News Details

• Revenues of $133.8 million for the quarter, up 32.5% from prior year period.
• Income from continuing operations of $7.0 million for the quarter, up $8.2 million from prior year period.
• Net income of $6.1 millionfor the quarter, down 59.3% from prior year period, due largely to income from discontinued operations of $21.0 million including the gain on sale of PFG in 2015.
• Adjusted EBITDA from continuing operations of $17.4 million for the quarter, up 141.7% from prior year period.
• Book value of $9.83 per Class A common share, up 9.7% compared to $8.96as of December 31, 2015 including the impact of a 5.6m block share purchase.
• Declared dividend of $0.025 per share to Class A stockholders of record on August 22, 2016 with a payment date of August 29, 2016.

NEW YORK--(BUSINESS WIRE)-- Tiptree Financial Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), a diversified holding company which operates in the insurance and insurance services, specialty finance, asset management and real estate industries, today announced its financial results for the three and six months ended June 30, 2016. This release reports Tiptree on a consolidated basis except where the discussion specifically notes that the amounts are attributable to the Class A common stockholders. Tiptree’s primary asset is its ownership of Tiptree Financial Partners, L.P. (“TFP”). Tiptree reports a non-controlling interest representing the economic interest in TFP held by other limited partners of TFP.

Second Quarter 2016 Highlights

• Tiptree purchased 5,596,000 shares of Class A common stock for $36.4 million at a 29% discount to March 31, 2016 book value per Class A share.
• Fortegra Financial Corporation (“Fortegra”) contributed $8.1 million and $17.1 million in pre-tax earnings to consolidated results for the three and six months ended June 30, 2016, respectively, compared to $6.3 million and $10.3 million for the prior year periods.
• Purchased an additional $10.7 million in non-performing residential mortgage loans (“NPLs”), bringing the Company’s total investment in NPLs to $62.3 million.
• Launched seventh CLO with Tiptree investment of $26 million in subordinated notes.

In addition, on August 1, 2016, Care acquired an additional seniors housing community for $29.4 million.

Second Quarter 2016 Financial Overview

Consolidated Results

For the three months ended June 30, 2016 net income before taxes from continuing operations was $11.0 million which represented an increase of $12.6 million from the three months ended June 30, 2015. The Company earned income before taxes from continuing operations of $16.0 million for the six months ended June 30, 2016, which was an increase of $23.5 million from the six months ended June 30, 2015. The key drivers of pre-tax results from continuing operations were improved profitability in our insurance and insurance services segment driven by higher revenues and investment income, increased rental income in our senior housing real estate operations, increases in mortgage volume and margins with the addition of Reliance and improving market conditions, and increased revenue on principal investments partially offset by higher corporate expenses associated with our effort to improve our controls and financial reporting infrastructure. A discussion of the changes in revenues, expenses and net income is presented below and in more detail in our segment analysis.

The Company reported revenues of $133.8 million for the three months ended June 30, 2016, which was an increase of $32.7 million or 32.4% from the prior year period. For the six months ended June 30, 2016, the Company reported revenues of $265.6 million, an increase of $75.5 million or 39.7% from the six months ended June 30, 2015. The primary drivers of the increase in revenues were improvements in earned premiums, service and administrative fees and investment income in our insurance and insurance services segment, increased mortgage volume and margins from the acquisition of Reliance in specialty finance, improvement in rental income attributable to acquisitions of senior housing properties at Care, and improvement in the performance of our principal investments.

Total Company expenses were $127.6 million for the three months ended June 30, 2016, an increase of $24.9 million or 24.3% from the three months ended June 30, 2015. For the six months ended June 30, 2016, the Company incurred expenses of $255.6 million, an increase of $58.3 million or 29.5% from the prior year period. The primary drivers of the increase in expenses were commission expenses in insurance and insurance services as a result of the growth in written premiums, higher payroll and commission expense primarily related to the addition of Reliance volume and headcount in specialty finance, increased operating expenses and depreciation and amortization associated with additional investments in our real estate segment and increases in corporate payroll and professional expenses to improve our reporting and controls infrastructure.

The Company reported net income before non-controlling interest of $7.0 million for the three months ended June 30, 2016, a decrease of $12.8 million from the three months ended June 30, 2015. The primary drivers of the year-over-year difference in net income before non-controlling interests were the same factors which impacted the positive year-over-year change in pre-tax income from continuing operations, and which were more than offset by $21.0 million of earnings from discontinued operations related to PFG reported in the second quarter of 2015 that did not repeat in 2016.

For the six months ended June 30, 2016, net income before non-controlling interests was $14.4 million, a decrease of $3.3 million, or 18.9% from the comparable prior year period. The primary drivers of the year-over-year difference in net income before non-controlling interests were the same factors which impacted the positive year-over-year change in pre-tax income from continuing operations, and which were more than offset by $23.3 million of earnings from discontinued operations in the six months ended June 30, 2015 which included the one-time net gain on the sale of PFG of $16.3 million. Additionally, a tax benefit of $2.4 million was recognized in the first quarter 2016 which was driven by discrete tax benefits of $4.0 million primarily from the tax reorganization effective January 1, 2016.

Adjusted EBITDA from continuing operations was $17.4 million for the three months ended June 30, 2016, an increase of $10.2 million or 142.4% from the three months ended June 30, 2015. For the six months ended June 30, 2016, the Company reported Adjusted EBITDA from continuing operations of $32.8 million, an increase of $20.7 million or 172.7% from the six months ended June 30, 2015. The key drivers of the change in Adjusted EBITDA were the same as those which impacted our pre-tax income from continuing operations. The smaller increase in Adjusted EBITDA versus the amount reported for pre-tax income from continuing operations was primarily driven by the smaller period-over-period changes attributable to increased depreciation and amortization at our real estate segment and the lower purchase accounting impacts at our insurance and insurance services segment.

Total Company Adjusted EBITDA was $17.4 million for the three months ended June 30, 2016, a decrease of $14.8 million from the three months ended June 30, 2015. Adjusted EBITDA for the six months ended June 30, 2016 was $32.8 million, a decrease of $12.5 million from the six months ended June 30, 2015. The largest driver of the decrease for both periods was the sale of PFG which contributed $25.0 million and $33.2 million in the three and six months ended June 30, 2015, respectively. The other drivers were the same factors that impacted Adjusted EBITDA from continuing operations.

Management believes that Adjusted EBITDA provides a supplementary metric to enhance investors’ understanding of the on-going earnings potential of the Company’s businesses and an indication of the Company’s ability to generate additional funds for re-investment in the combined businesses. Because it is a Non-GAAP measure, it should be reviewed in conjunction with the Company’s GAAP results. See “Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA” below for further information relating to the Company’s Adjusted EBITDA measure, including a reconciliation to GAAP net income.

Segment Results

Insurance and Insurance Services segment

The Company’s insurance and insurance services segment is comprised of its wholly-owned Fortegra subsidiary, which we acquired in December 2014. The acquisition of Fortegra resulted in purchase price accounting adjustments in our insurance and insurance services segment giving effect to the push-down accounting treatment of the acquisition. These adjustments include setting deferred cost assets to a fair value of zero, modifying deferred revenue liabilities to their respective fair values, and recording a substantial intangible asset representing the value of the business acquired (“VOBA”). The application of push-down accounting creates a modest impact to net income, but significantly impacts individual assets, liabilities, revenues, and expenses. Due to acquisition accounting, the line items through which revenue and expenses relate to acquired contracts are recognized in a single line item, depreciation and amortization, and are different than newly originated contracts. To allow for better period-over-period comparison of operations, we eliminated the effects of purchase accounting (“As Adjusted”). The Company believes that As Adjusted information provides useful supplemental information to investors, but should be reviewed in conjunction with their nearest GAAP equivalent. See “Non-GAAP Financial Measures - Fortegra” below for further information, including a reconciliation from GAAP results to As Adjusted results.

Insurance and insurance services segment pre-tax income was $8.1 million for the three months ended June 30, 2016, an increase of $1.8 million or 28.2% over the prior year period operating results. The primary drivers of the improvement in period-over-period results was a reduction in depreciation and amortization expenses associated with the VOBA of $3.9 million and reduction in operating expenses of $1.3 million partially offset by a reduced net revenues of $3.3 million.

As Adjusted pre-tax income was $7.6 million for the three months ended June 30, 2016, an increase of $2.7 million or 54.7%. The primary drivers of the period-over-period improvement include an increase in net revenues of $0.9 million driven by improvements in investment income and earned premiums, partially offset by higher commission expense and net loss and loss adjustment expense. As Adjusted operating expenses were down $1.8 million as a result of cost actions taken throughout 2015 to reduce headcount, professional fees and other expenses.

Insurance and insurance services segment pre-tax income was $17.1 million for the six months ended June 30, 2016, an increase of $6.7 million or 65.4% over the prior year period operating results. The primary drivers of the improvement in period-over-period results was a reduction in depreciation and amortization expenses associated with the VOBA of $11.8 million, reduction in operating expenses of $1.5 million partially offset by reduced net revenues of $6.6 million.

As Adjusted pre-tax income was $16.0 million for the six months ended June 30, 2016, an increase of $7.2 million or 81.6%. The primary drivers of the period-over-period improvement include an increase in net revenues of $4.5 million driven by improvements in investment income and credit protection and specialty product earned premiums and service fees, partially offset by higher commission expense and net loss and loss adjustment expense. As Adjusted operating expenses were down $2.7 million as a result of cost actions taken throughout 2015 to reduce headcount and professional fees in addition to lower interest expense.

For insurance and insurance services, the main components of revenue are service and administrative fees, ceding commissions and earned premiums, net. Total revenues were $87.8 million for the three months ended June 30, 2016, up $9.3 million, or 11.8% over the prior year period. The increase was primarily driven by an increase in earned premiums of $6.6 million, or 16.6%, an increase of $2.7 million, or 10.7%, in service and administrative fees, and an increase of $1.0 in investment income, offset by a reduction of $1.0 million in other income.

Total revenues were $177.1 million for the six months ended June 30, 2016, up $26.2 million, or 17.4% over the prior year period. The increase was primarily driven by an increase in earned premiums of $13.8 million, or 18.0%, an increase of $11.1 million, or 23.4%, in service and administrative fees, and an increase of $3.2 million in investment income, partially offset by a decrease of $3.1 million in other income.

As Adjusted net revenues for the three months ended June 30, 2016 were $28.7 million, up $0.9 million or 3.3% from the comparable 2015 period. The increase was primarily driven by improvements in investment income, and higher service and administrative fees in the credit protection and specialty products lines. Those improvements were dampened slightly by a reduction in period-over-period As Adjusted net revenues for cell phone warranty contracts as competitive pressures remain.

As Adjusted net revenues for the six months ended June 30, 2016 were $59.4 million, up $4.5 million or 8.1% from the comparable 2015 period. Credit protection As Adjusted net revenues for the six months ended June 30, 2016 were $31.7 million, higher than the comparable 2015 period operating results by $3.5 million or 12.4%. Warranty products, including cell phone protection, were $12.9 million for the six months ended June 30, 2016, down $3.4 million or 21.1% from the comparable 2015 period. Specialty products As Adjusted net revenue for the six months ended June 30, 2016 were $5.0 million, up 75.9% from the prior year period operating results due to increased earned premiums and service and administrative fees. Credit protection products and specialty products continue to provide opportunities for growth through a combination of expanded product offerings, new clients and geographic expansion in the latter case.

Operating expenses in the insurance and insurance services segment are composed of payroll and employee commissions, interest expense, professional fees, depreciation and amortization expenses and other expenses. Segment operating expenses for the three months ended June 30, 2016 were $22.0 million, a decrease of $5.1 million or 18.8% as compared to the previous year period costs. The primary driver of the period-over-period decrease was attributable to lower depreciation and amortization expense as a result of the decline in the purchase accounting impact from the amortization of the fair value attributed to the insurance policies and contracts acquired, which was $0.9 million for the three months ended June 30, 2016 versus $4.7 million in the comparable 2015 period. As adjusted operating expenses of $21.2 million were down period-over-period as a result of the cost reduction efforts described above.

Segment operating expenses for the six months ended June 30, 2016 were $45.6 million, a decrease of $13.3 million or 22.6% as compared to the previous year period costs. The primary driver of the period-over-period decrease was attributable to lower depreciation and amortization expense as a result of the decline in the purchase accounting impact from the amortization of the fair value attributed to the insurance policies and contracts acquired, which was $2.4 million for the six months ended June 30, 2016 versus $14.1 million in the comparable 2015 period. As Adjusted operating expenses of $43.4 million were down by $2.7 million period-over-period as a result of the cost reduction efforts described above.

Insurance and insurance services segment adjusted EBITDA was $11.4 million and $23.4 million for the three and six months ended June 30, 2016, respectively. The key drivers of Adjusted EBITDA growth was higher credit insurance and specialty products net revenues, increased investment income, and lower operating expenses, adjusted for the impact of purchase accounting effects, partially offset by lower warranty revenues driven by competition in the cell phone warranty business. See “Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA” below for a reconciliation to GAAP net income.

Specialty Finance segment

Specialty finance pre-tax income was $2.3 million for the three months ended June 30, 2016, compared with $0.6 million for the same period in 2015. The key drivers of the increase were the addition of Reliance’s earnings in 2016 and increases in average loans outstanding at Siena over the prior year period. Segment revenues were $22.2 million for the three months ended June 30, 2016, compared with $8.0 million for the comparable 2015 period, an increase of $14.2 million or 178.3%. Segment expenses were $19.9 million in the three months ended June 30, 2016, compared with $7.4 million in the comparable 2015 period, an increase of $12.5 million or 168.5%. Margins expanded as revenue growth outpaced expense increases as the businesses scaled operations and increased their volumes.

For the six months ended June 30, 2016, specialty finance pre-tax income was $1.3 million compared with $1.0 million for the same period in 2015. Segment revenues were $38.8 million for the six months ended June 30, 2016, compared with $14.2 million for the comparable 2015 period, an increase of $24.5 million or 172.4%. Segment expenses were $37.4 million in the six months ended June 30, 2016, compared with $13.2 million in the comparable 2015 period, an increase of $24.2 million or 183.0%. For the first half of 2016, year-over-year expenses increased at a higher rate than revenues which was driven by increasing mortgage payroll and marketing expenses as the businesses expanded loan officer headcount in an effort to grow originations. Growth in volume tends to lag the hiring of new loan officers as the full ramp up of productivity generally takes four to six months.

Specialty finance Adjusted EBITDA was $2.6 million for the three months ended June 30, 2016 compared to $0.7 million in the prior year period. Specialty finance Adjusted EBITDA was $1.8 million for the six months ended June 30, 2016 compared to income of $1.2 million in the prior year period. The increase in Adjusted EBITDA was driven by the same factors that impacted pre-tax income explained above. See “Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA” below for further information relating to the Company’s adjusted EBITDA measure, including a reconciliation to GAAP net income.

Real Estate segment

Care had a pre-tax loss of $1.2 million for the three months ended June 30, 2016, compared with pre-tax loss of $2.0 million for the same period in 2015. Care had a pre-tax loss of $5.0 million for the six months ended June 30, 2016, compared with pre-tax loss of $6.2 million for the same period in 2015. The lower losses in both periods was driven by greater growth in rental income than operating expenses due to improvements in the underlying properties.

Since February 2015, Care has invested in 13 additional senior housing properties: 11 in February and March 2015 and two in January and March 2016. The increase in the number of properties over those periods has generated higher rental and other income in the 2016 periods compared with the comparable 2015 periods. However the Company also incurred additional depreciation, amortization and interest expenses as a consequence of the growth in Care’s property portfolio. Subsequent to the end of the quarter, Care acquired a new property with one of its existing operator partners for $29.4 million, of which Care contributed its pro rata share of the equity of $8.4 million.

Care’s segment NOI was $5.1 million for the three months ended June 30, 2016, compared with $4.2 million in the prior year period, an increase of $0.9 million or 21.6%, primarily as a result of an increase in rental revenue partially offset by increased property operating expenses. Care’s segment NOI was $10.0 million for the six months ended June 30, 2016, compared with $7.3 million in the prior year period, an increase of $2.7 million or 36.6%, primarily as a result of an increase in rental revenue partially offset by increased property operating expenses. Several of Care’s acquisitions over the last 18 months included properties that Care and its operating partners are enhancing through renovation projects and other capital upgrades in an effort to grow revenue and to allow them to operate more efficiently. Improvements resulted in NOI margins on Managed Properties going up from 24.2% to 26.0% for the six months ended June 30, 2016 against the prior year period. As the newer facilities ramp up and stabilize, we expect our results to reflect additional NOI margin improvements.

Care had Adjusted EBITDA of $2.3 million for the three months ended June 30, 2016, compared to $2.0 million in the three months ended June 30, 2015, with the drivers being the same as mentioned above for pre-tax income. Care had Adjusted EBITDA of $4.3 million for the six months ended June 30, 2016, compared to $2.7 million in the six months ended June 30, 2015, with the drivers being the same as mentioned above for pre-tax income. See “Non-GAAP Financial Measures” below for a reconciliation to GAAP net income. See “Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA” below for a reconciliation to GAAP net income.

Asset Management segment

Pre-tax income for the asset management segment was $1.1 million for the three months ended June 30, 2016, compared with $0.2 million for the 2015 period, an increase of $0.9 million. The key drivers of the increase were a reduction in payroll and employee commissions by $1.2 million due to normalizing the incentive compensation expense timing compared to the prior year period and a reduction in other expenses of $0.1 million, offset by $0.4 million reduced management fees as our older CLOs with higher fees run-off and are replaced with newer CLOs.

For the six months ended June 30, 2016, pre-tax income was $2.7 million compared with $2.1 million for the 2015 period, an increase of $0.7 million. The key drivers of the increase were a reduction in payroll and employee commissions by $0.8 million due to normalizing the incentive compensation expense timing compared to the prior year period, and a reduction in other expenses of $0.1 million, offset by reduced management fees. The reduction in management fees was driven by a combination of AUM declines in our older CLOs which are past their reinvestment periods and lower fees in our more recent CLOs as described herein.

Asset management segment adjusted EBITDA was $1.1 million and $2.7 million for the three and six months ended June 30, 2016, respectively, compared to $0.2 million and $2.1 million for the comparable prior year periods. The increase was driven by the same factors discussed above. See “Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA” below for a reconciliation to GAAP net income.

Net Income attributable to CLOs managed by the Company

Including the net income from our deconsolidated CLOs, pre-tax income from the Company’s CLO business was $6.6 million for the three months ended June 30, 2016 compared with $1.9 million for the same period in 2015. The primary drivers of the year-over-year increase of $4.7 million were increased distributions of $0.6 million and lower realized and unrealized losses incurred on the Company’s holdings of subordinated notes of $4.4 million which was only partially offset by the $0.4 million year-over-year reduction in management fees. This management fee reduction was due to the runoff of Telos 1 and Telos 2, which are past their reinvestment period, plus the impact of lower fees on later CLOs. The realized and unrealized losses in the three months ended June 30, 2016 were less than the same period in 2015 due to a recovery of the mark-to-market write-down taken on our CLO subordinated note holdings in the second half of 2015 and first quarter of 2016.

For the six months ended June 30, 2016, pre-tax income from the Company’s CLO business was $9.4 million compared to $2.7 million in the same period in 2015. The increases were driven by a reduction in losses of $9.6 million, partially offset by lower management fees and distributions of $0.6 million and $2.3 million, respectively. The decline in distributions is a result of lower overall subordinated note holdings and the reduction in the realized and unrealized losses was due to a slight recovery of the marked-to-market position in the 2016 period as compared to the marks taken throughout the 2015 period. See “Non-GAAP Financial Measures - CLO Net Income” below for a reconciliation to GAAP net income.

Corporate and Other segment

The Company’s corporate and other segment incorporates revenues from the Company’s principal investments, which include CLO subordinated notes, tax exempt securities, income from the Company’s credit investment portfolio and net gains or losses from the Company’s corporate finance activity, including the interest rate and credit derivative risk mitigation transactions. Segment expenses include interest expense on the Fortress credit facility and head office payroll, professional fees and other expenses.

Pre-tax income for the corporate and other segment was $0.7 million for the three months ended June 30, 2016, compared with a loss of $6.7 million for the 2015 period, an increase of $7.4 million. The key drivers of year-over-year increase were $5.3 million in CLO subordinated notes performance, $4.3 million in Credit investments (including the Telos 7 warehouse, Telos Credit Opportunities fund and NPLs) and improvement in Corporate principal investments revenues of $0.6 million, partially offset by increases in Corporate expenses of $2.8 million related to payroll and professional services.

For the six months ended June 30, 2016, the Company recorded a loss of $0.1 million compared with a loss of $14.7 million for the 2015 period, an increase of $14.6 million. The key drivers of year-over-year increase were $5.7 million in CLO subordinated notes performance, $7.2 million in Credit investments and improvement in Corporate principal investments revenues of $7.2 million, partially offset by increases in Corporate expenses of $5.5 million related to payroll and professional services.

Earnings Conference Call

Tiptree will host a conference call on Tuesday, August 9, 2016 at 10:00 a.m. Eastern Time to discuss its second quarter 2016 financial results. A copy of our investor presentation for the second quarter 2016, to be used during the conference call, as well as this press release, will be available in the Investor Relations section of the Company’s website, located at www.tiptreefinancial.com.

The conference call will be available via live or archived webcast at http://www.investors.tiptreefinancial.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.

To participate in the telephone conference call, please dial 1-877-407-4018 (domestic) or 1-201-689-8471 (international). Please dial in at least five minutes prior to the start time.

A replay of the call will be available from Tuesday, August 9, 2016 at 1:00 p.m. Eastern Time, until midnight Eastern on Tuesday, August 16, 2016. To listen to the replay, please dial 1-877-870-5176 (domestic) or 1-858-384-5517 (international), Passcode: 13642157.

About Tiptree

Tiptree is a diversified holding company engaged through its consolidated subsidiaries in a number of businesses and is an active acquirer of new businesses. Tiptree, whose operations date back to 2007, currently has subsidiaries that operate in five industries: insurance and insurance services, specialty finance, asset management and real estate. Tiptree’s principal investments are included in a corporate and others segment.

Forward-Looking Statements

This release contains “forward-looking statements” which involve risks, uncertainties and contingencies, many of which are beyond the Company’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “should,” “target,” “will,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the Company’s plans, objectives, expectations and intentions. The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, and as described in the Company’s other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this release. The factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to update any forward-looking statements.

Tiptree Financial Inc.
Non-GAAP Financial Measures
(Unaudited, in thousands)

Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA

Management uses EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that use of these financial measures on a consolidated basis and for each segment provide supplemental information useful to investors as it is frequently used by the financial community to analyze performance period to period, to analyze a company’s ability to service its debt and to facilitate comparison among companies. The Company believes segment EBITDA and Adjusted EBITDA provides additional supplemental information to compare results among our segments. Adjusted EBITDA is also used in determining incentive compensation for the Company’s executive officers. These measures are not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative or substitute for net income. The Company’s presentation of these measures may differ from similarly titled non-GAAP financial measures used by other companies. The Company defines EBITDA as GAAP net income of the Company adjusted to add consolidated interest expense, consolidated income taxes and consolidated depreciation and amortization expense as presented in its financial statements and Adjusted EBITDA as EBITDA adjusted to (i) subtract interest expense on asset-specific debt incurred in the ordinary course of its subsidiaries’ business operations, (ii) adjust for the effect of purchase accounting, (iii) add back significant acquisition related costs, (iv) adjust for significant relocation costs and (v) any significant one-time expenses.

Non-GAAP Financial Measures - Fortegra

The following table presents our insurance and insurance services segment results on a GAAP basis and an As Adjusted basis (a non GAAP measure which excludes the effects of purchase price accounting which management believes provides for better period-over-period comparison of the underlying operating performance of the business and aligns more closely with the basis upon which management performance is measured). Due to acquisition accounting, the line items through which revenue and expenses relate to acquired contracts are recognized in a single line item, depreciation and amortization, and are different than newly originated contracts. To allow for better period-over-period comparison of operations, we eliminated the effects of purchase accounting. The Company believes that As Adjusted information provides useful supplemental information to investors, but should be reviewed in conjunction with their nearest GAAP equivalent. Investors should not consider these Non-GAAP financial measures as a substitute for the financial information that Fortegra reports in accordance with U.S. GAAP. These Non-GAAP financial measures reflect subjective determinations by Fortegra management, and may differ from similarly titled Non-GAAP financial measures presented by other companies. See the below table for a reconciliation from actual to As Adjusted financials.

Non-GAAP Financial Measures - Net revenues

For insurance and insurance services, Net revenues, which is a non-GAAP financial measure, is shown as total revenue less commissions paid to brokers, member benefit claims and net loss and loss adjustment expenses. Year over year comparisons of total revenues are often impacted by clients’ choice as to whether to retain risk. We use net revenues as another means of understanding product contributions to our results and provides a comparison of period-over-period risk retained by the Company. Net revenues also adds supplemental information for investors to understand profitability of various products after reinsurance payments, claims and losses.

Non-GAAP Financial Measures - NOI

We evaluate performance of our real estate segment based on net operating income (“NOI”). We consider NOI as an important supplemental measure used to evaluate the operating performance of our real estate segment because it allows investors, analysts and our management to assess our unleveraged property-level operating results and to compare our operating results between periods and to the operating results of other real estate companies on a consistent basis. In addition, NOI is the basis upon which our partners in the Managed Properties are compensated. We define NOI as total revenue less property operating expense. Property operating expenses and resident fees and services are not relevant to Care’s Triple Net Lease Properties since Care does not manage the underlying operations and substantially all expenses are passed through to the tenant. Our calculation of NOI may differ from similarly titled non-GAAP financial measures used by other companies. NOI is not a measure of financial performance or liquidity under GAAP and should not be considered a substitute for pre-tax income. The following tables present revenues and expenses, which include amounts attributable to non-controlling interests, by property type in our real estate segment for the six months ended June 30, 2016 and 2015, respectively.

Reconciliation of NOI to Pre-tax Income