Tiptree Financial Inc. (NASDAQ:TIPT) Q1 2020 Earnings Conference Call - Final Transcript

May 08, 2020 • 09:00 am ET


Tiptree Financial Inc. (NASDAQ:TIPT) Q1 2020 Earnings Conference Call - Final Transcript


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Michael Barnes

positive, profits within Tiptree Capital were meaningfully impacted by unrealized mark-to-market losses on our investment in Invesque.

Like many companies operating in the skilled nursing and senior living sectors, Invesque has taken steps to conserve liquidity and in April suspended its dividend until the effects of their operations are fully known. Within shipping, the reduction in demand has affected charter rates for dry bulk commodities, with a notable exception of grain. However, the oversupply in oil markets has led to significant demand in floating storage, significantly increasing charter rates for product tankers. Overall, to date, we have seen a modest impact to our business operations from the economic lockdown.

As the U.S. and Europe begin the reopening process, we feel we are well-positioned to absorb the changing outlooks for consumer demand, global trade and financial markets. In short, we believe we are well-positioned to ride out this storm. The balance of 2020 will no doubt continue to have many challenges, but our commitment to our objectives of growing our insurance business, enhancing our results in Tiptree Capital and delivering superior long-term risk-adjusted returns for our shareholders will remain.

With that, I'll pass it to Sandra, who will take you through the financial results in more detail.

Sandra Bell

Thank you, Michael. On Page 4, we have presented the company's key metrics for the first-quarter 2020 compared to the prior-year period. Net loss before noncontrolling interests for the quarter was $60.6 million, a decrease of $64.9 million over the prior year. The decrease was primarily driven by unrealized losses on our investment in Invesque, as well as other equities, reflecting the disruption in global markets as a result of the COVID-19 pandemic.

Excluding investment gains and losses, revenues were up 18.7%, driven by improvements in Tiptree Insurance top-line results, including the addition of Smart AutoCare. Operating EBITDA for the quarter was $15.8 million, up 25% from the prior year due to growth in insurance operations, as well as positive contributions from Tiptree Capital, driven primarily by a full quarter of shipping operations with all five vessels under management.

On the bottom of the page, we show a walk from operating EBITDA to total pre-tax income, highlighting the key differences between the two metrics. Book value per share decreased to $9.73, driven by the net loss mentioned earlier. Despite the decline in book value, we believe that we maintained sufficient capital and liquidity to support our business. At quarter-end, cash and cash equivalents were $108.8 million, $84 million of which is held outside the statutory insurance entities.

Turning to Page 5, we highlight our capital allocated between Tiptree Insurance and Tiptree Capital, along with their respective returns, to assist investors in understanding Tiptree's enterprise value. When considering capital allocation decisions, we look at total capital, which includes corporate debt held at both the holding company and at our insurance subsidiaries. In February, we extended the maturity and upsized our corporate credit facility with a new $125 million five-year borrowing.

We evaluate our return on