Tiptree Financial Inc. (“Tiptree” or the “Company”) (NASDAQ:TIPT), a
diversified holding company which operates in four segments: insurance
and insurance services, specialty finance (including corporate, consumer
and tax-exempt credit), asset management and real estate, today
announced its financial results for the third quarter ended September
30, 2014.
Financial Highlights
-
Economic Net Income of Tiptree Operating Company, LLC (“Operating
Company”), was $9.0 million; Economic Net Income available to Class A
common stockholders was $5.5 million, or $0.32 per diluted Class A
share.
-
GAAP Net Loss of Operating Company was $2.8 million; GAAP Net Income
available to Tiptree Class A common stockholders was $0.3 million, or
$0.01 per diluted Class A share. Excluding the net loss related to the
consolidated CLOs, specifically the $19.6 million net loss
attributable to consolidated CLOs and the addition of $11.9 million
net loss attributable to VIE subordinated noteholders, net income
available to Class A common stockholders for the quarter ended
September 30, 2014 would have been $8.1 million compared to a net loss
of $3.6 million for the same period in 2013.
-
Basic Economic Book Value and Fully Diluted Economic Book Value Per
Share (including Tiptree level net assets) were $10.93 and $10.78,
respectively, at September 30, 2014.
-
Tiptree received proceeds of $29.8 million resulting in a gain of
approximately $7.9 million on the repayment of the Westside Loan, an
investment of Care, LLC, our healthcare real estate subsidiary.
-
Tiptree received approximately $8.1 million of distributions from its
investment in Star Asia Opportunity II (“SAO II”) related to the sale
of a Japanese property in which SAO II held an interest.
Business Developments
-
On August 11, 2014 we entered into an Agreement and Plan of Merger, to
acquire Fortegra Financial Corporation (“Fortegra”) for approximately
$218 million in cash. Fortegra is a publicly traded insurance services
company that offers a wide array of revenue enhancing products,
including payment protection products, motor club memberships, service
contracts, device and warranty services, and administration services
to its business partners, including insurance companies, retailers,
dealers, insurance brokers and agents and financial services
companies. Closing of the merger is subject to the satisfaction of
customary conditions including, among other things, insurance
regulatory approvals and is expected in the fourth quarter of 2014 or
first quarter of 2015.
-
On October 29, 2014, we entered into a definitive agreement to sell
Philadelphia Financial Group, Inc. (including both its third party
administration and life insurance operations), to funds managed by the
Tactical Opportunities Group of The Blackstone Group L.P., for
approximately $155 million in cash plus additional consideration of
approximately $10 million to be paid over two years. The transaction
is subject to customary closing conditions, including regulatory
approval, and is expected to close in the third quarter of 2015.
-
Tiptree appointed Jonathan Ilany as its Executive Vice President, Head
of Mortgage Finance and Asset Management. Mr. Ilany joins Michael G.
Barnes, Executive Chairman of Tiptree, and Geoffrey N. Kauffman,
President and Chief Executive Officer of Tiptree as a member of
Tiptree’s Management Executive Committee. Prior to that time, Mr.
Ilany was a member of our Board of Directors.
-
Tiptree increased the Telos CLO 2014-6, Ltd. (“Telos 6”) warehouse
credit facility to $225 million. Telos 6 priced on October 30, 2014
and is expected to close in the fourth quarter of 2014.
Third Quarter 2014 Financial Overview
Economic Net Income of Operating Company
Economic Net Income of Operating Company for the quarter ended September
30, 2014 was $9.0 million compared to $11.4 million for the quarter
ended September 30, 2013, a decline of $2.4 million. The decline in
Economic Net Income for the quarter ended September 30, 2014 was the
result of an increase in total revenue of $3.1 million and an increase
in expenses of $5.5 million. The higher revenue was the result of
increased revenue from (1) CLO equity distributions of $0.1 million, (2)
a distribution from our Star Asia investment of $8.1 million, and (3) an
unrealized gain of $6.7 million in our Care subsidiary; this higher
revenue was offset by unrealized losses of $4.5 million from the
marked-to-market of our CLO equity investments.
The increase of $5.5 million in expenses was largely driven by (1) an
increase in professional fees and other expenses of $1.4 million as a
result of increased costs from transaction activity and other costs
including legal, audit, tax preparation and consulting fees as a result
of Tiptree reporting as a public company and (2) an increase in interest
expense of $3.6 million from the prior year largely due to our credit
facility being outstanding for the full three months of 2014, and higher
interest expense from the warehouse facility in 2014 as compared to 2013.
GAAP Net Income Available to Class A Common Stockholders
Net income available to Class A common stockholders for the quarter
ended September 30, 2014 was $0.3 million compared to $1.8 million for
the same period in 2013, a decrease of $1.5 million. The decrease was
primarily due to (1) an increase of $2.3 million net realized and
unrealized gains, due to the gain from repayment of the Westside loan of
$7.9 million offset, in part, by declines of $1.5 million relating to
tax exempt business and $3.8 million in declines relating to warehouse
positions, (2) an increase of $10.6 million of investment income due to
an increase in interest income of $3.4 million from a derivative
position, an increase in rental revenue of $3.1 million due to
additional properties acquired, $2.4 million from the gain on sale of
loans held for sale related to Luxury and an increase of $1.2 million of
other income due to the inclusion of Luxury in 2014, (3) an increase in
total expenses of $11.7 million due to an increase in interest expense
relating to our credit facility of $2.6 million, an increase in payroll
expense of $3.8 million related to the inclusion of Luxury in 2014 and
property acquisitions at Care, an increase in professional fees of $1.2
million related to transaction activity and other costs including legal,
audit, tax preparation and consulting fees as a result of Tiptree
reporting as a public company and an increase in other expenses of $1.3
million largely driven by the inclusion of Luxury in 2014, (4) an $18.1
million increase in net losses attributable to consolidated CLOs, (5) a
net decrease in income attributable to noncontrolling interest of $8.9
million, and (6) an increase of $4.9 million in net losses attributable
to VIE subordinated noteholders.
The consolidation of CLOs affects the net income attributable to Class A
common stockholders reported under GAAP. Under GAAP, we are required to
consolidate all of the results of operations of the VIE’s that our
subsidiaries manage regardless of our economic interest. Excluding the
net loss related to the consolidated CLOs, specifically the $19.6
million net loss attributable to consolidated CLOs and the addition of
$11.9 million net loss attributable to VIE subordinated noteholders, net
income available to Class A common stockholders for the quarter ended
September 30, 2014 would have been $8.1 million compared to a net loss
of $3.6 million for the same period in 2013.
Year to Date Financial Overview
Economic Net Income and Book Value of Operating Company
Economic Net Income of Operating Company for the nine months ended
September 30, 2014 was $17.5 million compared to $29.9 million for the
nine months ended September 30, 2013, a decline of $12.4 million. The
decline in Economic Net Income for the nine month period was the result
of a decrease in total revenue of $7.4 million and an increase in
expenses of $5.0 million. The lower revenue was the result of unrealized
losses of $19.7 million from the marked-to-market of our investments,
largely driven by the loss of $10.7 million relating to CLO equity
investments and the loss of $7.1 million relating to the Company’s Star
Asia Investments. This was partially offset by increased revenue from
(1) distributions from our Star Asia investments of $8.5 million and (2)
interest income of $5.3 million largely comprising of interest from
warehouse positions of $2.3 million and interest income of $2.9 million
from derivative positions put into place during 2014.
The increase of $5.0 million in expenses was largely driven by (1) an
increase in professional fees and other expenses of $2.1 million as a
result of increased costs from transaction activity and other costs
including legal, audit, tax preparation and consulting fees as a result
of Tiptree reporting as a public company, and (2) an increase in
interest expense of $6.7 million from the prior year due to our credit
facility being outstanding for the full nine months of 2014, and higher
interest expense from derivative positions put into place during 2014.
Total annualized economic return since inception as of September 30,
2014 was 12.5%.1 Total Economic Book Value Per Share annual
growth rate since inception as of September 30, 2014 was 10.9%.2
|
|
|
(1)
|
|
This is the total Economic Return to original investors of Tiptree
Financial Partners L.P. (“TFP”) since inception, which is calculated
by taking the total life-to-date dividends received plus the Basic
Economic Book Value as of September 30, 2014.
|
|
|
|
|
|
|
|
(2)
|
|
This is calculated based upon the initial purchase price per share,
net of fees and expenses, and Basic Economic Book Value Per Share
(including Tiptree level net assets) as of September 30, 2014.
|
|
|
|
|
|
|
GAAP Net Income Available to Class A Common Stockholders
Net income available to Class A common stockholders for the period ended
September 30, 2014 was $2.4 million, compared to net income of
$6.6 million for the same period in 2013, a decrease of $4.2 million.
This decrease was primarily due to (1) an increase of $4.9 million net
realized and unrealized gains due to the gain from repayment of the
Westside loan of $7.9 million combined with a $3.8 million unrealized
gain from the tax exempt business, offset, in part, by a $6.0 million
overall decline in the value of other assets including credit
derivatives and warehouse assets, (2) an increase of $25.9 million of
investment income due to increased rental revenue of $10.0 million from
additional properties acquired, $6.5 million of interest income due to
$3.0 million related to credit derivatives and $2.5 million related to
the warehouse, $5.1 million from the gain on sale of loans held for
sale, related to Luxury and an increase of $2.7 million in other income
driven by the inclusion of Luxury in 2014, (3) an increase in total
expenses of $26.1 million largely due to an increase of $9.4 million of
payroll expense due to additional properties acquired at Care as well as
increases at Siena and Luxury, an increase in interest expense of $8.7
million related to $2.6 million relating to borrowings under our credit
facility, $3.0 million on derivative positions held and $1.0 million
related to the warehouse, and a $4.8 million increase in other expenses
due to a $2.1 million increase at Care from consolidation of operations
of joint ventures and a $2.1 million increase due to the inclusion of
Luxury in 2014 and a $1.1 million increase in professional fees related
to increases in legal, audit, tax preparation and consulting fees as a
result of Tiptree reporting as a public company, (4) $23.3 million
increase in net losses attributable to consolidated CLOs, (5) a net
decrease in income attributable to noncontrolling interest of $23.5
million, and (6) an increase of $4.3 million in net losses attributable
to VIE subordinated noteholders.
Exchange of TFP Units for Tiptree Shares
On November 3, 2014, the Company issued an aggregate of 9,866,456 shares
of Class A common stock to limited partners of TFP in exchange for TFP
partnership units in transactions exempt from registration under the
Securities Act of 1933. As a result, Tiptree’s combined direct and
indirect ownership of Operating Company is approximately 77%. As of
November 12, 2014, there were 31,829,633 shares of Class A common stock
of Tiptree outstanding.
About Tiptree Financial Inc.
Tiptree is a diversified holding company engaged through its
consolidated subsidiaries in a number of businesses and is an active
acquirer of new businesses. Tiptree, whose operations date back to 2007,
has subsidiaries that operate in four industry segments: insurance and
insurance services, specialty finance, asset management and real estate.
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 the Company’s control, are difficult to predict and could cause
actual results to differ materially from those expressed or forecast in
the forward-looking statements. The Company’s 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 Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as to the date of this release. The factors
described therein are not necessarily all of the important factors that
could cause actual results or developments to differ materially from
those expressed in any of the Company’s forward-looking
statements. Other unknown or unpredictable factors also could affect our
forward-looking statements. Consequently, the Company’s actual
performance could be materially different from the results described or
anticipated by its forward-looking statements. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. Except as required by the federal securities
laws, we undertake no obligation to update any forward-looking
statements.
Economic Net Income
Economic Net Income (“ENI”) is a non-GAAP financial measure of
profitability which Tiptree uses to measure the performance of its core
business. Management believes that ENI reflects the nature and substance
of the economic results of Tiptree’s businesses. Management also uses
ENI as a measurement for determining incentive compensation. ENI as used
by Tiptree may not be comparable to similar measures presented by other
companies as it is a non-GAAP financial measure that is not based on a
comprehensive set of accounting rules or principles and therefore may be
defined differently by other companies. ENI should be considered in
addition to, not as a substitute for, financial measures determined in
accordance with GAAP.
Economic Net Income Components
The following table details the individual revenue and expense
components of the non-GAAP measure ENI for the periods indicated (in
thousands):
|
|
|
Three Months Ended September 30,
|
|
Year to Date
|
|
|
|
2014
|
|
2013
|
|
$ Change
|
|
2014
|
|
2013
|
|
$ Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
4,779
|
|
|
$
|
1,830
|
|
|
$
|
2,949
|
|
|
$
|
8,919
|
|
|
$
|
3,622
|
|
|
$
|
5,297
|
|
|
Dividend/distribution income
|
|
11,994
|
|
|
3,475
|
|
|
8,519
|
|
|
20,168
|
|
|
12,439
|
|
|
7,729
|
|
|
Realized gains (losses)
|
|
1
|
|
|
(7
|
)
|
|
8
|
|
|
(751
|
)
|
|
(1,015
|
)
|
|
264
|
|
|
Unrealized (losses) gains
|
|
(1,775
|
)
|
|
7,599
|
|
|
(9,374
|
)
|
|
558
|
|
|
20,273
|
|
|
(19,715
|
)
|
|
Management fee income
|
|
4,705
|
|
|
3,694
|
|
|
1,011
|
|
|
11,354
|
|
|
12,281
|
|
|
(927
|
)
|
|
Total revenues
|
|
19,704
|
|
|
16,591
|
|
|
3,113
|
|
|
40,248
|
|
|
47,600
|
|
|
(7,352
|
)
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
3,497
|
|
|
2,935
|
|
|
562
|
|
|
7,853
|
|
|
9,839
|
|
|
(1,986
|
)
|
|
Distribution expense (convertible preferred)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,747
|
|
|
(1,747
|
)
|
|
Interest expense
|
|
4,158
|
|
|
596
|
|
|
3,562
|
|
|
8,158
|
|
|
1,496
|
|
|
6,662
|
|
|
Professional fees and other
|
|
3,093
|
|
|
1,694
|
|
|
1,399
|
|
|
6,713
|
|
|
4,633
|
|
|
2,080
|
|
|
Total expense
|
|
10,748
|
|
|
5,225
|
|
|
5,523
|
|
|
22,724
|
|
|
17,715
|
|
|
5,009
|
|
|
Economic Net Income of Operating Company
|
|
8,956
|
|
|
11,366
|
|
|
(2,410
|
)
|
|
17,524
|
|
|
29,885
|
|
|
(12,361
|
)
|
|
Less: Economic Net Income attributable to TFP
|
|
4,229
|
|
|
8,544
|
|
|
(4,315
|
)
|
|
10,609
|
|
|
22,450
|
|
|
(11,841
|
)
|
|
Economic Net Income of Tiptree before tax provision
|
|
4,727
|
|
|
2,822
|
|
|
1,905
|
|
|
6,915
|
|
|
7,435
|
|
|
(520
|
)
|
|
Less: Tax adjustment attributable to Tiptree
|
|
(771
|
)
|
|
894
|
|
|
(1,665
|
)
|
|
(1,308
|
)
|
|
567
|
|
|
(1,875
|
)
|
|
Economic Net Income of Tiptree
|
|
$
|
5,498
|
|
|
$
|
1,928
|
|
|
$
|
3,570
|
|
|
$
|
8,223
|
|
|
$
|
6,868
|
|
|
$
|
1,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Net Income to Economic Net Income
In addition to the other adjustments indicated in the table below, ENI
includes the following adjustments: (i) adjustment to results from real
estate to eliminate non-cash items similar to adjusted funds from
operations (“AFFO”), which is a non-GAAP financial measure widely used
in the real estate industry, (ii) in our insurance segment, adjustment
for fair value on available for sale securities, which is a non-GAAP
measure frequently used throughout the insurance industry, and (iii) in
our specialty finance segment, VIEs are shown as if not consolidated.
The following is a reconciliation of GAAP Net Income attributable to
Tiptree to ENI for the periods ended September 30, 2014 and 2013 (in
thousands):
|
|
|
Three Months Ended
|
|
Year to Date
|
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
GAAP Net Income of Tiptree
|
|
$
|
272
|
|
|
$
|
1,830
|
|
|
$
|
2,368
|
|
|
$
|
6,563
|
|
|
Plus: Tax adjustment attributable to Tiptree companies (1)
|
|
(1,459
|
)
|
|
1,881
|
|
|
(3,565
|
)
|
|
567
|
|
|
Plus: Portion of NCI attributed to TFP
|
|
(1,655
|
)
|
|
7,260
|
|
|
(1,664
|
)
|
|
21,589
|
|
|
GAAP Net (Loss)/Income of Operating Company
|
|
(2,842
|
)
|
|
10,971
|
|
|
(2,861
|
)
|
|
28,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to results from real estate operations (2)
|
|
1,386
|
|
|
(356
|
)
|
|
2,478
|
|
|
(3,758
|
)
|
|
Effect of change in majority ownership of subsidiaries (3)
|
|
585
|
|
|
(1,297
|
)
|
|
519
|
|
|
(1,673
|
)
|
|
Fair value adjustments to carrying value (4)
|
|
(5,145
|
)
|
|
(74
|
)
|
|
(7,973
|
)
|
|
914
|
|
|
Reversal of VIEs net losses attributable to TFI (5)
|
|
14,972
|
|
|
2,065
|
|
|
25,361
|
|
|
6,256
|
|
|
Reversal of TAMCO net gains for periods prior to acquisition of
TAMCO (6)
|
|
—
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
TFP convertible preferred reclass of distributions to expense (7)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,747
|
)
|
|
Foreign exchange reserve (8)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,174
|
|
|
Economic Net Income of Operating Company
|
|
8,956
|
|
|
11,366
|
|
|
17,524
|
|
|
29,885
|
|
|
Less: Economic Net Income attributable to the portion of TFP not
held by TFI
|
|
4,229
|
|
|
8,544
|
|
|
10,609
|
|
|
22,450
|
|
|
Economic Net Income of Tiptree before tax provision
|
|
4,727
|
|
|
2,822
|
|
|
6,915
|
|
|
7,435
|
|
|
Less: Tax adjustment attributable to Tiptree (9)
|
|
(771
|
)
|
|
894
|
|
|
(1,308
|
)
|
|
567
|
|
|
Economic Net Income of Tiptree
|
|
$
|
5,498
|
|
|
$
|
1,928
|
|
|
$
|
8,223
|
|
|
$
|
6,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Tax provision adjustment for Tiptree to reflect tax benefits at
certain entities, which reduces the tax expense at Operating Company.
|
|
|
|
(2)
|
|
Adjustments to results from real estate operations includes the
effects of straight lining lease revenue, expenses associated with
depreciation and amortization, certain transaction expenses,
non-cash equity compensation expenses, other non-cash charges, and
incentive compensation adjustments for unconsolidated partnerships
and joint ventures.
|
|
|
|
(3)
|
|
Effect of change in majority ownership of subsidiaries is the
dilutive effect of Care Investment Trust (Care Inc.) issuance of
shares related to the closing of the transaction with Care Inc. on
July 1, 2013 (the Contribution Transactions) and stock-based
compensation and the effect of Tiptree’s increased ownership of
Philadelphia Financial Group (PFG) due to the accretion of preferred
shares.
|
|
|
|
(4)
|
|
Adjustment is to account at fair value for the CLO subordinated
notes held by Tiptree and PFG’s available-for-sale securities. Fair
values are obtained from independent third party pricing sources.
|
|
|
|
(5)
|
|
Reversal of VIEs net losses/(gains) attributable to Tiptree (see
Management’s Discussion and Analysis—Tiptree Portion of Net Income
and Ownership of Consolidated CLOs within Tiptree Financial Inc.’s
Form 10-Q for the period ended September 30, 2014).
|
|
|
|
(6)
|
|
The purchase of TAMCO on June 30, 2012 in connection with the
internalization of our management was accounted for as a combination
of entities under common control. As a result, the assets and
liabilities of TAMCO were presented as if TAMCO had been
consolidated by Tiptree on January 1, 2010. For non-controlling
interest, we reversed the effect of this recasting of financial
information for prior periods.
|
|
|
|
(7)
|
|
Convertible preferred distribution reclassified as expense for
purposes of ENI so as to reflect a cost of capital charge for
outstanding convertible preferred. This class automatically
converted to common shares effective July 1, 2013.
|
|
|
|
(8)
|
|
Reflects the timing difference on the recognition of yen exposure
GAAP versus ENI.
|
|
|
|
(9)
|
|
Tax adjustment for Tiptree Financial Inc. only and not its
consolidated subsidiaries.
|
|
|
|
|
Reconciliation of GAAP Book Value to Economic Book Value
Economic Book Value (“EBV”) is a non-GAAP financial measure which
Tiptree uses to evaluate the performance of its core business.
Management believes that EBV provides greater transparency and enhanced
visibility into the underlying profitability drivers of our business and
provides a useful, alternative view of the economic results of Tiptree’s
businesses. EBV includes the following adjustments: (i) reversal of GAAP
value for TAMCO and CLO VIEs and replacement with fair value, (ii)
addition of life to date AFFO adjustments for real estate operations,
(iii) reclassification of convertible preferred distributions to expense
and (iv) foreign exchange timing adjustment.
EBV as used by Tiptree may not be comparable to similar measures
presented by other companies as it is a non-GAAP financial measure that
is not based on a comprehensive set of accounting rules or principles
and therefore may be defined differently by other companies. EBV should
be considered in addition to, not as a substitute for, financial
measures determined in accordance with GAAP. The following is a
reconciliation of GAAP Book Value attributable to Tiptree to EBV as of
September 30, 2014 and December 31, 2013 (in thousands except share
data):
|
|
|
September 30, 2014
|
|
December 31, 2013
|
|
Economic Book Value
|
|
|
|
|
|
|
|
GAAP TFI Total Capital
|
|
$
|
547,764
|
|
|
$
|
565,856
|
|
|
Less: Non-controlling interest in TFI
|
|
235,951
|
|
|
361,354
|
|
|
Less: Retained Earnings of consolidated TAMCO
|
|
64,550
|
|
|
84,591
|
|
|
GAAP Net Assets to Tiptree Class A Stockholders
|
|
247,263
|
|
|
119,911
|
|
|
Less: Net assets held directly at Tiptree
|
|
7,960
|
|
|
4,259
|
|
|
Plus: Portion of NCI held by TFP
|
|
214,024
|
|
|
339,283
|
|
|
GAAP Net Assets of Operating Company
|
|
453,327
|
|
|
454,935
|
|
|
Reversal of consolidation of TAMCO (including VIEs) (1)
|
|
(141,117
|
)
|
|
(144,817
|
)
|
|
Fair values of CLOs (2)
|
|
70,523
|
|
|
61,145
|
|
|
Value of TAMCO (3)
|
|
57,661
|
|
|
57,661
|
|
|
Adjustments to results from real estate operations (4)
|
|
6,157
|
|
|
3,711
|
|
|
Total Adjustments
|
|
(6,776
|
)
|
|
(22,300
|
)
|
|
Economic Operating Company Book Value
|
|
446,551
|
|
|
432,635
|
|
|
Basic Units outstanding (5)
|
|
41,593
|
|
|
41,525
|
|
|
Fully Diluted Unit adjustments (6)
|
|
578
|
|
|
480
|
|
|
Fully Diluted Economic Book Value Per Unit
|
|
42,171
|
|
|
42,005
|
|
|
Basic Economic Tiptree Book Value Per Class A Share
|
|
$
|
10.74
|
|
|
$
|
10.42
|
|
|
Net assets held directly at Tiptree
|
|
7,960
|
|
|
4,259
|
|
|
Economic Operating Company Book Value (including Tiptree level
net assets)
|
|
454,511
|
|
|
436,894
|
|
|
Basic Economic Book Value Per Share (including Tiptree level net
assets)
|
|
$
|
10.93
|
|
|
$
|
10.52
|
|
|
Fully Diluted Economic Book Value Per Share (including Tiptree level
net assets)
|
|
$
|
10.78
|
|
|
$
|
10.40
|
|
|
(1)
|
|
Under GAAP, Tiptree is required to consolidate all of the assets and
liabilities of the VIEs managed by TAMCO on Tiptree’s balance sheet
regardless of Tiptree’s economic interest. See Note 2(c) to the
consolidated financial statements included in the 2013 Annual Report
on Form 10-K. Adjustment is reversal of consolidation of TAMCO and
VIEs.
|
|
|
|
(2)
|
|
Adjustment includes the fair value of our ownership position in the
VIEs, which has been reversed as described in note (1) above.
|
|
|
|
(3)
|
|
Values TAMCO at the lower of cost or market, and reflects the
valuation of the purchase price based on the value of the
partnership units issued in consideration for TAMCO.
|
|
|
|
(4)
|
|
Adjustments to results from real estate operations reverses the
amounts, since inception, related to the effects of straight lining
lease revenue, expenses associated with depreciation and
amortization, certain transaction expenses, non-cash transaction
expenses, non-cash equity compensation expenses, other non-cash
charges, and incentive compensation adjustment for unconsolidated
partnerships and joint ventures.
|
|
|
|
(5)
|
|
Assumes full redemption of Operating Company units for Class A
common stock or exchange by TFP limited partners of their limited
partnership units for shares of Class A common stock. Operating
Company is owned approximately 25% by Tiptree and approximately 75%
by TFP. As of September 30, 2014, Tiptree owned approximately 37% of
TFP, with the remainder owned by the existing limited partners of
TFP. As a result, Tiptree’s combined direct and indirect ownership
of Operating Company was approximately 53% as of September 30, 2014.
Tiptree’s direct ownership of Operating Company’s shares is equal to
the number of shares of Class A common stock and, pursuant to
Operating Company’s limited liability agreement, this ratio will
remain 1:1. TFP’s ownership is equal to 2.798 times the number of
TFP partnership units outstanding and this ratio is expected to
remain 2.798:1. There were 11,068 and 11,068 partnership units
outstanding as of September 30, 2014 and December 31, 2013,
respectively. The basic EBV per partnership unit was $30.05 and
$29.16 as of September 30, 2014 and December 31, 2013, respectively.
The basic EBV (including Tiptree level net assets) per partnership
unit was $30.58 and $29.43 as of September 30, 2014 and December 31,
2013, respectively. The Dilutive EBV (including Tiptree level net
assets) per partnership unit was $30.16 and $29.10 as of September
30, 2014 and December 31, 2013, respectively. As of November 3,
2014, Tiptree owned 68% of the limited partnership units of TFP.
|
|
|
|
(6)
|
|
Assumes net exercise of all in-the-money outstanding warrants.
|
|
|
|
|
|
TIPTREE FINANCIAL INC.
|
|
AND SUBSIDIARIES
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
(in thousands, except share and per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30, 2014
|
|
December 31, 2013
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents – unrestricted
|
|
$
|
179,892
|
|
|
$
|
120,557
|
|
|
Cash and cash equivalents – restricted
|
|
23,785
|
|
|
26,395
|
|
|
Trading investments, at fair value
|
|
38,837
|
|
|
35,991
|
|
Investments in available for sale securities, at fair value
(amortized
cost: $16,889 and $17,708 in 2014 and 2013, respectively)
|
|
17,064
|
|
|
17,763
|
|
|
Loans held for sale, at fair value ($31,737 pledged as collateral
at September 30, 2014)
|
|
32,109
|
|
|
—
|
|
|
Investments in loans, at fair value
|
|
222,020
|
|
|
171,087
|
|
|
Loans owned, at amortized cost – net of allowance
|
|
32,714
|
|
|
40,260
|
|
|
Investments in partially-owned entities
|
|
2,832
|
|
|
9,972
|
|
|
Real estate
|
|
104,833
|
|
|
105,061
|
|
|
Policy loans
|
|
94,779
|
|
|
102,147
|
|
|
Deferred tax assets
|
|
7,487
|
|
|
3,310
|
|
|
Intangible assets
|
|
152,070
|
|
|
154,695
|
|
|
Goodwill
|
|
4,617
|
|
|
4,294
|
|
|
Other assets
|
|
46,202
|
|
|
49,201
|
|
|
Separate account assets
|
|
4,461,601
|
|
|
4,625,099
|
|
|
Assets of consolidated CLOs
|
|
1,627,680
|
|
|
1,414,616
|
|
|
Total assets
|
|
$
|
7,048,522
|
|
|
$
|
6,880,448
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative financial instruments, at fair value
|
|
$
|
460
|
|
|
$
|
598
|
|
|
U.S. Treasuries, short position
|
|
19,234
|
|
|
18,493
|
|
|
Debt
|
|
425,349
|
|
|
360,609
|
|
|
Policy liabilities
|
|
105,956
|
|
|
112,358
|
|
|
Due to brokers, dealers and trustees
|
|
18,390
|
|
|
8,193
|
|
|
Other liabilities and accrued expenses
|
|
52,627
|
|
|
13,636
|
|
|
Separate account liabilities
|
|
4,461,601
|
|
|
4,625,099
|
|
|
Liabilities of consolidated CLOs
|
|
1,417,141
|
|
|
1,175,606
|
|
|
Total liabilities
|
|
6,500,758
|
|
|
6,314,592
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
Preferred stock: $0.001 par value, 100,000,000 shares authorized,
none issued or outstanding
|
|
—
|
|
|
—
|
|
|
Common stock - Class A: $0.001 par value, 200,000,000 shares
authorized, 21,955,877 and 10,556,390 shares issued and outstanding,
respectively
|
|
22
|
|
|
11
|
|
|
Common stock - Class B: $0.001 par value, 50,000,000 shares
authorized, 19,636,823 and 30,968,877 shares issued and outstanding,
respectively
|
|
20
|
|
|
31
|
|
|
Additional paid-in capital
|
|
225,813
|
|
|
100,903
|
|
|
Accumulated other comprehensive income
|
|
107
|
|
|
33
|
|
|
Retained earnings
|
|
21,301
|
|
|
18,933
|
|
|
Total stockholders’ equity of Tiptree Financial Inc.
|
|
247,263
|
|
|
119,911
|
|
|
Non-controlling interest
|
|
235,951
|
|
|
361,354
|
|
|
Appropriated retained earnings of consolidated TAMCO
|
|
64,550
|
|
|
84,591
|
|
|
Total stockholders’ equity
|
|
547,764
|
|
|
565,856
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
7,048,522
|
|
|
$
|
6,880,448
|
|
|
|
|
|
|
|
|
|
|
|
|
TIPTREE FINANCIAL INC.
|
|
AND SUBSIDIARIES
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
(in thousands, except share and per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
Realized and unrealized gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on investments
|
|
$
|
7,909
|
|
|
$
|
669
|
|
|
$
|
7,007
|
|
|
$
|
(770
|
)
|
|
Change in unrealized (depreciation) appreciation on investments
|
|
(1,819
|
)
|
|
3,514
|
|
|
(1,530
|
)
|
|
1,014
|
|
|
Income from investments in partially owned entities
|
|
2,204
|
|
|
1,800
|
|
|
2,884
|
|
|
3,213
|
|
|
Net realized and unrealized gain
|
|
8,294
|
|
|
5,983
|
|
|
8,361
|
|
|
3,457
|
|
|
Investment income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
7,363
|
|
|
3,916
|
|
|
17,664
|
|
|
11,131
|
|
|
Separate account fees
|
|
5,931
|
|
|
5,526
|
|
|
16,943
|
|
|
16,336
|
|
|
Administrative service fees
|
|
12,845
|
|
|
12,760
|
|
|
37,786
|
|
|
36,856
|
|
|
Rental revenue
|
|
4,469
|
|
|
1,363
|
|
|
13,308
|
|
|
3,279
|
|
|
Gain on sale of loans held for sale, net
|
|
2,383
|
|
|
—
|
|
|
5,117
|
|
|
—
|
|
|
Other income
|
|
1,537
|
|
|
325
|
|
|
3,404
|
|
|
701
|
|
|
Total investment income
|
|
34,528
|
|
|
23,890
|
|
|
94,222
|
|
|
68,303
|
|
|
Total net realized and unrealized gains and investment income
|
|
$
|
42,822
|
|
|
$
|
29,873
|
|
|
$
|
102,583
|
|
|
$
|
71,760
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
8,500
|
|
|
$
|
4,110
|
|
|
$
|
20,721
|
|
|
$
|
12,008
|
|
|
Payroll expense
|
|
12,559
|
|
|
8,753
|
|
|
35,642
|
|
|
26,277
|
|
|
Professional fees
|
|
3,420
|
|
|
2,252
|
|
|
7,334
|
|
|
6,204
|
|
|
Change in future policy benefits
|
|
1,063
|
|
|
1,189
|
|
|
3,260
|
|
|
3,502
|
|
|
Mortality expenses
|
|
2,667
|
|
|
2,633
|
|
|
7,892
|
|
|
7,885
|
|
|
Commission expense
|
|
679
|
|
|
631
|
|
|
1,837
|
|
|
1,805
|
|
|
Depreciation and amortization expenses
|
|
2,290
|
|
|
1,216
|
|
|
5,656
|
|
|
3,382
|
|
|
Other expenses
|
|
5,505
|
|
|
4,227
|
|
|
15,562
|
|
|
10,722
|
|
|
Total expenses
|
|
36,683
|
|
|
25,011
|
|
|
97,904
|
|
|
71,785
|
|
|
Net income (loss) before taxes and income attributable to
consolidated CLOs from continuing operations
|
|
6,139
|
|
|
4,862
|
|
|
4,679
|
|
|
(25
|
)
|
|
Results of consolidated CLOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income attributable to consolidated CLOs
|
|
(4,093
|
)
|
|
11,256
|
|
|
20,742
|
|
|
33,475
|
|
|
Expenses attributable to consolidated CLOs
|
|
15,552
|
|
|
12,783
|
|
|
44,541
|
|
|
34,021
|
|
|
Net loss attributable to consolidated CLOs
|
|
(19,645
|
)
|
|
(1,527
|
)
|
|
(23,799
|
)
|
|
(546
|
)
|
|
(Loss) income before taxes from continuing operations
|
|
(13,506
|
)
|
|
3,335
|
|
|
(19,120
|
)
|
|
(571
|
)
|
|
Provision for income taxes
|
|
(20
|
)
|
|
1,434
|
|
|
906
|
|
|
4,549
|
|
|
(Loss) income from continuing operations
|
|
(13,486
|
)
|
|
1,901
|
|
|
(20,026
|
)
|
|
(5,120
|
)
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Bickford portfolio, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,463
|
|
|
Income from discontinued operations, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,647
|
|
|
Provision for income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Discontinued operations, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,110
|
|
|
Net (loss) income
|
|
(13,486
|
)
|
|
1,901
|
|
|
(20,026
|
)
|
|
11,990
|
|
|
Less: Net (loss) income attributable to noncontrolling interest
|
|
(1,904
|
)
|
|
7,008
|
|
|
(2,353
|
)
|
|
21,185
|
|
|
Less: Net (loss) income attributable to VIE subordinated noteholders
|
|
(11,854
|
)
|
|
(6,937
|
)
|
|
(20,041
|
)
|
|
(15,758
|
)
|
|
Net income available to common stockholders
|
|
$
|
272
|
|
|
$
|
1,830
|
|
|
$
|
2,368
|
|
|
$
|
6,563
|
|
|
Net income (loss) per Class A common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic, continuing operations, net
|
|
$
|
0.02
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
(1.03
|
)
|
|
Basic, discontinued operations, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.67
|
|
|
Net income basic
|
|
0.02
|
|
|
0.18
|
|
|
0.18
|
|
|
0.64
|
|
|
Diluted, continuing operations, net
|
|
0.01
|
|
|
0.18
|
|
|
0.18
|
|
|
(1.03
|
)
|
|
Diluted, discontinued operations, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.67
|
|
|
Net income dilutive
|
|
$
|
0.01
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.64
|
|
|
Weighted average number of Class A common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
17,449,974
|
|
|
10,246,176
|
|
|
12,909,949
|
|
|
10,243,893
|
|
|
Diluted
|
|
17,449,974
|
|
|
10,271,537
|
|
|
12,909,949
|
|
|
10,266,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copyright Business Wire 2014