Tiptree Inc. (NASDAQ:TIPT) Q1 2022 Earnings Conference Call May 6, 2022 9:00 AM ET

Company Participants

Sandra Bell - Chief Financial Officer

Michael Barnes - Executive Chairman

Conference Call Participants

Alex Vezendan - Veradace Capital

Walter Schenker - MAZ Partners

Operator

Greetings. Welcome to the Tiptree Inc.’s First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I’d now turn the conference over to your host, Ms. Sandra Bell, Chief Financial Officer. Thank you, ma’am. You may begin.

Sandra Bell

Good morning, and welcome to our first quarter 2022 earnings call. We are joined today by our Executive Chairman, Michael Barnes; and CEO, Jonathan Ilany. You can find the slides that accompany this review on our Investor Relations website.

Please note that some of our comments today will contain forward-looking statements based on our current view of our business and actual future results may differ materially. Please see our most recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. In addition, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning’s presentation. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our SEC filings, the appendix to our presentation, and posted on our website.

With that, I will turn the call over to Michael.

Michael Barnes

Thanks, Sandra. Good morning and welcome to our earnings call. In the first quarter, our operating businesses continued to produce excellent returns, with revenues increasing 10% to 325 million and adjusted net income improving 17% to 15 million. Fortegra posted another great quarter, with premiums and equivalents of 601 million, 26% growth from the prior year led by strength in the admitted and E&S insurance lines. The business continues to experience hard markets for its specialty E&S lines, which contributed to the record quarterly adjusted net income of 21 million and return on equity of 28%. In early April, Fortegra also added a bolt on acquisition in the UK for just over $15 million of net cash consideration, further establishing its footprint in the European auto warranty sector.

The Warburg regulatory approval process remains on track and we expect to close within the second quarter. We anticipate using investment proceeds for additional growth capital in Fortegra’s specialty lines and to repay Tiptree’s corporate debt facility. Like many of our peers, our investments experienced negative mark to market for the quarter, both within our insurance investment portfolio and on our investment shares. We are likely to experience such volatility from quarter-to-quarter on publicly traded bonds and stocks. And therefore, we tend to look at performance over a much longer time horizon. Our fixed income portfolio remains conservatively positioned with a AA+ rating and a 2.5 year weighted average duration. We feel confident that the majority of the unrealized losses from this quarter will be recovered over the coming years as bonds mature.