Company: TIPT
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0001393726-25-000028
Chunk: 125

Company: TIPTREE INC.
Filing Date: 2025-03-03
Form: 10-K
Item: Item 7A
Chunk 125
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate risk related to borrowings in various businesses. These risks result primarily from changes in SOFR rates and the spread over SOFR rates related to the credit risks of our businesses.

For fixed rate debt, interest rate fluctuations generally affect the fair value of our liabilities, but do not impact our earnings. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until such obligations mature or until we elect to prepay and refinance such obligations. If interest rates have risen at the time our fixed rate debt matures or is refinanced, our future earnings could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of maturity or refinancing may lower our overall interest expense. As of December 31, 2024, the Company’s insurance subsidiary had $125.0 million and $150.0 million of general purpose fixed rate debt outstanding maturing in 2057 and 2064, respectively.

For general purpose floating rate debt, interest rate fluctuations primarily affect interest expense and cash flows. If market interest rates rise, our earnings could be adversely affected by an increase in interest expense. In contrast, lower interest rates may reduce our interest expense and improve our earnings, except to the extent that our borrowings are subject to interest rate floors. The floating interest rate risk of asset based financing is generally offset as the financing and the purchased financial asset are generally subject to the same interest rate risk. As of December 31, 2024, the Company’s insurance subsidiary had $35.0 million of floating rate corporate debt with a weighted average rate of 9.5% compared to $165.0 million of floating rate corporate debt as of December 31, 2023, with a weighted average rate of 7.3%. For floating rate risk of other asset based financing such as borrowings to finance acquisitions of real estate, we generally hedge our exposure to the variability of the benchmark index with an interest rate swap. As of December 31, 2024 and 2023, Tiptree’s holding company had no general purpose floating rate debt as it was repaid in June 2022. 

Our consolidated results include investments in bonds, loans or other interest bearing instruments. The fair values of such investments fluctuate in response to changes in market interest rates. Increases and decreases in interest rates generally translate into decreases and increases in fair values of these instruments