TIPTREE INC. 10-K

tipt-20241231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31 , 2024 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 001-33549 Tiptree Inc. (Exact name of Registrant as Specified in Its Charter) Maryland 38-3754322 (State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification No.) 660 Steamboat Road, 2nd Floor, Greenwich, Connecticut 06830 (Address of Principal Executive Offices) (Zip Code) (Registrant’s telephone number, including area code) ( 212 ) 446-1400 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered common stock, par value $0.001 per share TIPT NASDAQ Capital Market Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 762(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒ As of June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was approximately $ 405,201,906 , based upon the closing sales price of $16.49 per share as reported on the Nasdaq Capital Market. For purposes of this calculation, all of the registrant’s directors and executive officers were deemed to be affiliates of the registrant. As of February 23, 2025, there were 37,259,169 shares, par value $0.001, of the registrant’s common stock outstanding. Documents Incorporated by Reference Certain information in the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission relating to the registrant’s 2025 Annual Meeting of Stockholders is incorporated by reference into Part III. TIPTREE INC. Annual Report on Form 10-K December 31, 2024 Table of Contents ITEM Page Number PART I 4 Item 1. Business 9 Item 1A. Risk Factors 25 Item 1B. Unresolved Staff Comments 51 Item 1C. Cybersecurity 52 Item 2. Properties 52 Item 3. Legal Proceedings 52 Item 4. Mine Safety Disclosures 52 PART II 52 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 Item 6. Reserved. 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 54 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 79 Item 8. Financial Statements and Supplementary Data F- 1 Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets for December 31, 2024 and 2023 F- 5 Consolidated Statements of Operations for the three years ended December 31, 2024, 2023 and 2022 F- 6 Consolidated Statements of Comprehensive Income (Loss) for the three years ended December 31, 2024, 2023 and 2022 F- 7 Consolidated Statement of Changes in Stockholders’ Equity for the three years ended December 31, 2024, 2023 and 2022 F- 8 Consolidated Statements of Cash Flows for the three years ended December 31, 2024, 2023 and 2022 F- 10 Notes to Consolidated Financial Statements F- 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 69 Item 9A. Controls and Procedures 69 Item 9B. Other Information 70 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 57 PART III 70 Item 10. Directors, Executive Officers and Corporate Governance 70 Item 11. Executive Compensation 70 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 70 Item 13. Certain Relationships and Related Transactions, and Director Independence 70 Item 14. Principal Accountant Fees and Services 71 PART IV 72 Item 15. Exhibits, Financial Statement Schedules 72 Item 16. Form 10-K Summary 75 Signatures 76 3 PART I Forward-Looking Statements Except for the historical information included and incorporated by reference in this Annual Report on Form 10-K, the information included and incorporated by reference herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations and our strategic plans and objectives. When we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions, we intend to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those described in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K and in our other public filings with the SEC. The factors described herein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the applicable law, we undertake no obligation to update any forward-looking statements. Market and Industry Data This Annual Report on Form 10-K includes certain market and industry data and statistics, which are based on publicly available information, industry publications and surveys, reports by market research firms and our own estimates based on our management’s knowledge of, and experience in, the insurance industry and market segments in which we compete. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. In addition, certain information contained in this Form 10-K, including information relating to the proportion of new opportunities we pursue, represents management estimates. While we believe our internal estimates to be reasonable, they have not been verified by any independent sources. Such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements and Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 4 Summary Risk Factors Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Item 1A. Risk Factors herein. These risks include, but are not limited to, the following: • A portion of our assets are illiquid or have limited liquidity, which may limit our ability to sell those assets at favorable prices or at all and creates uncertainty in connection with valuing such assets. • We operate in highly competitive markets for business opportunities and personnel, which could impede our growth and negatively impact our results of operations. • The amount of statutory capital and reserve requirements applicable to our insurance subsidiaries can increase due to factors outside of our control. • Our insurance subsidiaries’ actual claims losses may exceed their reserves for claims, which may require them to establish additional reserves. • Performance of our insurance subsidiaries’ investment portfolio is subject to a variety of investment risks. • Our insurance subsidiaries could be forced to sell investments to meet their liquidity requirements. • We may need to raise additional capital in the future or may need to refinance existing indebtedness, but there is no assurance that such capital will be available on a timely basis, on acceptable terms or at all. • Cybersecurity attacks or information system failures could disrupt our businesses, including our insurance businesses. • Third-party vendors our insurance subsidiaries rely upon to provide certain business and administrative services on their behalf may not perform as anticipated. These include independent financial institutions, lenders, distribution partners, agents, brokers and retailers for distribution of its products and services, and the loss of these distribution sources, or their failure to sell our insurance business’s products and services could be adverse. • A downgrade in our insurance subsidiaries’ claims paying ability or financial strength ratings could increase policy surrenders and withdrawals, adversely affecting relationships with distributors and reducing new policy sales. • If market conditions cause reinsurance to be more costly or unavailable, our insurance subsidiaries may be required to bear increased risks or reduce the level of their underwriting commitments. • Our insurance subsidiaries may incur losses if reinsurers are unwilling or unable to meet their obligations under reinsurance contracts. • New lines of business, new products and services or new geographic markets may subject our insurance subsidiaries to additional risks. • The effects of emerging claim and coverage issues on our insurance subsidiaries’ business are uncertain. • Our insurance subsidiaries’ international operations expose them to investment, political and economic risks, including foreign currency and credit risk. • Our insurance subsidiaries’ continued growth depends partly on the continued growth of their business’s customer base. • Our results of operations have in the past varied quarterly and may not be indicative of our long-term prospects. • Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity, could result in the sale of fewer policies than expected or an increase in the frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our insurance subsidiaries’ growth and profitability. • Our business’s risk management policies and procedures may prove to be ineffective and leave them exposed to unidentified or unanticipated risk. • Our insurance subsidiaries may not be able to generate sufficient cash to service all of their indebtedness and may be forced to take other actions to satisfy their obligations under their indebtedness, which may not be successful. • Restrictive covenants in the agreements governing our insurance subsidiaries’ indebtedness may restrict their ability to pursue their business strategies. • Retentions in various lines of business and catastrophic events expose our insurance subsidiaries to potential losses. • The exit of the United Kingdom from the European Union could adversely affect our insurance subsidiaries’ business. • Due to the structure of some of our insurance business’s commissions, it is exposed to risks related to the creditworthiness of some of its independent agents and program partners. • Our insurance subsidiaries may act based on inaccurate or incomplete information regarding the accounts they underwrite. 5 • The insurance industry is cyclical in nature, competition is intense and our insurance business may lose clients or business as a result of consolidation within the financial services industry or otherwise. • Any failure to establish, maintain, protect or enforce our insurance subsidiaries’ intellectual property rights could impair their intellectual property, technology platform and brand. In addition, they may be sued for alleged infringement, misappropriation or other violation of their proprietary rights. • Our businesses employ third-party licensed software, and the inability to maintain these licenses, errors in the software they license or the terms of open source licenses could result in increased costs or reduced service levels, which would adversely affect their business. • Some of our investments are made jointly with other persons or entities, which may limit our flexibility with respect to such jointly owned investments. • Our mortgage business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our mortgage business. • Our mortgage business is highly dependent upon programs administered by GSEs to generate revenues through mortgage loan sales to institutional investors. Any changes in existing U.S. government-sponsored mortgage programs could materially and adversely affect our mortgage business, financial condition and results of operations. • We may be unable to obtain sufficient capital to meet the financing requirements of our mortgage business. • In our mortgage business, we may sustain losses and/or be required to indemnify or repurchase loans we originated, or will originate, if, among other things, our loans fail to meet certain criteria or characteristics. • We may be limited in the future in utilizing net operating losses incurred during prior periods to offset taxable income. • We may leverage certain of our assets and a decline in the fair value of such assets may adversely affect our financial condition and results of operations. • Certain of our and our subsidiaries’ assets are subject to credit risk, market risk, interest rate risk, credit spread risk, call and redemption risk and refinancing risk, and any one of these risks may materially and adversely affect the value of our assets, our results of operations and our financial condition. • Our risk mitigation or hedging strategies could result in our experiencing significant losses. • The values we record for certain investments and liabilities are based on estimates of fair value made by our management, which may cause our operating results to fluctuate and may not be indicative of the value we can realize on a sale. • The accounting rules applicable to certain of our transactions are highly complex and require the application of significant judgment and assumptions by our management. In addition, changes in accounting interpretations or assumptions could impact our financial statements. • Because we are a holding company, our ability to meet our obligations and pay dividends to stockholders will depend on distributions from our subsidiaries that may be subject to restrictions and income from assets. • Some provisions of our charter may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests. • Maryland takeover statutes may prevent a change of our control, which could depress our stock price. • Our holding company structure with multiple lines of business, may adversely impact the market price of our common stock and our ability to raise equity and debt capital. • Maintenance of our 1940 Act exemption imposes limits on our operations. • Increasing regulatory focus on privacy issues and expanding laws could affect our various subsidiaries’ business models and expose them to increased liability. • Our insurance subsidiaries could be adversely affected if their controls to ensure compliance with guidelines, policies and legal and regulatory standards are not effective. • Our businesses are subject to risks related to litigation and regulatory actions, including increased compliance costs. • Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the United States, the EU and other jurisdictions. • We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions. • Assessments and premium surcharges for state guaranty funds, secondary-injury funds, residual market programs and other mandatory pooling arrangements may reduce our insurance subsidiaries’ profitability. • Operation of dry bulk vessels and product tankers is subject to complex laws and regulations, including environmental laws and regulations that, if any of our vessel owner subsidiaries are found guilty of violation, can result in substantial fines and costs to the Company. 6 Note to Reader In reading this Annual Report on Form 10-K, references to: “1940 Act” means the Investment Company Act of 1940, as amended. “2017 Notes” means our insurance subsidiaries’ 8.50% Fixed Rate Resetting Junior Subordinated Notes due in October 2057. “2024 Notes” means our insurance subsidiaries’ 9.25% Fixed Rate Resetting Junior Subordinated Notes due in November 2064. “A.M. Best” means A.M. Best Company, Inc. “CAGR” means compound annual growth rate. “CFPB” means the Consumer Financial Protection Bureau. “Code” means the Internal Revenue Code of 1986, as amended. “Common Stock” or “Common Shares” means Tiptree’s common stock $0.001 par value per share. “Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act. “E&S” means excess and surplus. “EBITDA” means earnings before interest, taxes, depreciation and amortization. “EBITDAR” means earnings before interest, taxes, depreciation and amortization, and restructuring or rent costs. “EU” means European Union. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Fannie Mae” means Federal National Mortgage Association. “Fortegra” or “The Fortegra Group” means The Fortegra Group, LLC and its subsidiaries prior to June 21, 2022 and The Fortegra Group, Inc. on or after June 21, 2022. “Fortegra Additional Warrants” means the additional warrants issued to Warburg and Tiptree Holdings to acquire Fortegra Common Stock. “Fortegra Additional Warrants (Warburg)” means the Fortegra Additional Warrants issued to Warburg. “Fortegra Common Stock” means the common stock of Fortegra. “Fortegra Credit Agreement” means the Second Amended and Restated Credit Agreement dated as of October 21, 2022 by and among The Fortegra Group, Inc., Fortegra Financial and Lots Intermediate Co., as borrowers, Fifth Third Bank, N.A., as administrative agent and issuing lender. “Fortegra Financial” means Fortegra Financial Corporation. “Fortegra Plan” means the 2022 Equity Incentive Plan of Fortegra. “Fortegra Preferred Stock” means the 5,333,333 shares of Series A Preferred Stock of Fortegra issued to Warburg. “Fortegra Warrants” means the warrants to purchase shares of Fortegra Common Stock. “Freddie Mac” means Federal Home Loan Mortgage Corporation. “GAAP” means U.S. generally accepted accounting principles. “Ginnie Mae” means Government National Mortgage Association. “GSE” means government-sponsored enterprise. “GWPPE” means gross written premium and premium equivalents. “Invesque” means Invesque Inc. “ITC” means ITC Compliance GRP Limited. “KBRA” means Kroll Bond Rating Agency, LLC. “Luxury” means Luxury Mortgage Corp. “MGAs” means managing general agents. “NAIC” means the National Association of Insurance Commissioners. “NCI” means non-controlling interests. “Notes” means the 2017 Notes and the 2024 Notes. “Premia” means Premia Solutions Limited. “Reliance” means Reliance First Capital, LLC. “ROAE” means return on average equity. “SEC” means the U.S. Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended. “SOFR” means the Secured Overnight Financing Rate. “Tiptree”, the “Company”, “we”, “its”, “us” and “our” means, unless otherwise indicated by the context, Tiptree Inc. and its consolidated subsidiaries. “Tiptree Advisors” means collectively: Tiptree Advisors Holdings, L.P., Tiptree Advisors, LLC, Tiptree GP Holdings, LLC and Tiptree Holdings GP, LLC. “Tiptree Credit Agreement” means the Credit Agreement, dated as of February 7, 2025, among Tiptree, Tiptree Holdings, the lenders party thereto from time to time and Fortress Credit Corp., as administrative agent, collateral agent and lead arranger. “Tiptree Holdings” means Tiptree Holdings LLC. 7 “Transition Services Agreement” means the Amended and Restated Transition Services Agreement between Tiptree Advisors and Tiptree Inc., effective as of January 1, 2019. “VSC” means vehicle service contracts. “Warburg” means WP Falcon Aggregator, L.P., a Delaware limited partnership affiliated with funds advised or managed by Warburg Pincus LLC. “WP Transaction” means the $200 million strategic investment in Fortegra by Warburg. 8 Item 1. Business OVERVIEW Our Business At Tiptree, our mission is to build long-term value by allocating capital to select small and middle market companies across industries. We have a significant track record investing in the insurance and credit-related financial sectors. With proprietary access and a flexible capital base, we seek to uncover compelling investment opportunities and support management teams in unlocking the full value potential of their businesses. This investment philosophy, executed by our experienced leadership, is our hallmark and has delivered consistent risk-adjusted returns to our stockholders since 2007. We categorize our businesses into: Insurance and Tiptree Capital. Insurance: Our Insurance segment consists of Fortegra, which is a growing, consistently profitable, and multinational specialty insurance company focused on underwriting complex and niche risks in underserved markets. Founded in 1978, the business has a long-standing track record of disciplined and stable underwriting results while generating strong growth and attractive returns on capital. Fortegra is an underwriting-focused company, with deep expertise within the admitted and E&S insurance lines and capital light fee-based services markets. It targets moderate risk limits and utilizes a sophisticated reinsurance strategy to reduce volatility and protect its capital. The business differentiates itself through its go-to-market strategy, expertise in customized underwriting solutions and the value-added services offered to its distribution partners. Tiptree Capital: We own a diversified group of businesses and investments that are owned and managed separately as Tiptree Capital, which include our Mortgage segment operations. We manage Tiptree Capital with a long-term focus, balancing current cash flow and long-term value appreciation. Today, Tiptree Capital consists primarily of our mortgage operations and principal investments. Our Operating Principles We acquire controlling interests and invest in businesses that we believe (i) operate in industries with long-term macroeconomic growth opportunities, (ii) have positive and stable cash flows, (iii) offer scalable business models with embedded optionality, and (iv) have strong management teams. We believe that our patient capital approach and long-term outlook enhances the ability for our businesses to grow earnings and cash flows across market cycles. Underwrite to a Profit . Our principal strategic objective is to continue expanding Fortegra’s operations, particularly the specialty insurance and service contract businesses. Our highest priority is to maintain strong underwriting practices, with attention paid to the insurance disciplines of pricing, underwriting and claims management. Invest for Long-term Returns. Our financial goals are to generate consistent and growing earnings and cash flow, and to enhance stockholder value as measured by growth in stock price plus dividends paid. We manage Tiptree with a long-term perspective, balancing cash-flowing investments with opportunities for capital appreciation. We focus on targeting investment returns that have a combination of current earnings and long-term capital appreciation, understanding that temporary accounting gains and losses may vary significantly from one period to the next. Think Like Owners. Efficient deployment of capital is our top priority. We aim to find the best use of capital to create long-term value for our stockholders. We hope to achieve this through a combination of investments in our existing businesses, select acquisitions and monetization opportunities, opportunistic share repurchases and paying a consistent dividend. As of December 31, 2024, directors, officers, employees and related trusts owned 34% of the Company. As of December 31, 2024, Tiptree and its consolidated subsidiaries had 1,496 employees, 18 of whom were at our corporate headquarters. Corporate employees are responsible for overall strategy, capital allocation and investment decisions, as well as public company reporting and compliance. Our businesses are subject to regulation as described below. The 1940 Act may limit the types and nature of businesses that we engage in and assets that we may acquire. See “Risk Factors-Risks Related to Regulatory and Legal Matters-Maintenance of our 1940 Act exemption will impose limits on our operations.” Insurance Fortegra is a growing multinational specialty insurance company focused on underwriting complex and niche risks in underserved markets. Founded in 1978, the business has a long-standing track record of disciplined and stable underwriting results while generating strong growth and attractive returns on capital. Fortegra is an underwriting-focused company, with deep expertise 9 within the admitted and E&S insurance lines and capital light fee-based services markets. It targets moderate risk limits and utilizes a sophisticated reinsurance strategy to reduce volatility and protect its capital. The business differentiates itself through its go-to-market strategy, expertise in customized underwriting solutions and the value-added services offered to its distribution partners. Fortegra’s financial success is demonstrated through its GWPPE CAGR of 23%, average combined ratio of 91%, average ROAE of 17% and average adjusted ROAE of 22%, each measured since January 1, 2019 through December 31, 2024. Fortegra’s balanced business mix allows it to opportunistically allocate capital as market conditions change and utilize the cash flows generated through capital light, fee-based businesses to partially fund the growth capital required across its insurance businesses. Fortegra has proven its ability to opportunistically take advantage of market dynamics throughout its history, and remains well positioned to benefit from an increasingly complex world, leading to secular growth in the specialty P&C market. Fortegra underwrites specialty programs which are distributed primarily through MGAs, retail agents and other distributors, collectively referred to as distribution partners. We believe this agent-centric specialty focus provides Fortegra with a competitive advantage and enables them to provide distribution partners with value-added services to improve their underwriting and operating performance, driving high agent retention. We believe this “one-to-many” distribution model is more efficient for the types of specialty risks Fortegra underwrites and allows the business to leverage its agents’ specialization in a particular market as well as their extensive retail network. To align economic interests, distribution partners receive variable forms of commission based on underwriting performance which supports the consistency and stability of Fortegra’s underwriting results. We believe this agent-centric distribution model is positioned for success given the continued growth of MGAs as a distribution channel and the differentiated approach Fortegra takes in this market. Our Insurance Products and Services Business and Product Mix by Gross Written Premiums and Premium Equivalents ($ in thousands) For the Year Ended December 31, 2024 2023 2022 Property and short-tail $ 845,721 $ 548,984 $ 263,933 Contractual liability 347,510 396,861 351,869 General liability 389,162 353,011 305,325 Alternative risks 362,153 330,171 363,362 Professional liability 276,390 232,944 82,340 Europe 163,292 141,208 125,150 Commercial lines $ 2,384,228 $ 2,003,179 $ 1,491,979 Personal lines $ 335,236 $ 382,397 $ 397,423 Insurance $ 2,719,464 $ 2,385,576 $ 1,889,402 Auto and consumer goods warranty 303,195 302,746 318,550 Other services 45,540 59,532 55,176 Services $ 348,735 $ 362,278 $ 373,726 Total $ 3,068,199 $ 2,747,854 $ 2,263,128 Insurance: Includes lines of business that pertain to coverages written or reinsured, on an admitted or E&S basis, through one of Fortegra’s licensed and regulated insurance entities. Insurance lines of business are further presented as those providing benefits to commercial entities, and those which provide personal coverage benefits to end-consumers. Additionally, Fortegra’s European lines of business includes auto and consumer goods warranty products, as they are regulated insurance products in their locally-issued countries. Fortegra gives limited delegated underwriting authority to its distribution partners, allowing them authority to quote, bind and issue policies within specifically agreed-upon underwriting guidelines. Fortegra’s distribution partners do not establish the policy pricing and terms or place reinsurance on its behalf and in most instances do not manage claims on its behalf. To align economic interests in both commercial and personal lines of business, distribution partners receive variable forms of commission based on underlying losses and underwriting performance, which supports the consistency and stability of Fortegra’s underwriting results. • Commercial: Through Fortegra’s network of partner MGAs, wholesale agents, retail agents, and brokers, bespoke admitted and E&S coverages are cultivated, ultimately benefiting commercial insureds. The business offers general liability, professional liability, property and other short-tail coverages, contractual liability protection, and alternative risks products. Fortegra continues to experience favorable trends in the E&S market in the U.S. while broadening its reach globally, including throughout Europe. The E&S insurance business launched in 2020 and has grown to more than $1,164.5 million of GWPPE for the year ended December 31, 2024. By scaling operations to support international growth, Fortegra is able to capitalize on 10 commonalities across geographies and leverage its shared service platform to drive cost efficiencies. Primarily, the following products are offered: – General Liability , including but not limited to, general and occurrence-basis other liability; commercial multi-peril liability; – Professional Liability , including but not limited to, professional and claims-made other liability; miscellaneous errors & omissions; cyber liability; – Property and Other Short-Tail , including but not limited to, commercial auto physical damage; commercial property; earthquake; homeowners; and inland marine; – Contractual Liability Protection (“CLIP”) , within portions of auto & consumer goods warranty lines, an embedded CLIP is provided. In these cases, the issuing party separately buys an insurance policy, called a “contractual liability insurance policy” CLIP from an insurance company to insure the financial obligations assumed by the issuing company; – Alternative Risks , including credit insurance products designed to offer lenders protection from events that limit a borrower’s ability to make payments on outstanding loan balances. Collateral protection products are designed to primarily protect the commercial entity from losses to collateral pledged to secure a loan. In most instances, these products offer lenders the option to protect collateral from a comprehensive loss due to fire, wind, flood and theft. Additionally, if the collateral is an automobile, the coverage protects against collision losses. • Personal: In addition to commercial products, Fortegra’s distribution partners offer a range of products which insure consumers, including credit protection surrounding loan payments. These products offer consumers the option to protect loan balance repayment in the event of death, involuntary unemployment or disability. Additionally, while the business has strategically and intentionally de-emphasized non-standard auto coverage, it offers these products on a limited basis through select partners. Services: Includes lines of business that generate service fees and other sources of income through non-insurance services entities. Services lines of business are further presented as those servicing auto warranty contracts and all other services. To align economic interests with partners and reduce the volatility of underwriting results related to various auto warranty, consumer warranty and motor club administration products, distribution partners receive variable forms of commission based on underlying losses and overall program performance. A substantial portion of underwriting risk is typically ceded via third-party captive reinsurance arrangements. • Auto & Consumer Warranty: Through Fortegra’s network of partner MGAs, wholesale agents, retail agents, brokers, and mobile device retailers, many of which also distribute insurance products, the business provides various auto warranty programs (including but not limited to, vehicle service contracts, GAP, and other ancillary products), and consumer goods warranty programs (including but not limited to, mobile devices, consumer electronics, appliances, furniture, etc.). Within auto & consumer warranty, service fee income is earned for providing any combination of administrator and/or obligor services, both within the U.S. and Europe. • Other Services: Fortegra administers multiple forms of motor clubs marketed by distribution partners, which are complementary to, and typically embedded within, other insurance or services programs. As part of its European operations, Fortegra provides regulatory support and compliance services to the retail automotive sector in the U.K. Included in Fortegra’s vertically integrated insurance and services offerings, the business generates additional sources of fee income through value-add services, including but not limited to, premium or warranty contract financing, lead generation support, and business process outsourcing. Our Insurance Competitive Strengths We believe that Fortegra’s competitive strengths include: Highly diversified and complementary business mix with a focus on underserved specialty insurance markets requiring distinct industry expertise. Fortegra has a highly diverse set of specialty programs, focused on classes of business where its underwriters have extensive experience. The focus on programs that we believe are frequently underserved in the market provides Fortegra a distinct competitive advantage. For example, Fortegra often targets smaller limit lines of business that it believes has significant growth potential but have been overlooked by traditional insurance carriers. Its dedicated underwriters have specific expertise in their given specialty markets, and will only enter a new market segment after extensive analysis and assessment. 11 Track record of profitable growth driven by disciplined strategic action s. Fortegra delivered GWPPE CAGR of 23%, net income CAGR of 38% and an adjusted net income CAGR of 37%, each measured from January 1, 2019 through December 31, 2024, while increasing its return on equity over that time, highlighted by its 2024 ROAE of 26% and adjusted ROAE of 29%. The business targets and hires underwriters with strong reputations in their areas of expertise and empowers them to source specialty programs from their proprietary networks. Once onboarded, Fortegra’s platform is dedicated to improving its agents’ performance through aligned incentives, underwriting and structural expertise, technology and data analytics, and ancillary services (e.g. claims). The platform has expanded into new lines of business and geographies, all while maintaining a disciplined approach to risk selection. Growth has been supported by multiple industry tailwinds in recent years, including the continued trend of insurance distribution through MGAs, the secular migration of risks into the U.S. E&S market, the need for reliable carrier capacity as traditional insurance carriers, reinsurance providers and alternative capital solutions have experienced dislocation and the persistent U.S. P&C insurance hard-market environment. Stable and highly predictable underwriting results driven by differentiated expertise, rigorous data driven approach to risk selection and a fully aligned distribution network. Fortegra has a long-standing track record of consistent underwriting results that have experienced limited volatility, which is the result of a deliberate organizational design. Its underwriting track record is demonstrated through its average combined ratio of 90.7% from 2019 through the year ended December 31, 2024. The business takes a disciplined approach to program selection, due diligence, pricing and structuring led by long-tenured, specialty insurance underwriting and actuarial experts, with active input from compliance, information technology and legal teams. Fortegra generally does not write commoditized, longer-tail classes of business which can experience periods of volatility such as workers compensation or commercial auto. The stability of its financial results is also driven by an intense data driven underwriting approach, which is enhanced by AI and machine learning to constantly refine pricing and risk appetite. Lastly, Fortegra’s selected group of distribution partners are fully aligned as a result of variable commission structures which support the consistency and stability of underwriting results. Agent-centric and highly efficient operating platform driven by scalable and proprietary data, analytics and technology stack. Fortegra complements underwriting expertise with robust technology platforms supported by highly trained data science and engineering teams to improve the scale and profitability of its programs. The platform allows the business to launch new programs and grow premiums without significant incremental upfront expenses. Fortegra’s technology delivers low-cost, automated administrative services to partners, enabling the business to automate core business processes, reduce operating costs, increase operating efficiency and secure high agent retention, highlighted by Fortegra’s five year annual average agent retention of greater than 95%. Fortegra uses the data collected to quickly analyze claims, which feeds into underwriting and actuarial teams and their decision making. Data and technology capabilities are used to monitor existing program performance, implement necessary underwriting action and if appropriate, exit programs which do not meet Fortegra’s underwriting standards. We believe that Fortegra’s technology platform provides an advantage in partnering with and delivering value-added capabilities to its distribution network. Dynamic capital allocator with a sophisticated reinsurance program to optimize risk and return while maintaining a conservative financial profile. Fortegra actively manages its capital to ensure disciplined, profitable growth across cycles. Its complementary business mix allows the business to pivot rapidly as market conditions change. The business mix is intentionally designed to have a balance of risk-bearing and capital light, fee-based earnings, which we believe provides a significant diversification benefit and allows us to allocate our capital and focus as market conditions change. Additionally, the diverse business mix enables Fortegra to use the cash flows generated through capital light, fee-based businesses to help fund the growth capital required in insurance businesses. Fortegra utilizes a sophisticated reinsurance strategy to optimize capital deployed and reduce volatility while generating attractive economics. This strategy is further augmented by Fortegra’s conservative balance sheet and highly liquid fixed income investment portfolio which has an average S&P rating of A+. Visionary, proven, and deep leadership team with a collaborative culture. Fortegra’s executive management team is comprised of highly experienced professionals with an average of over 25 years of industry experience. The team includes a deep bench of seasoned underwriters who have expertise in their designated specialization driving underwriting performance. The culture is highly collaborative focused on continuous improvement across underwriting, claims, technology and operations to ensure enterprise-wide connectivity as the business scales. Fortegra is led by its Chief Executive Officer, Rick Kahlbaugh, who has been in executive leadership positions with the Company for over 20 years. Fortegra prioritizes attracting and investing in the best talent in the industry to continue to drive profitable growth. The interests of Fortegra’s executive management team are closely aligned with investors through a combination of a long-term incentive plan and management bonus pool tied to operating results. 12 Our Insurance Strategy We will seek to continue to execute upon our strategy, which focuses on providing specialty lines to underserved markets where Fortegra has significant expertise. We believe this approach will enable Fortegra to continue to generate profitable growth and attractive returns on capital. The core drivers of this strategy include: Leveraging our deep expertise and efficient distribution to continue driving profitable growth. Fortegra’s core strategy centers on its deep expertise in underserved markets and a distinctive approach to program business. We expect to actively pursue new specialty opportunities through: • Continuing to successfully recruit and hire talented specialty underwriters that have a favorable track record, sector expertise and strong agent following; • Leveraging Fortegra’s distribution partner network to enter new specialty programs where it has underwriting expertise; • Partnering with reinsurers who are looking for highly experienced specialty carriers like Fortegra that can deliver a breadth of services and favorable underwriting results; • Working with reinsurance intermediaries that are seeking to move their business away from the fronting/hybrid model to a fully integrated specialty insurance company model; • Expanding into new geographies including the specialty insurance and warranty markets in Europe; and • Deepening Fortegra’s auto warranty footprint through dealership expansion and build-out of a direct salesforce. Utilizing technology to strengthen Fortegra’s operational scalability and continue to refine underwriting performance. At the core of the strategic vision is a profound commitment to technology as a driving force behind its success. The scalability and adaptability of its technology seamlessly aligns with an expanding business landscape. This dynamic technological infrastructure empowers the Fortegra team through the integration of data tools across claims, underwriting, and actuarial functions, providing a significant competitive edge and contributing to a low expense ratio. Technology and data capabilities are leveraged to enhance agent experience and performance through elevated service, improved underwriting insights, and streamlined claims processes. Fortegra’s technology and data also generate underwriting-qualified leads for its distribution partners, while ensuring the business remains within the boundaries of its risk parameters. This scalable technology platform was designed to support continued growth while necessitating minimal incremental investment. Empowering partners for enhanced performance through its differentiated underwriting approach. Fortegra’s distinctive underwriting approach involves the recruitment of experienced underwriters which are typically very well known to the business and have established networks of experienced distribution partners. These partners play a pivotal role in identifying attractive, smaller programs that align within Fortegra’s risk parameters. Alignment of interests with distribution partners provides them access to pricing, underwriting, and robust risk management processes, which enhance the collective financial performance. Fortegra’s organizational culture is rooted in sound underwriting practices that enable it to achieve targeted growth objectives while consistently delivering desired profitability. Sustaining a highly disciplined underwriting approach with focus on profitability. Fortegra constantly assesses the risks in its portfolio to assure sound pricing and risk management in accordance with its underwriting guidelines with the goal of increasing returns and maintaining the stability of its combined ratio. Underwriting integrity or risk selection will not be sacrificed for the sake of premium growth. As Fortegra assesses market pricing, to the extent it is below its underwriting return objectives, capital will not be put at risk for premium growth. Maintaining a high-quality balance sheet with strong ratings. Fortegra has and seeks to maintain a strong and conservative balance sheet, supported by a comprehensive risk management program reflected by its financial strength ratings of “A-” (Excellent) (Outlook Stable) from A.M. Best. Fortegra has a short duration, liquid and high-quality investment portfolio, with 89% invested in cash and investment grade fixed income securities, which have an average S&P rating of A+, as of December 31, 2024. Fortegra has highly rated and well capitalized reinsurance partners and retains excess collateral where applicable to support its outstanding reinsurance recoverable. Distribution & Marketing Fortegra distributes its products through MGAs, retail agents, and other distributors, collectively referred to as distribution partners. The business generally targets markets that are niche and specialty in nature, which it believes are underserved by 13 competitors and have high barriers to entry. Fortegra focuses on establishing quality relationships, emphasizing customer service, and providing underwriting expertise and value-added services. This agent-centric focus, along with its ability to help distribution partners enhance revenue and optimize underwriting profitability and operational efficiencies, provides Fortegra with a competitive advantage that has enabled it to develop and maintain numerous long-term client relationships, as evidenced by its high agent retention rate of greater than 95% (over the last five years). Fortegra believes this “one-to-many” distribution model is operationally more efficient for the types of risks it underwrites, leveraging its partners’ specialized experience in their specific markets, lines of business and associated risks, as well as their extensive retail networks. To align economic interests, distribution partners receive variable forms of commission based on underwriting performance, which reduces the volatility of underwriting results and promotes further profitable growth. Fortegra’s distribution partner relationships vary across the insurance products and services that it offers as follows: • Insurance products are distributed primarily through a network of MGAs, who in turn market and distribute through independent agents, retailers and wholesale brokers, or direct through lenders and financial institutions. • Service products are distributed by automobile dealerships, retailers (regional and specialty retailers, furniture stores, regional cellular service providers, and mobile device service providers), and MGAs, as well as financial services companies. Fortegra’s vertically integrated platform also allows it to engage in direct relationships with distributors for premium and service contract financing options, and regulatory compliance. Fortegra’s partners receive a commission-based fee for the distribution of its products. A significant portion of Fortegra’s commission agreements are on a variable or sliding scale commission basis, which allows Fortegra to adjust commissions based upon underlying underwriting performance, economically aligning itself with distribution partners. Fortegra has a highly diverse set of programs designed to limit concentration risk to its distribution partners, with its largest distribution partners each representing less than 6% of GWPPE for the year ended December 31, 2024. Fortegra’s marketing department focuses on building tailored solutions for its distribution partners, playing a pivotal role in driving brand recognition, revenue growth, and partner engagement. Utilizing a data-driven approach, the team develops and executes marketing strategies that support Fortegra’s sales activities, and the customer acquisition efforts of distribution partners. Extending marketing capabilities to distribution partners is a key differentiator that contributes to revenue growth and promotes longstanding distribution relationships. Underwriting Fortegra is an underwriting focused company with deep expertise within admitted and E&S insurance lines, as well as fee-based services markets, with a focus on underwriting complex and niche risks in underserved markets. Throughout the organization there is a strong culture of collaboration. Underwriting, claims and actuarial teams are closely integrated and aligned to facilitate operational efficiency, continuously monitor results, and make changes to programs as necessary. Centralized data systems allow for the real-time identification of pricing and claims trends within a program. Fortegra believes its approach to partner and program diligence, underwriting (including risk selection and pricing), and claims management, combined with its alignment and ability to improve its partner’s performance, has contributed to a superior combined ratio, which averaged 90.7% from 2019 through December 31, 2024. Fortegra’s underwriting team consisted of 104 professionals as of December 31, 2024. Fortegra hires experienced underwriters with a proven track record of underwriting profitability, deep knowledge of the specialty products that they underwrite, and longstanding relationships with its distribution partners. This approach accelerates expansion within particular lines due to the underwriters’ historical experience. Fortegra benefits from the underwriters’ prior experience within a particular line of business without the cost and volatility associated with unproven, blue-sky initiatives. Fortegra’s underwriters work with its distribution partners to develop the underwriting guidelines for each program. Limited delegated underwriting authority is given to its MGAs, including the ability to quote, bind, and issue policies within specifically agreed-upon underwriting guidelines. Fortegra’s distribution partners do not establish the policy pricing and terms, nor do they place reinsurance on its behalf. Fortegra has an established data and process-based approach to initial due diligence, structuring and onboarding, and regular maintenance and oversight. Fortegra’s underwriting team prices to a target margin, accounting for claims and administrative services. Fortegra continually seeks risk exposures where it can sustainably improve loss ratios and adjust its underwriting accordingly. Each program must be profitable on its own or adjustments are made, including underwriting guideline changes, pricing adjustments, or ultimately program cancellation if an underperforming program cannot be rehabilitated. This benefits underwriting results, and also earns its partners additional economic benefits through its variable commission structures. 14 Fortegra’s partners are compensated through variable or sliding-scale commission agreements, which allows the business to adjust commissions based upon underlying underwriting performance. Under these types of arrangements, its partners are paid an upfront provisional commission based on volumes. Subsequent adjustments to these commissions are calculated on underlying performance based upon the actual losses incurred compared to premiums or service fee income earned. Fortegra believes these types of contractual arrangements align economic interests by sharing the risks and rewards of its programs, which help Fortegra to better manage its risk exposures and deliver more consistent profit margins. This alignment underpins all of Fortegra’s partnerships; it fosters collaboration, lasting relationships and consistent profitability. Claims Fortegra’s claims department consisted of 349 claims professionals as of December 31, 2024. Fortegra organizes its claims department by product and geography, with specialized teams aligned by area of expertise. The business maintains claims disposition authority for the majority of its claims across both insurance and services. In-house claims professionals have specific niche expertise to accurately assess claims, which is crucial for the unique risks the business underwrites. Fortegra’s claims department maintains close collaboration with its underwriting and actuarial teams as to current claims trends and ongoing underwriting performance. On certain occasions where a TPA or external specialist possesses specific expertise, Fortegra may contract with them to provide services within its defined framework, subject to oversight while Fortegra retains ultimate claims settlement authority. When necessary, the claims team has access to a panel of expert attorneys, mediators, investigators, and independent adjusters who will be retained in connection with litigation or loss inspection. This allows Fortegra’s claims professionals to focus on more complex claims and enhances the efficiency and work quality of its claims department. The business seeks to adjudicate claims efficiently while maintaining strict compliance with all licensing, regulatory, and statutory requirements. Fortegra continues to invest in claims technology that enables it to add new programs and scale rapidly. Its centralized data systems allow for the real-time identification of claims trends within a program, which can be fed back to underwriting and actuarial teams to adjust its underwriting accordingly. Technology Technology is core to Fortegra’s strategy and a competitive advantage for the business. Fortegra has invested in technology to complement and enhance its underwriting, actuarial, and claims expertise, including systems, data science and engineering, and AI. These investments have strengthened Fortegra’s overall operational framework, improving scalability and profitability for both the business and its partners. Core system enhancements afford better claims adjudication, inform precise claims data capture, and provide improved customer service, while data engineering connects existing systems to reduce human intervention. The enrichment of claims data enhances underwriting decisions and actuarial analyses with extensive integrated data science tools. The business is supported by technology in multiple ways, including: • Assisting underwriting and actuarial teams by providing data and insight that feeds into its decision making processes. Fortegra’s underwriting is complemented by its highly trained data science and engineering teams. These teams deploy machine learning tools and a scalable data platform to support a collaborative approach that has allowed Fortegra to improve the scale and profitability of its business. The machine learning tools that the data science team build start with input from the underwriting and actuarial teams to build bespoke models for select lines that provide meaningful insight back to the underwriters in their processes. Fortegra leverages machine learning in its marketing processes to produce underwriting-qualified leads for its distribution partners. In the claims process, Fortegra utilizes machine learning document processing to streamline claims intake and improve data quality; • Improving its service platform to make it easier to do business with its distribution partners and effectively serve a high volume of policies in an efficient manner. This integrated, proprietary technology efficiently manages the high volume of policies and claims that result from servicing a large volume of small policyholders and contract holders. Its technology is highly automated, scalable and allows Fortegra to operate efficiently; • Enhancing its ability to generate business leads that fit Fortegra’s risk profile using AI. Fortegra’s flexible technology platform provides value-added services that it believes creates stronger relationships with its distribution partners. Fortegra’s technology platform is connected to its distribution partners and provides them with access to claims and performance dashboards. These value-added services deepen its relationships and contribute to the high persistency rate with Fortegra’s distribution partners; and • Providing a scalable platform to grow the business and add new product lines with minimal incremental expense. Fortegra’s technology infrastructure is scalable and affords it the opportunity to add new partners and services without significant 15 additional expense. Fortegra designed its scalable technology platform to support the business’s continued growth while necessitating only minimal incremental investment. Reinsurance Strategy Fortegra’s reinsurance strategy fosters efficient capital management to enable continued growth of its specialty insurance platform. The business leverages both quota share and excess of loss reinsurance arrangements with a diverse, highly rated, and appropriately capitalized panel of reinsurers. Reinsurance is also a key element of its enterprise risk management framework, limiting extreme loss events, reducing volatility, and driving consistent underwriting profitability for the stockholders. Quota share reinsurance: refers to a reinsurance contract whereby the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class. Fortegra has various quota share contracts that cover its insurance programs. Fortegra’s whole account quota share reinsurance agreements (“WAQS”), which cover portions of its commercial P&C insurance gross written premiums (including general liability, professional liability, property and short-tail), provide between 55% and 60% quota share of losses and significant ceding fees to offset administrative, underwriting and acquisition expenses. Additionally, this reinsurance agreement generates ceding commission income based on underlying underwriting performance, and investment income earned by the assuming reinsurers. Excess of loss reinsurance: refers to a reinsurance contract whereby the reinsurer agrees to assume all or a portion of the ceding company’s losses for an individual claim or an event in excess of a specified amount in exchange for a premium payable amount negotiated between the parties. Fortegra utilizes an excess of loss reinsurance agreement related to catastrophic property exposures, with limits in excess of a 1:200-year event. Captive Reinsurance Arrangements: A significant portion of partners within contractual liability and alternative risk lines of insurance business, as well as its auto and consumer goods line of services business, have created captive reinsurance companies to assume the underwriting risk on the products it delivers. These captive reinsurance companies are known as Producer-Owned Reinsurance Companies (“PORCs”) and, in most instances, each PORC assumes predominantly all of the underwriting risk associated with the products they deliver. In such PORC relationships, as is typically required by applicable laws and insurance regulations, Fortegra acts in a fronting and administrative capacity on behalf of the PORC, providing underwriting and claims services. It receives ceding and administration fees associated with underwriting and servicing the underlying policies. Because reinsurance does not relieve Fortegra of its primary liability to the policyholder, Fortegra generally requires cash or other forms of collateral posted by the PORC to secure the reinsurance receivable if a PORC is unable to pay the claims it has assumed. Fortegra’s reinsurance treaties renew on an annual basis throughout the year. At each treaty renewal, Fortegra considers several factors that influence its reinsurance program, including any plans to change the underlying insurance coverage it offers, changes in loss trends, its capital levels, changes in its risk appetite and the cost and market capacity. The following table reflects Fortegra’s key reinsurance treaties: Treaty Description Net Retention Reinsurance Coverage WAQS (2023 - 2024) Covers general liability, professional liability, property and short-tail lines 40%, $5 million per aggregate 60% Placed WAQS (2024 - 2025) Covers general liability, professional liability, property and short-tail lines 45%, $5 million per aggregate 55% Placed WAQS - Specific GL (2024 - 2025) Covers select general liability programs 43%, $5 million per aggregate 57% Placed Property Catastrophe Excess of Loss (2023 - 2024) Protection in excess of a 1:200 year catastrophic event; a 1:250 event results in approximately 1% impact to loss / combined ratio $8 Million, 50% co-participation on $4 million excess of $8 million $40 Million excess of $8 Million per event, $80 million in aggregate Property Catastrophe Excess of Loss (2024 - 2025) Protection in excess of a 1:200 year catastrophic event; a 1:250 event results in approximately 1% impact to loss / combined ratio $14 Million, 22% co-participation on $14 million excess of $14 million $48 Million excess of $14 Million per event, $130 million in aggregate For the limited amount of gross property exposures that are in excess of desired retentions, Fortegra works with its distribution partners to purchase facultative reinsurance to cover those individual risks. In addition to the purchase of property catastrophe reinsurance, Fortegra also manages its property exposures by leveraging catastrophe models to monitor risk aggregations that are measured in terms of probable maximum loss (“PML”) and Tail Value-at-Risk (“TVAR”), both of which estimate the amount of loss it would expect in extreme loss scenarios. 16 In Fortegra’s commercial insurance lines, its reinsurers tend to be highly rated, well-capitalized, professional third-party reinsurers. Fortegra typically contracts with third-party reinsurers that have attained an “A-” or better financial strength rating from A.M. Best. Those reinsurers that fall below this threshold are required to post collateral on a funds held basis or with letters of credit. Counterparty Risk Fortegra monitors its counterparty risk monthly through both adjustments to the sliding scale commission arrangements and a thorough evaluation of its reinsurance receivables and prepaid insurance premiums, and associated collateral. ($ in millions) As of December 31, 2024 2023 Third-party captives (1) Reinsurance receivables and prepaid reinsurance premiums $ 835 $ 871 Collateral $ 1,105 $ 1,036 % Collateralized 132 % 119 % Professional Reinsurers (2) Reinsurance receivables and prepaid reinsurance premiums $ 1,204 $ 984 Collateral $ 351 $ 644 % Collateralized 29 % 65 % Total Reinsurance receivables and prepaid reinsurance premiums $ 2,039 $ 1,854 Collateral $ 1,456 $ 1,680 % Collateralized 71 % 91 % _________________ (1) Includes domestic insurance companies owned by distribution partners. (2) “Professional reinsurers” include all reinsurers except for third-party captives. Total reinsurance receivables and prepaid reinsurance premiums were $2.0 billion and $1.9 billion as of December 31, 2024 and 2023, respectively. Of those amounts, $835 million and $871 million, respectively, related to contracts with third-party captives in which Fortegra holds collateral or receives letters of credit in excess of the reinsurance receivables and prepaid reinsurance premiums. The remainder relates to receivables held with high quality professional reinsurers. Additionally, any receivable held with unrated professional reinsurers is fully collateralized. The following table sets forth the percentage of Fortegra’s reinsurance receivables broken out by the A.M. Best financial strength rating of those professional reinsurers, excluding gross-up adjustments, as of December 31, 2024 and 2023. Percentage as of December 31, Rating: 2024 2023 A++ 1 % 1 % A+ 9 % 19 % A 28 % 26 % A- 56 % 28 % B++ 1 % — % Unrated 5 % 26 % Reserves Fortegra establishes loss reserves to cover its estimated ultimate losses under all insurance policies that it underwrites, and loss adjustment expenses relating to the investigation and settlement of policy claims. These reserves include estimates of the cost of the claims reported to Fortegra (case reserves) and estimates of the cost of claims that have been incurred but not yet reported. Fortegra’s reserving process is built upon expected loss and loss adjustment expense ratio picks at the program, line of business, and accident year level, which are set by management with input from underwriting, actuarial and claims. Management reviews results monthly against expected results to monitor underwriting performance. When determined necessary, underwriting actions are discussed and implemented, and reserve changes are made. Regular internal actuarial analyses are performed on a quarterly basis by program, line of business, and accident year/treaty year. Quarterly, an independent third-party actuarial review is completed to provide management with additional information related to reserve adequacy. Where the internal and external projections differ, a comparison is examined to determine the drivers. Information provided by the independent actuaries is considered as part of the input in the internal reserving process. Unpaid claims reserves represent Fortegra’s best estimates at a given time, based on actuarial estimates. Actual claim costs are dependent 17 upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. Fortegra regularly reviews and updates its method of estimating such unpaid claims reserves based on actual claims experience. Fortegra’s actuaries apply a variety of generally accepted actuarial methods (including loss development methods, Bornhuetter-Ferguson methods, Cape Cod methods, and expected loss methods) to historical loss experience when calculating indicated reserves. Key assumptions underlying these analyses, including anticipated future loss development patterns and expected ultimate loss and loss adjustment expense ratios, are reviewed regularly and updated as needed based on actual claims experience. In accordance with applicable statutory insurance company regulations, Fortegra’s recorded unpaid claims reserves are evaluated by appointed independent third-party actuaries, who perform this function in compliance with the Standards of Practice and Codes of Conduct of the American Academy of Actuaries. As of December 31, 2024, Fortegra’s reserves were found to be consistent with reserves computed in accordance with actuarial standards of practice and make a reasonable provision for all of its unpaid loss and loss adjustment expense obligations, as well as its unearned premium reserves for long duration contracts, by the appointed independent third-party actuaries. Insurance Investments Fortegra seeks to maintain a balanced and well-diversified investment portfolio with the primary investment objectives of remaining liquid to fund expected reserve payments, capital preservation, and a stable level of investment income enabling continued growth of core and new business lines. Its investment portfolio, including cash and cash equivalents and total investments, were $1.5 billion as of December 31, 2024. Fortegra’s investment policy establishes the investment parameters, such as maximum percentage of investment in a certain type of security and minimum levels of credit quality and is designed to manage investment risk. Tiptree Advisors, a credit oriented asset manager owned by the Company, manages Fortegra’s investment portfolio consistent with its internally prescribed guidelines and with oversight from Tiptree. Fortegra’s investments are subject to general economic conditions and market risks in addition to risks inherent to particular securities and risks relating to the performance of its investment advisers. Fortegra conducts monthly stress tests and uses predictive analytics to manage its investments, which it believes reduces risk to its investment performance. Fortegra also maintains an investment committee that meets monthly to ensure its investment objectives remain aligned with its broader strategic and financial objectives. As of December 31, 2024, the majority of its investments, $1.1 billion or 70.9%, of total cash and invested assets, was comprised of fixed maturity securities that are classified as available for sale and carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of AOCI. Cash & cash equivalents were $286 million, or approximately 18.5% of total cash and invested assets as of December 31, 2024. Also included in its investments were $99 million of equity securities, $10 million of loans, at fair value, $5 million of exchange traded fixed income funds, at fair value, and $50 million of other investments. The following table provides a summary of Fortegra’s investments and cash and cash equivalents as of December 31, 2024 and 2023: As of ($ in millions) December 31, 2024 December 31, 2023 Investments: Fair Value % of Total Fair Value Fair Value % of Total Fair Value Cash and cash equivalents $ 286 18.5 % $ 410 30.9 % Available for sale securities, at fair value 1,097 70.9 % 772 58.2 % Loans, at fair value 10 0.7 % 11 0.8 % Common and preferred equity securities 99 6.4 % 26 2.0 % Exchange traded funds 5 0.3 % 1 0.1 % Other investments 50 3.2 % 107 8.1 % Total cash and invested assets $ 1,548 100.0 % $ 1,327 100.0 % Fixed Maturity Securities As of December 31, 2024, Fortegra’s fixed maturity securities portfolio totaled $1.4 billion, including cash and cash equivalents and available for sale securities, at fair value. It had a weighted-average effective duration of 2.8 years, an average S&P rating of A+, and a book yield of 4.0%. The fixed maturity securities portfolio represented 89% of total investments. 18 The following table provides a summary of Fortegra’s amortized cost and fair value on available for sale securities as of December 31, 2024 and 2023: As of ($ in millions) December 31, 2024 December 31, 2023 Fixed Maturity Securities: Amortized Cost Fair Value % of Total Fair Value Amortized Cost Fair Value % of Total Fair Value Obligations of the U.S. Treasury and U.S. Government agencies $ 416 $ 385 35.1 % $ 467 $ 441 57.1 % Obligations of state and political subdivisions 42 39 3.6 % 49 45 5.8 % Corporate securities 606 598 54.5 % 261 255 33.0 % Asset-backed securities 25 23 2.1 % 29 26 3.4 % Certificate of deposits 1 1 0.1 % 1 1 0.1 % Obligations of foreign governments 52 51 4.6 % 5 5 0.6 % Total available for sale investments $ 1,141 $ 1,097 100 % $ 812 $ 773 100 % The following table provides the credit quality of Fortegra’s available for sale investments as of December 31, 2024 and 2023: As of ($ in millions) December 31, 2024 December 31, 2023 Rating: Amortized Cost Fair Value % of Total Fair Value Amortized Cost Fair Value % of Total Fair Value AAA $ 41 $ 39 3.6 % $ 29 $ 27 3.5 % AA 524 489 44.6 % 540 509 65.9 % A 173 169 15.4 % 162 154 19.9 % BBB 337 335 30.5 % 64 65 8.4 % BB 36 35 3.2 % 12 12 1.6 % B or unrated 31 31 2.8 % 5 5 0.6 % Total available for sale investments $ 1,141 $ 1,097 100 % $ 812 $ 772 100 % The amortized cost and fair value of Fortegra’s available for sale investments is summarized by contractual maturity as of December 31, 2024 in the table below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. ($ in millions) As of December 31, 2024 Amortized Cost Fair Value % of Total Fair Value Due in one year or less $ 239 $ 239 22 % Due after one year through five years 438 431 39 % Due after five years through ten years 224 202 18 % Due after ten years 214 203 19 % Asset-backed securities 25 23 2 % Total available for sale investments $ 1,141 $ 1,097 100 % Competition Fortegra operates in several niche markets and believes that no single company competes against it in all of its business lines. Fortegra may compete with other specialty insurance carriers within a given line of business, but it identifies no specific insurers as clear competition across all underwritten lines. Within the United States, Fortegra competes with specialty insurers such as RLI Corporation, W.R. Berkley Corporation, Kinsale, Skyward Specialty and Markel Corporation. Across Fortegra’s varying lines of business, it competes with a number of companies that write similar products, including: AIG, Allstate, Assurant, Asurion, LLC, AXA SA, Securian Financial, and Great American. These lists are not exhaustive and are constantly evolving as underwritten lines for Fortegra and its competitors evolves. In general, the insurance markets in which Fortegra operates in are highly competitive. The competition faced is driven by a confluence of factors, including product pricing, industry knowledge and expertise, quality of customer service, effectiveness of distribution channels, technology platforms and underwriting processes, the quality of information systems, financial strength ratings, size, breadth of products offered, overall reputation, and other factors. Fortegra primarily competes by leveraging its 19 proprietary technological innovations, decades of underwriting expertise, robust distribution relationships, data-driven marketing initiatives, its “agent-centric” mentality, and best-in-class reputation. Ratings Fortegra currently has a rating of “A-” (Excellent) (Outlook Stable) from A.M. Best, which rates insurance companies based on factors of concern to policyholders. A.M. Best currently assigns 16 ratings to insurance companies, which currently range from “A++” (Superior) to “S” (Rating Suspended). “A-” (Excellent) is the fourth highest rating. In evaluating a company’s financial and operating performance, A.M. Best performs quantitative and qualitative analyses, which includes a review of the company’s balance sheet strength, operating performance and business profile. Each of A.M. Best’s ratings reflect its opinion of an insurance company’s financial strength, operating performance and ability to meet its obligations to policyholders. These evaluations are not directed to purchasers of an insurance company’s securities. Seasonality Fortegra’s financial results have historically been, and we expect will continue to be, affected by seasonal variations. Fortegra’s commercial P&C lines of business are subject to underlying program renewal dates, while a significant portion of revenues related to the alternative risks and auto and consumer goods warranty lines of business may fluctuate seasonally based on consumer spending, which has historically been higher in September and December, corresponding to auto-sales events and the back-to-school and holiday seasons. Accordingly, its insurance revenues have historically been higher in the third and fourth quarters than in the first half of the year. Intellectual Property Fortegra owns or licenses a number of trademarks, trade names, service marks, trade secrets and other intellectual property rights that relate to its services and products within the various jurisdictions in which it operates. Although Fortegra believes that these intellectual property rights are, in the aggregate, important to Fortegra, it also believes that the business is not materially dependent upon any particular trademark, trade name, copyright, service mark, license or other intellectual property right. Additionally, Fortegra’s insurance subsidiaries have entered into confidentiality agreements with its partners that impose restrictions on partners’ use of proprietary software and other intellectual property rights. Regulation Fortegra is subjected to federal, state, local and foreign regulation and supervision. The type and degree of regulation and supervision varies depending on which type of license may be involved, such as: insurance company, administrator and agency licenses; or service contract administration and obligor licenses; or premium finance and consumer finance licenses. Fortegra is also subject to the related federal, state and foreign data privacy and data protection laws. Its insurance subsidiaries are active in 50 states in the United States. Its U.S. insurance company subsidiaries are domiciled in several states, including Arizona, California, Delaware, Georgia, Kentucky and Louisiana. The regulation, supervision and administration by state departments of insurance relate, among other things, to: standards of solvency that must be met and maintained, restrictions on the payment of dividends, changes in control of insurance companies, the licensing of insurers and their agents and other producers, the types of insurance that may be written, privacy practices, the ability to enter and exit certain insurance markets, the nature of and limitations on investments and premium rates, or restrictions on the size of risks that may be insured under a single policy, reserves and provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of policyholders, payment of sales compensation to third parties, approval of policy forms and premium rates, the types of risks that are not subject to form and rate regulation, the regulation of market conduct, including advertising, underwriting, claims practices, policy cancellation or non-renewal, and the insurer’s oversight of its agents. As part of their routine regulatory oversight process, state insurance departments conduct periodic detailed financial examinations of the books, records, accounts and operations of insurance companies that are domiciled in their states. In addition, our insurance subsidiaries are generally restricted by the insurance laws of their respective domiciles as to the amount of dividends they may pay without the prior approval of the respective regulatory authorities. Generally, the maximum dividend that may be paid by an insurance subsidiary during any year without prior regulatory approval is limited to a stated percentage of that subsidiary’s statutory surplus as of a certain date, or net income of the subsidiary for the preceding year. Fortegra’s insurance company subsidiaries are also subject to certain state regulations that define eligible investments and establish diversification requirements and concentration limits among asset classes. Failure to comply with these regulations would cause non-conforming investments to be treated as non-admitted assets in the states in which it is licensed to sell insurance policies for purposes of measuring statutory surplus and, in some instances, would require Fortegra to sell those investments. Such investment laws are generally permissive with respect to federal, state and municipal obligations, and more restrictive with respect to corporate obligations, particularly non-investment grade obligations, foreign investment, equity securities and real estate investments. Each 20 insurance company is therefore limited by the investment laws of its state of domicile from making excessive investments in any given security (such as single issuer limitations) or in certain classes or riskier investments (such as aggregate limitation in non-investment grade bonds) or in its affiliates. The NAIC provides model insurance laws and regulations for adoption by the states and standardized insurance industry accounting and reporting guidance. However, model insurance laws and regulations only become effective when adopted and enacted by the states, and statutory accounting and reporting principles continue to be established by individual state laws, regulations and permitted practices. The NAIC has adopted a model act with risk-based capital (“RBC”) formulas to be applied to insurance companies to measure the minimum amount of capital appropriate for an insurance company to support its overall business operations in light of its size and risk profile. State insurance regulators use RBC standards as a tool to monitor capital adequacy and to determine appropriate actions relating to insurers that show signs of weak or deteriorating conditions. The domiciliary states of our insurance company subsidiaries have adopted laws substantially similar to the NAIC’s RBC model act. Fortegra’s insurance holding company is subject to the respective state insurance holding company statutes which may require prior regulatory approval or non-disapproval of material transactions between an insurance company and an affiliate or of a change in control of a domestic insurer or of payments of extraordinary dividends or distributions. Fortegra’s insurance, service contract, and premium finance businesses are subject to U.S. federal and state regulations governing the protection of personal confidential information and data security, including the Gramm-Leach-Bliley Act, New York Department of Financial Services Cybersecurity Regulation and California Consumer Privacy Act. Fortegra’s subsidiaries operating in the EU are subject to the General Data Protection Regulation, or the “GDPR,” which regulates data protection for all individuals within the EU. Fortegra is active and subject to regulation in twenty foreign jurisdictions and intends to write business in additional foreign jurisdictions. A portion of its foreign business is conducted via our insurance company in Malta. Malta is a member country of the EU, and as of December 31, 2024, Fortegra is active in eighteen countries in the EU. The EU’s executive body, the European Commission, implemented insurance directives and capital adequacy and risk management regulations. EU member countries follow the insurance directives approved by the European Commission. The insurance directives set forth a regulatory regime for the authorization and supervision of insurers, with a broad set of principles and standards for protecting policyholders across the EU. These directives give insurers authorized in any one EU country or territory the freedom to conduct insurance business in any other EU country or territory, referred to as passporting. Procedures are in place regarding the notifications and approvals by the home state regulator for passporting. Insurers exercising this freedom continue to be regulated by their home state regulator, although the host state is entitled to impose domestic rules with which passporting insurers are required to follow for its business in the host state, in the interest of the general good. Within this context, our Malta company is authorized and supervised by the Malta Financial Services Authority (“MFSA”) and passports across EU member states. In addition to the regulation of authorization and distribution, the European Commission established capital adequacy and risk management regulations, called Solvency II, that apply to insurers within the EU. Solvency II includes capital requirements, risk management and corporate governance frameworks, and financial reporting requirements, which are subject to MFSA regulatory oversight. Even though the United Kingdom exited the EU, United Kingdom insurance regulation generally follows the same insurance directives and Solvency II principles, with the Prudential Regulatory Authority overseeing Solvency II principles and the Financial Conduct Authority overseeing the market conduct principles within those insurance directives. After Brexit, United Kingdom regulators established the Temporary Permissions Regime, (TPR), which permits passporting insurers to continue operating in the United Kingdom for up to three years post-Brexit. Fortegra’s Malta company was passporting into the United Kingdom prior to Brexit and registered to operate under the TPR until its branch was granted permanent authority by United Kingdom regulators in July 2022. Aspects of the relationship between the United Kingdom and the EU remain to be negotiated and their relationship will continue to evolve, including with respect to the cross-border provision of products and services and related compliance requirements. Post-transition period changes to the EU and United Kingdom legal, trade and regulatory frameworks, as well as changes to United Kingdom regulatory requirements for insurers operating in that host country, could increase its compliance costs and subject Fortegra to operational challenges in the region. Actions taken by the prudential regulator and/or conduct regulator could result in additional capital requirements or restrict or prohibit the sale of its products, which would adversely affect Fortegra’s business, revenues and results of operations. Additionally, a portion of its US and EU business is also ceded to Fortegra’s reinsurance company subsidiary domiciled in Turks and Caicos. Fortegra’s Turks and Caicos company is subject to Solvency II type of regulation by the domestic regulator. 21 Fortegra is also subject to federal and state laws and regulations related to the administration of insurance products on behalf of other insurers. In order for it to process and administer insurance products of other companies, Fortegra is required to maintain licenses of a third-party administrator in the states where those insurance companies operate. Similar to the federal and state regulations related to its insurance companies, Fortegra’s service contract companies, motor club companies and premium and consumer finance companies are subject to federal and state rules pertaining to authorization to operate, scope of permitted benefits and terms of service, disclosures, benefits requests, cancellation and termination. For example, some states require that forms be filed for prior review or require that its distributors hold a license to sell. Employees As of December 31, 2024, Fortegra had 1,144 employees across 24 offices in nine countries. Tiptree Capital We own a diversified group of investments that are owned and managed separately as Tiptree Capital, and include our Mortgage segment operations. Consistent with our operating principles, we manage Tiptree Capital with a long-term focus, balancing current cash flow and long-term value appreciation. We expect the investments within Tiptree Capital to change over time as we exit investments and reallocate capital to new investment opportunities. Though we do not have any specific sector focus, historically, the majority of our investments have occurred within four major sectors: asset management, real assets, specialty finance and credit investments. Tiptree Capital – Mortgage Operations Our mortgage operations are conducted through Reliance First Capital, LLC. Our mortgage business has been focused on primarily originating and servicing agency-eligible (Federal Housing Administration (“FHA”) and Veterans Administration (“VA”)) and conventional and government loans that can be transferred to Ginnie Mae pools or sold on a servicing-retained or servicing-released basis to Fannie Mae, Freddie Mac or secondary market investors and aggregators. Revenues are primarily generated from gain on sale income, loan fee income, servicing fee income, and net interest income. The growth in our mortgage business is expected primarily to come from increased origination volume, retention of additional mortgage servicing rights, and new products. Competition The residential mortgage market is highly competitive. There are a large number of institutions offering these products, including many that operate on a national scale, as well as local savings banks, commercial banks, and other lenders. Many of our competitors are larger and have access to greater financial resources. In addition, many of the largest competitors are banks or are affiliated with banking institutions, the advantages of which include, but are not limited to, having access to financing with more favorable terms, including lower interest rate bank deposits as a favorable source of funding. Regulation Our mortgage operations are subject to extensive regulation focused on consumer protection by U.S. federal, state and local governmental authorities, including the New York Department of Financial Services, CFPB, the Federal Trade Commission and various federal and state agencies that license, audit and conduct examinations. Our mortgage operations must comply with a number of federal, state and local consumer protection and privacy laws including laws that apply to loan origination, fair lending, debt collection, use of credit reports, safeguarding of non-public personally identifiable information about customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers. Employees As of December 31, 2024, our Mortgage operations had 332 employees. Tiptree Capital - Other Tiptree Capital - Other currently includes: • Our principal investments which include cash and cash equivalents, government bonds and select equity securities. • Our ownership of a credit oriented asset manager, Tiptree Advisors. 22 Competitive Strengths The depth and breadth of experience of our management team enables us to source, structure, execute and manage the capital allocated to Tiptree Capital. In addition, in each of our investments, we benefit by partnering with experienced management teams and third-party managers, which we have hired or chosen based on their depth of experience in their respective sectors. Competition In the sectors in which Tiptree Capital participates, the markets are highly competitive. There are a large number of competitors offering similar products and services, including many that operate on an international scale, and which are often affiliated with major multi-national companies. Many of these organizations have substantially more personnel and greater financial and commercial resources than we do. Some of these competitors have proprietary products and distribution capabilities that may make it more difficult for us to compete with them. Some competitors also have greater name recognition, have managed their businesses for longer periods of time, have greater experience over a wider range of products or have other competitive advantages. Regulation In the sectors in which Tiptree Capital participates, we are subject to extensive regulation by international, federal, state and local governmental authorities, including the SEC, the Federal Trade Commission, the EU, the United Kingdom and various state agencies. Our asset manager is registered with the SEC as an investment advisor and is subject to various federal and state laws and regulations and rules of various securities regulators and exchanges. These laws and regulations primarily are intended to protect clients and generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Our international operations and activities also expose us to risks associated with trade and economic sanctions, prohibitions or other restrictions, including environmental and cybersecurity regulations, imposed by the United States or other governments or organizations, including the United Nations, the EU and its member countries. Under economic and trade sanctions laws, governments may seek to impose modifications to, prohibitions/restrictions on business practices and activities, and modifications to compliance programs, which may increase compliance costs, and, in the event of a violation, may subject us to fines and other penalties. In our international activities, we are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws and regulations in various jurisdictions in which we conduct business, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. Employees As of December 31, 2024, Tiptree Capital - Other’s combined operations had 32 employees. Human Capital The success of our businesses depends on our ability to attract and retain experienced personnel and seasoned key executives who are knowledgeable about their industry and business. We recruit talent in diverse communities. Tiptree’s seven member board of directors includes two women and one underrepresented minority. Our talent strategy is focused on employee engagement and investments in programs to support career development, as well as recognizing and rewarding performance. An important element of our talent strategy is succession planning and building leadership at various levels across the organization. We strive to: • Provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. • Align executives’ long-term equity compensation with stockholders’ interests by linking realizable pay with earnings and total stockholder return. • Ensure that annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through their talent management process as part of the annual review procedures and upon internal transfer and/or promotion. • Ensure that all employees are eligible for health insurance, paid and unpaid leaves, and life and disability/accident coverage as well as access to wellness programs. 23 The Fortegra Foundation (the “Foundation”), a non-profit corporation chaired by Fortegra’s Chief Executive Officer, Mr. Richard S. Kahlbaugh, is a 501(c)(3) tax-exempt charity committed to giving back to its communities in which we live and work. The Foundation accomplishes this objective through monetary donations to local, national, and global organizations providing support to military families and improving the health and welfare of children and families— two primary areas of focus. For example, the Foundation has supported clean water initiatives in Africa and, in 2022 alone, helped build three life-changing water wells in The Republic of Zambia. Fortegra has programs that assist employees in developing key skills that enable them to perform their jobs and to advance their careers. For example, Fortegra has a Leadership Development Program (“LDP”), an early career program designed to attract and develop talent. The LDP includes recent college graduates who typically rotate through several departments over a two-year period, with the intent of gaining a deeper understanding of Fortegra and ultimately becoming better equipped with the knowledge and experience needed to excel as future leaders. Fortegra’s N.O.W. (Network of Women), its employee resource group, works to foster a supportive and equitable environment within Fortegra. The group achieves this by providing networking opportunities, educational initiatives, mentoring programs, and policies that support the unique needs of women in the workforce. Although led by women, the programming and resources provided are available to all Fortegra employees. We invest in our employees’ career growth and provide employees with a wide range of training and development opportunities, including face-to-face, virtual and self-directed learning, mentoring, external development opportunities and continuing education required by certain professional organizations. AVAILABLE INFORMATION We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are also available free of charge on our Internet site at www.tiptreeinc.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Our Investor Relations Department can be contacted at Tiptree Inc., 660 Steamboat Road, 2nd Floor, Greenwich, Connecticut 06830, Attn: Investor Relations, telephone: (212) 446-1400, email: IR@tiptreeinc.com . 24 Item 1A. Risk Factors We are subject to certain risks and uncertainties in our business operations which are described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are not presently known or are currently deemed immaterial may also impair our business, results of operations and financial condition. Risks Related to our Businesses A portion of our assets are illiquid or have limited liquidity, which may limit our ability to sell those assets at favorable prices or at all and creates uncertainty in connection with valuing such assets. Our assets include equity securities, real estate, non-controlling interests in credit assets and related equity interests which may be illiquid or have limited liquidity. It may be difficult for us to dispose of assets with limited liquidity rapidly, or at favorable prices, if at all. In addition, assets with limited liquidity may be more difficult to value and may be sold at a substantial discount or experience more volatility than more liquid assets. We may not be able to dispose of assets at the carrying value reflected in our financial statements. Our results of operations and cash flows may be materially and adversely affected if our determinations regarding the fair value of our illiquid assets are materially higher than the values ultimately realized upon their disposal. We operate in highly competitive markets for business opportunities and personnel, which could impede our growth and negatively impact our results of operations. We operate in highly competitive markets for business opportunities in each of our areas of focus. Many of our competitors have financial, personnel and other resource advantages relative to us and may be better able to react to market conditions. These factors may place us at a competitive disadvantage in successfully competing for future business opportunities and personnel, which could impede our growth and negatively impact our business, financial condition and results of operations. Our insurance subsidiaries face competition from other specialty insurance companies, standard insurance companies and underwriting agencies, as well as from diversified financial services companies that are larger than we are and that have greater financial, marketing, personnel and other resources than we do. Many of these competitors have more experience and market recognition than our insurance subsidiaries. In addition, it may be difficult or prohibitively expensive for our insurance subsidiaries to implement technology systems and processes that are competitive with the systems and processes of these larger companies. In particular, competition in the insurance industry is based on many factors, including price of coverage, general reputation and perceived financial strength, relationships with brokers, terms and conditions of products offered, ratings assigned by independent rating agencies, speed of claims payment and reputation, and the experience and reputation of the members of an underwriting team in the particular lines of insurance they seek to underwrite. In recent years, the insurance industry has undergone increasing consolidation, which may further increase competition. A number of new, proposed or potential industry or legislative developments could further increase competition in the insurance industry. These developments include: • an increase in capital raising by companies in the industry, which could result in new entrants to the insurance markets and an excess of capital in the industry; and • the deregulation of commercial insurance lines in certain states and the possibility of federal regulatory reform of the insurance industry, which could increase competition from standard carriers. Our insurance subsidiaries may not be able to continue to compete successfully in one or more insurance markets. Increased competition in these markets could result in a change in the supply and demand for insurance, affect our insurance subsidiaries’ ability to price their products at risk-adequate rates and retain existing business, or underwrite new business on favorable terms. If this increased competition limits our insurance subsidiaries’ ability to transact business, their results of operations would be adversely affected. Additionally, our E&S insurance operations cover risks that are typically more complex and unusual than standard risks and require a high degree of specialized underwriting. As a result, E&S risks do not often fit the underwriting criteria of standard insurance carriers, and are generally considered higher risk than those covered in the standard market. If our underwriting staff inadequately judges and prices the risks associated with the business underwritten in the E&S market, our financial results could be adversely impacted. 25 Warburg exerts substantial influence on Fortegra, potentially in a manner that is not in Tiptree’s shareholders’ interests. Warburg acquired an approximate 24% ownership in Fortegra on an as converted basis from us as part of the WP Transaction and has contractual consent rights over Fortegra, including but not limited to certain acquisitions or dispositions, a sale or change of control of Fortegra that does not achieve certain thresholds, an initial public offering that does not achieve certain gross proceeds thresholds, incurrence of certain indebtedness, the issuance of equity senior in right to shares of Fortegra common or preferred stock, or amendments to the terms thereof, affiliated or related party transactions and transactions between Fortegra and us, any hiring or firing of certain management of Fortegra, and any material change in the nature of the business conducted by Fortegra. Warburg also has pro rata representation on the Fortegra board of directors. As a result of their substantial ownership in Fortegra, Warburg may exert a substantial influence on Fortegra, potentially in a manner that is not in Tiptree’s shareholder’s interests. We are exposed to risks associated with acquiring or divesting businesses or business operations. We regularly evaluate strategic acquisition opportunities for growth. Acquired companies and operations may have unforeseen operating difficulties and may require greater than expected financial and other resources. In addition, potential issues associated with acquisitions could among other things, include: • our ability to realize the full extent of the benefits, synergies or cost savings that we expect to realize as a result of the completion and integration of an acquisition within the anticipated time frame, or at all; • receipt of necessary consents, clearances and approvals in connection with the acquisition; • diversion of management’s attention from other strategies and objectives; • motivating, recruiting and retaining executives and key employees; and • conforming and integrating financial reporting, standards, controls, procedures and policies, business cultures and compensation structures. If an acquisition is not successfully completed or integrated into our existing operations, our business, results of operations and financial condition could be materially adversely effected. We have also divested, and may in the future divest, businesses or business operations. Any divestitures may involve a number of risks, including the diversion of management’s attention, significant costs and expenses, the loss of customer relationships and cash flow, and the disruption of the affected business or business operations. Failure to timely complete or to consummate a divestiture may negatively affect the valuation of the affected business or business operations or result in restructuring charges. We may need to raise additional capital in the future or may need to refinance existing indebtedness, but there is no assurance that such capital will be available on a timely basis, on acceptable terms or at all. We may need to raise additional funds or refinance our indebtedness in order to grow our business or fund our strategy or acquisitions. Additional financing may not be available in sufficient amounts, if at all, or on terms acceptable to us and may be dilutive to existing stockholders. Additionally, any securities issued to raise such funds may have rights, preferences and privileges senior to those of our existing stockholders. We also cannot predict the extent and duration of future economic and market disruptions, the impact of government interventions into the market to address these disruptions and their combined impact on our industries, businesses and our insurance subsidiaries’ investment portfolios. If adequate funds are not available on a timely basis, if at all, or on acceptable terms, our ability to expand, develop or enhance our subsidiaries’ services and products, enter new markets, consummate acquisitions or respond to competitive pressures could be materially limited. The amount of statutory capital and reserve requirements applicable to our insurance subsidiaries can increase due to factors outside of our control. Our insurance subsidiaries are subject to regulation by state and, in some cases, foreign insurance authorities with respect to statutory capital, reserve and other requirements, including statutory capital and reserve requirements established by applicable insurance regulators based on RBC and Solvency II formulas. In any particular year, these requirements may increase or decrease depending on a variety of factors, most of which are outside our control, such as the amount of statutory income or losses generated, changes in equity market levels, the value of fixed-income and equity securities in the subsidiary’s investment portfolio, changes in interest rates and foreign currency exchange rates, as well as changes to the RBC and Solvency II formulas used by insurance regulators. The laws of the various states in which our insurance subsidiaries operate establish insurance departments and 26 other regulatory agencies with broad powers to preclude or temporarily suspend our insurance subsidiaries from carrying on some or all of these activities or otherwise fine or penalize our insurance subsidiaries in any jurisdiction in which we operate. Such regulation or compliance could reduce our insurance subsidiaries’ profitability or limit their growth by increasing the costs of compliance, limiting or restricting the products or services they sell, or the methods by which they sell services and products, or subject them to the possibility of regulatory actions or proceedings. Additionally, increases in the amount of additional statutory reserves that our insurance subsidiaries are required to hold could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our insurance subsidiaries’ actual claims losses may exceed their reserves for claims, which may require them to establish additional reserves that may materially and adversely affect their business, results of operations and financial condition. Our insurance subsidiaries maintain reserves to cover their estimated ultimate exposure for claims with respect to reported claims, and incurred, but not reported, claims as of the end of each accounting period. Reserves, whether calculated under GAAP or statutory accounting principles, do not represent an exact calculation of exposure. Instead, they represent our insurance subsidiaries’ best estimates, generally involving actuarial projections, of the ultimate settlement and administration costs for a claim or group of claims, based on our assessment of facts and circumstances known at the time of calculation. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by external factors such as changes in the economic cycle, unemployment, inflation, judicial trends, legislative changes, as well as changes in claims handling procedures. Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of operations of the period in which such estimates are updated. Because the establishment of reserves is an inherently uncertain process involving estimates of future losses, we can give no assurances that ultimate losses will not exceed existing claims reserves. In general, future loss development could require reserves to be increased, which could have a material adverse effect on our insurance subsidiaries’ business, results of operations and financial condition. Performance of our insurance subsidiaries’ investment portfolio is subject to a variety of investment risks. Our insurance subsidiaries’ results of operations depend significantly on the performance of their investment portfolio. We manage our insurance subsidiaries’ portfolio of investments along with one or more additional advisers. Such investments are subject to general economic conditions and market risks in addition to risks inherent to particular securities and risks relating to the performance of our investment advisers. Our primary market risk exposures are to changes in interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk.” Prior to 2022, interest rates had been at or near historic lows for an extended period of time. A protracted low interest rate environment places pressure on our insurance subsidiaries’ net investment income, which, in turn, would have a material adverse effect on our profitability. From 2022 to 2024, interest rates increased rapidly and significantly, which caused a significant decrease in the value of our fixed income securities, the majority of which were unrealized and recorded in equity. Future increases in interest rates could cause the values of our insurance subsidiaries’ fixed income securities portfolios to decline further, with the magnitude of the decline depending on the duration of securities included in our insurance subsidiaries’ portfolio and the amount by which interest rates increase. Some fixed income securities have call or prepayment options, which create possible reinvestment risk in declining rate environments. Other fixed income securities, such as mortgage-backed and asset-backed securities, carry prepayment risk or, in a rising interest rate environment, may not prepay as quickly as expected when purchased, which can affect the value of these securities and the amount and timing of cash flows therefrom. The value of our insurance subsidiaries’ investment portfolio is also subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities our insurance subsidiaries’ hold, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments on such investments. Downgrades in the credit ratings of fixed maturities may also have a significant negative effect on the market valuation of such securities. Such factors could reduce our insurance subsidiaries’ net investment income and result in realized investment losses. Our insurance subsidiaries’ investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the securities our insurance subsidiaries’ hold in their portfolio does not reflect prices at which actual transactions would occur. 27 The performance of our insurance subsidiaries’ investments also depends heavily on our skills and those of our insurance subsidiaries’ other investment advisers, in analyzing, selecting and managing the investments. Our insurance subsidiaries’ investment policy establishes investment parameters such as maximum percentages of investment in certain types of securities and minimum levels of credit quality and is designed to manage investment risk. Achievement of our insurance subsidiaries’ investment objectives will depend, in part, on our ability and other investment advisers’ ability to provide competent, attentive and efficient services to our insurance subsidiaries’ portfolio under the terms of the respective investment management agreement and to successfully manage their investment risk. There can be no assurance that, over time, we or our insurance subsidiaries’ other investment advisers will be able to provide services on that basis or that we or they will be able to invest such assets on attractive terms or generate any investment returns for stockholders or avoid investment losses. Our insurance subsidiaries’ investment objectives may not be achieved and results may vary substantially over time. In addition, although we and our insurance subsidiaries’ other investment advisers seek to employ investment strategies that are not correlated with our insurance subsidiaries’ insurance and reinsurance exposures, losses in their investment portfolio may occur at the same time as underwriting losses. The performance of our insurance subsidiaries’ investment portfolio is highly dependent on the financial and managerial experience of certain investment professionals associated with our insurance subsidiaries’ investment advisers, none of whom are under any contractual obligation to our insurance subsidiaries to continue to be associated with such investment advisers. The loss of one or more of these individuals could have a material adverse effect on the performance of our insurance subsidiaries’ investment portfolio. A shift in our insurance subsidiaries’ investment strategy could increase the riskiness of our insurance subsidiaries’ investment portfolio and the volatility of our results, which, in turn, may have a material adverse effect on our profitability. Our insurance subsidiaries’ investment strategy has historically been largely focused on fixed income securities which are subject to less volatility but also lower returns as compared to certain other asset classes. In the future, our insurance subsidiaries’ investment strategy may include a greater focus on investments in equity securities, which are subject, among other things, to changes in value that may be attributable to market perception of a particular issuer or to general stock market fluctuations that affect all issuers. Investments in equity securities may be more volatile than investments in other asset classes such as fixed income securities. Common stocks generally subject their holders to more risks than preferred stocks and debt securities because common stockholders’ claims are subordinated to those of holders of preferred stocks and debt securities upon the bankruptcy of the issuer. An increase in the riskiness of our insurance subsidiaries’ investment portfolio could lead to volatility of our results, which, in turn, may have a material adverse effect on our profitability. Our insurance subsidiaries could be forced to sell investments to meet their liquidity requirements. Our insurance subsidiaries invest a portion of the premiums they receive from their insureds until they are needed to pay policyholder claims. Consequently, o ur insurance subsidiaries seek to manage the duration of their investment portfolio based on the duration of their losses and loss adjustment expenses reserves to ensure sufficient liquidity and avoid having to liquidate investments to fund claims. Risks such as inadequate losses and loss adjustment expenses reserves or unfavorable trends in litigation could potentially result in the need to sell investments to fund these liabilities. Our insurance subsidiaries may not be able to sell their investments at favorable prices or at all. Sales could result in significant realized losses depending on the conditions of the general market, interest rates and credit issues with individual securities. Cybersecurity attacks, technology breaches or failures of our or our third-party service providers’ information systems could disrupt our various business operations and could result in the loss of critical and personally identifiable information, which could result in the loss of reputation and customers, reduce profitability, subject our businesses to fines, penalties and litigation and have a material adverse effect on our business’s results of operation, financial condition and cash flows. Tiptree’s businesses are highly dependent upon the effective operation of their information systems and those of their third-party service providers and their ability to collect, use, store, transmit, retrieve and otherwise process personally identifiable information and other data, manage significant databases and expand and upgrade their information systems. Our businesses rely on these systems for a variety of functions, including marketing and selling their products and services, performing their services, managing their operations, processing claims and applications, providing information to customers, performing actuarial analyses and maintaining financial records. Some of these systems may include or rely on third-party systems not located on their premises or under their control. The interruption or loss of their information processing capabilities, or those of their third-party service providers, through cybersecurity attacks, computer hacks, theft, malicious software, phishing, employee error, ransomware, malware, denial-of-service attacks, social engineering, viruses, worms, other malicious software programs, the loss of stored data, programming errors, the breakdown or malfunctioning of computer equipment or software systems, telecommunications and electrical failure or damage caused by weather or natural disasters, war, catastrophes, terrorist attacks, industrial accidents or any 28 other significant disruptions or security breaches could harm our businesses by hampering their ability to generate revenues and could negatively affect their partner relationships, competitive position and reputation. In addition, our business’s information systems may be vulnerable to physical or electronic intrusions, computer viruses or other attacks which could disable their information systems and their security measures may not prevent such attacks. Such information systems are additionally vulnerable to security incidents from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners, or other third parties, or from cyberattacks by malicious third parties. There are numerous and evolving risks to cybersecurity and privacy from cyber threat actors, including criminal hackers, state-sponsored intrusions, industrial espionage and employee malfeasance. There is also a potential heightened risk of cybersecurity incidents as a result of geopolitical events outside of our control, such as the ongoing Russia-Ukraine conflict, as well as other geographical conflicts. Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our IT systems and those of our business partners or third-party service providers to sophisticated and targeted measures known as advanced persistent threats. These cyber threat actors are becoming more sophisticated and coordinated in their attempts to access IT systems and data, including the IT systems of cloud providers and third parties with whom our businesses conduct or may conduct business. Although our businesses devote significant resources to prevent, detect, address and mitigate unwanted intrusions and other threats and protect their systems and data, whether such data is housed internally or by external third parties, such internal controls may not be adequate or successful in protecting against all security breaches and cybersecurity attacks, social-engineering attacks, computer break-ins, theft and other improper activity. Our businesses have experienced immaterial cybersecurity incidents and they and their third-party service providers will likely continue to experience cybersecurity incidents of varying degrees. Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, generally are not recognized until launched against a target and can originate from a wide variety of sources, our businesses and the third parties with whom they do business may be unable to anticipate these techniques or to implement adequate preventative measures effective against all such security threats. With the increasing frequency of cyber-related fraud to obtain inappropriate payments and other threats related to cybersecurity attacks, our businesses may find it necessary to expend resources to remediate cyber-related incidents or to enhance and strengthen their cybersecurity. Such remediation efforts may not be successful and could result in interruptions, delays or cessation of service. Our businesses have also implemented physical, administrative and logical security systems with the intent of maintaining the physical security of their facilities and systems and protecting their and their customers’ confidential and personally identifiable information against unauthorized access through their information systems or by other electronic transmission or through misdirection, theft or loss of data. Despite such efforts, they have in the past, and may in the future, be subject to a breach of their security systems that results in unauthorized access to their facilities or the information they are trying to protect. Anyone who is able to circumvent their security measures or those of their third-party service providers and penetrate their information systems could access, view, misappropriate, alter, destroy, misuse or delete any information in such systems, including personally identifiable information and proprietary business information (their own or that of third parties) or compromise of their control networks or other critical systems and infrastructure, resulting in disruptions to their business operations or access to their financial reporting systems. While our businesses have implemented business contingency plans and other reasonable plans to protect their systems, sustained or repeated system failures or service denials could severely limit their ability to write and process new and renewal business, provide customer service or otherwise operate in the ordinary course of business. In addition, most states require that customers be notified if a security breach results in the disclosure of personally identifiable customer information and the trend toward general public notification of such incidents could exacerbate the harm to our companies’ business, financial condition and results of operations. Any failure, interruption or compromise of the security of our business’s information systems or those of their third-party service providers that result in inappropriate disclosure of such information could result in, among other things, significant financial losses, unfavorable publicity and damage to their reputation, governmental inquiry and oversight, difficulty in marketing their services, loss of customers, significant civil and criminal liability related to legal or regulatory violations, litigation and the incurrence of significant technical, legal and other expenses, any of which may have a material adverse effect on their business, results of operations, financial condition and cash flows. Additionally, the costs related to significant security breaches or disruptions could be material and cause our businesses to incur significant expenses, and any cybersecurity insurance that our businesses may have in place may not cover such expenses. In some cases, our businesses rely on the safeguards put in place by third parties to protect against security threats. These third parties, including vendors that provide products and services for their operations, could also be a source of security risk to them in the event of a failure or a security incident affecting such third parties’ own security systems and infrastructure. If the information technology systems of our business’s third-party service providers become subject to disruptions or security breaches, our businesses may have insufficient recourse against such third parties and our businesses may have to expend significant resources to mitigate the impact of such an event and to develop and implement protections to prevent future events of this nature from occurring. Our business’s network of ecosystem partners could also be a source of vulnerability to the extent their applications interface with our businesses, whether unintentionally or through a malicious backdoor. Our businesses do not review the software code included in third-party integrations in all instances. 29 Our insurance business is dependent on independent financial institutions, lenders, distribution partners, agents, brokers and retailers for distribution of its products and services, and the loss of these distribution sources, or their failure to sell our insurance business’s products and services could materially and adversely affect its business, results of operations and financial condition and cash flows. Our insurance business is dependent on independent financial institutions, lenders, distribution partners, agents, brokers and retailers to distribute its products and services and its revenue is dependent on the level of business conducted by such distributors as well as the effectiveness of their sales efforts, each of which is beyond our insurance business’s control because such distributors typically do not have any minimum performance or sales requirements. Further, although its program arrangements with these distributors can be exclusive, they can be canceled on relatively short notice. Therefore, our insurance business’s growth is dependent, in part, on its ability to identify and attract new distribution relationships and successfully integrate its information systems with those of its new distributors. The impairment of our insurance business’s distribution relationships, the loss of a significant number of its distribution relationships, the failure to establish new distribution relationships, the failure to offer increasingly competitive products, the increase in sales of competitors’ services and products by these distributors or the decline in distributors’ overall business activity or the effectiveness of their sales of our insurance business’s products could materially reduce our insurance business’s sales and revenues and have a material adverse effect on its business, results of operations, financial condition and cash flows. Our insurance business may lose distributors or business as a result of consolidation within the financial services industry or otherwise. There has been considerable consolidation in the financial services industry, driven primarily by the acquisition of small and mid-size organizations by larger entities. We expect this trend to continue. Our insurance business may lose business or suffer decreased revenues if one or more of its significant distributors consolidate or align themselves with other companies. While our insurance business has not been materially affected by consolidation to date, it may be affected by industry consolidation that occurs in the future, particularly if any of its significant clients are acquired by organizations that already possess the operations, services and products that it provides. A downgrade in our insurance subsidiaries’ claims paying ability or financial strength ratings could increase policy surrenders and withdrawals, adversely affecting relationships with distributors and reducing new policy sales. Participants in the insurance industry use ratings from independent ratings agencies, such as A.M. Best and KBRA, as an important means of assessing the financial strength and quality of insurers, including their ability to pay claims. In setting its ratings, A.M. Best and KBRA perform quantitative and qualitative analyses of a company’s balance sheet strength, operating performance and business profile. A.M. Best financial strength ratings range from “A++” (Superior) to “F” for insurance companies that have been publicly placed in liquidation. KBRA’s ratings range from AAA (extremely strong) to R (under regulatory supervision). Currently, A.M. Best has assigned a financial strength of “A-” (Excellent) (Outlook Stable) and KBRA has assigned a financial strength rating of “A–” (Outlook Stable) to our insurance subsidiaries. A.M. Best and KBRA assign ratings that are intended to provide an independent opinion of an insurance company’s ability to meet its obligations to policyholders. These analyses include comparisons to peers and industry standards as well as assessments of operating plans, philosophy and management. A.M. Best and KBRA periodically review our insurance subsidiaries’ financial strength ratings and may, at their discretion, revise downward or revoke their ratings based primarily on their analyses of our insurance subsidiaries’ balance sheet strength (including capital adequacy and loss adjustment expense reserve adequacy), operating performance and business profile. Other independent ratings agencies may also assign our insurance subsidiaries’ financial strength ratings in the future, and these ratings may be below expectations. Factors that could affect such analyses include: • if our insurance subsidiaries change their business practices from their organizational business plan in a manner that no longer supports A.M. Best’s or KBRA’s ratings; • if unfavorable financial, regulatory or market trends affect our insurance subsidiaries , including excess market capacity; • if our insurance subsidiaries’ losses exceed their loss reserves; • if our insurance subsidiaries have unresolved issues with government regulators; • if our insurance subsidiaries are unable to retain their senior management or other key personnel; • if our insurance subsidiaries’ investment portfolio incurs significant losses; or 30 • if A.M. Best or KBRA alters its capital adequacy assessment methodology in a manner that would adversely affect our insurance subsidiaries’ ratings. These and other factors could result in a downgrade of our insurance subsidiaries’ financial strength ratings. A downgrade or withdrawal of our insurance subsidiaries’ ratings could result in any of the following consequences, among others: • causing our insurance subsidiaries’ current and future distribution partners and insureds to choose other, more highly-rated competitors; • increasing the cost or reducing the availability of reinsurance to our insurance subsidiaries ; or • severely limiting or preventing our insurance subsidiaries from writing new and renewal insurance contracts. In addition, in view of the earnings and capital pressures experienced by many financial institutions, including insurance companies, it is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate or will increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels. We can offer no assurance that our insurance subsidiaries’ ratings will remain at their current levels. It is possible that such reviews of our insurance subsidiaries may result in adverse ratings consequences, which could have a material adverse effect on our insurance subsidiaries’ business, results of operations , financial condition and cash flows . If market conditions cause reinsurance to be more costly or unavailable, our insurance subsidiaries may be required to bear increased risks or reduce the level of their underwriting commitments. Our insurance subsidiaries’ reinsurance facilities are generally subject to annual renewal. They may not be able to maintain their current reinsurance facilities and their customers may not be able to continue to operate their captive reinsurance companies. As a result, even where highly desirable or necessary, they may not be able to obtain other reinsurance facilities in adequate amounts and at favorable rates. If our insurance subsidiaries are unable to renew their expiring facilities or to obtain or structure new reinsurance facilities, either their net exposures would increase or, if they are unwilling to bear an increase in net exposures, they may have to reduce the level of their underwriting commitments. Either of these potential developments could have a material adverse effect on their business, results of operations, financial condition and cash flows. Our insurance subsidiaries’ failure to accurately pay claims in a timely manner could have a material adverse effect on their business, results of operations, financial condition and cash flows. Our insurance subsidiaries must accurately and timely evaluate and pay claims that are made under their policies. Many factors affect their ability to pay claims accurately and timely, including the training and experience of their claims representatives, including their distribution partners, the effectiveness of their management, and their ability to develop or select and implement appropriate procedures and systems to support their claims functions and other factors. Their failure to pay claims accurately and timely could lead to regulatory and administrative actions or material litigation, undermine their reputation in the marketplace and have a material adverse effect on their business, financial condition, results of operations and cash flows. In addition, if our insurance subsidiaries do not manage their distribution partners effectively, or if their distribution partners are unable to effectively handle their volume of claims, their ability to handle an increasing workload could be adversely affected. In addition to potentially requiring that growth be slowed in the affected markets, our insurance subsidiaries’ business could suffer from decreased quality of claims work which, in turn, could have a material adverse effect on their operating margins. Our insurance subsidiaries may incur losses if reinsurers are unwilling or unable to meet their obligations under reinsurance contracts. Our insurance subsidiaries use reinsurance to reduce the severity and incidence of claims costs, and to provide relief with regard to certain reserves. Under these reinsurance arrangements, other insurers assume a portion of our losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, reinsurance arrangements do not eliminate our obligation to pay claims and we assume credit risk with respect to our ability to recover amounts due from reinsurers. The inability or unwillingness of any reinsurer to meet its financial obligations could negatively affect our business, results of operations, financial condition and cash flows. As credit risk is generally a function of the economy, our insurance subsidiaries face a greater credit risk in an economic downturn. While our insurance subsidiaries attempt to manage credit risks through underwriting guidelines, collateral requirements and other oversight mechanisms, their efforts may not be successful. For example, to reduce such credit risk, our insurance subsidiaries require certain third parties to post collateral for some or all of their obligations to them. In cases where our insurance subsidiaries receive letters of credit from banks as collateral and one of their 31 counterparties is unable to honor its obligations, our insurance subsidiaries are exposed to the credit risk of the banks that issued the letters of credit. New lines of business, new products and services or new geographic markets may subject our insurance subsidiaries to additional risks. From time to time, our insurance subsidiaries may implement new lines of business, offer new products and services within existing lines of business, or expand into new geographic markets. In addition, our insurance subsidiaries will continue to make investments in development and marketing for new products and services. There are substantial risks and uncertainties associated with these efforts. In developing and marketing new lines of business, new products or services and/or expansions into new geographic markets, our insurance subsidiaries may invest significant time and resources. Initial timetables for the development and introduction of new lines of business and/or new products or services and/or expansions into new geographies, may not be achieved and price and profitability targets may not prove feasible. Furthermore, new lines of business and/or new product or service offerings may not gain market acceptance. Our insurance subsidiaries also may not gain market acceptance in new geographies. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, the burden on management and our insurance subsidiaries’ IT of introducing any new line of business or new product or service and/or new geographic market could have a significant impact on the effectiveness of their system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our insurance subsidiaries’ business, financial condition, results of operations and cash flows. If our insurance subsidiaries fail to manage future growth effectively, their business, results of operations, financial condition and cash flows would be harmed. Our insurance subsidiaries have expanded their operations significantly and anticipate that further expansion will be required in order for them to significantly grow their business. In particular, they may require additional capital, systems development and skilled personnel. Their growth has placed and may continue to place increasing and significant demands on their management, operational and financial systems and infrastructure and their other resources. If our insurance subsidiaries do not effectively manage their growth, the quality of their services could suffer, which could harm their business, results of operations, financial condition and cash flows. In order to manage future growth, they may need to hire, integrate and retain highly skilled and motivated employees. Our insurance subsidiaries may not be able to hire new employees quickly enough to meet their needs. If they fail to effectively manage their hiring needs and successfully integrate new hires, their efficiency and their employee morale, productivity and retention could suffer, and their business, results of operations, financial condition and cash flows could be harmed. They may also be required to continue to improve their existing systems for operational and financial management, including their reporting systems, procedures and controls. These improvements may require significant capital expenditures and place increasing demands on their management. They may not be successful in managing or expanding their operations or in maintaining adequate financial and operating systems and controls. If they do not successfully implement any required improvements in these areas, their business, results of operations, financial condition and cash flows could be harmed. The effects of emerging claim and coverage issues on our insurance subsidiaries’ business are uncertain. As industry practices and economic, legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may have a material adverse effect on our insurance subsidiaries’ business by either extending coverage beyond their underwriting intent or by increasing the number or size of claims. In some instances, these emerging issues may not become apparent for some time after they have issued the affected insurance policies. As a result, the full extent of liability under their insurance policies may not be known until many years after the policies are issued. In addition, the potential passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to extend the statutes of limitations or otherwise to repeal or weaken tort reforms could have an adverse impact on their business. The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm their business and have a material adverse effect on their results of operations. Our insurance subsidiaries’ international operations expose them to investment, political and economic risks, including foreign currency and credit risk. Our insurance subsidiaries’ expanding international operations in the United Kingdom, continental Europe and the Asia-Pacific region, expose them to increased investment, political and economic risks, including foreign currency exchange rate risk with certain assets and liabilities, and credit risk. Changes in the value of the U.S. dollar relative to the value of the British Pound Sterling, Euro and other currencies in the jurisdictions in which they operate could have a material adverse effect on their business, 32 results of operations, financial condition and cash flows. Their investments in non-U.S.-denominated assets are subject to fluctuations in non-U.S. securities and currency markets, and those markets can be volatile. Non-U.S. currency fluctuations also affect the value of any dividends paid by their non-U.S. subsidiaries to their parent companies in the United States. Our insurance subsidiaries use AI, machine learning and statistical models to assist their decision-making in key areas, such as underwriting, claims, reserving, and catastrophe risk, but actual results could differ materially from the model outputs and related analyses. Our insurance subsidiaries use various modeling techniques, including Stochastic, Bayesian statistics, classification, regression, clustering and other advanced machine learning techniques along with data analytics to analyze and estimate loss trends and other risks associated with their underwriting and claims operations. Our insurance subsidiaries use the modeled outputs and related analyses to assist them in certain decisions involving underwriting, pricing, claims, reserving, reinsurance, and catastrophe risk. As with many technological innovations, AI and machine learning present risks and challenges that could affect their adoption, and therefore our insurance subsidiaries’ business. The assumptions used in deriving modeled outputs and related analyses are subject to uncertainties, model errors and the limitations of historical internal and industry data. In addition, the modeled outputs and related analyses may from time to time contain inaccuracies, which could have a material adverse effect on our insurance subsidiaries’ results of operations, if, based upon these models, they misprice their products, underestimate the frequency and/or severity of loss events, or overestimate the risks they are exposed to. Persistent inaccuracies may adversely impact new business growth and retention of our insurance subsidiaries’ existing clients which could have a material adverse effect on our insurance subsidiaries’ results of operations and financial condition. Additionally, there are significant risks involved in developing and deploying AI, such as an increase in intellectual property infringement or misappropriation, data privacy, cybersecurity, operational and technological risks, harmful content, accuracy, bias, toxicity and discrimination, any of which could affect our insurance subsidiaries’ further development, adoption, and use of AI, and may cause them to incur additional research and development costs to resolve such issues. In addition, no assurance can be provided that the usage of such AI will enhance our insurance subsidiaries’ business or assist in being more efficient or profitable. The introduction of AI technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could adversely affect our insurance subsidiaries’ results of operations and financial condition. It is not possible to predict all of the risks related to the use of AI, and changes in laws, rules, directives and regulations governing AI may adversely affect our insurance subsidiaries’ ability to develop and use AI or subject them to legal liability. Our businesses could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified personnel. The success of our businesses depends on their ability to attract and retain experienced personnel and seasoned key executives who are knowledgeable about their industry and business. The pool of talent from which they actively recruit is limited and may fluctuate based on market dynamics specific to their industry and independent of overall economic conditions. As such, higher demand for employees having the desired skills and expertise could lead to increased compensation expectations for existing and prospective personnel, making it difficult for them to retain and recruit key personnel and maintain labor costs at desired levels. Should any of their key executives cease to be employed by them, or if they are unable to retain and attract talented personnel, they may be unable to maintain their current competitive position in the specialized markets in which they operate, which could have a material adverse effect on their results of operations. Our insurance subsidiaries’ continued growth depends in part on their ability to continue to grow their customer base. Increasing the customer base of our insurance subsidiaries will depend, to a significant extent, on their ability to effectively expand their sales and marketing activities, as well as their partner ecosystem and other customer referral sources. They may not be able to recruit qualified sales and marketing personnel, train them to perform and achieve an acceptable level of sales production from them on a timely basis or at all. If our insurance subsidiaries are unable to maintain effective sales and marketing activities and maintain and expand their partner network, their ability to attract new customers could be harmed and their business, results of operations, financial condition and cash flows would suffer. Our insurance subsidiaries may not be able to effectively start up or integrate new program opportunities, and they may invest in new program opportunities or initiatives that are ultimately unsuccessful. Our insurance subsidiaries’ ability to grow their business depends, in part, on their creation, implementation and acquisition of new insurance programs that are profitable and fit within their business model. New program launches as well as 33 resources to integrate business acquisitions are subject to many obstacles, including ensuring they have sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens and planning for internal infrastructure needs. If they cannot accurately assess and overcome these obstacles or they improperly implement new insurance programs, their ability to grow profitably will be impaired. Additionally, they may be unsuccessful in identifying new program opportunities, or they may be unable to develop or market new programs or initiatives in a timely or cost-effective manner. In addition, new programs or initiatives may not achieve the market penetration or price levels necessary for profitability. If they are unable to develop timely enhancements to, and new features for, their existing programs and services or if they are unable to develop new programs and services, their programs and services may become less marketable and less competitive, and their business, results of operations, financial condition and cash flows would be harmed. If our businesses are unable to maintain a high level of service, their business, results of operations, financial condition and cash flows may be harmed. One of the key attributes of our various businesses is providing high quality service to their partners and customers. They may be unable to sustain these levels of service, which would harm their reputation and our business. Alternatively, they may only be able to sustain high levels of service by significantly increasing their operating costs, which would materially and adversely affect their results of operations. The level of service they are able to provide depends on their personnel to a significant extent. Their personnel must be well-trained in their processes and able to handle customer calls effectively and efficiently. Any inability of their personnel to meet service level demands, whether due to absenteeism, training, turnover, disruptions at their facilities, including due to health emergencies, such as pandemics, bad weather, power outages or other reasons, could adversely impact their business. If they are unable to maintain high levels of service performance, their reputation could suffer and their business, results of operations, financial condition and cash flows would be harmed. Our business’s results of operations have in the past varied from quarter to quarter and may not be indicative of our long-term prospects. Our business’s results of operations are subject to fluctuation and have historically varied from quarter to quarter. We expect our quarterly results to continue to fluctuate in the future due to a number of factors, including the general economic conditions in the markets where we operate, the frequency, occurrence or severity of catastrophic or other insured events or otherwise, fluctuating interest rates, claims exceeding our insurance subsidiaries’ loss reserves, competition in the industries in which our subsidiaries operate, deviations from expected renewal rates of existing policies and contracts, adverse investment performance and the cost of reinsurance coverage. In particular, our insurance subsidiaries seek to underwrite products and make investments to achieve favorable returns on tangible stockholders’ equity over the long-term. In addition, their opportunistic nature may result in fluctuations in gross written premiums from period to period as they concentrate on underwriting contracts that they believe will generate better long-term, rather than short-term, results. Accordingly, their short-term results of operations may not be indicative of their long-term prospects. The industries in which our businesses operate are cyclical in nature. The financial performance of the insurance industry has historically fluctuated with periods of lower premium rates and excess underwriting capacity resulting from increased competition (a “soft market”) followed by periods of higher premium rates and reduced underwriting capacity resulting from decreased competition (a “hard market”). Soft markets occur when the supply of insurance capital in a given market or territory is greater than the amount of insurance coverage demanded by all potential insureds in that market. When this occurs, insurance prices tend to decline and policy terms and conditions become more favorable to insureds. Conversely, hard markets occur when there is not enough insurance capital capacity in the market to meet the needs of potential insureds, causing insurance prices to generally rise and policy terms and conditions to become more favorable to insurers. Although an individual insurance company’s financial performance depends on its own specific business characteristics, the profitability of most P&C insurance companies tends to follow this cyclical market pattern. Further, this cyclical market pattern can be more pronounced in the E&S market than in the standard insurance market. When the standard insurance market hardens, the E&S market typically hardens, and growth in the E&S market can be significantly more rapid than growth in the standard insurance market. Similarly, when conditions begin to soften, many customers that were previously driven into the E&S market may return to the admitted carrier market, exacerbating the effects of rate decreases. Some of our insurance subsidiaries’ specialty programs are exposed to these hard and soft market cycles. Our insurance subsidiaries’ business generally impacted by P&C commercial market cycles is primarily reported in their property and short-tail, general liability and professional liability lines. Across these lines, they manage various multiline and monoline programs that are impacted in different ways by market cycles. Currently, our insurance subsidiaries believe the following specialty programs and lines of business are in, to varying degrees, a 34 hard market: programs in the property and short-tail lines; within general liability line of business, contractors, excess liability and manufactured home parks programs; and programs in the professional liability line of business. Our insurance subsidiaries seek to limit the potential impact of these trends through their underwriting process that includes, but is not limited to, maintaining a diverse book of business with exposures to various lines, and products, limiting their risk exposures through reinsurance, carefully crafting their underwriting guidelines and monitoring how their distribution partners adhere to those guidelines. Additionally, our insurance subsidiaries believe that other insurance lines, specifically personal lines and alternative risks, are not influenced by the hard and soft market cycles to the same degree as P&C commercial lines. Furthermore, adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity, could result in the sale of fewer policies than expected or an increase in the frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our insurance subsidiaries’ growth and profitability. In an economic downturn that is characterized by higher unemployment, declining spending and reduced corporate revenue, the demand for insurance products is generally adversely affected, which directly affects their premium levels and profitability. Negative economic factors may also affect their ability to receive the appropriate rate for the risk they insure with their policyholders and may adversely affect the number of policies they can write, and their opportunities to underwrite profitable business. In an economic downturn, our insurance subsidiaries’ customers may have less need for insurance coverage, cancel existing insurance policies, modify their coverage or not renew their policies. Existing policyholders may exaggerate or even falsify claims to obtain higher claims payments. Some of our insurance subsidiaries’ lines of business that provide reconstruction, replacement or repair benefits may be negatively affected by higher rates for labor or the cost of replacement parts, and they have also experienced temporarily higher claims severities, in particular for their service contracts lines of business. In addition, high inflation may impact the creditworthiness of reinsurers and counterparties that our insurance subsidiaries contract with, which may negatively impact the ability of such parties to make timely payments pursuant to our insurance subsidiaries’ contracts with them. These outcomes would reduce their underwriting profit to the extent these factors are not reflected in the rates they charge, including to the extent their distribution partners are unable or unwilling to effectively implement pricing or coverage to mitigate these impacts. The financial performance of the mortgage segment largely depends on the health of the U.S. residential real estate industry, which is seasonal, cyclical, and affected by changes in general economic conditions beyond our control. Economic factors such as increased interest rates, slow economic growth or recessionary conditions, the pace of home price appreciation or the lack of it, changes in household debt levels, and increased unemployment or stagnant or declining wages affect our clients’ income and thus their ability and willingness to make loan payments. National or global events affect all such macroeconomic conditions. Weak or a significant deterioration in economic conditions reduce the amount of disposable income consumers have, which in turn reduces consumer spending and the willingness of qualified potential clients to take out loans. As a result, such economic factors affect loan origination volume. If our insurance subsidiaries are not able to maintain and enhance their brand, their business and results of operations will be harmed. Damage to their reputation and negative publicity could have a material adverse effect on their business, results of operations, financial condition and cash flows. We believe that maintaining and enhancing our insurance subsidiaries’ brand identity is critical to their relationships with their existing customers and partners and to their ability to attract new customers and partners. They also intend to grow their brand awareness among consumers and potential program partners in order to further expand their reach and attract new customers and program partners. The promotion of their brand in these and other ways may require them to make substantial investments and it is anticipated that, as their market becomes increasingly competitive, these branding initiatives may become increasingly difficult and expensive. Our insurance subsidiaries’ brand promotion activities may not be successful or yield increased revenue, and to the extent that these activities yield increased revenue, the increased revenue may not offset the expenses they incur and their results of operations could be harmed. If they do not successfully maintain and enhance their brand, their business may not grow and they could lose their relationships with customers or partners, which would harm their business, results of operations, financial condition and cash flows. Our insurance subsidiaries may be adversely affected by negative publicity relating to brand and activities. For instance, if their brand receives negative publicity, the number of customers visiting their platforms could decrease, and their cost of acquiring customers could increase as a result of a reduction in the number of consumers coming from their direct customer acquisition channel. Our business’s risk management policies and procedures may prove to be ineffective and leave them exposed to unidentified or unanticipated risk, which could adversely affect their business, results of operations, financial condition or cash flows. 35 Our businesses have developed and continue to develop enterprise-wide risk management policies and procedures to mitigate risk and loss to which they are exposed. There are, however, inherent limitations to risk management strategies because there may exist, or develop in the future, risks that they have not appropriately anticipated or identified. If their risk management policies and procedures are ineffective, they may suffer unexpected losses and could be materially adversely affected. As their business changes and the markets in which they operate evolve, their risk management framework may not evolve at the same pace as those changes. As a result, there is a risk that new products or new business strategies may present risks that are not appropriately identified, monitored or managed. In times of market stress, unanticipated market movements or unanticipated claims experience, the effectiveness of their risk management strategies may be limited, resulting in losses to them. In addition, there can be no assurance that they can effectively review and monitor all risks or that all of their employees will follow their risk management policies and procedures. Moreover, state legislatures and regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to insurers and within mortgage originators that may pose risk to borrowers. Our insurance and mortgage subsidiaries operate within an enterprise risk management (“ERM”) framework designed to assess and monitor their risks. However, there can be no assurance that they can effectively review and monitor all risks, or that all of their employees will operate within the ERM framework or that their ERM framework will result in their accurately identifying all risks and accurately limiting their exposures based on our business’s assessments. Our insurance subsidiaries may not be able to generate sufficient cash to service all of their indebtedness and may be forced to take other actions to satisfy their obligations under their indebtedness, which may not be successful. Our insurance subsidiaries’ ability to make scheduled payments on or refinance their debt obligations depends on their financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond their control. They may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on their indebtedness. If their cash flows and capital resources are insufficient to fund their debt service obligations, they could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter their dividend policy, seek additional debt or equity capital or restructure or refinance their indebtedness. They may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow them to meet their scheduled debt service obligations. The instruments that will govern their indebtedness may restrict their ability to dispose of assets and may restrict the use of proceeds from those dispositions and may also restrict their ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. They may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due. Our insurance subsidiaries’ inability to generate sufficient cash flows to satisfy their debt obligations, or to refinance their indebtedness on commercially reasonable terms or at all, may materially adversely affect their business, results of operations, financial condition and cash flows. Restrictive covenants in the agreements governing our indebtedness may restrict our ability to operate our business and may restrict our insurance subsidiaries’ ability to pursue our business strategies. The agreements governing our and our insurance subsidiaries’ indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions and may limit our ability to operate and our insurance subsidiaries’ ability to pursue their business strategies or undertake actions that may be in our or their best interests, as applicable. The Tiptree Credit Agreement includes covenants restricting, among other things, our ability to: • pledge Fortegra common stock; • incur or guarantee additional debt; • incur liens; • make negative pledges; • make junior payments; • make investments or complete acquisitions or dispositions of assets; • complete mergers, consolidations and dissolutions; • enter into transactions with affiliates; • prepay certain debt; and 36 • otherwise conduct our business. The agreements governing our insurance subsidiaries’ indebtedness include covenants restricting, among other things, their ability to: • incur or guarantee additional debt; • incur liens; • complete mergers, consolidations and dissolutions; • enter into transactions with affiliates; • pay dividends or other distributions; • sell certain of their assets that have been pledged as collateral; and • undergo a change in control. A breach of the covenants under the Tiptree Credit Agreement, the respective indentures that govern the Notes and the Fortegra Credit Agreement, could result in an event of default. Such default may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event our lenders or our insurance subsidiaries’ lenders or noteholders accelerate the repayment of their indebtedness, we or they and their subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we and our insurance subsidiaries may be: • unable to raise additional debt or equity financing to operate during general economic or business downturns; or • unable to operate or compete effectively or to take advantage of new business opportunities. These restrictions may affect our and our insurance subsidiaries’ ability to grow in accordance with our or their respective strategies. In addition, our or their respective financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of future financing. Retentions in various lines of business expose our insurance subsidiaries to potential losses. Our insurance subsidiaries retain risk for their own account on business underwritten by their insurance subsidiaries. The determination to reduce the amount of reinsurance they purchase, or not to purchase reinsurance for a particular risk, customer segment or category is based on a variety of factors, including market conditions, pricing, availability of reinsurance, their capital levels and their loss history. Such determinations increase their financial exposure to losses associated with such risks, customer segments or categories and, in the event of significant losses associated with such risks, customer segments or categories, could have a material adverse effect on their business, results of operations, financial condition and cash flows. The exit of the United Kingdom from the European Union could adversely affect our insurance subsidiaries’ business. The United Kingdom ceased to be a part of the EU on December 31, 2020 (which is commonly referred to as “Brexit”). Aspects of the relationship between the United Kingdom and the EU remain to be negotiated and their relationship will continue to evolve, including with respect to the cross-border provision of products and services and related compliance requirements. The effects of Brexit on our insurance subsidiaries’ business will depend on the manner in which it is implemented and any other relevant agreements between the United Kingdom and the EU, among other factors. For example, the United Kingdom ratified a trade and cooperation agreement governing its future relationship with the EU. Among other things, the agreement, which became effective in mid-2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and governance. Because the agreement merely sets forth a framework in many respects that requires complex additional bilateral negotiations between the United Kingdom and the EU, significant uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal. Because our insurance subsidiaries conduct business in both the United Kingdom and the EU and because they rely on their Malta insurance subsidiary’s ability to conduct business in the United Kingdom, they face risks associated with the uncertainty and disruptions relating to Brexit, including the risk of additional regulatory and other costs and challenges and/or limitations on their ability to sell particular products and services. As a result, the ongoing uncertainty surrounding Brexit could have a material adverse effect on their business (including their European growth plans), results of operations, financial condition and cash flows. Proposed or potential industry or legislative developments in the E&S market could further increase competition in our insurance subsidiaries’ industry and have a material adverse effect on their premiums, underwriting results and profits. 37 A number of new, proposed or potential industry or legislative developments could further increase competition in the E&S market and have a material adverse effect on our insurance subsidiaries’ premiums, underwriting results and profits. These developments include: • Changing distribution practices caused by the internet, including shifts in the way in which E&S insurance is purchased by consumers. Our insurance subsidiaries currently depend largely on distribution through third-party agents and brokers. If their distribution model were to be significantly altered by changes in the way E&S insurance is regulated, marketed, or sold including, without limitation, through the use of the internet, it could have a material adverse effect on our insurance subsidiaries’ premiums, underwriting results and profits; • Admitted products may be preferred from a regulatory or legislative perspective in certain jurisdictions; and • The market for E&S as compared to admitted products may shift based on the availability of admitted products at competitive prices and consumer, agent or broker preferences, among other factors. Due to the structure of some of our insurance business’s commissions, it is exposed to risks related to the creditworthiness of some of its independent agents and program partners. Our insurance business is subject to the credit risk of some of the independent agents and program partners with which it contracts to sell its products and services. Our insurance business typically advances commissions as part of its product offerings. These advances are a percentage of the premiums charged. If our insurance business over-advances such commissions, the agents and program partners may not be able to fulfill their payback obligations, which could have a material adverse effect on our insurance businesses, results of operations and financial condition. Failure of our insurance subsidiaries’ distribution partners to properly market, underwrite or administer policies could adversely affect our insurance subsidiaries. The marketing, underwriting, claims administration and other administration of policies in connection with our insurance subsidiaries’ issuing carrier services are the responsibility of their distribution partners. Any failure by them to properly handle these functions could result in liability to our insurance subsidiaries. Even though their distribution partners may be required to compensate them for any such liability, there are risks that they do not pay them because such partners become insolvent or otherwise. Any such failures could create regulatory issues or harm our insurance subsidiaries’ reputation, which could have a material adverse effect on their business, results of operations, financial condition and cash flows. Third-party vendors our businesses rely upon to provide certain business and administrative services on their behalf may not perform as anticipated, which could have an adverse effect on their business, results of operations, financial condition and cash flows. Our businesses have taken action to reduce coordination costs and take advantage of economies of scale by transitioning multiple functions and services to third-party providers. They periodically negotiate provisions and renewals of these relationships, and there can be no assurance that such terms will remain acceptable to us or such third parties. If such third-party providers experience disruptions or do not perform as anticipated, or our businesses experience problems with a transition to a third-party provider, they may experience operational difficulties, an inability to meet obligations (including policyholder obligations), a loss of business and increased costs, or suffer other negative consequences, all of which may have a material adverse effect on their business, results of operations, liquidity and cash flows. Our insurance subsidiaries may act based on inaccurate or incomplete information regarding the accounts they underwrite. Our insurance subsidiaries rely on information provided by insureds or their representatives when underwriting insurance policies. While they may make inquiries to validate or supplement the information provided, they may make underwriting decisions based on incorrect or incomplete information. It is possible that they will misunderstand the nature or extent of the activities or facilities and the corresponding extent of the risks that they insure because of their reliance on inadequate or inaccurate information. Any failure to protect or enforce our insurance subsidiaries’ intellectual property rights could impair their intellectual property, technology platform and brand. In addition, they may be sued by third parties for alleged infringement of their proprietary rights. 38 Our insurance subsidiaries’ success and ability to compete depend in part on their ability to establish, maintain, protect and enforce their intellectual property and proprietary rights, which includes their rights in their technology platform and their brand. Our insurance subsidiaries primarily rely on a combination of intellectual property rights, such as copyrights, trade secrets and trademarks, in addition to confidentiality agreements, procedures and contractual provisions with their employees, clients, service providers, partners and other third parties to establish, maintain, protect and enforce their proprietary or confidential information and intellectual property rights. Our insurance subsidiaries also rely on agreements under which they contract to own, or license rights to use, intellectual property developed by employees, contractors and other third parties. In addition, while they generally enter into confidentiality agreements with employees and third parties to protect their trade secrets, know-how, business strategy and other proprietary information, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for their trade secrets and know-how. Similarly, while they seek to enter into agreements with all of their employees who develop intellectual property during their employment to assign the rights in such intellectual property to our insurance subsidiaries, they may fail to enter into such agreements with all relevant employees, such agreements may be breached or may not be self-executing, and they may be subject to claims that such employees misappropriated relevant rights from their previous employers. The steps our insurance subsidiaries take to protect their intellectual property may be inadequate and despite their efforts to protect their proprietary rights and intellectual property, unauthorized parties may attempt to copy aspects of their solutions or to obtain and use information that they regard as proprietary, and third parties may attempt to independently develop similar technology. Policing unauthorized use of their technology and intellectual property rights may be difficult and may not be effective. Litigation brought to protect and enforce their intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of their intellectual property. The litigation process is subject to inherent uncertainties, and they may not prevail in litigation matters regardless of the merits of their position. Further, adequate remedies may not be available in the event of an unauthorized use or disclosure of their trade secrets. Additionally, their efforts to enforce their intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability and scope of their intellectual property rights. Our insurance subsidiaries’ failure to secure, protect, defend and enforce their intellectual property rights could adversely affect their brand and adversely affect their business. Our insurance subsidiaries’ success also depends in part on them not infringing, misappropriating or otherwise violating the intellectual property rights of others. Their competitors and other third parties may own or claim to own intellectual property relating to our insurance subsidiaries’ industry and, in the future, may claim that our insurance subsidiaries are infringing, misappropriating or otherwise violating their intellectual property rights, and our insurance subsidiaries may be found to be infringing on such rights. The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. The disposition of any such claims, whether through settlement or licensing discussions or litigation, could cause our insurance subsidiaries to incur significant expenses and, if successfully asserted against them, could require that they pay substantial damages or ongoing royalty payments, prevent them from offering certain of their products and services, require them to change their technology or business practices or require that they comply with other unfavorable terms. Even if our insurance subsidiaries were to prevail in such a dispute, any litigation could be costly and time-consuming, divert the attention of their management and key personnel from their business operations and materially adversely affect their business, financial condition and results of operations. Our businesses employ third-party licensed software, and the inability to maintain these licenses, errors in the software they license or the terms of open source licenses could result in increased costs or reduced service levels, which would adversely affect their business. Our businesses rely on certain third-party software obtained under licenses from other companies and anticipate that they will continue to rely on such third-party software in the future. Although they believe that there are commercially reasonable alternatives to the third-party software they currently license, this may not always be the case, or it may be difficult or costly to replace their existing third-party software. In addition, integration of new third-party software may require significant work and require substantial investment of their time and resources. Our business’s use of additional or alternative third-party software would require them to enter into license agreements with third parties, which may not be available on commercially reasonable terms or at all. Many of the risks associated with the use of third-party software cannot be eliminated, and these risks could negatively impact their respective business. Additionally, some of the software powering our business’s technology systems incorporates software covered by open source licenses. The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on their ability to operate their systems. In the event that portions of their proprietary software are determined to be subject to an open source license, they could 39 be required to publicly release the affected portions of their source code, which could allow our business’s clients and competitors to freely use such source code without compensation to us, or re-engineer all or a portion of their technology systems, each of which could reduce or eliminate the value of their technology systems. While our businesses take steps to monitor the use of all software covered by open source licenses in our technology systems to ensure that no such software is used in such a way as to require us to disclose the source code to the related technology when they do not wish to do so, such use could inadvertently occur and could harm our businesses, results of operations, financial condition and cash flows. In addition, the source code for open source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our business’s systems that rely on open source software and may present additional security risks. Such risk could be difficult or impossible to eliminate and could adversely affect our business’s , results of operations, financial condition and cash flows. Such risk could be difficult or impossible to eliminate and could adversely affect our business’s results of operations, financial condition and cash flows. Some of our investments are made jointly with other persons or entities, which may limit our flexibility with respect to such jointly owned investments and could, thereby, have a material adverse effect on our business, results of operations and financial condition and our ability to sell these investments. Some of our current investments are, and future investments may be, made jointly with other persons or entities when circumstances warrant the use of such structures and we may continue to do so in the future. Our participation in such joint investments is subject to the risks that: • we could experience an impasse on certain decisions because we do not have sole decision-making authority, which could require us to expend additional resources on resolving such impasses or potential disputes; • our partners could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments; • our partners might become bankrupt, fail to fund their share of required capital contributions or fail to fulfill their obligations as partners, which may require us to infuse our own capital into such venture(s) on behalf of the partner(s) despite other competing uses for such capital; • our partners may have competing interests in our markets that could create conflict of interest issues; • any sale or other disposition of our interest in such a venture may require consents which we may not be able to obtain; • such transactions may also trigger other contractual rights held by a partner, lender or other third-party depending on how the transaction is structured; and • there may be disagreements as to whether consents and/or approvals are required in connection with the consummation of a particular transaction with a partner, lender and/or other third-party, or whether such transaction triggers other contractual rights held by a partner, lender and/or other third-party, and in either case, those disagreements may result in litigation. Our mortgage business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our mortgage business . Changes in interest rates and the level of interest rates are key drivers that impact the volatility of our mortgage loan originations. The historically low interest rate environment over the last several years created strong demand for mortgages. While long-term residential mortgage interest rates were at or near record lows for an extended period, from 2022 to 2024, the Federal Reserve initiated a rapid series of interest rate increases that resulted in lower revenue and profitability in our mortgage business. The overwhelming majority of our mortgage loan originations have historically been refinancing existing homeowner’s mortgage loans, with a particular emphasis on cash out refinancings. With the recent rise in interest rates, we may not be able to continue to grow our mortgage originations in the future. With regard to the portion of our mortgage business that is centered on refinancing existing mortgages, we generally note that the refinance market experiences more significant fluctuations than the purchase market as a result of interest rate changes, with the rate and term financing market impacted the most by the volatility in mortgage rates. As interest rates rise, refinancing generally becomes a smaller portion of the market as fewer consumers are interested in refinancing their mortgages. With regard to our purchase mortgage loan business, higher interest rates may also reduce demand for purchase mortgages as home ownership becomes more expensive. This could adversely affect our mortgage business’s revenues or require our mortgage business to increase marketing expenditures in an attempt to increase or maintain its volume of mortgages. Decreases in interest rates can also adversely affect our mortgage business’s financial condition, the value of its mortgage servicing rights (“MSRs”) portfolio, and its results of operations. Even in sustained low interest rate environments, refinancing transactions decline over time, as many clients and potential clients have already taken advantage of the low interest rates. 40 Changes in interest rates are also a key driver of the performance of our servicing business, particularly because our mortgage business’s portfolio is composed primarily of MSRs related to high-quality loans, the values of which are highly sensitive to changes in interest rates. Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates. As a result, decreases in interest rates could have a detrimental effect on our mortgage business. Borrowings under some of our mortgage business’s finance and warehouse facilities are at variable rates of interest, which also expose us to interest rate risk. As interest rates increase, our mortgage business’s debt service obligations on certain of its variable-rate indebtedness have increased even though the amount borrowed remains the same, and net income and cash flows, including cash available for servicing indebtedness, have correspondingly decreased. Our mortgage business currently has entered into, and in the future may continue to enter into, interest rate swaps that involve the exchange of floating for fixed-rate interest payments to reduce interest rate volatility. However, our mortgage business may not maintain interest rate swaps with respect to all of its variable-rate indebtedness, and any such swaps may not fully mitigate its interest rate risk, may prove disadvantageous, or may create additional risks. In addition, our mortgage business is materially affected by the monetary policies of the U.S. government and its agencies. Our mortgage business is particularly affected by the policies of the Federal Reserve, which influence interest rates and impact the size of the loan origination market. In 2017, the Federal Reserve ended its quantitative easing program and started its balance sheet reduction plan. The Federal Reserve's balance sheet consists of U.S. Treasuries and mortgage-backed securities (“MBS”) issued by Fannie Mae, Freddie Mac and Ginnie Mae. To shrink its balance sheet, the Federal Reserve had slowed the pace of MBS purchases to a point at which natural runoff exceeded new purchases, resulting in a net reduction. In response to the COVID-19 pandemic, state and federal authorities took several actions to provide relief to those negatively affected by COVID-19, such as the CARES Act and the Federal Reserve's support of the financial markets. The lasting results of these policies by the Federal Reserve are unknown at this time. Our mortgage business’s MSRs are highly volatile assets with continually changing values, and these changes in value, or inaccuracies in estimates of their value, could adversely affect our mortgage business’s financial condition and results of operations. The value of our mortgage business’s MSRs is based on the cash flows projected to result from the servicing of the related mortgage loans and continually fluctuates due to a number of factors. These factors include changes in interest rates; historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates and refinancings. Other market conditions also affect the number of loans that are refinanced and thus no longer result in cash flows, and the number of loans that become delinquent. Our mortgage business uses two external valuation firms to fair value its MSR assets. These valuation firms utilize market participant data and actual MSR market trades to value our MSRs for purposes of financial reporting, These models are complex and use asset-specific collateral data and market inputs for interest and discount rates. In addition, the modeling requirements of MSRs are complex because of the high number of variables that drive cash flows associated with MSRs, and because of the complexity involved with anticipating such variables over the life of the MSR. Even if the general accuracy of their valuation models is validated, valuations are highly dependent upon the reasonableness of their assumptions and the results of the models. If loan delinquencies or prepayment speeds are higher than anticipated or other factors perform worse than modeled, the recorded value of certain of their MSRs may decrease, which could adversely affect their business and financial condition. Our mortgage business is highly dependent upon programs administered by GSEs, such as Fannie Mae and Freddie Mac, as well as Ginnie Mae, to generate revenues through mortgage loan sales to institutional investors. Any changes in existing U.S. government-sponsored mortgage programs could materially and adversely affect our mortgage business, financial condition and results of operations. There is uncertainty regarding the future of Fannie Mae and Freddie Mac, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have. The future roles of Fannie Mae and Freddie Mac could be reduced or eliminated and the nature of their guarantees could be limited or eliminated relative to historical measurements. The elimination or modification of the traditional roles of Fannie Mae or Freddie Mac could adversely affect our mortgage business, financial condition and results of operations. Furthermore, any discontinuation of, or significant reduction in, the operation of these GSEs and Ginnie Mae, or any significant adverse change in the level of activity of these agencies in the primary or secondary mortgage markets or in the underwriting criteria of these agencies could materially and adversely affect our business, financial condition and results of operations. We may be unable to obtain sufficient capital to meet the financing requirements of our mortgage business. 41 We fund substantially all of the loans which we originate through borrowings under warehouse financing and repurchase facilities. Our borrowings are in turn repaid with the proceeds we receive from selling such loans through securitizations, and to a lesser extent given our business model, whole loan sales. As we expand our operations, we will require increased financing. There can be no assurance that such financing will be available on terms reasonably satisfactory to us or at all. An event of default, an adverse action by a regulatory authority or a general deterioration in the economy that constricts the availability of credit-similar to the market conditions experienced in recent years-may increase our cost of funds and make it difficult for us to obtain new, or retain existing, warehouse financing facilities. If we fail to maintain, renew or obtain adequate funding under these warehouse financing facilities or other financing arrangements, or there is a substantial reduction in the size of or increase in the cost of such facilities, we would have to curtail our mortgage loan production activities, which could have a material adverse effect on our business, financial condition and operating results in our mortgage business. If the value of the collateral underlying certain of our mortgage business’s loan funding facilities decreases, they could be required to satisfy a margin call, and an unanticipated margin call could have a material adverse effect on their liquidity. Certain of our mortgage business’s loan funding, early buy-out facilities, and MSR-backed facilities are subject to margin calls based on the lender's opinion of the value of the loan collateral securing such financing and certain of their hedges related to newly originated mortgages are also subject to margin calls. A margin call would require our mortgage business to repay a portion of the outstanding borrowings. A large, unanticipated margin call could have a material adverse effect on their liquidity. In our mortgage business, we may sustain losses and/or be required to indemnify or repurchase loans we originated, or will originate, if, among other things, our loans fail to meet certain criteria or characteristics. Securitizations guaranteed by government agencies and contracts with purchasers of our mortgage loans contain provisions that require us to indemnify or repurchase the related loans under certain circumstances. While these contractual relationships vary, they contain provisions that require us to repurchase loans if: • our representations and warranties concerning loan quality and loan circumstances are inaccurate, including representations concerning the licensing of a mortgage broker; • we fail to secure adequate mortgage insurance within a certain period after closing; • a mortgage insurance provider denies coverage; or • we fail to comply, at the individual loan level or otherwise, with regulatory requirements in the current dynamic regulatory environment. We maintain reserves that we believe are appropriate to cover potential loan repurchase or indemnification losses, but there can be no assurance that such reserves will, in fact, be sufficient to cover future repurchase and indemnification claims. If we are required to indemnify or repurchase loans that we originate and sell that result in losses that exceed our reserve, this could adversely affect our business, financial condition and results of operations. Furthermore, in the ordinary course of our mortgage business, we are subject to claims made against us by borrowers and private investors arising from, among other things, losses that are claimed to have been incurred as a result of alleged breaches of fiduciary obligations, misrepresentations, errors and omissions of our employees, officers and agents (including our appraisers), incomplete documentation and our failure to comply with various laws and regulations applicable to our business. In addition, should the mortgage loans we originate sustain higher levels of delinquencies and/or defaults, we may lose the ability to originate and/or sell FHA loans, or to do so profitably and investors to whom we currently sell our mortgage loans may refuse to continue to do business with us, or may reduce the prices they are willing to purchase our mortgage loans and it may be difficult or impossible to sell any of our mortgage loans in the future. Any of the foregoing risks could adversely affect our business, financial condition and results of operations in our mortgage business. We may be limited in the future in utilizing net operating losses incurred during prior periods to offset taxable income. We previously incurred net operating losses. In the event that we experience an “ownership change” within the meaning of Section 382 of the Code, our ability to use those net operating losses to offset taxable income could be subject to an annual limitation. The annual limitation would be equal to a percentage of our equity value at the time the ownership change occurred. In general, such an “ownership change” would occur if the percentage of our stock owned by one or more 5% stockholders (including certain groups or persons acting in concert) were to increase by 50 percentage points during any three-year period. All stockholders that own less than 5% of our stock are treated as a single 5% stockholder. In addition, the Treasury Regulations under Section 382 of the Code contain additional rules the effect of which is to make it more likely that an ownership change could be deemed to 42 occur. Accordingly, our ability to use prior net operating losses to offset future taxable income would be subject to a limitation if we experience an ownership change. We may leverage certain of our assets and a decline in the fair value of such assets may adversely affect our financial condition and results of operations. We leverage certain of our assets, including through borrowings, generally through warehouse credit facilities, secured loans, securitizations and other borrowings. A rapid decline in the fair value of our leveraged assets may adversely affect us. Lenders may require us to post additional collateral to support the borrowing. If we cannot post the additional collateral, we may have to rapidly liquidate assets, which we may be unable to do on favorable terms or at all. Even after liquidating assets, we may still be unable to post the required collateral, further harming our liquidity and subjecting us to liability to lenders for the declines in the fair values of the collateral. A reduction in credit availability may adversely affect our business, financial condition and results of operations. Certain of our and our subsidiaries’ assets are subject to credit risk, market risk, interest rate risk, credit spread risk, call and redemption risk and refinancing risk, and any one of these risks may materially and adversely affect the value of our assets, our results of operations and our financial condition. Some of our assets, including our direct investments, are subject to credit risk, market risk, interest rate risk, credit spread risk, call and redemption risk and refinancing risk. Credit risk is the risk that the obligor will be unable to pay scheduled principal and/or interest payments. Defaults by third parties in the payment or performance of their obligations could reduce our income and realized gains or result in the recognition of losses. The fair value of our assets may be materially and adversely affected by increases in interest rates, downgrades in our direct investments and by other factors that may result in the recognition of other-than-temporary impairments. Each of these events may cause us to reduce the fair value of our assets. Interest rate risk is the risk that general interest rates will rise or that the risk spread used in our financings will increase. Although interest rates were at historically low levels for the last several years, the recent period of sharply rising interest rates has resulted in unrealized losses on the fair value of certain of our investments and has had an adverse impact on our business by negatively impacting our results and increasing our cost of borrowing to finance operations. Market risk is the risk that one or more markets to which the assets relate will decline in value, including the possibility that such markets will deteriorate sharply and unpredictably, which will likely impair the market value of the related instruments. Credit spread risk is the risk that the market value of fixed income investments will change in response to changes in perceived or actual credit risk beyond changes that would be attributable to changes, if any, in interest rates. Call and redemption risk is the risk that fixed income investments will be called or redeemed prior to maturity at a time when yields on other debt instruments in which the call or redemption proceeds could be invested are lower than the yield on the called or redeemed investments. Refinancing risk is the risk that we will be unable to refinance some or all of our indebtedness or that any refinancing will not be on terms as favorable as those of our existing indebtedness, which could increase our funding costs, limit our ability to borrow, or result in a sale of the leveraged asset on disadvantageous terms. Any one of the risks described above may materially and adversely affect the value of our assets, our results of operations and our financial condition. Our risk mitigation or hedging strategies could result in our experiencing significant losses that may materially adversely affect us. We may pursue risk mitigation and hedging strategies to seek to reduce our exposure to losses from adverse credit events, interest rate changes, market risk and other risks. These strategies may include short Treasury positions, interest rate swaps, foreign exchange derivatives, credit derivatives, freight forward agreements, fuel oil swaps and other derivative hedging instruments. Since we account for derivatives at fair market value, changes in fair market value are reflected in net income other than derivative hedging instruments which are reflected in accumulated other comprehensive income in stockholders’ equity. Some of these strategies could result in our experiencing significant losses that may materially adversely affect our business, financial condition and results of operations. 43 The values we record for certain investments and liabilities are based on estimates of fair value made by our management, which may cause our operating results to fluctuate and may not be indicative of the value we can realize on a sale. Some of our investments and liabilities are not actively traded and the fair value of such investments and liabilities are not readily determinable. Each of these carrying values is based on an estimate of fair value by our management. Management reports the estimated fair value of these investments and liabilities quarterly, which may cause our quarterly operating results to fluctuate. Therefore, our past quarterly results may not be indicative of our performance in future quarters. In addition, because such valuations are inherently uncertain, in some cases based on internal models and unobservable inputs, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments and liabilities existed. As such, we may be unable to realize the carrying value upon a sale of these investments or liabilities. The accounting rules applicable to certain of our transactions are highly complex and require the application of significant judgment and assumptions by our management. In addition, changes in accounting interpretations or assumptions could impact our financial statements. Accounting rules for consolidations, income taxes, business acquisitions, transfers of financial assets and other aspects of our operations are highly complex and require the application of judgment and assumptions by our management. In addition, changes in accounting rules, interpretations or assumptions could materially impact the presentation, disclosure and usability of our financial statements. For more information see Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates”. Changes in accounting practices and future pronouncements may materially affect our reported financial results. Developments in accounting practices may require us to incur considerable additional expenses to comply with new rules, particularly if we are required to prepare information relating to prior periods for comparative purposes or to otherwise apply the new requirements retroactively. The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, stockholders’ equity and other relevant financial statement line items. Our insurance subsidiaries are required are required to comply with Statutory Accounting Principles (“SAP”). SAP and various components of SAP are subject to constant review by the NAIC and its task forces and committees, as well as state insurance departments, in an effort to address emerging issues and otherwise improve financial reporting. Various proposals are pending before committees and task forces of the NAIC, some of which, if enacted, could have negative effects on insurance industry participants. The NAIC continuously examines existing laws and regulations. Whether or in what form such reforms will be enacted and, if so, whether the enacted reforms will positively or negatively affect us is unknown. Catastrophic events could significantly impact the Company’s businesses. Unforeseen or catastrophic events, such as severe weather, natural disasters, pandemics (e.g. the COVID 19 pandemic) cybersecurity attacks, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Although the Company and its subsidiaries have established disaster recovery plans, there is no guarantee that such plans will allow the Company and its subsidiaries to operate without disruption if such an event was to occur and the occurrence of any such event could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. Acts of war may disrupt international trade, create market volatility in debt, equity and commodities markets and result in import bans, export control regulations, increased costs, and sanctions by governmental authorities. These effects, individually or in the aggregate, could materially adversely impact our businesses, operations, financial condition, operating results, liquidity and cash flows and such adverse impacts may be material to our results of operations and liquidity position. Whether or to what extent damage that may be caused by natural events, such as wildfires, severe tropical storms and hurricanes, will affect our insurance subsidiaries’ ability to write new insurance policies and reinsurance contracts is unknown, but, to the extent our insurance subsidiaries’ policies are concentrated in the specific geographic areas in which these events occur, any increase in frequency and severity of such events and the total amount of our loss exposure in the impacted areas of such events may adversely affect their business, financial condition and results of operations. In addition, although our insurance subsidiaries have historically had limited exposure to catastrophic risk, claims from catastrophe events could reduce their earnings and cause substantial volatility in their business, financial condition and results of operations for any period. Assessing the risk of loss and 44 damage associated with natural and catastrophic events remains a challenge and might adversely affect their business, results of operations, financial condition and cash flows. Our business, particularly our insurance subsidiaries’ business, is exposed to risks associated with severe weather conditions and other catastrophes. Catastrophes can be caused by various events, including natural events such as severe winter weather, tornadoes, windstorms, earthquakes, hailstorms, severe thunderstorms and fires, and other events such as explosions, war, terrorist attacks and riots. The incidence and severity of catastrophes and severe weather conditions are inherently unpredictable. For example, our insurance subsidiary underwrites property risks in geographies that are subject to earthquakes, such as California, in geographies that are subject to wildfires, such as the southwestern United States, and in geographies that are subject to windstorms, such as the southeastern United States. The extent of losses from catastrophes is a function of the total amount of insured value, the number of insureds affected, the frequency and severity of the events, the effectiveness of our catastrophe risk management program and the adequacy of our reinsurance coverage. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. Severe weather conditions and catastrophes can cause losses in our property lines and generally result in both an increase in the number of claims incurred and an increase in the dollar amount of each claim asserted, which may require us to increase our reserves, causing our liquidity and financial condition to deteriorate. In addition, our inability to obtain reinsurance coverage at reasonable rates, and in amounts adequate to mitigate the risks associated with severe weather conditions and other catastrophes, could have a material adverse effect on our business and results of operations. Further toward mitigating these risks, we underwrite a diversified mix of programs that span across multiple lines of business, industries, geographies and distribution channels. In addition, while policy terms and conditions for our insurance subsidiaries’ lines of business preclude coverage for virus-related claims, court decisions and governmental actions may challenge the validity of any exclusions or our interpretation of how such terms and conditions operate. If pandemics, disease outbreaks and other events occur or re-occur and measures that are put into place by various governmental authorities to stabilize the economy are not effective, our business, financial condition, results of operations and cash flows may be materially adversely affected. U.S. insurers are required by state and federal law to offer coverage for acts of terrorism in certain commercial lines. The Terrorism Risk Insurance Act, as extended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”) requires commercial property and casualty (“P&C”) insurance companies to offer coverage for acts of terrorism, whether foreign or domestic, and established a federal assistance program through the end of 2020 to help cover claims related to future terrorism-related losses. The likelihood and impact of any terrorist act is unpredictable, and the ultimate impact on our insurance subsidiaries would depend upon the nature, extent, location and timing of such an act. Although our insurance subsidiaries reinsure a portion of the terrorism risk they retain under TRIPRA, such terrorism reinsurance does not provide full coverage for an act stemming from nuclear, biological or chemical terrorism. To the extent an act of terrorism, whether a domestic or foreign act, is certified by the Secretary of Treasury, our insurance subsidiaries may be covered under TRIPRA for their losses for certain P&C lines of insurance. However, any such coverage would be subject to a mandatory deductible based on 20% of earned premium for the prior year for the covered commercial P&C insurance. Risks Related to our Structure Because we are a holding company, our ability to meet our obligations and pay dividends to stockholders will depend on distributions from our subsidiaries that may be subject to restrictions and income from assets. We are a holding company and do not have any significant operations of our own, other than our principal investments. Our ability to meet our obligations will depend on distributions from our subsidiaries and income from assets. The amount of dividends and other distributions that our subsidiaries may distribute to us may be subject to restrictions imposed by state law, restrictions that may be imposed by state regulators and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur. Such restrictions would also affect our ability to pay dividends to stockholders, if and when we choose to do so. Our insurance business’s Notes and $200 million revolving credit facility restrict dividends to us based on the leverage ratio of our insurance business and its subsidiaries. Additionally, our regulated insurance company subsidiaries are required to satisfy minimum capital and surplus requirements according to the laws and regulations of the states in which they operate, which regulate the amount of dividends and distributions we receive from them. In general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula, which varies by state. Some states have an additional stipulation that dividends may only be paid out of earned surplus. States also regulate transactions between our insurance company subsidiaries and us or our other subsidiaries, such as those relating to compensation for shared services, and in some instances, require prior approval of such transactions within the holding company structure. If insurance regulators determine that payment of 45 an ordinary dividend or any other payments by our insurance company subsidiaries to us or our other subsidiaries (such as payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block or otherwise restrict such payments that would otherwise be permitted without prior approval. In addition, there could be future regulatory actions restricting the ability of our insurance company subsidiaries to pay dividends or share services. The primary factor in determining the amount of capital available for potential dividends is the level of capital needed to maintain desired financial strength ratings from rating agencies for our insurance company subsidiaries. Given recent economic events that have affected the insurance industry, both regulators and rating agencies could become more conservative in their methodology and criteria, including increasing capital requirements for our insurance company subsidiaries which, in turn, could negatively affect our capital resources. Some provisions of our charter may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests. Our charter restricts any person that owns 9.8% or more of our capital stock, other than stockholders approved by applicable state insurance regulators, from voting in excess of 9.8% of our voting securities. This provision is intended to satisfy the requirements of applicable state regulators in connection with insurance laws and regulations that prohibit any person from acquiring control of a regulated insurance company without the prior approval of the insurance regulators. In addition, our charter provides for the classification of our board of directors into three classes, one of which is to be elected each year. Our charter also generally only permits stockholders to act without a meeting by unanimous consent. These provisions may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests. Maryland takeover statutes may prevent a change of our control, which could depress our stock price. Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” will have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. “Control shares” means voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: one-tenth or more but less than one-third; one-third or more but less than a majority; or a majority or more of all voting power. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions. Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which such stockholder became an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Our bylaws contain a provision exempting from the control share statute any and all acquisitions by any person of our shares of stock. Our board of directors has also adopted a resolution which provides that any business combination between us and any other person is exempted from the provisions of the business combination statute, provided that the business combination is first approved by the board of directors. However, our board of directors may amend or eliminate this provision in our bylaws regarding the control share statute or amend or repeal this resolution regarding the business combination statute. If our board takes such action in the future, the control share and business combination statutes may prevent or discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. Our holding company structure with multiple lines of business, may adversely impact the market price of our common stock and our ability to raise equity and debt capital. Tiptree holds and manages multiple lines of business. Analysts, investors and lenders may have difficulty analyzing and valuing a company with multiple lines of business, which could adversely impact the market price of our common stock and our ability to raise equity and debt capital at a holding company level. Moreover, our management is required to make decisions regarding the allocation of capital among the different lines of business, and such decisions could materially and adversely affect our business or one or more of our lines of business. Risks Related to Regulatory and Legal Matters Maintenance of our 1940 Act exemption imposes limits on our operations. 46 We conduct our operations so that we are not required to register as an investment company under the 1940 Act. Therefore, we must limit the types and nature of businesses in which we engage and assets that we acquire. We monitor our compliance with the 1940 Act on an ongoing basis and may be compelled to take or refrain from taking actions, to acquire additional income or loss generating assets or to forgo opportunities that might otherwise be beneficial or advisable, including, but not limited to selling assets that are considered to be investment securities or forgoing the sale of assets that are not investment securities, in order to ensure that we (or a subsidiary) may continue to rely on the applicable exceptions or exemptions. These limitations on our freedom of action could have a material adverse effect on our financial condition and results of operations. If we fail to maintain an exemption, exception or other exclusion from registration as an investment company, we could, among other things, be required to substantially change the manner in which we conduct our operations either to avoid being required to register as an investment company or to register as an investment company. If we were required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to, among other things, our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and our financial condition and results of operations may be adversely affected. If we did not register despite being required to do so, criminal and civil actions could be brought against us, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business. A change in law, regulation or regulatory enforcement applicable to insurance products could adversely affect our financial condition and results of operations. A change in state or U.S. federal tax laws could materially affect our insurance businesses. For example, tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”), which was signed into law on December 22, 2017, fundamentally overhauled the U.S. tax system by, among other significant changes, reducing the U.S. corporate income tax rate to 21%. In the context of the taxation of U.S. P&C insurance companies such as our insurance companies, the TCJA also modified the loss reserve discounting rules and the proration rules that apply to reduce reserve deductions to reflect the lower corporate income tax rate, which could have an adverse impact on our insurance subsidiaries. It is possible that other legislation could be introduced and enacted by the current Congress or future Congresses that could have an adverse impact on our insurance subsidiaries. Additional regulations or pronouncements interpreting or clarifying provisions of the TCJA have been and will continue to be issued, and such regulations or pronouncements may be different from our insurance subsidiaries’ interpretation and thus adversely affect their results. If, when or in what form such regulations or pronouncements may be provided or finalized, whether such guidance will have a retroactive effect or such regulations’ or pronouncements’ potential impact on our insurance subsidiaries is unknown. Currently, our insurance business does not collect sales or other related taxes on its services. Whether sales of our insurance business’s services are subject to state sales and use taxes is uncertain, due in part to the nature of its services and the relationships through which its services are offered, as well as changing state laws and interpretations of those laws. One or more states may seek to impose sales or use tax or other tax collection obligations on our insurance business, whether based on sales by our insurance business or its resellers or clients, including for past sales. A successful assertion that our insurance business should be collecting sales or other related taxes on its services could result in substantial tax liabilities for past sales, discourage customers from purchasing its services, discourage clients from offering or billing for its services, or otherwise cause material harm to its business, financial condition and results of operations. With regard to our insurance business’s payment protection products and financing of VSCs, there are federal and state laws and regulations that govern the disclosures related to the sales of those products. Our insurance business’s ability to offer and administer these products on behalf of their distribution partners is dependent upon their continued ability to sell such products. To the extent that federal or state laws or regulations change to restrict or prohibit the sale of these products, our insurance business’s revenues would be adversely affected. For example, the CFPB’s enforcement actions have resulted in large refunds and civil penalties against financial institutions in connection with their marketing of payment protection and other products. Due to such regulatory actions, some lenders may reduce their sales and marketing of payment protection and other ancillary products, which may adversely affect our insurance business’s revenues. The full impact of the CFPB’s oversight is unpredictable and continues to evolve. With respect to the P&C insurance policies our insurance business underwrites, federal legislative proposals regarding national catastrophe insurance, if adopted, could reduce the business need for some of the related products that our insurance business provides. Increasing regulatory focus on privacy issues and expanding laws could affect our various subsidiaries’ business model and expose them to increased liability. 47 Some of our subsidiaries collect, use, store, transmit, retrieve, retain and otherwise process confidential and personally identifiable information in their information systems in and across multiple jurisdictions, and they are subject to a variety of confidentiality obligations and privacy, data protection and information security laws, regulations, orders and industry standards in the jurisdictions in which they do business. The regulatory environment surrounding information security, data privacy and cybersecurity is evolving and increasingly demanding and there has been an increasing focus on privacy and data protection issues with the potential to affect our businesses. A number of our subsidiaries are subject to numerous U.S. federal and state laws and non-U.S. regulations governing the collection, transmission, storage, use and protection of personally identifiable and confidential information of their customers and employees. Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows. On October 24, 2017, the NAIC adopted an Insurance Data Security Model Law, which requires licensed insurance entities to comply with detailed information security requirements. The NAIC model law has been adopted by certain states and is under consideration by others. It is not yet known whether or not, and to what extent, states legislatures or insurance regulators where our insurance subsidiaries operate will enact the Insurance Data Security Model Law in whole or in part, or in a modified form. Such enactments, especially if inconsistent between states or with existing laws and regulations, could raise compliance costs or increase the risk of noncompliance, and noncompliance could subject our insurance subsidiaries to regulatory enforcement actions and penalties, as well as reputational harm. Any such events could potentially have an adverse impact on our insurance subsidiaries’ business, results of operations, financial condition and cash flows. Our insurance and mortgage subsidiaries are subject to the privacy regulations of the Gramm-Leach-Bliley Act of 1999 (the “Gramm-Leach-Bliley Act”), along with its implementing regulations, which restricts certain collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices, provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information and imposes requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, on March 1, 2017, new cybersecurity rules took effect for financial institutions, insurers and certain other companies, like our insurance and mortgage subsidiaries, supervised by the NY Department of Financial Services (the “NY DFS Cybersecurity Regulation”). The NY DFS Cybersecurity Regulation imposes significant regulatory burdens intended to protect the confidentiality, integrity and availability of information systems. Our insurance and mortgage subsidiaries also have contractual obligations to protect confidential and personally identifiable information we obtain from third parties. These obligations generally require them, in accordance with applicable laws, to protect such information to the same extent that they protect their own such information. Many states in which our insurance and mortgage subsidiaries operate have laws that protect the privacy and security of sensitive and personal information. Certain current or proposed state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, certain of our insurance and mortgage businesses are subject to the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (collectively, the “CCPA”), which among other things, requires companies covered by the legislation to provide disclosures to California consumers and affords such consumers rights of access and deletion of personal information. Internationally, many jurisdictions have established their own data security and privacy legal framework with which our insurance subsidiaries operating in such jurisdictions, or their customers, may need to comply, including, but not limited to, the EU. The EU has adopted the General Data Protection Regulation, or the GDPR, which contains numerous requirements, robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. The GDPR imposes significant penalties for non-compliance with fines of up to 4% of total annual worldwide turnover or €20 million (whichever is higher), depending on the type and severity of the violation. In addition, following Brexit, the U.K. General Data Protection Regulation (i.e., a version of the GDPR as implemented into U.K. law) went into effect, which may expose us to burdens and risks comparable to those of the GDPR. Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our insurance subsidiaries’ existing data management practices or the features of their services and platform capabilities. Any failure or perceived failure by our insurance subsidiaries, or any third parties with which they do business, to comply with their posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which they or such third parties are or may become subject, may result in actions or other claims against our insurance subsidiaries by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities. In addition, any such action, particularly to the extent our insurance subsidiaries were found to be guilty of violations or otherwise liable for damages, would damage their reputation and adversely affect their business, financial condition and results of operations. Even if our businesses are not determined to have violated these 48 laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our businesses, financial condition, and results of operations. Compliance with existing and new regulations affecting our business in regulated industries may increase costs and limit our ability to pursue business opportunities. We are subject to extensive laws and regulations administered and enforced by a number of different federal and state governmental authorities in the industries in which we operate. Regulation of such industries may increase. In the past, there has been significant legislation affecting financial services and insurance, including the Dodd-Frank Act. In addition, we are subject to regulations governing the protection of personal confidential information and data security including the Gramm-Leach-Bliley Act, the GDPR, the NY DFS Cybersecurity Regulation and the CCPA. Accordingly, the impact that any new laws and regulations will have on us is unknown. The costs to comply with these laws and regulations may be substantial and could have a significant negative impact on us and limit our ability to pursue business opportunities. We can give no assurances that with changes to laws and regulations, our businesses can continue to be conducted in each jurisdiction in the manner as we have in the past. Our insurance subsidiaries are subject to regulation by state and, in some cases, foreign insurance authorities with respect to statutory capital, reserve and other requirements, including statutory capital and reserve requirements established by applicable insurance regulators based on RBC and Solvency II formulas. In any particular year, these requirements may increase or decrease depending on a variety of factors, most of which are outside our insurance subsidiaries’ control, such as the amount of statutory income or losses generated, changes in equity market levels, the value of fixed-income and equity securities in our investment portfolio, changes in interest rates and foreign currency exchange rates, as well as changes to the RBC formulas used by insurance regulators. The laws of the various states in which our insurance businesses operate establish insurance departments and other regulatory agencies with broad powers to preclude or temporarily suspend our insurance subsidiaries from carrying on some or all of their activities or otherwise fine or penalize them in any jurisdiction in which they operate. Such regulation or compliance could reduce our insurance business’s profitability or limit their growth by increasing the costs of compliance, limiting or restricting the products or services they sell, or the methods by which they sell their services and products, or subjecting their business to the possibility of regulatory actions or proceedings. Additionally, increases in the amount of additional statutory reserves that our insurance subsidiaries are required to hold could have a material adverse effect on their business, results of operations, financial condition and cash flows. While the CFPB does not have direct jurisdiction over insurance products, it is possible that regulatory actions taken by the CFPB may affect the sales practices related to these products and thereby potentially affect our insurance business or the clients that it serves. In 2017, the CFPB issued rules under its unfair, deceptive and abusive acts and practices rulemaking authority relating to consumer installment loans, among other things. Such CFPB rules regarding consumer installment loans could adversely impact our insurance business’s volume of insurance products and services and cost structure. Due to such regulatory actions, some lenders may reduce their sales and marketing of payment protection and other ancillary products, which may adversely affect our insurance business’s revenues. Due to the highly regulated nature of the residential mortgage industry, our mortgage subsidiaries are required to comply with a wide array of federal, state and local laws and regulations that regulate licensing, allowable fees and loan terms, permissible servicing and debt collection practices, limitations on forced-placed insurance, special consumer protections in connection with default and foreclosure, and protection of confidential, nonpublic consumer information. These laws and regulations are constantly changing and the volume of new or modified laws and regulations has increased in recent years as states and local cities and counties continue to enact laws that either restrict or impose additional obligations in connection with certain loan origination, acquisition and servicing activities in those cities and counties. These laws and regulations are complex and vary greatly among different states and localities, and in some cases, these laws are in conflict with each other or with U.S. federal law. A failure by us or our servicers to comply with applicable laws or regulations could subject our mortgage business and/or our mortgage servicers to lawsuits or governmental actions, which could result in the loss or suspension of our licenses in the applicable jurisdictions where such violations occur and/or monetary fines or changes in our mortgage operations. If we were to determine to change servicers, there is no assurance that we could find servicers that satisfy our requirements or with whom we could enter into agreements on satisfactory terms. Any of these outcomes could materially and adversely affect our mortgage business. The CFPB continues to be active in its monitoring of the loan origination and servicing sectors, and its recently issued rules increase our regulatory compliance burden and associated costs. Our mortgage business is subject to the regulatory, supervisory and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including residential mortgage originators and loan servicers. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including the Truth in Lending Act, the Real Estate Settlement Procedures Act and the Fair Debt Collections 49 Practices Act. The CFPB has issued a number of regulations under the Dodd-Frank Act relating to loan origination and servicing activities, including ability to repay and "Qualified Mortgage" standards and other origination standards and practices. The CFPB’s examinations have increased, and will likely continue to increase, our mortgage business’s administrative and compliance costs. They could also greatly influence the availability and cost of residential mortgage credit and increase servicing costs and risks. These increased costs of compliance, the effect of these rules on the lending industry and loan servicing, and any failure in our mortgage business’s ability to comply with the new rules by their effective dates, could be detrimental to their business. The CFPB also issued guidelines on sending examiners to banks and other institutions that service and/or originate mortgages to assess whether consumers' interests are protected. The CFPB also has broad enforcement powers, and can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and, when necessary, has issued civil money penalties to parties the CFPB determines has violated the laws and regulations it enforces. Our mortgage business’s failure to comply with the federal consumer protection laws, rules and regulations to which they are subject, whether actual or alleged, could expose them to enforcement actions or potential litigation liabilities. Our insurance subsidiaries could be adversely affected if their controls to ensure compliance with guidelines, policies and legal and regulatory standards are not effective. Our insurance business is highly dependent on the ability of our insurance subsidiaries to engage on a daily basis in a large number of insurance underwriting, claim processing and investment activities, many of which are highly complex. These activities often are subject to internal guidelines and policies, as well as legal and regulatory standards, including those related to privacy, anti-corruption, anti-bribery and global finance and insurance matters. The continued expansion into new products and geographic markets has brought about additional requirements. A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met. If our insurance subsidiaries’ controls are not effective, it could lead to financial loss, unanticipated risk exposure (including underwriting, credit and investment risk) or damage to their reputation. Our businesses are subject to risks related to litigation and regulatory actions. Over the last several years, businesses in many areas of the financial services industry have been subject to increasing amounts of regulatory scrutiny. In addition, there has been an increase in litigation involving firms in the financial services industry and public companies generally, some of which have involved new types of legal claims, particularly in the insurance industry. We may be materially and adversely affected by judgments, settlements, fines, penalties, unanticipated costs or other effects of legal and administrative proceedings now pending or that may be instituted in the future, including from investigations by regulatory bodies or administrative agencies. An adverse outcome of any investigation by, or other inquiries from, any such bodies or agencies also could result in non-monetary penalties or sanctions, loss of licenses or approvals, changes in personnel, increased review and scrutiny of us by our clients, counterparties, regulatory authorities, potential litigants, the media and others, any of which could have a material adverse effect on us. We are involved in various litigation matters from time to time. For example, we are a defendant in Mullins v. Southern Financial Life Insurance Co. , a class action lawsuit alleging violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud. This and other such matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Our insurance and indemnities may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. If we are unsuccessful in our defense in these litigation matters, or any other legal proceeding, we may be forced to pay damages or fines, enter into consent decrees or change our business practices, any of which could have a material adverse effect our business, results of operations, financial condition or cash flows. Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the United States, the EU and other jurisdictions. Our international operations and activities expose us to risks associated with trade and economic sanctions, prohibitions or other restrictions imposed by the United States or other governments or organizations, including the United Nations, the EU and its member countries. Under economic and trade sanctions laws, governments may seek to impose modifications to, prohibitions/restrictions on business practices and activities, and modifications to compliance programs, which may increase compliance costs, and, in the event of a violation, may subject us to fines and other penalties. 50 We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions. We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws and regulations in various jurisdictions in which we conduct business, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. We operate in countries known to present heightened risks for corruption and our dry bulk shipping and product tankers and related operations requires us to interact with government officials, including port officials, harbor masters, maritime regulators, customs officials and pilots. Non-compliance with anti-corruption, anti-bribery or anti-money laundering laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. Assessments and premium surcharges for state guaranty funds, secondary-injury funds, residual market programs and other mandatory pooling arrangements may reduce our insurance subsidiaries’ profitability. Most states require insurance companies licensed to do business in their state to participate in guaranty funds, which require the insurance companies to bear a portion of the unfunded obligations of impaired, insolvent or failed insurance companies. These obligations are funded by assessments, which are expected to continue in the future. State guaranty associations levy assessments, up to prescribed limits, on all member insurance companies in the state based on their proportionate share of premiums written in the lines of business in which the impaired, insolvent or failed insurance companies are engaged. Accordingly, the assessments levied on our insurance subsidiaries may increase as they increase their written premiums. These funds are supported by either assessments or premium surcharges based on incurred losses. In addition, as a condition to conducting business in some states, insurance companies are required to participate in residual market programs to provide insurance to those who cannot procure coverage from an insurance carrier on a negotiated basis. Insurance companies generally can fulfill their residual market obligations by, among other things, participating in a reinsurance pool where the results of all policies provided through the pool are shared by the participating insurance companies. Although our insurance subsidiaries price their insurance to account for their potential obligations under these pooling arrangements, they may not be able to accurately estimate their liability for these obligations. Accordingly, mandatory pooling arrangements may cause a decrease in their profits. Further, the impairment, insolvency or failure of other insurance companies in these pooling arrangements would likely increase the liability for other members in the pool. The effect of assessments and premium surcharges or increases in such assessments or surcharges could reduce our insurance subsidiaries’ profitability in any given period or limit the ability to grow their business. Operation of dry bulk vessels and product tankers is subject to complex laws and regulations, including environmental laws and regulations that, if any of our vessel owner subsidiaries are found guilty of violation, can result in substantial fines and costs to the Company. The shipping business and vessel ownership are subject to government regulation in the form of international conventions, national, state and local laws, and regulations in force in the jurisdictions in which vessels operate, as well as in the country or countries of their registration. The principal international convention governing marine pollution prevention and response is the International Convention for the Prevention of Pollution from Ships (“MARPOL”). MARPOL regulates, among other things, the management and discharge of oil and garbage, as well as air emissions from vessels with a view of reducing pollution to the marine environment. One of MARPOL’s key requirements is that transfers and discharges of oily water must be recorded in an Oil Record Book. Similar requirements exist for garbage records and recording changeovers between high and low sulfur fuel due to the impact on air emissions. The Act to Prevent Pollution from Ships, 33 U.S.C. § 1901, et seq. (“APPS”), implements MARPOL in the United States. The U.S. Coast Guard (“USCG”) is the responsible regulatory and enforcement agency and has promulgated regulations implementing APPS at 33 C.F.R. Part 151. Civil and administrative violations of APPS and the implementing USCG regulations may be enforced by the USCG, whereas criminal violations are enforced by the U.S. Department of Justice. Item 1B. Unresolved Staff Comments None. 51 Item 1C. Cybersecurity The Company has adopted processes designed to identify, assess and manage material risks from cybersecurity threats. Those processes include response to and an assessment of internal and external threats to the security, confidentiality, integrity and availability of Company data and systems along with other material risks to our Company, at least annually or whenever there are material changes to the Company’s systems or operations. As part of our risk management process, the Company engages outside providers to conduct periodic internal and external penetration testing. Our information security management system is based upon industry leading frameworks, including CIS-18, ISO 27001, and NIST CSF. The Company stores Company data in cloud and local server environments with security appropriate to the data involved and has adopted controls around, among other things, vendor risk assessment, access and acceptable use and backup and recovery. We have implemented security monitoring capabilities designed to alert us to suspicious activity and developed an incident response program that includes periodic testing and is designed to restore business operations as quickly and as orderly as possible in the event of a breach. In addition, employees participate in an ongoing program of mandatory annual training and receive communications regarding the cybersecurity environment to increase awareness throughout the Company. The Company also performs periodic cybersecurity security assessments of our key vendors to help protect Company data when it leaves our network . Operational responsibility for overseeing the adequacy and effectiveness of the Company’s risk management, control and governance processes is the responsibility of the Chief Operating Officer (“COO”) in consultation with senior management of the Company and the Chief Information Security Officers (“CISO”) of the Company and its operating subsidiaries. Aspects of the information systems of the parent holding company and each material operating business are distinct so each has its own CISO, which in the case of the parent holding company is an independent third-party service provider. The CISOs’ expertise in information technology and cybersecurity has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience. Each of the CISOs has more than 10 years’ experience in information technology and cybersecurity. The COO reports regularly, and at least annually, to the Company’s Audit Committee and such report may address overall assessment of the Company’s compliance with the Company’s cybersecurity policies, and include topics such as risk assessment, risk management and control decisions, service provider arrangements, test results, security incidents and responses, and recommendations for changes and updates to policies and procedures. We are not aware of any material risks from cybersecurity threats, that have materially affected or are reasonably likely to materially affect the Company, including our business strategy, results of operations or financial condition, but we cannot provide assurance that we will not be materially affected in the future by such risks or any future material incidents. See “Risk Factors-Cybersecurity attacks, technology breaches or failures of our or our third-party service providers’ information systems could disrupt our various business operations and could result in the loss of critical and personally identifiable information, which could result in the loss of reputation and customers, reduce profitability, subject our businesses to fines, penalties and litigation and have a material adverse effect on our business’s results of operation, financial condition and cash flows” for additional information regarding cybersecurity risks. Item 2. Properties Our principal executive office is located at 660 Steamboat Road, 2nd Floor, Greenwich, Connecticut 06830. We and our subsidiaries lease properties throughout the United States and Europe, all of which are used as administrative offices. We believe that the terms of the leases at each of our subsidiaries are sufficient to meet our present needs and we do not anticipate any difficulty in securing additional space, as needed, on acceptable terms. Item 3. Legal Proceedings Our legal proceedings are discussed under the heading “Litigation” in Note (21) — Commitments and Contingencies in the Notes to the consolidated financial statements in this report. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information 52 Tiptree’s common stock is traded on the Nasdaq Capital Market under the ticker symbol “TIPT.” Holders As of December 31, 2024, there were 38 common stockholders of record. This number does not include beneficial owners whose shares are held by nominees in street name. Item 6. Reserved. 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in this section as follows: • Overview • Results of Operations • Non-GAAP Measures and Reconciliations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates OVERVIEW Tiptree allocates capital to select small and middle market companies with the mission of building long-term value. Established in 2007, we have a significant track record investing in the insurance sector and across a variety of other industries, including mortgage, specialty finance and shipping. Our largest operating subsidiary, Fortegra, is a leading provider of specialty insurance products and related services. We also generate earnings from a diverse group of select investments that we refer to as Tiptree Capital, which includes our Mortgage segment and other, non-insurance businesses and assets. We evaluate performance primarily by the comparison of stockholders’ long-term total return on capital, as measured by growth in stock price plus dividends paid, in addition to Adjusted Net Income. Our 2024 highlights include: Overall: • Tiptree reported net income of $53.4 million for the year ended December 31, 2024, compared to $14.0 million in the prior year period, driven by growth in insurance operations. Return on average equity was 12.2%, compared to 3.4% in 2023. • Adjusted net income of $100.1 million increased from $61.9 million in 2023, driven by growth in insurance operations. Adjusted return on average equity was 22.9%, as compared to 15.2% in 2023. Insurance: • Gross written premiums and premium equivalents were $3.1 billion for the year ended December 31, 2024, an increase of $320.3 million, or 11.7%, from the prior year period as a result of growth in E&S insurance lines in the U.S. and Europe. • Net written premiums were $1.4 billion for the year ended December 31, 2024, an increase of 9.0%, driven by growth in gross written premiums and increased retention on Fortegra’s whole account quota share reinsurance arrangement from 30% to 40%, effective April 1, 2023. • Total revenues were $2.0 billion, an increase of $380.6 million, or 23.9%, from 2023, driven by premium growth in specialty E&S and admitted insurance lines in the U.S. and Europe. • Combined ratio of 90.0%, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform. • Income before taxes of $183.2 million as compared to $129.8 million in 2023. Return on average equity was 26.0% in 2024 as compared to 25.7% in 2023, with the increases driven by growth in underwriting and fee revenues. • Adjusted net income (before NCI) was $157.0 million, an increase of $41.3 million, or 35.7%, from 2023. Adjusted return on average equity was 29.1%, as compared to 29.2% in 2023. • Fortegra’s total stockholders’ equity was $625.5 million as of December 31, 2024, compared to $452.6 million as of December 31, 2023, with the increase driven by growth in retained earnings and the aggregate capital contribution from Tiptree, Warburg, and Fortegra independent directors of $40.0 million during 2024. Tiptree Capital: • Mortgage income before taxes was $4.7 million for the year ended December 31, 2024, as compared to loss of $3.3 million in 2023, with the increase driven by the positive fair value adjustments in mortgage servicing rights, higher origination volumes and loan servicing fees. 54 Key Trends: Our results of operations are affected by a variety of factors including, but not limited to, general economic conditions and GDP growth, market liquidity and volatility, consumer confidence, U.S. demographics, employment and wage growth, business confidence and investment, inflation, interest rates and spreads, the impact of the regulatory environment, and the other factors set forth in Part I, Item 1A in our Annual Report on Form 10-K. Generally, our businesses are positively affected by a healthy U.S. consumer, stable to gradually rising interest rates, stable markets and business conditions, and global growth and trade flows. Conversely, rising unemployment, volatile markets, rapidly rising interest rates, inflation, changing regulatory requirements and slowing business conditions can have a material adverse effect on our results of operations or financial condition. Insurance results primarily depend on pricing, underwriting, risk retention and the accuracy of reserves, reinsurance arrangements, returns on invested assets, and policy and contract renewals and run-off. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches. The business has historically generated significant fee-based revenues by incorporating value-add coverages and services. Underwriting risk is mitigated through a combination of reinsurance and sliding scale commission structures with agents, distribution partners and/or third-party reinsurers. To mitigate counterparty risk, Fortegra ensures its reinsurance receivables are placed with highly rated and appropriately capitalized counterparties or with our distribution partners’ captive insurance vehicles which are collateralized with highly liquid investments, cash or letters of credit. While Fortegra’s insurance operations have historically maintained a relatively stable combined ratio, initiatives to change the business mix along with these economic factors could generate different results than the business has historically experienced. In particular, inflation can have an impact on replacement costs associated with claims from our customers to the extent we are unable to pass the higher costs of claims through higher premiums. In addition, fluctuations of the U.S. dollar relative to other currencies, including the British pound and Euro, would have an impact on book value between periods. Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. From 2021 to 2024, the U.S. fixed income markets experienced a significant rise in interest rates. Rising interest rates have and could continue to impact the value of Fortegra’s fixed maturity securities, with any unrealized losses recorded in equity, and if realized, could impact our results of operations. Offsetting the impact of a rising interest rate environment, new investments in fixed rate instruments from both maturities and portfolio growth have and could continue to result in higher net interest income on investments. The weighted average duration of our fixed income available for sale securities is less than three years. While our asset and liability mix is relatively matched, should we need to liquidate any of these investments before maturity to pay claims, any realized losses could materially negatively impact our results of operations. Changes in fair value for loans, credit investment funds, and equity securities in Fortegra’s investment portfolio are reported as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, currency risk, or market risk, including specific company or industry factors. In addition, our equity holdings are relatively concentrated. General equity market trends, along with company and industry specific factors, can impact the fair value which can result in unrealized gains and losses affecting our results. Elevated 10-year treasury yields, and the tapering of the Federal Reserve’s purchases of mortgage-backed securities, has resulted in substantial increases in mortgage interest rates. Low mortgage interest rates driven by the Federal Reserve intervention in mortgage markets, and rising home prices in certain markets, provided tailwinds to the mortgage markets in 2020 and 2021, which benefited our mortgage operations and margins. The substantial rise in rates resulted in a sharp reversal of those trends, with volumes and margins declining significantly. Only partially offsetting the declines in mortgage originations is an increase in the fair value of our mortgage servicing portfolio as rising rates slow prepayment speeds, with a resulting increase in servicing income. Continued elevated mortgage rates could have a negative impact on our mortgage operations, and is likely to be only partially mitigated by the improvement in mortgage servicing revenues. A sustained period of negative profitability in the mortgage industry could also impact the availability of funding sources for our mortgage business. Rising interest rates can also impact the cost of floating interest rate debt obligations, while declining rates can decrease the cost of debt. Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations. RESULTS OF OPERATIONS The following is a summary of our consolidated financial results for the years ended December 31, 2024 and 2023. In 55 addition to GAAP results, management uses the Non-GAAP measures Adjusted net income, Adjusted return on average equity and book value per share as measurements of operating performance. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and comparison among companies. Adjusted Net Income and Adjusted Return on Average Equity. Adjusted net income is defined as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting, all of which is reduced for non-controlling interests. The calculation of adjusted net income excludes net realized and unrealized gains (losses) that relate to investments or assets rather than business operations. Adjusted net income is presented before the impacts of non-controlling interests. Adjusted return on average equity represents adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. Management uses adjusted net income and adjusted return on average equity as part of its capital allocation process and to assess comparative returns on invested capital. We believe adjusted net income provides additional clarity on the results of the Company’s underlying business operations as a whole for the periods presented by excluding distortions created by the unpredictability and volatility of realized and unrealized gains (losses). We also believe adjusted net income provides useful supplemental information to investors as it is frequently used by the financial community to analyze financial performance between periods and for comparison among companies. Adjusted net income and adjusted return on average equity are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for GAAP net income. See “Non-GAAP Reconciliations” for a reconciliation of these measures to their GAAP equivalents. Selected Key Metrics ($ in thousands, except per share information) Year Ended December 31, GAAP: 2024 2023 Total revenues $ 2,042,854 $ 1,649,031 Net income (loss) attributable to common stockholders $ 53,367 $ 13,951 Diluted earnings per share $ 1.30 $ 0.33 Cash dividends paid per common share $ 0.49 $ 0.20 Return on average equity 12.2 % 3.4 % Non-GAAP: (1) Adjusted net income $ 100,060 $ 61,917 Adjusted return on average equity 22.9 % 15.2 % Book value per share $ 12.29 $ 11.34 (1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Adjusted net income is presented after the impacts of non-controlling interests. Revenues For the year ended December 31, 2024, revenues were $2.0 billion, which increased $393.8 million, or 23.9%, compared to the prior year period. The changes were primarily driven by growth in earned premiums, net and service and administrative fees, higher investment income, net realized and unrealized gains, and an increase in other income, including interest income on cash equivalents, compared to the prior year period. The table below provides a break down between net realized and unrealized gains and losses from Invesque and other securities which impacted our consolidated results on a pre-tax basis. Many investments are carried at fair value and marked to market through unrealized gains and losses. As a result, we expect earnings related to these investments to be relatively volatile between periods. Fixed income securities are primarily marked to market through AOCI in stockholders’ equity and do not impact net realized and unrealized gains and losses until they are sold. ($ in thousands) Year Ended December 31, 2024 2023 Net realized and unrealized gains (losses) - Invesque $ (3,536) $ (11,293) Net realized and unrealized gains (losses) (1) $ 13,838 $ (64) (1) Excludes Invesque, Maritime transportation and Mortgage realized and unrealized gains and losses. 56 Net Income (Loss) Attributable to common stockholders For the year ended December 31, 2024, the net income attributable to common stockholders was $53.4 million, compared to $14.0 million in the prior year period, driven by growth in insurance underwriting and fee income and growth in net investment income and net realized and unrealized gains on the investment portfolio. Adjusted net income & Adjusted return on average equity - Non-GAAP Adjusted net income for the year ended December 31, 2024 was $100.1 million, an increase of $38.1 million, or 61.6%, from the year ended December 31, 2023, driven by growth in our insurance operations. For the year ended December 31, 2024, adjusted return on average equity was 22.9%, as compared to 15.2% for the year ended December 31, 2023, driven by the increase in adjusted net income. Book Value per share - Non-GAAP Total stockholders’ equity was $656.8 million as of December 31, 2024 compared to $576.6 million as of December 31, 2023, with the increase driven by comprehensive income, partially offset by net changes in non-controlling interests and dividends paid. In the year ended December 31, 2024, Tiptree returned $18.3 million to common stockholders through dividends paid. Book value per share for the period ended December 31, 2024 was $12.29, an increase from book value per share of $11.34 as of December 31, 2023, driven by comprehensive income per share, partially offset by dividends paid of $0.49 per share, net changes in non-controlling interests and preferred dividends paid at Fortegra. Results by Segment We classify our business into two reportable segments, Insurance and Mortgage, with the remainder of our operations aggregated into Tiptree Capital - Other. Corporate activities include holding company interest expense, corporate employee compensation and benefits, and other expenses, including public company expenses. The following tables present the components of Revenue, Income (loss) before taxes and Adjusted net income for the following periods: ($ in thousands) Year Ended December 31, 2024 2023 Revenues: Insurance $ 1,973,709 $ 1,593,070 Mortgage 65,914 53,864 Tiptree Capital - other 3,231 2,097 Corporate — — Total revenues $ 2,042,854 $ 1,649,031 Income (loss) before taxes: Insurance $ 183,158 $ 129,816 Mortgage 4,725 (3,285) Tiptree Capital - other (163) (3,264) Corporate (38,401) (40,214) Total income (loss) before taxes $ 149,319 $ 83,053 Non-GAAP - Adjusted net income: (1) Insurance $ 124,393 $ 91,963 Mortgage 1,531 (1,082) Tiptree Capital - other 289 923 Corporate (26,153) (29,887) Total adjusted net income $ 100,060 $ 61,917 57 (1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Insurance Our principal operating subsidiary, Fortegra, is a specialty insurance underwriter and service provider, which focuses on niche lines and fee-oriented services. The combination of specialty insurance underwriting, service contract products, and related service solutions delivered through a vertically integrated business model creates a blend of traditional underwriting revenues, investment income and unregulated fee revenues. The business is an agent-driven model, distributing products through independent insurance agents, consumer finance companies, online retailers, auto dealers, and regional big box retailers to deliver products that complement the consumer transaction. As of December 31, 2024, Fortegra was owned approximately 79.1% by Tiptree, 17.7% by Warburg and 3.2% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock. The following tables and discussion present the Insurance segment results, including non-controlling interests, for the years ended December 31, 2024 and 2023. Components of our Results of Operations Revenues Earned Premiums, net represents the earned portion of gross written and assumed premiums, less the earned portion that is ceded to third-party reinsurers under reinsurance agreements. Fortegra’s insurance policies generally have a term of six months to seven years depending on the underlying product and premiums are earned pro rata over the term of the policy. At the end of each reporting period, premiums written but not earned are classified as unearned premiums and are earned in subsequent periods over the remaining term of the policy. Service and Administrative Fees represent the earned portion of gross written premiums and premium equivalents, which is generated from non-insurance products including warranty service contracts, motor club contracts and other services offered as part of Fortegra’s vertically integrated product offerings. Such fees are typically positively correlated with transaction volume and are recognized as revenue when realized and earned. At the end of each reporting period, gross written premiums and premium equivalents written for service contracts not earned are classified as deferred revenue, which are earned in subsequent periods over the remaining term of the policy. Ceding Commissions and Other Revenue consists of commissions earned on policies written on behalf of third-party insurance companies with no exposure to the insured risk and certain fees earned in conjunction with underwriting policies. Other revenue also includes the interest income earned on the premium finance product offering. Net Investment Income represents earned investment income on our portfolio of invested assets. Our invested assets are primarily comprised of fixed maturity securities, and may also include cash and cash equivalents and equity securities. The principal factors that influence net investment income are the size of our investment portfolio, the yield on that portfolio and expenses due to external investment managers. The insurance investment portfolio includes investments held in statutory insurance companies and in unregulated entities. The portfolios held in statutory insurance companies are subject to different regulatory considerations, including with respect to types of assets, concentration limits, affiliate transactions and the use of leverage. 58 Net Realized and Unrealized Gains (Losses) on investments are a function of the difference between the amount received by us on the sale of a security and the security’s cost-basis, as well as any “other-than-temporary” impairments and allowances for credit losses which are recognized in earnings. In addition, equity securities and certain other investments are carried at fair value with unrealized gains and losses included in this line. Fortegra’s investment strategy is designed to achieve attractive risk-adjusted returns across select asset classes, sectors and geographies while maintaining adequate liquidity to meet claims payment obligations. As such, volatility from realized and unrealized gains and losses may impact period-over-period performance. Unrealized gains and losses on equity securities and loans held at fair value impact current period net income, while unrealized gains and losses on AFS securities impact AOCI. Expenses Net Losses and Loss Adjustment Expenses represent actual insurance claims paid, changes in unpaid claim reserves, net of amounts ceded and the costs of administering claims for insurance lines. Incurred claims are impacted by loss frequency, which is a measure of the number of claims per unit of insured exposure, and loss severity, which is based on the average size of claims. Factors affecting loss frequency and loss severity include the volume of underwritten contracts, changes in claims reporting patterns, claims settlement patterns, judicial decisions, economic conditions, morbidity patterns and the attitudes of claimants towards settlements, and original pricing of the product for purposes of the loss ratio in relation to loss emergence over time. Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Member Benefit Claims represent the costs of services and replacement devices incurred in warranty and motor club service contracts. Member benefit claims represent claims paid on behalf of contract holders directly to third-party providers for roadside assistance and for the repair or replacement of covered products. Claims can also be paid directly to contract holders as a reimbursement payment, provided supporting documentation of loss is submitted to the Company. Claims are recognized as expense when incurred. Commission Expenses reflect commissions paid to retail agents, program administrators and managing general underwriters, net of ceding commissions received on business ceded under certain reinsurance contracts. Commission expenses are deferred and amortized to expense in proportion to the premium earned over the policy life. Commission expense is incurred on most product lines. The majority of commissions are retrospective commissions paid to agents, distributors and retailers selling the Company’s products, including credit insurance policies, warranty service contracts and motor club memberships. When claims increase, in most cases distribution partners bear the risk through a reduction in their retrospective commissions. Commission rates are, in many cases, set by state regulators, such as in credit and collateral protection programs and are also impacted by market conditions and the retention levels of distribution partners. Operating and Other Expenses represent the general and administrative expenses of insurance operations including employee compensation and benefits and other expenses, including, technology costs, office rent, and professional services fees, such as legal, accounting and actuarial services. Interest Expense consists primarily of interest expense on corporate revolving debt, notes, preferred trust securities due June 15, 2037 (Preferred Trust Securities) and asset based debt for premium finance and warranty service contract financing, which is non-recourse to Fortegra. Depreciation Expense is primarily associated with furniture, fixtures and equipment. Amortization Expense is primarily associated with purchase accounting amortization including values associated with acquired customer relationships, trade names and internally developed software and technology. Key Performance Metrics We discuss certain key performance metrics, described below, which provide useful information about our business and the operational factors underlying its financial performance. 59 Gross written premiums and premium equivalents represent total gross written premiums from insurance policies and warranty service contracts issued during a reporting period. They represent the volume of insurance policies written or assumed and warranty service contracts issued during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. Gross written premiums is a volume measure commonly used in the insurance industry to compare sales performance by period. Premium equivalents are used to compare sales performance of warranty service and administrative contract volumes to gross written premiums. Similar to how management considers gross written premiums to be a relevant measure of volume, regardless of the impact of reinsurance on net earned premiums, management considers premium equivalents to be a relevant measure of contract volume, regardless of whether the Company retains the full obligation. Investors also use these measures to compare sales growth among comparable companies, while management uses these measures to evaluate the relative performance of various sales channels. Net written premiums are gross written premiums less ceded written premiums. Gross written premiums are the amounts received, or to be received, for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by new business submissions, binding of new business submissions into policies, renewals of existing policies, and average size and premium rate of bound policies. Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels, policy limits and co-participations. Combined Ratio, Loss Ratio, Acquisition Ratio, Underwriting Ratio and Operating Expense Ratio Combined ratio is an operating measure, which equals the sum of the underwriting ratio and the operating expense ratio. Loss ratio is the ratio of the GAAP line items net losses and loss adjustment expenses and member benefit claims to earned premiums, net, service and administrative fees (excluding ceding fees), and other revenue (excluding cash and cash equivalent interest income). Acquisition ratio is the ratio of the GAAP line items commission expense (less ceding fees and ceding commissions) to earned premiums, net, service and administrative fees (excluding ceding fees), and other revenue (excluding cash and cash equivalent interest income). Underwriting ratio is the combination of the loss ratio and the acquisition ratio. Operating expense ratio is the ratio of the GAAP line items employee compensation and benefits and other expenses to earned premiums, net, service and administrative fees (excluding ceding fees) and other revenue (excluding cash and cash equivalent interest income). A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss. These ratios are commonly used in the insurance industry as a measure of underwriting profitability, excluding earnings on the insurance portfolio. Investors commonly use these measures to compare underwriting performance among companies separate from the performance of the investment portfolio. Management uses these measures to compare the profitability of various products we underwrite as well as profitability among our various agents and sales channels. Return on average equity is expressed as the ratio of net income to average stockholders’ equity during the period. Management uses this ratio as a measure of the on-going performance of the totality of the Company’s operations. Non-GAAP Financial Measures Underwriting and Fee Revenues and Underwriting and Fee Margin In order to better explain to investors the underwriting performance of the Company’s programs and the respective retentions between the Company and its agents and reinsurance partners, we use the non-GAAP metrics – underwriting and fee revenues and underwriting and fee margin. We generally manage our exposure to the risks we underwrite using both reinsurance (e.g., quota share and excess of loss) and sliding scale commission agreements with our agents (e.g., commissions paid are adjusted based on the actual underlying losses incurred), which mitigates our risk. Generally, when losses are incurred, the risk which is retained by our agents and reinsurers is reflected in a reduction in commissions paid. Underwriting and fee revenues represents earned premiums, net, service and administrative fees (excluding ceding fees) and other income (excluding cash and cash equivalent interest income). We reconcile underwriting and fee revenues as total revenues excluding net investment income, net realized gains (losses) and net unrealized gains (losses), ceding fees, ceding commissions and cash and cash equivalent interest income as reported in other income. See “—Non-GAAP Reconciliations” for a reconciliation of underwriting and fee revenues to total revenues in accordance with GAAP. 60 Underwriting and fee margin represents income before taxes excluding net investment income, net realized gains (losses), net unrealized gains (losses), cash and cash equivalent interest income, employee compensation and benefits, other expenses, interest expense and depreciation and amortization. We deliver our products and services on a vertically integrated basis to our agents. As such, underwriting and fee margin exclude general and administrative expenses, interest income, depreciation and amortization and other corporate expenses, including income taxes, as these corporate expenses support our vertically integrated delivery model and are not specifically supporting any individual business line. See “—Non-GAAP Reconciliations” for a reconciliation of underwriting and fee margin to total revenues in accordance with GAAP. Adjusted net income represents income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses), and intangibles amortization associated with purchase accounting. Adjusted return on average equity represents adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. Results of Operations - Year Ended December 31, 2024 compared to 2023 ($ in thousands) Year Ended December 31, 2024 2023 Change % Change Revenues: Earned premiums, net $ 1,471,930 $ 1,127,834 $ 344,096 30.5 % Service and administrative fees 405,193 395,969 9,224 2.3 % Ceding commissions 15,384 14,915 469 3.1 % Net investment income 32,976 26,674 6,302 23.6 % Net realized and unrealized gains (losses) 8,496 (4,207) 12,703 NM% Other revenue 39,730 31,885 7,845 24.6 % Total revenues $ 1,973,709 $ 1,593,070 $ 380,639 23.9 % Expenses: Net losses and loss adjustment expenses 722,190 482,506 239,684 49.7 % Member benefit claims 119,017 119,288 (271) (0.2) % Commission expense 648,819 603,033 45,786 7.6 % Employee compensation and benefits 137,743 114,341 23,402 20.5 % Interest expense 30,247 25,836 4,411 17.1 % Depreciation and amortization 19,860 21,425 (1,565) (7.3) % Other expenses 112,675 96,825 15,850 16.4 % Total expenses $ 1,790,551 $ 1,463,254 $ 327,297 22.4 % Income (loss) before taxes (1) $ 183,158 $ 129,816 $ 53,342 41.1 % Key Performance Metrics: Gross written premiums and premium equivalents $ 3,068,199 $ 2,747,854 $ 320,345 11.7 % Net written premiums $ 1,438,952 $ 1,319,948 $ 119,004 9.0 % Loss ratio 45.5 % 40.1 % Acquisition ratio 31.5 % 36.2 % Underwriting ratio 77.0 % 76.3 % Operating expense ratio 13.0 % 14.0 % Combined ratio 90.0 % 90.3 % Return on average equity 26.0 % 25.7 % Non-GAAP Financial Measures (2) : Adjusted net income (before NCI) $ 157,031 $ 115,705 $ 41,326 35.7 % Adjusted return on average equity 29.1 % 29.2 % Adjusted net income $ 124,393 $ 91,963 $ 32,430 35.3 % (1) Net income was $139.6 million for the year ended December 31, 2024 compared to $101.3 million for the year ended December 31, 2023. (2) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Revenues - Year Ended December 31, 2024 compared to 2023 61 For the year ended December 31, 2024, total revenues increased 23.9%, to $2.0 billion, as compared to $1.6 billion for the year ended December 31, 2023. Earned premiums, net of $1.5 billion increased $344.1 million, or 30.5%, driven by growth in specialty E&S and admitted insurance lines. Earned premiums assumed from other insurance companies were $586.9 million, or 39.9% of total earned premiums, net, compared to $404.7 million, or 35.9%, in the prior year period. As it expands to new geographies and expands product offerings, the Company works to obtain necessary licenses and intends to write this business directly upon obtaining necessary licenses. The Company views direct written and assumed business as having similar characteristics. For the presented periods, earned premiums, net, did not include any significant regional geographic concentrations. Service and administrative fees of $405.2 million increased by 2.3% primarily driven by growth in vehicle service contract revenues. Ceding commissions of $15.4 million increased by $0.5 million, or 3.1%, in line with growth in ceded premiums. Other revenues increased by $7.8 million, or 24.6%, driven by growth in premium finance product offerings and interest income on cash and cash equivalents. For the year ended December 31, 2024, 23.3% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the year ended December 31, 2024, 79.9% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies. For the year ended December 31, 2024, net investment income was $33.0 million as compared to $26.7 million in the prior year period, primarily driven by growth in investments and the increase in yields. Net realized and unrealized gains were $8.5 million, an improvement of $12.7 million, as compared to net realized and unrealized losses of $4.2 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments carried at fair value. Unrealized losses on AFS securities impacting OCI for the year ended December 31, 2024 were $1.0 million, driven by negative fair value adjustments on mortgage-backed securities and corporate bonds and other investments. Expenses - Year Ended December 31, 2024 compared to 2023 For the year ended December 31, 2024, net losses and loss adjustment expenses were $722.2 million, member benefit claims were $119.0 million and commission expense was $648.8 million, as compared to $482.5 million, $119.3 million, and $603.0 million, respectively, for the year ended December 31, 2023. The increase in net losses and loss adjustment expenses of $239.7 million, or 49.7%, was driven by growth in U.S. and European insurance lines and the shift in business mix toward commercial lines, which tend to have higher loss ratios and lower commission and expense ratios. In addition, the Company experienced favorable prior year development of $0.6 million for the year ended December 31, 2024, primarily as a result of lower-than-expected losses in its commercial lines of business. For the year ended December 31, 2023, the Company experienced favorable prior year development of $11.2 million, primarily driven by a commutation agreement with a partner resulting in a reduction of policy liabilities and unpaid claims of $75.6 million relating to policies written in the 2020 and 2021 treaty years. For the year ended December 31, 2024 and 2023, net losses and adjustment expenses included $47.7 million and $2.3 million of net catastrophe losses, respectively, primarily related to Hurricanes Helene and Milton. The decrease in member benefit claims of $0.3 million, or 0.2%, was driven by moderating inflation on replacement costs and labor rates. Commission expenses increased by $45.8 million, or 7.6%, generally in line with the growth in earned premiums, net and service and administrative fees, partially offset by the impacts from sliding scale commission structures. For the year ended December 31, 2024, employee compensation and benefits were $137.7 million and other expenses were $112.7 million, as compared to $114.3 million and $96.8 million, respectively, for the year ended December 31, 2023. Employee compensation and benefits increased by $23.4 million, or 20.5%, driven by investments in human capital associated with growth in E&S, admitted and services lines. Other expenses increased by $15.9 million, or 16.4%, driven by a change in fair value of the Fortegra Additional Warrant liability of $7.4 million, and increased marketing and information technology expenses. For the year ended December 31, 2024, interest expense was $30.2 million as compared to $25.8 million for the year ended December 31, 2023. On November 7, 2024, Fortegra issued $150.0 million of 9.25% Fixed Rate Resetting Junior Subordinated Notes due November 2064. The proceeds of the 2024 Notes were used to repay outstanding indebtedness under Fortegra’s credit agreement, for insurance company growth capital and general corporate purposes. The increase in interest expense of $4.4 million, or 17.1%, was primarily driven by the issuance of the new debt, the rise in short-term interest rates and increased borrowings on Fortegra’s corporate revolver and asset based debt for premium finance lines. For the year ended December 31, 2024, depreciation and amortization expense was $19.9 million, including $15.4 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra in 2014 and additional 62 services businesses from 2019 to 2023, as compared to $21.4 million, including $16.9 million of intangible amortization from purchase accounting in 2023. Gross Written Premiums and Premium Equivalents (1) ($ in thousands) Year Ended December 31, 2024 2023 2022 Property and short-tail $ 845,721 $ 548,984 $ 263,933 Contractual liability 347,510 396,861 351,869 General liability 389,162 353,011 305,325 Alternative risks 362,153 330,171 363,362 Professional liability 276,390 232,944 82,340 Europe 163,292 141,208 125,150 Commercial lines $ 2,384,228 $ 2,003,179 $ 1,491,979 Personal lines $ 335,236 $ 382,397 $ 397,423 Insurance $ 2,719,464 $ 2,385,576 $ 1,889,402 Auto and consumer goods warranty 303,195 302,746 318,550 Other services 45,540 59,532 55,176 Services $ 348,735 $ 362,278 $ 373,726 Total $ 3,068,199 $ 2,747,854 $ 2,263,128 (1) The total gross written premiums and premium equivalents of $3,068.2 million, $2,747.9 million and $2,263.1 million for the years ended December 31, 2024, 2023 and 2022, respectively, were comprised of gross written premiums of $2,194.0 million, $1,896.5 million and $1,515.1 million, plus assumed premiums of $525.5 million, $489.1 million and $374.3 million, plus gross service and administrative fee additions of $348.7 million, $362.3 million and $373.7 million. See Note (8) Reinsurance Recoverable and Prepaid Reinsurance Premiums and Note (14) Revenue from Contracts with Customers within the respective periods for more information. Total gross written premiums and premium equivalents for the year ended December 31, 2024 were $3.1 billion, representing an increase of $320.3 million, or 11.7%. The increase was driven by a combination of factors including expanding Fortegra’s distribution partner network and growing E&S insurance lines. For the year ended December 31, 2024, Insurance increased by $333.9 million, or 14.0%, driven by growth in specialty commercial lines, including E&S business, partially offset by decline in the personal lines. The year ended December 31, 2023, also benefited from a book-roll transaction of $125.1 million with one of Fortegra’s distribution partners. For the year ended December 31, 2024, Services decreased by $13.5 million, or 3.7%, driven by lower volume in consumer goods and vehicle service contracts, partially offset by the acquisition of Premia. The combination of unearned premiums and deferred revenues on Fortegra’s balance sheet grew to $2.5 billion, representing an increase of $93.7 million, or 4.0%, from December 31, 2023 to December 31, 2024, as a result of growth in gross written premiums and premium equivalents. Net written premiums ($ in thousands) Year Ended December 31, 2024 2023 2022 Property and short-tail $ 488,669 $ 411,674 $ 188,069 Contractual liability 87,470 68,368 100,338 General liability 182,407 163,567 147,442 Alternative risks 278,241 246,431 268,775 Professional liability 88,791 84,380 52,073 Europe 163,189 141,208 125,150 Commercial lines $ 1,288,767 $ 1,115,628 $ 881,847 Personal lines $ 150,185 $ 204,320 $ 207,543 Insurance $ 1,438,952 $ 1,319,948 $ 1,089,390 Net written premiums for the year ended December 31, 2024 were $1.4 billion, representing an increase of $119.0 million, or 9.0%, consistent with growth in gross written premiums, and as a result of increased retention on Fortegra’s whole account quota share reinsurance arrangement from 30% to 40%, effective April 1, 2023. For the year ended December 31, 2024, commercial lines increased by $173.1 million, or 15.5%, driven by growth in specialty E&S and admitted business. For the year ended December 31, 2024, personal lines decreased by $54.1 million, or 26.5%, driven by declines in auto and personal 63 credit lines. Property and short-tail lines represented $488.7 million, or 34.0%, of the total net written premiums for the year ended December 31, 2024 compared to $411.7 million, or 31.2%, for the prior year period. Property and short-tail net written premiums were diversified by geographic location, exposure and risk type with substantial reinsurance protection. As of December 31, 2024, the net loss to the Company in a 1-in-250 year catastrophe event represented approximately 4.2% of Fortegra’s stockholders’ equity. This reported loss includes the impact of incurred losses based on the estimated frequency and severity of potential events, reinstatements premiums, reinsurance recoveries and taxes. Combined Ratio The combined ratio was 90.0% for the year ended December 31, 2024, compared to 90.3% for the prior year period, reflecting the consistent underwriting performance and scalability of the Company’s operating platform. The underwriting ratio was 77.0%, an increase of 0.7 percentage points from the prior year period, which consists of a loss ratio of 45.5%, compared to 40.1% in the prior year period, and an acquisition ratio of 31.5%, compared to 36.2% in the prior year period. The increase in loss ratio was driven by changes in business mix towards commercial lines and increases in repair and labor costs on vehicle service contracts compared to prior year period, which was partially offset by the decline in acquisition ratio as a result of swing rate commission structures. Additionally, for the year ended December 31, 2024, the loss ratio included 2.6 percentage points related to net catastrophe losses as compared to 0.2 percentage points in the prior year period. The primary catastrophic events impacting 2024 were Hurricanes Helene and Milton. The operating expense ratio was 13.0%, as compared to 14.0% in the prior year period, driven by operating efficiencies as premiums and revenues grew. Underwriting and Fee Revenues and Margin - Non-GAAP The below table shows underwriting and fee revenues and underwriting and fee margin by business mix for the years ended December 31, 2024 and 2023. Year Ended December 31, ($ in thousands) 2024 2023 Insurance Services Total Insurance Services Total Underwriting and Fee Revenues (1) $ 1,480,104 $ 367,986 $ 1,848,090 $ 1,141,019 $ 359,004 $ 1,500,023 Net losses and loss adjustment expenses 722,190 — 722,190 482,456 50 482,506 Member benefit claims — 119,017 119,017 — 119,288 119,288 Commission expense (2) 446,687 135,501 582,188 411,012 132,478 543,490 Underwriting and Fee Margin (1) $ 311,227 $ 113,468 $ 424,695 $ 247,551 $ 107,188 $ 354,739 Loss ratio 48.8 % 32.3 % 45.5 % 42.3 % 33.2 % 40.1 % Acquisition ratio 30.2 % 36.8 % 31.5 % 36.0 % 36.9 % 36.2 % Underwriting ratio 79.0 % 69.1 % 77.0 % 78.3 % 70.1 % 76.3 % (1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. (2) Commission expense in this table is presented net of ceding fees and ceding commissions of $51.2 million and $15.4 million, respectively, for the year ended December 31, 2024, and $44.6 million and $14.9 million, respectively, for the year ended December 31, 2023. Underwriting and fee revenues were $1.8 billion for the year ended December 31, 2024 as compared to $1.5 billion for the year ended December 31, 2023. Total underwriting and fee revenues increased $348.1 million, or 23.2%, driven by growth in insurance. The increase in insurance was $339.1 million, or 29.7%, driven by growth in specialty E&S and admitted insurance lines. The increase in services was $9.0 million, or 2.5%, driven by growth in vehicle service contracts and premium finance offerings. Underwriting and fee margin was $424.7 million for the year ended December 31, 2024 as compared to $354.7 million for the year ended December 31, 2023. Total underwriting and fee margin increased $70.0 million, or 19.7%, driven by growth in insurance. Insurance grew by $63.7 million, or 25.7%, driven by revenue growth in specialty E&S and admitted lines. Services increased by $6.3 million, or 5.9%, driven by growth in vehicle service contracts and premium finance offerings. Return on Average Equity Return on average equity was 26.0% for the year ended December 31, 2024, as compared to 25.7% for the year ended December 31, 2023. The increase in net income and annualized return on average equity was driven by revenue growth and consistent combined ratio, in addition to improvements in net investment income and net realized and unrealized gains and losses. 64 Adjusted Net Income and Adjusted Return on Average Equity - Non-GAAP For the year ended December 31, 2024, adjusted net income (before NCI) and adjusted return on average equity were $157.0 million and 29.1%, respectively, as compared to $115.7 million and 29.2%, respectively, for the year ended December 31, 2023. The improvement of adjusted net income was driven by the growth in revenues and consistent combined ratio, in addition to improvements in net investment income. Tiptree Capital Tiptree Capital consists of our Mortgage segment, which includes the operating results of Reliance, our mortgage business, and Tiptree Capital - Other, which consists of our other non-insurance operating businesses and investments. Mortgage Through our Mortgage operating subsidiary, Reliance, we originate, sell, securitize and service one-to-four-family, residential mortgage loans, comprised of conforming mortgage loans, Federal Housing Administration (“FHA”), Veterans Administration (“VA”), United States Department of Agriculture (“USDA”), and to a lesser extent, non-agency jumbo prime. We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer and servicer for Ginnie Mae. We originate residential mortgage loans through our retail distribution channel (directly to consumers) in 39 states and the District of Columbia as of December 31, 2024. Components of our Results of Operations Revenues Net Realized and Unrealized Gains (Losses) include gains on sale of mortgage loans and the fair value adjustment in mortgage servicing rights. Gains on the sale of mortgage loans represent the difference between the selling price and carrying value of loans sold and are recognized upon settlement. Such gains also include the changes in fair value of loans held for sale and loan-related hedges and derivatives. We transfer the risk of loss or default to the loan purchaser, however, in some cases we are required to indemnify purchasers for losses related to non-compliance with borrowers’ creditworthiness and collateral requirements. Because of this, we recognize gains on sale net of required indemnification and premium recapture reserves. The fair value adjustment on mortgage servicing rights represents fair value adjustments considering estimated prepayments and other factors associated with changes in interest rates, plus actual run-off in the servicing portfolio. We report these adjustments separate from servicing income and servicing expense. Other Revenue includes loan origination fees, interest income, and mortgage servicing income. Loan origination fees are earned as mortgage loans are funded. Servicing fees are earned over the life of the loan. Interest income includes interest earned on loans held for sale and interest income on bank balances and short-term investments. Expenses Employee Compensation and Benefits includes salaries, commissions, benefits, bonuses, other incentive compensation and related taxes for employees. Commissions expense for sales staff generally varies with loan origination volumes. Interest Expense represents borrowing costs under warehouse and other credit facilities used primarily to fund loan originations. Amortization of deferred financing costs, including commitment fees, is included in interest expense. Depreciation is mainly associated with furniture, fixtures and equipment. Amortization is primarily associated with a trade name and internally developed software. Other Expenses include loan origination expenses, namely, leads, appraisals, credit reporting and licensing fees, general and administrative expenses, including office rent, insurance, legal, consulting and payroll processing expenses, and servicing expense. 65 The following tables present the Mortgage segment results for the following periods: Results of Operations ($ in thousands) Year Ended December 31, 2024 2023 Revenues: Net realized and unrealized gains (losses) $ 42,978 $ 34,232 Other revenue 22,936 19,632 Total revenues $ 65,914 $ 53,864 Expenses: Employee compensation and benefits $ 37,452 $ 34,040 Interest expense 2,001 1,856 Depreciation and amortization 343 617 Other expenses 21,393 20,636 Total expenses $ 61,189 $ 57,149 Income (loss) before taxes $ 4,725 $ (3,285) Key Performance Metrics: Origination volumes $ 946,183 $ 876,914 Gain on sale margins 4.8 % 4.7 % Return on average equity 6.7 % (4.6) % Non-GAAP Financial Measures (1) : Adjusted net income $ 1,531 $ (1,082) Adjusted return on average equity 2.8 % (2.0) % (1) See “ — Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Revenues - Year Ended December 31, 2024 compared to 2023 For the year ended December 31, 2024, $946.2 million of loans were funded, compared to $876.9 million for the prior year period, an increase of $69.3 million, or 7.9%, driven by decrease in mortgage interest rates compared to the prior year period. Gain on sale margins remained consistent at 4.8% for the year ended December 31, 2024. Net realized and unrealized gains for the year ended December 31, 2024 were $43.0 million, compared to $34.2 million in the prior year period, an increase of $8.7 million or 25.5%. The primary driver of increased gain on sale revenues was the increase in volumes and positive fair value adjustment in mortgage servicing rights of $2.7 million in 2024 compared to a negative fair value adjustment of $1.9 million in the prior year period. Other revenue for the year ended December 31, 2024 was $22.9 million, compared to $19.6 million in the prior year period, an increase of $3.3 million, or 16.8%, driven by increased servicing revenues and interest income on mortgage loans. As of December 31, 2024, the mortgage servicing asset was $42.6 million, an increase from $40.8 million as of December 31, 2023. Expenses - Year Ended December 31, 2024 compared to 2023 For the year ended December 31, 2024, employee compensation and benefits were $37.5 million, compared to $34.0 million in the prior year period, an increase of $3.4 million or 10.0%. The increase was driven primarily by higher commissions on higher origination volumes. For the year ended December 31, 2024, interest expense was at $2.0 million, an increase of from the prior year period of $0.1 million, or 7.8%, with the increase driven by higher interest rates. For the year ended December 31, 2024, other expenses were $21.4 million, compared to $20.6 million in the prior year period, an increase of $0.8 million, with the increase driven by a higher mortgage operational expenses. 66 Income (loss) before taxes The income before taxes for the year ended December 31, 2024 was $4.7 million, compared to loss before taxes of $3.3 million in the prior year period driven by higher volumes. Tiptree Capital - Other The following tables present a summary of Tiptree Capital - Other results for the following periods: Results of Operations ($ in thousands) Year Ended December 31, 2024 2023 Revenues: Net realized and unrealized gains (losses) $ (905) $ (5,289) Other income 4,136 7,386 Total revenue $ 3,231 $ 2,097 Expenses: Employee compensation and benefits $ 515 $ 579 Depreciation and amortization — 97 Other expenses 2,879 4,685 Total expenses $ 3,394 $ 5,361 Income (loss) before taxes $ (163) $ (3,264) Non-GAAP Financial Measures (1) : Adjusted net income $ 289 $ 923 Adjusted return on average equity 0.4 % 0.9 % (1) See “ — Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures. Revenues Tiptree Capital - Other earns revenues from the following sources: net interest income; realized and unrealized gains and losses on the Company’s investment holdings (including Invesque until its sale in April 2024); and charter revenues from vessels within the Company’s maritime transportation operations. Subsequent to the sale of our dry bulk and tanker vessels, operations include two smaller vessels and other ancillary assets. Revenues for the year ended December 31, 2024 were $3.2 million compared to $2.1 million in the prior year period with the improvement driven by decreased investment losses on Invesque in 2024, partially offset by lower interest income on cash and cash equivalents recorded in other income in 2024 compared to 2023. Income (loss) before taxes The loss before taxes from Tiptree Capital - Other for the year ended December 31, 2024 was $0.2 million, compared to the loss before taxes of $3.3 million in the prior year period. The improvement was driven by the same factors that impacted revenues. Adjusted net income - Non-GAAP (1) Adjusted net income decreased to $0.3 million for the year ended December 31, 2024 compared to $0.9 million in 2023. 67 Corporate The following table presents a summary of corporate results for the following periods: Results of Operations ($ in thousands) Year Ended December 31, 2024 2023 Employee compensation and benefits $ 8,220 $ 8,885 Employee incentive compensation expense 20,425 21,230 Depreciation and amortization 1,450 1,327 Other expenses 8,306 8,772 Total expenses $ 38,401 $ 40,214 Corporate expenses include expenses of the holding company for employee compensation and benefits, interest expense, and public company and other expenses. Corporate employee compensation and benefits includes the expense of management, legal and accounting staff. Other expenses primarily consisted of audit and professional fees, insurance, office rent and other related expenses. Employee compensation and benefits, including incentive compensation expense, were $28.6 million for the year ended December 31, 2024, compared to $30.1 million for the prior year period, driven by a decrease in accrued cash incentive compensation expense. Of the incentive compensation expense in the year ended December 31, 2024, $8.7 million was stock-based compensation expense, compared to $6.3 million in 2023. As of December 31, 2024 and 2023, the Company had no outstanding borrowings at the holding company and therefore incurred no interest expense for related periods. Other expenses declined to $8.3 million driven primarily by decreased professional fees. Provision for Income Taxes The total income tax expense of $61.7 million and $43.1 million for the years ended December 31, 2024 and 2023, respectively, is reflected as a component of net income (loss). For the years ended December 31, 2024 and 2023, the Company’s effective tax rate was equal to 41.3% and 51.8%, respectively. The effective rates for the years ended December 31, 2024 and 2023 were significantly higher than the U.S. statutory income tax rate of 21.0%, primarily due to the impact of outside basis deferred taxes on Tiptree’s investment in Fortegra. Tiptree owns less than 80% of Fortegra and is required to record deferred taxes on the outside basis on its investment in Fortegra. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell all of its Fortegra stock at its carrying value on Tiptree’s balance sheet. As of December 31, 2024, this deferred tax liability relating to Fortegra was $84.7 million, which was an increase of $23.0 million from the year ended December 31, 2023, of which a $0.5 million benefit was recorded in OCI, and a $23.5 million expense was recorded as a provision for income taxes. As of December 31, 2023, this deferred tax liability relating to Fortegra was $61.7 million, which was an increase of $21.7 million from the year ended December 31, 2022, of which $3.8 million expense was recorded in OCI, $1.2 million benefit was recorded directly in stockholders’ equity, and $19.1 million expense was recorded as a provision for income taxes. Excluding the impact of these deferred taxes, the effective tax rates for the twelve months ended December 31, 2024 and 2023 were 25.5% and 28.8%, respectively. Balance Sheet Information Tiptree’s total assets were $5,694.8 million as of December 31, 2024, compared to $5,139.3 million as of December 31, 2023. The $555.5 million increase in assets is primarily attributable to the growth in the Insurance segment. Total stockholders’ equity was $656.8 million as of December 31, 2024, compared to $576.6 million as of December 31, 2023, with the increase primarily driven by comprehensive income for the year ended December 31, 2024. As of December 31, 2024, there were 37,255,838 shares of common stock outstanding as compared to 36,756,187 shares as of December 31, 2023, with the increase driven by the vesting of share-based incentive compensation. 68 In March and April 2024, Tiptree, Warburg and Fortegra independent directors contributed $30.0 million, $9.9 million and $0.1 million, respectively, to Fortegra in exchange for common shares of Fortegra. As of December 31, 2024, Fortegra was owned approximately 79.1% by Tiptree Holdings, 17.7% by Warburg and 3.2% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and management options, and the conversion of outstanding preferred stock. The following table is a summary of certain balance sheet information: As of December 31, 2024 ($ in thousands) Tiptree Capital Insurance Mortgage Other Corporate Total Total assets $ 5,432,987 $ 202,664 $ 36,818 $ 22,320 $ 5,694,789 Corporate debt $ 310,000 $ — $ — $ — $ 310,000 Asset based debt 63,699 68,394 — — 132,093 Tiptree Inc. stockholders’ equity (1) $ 426,412 $ 55,928 $ 35,893 $ (60,535) $ 457,698 Non-controlling interests: Fortegra preferred interests 77,679 — — — 77,679 Common interests 121,394 — — — 121,394 Total stockholders’ equity $ 625,485 $ 55,928 $ 35,893 $ (60,535) $ 656,771 (1) Included in Corporate equity is the deferred tax liability on the outside basis on Tiptree’s investmen t in Fortegra of $84.7 million as of December 31, 2024. 69 NON-GAAP MEASURES AND RECONCILIATIONS Non-GAAP Reconciliations In addition to GAAP results, management uses the non-GAAP financial measures underwriting and fee revenues and underwriting and fee margin in order to better explain to investors the underwriting performance and the respective retentions between the Company and its agents and reinsurance partners. We also use the non-GAAP financial measures adjusted net income and adjusted return on average equity as measures of operating performance and as part of our resource and capital allocation process, to assess comparative returns on invested capital. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and to compare relative performance among comparable companies. Adjusted net income, adjusted return on average equity, underwriting and fee revenues and underwriting and fee margin are not measurements of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for earned premiums, net income or any other measure derived in accordance with GAAP. Underwriting and Fee Revenues and Underwriting and Fee Margin — Non-GAAP (Insurance only) Underwriting and Fee Revenues — Non-GAAP — We define underwriting and fee revenues as earned premiums, net, service and administrative fees (excluding ceding fees) and other income (excluding cash and cash equivalent interest income). We reconcile underwriting and fee revenues as total revenues excluding net investment income, net realized gains (losses) and net unrealized gains (losses), ceding fees, ceding commissions and cash and cash equivalent interest income as reported in other income. Underwriting and fee revenues represents revenues generated by our underwriting and fee-based operations and allows us to evaluate our underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting and fee revenues should not be viewed as a substitute for total revenues calculated in accordance with GAAP, and other companies may define underwriting and fee revenues differently. ($ in thousands) Year Ended December 31, 2024 2023 Total revenues $ 1,973,709 $ 1,593,070 Less: Net investment income (32,976) (26,674) Less: Net realized and unrealized gains (losses) (8,496) 4,207 Less: Ceding fees (1) (51,247) (44,628) Less: Ceding commissions (15,384) (14,915) Less: Cash and cash equivalent interest income (2) (17,516) (11,037) Underwriting and fee revenues (3) $ 1,848,090 $ 1,500,023 (1) Ceding fees were included in service and administrative fees on the statement of operations. (2) Cash and cash equivalent interest income was included in other revenue on the statement of operations. (3) Underwriting and fee revenues exclude ceding fees, ceding commissions and cash and cash equivalent interest income from other revenue. Underwriting and Fee Margin — Non-GAAP — We define underwriting and fee margin as income before taxes, excluding net investment income, net realized gains (losses), net unrealized gains (losses), cash and cash equivalent interest income, employee compensation and benefits, other expenses, interest expense and depreciation and amortization. Underwriting and fee margin represents the underwriting performance of our underwriting and fee-based programs. As such, underwriting and fee margin excludes general administrative expenses, interest expense, depreciation and amortization and other corporate expenses as those expenses support the vertically integrated business model and not any individual component of our business mix. We use this metric as we believe it gives our management and other users of our financial information useful insight into the specific performance of our underlying underwriting and fee programs. Underwriting and fee income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define underwriting and fee margin differently. 70 ($ in thousands) Year Ended December 31, 2024 2023 Income (loss) before income taxes $ 183,158 $ 129,816 Less: Net investment income (32,976) (26,674) Less: Net realized and unrealized gains (losses) (8,496) 4,207 Less: Cash and cash equivalent interest income (1) (17,516) (11,037) Plus: Depreciation and amortization 19,860 21,425 Plus: Interest expense 30,247 25,836 Plus: Employee compensation and benefits 137,743 114,341 Plus: Other expenses 112,675 96,825 Underwriting and fee margin (2) $ 424,695 $ 354,739 (1) Cash and cash equivalent interest income was included in other revenue on the statement of operations. (2) Underwriting and fee margin exclude cash and cash equivalent interest income. Adjusted Net Income — Non-GAAP We define adjusted net income as income before taxes, less provision (benefit) for income taxes, and excluding the after-tax impact of various expenses that we consider to be unique and non-recurring in nature, including merger and acquisition related expenses, stock-based compensation, net realized and unrealized gains (losses) and intangibles amortization associated with purchase accounting, all of which is reduced for non-controlling interests. The calculation of adjusted net income excludes net realized and unrealized gains (losses) that relate to investments or assets rather than business operations. Adjusted net income should not be viewed as a substitute for income before taxes calculated in accordance with GAAP, and other companies may define adjusted net income differently. Adjusted net income (before NCI) is presented before the impacts of non-controlling interests. We present adjustments for amortization associated with acquired intangible assets. The intangible assets were recorded as part of purchase accounting in connection with Tiptree’s acquisition of Fortegra Financial in 2014, and additional services businesses from 2019 to 2024. The intangible assets acquired contribute to overall revenue generation, and the respective purchase accounting adjustments will continue to occur in future periods until such intangible assets are fully amortized in accordance with the respective amortization periods required by GAAP. Adjusted Return on Average Equity — Non-GAAP We define adjusted return on average equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “—Adjusted Net Income—Non-GAAP” above. Adjusted return on average equity should not be viewed as a substitute for return on average equity calculated in accordance with GAAP, and other companies may define adjusted return on average equity differently. 71 Year Ended December 31, 2024 ($ in thousands) Tiptree Capital Insurance Mortgage Other Corporate Total Income (loss) before taxes $ 183,158 $ 4,725 $ (163) $ (38,401) $ 149,319 Less: Income tax (benefit) expense (43,260) (1,091) (540) (16,761) (61,652) Less: Net realized and unrealized gains (losses) (1) (8,496) (2,711) 905 — (10,302) Plus: Intangibles amortization (2) 15,413 — — — 15,413 Plus: Stock-based compensation expense 8,998 — — 8,682 17,680 Plus: Non-recurring expenses (3) 3,455 — — — 3,455 Plus: Non-cash fair value adjustments (4) 7,436 — — — 7,436 Plus: Impact of tax deconsolidation of Fortegra (5) — — — 23,495 23,495 Less: Tax on adjustments (6) (9,673) 608 87 (3,168) (12,146) Adjusted net income (before NCI) $ 157,031 $ 1,531 $ 289 $ (26,153) $ 132,698 Less: Impact of non-controlling interests (32,638) — — — (32,638) Adjusted net income $ 124,393 $ 1,531 $ 289 $ (26,153) $ 100,060 Adjusted net income (before NCI) $ 157,031 $ 1,531 $ 289 $ (26,153) $ 132,698 Average stockholders’ equity $ 539,049 $ 54,113 $ 80,856 $ (57,350) $ 616,668 Adjusted return on average equity (7) 29.1 % 2.8 % 0.4 % NM% 21.5 % Year Ended December 31, 2023 ($ in thousands) Tiptree Capital Insurance Mortgage Other Corporate Total Income (loss) before taxes $ 129,816 $ (3,285) $ (3,264) $ (40,214) $ 83,053 Less: Income tax (benefit) expense (28,224) 837 153 (15,822) (43,056) Less: Net realized and unrealized gains (losses) (1) 4,207 1,861 5,289 — 11,357 Plus: Intangibles amortization (2) 16,919 — — — 16,919 Plus: Stock-based compensation expense 2,018 — — 6,251 8,269 Plus: Non-recurring expenses (3) 2,824 — — — 2,824 Plus: Non-cash fair value adjustments (4) (1,769) — — — (1,769) Plus: Impact of tax deconsolidation of Fortegra (5) — — — 19,101 19,101 Less: Tax on adjustments (6) (10,086) (495) (1,255) 797 (11,039) Adjusted net income (before NCI) $ 115,705 $ (1,082) $ 923 $ (29,887) $ 85,659 Less: Impact of non-controlling interests (23,742) — — — (23,742) Adjusted net income $ 91,963 $ (1,082) $ 923 $ (29,887) $ 61,917 Adjusted net income (before NCI) $ 115,705 $ (1,082) $ 923 $ (29,887) $ 85,659 Average stockholders’ equity $ 395,661 $ 53,520 $ 100,325 $ 5,564 $ 555,070 Adjusted return on average equity (7) 29.2 % (2.0) % 0.9 % NM% 15.4 % (1) Net realized and unrealized gains (losses) added back in Adjusted net income excludes net realized and unrealized gains (losses) from the mortgage segment and unrealized gains (losses) on mortgage servicing rights. (2) Specifically associated with acquisition purchase accounting. See Note (9) Goodwill and Intangible Assets, net. (3) For the years ended December 31, 2024 and 2023, included in other expenses were expenses related to legal and other expenses associated with preparation of the registration statement for the withdrawn Fortegra initial public offering in 2024 and acquisitions of services businesses in 2023, respectively. (4) For the years ended December 31, 2024 and 2023, non-cash fair-value adjustments represent a change in fair value of the Fortegra Additional Warrant liability. (5) For the years ended December 31, 2024 and 2023, included in the adjustment is an add-back of $23.5 million and $19.1 million, respectively, related to deferred tax expense from the WP Transaction. (6) Tax on adjustments represents the tax applied to the total non-GAAP adjustments and includes adjustments for non-recurring or discrete tax impacts. (7) Total Adjusted return on average equity after non-controlling interests was 22.9% and 15.2% for the years ended December 31, 2024 and 2023, respectively, based on $100.1 million and $61.9 million of Adjusted net income over $437.3 million and $407.1 million of average Tiptree Inc. stockholders’ equity. Book Value per share - Non-GAAP Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table 72 provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares. ($ in thousands, except per share information) As of December 31, 2024 2023 Total stockholders’ equity $ 656,771 $ 576,565 Less: Non-controlling interests 199,073 159,699 Total stockholders’ equity, net of non-controlling interests $ 457,698 $ 416,866 Total common shares outstanding 37,256 36,756 Book value per share $ 12.29 $ 11.34 LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity are unrestricted cash, cash equivalents and other liquid investments, the Tiptree Credit Agreement and distributions from operating subsidiaries, including income from our investment portfolio and sales of assets and investments. We intend to use our cash resources to continue to fund our operations and grow our businesses. We may seek additional sources of cash to fund acquisitions or investments. These additional sources of cash may take the form of debt or equity and may be at the parent, subsidiary or asset level. We are a holding company, and our liquidity needs are primarily for compensation, professional fees, office rent and insurance costs. Our subsidiaries’ ability to generate sufficient net income and cash flows to make cash distributions will be subject to numerous business and other factors, including restrictions contained in agreements for the strategic investment by Warburg in Fortegra, our subsidiaries’ financing agreements, regulatory restrictions, availability of sufficient funds at such subsidiaries, general economic and business conditions, tax considerations, strategic plans, financial results and other factors such as target capital ratios and ratio levels anticipated by rating agencies to maintain or improve current ratings. We expect our cash and cash equivalents and distributions from operating subsidiaries, our subsidiaries’ access to financing, and sales of investments to be adequate to fund our operations for at least the next 12 months, as well as the long term. As of December 31, 2024, cash and cash equivalents, excluding restricted cash, were $320.1 million, compared to $468.7 million as of December 31, 2023, a decrease of $148.6 million, primarily driven by the increase in investments, partially offset by cash flow from operations at our insurance business. Our mortgage business relies on short term uncommitted sources of financing as a part of their normal course of operations. To date, we have been able to obtain and renew uncommitted warehouse credit facilities. If we were not able to obtain financing, then we may need to draw on other sources of liquidity to fund our mortgage business. See Note (11) Debt, net in the notes to our consolidated financial statements for additional information regarding our insurance and mortgage borrowings. We believe that cash flow from operations will provide sufficient capital to continue to grow the business and fund interest on the outstanding debt, capital expenditures and other general corporate needs over the next several years. As we continue to expand our business, including by any acquisitions we may make, we may, in the future, require additional working capital for increased costs. For purposes of determining enterprise value, we consider corporate credit agreements and preferred trust securities, which we refer to as corporate debt, as corporate financing and associated interest expense is added back. The below table outlines this amount by debt outstanding and interest expense at the insurance company and corporate level. Corporate Debt ($ in thousands) Corporate Debt Outstanding as of December 31, Interest Expense for the year ended December 31, 2024 2023 2024 2023 Insurance $ 310,000 $ 290,000 $ 24,145 $ 19,531 Total $ 310,000 $ 290,000 $ 24,145 $ 19,531 73 On February 7, 2025, we entered into the Tiptree Credit Agreement, pursuant to which Tiptree Holdings borrowed $75.0 million to, among other things, fund working capital and general corporate purposes. The principal of, and all accrued and unpaid interest on, all loans under the Tiptree Credit Agreement will mature on February 7, 2028. As of December 31, 2024, no borrowings were outstanding as compared to $130.0 million outstanding under the revolving line of credit in our insurance business as of December 31, 2023. The maximum borrowing capacity under the agreements as of December 31, 2024 and 2023 was $200.0 million. On October 16, 2017, a subsidiary of Fortegra issued $125.0 million of 8.50% Fixed Rate Resetting Junior Subordinated Notes due October 2057. Substantially all of the net proceeds were used to repay the existing secured credit agreement at that time, which was terminated thereafter. Beginning on October 15, 2027, the Company may redeem the 2017 Notes at par plus accrued and unpaid interest. On November 7, 2024, Fortegra issued $150.0 million of 9.25% Fixed Rate Resetting Junior Subordinated Notes due November 2064 (“the 2024 Notes”). The proceeds of the 2024 Notes were used to repay outstanding indebtedness under the Company’s credit agreement, for insurance company growth capital and general corporate purposes. Beginning on November 15, 2029, the Company may redeem the 2024 Notes at par plus accrued and unpaid interest. On June 20, 2007, a subsidiary of Fortegra issued $35.0 million of preferred trust securities due June 15, 2037. Interest is payable quarterly at an interest rate of SOFR plus 4.10% plus a spread adjustment (previously, LIBOR plus 4.10%). The Company may redeem the preferred trust securities, in whole or in part, at a price equal to the full outstanding principal amount of such preferred trust securities outstanding plus accrued and unpaid interest. Consolidated Comparison of Cash Flows ($ in thousands) Year Ended December 31, 2024 2023 Cash and cash equivalents provided by (used in): Operating activities $ 240,756 $ 71,452 Investing activities (322,985) (244,669) Financing activities 6,287 113,406 Effect of exchange rate changes on cash (355) 1,525 Change in cash, cash equivalents and restricted cash $ (76,297) $ (58,286) Operating Activities Cash provided by operating activities was $240.8 million for the year ended December 31, 2024. In 2024, the primary sources of cash from operating activities included growth in insurance premiums written resulting in increases in policy liabilities and unpaid claims, deferred revenues and unearned premiums, which were partially offset by increases in accounts receivable and prepaid reinsurance premiums and decreases in reinsurance payables, and other liabilities and accrued expenses. Cash provided by operating activities was $71.5 million for the year ended December 31, 2023. In 2023, the primary sources of cash from operating activities included growth in insurance premiums written resulting in increases in deferred revenues, unearned premiums, policy liabilities and unpaid claims, reinsurance payables and other liabilities and accrued expenses which were partially offset by increases in notes and accounts receivable, reinsurance recoverable and prepaid reinsurance premiums. Investing Activities Cash used in investing activities was $323.0 million for the year ended December 31, 2024. In 2024, the primary use of cash was the purchases of investments outpacing proceeds from sales and maturities, in addition to the issuance of notes receivable exceeding proceeds from notes receivable. Cash used in investing activities was $244.7 million for the year ended December 31, 2023. In 2023, the primary uses of cash were the purchases of investments outpacing the proceeds from the sale of investments, as well as the acquisition of Premia. 74 Financing Activities Cash provided by financing activities was $6.3 million for the year ended December 31, 2024. In 2024, the cash provided was primarily from Fortegra’s issuance of $150.0 million of 9.25% Fixed Rate Resetting Junior Subordinated Notes due November 2064 (the “2024 Notes”), partially offset by repayments of its revolving line of credit of $130 million and the payment of common and preferred dividends. Cash provided by financing activities was $113.4 million for the year ended December 31, 2023. In 2023, the cash provided was primarily proceeds from corporate borrowings and mortgage warehouse facilities which exceeded repayments, partially offset by non-controlling interests distributions and the payment of dividends. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company’s significant accounting policies are described in Note (2) Summary of Significant Accounting Policies. As disclosed in Note (2), the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Impairment Goodwill and Intangible Assets, net The initial measurement of goodwill and intangibles requires judgment concerning estimates of the fair value of the acquired assets and liabilities. Goodwill and indefinite-lived intangible assets are not amortized but subject to tests for impairment annually or if events or circumstances indicate it is more likely than not they may be impaired. Finite-lived intangible assets are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. At both December 31, 2024 and 2023, we had two reporting units for goodwill impairment testing, of which the fair value significantly exceeded carrying value as of that date. See Note (9) Goodwill and Intangible Assets, net. Reserves Unpaid claims are reserve estimates that include an amount determined from individual case estimates and loss reports, and an amount, based on past experience, for losses incurred but not reported (IBNR) that are established in accordance with GAAP using generally accepted actuarial methods. The Company uses a number of algorithms in establishing its unpaid claims reserves. These algorithms are used to calculate unpaid claims as a function of paid losses, earned premiums, target loss ratios, in-force amounts, unearned premium reserves, industry recognized morbidity tables or a combination of these factors. In arriving at the IBNR reserves, the Company conducts an actuarial analysis on a basis gross of reinsurance. The same estimates used as a basis in calculating the gross IBNR reserves are then used as the basis for calculating the net IBNR reserves, which take into account the impact of reinsurance. Anticipated future loss development patterns form a key assumption underlying these analyses. Our claims are generally reported and settled quickly, resulting in consistent historical loss development patterns. From the anticipated loss development patterns, a variety of actuarial loss projection techniques are employed, such as the chain ladder method, the Bornhuetter-Ferguson method and expected loss ratio method. The unpaid claims reserves represent the Company’s best estimates, generally involving actuarial projections at a given time. Actual claim costs are dependent upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. The Company periodically reviews and updates its methods of making such unpaid claims reserve estimates and establishing the related liabilities based on our actual experience. The Company has not made any changes to its methodologies for determining unpaid claims reserves in the periods presented. During the years ended December 31, 2024, 2023 and 2022, the Company experienced favorable prior year development of $0.6 million, $11.2 million and $0.9 million, respectively. In 2024, the $0.6 million favorable prior year development was 75 primarily driven by lower than expected claims paid development in our commercial lines of business. In 2023, the $11.2 million favorable prior year development was primarily driven by lower than expected claims paid development in our commercial lines of business for the 2018 and 2020 accident years. In 2022, the $0.9 million favorable prior year development was primarily due to lower-than-expected claim severity in our commercial lines business. Management considers the prior year development for all three 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. For the year ended December 31, 2024, net losses and loss adjustment expenses were $722.2 million, which resulted to a loss ratio of 45.5%. Without the $0.6 million of favorable prior year development, the 2024 loss ratio would have been approximately 0.1% higher. For comparison, the 2023 and 2022 loss ratios were 40.1% and 37.7%, respectively. In general, the Company's loss ratio results have been predictable and consistent over time, with the increase over prior year periods driven by the product mix increasing toward lines with higher loss ratios and lower acquisition ratios. Actuarial estimates are subject to estimation variability, and while management uses its best judgment in establishing the estimate of required unpaid claims, different assumptions and variables could lead to significantly different unpaid claims estimates. The variability in these estimates can, and have in the past, been significant to pretax income. 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. While management has used its best judgment in establishing the estimate of required unpaid claims, different assumptions and variables could lead to significantly different unpaid claims estimates. The determination of best estimates is affected by many factors, including but not limited to: • the quality and applicability of historical data, • current and future economic conditions, • trends in loss frequencies and severities for various causes of loss, • changes in claims reporting patterns, • claims settlement patterns and timing, • regulatory, legislative and judicial decisions, • morbidity patterns, and • the attitudes of claimants towards settlements. The adequacy of our unpaid claims reserves will be impacted by future trends that impact these factors. Two key measures of loss activity are loss frequency, which is the measure of the number of claims per unit of insured exposure, and loss severity, which is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls, changes in economic activity and weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations. If the actual level of loss frequency and severity are higher or lower than expected, the ultimate reserves required will be different than management’s estimate. Based on our actuarial analysis, we have determined that an aggregate change that is greater than 5% in loss frequency and loss severity is not reasonably likely given the Company’s low limit underwriting and low severity philosophies. The effect of higher and lower levels of loss frequency and severity on our ultimate costs for claims occurring in 2024 would be as follows: Accident Year 2024 Sensitivity Test Change in Loss & Frequency & Severity on Ultimate ($ in millions) Scenario Ultimate Cost Change 5% higher $ 757 $ 36 3% higher $ 743 $ 22 1% higher $ 728 $ 7 Base scenario $ 721 $ — 1% lower $ 714 $ (7) 76 3% lower $ 699 $ (22) 5% lower $ 685 $ (36) 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. Deferred Acquisition Costs The Company defers certain costs of acquiring new and renewal insurance policies, and other products as follows: 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 occurred. These capitalized costs are amortized as the related premium is earned. Other deferred acquisition costs are limited to prepaid direct costs, typically commissions and contract transaction fees, that resulted from successful contract transactions and would not have been incurred by the Company had the transactions not occurred. These capitalized costs are amortized as the related service and administrative fees are earned. The Company evaluates whether all deferred acquisition costs are recoverable at year end, and considers investment income in the recoverability analysis for insurance policy related deferred acquisition costs. As a result of the Company’s evaluations, no write-offs for unrecoverable deferred acquisition costs were recognized during the years ended December 31, 2024 and 2023. Amortization of deferred acquisition costs was $657.6 million, $583.6 million and $479.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. Revenue Recognition The Company earns revenues from a variety of sources: Earned Premiums, net Net earned premiums is from direct and assumed earned premiums consisting of revenue generated from the direct sale of insurance policies by the Company’s distributors and premiums written for insurance policies by another carrier and assumed by the Company. Whether direct or assumed, the premium is earned over the life of the respective policy using methods appropriate to the pattern of losses for the type of business. Methods used include pro rata, Rule of 78’s, and other actuarial methods. 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 PORCs, earned in the same manner. The amount ceded is proportional to the amount of risk assumed by the reinsurer. Service and Administrative Fees The Company earns service and administrative fees from a variety of activities. Such fees are typically positively correlated with transaction volume and are recognized as revenue as they become both realized and earned. Revenues from contracts with customers were $341.5 million and $341.4 million for the years ended December 31, 2024 and 2023, respectively, and include auto and consumer goods service contracts, motor clubs, other service and administrative fees, vessel related revenue and management fee income. See Note (14) Revenue from Contracts with Customers for more detailed disclosure regarding these revenues. Service fee revenue is recognized as the services are performed. 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 memberships 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 pro rata, Rule of 78’s, modified Rule of 78’s, or other 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. In addition, we also record on an earned basis a ceding fee paid by our reinsurers 77 on ceded insurance premiums. This fee reimburses us for administrative, underwriting, and acquisition expenses. These fees are earned primarily pro-rata over the remaining term of the policy. Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in earnings in the period that includes the enactment date. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting guidance requires these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. The Company establishes valuation allowances for deferred tax assets when, in its judgment, it concludes that it is more likely than not that the deferred tax assets will not be realized. These judgments are based on projections of future income, including tax-planning strategies, by individual tax jurisdictions. Changes in economic conditions and the competitive environment may impact the accuracy of the Company’s projections. On a quarterly basis, the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to the Company’s valuation allowance is appropriate. Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note (2) Summary of Significant Accounting Policies, in the accompanying consolidated financial statements. 78 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are exposed to interest rate risk related to borrowings in various businesses. These risks result primarily from changes in SOFR rates and the spread over SOFR rates related to the credit risks of our businesses. For fixed rate debt, interest rate fluctuations generally affect the fair value of our liabilities, but do not impact our earnings. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until such obligations mature or until we elect to prepay and refinance such obligations. If interest rates have risen at the time our fixed rate debt matures or is refinanced, our future earnings could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of maturity or refinancing may lower our overall interest expense. As of December 31, 2024, the Company’s insurance subsidiary had $125.0 million and $150.0 million of general purpose fixed rate debt outstanding maturing in 2057 and 2064, respectively. For general purpose floating rate debt, interest rate fluctuations primarily affect interest expense and cash flows. If market interest rates rise, our earnings could be adversely affected by an increase in interest expense. In contrast, lower interest rates may reduce our interest expense and improve our earnings, except to the extent that our borrowings are subject to interest rate floors. The floating interest rate risk of asset based financing is generally offset as the financing and the purchased financial asset are generally subject to the same interest rate risk. As of December 31, 2024, the Company’s insurance subsidiary had $35.0 million of floating rate corporate debt with a weighted average rate of 9.5% compared to $165.0 million of floating rate corporate debt as of December 31, 2023, with a weighted average rate of 7.3%. For floating rate risk of other asset based financing such as borrowings to finance acquisitions of real estate, we generally hedge our exposure to the variability of the benchmark index with an interest rate swap. As of December 31, 2024 and 2023, Tiptree’s holding company had no general purpose floating rate debt as it was repaid in June 2022. Our consolidated results include investments in bonds, loans or other interest bearing instruments. The fair values of such investments fluctuate in response to changes in market interest rates. Increases and decreases in interest rates generally translate into decreases and increases in fair values of these instruments. Some of these investments bear a floating rate of interest which subjects the Company to cash flow risk based upon changes in the underlying interest rate index. As noted above in the discussion of risks related to floating rate borrowings, the Company mitigates a significant amount of our floating rate risk by matching the funding of such investments with borrowings based upon the same interest rate index. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. As of December 31, 2024, we had $1,157.3 million invested in interest bearing instruments, which represents 74.8% of the total investment portfolio (including cash and cash equivalents). The estimated effects of a hypothetical increase in interest rates of 100 bps would result in a decrease to the fair value of the portfolio by $38.7 million. As of December 31, 2023, we had $879.6 million invested in interest bearing instruments, which represented 66% of the total investment portfolio. The estimated effects of a hypothetical increase in interest rates of 100 bps would result in a decrease to the fair value of the portfolio by $26.8 million. 79 Credit Risk We are exposed to credit risk in the form of available for sale securities, investments in loans, and other investments as follows: ($ in thousands) As of December 31, 2024 2023 Available for sale securities, at fair value (1) Obligations of state and political subdivisions $ 38,675 $ 45,459 Corporate securities 598,134 254,598 Asset backed securities 22,860 26,186 Certificates of deposit 1,145 1,724 Obligations of foreign governments 51,472 4,557 Loans, at fair value (2) Corporate loans 10,272 11,218 Other investments (3) Corporate bonds, at fair value 3,331 62,081 Debentures 25,320 25,648 Investment in credit fund 21,332 11,830 Other — 7,201 Total $ 772,541 $ 450,502 (1) The Company also holds investments in U.S. Treasury securities and obligations of U.S. government authorities and agencies of $395.6 million and $470.1 million as of December 31, 2024 and 2023, respectively. These investments do not represent a credit risk and are excluded. (2) The Company also holds investments in mortgage loans held for sale of $71.1 million and $58.3 million as of December 31, 2024 and 2023, respectively. These investments do not represent a credit risk and are excluded. (3) The Company also holds other investments of $3.1 million and $4.3 million as of December 31, 2024 and 2023, respectively. These investments do not represent a credit risk and are excluded. Credit risk within the Company’s investments represents the exposure to the adverse changes in the creditworthiness of individual investment holdings, issuers, groups of issuers, industries, and countries. Our policy is to invest in high-quality securities and to limit investments in the instruments that are either unrated or rated below investment grade. As of December 31, 2024 and 2023, 84% and 72%, respectively, of the investments subject to credit risk had investment grade ratings. In addition, our mortgage business also underwrites mortgage loans for the purpose of selling them into the secondary market. Due to the relatively short holding period, the credit risk associated with mortgage loans held for sale is not expected to be significant. See Note (6) Investments to the consolidated financial statements for more information regarding our investments in loans by type. Market Risk We are primarily exposed to market risk related to the following investments: ($ in thousands) As of December 31, 2024 As of December 31, 2023 Insurance Tiptree Capital - Other Total Insurance Tiptree Capital - Other Total Invesque $ — $ — $ — $ 719 $ 3,442 $ 4,161 Exchange traded funds 5,075 — 5,075 1,349 — 1,349 Other equity securities 99,393 4,152 103,545 25,045 37,753 62,798 Total equity securities $ 104,468 $ 4,152 $ 108,620 $ 27,113 $ 41,195 $ 68,308 A 10% increase or decrease in the fair value of such investments would result in $10.8 million and $6.8 million of unrealized gains and losses as of December 31, 2024 and 2023, respectively. Foreign Currency Exchange Rate Ris k We have foreign currency exchange rate risk associated with certain assets and liabilities related to our foreign operations. At December 31, 2024 and 2023, 88% and 93%, respectively of our invested assets were denominated in United States (U.S.) 80 Dollars. At that date, the largest foreign currency denominated asset balances were fixed income securities denominated in British Pound Sterling and Euros reported within available for sale securities, at fair value. At December 31, 2024 and 2023, 87% and 92%, respectively, of our insurance subsidiary’s combined unpaid premiums and deferred revenue were denominated in U.S. Dollars. Counterparty Risk We are subject to counterparty risk to the extent that we engage in derivative activities for hedging or other purposes. As of December 31, 2024 and 2023, the total fair value of derivative assets subject to counterparty risk, including the effect of any legal right of offset, totaled $3.1 million and $4.0 million, respectively. We generally manage our counterparty risk to derivative counterparties by entering into contracts with counterparties of high credit quality. Total reinsurance recoverables and prepaid reinsurance premiums were $2,039.1 million and $1,854.4 million of December 31, 2024 and 2023, respectively. Of those amounts, $835.3 million and $870.5 million, respectively, related to contracts with third-party captives in which we hold collateral or receive letters of credit in excess of the reinsurance receivables. The remainder is held with high quality reinsurers, substantially all of which have a rating of A or better by A.M. Best. As of December 31, 2024, the non-affiliated reinsurers from whom our insurance business has the largest reinsurance receivable balances represented $220.4 million, or 10.8% of the total, and included: Allianz Global Risks US Insurance Company (AM Best Rating: A+ rated), Allianz Reinsurance America, Inc. (AM Best Rating: A+ rated), and Ferian Re, LTD (AM Best Rating: Not Rated). Receivable balances from authorized reinsurers, such as the Allianz companies noted above, do not require collateral based on the authorized status of the parties. Receivable balances from unauthorized reinsurers are collateralized by assets on hand, assets held in trust accounts, and/or letters of credit. The Company monitors collateral values, authorization status, financial statements and AM Best ratings of its reinsurers periodically. As of December 31, 2024, the Company does not believe there is a risk of loss due to the concentration of credit risk in the reinsurance program given the related collateralization or reinsurer AM Best rating. ($ in thousands) As of December 31, 2024 2023 Third-party captives Reinsurance receivables and prepaid reinsurance premiums $ 835,331 $ 870,511 Collateral $ 1,105,124 $ 1,035,728 % Collateralized 132 % 119 % Professional Reinsurers Reinsurance receivables and prepaid reinsurance premiums $ 1,203,805 $ 983,900 Collateral $ 350,871 $ 643,853 % Collateralized 29 % 65 % Total Reinsurance receivables and prepaid reinsurance premiums $ 2,039,136 $ 1,854,410 Collateral $ 1,455,995 $ 1,679,581 % Collateralized 71 % 91 % We were also exposed to counterparty risk of approximately $286.3 million and $265.9 million as of December 31, 2024 and 2023, respectively, related to our retrospective commission arrangements; associated risks are offset by the Company’s contractual ability to withhold future commissions against the retrospective balances. In addition, we are exposed to counterparty risk of approximately $138.2 million and $134.1 million as of December 31, 2024 and 2023, respectively, related to our premium financing business. The risk associated with such arrangements is mitigated by the fact that we have the contractual ability to cancel the insurance policy and have premiums refunded to us by the insurer in the event of a counterparty default. 81 Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 5 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 F- 6 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022 F- 7 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 F- 8 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 F- 10 Notes to Consolidated Financial Statements F- 12 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Tiptree Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Tiptree Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Policy liabilities and unpaid claims – Refer to Notes 2 and 13 to the financial statements Critical Audit Matter Description Policy liabilities and unpaid claims include claims in the normal course of settlement and reserve estimates. The Company estimates policy liabilities and unpaid claims 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 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 F-2 Our audit procedures related to testing management’s significant estimates and assumptions used in determining policy liabilities and unpaid claims included the following, among others: • We tested the design and operating effectiveness of controls over policy liabilities and unpaid claims, including those related to the estimation and management’s review of the estimates as well as the selection of underlying assumptions. • 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 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 or performed actuarial peer review procedures to evaluate management’s application of actuarial methods and significant assumptions. ▪ We performed retrospective procedures comparing actual loss development with expected 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. /s/ Deloitte & Touche LLP New York, New York March 3, 2025 We have served as the Company's auditor since 2017. F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Tiptree Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Tiptree Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. 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, 2024, of the Company and our report dated March 3, 2025 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP New York, New York March 3, 2025 F-4 TIPTREE INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share data) As of December 31, 2024 2023 Assets: Investments: Available for sale securities, at fair value, net of allowance for credit losses $ 1,107,929 $ 802,609 Loans, at fair value 81,330 69,556 Equity securities 108,620 68,308 Other investments 53,084 111,088 Total investments 1,350,963 1,051,561 Cash and cash equivalents 320,067 468,711 Restricted cash 96,197 23,850 Notes and accounts receivable, net 799,131 684,608 Reinsurance recoverable 992,883 953,886 Prepaid reinsurance premiums 1,046,253 900,524 Deferred acquisition costs 565,872 565,746 Goodwill 206,706 206,155 Intangible assets, net 102,859 118,757 Other assets 213,858 165,515 Total assets $ 5,694,789 $ 5,139,313 Liabilities and Stockholders’ Equity Liabilities: Debt, net $ 427,089 $ 402,411 Unearned premiums 1,766,068 1,695,058 Policy liabilities and unpaid claims 1,298,081 844,848 Deferred revenue 695,772 673,085 Reinsurance payable 443,083 543,602 Other liabilities and accrued expenses 407,925 403,744 Total liabilities $ 5,038,018 $ 4,562,748 Stockholders’ Equity: Preferred stock: $ 0.001 par value, 100,000,000 shares authorized, none issued or outstanding $ — $ — Common stock: $ 0.001 par value, 200,000,000 shares authorized, 37,255,838 and 36,756,187 shares issued and outstanding, respectively 37 37 Additional paid-in capital 389,693 382,239 Accumulated other comprehensive income (loss), net of tax ( 27,750 ) ( 26,073 ) Retained earnings 95,718 60,663 Total Tiptree Inc. stockholders’ equity 457,698 416,866 Non-controlling interests: Fortegra preferred interests 77,679 77,679 Common interests 121,394 82,020 Total non-controlling interests 199,073 159,699 Total stockholders’ equity 656,771 576,565 Total liabilities and stockholders’ equity $ 5,694,789 $ 5,139,313 See accompanying notes to consolidated financial statements. F-5 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except share data) For the Year Ended December 31, 2024 2023 2022 Revenues: Earned premiums, net $ 1,471,930 $ 1,127,834 $ 904,765 Service and administrative fees 405,193 395,969 320,720 Ceding commissions 15,384 14,915 13,880 Net investment income 32,976 26,674 12,219 Net realized and unrealized gains (losses) 50,569 24,736 69,983 Other revenue 66,802 58,903 76,185 Total revenues 2,042,854 1,649,031 1,397,752 Expenses: Policy and contract benefits 841,207 601,794 452,605 Commission expense 648,819 603,033 522,686 Employee compensation and benefits 204,355 179,075 182,657 Interest expense 32,248 27,692 30,240 Depreciation and amortization 21,653 23,466 22,973 Other expenses 145,253 130,918 132,580 Total expenses 1,893,535 1,565,978 1,343,741 Income (loss) before taxes 149,319 83,053 54,011 Less: provision (benefit) for income taxes 61,652 43,056 50,450 Net income (loss) 87,667 39,997 3,561 Less: net income (loss) attributable to non-controlling interests 34,300 26,046 11,835 Net income (loss) attributable to common stockholders $ 53,367 $ 13,951 $ ( 8,274 ) Net income (loss) per common share: Basic earnings per share $ 1.44 $ 0.38 $ ( 0.23 ) Diluted earnings per share $ 1.30 $ 0.33 $ ( 0.23 ) Weighted average number of common shares: Basic 36,872,706 36,693,204 35,531,149 Diluted 37,926,792 37,619,095 35,531,149 Dividends declared per common share $ 0.49 $ 0.20 $ 0.16 See accompanying notes to consolidated financial statements. F-6 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) (in thousands) For the Year Ended December 31, 2024 2023 2022 Net income (loss) $ 87,667 $ 39,997 $ 3,561 Other comprehensive income (loss), net of tax: Change in unrealized gains (losses) on available for sale securities ( 1,012 ) 19,003 ( 55,290 ) Change in unrealized currency translation adjustments ( 2,431 ) 7,213 ( 7,351 ) Related (provision) benefit for income taxes 891 ( 8,105 ) 14,973 Other comprehensive income (loss), net of tax ( 2,552 ) 18,111 ( 47,668 ) Comprehensive income (loss) 85,115 58,108 ( 44,107 ) Less: comprehensive income (loss) attributable to non-controlling interests 33,425 30,801 8,104 Comprehensive income (loss) attributable to common stockholders $ 51,690 $ 27,307 $ ( 52,211 ) See accompanying notes to consolidated financial statements. F-7 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share data) Common stock Non-controlling interests Number of shares Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total Tiptree Inc. stockholders’ equity Fortegra preferred interests Common interests Total stockholders' equity Balance at December 31, 2021 34,124,153 $ 34 $ 317,459 $ ( 2,685 ) $ 68,146 $ 382,954 $ — $ 17,227 $ 400,181 Amortization of share-based incentive compensation — — 6,600 — — 6,600 — 869 7,469 Vesting of share-based incentive compensation 292,548 — ( 172 ) — — ( 172 ) — ( 1,086 ) ( 1,258 ) Shares issued in exchange for vested subsidiary awards (1) 114,353 — 866 — — 866 — ( 1,047 ) ( 181 ) Shares purchased under stock purchase plan ( 165,040 ) — ( 1,727 ) — — ( 1,727 ) — — ( 1,727 ) Shares issued upon exercise of warrants 1,999,989 2 13,722 — — 13,724 — — 13,724 Shares issued upon exercise of options 19,296 — — — — — — — — Transfer of liability awards — — 4,847 — — 4,847 — — 4,847 WP Transaction — — 41,092 7,193 — 48,285 77,679 41,044 167,008 Non-controlling interest contributions — — — — — — — 250 250 Non-controlling interest distributions — — — — — — — ( 3,939 ) ( 3,939 ) Net change in non-controlling interests and other — — ( 42 ) — — ( 42 ) — 491 449 Common stock dividends declared — — — — ( 5,759 ) ( 5,759 ) — — ( 5,759 ) Other comprehensive income (loss), net of tax — — — ( 43,937 ) — ( 43,937 ) — ( 3,731 ) ( 47,668 ) Subsidiary preferred dividends declared — — — — ( 3,384 ) ( 3,384 ) — — ( 3,384 ) Net income (loss) — — — — ( 4,890 ) ( 4,890 ) — 8,451 3,561 Balance at December 31, 2022 36,385,299 $ 36 $ 382,645 $ ( 39,429 ) $ 54,113 $ 397,365 $ 77,679 $ 58,529 $ 533,573 Amortization of share-based incentive compensation — — 5,845 — — 5,845 — 1,863 7,708 Vesting of share-based incentive compensation 315,881 1 ( 250 ) — — ( 249 ) — ( 470 ) ( 719 ) Shares issued upon exercise of options 55,007 — — — — — — — — Non-controlling interest distributions — — ( 1,751 ) — — ( 1,751 ) — ( 3,208 ) ( 4,959 ) Net change in non-controlling interests and other — — ( 4,250 ) — — ( 4,250 ) — 905 ( 3,345 ) Common stock dividends declared — — — — ( 7,401 ) ( 7,401 ) — — ( 7,401 ) Other comprehensive income (loss), net of tax — — — 13,356 — 13,356 — 4,755 18,111 Subsidiary preferred dividends declared — — — — ( 6,400 ) ( 6,400 ) — — ( 6,400 ) Net income (loss) — — — — 20,351 20,351 — 19,646 39,997 Balance at December 31, 2023 36,756,187 $ 37 $ 382,239 $ ( 26,073 ) $ 60,663 $ 416,866 $ 77,679 $ 82,020 $ 576,565 Amortization of share-based incentive compensation — — 8,407 — — 8,407 — 3,475 11,882 Vesting of share-based incentive compensation 499,651 — ( 953 ) — — ( 953 ) — ( 752 ) ( 1,705 ) Non-controlling interest contributions — — — — — — — 9,956 9,956 Non-controlling interest distributions — — — — — — — ( 644 ) ( 644 ) Net change in non-controlling interests and other — — — — — — — 332 332 Common stock dividends declared — — — — ( 18,312 ) ( 18,312 ) — — ( 18,312 ) Other comprehensive income (loss), net of tax — — — ( 1,677 ) — ( 1,677 ) — ( 875 ) ( 2,552 ) Subsidiary preferred dividends declared — — — — ( 6,418 ) ( 6,418 ) — — ( 6,418 ) Net income (loss) — — — — 59,785 59,785 — 27,882 87,667 Balance at December 31, 2024 37,255,838 $ 37 $ 389,693 $ ( 27,750 ) $ 95,718 $ 457,698 $ 77,679 $ 121,394 $ 656,771 (1) Exchange included $ 181 in cash . F-8 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share data) See accompanying notes to consolidated financial statements. F-9 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2024 2023 2022 Operating Activities: Net income (loss) attributable to common stockholders $ 53,367 $ 13,951 $ ( 8,274 ) Net income (loss) attributable to non-controlling interests 34,300 26,046 11,835 Net income (loss) 87,667 39,997 3,561 Adjustments to reconcile net income to net cash provided by (used in) operating activities Net realized and unrealized (gains) losses ( 50,569 ) ( 24,736 ) ( 69,983 ) Net (gain) loss on held for sale of business — — ( 3,825 ) Non-cash compensation expense 17,721 8,275 9,705 Amortization/accretion of premiums and discounts ( 6,002 ) ( 7,556 ) 976 Depreciation and amortization expense 21,653 23,466 22,973 Non-cash lease expense 7,815 7,951 9,301 Deferred provision (benefit) for income taxes 31,141 37,024 47,548 Amortization of deferred financing costs 1,213 1,125 1,341 Change in fair value of liability classified warrants 7,436 ( 1,769 ) ( 939 ) Other 434 148 1,137 Changes in operating assets and liabilities: Mortgage loans originated for sale ( 946,183 ) ( 876,914 ) ( 2,136,005 ) Proceeds from the sale of mortgage loans originated for sale 975,186 903,354 2,403,223 (Increase) decrease in notes and accounts receivable ( 110,947 ) ( 160,501 ) ( 13,227 ) (Increase) decrease in reinsurance recoverable ( 38,997 ) ( 505,700 ) ( 203,874 ) (Increase) decrease in prepaid reinsurance premiums ( 145,729 ) ( 175,054 ) ( 91,380 ) (Increase) decrease in deferred acquisition costs ( 126 ) ( 65,404 ) ( 119,552 ) (Increase) decrease in other assets ( 5,646 ) 20,921 7,463 Increase (decrease) in unearned premiums 71,010 337,622 233,484 Increase (decrease) in policy liabilities and unpaid claims 453,233 277,655 235,490 Increase (decrease) in deferred revenue 22,687 14,613 113,899 Increase (decrease) in reinsurance payable ( 100,519 ) 238,505 39,528 Increase (decrease) in other liabilities and accrued expenses ( 51,722 ) ( 21,570 ) ( 27,771 ) Net cash provided by (used in) operating activities 240,756 71,452 463,073 Investing Activities: Purchases of investments ( 955,296 ) ( 1,492,227 ) ( 1,197,383 ) Proceeds from sales and maturities of investments 642,820 1,296,337 1,260,594 Purchases of property, plant and equipment ( 4,031 ) ( 14,030 ) ( 10,727 ) Proceeds from the sale of businesses and other assets — — 742 Proceeds from notes receivable 101,063 117,834 85,435 Issuance of notes receivable ( 107,541 ) ( 132,857 ) ( 114,187 ) Business and asset acquisitions, net of cash and deposits — ( 19,726 ) ( 14,960 ) Net cash provided by (used in) investing activities ( 322,985 ) ( 244,669 ) 9,514 Financing Activities: Dividends paid ( 24,818 ) ( 13,731 ) ( 7,775 ) Cash received for the exercise of warrants — — 13,724 Net non-controlling interest (redemptions) contributions and other 7,641 ( 14,783 ) ( 5,590 ) Issuance of Fortegra Common Stock — — 98,433 Issuance of Fortegra Warrants — — 13,101 Issuance of Fortegra Additional Warrants (Warburg) — — 6,230 Issuance of Fortegra Preferred Stock — — 83,486 Payment of WP Transaction costs — — ( 12,910 ) Payment of debt issuance costs ( 7,140 ) ( 1,487 ) ( 1,380 ) Proceeds from borrowings and mortgage notes payable 1,235,881 1,431,526 2,365,320 Principal paydowns of borrowings and mortgage notes payable ( 1,205,277 ) ( 1,288,119 ) ( 2,666,098 ) Repurchases of common stock and other changes in additional paid-in capital — — ( 1,727 ) Net cash provided by (used in) financing activities 6,287 113,406 ( 115,186 ) F-10 TIPTREE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, Effect of exchange rate changes on cash ( 355 ) 1,525 ( 1,828 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 76,297 ) ( 58,286 ) 355,573 Cash, cash equivalents and restricted cash – beginning of period 492,561 550,847 195,086 Cash, cash equivalents and restricted cash – beginning of period - held for sale — — 9,360 Cash, cash equivalents and restricted cash – end of period 416,264 492,561 560,019 Less: Reclassification of cash to held for sale — — 9,172 Cash, cash equivalents and restricted cash – end of period $ 416,264 $ 492,561 $ 550,847 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest expense $ 28,708 $ 26,513 $ 29,442 Cash (received) paid during the period for income taxes $ 15,291 $ ( 15,178 ) $ 2,259 Supplemental Schedule of Non-Cash Investing and Financing Activities: Right of use asset obtained in exchange for lease liability $ 2,062 $ 3,338 $ 14,698 Bonds and trade receivables exchanged for corporate loans and equity securities $ — $ — $ 19,846 Shares issued in exchange for vested subsidiary awards $ — $ — $ 866 As of December 31, Reconciliation of cash, cash equivalents and restricted cash 2024 2023 2022 Cash and cash equivalents $ 320,067 $ 468,711 $ 538,065 Restricted cash 96,197 23,850 12,782 Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 416,264 $ 492,561 $ 550,847 See accompanying notes to consolidated financial statements. F-11 TIPTREE INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2024 (in thousands, except share data) (1) Organization Tiptree Inc. (together with its consolidated subsidiaries, collectively, Tiptree, the Company, or we) is a Maryland Corporation that was incorporated on March 19, 2007. Tiptree’s common stock trades on the Nasdaq Capital Market under the symbol “TIPT.” 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: Insurance and Mortgage. We refer to our non-insurance operations, assets and other investments, which is comprised of our Mortgage reportable segment and our non-reportable segments and other business activities, as Tiptree Capital. As of December 31, 2024, Fortegra was owned approximately 79.1 % by Tiptree Holdings, 17.7 % by Warburg and 3.2 % by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and management options, and the conversion of outstanding preferred stock. See Note (17) Stockholders' Equity for additional information. (2) Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements of Tiptree have been prepared in accordance with GAAP and include the accounts of the Company and its subsidiaries. The consolidated financial statements are presented in U.S. dollars, the main operating currency of the Company. 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 eliminated. Reclassifications As a result of changes in presentation, certain prior year amounts have been reclassified to conform to the current present ation. These reclassif ications had no effect on the reported results of operations. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Management makes estimates and assumptions that include, but are not limited to, the determination of the following significant items: • Fair value of financial assets and liabilities, including, but not limited to, securities, loans and derivatives • Value of acquired assets and liabilities; • Carrying value of goodwill and other intangibles, including estimated amortization period and useful lives; • Reserves for unpaid losses and loss adjustment expenses, estimated future claims and losses, potential litigation and other claims; • 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; and • Other matters that affect the reported amounts and disclosure of contingencies in the consolidated financial statements Although these and other estimates and assumptions are based on the best available estimates, actual results could differ materially from management’s estimates. Business Combination Accounting The Company accounts for business combinations by applying the acquisition method of accounting. The acquisition method requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at fair F-12 TIPTREE INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2024 (in thousands, except share data) value as of the closing date of the acquisition. 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 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. The fair value of any contingent consideration liability is remeasured at each reporting date with any change recorded in other expense in the consolidated statements of operations. Acquisition and transaction costs are expensed as incurred. In certain instances, the Company may acquire less than 100% ownership of an entity, resulting in the recording of a non-controlling inter