What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-14 compared with 2021-03-11 · 597 added, 746 removed, 1815 unchanged (43% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2021 and 2020

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The Company estimates policy liabilities and unpaid claims reserves by applying a variety of generally accepted actuarial methods to historical loss development patterns, which require numerous assumptions and significant judgment.

We identified policy liabilities and unpaid claims as a critical audit matter because of the significant estimates and assumptions management make in forecasting ultimate losses.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists, when performing audit procedures to evaluate management’s selection of various assumptions in determining unpaid claims reserves.

We identified policy liabilities and unpaid claims as a critical audit matter because of the significant estimates and assumptions management made in forecasting ultimate losses.

This critical audit matter required a high degree of auditor judgment and an increased extent of audit effort, including the need to involve our actuarial specialists, when performing audit procedures to evaluate management’s selection of various assumptions in determining unpaid claims reserves.

How the Critical Audit Matter Was Addressed in the Audit

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• We tested the design and operating effectiveness of controls over the completeness and accuracy of the premium and claim data utilized by management and their third-party actuaries.

• We evaluated the methods and assumptions used by the Company to estimate the policy liabilities and unpaid claims reserve through the following procedures:

◦ With assistance from our actuarial specialists, we developed an independent expected range of policy liabilities and unpaid claims based on historical and industry claim development factors.

◦ With assistance from our actuarial specialists, we performed retrospective procedures comparing actual loss development with expected loss development to assess the reasonableness of assumption used, including consideration of potential bias, in the estimation of policy liabilities and unpaid claims.

• We evaluated the methods and assumptions used by the Company to estimate the policy liabilities and unpaid claims reserves through the following procedures:

◦ With assistance from our actuarial specialists, we developed an independent expected range of policy liabilities and unpaid claims reserves based on historical and industry claim development factors.

◦ With assistance from our actuarial specialists, we performed retrospective procedures comparing actual loss development with expected loss development to assess the reasonableness of assumptions used, including consideration of potential bias, in the estimation of policy liabilities and unpaid claims.

◦ We tested the underlying data that served as the basis for the actuarial analysis, including historical claims data, to test that the inputs to the actuarial estimates were complete and accurate.

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated March 11, 2022 expressed an unqualified opinion on those financial statements.

As described in Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”), management excluded from its assessment the internal control over financial reporting at Smart AutoCare as the business was acquired on January 3, 2020.

Smart AutoCare constitutes 12% of total assets and 9% of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2020.

Accordingly, our audit did not include the internal control over financial reporting at Smart AutoCare.

Basis for Opinion

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(in thousands, except share data)

2020 December 31, 2019

As of December 31,

Available for sale securities, at fair value, net of allowance for credit losses $ 577,448 $ 377,133

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(in thousands, except share data)

For the Year Ended

For the Year Ended December 31,

2021 2020 2019

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provision (benefit) for income taxes 21,291 ( 13,627 ) 9,017

Net income (loss) from continuing operations ( 25,225 ) 20,122 ( 13,887 )

Discontinued operations:

Income (loss) before taxes from discontinued operations — — 624

Gain on sale of discontinued operations — — 56,860

Provision (benefit) for income taxes — — 13,714

Net income (loss) from discontinued operations — — 43,770

Net income (loss) 44,051 ( 25,225 ) 20,122

net income (loss) attributable to non-controlling interests - TFP — — 5,500

net income (loss) attributable to non-controlling interests 5,919 3,933 1,761

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Net income (loss) per common share:

Basic, continuing operations, net $ ( 0.86 ) $ 0.52 $ ( 0.38 )

Basic, discontinued operations, net — — 1.07

Basic earnings per share $ 1.13 $ ( 0.86 ) $ 0.52

Diluted, continuing operations, net ( 0.86 ) 0.50 ( 0.38 )

Diluted, discontinued operations, net — — 1.07

Diluted earnings per share $ 1.09 $ ( 0.86 ) $ 0.50

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(in thousands)

For the Year Ended

For the Year Ended December 31,

2021 2020 2019

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Related (provision) benefit for income taxes 2,223 ( 1,289 ) ( 1,409 )

Reclassification of (gains) losses included in net income ( 528 ) ( 1,312 ) 819

Reclassification of (gains) losses included in net income (loss) ( 638 ) ( 528 ) ( 1,312 )

Related (provision) benefit for income taxes 139 113 280

Unrealized gains (losses) on available for sale securities, net of tax ( 8,388 ) 3,949 3,879

Interest rate swaps (cash flow hedges):

Unrealized gains (losses) on interest rate swaps — — 1,111

Related (provision) benefit for income taxes — — ( 276 )

Reclassification of (gains) losses included in net income (1)

— — ( 3,845 )

Related (provision) benefit for income taxes — — 936

Unrealized (losses) gains on interest rate swaps from cash flow hedges, net of tax — — ( 2,074 )

Other comprehensive income (loss), net of tax ( 8,388 ) 3,949 3,879

Comprehensive income (loss) 35,663 ( 21,276 ) 24,001

Comprehensive income (loss) attributable to non-controlling interests - TFP — — 5,278

comprehensive income (loss) attributable to non-controlling interests $ 5,890 3,948 1,785

Comprehensive income (loss) attributable to common stockholders $ 29,773 $ ( 25,224 ) $ 22,216

(1) Deconsolidated as part of the sale of Care.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations.

See accompanying notes to consolidated financial statements.

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(in thousands, except shares)

Number of Shares Par Value Additional paid in capital Accumulated

comprehensive

income (loss) Retained

earnings Shares held by subsidiaries Total stockholders’ equity to Tiptree Inc.

Non-controlling

interests - TFP Non-controlling

interests - Other Total stockholders' equity

Common stock Class B Common stock Class B Common stock Common stock Amount Class B Shares Class B Amount

Number of shares Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total

stockholders’ equity Non-controlling interests Total stockholders' equity

Balance at December 31, 2018 35,870,348 $ 36 $ 331,892 $ ( 2,058 ) $ 57,231 $ 387,101 $ 12,158 $ 399,259

Adoption of accounting standard (1)

— — — ( 99 ) 99 — — —

Amortization of share-based incentive compensation — — 3,145 — — 3,145 2,917 6,062

Vesting of share-based incentive compensation (2)

Shares purchased under stock purchase plan ( 2,177,235 ) — ( 2 ) — ( 14,109 ) — — — — — — ( 14,111 ) — — ( 14,111 )

Reorganization merger (1) (2)

164,935 — 187 — — 187 ( 2,483 ) ( 2,296 )

Cancellation of treasury shares ( 5,035,977 ) — ( 5 ) — ( 33,530 ) — — 5,035,977 33,535 — — — — — —

Shares purchased under stock purchase plan ( 1,472,730 ) ( 1 ) ( 9,084 ) — — ( 9,085 ) — ( 9,085 )

Non-controlling interest contributions — — — — — — 61 61

Non-controlling interest distributions — — — — — — ( 3,585 ) ( 3,585 )

Net change in non-controlling interest — — — — ( 132 ) — — — — — — ( 132 ) — ( 14,097 ) ( 14,229 )

Net change in non-controlling

interest — — — — — — 2,500 2,500

Dividends declared — — — — ( 5,502 ) ( 5,502 ) — ( 5,502 )

Other comprehensive income, net of tax — — — — — ( 2,683 ) — — — — — ( 2,683 ) ( 563 ) ( 437 ) ( 3,683 )

Other comprehensive income (loss), net of tax — — — 3,855 — 3,855 24 3,879

Net income (loss) — — — — 18,361 18,361 1,761 20,122

Balance at December 31, 2019 34,562,553 $ 35 $ 326,140 $ 1,698 $ 70,189 $ 398,062 $ 13,353 $ 411,415

(1) Includes the exchange of 424,399 units of TFP for 1,187,468 shares of common stock.

(2) On April 10, 2018, the Company completed a reorganization merger whereby TFP merged with and into the Company with the Company continuing as the surviving company (Reorganization Merger).

After the Reorganization Merger, TFP ceased to exist and the Company owned 100 % of Operating Company.

See Note (17) Stockholders’ Equity for more information.

See accompanying notes to consolidated financial statements.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except shares)

Number of shares Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total

stockholders’ equity Non-controlling interests Total stockholders' equity

Balance at December 31, 2018 35,870,348 $ 36 $ 331,892 $ ( 2,058 ) $ 57,231 $ 387,101 $ 12,158 $ 399,259

Adoption of accounting standard (3)

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Non-controlling interest distributions — — ( 645 ) — — ( 645 ) ( 1,389 ) ( 2,034 )

— — — — — — ( 3,585 ) ( 3,585 )

Net change in non-controlling

interest — — — — — — 2,500 2,500

Net change in non-controlling interest — — ( 135 ) — — ( 135 ) ( 425 ) ( 560 )

Dividends declared — — — — ( 5,566 ) ( 5,566 ) — ( 5,566 )

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Balance at December 31, 2020 32,682,462 $ 33 $ 315,014 $ 5,674 $ 35,423 $ 356,144 $ 17,394 $ 373,538

Adoption of accounting standard (3)

— — — 42 ( 42 ) — — —

Amortization of share-based incentive compensation — — 2,331 — — 2,331 1,725 4,056

Vesting of share-based incentive compensation 596,601 — 3,563 — — 3,563 ( 4,816 ) ( 1,253 )

Shares issued in exchange for vested subsidiary awards (4)

1,166,307 2 105 — — 107 ( 1,565 ) ( 1,458 )

Shares purchased under stock purchase plan ( 528,662 ) ( 1 ) ( 2,881 ) — — ( 2,882 ) — ( 2,882 )

Shares issued upon exercise of warrants 207,445 — — — — — — —

Repurchase of vested subsidiary awards — — ( 770 ) — — ( 770 ) ( 309 ) ( 1,079 )

Non-controlling interest contributions — — — — — — 100 100

Non-controlling interest distributions — — — — — — ( 1,095 ) ( 1,095 )

— — ( 645 ) — — ( 645 ) ( 1,389 ) ( 2,034 )

Net change in non-controlling interest — — ( 135 ) — — ( 135 ) ( 425 ) ( 560 )

Net change in non-controlling

interest — — 97 — — 97 ( 97 ) —

Dividends declared — — — — ( 5,409 ) ( 5,409 ) — ( 5,409 )

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See Note (2) Summary of Significant Accounting Policies.

(4) Exchange included $ 1,458 in cash.

See accompanying notes to consolidated financial statements.

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(in thousands)

Year Ended December 31,

Operating Activities:

For the Year Ended December 31,

2021 2020 2019

Operating Activities:

Net income (loss) attributable to common stockholders $ 38,132 $ ( 29,158 ) $ 18,361

Net income (loss) attributable to non-controlling interests - TFP — — 5,500

Net income (loss) attributable to non-controlling interests 5,919 3,933 1,761

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Proceeds from sales and maturities of investments 1,172,044 1,400,229 394,331

Proceeds from the sale of real estate 2,981 11,857 17,705

Proceeds from the sale of real estate and other assets 8,604 2,981 11,857

Purchases of property, plant and equipment ( 2,764 ) ( 6,694 ) ( 8,519 )

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Dividends paid ( 5,409 ) ( 5,566 ) ( 5,502 )

Non-controlling interest contributions — 61 3,150

Non-controlling interest distributions ( 2,134 ) ( 3,585 ) ( 241 )

Net non-controlling interest (redemptions) contributions ( 3,532 ) ( 2,134 ) ( 3,524 )

Payment of debt issuance costs ( 114 ) ( 4,571 ) ( 586 )

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Principal paydowns of borrowings and mortgage notes payable ( 3,993,364 ) ( 3,321,779 ) ( 2,181,704 )

Repurchases of common stock ( 13,889 ) ( 9,085 ) ( 14,111 )

Repurchases of common stock and other changes in additional paid-in capital ( 8,145 ) ( 13,889 ) ( 9,085 )

Net cash provided by (used in) financing activities 73,735 31,749 36,928

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Acquired real estate properties through, or in lieu of, foreclosure of the related loan $ — $ — $ 2,596

Shares issued in exchange for vested subsidiary awards $ 107 $ — $ —

Acquisition of non-controlling interest $ — $ — $ 2,500

Equity securities acquired through the sale of a subsidiary and asset sales $ — $ — $ 135,675

Cancellation of treasury shares $ — $ — $ 33,535

As of December 31,

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Tiptree’s common stock trades on the Nasdaq Capital Market under the symbol “TIPT”.

Tiptree is a holding company that combines specialty insurance operations with investment management capabilities.

We allocate our capital across our insurance operations and other investments.

Tiptree is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments.

We classify our business into two reportable segments:

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dollars, the main operating currency of the Company.

Non-controlling interests on the consolidated balance sheets represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than Tiptree.

Non-controlling interests on the consolidated financial statements represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than Tiptree.

Accounts and transactions between consolidated entities have been

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• Carrying value of goodwill and other intangibles, including estimated amortization period and useful lives;

• Vessel valuations, residual value of vessels and the useful lives of vessels;

• Reserves for unpaid losses and loss adjustment expenses, estimated future claims and losses, potential litigation and other claims;

• Deferred acquisition costs and value of business acquired (VOBA);

• The realization of deferred tax assets, and recognition and measurement of uncertain tax positions;

• Revenue recognition including, but not limited to, the timing and amount of insurance premiums, service and administration fees, and loan origination fees;

• Deferred acquisition costs

• The realization of deferred tax assets, and recognition and measurement of uncertain tax positions;

• Vessel valuations, residual value of vessels and the useful lives of vessels;

• Other matters that affect the reported amounts and disclosure of contingencies in the consolidated financial statements

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The acquisition method requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at fair value as of the closing date of the acquisition.

The net assets acquired may consist of tangible and intangible assets and the

The net assets acquired may consist of tangible and intangible assets and the excess of purchase price over the fair value of identifiable net assets acquired, or goodwill.

The determination of estimated

AND SUBSIDIARIES

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(in thousands, except share data)

excess of purchase price over the fair value of identifiable net assets acquired, or goodwill.

The determination of estimated useful lives and the allocation of the purchase price to the intangible assets requires significant judgment and affects the amount of future amortization and possible impairment charges.

useful lives and the allocation of the purchase price to the intangible assets requires significant judgment and affects the amount of future amortization and possible impairment charges.

Contingent consideration, if any, is measured at fair value on the date of acquisition.

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At the time of reclassification to held for sale, the Company ceases the recording of depreciation and amortization on assets transferred.

Accounting policies specific to our dispositions, assets and liabilities held for sale and discontinued operations are described in more detail in (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations.

Accounting policies specific to our dispositions, assets and liabilities held for sale and discontinued operations are described in more detail in (4) Dispositions and Assets and Liabilities Held for Sale.

Fair Value Measurement

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Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3 of the fair value hierarchy.

In certain cases, the inputs used to measure fair value may fall into

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level in the fair value hierarchy within

AND SUBSIDIARIES

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(in thousands, except share data)

different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Tiptree’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and the consideration of factors specific to the investment.

which the fair value measurement in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Tiptree’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and the consideration of factors specific to the instrument.

From time to time, Tiptree’s assets and liabilities will transfer between one level to another level.

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Derivative Instruments Designated as Cash Flow Hedging Instruments

The Company uses cash flow hedges to reduce the exposure to variability of cash flows from floating rate borrowings.

The Company uses cash flow hedges from time to time to reduce the exposure to variability of cash flows from floating rate borrowings.

If a derivative instrument meets certain cash flow hedge accounting criteria, it is recorded on the consolidated balance sheet at its fair value, as either an asset or a liability, with offsetting changes in fair value recognized in AOCI.

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Stock Based Compensation

The Company accounts for equity‑based compensation issued to employees, directors, and affiliates of the Company using the current fair value based methodology.

The Company initially measures the cost of restricted stock unit (RSUs) and restricted stock awards at fair value on the date of grant and subsequently recognizes the cost of such awards over the vesting period using the straight-line method.

The compensation costs are charged to expense over the vesting period with a corresponding credit to additional paid-in capital.

Compensation cost is recognized for stock options issued to employees, based on the fair value of these awards at the date of grant.

Compensation cost is recognized over the required service period, generally defined as the vesting period.

Grants of subsidiary RSUs exchangeable into common stock of the Company are accounted for as equity based upon their expected settlement method.

The Company accounts for share‑based compensation issued to employees, directors, and affiliates of the Company using the current fair value based methodology.

The Company initially measures the cost of all share-based compensation incentive awards at fair value on the date of grant, whether accounted for as an equity or liability award.

The compensation cost is recognized over the required service period, generally defined as the vesting period using the straight-line method.

When the share-based compensation awards are accounted for as equity awards, the compensation cost is charged to expense with a corresponding credit to additional paid-in capital.

If the share-based compensation awards are accounted for as liability awards, their fair value is remeasured at each reporting period, with the compensation cost charged to expense with a corresponding credit to other liabilities.

Grants of subsidiary restricted stock units (RSUs) exchangeable into common stock of the Company are accounted for as equity based upon their expected settlement method.

The Company recognizes the cost of such awards over the vesting period using the straight-line method and uses the graded-vesting method to recognize compensation expense for the performance vesting RSUs.

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Accordingly, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive distributions.

The participating securities do not have a contractual obligation to absorb losses and are only allocated in periods where there is income from continuing operations.

The participating securities do not have a contractual obligation to absorb losses and are only allocated in periods where there is income.

See Note (22) Earnings Per Share, for EPS computations.

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For AFS securities, the Company reviews its securities portfolio for impairment and determines if impairment is related to credit loss or non-credit loss.

In making the assessment of whether a loss is from credit or other factors, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of

AND SUBSIDIARIES

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(in thousands, except share data)

agency, and adverse conditions related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.

the security.

If the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis.

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write-offs, recoveries) is recognized as part of the allowance for credit losses on AFS securities.

For AFS securities which have an expectation of zero risk nonpayment of the amortized cost basis (e.g.

For AFS securities which have an expectation of zero risk of nonpayment of the amortized cost basis (e.g.

Treasury securities or agency securities), the expected credit loss is zero.

Loans, at Fair Value

Loans, at fair value is substantially comprised of (i) corporate loans, (ii) non-performing residential loans (NPLs) and (iii) loans originated by the Company’s mortgage finance business.

Loans, at fair value is substantially comprised of (i) corporate loans and (ii) loans originated by the Company’s mortgage finance business.

Changes in their fair value are reported within net realized and unrealized gains (losses) in our consolidated statements of operations.

Corporate Loans

Corporate loans are comprised of a diversified portfolio of middle market leveraged loans which are carried at fair value.

In general, the fair value of leveraged loans is obtained from an independent pricing service which provides coverage of secondary market participants.

Corporate loans are comprised of middle market loans and bank loans which are carried at fair value.

In general, the fair value is obtained from an independent pricing service which provides coverage of secondary market participants.

The values represent a composite of mark-to-market bid/offer prices.

In certain circumstances, the Company will make its own determination of fair value of leveraged loans based on internal models and other unobservable inputs.

Non-Performing Residential Loans (NPLs)

The Company has purchased portfolios of NPLs which consist of residential mortgage loans.

Such loans are carried at fair value, which is measured on an individual loan basis.

We seek to either (i) convert such loans into real estate owned property (REO) through foreclosure or another resolution process that can then be sold, or (ii) modify and resell them at higher prices if circumstances warrant.

The Company has elected the fair value option for NPLs as we have concluded that fair value timely reflects the results of our investment performance.

As substantially all of our loans were non-performing when acquired, we generally look to the estimated fair value of the underlying property collateral to assess the recoverability of our investments.

We primarily utilize the local broker price opinion (BPO) but also consider any other comparable home sales or other market data, as considered necessary, in estimating a property’s fair value.

For further discussion on the observable and unobservable inputs to the model and determination of fair value of NPLs, see Note (12) Fair Value of Financial Instruments.

Certain NPLs are loans that are delinquent on obligated payments of principal and interest.

Certain other NPLs are making some payments, generally as a result of a modification or a workout plan.

The fair value of NPLs are determined using a discounted cash flow model.

As such, both the changes in fair value and the net periodic cash flows related to NPLs are recorded in net realized and unrealized gains (losses) in the consolidated statements of operations.

The Company does not hold any NPLs as of December 31, 2020.

In certain circumstances, the Company will make its own determination of fair value of loans based on internal models and other unobservable inputs.

Mortgage Loans Held for Sale

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The gains or losses on sales of such loans, net of any accrual for standard representations and warranties, are reported in operating results as a component of net realized and unrealized gains (losses) in the consolidated statements of operations in the period when the sale occurs.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Equity Securities

2 unchanged sentences

Other Investments

Foreclosed Residential Real Estate Property (REO)

NPLs are reclassified to REO once the Company has obtained legal title to the property upon completion of a foreclosure sale or the borrower has conveyed all interest in the property to satisfy that loan through completion of a deed in lieu of foreclosure.

Because the Company elected the fair value option for NPLs, upon recognition as REO, the property fair value is estimated using market values and, if the property meets held-for-sale criteria, it is initially recorded at fair value less costs to sell as its new cost basis.

Subsequently, the property is carried at (i) the fair value of the asset minus the estimated costs to sell the asset or (ii) the initial REO value, whichever is lower.

Adjustments to the carrying value of REOs are recorded in net realized and unrealized gains (losses).

Investments in vessels, net are carried at cost (inclusive of capitalized acquisition costs, where applicable) less accumulated depreciation.

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An impairment charge would be recognized if the estimated undiscounted future net cash flows expected to result from the operation and subsequent disposal of the vessel are less than the vessel’s carrying amount.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The Company’s estimate of future revenue is based upon time charter equivalent (TCE) rates using current market rates.

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The projected undiscounted future cash flows are comprised of the net of these inflows and outflows, plus an estimated salvage value.

As of December 31, 2020, the undiscounted future cash flows were higher than the carrying amount of each of the vessels in the Company’s fleet and, as such, no loss on impairment was recognized.

As of December 31, 2021, the appraised values and undiscounted future cash flows were both higher than the carrying amount of each of the vessels in the Company’s fleet and, as such, no loss on impairment was recognized.

Cash and Cash Equivalents

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The Company’s restricted cash primarily consists of cash for unremitted premiums received from agents and insurers, fiduciary cash for reinsurers and pledged assets for the protection of policy holders in various state jurisdictions.

Restricted cash also includes cash posted as collateral under credit facilities to maintain borrowing base sufficiency, borrower escrow

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

funds for taxes, insurance, rate-lock fees and servicing related escrow funds and collateral on warehouse borrowings.

Restricted cash also includes cash posted as collateral under credit facilities to maintain borrowing base sufficiency, borrower escrow funds for taxes, insurance, rate-lock fees and servicing related escrow funds and collateral on warehouse borrowings.

Notes and Accounts Receivable, Net

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Reinsurance Receivables

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Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Through the insurance business, the Company has various reinsurance agreements in place whereby the amount of risk in excess of its retention goals is reinsured by unrelated domestic and foreign insurance companies.

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Amortization of deferred acquisition costs was $ 375,052 , $ 265,781 and $ 287,834 for the years ended December 31, 2021, 2020 and 2019, respectively.

Insurance policy related deferred acquisition costs are limited to direct costs that resulted from successful contract transactions and would not have been incurred by the Company’s insurance company subsidiaries had the transactions not

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

These capitalized costs are amortized as the related premium is earned.

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See Note (9) Goodwill and Intangible Assets, net.

Other assets primarily consist of right of use assets, prepaid expenses, and furniture, fixtures and equipment, net.

Other assets primarily consist of mortgage servicing rights, loans eligible for repurchase, right of use assets, prepaid expenses, and furniture, fixtures and equipment, net.

See Note (15) Other Assets and Other Liabilities and Accrued Expenses.

Mortgage Servicing Rights

Mortgage servicing rights represent the fair value of the right to service the underlying mortgage loans.

The estimated fair value is provided by a third-party valuation service and represents the price that a willing buyer would currently pay for the Company’s mortgage servicing rights.

Changes in fair value are recorded in net realized and unrealized gains (losses) on the consolidated statements of operations in the period of change.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Debt is carried on the consolidated balance sheets at an amount equal to the unpaid principal balance, net of any remaining unamortized discount or premium and direct and any incremental costs attributable to issuance.

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The actuarial methods used include but are not limited to the chain ladder method, the Bornhuetter-Ferguson method, and the expected loss ratio method.

The actuarial analyses are performed on a basis gross of ceded

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Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

reinsurance, and the resulting factors and estimates are then used in calculating the net loss reserves which take into account the impact of reinsurance.

The actuarial analyses are performed on a basis gross of ceded reinsurance, and the resulting factors and estimates are then used in calculating the net loss reserves which take into account the impact of reinsurance.

The Company has not made any changes to its methodologies for determining claim reserves in the periods presented.

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For December 31, 2021 and 2020, our appointed independent third-party actuaries found the Company’s reserves to be adequate.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Deferred Revenue

Deferred revenues represent the portion of income that will be earned in the future attributable to motor club memberships, mobile device protection plans, and other non-insurance service contracts that are earned over the respective contract periods using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract.

Deferred revenues represent the portion of income that will be earned in the future attributable to motor club memberships, mobile device protection plans, and other non-insurance service contracts that are earned over the respective contract periods using the Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract.

A deficiency reserve would be recorded if anticipated contract benefits, deferred acquisition costs and contract service costs exceed the recorded deferred revenues and anticipated investment income.

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Methods used include the Rule of 78's, pro rata, and other actuarial methods.

Management selects the appropriate method based on available information, and periodically reviews the

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

selections as additional information becomes available.

Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

Direct and assumed premiums are offset by premiums ceded to the Company’s reinsurers, including producer owned reinsurance companies (PORCs), earned in the same manner.

12 unchanged sentences

Administrative fee revenue includes the administration of premium associated with our producers and their PORCs.

In addition, we also earn fee revenue from debt cancellation programs, motor club programs, and warranty programs.

Related administrative fee revenue is recognized consistent with the earnings recognition pattern of the underlying insurance policies, debt cancellation contracts and motor club memberships being administered, using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract.

In addition, we also earn fee revenue from debt cancellation, motor club, and service contract products.

Related administrative fee revenue is recognized consistent with the earnings recognition pattern of the underlying insurance policies, debt cancellation contracts, auto and consumer goods service contracts, and motor club memberships being administered, using Rule of 78's, modified Rule of 78's, pro rata, or other actuarial methods as appropriate for the contract.

Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

2 unchanged sentences

As experience changes, adjustments to the ceding commissions are reflected in the period incurred and are based on the claim experience of the related policy.

The adjustment is calculated by adding the earned premium and investment income from the assets held in trust for the Company’s benefit less earned commissions, incurred claims and the reinsurer's fee for the coverage.

The adjustment is calculated by adding the earned premium and investment income from the assets held in

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

trust for the Company’s benefit less earned commissions, incurred claims and the reinsurer's fee for the coverage.

Vessel Related Revenue

11 unchanged sentences

Net Losses and Loss Adjustment Expenses

Net losses and loss adjustment expenses represent losses and related claim adjudication and processing costs on insurance

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

contract claims, net of amounts ceded.

Net losses and loss adjustment expenses represent losses and related claim adjudication and processing costs on insurance contract claims, net of amounts ceded.

Net losses include actual claims paid and the change in unpaid claim reserves.

Commissions Payable and Expense

Commissions are paid to distributors and retailers selling credit insurance policies, motor club memberships, mobile device protection, and warranty service contracts, and are generally deferred and expensed in proportion to the earning of related revenue.

Commissions are paid to distributors and retailers selling credit insurance policies, motor club memberships, mobile device protection, and vehicle service contracts, and are generally deferred and expensed in proportion to the earning of related revenue.

Credit insurance commission rates, in many instances, are set by state regulators and are also impacted by market conditions.

5 unchanged sentences

Recently Adopted Accounting Pronouncements

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Standard Description Adoption Date Impact on Financial Statements

2019-12 Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes The standard eliminates the need for an organization to analyze whether the following apply in a given period (1) exception to the incremental approach for intraperiod tax allocation, (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (1) franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to tax, and (4) enacted changes in tax laws in interim periods.

January 1, 2021 The standard makes changes to areas of tax accounting for transactions and situations

which do not currently apply to the Company’s activity, so the adoption of the standard does

not currently impact the Company’s financial

2016-13 Financial Instruments -Credit Losses (Topic 326):

14 unchanged sentences

January 1, 2020 The retrospective adoption of this standard resulted in additional disclosures related to inputs of Level 3 investments.

This adoption resulted in no material impact to the Company’s consolidated financial statements.

This adoption resulted in an immaterial impact to the Company’s consolidated financial statements.

See Note (12) Fair Value of Financial Instruments.

3 unchanged sentences

January 1, 2019 The adoption of this guidance resulted in an immaterial reclassification from AOCI to retained earnings in the Company’s consolidated financial statements.

2016-02 Leases (Topic 842) This new standard introduced a new lessee model that brings substantially all leases onto the balance sheet.

In addition, while the new guidance retains most of the principles of the previous existing lessor model in GAAP, it aligns many of those principles with ASC 606, Revenue From Contracts With Customers.

January 1, 2019 The adoption of this guidance (practical expedient) resulted in the Company recognizing a right of use asset of $ 32,052 as part of other assets and a lease liability of $ 33,558 as part of other liabilities and accrued expenses in the consolidated balance sheets, as well as de-recognizing the liability for deferred rent that was required under the previous guidance for its operating lease agreements at January 1, 2019.

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

Standard Description Adoption Date Impact on Financial Statements

2016-02 Leases (Topic 842) This new standard introduced a new lessee model that brings substantially all leases onto the balance sheet.

2014-09 Revenue from Contracts with Customers (Topic 606) This ASU outlined a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes previous revenue recognition guidance, including industry-specific guidance.

January 1, 2018 The Company has chosen the modified-retrospective method of adopting Topic 606, and has assessed these contracts and concluded that changes in accounting and revenue recognition upon adoption of Topic 606 were not material to the Company’s financial position as of January 1, 2018, and did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements, Not Yet Adopted

Standard Description Adoption Date Impact on Financial Statements

2019-12 Income Taxes (Topic 740):

For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption of the amendments is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued.

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

The Company is currently evaluating the effect on its consolidated financial statements.

2020-04 Reference Rate Reform (Topic 848):

5 unchanged sentences

(3) Acquisitions

Acquisition of Sky Auto

On December 31, 2020, a subsidiary in our insurance business acquired all of the equity interests in Sky Auto for total net cash consideration of approximately $ 25,200 .

Sky Auto markets vehicle service contracts to consumers within the United States.

Identifiable assets acquired were primarily made up of goodwill and intangible assets.

Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of goodwill and intangible assets of approximately

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

$ 20,000 and $ 5,340 .

It is expected that the tax basis in goodwill and intangible assets will be similar to the GAAP values provided above.

See Note (9) Goodwill and Intangible Assets, net.

Acquisition of Smart AutoCare

2 unchanged sentences

and Smart AutoCare Administration Solutions, Inc.

(together Smart AutoCare), pursuant to the Equity Interest Purchase Agreement (the Purchase Agreement) between Fortegra Warranty Holdings, LLC.

(together Smart AutoCare), pursuant to the Equity Interest Purchase Agreement (as amended, the Purchase Agreement) between Fortegra Warranty Holdings, LLC.

(Buyer) and Peter Masi (Seller), dated as of December 16, 2019.

Concurrent with the Acquisition, Freedom terminated reinsurance agreements with affiliates of Seller (the Commutation Transaction).

Tiptree paid Seller $ 111,804 , net of working capital true-ups, in cash at closing, $ 8,250 of which will be held in an escrow account for 18 months to satisfy indemnity claims.

Tiptree paid Seller $ 111,804 , net of working capital true-ups, in cash at closing, $ 8,250 of which was held in an escrow account to satisfy indemnity claims and was released on August 3, 2021.

Simultaneously, pursuant to the Commutation Transaction, affiliates of Seller paid Freedom $ 102,000 in cash.

The Purchase Agreement also provides for an earn out of up to $ 50,000 in cash based on Smart AutoCare achieving specified performance metrics measured on the 3 -year and 5 -year anniversary of closing (Reserve Based Earn-Out Amount) and an additional earn out of up to $ 30,000 payable in cash or Tiptree common stock based on Smart AutoCare achieving other certain specified performance metrics measured on the 4 -year and 5 -year anniversary of closing (Profits Based Earn-Out Amount).

The Purchase Agreement also provides for an earn out of up to $ 50,000 in cash based on Smart AutoCare achieving specified performance metrics measured on the 4-year and 6-year anniversary of closing (Reserve Based Earn-Out Amount) and an additional earn out of up to $ 30,000 payable in cash or Tiptree common stock based on Smart AutoCare achieving other certain specified performance metrics measured on the 4-year anniversary of closing (Profits Based Earn-Out Amount).

In addition, the purchase price will be subject to a true-up following the 6-year anniversary of the closing (Underwriting Profitability True-Up) based on the adequacy of certain legacy reserves, offset by certain earnings on new business.

3 unchanged sentences

The financial results of Smart AutoCare have been included in the Company’s results as of the acquisition date.

For the period from the Acquisition until December 31, 2020, Smart AutoCare total revenue was $ 70,022 and the loss before taxes was $ 226 .

The fair value of assets acquired and liabilities assumed represent the allocation as our evaluation of facts and circumstances available as of the acquisition date.

1 unchanged sentence

The allocation of the purchase price has been finalized and all measurement period adjustments have been recorded.

Management’s allocation of the purchase price to the net assets acquired resulted in the recording of finite-lived intangible assets valued at $ 93,700 , with an estimated amortization period of 5 to 13.5 years.

It is expected that the tax basis in intangible assets will be similar to the GAAP values provided above.

The residual amount of the purchase price after the allocation to net assets acquired and identifiable intangibles of $ 60,346 has been allocated to goodwill.

31 unchanged sentences

Total acquired finite-lived intangible assets 7.7 $ 93,700

On July 1, 2019, a subsidiary in our insurance business acquired a majority interest in Ingenasys, Ltd., the parent holding company of Defend Insurance Group (Defend), for total net cash consideration of approximately $ 4,600 .

Defend is an automotive finance and insurance provider and insurance administrator operating in the Czech Republic, Poland, Hungary, Slovakia, and the UK.

Acquisition of Sky Auto

On December 31, 2020, a subsidiary in our insurance business acquired all of the equity interests in Sky Auto for total net cash consideration of approximately $ 25,200 .

Sky Auto markets vehicle service contracts to consumers within the United States.

Identifiable assets acquired were primarily made up of goodwill and intangible assets.

Management’s allocation of the purchase price to the net assets acquired resulted in the recording of goodwill and intangible assets of $ 19,867 and $ 5,340 .

The tax basis in goodwill and intangible assets is equal to the GAAP values provided above.

The acquired goodwill and intangibles will be amortized over a period of 15 years for tax purposes.

See Note (9) Goodwill and Intangible Assets, net.

3 unchanged sentences

(in thousands, except share data)

(4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations

Defend is an automotive finance and insurance provider and insurance administrator operating in the Czech Republic, Poland, Hungary, Slovakia, and the UK.

Identifiable assets acquired were primarily made up of goodwill and intangible assets.

See Note (9) Goodwill and Intangible Assets, net.

(4) Dispositions and Assets and Liabilities Held for Sale

On April 26, 2019, the Company completed the sale of the management contracts and related assets for the CLOs managed by Telos Asset Management, LLC (Telos).

4 unchanged sentences

This contingent consideration represents a gain contingency, and the Company will not recognize any additional gain unless such consideration is realized.

On February 1, 2018, the Company completed the sale of Care, as well as two senior living properties held in our insurance business, to Invesque Inc.

The pre-tax comprehensive income on the sale was approximately $ 54,860 , which consists of $ 56,860 gain on sale of a subsidiary, $ 1,845 of realized gain on the sale of the insurance properties, offset by the reclassification of an interest rate swap from AOCI of $ 3,845 .

The gain on sale of a subsidiary includes $ 10,676 of earnout consideration recognized in December 2018 as a result of a portfolio disposition by Invesque.

Total consideration received for the sale of Care was $ 150,741 , including approximately 16.6 million shares of Invesque, resulting in an ownership of approximately 34 % of the acquiring company at the time of sale.

The Company has elected to apply the fair value option to the investment in Invesque.

As such, these shares are held at fair value within equity securities.

When the Company entered into a purchase agreement on November 16, 2017 to sell Care, the Company concluded that the sale met the requirements to be classified as a discontinued operation.

As a result, the Company reclassified the income and expenses attributable to Care to net income (loss) from discontinued operations through the completion of the sale.

Assets and Liabilities Held for Sale

6 unchanged sentences

Total investments 238,881 169,147

Cash and cash equivalents 4,870 7,137

Restricted cash 9 —

Cash, cash equivalents and restricted cash 9,360 4,879

Notes and accounts receivable, net 157 1,760

3 unchanged sentences

Other liabilities and accrued expenses (1)

15,021 13,040

Liabilities held for sale $ 242,994 $ 175,112

(1) Includes deferred tax liabilities of $ 939 as of December 31, 2020.

During the year ended December 31, 2020, the Company recorded an impairment of $ 4,428 related to assets and liabilities held for sale.

(1) Includes deferred tax liabilities of $ 659 and $ 939 as of December 31, 2021 and December 31, 2020, respectively.

During the year ended December 31, 2021 and December 31, 2020, the Company recorded an impairment of $ 1,928 and $ 4,428 , respectively, related to assets and liabilities held for sale.

See Note (16) Other Revenue and Other Expenses.

No impairment related to assets and liabilities held for sale was recorded for the years ended December 31, 2019 or 2018.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

No impairment related to assets and liabilities held for sale was recorded for the year ended December 31, 2019.

Luxury has a total borrowing capacity at December 31, 2021 of $ 299,500 .

As of December 31, 2021 and 2020, a total of $ 227,973 and $ 162,072 , respectively, was outstanding under such financing agreements.

Discontinued Operations

The following table presents detail of Care’s revenues and expenses of discontinued operations in the consolidated statements of operations for the following periods:

Year Ended December 31,

2020 2019 2018

Rental and related revenue $ — $ — $ 6,476

Other revenue — — 149

Total revenues — — 6,625

Employee compensation and benefits — — 2,788

Interest expense — — 1,252

Other expenses — — 1,961

Total expenses — — 6,001

Net income (loss) before taxes from discontinued operations — — 624

Gain on sale of discontinued operations — — 56,860

provision (benefit) for income taxes — — 13,714

Net income (loss) from discontinued operations $ — $ — $ 43,770

The following table presents a summary of cash flows related to discontinued operations included in the consolidated statements of cash flows for the following periods:

Year Ended December 31,

2020 2019 2018

Net cash provided by (used in):

Operating activities $ — $ — $ ( 2,095 )

Investing activities — — ( 592 )

Financing activities — — ( 123 )

Net cash flows provided by discontinued operations $ — $ — $ ( 2,810 )

Significant Accounting Policies Related to Dispositions and Discontinued Operations

Except as noted below, Care and our CLO management business adhered to the Significant Accounting Policies as described in Note (2) Summary of Significant Accounting Policies.

Revenue Recognition

Rental and Related Revenue

Rental revenue from residents in properties owned by Care but managed by a management company pursuant to a management agreement (Managed Properties) were recognized monthly as services were provided, as lease periods for residents were short-term in nature.

The Company recognized rental revenue from triple net leases on a straight-line basis over the non-cancelable term of the lease unless another systematic and rational basis was more representative of the time pattern in which the use benefit was derived from the leased property.

Renewal options in leases with rental terms that were higher than those in the primary term were excluded from the calculation of straight-line rent if the renewals were not reasonably assured.

The Company commenced rental revenue recognition when the tenant took control of the leased space.

The Company recognized lease termination payments as a component of rental revenue in the period received, provided that there were no further obligations under the lease.

Revenue related to rental revenue was primarily attributable to services provided to the occupants of our senior living properties.

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

Management Fee Income

The Company earned management and incentive fees from the CLOs it managed.

These management fees were paid periodically in accordance with the terms of the individual management agreements for as long as the Company managed the funds.

Management fees typically consisted of fees based on the amount of assets held in the CLOs.

Management fees were recognized as revenue when earned.

The Company did not recognize incentive fees until all contractual contingencies were removed.

Management fee income is recorded in other revenue.

(5) Segment Data

Tiptree is a holding company that allocates capital across a broad spectrum of businesses, assets and other investments.

Tiptree’s principal operating subsidiary, The Fortegra Group, LLC (Fortegra), along with its subsidiaries, is a leading provider of specialty insurance underwriting, warranty and service contract products and related service solutions.

Tiptree’s principal operating subsidiary, The Fortegra Group, LLC and its subsidiaries (Fortegra), is a leading provider of specialty insurance, service contract products and related service solutions.

Based on the ASC 280 quantitative analysis performed as of December 31, 2021, our reportable segments are Insurance and Mortgage.

3 unchanged sentences

Segment results incorporate the revenues and expenses of these subsidiaries since they commenced operations or were acquired.

For the year ended December 31, 2020, Mortgage has been broken out of Tiptree Capital as a reportable segment since it meets the quantitative threshold for disclosure.

Prior year segments have been conformed to the current year presentation.

Intercompany transactions are eliminated.

1 unchanged sentence

Insurance operations are conducted through Fortegra, which includes Fortegra Financial Corporation and Fortegra Warranty.

Fortegra underwrites and administers specialty insurance programs and products, and is a leading provider of credit and asset protection products and administration services.

Fortegra’s programs are provided across a diverse range of products and services including credit protection insurance, warranty and service contract products, premium finance, and niche personal and commercial lines of insurance.

On January 3, 2020, Fortegra Warranty acquired Smart AutoCare, a vehicle warranty solutions provider in the United States.

On December 31, 2020, Fortegra acquired Sky Auto, a vehicle service contract marketer within the United States.

See Note (3) Acquisitions.

Fortegra is a leading provider of specialty insurance products and related services.

Fortegra designs, markets and underwrites specialty commercial and personal property and casualty insurance products incorporating value-added coverages and services for select target markets or niches.

Fortegra’s products and services include niche commercial and personal lines, service contracts, and other insurance services.

Tiptree Capital:

Mortgage operations are conducted through Reliance.

The Company’s mortgage origination business originates loans for sale to institutional investors, including GSEs and FHA/VA and services loans on behalf of Fannie Mae, Freddie Mac, and GNMA.

Other includes our asset management, mortgage operations of Luxury, shipping operations, and other investments (including our Invesque shares).

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The Company’s mortgage origination business originates loans for sale to institutional investors, including GSEs and FHA/VA and services loans on behalf of Fannie Mae, Freddie Mac, and Ginnie Mae.

Other includes our maritime shipping operations, asset management, other investments (including our Invesque shares), and our held-for-sale mortgage operations (Luxury Mortgage).

The tables below present the components of revenue, expense, income (loss) before taxes, and assets for our reportable segments as well as Tiptree Capital - Other for the following periods:

Year Ended December 31, 2020

For the Year Ended December 31, 2021

Tiptree Capital

8 unchanged sentences

Net income (loss) attributable to common stockholders $ 38,132

Year Ended December 31, 2019

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

For the Year Ended December 31, 2020

Tiptree Capital

8 unchanged sentences

Net income (loss) attributable to common stockholders $ ( 29,158 )

Year Ended December 31, 2018

For the Year Ended December 31, 2019

Tiptree Capital

3 unchanged sentences

Corporate expenses — — — ( 34,241 )

Income (loss) before taxes from continuing operations $ 14,172 $ 335 $ ( 4,059 ) $ ( 19,796 )

Income (loss) before taxes $ 37,030 $ 2,959 $ 23,391 $ 29,139

provision (benefit) for income taxes 9,017

Net income (loss) from discontinued operations 43,770

Net income (loss) $ 20,122

2 unchanged sentences

The Company conducts its operations primarily in the U.S.

with less than 6 % of total revenues generated overseas for the years ended December 31, 2020, 2019 and 2018.

with 7.2 %, 5.2 %, and 2.9 % of total revenues generated overseas for the years ended December 31, 2021, 2020 and 2019 respectively.

The following table presents the reportable segments and Tiptree Capital - Other assets for the following periods:

8 unchanged sentences

(6) Investments

The following table presents the Company's investments related to insurance operations (Insurance) and investments from other Tiptree investing activities (Tiptree Capital), measured at fair value as of the following periods:

The following table presents the Company's investments related to insurance operations and other Tiptree investing activities, measured at fair value as of the following periods:

As of December 31, 2021

14 unchanged sentences

Total investments $ 608,891 $ 92,376 $ 110,137 $ 811,404

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Available for Sale Securities, at fair value, net of allowance for credit losses

All of the Company’s investments in Available for Sale Securities, at fair value, net of allowance for credit losses (AFS securities) as of December 31, 2020 and December 31, 2019 are held by subsidiaries in the insurance business.

Available for Sale Securities, at fair value

All of the Company’s investments in Available for Sale Securities, at fair value, net of allowance for credit losses (AFS securities) as of December 31, 2021 and December 31, 2020 are held by subsidiaries in the insurance segment.

The following tables present the Company's investments in AFS securities:

11 unchanged sentences

Total $ 581,064 $ ( 245 ) $ 3,739 $ ( 7,110 ) $ 577,448

(1) - Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statements of operations (as a credit loss on AFS securities).

Amount excludes unrealized losses relating to non-credit factors.

As of December 31, 2020

Amortized cost Gross

Amortized cost Allowance for Credit Losses (1)

unrealized gains Gross

8 unchanged sentences

Total $ 369,751 $ — $ 9,541 $ ( 2,159 ) $ 377,133

(1) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in net realized and unrealized gains (losses) as a credit loss on AFS securities.

Amount excludes unrealized losses relating to non-credit factors.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The amortized cost and fair values of AFS securities, by contractual maturity date, are shown below.

8 unchanged sentences

Total $ 581,064 $ 577,448 $ 369,751 $ 377,133

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The following tables present the gross unrealized losses on AFS securities by length of time that individual AFS securities have been in a continuous unrealized loss position for less than twelve months, and twelve months or greater and do not have an allowance for credit losses:

2 unchanged sentences

Fair value Gross

unrealized losses # of Securities Fair value Gross unrealized losses # of Securities

unrealized losses # of Securities (1)

Fair value Gross unrealized losses # of Securities (1)

Treasury securities and obligations of U.S.

4 unchanged sentences

Asset backed securities 7,454 ( 84 ) 38 2,316 ( 2,062 ) 5

Certificates of deposit 1,339 — 2 — — —

Obligations of foreign governments 2,278 ( 58 ) 8 — — —

$ 344,073 $ ( 4,403 ) 762 $ 25,110 $ ( 2,707 ) 102

2 unchanged sentences

Fair value Gross

unrealized losses # of Securities Fair value Gross unrealized losses # of Securities

unrealized losses # of Securities (1)

Fair value Gross unrealized losses # of Securities (1)

Treasury securities and obligations of U.S.

5 unchanged sentences

$ 16,603 $ ( 60 ) 49 $ 18,929 $ ( 2,099 ) 11

(1) Presented in whole numbers.

Management believes that it is more likely than not that the Company will be able to hold the fixed maturity AFS securities that were in an unrealized loss position as of December 31, 2021 until full recovery of their amortized cost basis.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The table below presents a roll-forward of the activity in the allowance for credit losses on AFS securities by type as of December 31, 2021:

Obligations of state and political subdivisions Corporate securities Asset backed securities Total

Obligations of state and political subdivisions Corporate securities Asset backed securities Obligations of foreign governments Total

Balance at December 31, 2019 $ — $ — $ — $ — $ —

Increase in the allowance for the initial adoption of ASU 2016-13 ( 1 ) ( 50 ) ( 2 ) — ( 53 )

Reduction in credit losses due to AFS securities sold during the year — 3 — — 3

Recoveries of amounts previously written off during the year 1 47 2 50

Ending balance of the allowance for credit losses on AFS securities $ — $ — $ — $ —

Gains from recoveries of amounts previously written off 1 47 2 — 50

Balance at December 31, 2020 $ — $ — $ — $ — $ —

(Increase) in allowance for credit losses — ( 296 ) — ( 6 ) ( 302 )

Reduction in credit losses due to AFS securities sold during the year — 3 — 1 4

Gains from recoveries of amounts previously written off — 52 — 1 53

Balance at December 31, 2021 $ — $ ( 241 ) $ — $ ( 4 ) $ ( 245 )

The Company applies a discounted cash flow model, based on assumptions and model outputs provided by an investment management company, in determining its lifetime expected credit losses on AFS securities.

This includes determining the present value of expected future cash flows discounted at the book yield of the security.

The table below presents the amount of credit losses (gains from recoveries) on AFS securities recorded by the Company for the following period:

Year Ended December 31, 2020

Credit losses (gains from recoveries) on AFS securities $ ( 53 )

The table below presents the amount of gains from recoveries (credit losses) on AFS securities recorded by the Company for the following period:

For the Year Ended December 31,

Net gains from recoveries (credit losses) on AFS securities $ ( 245 ) $ 53

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts.

The Company cannot remove or replace investments in

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

regulatory deposit accounts without prior approval of the contractual party or regulatory authority, as applicable.

The Company cannot remove or replace investments in regulatory deposit accounts without prior approval of the contractual party or regulatory authority, as applicable.

The following table presents the Company's restricted investments included in the Company's AFS securities:

2020 December 31, 2019

As of December 31,

Fair value of restricted investments in trust pursuant to reinsurance agreements $ 42,471 $ 44,349

2 unchanged sentences

The following table presents additional information on the Company’s AFS securities:

For the Year Ended

For the Year Ended December 31,

2021 2020 2019

1 unchanged sentence

Proceeds from maturities, calls and prepayments of AFS securities $ 68,923 $ 84,923 $ 36,459

Gains (losses) realized on maturities, calls and prepayments of AFS securities $ — $ — $ ( 30 )

Gross proceeds from sales of AFS securities $ 86,981 $ 35,603 $ 170,495

The following table presents the gross realized gains and gross realized losses from sales and or redemptions of AFS securities:

For the Year Ended

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The following table presents the gross realized gains and gross realized losses from sales and redemptions of AFS securities:

For the Year Ended December 31,

2021 2020 2019

8 unchanged sentences

$ 7,099 $ 10,156 $ ( 3,057 ) $ — $ 7,795 $ 12,281 $ ( 4,486 ) $ —

Non-performing loans (2)

— — — — 387 409 ( 22 ) —

Mortgage loans held for sale (2)

2 unchanged sentences

(1) The cost basis of Corporate loans was approximately $ 9,094 and $ 11,282 at December 31, 2021 and December 31, 2020, respectively.

(2) The cost basis of NPLs was approximately $ 282 at December 31, 2019, respectively.

The are no NPLs as of December 31, 2020.

(3) As of December 31, 2020 and December 31, 2019, there were two mortgage loans held for sale and one mortgage loan held for sale that were 90 days or more past due, respectively, with a fair value of $ 534 and $ 198 , respectively.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

(2) As of December 31, 2021 and December 31, 2020, there was one mortgage loan held for sale and two mortgage loans held for sale that were 90 days or more past due, respectively, with a fair value of $ 136 and $ 534 , respectively.

Equity Securities

Equity securities represents the carrying amount of the Company's basis in equity investments.

Included within the equity securities balance are 17.0 million shares of Invesque as of December 31, 2020, and 16.6 million as of December 31, 2019, for which the Company has elected to apply the fair value option.

Equity securities consist mainly of publicly traded common and preferred stocks and fixed income exchange traded funds.

Included within the equity securities balance are 17.0 million shares of Invesque as of December 31, 2021 and December 31, 2020, for which the Company has elected to apply the fair value option.

The following table presents information on the cost and fair value of the Company’s equity securities related to insurance operations and other Tiptree investing activity as of the following periods:

13 unchanged sentences

Total equity securities $ 123,846 $ 98,130 $ 111,491 $ 25,708 $ 235,337 $ 123,838

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Other Investments

8 unchanged sentences

Debentures 21,057 — — 21,057

Trade claims 19,737 — — 19,737

Other 216 7,981 1,332 9,529

12 unchanged sentences

(2) Net of accumulated depreciation of $ 13,059 and $ 8,372 as of December 31, 2021 and December 31, 2020, respectively.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Net Investment Income - Insurance

13 unchanged sentences

The following tables present the components of other investment income by type:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

For the Year Ended December 31,

8 unchanged sentences

(1) Primarily relates to Loans, at fair value classified as Held for Sale.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

See Note (4) Dispositions and Assets and Liabilities Held for Sale.

Net Realized and Unrealized Gains (Losses)

The following table presents the components of net realized and unrealized gains (losses) recorded on the consolidated statements of operations.

Net unrealized gains (losses) on AFS securities are included within other comprehensive income (OCI), and as such, are not included in this table.

Net realized and unrealized gains (losses) on non-investment financial assets and liabilities are included below:

Net unrealized gains (losses) on AFS securities are included within other comprehensive income (loss) (OCI), net of tax, and, as such, are not included in this table.

Net realized and unrealized gains (losses) on non-investment related financial assets and liabilities are included below:

For the Year Ended December 31,

2 unchanged sentences

Reclass of unrealized gains (losses) on AFS securities from OCI $ 638 $ 528 $ 1,312

Gains from recoveries (credit losses) on AFS securities 53 — —

Net gains from recoveries (credit losses) on AFS securities ( 245 ) 53 —

Net realized gains (losses) on loans ( 389 ) ( 945 ) 2,100

Net realized gains (losses) on equity securities ( 10,434 ) ( 24,586 ) 947

Net realized gain on corporate bonds 7,299 39 1,627

Net realized gains (losses) on corporate bonds 3,917 7,299 279

Other 1,346 2,511 39

1 unchanged sentence

Net realized gains (losses) on loans 91,538 111,725 52,617

Other 2,165 ( 10,314 ) —

Net realized gains (losses) on loans (1)

11 unchanged sentences

Net change in unrealized gains (losses) on loans (1)

815 2,185 983

Net unrealized gains (losses) on equity securities held at period end 3,090 ( 67,656 ) ( 992 )

2 unchanged sentences

Total net realized and unrealized gains (losses) $ 151,350 $ 62,410 $ 83,868

(1) Primarily relates to Loans, at fair value classified as Held for Sale.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations

(1) Relates to Loans, at fair value classified as Held for Sale.

See Note (4) Dispositions and Assets and Liabilities Held for Sale.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

(7) Notes and Accounts Receivable, net

1 unchanged sentence

As of December 31,

Notes receivable, net - premium financing program $ 62,075 $ 42,192

Accounts and premiums receivable, net $ 137,082 $ 95,269

Retrospective commissions receivable 157,853 131,760

Notes receivable, net - premium financing program 89,788 62,075

Trust receivables 41,889 54,393

1 unchanged sentence

Total notes and accounts receivable, net $ 454,369 $ 370,452

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The following table presents the total valuation allowance and bad debt expense for the following periods:

30 unchanged sentences

Total premiums written $ 1,012,784 $ 627,812 $ 158,578 $ 543,550 29.2 %

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Direct amount Ceded to other companies Assumed from other companies Net amount Percentage of amount - assumed to net

Premiums earned:

11 unchanged sentences

Total premiums written 918,089 478,095 97,139 537,133 18.1 %

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Direct amount Ceded to other companies Assumed from other companies Net amount Percentage of amount - assumed to net

Premiums earned:

13 unchanged sentences

Total policy and contract benefits $ 327,012

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Direct amount Ceded to other companies Assumed from other companies Net amount Percentage of amount - assumed to net

For the Year Ended December 31, 2020

16 unchanged sentences

The following table presents the components of the reinsurance receivables:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

2020 December 31, 2019

As of December 31,

Prepaid reinsurance premiums:

4 unchanged sentences

Property and liability insurance 479,091 423,868

423,868 286,411

Total 634,090 560,195

7 unchanged sentences

(1) Including policyholder account balances ceded.

(2) Includes amounts from the acquired balance sheet of Smart AutoCare.

See Note (3) Acquisitions.

The following table presents the aggregate amount included in reinsurance receivables that is comprised of the three largest receivable balances from non-affiliated reinsurers:

2 unchanged sentences

As of December 31, 2021, the non-affiliated reinsurers from whom our insurance business has the largest receivable balances were:

MFI Insurance Company, LTD (A.

Not rated), Frandisco Property and Casualty Company (A.

Not rated) and Canada Life International Reinsurance (Barbados) Corporation (A.

Not rated).The related receivables of these reinsurers are collateralized by assets on hand, assets held in trust accounts and letters of credit.

Allianz Global Corporate & Specialty SE (A.

A+ rated), Canada Life International Reinsurance (Bermuda) Corporation (A.

A+ rated), and Canada Life Assurance Company (A.

The related receivables of these reinsurers are collateralized by assets on hand, assets held in trust accounts and letters of credit.

As of December 31, 2021, the Company does not believe there is a risk of loss due to the concentration of credit risk in the reinsurance program given the collateralization.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

(9) Goodwill and Intangible Assets, net

1 unchanged sentence

As of December 31, 2021 As of December 31, 2020

Finite-Lived Intangible Assets:

Insurance Other Total Insurance Other Total

7 unchanged sentences

Accumulated amortization ( 36,320 ) — ( 36,320 ) ( 36,238 ) — ( 36,238 )

Other 640 — 640 640 — 640

Accumulated amortization ( 203 ) — ( 203 ) — — —

Total finite-lived intangible assets 107,547 326 107,873 122,957 497 123,454

Indefinite-Lived Intangible Assets:

Insurance licensing agreements 13,761 — 13,761 13,761 — 13,761

13,761 — 13,761 14,261 — 14,261

Other — 1,124 1,124 — 1,000 1,000

Intangible assets, net 136,718 1,497 138,215 47,305 669 47,974

Total indefinite-lived intangible assets 13,761 1,124 14,885 13,761 1,000 14,761

Total intangible assets, net $ 121,308 $ 1,450 $ 122,758 $ 136,718 $ 1,497 $ 138,215

Goodwill 177,395 1,708 179,103 177,528 1,708 179,236

Total goodwill and intangible assets, net $ 298,703 $ 3,158 $ 301,861 $ 314,246 $ 3,205 $ 317,451

(1) Represents intangible assets with an indefinite useful life.

Impairment tests are performed at least annually on these assets.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

(1) Impairment tests are performed at least annually on indefinite-lived intangible assets.

The following table presents the activity in goodwill, by operating segment and/or reporting unit, as appropriate, and includes the adjustments made to the balance of goodwill to reflect the effect of the final valuation adjustments made for acquisitions, as well as the reduction to any goodwill attributable to impairment related charges:

Insurance Other (1)

Balance at December 31, 2018 $ 89,854 $ 1,708 $ 91,562

Goodwill acquired (2)

7,585 — 7,585

Tiptree Capital

Insurance Other Total

Balance at December 31, 2019 97,439 1,708 99,147

4 unchanged sentences

Balance at December 31, 2020 $ 177,528 $ 1,708 $ 179,236

Purchase accounting adjustment (2)

( 133 ) — ( 133 )

Balance at December 31, 2021 $ 177,395 $ 1,708 $ 179,103

Accumulated impairments $ — $ 699 $ 699

(1) Other is primarily comprised of Mortgage.

(2) Relates to acquisitions in respective years.

(1) Relates to acquisitions in in our insurance business as of December 31, 2020.

See Note (3) Acquisitions.

(3) Relates to adjustments during the measurement period as permitted under ASC 805 for the final valuation of acquisitions in our insurance business as of July 1, 2019 and January 3, 2020.

(2) Relates to adjustments during the measurement period as permitted under ASC 805 for the final valuation of acquisitions in our insurance business as of January 3, 2020 and December 31, 2020.

The Company conducts annual impairment tests of its goodwill as of October 1.

2 unchanged sentences

The following table presents the activity, by operating segment and/or reporting unit, as appropriate, in finite and indefinite-lived other intangible assets and includes the adjustments made to the balance to reflect the effect of any final valuation adjustments made for acquisitions, as well as any reduction attributable to impairment-related charges:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Insurance Other Total

2 unchanged sentences

99,040 1,000 100,040

amortization expense ( 7,726 ) ( 171 ) ( 7,897 )

Balance at December 31, 2019 $ 47,305 $ 669 $ 47,974

Intangible assets acquired (1) (2)

99,040 1,000 100,040

Purchase accounting adjustment (2)

2 unchanged sentences

Balance at December 31, 2020 $ 136,718 $ 1,497 $ 138,215

(1) Relates to acquisitions in respective years.

Intangibles acquired — 124 124

amortization expense ( 15,410 ) ( 171 ) ( 15,581 )

Balance at December 31, 2021 $ 121,308 $ 1,450 $ 122,758

(1) Relates to acquisitions in in our insurance business as of December 31, 2020.

See Note (3) Acquisitions.

(2) The addition to Other relates to a fishing license acquired by our shipping operations.

(3) Relates to adjustments during the measurement period as permitted under ASC 805 for the final valuation of an acquisition in our insurance business as of July 1, 2019.

(2) Relates to adjustments during the measurement period as permitted under ASC 805 for the final valuation of acquisitions in our insurance business as of July 1, 2019.

The following table presents the amortization expense on finite-lived intangible assets for the following periods:

4 unchanged sentences

The following table presents the amortization expense on finite-lived intangible assets for the next five years and thereafter by operating segment and/or reporting unit, as appropriate:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

As of December 31, 2021

Insurance Other (1)

Insurance Other Total

2022 $ 15,848 $ 126 $ 15,974

5 unchanged sentences

Total $ 107,547 $ 326 $ 107,873

(1) Other is primarily comprised of Mortgage.

(10) Derivative Financial Instruments and Hedging

13 unchanged sentences

Outstanding IRLCs expose the Company to the risk that the price of the loans underlying the commitments might decline from inception of the rate lock to funding of the loan.

To manage this risk, the Company utilizes forward delivery contracts and to be announced (TBA) mortgage backed securities to economically hedge the risk of potential changes in the value of the loans that would result from the commitments.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

result from the commitments.

Forward Delivery Contracts and TBA Mortgage Backed Securities

17 unchanged sentences

(11) Debt, net

The following table presents the balance of the Company’s debt obligations, net of discounts and deferred financing costs.

Stated interest rate or range of rates Maximum borrowing capacity as of As of

Debt Type Stated maturity date December 31, 2020 December 31,

2020 December 31, 2019

Corporate debt

Secured revolving credit agreements August 2023 LIBOR + 2.25 % $ 200,000 $ — $ 25,000

Secured term credit agreements February 2025 LIBOR + 6.75 % 120,313 120,313 68,210

Preferred trust securities June 2037 LIBOR + 4.10 % 35,000 35,000 35,000

Junior subordinated notes October 2057 8.50 % 125,000 125,000 125,000

The following table presents the balance of the Company’s debt obligations, net of discounts and deferred financing costs for our corporate and asset based debt.

Asset based debt is generally recourse only to specific assets and related cash flows.

As of December 31, 2021

Corporate debt Insurance Other Corporate Total

Secured revolving credit agreements (1)

$ 2,160 $ — $ — $ 2,160

Secured term credit agreements (LIBOR + 6.75 %) (2)

— — 114,063 114,063

Preferred trust securities (LIBOR + 4.10 %)

35,000 — — 35,000

8.50 % Junior subordinated notes

125,000 — — 125,000

Total corporate debt 162,160 — 114,063 276,223

Asset based debt (3)

Asset based revolving financing October 2023 LIBOR + 2.75 % 75,000 27,510 21,576

Residential mortgage warehouse borrowings (2)

April 2021 - LIBOR + 2.00 % 110,000 55,994 90,673

August 2021 to LIBOR + 3.00 %

Vessel backed term loan November 2024 LIBOR + 4.75 % 15,800 15,800 18,000

Asset based revolving financing (LIBOR + 2.75 %)

42,310 — — 42,310

Residential mortgage warehouse borrowings (LIBOR + 1.88 % to 3.00 %) (2)(3)

— 72,518 — 72,518

Vessel backed term loan (LIBOR + 4.75 %)

— 13,600 — 13,600

Total asset based debt 42,310 86,118 — 128,428

3 unchanged sentences

Total debt, net $ 195,996 $ 85,049 $ 112,304 $ 393,349

(1) Asset based debt is generally recourse only to specific assets and related cash flows.

As of December 31, 2020

Corporate debt Insurance Other Corporate Total

Secured revolving credit agreements (1)

$ — $ — $ — $ —

Secured term credit agreements (LIBOR + 6.75 %) (2)

— — 120,313 120,313

Preferred trust securities (LIBOR + 4.10 %)

35,000 — — 35,000

8.50 % Junior subordinated notes

125,000 — — 125,000

Total corporate debt 160,000 — 120,313 280,313

Asset based debt (3)

Asset based revolving financing (LIBOR + 2.75 %)

27,510 — — 27,510

Residential mortgage warehouse borrowings (LIBOR + 1.88 % to 3.00 %) (2)(3)

— 55,994 — 55,994

Vessel backed term loan (LIBOR + 4.75 %)

— 15,800 — 15,800

Total asset based debt 27,510 71,794 — 99,304

Total debt, face value 187,510 71,794 120,313 379,617

Unamortized discount, net — — ( 2,035 ) ( 2,035 )

Unamortized deferred financing costs ( 9,537 ) ( 5 ) ( 1,794 ) ( 11,336 )

Total debt, net $ 177,973 $ 71,789 $ 116,484 $ 366,246

(1) The secured revolving credit agreements provide a two rate structure at the Company’s discretion;

Prime + 1.25 % for swing loans and LIBOR + 2.25 %.

(2) Includes LIBOR floor of 1.00 %.

(3) The weighted average coupon rate for residential mortgage warehouse borrowings was 2.76 % and 2.75 % at December 31, 2021 and December 31, 2020, respectively.

Includes LIBOR floor ranging from 0.50 % to 1.00 %

The following table presents the amount of interest expense the Company incurred on its debt for the following periods:

1 unchanged sentence

2021 2020 2019

Interest expense - corporate debt $ 23,322 $ 19,682 $ 18,162

Interest expense - asset based debt 9,260 7,377 8,851

Total Interest expense - corporate debt 24,425 $ 23,322 $ 19,682

Total Interest expense - asset based debt 13,018 9,260 7,377

Interest expense on debt $ 37,443 $ 32,582 $ 27,059

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The following table presents the contractual principal payments and future maturities of the unpaid principal balance on the Company’s debt for the following periods:

3 unchanged sentences

Total $ 404,651

The following narrative is a summary of certain terms of our debt agreements for the period ended December 31, 2020:

The following narrative is a summary of certain terms of our debt agreements for the year ended December 31, 2021:

Corporate Debt

1 unchanged sentence

As of December 31, 2021 and December 31, 2020, a total of $ 2,160 and $ 0 , respectively, was outstanding under the revolving line of credit in our insurance business.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The maximum borrowing capacity under the agreements as of December 31, 2021 is $ 200,000 .

On August 4, 2020, Fortegra entered into an Amended and Restated Credit Agreement by and among Fortegra Financial and its subsidiary, LOTS Intermediate Co., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s subsidiaries, as guarantors, and Fifth Third Bank, National Association, as the administrative agent and issuing lender (the Fortegra Credit Agreement).

1 unchanged sentence

The Fortegra Credit Agreement replaced the $ 30,000 revolving line of credit with the Fifth Third Bank (the “Working Capital Facility”) .

As of December 31, 2019, the Company had the Working Capital Facility of $ 30,000 , which provided for a $ 30,000 accordion feature.

The Working Capital Facility had a maturity date of April 28, 2020 and an interest rate of 30-day LIBOR rate plus 1.20 %.

On December 30, 2019, the Working Capital Facility was amended, adding the ability to issue up to $ 75,000 in standby letters of credit (“SBLCs”), and applying an aggregate maximum of $ 75,000 for the combined values of outstanding debt and issued SBLCs.

The Working Capital Facility contained terms and conditions typical for a transaction of this type.

Secured Term Credit Agreement

8 unchanged sentences

The Credit Agreement also contains customary mandatory repayment provisions (subject to customary exceptions) and requires that net cash proceeds from the sale by Tiptree and certain of its subsidiaries of capital stock of Invesque be applied to prepay loans until the outstanding principal amount of loans is $ 62,500 , with remaining proceeds subject to reinvestment rights.

Prepayments, whether mandatory or voluntary, reduce future scheduled amortization payments in the order they come due.

Prepayments, whether mandatory or voluntary, reduce future scheduled amortization payments in the order they come

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The Credit Agreement also requires the payment of a prepayment fee upon a repricing transaction or equity issuance consummated after the closing date, or the sale of Fortegra, or any of its material subsidiaries.

As of December 31, 2021, a total of $ 114,063 was outstanding under this agreement.

The maximum borrowing capacity on this agreement is $ 114,063 .

Junior Subordinated Notes

5 unchanged sentences

This credit agreement contains customary financial covenants that require, among other items, maximum leverage and limitations on restricted payments under certain circumstances.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Preferred Trust Securities

4 unchanged sentences

Asset Backed Revolving Financing

As of December 31, 2019, a total of $ 9,840 was outstanding under the borrowing related to our premium finance business in our insurance business.

During April 2019, the maturity date of this borrowing was extended to April 2021 with a new rate of LIBOR plus 2.40 %.

On December 30, 2019, the maximum borrowing capacity of this borrowing was reduced from $ 25,000 to $ 13,000 .

This agreement was replaced on October 16, 2020 with a new agreement, described below.

On August 5, 2019, a subsidiary in our insurance business entered into a $ 15,000 revolving line of credit agreement related to our warranty service contract finance business.

The borrowing has a maturity date of April 28, 2021 and a rate of LIBOR plus 2.40 %.

On December 30, 2019, the maximum borrowing capacity of this borrowing was increased from $ 15,000 to $ 27,000 .

As of December 31, 2019, a total of $ 11,736 was outstanding under the borrowing.

This agreement was replaced on October 16, 2020 with a new agreement, described below.

On October 16, 2020, subsidiaries in our insurance business entered into a three year $ 75,000 secured credit agreement which replaced the individual agreements in our premium finance and warranty service contract finance businesses.

On October 16, 2020, subsidiaries in our insurance business entered into a three year $ 75,000 secured credit agreement, which replaced the individual agreements in its premium finance and service contract finance businesses.

The borrowers can select from various borrowing and rate options under the agreement, as well the option to convert certain borrowings to term loans, if no default or event of default exists.

The agreement extends up to $ 20,000 for our premium finance business and up to $ 55,000 for our warranty service contract finance business, and is secured by substantially all of the assets of the borrowers.

The agreement extends up to $ 20,000 for our premium finance business and up to $ 55,000 for our service contract finance business, and is secured by substantially all of the assets of the borrowers.

The obligations under the agreement are non-recourse to Fortegra and its subsidiaries (other than borrowers and their subsidiaries).

1 unchanged sentence

Residential Mortgage Warehouse Borrowings

In April 2020, a subsidiary in our mortgage business renewed a $ 60,000 warehouse line of credit, extending the maturity date to April 2021 and establishing a LIBOR floor of 1.0 %.

In March 2021, the $ 60,000 warehouse line of credit was renewed and the maturity date was extended from April 2021 to April 2022.

In July 2021, the $ 50,000 warehouse line of credit was renewed and the maturity date was extended from August 2021 to August 2022.

In April 2020, a subsidiary in our mortgage business renewed the $ 60,000 warehouse line of credit, extending the maturity date to April 2021 and establishing a LIBOR floor of 1.0 %.

Additionally, during March 2020, another warehouse line maturing in August 2020 temporarily raised the maximum borrowing capacity to $ 65,000 , returning to a maximum borrowing capacity of $ 50,000 in May 2020 and establishing a LIBOR floor of 0.50 %.

1 unchanged sentence

As of December 31, 2021 and December 31, 2020, a total of $ 72,518 and $ 55,994 , respectively, was outstanding under such financing agreements.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Vessel Backed Term Loan

5 unchanged sentences

As of December 31, 2021, a total of $ 13,600 was outstanding under the borrowing.

As of December 31, 2020, the Company is in compliance with the representations and covenants for outstanding borrowings or has obtained waivers for any events of non-compliance.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

As of December 31, 2021, the Company is in compliance with the representations and covenants for its outstanding debt or has obtained waivers for any events of non-compliance.

(12) Fair Value of Financial Instruments

18 unchanged sentences

expected cash flow streams, default rates, supply and demand considerations and market volatility.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Available for Sale Securities, at fair value

The fair values of available for sale securities are based on prices provided by an independent pricing service and a third-party investment manager.

The fair values of AFS securities are based on prices provided by an independent pricing service and a third-party investment manager.

The Company obtains an understanding of the methods, models and inputs used by the independent pricing service and the third-party investment manager by analyzing the investment manager-provided pricing report.

The following details the methods and assumptions used to estimate the fair value of each class of AFS securities and the applicable level each security falls within the fair value hierarchy:

U.S Treasury Securities, Obligations of U.S.

Treasury Securities, Obligations of U.S.

Government Authorities and Agencies, Obligations of State and Political Subdivisions, Corporate Securities, Asset Backed Securities, and Obligations of Foreign Governments:

6 unchanged sentences

The fair values of non-publicly traded common and preferred stocks are based on prices obtained from an independent pricing service using unobservable inputs and fall under Level 3 in the fair value hierarchy.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Loans, at fair value

Corporate Loans :

These loans are comprised of a diversified portfolio of middle market and broadly syndicated leveraged loans and are generally classified under either Level 2 or Level 3 in the fair value hierarchy.

To determine fair value, the Company uses quoted prices which include those provided from pricing vendors, where available.

We perform internal price verification procedures to ensure that the prices and quotes provided from the independent pricing vendors are reasonable.

Such verification procedures include comparison of pricing sources and analysis of variances among pricing sources.

The Company has evaluated each loan’s respective liquidity and has additionally performed valuation benchmarking.

The key characteristics which were evaluated as part of this determination were liquidity ratings, price changes to index benchmarks, depth of quotes, credit ratings and industry trends.

These loans are comprised of middle market loans and bank loans and are generally classified under either Level 2 or Level 3 in the fair value hierarchy.

To determine fair value, the Company uses quoted prices which include those provided from pricing vendors which provide coverage of secondary market participants, where available.

The values represent a composite of mark-to-market bid/offer prices.

In certain circumstances, the Company will make its own determination of fair value of loans based on internal models and other unobservable inputs.

Mortgage Loans Held for Sale :

3 unchanged sentences

The fair value of these instruments is based upon valuation pricing models, which represent the amount the Company would expect to receive or pay at the balance sheet date to exit the position.

Our mortgage origination subsidiaries issue IRLCs to their customers, which are carried at estimated fair value on the Company’s consolidated balance sheet.

Our mortgage origination subsidiaries issue IRLCs to their customers, which are carried at estimated fair value on the Company’s consolidated balance sheets.

The estimated fair values of these commitments are generally calculated by reference to the value of the underlying loan associated with the IRLC net of costs to produce and an expected pull through assumption.

5 unchanged sentences

Corporate bonds are generally classified under Level 2 in the fair value hierarchy and fair value is provided by a third-party investment manager, based on quoted market prices.

We perform internal price verification procedures monthly.

We perform internal price verification procedures monthly to ensure that the prices provided are reasonable.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Trade claims represent unsecured claims of bankrupt companies and are generally classified under Level 3 in the fair value hierarchy.

The fair value is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment.

The inputs are intended to reflect the assumptions a market participant would use in pricing the asset or liability.

Securities Sold, Not Yet Purchased

Securities sold, not yet purchased are generally classified under Level 1 or Level 2 in the fair value hierarchy, based on the leveling of the securities sold short, and fair value is provided by a third-party investment manager, based on quoted market prices.

We perform internal price verification procedures to ensure that the prices provided are reasonable.

We perform internal price verification procedures monthly to ensure that the prices provided are reasonable.

Mortgage Servicing Rights

2 unchanged sentences

The following tables present the Company’s fair value hierarchies for financial assets and liabilities, measured on a recurring basis:

As of December 31, 2020

Quoted prices in

active markets

Level 1 Other significant

observable inputs

Level 2 Significant unobservable inputs

Level 3 Fair value

Available for sale securities, at fair value:

Treasury securities and obligations of U.S.

government authorities and agencies $ — $ 196,303 $ — $ 196,303

Obligations of state and political subdivisions — 44,350 — 44,350

AND SUBSIDIARIES

3 unchanged sentences

As of December 31, 2021

Quoted prices in

active markets

Quoted prices in active markets

Level 1 Other significant

2 unchanged sentences

Level 3 Fair value

Available for sale securities, at fair value:

Treasury securities and obligations of U.S.

government authorities and agencies $ — $ 351,178 $ — $ 351,178

Obligations of state and political subdivisions — 58,660 — 58,660

Obligations of foreign governments — 2,590 — 2,590

9 unchanged sentences

Invesque 34,814 — — 34,814

Fixed income exchange traded fund 63,875 — — 63,875

Fixed income ETFs 53,154 — — 53,154

Other equity securities 49,309 — 1,206 50,515

3 unchanged sentences

Derivative assets 113 569 7,514 8,196

Trade claims — — 19,737 19,737

CLOs — — 441 441

3 unchanged sentences

Total $ 140,086 $ 717,157 $ 61,443 $ 918,686

Derivative liabilities (2)

$ — $ 2,090 $ — $ 2,090

Securities sold, not yet purchased $ 242 $ — $ — $ 242

16,479 30,158 — 46,637

Derivative liabilities — 2,141 — 2,141

Contingent consideration payable — — 200 200

2 unchanged sentences

(2) Included in other liabilities and accrued expenses.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

As of December 31, 2020

15 unchanged sentences

Mortgage loans held for sale — 82,937 — 82,937

Non-performing loans — — 387 387

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

As of December 31, 2019

Level 1 Other significant

observable inputs

Level 2 Significant unobservable inputs

Level 3 Fair value

Total loans, at fair value — 82,937 7,795 90,732

1 unchanged sentence

Invesque 31,078 — — 31,078

Fixed income exchange traded fund 25,039 — — 25,039

Fixed income ETFs 63,875 — — 63,875

Other equity securities 28,850 — 35 28,885

8 unchanged sentences

Total $ 127,248 $ 563,866 $ 33,455 $ 724,569

Securities sold, not yet purchased $ 16,479 $ 30,158 $ — $ 46,637

Derivative liabilities — 2,090 — 2,090

$ — $ 3,758 $ — $ 3,758

Contingent consideration payable — — 200 200

Total $ 16,479 $ 32,248 $ 200 $ 48,927

1 unchanged sentence

(2) Included in other liabilities and accrued expenses.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Transfers between Level 2 and 3 were a result of subjecting third-party pricing on assets to various liquidity, depth, bid-ask spread and benchmarking criteria as well as assessing the availability of observable inputs affecting their fair valuation.

The following table presents additional information about assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the following periods:

For the Year Ended

Balance at January 1, $ 33,455 $ 32,470

5 unchanged sentences

Sales ( 9,238 ) ( 6,672 )

Issuances — 111

Conversions to real estate owned — ( 2,596 )

Conversions to mortgage loans held for sale ( 111,023 ) ( 118,396 )

Balance at December 31,

$ 61,443 $ 33,455

Changes in unrealized gains (losses) included in earnings related to assets still held at period end $ ( 2,421 ) $ ( 7,978 )

Changes in unrealized gains (losses) included in OCI related to assets still held at period end $ ( 243 ) $ ( 329 )

(1) Transfers between Level 2 and 3 were a result of subjecting third-party pricing on assets to various liquidity, depth, bid-ask spread and benchmarking criteria as well as assessing the availability of observable inputs affecting their fair valuation.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The following table presents the range and weighted average (WA) used to develop significant unobservable inputs for the fair value measurements of Level 3 assets and liabilities.

As of December 31, As of December 31,

Assets 2020 2019 Valuation technique Unobservable input(s) (1)

Fair Value Range WA Range WA

2021 2020 Valuation technique Unobservable input(s) (1)

Assets Fair Value Range WA Range WA

IRLCs $ 7,514 $ 9,207 Internal model Pull through rate 55 % to 95 % 66 % 50 % to 95 % 68 %

2 unchanged sentences

Prepayment speed 5 % to 100 % 15 % 8 % to 60 % 22 %

Trade claims 19,737 — Internal model Plan projected recovery rate 15 % to 18 % 17 % N/A N/A

Total $ 57,084 $ 23,965

Contingent consideration payable - Smart AutoCare $ 200 $ — Cash Flow Model Forecast Cash EBITDA $ 20,000 to $ 30,000 N/A N/A

Actuarial Analysis Assumed Claim Liabilities $ 55,000 $ 55,000 N/A

Contingent consideration payable - Smart AutoCare $ 200 $ 200 Cash Flow Model Forecast Cash EBITDA $ 20,000 to $ 30,000 N/A $ 20,000 to $ 30,000 N/A

Actuarial Analysis Assumed Claim Liabilities $ 55,000 $ 55,000

Total $ 200 $ 200

(1) Unobservable inputs were weighted by the relative fair value of the instruments.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities that are not recorded at fair value and their respective levels within the fair value hierarchy:

22 unchanged sentences

Categorized under Level 1 in the fair value hierarchy.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Accounts and Premiums Receivable, net, Retrospective Commissions Receivable and Other Receivables:

5 unchanged sentences

Categorized under Level 2 in the fair value hierarchy.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

(13) Liability for Unpaid Claims and Claim Adjustment Expenses

The following tables present undiscounted information about incurred and paid claims development as of December 31, 2020 and 2019, net of reinsurance, as well as cumulative claim frequency and the total of IBNR liabilities plus expected development on reported claims included within the net incurred claims amounts.

This information is presented in the aggregate for all short duration contracts, due to the commonality of claims characteristics.

The tables reflect five years of information because historically approximately 95 % of incurred losses have been paid within five years of the accident period.

Roll forward of Claim Liability

The following table presents the activity in the net liability for unpaid losses and allocated loss adjustment expenses of short duration contracts for the following periods:

For the Year Ended

Policy liabilities and unpaid claims balance as of January 1, $ 233,438 $ 144,384

14 unchanged sentences

Net balance as of December 31, short duration

154,412 83,945

reinsurance recoverable on unpaid losses - short duration 165,129 113,163

4 unchanged sentences

Policy liabilities and unpaid claims balance as of December 31,

(1) Primarily relates to Smart AutoCare which was acquired on January 3, 2020.

See Note (3) Acquisitions for more information.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

$ 331,703 $ 233,438

The following schedule reconciles the total short duration contracts per the table above to the amount of total losses incurred as presented in the consolidated statements of operations, excluding the amount for member benefit claims:

5 unchanged sentences

Total losses incurred $ 253,473 $ 178,248 $ 151,009

During the year ended December 31, 2021 , the Company experienced an increase in prior year development of $ 2,606 , primarily as a result of higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business.

During the year ended December 31, 2020 , the Company experienced an increase in prior year development of $ 5,443 , primarily as a result of higher than expected claim frequency from business written by a small group of producers of our personal and commercial lines of business.

2 unchanged sentences

The underlying cause of this development was higher than expected claim frequency.

Management considers the prior year development for each of the two years to be insignificant when considered in the context of our annual earned premiums, net as well as our net losses and loss adjustment expenses and member benefit claims expenses.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Management considers the prior year development for each of these years to be insignificant when considered in the context of our annual earned premiums, net as well as our net losses and loss adjustment expenses and member benefit claims expenses.

We analyze our development on a quarterly basis and given the short duration nature of our products, favorable or adverse development emerges quickly and allows for timely reserve strengthening, if necessary, or modifications to our product pricing or offerings.

Based upon our internal analysis and our review of the statement of actuarial opinions provided by our actuarial consultants, we believe that the amounts recorded for policy liabilities and unpaid claims reasonably represents the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

I ncurred and Paid Development

The prior year development in 2021, 2020, and 2019 of $ 2,606 , $ 5,443 and $ 5,169 , respectively, represented 3.7 %, 20.2 % and 13.9 % of pretax income of our insurance business of $ 69,857 , $ 26,948 and $ 37,030 in each year, and 3.1 %, 12.4 % and 18.7 % of the opening net liability for losses and loss adjustment expenses of $ 83,945 , $ 43,881 and $ 27,615 , as of January 1 of each year.

Based upon our internal analysis and our review of the statement of actuarial opinions provided by our actuarial consultants, we believe that the amounts recorded for policy liabilities and unpaid claims reasonably represent the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.

Incurred and Paid Development

The following table presents information about incurred and paid loss development and average claim duration as of December 31, 2021 , net of reinsurance, as well as cumulative claim frequency and the total of IBNR liabilities plus expected development on reported claims included within the net incurred claims amounts.

3 unchanged sentences

The Company considers a claim that does not result in a liability as a claim closed without payment.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

In 2020 and 2021, timing effects related to the COVID 19 pandemic impacted claim activity and, consequently, the duration of paid claims relative to incurred losses.

We believe these impacts are temporary and do not reflect a long term fundamental change in duration or the relationship between paid claims and incurred losses.

Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance As of December 31, 2021

5 unchanged sentences

(Unaudited) 2020

(Unaudited) 2021

2016 $ 84,178 $ 87,290 $ 87,993 $ 88,615 $ 89,629 $ 89,981 $ 39 257

3 unchanged sentences

2020 172,007 169,706 $ 30,661 330

2021 250,300 59,994 473

Total $ 902,597

5 unchanged sentences

(Unaudited) 2020

(Unaudited) 2021

2016 62,989 $ 84,185 $ 86,531 $ 88,482 $ 88,976 $ 89,474

2 unchanged sentences

2019 122,348 128,787 132,747

2020 127,721 129,832

Total $ 748,196

1 unchanged sentence

Liabilities for loss and loss adjustment expenses, net of reinsurance $ 154,412

The following table presents supplementary information about average historical claims duration as of December 31, 2020 for short duration contracts:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)

Years 1 2 3 4 5

Short duration 77.2 % 12.6 % 2.1 % 1.5 % 0.6 %

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

The following table presents supplementary information about average historical claims duration as of December 31, 2021 for short duration contracts:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)

Years 1 2 3 4 5 6

Short duration 75.6 % 10.3 % 2.2 % 1.2 % 0.5 % 0.6 %

Reconciliation of Reserves to Balance Sheet

7 unchanged sentences

Short duration 165,129

Other insurance lines 180

Total reinsurance recoverable on unpaid losses and loss adjustment expenses 165,129

4 unchanged sentences

(14) Revenue from Contracts with Customers

The Company’s revenues from insurance and warranty operations are primarily accounted for under Financial Services-Insurance (Topic 944) that are not within the scope of Revenue for Contracts with Customers (Topic 606).

The Company’s remaining revenues that are within the scope of Topic 606 are primarily comprised of revenues from contracts with customers for monthly membership dues for motor clubs, monthly administration fees for services provided for premiums, claims and reinsurance processing revenues, vehicle service contracts and warranty coverage revenues for household goods and appliances (collectively, remaining contracts).

The Company’s revenues from insurance and contractual and liability insurance operations are primarily accounted for under Financial Services-Insurance (Topic 944) that are not within the scope of Revenue for Contracts with Customers (Topic 606).

The Company’s remaining revenues that are within the scope of Topic 606 are primarily comprised of revenues from contracts with customers for monthly membership dues for motor clubs, monthly administration fees for services provided for premiums, claims and reinsurance processing revenues, vehicle service contracts, vessel related revenue and revenues for household goods and appliances service contracts (collectively, remaining contracts).

The following table presents the disaggregated amounts of revenue from contracts with customers by product type for the following periods:

1 unchanged sentence

2021 2020 2019

Service and Administrative Fees:

Service contract revenue $ 163,583 $ 98,574 $ 27,597

Motor club revenue 41,634 36,159 36,076

Warranty coverage revenue 98,574 27,597 26,058

Vessel related revenue 35,562 22,697 16,747

3 unchanged sentences

Service and Administrative Fees

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

Service fee revenue is recognized as the services are performed.

2 unchanged sentences

Any losses that may occur due to a specific contract would be recognized in the period in which the loss is determined probable.

Administrative fee revenue includes the administration of premium associated with our producers and their producer owned reinsurance companies (PORCs).

In addition, we also earn fee revenue from debt cancellation programs, motor club programs, and warranty programs.

Administrative fee revenue includes the administration of premium associated with our producers and PORCs.

In addition, we also earn fee revenue from debt cancellation, motor club, and auto and consumer goods service contracts.

Management selects the

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

Information on Remaining Performance Obligations

Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less.

The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material at December 31, 2021.

Contract Balances

The timing of our revenue recognition may differ from the timing of payment by our customers.

1 unchanged sentence

Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the performance obligations are satisfied.

Charter Revenue

Vessel Related Revenue

The Company generates its revenues from charterers for the charter hire of its vessels.

3 unchanged sentences

Unearned revenue includes revenue received prior to the balance sheet date relating to services to be rendered after the balance sheet date.

Management Fees

The Company earned management fee income in the form of base management fees and incentive fees from the CLOs it managed.

These base management fees were billed as the services were provided and paid periodically in accordance with the terms of the individual management agreements for as long as the Company managed the funds.

Base management fees typically consisted of fees based on the amount of assets held in the CLOs.

Base management fees were recognized as revenue when earned.

The Company did not recognize incentive fees until all contractual contingencies were removed.

The following table presents the activity in the significant deferred assets and liabilities related to revenue from contracts with customers for the following period:

January 1, 2021 December 31, 2021

Beginning balance Additions Amortizations Ending balance

Beginning balance Additions Amortization Ending balance

Deferred acquisition costs

Service and Administrative Fees:

Service contract revenue $ 48,734 $ 94,717 $ 33,231 $ 110,220

Motor club revenue 13,081 38,831 32,488 19,424

Warranty coverage revenue 1,027 58,906 11,199 48,734

Total $ 61,815 $ 133,548 $ 65,719 $ 129,644

Deferred revenue

Service and Administrative Fees:

Service contract revenue $ 348,391 $ 285,591 $ 163,583 $ 470,399

Motor club revenue 16,969 49,535 41,634 24,870

Warranty coverage revenue (1)

49,368 405,537 106,514 $ 348,391

Total $ 365,360 $ 335,126 $ 205,217 $ 495,269

(1) Additions include $ 182,568 from the acquired balance sheet of Smart AutoCare.

See Note (3) Acquisitions.

Write-offs were not material for any period presented.

For the periods presented, no write-offs for unrecoverable deferred acquisition costs and deferred revenue were recognized.

AND SUBSIDIARIES

5 unchanged sentences

As of December 31,

Loans eligible for repurchase $ 36,732 $ 70,593

Mortgage servicing rights 29,833 14,758

Right of use asset - Operating leases (1)

23,870 27,291

Furniture, fixtures and equipment, net 15,798 12,305

Income tax receivable 19,824 19,513

Mortgage servicing rights 14,758 8,764

Furniture, fixtures and equipment, net 14,878 15,798

Prepaid expenses 10,722 8,159

Loans eligible for repurchase 70,593 6,733

Other 10,985 5,922

9 unchanged sentences

Accounts payable and accrued expenses $ 149,816 $ 106,142

Loans eligible for repurchase liability 36,732 70,593

Deferred tax liabilities, net 40,049 24,183

Operating lease liability (1)

29,396 32,914

Deferred tax liabilities, net 24,183 32,306

Securities sold, not yet purchased 46,637 —

Due to brokers 10,763 45,047

Loans eligible for repurchase liability 70,593 6,733

Commissions payable 20,412 18,678

Securities sold, not yet purchased 242 46,637

Other 19,126 18,671

19 unchanged sentences

(in thousands, except share data)

(2) Related to the impairment of Luxury for the year ended December 31, 2020, and the sale of Telos for the year ended December 31, 2019.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations.

(3) Includes $ 7,025 , $ 4,566 and $ 2,554 for the year ended December 31, 2020, 2019 and 2018, respectively, related to Insurance.

(2) Relates to the impairment of Luxury.

See Note (4) Dispositions and Assets and Liabilities Held for Sale.

(3) Includes $ 10,384 , $ 7,025 , and $ 4,566 for the years ended December 31, 2021, 2020 and 2019, respectively, related to Insurance.

Other Expenses

2 unchanged sentences

2021 2020 2019

Professional fees $ 20,711 $ 20,820 $ 15,216

General and administrative $ 36,654 $ 22,295 $ 18,563

Professional fees 27,285 20,711 20,820

Premium taxes 20,196 15,824 15,205

7 unchanged sentences

Stock Repurchases

On November 2, 2020, the Board of Directors authorized the Company to make repurchases of up to $ 20,000 of shares of the Company’s outstanding common stock in the aggregate, at the discretion of the Company's Executive Committee.

The shares purchased during the first, second and third quarters of 2020 were purchased under a previous authorization.

The Board of Directors authorized the Company to make repurchases of up to $ 20,000 of shares of the Company’s outstanding common stock in the aggregate, at the discretion of the Company's Executive Committee.

The following table presents the Company’s stock repurchase activity and remaining authorization.

1 unchanged sentence

December 31, 2021

Number of shares purchased Average price per share

Number of shares purchased Weighted average price per share

Share repurchase plan 528,662 $ 5.45

Block repurchase 500,000 7.00

Total 2,384,286 $ 5.82

Remaining repurchase authorization $ 13,669

In April 2021, warrants were exercised for 207,445 shares of Tiptree common stock.

As of December 31, 2021, there were warrants for 2,021,506 shares of Tiptree common stock outstanding at an exercise price of $ 6.97 .

The Company declared cash dividends per share for the following periods presented below:

Dividends per share for the

For the Year Ended December 31,

6 unchanged sentences

Total cash dividends declared $ 0.16 $ 0.16 $ 0.16

(1) See Note (25) Subsequent Events for when dividend was declared.

Reorganization Merger

On April 10, 2018, the Company completed a reorganization merger whereby TFP merged with and into the Company with the Company continuing as the surviving company (Reorganization Merger).

After the Reorganization Merger, TFP ceased to

(1) See Note (24) Subsequent Events for when the dividend was declared.

Statutory Reporting and Insurance Company Subsidiaries Dividend Restrictions

The Company’s U.S.

insurance subsidiaries prepare financial statements in accordance with Statutory Accounting Principles

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

exist and the Company owned 100 % of Operating Company.

As a result of the merger, the balance of Non-controlling interest - TFP as of the merger date was allocated to Additional paid-in capital and Accumulated other comprehensive income (loss), as detailed in the consolidated statement of changes in stockholders’ equity.

In connection with the Reorganization Merger, each TFP limited partner other than Tiptree received 2.798 shares of Class A common stock for each partnership unit, 6,861,561 Class A common shares were issued, and all outstanding Class B common stock was canceled.

Outstanding warrants to acquire 652,500 shares of Class A common stock at an exercise price of $ 11.33 per share owned by TFP were canceled.

In addition, warrants to acquire 103,994 shares of Class A common stock at an exercise price of $ 11.33 were issued to partners of TFP other than Tiptree, and expired unexercised on December 31, 2018.

Warrants to acquire 805,986 TFP LP units at $ 21.232 per unit were canceled and Tiptree issued warrants for 2,255,149 Tiptree shares of Class A common stock at an exercise price of $ 7.59 per share to holders of the canceled TFP warrants.

On April 16, 2018, the Company canceled 5,035,977 shares of Class A common stock held by a subsidiary of the Company,

which had no effect on total Tiptree Inc.

stockholders’ equity.

At the 2018 Annual Meeting of Stockholders of the Company held on June 6, 2018, the Company’s stockholders approved an

amendment and restatement (the Amendment) to the Fourth Articles of Amendment and Restatement of the Company (as amended by the Amendment, the Fifth A&R Charter) to remove all references to the Company’s Class B common stock as well as other ministerial changes, including changing the name of our Class A common stock to Common Stock.

The Amendment was filed with the State Department of Assessments and Taxation of Maryland on June 7, 2018.

Statutory Reporting and Insurance Company Subsidiaries Dividend Restrictions

The Company’s U.S.

insurance subsidiaries prepare financial statements in accordance with Statutory Accounting Principles (SAP) prescribed or permitted by the insurance departments of their states of domicile.

(SAP) prescribed or permitted by the insurance departments of their states of domicile.

Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (the NAIC) as well as state laws, regulations and administrative rules.

Statutory Capital, Surplus and Net Income

The Company’s insurance company subsidiaries must maintain minimum amounts of statutory capital and surplus as required by regulatory authorities, including the NAIC;

their capital and surplus levels exceeded respective minimum requirements as of December 31, 2020 and December 31, 2019.

Statutory Capital and Surplus

The Company’s insurance company subsidiaries must maintain minimum amounts of statutory capital and surplus as required

by regulatory authorities, including the NAIC;

their capital and surplus levels exceeded respective minimum requirements as

of December 31, 2021 and December 31, 2020.

As of December 31,

12 unchanged sentences

The statutory capital and surplus amounts and statutory net income presented above do not include the foreign insurance subsidiary in accordance with SAP.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Statutory Dividends

3 unchanged sentences

The Company eliminates all dividends from its subsidiaries in the consolidated financial statements.

The following table presents the dividends paid to the Company by its U.S domiciled insurance company subsidiaries and the combined amount available for ordinary dividends of the Company's U.S.

There were no dividends paid to the Company by its U.S.

domiciled insurance company subsidiaries for the years ended December 31, 2021 and 2020.

The following table presents the combined amount available for ordinary dividends of the Company's U.S.

domiciled insurance company subsidiaries for the following periods:

For the Year Ended

Ordinary dividends $ — $ 9,001

Extraordinary dividends — 1,188

Total dividends $ — $ 10,189

2020 December 31, 2019

As of December 31,

Amount available for ordinary dividends of the Company's insurance company subsidiaries $ 18,519 $ 13,418

2 unchanged sentences

The Company may seek regulatory approval to pay dividends in excess of this permitted amount, but there can be no assurance that the Company would receive regulatory approval if sought.

(18) Accumulated Other Comprehensive Income (Loss)

The following table presents the activity of AFS securities in accumulated other comprehensive income (loss) (AOCI), net of tax, for the following periods:

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

(18) Accumulated Other Comprehensive Income (Loss)

The following table presents the activity in accumulated other comprehensive income (loss) (AOCI), net of tax, for the following periods:

Unrealized gains (losses) on Amount attributable to

non-controlling interests

Available for sale securities Interest rate swaps Total AOCI (loss) TFP Other Total AOCI (loss) to Tiptree Inc.

Amount attributable to non-controlling interests Total AOCI to Tiptree Inc.

Balance at December 31, 2018 $ ( 2,069 ) $ 11 $ ( 2,058 )

1 unchanged sentence

Amounts reclassified from AOCI ( 1,032 ) — ( 1,032 )

Reclassification of AOCI - interest rate swaps (1)

OCI 3,879 ( 24 ) 3,855

Adoption of accounting standard (1)

( 99 ) — ( 99 )

Reorganization merger — — — ( 341 ) — ( 341 )

Period change ( 1,609 ) ( 2,074 ) ( 3,683 ) 222 437 ( 3,024 )

Balance at December 31, 2019 $ 1,711 $ ( 13 ) $ 1,698

1 unchanged sentence

Amounts reclassified from AOCI ( 415 ) ( 415 )

Period change 3,879 — 3,879 — ( 24 ) 3,855

OCI 3,949 ( 15 ) 3,934

Adoption of accounting standard (1)

( 99 ) — ( 99 ) — ( 99 )

Balance at December 31, 2020 $ 5,702 $ ( 28 ) $ 5,674

1 unchanged sentence

Amounts reclassified from AOCI ( 499 ) — ( 499 )

Period change 3,949 — 3,949 — ( 15 ) 3,934

Adoption of accounting standard (1)

42 — 42 — — 42

OCI ( 8,388 ) 29 ( 8,359 )

Balance at December 31, 2021 $ ( 2,686 ) $ 1 $ ( 2,685 )

(1) Due to adoption of 2018-02 and 2016-13, respectively.

(1) Amounts reclassified to retained earnings due to adoption of ASU 2016-13.

See Note (2) Summary of Significant Accounting Policies.

5 unchanged sentences

Net of tax $ 499 $ 415 $ 1,032

Reclassification of AOCI - interest rate swaps (1)

$ — $ — $ 3,845 Gain on sale of discontinued operations

Related tax (expense) benefit — — ( 936 ) Provision for income tax

Net of tax $ — $ — $ 2,909

(1) Relates to the sale of Care.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations.

(19) Stock Based Compensation

1 unchanged sentence

The Company adopted the Tiptree 2017 Omnibus Incentive Plan (2017 Equity Plan) on June 6, 2017, which permits the grant of restricted stock units (RSUs), stock, and stock options up to a maximum of 6,100,000 shares of common stock.

The general purpose of the 2017 Equity Plan is to attract, motivate and retain selected employees and directors for the Company and its subsidiaries, to provide them with incentives and rewards for performance and to better align their interests with the

Unless otherwise extended, the 2017 Equity Plan terminates automatically on June 6, 2027.

The table below summarizes changes to the issuances under the Company’s 2017 Equity Plan for the periods indicated, excluding awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock:

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

interests of the Company’s stockholders.

Unless otherwise extended, the 2017 Equity Plan terminates automatically on June 6, 2027.

2017 Equity Plan Number of shares (1)

2 unchanged sentences

Forfeited 8,318

Exchanged for vested subsidiary awards ( 14,405 )

Available for issuance as of December 31, 2019 4,765,863

RSU and option awards granted ( 702,264 )

Forfeited 8,318

Subsidiary exchanged shares ( 14,405 )

RSU, stock and option awards granted ( 977,446 )

Available for issuance as of December 31, 2020 3,788,417

RSU, stock and option awards granted ( 61,713 )

PRSU awards vested ( 215,583 )

Exchanged for vested subsidiary awards ( 1,166,307 )

Available for issuance as of December 31, 2021

3 unchanged sentences

The Company values RSUs at their grant-date fair value as measured by Tiptree’s common stock price.

Generally, the Tiptree RSUs vest and become non-forfeitable with respect to one-third of Tiptree shares granted on each of the one , two and three year anniversaries of the date of the grant, and expensed using the straight-line method over the requisite service period.

Generally, the Tiptree RSUs vest and become non-forfeitable with respect to one-third of Tiptree shares granted on each of the first, second and third year anniversaries of the date of the grant, and expensed using the straight-line method over the requisite service period.

Stock Awards - Directors’ Compensation

8 unchanged sentences

Unvested units as of December 31, 2019 958,609 $ 6.23

Granted 476,449 6.25

Vested ( 557,633 ) 6.54

Forfeited ( 8,318 ) 6.10

Unvested units as of December 31, 2020 953,145 $ 6.52

1 unchanged sentence

Unvested units as of December 31, 2021

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

599,012 $ 6.59

The following tables present the detail of the granted and vested RSUs and stock awards for the periods indicated:

8 unchanged sentences

Net Vested 381,018 504,195 164,935

(1) Includes 256,619 , 307,148 and 147,467 shares that vest ratably over three years and 212,638 , 112,907 and 121,332 shares that cliff vest in February 2023, 2022 and 2021, respectively, for the years ended December 31, 2020, 2019 and 2018, respectively.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

(1) Includes 256,619 and 307,148 shares that vest ratably over three years and 212,638 and 112,907 shares that cliff vest in February 2023 and 2022 for the years ended December 31, 2020 and 2019, respectively.

Tiptree Senior Management Incentive Plan

On August 4, 2021, a total of 3,500,000 Performance Restricted Stock Units (PRSUs) were awarded to members of the Company’s senior management.

The PRSUs have a 10-year term and are subject to the recipient’s continuous service and a market requirement.

A portion of the PRSUs will generally vest upon the achievement of each of five Tiptree share price target milestones ranging from $ 15 to $ 60 , adjusted for dividends paid, within five pre-established determination periods (subject to a catch-up vesting mechanism) occurring on the second, fourth, sixth, eighth and tenth anniversaries of the grant date.

In November 2021, the first tranche of the PRSUs vested, resulting in a net issuance of 215,583 shares of Tiptree common stock.

As of December 31, 2021, 3,266,667 PRSUs are unvested.

The below table illustrates the aggregate number of PRSUs that will vest upon the achievement of each Tiptree share price target.

Such price targets will be adjusted down for cumulative dividends paid by the Company since grant (e.g., the next share price target is $ 19.92 as adjusted for cumulative dividends paid to date).

Tiptree Share Price Target Number of PRSUs that Vest

$ 60 1,166,667

Upon vesting, the Company will issue shares or if shares are not available under the 2017 Equity Plan, then the Company may in its sole discretion instead deliver cash equal to the fair market value of the underlying shares.

As of December 31, 2021, the Company does not have sufficient shares available in the 2017 Equity Plan to settle the PRSUs awarded;

as such, the PRSUs are classified as liability awards and will be remeasured at each reporting date until the date of settlement, and expensed using the straight-line method over the requisite service period.

The fair value of the PRSUs are estimated on the date of grant and at each subsequent reporting date using a Black-Scholes-Merton option pricing formula embedded within a Monte Carlo model used to simulate the future stock prices of the Company, which assumes that the market requirement is achieved.

The historical volatility is computed based on historical daily returns of the Company’s stock price simulated over the performance period using a lookback period of 10 years .

The valuation is done under a risk-neutral framework using the 10-year zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve on the reporting date.

The current quarterly dividend rates in effect as of the reporting date are used to calculate a spot dividend yield for use in the model.

The following table presents the assumptions used to remeasure the fair value of the PRSUs as of December 31, 2021, which were granted in 2021 and classified as liability awards.

Valuation Input For the Year Ended December 31, 2021

Assumption Average

Historical volatility 37.69 % 35.51 %

Risk-free rate 1.48 % 1.41 %

Dividend yield 1.18 % 1.32 %

Cost of equity 10.45 % 10.07 %

Expected term (years) 7 9

Subsidiary Incentive Plans

2 unchanged sentences

These awards are subject to performance-vesting criteria based on the performance of the subsidiary (performance vesting awards) and time-vesting subject to continued employment (time vesting awards).

Following the service period, such vested awards may be exchanged at fair market value, at the option of the holder, for Tiptree common stock under the 2017 Equity Plan.

Following the service period, such vested awards may be exchanged

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

at fair market value, at the option of the holder, for Tiptree common stock under the 2017 Equity Plan.

The service period for certain grants has been achieved and those vested subsidiary awards are currently eligible for exchange.

3 unchanged sentences

Unvested balance as of December 31, 2018 $ 8,710

Granted 1,113

Vested ( 4,991 )

1 unchanged sentence

Unvested balance as of December 31, 2019 $ 4,279

Granted 1,108

Vested ( 4,237 )

5 unchanged sentences

Unvested balance as of December 31, 2021

The net vested and unvested balance of subsidiary awards (assuming full vesting) translates to an aggregate of 2,954,566 which are eligible for exchange as of December 31, 2020.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The net vested balance of subsidiary awards eligible for exchange as of December 31, 2021 translates to 1,423,604 shares of Tiptree common stock.

Stock Option Awards

1 unchanged sentence

Option awards have been granted to the Executive Committee with an exercise price equal to the fair market value of our common stock on the date of grant.

The option awards have a 10 -year term and are subject the recipient’s continuous service, a market requirement, and vest one third on each of the three , four , and five year anniversaries of the grant date.

The market requirement is a book value per share target that can be met at any time before the option expires and it only needs to be met once for the option to remain exercisable for the remainder of its term.

The option awards have a 10-year term and are subject to the recipient’s continuous service, a market requirement, and vest one third on each of the three , four , and five year anniversaries of the grant date.

The market requirement is the Company's 20-day volume weighted average per share trading price plus actual cash dividends paid following issuance of the option that exceeds the book value on the option grant date.

If the service condition is met, the full amount of the compensation expense will be recognized over the appropriate vesting period whether the market requirement is met or not.

The options granted after 2017 include a retirement provision and are amortized over the lesser of the service condition or expected retirement date.

There were no options granted during the year ended December 31, 2021.

Book value targets for grants in 2020, 2019, 2018, 2017 and 2016 are $ 11.52 , $ 10.79 , $ 9.97 , $ 10.14 and $ 8.96 , respectively.

During the year ended December 31, 2021, book value targets for all outstanding options were achieved.

The fair value option grants are estimated on the date of grant using a Black-Scholes-Merton option pricing formula embedded within a Monte Carlo model used to simulate the future stock prices of the Company, which assumes that the market requirement is achieved.

2 unchanged sentences

The current quarterly dividend rates in effect as of the date of the grant are used to calculate a spot dividend yield as of the date of grant for use in the model.

The following table presents the assumptions used to estimate the fair values of the stock options granted for the following periods:

Year Ended December 31,

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

There were no stock option awards granted in 2021.

The following table presents the assumptions used to estimate the fair values of the stock options granted in 2020.

Valuation Input (1)

Assumption Average Assumption Average

Historical volatility 27.60 % N/A 27.69 % N/A

Risk-free rate 1.51 % N/A 2.62 % N/A

Dividend yield 2.20 % N/A 2.21 % N/A

For the Year Ended December 31, 2020

Assumption Average

Historical volatility 27.60 % N/A

Risk-free rate 1.51 % N/A

Dividend yield 2.20 % N/A

Expected term (years) 7.0

(1) Not applicable for the year ended December 31, 2021 as there were no new grants during the period.

The following table presents the Company's stock option activity for the current period:

1 unchanged sentence

Balance, December 31, 2020 1,715,619 $ 6.49 $ 2.29 —

Granted 242,663 5.85 1.88 —

Balance, December 31, 2021

Granted 225,815 6.26 1.69 —

Balance, December 31, 2019 1,290,342 $ 6.24 $ 2.45 —

Granted 425,277 7.25 1.83 —

Balance, December 31, 2020 1,715,619 $ 6.49 $ 2.29 —

1,715,619 $ 6.49 $ 2.29 712,542

Weighted average remaining contractual term at December 31, 2021 (in years)

1 unchanged sentence

The following table presents total stock based compensation expense and the related income tax benefit recognized on the consolidated statements of operations:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Year Ended December 31,

For the Year Ended December 31,

2021 2020 2019

Employee compensation and benefits (1)

$ 10,665 $ 7,571 $ 6,062

Director compensation 465 546 301

1 unchanged sentence

Net stock based compensation expense $ 8,792 $ 6,412 $ 4,989

(1) Includes $ 6,609 related to liability awards recorded in other liabilities as of December 31, 2021.

Additional information on total non-vested stock based compensation is as follows:

December 31, 2020

Stock options Restricted stock awards and RSUs

As of December 31, 2021

Stock options Restricted stock awards and RSUs Performance Restricted Stock Units

Unrecognized compensation cost related to non-vested awards $ 231 $ 2,143 $ 18,491

Weighted - average recognition period (in years) 1.03 0.64 1.14

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

(20) Income Taxes

The following table presents the Company’s provision (benefit) for income taxes reflected as a component of income (loss):

Year Ended December 31,

For the Year Ended December 31,

2021 2020 2019

9 unchanged sentences

Total deferred provision (benefit) for income taxes 17,730 10,733 6,815

Total provision (benefit) for income taxes from continuing operations $ ( 13,627 ) $ 9,017 $ ( 5,909 )

Provision (benefit) for income taxes from discontinued operations — — 13,714

Total provision (benefit) for income taxes $ 21,291 $ ( 13,627 ) $ 9,017

3 unchanged sentences

federal rate is before the consideration of rate reconciling items.

A reconciliation of the expected federal provision (benefit) for income taxes on income from continuing operations using the federal statutory income tax rate to the actual provision (benefit) for income taxes and resulting effective income tax rate is as follows for the periods indicated below:

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

Year Ended December 31,

A reconciliation of the expected federal provision (benefit) for income taxes on income using the federal statutory income tax rate to the actual provision (benefit) for income taxes and resulting effective income tax rate is as follows for the periods indicated below:

For the Year Ended December 31,

2021 2020 2019

Income (loss) before income taxes from continuing operations $ ( 38,852 ) $ 29,139 $ ( 19,796 )

Income (loss) before income taxes $ 65,342 $ ( 38,852 ) $ 29,139

Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

1 unchanged sentence

Effect of state provision (benefit) for income taxes, net of federal benefit 4,550 1,929 549

Effect of non-deductible compensation

4,518 769 105

Effect of CARES Act refund claims — ( 7,293 ) —

Effect of foreign operations ( 541 ) ( 938 ) 440

Effect of permanent differences 62 ( 30 ) 170

Effect of dividends received deduction ( 26 ) ( 29 ) ( 1,534 )

Effect of stock-based compensation

( 1,642 ) ( 676 ) ( 398 )

Effect of return-to-accrual 154 330 1,524

Effect of other items 531 411 678

Tax (benefit) on income from continuing operations $ ( 13,627 ) $ 9,017 $ ( 5,909 )

Tax (benefit) on income $ 21,291 $ ( 13,627 ) $ 9,017

Effective tax rate 32.6 % 35.1 % 31.0 %

For the year ended December 31, 2020, the Company’s effective tax rate on income from continuing operations was equal to 35.1 %.

For the year ended December 31, 2021, the Company’s effective tax rate on income was equal to 32.6 %.

The effective tax rate for the year ended December 31, 2021 is higher than the U.S.

statutory income tax rate of 21.0 % primarily from the impact of expected refunds arising from the CARES Act.

For the year ended December 31, 2019, the Company’s effective tax rate on income from continuing operations was equal to 31 %.

statutory income tax rate of 21.0 % primarily from the impact of state taxes and non-deductible compensation, partially offset by the effect of stock based compensation.

For the year ended December 31, 2020, the Company’s effective tax rate on income from was equal to 35.1 %.

The effective tax rate for the year ended December 31, 2020 is higher than the U.S.

statutory income tax rate of 21.0 % primarily due to the non-recurring return-to-provision, as well as ongoing state and foreign taxes.

For the year ended December 31, 2018, the Company’s effective tax rate on losses from continuing operations was equal to 29.9 %.

statutory income tax rate of 21.0 % primarily from the impact of expected refunds arising from the CARES Act.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

For the year ended December 31, 2019, the Company’s effective tax rate on losses from was equal to 31.0 %.

The effective tax rate for the year ended December 31, 2019 is higher than the U.S.

statutory income tax rate of 21.0 % primarily due to the dividends received deduction, offset by the effect of foreign operations.

statutory income tax rate of 21.0 % primarily due to the return-to-provision, as well as ongoing state and foreign taxes.

The table below presents the components of the Company’s net deferred tax assets and liabilities as of the respective balance sheet dates:

20 unchanged sentences

$ 40,708 $ 25,122

(1) Includes $939 classified as held for sale.

See Note (4) Dispositions, Assets and Liabilities Held for Sale and Discontinued Operations

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

(1) Includes $ 659 and $ 939 classified as held for sale as of December 31, 2021 and December 31, 2020, respectively.

See Note (4) Dispositions and Assets and Liabilities Held for Sale.

As of January 2016, Tiptree has established a U.S.

2 unchanged sentences

Additionally, as needed the Company will take all necessary steps to comply with any income tax withholding requirements.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(in thousands, except share data)

As of December 31, 2021, the Company had total U.S.

Federal net operating loss carryforwards (NOLs) of $ 70,803 arising from continuing operations.

Federal net operating loss carryforwards (NOLs) of $ 117,098 .

The following table presents the U.S.

Federal NOLs by tax year of expiration:

December 31, 2021

Tax Year of Expiration

3 unchanged sentences

Federal NOL, Tiptree and its subsidiaries have NOLs in various state jurisdictions totaling $ 14,399 as of December 31, 2021.

Valuation allowances have been established for various state deferred tax assets of $ 6,871 , which are primarily state NOLs, since management has concluded it is more likely than not they will expire unutilized based on existing positive and negative evidence.

Valuation allowances of $ 8,563 have been established for primarily state deferred tax assets, which are primarily state NOLs, since management has concluded it is more likely than not they will expire unutilized based on existing positive and negative evidence.

Management believes it is more likely than not the remaining NOLs and deferred tax assets will be utilized prior to their expiration dates.

1 unchanged sentence

In 2021, the Company recorded a net increase in its valuation allowances equal to $ 1,692 , compared to a net increase in its valuation allowance of $ 1,910 in 2020.

As of December 31, 2020, the Company had no material unrecognized tax benefits or accrued interest and penalties.

This is consistent with the tax years ending December 31, 2019 and December 31, 2018.

As of December 31, 2021 and 2020, the Company had no material unrecognized tax benefits or accrued interest and penalties.

Federal tax years 2017 and onward are open for examination as of December 31, 2021.

21 unchanged sentences

The following table presents rent expense for the Company’s office leases recorded on the consolidated statements of operations for the following periods:

For the Year Ended

For the Year Ended December 31,

2021 2020 2019

1 unchanged sentence

$ 8,924 $ 7,374 $ 8,612

(1) Includes lease expense of $ 509 and $ 385 for the years ended December 31, 2020 and 2019, respectively, for assets held for sale.

(1) Includes lease expense of $ 609 and $ 509 for the year ended December 31, 2021 and 2020, respectively, for assets held for sale.

The Company is a defendant in Mullins v.

Southern Financial Life Insurance Co., which was filed in February 2006, in the Pike Circuit Court, in the Commonwealth of Kentucky.

Southern Financial Life Insurance Co., which was filed in February 2006, in the Pike County Circuit Court, in the Commonwealth of Kentucky.

A class was certified in June 2010.

At issue is the duration or term of coverage under certain disability and life credit insurance policies.

The action alleges violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud and seeks compensatory and punitive damages, attorney fees and interest.

To date, the court has not awarded sanctions in connection with Plaintiffs’ April 2012 Motion for Sanctions.

In January 2015, the trial court issued an Order denying the Company’s motion to decertify the class, which was upheld on appeal.

Following a February 2017 hearing, the court denied the Company’s Motion for Summary Judgment as to certain disability insurance policies.

In January 2018, the court vacated its November 2017 order granting Company’s Motion for Summary Judgment as to the life certificates at issue with leave to refile.

No trial or additional hearings are currently

At issue is whether the coverage period of certain credit disability and life insurance policies issued in Kentucky were limited by the term of the associated loan.

The action alleges violations of the Kentucky Consumer Protection Act and certain insurance statutes, common law fraud and breach of contract and the covenant of good faith and fair dealing.

Plaintiffs seek compensatory and punitive damages, attorneys’ fees and interest.

In July 2021, the court entered an Order granting Plaintiffs’ Motion for Partial Summary Judgment as to certain disability policies, ruling that if a class member became disabled during the coverage period, benefits could extend beyond the coverage period until the associated loan was paid off.

The Company intends to challenge the court’s ruling.

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

2022, a hearing was held on competing motions for partial summary judgment on the principal claims.

A hearing for Plaintiffs’ Motion for Sanctions for Spoliation of Evidence is scheduled for June 9, 2022.

The court has not yet ruled on the pending motions.

No additional hearings are scheduled and a trial date has not been set.

The Company considers such litigation customary in the insurance industry.

9 unchanged sentences

Diluted net income attributable to common stockholders includes the effect of unvested subsidiaries’ RSUs, when dilutive.

The assumed exercise of all potentially dilutive instruments are included in the diluted net income per common share calculation, if dilutive.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2020

(in thousands, except share data)

The assumed exercise of all potentially dilutive instruments is included in the diluted net income per common share calculation, if dilutive.

The following table presents a reconciliation of basic and diluted net income per common share for the following periods:

For the Year Ended

For the Year Ended December 31,

2021 2020 2019

Net income (loss) from continuing operations $ ( 25,225 ) $ 20,122 $ ( 13,887 )

Net income (loss) $ 44,051 $ ( 25,225 ) $ 20,122

Net income (loss) attributable to non-controlling interests 5,919 3,933 1,761

Net income allocated to participating securities 703 — 472

Net income (loss) attributable to common stockholders ( 29,158 ) 17,889 ( 13,275 )

Net income (loss) from discontinued operations — — 43,770

Net income (loss) from discontinued operations attributable to non-controlling interests — — 6,562

Net income (loss) from discontinued operations attributable to common stockholders — — 37,208

Net income (loss) attributable to common shares - basic $ ( 29,158 ) $ 17,889 $ 23,933

Net income (loss) attributable to Tiptree Inc.

common shares - basic 37,429 ( 29,158 ) 17,889

Effect of Dilutive Securities:

Securities of subsidiaries ( 780 ) — ( 723 )

Net income (loss) attributable to common shares - diluted $ ( 29,158 ) $ 17,166 $ 23,933

Adjustments to income relating to exchangeable interests, net of tax 9 — —

Net income (loss) attributable to Tiptree Inc.

common shares - diluted $ 36,658 $ ( 29,158 ) $ 17,166

Weighted average number of shares of common stock outstanding - basic 33,223,792 33,859,775 34,578,292

2 unchanged sentences

33,688,256 33,859,775 34,578,292

Net income (loss) from continuing operations $ ( 0.86 ) $ 0.52 $ ( 0.38 )

Net income (loss) from discontinued operations — — 1.07

Basic net income (loss) attributable to common shares $ 1.13 $ ( 0.86 ) $ 0.52

Net income (loss) from continuing operations $ ( 0.86 ) $ 0.50 $ ( 0.38 )

Net income (loss) from discontinued operations — — 1.07

Diluted net income (loss) attributable to common shares $ 1.09 $ ( 0.86 ) $ 0.50

1 unchanged sentence

Corvid Peak is a related party of the Company because Corvid Peak is deemed to be controlled by Michael Barnes, the Company’s Executive Chairman.

Tiptree agreed to invest $ 75,000 to seed new investment funds to be managed by Corvid Peak, which was completely funded in the first quarter of 2020.

The Company will pay Corvid Peak an annual management fee of 1.25 % of the net asset value of invested capital and an incentive fee equal to 20 % of the net profits , subject to a conventional high water mark.

The Company incurred $ 2,792 and $ 1,006 of management and incentive fees to Corvid Peak for the year ended December 31, 2020 and 2019, respectively.

Pursuant to the Transition Services Agreement, Tiptree and Corvid Peak have mutually agreed to provide certain services to one another.

Payments under the Transition Services Agreement in the year ended December 31, 2020 and 2019 were not material.

Pursuant to the Emeritus Agreement, Tiptree agreed to provide Mr.

Inayatullah, a greater than 5 % stockholder of the Company, office space and support services, and reimburse Mr.

Inayatullah for a portion of benefit expenses in exchange for advice and other consulting services as requested by the Company’s Executive Committee.

Transactions related to the Emeritus Agreement in the year ended December 31, 2020 were not material.

The Company is invested in a fund managed by Corvid Peak (the “Corvid Peak Fund”) and Corvid Peak manages investment portfolio accounts of Fortegra and certain of its subsidiaries under an investment advisory agreement (the “IAA”).

With respect to the Corvid Peak Fund and IAA, the Company incurred $ 1,988 , $ 2,792 and $ 1,006 of management and incentive fees for the years ended December 31, 2021, 2020 and 2019, respectively.

Beginning January 1,

AND SUBSIDIARIES

2 unchanged sentences

(in thousands, except share data)

(24) Summarized Quarterly Information (Unaudited)

First Quarter Second Quarter Third Quarter Fourth Quarter

Total revenues $ 129,671 $ 199,194 $ 224,041 $ 257,395

Total expenses 211,422 194,760 210,144 232,827

Income (loss) before taxes ( 81,751 ) 4,434 13,897 24,568

provision (benefit) for income taxes ( 21,181 ) ( 5 ) ( 844 ) 8,403

Net income (loss) ( 60,570 ) 4,439 14,741 16,165

net income (loss) attributable to non-controlling interests ( 563 ) 623 1,978 1,895

Net income (loss) attributable to common stockholders $ ( 60,007 ) $ 3,816 $ 12,763 $ 14,270

Net (loss) income per Common Share:

Basic earnings per share $ ( 1.74 ) $ 0.11 $ 0.37 $ 0.42

Diluted earnings per share $ ( 1.74 ) $ 0.10 $ 0.35 $ 0.40

Weighted average number of Common Shares:

Basic 34,566,330 33,984,195 33,684,301 33,213,307

Diluted 34,566,330 33,984,195 33,684,301 33,213,307

First Quarter Second Quarter Third Quarter Fourth Quarter

Total revenues $ 183,903 $ 191,072 $ 189,185 $ 208,568

Total expenses 178,748 175,367 190,783 198,691

Income (loss) before taxes 5,155 15,705 ( 1,598 ) 9,877

provision (benefit) for income taxes 854 3,501 ( 649 ) 5,311

Net income (loss) 4,301 12,204 ( 949 ) 4,566

net income (loss) attributable to non-controlling interests 376 458 508 419

Net income (loss) attributable to common stockholders $ 3,925 $ 11,746 $ ( 1,457 ) $ 4,147

Net (loss) income per Common Share:

Basic earnings per share $ 0.11 $ 0.33 $ ( 0.04 ) $ 0.12

Diluted earnings per share $ 0.11 $ 0.32 $ ( 0.04 ) $ 0.11

Weighted average number of Common Shares:

Basic 34,673,054 34,527,230 34,552,171 34,562,219

Diluted 34,673,054 34,527,230 34,552,171 34,578,357

2021, Tiptree has been allocated 10.2 % of certain profits interests earned by Corvid Peak with an additional 10.2 % interest for each of the next consecutive four years.

As of January 1, 2022, Tiptree’s percentage interest was 21.95 % (including interests acquired from former Corvid Peak equity holders).

For the year ended December 31, 2021, the Company recognized a $ 81 loss of allocated profit/loss interest that has been recorded in other revenue in the consolidated statements of operations.

Pursuant to the Transition Services Agreement, Tiptree and Corvid Peak have mutually agreed to provide certain services to one another.

Payments under the Transition Services Agreement in the years ended December 31, 2021, 2020 and 2019 were not material.

Pursuant to a Partner Emeritus Agreement, Tiptree agreed to provide Mr.

Inayatullah, a greater than 5 % stockholder of the Company, office space and support services, and reimburse Mr.

Inayatullah for a portion of benefit expenses in exchange for advice and other consulting services as requested by the Company’s Executive Committee.

Transactions related to the Partner Emeritus Agreement in the years ended December 31, 2021 and 2020 were not material.

(24) Subsequent Events

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data