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Why Shares of Tiptree Are Soaring Today

By Bram Berkowitz – Oct 12, 2021 at 11:40AM

Key Points

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The company announced a strategic partnership with private equity firm Warburg Pincus.

What happened

Shares of specialty insurance and investment management company Tiptree (TIPT -0.06%) had jumped more than 26% as of 11:15 a.m. EDT after the company announced a strategic partnership with Warburg Pincus.

So what

A growth investment private equity firm, Warburg Pincus plans to inject $200 million into one of Tiptree's subsidiaries, The Fortegra Group, a specialty insurance company in the U.S. and Europe. The deal is divided into $120 million of common equity and $80 million of convertible preferred stock. In return, Warburg will receive a 24% stake in The Fortegra Group.

"This investment accomplishes many of our strategic goals including raising capital to accelerate Fortegra's growth and recapitalizing both companies balance sheets through the repayment of indebtedness," Tiptree's executive chairman Michael Barnes said in a statement.

The Fortegra Group generates more than $2 billion of gross insurance revenue from premiums each year, is profitable, and is in growth mode, according to Fortegra CEO Rick Kahlbaugh.

Green squiggly chart line trending upward.

Image source: Getty Images.

Now what

Prior to the transaction with Warburg Pincus, Tiptree traded below book value. Now, the company trades at roughly 119% to book value, showing that investors clearly approve of this deal.

The company is also coming off a solid second quarter and first half of the year in terms of financial performance, so it looks to be heading in the right direction.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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