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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-29 · 142 added, 166 removed, 669 unchanged (32% of the section changed)

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Our 2024 highlights include:

• Tiptree reported net income of $14.0 million for the year ended December 31, 2023, compared to a net loss of $8.3 million in the prior year period, driven by growth in insurance operations and the decrease in tax expense related to the tax deconsolidation of Fortegra from $33.1 million in 2022 to $19.1 million in 2023, partially offset by lower mortgage and shipping revenues.

• 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 $61.9 million increased $8.9 million from $53.0 million in 2022, driven by growth in insurance operations.

• 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.

• Gross written premiums and premium equivalents were $2.7 billion for the year ended December 31, 2023, an increase of $484.7 million, or 21.4%, from the prior year period as a result of growth in specialty E&S and admitted insurance lines in the U.S.

and Europe, along with benefits from a book-roll transaction with one of Fortegra’s MGA partners.

• Net written premiums were $1.3 billion for the year ended December 31, 2023, an increase of 21.2%, 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.

• 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.

• 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, along with growth in net investment income.

• 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 25.7% in 2023 as compared to 14.6% in 2022.

The increases were driven by growth in underwriting and fee revenues and increased net investment income.

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 $452.6 million as of December 31, 2023, compared to $338.7 million as of December 31, 2022, with the increase driven by net income during the year as well as an improvement in the accumulated other comprehensive loss position, which was $31.1 million as of December 31, 2023, compared to $52.7 million as of December 31, 2022.

• As of December 31, 2023, Fortegra held an outstanding balance of $130.0 million on its revolving line of credit, as compared to a balance of $46.0 million as of September 30, 2023.

The increase in borrowings was primarily to fund statutory capital requirements and general corporate purposes.

• In December 2023, Fortegra entered into 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.

• 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 loss before taxes was $3.3 million for the year ended December 31, 2023, as compared to income of $0.9 million in 2022, with the decrease driven by declines in origination volumes and negative fair value adjustments on the mortgage servicing portfolio.

• 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.

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 the Annual Report on Form 10-K.

Generally, our businesses are positively affected by a healthy U.S.

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Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches.

The types of products Fortegra offers tend to have limited aggregation risk and limited exposure to catastrophic and residual risk.

The business has historically generated significant fee-based revenues by incorporating value-add coverages and services.

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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, rising 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 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.

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Many of those investments are held at fair value.

In recent periods, the U.S.

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 interest income on investments.

The weighted average duration of our fixed income available for sale securities is less than three years.

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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.

Rising 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.

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 in recent periods resulted in a sharp reversal of those trends, with volumes and margins declining significantly.

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 rising or elevated mortgage rates could have a materially negative impact on our mortgage operations, and is likely to be only partially mitigated by the improvement in mortgage servicing revenues.

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.

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Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations.

A continuation of rising rates could have a material impact on our costs of floating rate debt.

RESULTS OF OPERATIONS

The following is a summary of our consolidated financial results for the years ended December 31, 2024 and 2023.

In 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.

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.

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Adjusted net income is presented after the impacts of non-controlling interests.

For the year ended December 31, 2023, revenues were $1,649.0 million, which increased $251.3 million, or 18.0%, compared to the prior year period.

The changes were primarily driven by growth in earned premiums, net, and service and administrative fees in our insurance business, partially offset by lower mortgage and shipping revenues compared to the prior year periods.

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.

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($ in thousands) Year Ended December 31,

Net realized gains - Maritime transportation $ — $ 34,803

Net realized and unrealized gains (losses) - Invesque $ (3,536) $ (11,293)

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Net Income (Loss) Attributable to common stockholders

For the year ended December 31, 2023, the net income attributable to common stockholders was $14.0 million, compared to a net loss of $8.3 million in the prior year period.

The increase was driven by growth in Fortegra’s underwriting and fee operations, and tax expense associated with the tax deconsolidation of Fortegra of $19.1 million in 2023, compared to $33.1 million in 2022, partially offset by the gain on the sale of our vessels in 2022.

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

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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,

($ in thousands) Year Ended

Insurance $ 1,973,709 $ 1,593,070

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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 year ended December 31, 2023 and 2022.

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

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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.

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.

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Net investment income 32,976 26,674 6,302 23.6 %

Net realized and unrealized gains (losses) (4,207) (20,347) 16,140 (79.3) %

Net realized and unrealized gains (losses) 8,496 (4,207) 12,703 NM%

Other revenue 39,730 31,885 7,845 24.6 %

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Revenues - Year Ended December 31, 2024 compared to 2023

For the year ended December 31, 2023, total revenues increased 27.6%, to $1,593.1 million, as compared to $1,248.8 million for the year ended December 31, 2022.

Earned premiums, net of $1,127.8 million increased $223.1 million, or 24.7%, driven by growth in specialty E&S and admitted insurance lines.

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.

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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 losses were $4.2 million, an improvement of $16.1 million, as compared to net realized and unrealized losses of $20.3 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 gains on AFS securities impacting OCI for the year ended December 31, 2023 were $19.0 million, driven by positive fair value adjustments on mortgage-backed securities and corporate bonds and other investments.

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

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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 $11.2 million for the year ended December 31, 2023, primarily 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, 2022, the Company experienced favorable prior year development of $0.9 million, primarily as a result of lower-than-expected claim severity in our commercial lines of business.

For the periods presented, net losses and adjustment expenses did not include any significant catastrophic losses or regional concentration exposure.

The increase in member benefit claims of $28.3 million, or 31.1%, was driven by growth in vehicle service contracts and the impacts of inflation on replacement costs and labor rates.

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 $26.4 million, or 30.1%, driven by continued investment in data science, European platform expansion, and to support continued growth in the U.S.

insurance business.

Other expenses increased by $18.0 million, or 22.8%, driven primarily by investment in data science, technology and marketing expenses, and professional fees associated with the acquisition of Premia.

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.

The increase in interest expense of $5.8 million, or 28.8%, was primarily driven by 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, 2023, depreciation and amortization expense was $21.4 million, including $16.9 million of intangible amortization related to purchase accounting associated with the acquisitions of Fortegra, Smart AutoCare, Sky Auto, ITC and Premia, as compared to $18.6 million, including $16.2 million of intangible amortization from purchase accounting in 2022.

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

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)

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See Note (8) Reinsurance Recoverable and Prepaid Reinsurance Premiums and Note (14) Revenue from Contracts with Customers within the respective periods for more information.

(2) The premium equivalents metric excludes amounts received from failure to perform vehicle service contracts held in off-balance sheet trusts and premium finance volumes as it was determined to be unlikely these amounts will be recognized as revenue.

Amounts for the years ended December 31, 2022 and 2021 have been conformed resulting in a reduction of premium equivalents of $418 million and $258 million, respectively.

This change only impacted the premium equivalents metric and did not impact the Company’s financial statements, including its notes to the consolidated financial statements.

Total gross written premiums and premium equivalents for the year ended December 31, 2023 were $2,747.9 million, representing an increase of $484.7 million, or 21.4%.

The growth is driven by a combination of factors including expanding Fortegra’s distribution partner network, growing specialty admitted and E&S insurance lines, and increasing penetration in the vehicle service contract sector.

For the year ended December 31, 2023, Insurance increased by $496.2 million, or 26.3%, driven by growth in specialty commercial lines, including E&S and admitted business.

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 $2,368.1 million, representing an increase of $361.6 million, or 18.0%, from December 31, 2022 to December 31, 2023, as a result of growth in gross written premiums and premium equivalents, primarily related to E&S and admitted insurance lines, including the book roll transaction with one of Fortegra’s MGA partners.

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

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Insurance $ 1,438,952 $ 1,319,948 $ 1,089,390

Net written premiums for the year ended December 31, 2023 were $1,319.9 million, representing an increase of $230.6 million, or 21.2%, driven by growth in commercial E&S lines.

For the year ended December 31, 2023, commercial lines increased by $233.8 million, or 26.5%, driven by growth in specialty E&S and admitted business, including a book-roll transaction of $125.1 million with one of Fortegra’s distribution partners.

For the year ended December 31, 2023, personal lines decreased by $3.2 million, or 1.6%, driven by declines in personal credit lines.

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

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.

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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 76.3%, a decrease of 0.4% from the prior year period, which consists of a loss ratio of 40.1%, compared to 37.7% in the prior year period, and an acquisition ratio of 36.2%, compared to 39.0% in the prior year period.

The loss ratio increase was driven by a shift in business mix towards commercial lines and increases in repair and labor costs on vehicle service contracts.

The decrease in the acquisition ratio was driven by the shift in business mix toward commercial lines and impacts from sliding scale commission structures.

The operating expense ratio was 14.0%, as compared to 13.7% in the prior year

The increase in the operating expense ratio was a result of continued investment in data science, European platform expansion, and to support continued growth in U.S.

insurance lines.

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 year ended December 31, 2023 and 2022.

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,

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(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 $1,500.0 million for the year ended December 31, 2023 as compared to $1,200.4 million for the year ended December 31, 2022.

Total underwriting and fee revenues increased $299.6 million, or 25.0%, driven by growth in all business lines.

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 $76.2 million, or 26.9%, driven by growth in vehicle service contracts and premium finance offerings, in addition to acquisitions of Premia in 2023 and ITC in 2022.

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 $75.6 million, or 27.1%, driven by growth in all product lines.

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 $12.5 million, or 13.2%, driven by growth in vehicle service contracts and the acquisition of Premia and ITC, partially offset by increased member benefit claims associated with the impacts of inflation on replacement costs and labor rates.

Services increased by $6.3 million, or 5.9%, driven by growth in vehicle service contracts and premium finance offerings.

Return on Average Equity

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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.

As of December 31, 2023, Tiptree Capital - Other includes our Invesque shares and other investments.

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.

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Adjusted net income $ 1,531 $ (1,082)

$ (1,082) $ (4,658)

Adjusted return on average equity 2.8 % (2.0) %

(2.0) % (8.1) %

(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, 2023, $876.9 million of loans were funded, compared to $1,134.4 million for the prior year period, a decrease of $257.4 million, or 22.7%, driven by increase in mortgage interest rates compared to the prior year period.

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, 2023 were $34.2 million, compared to $51.3 million in the prior year period, a decrease of $17.1 million or 33.3%.

The primary driver of decreased gain on sale revenues was the decline in volumes and negative fair value adjustment in mortgage servicing rights of $1.9 million in 2023 compared to a positive fair value adjustment of $7.0 million in the prior year period.

Other revenue for the year ended December 31, 2023 was $19.6 million, compared to $18.9 million in the prior year period, an increase of $0.7 million, or 3.9%, driven by increased servicing revenues.

As of December 31, 2023, the mortgage servicing asset was $40.8 million, a decrease from $41.4 million as of December 31, 2022.

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, 2023, employee compensation and benefits were $34.0 million, compared to $41.6 million in the prior year period, a decrease of $7.6 million or 18.2%.

The decrease was driven primarily by reduced commissions on lower origination volumes.

For the year ended December 31, 2023, interest expense was at $1.9 million, an increase of $0.2 million, or 13.8%, with the increase driven by higher interest rates.

For the year ended December 31, 2023, other expenses were $20.6 million, compared to $25.3 million in the prior year period, a decrease of $4.7 million, with the decrease driven by a reduction of mortgage operational expenses, including marketing costs.

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.

Income (loss) before taxes

The loss before taxes for the year ended December 31, 2023 was $3.3 million, compared to income before taxes of $0.9 million in the prior year period driven by a decline in volumes.

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

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Results of Operations

Year Ended December 31,

($ in thousands) Total revenue Income (loss) before taxes

($ in thousands) Year Ended December 31,

Net realized and unrealized gains (losses)

$ (905) $ (5,289)

Senior living (Invesque) $ (9,342) $ (16,015) $ (9,342) $ (16,015)

Maritime transportation (1)

Total revenue

$ 3,231 $ 2,097

Employee compensation and benefits

Depreciation and amortization

Other expenses 2,879 4,685

Total expenses

$ 3,394 $ 5,361

Total $ 2,097 $ 78,710 $ (3,264) $ 31,403

(1) Includes $5.4 million and $15.1 million of expenses related to our Maritime transportation operations for the years ended December 31, 2023 and 2022, respectively.

(2) Includes asset management, our formerly held for sale mortgage originator (Luxury) for the year ended December 31, 2022, as it was deconsolidated on July 1, 2022, and certain intercompany elimination transactions.

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.

Tiptree Capital - Other earns revenues from the following sources:

net interest income;

revenues on our formerly held for sale mortgage originator (Luxury);

realized and unrealized gains and losses on the Company’s investment holdings (including Invesque);

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, 2023 were $2.1 million compared to $78.7 million in the prior year period with the decline driven by the deconsolidation of Luxury effective July 1, 2022, and the sale of five vessels, partially offset by investment gains on securities in the Company’s investment holdings and decreased investment losses on Invesque in 2023 compared to 2022.

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, 2023 was $3.3 million, compared to the income before taxes of $31.4 million in the prior year period.

The decrease was driven by the same factors that impacted revenues.

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)

($ in thousands) Year Ended December 31,

Senior living (Invesque) $ — $ —

Maritime transportation (2,769) 12,707

Other 3,692 920

Total $ 923 $ 13,627

(1) See “—Non-GAAP Reconciliations” for a discussion of non-GAAP financial measures.

Adjusted net income decreased to $0.3 million for the year ended December 31, 2024 compared to $0.9 million in 2023.

The decrease was driven from the sale of five vessels in 2022, partially offset by interest income on cash and cash equivalents and U.S.

Treasury securities recorded in other income.

The following table presents a summary of corporate results for the following periods:

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Employee incentive compensation expense 20,425 21,230

Interest expense — 4,225

Depreciation and amortization 1,450 1,327

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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 $30.1 million for the year ended December 31, 2023, compared to $27.2 million for the prior year period, driven by an increase in accrued bonus expense.

Of the incentive compensation expense in the year ended December 31, 2023 and 2022, $6.3 million was stock-based compensation expense.

As of December 31, 2023, the Company had no outstanding borrowings at the holding company and therefore incurred no interest expense for the year ended December 31, 2023 compared to $4.2 million in 2022.

Other expenses of $8.8 million decreased by $5.4 million from the year ended December 31, 2022, primarily driven by decreased consulting and professional fees.

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 $43.1 million for the year ended December 31, 2023 and $50.5 million for the year ended December 31, 2022 is reflected as a component of net income (loss).

For the year ended December 31, 2023, the Company’s effective tax rate was equal to 51.8%.

For the year ended December 31, 2022, the Company’s effective tax rate was equal to 93.4%.

The effective rates for the year ended December 31, 2023 and 2022 were significantly higher than the U.S.

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.

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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.

As of December 31, 2022, this deferred tax liability was $40.0 million, of which $14.1 million was recorded directly in stockholders’ equity, a benefit of $2.4 million in other comprehensive income and $28.3 million as a provision for income taxes in the consolidated statements of operations for the year ended December 31, 2022.

Additional one time impacts from the transaction incurred in 2022 caused $4.8 million of expense, leading to $33.1 million of expense in the statement of operations.

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.

On August 16, 2022, the U.S.

government enacted Public Law no.

117-169, commonly referred to as the Inflation Reduction Act, which, among other things, establishes a corporate minimum tax on book earnings and an excise tax on stock buybacks.

It is not expected that this legislation will have a material financial impact on the Company or its operations.

Balance Sheet Information

Tiptree’s total assets were $5.1 billion as of December 31, 2023, compared to $4.0 billion as of December 31, 2022.

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, 2023, there were 36,756,187 shares of common stock outstanding as compared to 36,385,299 shares as of December 31, 2022, with the increase driven by the vesting of share-based incentive compensation and the exercise of options.

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.

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

Tiptree Capital

($ in thousands) Insurance Mortgage Other Corporate Total

($ in thousands) Tiptree Capital

Insurance Mortgage Other Corporate Total

Total assets $ 5,432,987 $ 202,664 $ 36,818 $ 22,320 $ 5,694,789

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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 $61.7 million a s of December 31, 2023.

(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.

NON-GAAP MEASURES AND RECONCILIATIONS

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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,

($ in thousands) Year Ended

Total revenues $ 1,973,709 $ 1,593,070

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(1) Ceding fees were included in service and administrative fees on the statement of operations.

(2) Cash and cash equivalent interest income were included in other revenue 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.

The year ended December 31, 2022 has been conformed resulting in a reduction of underwriting and fee revenues of $56.5 million.

This change only impacted the underwriting and fee revenues metric and did not impact the Company’s consolidated financial statements, including its notes to the consolidated financial statements.

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.

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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.

($ in thousands) Year Ended December 31,

($ in thousands) Year Ended

Income (loss) before income taxes $ 183,158 $ 129,816

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$ 424,695 $ 354,739

(1) Cash and cash equivalent interests income were included in other revenue on the statement of operations.

(2) Underwriting and fee margin exclude the cash and cash equivalent interest income.

The year ended December 31, 2022 has been conformed resulting in a reduction of underwriting and fee margin of $2.5 million.

This change only impacted the underwriting and fee margin metric and did not impact the Company’s consolidated financial statements, including its notes to the consolidated financial statements.

(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

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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, Defend in 2019, Smart AutoCare, Sky Auto in 2020, ITC in 2022 and Premia in 2023.

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.

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29.2 % (2.0) % 0.9 % NM% 15.4 %

The footnotes below correspond to the tables above, under “—Adjusted Net Income - Non-GAAP” and “—Adjusted Return on Average Equity - Non-GAAP”.

(1) Net realized and unrealized gains (losses) added back in Adjusted net income excludes net realized and unrealized gains (losses) from the mortgage segment, those relating to our held-for-sale mortgage originator (Luxury), and unrealized gains (losses) on mortgage servicing rights.

(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 year ended December 31, 2023 and 2022, included in other expenses were expenses related to banker and legal fees associated with the acquisitions of Premia and ITC.

(4) For the year ended December 31, 2023 and 2022.

non-cash fair-value adjustments represent a change in fair value of the Fortegra Additional Warrant liability which are added-back to adjusted net income.

For the 2022 periods, maritime transportation depreciation and amortization was deducted as a reduction in the value of the vessels.

(5) For the year ended December 31, 2023 and 2022, included in the adjustment is an add-back of $19.1 million and $33.1 million, respectively, related to deferred tax expense from the WP Transaction.

(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.

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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 provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.

The following table

provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares.

($ in thousands, except per share information)

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LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are unrestricted cash, cash equivalents and other liquid investments and distributions from operating subsidiaries, including income from our investment portfolio and sales of assets and investments.

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.

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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, 2023, cash and cash equivalents, excluding restricted cash, were $468.7 million, compared to $538.1 million at December 31, 2022, a decrease of $69.4 million, primarily driven by an increase in investments.

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.

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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 consolidated financial statements, for additional information regarding our mortgage warehouse borrowings.

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.

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Insurance $ 310,000 $ 290,000 $ 24,145 $ 19,531

Corporate — — — 4,615

Total $ 310,000 $ 290,000 $ 24,145 $ 19,531

The balance of the corporate credit facility was repaid during June 2022 as part of the WP Transaction.

See Note (11) Debt, net in the notes to consolidated financial statements for details for prior periods.

As of December 31, 2023 and 2022, a total of $130.0 million and $0 , respectively, was outstanding under the revolving line of credit in our insurance business.

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.

The increase in borrowings was primarily to fund statutory capital requirements and general corporate purposes.

On October 21, 2022, a subsidiary of Fortegra entered into a Second Amended and Restated Credit Agreement by and among Fortegra, and its subsidiary, LOTS Intermediate Co., as borrowers, the lenders from time to time party thereto, certain of Fortegra’s subsidiaries, as guarantors, and Fifth Third Bank, National Association, as the administrative agent and issuing lender (the “Fortegra Credit Agreement”).

The Fortegra Credit Agreement provides for a $200.0 million revolving credit facility, all of which is available for the issuance of letters of credit, with a sub-limit of $25.0 million for swing loans and matures on October 1, 2027.

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

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Cash provided by operating activities was $240.8 million for the year ended December 31, 2024.

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.

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 2022, the primary sources of cash from operating activities included proceeds from mortgage loans outpacing originations and growth in insurance premiums written resulting in increases in unearned premiums, policy liabilities and unpaid claims and deferred revenues, which were partially offset by increases in deferred acquisition costs, 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.

Cash provided by investing activities was $9.5 million for the year ended December 31, 2022.

In 2022, the primary sources of cash were the proceeds of sales and maturities of investments outpacing the purchases of investments offset by the acquisition of ITC.

Financing Activities

Cash provided by financing activities was $6.3 million for the year ended December 31, 2024.

In 2023, the cash provided was primarily proceeds from corporate borrowings at Fortegra and mortgage warehouse facilities which exceeded repayments, partially offset by non-controlling interests distributions and the payment of common and preferred dividends.

Cash used in financing activities was $115.2 million for the year ended December 31, 2022.

In 2022, principal repayments on mortgage warehouse facilities exceeded proceeds from borrowings, which was partially offset by cash received from the WP Transaction and the exercise of warrants.

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

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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, 2023 and 2022, we had two reporting units for goodwill impairment testing, of which the fair value substantially exceeded carrying value as of that date.

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.

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

During the year ended December 31, 2023 and 2022, the Company experienced favorable prior year development of $11.2 million and $0.9 million, respectively, compared to unfavorable prior year development of $1.2 million for the year ended December 31, 2021.

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

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 is primarily due to lower-than-expected claim severity in our commercial lines business.

In 2021, the $1.2 million increase in prior year development is primarily due to higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business.

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.

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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.

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.

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.

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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 on ceded insurance premiums.

In addition, we also record on an earned basis a ceding fee paid by our reinsurers

on ceded insurance premiums.

This fee reimburses us for administrative, underwriting, and acquisition expenses.

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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.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis