Q3 2024 Tiptree Inc Earnings Call

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Ladies and gentlemen greetings and welcome to the tip tree ink, third quarter 2020 for earnings conference call. At this time all participants are in the Lissinoni mode, a brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad.

As a reminder this conference has been recorded.

It is now my pleasure to introduce your host, Scott McKinney, Chief Financial Officer. Thank you and I hope to you.

Good morning and welcome to our third quarter 2024 earnings call. Joining me today are Michael Barnes, our executive chairman, Jonathan Alani CEO and Randy Maltzbeat President.

Some of our comments today will contain forward-looking statements and actual future results made different materially. Please see our most recent SEC filings which identify the principal risks and uncertainties that could affect future performance.

In today's call we will discuss non-gap financial measures, which are described in more detail in our presentation. Reconciliation of these measures and additional disclosures can be found in our SEC filings, the appendix to our presentation and on our website. With that I will turn the call over to Michael.

Thank you Scott and good morning to everyone. The strong performance from our businesses continued in the third quarter. Revenue's year today have increased by 28% from the prior year, while delivering an adjusted return on equity of 22%.

Our insurance company for Tegra delivered revenue growth of 28% and adjusted net income growth of 38%.

These exceptional figures were driven by continued expansion, especially insurance lines, particularly in the excess and surplus market.

Gross-Ritten premiums in equivalents were 2.2 billion, an increase of 10% over 2023.

We continue to see a strong pipeline of opportunities and the pricing of our movement remains attractive for underwriting new business.

Within the third quarter, we witnessed several catastrophic events, resulting in extreme destruction and personal loss in communities across the country. Our thoughts are with those who were impacted, and the team of fatigue where remains focused on delivering quality service to its policy holders.

Despite these events, for Tegres combined ratio improved to 90 percent, demonstrating the underwriting discipline and diversification of risk that we have observed for many years.

The investment portfolio, which is overseen by our asset management subsidiary, tip-free advisors, and to the quarter at 1.5 billion of investable assets.

Our focus when investing paid in premiums remains unchanged.

We allocate to high quality liquid fixed income securities coupled with select, high yielding investment opportunities to enhance return.

As a portfolio grows and maturing investments role, we continue to see attractive opportunities that high-quality bonds that enhance our overall book yield and future earnings profile.

The team at a residential mortgage origination and servicing business reliance continues to execute in a tough operating environment.

Volume Civic increased modestly compared to the prior year and the fee income from our retained service single has led the business to profitability. We hold a positive outlook for the business and anticipating increased potential for future profit as mortgage rates tighten.

We are pleased with TipTree's performance thus far in 2024.

and as always, we remain committed for growing long-term shareholder value and will continue to seek constructive ways to more fully reflect the intrinsic value of tip trees businesses in our share price. With that, I'll turn the call over to Scott for his comment.

Thank you, Michael.

Scott: As you highlighted, the results for the quarter and nine months exceeded our expectations, and we remain positive on the outlook for growth.

Tip 3's revenues were up 19% for the quarter, driven by growth in earned premiums, an increase in net investment income and investment gains as compared to the prior year.

A Justin net income for the quarter was 27.9 million, representing an increase of 56% driven by strong underwriting and investment income at our insurance business and increased origination volume at our mortgage business.

Scott: Consolidated in that income was 11.9 million compared to 2.2 million in the prior year.

TIPTREAS GAP TAXRATE for the quarter was 44%.

Setting aside the book tax implications of being de-consolidated from foretaguer for tax purposes, our effective tax rate was 28%.

The vast majority of which is deferred.

Scott: Our balance sheet remains well positioned. We ended the quarter with a highly rated liquid investment portfolio, substantial cash balances and strong cash flow from operations.

Scott: Consolidated cash flow from operations was 171 million. Driven by premium growth and profitable insurance and fee-based earnings, with the majority of proceeds being deployed into fixed income investments at attractive yields.

Scott: Both value per share increased by 18.6% from the prior year, inclusive of dividends paid. This was driven by earnings growth and a significant recovery of unrealized losses on four-tagros fixing come portfolio.

Turning to our insurance results for the quarter, growth rate in premiums and equivalents increase 13% year over year, driven by growth in excess and surplus lines.

ENS lines represented 40% or about 312 million of total premiums and grew at a rate of 34% in the quarter.

Scott: We continue to see submission growth and positive rate movement on both property and casually lines.

Networking premiums were 389 million, an increase of 17% driven by overall premium growth and increased retention on both ENS and admitted PNC lines.

Scott: Property lines accounted for 33% of net written premiums up from 20% in the prior year.

Scott: Revenue's grew by 18% in the combined ratio remain consistent at 90.2%.

Even with the higher-than-average catastrophic events this quarter, our combined ratio continues to demonstrate the teams underwriting discipline, as we expand our diverse portfolio of paid-in premiums.

Impact from name storm losses in the third quarter were well within our actual aerial defined loss reserves and we continue to maintain a conservative position with respect to loss reserves at our insurance subsidiaries.

We're Tegger's annualized adjusted return on equity was 28%. Driven by the combination of profitable insurance underwriting and fee-based service offerings.

In regards to the investment portfolio, we enter the quarter at 1.5 billion of investable assets, with 90% invested in a combination of high credit quality, liquid securities, and cash with an average S&P rating of AA- and a duration of 2.7 years.

For the nine months, net investment income combined with interest on cash equivalents amounted to 37 million, representing a 35% increase over the prior year.

Our book yield was 4.1% at quarter end of 90 basis points from the prior year, driven by improving yields on our fixed income securities.

Additionally, with the moving rates in the quarter, we saw substantial recovery on the bond portfolio, registering a 22 million positive pretext impact to equity.

At quarter end, 24% of the total portfolio was held in cash in equivalence.

With these substantial cash balances, in addition to near-term maturities and further growth in invested assets, we expect the portfolio will be a driver of future earnings growth.

Longer-term transit for Tiger-Rumane favorable as the next set of Charot Highlight. Over the past five years, top-line premiums have compounded at 23% annually, primarily driven by organic growth.

The flow of business into ENS markets and ongoing positive rate environment, coupled with the addition of new agents and distribution partners have driven this growth and are expected to continue as we look forward.

During the same period the combined ratio has improved by 250 basis points with limited volatility from period to period.

As the business increasingly focuses on specialty P&C lines, the mix shift has driven an increase in the loss ratio, which has been more than offset by reductions in both the acquisition ratio and the operating expense ratio.

Scott: Even with that, we continue to make meaningful investments in people, technology and data.

That includes investments in our agent relationships and technology primarily focused on the underwriting and claims management tools that we believe will facilitate better results over the long term.

Speaker Change: Tip 3 capital into the quarter with 110 million of capital to play across our mortgage or origination and servicing business, our liquid investment portfolio and cash.

Speaker Change: Pretexting come for the year was 1.8 million driven by positive contributions from our mortgage operations and realize gains on other investments.

Morgan's Originations for the year were 693 million up 4% on a comparative basis.

Contributions from the servicing portfolio in addition to proactive cost management throughout the past two years have sustained our profitability despite the prevailing interest rate environment.

Scott: As we look ahead, we expect the origination volumes to improve given the outlook for declining mortgage rates.

Speaker Change: Consistent with prior quarters, we have included information to arrive at TipTree's Some of the parts value, which takes into account a range of values for Fortegra, based on the multiple implied by Warverg's investment, as well as peer earnings multiples.

We're Tigers Adjustment & Income, increased to 147 million on a trailing 12-month basis.

Scott: This growth, along with our holdings in tip tree capital, has contributed to an increase in our view of tip trees in transit value per share.

With that I'll pass the call back to Michael to wrap up our prepared remarks.

Michael: Thanks Scott. Our third quarter was another great quarter. Vertegra continues to deliver excellent financial results. The pipeline of new opportunities continues to build, and spent and the specialty market conditions remain favorable.

Speaker Change: Reliance remains profitable despite a challenging operating environment and is focused on opportunities to increase volume and profitability.

We at TIP-3 will continue to look for opportunities to allocate capital for long-term value creation. I'd now like to turn the call back to the operator for Q&A.

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Ladies and gentlemen, as there are no further questions, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.