Item 1. Business
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
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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
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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.
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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.
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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
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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.
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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
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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, $130 million in aggregate
For the limited amount of gross property exposures that are in excess of desired retentions, Fortegra works with its distribution partners to purchase facultative reinsurance to cover those individual risks. In addition to the purchase of property catastrophe reinsurance, Fortegra also manages its property exposures by leveraging catastrophe models to monitor risk aggregations that are measured in terms of probable maximum loss (“PML”) and Tail Value-at-Risk (“TVAR”), both of which estimate the amount of loss it would expect in extreme loss scenarios.
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In Fortegra’s commercial insurance lines, its reinsurers tend to be highly rated, well-capitalized, professional third-party reinsurers. Fortegra typically contracts with third-party reinsurers that have attained an “A-” or better financial strength rating from A.M. Best. Those reinsurers that fall below this threshold are required to post collateral on a funds held basis or with letters of credit.
Counterparty Risk
Fortegra monitors its counterparty risk monthly through both adjustments to the sliding scale commission arrangements and a thorough evaluation of its reinsurance receivables and prepaid insurance premiums, and associated collateral.
($ 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 %
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(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
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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 $1.4 billion, including cash and cash equivalents and available for sale securities, at fair value. It had a weighted-average effective duration of 2.8 years, an average S&P rating of A+, and a book yield of 4.0%. The fixed maturity securities portfolio represented 89% of total investments.
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The following table provides a summary of Fortegra’s amortized cost and fair value on available for sale securities as of December 31, 2024 and 2023:
As of
($ 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
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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
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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.
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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.
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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.
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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 .
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