Tiptree Financial Inc. Reports Financial Results For The Fourth Quarter And Year Ended December 31, 2013

NEW YORK, March 18, 2014 /PRNewswire/ -- 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 fourth quarter and year ended December 31, 2013. Tiptree operates its business through Tiptree Operating Company, LLC ("Operating Company") which is owned 25% by Tiptree and 75% by Tiptree Financial Partners, L.P. ("TFP").

Fourth Quarter Highlights

• Economic net income of Operating Company was $4.9 million; economic net income available to Class A stockholders was $2.2 million, or $0.21 per diluted Class A share.
• GAAP net income of Operating Company was $6.1 million; GAAP net income available to Tiptree Class A stockholders was $2.3 million, or $0.22 per diluted Class A share.
• Economic Book Value per Class A share was $10.42 at December 31, 2013.

2013 Highlights

• Sold the Bickford Portfolio for cash of $44 million and a net gain of approximately $15.5 million.
• Purchased an interest in Siena Capital Finance LLC for $10 million.
• Economic net income of Operating Company was $34.7 million; economic net income available to Class A stockholders was $9.0 million, or $0.88 per diluted Class A share.
• GAAP net income of Operating Company was $34.8 million; GAAP net income available to Tiptree Class A stockholders was $8.8 million, or $0.86 per diluted Class A share.
• Completed a public listing on NASDAQ through the Contribution Transactions.

Geoffrey Kauffman, President and Chief Executive Officer of Tiptree, commented, "We made meaningful progress in 2013 as we successfully listed the Company on the NASDAQ, added Siena Capital and more recently completed the acquisition of Luxury Mortgage. We intend to continue to focus on increasing book value and cash flow through acquisitions that complement our diversified portfolio of holdings, while maintaining the disciplined approach that has proven successful for the past seven years.

As we move forward, we plan to continue our proven strategy of working closely with our portfolio companies' management teams to build strong strategic alliances. We will endeavor to help develop and execute their future growth plans and new business initiatives, while providing incremental capital to support this growth. We are energized by the growth opportunities both from within our current portfolio and from potential acquisitions in our ongoing efforts to create long-term shareholder value."

2013 Financial Overview

Economic Net income of Operating Company
Economic net income of Operating Company for the year ended 2013 was $34.7 million compared to $36.3 million for 2012. Although net income was relatively unchanged from the prior year, there were changes in various components of total revenue and total expenses. Revenue from dividend/ distributions increased $2.4 million due to the additional Telos warehouse activity in 2013 and management fee income increased $9.2 million due to the purchase of TAMCO in June 2012. Offsetting these revenue increases, our tax-exempt assets experienced higher than usual unrealized gains in 2012; the unrealized gains for the tax-exempt assets declined by $6.8 million in 2013 from their highs in 2012. Total expenses increased $9.3 million from 2012 to 2013 largely due to the internalization of employees in 2012 as a result of the purchase of TAMCO, an increase in interest expense related to the Company's new credit facility in 2013, and additional professional fees related to the Company's expenses as a public company in 2013.

GAAP Net income available to Class A common stockholders
Net income available to Class A common stockholders for 2013 was $8.8 million compared to $8.7 million for 2012, an increase of $0.1 million, or 1.3%. This increase was primarily due to the $29.1 million decrease representing the net impact of the consolidated CLOs on our net income available to Class A common stockholders offset in part by increases in revenue from administrative service fees of $26.5 million and the gain on the sale of the Bickford portfolio of $15.5 million.

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, currently 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 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 Securities and Exchange Commission ("SEC"). 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 our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the 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):

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 three months and years ended December 31, 2013 and 2012 (in thousands):

Reconciliation of GAAP Book Value to Economic Book Value:

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 December 31, 2013 and 2012 (in thousands except share data):  

SOURCE Tiptree Financial Inc.