TIPTREE INC

Previous wording

•Tiptree reported net income of $21.9 million for the six months ended June 30, 2024, compared to $4.9 million in the prior year period, driven by growth in insurance operations, partially offset by the increase in tax expense related to the tax deconsolidation of Fortegra from $5.8 million in 2023 to $10.8 million in 2024. Return on average equity was 10.3%, compared to 2.5% in 2023.

Current wording

•Tiptree reported net income of $33.8 million for the nine months ended September 30, 2024, compared to $7.1 million in the prior year period, driven by growth in insurance operations. Return on average equity was 10.3%, compared to 2.4% in 2023.

Previous wording

•Adjusted net income of $45.0 million increased from $30.2 million in 2023, driven by growth in insurance operations. Adjusted return on average equity was 21.1%, as compared to 15.1% in 2023.

Current wording

•Adjusted net income of $72.8 million increased from $48.1 million in 2023, driven by growth in insurance operations. Adjusted return on average equity was 22.1%, as compared to 16.2% in 2023.

Previous wording

•Gross written premiums and premium equivalents were $1,439.5 million for the six months ended June 30, 2024, an increase of $102.3 million, or 7.6%, from the prior year period as a result of growth in E&S insurance lines in the U.S. and Europe.

Current wording

•Gross written premiums and premium equivalents were $2.2 billion for the nine months ended September 30, 2024, an increase of $192.6 million, or 9.5%, from the prior year period as a result of growth in E&S insurance lines in the U.S. and Europe.

Previous wording

•Net written premiums were $684.0 million for the six months ended June 30, 2024, an increase of 13.7%, driven by growth in gross written premiums and increased retention on Fortegra’s whole account quota share reinsurance arrangement from 30% to 40%, effective April 1, 2023.

Current wording

•Net written premiums were $1.1 billion for the nine months ended September 30, 2024, an increase of 14.7%, driven by growth in gross written premiums and increased retention on Fortegra’s whole account quota share reinsurance arrangement from 30% to 40%, effective April 1, 2023.

Previous wording

•Total revenues were $1,008.7 million, an increase of $255.6 million, or 33.9%, from 2023, driven by premium growth in specialty E&S and admitted insurance lines in the U.S. and Europe.

Current wording

•Total revenues were $1.5 billion, an increase of $329.8 million, or 28.4%, from 2023, driven by premium growth in specialty E&S and admitted insurance lines in the U.S. and Europe.

Previous wording

•Combined ratio of 90.0%, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform.

Current wording

•Combined ratio of 90.2%, driven by consistent underwriting performance and the scalability of Fortegra’s operating platform.

Previous wording

•Income before taxes of $88.1 million as compared to $49.9 million in 2023. Return on average equity was 25.8% in 2024 as compared to 20.2% in 2023, with the increases driven by growth in underwriting and fee revenues.

Current wording

•Income before taxes of $135.3 million as compared to $85.6 million in 2023. Return on average equity was 25.1% in 2024 as compared to 22.9% in 2023, with the increases driven by growth in underwriting and fee revenues.

Previous wording

•Adjusted net income (before NCI) was $74.4 million, an increase of $21.4 million, or 40.3%, from 2023. Adjusted return on average equity was 29.7%, as compared to 29.6% in 2023.

Current wording

•Adjusted net income (before NCI) was $114.5 million, an increase of $31.4 million, or 37.8%, from 2023. Adjusted return on average equity was 28.8%, as compared to 30.3% in 2023.

Previous wording

•Fortegra’s total stockholders’ equity was $549.2 million as of June 30, 2024, compared to $452.6 million as of December 31, 2023, with the increase driven by net income during the current year period, the aggregate capital contribution from Tiptree, Warburg, and Fortegra independent directors of $40.0 million, partially offset by an increase in the accumulated other comprehensive loss position.

Current wording

•Fortegra’s total stockholders’ equity was $606.4 million as of September 30, 2024, compared to $452.6 million as of December 31, 2023, with the increase driven by comprehensive income during the current year period and the aggregate capital contribution from Tiptree, Warburg, and Fortegra independent directors of $40.0 million.

Previous wording

•Mortgage income before taxes was $1.3 million for the six months ended June 30, 2024, as compared to loss of $1.3 million in 2023, with the increase driven by higher origination volumes and loan servicing fees, and positive fair value adjustments on the mortgage servicing portfolio.

Current wording

•Mortgage income before taxes was $1.2 million for the nine months ended September 30, 2024, as compared to loss of $0.9 million in 2023, with the increase driven by higher origination volumes and loan servicing fees.

Previous wording

Insurance results primarily depend on pricing, underwriting, risk retention and the accuracy of reserves, reinsurance arrangements, returns on invested assets, and policy and contract renewals and run-off. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches. The business has historically generated significant fee-based revenues by incorporating value-add coverages and services. Underwriting risk is mitigated through a combination of reinsurance and sliding scale commission structures with agents, distribution partners and/or third-party reinsurers. To mitigate counterparty risk, Fortegra ensures its reinsurance receivables are placed with highly rated and appropriately capitalized counterparties or with our distribution partners’ captive insurance vehicles which are collateralized with highly liquid investments, cash or letters of credit. While Fortegra’s insurance operations have historically maintained a relatively stable combined ratio, initiatives to change the business mix along with these economic factors could generate different results than the business has historically experienced. In particular, rising inflation can have an impact on replacement costs associated with claims from our customers to the extent we are unable to pass the higher costs of claims through higher premiums. In addition, fluctuations of the U.S. dollar relative to other currencies, including the British pound and Euro, would have an impact on book value between periods.

Current wording

Insurance results primarily depend on pricing, underwriting, risk retention and the accuracy of reserves, reinsurance arrangements, returns on invested assets, and policy and contract renewals and run-off. Factors affecting these items, including conditions in financial markets, the global economy and the markets in which we operate, fluctuations in exchange rates, interest rates and inflation, including the current period of inflationary pressures, may have a material adverse effect on our results of operations or financial condition. Fortegra designs, markets and underwrites specialty property and casualty insurance products for select target markets or niches. The business has historically generated significant fee-based revenues by incorporating value-add coverages and services. Underwriting risk is mitigated through a combination of reinsurance and sliding scale commission structures with agents, distribution partners and/or third-party reinsurers. To mitigate counterparty risk, Fortegra ensures its reinsurance receivables are placed with highly rated and appropriately capitalized counterparties or with our distribution partners’ captive insurance vehicles which are collateralized with highly liquid investments, cash or letters of credit. While Fortegra’s insurance operations have historically maintained a relatively stable combined ratio, initiatives to change the business mix along with these economic factors could generate different results than the business has historically experienced. In particular, inflation can have an impact on replacement costs associated with claims from our customers to the extent we are unable to pass the higher costs of claims through higher premiums. In addition, fluctuations of the U.S. dollar relative to other currencies, including the British pound and Euro, would have an impact on book value between periods.

Previous wording

Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. In recent periods, the U.S. fixed income markets experienced a significant rise in interest rates. Rising interest rates have and could continue to impact the value of Fortegra’s fixed maturity securities, with any unrealized losses recorded in equity, and if realized, could impact our results of operations. Offsetting the impact of a rising interest rate environment, new investments in fixed rate instruments from both maturities and portfolio growth have and could continue to result in higher net interest income on investments. The weighted average duration of our fixed income available for sale securities is less than three years. While our asset and liability mix is relatively matched, should we need to liquidate any of these investments before maturity to pay claims, any realized losses could materially negatively impact our results of operations. Changes in fair value for loans, credit investment funds, and equity securities in Fortegra’s investment portfolio are reported as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, currency risk, or market risk, including specific company or industry factors. In addition, our equity holdings are relatively concentrated. General equity market trends, along with company and industry specific factors, can impact the fair value which can result in unrealized gains and losses affecting our results.

Current wording

Fortegra’s investment portfolio includes fixed maturity securities, loans, credit investment funds, and equity securities. Many of those investments are held at fair value. From 2021 to 2023, the U.S. fixed income markets experienced a significant rise in interest rates. Rising interest rates have and could continue to impact the value of Fortegra’s fixed maturity securities, with any unrealized losses recorded in equity, and if realized, could impact our results of operations. Offsetting the impact of a rising interest rate environment, new investments in fixed rate instruments from both maturities and portfolio growth have and could continue to result in higher net interest income on investments. The weighted average duration of our fixed income available for sale securities is less than three years. While our asset and liability mix is relatively matched, should we need to liquidate any of these investments before maturity to pay claims, any realized losses could materially negatively impact our results of operations. Changes in fair value for loans, credit investment funds, and equity securities in Fortegra’s investment portfolio are reported as unrealized gains or losses in revenues and can be impacted by changes in interest rates, credit risk, currency risk, or market risk, including specific company or industry factors. In addition, our equity holdings are relatively concentrated. General equity market trends, along with company and industry specific factors, can impact the fair value which can result in unrealized gains and losses affecting our results.

Previous wording

Rising 10-year treasury yields, and the tapering of the Federal Reserve’s purchases of mortgage-backed securities, has resulted in substantial increases in mortgage interest rates. Low mortgage interest rates driven by the Federal Reserve intervention in mortgage markets, and rising home prices in certain markets, provided tailwinds to the mortgage markets in 2020 and 2021, which benefited our mortgage operations and margins. The substantial rise in rates resulted in a sharp reversal of those trends, with volumes and margins declining significantly. Only partially offsetting the declines in mortgage originations is an increase in the fair value of our mortgage servicing portfolio as rising rates slow prepayment speeds, with a resulting increase in servicing income. Continued rising or elevated mortgage rates could have a materially negative impact on our mortgage operations, and is likely to be only partially mitigated by the improvement in mortgage servicing revenues. A sustained period of negative profitability in the mortgage industry could also impact the availability of funding sources for our mortgage business.

Current wording

Elevated 10-year treasury yields, and the tapering of the Federal Reserve’s purchases of mortgage-backed securities, has resulted in substantial increases in mortgage interest rates. Low mortgage interest rates driven by the Federal Reserve intervention in mortgage markets, and rising home prices in certain markets, provided tailwinds to the mortgage markets in 2020 and 2021, which benefited our mortgage operations and margins. The substantial rise in rates resulted in a sharp reversal of those trends, with volumes and margins declining significantly. Only partially offsetting the declines in mortgage originations is an increase in the fair value of our mortgage servicing portfolio as rising rates slow prepayment speeds, with a resulting increase in servicing income. Continued elevated mortgage rates could have a negative impact on our mortgage operations, and is likely to be only partially mitigated by the improvement in mortgage servicing revenues. A sustained period of negative profitability in the mortgage industry could also impact the availability of funding sources for our mortgage business.

Previous wording

Rising interest rates can also impact the cost of floating interest rate debt obligations, while declining rates can decrease the cost of debt. Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations. A continuation of rising rates could have a material impact on our costs of floating rate debt.

Current wording

Rising interest rates can also impact the cost of floating interest rate debt obligations, while declining rates can decrease the cost of debt. Our secured revolving and term credit agreements, preferred trust securities and asset based revolving financing are all floating rate obligations.

Previous wording

In addition to GAAP results, management uses the Non-GAAP measures Adjusted net income, Adjusted return on average equity and book value per share as measurements of operating performance. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and comparison among companies.

Current wording

The following is a summary of our condensed consolidated financial results for the three months ended September 30, 2024 and 2023. In addition to GAAP results, management uses the Non-GAAP measures Adjusted net income, Adjusted return on average equity and book value per share as measurements of operating performance. Management believes these measures provide supplemental information useful to investors as they are frequently used by the financial community to analyze financial performance and comparison among companies.

Previous wording

For the three months ended June 30, 2024, revenues were $546.7 million, which increased $142.2 million, or 35.1%, compared to the prior year period. For the six months ended June 30, 2024, revenues were $1.0 billion, which increased $258.8 million, or 32.9%, compared to the prior year period. The changes for both periods were primarily driven by growth in earned premiums, net, service and administrative fees, and net realized and unrealized gains compared to the prior year period.

Current wording

For the three months ended September 30, 2024, revenues were $494.4 million, which increased $77.8 million, or 18.7%, compared to the prior year period. For the nine months ended September 30, 2024, revenues were $1,539.3 million, which increased $336.6 million, or 28.0%, compared to the prior year period. The changes for both periods were primarily driven by growth in earned premiums, net, higher investment income, net realized and unrealized gains, and an increase in other income, including interest income on cash equivalents, compared to the prior year period.

Previous wording

(2) Excludes Invesque, Maritime transportation and Mortgage realized and unrealized gains and losses

Current wording

(2) Excludes Invesque and Mortgage realized and unrealized gains and losses.

Previous wording

For the three months ended June 30, 2024, the net income attributable to common stockholders was $12.9 million, compared to $6.0 million in the prior year period, driven by growth in Fortegra’s underwriting and fee income. For the six months ended June 30, 2024, the net income attributable to common stockholders was $21.9 million, which increased $17.0 million, or 344.5%, compared to the prior year period, driven by growth in Fortegra’s underwriting and fee income, and improved mortgage operations.

Current wording

For the three months ended September 30, 2024, the net income attributable to common stockholders was $11.9 million, compared to $2.2 million in the prior year period, driven by growth in Fortegra’s underwriting and fee income. For the nine months ended September 30, 2024, the net income attributable to common stockholders was $33.8 million, which increased $26.7 million, compared to the prior year period, driven by growth in Fortegra’s underwriting and fee income.

Previous wording

Total stockholders’ equity was $618.1 million as of June 30, 2024 compared to $546.1 million as of June 30, 2023, with the increase driven by comprehensive income over the trailing four quarters, partially offset by net changes in non-controlling interests and preferred dividends paid at Fortegra. In the six months ended June 30, 2024, Tiptree returned $4.4 million to stockholders through dividends paid.

Current wording

Total stockholders’ equity was $656.2 million as of September 30, 2024 compared to $543.6 million as of September 30, 2023, with the increase driven by comprehensive income over the trailing four quarters, partially offset by net changes in non-controlling interests and preferred dividends paid at Fortegra. In the nine months ended September 30, 2024, Tiptree returned $6.6 million to stockholders through dividends paid.

Previous wording

Book value per share for the period ended June 30, 2024 was $11.86, an increase from book value per share of $10.94 as of June 30, 2023, driven by comprehensive income per share, partially offset by dividends paid of $0.22 per share, net changes in non-controlling interests and preferred dividends paid at Fortegra.

Current wording

Book value per share for the period ended September 30, 2024 was $12.56, an increase from book value per share of $10.78 as of September 30, 2023, driven by comprehensive income per share, partially offset by dividends paid of $0.23 per share, net changes in non-controlling interests and preferred dividends paid at Fortegra.

Previous wording

As of June 30, 2024, Fortegra was owned approximately 79.3% by Tiptree, 17.7% by Warburg and 3.0% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and the conversion of outstanding preferred stock. The following tables and discussion present the Insurance segment results, including non-controlling interests, for the three months ended June 30, 2024 and 2023.

Current wording

As of September 30, 2024, Fortegra was owned approximately 79.3% by Tiptree, 17.7% by Warburg and 3.0% by management and directors of Fortegra, before giving effect to the exercise of outstanding warrants and management options, and the conversion of outstanding preferred stock. The following tables and discussion present the Insurance segment results, including non-controlling interests, for the three months ended September 30, 2024 and 2023.

Previous wording

Ceding Commissions and Other Revenue consists of commissions earned on policies written on behalf of third-party insurance companies with no exposure to the insured risk and certain fees earned in conjunction with underwriting policies. Other revenue also includes the interest income earned on the premium finance product offering.

Current wording

Ceding Commissions and Other Revenue consists of commissions earned on policies written on behalf of third-party insurance companies with no exposure to the insured risk and certain fees earned in conjunction with underwriting policies. Other revenue also includes the interest income earned on cash equivalents and premium finance product offerings.

Previous wording

(1)Net income was $37.6 million for the three months ended June 30, 2024 compared to $21.3 million for the three months ended June 30, 2023.

Current wording

(1)Net income was $35.1 million for the three months ended September 30, 2024 compared to $26.5 million for the three months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, total revenues increased 37.8%, to $529.9 million, as compared to $384.7 million for the three months ended June 30, 2023. Earned premiums, net of $398.5 million increased $128.7 million, or 47.7%, driven by growth in specialty E&S and admitted insurance lines. Earned premiums assumed from other insurance companies were $159.8 million, or 40.1% of the total, compared to $110.7 million, or 41.0% of the total, in the prior year period. Included in the current period were earned premiums associated with the book-roll transaction with one of Fortegra’s MGA partners that was assumed in December 2023. As it expands to new geographies and expands product offerings, the Company works to obtain necessary licenses and intends to write this business directly upon obtaining necessary licenses. The Company views direct written and assumed business as having similar characteristics. Service and administrative fees of $105.8 million increased by 7.9% driven primarily by growth in vehicle service contract revenues. Ceding commissions of $5.1 million increased by $0.4 million, or 8.3%. Other revenues increased by $4.3 million, or 57.6%, driven by growth in premium finance product offerings and interest income on cash and cash equivalents.

Current wording

For the three months ended September 30, 2024, total revenues increased 18.2%, to $481.0 million, as compared to $406.8 million for the three months ended September 30, 2023. Earned premiums, net of $359.5 million increased $68.2 million, or 23.4%, driven by growth in E&S and specialty admitted insurance lines. Earned premiums assumed from other insurance companies were $129.5 million, or 36.0% of the total, compared to $78.6 million, or 27.0% of the total, in the prior year period. Included in the current period were earned premiums associated with the book-roll transaction with one of Fortegra’s MGA partners that was assumed in December 2023. As it expands to new geographies and expands product offerings, the Company works to obtain necessary licenses and intends to write this business directly upon obtaining necessary licenses. The Company views direct written and assumed business as having similar characteristics. Service and administrative fees of $95.4 million decreased by 4.8% driven primarily by a decline in vehicle service contract revenues in Europe. Ceding commissions of $3.7 million increased by $1.3 million, or 52.3%. Other revenues increased by $2.0 million, or 22.1%, driven by growth in interest income on cash equivalents and premium finance product offerings.

Previous wording

For the three months ended June 30, 2024, 23.1% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the three months ended June 30, 2024, 77.9% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

Current wording

For the three months ended September 30, 2024, 22.9% of revenues were derived from fees that were not solely dependent upon the underwriting performance of Fortegra’s insurance products, resulting in more diversified earnings. For the three months ended September 30, 2024, 81.2% of fee-based revenues were generated in non-regulated service companies, with the remainder in regulated insurance companies.

Previous wording

For the three months ended June 30, 2024, net investment income was $6.4 million as compared to $9.1 million in the prior year period, a decrease of $2.7 million driven by increased cash equivalent balances for which interest income is reported in other income and increased investments expenses. Net realized and unrealized gains were $2.5 million, an improvement of $6.9 million, as compared to net realized and unrealized losses of $4.4 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments carried at fair value. Unrealized losses on AFS securities impacting OCI for the three months ended June 30, 2024 were $0.9 million, driven by the increase in yields (yields and bonds prices are inversely related) and corresponding impact to the fair value of investments.

Current wording

For the three months ended September 30, 2024, net investment income was $9.1 million as compared to $5.4 million in the prior year period, an increase of $3.7 million driven by increased yields on investments. Net realized and unrealized gains were $2.2 million, an improvement of $3.8 million, as compared to net realized and unrealized losses of $1.6 million in the prior year period, primarily driven by the change in fair value of certain equity and other investments carried at fair value. Unrealized gains on AFS securities impacting OCI for the three months ended September 30, 2024 were $21.7 million, driven by the decrease in interest rates (interest rate yields and bonds prices are inversely related) and corresponding impact to the fair value of investments.

Previous wording

For the three months ended June 30, 2024, net losses and loss adjustment expenses were $205.3 million, member benefit claims were $28.7 million and commission expense was $173.3 million, as compared to $115.0 million, $32.7 million, and $142.7 million, respectively, for the three months ended June 30, 2023. The increase in net losses and loss adjustment expenses of $90.2 million, or 78.4%, was driven by growth in U.S. and European insurance lines and the shift in business mix toward commercial lines, which tend to have higher loss ratios and lower commission and expense ratios. In addition, the Company experienced favorable prior year development of $1.6 million for the three months ended June 30, 2024, driven by lower-than-expected claim severity in our commercial lines of business. The decrease in member benefit claims of $4.0 million, or 12.2%, was driven by declines in auto and consumer goods claim frequencies. Commission expenses increased by $30.6 million, or 21.4%, generally in line with the growth in earned premiums, net and service and administrative fees, partially offset by the impact of sliding scale commissions as losses increased.

Current wording

For the three months ended September 30, 2024, net losses and loss adjustment expenses were $175.9 million, member benefit claims were $27.5 million and commission expense was $154.0 million, as compared to $125.1 million, $28.8 million, and $153.7 million, respectively, for the three months ended September 30, 2023. The increase in net losses and loss adjustment expenses of $50.8 million, or 40.6%, was driven by growth in U.S. and European insurance lines and the shift in business mix toward commercial lines, which tend to have higher loss ratios and lower commission and expense ratios. In addition, the Company experienced unfavorable prior year development of $1.4 million for the three months ended September 30, 2024, driven by higher-than-expected claims in our commercial lines of business. The decrease in member benefit claims of $1.3 million, or 4.6%, was driven by declines in auto and consumer goods claim frequencies. Commission expenses increased by $0.3 million, or 0.2%, driven by growth in earned premiums, partially offset by impacts from sliding scale commission structures.

Previous wording

For the three months ended June 30, 2024, employee compensation and benefits were $31.6 million and other expenses were $27.6 million, as compared to $27.7 million and $24.2 million, respectively, for the three months ended June 30, 2023. Employee compensation and benefits increased by $3.8 million, or 13.9%, driven by investments in human capital associated with growth in E&S, admitted and warranty lines. Other expenses increased by $3.3 million, or 13.8%, driven by a change in fair value of the Fortegra Additional Warrant liability of $0.9 million, and increased marketing and information technology expenses.

Current wording

For the three months ended September 30, 2024, employee compensation and benefits were $37.9 million and other expenses were $26.3 million, as compared to $31.0 million and $20.3 million, respectively, for the three months ended September 30, 2023. Employee compensation and benefits increased by $6.9 million, or 22.3%, driven by investments in human capital associated with growth in E&S, admitted and services lines. Other expenses increased by $6.0 million, or 29.8%, driven by a change in fair value of the Fortegra Additional Warrant liability of $0.9 million, and increased marketing and information technology expenses.

Previous wording

For the three months ended June 30, 2024, interest expense was $7.5 million as compared to $6.6 million for the three months ended June 30, 2023. The increase in interest expense of $0.9 million, or 13.8%, was primarily driven by increased borrowings on Fortegra’s corporate revolver and asset based debt for premium finance lines.

Current wording

For the three months ended September 30, 2024, interest expense was $7.2 million as compared to $6.3 million for the three months ended September 30, 2023. The increase in interest expense of $0.9 million, or 14.6%, was primarily driven by increased borrowings on Fortegra’s corporate revolver and asset based debt for premium finance lines.

Previous wording

For the three months ended June 30, 2024, depreciation and amortization expense was $4.8 million, including $3.7 million of intangible amortization related to purchase accounting associated with acquisitions at Fortegra from 2019 to 2023, as compared to $5.3 million, including $3.9 million of intangible amortization from purchase accounting in 2023.

Current wording

For the three months ended September 30, 2024, depreciation and amortization expense was $5.0 million, including $3.9 million of intangible amortization related to purchase accounting associated with acquisitions at Fortegra from 2019 to 2023, as compared to $5.8 million, including $4.9 million of intangible amortization from purchase accounting in 2023.

Previous wording

(1) The total gross written premiums and premium equivalents of $776.1 million and $716.1 million for the three months ended June 30, 2024 and 2023, respectively, were comprised of gross written premiums of $573.8 million and $501.3 million, plus assumed premiums of $107.9 million and $113.2 million, plus gross service and administrative fee additions of $94.4 million and $101.5 million, respectively. See Note (7) Reinsurance Recoverable and Prepaid Reinsurance Premiums and Note (13) Revenue from Contracts with Customers within the respective periods for more information.

Current wording

(1) The total gross written premiums and premium equivalents of $776.8 million and $686.5 million for the three months ended September 30, 2024 and 2023, respectively, were comprised of gross written premiums of $573.0 million and $522.1 million, plus assumed premiums of $108.0 million and $75.8 million, plus gross service and administrative fee additions of $95.8 million and $88.7 million, respectively. See Note (7) Reinsurance Recoverable and Prepaid Reinsurance Premiums and Note (13) Revenue from Contracts with Customers within the respective periods for more information.

Previous wording

(2) The premium equivalents metric excludes amounts received from failure to perform vehicle service contracts held in off-balance sheet trusts and premium finance volumes as it was determined to be unlikely these amounts will be recognized as revenue. The second quarter 2023 has been conformed resulting in a reduction of premium equivalents of $139.0 million. This change only impacted the premium equivalents metric and did not impact the Company’s condensed consolidated financial statements.

Current wording

(2) The premium equivalents metric excludes amounts received from failure to perform vehicle service contracts held in off-balance sheet trusts and premium finance volumes as it was determined to be unlikely these amounts will be recognized as revenue. The three months ended September 30, 2023 has been conformed resulting in a reduction of premium equivalents of $148.0 million. This change only impacted the premium equivalents metric and did not impact the Company’s condensed consolidated financial statements.

Previous wording

Total gross written premiums and premium equivalents for the three months ended June 30, 2024 were $776.1 million, representing an increase of $60.0 million, or 8.4%. The increase was driven by a combination of factors including expanding Fortegra’s distribution partner network, and growing E&S insurance lines.

Current wording

Total gross written premiums and premium equivalents for the three months ended September 30, 2024 were $776.8 million, representing an increase of $90.3 million, or 13.2%. The increase was driven by a combination of factors including expanding Fortegra’s distribution partner network and growing E&S insurance lines.

Previous wording

For the three months ended June 30, 2024, Insurance increased by $67.1 million, or 10.9%, driven by growth in specialty commercial lines in the E&S business. For the three months ended June 30, 2024, Services decreased by $7.1 million, or 7.0%, driven by declines in auto and consumer goods warranty contracts.

Current wording

For the three months ended September 30, 2024, Insurance increased by $83.2 million, or 13.9%, driven by growth in commercial E&S lines, partially offset by a decline in personal credit and auto lines. For the three months ended September 30, 2024, Services increased by $7.1 million, or 8.0%, driven by growth in auto and consumer goods service contracts.

Previous wording

The growth in gross written premiums and premium equivalents, combined with higher retention in select products as of June 30, 2024, has resulted in an increase of $152.2 million, or 6.9%, in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to June 30, 2023. As of June 30, 2024, unearned premiums and deferred revenues were $2.4 billion, as compared to $2.2 billion as of June 30, 2023.

Current wording

The growth in gross written premiums and premium equivalents, combined with higher retention in select products as of September 30, 2024, has resulted in an increase of $117.1 million, or 5.1%, in unearned premiums and deferred revenue on the condensed consolidated balance sheets as compared to September 30, 2023. As of September 30, 2024, unearned premiums and deferred revenues were $2.4 billion, as compared to $2.3 billion as of September 30, 2023.

Previous wording

Net written premiums for the three months ended June 30, 2024 were $365.9 million, representing an increase of $45.3 million, or 14.1%, consistent with growth in gross written premiums, and as a result of increased retention on Fortegra’s whole account quota share reinsurance arrangement. For the three months ended June 30, 2024, Net written premiums from commercial lines increased by $51.0 million, or 18.5%, driven by growth in specialty E&S and admitted business. For the three months ended June 30, 2024, net written premiums from personal lines decreased by $5.7 million, or 12.7%, driven by declines in personal credit insurance lines. Net written premiums from property and short-tail lines represented $108.3 million, or 29.6%, of the total net written premiums for the three months ended June 30, 2024 compared to $100.1 million, or 31.2%, for the prior year period. Property and short-tail net written premiums were diversified by geographic location, exposure and risk type with substantial reinsurance protection. As of June 30, 2024, the net loss to the Company in a 1-in-250 year catastrophe event represented approximately 2.6% of Fortegra’s stockholders’ equity. This reported loss includes the impact of incurred losses based on the estimated frequency and severity of potential events, reinstatements premiums, reinsurance recoveries and taxes.

Current wording

Net written premiums for the three months ended September 30, 2024 were $389.3 million, representing an increase of $55.4 million, or 16.6%, consistent with growth in gross written premiums, and as a result of increased retention on Fortegra’s whole account quota share reinsurance arrangement. For the three months ended September 30, 2024, Net written premiums from commercial lines increased by $72.8 million, or 26.7%, driven by growth in E&S and specialty admitted business. For the three months ended September 30, 2024, net written premiums from personal lines decreased by $17.4 million, or 28.6%, driven by declines in personal credit and auto insurance lines. Net written premiums from property and short-tail lines represented $152.0 million, or 39.1%, of the total net written premiums for the three months ended September 30, 2024 compared to $73.9 million, or 22.1%, for the prior year period. Property and short-tail net written premiums were diversified by geographic location, exposure and risk type with substantial reinsurance protection. As of September 30, 2024, the net loss to the Company in a 1-in-250 year catastrophe event represented approximately 2.4% of Fortegra’s stockholders’ equity. This reported loss includes the impact of incurred losses based on the estimated frequency and severity of potential events, reinstatements premiums, reinsurance recoveries and taxes.

Previous wording

The combined ratio was 90.0% for the six months ended June 30, 2024, compared to 90.8% for the prior year period, reflecting the consistent underwriting performance and scalability of the Company’s operating platform. The underwriting ratio was 77.8%, an increase of 1.0% from the prior year period, which consists of a loss ratio of 46.8%, compared to 40.6% in the prior year period, and an acquisition ratio of 31.0%, compared to 36.2% in the prior year period. The increase in loss ratio was driven by changes in business mix, which was partially offset by the decline in acquisition ratio. The operating expense ratio decreased 1.8% percentage points to 12.2%, as compared to 14.0% in the prior year period.

Current wording

The combined ratio was 90.2% for the three months ended September 30, 2024 and 2023, reflecting the consistent underwriting performance and scalability of the Company’s operating platform. The underwriting ratio was 76.2%, a decrease of 0.2 percentage points from the prior year period, which consists of a loss ratio of 45.1%, compared to 39.8% in the prior year period, and an acquisition ratio of 31.1%, compared to 36.6% in the prior year period. The increase in loss ratio was driven by changes in business mix towards commercial lines and increases in repair and labor costs on vehicle service contracts compared to prior year period, which was more than offset by the decline in acquisition ratio as a result of swing rate commission structures. The operating expense ratio increased 0.2 percentage points to 14.0%, as compared to 13.8% in the prior year period.

Previous wording

(2) Commission expense in this table is presented net of ceding fees and ceding commissions of $15.0 million and $5.1 million, respectively, as of the three months ended June 30, 2024, and $11.0 million and $4.7 million, respectively, as of the three months ended June 30, 2023.

Current wording

(2) Commission expense in this table is presented net of ceding fees and ceding commissions of $9.9 million and $3.7 million, respectively, as of the three months ended September 30, 2024, and $9.7 million and $2.4 million, respectively, as of the three months ended September 30, 2023.

Previous wording

Underwriting and fee revenues were $495.2 million for the three months ended June 30, 2024 as compared to $362.3 million for the three months ended June 30, 2023. Total underwriting and fee revenues increased $132.9 million, or 36.7%, driven by growth in all business lines. The increase in Insurance was $127.0 million, or 46.6%, driven by growth in specialty E&S and admitted insurance lines. The increase in Services was $5.9 million, or 6.6%, driven by growth in vehicle service contracts and premium finance offerings.

Current wording

Underwriting and fee revenues were $451.0 million for the three months ended September 30, 2024 as compared to $387.2 million for the three months ended September 30, 2023. Total underwriting and fee revenues increased $63.8 million, or 16.5%, driven by growth in Insurance lines. The increase in Insurance was $67.1 million, or 22.8%, driven by growth in E&S and specialty admitted insurance lines. The decrease in Services was $3.3 million, or 3.6%, driven by a decline in vehicle service contracts in Europe.

Previous wording

Return on average equity was 28.4% for the three months ended June 30, 2024, as compared to 23.1% for the prior year period. The increase in net income and annualized return on average equity was driven by revenue growth and improvement of the combined ratio, in addition to improvements in net realized and unrealized gains and losses.

Current wording

Return on average equity was 24.3% for the three months ended September 30, 2024, as compared to 27.5% for the prior year period. The decrease in return on average equity was driven by the increase in net income, which was driven by revenue growth and consistent the combined ratio, in addition to improvements in net realized and unrealized gains and losses, more than offset by the higher average stockholders’ equity as a result of capital contribution from Tiptree, Warburg, and Fortegra independent directors in March and April 2024.