Insurance and Insurance Services
Tiptree’s insurance operations consist of Fortegra, a specialized insurance
and insurance services company offering consumer related protection products,
including credit insurance, non-standard auto insurance, warranties, service
contracts, auto warranty and roadside assistance. Fortegra also offers administration
services through a vertically integrated platform and provides fronting services
for self-insured clients.
Fortegra’s products and related services offer protection from life
events and uncertainties along with simplified steps to ease consumers’
recovery. Credit insurance and debt protection products offer consumers the
option to protect a loan balance in the event of death, disability, job loss
or other events that could impair the consumers’ ability to repay a debt
and damage their credit. Fortegra’s non-standard auto insurance programs,
administered by managing general agents (“MGAs”), focus on servicing
consumers in the non-standard market. Warranty and other service contracts for
mobile handsets, furniture and major appliances provide consumers protection
from product failure and loss. Automotive products protect consumers from mechanical
failure and provide roadside assistance when needed.
Fortegra’s products are marketed under its Fortegra, Life of the South,
ProtectCELL, 4Warranty, United Motor Club, Continental Car Club, Auto Knight
and Consecta brands. Through these brands, Fortegra delivers credit insurance,
debt protection, warranty contracts, motor club solutions, membership plans
and other services to installment loan companies, retailers, independent wireless
dealers, regional banks, community banks, warranty administrators, automobile
dealers, vacation ownership developers and credit unions. Fortegra’s clients
then offer these products and services to their customers in conjunction with
consumer transactions.
Fortegra typically structures agreements with its clients whereby they share
in the economic results of the program either through retrospective commission
arrangements or producer-owned reinsurance companies. Fortegra may selectively
assume insurance underwriting risk to meet clients’ needs or to enhance
its profitability.
Fortegra generates revenues from net earned premiums. These premiums consist
of direct and assumed earned premiums generated from the direct sale of payment
protection insurance policies and non-standard auto insurance policies and premiums
written by another carrier for payment protection insurance policies assumed
by Fortegra. In addition to ceding premiums to producer owned reinsurance companies,
Fortegra elects to cede to reinsurers a significant portion of the credit and
auto insurance that it underwrites for loss protection and capital management
purposes. Net earned premiums are offset in-part by commission expenses and
loss and loss adjustment expenses.
In addition, Fortegra generates service and administrative fee revenue for
administering payment protection products and fronting arrangements on behalf
of its clients and earns service and administrative fees from sales of warranty
products and motor club solutions. These revenues are offset in part by commission
expenses and member benefit claims. Fortegra earns ceding commissions for credit
insurance that it cedes to reinsurers through coinsurance arrangements. In addition,
Fortegra generates net investment income from its investment portfolio.
Mortgage Business
The operations of Luxury and Reliance include the origination, packaging and
sale of mortgage loans, primarily FHA/ VA, conforming/agency and jumbo mortgage
loans. The loans are typically sold shortly after origination into a liquid
secondary market. Loans sold into the secondary market may be sold “servicing-retained”
or “servicing-released,” referring to whether the rights to service
the mortgage are retained by the originator or released to the secondary market
investor at the time of sale. Luxury and Reliance currently sell all of their
loans on a servicing released basis. Our mortgage business is financed using
warehouse revolving credit facilities to fund mortgage loans held for sale.
Revenues are generated from gain on sale of loans, net interest income and loan
fee income.
Our mortgage business offers a variety of residential fixed and adjustable
rate mortgage products. We currently use two production channels to originate
or acquire mortgage loans: retail sales offices (commonly referred to as “retail”),
and a broker channel (commonly referred to as “wholesale”). Each
production channel produces similar mortgage loan products and generally applies
the same underwriting standards. We leverage technology to streamline the mortgage
origination process and bring service and convenience to both channels. In the
wholesale channel, brokers are able to register and lock loans, check the status
of the loan, and deliver documents in electronic format through the Internet.
Our sales support team assists brokers in jurisdictions where our mortgage business
is licensed to do business.
In the retail channel, loans are originated by mortgage loan originators employed
by us. When loans are originated on a retail basis, the origination documentation
is completed internally inclusive of customer disclosures and other aspects
of the lending process and the funding of the transactions. In the wholesale
channel, an unaffiliated bank, mortgage bank, or mortgage brokerage company
completes much of the loan paperwork. All loans are underwritten on a loan-level
basis to our underwriting standards.
Siena Lending Group
Siena is a commercial finance company providing financing solutions to small
and medium sized U.S. companies. Siena originates, structures, underwrites and
services senior secured asset-based loans for companies with sales typically
between $5 million and $50 million operating across a range of industry sectors.
Its core financing solutions include revolving lines of credit and term loans
and typically range in size from $1 million to $25 million. Siena also has the
ability to arrange significantly larger transactions that may be syndicated
to others or Siena may participate in large syndications itself. Siena funds
its lending practice from capital contributions by its owners as well as from
a revolving credit agreement.
Siena’s loans are typically used to fund working capital needs and are
secured by eligible, margined collateral, including accounts receivable, inventories,
and, to a lesser extent, other long-term assets. In determining a borrowers’
ability and willingness to repay loans, Siena conducts a detailed due diligence
investigation to assess financial reporting accuracy and capabilities as well
as to verify the values of business assets, among other things. Siena employs
third parties to conduct field exams to audit financial reporting and to appraise
the value of certain types of collateral in order to estimate its liquidation
value. Financing arrangements with customers also typically include substantial
controls over the application of borrowers’ cash and Siena retains discretion
over collateral advance rates and eligibility among other key terms and conditions.
Siena also offers a servicing platform, which provides asset-based lending
solutions for community and regional banks that do not have the expertise or
capacity to underwrite or service asset-based loans.
Real Estate
Tiptree’s real estate operations consist of Care, a real estate investment
company focused on seniors housing.
In Triple Net Lease Properties, Care only owns the real estate and enters into
a long term lease with an operator who is typically responsible for bearing
operating costs, including maintenance, utilities, taxes, insurance, repairs
and capital improvements. Triple Net Lease Properties are not consolidated since
Care does not manage the underlying operations. For Triple Net Lease Properties
operations, Care recognizes primarily rental income from the lease since substantially
all expenses are passed through to the tenant. In Managed Properties, Care generally
owns between 65-80% of the real estate and the operations with affiliates of
the management company owning the remainder. Care therefore consolidates all
of the assets, liabilities, income and expense of the Managed Properties operations
in segment reporting.
Care’s seniors housing communities currently include senior apartments,
independent and assisted living communities, a skilled nursing facility and
memory care communities. Rent payments and services provided in these facilities
are primarily paid for by the residents directly or through private insurance
and are less reliant on government reimbursement programs such as Medicaid and
Medicare. Care intends to continue to grow its portfolio primarily through the
acquisition of seniors housing properties, utilizing investment structures such
as Triple Net Lease Properties and Managed Properties. As Care acquires additional
properties and expands its portfolio, it intends to further diversify its concentrations
by tenant, asset class and geography within the seniors housing sector, including
further investments in senior apartments, independent and assisted living communities,
and memory care communities.
Asset Management
TAMCO
Tiptree’s asset management operations are conducted through TAMCO, an
SEC-registered investment adviser that is primarily a holding company for Tiptree’s
asset management subsidiaries, which include Telos and MCM. Telos primarily
manages credit related assets. MCM currently manages portfolios of tax exempt
securities for third parties and the Company. Tiptree seeks to grow its asset
management operations through acquisitions and through investments in new products
launched and managed by its subsidiaries.