Sandra Bell - Chief Financial Officer Michael Barnes - Executive Chairman Jonathan Ilany - Chief Executive Officer

Greetings, and welcome to the Tiptree Inc., First Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sandra Bell, Chief Financial Officer. Thank you, you may begin.

Good morning. And welcome to our first quarter 2017 earnings call. I am joined today by our Executive Chairman, Michael Barnes and CEO, Jonathan Ilany. We have posted the earnings release and presentation on our Web site at tiptreeinc.com. Our remarks today are qualified in their entirety by the disclaimers on page one of the presentation. Prior to turning the call over to Michael, I want to highlight a few of the key disclosures. This presentation supplements our SEC filings, and is provided solely for information purposes. Throughout the presentation, there are forward-looking statements. Our businesses are subject to risks and uncertainties, which are outlined in our SEC filings and which could impact our expectations of future results. Except as required by securities laws, we undertake no obligation to update any forward-looking statements. We use non-GAAP measures, which we believe provide additional information about our business, and are useful to investors. As these measures are not GAAP, they should not be used as a substitute for GAAP disclosures. The appendix provides a reconciliation of each of these measures to their GAAP equivalent. As discussed in our recent SEC filings, as we file the 10-K, certain immaterial errors were identified in the financial statements and related disclosures. The common characteristics among these errors in addition to their immateriality, was the fact that they were one time and unique in nature. As a result of their immateriality, the Company expects no changes to the year-end or first quarter financial. Although, these items are not material to the financial statements, the Company is also required to evaluate the impact of the immaterial errors on the Company’s internal control. With that, let me turn the call over to Michael, who will begin on page three of the presentation.

Good morning and thank you for joining our earnings call today. For the first quarter, total revenue grew 25.4% year over year, while generating $1.3 million of net income and $11.8 million of adjusted EBITDA. Tiptree's as exchange book value per share ended the quarter at $10.15, up 11.5% from this point last year. First quarter operating results continue to trend positively, excluding unrealized mark-to-market activity on our equity investments and similarly, excluding gains on legacy corporate investments in 2016. It is important to note, we will experience occasional short term volatility from quarter-to-quarter with these types of mark-to-market investments but continue to believe over the long term, our investments will provide attractive risk adjustment returns. Sandra will go through those drivers in further detail later in the call. Our primary focus, as always, is on continuing to build the Company that can generate a higher portion of stable and repeatable earnings from operations. With regard to our insurance business, we are constantly working to recalibrate the product mix to achieve a balance between growing near term earned premiums and operating products that will increase investible assets over time. While these are sometimes competing objectives, we target a combined ratio in the mid 90s or better, while growing our investible assets and longer term investment income. For the first quarter, gross written premiums were $165 million, down 9%, driven by reductions in non-standard auto programs which was partially offset by increases in our warranty product. Non-standard auto is a good example of how we enter new product market; we start small; feeding much of the business until we have a track record of underwriting performance; we then recalibrate to focus on the most successful programs to build the business and increase retention of desire. In the short term like non-standard…

Thank you, Michael. On page four, we've presented our first quarter operating performance by segment. In the upper left hand portion of the page, we highlight pre-tax income and adjusted EBITDA by segment contribution. Overall, pre-tax income was $2.5 million and adjusted EBITDA was $11.8 million, down $2.5 million and $3.5 million respectively from the prior year. On the bottom left hand portion of the page, we highlight the impact on earnings from our investments for the quarter, which include unrealized marks on our equity and gains and losses on CLO sub-note and legacy corporate investments. The combination of these factors was the primary driver of the decline year-over-year. Excluding these impacts, pre-tax income and adjusted EBITDA from operations would have been up slightly. At a high level, I would like to take a minute to review the key drivers of our performance this quarter. As always I will delve into each segment in more detail shortly. Our specialty insurance segment contributed $9.4 million of adjusted EBITDA, down from the prior year. The decline was driven primarily by unrealized losses in our equity portfolio in 2017 versus unrealized gains in 2016 that are highlighted in the box I just mentioned. Additionally, we experienced softness in credit and mobile protection products, as well as increases in stock-based compensation expense over the prior year. Approximately $900,000 of the increase in stock compensation was a one-time catch up expense related to performance awards. The softness in underwriting margins is largely due to the change in product mix where our growth in written premiums is coming from longer duration warranty and other specialty products that earn out over a longer time horizon. Because premiums are paid up front, we keep the flow over a longer duration, which allows us to match assets and liabilities…

Thanks, Sandra. We believe Tiptree is well positioned for the remainder of 2017 and beyond. Our insurance business is focused on growing premiums, while maintaining profitable underwriting standards. And as our mix of business trends toward longer duration products, we expect our invested assets to grow accordingly. Our strategic objective is to leverage Tiptree’s investment expertise to increase investment income over the long-term as the insurance business grows, while maintaining an attractive combined ratio. Our asset management business is stable. We are looking to further leverage our investment expertise to expand assets under management, potentially into other asset classes. Our senior living pipeline remains strong and we continue to make further acquisitions and increase NOI. We believe our efforts to better position the Company for growth and providing greater transparency into our investment and operating performance should allow investors to better understand Tiptree's intrinsic value. With that, we can open the line for questions.

Thank you, Christine. And thanks everyone for joining us today. If you do have any questions, please feel free to reach out to me directly. We look forward to speaking with you again shortly after the second quarter results are in. This concludes our conference call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines, at this time. Thank you for your participation, and have a wonderful day.