10-Q 1 tfi10-q3312015.htm 10-Q TFI 10-Q 3312015
E


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
 
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly period ended March 31, 2015
OR
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from            to            
Commission File Number: 001-33549
Tiptree Financial Inc.
(Exact name of Registrant as Specified in Its Charter)
Maryland
 
38-3754322
(State or Other Jurisdiction of
 
(IRS Employer
Incorporation of Organization)
 
Identification No.)
 
 
 
 
 
 
780 Third Avenue, 21st Floor, New York, New York
 
10017
(Address of Principal Executive Offices)
 
(Zip Code)
(212) 446-1400
(Registrant’s Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨                    Accelerated filer ¨
Non-accelerated filer ¨                    Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

As of May 11, 2015, there were 31,945,338 shares, par value $0.001, of the registrant’s Class A common stock outstanding and 9,766,537 shares, par value $0.001, of the registrant’s Class B common stock outstanding.




E


Tiptree Financial Inc.
Quarterly Report on Form 10-Q
March 31, 2015
Table of Contents

ITEM
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)




TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except shares and per share data)

 
As of

March 31, 2015
 
December 31, 2014
Assets
(Unaudited)
 
As adjusted
Cash and cash equivalents – unrestricted
$
46,420

 
$
52,987

Cash and cash equivalents – restricted
27,701

 
28,045

Trading assets, at fair value
27,490

 
30,163

Investments in available for sale securities, at fair value (amortized cost: $175,631 at March 31, 2015 and $171,679 at December 31, 2014)
176,567

 
171,128

Mortgage loans held for sale, at fair value (pledged as collateral: $50,848 at March 31, 2015 and $28,049 at December 31, 2014)
51,962

 
28,661

Investments in loans, at fair value
2,545

 
2,601

Loans owned, at amortized cost – net of allowance
43,220

 
36,095

Notes receivable, net
22,030

 
21,916

Accounts and premiums receivable, net
52,104

 
39,666

Reinsurance receivables
276,118

 
264,776

Investments in partially-owned entities
157

 
2,451

Real estate
209,079

 
131,308

Intangible assets
112,981

 
120,394

Other receivables
37,243

 
36,068

Goodwill
92,118

 
92,118

Other assets
58,919

 
36,875

Assets of consolidated CLOs
1,890,002

 
1,978,094

Assets held for sale
5,330,151

 
5,129,745

Total assets
$
8,456,807

 
$
8,203,091

Liabilities and Stockholders’ Equity
 
 
 
Liabilities:
 
 
 
Trading liabilities, at fair value
$
23,428

 
$
22,573

Debt
473,640

 
363,199

Unearned premiums
307,056

 
299,826

Policy liabilities
66,070

 
63,365

Deferred revenue
58,972

 
45,393

Deferred tax liabilities
43,403

 
45,925

Commissions payable
9,950

 
12,983

Other liabilities and accrued expenses
77,848

 
63,928

Liabilities of consolidated CLOs
1,795,415

 
1,877,377

Liabilities held for sale and discontinued operations
5,203,782

 
5,006,901

Total liabilities
$
8,059,564

 
$
7,801,470

Commitments and contingencies (Note 16)

 

 
 
 
 
Stockholders’ Equity:
 
 
 
Preferred stock: $0.001 par value, 100,000,000 shares authorized, none issued or outstanding
$

 
$

Common stock - Class A: $0.001 par value, 200,000,000 shares authorized, 31,992,470 and 31,830,174 shares issued and outstanding respectively
32

 
32

Common stock - Class B: $0.001 par value, 50,000,000 shares authorized, 9,770,367 and 9,770,367 shares issued and outstanding respectively
10

 
10

Additional paid-in capital
273,014

 
271,090

Accumulated other comprehensive income
1,034

 
(49
)
Retained earnings
11,597

 
13,379

Total stockholders’ equity of Tiptree Financial Inc.
285,687

 
284,462

Non-controlling interests (including $88,341 and $90,144 attributable to Tiptree Financial Partners, L.P., respectively)
111,556

 
117,159

Total stockholders’ equity
397,243

 
401,621

Total liabilities and stockholders’ equity
$
8,456,807

 
$
8,203,091

See accompanying notes to consolidated financial statements.

Page F-2

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except shares and per share data)



Three months ended March 31,

2015

2014
Revenues:
 
 
As adjusted
Net realized and unrealized gains on investments
$
130

 
$
989

Interest income
2,296

 
3,992

Net credit derivative loss
(90
)
 
(264
)
Service and administrative fees
21,927

 

Ceding commissions
9,937

 

Earned premiums, net
37,353

 

Gain on sale of loans held for sale, net
2,593

 
975

Loan fee income
1,399

 
429

Rental revenue
9,369

 
4,456

Other income
3,096

 
289

Total revenue
88,010

 
10,866

 
 
 
 
Expenses:
 
 
 
Interest expense
5,129

 
2,814

Payroll and employee commissions
20,341

 
5,715

Commission expense
16,528

 

Member benefit claims
7,579

 

Net losses and loss adjustment expenses
12,450

 

Professional fees
4,628

 
1,074

Depreciation and amortization expenses
15,464

 
1,668

Acquisition costs
1,349

 

Other expenses
11,144

 
2,578

Total expense
94,612

 
13,849

 
 
 
 
Results of consolidated CLOs:
 
 
 
Income attributable to consolidated CLOs
15,663

 
14,615

Expenses attributable to consolidated CLOs
14,921

 
9,972

Net Income attributable to consolidated CLOs
742

 
4,643

(Loss) income before taxes from continuing operations
(5,860
)
 
1,660

Less: Provision for income taxes
(1,496
)
 
(652
)
 (Loss) income from continuing operations
(4,364
)
 
2,312

 
 
 
 
Discontinued operations:
 
 
 
Income from discontinued operations, net
2,345

 
1,290

Discontinued operations, net
2,345

 
1,290

Net (loss) income before non-controlling interests
(2,019
)
 
3,602

Less: net (loss) income attributable to noncontrolling interests - Tiptree Financial Partners, L.P.
(860
)
 
2,306

Less: net (loss) attributable to noncontrolling interests - Other
(180
)
 
(330
)
Net (loss) income available to common stockholders
$
(979
)
 
$
1,626

 
 
 
 
Net income (loss) per Class A common share:
 
 
 
Basic, continuing operations, net
$
(0.08
)
 
$
0.12

Basic, discontinued operations, net
0.05

 
0.03

Net income basic
(0.03
)
 
0.15

 
 
 
 
Diluted, continuing operations, net
(0.08
)
 
0.12

Diluted, discontinued operations, net
0.05

 
0.03

Net income dilutive
$
(0.03
)
 
$
0.15

 
 
 
 
Weighted average number of Class A common shares:
 
 
 
Basic
32,138,455

 
10,586,587

Diluted
32,138,455

 
10,586,587



See accompanying notes to consolidated financial statements.

Page F-3


TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)



 
Three Months Ended March 31,
 
2015
 
2014
 
 
 
As adjusted
Net (loss) income before non-controlling interests
$
(2,019
)
 
$
3,602

 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
Unrealized gains (losses) on available-for-sale securities:
 
 
 
Unrealized holding gains arising during the period
1,647

 
88

Related tax (expense)
(585
)
 
(31
)
Reclassification of (gains) included in net income
(15
)
 
(5
)
Related tax expense
5

 
2

Unrealized gains on available-for-sale securities, net of tax
1,052

 
54

 
 
 
 
Interest rate swap:
 
 
 
Unrealized (loss) on interest rate swap
(234
)
 

Related tax benefit
82

 

Reclassification of losses included in net income
281

 

Related tax (benefit)
(98
)
 

Unrealized gain on interest rate swap, net of tax
31

 

 
 
 
 
Other comprehensive income, net of tax
1,083

 
54

Comprehensive (loss) income
(936
)
 
3,656

Less: comprehensive (loss) income attributable to non-controlling interests - Tiptree Financial Partners, L.P.
(860
)
 
2,306

Less: comprehensive (loss) attributable to non-controlling interests - Other
(180
)
 
(330
)
Total comprehensive income available to common stockholders
$
104

 
$
1,680

























See accompanying notes to consolidated financial statements

Page F-4


TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(in thousands, except shares)


 
Number of Shares
 
Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A
 
Class B
 
Class A
 
Class B
 
Additional paid in capital
 
Accumulated
other
comprehensive
income (loss)
 
Retained
earnings
(deficit)
 
Non-controlling
interests - Tiptree Financial Partners, L.P.
 
Non-controlling
interests - Other
 
Total
Balance at December 31, 2014
31,830,174

 
9,770,367

 
$
32

 
$
10

 
$
271,090

 
$
(49
)
 
$
13,379

 
$
90,144

 
$
27,015

 
$
401,621

Stock-based compensation to directors, employees and other persons for services rendered
228,587

 

 

 

 
1,763

 

 

 

 

 
1,763

Non-controlling interest contributions to Care subsidiary

 

 

 

 

 

 

 

 
2,218

 
2,218

Other comprehensive loss, net of tax

 

 

 

 

 
1,083

 

 

 

 
1,083

Non-controlling interest distributions from Care subsidiary

 

 

 

 

 

 

 

 
(70
)
 
(70
)
Shares purchased under stock purchase plan
(66,291
)
 

 

 

 
(486
)
 

 

 

 

 
(486
)
Net changes in non-controlling interest

 

 

 

 
647

 

 

 
(943
)
 
(5,768
)
 
(6,064
)
Dividends declared

 

 

 

 

 

 
(803
)
 

 

 
(803
)
Net (loss) income

 

 

 

 

 

 
(979
)
 
(860
)
 
(180
)
 
(2,019
)
Balance at March 31, 2015
31,992,470

 
9,770,367

 
$
32

 
$
10

 
$
273,014

 
$
1,034

 
$
11,597

 
$
88,341

 
$
23,215

 
$
397,243
















See accompanying notes to consolidated financial statements

Page F-5

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)



 
Three months ended March 31,
 
2015
 
2014
 
 
 
As adjusted
Cash flows from operating activities:
 
 
 
Net (loss) income available to common stockholders
$
(979
)
 
$
1,626

Net (loss) income attributable to noncontrolling interests - Tiptree Financial Partners, L.P.
(860
)
 
2,306

Net (loss) attributable to noncontrolling interests - Other
(180
)
 
(330
)
Net (loss) income
(2,019
)
 
3,602

(Earnings) from discontinued operations
(2,345
)
 
(1,290
)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Net realized and unrealized loss (gain) – trading assets
539

 
(653
)
Non cash compensation expense

 
53

Increase in non cash interest from investments in loans

 
(99
)
Depreciation and amortization expense
15,465

 
1,574

Provision for loan losses
63

 

Amortization and write off of deferred financing costs
122

 
60

Accretion of mortgage note discount
15

 
(73
)
Increase in unearned premiums from acquisitions
7,230

 

Increase in other liabilities and accrued expenses
23,927

 
15,827

(Income)/ loss from investments in partially-owned entities, net
19

 
(344
)
Net (increase) decrease in loans originated for sale
(22,800
)
 
5,606

Deferred tax expense
(4,875
)
 
(1,385
)
(Increase) in other assets
(56,340
)
 
(1,602
)
Operating activities from CLOs
10,642

 
5,681

Cash (used in) provided by operating activities - continuing operations
(30,357
)
 
26,957

Cash provided by (used in) operating activities - discontinued operations
30,950

 
(324
)
Net cash (used in) provided by operating activities
593

 
26,633

Cash flows from investing activities:
 
 
 
Purchases of trading securities and loans carried at fair value

 
(52,372
)
Purchases of available for sale securities
(13,466
)
 

Purchases of real estate
(83,698
)
 
(69
)
Purchases of loans

 
(2,700
)
Purchases of fixed assets
(487
)
 
(2
)
Increase/ (decrease) in restricted cash
344

 
(9,834
)
Acquisitions, net cash
(3,000
)
 
6,689

Change in noncontrolling interest
2,149

 
(34
)
Proceeds from loan repayments

 
303

Proceeds from sales of trading securities and loans carried at fair value
3,211

 
35,064

Proceeds from sales and maturities of available for sale securities
8,892

 

Proceeds from distributions paid by partially owned entities
2,275

 
278

Investing activities from CLOs
34,595

 
42,046

Cash provided by (used in) investing activities - continuing operations
(49,185
)
 
19,369

Cash (used in) provided by investing activities from discontinued operations
(1,738
)
 
2,735

Net cash (used in) provided by investing activities
(50,923
)
 
22,104


Page F-6

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)


 
Three months ended March 31,
 
2015
 
2014
 
 
 
As adjusted
Cash flows from financing activities:
 
 
 
Proceeds from loans
329,773

 
6,598

Principal paydowns of loans and mortgage notes payable
(219,345
)
 
(6,082
)
Proceeds from issuance of common units of subsidiaries
1,718

 
400

Financing activities from CLOs
(39,171
)
 
(43,886
)
Cash provided by (used in) financing activities - continuing operations
72,975

 
(42,970
)
Cash (used in) financing activities - discontinued operations
(2,500
)
 
(1,500
)
Net cash provided by (used in) financing activities
70,475

 
(44,470
)
Net increase in cash
20,145

 
4,267

Cash and cash equivalents – unrestricted – beginning of period
81,348

 
120,557

Cash and cash equivalents – unrestricted – end of period
101,493

 
124,824

Less: Reclassification of cash to assets held for sale
55,073

 
23,825

Cash and cash equivalents of continuing operations – unrestricted – end of period
$
46,420

 
$
100,999

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
28,707

 
$
10,295

Cash paid for taxes
1,316

 
782

Noncash investing and financing activities:
 
 
 
Capital change due to equity compensation
$
1,763

 
$
400

     Net assets related to acquisitions

 
(3,275
)































See accompanying notes to consolidated financial statements.

Page F-7

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)


Basis of Presentation
The accompanying unaudited consolidated financial statements of Tiptree Financial Inc. (Tiptree and, together with its consolidated subsidiaries, collectively, the Company) have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The consolidated financial statements are presented in U.S. dollars, the main operating currency of the Company. The unaudited consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2014. In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, including normal recurring adjustments necessary to present fairly the Company’s financial position, results of operations, comprehensive income and cash flows for each of the interim periods presented. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2015.

(1) Organization

Tiptree is a Maryland Corporation that was incorporated on March 19, 2007. Until July 1, 2013, Tiptree operated under the name Care Investment Trust Inc. (which, for the period prior to July 1, 2013, we refer to as Care Inc.). Tiptree is a diversified holding company which conducts its operations through Tiptree Operating Company, LLC (the Company). Tiptree’s primary focus is on five reporting segments: insurance and insurance services, specialty finance, asset management, real estate, and corporate and other.

Tiptree’s Class A Common Stock is traded on the NASDAQ Capital Market under the symbol “TIPT”.

2015 Transactions

On January 1, 2015, Fortegra exercised an option to purchase the remaining 37.6% ownership interest in ProtectCELL it did not own and now owns 100% of ProtectCELL. Fortegra made an initial payment of $3,000, and the Company expects to make the final payment later in 2015.

On January 26, 2015, Tiptree entered into a first amendment to its existing credit agreement with Fortress Credit Corp. (Fortress) (the Amendment). The Amendment provides for additional term loans in an aggregate principal amount of $25,000 to Tiptree and will have the same maturity date, margin above LIBOR, principal repayment terms, and conditions and covenants as the existing term loans under the existing Fortress credit agreement, subject to certain exceptions in the Amendment. Tiptree is required to prepay $25,000 of the loan upon the closing of the sale of Philadelphia Financial Group Inc. (PFG). In addition, Tiptree is required to pay a prepayment premium of 2% of the outstanding loan amount if Tiptree voluntarily prepays the loan prior to June 30, 2016.

On February 9, 2015, affiliates of Care entered into a joint venture to own and operate five seniors housing communities with affiliates of Royal Senior Care Management LLC (Royal). The joint venture acquired the communities for $30,052. Affiliates of Care own an 80% interest in the joint venture, while affiliates of Royal own the remaining 20% interest and provide management services to the communities under management contracts. In connection with the acquisition, Care and Royal secured a $22,500, five year loan (subject to a holdback), which includes 36 months of interest only payments and an additional $2,000 commitment that will be available between February 9, 2016 and February 9, 2019, subject to certain conditions.

On March 30, 2015, affiliates of Care acquired six seniors housing communities for $54,788. The properties are leased to affiliates of Greenfield Holdings, LLC that will operate the properties. In connection with the acquisition, Care secured a $39,500, 10 year loan (subject to a holdback), which includes 18 months of interest only payments. As of March 31, 2015, the loan had an aggregate balance of $38,700.

2014 Transactions

Fortegra Financial Corporation
In December 2014, the Company completed the acquisition of Fortegra Financial Corporation (Fortegra), and paid $211,740 for 100% ownership. Fortegra is consolidated within the Company’s insurance and insurance services segment since the

Page F-8

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

acquisition’s closing date. The assets acquired were valued at $771,559, which includes $115,000 of intangible assets and $90,213 of goodwill.

Luxury Mortgage Corp.

The Company completed the acquisition of 67.5% of Luxury Mortgage Corp. (Luxury) in January 2014; therefore, Luxury is consolidated within the Company’s financial statements beginning with the first quarter of 2014 and reported in Tiptree’s specialty finance segment.

(2) Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim consolidated financial statements of the Company have been prepared using the accounting policies set forth in Note 2 of Notes to Consolidated Financial Statements included in the Company’s 2014 Annual Report on Form 10-K.

Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.

Principles of Consolidation
The consolidated financial statements reflect the consolidated accounts of Tiptree and (i) its wholly-owned subsidiaries, (ii) subsidiaries in which it has a controlling interest, and (iii) certain other entities known as variable interest entities (VIEs) in which Tiptree, through its subsidiaries, is deemed to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. This consolidation, particularly with respect to the VIEs, significantly impacts these consolidated financial statements.

Certain changes to the consolidated balance sheet amounts for December 31, 2014 have been made in accordance with accounting for business combinations, to reflect the retrospective adjustments made during the measurement period, to the preliminary amounts recorded for the estimated fair value of acquired net assets. Please see Note 4—Business Acquisitions, for more information on the measurement period adjustments.

Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The estimates and assumptions most susceptible to change are the valuation of securities, loans, derivative positions, deferred income taxes and acquired assets and liabilities. Although these and other estimates and assumptions are based on the best available estimates, actual results could differ materially from management’s estimates.

Discontinued Operations
As a result of recent accounting guidance (see ASU 2014-08 below), for periods beginning on or after December 15, 2015, the results of operations of a business of the Company that have either been disposed of or are classified as held-for-sale are reported in discontinued operations if the disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. For operations that have been disposed prior to December 15, 2014, the Company presents the operations of business that meet the criteria for reporting as discontinued operations, and retrospectively reclassifies operating results for all prior periods presented. The Company carries assets and liabilities held for sale at the lower of carrying value on the date the asset is initially classified as held for sale or fair value less costs to sell. At the time of reclassification to held for sale, the Company ceased recording depreciation on assets transferred.

Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and other items of comprehensive income (loss). These other items are generally comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap, net of the related tax effects.

Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-08, Presentation of Financial Statements

Page F-9

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

(Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. These amendments change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. In addition, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information. ASU 2014-08 is effective for the first quarter of 2015 for the Company. The effects of applying the revised guidance will vary based upon the nature and size of future disposal transactions. It is expected that fewer disposal transactions will meet the new criteria to be reported as discontinued operations.

In August 2014, the FASB issued ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. This pronouncement is effective for annual and interim periods after December 15, 2014, with early adoption permitted. ASU 2014-13 provides for a measurement alternative whereby a company can measure both the financial assets and financial liabilities of its CLOs using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The Company has elected to early adopt ASU 2014-13 for the year ended December 31, 2014 as it pertains to the CLOs it consolidates and has elected to apply it retrospectively to all relevant prior periods. The application of this new guidance resulted in adjustments to certain balances in the previously issued consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows for the year ended December 31, 2014 as well as for the interim periods ending March 31, 2014, June 30, 2014, and September 30, 2014. Please see Note 3—Out of Period Adjustments, Changes in Accounting, Principles and reclassifications, for more information on the ASU 2014-13 adoption.

Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this standard affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This standard will be effective for the Company January 1, 2017 and the Company is evaluating the effect upon its financial statements. In April 2015, the FASB proposed deferring the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016.

In June 2014, the FASB issued ASU 2014-12 Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period shall be treated as a performance condition. ASU 2014-12 will be effective for the Company on January 1, 2016. The Company is currently evaluating the effect upon its financial statements.

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The pronouncement eliminates the concept of extraordinary items from the income statement presentation. Eliminating this concept removes the uncertainty in determining when a transaction is both unusual in nature and infrequent in occurrence. However, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU 2015-01 will be effective for the Company on January 1, 2016 and early adoption is permitted. The Company is currently evaluating the effect upon its financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which amends the consolidation requirements in the FASB Accounting Standards Codification 810, Consolidation. ASU 2015-02 makes targeted amendments to the current consolidation guidance for VIEs, which could change consolidation conclusions. ASU 2015-02 will be effective for the Company on January 1, 2016 and early adoption is permitted. The Company is currently evaluating the effect upon its financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and consistent with debt discounts. ASU 2015-03 requires retrospective adoption and will be effective for the Company on January 1, 2016 and early adoption is permitted. The Company is currently evaluating the effect upon its financial statements.


Page F-10

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

(3) Out of Period Adjustments, Changes in Accounting Principles and Reclassifications

Management is presenting these tables to provide a clear understanding of out of period adjustments, the adoption of accounting principles and reclassifications to the Company’s historical results for the first quarter of 2014.

As it relates to the statement of operations, we have revised our prior year financial statements for an immaterial uncorrected misstatement. The revision, related to our real estate segment, increased depreciation and amortization expense by $852, and decreased net (loss) income attributable to noncontrolling interests - Tiptree Financial Partners, L.P. by $508 and decreased net (loss) income attributable to noncontrolling interests - Other by $170. The effects of these adjustments are presented below.

As it relates to the Statements of Cash Flows, we have revised our prior year presentation for an immaterial uncorrected misstatement. This revision, related to the presentation of our activities from CLOs, reduced operating activities from CLOs by $26,662 and increased investing activities from CLOs by $26,662.
As mentioned in Note 2, in 2014, the Company elected to early adopt ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. The effects of these adjustments are presented below.

The pending sale of PFG is a transaction that qualifies to be treated as discontinued operations. This reclassification is reflected below (see Note 5—Dispositions, Assets Held for Sale and Discontinued Operations).

Certain prior period amounts have been reclassified to conform to the current year presentation. These amounts are identified under the reclassification heading in the tables below.
For the three months ended March 31, 2014
 
 
As previously filed
 
Out of period adjustments
 
ASU 2014-13 adoption
 
Discontinued operations
 
Reclassifications
 
As adjusted
 
Notes
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized (loss) gain on investments
 
$
142

 
$

 
$

 
$
(5
)
 
$
(137
)
 
$

 
 
Change in unrealized appreciation on investments
 
516

 

 

 

 
(516
)
 

 
 
Income from investments in partially owned entities
 
344

 

 

 

 
(344
)
 

 
 
Net realized and unrealized gains
 
1,002

 

 

 
(5
)
 
(997
)
 

 
 
Investment income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized and unrealized gains from investments
 

 

 

 

 
989

 
989

 
(2), (3)

Interest income
 
5,363

 

 

 
(1,188
)
 
(183
)
 
3,992

 
(1
)
Net Credit derivative revenue (loss)
 

 

 

 

 
(264
)
 
(264
)
 
(3
)
Separate account fees
 
5,487

 

 

 
(5,487
)
 

 

 
 
Administrative service fees
 
12,352

 

 

 
(12,352
)
 

 

 
 
Loan fee income
 

 

 

 

 
429

 
429

 
(1
)
Rental revenue
 
4,446

 

 

 

 
10

 
4,456

 
 
Gain on sale of loans held for sale, net
 
952

 

 

 

 
23

 
975

 
 
Other income
 
730

 

 

 
(1
)
 
(440
)
 
289

 
(1
)
Total investment income
 
29,330

 

 

 
(19,028
)
 
564

 
10,866

 
 
Total net realized and unrealized gains and investment income
 
30,332

 

 

 
(19,033
)
 
(433
)
 
10,866

 
(1
)

Page F-11

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

For the three months ended March 31, 2014
 
 
As previously filed
 
Out of period adjustments
 
ASU 2014-13 adoption
 
Discontinued operations
 
Reclassifications
 
As adjusted
 
Notes
Total revenue
 
$
30,332

 
$

 
$

 
$
(19,033
)
 
$
(433
)
 
$
10,866

 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
5,962

 

 

 
(2,914
)
 
(234
)
 
2,814

 
(3
)
Payroll expense
 
10,570

 

 

 
(5,283
)
 
428

 
5,715

 
(1
)
Professional fees
 
1,090

 

 

 
(190
)
 
174

 
1,074

 
(1
)
Change in future policy benefits
 
1,125

 

 

 
(1,125
)
 

 

 
 
Mortality expenses
 
2,642

 

 

 
(2,642
)
 

 

 
 
Commission expense
 
984

 

 

 
(574
)
 
(410
)
 

 
(1
)
Depreciation and amortization expenses
 
1,563

 
852

 

 
(803
)
 
56

 
1,668

 
(1
)
Other expenses
 
6,156

 

 

 
(3,131
)
 
(447
)
 
2,578

 
(1
)
Total expenses
 
30,092

 
852

 

 
(16,662
)
 
(433
)
 
13,849

 
 
Results of consolidated CLOs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income attributable to consolidated CLOs
 
11,986

 

 
2,629

 

 

 
14,615

 
 
Expenses attributable to consolidated CLOs
 
13,992

 

 
(4,020
)
 

 

 
9,972

 
 
Net (loss) income attributable to consolidated CLOs
 
(2,006
)
 

 
6,649

 

 

 
4,643

 
 
(Loss) income before taxes from continuing operations
 
(1,766
)

(852
)

6,649


(2,371
)



1,660

 
 
Provision (benefit) for income taxes
 
429

 

 

 
(1,081
)
 

 
(652
)
 
 
(Loss) income from continuing operations
 
(2,195
)
 
(852
)
 
6,649

 
(1,290
)
 

 
2,312


 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, net
 

 

 

 
1,290

 

 
1,290

 
 
Discontinued operations, net
 

 

 

 
1,290

 

 
1,290

 
 
Net (loss) income before noncontrolling interest
 
(2,195
)
 
(852
)
 
6,649



 

 
3,602

 
 
Less: net income attributable to noncontrolling interests
 
298

 

 

 

 
(298
)
 

 
(1
)
Less net (loss) income attributable to VIE subordinated noteholders
 
(3,518
)
 

 
3,518

 

 

 

 
 
Less: net (loss) income attributable to noncontrolling interests - Tiptree Financial Partners, L.P.
 

 
(508
)
 
2,814

 

 

 
2,306

 
(1
)
Less: net (loss) income attributable to noncontrolling interests - Other
 

 
(170
)
 
(458
)
 

 
298

 
(330
)
 
(1
)

Page F-12

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

For the three months ended March 31, 2014
 
 
As previously filed
 
Out of period adjustments
 
ASU 2014-13 adoption
 
Discontinued operations
 
Reclassifications
 
As adjusted
 
Notes
Net income available to common stockholders
 
$
1,025


$
(174
)

$
775


$


$


$
1,626

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic, continuing operations, net
 
$
0.10

 
$
(0.02
)
 
$
0.07

 
$
(0.03
)
 
$

 
$
0.12

 
 
Basic, discontinued operations, net
 

 

 

 
0.03

 

 
0.03

 
 
Net income basic
 
$
0.10

 
$
(0.02
)
 
$
0.07

 
$

 
$

 
$
0.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted, continuing operations, net
 
$
0.10

 
$
(0.02
)
 
$
0.07

 
$
(0.03
)
 
$

 
$
0.12

 
 
Diluted, discontinued operations, net
 

 

 

 
0.03

 

 
0.03

 
 
Net income, diluted
 
$
0.10

 
$
(0.02
)
 
$
0.07

 
$

 
$

 
$
0.15

 
 

Notes:
(1)    Prior period information reclassified to conform to the current year presentation.
(2)    Collapse of line items presented individually for the first quarter of 2014.
(3)
Net credit derivative income (loss) associated with master netting agreement (see Note 14—Derivative Financial Instruments and Hedging).
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(4) Business Acquisitions
In accordance with ASC Topic 805, Business Combinations, the Company accounts for acquisitions by applying the acquisition method of accounting. The acquisition method requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at fair value as of the closing date of the acquisition.
Fortegra Financial Corporation
In December 2014, the Company completed the acquisition of Fortegra, and paid $211,740 for 100% ownership. Fortegra’s products include payment protection products, motor club memberships, service contracts, device and warranty services, as well as administration services to business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies. The primary reason for the Company’s acquisition of Fortegra is to expand its insurance and insurance services operations.

Fortegra’s results are included in the Company’s insurance and insurance services segment. The Company did not issue shares of its common stock in connection with the acquisition of Fortegra.

Recording of the Preliminary Value of Assets Acquired and Liabilities Assumed

The consideration for the acquisition of Fortegra was funded through parent's cash on hand of $91,740 and borrowings of $120,000. The purchase price of Fortegra was largely determined on the basis of management’s expectations of future earnings and cash flows, resulting in the recognition of goodwill. The preliminary purchase price allocation below has been developed based on preliminary estimates of and subsequent adjustments to fair value using the historical financial statements of Fortegra as of the acquisition date. In addition, the allocation of the purchase price to intangible assets is based on preliminary fair value estimates and subject to the completion of management’s final analysis.

Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of intangible assets. Because valuations of acquired assets and liabilities are still in process, information may become available within the measurement period, which may or may not change these valuations and, accordingly, the purchase price allocation is subject to adjustment. The residual amount of the purchase price after preliminary allocation to net assets acquired and identifiable intangibles has been allocated to goodwill. This goodwill is included in the insurance and insurance services segment.


Page F-13

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

During 2015, the Company received the preliminary valuation study prepared by an external valuation expert for identifiable intangible assets and goodwill for the 2014 acquisition of Fortegra. Accordingly, the consolidated balance sheet at December 31, 2014, has been retrospectively adjusted to include the effect of the measurement period adjustments as required under ASC 805, Business Combinations, (ASC 805), for the Fortegra purchase. Adjustments were recorded to the values of intangible assets and goodwill based upon completion of valuation models in the studies and the refinement of assumptions supporting those models as presented in the valuation studies.

Using this preliminary valuation study, the Company decreased the balance of goodwill as of December 4, 2014 by $3,229 and increased other intangibles assets by $500 with corresponding decreases of $6,270 to other liabilities and accrued expenses and $105 to non-controlling interests, as shown in the table below. See Note 12—Identifiable Intangible Assets and Goodwill, for more information on the retrospective measurement period adjustments made in 2015 to Fortegra’s December 4, 2014 balances. The Fortegra acquisition determinations are preliminary, mainly due to ongoing review of the preliminary studies.

The following table presents the preliminary determination of the fair value amounts for the identifiable assets acquired, liabilities assumed, and goodwill recorded as of the acquisition date of Fortegra including the effects of the retrospective measurement period adjustments recorded in 2015, as discussed above:
 
Preliminary Fair Values
Assets:
 
Cash and cash equivalents – unrestricted
$
24,906

Cash and cash equivalents – restricted
6,693

Investments in available for sale securities, at fair value
166,839

Notes receivable, net
17,775

Accounts and premiums receivable, net
40,762

Reinsurance receivables
258,179

Other assets
51,192

Intangible assets
115,000

Liabilities:
 
Debt
43,548

Unearned premiums
290,029

Policy liabilities
63,435

Deferred revenue
39,122

Deferred tax liability
38,208

Other liabilities and accrued expenses (1)
79,227

Net assets acquired
127,777

Non-controlling interests
(6,250
)
Goodwill
90,213

 
$
211,740

Consideration:
 
Cash
91,740

Debt
120,000

Total consideration paid
$
211,740

(1) Includes $809 of unsettled liabilities associated with Fortegra’s previous discontinued operations, which is included as a component of liabilities held for sale and discontinued operations within the Company’s consolidated balance sheet.

Non-Tax Deductible Goodwill Associated with the Fortegra Acquisition
The acquisition of Fortegra is being treated as a stock purchase for tax purposes and any goodwill and identified intangible assets recorded by the Company in connection with the acquisition will not be deductible for tax purposes.

(5) Dispositions, Assets Held for Sale and Discontinued Operations

The Company classified its PFG subsidiary as held for sale as of December 31, 2014, as the transaction meets all the requirements to be classified in this manner according to ASC 360, Property, Plant and Equipment. At the time of this classification, the pending sale of PFG also met the requirements of ASC 205, Presentation of Financial Statements to be classified as discontinued operations. As previously noted, the FASB subsequently issued ASU 2014-08 which prospectively amended these requirements for annual periods beginning on or after December 15, 2014 and interim periods beginning on or after December 15, 2015. As

Page F-14

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

a result, the Company has reclassified the income and expense attributable to PFG to income from discontinued operations, net for the three months ended March 31, 2015 and 2014. See Note 2—Summary of Significant Accounting Policies, for more information.

The following table represents detail of the assets and liabilities of PFG categorized as held for sale on the Company’s consolidated balance sheets for the following periods:
 
As of
 
March 31, 2015
 
December 31, 2014
Assets:
 
 
 
Cash and cash equivalents - unrestricted
$
55,073

 
$
28,361

Investments in available for sale securities, at fair value
17,841

 
17,409

Policy loans
100,025

 
99,102

Intangible assets
149,454

 
149,932

Goodwill
3,088

 
3,088

Other assets
19,802

 
22,982

Separate account assets
4,975,424

 
4,799,429

Reinsurance receivables
9,444

 
9,442

Total assets held for sale
$
5,330,151

 
$
5,129,745

 
 
 
 
Liabilities:
 
 
 
Debt
$
80,848

 
$
83,348

Policy liabilities
109,379

 
108,455

Reinsurance payables
1,124

 

Deferred tax liabilities
2,102

 
801

Other liabilities and accrued expenses
34,134

 
14,060

Separate account liabilities
4,975,424

 
4,799,429

Total liabilities held for sale
$
5,203,011

 
$
5,006,093


The Company has reclassified income and expenses from discontinued operations related to the PFG transaction. The following table represents detail revenues and expenses of discontinued operations in the consolidated statements of operations for the periods presented:
 
Three Months Ended March 31,
 
2015
 
2014
 

 

Revenues:
 
 
 
Net realized gain on investments
$
20

 
$
5

Interest income
1,174

 
1,188

Separate account fees
6,226

 
5,487

Administrative service fees
12,659

 
12,352

Other income
2

 
1

Total Revenues
20,081

 
19,033

Expenses:
 
 
 
Interest expense
2,654

 
2,914

Payroll expense
4,612

 
5,283

Professional fees
319

 
190

Change in future policy benefits
1,102

 
1,125

Mortality expenses
2,805

 
2,642

Commission expense
808

 
574

Depreciation and amortization expenses
457

 
803

Other expenses
2,237

 
3,131

Total expenses
14,994

 
16,662

Less: Provision for income taxes
2,742

 
1,081

Income from discontinued operations, net
$
2,345

 
$
1,290


Page F-15

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

See Note 17—Fair Value of Financial Instruments, for information regarding the leveling of assets and liabilities held for sale.
Available for sale securities associated with assets held for sale was $17,841, with an amortized cost of $17,429 as of March 31, 2015. These securities had unrealized gains of $419 and unrealized losses of $7. There were six securities that were in an unrealized loss position for more than one year with a fair value of $402, an amortized cost of $398 and associated unrealized losses of $4 as of March 31, 2015.
As of March 31, 2015, debt associated with liabilities held for sale was $80,848. This debt carries a weighted average interest rate of 12.66% and matures on July 13, 2022. During the three months ended March 31, 2015 and 2014, interest expense of $2,654 and $2,914 was recorded, respectively.
The following table presents the cash flows from discontinued operations for the periods indicated:
 
Three Months Ended March 31,
 
2015
 
2014
Net cash provided by/(used in):
 
 
 
Operating activities
$
30,950

 
$
(324
)
Investing activities
(1,738
)
 
2,735

Financing activities
(2,500
)
 
(1,500
)
Net cash flows
$
26,712

 
$
911


The absence of cash flows from discontinued operations, on a going forward basis, is not expected to have a material impact upon the Company’s future liquidity and capital resources as the acquisition of Fortegra is expected to provide future liquidity.

As of March 31, 2015 and December 31, 2014, the Company has $771 and $809, respectively, included on the consolidated balance sheets as liabilities from discontinued operations associated with Fortegra’s dispositions as of December 31, 2013.

(6) Operating Segment Data

During the year ended December 31, 2014, management changed its reportable operating segments. The Company now has five reportable operating segments. The Company’s five operating segments are: insurance and insurance services, specialty finance, asset management, real estate and our corporate and other segment. The Company’s operating segments are organized in a manner that reflects how management views these strategic business units.
Each reportable segment’s profit/(loss) is reported before income taxes, discontinued operations and non-controlling interests. Intersegment revenue and expense relate to interest paid and received on loans and interest rate swaps between segments.

Descriptions of each of the reportable segments are as follows:

Insurance and Insurance Services operations are conducted through Fortegra, a wholly owned subsidiary acquired by the Company on December 4, 2014. Fortegra is a specialized insurance company that offers a wide array of consumer related protection products, including credit-related insurance, mobile device protection, and warranty and service contracts. Fortegra also provides third party administration services to insurance companies, retailers, automobile dealers, insurance brokers and agents and financial services companies.
For insurance and insurance services, the main drivers of revenue are earned premiums, net and service and administrative fees.
Specialty Finance is comprised of Siena Capital Finance LLC (Siena), which commenced operations in April 2013, and Luxury, which was acquired in January 2014. Segment results incorporate the revenues and expenses of these subsidiaries since they commenced operations or were acquired.
Siena’s business consists of structuring asset-based loan facilities across diversified industries which include manufacturing, distribution, wholesale, and service companies. Luxury is a residential mortgage lender that originates loans, primarily FHA, prime jumbo and super jumbo mortgages for sale to institutional investors.
For specialty finance, the main drivers of revenue are gain on the sale of loans held for sale, net, loan fees earned and investment interest.

Page F-16

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

Asset Management operations primarily comprise Telos Asset Management’s (TLAM) management of CLOs and Muni Capital Management’s (MCM) management of Non-Profit Preferred Funding Trust I (NPPF I). Both TLAM and MCM are subsidiaries of Tiptree Asset Management Company, LLC (TAMCO), an SEC-registered investment advisor owned by the Company. MCM also manages NPPF I, which is a structured tax-exempt pass-through entity that holds tax-exempt bonds for the benefit of unaffiliated investors.
The asset management segment generates fee income from the CLOs under management and from its management of NPPF I, a portfolio of tax-exempt securities owned by third-party investors.
Real Estate operations include Care LLC, a wholly-owned subsidiary of Tiptree which has a geographically diverse portfolio of seniors housing properties including assisted-living, independent-living, memory care and skilled nursing in the U.S.
Revenue for this segment includes largely rental revenue and investment interest.
Corporate and other operations include Tiptree Direct and Muni Funding Company of America LLC (MFCA). Tiptree Direct Holdings LLC (Tiptree Direct) holds the Company’s principal investments, which consist of CLO subordinated notes, risk mitigation transactions, warehouse holdings, holdings in the Star Asia Finance, Limited, Star Asia Opportunity, LLC and Star Asia Opportunity II-LLC (Star Asia Entities) and other corporate investments. MFCA is a specialty finance company that owns and manages a portfolio of non-investment grade and non-rated direct and indirect debt obligations of middle-market tax-exempt borrowers.
For corporate and other, the main drivers of revenue include investment interest, net realized and unrealized gains on investments, distributions earned on the subordinated CLO debt and interest-only positions held by the Company and realized and unrealized gains and losses on such debt and positions.
Intersegment revenues/expenses refers to those items of revenue/expense which are eliminated upon consolidation. Intersegment revenue and expense between the specialty finance segment and corporate and other segment largely relate to interest paid and received on subordinated debt and interest-only positions. Management made estimates to allocate a proportionate share of MCM’s expenses to the asset management segment relating to its management of NPPF I. The remaining expenses not allocated are related to MFCA and have been allocated to the corporate and other segment.
The tables below present the components of revenue, expense, profit or loss, and segment assets for each of the operating segments for the following periods:
 
Three months ended March 31, 2015
 
Insurance and insurance services
 
Specialty finance
 
Asset management
 
Real estate
 
Corporate and other
 
Totals
Net realized and unrealized gains on investments
$
(5
)
 
$
853

 
$

 
$
(485
)
 
$
(233
)
 
$
130

Interest income
712

 
1,353

 

 
19

 
212

 
2,296

Net credit derivative loss

 

 

 

 
(90
)
 
(90
)
Service and administrative fees
21,927

 

 

 

 

 
21,927

Ceding commissions
9,937

 

 

 

 

 
9,937

Earned premiums, net
37,353

 

 

 

 

 
37,353

Gain on sale of loans held for sale, net

 
2,593

 

 

 

 
2,593

Loan fee income

 
1,399

 

 

 

 
1,399

Rental revenue

 
17

 

 
9,352

 

 
9,369

Other income
2,455

 
40

 
63

 
538

 

 
3,096

Total revenue
$
72,379

 
$
6,255

 
$
63

 
$
9,424

 
$
(111
)
 
$
88,010

 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
$
1,739

 
$
511

 
$

 
$
1,330

 
$
1,549

 
$
5,129

Payroll and employee commissions
10,405

 
3,724

 
548

 
3,923

 
1,741

 
20,341

Commission expense
16,528

 

 

 

 

 
16,528

Member benefit claims
7,579

 

 

 

 

 
7,579

Net losses and loss adjustment expenses
12,450

 

 

 

 

 
12,450

Professional fees
1,984

 
257

 
38

 
179

 
2,170

 
4,628

Depreciation and amortization expenses
11,954

 
122

 

 
3,388

 

 
15,464

Acquisition costs

 

 

 
1,349

 

 
1,349


Page F-17

TIPTREE FINANCIAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2015
(in thousands, except shares and per share data)

 
Three months ended March 31, 2015
 
Insurance and insurance services
 
Specialty finance
 
Asset management
 
Real estate
 
Corporate and other
 
Totals
Other expenses
5,714

 
1,206

 
124

 
3,436

 
664

 
11,144

Total expense
68,353

 
5,820

 
710

 
13,605

 
6,124

 
94,612

Net income attributable to consolidated CLOs

 

 
2,821

 

 
(2,079
)
 
742

Segment profit/(loss)
$
4,026

 
$
435

 
$
2,174

 
$
(4,181
)
 
$
(8,314
)
 
$
(5,860
)
Less: Provision for income taxes
 
 
 
 
 
 
 
 
 
 
(1,496
)
Discontinued operations
 
 
 
 
 
 
 
 
 
 
2,345

Net income before non-controlling interests
 
 
 
 
 
 
 
 
 
 
$
(2,019
)
Less: net (loss) attributable to noncontrolling interests from continuing operations and discontinued operations - Tiptree Financial Partners, L.P.
 
 
 
 
 
 
 
 
 
 
(860
)
Less: net (loss) attributable to noncontrolling interests from continuing operations and discontinued operations - Other
 
 
 
 
 
 
 
 
 
 
(180
)
Net (loss) income available to common stockholders
 
 
 
 
 
 
 
 
 
 
$
(979
)
 
 
 
 
 
 
 
 
 
 
 
 
Segment Assets as of March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Segment assets
$
795,071

 
$
108,905

 
$
2,985

 
$
265,661

 
$
64,032

 
$
1,236,654

Assets of consolidated CLOs
 
 
 
 
 
 
 
 
 
 
1,890,002

Assets held for sale
 
 
 
 
 
 
 
 
 
 
5,330,151

Total assets
 
 
 
 
 
 
 
 
 
 
$
8,456,807



 
Three months ended March 31, 2014
 
Insurance and insurance services
 
Specialty finance
 
Asset management
 
Real estate
 
Corporate and other
 
Totals
Net realized and unrealized gains on investments
$


$
52


$

 
$
(309
)

$
1,246


$
989

Interest income


454




683


2,855


3,992

Net credit derivative loss








(264
)

(264
)
Gain on sale of loans held for sale, net

 
975

 

 

 

 
975

Loan fee income

 
429

 

 

 

 
429

Rental revenue

 
10

 

 
4,446

 

 
4,456

Other income

 
1

 
94

 
194

 

 
289

Total revenue

 
1,921

 
94

 
5,014

 
3,837

 
10,866

 
 
 
 
 
 
 
 
 
 
 
 
Interest expense

 
144

 

 
978

 
1,692

 
2,814

Payroll and employee commissions

 
1,593

 
706

 
1,798

 
1,618

 
5,715

Professional fees

 
181

 
45

 
55

 
793

 
1,074

Depreciation and amortization expenses

 
110

 

 
1,558

 

 
1,668

Other expenses


551


145


1,389


493


2,578

Total expense


2,579


896


5,778


4,596


13,849

Net intersegment revenue/(expense)

 
(78
)
 

 

 
78

 

Net income attributable to consolidated CLOs




3,121




1,522


4,643

Segment profit/(loss)


(736
)

2,319


(764
)

841


1,660

Less: Provision for income taxes















(652
)
Discontinued operations