Tiptree Reports First Quarter 2019 Results
- Revenues of
$183.9 million for the quarter, up 24.2% from the prior year period. - Net income before non-controlling interests of
$4.3 million for the quarter, a decrease of$24.7 million driven by the non-repeat gain on sale of Care in the prior year period. - Operating EBITDA(1) of
$12.6 million for the quarter, an increase of$3.7 million , or 41.6% from the prior year period. - Book value per share(2) as of
March 31, 2019 was$11.12 , which including dividends paid represents a 6.3%(3) year over year return. - Declared a dividend of
$0.04 per share (an increase of 14.3%) to stockholders of record on May 20, 2019 with a payment date of May 27, 2019.
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Summary Consolidated Statements of Operations
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| ($ in millions, except per share information) | Three Months Ended |
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GAAP: |
2019 | 2018 | |||||
| Total revenues | $ | 183.9 | $ | 148.1 | |||
| Net income before non-controlling interests | $ | 4.3 | $ | 29.0 | |||
| Net income attributable to Common Stockholders | $ | 3.9 | $ | 23.6 | |||
| Diluted earnings per share | $ | 0.11 | $ | 0.79 | |||
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Non-GAAP: (1) 
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| Operating EBITDA | $ | 12.6 | $ | 8.9 | |||
| Adjusted EBITDA | $ | 14.6 | $ | 5.4 | |||
| Book value per share (2) | $ | 11.12 | $ | 10.59 | |||
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(1) |
For further information relating to the Company’s Operating EBITDA, Adjusted EBITDA and Book value per share, including a reconciliation to GAAP financials, see “—Non-GAAP Reconciliations” below. |
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(2) |
For periods prior to |
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(3) |
Total return per share as of |
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Earnings Conference Call
Tiptree will host a conference call on
The conference call will be available via live or archived webcast at http://www.investors.tiptreeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). Please dial in at least five minutes prior to the start time.
A replay of the call will be available from
Q1’19 Financial Overview
Overall:
- Delivered quarterly return of 3.1%, as measured by growth in book value per share plus dividends paid.
- Year-to-date 2019, we purchased and retired 1,472,730 shares of our Common Stock for
$9.1 million through open market and block purchases. - Increased our quarterly dividend for the third consecutive year to
$0.04 per share, a 14.3% increase.
Insurance:
- Gross written premiums for first quarter 2019 were
$198.4 million , with net written premiums of$121.0 million , up 10.8%, driven by growth in credit and warranty products. - Continued to expand product offerings while maintaining a consistent combined ratio of 93.5%.
- Within our insurance investment portfolio, we reduced our exposure to levered credit by selling approximately
$80.0 million of assets and repaying asset-based debt.
- In 2019, began re-positioning our asset management platform, by agreeing to invest
$75 million to seed new investment funds in exchange for management control of, and a profit participation in, Corvid Peak (formerly known asTricadia ).
Consolidated Results of Operations
Revenues
For the three months ended
Net Income before non-controlling interests
For the three months ended
Net Income Available to Common Stockholders
For the three months ended
Income before taxes (from continuing and discontinued operations)
The table below highlights key drivers impacting our consolidated results on a pre-tax basis. Many of our investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect our earnings relating to these investments to be relatively volatile between periods in contrast to our fixed income securities, which are marked to market through accumulated other comprehensive income (“AOCI”) in stockholders equity. On
| ($ in millions) | Three Months Ended |
|||||||||
| 2019 | 2018 | |||||||||
| Net realized and unrealized gains (losses)(1) | $ | 4.0 | $ | (7.7 | ) | |||||
| Discontinued operations (Care)(2) | $ | — | $ | 46.8 | ||||||
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(1) |
Excludes Mortgage realized and unrealized gains and losses - Performing and NPLs. |
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(2) |
Represents Care for the three months ended |
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Non-GAAP
Management uses Operating EBITDA, Adjusted EBITDA and book value per share as measurements of operating performance which are non-GAAP measures. Management believes the use of Operating EBITDA and Adjusted EBITDA provides supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance, and to analyze a company’s ability to service its debt and to facilitate comparison among companies. Management uses Operating EBITDA as part of its capital allocation process and to assess comparative returns on invested capital amongst our businesses and investments. Adjusted EBITDA is also used in determining incentive compensation for the Company’s executive officers. Operating EBITDA 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. Management believes the use of book value per share provides supplemental information useful to investors as it is frequently used by the financial community to analyze company growth on a relative per share basis.
Operating EBITDA for the three months ended
Total stockholders’ equity was
Results by Segment
Tiptree is a holding company that combines insurance operations with investment management capabilities. Our principal operating subsidiary is a leading provider of specialty insurance products and related services. We also allocate capital across a broad spectrum of businesses, assets and other investments, which we refer to as
Pre-tax Income
| ($ in millions) | Three Months Ended |
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| 2019 | 2018 | |||||||||
| |
$ | 8.1 | $ | 1.3 | ||||||
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5.9 | (1.7 | ) | |||||||
| Corporate | (8.9 | ) | (6.7 | ) | ||||||
| Pre-tax income (loss) from continuing operations | $ | 5.1 | $ | (7.1 | ) | |||||
| Pre-tax income (loss) from discontinued operations (1) | $ | — | $ | 46.8 | ||||||
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(1) |
Represents Care for the three months ended |
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Operating EBITDA - Non-GAAP (1)
The following tables present the components of Operating EBITDA.
| ($ in millions) | Three Months Ended |
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| 2019 | 2018 | ||||||||||
| |
$ | 13.7 | $ | 13.3 | |||||||
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4.7 | 3.3 | |||||||||
| Corporate | (5.8 | ) | (7.7 | ) | |||||||
| Operating EBITDA | $ | 12.6 | $ | 8.9 | |||||||
| (1) | For further information relating to the Company’s Total Capital and Operating EBITDA, including a reconciliation to GAAP total stockholders equity and pre-tax income, see “—Non-GAAP Reconciliations.” | |
| (2) | Includes discontinued operations related to Care. As of |
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About Tiptree
Forward-Looking Statements
This release contains “forward-looking statements” which involve risks, uncertainties and contingencies, many of which are beyond the Company’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the Company’s plans, objectives, expectations and intentions. The 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 forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, and as described in the Company’s other filings with the
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Condensed Consolidated Balance Sheet ($ in thousands, except share data) |
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| As of | ||||||||
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| Assets: | ||||||||
| Investments: | ||||||||
| Available for sale securities, at fair value | $ | 283,929 | $ | 283,563 | ||||
| Loans, at fair value | 125,145 | 215,383 | ||||||
| Equity securities | 122,592 | 122,979 | ||||||
| Other investments | 76,741 | 75,002 | ||||||
| Total investments | 608,407 | 696,927 | ||||||
| Cash and cash equivalents | 88,079 | 86,003 | ||||||
| Restricted cash | 13,062 | 10,521 | ||||||
| Notes and accounts receivable, net | 231,990 | 223,105 | ||||||
| Reinsurance receivables | 420,996 | 420,351 | ||||||
| Deferred acquisition costs | 170,727 | 170,063 | ||||||
| |
91,562 | 91,562 | ||||||
| Intangible assets, net | 50,098 | 52,121 | ||||||
| Other assets | 70,465 | 46,034 | ||||||
| Assets held for sale | 69,454 | 68,231 | ||||||
| Total assets | $ | 1,814,840 | $ | 1,864,918 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Debt, net | $ | 282,798 | $ | 354,083 | ||||
| Unearned premiums | 589,074 | 599,444 | ||||||
| Policy liabilities and unpaid claims | 130,585 | 131,611 | ||||||
| Deferred revenue | 75,276 | 75,754 | ||||||
| Reinsurance payable | 115,029 | 117,597 | ||||||
| Other liabilities and accrued expenses | 163,224 | 124,190 | ||||||
| Liabilities held for sale | 64,199 | 62,980 | ||||||
| Total liabilities | $ | 1,420,185 | $ | 1,465,659 | ||||
| Stockholders’ Equity: | ||||||||
| Preferred stock: |
$ | — | $ | — | ||||
| Common Stock: |
35 | 36 | ||||||
| Additional paid-in capital | 323,334 | 331,892 | ||||||
| Accumulated other comprehensive income (loss), net of tax | 251 | (2,058 | ) | |||||
| Retained earnings | 60,015 | 57,231 | ||||||
| |
383,635 | 387,101 | ||||||
| Non-controlling interests - Other | 11,020 | 12,158 | ||||||
| Total stockholders’ equity | 394,655 | 399,259 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,814,840 | $ | 1,864,918 | ||||
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Condensed Consolidated Statements of Operations ($ in thousands, except share data) |
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| Three Months Ended |
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| 2019 | 2018 | |||||||
| Revenues: | ||||||||
| Earned premiums, net | $ | 118,973 | $ | 101,645 | ||||
| Service and administrative fees | 25,895 | 24,576 | ||||||
| Ceding commissions | 2,504 | 2,283 | ||||||
| Net investment income | 4,301 | 4,205 | ||||||
| Net realized and unrealized gains (losses) | 20,151 | 7,384 | ||||||
| Other revenue | 12,079 | 7,979 | ||||||
| Total revenues | 183,903 | 148,072 | ||||||
| Expenses: | ||||||||
| Policy and contract benefits | 40,841 | 36,626 | ||||||
| Commission expense | 74,903 | 62,633 | ||||||
| Employee compensation and benefits | 29,153 | 27,788 | ||||||
| Interest expense | 6,920 | 5,946 | ||||||
| Depreciation and amortization | 3,094 | 2,957 | ||||||
| Other expenses | 23,837 | 19,165 | ||||||
| Total expenses | 178,748 | 155,115 | ||||||
| Income (loss) before taxes from continuing operations | 5,155 | (7,043 | ) | |||||
| Less: provision (benefit) for income taxes | 854 | (1,568 | ) | |||||
| Net income (loss) from continuing operations | 4,301 | (5,475 | ) | |||||
| Discontinued operations: | ||||||||
| Income (loss) before taxes from discontinued operations | — | 624 | ||||||
| Gain on sale of discontinued operations | — | 46,184 | ||||||
| Less: Provision (benefit) for income taxes | — | 12,327 | ||||||
| Net income (loss) from discontinued operations | — | 34,481 | ||||||
| Net income (loss) before non-controlling interests | 4,301 | 29,006 | ||||||
| Less: net income (loss) attributable to non-controlling interests - TFP | — | 5,392 | ||||||
| Less: net income (loss) attributable to non-controlling interests - Other | 376 | 54 | ||||||
| Net income (loss) attributable to Common Stockholders | $ | 3,925 | $ | 23,560 | ||||
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Net income (loss) per Common Share: |
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| Basic, continuing operations, net | $ | 0.11 | $ | (0.15 | ) | |||
| Basic, discontinued operations, net | — | 0.94 | ||||||
| Basic earnings per share | $ | 0.11 | $ | 0.79 | ||||
| Diluted, continuing operations, net | 0.11 | (0.15 | ) | |||||
| Diluted, discontinued operations, net | — | 0.94 | ||||||
| Diluted earnings per share | $ | 0.11 | $ | 0.79 | ||||
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Weighted average number of Common Shares: |
||||||||
| Basic | 34,673,054 | 29,861,496 | ||||||
| Diluted | 34,673,054 | 29,861,496 | ||||||
| Dividends declared per Common Share | $ | 0.040 | $ | 0.035 | ||||
Non-GAAP Reconciliations (Unaudited)
Non-GAAP Financial Measures — Adjusted EBITDA and Operating EBITDA
The Company defines Adjusted EBITDA as GAAP net income of the Company adjusted to add (i) corporate interest expense, consolidated income taxes and consolidated depreciation and amortization expense, (ii) adjust for the effect of purchase accounting, (iii) adjust for non-cash fair value adjustments, and (iv) any significant non-recurring expenses. Operating EBITDA represents Adjusted EBITDA plus stock based compensation expense, less realized and unrealized gains and losses and less third party non-controlling interests. Operating EBITDA 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.
| ($ in millions) | Three Months Ended |
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| 2019 | 2018 | ||||||||
| Net income (loss) attributable to Common Stockholders | $ | 3.9 | $ | 23.6 | |||||
| Add: net (loss) income attributable to noncontrolling interests | 0.4 | 5.4 | |||||||
| Less: net income from discontinued operations | — | 34.5 | |||||||
| Income (loss) from continuing operations | $ | 4.3 | $ | (5.5 | ) | ||||
| Corporate Debt related interest expense(1) | 5.0 | 3.8 | |||||||
| Consolidated income tax expense (benefit) | 0.9 | (1.6 | ) | ||||||
| Depreciation and amortization expense(2) | 3.0 | 2.8 | |||||||
| Non-cash fair value adjustments(3) | (0.6 | ) | 0.1 | ||||||
| Non-recurring expenses(4) | 2.0 | (0.3 | ) | ||||||
| Adjusted EBITDA from continuing operations | $ | 14.6 | $ | (0.7 | ) | ||||
| Add: Stock-based compensation expense | 1.4 | 1.2 | |||||||
| Add: Vessel depreciation, net of capital expenditures | 0.6 | — | |||||||
| Less: Realized and unrealized gain (loss)(5) | 4.0 | (7.7 | ) | ||||||
| Less: Third party non-controlling interests(6) | — | (0.1 | ) | ||||||
| Operating EBITDA from continuing operations | $ | 12.6 | $ | 8.3 | |||||
| Income (loss) from discontinued operations | $ | — | $ | 34.5 | |||||
| Consolidated income tax expense (benefit) | — | 12.3 | |||||||
| Non-cash fair value adjustments (3) | — | (40.7 | ) | ||||||
| Adjusted EBITDA from discontinued operations | $ | — | $ | 6.1 | |||||
| Less: Realized and unrealized gain (loss) (5) | — | 5.5 | |||||||
| Operating EBITDA from discontinued operations | $ | — | $ | 0.6 | |||||
| Total Adjusted EBITDA | $ | 14.6 | $ | 5.4 | |||||
| Total Operating EBITDA | $ | 12.6 | $ | 8.9 | |||||
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_______________ |
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| (1) | Corporate Debt interest expense includes Secured corporate credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt in specialty insurance and asset management, mortgage and other operations is not added-back for Adjusted EBITDA and Operating EBITDA. | |
| (2) | Represents total depreciation and amortization expense less purchase accounting amortization related adjustments at the |
|
| (3) | For our specialty insurance operations, depreciation and amortization on senior living real estate that is within net investment income is added back to Adjusted EBITDA. For Care (Discontinued Operations), the reduction in EBITDA is related to accumulated depreciation and amortization, and certain operating expenses, which were previously included in Adjusted EBITDA in prior periods. | |
| (4) | Acquisition, start-up and disposition costs including debt extinguishment, legal, taxes, banker fees and other costs. In 2018, includes payments pursuant to a separation agreement, dated |
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| (5) | Adjustment excludes Mortgage realized and unrealized gains and losses - Performing and NPLs as those are recurring in nature and align with those business models. | |
| (6) | Removes the Operating EBITDA associated with third party non-controlling interests. Does not remove the non-controlling interests related to employee based shares. | |
Non-GAAP Financial Measures — Adjusted EBITDA and Operating EBITDA
The tables below present Adjusted EBITDA and Operating EBITDA by business component.
| Three Months Ended |
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| ($ in millions) |
Specialty |
Tiptree |
Corporate |
Total | |||||||||||||
| Pre-tax income/(loss) from continuing ops | $ | 8.1 | $ | 5.9 | $ | (8.9 | ) | $ | 5.1 | ||||||||
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Adjustments: |
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| Corporate Debt related interest expense(2) | 3.4 | — | 1.6 | 5.0 | |||||||||||||
| Depreciation and amortization expenses(3) | 2.2 | 0.8 | 0.1 | 3.1 | |||||||||||||
| Non-cash fair value adjustments(4) | — | (0.6 | ) | — | (0.6 | ) | |||||||||||
| Non-recurring expenses(5) | 1.3 | — | 0.7 | 2.0 | |||||||||||||
| Adjusted EBITDA | $ | 15.0 | $ | 6.1 | $ | (6.5 | ) | $ | 14.6 | ||||||||
| Add: Stock-based compensation expense | 0.6 | 0.1 | 0.7 | 1.4 | |||||||||||||
| Add: Vessel depreciation, net of capital expenditures | — | 0.6 | — | 0.6 | |||||||||||||
| Less: Realized and unrealized gain (loss)(6) | 1.9 | 2.1 | — | 4.0 | |||||||||||||
| Operating EBITDA | $ | 13.7 | $ | 4.7 | $ | (5.8 | ) | $ | 12.6 | ||||||||
| Three Months Ended |
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| ($ in millions) |
Specialty |
Tiptree |
Corporate |
Total | |||||||||||||
| Pre-tax income/(loss) from continuing ops | $ | 1.3 | $ | (1.7 | ) | $ | (6.7 | ) | $ | (7.1 | ) | ||||||
| Pre-tax income/(loss) from discontinued ops | — | 46.8 | — | 46.8 | |||||||||||||
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Adjustments: |
|||||||||||||||||
| Corporate Debt related interest expense(2) | 3.2 | — | 0.6 | 3.8 | |||||||||||||
| Depreciation and amortization expenses(3) | 2.5 | 0.2 | 0.1 | 2.8 | |||||||||||||
| Non-cash fair value adjustments(4) | 0.1 | (40.7 | ) | — | (40.6 | ) | |||||||||||
| Non-recurring expenses(5) | 1.1 | 0.9 | (2.3 | ) | (0.3 | ) | |||||||||||
| Adjusted EBITDA | $ | 8.2 | $ | 5.5 | $ | (8.3 | ) | $ | 5.4 | ||||||||
| Add: Stock-based compensation expense | 0.6 | $ | — | 0.6 | 1.2 | ||||||||||||
| Less: Realized and unrealized gain (loss)(6) | (4.5 | ) | 2.3 | — | (2.2 | ) | |||||||||||
| Less: Third party non-controlling interests(7) | — | (0.1 | ) | — | (0.1 | ) | |||||||||||
| Operating EBITDA | $ | 13.3 | $ | 3.3 | $ | (7.7 | ) | $ | 8.9 | ||||||||
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_______________ |
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The footnotes below correspond to the tables above, under “—Adjusted EBITDA and Operating EBITDA - Non-GAAP” |
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| (1) |
Includes discontinued operations related to Care. For more information, see “Note—(3) Dispositions, Assets Held for Sale & Discontinued Operations” in our Form 10-Q for the quarter ended |
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| (2) | Corporate Debt interest expense includes Secured corporate credit agreements, junior subordinated notes and preferred trust securities. Interest expense associated with asset-specific debt in specialty insurance and asset management, mortgage and other operations is not added-back for Adjusted EBITDA and Operating EBITDA. | |
| (3) | Represents total depreciation and amortization expense less purchase accounting amortization related adjustments at the |
|
| (4) | For our specialty insurance operations, depreciation and amortization on senior living real estate that is within net investment income is added back to Adjusted EBITDA. For Care (Discontinued Operations), the reduction in EBITDA is related to accumulated depreciation and amortization, and certain operating expenses, which were previously included in Adjusted EBITDA in prior periods. | |
| (5) | Acquisition, start-up and disposition costs including debt extinguishment, legal, taxes, banker fees and other costs. In 2018, includes payments pursuant to a separation agreement, dated |
|
| (6) | Adjustment excludes Mortgage realized and unrealized gains and losses - Performing and NPLs as those are recurring in nature and align with those business models. | |
| (7) | Removes the Operating EBITDA associated with third party non-controlling interests. Does not remove the non-controlling interests related to employee based shares. | |
Non-GAAP Financial Measures — Book value per share
Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.
| ($ in millions, except per share information) | As of |
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|
2019 |
2018 |
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| Total stockholders’ equity | $ | 394.6 | $ | 407.7 | |||||
| Less non-controlling interest - other | 11.0 | 5.4 | |||||||
| Total stockholders’ equity, net of non-controlling interests - other | $ | 383.6 | $ | 402.3 | |||||
| Total Common shares outstanding | 34.5 | 29.9 | |||||||
| Total Class B shares outstanding | — | 8.0 | |||||||
| Total shares outstanding | 34.5 | 37.9 | |||||||
| Book value per share(1) | $ | 11.12 | $ | 10.59 | |||||
| (1) | For periods prior to |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190506005684/en/
Investor Relations, 212-446-1400
[email protected]
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