Sky Auto. Europe Warranty Solutions increased by $8.0 million, or 122.4%, driven
by growth in auto and consumer goods warranty programs.

Underwriting and fee margin was $65.6 million for the three months ended
September 30, 2021 as compared to $43.7 million for the three months ended
September 30, 2020. Total underwriting and fee margin increased $21.9 million,
or 50.2%, driven by growth in all business lines. The total underwriting ratio
of 73.8% decreased by 0.5% driven by growth and improved margins in U.S. and
Europe Warranty Solutions. U.S. Insurance underwriting ratio of 78.9% increased
by 0.8% driven by business mix factors. U.S. Warranty Solutions underwriting
ratio of 61.8% decreased by 1.8% driven by the impact to margin from the
acquisition of Sky Auto. Europe Warranty Solutions underwriting ratio of 64.3%
decreased by 7.5% driven by reduced commissions expense as a percent of revenues
versus the prior year period.

                                                                      Nine Months Ended September 30,
                                                                                                 Underwriting and Fee
($ in thousands)                                       Underwriting and Fee Revenues (1)              Margin (1)
                                                            2021                   2020                        2021               2020
U.S. Insurance                                       $   504,038               $ 369,230                   $ 101,810          $  77,045
U.S. Warranty Solutions                                  168,476                 116,230                      65,453             43,231
Europe Warranty Solutions                                 34,675                  15,345                      10,146              5,596
Total                                                $   707,189               $ 500,805                   $ 177,409          $ 125,872

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

Underwriting and fee revenues were $707.2 million for the nine months ended
September 30, 2021 as compared to $500.8 million for the nine months ended
September 30, 2020. Total underwriting and fee revenues increased $206.4
million, or 41.2%, driven by growth in all business lines. The increase in U.S.
Insurance was $134.8 million, or 36.5%, driven by growth in commercial, credit
and warranty insurance programs. The increase in U.S. Warranty Solutions was
$52.2 million, or 45.0%, driven by growth in auto, consumer goods, and premium
and warranty finance programs, including the Sky Auto acquisition. Europe
Warranty Solutions increased by $19.3 million, or 126.0%, driven by growth in
auto and consumer goods warranty programs.

Underwriting and fee margin was $177.4 million for the nine months ended
September 30, 2021 as compared to $125.9 million for the nine months ended
September 30, 2020. Total underwriting and fee margin increased $51.5 million,
or 40.9%, driven by growth in all business lines. Total underwriting ratio of
74.9% was stable as compared to prior year as a result of maintaining consistent
profitability while growing insurance lines and warranty service contracts. U.S.
Insurance underwriting ratio of 79.8% increased by 0.7% driven by change in
business mix. U.S. Warranty Solutions underwriting ratio of 61.1% decreased by
1.7% driven by the impact to margin from the acquisition of Sky Auto. Europe
Warranty Solutions underwriting ratio of 70.7% increased by 7.2% as the growing
book of business normalized.

Adjusted Net Income and Adjusted Return on Average Equity

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

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

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

For the three months ended September 30, 2021, adjusted net income and adjusted
return on average equity were $19.5 million and 26.8%, respectively, as compared
to $12.1 million and 17.1%, respectively, for the three months ended September
30, 2020. The improvement in both metrics was driven by the growth in
underwriting and fee revenues in addition to a 1.0 percentage point improvement
in the combined ratio.

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For the nine months ended September 30, 2021, adjusted net income and adjusted
return on average equity were $46.4 million and 20.9%, respectively, as compared
to $29.8 million and 14.2%, respectively, for the nine months ended September
30, 2020. The improvement in both metrics was driven by the growth in
underwriting and fee revenues in addition to a 1.1 percentage point improvement
in the combined ratio.

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

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

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

For the three months ended September 30, 2021, net investment income was $3.3
million as compared to $3.0 million in the prior year period, driven by growth
in investments, partially offset by lower interest rates. Net realized and
unrealized losses were $7.5 million, a decrease of $8.2 million, driven by
realized and unrealized losses on equity securities and other investments in the
2021 period as compared to gains in the 2020 period.

For the nine months ended September 30, 2021, net investment income was $9.3
million as compared to $8.8 million in the prior year period, driven by growth
in investments, partially offset by lower interest rates. Net realized and
unrealized gains were $5.0 million, an increase of $32.3 million, driven by
realized and unrealized gains on equity securities in the 2021 period, as
compared to losses on equity securities and other investments in the 2020
period.

Tiptree Capital

Tiptree Capital consists of our Mortgage segment, which includes the operating
results of Reliance, our mortgage business, and Tiptree Capital - Other, which
consists of our other non-insurance operating businesses and investments. As of
September 30, 2021, Tiptree Capital - Other includes our Invesque shares,
maritime transportation operations, and the mortgage operations of Luxury, which
is classified as held for sale on our balance sheet.

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 Federal National Mortgage Association
("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac"). The
Company is also an approved issuer and servicer for Government National Mortgage
Association ("GNMA" or "Ginnie Mae"). The Company originates residential
mortgage loans through its retail distribution channel (directly to consumers)
in 39 states and the District of Columbia as of September 30, 2021.

The following tables present the Mortgage segment results for the three and nine
months ended September 30, 2021 and 2020.

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Results of Operations
                                                 Three Months Ended               Nine Months Ended
($ in thousands)                                   September 30,                    September 30,
                                                2021           2020              2021           2020
Revenues:

Net realized and unrealized gains (losses) $ 22,651 $ 31,892

  $ 73,454       $ 69,733
Other revenue                                   4,774          3,987            13,737         11,178
Total revenues                               $ 27,425       $ 35,879          $ 87,191       $ 80,911
Expenses:
Employee compensation and benefits           $ 14,382       $ 15,893          $ 42,849       $ 43,240
Interest expense                                  276            251               837            891
Depreciation and amortization                     218            239               670            715
Other expenses                                  6,282          5,043            17,716         15,297
Total expenses                               $ 21,158       $ 21,426          $ 62,072       $ 60,143
Income (loss) before taxes                   $  6,267       $ 14,453          $ 25,119       $ 20,768

Key Performance Metrics:
Return on average equity                         36.5  %       101.1  %           44.4  %        51.8  %

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

Revenues

Net Realized and Unrealized Gains (Losses)

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

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

Revenues - Three and Nine Months Ended September 30, 2021 compared to 2020

For the three months ended September 30, 2021, we funded $385.0 million of
loans, compared to $440.1 million for 2020, a decrease of $55.1 million, or
12.5%. The decrease in origination volumes is driven by lower mortgage
refinancing levels across the industry as compared to cyclical highs observed in
2020. Gain on sale margins decreased to 5.5% for the three months ended
September 30, 2021, down approximately 130 basis points from 6.8% for the three
months ended September 30, 2020. Net realized and unrealized gains for the three
months ended September 30, 2021 were $22.7 million, compared to $31.9 million
for 2020, a decrease of $9.2 million or 29.0%. The primary drivers of the
decreased gains on sale revenues were decreases in origination volumes and gain
on sale margins, relative to the third quarter of 2020, partially offset by
positive fair value adjustments in mortgage servicing rights of $1.1 million as
interest rates increased in the third quarter 2021 relative to the prior period.
Other revenue for the three months ended September 30, 2021 was $4.8 million,
compared to $4.0 million for 2020, an increase of $0.8 million or 19.7% driven
by increased servicing fees associated with increased loans serviced.

For the nine months ended September 30, 2021, we funded $1,180.8 million of
loans, compared to $1,186.3 million for 2020, a decrease of $5.5 million, or
0.5%. Origination volumes in the 2021 and 2020 periods were primarily attributed
to the lower interest rate environment and rising home prices. Gain on sale
margins also decreased to 5.7% for the nine months ended
                                       15
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September 30, 2021, down approximately 50 basis points from 6.2% for the nine
months ended September 30, 2020. Net realized and unrealized gains for the nine
months ended September 30, 2021 were $73.5 million, compared to $69.7 million
for 2020, an increase of $3.7 million or 5.3%. The primary driver of increased
gain on sale revenues was positive fair value adjustments in mortgage servicing
rights of $5.1 million as interest rates increased from year-end 2020, partially
offset by slightly lower volumes and margins. Other revenue for the nine months
ended September 30, 2021 was $13.7 million, compared to $11.2 million for 2020,
an increase of $2.6 million or 22.9% driven primarily by higher servicing fees
from an increase in loans serviced.

Expenses

Employee Compensation and Benefits

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

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 and Amortization

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

Other Expenses

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

Expenses - Three and Nine Months Ended September 30, 2021 compared to 2020

For the three months ended September 30, 2021, employee compensation and
benefits was $14.4 million, compared to $15.9 million in 2020, a decrease of
$1.5 million or 9.5%. This decrease was driven primarily by reduced commissions
on lower origination volumes, in addition to decreased incentive compensation.
For the three months ended September 30, 2021 and 2020, interest expense was
$0.3 million and depreciation and amortization expense was $0.2 million. For the
three months ended September 30, 2021, other expenses were $6.3 million compared
to $5.0 million in 2020, with the $1.2 million increase driven by increased loan
origination expenses, including marketing costs.

For the nine months ended September 30, 2021, employee compensation and benefits
was $42.8 million, compared to $43.2 million in 2020, a decrease of $0.4 million
or 0.9%. This decrease was driven primarily by reduced commissions on lower
origination volumes. For the nine months ended September 30, 2021, interest
expense was $0.8 million compared to $0.9 million in 2020. For the nine months
ended September 30, 2021 and 2020, depreciation and amortization expense was
$0.7 million. For the nine months ended September 30, 2021, other expenses were
$17.7 million compared to $15.3 million in 2020 with the $2.4 million increase
driven by increased loan origination expenses, including marketing costs.

Income (loss) before taxes

Income before taxes for the three months ended September 30, 2021 was $6.3
million, compared to income before taxes of $14.5 million in 2020. The primary
driver of the decline was lower volume and gain on sale margins as compared to
the 2020 period.

Income before taxes for the nine months ended September 30, 2021 was $25.1
million, compared to income before taxes of $20.8 million in 2020. The primary
driver of the increase was higher servicing fees attributable to the larger
servicing portfolio, in addition to positive fair value adjustments on the
mortgage servicing rights asset, as compared to the nine month 2020 period.

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Tiptree Capital - Other

The following tables present a summary of Tiptree Capital - Other results for
the three and nine months ended September 30, 2021 and 2020.

Results of Operations

Three Months Ended September 30,

                                                                                                   Income (loss) before
($ in thousands)                                                     Total revenue                         taxes
                                                                 2021                  2020                     2021              2020
Senior living (Invesque)                                 $    (10,396)              $ (7,586)               $ (10,396)         $ (7,586)
Maritime transportation                                        11,424                  5,517                    5,231               138
Other (1)                                                      11,446                 16,226                      465             2,470
Total                                                    $     12,474               $ 14,157                $  (4,700)         $ (4,978)


                                                                         Nine Months Ended September 30,
($ in thousands)                                          Total revenue                      Income (loss) before taxes
                                                          2021                  2020                                            2021                  2020
Senior living (Invesque)                              $   3,512             $ (63,437)                                       $  3,512             $ (63,437)
Maritime transportation                                  25,041                17,218                                           7,738                 1,041
Other (1)                                                43,712                35,915                                           1,664                 2,989
Total                                                 $  72,265             $ (10,304)                                       $ 12,914             $ (59,407)

(1) Includes our held for sale mortgage originator (Luxury), asset management,
and certain intercompany elimination transactions.

Revenues

Tiptree Capital - Other earns revenues from the following sources: net interest
income; revenues on our held for sale mortgage originator; realized and
unrealized gains and losses on the Company's investment holdings (primarily
Invesque); and charter revenue from vessels within the Company's maritime
transportation operations.

Revenues for the three months ended September 30, 2021 were $12.5 million
compared to revenues of $14.2 million for 2020. The primary drivers of the
change in revenues were unrealized losses on Invesque of $10.4 million in the
2021 period compared to unrealized losses of $7.6 million in the 2020 period and
lower mortgage gain on sale revenues in the held for sale mortgage originator,
partially offset by increased dry-bulk charter rates earned by the maritime
transportation business.

Revenues for the nine months ended September 30, 2021 were $72.3 million
compared to negative revenues of $10.3 million for 2020. The primary driver of
the change in revenues for the nine months ended September 30, 2021 was
unrealized gains on Invesque in the 2021 period compared to unrealized losses in
the 2020 period, partially offset by the suspension of its monthly dividend
payment in April 2020, increased dry-bulk charter rates earned by the maritime
transportation business, and growth in mortgage gain on sale revenues in the
held for sale mortgage originator.

Income (loss) before taxes

For the three months ended September 30, 2021, the loss before taxes from
Tiptree Capital - Other was $4.7 million, compared to a loss before taxes of
$5.0 million in 2020. The primary drivers were unrealized losses in the 2021 and
2020 periods on the investment in Invesque. Maritime transportation operations
earned higher income before taxes in 2021 compared to 2020 driven by increased
revenues from higher dry-bulk charter rates.

The income before taxes from Tiptree Capital - Other for the nine months ended
September 30, 2021 was $12.9 million, compared to a loss before taxes of $59.4
million in 2020. The primary driver of the increase was unrealized gains in the
2021 period compared to losses in the 2020 period on our investment in Invesque,
in addition to increased income before taxes in our maritime transportation
business due to a rise in dry-bulk charter rates.


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Adjusted net income - Non-GAAP(1)

                                 Three Months Ended              Nine Months Ended
($ in thousands)                   September 30,                   September 30,
                                  2021             2020              2021                 2020
Senior living (Invesque)   $         -            $   -      $                -         $ 2,001
Maritime transportation          5,503              475                   8,074           1,536
Other                               19               20                      79              28
Total                      $     5,522            $ 495      $            8,153         $ 3,565

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

Adjusted net income increased to $8.2 million for the nine months ended
September 30, 2021 compared to $3.6 million in 2020. The increase was driven by
improvement in maritime transportation operations from higher dry-bulk charter
rates, partially offset by the impact of the discontinuation of the Invesque
dividend in April 2020.

Corporate

The following table presents a summary of corporate results for the three and
nine months ended September 30, 2021 and 2020.

Results of Operations
                                                    Three Months Ended                Nine Months Ended
($ in thousands)                                      September 30,                     September 30,
                                                  2021               2020               2021                  2020
Employee compensation and benefits           $     1,785          $  1,962          $    5,621             $  5,819
Employee incentive compensation expense            4,835             1,922              10,760                4,293
Interest expense                                   2,553             2,684               7,675                7,365
Depreciation and amortization                        203               203                 602                  603
Other expenses                                     1,944             2,254               8,493                7,119
Total expenses                               $    11,320          $  9,025          $   33,151             $ 25,199



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,
was $16.4 million for the nine months ended September 30, 2021 compared to $10.1
million for 2020, driven by an increase in performance related employee
incentive compensation. Interest expense for the nine months ended September 30,
2021 was $7.7 million, up from $7.4 million in 2020, driven by a higher average
outstanding balance during the first quarter of 2021 associated with upsizing
the borrowing facility in February 2020. As of September 30, 2021, the
outstanding borrowing was $115.6 million compared to $120.3 million at December
31, 2020. Other expenses of $8.5 million increased by $1.4 million from the nine
months ended September 30, 2020 primarily driven by $2.2 million of
non-recurring professional and legal fees associated with preparation of the
registration statement for the potential Fortegra initial public offering in
2021 (which registration statement has been withdrawn), compared to $0.4 million
of non-recurring debt extinguishment fees associated with the refinancing of the
corporate credit facility in the prior year.

Provision for Income Taxes

The total income tax expense of $0.2 million for the three months ended
September 30, 2021, and the total income tax benefit of $0.8 million for the
three months ended September 30, 2020 are reflected as components of net income
(loss). For the three months ended September 30, 2021, the Company's effective
tax rate was equal to 6.6%. The effective rate for the three months ended
September 30, 2021 was lower than the U.S. federal statutory income tax rate of
21.0%, primarily from the impact of the effect of foreign operations and
discrete items, partially offset by state taxes. For the three months ended
September 30, 2020, the Company's effective tax rate was equal to (6.1)%. The
effective rate for the three months ended September 30, 2020 was lower than the
U.S. federal statutory income tax rate of 21.0% due to the effect of discrete
items, including expected refunds arising from the CARES Act.
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The total income tax expense of $11.4 million for the nine months ended
September 30, 2021, and the total income tax benefit of $22.0 million for the
nine months ended September 30, 2020 are reflected as components of net income
(loss). For the nine months ended September 30, 2021, the Company's effective
tax rate was equal to 21.0%. The effective rate for the nine months ended
September 30, 2021 was equal to the U.S. federal statutory income tax rate of
21.0%, due to the impact of state taxes offset by other discrete items. For the
nine months ended September 30, 2020, the Company's effective tax rate was equal
to 34.7%. The effective rate for the nine months ended September 30, 2020 was
higher than the U.S. federal statutory income tax rate of 21.0%, primarily from
the impact of state taxes and other discrete items.

Balance Sheet Information

Tiptree's total assets were $3,378.4 million as of September 30, 2021, compared
to $2,995.8 million as of December 31, 2020. The $382.6 million increase in
assets is primarily attributable to the growth in the Insurance segment.

Total stockholders' equity was $402.1 million as of September 30, 2021, compared
to $373.5 million as of December 31, 2020, primarily driven by net income for
nine months ended September 30, 2021, partially offset by dividends. As of
September 30, 2021, there were 33,888,810 shares of common stock outstanding as
compared to 32,682,462 as of December 31, 2020.

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