S-3/A

As filed with the Securities and Exchange Commission on December 7, 2016

Registration No. 333-214394

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 1 to

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

TIPTREE FINANCIAL INC.

(Exact name of Registrant as specified in its charter)

Maryland	38-3754322
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification Number)

780 Third Avenue, 21^st Floor

New York, New York 10017

(212) 446-1400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Neil C. Rifkind, Esq.

Vice President, General Counsel and Secretary

Tiptree Financial Inc.

780 Third Avenue, 21^st Floor

New York, New York 10017

(212) 446-1400

(212) 446-1409—Facsimile

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael R. Littenberg, Esq.

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

(212) 596-9160

(212) 596-9090—Facsimile

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  ¨

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  ý

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  ¨

If this form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered(1)	Proposed Maximum Offering Price Per Share(2)	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee(2)
Class A common stock, par value $0.001 per share	101,845 shares	$6.40	$651808	$76

(1) Represents shares of the Registrant’s Class A common stock registered for resale by selling stockholders. All of the shares to be registered hereunder were outstanding prior to the filing of this Registration Statement. This registration statement also relates to an indeterminate number of shares of the Registrant’s Class A common stock that may be issued upon stock splits, stock dividends or similar transactions in accordance with Rule 416 under the Securities Act of 1933.

(2) Estimated solely for the purpose of calculating the registration fee, and based upon the average of the high and low prices of the Registrant’s common stock as reported on NASDAQ on December 2, 2016 in accordance with Rule 457(c) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities, and we and the selling stockholders are not soliciting offers to buy these securities, in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DA TED DECEMBER 7, 2016

TIPTREE FINANCIAL INC.

PROSPECTUS

101,845 shares

Class A Common Stock

par value $0.001 per share

This prospectus relates to the disposition from time to time by the selling stockholders of up to 101,845 shares, which we refer to as the “Shares”, of our Class A common stock held by them. We will not receive any of the proceeds from the sale of the Shares.

The selling stockholders may sell the Shares from time to time through any of the means described in the section of this prospectus entitled “Plan of Distribution.” We cannot assure you that the selling stockholders will sell all or any portion of the Shares offered under this prospectus. The prices at which the selling stockholders may sell the Shares will be determined by the prevailing market price for the shares or in negotiated transactions.

Our Class A common stock is traded on the Nasdaq Capital Market under the symbol “TIPT.” On , 2016, the last reported sale price of our Class A common stock was $ per share.

Investing in our Class A common stock involves risks. We urge you to carefully read the section entitled “Risk Factors” beginning on page 3 of this prospectus as well as the risk factors and other information in any documents we incorporate by reference into this prospectus to read about important factors you should consider before deciding whether to invest in our Class A common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is , 2016

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
RISK FACTORS	3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	24
USE OF PROCEEDS	26
DESCRIPTION OF CAPITAL STOCK	26
SELLING STOCKHOLDERS	32
PLAN OF DISTRIBUTION	34
LEGAL MATTERS	35
EXPERTS	35
WHERE YOU CAN FIND ADDITIONAL INFORMATION	36

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, which we refer to as the SEC, using the SEC’s “shelf” registration rules. Pursuant to this prospectus, the selling stockholders named in the section titled “Selling Stockholders” may, from time to time, sell up to a total of 101,845 shares of our Class A common stock described in this prospectus in one or more offerings.

When the selling stockholders sell Class A common stock under this prospectus, we will, if necessary and required by law, provide a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add to, update, modify or replace information contained in this prospectus.

As permitted under the rules of the SEC, this prospectus incorporates important business information about us that is contained in documents that we file with the SEC, but that are not included in or delivered with this prospectus. You may obtain copies of these documents, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources. See “Where You Can Find Additional Information” in this prospectus.

You should rely only on the information contained in or incorporated by reference into this prospectus. We have not authorized anyone to provide you with additional or different information from that contained in or incorporated by reference into this prospectus. You should assume that the information contained in or incorporated by reference into this prospectus is accurate only as of any date on the front cover of this prospectus or the date of the document incorporated by reference, as applicable, regardless of the time of delivery of this prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither we nor the selling stockholders are making an offer of these securities in any jurisdiction where the offer is not permitted.

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PROSPECTUS SUMMARY

This summary highlights information contained in or incorporated by reference into this prospectus. This summary may not contain all of the information that you should consider before deciding whether or not you should invest in our Class A common stock. You should carefully read this prospectus, including the documents incorporated by reference, which are described under the heading “Where You Can Find Additional Information” in this prospectus. References in this prospectus to “Tiptree,” the “Company,” “we,” “us” and “our” refer to Tiptree Financial Inc. and its consolidated subsidiaries.

Our Business

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 four industries: insurance and insurance services, specialty finance, asset management and real estate. Tiptree’s principal investments are included in a corporate and others segment.

We operate our business through Tiptree Operating Company, LLC, which we refer to as Operating Company, which owns substantially all of our assets. As of December 31, 2015, Tiptree owned, directly or indirectly, approximately 81% of the assets of Operating Company with the remaining 19% held by non-controlling shareholders through their interests in Tiptree Financial Partners, L.P. (“TFP”). Effective January 1, 2016, Tiptree, TFP and Operating Company created a consolidated group among themselves and various Operating Company subsidiaries for U.S. federal income tax purposes, with Tiptree being the parent company. In connection with the creation of the consolidated group, TFP and the Operating Company elected to be treated as corporations for U.S. federal income tax purposes, and Tiptree contributed its interest in Operating Company to TFP in exchange for additional common units of TFP. As a result of these steps, as of January 1, 2016, Tiptree directly owns approximately 81% of TFP and TFP directly owns 100% of Operating Company. There was no change to the relative economic position of the parties to the transactions as a result of this reorganization.

Our principal place of business is located at 780 Third Avenue, 21^st Floor, New York, New York 10017 and our telephone number is (212) 446-1400. Our Internet website is at www.tiptreefinancial.com. The contents of our website are not incorporated by reference into this prospectus.

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The Offering

Securities Offered by the Selling Stockholders	Up to 101,845 shares of Class A common stock.
Common Stock Outstanding	As of November 30, 2016, 34,983,616 shares of Class A common stock (including 6,596,000 shares of Class A common stock held by subsidiaries of the registrant) and 8,049,029 shares of Class B common stock. Holders of Class A common stock and Class B common stock vote together as a single class, subject to certain exceptions, but holders of Class B common stock have no economic rights in the Company, including no right to receive dividends or other distributions, upon our liquidation or dissolution or otherwise. See “Description of Capital Stock - Common Stock” for a discussion of the circumstances under which TFP limited partners may redeem or exchange their partnership units for shares of Class A common stock. None of such additional shares of Class A common stock are covered by this prospectus.
Use of Proceeds	We will not receive any of the proceeds from the sale of Shares. The proceeds from the sale of any Shares will be received by the applicable selling stockholders.
NASDAQ Capital Market Trading Symbol	Our Class A common stock trades on the Nasdaq Capital Market under the trading symbol “TIPT”.

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information included or incorporated by reference in this prospectus before making a decision to invest in our Class A common stock. If any of these risks actually occur, our business, results of operations and financial condition could suffer. In that case, the market price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Class A Common Stock

Our stock market price and trading volume is volatile.

The market for our Class A common stock is volatile. In the nine months ended September 30, 2016, the lowest closing sale price of our Class A common stock was $4.94 and the highest closing sale price was $6.43. Our stock is subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding our business, and changes in estimates and evaluations by securities analysts or other events or factors.

Over the years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small-capitalization companies like us, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of Class A common stock are subject to significant volatility resulting from purely market forces over which we will have no control. Further, to date, the market for our Class A common stock has been very limited. As a result, our stockholders may be unable to sell significant quantities of Class A common stock in the public trading markets without a significant reduction in the price of our Class A common stock.

Shares of Class A common stock eligible for public sale, including pursuant to this registration statement, could adversely affect our stock price.

The market price for our Class A common stock could decline as a result of sales by stockholders of a large number of shares of our Class A common stock in the market or the perception that such sales may occur. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. Of the 34,983,616 shares of Class A common stock outstanding as of November 30, 2016 (including  6,596,000  shares of Class A common stock held by subsidiaries of the registrant) and 8,049,029 shares of Class A common stock issuable upon exchange of TFP limited partnership units:

• 28,285,771 shares of Class A common stock generally are currently freely tradable in the public market and 6,596,000  shares of Class A common stock are held by subsidiaries of the registrant;

• 101,845 shares of Class A common stock held by selling stockholders that are included in this prospectus will be freely tradable in the public market, upon the effectiveness of the registration statement of which this prospectus forms a part;

• 8,049,029 shares of Class A common stock will be issuable upon future redemptions or exchanges of limited partnership units of TFP (including upon exercise of warrants and options), which shares are not expected to be freely tradable in the public market at the time of issuance;

In addition, the following are not outstanding but may be issued pursuant to existing RSUs and options:

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• 299,817 shares of Class A common stock which are issuable pursuant to existing RSUs, subject to vesting; and

• 251,237 Class A shares, which are issuable pursuant to existing stock options, subject to vesting upon time-based and performance-based criteria.

In addition, 652,500 shares of Class A common stock may be issued pursuant to warrants held by TFP, and may be registered for resale pursuant to the terms of a Registration Rights Agreement.

The resale by the selling stockholders of the Shares covered by this registration statement and the trading of additional Class A common stock in the public market could have an adverse effect on the price of our Class A common stock and could impair our future ability to obtain capital through an offering of equity securities.

Some provisions of our charter may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests.

Our charter restricts any person that owns 9.8% or more of our capital stock, other than TFP and its affiliates or another stockholder approved by applicable state insurance regulators, from voting in excess of 9.8% of our voting securities. This provision is intended to satisfy the requirements of applicable state regulators in connection with insurance laws and regulations that prohibit any person from acquiring control of a regulated insurance company without the prior approval of the insurance regulators. In addition, our charter provides for the classification of our board of directors into three classes, one of which is to be elected each year. Our charter also generally only permits stockholders to act without a meeting by unanimous consent. These provisions may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests.

See “Description of Capital Stock” for a discussion of additional provisions that could delay, deter or prevent a takeover of, or combination involving, our company.

Maryland takeover statutes may prevent a change of our control, which could depress our stock price.

Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” will have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. “Control shares” means voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: one-tenth or more but less than one-third; one-third or more but less than a majority; or a majority or more of all voting power. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which such stockholder became an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities.

Our bylaws contain a provision exempting from the control share statute any and all acquisitions by any person of our shares of stock. Our board of directors has also adopted a resolution which provides that any business combination between us and any other person is exempted from the provisions of the business combination statute, provided that the business combination is first approved by the board of directors. However, our board of directors may amend or eliminate

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this provision in our bylaws regarding the control share statute or amend or repeal this resolution regarding the business combination statute. If our board takes such action in the future, the control share and business combination statutes may prevent or discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Risks Related to our Businesses

We have identified, and may identify in the future, material weaknesses in our internal control over financial reporting, which may require us to incur substantial costs and divert management resources in connection with our efforts to remediate the material weaknesses.

We have determined that material weaknesses in internal controls over financial reporting existed as of December 31, 2015. Detailed descriptions of the material weaknesses are provided in Part II, Item 9A—“Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2015. Due solely to the material weaknesses, management has concluded that we did not maintain an effective internal control over financial reporting as of December 31, 2015 (and, solely as a result of the material weaknesses, we have concluded that our disclosure controls and procedures were not effective as of December 31, 2015). We are in the process of developing and implementing new processes and procedures to remediate the material weaknesses. We cannot be certain that any remedial measures we take will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future and, accordingly, additional material weaknesses may occur in the future. It is possible that additional control deficiencies may be identified in addition to, or that are unrelated to, the material weaknesses described above. These control deficiencies may represent one or more material weaknesses. Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the future could, among other things, cause us to fail to file timely our periodic reports with the SEC (which may have a material adverse effect on our ability to access the capital markets); prevent us from providing reliable and accurate financial information and forecasts or from avoiding or detecting fraud; or require us to incur additional costs or divert management resources to, among other things, comply with Section 404 of the Sarbanes-Oxley Act of 2002.

We operate in highly competitive markets for business opportunities and personnel, which could impede our growth and negatively impact our results of operations.

We operate in highly competitive markets for business opportunities in each of our areas of focus. Many of our competitors have financial, personnel and other resource advantages relative to us and may be better able to react to market conditions. These factors may place us at a competitive disadvantage in successfully competing for future business opportunities and personnel, which could impede our growth and negatively impact our business, financial condition and results of operations.

Acquisitions may have unforeseen operating difficulties and may require greater than expected financial and other resources and we may fail to successfully integrate the businesses we acquire which would have an adverse effect on our business results of operation and financial condition.

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We regularly evaluate opportunities for strategic growth through acquisitions. Acquired companies and operations may have unforeseen operating difficulties and may require greater than expected financial and other resources. In addition, potential issues associated with acquisitions could, among other things include:

• our ability to realize the full extent of the benefits, synergies or cost savings that we expect to realize as a result of the completion of an acquisition within the anticipated time frame, or at all;

• receipt of necessary consents, clearances and approvals in connection with the acquisition;

• diversion of management’s attention from other strategies and objectives;

• motivating, recruiting and retaining executives and key employees; and

• conforming and integrating financial reporting, standards, controls, procedures and policies, business cultures and compensation structures.

If an acquisition is not successfully completed or integrated into our existing operations, our business, results of operations and financial condition could be materially adversely effected.

We may need to raise additional capital in the future or may need to refinance existing indebtedness, but there is no assurance that such capital will be available on a timely basis, on acceptable terms or at all.

We may need to raise additional funds in order to grow our business or fund our strategy or acquisitions. Additional financing may not be available in sufficient amounts, if at all, or on terms acceptable to us and may be dilutive to existing stockholders. Additionally, any securities issued to raise such funds may have rights, preferences and privileges senior to those of our existing stockholders. If adequate funds are not available on a timely basis, if at all, or on acceptable terms, our ability to expand, develop or enhance our subsidiaries’ services and products, enter new markets, consummate acquisitions or respond to competitive pressures could be materially limited.

The amount of statutory capital and reserve requirements applicable to our insurance subsidiaries can increase due to factors outside of our control.

Our insurance subsidiaries are subject to statutory capital and reserve requirements established by applicable insurance regulators based on risk-based capital formulas. In any particular year, these requirements may increase or decrease depending on a variety of factors, most of which are outside our control, such as the amount of statutory income or losses generated, changes in equity market levels, the value of fixed-income and equity securities in the subsidiary’s investment portfolio, changes in interest rates and foreign currency exchange rates, as well as changes to the risk-based capital formulas used by insurance regulators. Increases in the amount of additional statutory reserves that our insurance subsidiaries are required to hold may adversely affect our financial condition and results of operations.

A downgrade in our insurance subsidiaries’ claims paying ability or financial strength ratings could increase policy surrenders and withdrawals, adversely affecting relationships with distributors and reducing new policy sales.

Claims paying ability ratings, sometimes referred to as financial strength ratings, indicate a rating agency’s view of an insurance company’s ability to meet its obligations to its policy holders. These ratings are therefore key factors underlying the competitive position of insurers. Some distributors of insurance products may choose not to do business with insurance companies that are rated below certain financial strength ratings. Fortegra’s insurance subsidiaries currently have a rating of “A-” from A.M. Best Company, Inc. Rating agencies can be expected to continue to monitor our insurance subsidiaries’ financial strength and claims paying ability, and no assurances can be given that future ratings downgrades will not occur, whether due to changes in their performance, changes in rating agencies’ industry views or ratings methodologies, or a combination of such factors. A ratings downgrade or the potential for such a downgrade in a

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rating could, to the extent applicable to a particular type of policy, adversely affect relationships with distributors of insurance products, reduce new policy sales and adversely affect our ability to compete in the insurance industry.

Our insurance subsidiaries may incur losses if reinsurers are unwilling or unable to meet their obligations under reinsurance contracts.

Our insurance subsidiaries use reinsurance to reduce the severity and incidence of claims costs, and to provide relief with regard to certain reserves. Under these reinsurance arrangements, other insurers assume a portion of our losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, reinsurance arrangements do not eliminate our obligation to pay claims and we assume credit risk with respect to our ability to recover amounts due from reinsurers. The inability or unwillingness of any reinsurer to meet its financial obligations could negatively affect our financial condition and results of operations.

Fortegra’s reinsurance facilities are generally subject to annual renewal. Fortegra may not be able to maintain its current reinsurance facilities and its clients may not be able to continue to operate their captive reinsurance companies. As a result, even where highly desirable or necessary, Fortegra may not be able to obtain other reinsurance facilities in adequate amounts and at favorable rates. If Fortegra is unable to renew its expiring facilities or to obtain or structure new reinsurance facilities, either its net exposures would increase or, if it is unwilling to bear an increase in net exposures, it may have to reduce the level of its underwriting commitments. Either of these potential developments could have a material adverse effect on our results of operations and financial condition.

Our insurance subsidiaries’ actual claims losses may exceed their reserves for claims, which may require them to establish additional reserves that may materially and adversely affect their business, results of operations and financial condition.

Our insurance subsidiaries maintain reserves to cover their estimated ultimate exposure for claims with respect to reported claims and incurred but not reported claims as of the end of each accounting period. Reserves, whether calculated under GAAP or statutory accounting principles, do not represent an exact calculation of exposure. Instead, they represent our insurance subsidiaries’ best estimates, generally involving actuarial projections, of the ultimate settlement and administration costs for a claim or group of claims, based on our assessment of facts and circumstances known at the time of calculation. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are affected by external factors such as changes in the economic cycle, unemployment, changes in the social perception of the value of work, emerging medical perceptions regarding physiological or psychological causes of disability, emerging health issues, new methods of treatment or accommodation, inflation, judicial trends, legislative changes, as well as changes in claims handling procedures. Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of income of the period in which such estimates are updated. Because the establishment of reserves is an inherently uncertain process involving estimates of future losses, we can give no assurances that ultimate losses will not exceed existing claims reserves. In general, future loss development could require reserves to be increased, which could have a material adverse effect on our insurance subsidiaries’ business, results of operations and financial condition.

Fortegra is dependent on independent financial institutions, lenders and retailers for distribution of its products and services, and the loss of these distribution sources, or their failure to sell Fortegra’s products and services could materially and adversely affect its business, results of operations and financial condition.

Fortegra is dependent on financial institutions, lenders and retailers to distribute its products and services and its revenue is dependent on the level of business conducted by such distributors as well as the effectiveness of their sales

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efforts, each of which is beyond Fortegra’s control because such distributors typically do not have any minimum performance or sales requirements. Further, although its contracts with these distributors are typically exclusive, they can be canceled on relatively short notice. Therefore, Fortegra’s growth is dependent, in part, on its ability to identify and attract new distribution relationships and successfully implement its information systems with those of its new distributors.The impairment of Fortegra’s distribution relationships, the loss of a significant number of its distribution relationships, the failure to establish new distribution relationships, the failure to offer increasingly competitive products, the increase in sales of competitors’ services and products by these distributors or the decline in their overall business activity or the effectiveness of their sales of Fortegra’s products could materially reduce Fortegra’s sales and revenues and have a material adverse effect on its business, results of operations and financial condition.

Fortegra may lose clients or business as a result of consolidation within the financial services industry.

There has been considerable consolidation in the financial services industry, driven primarily by the acquisition of small and mid-size organizations by larger entities. We expect this trend to continue. Fortegra may lose business or suffer decreased revenues if one or more of its significant clients or distributors consolidate or align themselves with other companies. While Fortegra’s business has not been materially affected by consolidation to date, it may be affected by industry consolidation that occurs in the future, particularly if any of its significant clients are acquired by organizations that already possess the operations, services and products that it provides.

Due to the structure of some of Fortegra’s commissions, it is exposed to risks related to the creditworthiness of some of its agents.

Fortegra is subject to the credit risk of some of the agents with which it contracts to sell its products and services. Fortegra typically advances agents’ commissions as part of its product offerings. These advances are a percentage of the premiums charged. If Fortegra over-advances such commissions to agents, the agents may not be able to fulfill their payback obligations, which could have a material adverse effect on Fortegra’s results of operations and financial condition.

Our information systems may fail or their security may be compromised, which could damage our business and materially and adversely affect our results of operations and financial condition.

Our business is highly dependent upon the effective operation of our information systems and our ability to store, retrieve, process and manage significant databases and expand and upgrade our information systems. We rely on these systems throughout our businesses for a variety of functions, including marketing and selling our products and services, performing our services, managing our operations, processing claims and applications, providing information to clients, performing actuarial analyses and maintaining financial records. The interruption or loss of our information processing capabilities through the loss of stored data, programming errors, the breakdown or malfunctioning of computer equipment or software systems, telecommunications failure or damage caused by weather or natural disasters or any other significant disruptions could harm our business, ability to generate revenues, client relationships, competitive position and reputation. In addition, our information systems may be vulnerable to physical or electronic intrusions, computer viruses or other attacks which could disable our information systems and our security measures may not prevent such attacks. The failure of our systems as a result of any security breaches, intrusions or attacks could cause significant interruptions to our operations, which could result in a material adverse effect on our business, results of operations and financial condition.

Our mortgage business is highly dependent upon programs administered by GSEs, such as Fannie Mae and Freddie Mac, and Ginnie Mae, to generate revenues through mortgage loan sales to institutional investors. Any changes in existing U.S. government-sponsored mortgage programs could materially and adversely affect our mortgage businesses, financial condition and results of operations.

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There is uncertainty regarding the future of Fannie Mae and Freddie Mac, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have. The future roles of Fannie Mae and Freddie Mac could be reduced or eliminated and the nature of their guarantees could be limited or eliminated relative to historical measurements. The elimination or modification of the traditional roles of Fannie Mae or Freddie Mac could adversely affect our mortgage businesses, financial condition and results of operations. Furthermore, any discontinuation of, or significant reduction in, the operation of these GSEs and Ginnie Mae, or any significant adverse change in the level of activity of these agencies in the primary or secondary mortgage markets or in the underwriting criteria of these agencies could materially and adversely affect our business, financial condition and results of operations.

We may be required to indemnify or repurchase loans we originated, or will originate, if, among other things, our loans fail to meet certain criteria or characteristics.

The contracts with purchasers of our whole loans contain provisions that require us to indemnify or repurchase the related loans under certain circumstances. While our contracts vary, they contain provisions that require us to repurchase loans if:

• our representations and warranties concerning loan quality and loan circumstances are inaccurate, including representations concerning the licensing of a mortgage broker;

• we fail to secure adequate mortgage insurance within a certain period after closing;

• a mortgage insurance provider denies coverage; or

• we fail to comply, at the individual loan level or otherwise, with regulatory requirements in the current dynamic regulatory environment.

We maintain reserves that we believe are appropriate to cover potential loan repurchase or indemnification losses, but there can be no assurance that such reserves will, in fact, be sufficient to cover future repurchase and indemnification claims. If we are required to indemnify or repurchase loans that we originate and sell that result in losses that exceed our reserve, this could adversely affect our business, financial condition and results of operations.

The residential mortgage loans which our mortgage businesses originate may be subject to delinquency, foreclosure and loss, which could result in significant losses to us.

Residential mortgage loans are secured by residential property and those that are not guaranteed by a U.S. Government agency or GSE are subject to risks of delinquency, foreclosure and loss during the period of time that loans are held pending sale, generally 20-30 days. The ability of a borrower to repay a loan secured by a residential property depends upon the income or assets of the borrower as well as a number of other factors. In the event of any default or underwriting flaw under a mortgage loan held directly by our mortgage businesses, we may bear, or be required to indemnify against, a risk of loss of principal to the extent of any deficiency between the value of the collateral on the one hand and the principal and accrued interest of the mortgage loan on the other, which could have a material adverse effect on our cash flow from operations. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can be an expensive and lengthy process which could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan.

We may be unable to obtain sufficient capital to meet the financing requirements of our mortgage business.

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We fund substantially all of the loans which we originate through borrowings under warehouse financing and repurchase facilities.  Our borrowings are in turn repaid with the proceeds we receive from selling such loans through whole loan sales.  As we expand our operations, we will require increased financing.

There can be no assurance that such financing will be available on terms reasonably satisfactory to us or at all.  An event of default, an adverse action by a regulatory authority or a general deterioration in the economy that constricts the availability of credit-similar to the market conditions experienced in recent years-may increase our cost of funds and make it difficult for us to obtain new, or retain existing, warehouse financing facilities.  If we fail to maintain, renew or obtain adequate funding under these warehouse financing facilities or other financing arrangements, or there is a substantial reduction in the size of or increase in the cost of such facilities, we would have to curtail our mortgage loan production activities, which could have a material adverse effect on our business, financial condition and operating results.

Certain contingency risks associated with the loans we originate and purchase may materially and adversely affect us.

Although we sell substantially all of the loans that we originate and purchase on a nonrecourse basis, we retain some degree of credit risk on all loans originated or purchased, even after they are sold. We remain subject to claims for repurchases of mortgage loans previously sold under provisions requiring repurchase in the event of early payment defaults or breaches of representations and warranties regarding loan quality, compliance and certain other loan characteristics. We also remain subject to claims for indemnification by HUD with respect to FHA and VA loans we originate for alleged failure to comply with FHA or VA guidelines with respect to such loans.

In the ordinary course of our business, we are subject to claims made against us by borrowers and private investors arising from, among other things, losses that are claimed to have been incurred as a result of alleged breaches of fiduciary obligations, misrepresentations, errors and omissions of our employees, officers and agents (including our appraisers), incomplete documentation and our failure to comply with various laws and regulations applicable to our business. We believe that the liability with respect to any currently asserted claims or legal actions is not likely to be material to our financial condition or results of operations; however, any claims asserted in the future may result in legal expenses or liabilities which could have a material adverse effect on us.

The underwriting practices in our mortgage businesses may not adequately capture the risk inherent in our mortgage lending operations and failures in our underwriting process may result in loans that expose us to a greater risk of loss.

Our mortgage businesses seek to mitigate the risks inherent in our mortgage lending operations by adhering to specific underwriting practices. These practices will often include, among other things, analysis of a borrower’s prior credit history, credit score, employment, income verification, financial statements, tax returns and cash flow projections; valuation of collateral; and verification of liquid assets. If our underwriting process fails to capture accurate information or proves to be inadequate, we may incur losses on mortgage loans that meet our underwriting criteria, and those losses may exceed the amounts set aside as reserves in the allowance for loan losses. With respect to the loans we originate for others, if we fail to underwrite to our investors’ requirements, we could be subject to indemnity and/or repurchase claims.

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In addition, should the mortgage loans we originate sustain higher levels of delinquencies and/or defaults, (1) we may lose the ability to originate and/or sell FHA loans, or to do so profitably and (2) investors to whom we currently sell our mortgage loans may refuse to continue to do business with us, or may reduce the prices they are willing to purchase our mortgage loans and it may be difficult or impossible to sell any of our mortgage loans in the future. Any of the foregoing risks could adversely affect our business, financial condition and results of operations.

Geographic concentration of our mortgage loans increases our exposure to risks in those areas.

Concentration of originations in any one area increases our exposure to the economic and natural hazard risks associated with that area. A significant percentage of our mortgage originations by loan balance were secured by properties in California, Connecticut, Florida, Michigan, New Jersey, New York, North Carolina, Pennsylvania and Tennessee. These states have experienced, and may experience in the future, an economic downturn and have also suffered the effects of certain natural hazards. In the recent past, as a result of an economic downturn, real estate values in these and most other states have decreased drastically and may continue to decrease in the future, which could have a material adverse effect on our results of operations or financial condition.

Additionally, if borrowers are not insured for natural disasters, which are typically not covered by standard hazard insurance policies, then they may not be able to repair the property or may stop paying their mortgages if the property is damaged. This would cause delays in the sale of properties, increased loan repurchase activity and decrease our ability to recover losses on properties affected by such disasters. This could have a material adverse effect on our results of operations or financial condition.

The volume of our mortgage loan originations is subject to a variety of factors, which include the level of interest rates, overall conditions in the housing market and general economic trends.

Changes in interest rates and the level of interest rates are key drivers that impact the volatility of our mortgage loan originations.  The historically low interest rate environment in 2014 and 2015 has created strong demand for mortgages. The Federal Reserve recently raised rates and has indicated an intention to continue raising rates in the near future. Further increases in interest rates could result in us having lower revenue or profitability. Demand for mortgages could be negatively impacted by rising interest rates but demand for mortgages is also driven by general economic conditions, home price appreciation and housing starts so a gradual increase in interest rates may or may not affect our mortgage origination volumes depending on trends in these other factors. The overwhelming majority of our mortgage loan originations have historically been refinancing existing homeowner’s mortgage loans. With rates at or near historically low levels, we have been able to continue to grow our mortgage loan originations by focusing on refinances. We may not be able to continue to do so in the future.

A reduction in fees paid to Telos could adversely affect our profitability.

Telos Asset Management, LLC (“Telos”) generates management and advisory fees based on the amount of assets managed, and, in certain cases, on the returns generated by the assets managed. A reduction in fees paid to Telos, due to termination of management agreements, reduction in assets managed (for example as a result of exercise of optional call provisions by subordinated noteholders), lower than expected returns or otherwise, could adversely affect our results of operations.

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Changes in CLO spreads and an adverse market environment could make it difficult for us to launch new CLOs.

The ability to issue new CLOs is dependent, in part, on the amount of excess interest earned on a new CLO’s investments over interest payable on its debt obligations. If the spread is not attractive to potential CLO equity investors we may not be able to sponsor the issuance of new CLOs, which could have a material adverse impact on our business. During the fourth quarter of 2015, there was a dislocation in the credit markets that significantly impeded CLO formation. Continued dislocation in credit markets could impede our ability to launch new CLOs which could adversely impact our results of operations and financial condition.

We expect to enter into warehouse agreements in connection with our potential investment in and management of CLOs, which may expose us to substantial risks.

In connection with our potential investment in and management of new CLOs, we expect to enter into warehouse lending agreements with warehouse loan providers such as banks or other financial institutions, pursuant to which the warehouse facility will be used to help finance the purchase of investments that will be ultimately included in a CLO. We will typically select the investments in the warehouse subject to the approval of the warehouse provider. If the relevant CLO transaction is not issued, the warehouse investments may be liquidated, and we may experience a loss if the aggregate sale price of the collateral is less than the warehouse loan amount. In addition, regardless of whether the CLO is issued or consummated, if any of the warehoused investments are sold before such issuance or consummation, we may have to bear any resulting loss on the sale. The amount at risk in connection with a warehouse agreement will vary and may not be limited to the amount, if any, that we invest in the related CLO upon its issuance. Although we would expect to complete the issuance of a particular CLO within six to nine months after establishing a related warehouse, we may not be able to complete the issuance within such expected time period or at all.

Because the values we record for certain investments and liabilities are based on estimates of fair value made by our management, we are exposed to substantial risks.

Some of our investments and liabilities, including CLO subordinated notes and NPLs, are not actively traded and the fair value of such investments and liabilities are not readily determinable. Each of these carrying values is based on an estimate of fair value by our management. Management reports the estimated fair value of these investments and liabilities quarterly, which may cause our quarterly operating results to fluctuate. Therefore, our past quarterly results may not be indicative of our performance in future quarters. In addition, because such valuations are inherently uncertain, and in some cases based on internal models and unobservable inputs, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments and liabilities existed and we may be unable to realize the carrying value upon a sale of these investments.

The accounting rules applicable to certain of our transactions are highly complex and require the application of significant judgment and assumptions by our management. In addition, changes in accounting interpretations or assumptions could impact our financial statements.

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Accounting rules for consolidations, income taxes, business acquisitions, transfers of financial assets, securitization transactions and other aspects of our operations are highly complex and require the application of judgment and assumptions by our management. The consolidation of variable interest entities (“VIEs”) is subject to periodic reassessment which could lead to the deconsolidation of previously consolidated entities or the consolidation of entities that were previously not required to be consolidated. Deferred tax assets are subject to the establishment of a valuation allowance in the event management concludes that the tax benefits of certain timing differences may not be realized. Business acquisitions require the valuation of assets acquired and liabilities assumed. Assets acquired include intangible assets, including goodwill that will be subject to periodic testing and evaluation for impairment. A substantial amount of our assets are illiquid assets held at estimated fair value, which amounts are not readily determinable. We report estimated fair value of these assets quarterly, which may cause our quarterly operating results to fluctuate. Therefore, our past quarterly results may not be indicative of our performance in future quarters. Fair market valuations are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, so our determinations of fair value may differ materially from the values that would have been used if a ready market for these assets existed and we may be unable to realize the carrying value on a sale of these assets. Those assets that are not held at fair value are held at original cost and are either depreciated or amortized. These complexities could lead to a delay in the preparation of our financial information. In addition, changes in accounting rules, interpretations or assumptions could materially impact the presentation, disclosure and usability of our financial statements.

Our real estate operating entities expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our financial condition and results of operations.

Our ownership of real estate operating entities exposes us to various operational risks, liabilities and claims that could increase our costs or adversely affect our ability to generate revenues, thereby reducing our profitability. These operational risks include fluctuations in occupancy levels, the inability to achieve economic resident fees (including anticipated increases in those fees), rent control regulations, increases in the cost of food, materials, energy, labor (as a result of unionization or otherwise) or other services, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, professional and general liability claims, and the availability and cost of professional and general liability insurance. Any one or a combination of these factors could result in operating deficiencies in our operating assets, which could adversely affect our financial condition and results of operations.

Liability relating to environmental matters may decrease the value of our real estate assets.

Under various federal, state and local laws, an owner or operator of real property may become liable for the costs of cleanup of certain hazardous substances released on or under its property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of hazardous substances may adversely affect an owner’s ability to sell real estate or borrow using real estate as collateral. To the extent that any of our owned real estate encounters environmental issues, it may adversely affect the value of that real estate. Further, in regard to any mortgage investment, if the owner of the underlying property becomes liable for cleanup costs, the ability of the owner to make debt payments may be reduced, which in turn may adversely affect the value of the relevant mortgage asset held by us. In addition, in certain instances, we may be liable in part or in full for the cost of any required remediation or clean up.

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Violation of fraud and abuse laws applicable to our real estate tenants, lessees and operators may jeopardize a tenant’s, lessee’s or operator’s ability to make payments to us.

The federal government and numerous state governments have passed laws and regulations that attempt to eliminate healthcare fraud and abuse by prohibiting business arrangements that induce patient referrals or inappropriately influence the ordering of specific ancillary services. In addition, numerous federal laws have continued to strengthen the federal fraud and abuse laws to provide for broader interpretations of prohibited conduct and stiffer penalties for violations. Violations of these laws may result in the imposition of criminal and civil penalties, including possible exclusion from federal and state healthcare programs. Imposition of any of these penalties upon any of our tenants, lessees or operators could jeopardize their ability to operate a facility or to make payments to us, thereby potentially adversely affecting us, or our financial condition and results of operations.

In the past several years, federal and state governments have significantly increased investigation and enforcement activity to detect and eliminate fraud and abuse in the Medicare and Medicaid programs. In addition, legislation and regulations have been adopted at state and federal levels, which severely restricts the ability of physicians to refer patients to entities in which they have a financial interest. It is anticipated that the trend toward increased investigation and enforcement activity in the area of fraud and abuse, as well as self-referrals, will continue in future years and could adversely affect our prospective tenants, lessees or operators and their operations, and in turn their ability to make payments to us.

Some of our investments are made jointly with other persons or entities, which may limit our flexibility with respect to such jointly owned investments and could, thereby, have a material adverse effect on our business, results of operations and financial condition and our ability to sell these investments.

Some of our investments are made jointly with other persons or entities when circumstances warrant the use of such structures and we may continue to do so in the future. Our participation in such joint investments is subject to the risks that:

we could experience an impasse on certain decisions because we do not have sole decision-making authority, which could require us to expend additional resources on resolving such impasses or potential disputes;

• our partners could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments;

• our partners might become bankrupt, fail to fund their share of required capital contributions or fail to fulfill their obligations as partners, which may require us to infuse our own capital into such venture(s) on behalf of the partner(s) despite other competing uses for such capital;

• our partners may have competing interests in our markets that could create conflict of interest issues;

• any sale or other disposition of our interest in such a venture may require consents which we may not be able to obtain;

• such transactions may also trigger other contractual rights held by a partner, lender or other third party depending on how the transaction is structured; and

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• there may be disagreements as to whether consents and/or approvals are required in connection with the consummation of a particular transaction with a partner, lender and/or other third party, or whether such transaction triggers other contractual rights held by a partner, lender and/or other third party, and in either case, those disagreements may result in litigation.

A portion of our assets are illiquid or have limited liquidity, which may limit our ability to sell those assets at favorable prices or at all and creates uncertainty in connection with valuing such assets.

Our assets include real estate, non-controlling interests in credit assets and related equity interests which may be illiquid or have limited liquidity. It may be difficult for us to dispose of assets with limited liquidity rapidly, or at favorable prices, if at all. In addition, assets with limited liquidity may be more difficult to value and may be sold at a substantial discount or experience more volatility than more liquid assets. We may not be able to dispose of assets at the carrying value reflected in our financial statements. Our results of operations and cash flows may be materially and adversely affected if our determinations regarding the fair value of our illiquid assets are materially higher than the values ultimately realized upon their disposal.

We leverage our assets and a decline in the fair value of such assets may adversely affect our financial condition and results of operations.

We leverage our assets, including through borrowings, generally through warehouse credit facilities, secured loans, derivative instruments such as total return swaps, securitizations (including the issuance of CLOs) and other borrowings. A rapid decline in the fair value of our leveraged assets may adversely affect us. Lenders may require us to post additional collateral to support the borrowing. If we cannot post the additional collateral, we may have to rapidly liquidate assets, which we may be unable to do on favorable terms or at all. Even after liquidating assets, we may still be unable to post the required collateral, further harming our liquidity and subjecting us to liability to lenders for the declines in the fair values of the collateral. A reduction in credit availability may adversely affect our business, financial condition and results of operations.

Certain of our and our subsidiaries’ assets are subject to credit risk, market risk, interest rate risk, credit spread risk, call and redemption risk and/or tax risk, and any one of these risks may materially and adversely affect the value of our assets, our results of operations and our financial condition.

Some of our assets, including our direct investments, are subject to credit risk, interest rate risk, market risk, credit spread risk, selection risk, call and redemption risk and refinancing risk.

Credit risk is the risk that the obligor will be unable to pay scheduled principal and/or interest payments. Defaults by third parties in the payment or performance of their obligations could reduce our income and realized gains or result in the recognition of losses. The fair value of our assets may be materially and adversely affected by increases in interest rates, downgrades in our direct investments and by other factors that may result in the recognition of other-than-temporary impairments. Each of these events may cause us to reduce the fair value of our assets.

Interest rate risk is the risk that general interest rates will rise or that the risk spread used in our financings will increase. Although interest rates have been at historically low levels for the last several years, the Federal Reserve recently raised rates and has indicated an intention to continue raising rates in the coming months, and a period of sharply rising interest rates could have an adverse impact on our business by negatively impacting demand for mortgages, corporate loans and value of our CLO subordinated notes and increasing our cost of borrowing to finance operations as well as acquisitions in our real estate segment.

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Market risk is the risk that one or more markets to which the assets relate will decline in value, including the possibility that such markets will deteriorate sharply and unpredictably, which will likely impair the market value of the related instruments.

Credit spread risk is the risk that the market value of fixed income instruments will change in response to changes in perceived or actual credit risk beyond changes that would be attributable to changes, if any, in interest rates.

Call and redemption risk is the risk that debt instruments will be called or redeemed prior to maturity at a time when yields on other debt instruments in which the call or redemption proceeds could be invested are lower than the yield on the called or redeemed instrument.

Refinancing risk is the risk that we will be unable to refinance some or all of our indebtedness or that any refinancing will not be on terms as favorable as those of our existing indebtedness, which could increase our funding costs, limit our ability to borrow, or result in a sale of the leveraged asset on disadvantageous terms. Any one of these risks may materially and adversely affect the value of our assets, our results of operations and our financial condition.

Our risk mitigation or hedging strategies could result in our experiencing significant losses that may materially adversely affect us.

We pursue risk mitigation and hedging strategies to seek to reduce our exposure to losses from adverse credit events, interest rate changes and other risks. These strategies include short Treasury positions, interest rate swaps, credit derivative swaps, CDX derivative index positions, buying and selling credit protection on different tranches of risk in differing CDX indexes and derivative hedging instruments. Since we account for derivatives at fair market value, changes in fair market value are reflected in net income other than derivative hedging instruments which are reflected in accumulated other comprehensive income in stockholders’ equity. Some of these strategies could result in our experiencing significant losses that may materially adversely affect our business, financial condition and results of operations.

We face risks related to recession, financial and credit market disruptions and other economic conditions.

Demand for our products and services may be impacted by weak economic conditions, recession, equity market, and fixed income volatility or other negative economic factors that are out of our control. Similarly, disruptions in financial and/or credit markets may impact our and our subsidiaries’ ability to manage normal commercial relationships with customers, counterparties and creditors which could negatively impact our business, financial condition and results of operations.

We acquire NPLs which have a substantial risk of loss.

We acquire NPLs where the borrower has failed to make timely payments of principal and/or interest. Many of these loans will have current loan-to-value ratios in excess of 100%, meaning the amount owed on the loan exceeds the value of the underlying real estate, however we expect to purchase NPLs at significant discounts to unpaid principal balance (“UPB”) and underlying property value. If actual results are different from our assumptions in determining the prices for such loans, particularly if the market value of the underlying property decreases significantly, we may incur a loss.

We may be materially and adversely affected by risks affecting borrowers in NPLs we acquire which may be geographically concentrated.

Our acquisition of NPLs are not subject to any geographic, diversification or concentration limitations. Accordingly, our portfolio of NPLs may be concentrated by geography, and borrower demographics, increasing the risk of loss to us if the particular concentration in our NPL portfolio is subject to greater risks or undergoing adverse developments. In addition, adverse conditions in the areas where the properties securing or otherwise underlying the NPLs

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are located (including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our NPLs. A material decline in the demand for housing in these or other areas where we will own assets may materially and adversely affect us. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments in NPLs.

We rely on a third party with respect to our NPL acquisitions, and, if our relationship with either is terminated, we may not be able to replace that third party on favorable terms in a timely manner, or at all.

We use a third party to identify, evaluate and coordinates our NPL acquisitions as well as to manage our NPL portfolio, including loan modifications and conversion to REO. Maintaining our relationship with such third party is important for us to effectively run our NPL business. If our agreements with such third party terminates and we are unable to obtain a replacement, our ability to acquire, resolve or dispose of our NPLs could be adversely affected.

Our use of models in connection with the valuation of our NPLs subjects us to potential risks in the event that such models are inaccurate.

We rely on a third party’s proprietary models to evaluate NPLs to purchase. The models are based on historical trends. These trends may not be indicative of future results. Furthermore, the assumptions underlying the models may prove to be inaccurate, causing actual results to differ from results predicted by the models. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risk of loss.

The failure of third party servicers to service our NPL assets effectively would materially and adversely affect us.

We rely on third parties to service our NPLs, including managing collections. If the servicers are not vigilant in encouraging borrowers to make their monthly payments, the borrowers may be far less likely to make these payments. We also will rely on the servicers to provide all of our property management and renovation management services associated with the real properties we acquire upon conversion of NPLs to REO. The failure of our servicers to effectively service our NPLs and REO could negatively impact the value of our NPLs.

Mortgage servicing is heavily regulated at the U.S. federal, state and local levels and our servicer’s failure to comply with applicable regulations could materially adversely affect our expenses and results of operations.

Mortgage servicers must comply with U.S. federal, state and local laws and regulations that regulate, among other things, the manner in which it services our NPL mortgage loans and manages our real property in accordance with the servicing agreement, including recent CFPB mortgage servicing regulations promulgated pursuant to the Dodd-Frank Act. These laws and regulations cover topics such as licensing; allowable fees and loan terms; permissible servicing and debt collection practices; limitations on forced-placed insurance; special consumer protections in connection with default and foreclosure; and protection of confidential, nonpublic consumer information. The volume of new or modified laws and regulations has increased in recent years, and states and individual cities and counties continue to enact laws that either restrict or impose additional obligations in connection with certain loan origination, acquisition and servicing activities in those cities and counties. The laws and regulations are complex and vary greatly among the states and localities, and in some cases, these laws are in conflict with each other or with U.S. federal law. Material changes in these rules and regulations could increase our expenses under the servicing agreement. From time to time, our mortgage servicers may be party to certain regulatory inquiries and proceedings, which, even if unrelated to the residential mortgage servicing operation, may result in adverse findings, fines, penalties or other assessments and may affect adversely its reputation. Our mortgage servicer’s failure to comply with applicable laws and regulations could adversely affect our

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expenses and results of operations. If we were to determine to change servicers, there is no assurance that we could find servicers that satisfy our requirements or with whom we could enter into agreements on satisfactory terms.

The supply of NPLs may decline over time as a result of higher credit standards for new loans and/or general economic improvement and the prices for NPLs may increase, which could materially and adversely affect our ability to grow this portfolio.

Following a result of the economic crisis in 2008, supply of NPLs available for sale increased significantly. However, in response to the economic crisis, lenders have increased their standards of credit-worthiness in originating new loans and fewer homeowners may go into distressed or non-performing status on their residential mortgage loans. In addition, the prices at which NPLs can be acquired may increase due to the entry of new participants into the distressed loan marketplace or a lower supply of NPLs in the marketplace. For these reasons, along with the general improvement in the economy, the supply of NPLs that we may acquire may decline over time, and such decline could materially and adversely affect our ability to grow this portfolio.

Risks Related to our Structure

Because we are a holding company, our ability to meet our obligations and pay dividends to stockholders will depend on distributions from our subsidiaries that may be subject to restrictions.

We are a holding company and do not have any significant operations of our own, other than our principal investments. Our ability to meet our obligations will depend on distributions from our subsidiaries. The amount of dividends and other distributions that our subsidiaries may distribute to us may be subject to restrictions imposed by state law, restrictions that may be imposed by state regulators and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur. Such restrictions would also affect our ability to pay dividends to stockholders, if and when we choose to do so.

Our regulated insurance company subsidiaries are required to satisfy minimum capital and surplus requirements according to the laws and regulations of the states in which they operate, which regulate the amount of dividends and distributions we receive from them. In general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Ordinary dividends, for which no regulatory approval is generally required, are limited to amounts determined by a formula, which varies by state. Some states have an additional stipulation that dividends may only be paid out of earned surplus. States also regulate transactions between our insurance company subsidiaries and us or our other subsidiaries, such as those relating to the shared services, and in some instances, require prior approval of such transactions within the holding company structure. If insurance regulators determine that payment of an ordinary dividend or any other payments by our insurance company subsidiaries to us or our other subsidiaries (such as payments for employee or other services) would be adverse to policyholders or creditors, the regulators may block or otherwise restrict such payments that would otherwise be permitted without prior approval. In addition, there could be future regulatory actions restricting the ability of our insurance company subsidiaries to pay dividends or share services.

Termination of our Transition Services Agreement or the Administrative Services Agreement could materially increase our costs, which could adversely affect our financial condition and results of operations.

Pursuant to a Transition Services Agreement, we pay fees to Tricadia Holdings, L.P., an asset management holding company which we refer to as “Tricadia” for the services of Michael Barnes, our Executive Chairman and for certain administrative and information technology services. A portion of the services that Tricadia provides to us are in turn provided to Tricadia by Mariner pursuant to an agreement that may be terminated by Tricadia or Mariner without our consent. In addition, pursuant to an Administrative Services Agreement, a subsidiary of Mariner provides certain back office services to us directly for a fee. If any of the Transition Services Agreement, Tricadia’s services agreement with

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Mariner or the Administrative Services Agreement is terminated, we would be required to make alternative arrangements for the performance of these services. We may not be able to obtain these services promptly or at reasonable rates or at all, and our costs of obtaining such services could materially increase, which could adversely affect our results of operations.

Some of our officers and directors currently or may in the future act as members, managers, officers, directors or employees of entities with conflicting business strategies.

Some of our officers and directors currently or may in the future act as members, managers, officers, directors or employees of entities with business strategies that may conflict with our business strategies. Michael Barnes, our Executive Chairman, is a founding partner and Co-Chief Investment Officer of Tricadia, and Executive Chairman and a member of the board of directors of TFP. Tricadia’s subsidiaries include, and Mr. Barnes is Co-Chief Investment Officer of, companies that manage hedge funds, private equity funds and structured vehicles with business strategies that may compete with ours. Jonathan Ilany, our Chief Executive Officer, is a limited partner of Mariner, which is a stockholder of Tiptree and provides certain back office services to Tiptree. Julia Wyatt, our Chief Operating Officer is also a limited partner of Tricadia. Such positions may give rise to actual or potential conflicts of interest, which may not be resolved in a manner that is in the best interests of the Company or the best interests of its stockholders.

We incur costs as a result of operating as a public company, and our management is required to devote substantial time to these compliance activities.

As a public company, we incur significant legal, accounting and other costs. In addition, the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act,” the Dodd-Frank Act and the rules of the SEC, and NASDAQ, impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to these compliance activities. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

Furthermore, if we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the market price of our common stock could decline and we could be subject to potential delisting by NASDAQ and review by such exchange, the SEC, or other regulatory authorities, which would require the expenditure by us of additional financial and management resources. As a result, our stockholders could lose confidence in our financial reporting, which would harm our business and the market price of our common stock.

Some provisions of our charter may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests.

Our charter restricts any person that owns 9.8% or more of our capital stock, other than TFP and its affiliates or another stockholder approved by applicable state insurance regulators, from voting in excess of 9.8% of our voting securities. This provision is intended to satisfy the requirements of applicable state regulators in connection with insurance laws and regulations that prohibit any person from acquiring control of a regulated insurance company without the prior approval of the insurance regulators. In addition, our charter provides for the classification of our board of directors into three classes, one of which is to be elected each year. Our charter also generally only permits stockholders to act without a meeting by unanimous consent. These provisions may delay, deter or prevent takeovers and business combinations that stockholders consider in their best interests.

Maryland takeover statutes may prevent a change of our control, which could depress our stock price.

Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” will have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. “Control shares” means voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of

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voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: one-tenth or more but less than one-third; one-third or more but less than a majority; or a majority or more of all voting power. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which such stockholder became an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities.

Our bylaws contain a provision exempting from the control share statute any and all acquisitions by any person of our shares of stock. Our board of directors has also adopted a resolution which provides that any business combination between us and any other person is exempted from the provisions of the business combination statute, provided that the business combination is first approved by the board of directors. However, our board of directors may amend or eliminate this provision in our bylaws regarding the control share statute or amend or repeal this resolution regarding the business combination statute. If our board takes such action in the future, the control share and business combination statutes may prevent or discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Our holding company structure with multiple lines of business, may adversely impact the market price of our Class A common stock and our ability to raise equity and debt capital.

Tiptree holds and manages multiple lines of business. Analysts, investors and lenders may have difficulty analyzing and valuing a company with multiple lines of business, which could adversely impact the market price of our Class A common stock and our ability to raise equity and debt capital at a holding company level. Moreover, our management is required to make decisions regarding the allocation of capital among the different lines of business, and such decisions could materially and adversely affect our business or one or more of our lines of business.

Risks Related to Regulatory and Legal Matters

Maintenance of our 1940 Act exemption imposes limits on our operations.

We conduct our operations so that we are not required to register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Therefore, we must limit the types and nature of businesses in which we engage and assets that we acquire. Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Assets that would generally be excluded from the term “investment securities,” include securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on certain exceptions from the definition of investment company set forth in the 1940 Act.

We monitor our compliance with the 1940 Act on an ongoing basis and may be compelled to take or refrain from taking actions, to acquire additional income or loss generating assets or to forgo opportunities that might otherwise be beneficial or advisable, including, but not limited to selling assets that are considered to be investment securities or forgoing the sale of assets that are not investment securities, in order to ensure that we (or a subsidiary) may continue to rely on the applicable exceptions or exemptions. These limitations on our freedom of action could have a material adverse effect on our financial condition and results of operations.

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If we fail to maintain an exemption, exception or other exclusion from registration as an investment company, we could, among other things, be required to substantially change the manner in which we conduct our operations either to avoid being required to register as an investment company or to register as an investment company. If we were required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to, among other things, our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and our financial condition and results of operations may be adversely affected. If we did not register despite being required to do so, criminal and civil actions could be brought against us, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

A change in law, regulation or regulatory enforcement applicable to insurance products could adversely affect our financial condition and results of operations.

A change in state or U.S. federal tax laws could materially affect our insurance businesses. Currently, Fortegra does not collect sales or other related taxes on its services. Whether sales of Fortegra’s services are subject to state sales and use taxes is uncertain, due in part to the nature of its services and the relationships through which its services are offered, as well as changing state laws and interpretations of those laws. One or more states may seek to impose sales or use tax or other tax collection obligations on Fortegra, whether based on sales by Fortegra or its resellers or clients, including for past sales. A successful assertion that Fortegra should be collecting sales or other related taxes on its services could result in substantial tax liabilities for past sales, discourage customers from purchasing its services, discourage clients from offering or billing for its services, or otherwise cause material harm to its business, financial condition and results of operations.

With regard to Fortegra’s payment protection products, there are federal and state laws and regulations that govern the disclosures related to lenders’ sales of those products. Fortegra’s ability to offer and administer these products on behalf of financial institutions is dependent upon their continued ability to sell such products. To the extent that federal or state laws or regulations change to restrict or prohibit the sale of these products, Fortegra’s revenues would be adversely affected. For example, the Dodd-Frank Act created the Consumer Financial Protection Bureau (“CFPB”) to add new regulatory oversight for the sales practices of such payment protection products. The CFPB’s enforcement actions have resulted in large refunds and civil penalties against financial institutions in connection with their marketing of payment protection and other products. Due to such regulatory actions, some lenders may reduce their sales and marketing of payment protection and other ancillary products, which may adversely affect Fortegra’s revenues. The full impact of the CFPB’s oversight is unpredictable and continues to evolve. With respect to the property and casualty insurance policies Fortegra underwrites, federal legislative proposals regarding national catastrophe insurance, if adopted, could reduce the business need for some of the related products that Fortegra provides.

Compliance with existing and new regulations affecting our business in regulated industries may increase costs and limit our ability to pursue business opportunities.

We are subject to extensive laws and regulations administered and enforced by a number of different federal and state governmental authorities in the industries in which we operate. Regulation of such industries are expected to increase. In the past several years, there has been significant legislation affecting financial services, insurance and health care, including the Dodd-Frank Act and the Patient Protection and Affordable Care Act, and many of the regulations associated with these laws have yet to be written. Accordingly, we cannot predict the impact that any new laws and regulations will have on us. The costs to comply with these laws and regulations may be substantial and could have a

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significant negative impact on us and limit our ability to pursue business opportunities. We can give no assurances that with changes to laws and regulations, our businesses can continue to be conducted in each jurisdiction in the manner as we have in the past.

Our insurance subsidiaries are subject to regulation by state and, in some cases, foreign insurance authorities with respect to statutory capital, reserve and other requirements. The laws of the various states in which our insurance businesses operate establish insurance departments and other regulatory agencies with broad powers to preclude or temporarily suspend our insurance subsidiaries from carrying on some or all of their activities or otherwise fine or penalize them in any jurisdiction in which they operate. Such regulation or compliance could reduce our insurance businesses’ profitability or limit their growth by increasing the costs of compliance, limiting or restricting the products or services they sell, or the methods by which they sell their services and products, or subjecting their business to the possibility of regulatory actions or proceedings. Due to the highly regulated nature of the residential mortgage industry, our mortgage subsidiaries are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, disclosures we must provide, the manner in which we conduct our mortgage business and the fees we may charge. These regulations directly impact our business and require constant compliance, monitoring and internal and external audits. There continue to be changes in, and new, state and federal laws and regulations that could increase costs and operational complexity of our mortgage businesses and impose significant penalties for violation.  A failure to comply with any of these existing or new laws or regulations could subject our mortgage businesses to lawsuits or governmental actions, which could result in the loss or suspension of our licenses in the applicable jurisdictions where such violations occur and/or monetary fines or changes in our mortgage operations.  Any of these outcomes could materially and adversely affect our mortgage businesses. New rules governing the content and timing of mortgage loan disclosures to borrowers, commonly known as TILA-RESPA Integrated Disclosures (“TRID”), issued by the Consumer Financial Protection Bureau (“CFPB”) became effective on October 3, 2015. While we believe our mortgage subsidiaries have taken steps to effectively implement TRID, the complexities and inter-related nature of the TRID rules could result in delays in loan closings and therefore lower loan volumes in our mortgage origination business until any implementation issues are resolved.

Changes to consumer protection laws or changes in their interpretation may impede collection efforts in connection with our investments in non-performing residential mortgage loans securing single family properties (“NPL”), delaying and/or reducing our returns on these investments. The CFPB has specifically focused on servicing and foreclosure practices, especially as it relates to the servicing of delinquent loans. Many of these laws and regulations are focused on sub-prime borrowers and are intended to curtail or prohibit some industry standard practices. While we believe that our practices are in compliance with these changes and enhanced regulations, certain of our collections methods could be prohibited in the future, forcing us to revise our practices and implement more costly or less effective policies and procedures. Federal or state bankruptcy or debtor relief laws could offer additional protection to borrowers seeking bankruptcy protection, providing a court greater leeway to reduce or discharge amounts owed to us. As a result, some of these changes in laws and regulations could impact our expected returns and/or ability to recover some of our investment.

Tiptree Asset Management Company, LLC is an asset management holding company registered with the SEC as an investment advisor and is subject to various federal and state laws and regulations and rules of various securities regulators and exchanges. These laws and regulations primarily are intended to protect clients and generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Possible sanctions that may be imposed include the suspension of

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individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser, censures and fines.

The final rules implementing the credit risk retention requirements of the Dodd-Frank Act become effective beginning on December 24, 2016 with respect to CLOs (the “Risk Retention Rules”). The Risk Retention Rules generally require sponsors of asset-backed securities transactions or their affiliates to retain not less than 5% of the credit risk of the assets collateralizing asset-backed securities for the life of the vehicle. Historically, Tiptree has invested in the subordinated notes of CLOs managed by Telos, in some cases in amounts greater than 5%, but from time to time subsequently sold the subordinated notes to fund new vehicles that establish warehouse credit facilities in anticipation of launching new CLOs. After the effective date of the Risk Retention Rules, the new mandatory risk retention requirement for CLOs may result in us having to maintain our investment in CLOs that we manage at 5% of the outstanding certificates for the life of the securities, reducing the availability of capital that would otherwise be available for other uses. The Risk Retention Rules generally prohibit hedging the credit risk that is required to be retained. While the impact of the Risk Retention Rules on the loan securitization market and the leveraged loan market generally are uncertain, the Risk Retention Rules may impact our returns in the business, and thus our ability or desire to manage CLOs in the future. We are exploring multiple alternatives for compliance with the Risk Retention Rules.

While the CFPB does not have direct jurisdiction over insurance products, it is possible that regulatory actions taken by the CFPB may affect the sales practices related to these products and thereby potentially affect Fortegra’s business or the clients that it serves. In March 2015, the CFPB announced it is considering proposing rules under its unfair, deceptive and abusive acts and practices rulemaking authority relating to consumer installment loans, among other things. If and when implemented CFPB rules regarding consumer installment loans could adversely impact Fortegra’s volume of insurance products and services and cost structure. In addition, the CFPB’s enforcement actions and examinations have resulted in large refunds and civil penalties against financial institutions in connection with their marketing of payment protection and other products. Due to such regulatory actions, some lenders may reduce their sales and marketing of payment protection and other ancillary products, which may adversely affect Fortegra’s revenues.

The properties held by our Care subsidiary are regulated by state and federal laws regarding healthcare facilities. Luxury is subject to extensive regulation by federal, state and local governmental authorities, including the CFPB, the Federal Trade Commission and various state agencies that license, audit and conduct examinations.

Unlike competitors that are banks, our mortgage businesses are subject to state licensing and operational requirements that result in substantial compliance costs.

Because we are not a depository institution, we do not benefit from a federal exemption to state mortgage banking, loan servicing or debt collection licensing and regulatory requirements. Our mortgage businesses must comply with state licensing requirements and varying compliance requirements in each of the states (and the District of Columbia) in which they do business. Future regulatory changes may increase our costs through stricter licensing laws, disclosure laws or increased fees or may impose conditions to licensing that we or our personnel are unable to meet. In addition, our mortgage businesses are subject to periodic examinations by state regulators, which can result in refunds to borrowers of certain fees earned by our mortgage businesses, and we may be required to pay substantial penalties imposed by state regulators due to compliance errors. Future state legislation and changes in existing regulation may significantly increase our mortgage businesses’ compliance costs or reduce the amount of ancillary fees, including late fees that we may charge to borrowers. This could make our business cost-prohibitive in the affected state or states and could materially affect our business, financial condition and results of operations.

Our businesses are subject to risks related to litigation and regulatory actions.

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Over the last several years, businesses in many areas of the financial services industry have been subject to increasing amounts of regulatory scrutiny. In addition, there has been an increase in litigation involving firms in the financial services industry and public companies generally, some of which have involved new types of legal claims, particularly in the insurance industry. We may be materially and adversely affected by judgments, settlements, fines, penalties, unanticipated costs or other effects of legal and administrative proceedings now pending or that may be instituted in the future, including from investigations by regulatory bodies or administrative agencies. An adverse outcome of any investigation by, or other inquiries from, any such bodies or agencies also could result in non-monetary penalties or sanctions, loss of licenses or approvals, changes in personnel, increased review and scrutiny of us by our clients, counterparties, regulatory authorities, potential litigants, the media and others, any of which could have a material adverse effect on us.

Failure to protect our clients’ confidential information and privacy could result in the loss of our reputation and customers, reduction in our profitability and subject us to fines, penalties and litigation and adversely affect our results of operations and financial condition.

We and our subsidiaries retain confidential information in our information systems, and we are subject to a variety of privacy regulations and confidentiality obligations. For example, some of the Company’s subsidiaries are subject to the privacy regulations of the Gramm-Leach-Bliley Act. We and certain of our subsidiaries also have contractual obligations to protect confidential information we obtain from third parties. These obligations generally require us, in accordance with applicable laws, to protect such information to the same extent that we protect our own confidential information. We have implemented physical, administrative and logical security systems with the intent of maintaining the physical security of our facilities and systems and protecting our clients’ and their customers’ confidential information and personally-identifiable information against unauthorized access through our information systems or by other electronic transmission or through misdirection, theft or loss of data. Despite such efforts, we may be subject to a breach of our security systems that results in unauthorized access to our facilities and/or the information we are trying to protect. Anyone who is able to circumvent our security measures and penetrate our information systems could access, view, misappropriate, alter or delete any information in the systems, including personally identifiable customer information and proprietary business information. In addition, most states require that customers be notified if a security breach results in the disclosure of personally-identifiable customer information. Any compromise of the security of our or our subsidiaries’ information systems that results in inappropriate disclosure of such information could result in, among other things, unfavorable publicity and damage to our and our subsidiaries’ reputation, governmental inquiry and oversight, difficulty in marketing our services, loss of clients, significant civil and criminal liability, litigation and the incurrence of significant technical, legal and other expenses, any of which may have a material adverse effect on our results of operations and financial condition.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information both included and incorporated by reference in this prospectus contains “forward-looking statements” within the meaning of Section 27A of the Securities Act. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, acquisitions and dispositions, discussion and analysis of our future financial condition, results of operations, our strategic plans and objectives, statutory required reserves of our insurance

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subsidiaries, reduction in management fees paid to our specialty finance subsidiaries, cost management, occupancy and leasing rates and trends, liquidity and ability to refinance our subsidiaries’ indebtedness as it matures, anticipated capital expenditures (and access to capital) and other matters. When we use words such as “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” or similar expressions, we intend to identify forward-looking statements.

The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some 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. You should not place undue reliance on these forward-looking statements. The cautionary statements contained or incorporated by reference into this prospectus should be considered in connection with any subsequent written or oral forward-looking statements that we may issue. A description of risks that could cause our results to vary appears under the caption “Risk Factors” in this prospectus. Except for our ongoing obligations to disclose certain information as required by the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

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USE OF PROCEEDS

We will not receive any of the cash proceeds from the sale of the Shares by any selling stockholder. All of the proceeds from any sales of the Shares will be received by the applicable selling stockholders.

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock is only a summary. While we believe that the following description covers the material terms of our capital stock, the description may not contain all of the information that is important to you and is qualified in its entirety by the provisions of our articles of amendment and restatement, which we refer to as our “charter,” and bylaws, copies of which are filed with the SEC and incorporated by reference in this prospectus. See “Where You Can Find Additional Information.”

General

Our charter provides that we may issue up to 200,000,000 shares of Class A common stock, 50,000,000 shares of Class B common stock and 100,000,000 shares of preferred stock, each having a par value of $0.001 per share. As of November 30, 2016, 34,983,616 shares of our Class A common stock were issued and outstanding (including  6,596,000  shares of Class A common stock held by subsidiaries of the registrant), 8,049,029 shares of our Class B common stock were issued and outstanding and no shares of preferred stock were issued and outstanding. Our board of directors, with the approval of a majority of the entire board and without any action on the part of our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue, subject to certain restrictions. Under Maryland law, our stockholders are not personally liable for our debts and obligations solely as a result of their status as stockholders.

Common Stock

All shares of our Class A common stock have equal rights as to earnings, assets, dividends and voting and, when they are issued, will be duly authorized, validly issued, fully paid and non-assessable. All shares of our Class B common stock have equal voting rights but no economic rights (including no right to receive dividends or other distributions upon our liquidation, dissolution or otherwise), and, when they are issued, will be duly authorized, validly issued, fully paid and non-assessable. Distributions may be paid to the holders of our Class A common stock if, as and when authorized by our board of directors and declared by us out of assets legally available therefor. Shares of our Class A common stock generally have no preemptive, appraisal, preferential exchange, conversion or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws, by contract or by the restrictions in our charter described below. In the event of our liquidation, dissolution or winding up, each share of our Class A common stock would be entitled to share ratably in all of our assets that are legally available for distribution after payment of or adequate provision for all of our known debts and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time.

Subject to our charter restrictions on the voting of our stock and except with respect to any amendment to our charter (including any articles supplementary relating to any series of preferred stock) that relates solely to the terms of one or more outstanding classes or series (but not to all outstanding classes or series) of common stock (other than, in the case of shares of Class A common stock, the Class A common stock and, in the case of shares of Class B common stock, the Class B common

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stock) or preferred stock if the holders of such affected class or series are entitled, either separately or together with the holders of one or more other such classes or series, to vote thereon pursuant to our charter (including any articles supplementary relating to any series of preferred stock) or pursuant to the Maryland General Corporation Law, each share of our Class A common stock entitles the holder to one vote and each share of our Class B common stock entitles the holder to the number of votes equal to the product of (x) the total number of common units of Operating Company held of record by such holder multiplied by (y) the Redemption Rate (as defined in the Operating Agreement of the Operating Company and which is currently 1 for 1), in each case on all matters submitted to a vote of stockholders, including the election of directors. Notwithstanding the foregoing, our bylaws provide that shares of our capital stock directly or indirectly owned by us shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by us in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. Holders of our Class A common stock and Class B common stock will vote together as a single class, subject to certain exceptions. Except as provided with respect to any other class or series of stock, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in the election of directors.

The Operating Agreement also provides that holders of membership interests of the Operating Company, other than the Company, will have the right to cause Operating Company to redeem their membership interests for a number of shares of Class A Common Stock at the Redemption Rate. However, the Company, at its sole option and discretion, has the right to deliver to the redeeming holder a cash amount (or a combination of cash and shares) based on the market value of the Class A Common Stock on the date of redemption. Upon redemption of each membership interest, one share of Class B Common Stock held by the redeeming holder will be transferred to the Company for cancellation for no consideration.

In addition, we are currently permitting holders of TFP limited partnership units to exchange their units directly for shares of Class A common stock. However, we may discontinue exchanges at any time or from time to time or instead pay a cash amount based on the average daily trading volume for the ten days prior to the redemption date (or a combination of cash and Class A common stock) in lieu thereof.

Power to Reclassify Shares of Our Stock

Our charter authorizes our board of directors to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock. Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and by our charter to set, subject to our charter restrictions on the transfer and ownership of our stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interests. No shares of our preferred stock are presently outstanding and we have no present plans to issue any preferred stock.

Power to Issue Additional Shares of Common Stock and Preferred Stock

We believe that the power of our board of directors to amend the charter from time to time without stockholder approval to increase or decrease the total number of authorized shares of our stock or the number of authorized shares of any class or series of our stock, to issue additional authorized but unissued shares of our common stock or preferred stock and to classify or

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reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue such classified or reclassified shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as additional shares of our existing Class A and Class B common stock, will be available for issuance without further action by our stockholders, unless stockholder action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our board of directors has no intention at the present time of doing so, it could authorize us to issue a class or series that could, depending upon the terms of such class or series, delay, defer or prevent a transaction or a change in control of us that might involve a premium price for holders of our Class A common stock or otherwise be in their best interests.

Action by Written Consent

Our charter provides that stockholders may take action without a meeting by unanimous written or electronic consent (except that any action required or permitted to be taken by the holders of Class B common stock, voting separately as a class, or, to the extent expressly permitted by the articles supplementary relating to one or more series of preferred stock, by the holders of such series of preferred stock, voting separately as a series, may be taken without a meeting by such class or series, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of such class or series entitled to vote thereon were present and voted).

Classified Board

Our charter provides that our board is classified, with respect to the terms for which directors severally hold office, into three classes. The directors elected at each annual meeting of the Company are elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualify.

On December 22, 2014, we elected to be subject to Section 3-804(c) of Title 3, Subtitle 8 (the “Election”) of the Maryland General Corporation Law (the “MGCL”). As a result of the Election, the board has the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board, and any director elected by the board to fill a vacancy will hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until his or her successor is elected and qualified.

Ownership Restrictions

We are subject to applicable state insurance laws and regulations as a result of our ownership of regulated insurance companies. To satisfy the requirements of applicable state insurance regulators, our charter includes provisions restricting any person that, together with its affiliates, has beneficial ownership of 9.8% or more of our voting securities from voting in excess of 9.8% of our voting securities. Our charter specifically exempts from these restrictions any capital stock beneficially owned by TFP and its affiliates, or any other stockholder who acquires beneficial ownership of 9.8% or more of our capital stock that has been approved by the Pennsylvania Insurance Commissioner, the Superintendent of the New York Department of Financial Services and any other applicable state insurance commissioner.

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Special Statutory Requirements for Certain Transactions

The summaries of the following statutes do not purport to be complete and are subject to, and qualified in their entirety by reference to, the applicable provisions of the Maryland General Corporation Law.

Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” will have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. Shares owned by the acquirer, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. “Control shares” means voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: one-tenth or more but less than one-third; one-third or more but less than a majority; or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which such stockholder became an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities.

An interested stockholder is defined as:

• any person who beneficially owns ten percent or more of the voting power of the corporation’s outstanding voting stock; or

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• an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

• 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

• two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder.

Our bylaws contain a provision exempting from the control share statute any and all acquisitions by any person of our shares of stock. Our board of directors has also adopted a resolution which provides that any business combination between us and any other person is exempted from the provisions of the business combination statute, provided that the business combination is first approved by the board of directors. However, our board of directors may amend or eliminate this provision in our bylaws regarding the control share statute or amend or repeal this resolution regarding the business combination statute. If our board takes such action in the future, the control share and business combination statutes may prevent or discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Exclusive Forum Bylaw

The Company’s bylaws contain a forum selection provision for the adjudication of certain disputes. The bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a claim of breach of a duty owed by any director or officer or other employee of the Company to the Company or the stockholders of the Company, any action asserting a claim against the Company or any director, officer or employee of the Company arising pursuant to any provision of the Maryland General Corporation Law, the Company’s charter or the Company’s bylaws, or any action asserting a claim against the Company or any director or officer or employee of the Company that is governed by the internal affairs doctrine.

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Transfer Agent and Registrar

The transfer agent and registrar for our shares of Class A common stock is Broadridge Financial Solutions, Inc.

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SELLING STOCKHOLDERS

We are registering the 101,845 Shares covered by this prospectus in order to permit the selling stockholders to offer such shares for resale from time to time. The term “selling stockholder” includes pledgees, donees, transferees and other successors-in-interest who may acquire shares through a pledge, gift, partnership distribution or other non-sale-related transfer from the selling stockholders.

The table below lists the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder) of the selling stockholders as of December 7, 2016 . We have prepared this table based on information furnished to us by or on behalf of the selling stockholders. The table below assumes that all offered shares are sold. However, we do not know when or in what amounts any selling stockholder may offer its shares for sale under this prospectus, if at all.

In accordance with SEC rules, each listed person’s beneficial ownership includes:

• all shares the selling stockholder actually owns beneficially or of record;

• all shares over which the selling stockholder has or shares voting or investment control (such as in the capacity as a general partner of an investment fund); and all shares the selling stockholder has the right to acquire within 60 days (such as upon exercise of options that are currently vested or which are scheduled to vest within 60 days).

Name of Selling Stockholder	Number of  Shares of Class A Common Stock Beneficially Owned Prior to Offering	Percentage (%) of Shares of Class A Common Stock Owned Prior to Offering(1)	Maximum Number of  Shares of Class A Common Stock to be Sold Pursuant to This  Prospectus	Number of Shares of Class A Common Stock Beneficially Owned After Offering	Percentage (%) of Shares of Class A Common Stock Beneficially Owned After Offering(1)
Richard Blass	17,027	*	1,402	15,625	*
Hugh Miller	17,027	*	1,402	15,625	*
Lee Miller	17,027	*	1,402	15,625	*
Marc Miller	17,027	*	1,402	15,625	*
Reliance Investors LLC(2)	1,629,760	5.74%	67,260	1,562,500	5.5%
TFPLP Holdings I LLC(3)	4,894,506	17.24%	28,977	4,865,529	17.14%

* Less than 1%.

Notes:

(1) Percentages are based on 28,387,616 shares of Class A common stock. The Company had 34,983,616 shares of Class A common stock outstanding as of November 30, 2016. For purposes of this calculation, the voting power of Class A common stock excludes 6,596,000  shares held by the Company’s subsidiaries as of November 30, 2016.

(2) The shares beneficially owned by Reliance Investors LLC (“Reliance Investors”) may be deemed to be beneficially owned by Wexford Capital LP (“Wexford Capital”), which is the manager of Reliance Investors, Wexford GP LLC (“Wexford GP”), which is the General Partner of Wexford Capital, by Charles E. Davidson in his capacity as Chairman and managing member of Wexford Capital and by Joseph M. Jacobs in his capacity as President and managing member of Wexford Capital.  Each of Wexford Capital, Wexford GP, Mr. Davidson and Mr. Jacobs disclaims beneficial ownership of the shares beneficially owned by Reliance Investors except, in the case of Mr. Davidson and Mr. Jacobs, to the extent of their respective interests in each member of Reliance Investors.

(3) The number of Class A common stock beneficially owned prior to the offering includes 28,977 shares to be sold pursuant to this prospectus as well as 3,569,509 shares issuable in redemption of TFP partnership units owned by Holdings I and 1,296,020 shares issuable in redemption upon exercise of warrants to acquire TFP partnership units held by Holdings I.

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Material Relationships Between the Company and the Selling Stockholders

Reliance Investors LLC, Richard Blass, Hugh Miller, Lee Miller and Marc Miller (collectively, the “Reliance Selling Stockholders”) received the Shares on August 11, 2016 as an annual earn-out consideration in connection with Tiptree’s acquisition of all of the outstanding equity interests of Reliance in accordance with that certain Securities Purchase Agreement, dated as of November 24, 2014 as amended by the First Amendment to the Securities Purchase Agreement, dated July 1, 2015 by and among the buyer group parties thereto and the seller parties thereto (the “Purchase Agreement”). Pursuant to the Purchase Agreement, Tiptree agreed to register any shares granted to the Reliance Selling Stockholders as earn-out consideration. Wexford Capital, an affiliate of Reliance Investors LLC, has the right to appoint one director to the board of Reliance until July 1, 2018. Hugh Miller is President and Chief Executive Officer and a director of Reliance. Richard Blass is Executive Vice President and Chief Financial Officer and a director of Reliance. Lee Miller is Executive Vice President, Chief Credit Officer and Treasurer of Reliance. Marc Miller is Executive Vice President, General Counsel and Secretary of Reliance.

In addition, Michael Barnes, our Executive Chairman, is deemed to be in control of Holdings I.

Other than indicated above, the selling stockholders have not had any other material relationship with us or any of our predecessors or affiliates within the past three years, other than beneficial ownership of the shares described in the table above.

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PLAN OF DISTRIBUTION

Shares covered by this prospectus may be offered and sold from time to time by the selling stockholders. The selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The selling stockholders may sell their Shares by one or more of, or a combination of, the following methods:

• purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;

• ordinary brokerage transactions and transactions in which the broker solicits purchasers;

• to or through underwriters or agents;

• block trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

• on the Nasdaq Capital Market or any other national securities exchange or quotation service on which the Shares may be listed or quoted at the time of sale;

• in the over-the-counter market;

• in privately negotiated transactions;

• in options transactions; and

• by any other legally available means.

In addition, any Shares that qualify for sale pursuant to Rule 144 promulgated under the Securities Act may be sold by the selling stockholders under Rule 144 rather than pursuant to this prospectus.

To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the Shares or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the Class A common stock in the course of hedging the positions they assume with a selling stockholder. The selling stockholders may also sell the Class A common stock short and redeliver the Shares to close out such short positions. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer or other financial institution of Shares offered by this prospectus, which Shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling stockholders may also pledge Shares to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution may effect sales of the pledged Shares pursuant to this prospectus (as supplemented or amended to reflect such transaction).

In effecting sales, broker-dealers or agents engaged by the selling stockholders may arrange for other broker-dealers to participate. Broker-dealers or agents may receive commissions, discounts or concessions from the selling stockholders in amounts to be negotiated prior to the sale. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the Shares of Class A common stock hereunder against certain liabilities, including liabilities arising under the Securities Act.

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In offering the Shares covered by this prospectus to be sold by the selling stockholders, the selling stockholders and any broker-dealers who execute sales for the selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. Any profits realized by the selling stockholders and the compensation of any broker-dealer may be deemed to be underwriting discounts and commissions.

In order to comply with the securities laws of certain states, if applicable, the Shares must be sold in such jurisdictions only through registered or licensed brokers or dealers.

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of Shares in the market and to the activities of the selling stockholders and their respective affiliates.

At the time a particular offer of Shares is made by a selling stockholder, if required, a prospectus supplement will be distributed that will set forth the number of Shares being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or re-allowed or paid to any dealer, and the proposed selling price to the public.

Our Class A common stock is listed on the NASDAQ Capital Market under the symbol “TIPT.”

We will pay all expenses of the registration of the shares of Class A common stock covered by this prospectus.

LEGAL MATTERS

The validity of the shares of Class A common stock offered by this prospectus has been passed upon for us by Venable LLP, Baltimore, Maryland.

EXPERTS

The consolidated financial statements of Tiptree Financial Inc. and subsidiaries as of December 31, 2015 and 2014, and for each of the years in the two-year period ended December 31, 2015, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2015 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

The audit report dated March 15, 2016, on the consolidated financial statements refers to Tiptree Financial Inc.’s adoption of ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis.

The audit report dated March 15, 2016, on the effectiveness of internal control over financial reporting as of December 31, 2015, expresses an opinion that Tiptree Financial Inc. did not maintain effective internal control over financial reporting as of December 31, 2015 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contains an explanatory paragraph that states material weaknesses related to ineffective process level controls over financial statement accounts at the Care Investment Trust LLC managed properties (“Care Managed Properties”) and Luxury Mortgage Corp. and Subsidiary (“Luxury”); insufficient knowledgeable resources with responsibilities for processes and

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internal controls over financial reporting at its Care Managed Properties and Luxury; inadequate monitoring activities over the Care Managed Properties and Luxury; and ineffective management review controls over income taxes, business combinations and the consolidated statement of cash flows have been identified and included in management’s assessment.

The audit report dated March 15, 2016, on the effectiveness of internal control over financial reporting as of December 31, 2015, also contains an explanatory paragraph that states Tiptree Financial Inc. acquired certain Care real estate properties and Reliance First Capital, LLC (“Reliance”) during 2015, and management excluded from its assessment of the effectiveness of Tiptree Financial Inc.’s internal control over financial reporting as of December 31, 2015, certain Care real estate properties and Reliance’s internal control over financial reporting associated with total assets of $28.5 million and $72.7 million, respectively and total revenues of $8.8 million and $22.9 million, respectively.

The consolidated financial statements of Fortegra Financial Corp. and subsidiaries as of and for the year ended December 31, 2013 are filed herewith in this Registration Statement as Exhibit 99.2 and have been audited by RSM US LLP (formerly McGladrey LLP), independent auditor, as stated in their report appearing elsewhere herein, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Fortegra Financial Corp. and subsidiaries as of and for the years ended December 31, 2012 and 2011 are filed herewith in this Registration Statement as Exhibit 99.2 and have been audited by Johnson Lambert LLP, independent registered public accounting firm as stated in their reports appearing elsewhere herein, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-3 under the Securities Act with respect to the shares of our common stock being offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us and the shares of our common stock, reference is made to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete. We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. The registration statement, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at 100 F Street, N.E., Washington, D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s website at www.sec.gov.

The SEC allows us to incorporate by reference information contained in documents we file with it, which means that we can disclose important information to you by referring you to those documents already on file with the SEC that contain that information. We incorporate by reference into this prospectus the documents listed below and any future filings made by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, except for information “furnished” under Items 2.02, 7.01 or 9.01 on Form 8-K or other information “furnished” to the SEC which is not deemed filed and not incorporated in this

prospectus, until the termination of the offering of securities described in the applicable prospectus supplement. The information contained in these future filings will automatically update and supersede the information contained in this prospectus or incorporated by reference to any previously filed document. We hereby incorporate by reference the following documents:

• Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed by the Company with the SEC on November 8, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on November 8, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on September 14, 2016;

• Quarterly Report on Form 10-Q for the period ended June 30, 2016, filed by the Company with the SEC on August 5, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on August 5, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on June 24, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on June 23, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on June 6, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on May 13, 2016;

• Quarterly Report on Form 10-Q for the period ended March 31, 2016, filed by the Company with the SEC on May 10, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on May 10, 2016;

• Portions of the Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 27, 2016 (File No. 001-33549), that are incorporated by reference into Part III of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 15, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on March 16, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on January 14, 2016;

• Current Report on Form 8-K filed by the Company with the SEC on January 7, 2016; and

• Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed by the Company with the SEC on March 15, 2016.

We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of any or all of the information incorporated by reference herein but not delivered with this prospectus. You may request a copy of these filings, at no cost, by writing to us at Tiptree Financial Inc., 780 Third Avenue, 21^st Floor, New York, New York 10017, Attn: Secretary, or by calling our corporate number at (212) 446-1400.

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TIPTREE FINANCIAL INC.

101,845 shares of

Class A Common Stock

PROSPECTUS

, 2016

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses payable by us in connection with the offering of securities described in this registration statement. All amounts shown are estimates, except for the SEC registration fee. We will bear all expenses shown below.

SEC registration fee	$	76
Accounting fees and expenses	50,000
Legal fees and expenses	50,000
Printing and mailing expenses	10,000
Other	919
Total	$	110,995

Item 15. Indemnification of Directors and Officers.

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (i) actual receipt of an improper benefit or profit in money, property or services or (ii) active or deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains a provision which limits the liability of our directors and officers to the maximum extent permitted by Maryland law.

Our charter also requires the Company, to the maximum extent permitted by Maryland law, to indemnify and hold harmless any present or former director or officer of the Company (or a predecessor of the Company) or any individual who, while a director or officer of the Company and at the request of the Company (or its predecessor), serves as a director, officer, partner, trustee, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, limited liability company, nonprofit entity or other enterprise, from and against any expenses, liability and loss (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such individual in connection with any proceeding in which the individual is named, or threatened to be named, a party in any such capacity. The Company may also be obligated to pay or reimburse such individual’s expenses in advance of the final disposition of any proceeding.

Our bylaws require the Company, to the maximum extent permitted by Maryland law, to indemnify and pay or reimburse reasonable expenses in advance of final disposition of a proceeding, to (i) any present or former director or officer of the Company who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (ii) any individual who, while a director and at the request of the Company, serves or served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. Upon approval of the Company’s board of directors, the Company may indemnify and advance expenses to a person who served a predecessor of the Company in any of the foregoing capacities and to any employee or agent of the Company (or its predecessors).

We also maintain directors’ and officers’ liability insurance, which provides coverage to our directors and officers for certain liabilities.

II-1

Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in such capacity, or in the defense of an issue, claim or matter in any such proceeding. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made, or are threatened to be made, a party by reason of their service in those or other capacities unless it is established that:

• the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; or

• the director or officer actually received an improper personal benefit in money, property or services; or

• in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of:

• a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

• a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

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Item 16. Exhibits.

The following exhibits are filed herewith or incorporated by reference herein:

Exhibit Number	Description
3.1	Fourth Articles of Amendment and Restatement of the Registrant (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 0001-33549), filed on July 2, 2013 and herein incorporated by reference).
3.2	Third Amended and Restated Bylaws of the Registrant (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33549), filed on May 14, 2014 and herein incorporated by reference).
3.3	Articles Supplementary of the Registrant, dated December 29, 2014 (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33549), filed on December 29, 2014 and herein incorporated by reference).
4.1	Form of Certificate of Class A Common Stock (previously filed as Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form 8-A (File No. 000-54474), filed on July 2, 2013 and herein incorporated by reference).
5.1	Opinion of Venable LLP*
23.1	Consent of KPMG LLP*
23.2	Consent of RSM US LLP*
23.3	Consent of Johnson Lambert LLP*
23.4	Consent of Venable LLP (included in Exhibit 5.1)*
99.1	Unaudited consolidated balance sheet of Fortegra as of September 30, 2014 and the related unaudited consolidated statements of income, unaudited consolidated statements of comprehensive income and unaudited consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013, the unaudited consolidated statement of stockholders’ equity for the nine months ended September 30, 2014 and the notes to the unaudited consolidated financial statements.*
99.2	Audited consolidated financial statements of Fortegra for the years ended December 31, 2013, 2012 and 2011.*
99.3	Unaudited pro forma combined financial statements and the notes related thereto.*

* Filed herewith.

Item 17. Undertakings.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation

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from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(i) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-4

The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act, and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on December 7, 2016 .

TIPTREE FINANCIAL INC.

By:	/s/ Jonathan Ilany
	Name: Jonathan Ilany
	Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
____*_______________ Michael G. Barnes	Executive Chairman and Director (Principal Executive Officer)	December 7, 2016
/s/ Jonathan Ilany______ Jonathan Ilany	Chief Executive Officer and Director (Principal Executive Officer)	December 7, 2016
____*_______________ Sandra Bell	Chief Financial Officer (Principal Financial Officer)	December 7, 2016
____*_______________ Timothy Schott	Principal Accounting Officer (Principal Accounting Officer)	December 7, 2016
____*_______________ Paul Friedman	Director	December 7, 2016
____*_______________ Lesley Goldwasser	Director	December 7, 2016
____*_______________ John E. Mack	Director	December 7, 2016
____*_______________ Bradley E. Smith	Director	December 7, 2016

* Pursuant to Power of Attorney filed with the Registration Statement on Form S-3 (File No. 333-214394) filed with the SEC on November 2, 2016.

By:      /s/ Jonathan Ilany

Attorney-in-Fact    

EXHIBIT INDEX

Exhibit Number	Description
3.1	Fourth Articles of Amendment and Restatement of the Registrant (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 0001-33549), filed on July 2, 2013 and herein incorporated by reference).
3.2	Third Amended and Restated Bylaws of the Registrant (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33549), filed on May 14, 2014 and herein incorporated by reference).
3.3	Articles Supplementary of the Registrant, dated December 29, 2014 (previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33549), filed on December 29, 2014 and herein incorporated by reference).
4.1	Form of Certificate of Class A Common Stock (previously filed as Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form 8-A (File No. 000-54474), filed on July 2, 2013 and herein incorporated by reference).
5.1	Opinion of Venable LLP*
23.1	Consent of KPMG LLP*
23.2	Consent of RSM US LLP*
23.3	Consent of Johnson Lambert LLP*
23.4	Consent of Venable LLP (included in Exhibit 5.1)*
99.1	Unaudited consolidated balance sheet of Fortegra as of September 30, 2014 and the related unaudited consolidated statements of income, unaudited consolidated statements of comprehensive income and unaudited consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013, the unaudited consolidated statement of stockholders’ equity for the nine months ended September 30, 2014 and the notes to the unaudited consolidated financial statements.*
99.2	Audited consolidated financial statements of Fortegra for the years ended December 31, 2013, 2012 and 2011.*
99.3	Unaudited pro forma combined financial statements and the notes related thereto.*

* Filed herewith.

EX-5.1

Exhibit 5.1

December 7, 2016

Tiptree Financial Inc.

780 Third Avenue, 21^st Floor

New York, New York 10017

Re:    Registration Statement on Form S-3

Ladies and Gentlemen:

We have served as Maryland counsel to Tiptree Financial Inc., a Maryland corporation (the “Company”), in connection with certain matters of Maryland law arising out of the registration of 101,845 shares (the “Shares”) of Class A Common Stock, par value $0.001 per share, of the Company (the “Class A Common Stock”), covered by the above-referenced Registration Statement, and all amendments thereto (the “Registration Statement”), filed by the Company with the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”). The Shares may be sold from time to time by the stockholders of the Company named in the Registration Statement under the caption “Selling Stockholders.” 72,868 Shares were issued as earn-out consideration in connection with the Company’s acquisition of all of the outstanding equity interests of Reliance First Capital, LLC and 28,977 Shares were issued to TFPLP Holdings I LLC as consideration in connection with the acquisition by TAMCO Manager, Inc. of a one percent interest in Tiptree Asset Management Company, LLC.

In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the “Documents”):

1.    The Registration Statement and the related form of prospectus included therein in the form in which it was transmitted to the Commission under the 1933 Act;

2.    The charter of the Company, certified by the State Department of Assessments and Taxation of Maryland (the “SDAT”);

3.    The Third Amended and Restated Bylaws of the Company, as amended, certified as of the date hereof by an officer of the Company;

Tiptree Financial Inc.

December 7, 2016

Page 2

4.    A certificate of the SDAT as to the good standing of the Company, dated as of a recent date;

5.    Resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof relating to, among other matters, the issuance of the Shares (the “Resolutions”), certified as of the date hereof by an officer of the Company;

6.    A certificate executed by an officer of the Company, dated as of the date hereof; and

7.    Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.

In expressing the opinion set forth below, we have assumed the following:

1.Each individual executing any of the Documents, whether on behalf of such individual or any other person, is legally competent to do so.

2.Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.

3.Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable in accordance with all stated terms.

4.All Documents submitted to us as originals are authentic. The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to us as certified or photostatic copies conform to the original documents. All signatures on all Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All representations, warranties, statements and information contained in the Documents are true and complete. There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise.

Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that:

Tiptree Financial Inc.

December 7, 2016

Page 3

1.The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT.

2.The issuance of the Shares has been duly authorized and the Shares are validly issued, fully paid and nonassessable.

The foregoing opinion is limited to the laws of the State of Maryland and we do not express any opinion herein concerning any other law. We express no opinion as to compliance with any federal or state securities laws, including the securities laws of the State of Maryland, or as to federal or state laws regarding fraudulent transfers. To the extent that any matter as to which our opinion is expressed herein would be governed by the laws of any jurisdiction other than the State of Maryland, we do not express any opinion on such matter. The opinion expressed herein is subject to the effect of judicial decisions which may permit the introduction of parol evidence to modify the terms or the interpretation of agreements.

The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated. We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.

This opinion is being furnished to you for submission to the Commission as an exhibit to the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.

Very truly yours,

/s/ Venable LLP

Venable LLP

EX-23.1

Exhibit 23.1

The Board of Directors
Tiptree Financial Inc.:

We consent to the use of our reports dated March 15, 2016, with respect to the consolidated balance sheets of Tiptree Financial, Inc and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the years in the two-year period ended December 31, 2015, and the effectiveness of internal control over financial reporting as of December 31, 2015 incorporated herein by reference and to the reference to our firm under the heading “Experts” in the prospectus.

Our report dated March 15, 2016, on the consolidated financial statements refers to Tiptree Financial Inc.’s adoption of ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis.

Our report dated March 15, 2016, on the effectiveness of internal control over financial reporting as of December 31, 2015, expresses our opinion that Tiptree Financial Inc. did not maintain effective internal control over financial reporting as of December 31, 2015 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contains an explanatory paragraph that states material weaknesses related to ineffective process level controls over financial statement accounts at the Care Investment Trust LLC managed properties (“Care managed properties”) and Luxury Mortgage Corp. and Subsidiary (“Luxury”); insufficient knowledgeable resources with responsibilities for processes and internal controls over financial reporting at its Care Managed Properties and Luxury; inadequate monitoring activities over the Care Managed Properties and Luxury; and ineffective management review controls over income taxes, business combinations and the consolidated statement of cash flows have been identified and included in management’s assessment.

Our report dated March 15, 2016, on the effectiveness of internal control over financial reporting as of December 31, 2015, also contains an explanatory paragraph that states Tiptree Financial Inc. acquired certain Care real estate properties and Reliance First Capital, LLC (“Reliance”) during 2015, and management excluded from its assessment of the effectiveness of Tiptree Financial Inc.’s internal control over financial reporting as of December 31, 2015, certain Care real estate properties and Reliance’s internal control over financial reporting associated with total assets of $28.5 million and $72.7 million, respectively and total revenues of $8.8 million and $22.9 million, respectively.

/s/ KPMG LLP

New York, New YorkDecember 6, 2016

EX-23.2

Exhibit 23.2

Consent of Independent Auditor

We consent to the use in Amendment No. 1 to the Registration Statement (No. 333-214394) on Form S-3 of Tiptree Financial Inc. of our report dated March 17, 2015, relating to the consolidated financial statements of Fortegra Financial Corporation as of and for the year ended December 31, 2013, appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference of our firm under the heading “Experts” in such Registration Statement.

/s/ RSM US LLP

Jacksonville, Florida

December 7, 2016

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the inclusion in the registration statement (No. 333-214394) on Amendment No.1 to Form S-3 by Tiptree Financial Inc. of our report dated March 29, 2013, except for Note 9, as to which is dated March 14, 2014, with respect to the consolidated financial statements of Fortegra Financial Corporation as of December 31, 2012 and for the years ended December 31, 2012 and 2011, which report appears in this Form S-3 at Exhibit 99.2 of Tiptree Financial Inc. and to the reference to our firm as experts in accounting and auditing.

/s/ Johnson Lambert LLP

Jacksonville, FL

December 7, 2016

EX-99.1

Exhibit 99.1

Fortegra Financial Corporation

Unaudited Consolidated Financial Statements for the nine months ended September 30, 2014 and 2013

Unless the context requires otherwise, references in this Exhibit 99.1 to "Fortegra Financial," "Fortegra," "we," "us," "the Company" or similar terms refer to Fortegra Financial Corporation and its subsidiaries.

1

ITEM 1. FINANCIAL STATEMENTS

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(All Amounts in Thousands, Except Share and Per Share Amounts)

	At
	September 30, 2014			December 31, 2013
Assets:
Investments:
Fixed maturity securities available-for-sale, at fair value (amortized cost of $157,497 at September 30, 2014 and $133,288 at December 31, 2013)	$	157,735		$	131,751
Equity securities available-for-sale, at fair value (cost of $7,081 at September 30, 2014 and December 31, 2013, respectively)	6,947			6,198
Short-term investments	871			871
Total investments	165,553			138,820
Cash and cash equivalents	2,483			21,681
Restricted cash	7,579			17,293
Accrued investment income	1,259			1,175
Notes receivable, net	19,421			11,920
Accounts and premiums receivable, net	31,444			18,702
Other receivables	32,048			33,409
Reinsurance receivables	241,159			215,084
Deferred acquisition costs	67,713			78,042
Property and equipment, net	12,400			14,332
Goodwill	73,701			73,701
Other intangible assets, net	45,221			49,173
Income taxes receivable	8,728			—
Other assets	8,584			6,307
Assets of discontinued operations	—			791
Total assets	$	717,293		$	680,430
Liabilities:
Unpaid claims	$	42,427		$	34,732
Unearned premiums	282,348			256,380
Policyholder account balances	21,478			23,486
Accrued expenses, accounts payable and other liabilities	51,249			53,035
Income taxes payable	—			2,842
Deferred revenue	62,748			76,927
Notes payable	10,173			3,273
Preferred trust securities	35,000			35,000
Deferred income taxes, net	31,606			19,659
Liabilities of discontinued operations	860			8,603
Total liabilities	537,889			513,937
Commitments and Contingencies (Note 17)
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued	—			—
Common stock, par value $0.01; 150,000,000 shares authorized; 21,281,415 and 20,912,853 shares issued at September 30, 2014 and December 31, 2013, respectively, including shares in treasury	213			209
Treasury stock, at cost; 1,225,815 at September 30, 2014 and 1,224,182 shares at December 31, 2013.	(8,027		)	(8,014		)
Additional paid-in capital	100,380			99,398
Accumulated other comprehensive loss, net of tax	(1,558		)	(3,665		)
Retained earnings	82,294			72,532
Stockholders' equity before non-controlling interests	173,302			160,460
Non-controlling interests	6,102			6,033
Total stockholders' equity	179,404			166,493
Total liabilities and stockholders' equity	$	717,293		$	680,430

See accompanying Notes to Consolidated Financial Statements.

2

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(All Amounts in Thousands, Except Share and Per Share Amounts)

	For the Nine Months Ended September 30,
	2014			2013
Revenues:
Service and administrative fees	$	126,633		$	126,651
Ceding commissions	32,567			22,851
Net investment income	2,315			2,415
Net realized investment gains	6			2,043
Net earned premium	103,278			100,929
Other income	1,888			499
Total revenues	266,687			255,388
Expenses:
Net losses and loss adjustment expenses	30,970			31,096
Member benefit claims	31,111			34,624
Commissions	119,726			112,224
Personnel costs	30,444			29,849
Other operating expenses	26,432			25,628
Depreciation and amortization	3,830			3,609
Amortization of intangibles	3,952			4,156
Interest expense	2,784			2,722
Loss on note receivable	1,317			—
(Gain) on sale of subsidiary	—			(402		)
Total expenses	250,566			243,506
Income from continuing operations before income taxes	16,121			11,882
Income taxes - continuing operations	4,624			3,927
Income from continuing operations before non-controlling interests	11,497			7,955
Discontinued operations:
Income from discontinued operations - net of tax	—			3,070
Loss on sale of discontinued operations - net of tax	(42		)	—
Discontinued operations - net of tax	(42		)	3,070
Net income before non-controlling interests	11,455			11,025
Less: net income (loss) attributable to non-controlling interests	1,693			868
Net income attributable to Fortegra Financial Corporation	$	9,762		$	10,157
Earnings per share - Basic:
Net income from continuing operations - net of tax	$	0.50		$	0.36
Discontinued operations - net of tax	—			0.16
Net income attributable to Fortegra Financial Corporation	$	0.50		$	0.52
Earnings per share - Diluted:
Net income from continuing operations - net of tax	$	0.48		$	0.35
Discontinued operations - net of tax	—			0.15
Net income attributable to Fortegra Financial Corporation	$	0.48		$	0.50
Weighted average common shares outstanding:
Basic	19,723,995			19,500,430
Diluted	20,528,052			20,531,122

See accompanying Notes to Consolidated Financial Statements.

3

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(All Amounts in Thousands)

	For the Nine Months Ended September 30,
	2014			2013
Net income before non-controlling interests	$	11,455		$	11,025
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding (losses) gains arising during the period	2,530			(3,495		)
Related tax benefit (expense) benefit	(885		)	1,223
Reclassification of (gains) included in net income	(6		)	(2,043		)
Related tax expense	2			715
Unrealized (losses) gains on available-for-sale securities, net of tax	1,641			(3,600		)
Interest rate swap:
Unrealized gain (loss) on interest rate swap	(133		)	301
Related tax (expense) benefit	46			(105		)
Reclassification of losses included in net income	858			845
Related tax benefit	(300		)	(296		)
Unrealized gain on interest rate swap, net of tax	471			745
Other comprehensive income (loss), net of tax	2,112			(2,855		)
Comprehensive income	13,567			8,170
Less: comprehensive income (loss) attributable to non-controlling interests	1,698			853
Comprehensive income attributable to Fortegra Financial Corporation	$	11,869		$	7,317

See accompanying Notes to Consolidated Financial Statements.

4

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

(All Amounts in Thousands, Except Share Amounts)

	Common Stock			Treasury Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Non-controlling Interests			Total Stockholders' Equity
	Shares	Amount		Shares		Amount
Balance, December 31, 2013	20,912,853	$	209	(1,224,182	)	$	(8,014	)	$	99,398		$	(3,665	)	$	72,532	$	6,033		$	166,493
Net income	—	—		—		—			—			—			9,762		1,693			11,455
Other comprehensive income, net of tax	—	—		—		—			—			2,107			—		5			2,112
Distributions to non-controlling interest partners	—	—		—		—			—			—			—		(1,380		)	(1,380		)
Non-controlling interest attributable to the consolidation of Creative Investigations Recovery Group, LLC	—	—		—		—			—			—			—		(249		)	(249		)
Stock-based compensation	108,695	2		—		—			870			—			—		—			872
Direct stock awards to employees	403	—		—		—			1			—			—		—			1
Shares issued for the Employee Stock Purchase Plan	18,642	—		—		—			113			—			—		—			113
Treasury stock purchased, net of issuances	—	—		(1,633	)	(13		)	—			—			—		—			(13		)
Options exercised, net of shares surrendered	240,822	2		—		—			(2		)	—			—		—			—
Balance, September 30, 2014	21,281,415	$	213	(1,225,815	)	$	(8,027	)	$	100,380		$	(1,558	)	$	82,294	$	6,102		$	179,404

See accompanying Notes to Consolidated Financial Statements.

5

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(All Amounts in Thousands)

	For the Nine Months Ended September 30,
	2014			2013
Operating Activities:
Net income attributable to Fortegra Financial Corporation	$	9,762		$	10,157
Adjustments to reconcile net income to net cash flows (used in) provided by operating activities:
Change in deferred acquisition costs	10,329			(8,209		)
Depreciation and amortization	7,782			9,661
Deferred income tax (benefit) - continuing operations	10,810			(1,610		)
Deferred income tax expense - discontinued operations	—			300
Net realized investment gains	(6		)	(2,043		)
Loss on sale of discontinued operations, net of tax	42			—
Loss on note receivable	1,317			—
Gain on sale of subsidiary	—			(402		)
Stock-based compensation expense	872			1,033
Direct stock awards to employees	1			29
Amortization of premiums and accretion of discounts on investments	1,347			1,097
Non-controlling interests	1,693			868
Change in allowance for doubtful accounts	(159		)	(118		)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:
Accrued investment income	(149		)	287
Accounts and premiums receivable, net	(12,549		)	(5,366		)
Other receivables	1,249			(22,716		)
Reinsurance receivables	(26,075		)	(7,647		)
Income taxes receivable	(8,728		)	2,919
Other assets	(2,276		)	(1,395		)
Unpaid claims	7,695			264
Unearned premiums	25,968			13,771
Policyholder account balances	(2,008		)	(1,620		)
Accrued expenses, accounts payable and other liabilities	(1,255		)	18,942
Income taxes payable	(2,842		)	222
Deferred revenue	(14,179		)	14,145
Change in assets of discontinued operations	791			—
Change in liabilities of discontinued operations	(7,743		)	—
Net cash flows provided by operating activities	1,689			22,569
Investing activities:
Proceeds from maturities, calls and prepayments of available-for-sale investments	20,653			7,963
Proceeds from sales of available-for-sale investments	3,805			54,663
Net change in short-term investments	—			251
Purchases of available-for-sale investments	(50,010		)	(78,739		)
Purchases of property and equipment	(1,900		)	(2,971		)
Net paid for acquisitions of subsidiaries, net of cash received	20			(3,112		)
Sale of subsidiaries, net of cash paid	—			2,180
Net (issuance) from notes receivable	(8,789		)	—
Net proceeds from notes receivable	—			(663		)
Net proceeds from related party note receivable	—			6,135
Change in restricted cash	9,714			2,350
Net cash flows (used in) investing activities	(26,507		)	(11,943		)
Financing activities:
Payments on notes payable	(71,139		)	(19,188		)
Proceeds from notes payable	78,039			12,500
Net proceeds from exercise of stock options	—			49
Purchase of treasury stock	(13		)	(1,372		)
Net proceeds received from stock issued in the Employee Stock Purchase Plan	113			152
Distributions to non-controlling interest partners	(1,380		)	(720		)
Dividends paid to non-controlling interests	—			(43		)
Net cash flows provided by (used in) financing activities	5,620			(8,622		)
Net (decrease) increase in cash and cash equivalents	(19,198		)	2,004
Cash and cash equivalents, beginning of period	21,681			15,209
Cash and cash equivalents, end of period	$	2,483		$	17,213

See accompanying Notes to Consolidated Financial Statements.

6

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Nature of Operations

Fortegra Financial Corporation (references to "Fortegra Financial," "Fortegra," "we," "us," "the Company" or similar terms refer to Fortegra Financial Corporation and its subsidiaries), traded on the New York Stock Exchange under the symbol: FRF, is an insurance services company headquartered in Jacksonville, Florida. Fortegra offers a wide array of revenue enhancing products, including payment protection products, motor club memberships, service contracts, device and warranty services, and administration services, to our business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies. In 2008, the Company changed its name from Life of the South Corporation to Fortegra Financial Corporation. The Company incorporated in the State of Georgia in 1981 and re-incorporated in the State of Delaware in 2010. The Company generates most of its business through networks of small to mid-sized community and regional banks, small loan companies, independent wireless retailers and automobile dealerships. The Company's subsidiaries (owned 100% directly or indirectly by the Company, unless otherwise noted below) at September 30, 2014, are as follows:

• 4Warranty Corporation ("4Warranty")

• Auto Knight Motor Club, Inc. ("Auto Knight")

• Continental Car Club, Inc. ("Continental")

• CRC Reassurance Company, Ltd. ("CRC") *

• Digital Leash, LLC, d/b/a ProtectCELL ("ProtectCELL"), 62.4% owned

• Insurance Company of the South ("ICOTS") *

• Life of the South Insurance Company ("LOTS") * and its subsidiary, Bankers Life of Louisiana ("Bankers Life") *

• LOTS Intermediate Co. ("LOTS IM")

• LOTS Reassurance Company ("LOTS RE") *

• LOTSolutions, Inc.

• Lyndon Southern Insurance Company ("Lyndon Southern") *

• Pacific Benefits Group Northwest, LLC ("PBG")

• Response Indemnity Company of California ("RICC") *

• South Bay Acceptance Corporation ("South Bay")

• South Bay Financial Services, LLC ("SBFS")

• Southern Financial Life Insurance Company ("SFLAC"), 85.0% owned *

• United Motor Club of America, Inc. ("United")

* = Insurance company subsidiary

Plan of Merger with Tiptree Financial, Inc.

As disclosed on August 12, 2014 in the Company's Current Report on Form 8-K, on August 11, 2014, the Company entered into an Agreement and Plan of Merger, (the "Merger Agreement") to be acquired by subsidiaries of Tiptree Financial Inc. ("Tiptree") for approximately $218.0 million, which would entitle shareholders to receive cash Merger Consideration of $10.00 per common share.  Tiptree is a publicly traded diversified holding company (NASDAQ: TIPT), with subsidiaries that operate in four industry segments: insurance and insurance services, specialty finance, asset management and real estate.  Following the execution of the merger agreement, stockholders representing approximately 62.0% of the outstanding shares of Fortegra common stock executed a written consent adopting and approving the merger agreement. No additional stockholder approvals are necessary to adopt the merger agreement or consummate the transaction. Consummation of the Merger is subject to the satisfaction of customary conditions including, among other things, insurance regulatory approvals.

The parties to the Merger Agreement expect the transaction to be funded through a combination of debt financing and cash on hand of Tiptree. On August 11, 2014 Tiptree obtained debt financing commitments for the transaction contemplated by the Merger Agreement. A syndicate of lenders led by Wells Fargo Bank, National Association (collectively, the "Lenders") has committed to provide a $90.0 million secured revolving credit facility and a $50.0 million secured term loan, on the terms and subject to the conditions set forth in a debt commitment letter (the "Debt Commitment Letter"). The obligation of the Lenders to provide debt financing under the Debt Commitment Letter is subject to a number of conditions, including consummation of the Merger in accordance with the Merger Agreement.

For additional details regarding the proposed merger, see the Information Statement (Form DEFM14C) filed with the Securities and Exchange Commission ("SEC") on September 30, 2014.

7

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

1. Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements of Fortegra have been prepared in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP") promulgated by the Financial Accounting Standards Board ("FASB") through the Accounting Standards Codification ("ASC") for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company's 2013 Form 10-K.

The interim consolidated financial statements in this Exhibit 99.1 have not been audited. In the opinion of management, the accompanying unaudited interim financial information reflects all adjustments, including normal recurring adjustments necessary to present fairly Fortegra's financial position, results of operations, comprehensive income and cash flows for each of the interim periods presented. The results of operations for the the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2014.

2. Summary of Significant Accounting Policies

Fortegra's interim Consolidated Financial Statements as of September 30, 2014 and 2013 are unaudited and have been prepared following the significant accounting policies disclosed in Note 2, "Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements of the Company's 2013 Form 10-K.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Fortegra Financial Corporation and its majority-owned and controlled subsidiaries. The Company eliminates all material intercompany account balances and transactions.

Non-Controlling Interests

The third-party ownership of the common stock of SFLAC and of the ownership interests of ProtectCELL, which is treated as a partnership for income tax purposes, have been reflected as non-controlling interests on the Consolidated Balance Sheets. In addition, the Company's non-controlling interests include the amount for the consolidation of the variable interest entity ("VIE"), Creative Investigations Recovery Group, LLC ("CIRG"). The following table shows the amount outstanding and the percentage of non-controlling interests by entity:

	At
	September 30, 2014					December 31, 2013
	Amount			Percent		Amount		Percent
ProtectCELL	$	5,769		37.6	%	$	5,471	37.6	%
SFLAC	582			15.0	%	562		15.0	%
CIRG	(249		)	100.0	%	—		—	%
Total non-controlling interests	$	6,102				$	6,033

Income (loss) attributable to these non-controlling interests are presented on the Consolidated Statements of Income as net income (loss) attributable to non-controlling interests and on the Consolidated Statements of Comprehensive Income as comprehensive income (loss) attributable to non-controlling interests.

Reportable Segment

The Company reports operating results and financial data in one operating and one reportable segment, Protection Products and Services. The Company has determined that its Chief Executive Officer is the Chief Operating Decision Maker. The financial results of the Company's single segment are equal to the net income from continuing operations reported in the Consolidated Statements of Income for all periods presented.

Discontinued Operations

The results of operations of a business of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if: 1) the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction; and 2) the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. The Company presents the operations of business(es) that meet the criteria for reporting as discontinued operations, and retrospectively reclassifies operating results for all prior periods presented.

On December 31, 2013, the Company completed the sale of its 100% ownership of Bliss and Glennon and eReinsure.com ("eReinsure"). The operating results of these businesses are presented in the line "Income from discontinued operations - net of tax" in the Consolidated Statements of Income for the nine months ended September 30, 2013. In accordance with accounting guidance, the Company has elected to not separately disclose the cash flows related to the Bliss and Glennon and eReinsure discontinued operations. In addition,

8

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

certain assets and liabilities associated with the disposition of Bliss and Glennon and eReinsure that are still subject to final settlement are included in the line items "Assets of discontinued operations" and "Liabilities of discontinued operations," in the Consolidated Balance Sheet at September 30, 2014 and at December 31, 2013. See the Note, "Divestitures," for more information on discontinued operations.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and other items of comprehensive income (loss). These other items are generally comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap, net of the related tax effects.

Use of Estimates

Preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain items in prior period consolidated financial statements were reclassified to conform to the current period presentation, which had no impact on net income, comprehensive income or loss, net cash provided by operating activities or stockholders' equity.

Subsequent Events

The Company reviewed all material events subsequent to September 30, 2014 that occurred up to the date on which the Company filed its Consolidated Financial Statements, and determined that no events required recognition or disclosure in these Consolidated Financial Statements and/or disclosure in the notes thereto.

Recently Adopted Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective prospectively for years and interim periods within those years beginning after December 15, 2013. The adoption of ASU No. 2013-11 did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management of a company to evaluate whether there is substantial doubt about the company’s ability to continue as a going concern. This ASU is effective for the annual reporting period ending after December 15, 2016, and for interim and annual reporting periods thereafter, with early adoption permitted. The Company is currently reviewing ASU No. 2014-15 and assessing the potential effects on its consolidated financial position, results of operations and cash flows.

In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. ASU No. 2014-12 requires that awards, which contain a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. ASU No. 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. ASU No. 2014-12 may be applied using two methods: a) prospectively to all awards granted or modified after the effective date or b) retrospectively to all awards with performance targets outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The Company is currently reviewing ASU No. 2014-12 and assessing the potential effects on its consolidated financial position, results of operations and cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition.  ASU No. 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU No. 2014-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, using either the full retrospective adoption or the modified retrospective adoption. ASU No. 2014-09 does not permit early adoption. The Company is currently reviewing ASU No. 2014-09 and assessing the potential effects on its consolidated financial position, results of operations and cash flows.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-08 requires

9

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations and also expands the disclosure requirements for discontinued operations and adds new disclosures for individually significant dispositions that do not qualify as discontinued operations. ASU No. 2014-08 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The adoption of ASU No. 2014-08 is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

3. Earnings Per Share

The following table details the earnings per share calculation:	For the Nine Months Ended September 30,
	2014			2013
Numerator: (for both basic and diluted earnings per share)
Income from continuing operations before non-controlling interests	$	11,497		$	7,955
Less: net income (loss) attributable to non-controlling interests	1,693			868
Net income from continuing operations - net of tax	9,804			7,087
Discontinued operations - net of tax	(42		)	3,070
Net income attributable to Fortegra Financial Corporation	$	9,762		$	10,157
Denominator:
Total weighted average basic common shares outstanding	19,723,995			19,500,430
Effect of dilutive stock options and restricted stock awards	804,057			1,030,692
Total weighted average diluted common shares outstanding	20,528,052			20,531,122
Earnings per share - Basic:
Net income from continuing operations - net of tax	$	0.50		$	0.36
Discontinued operations - net of tax	—			0.16
Net income attributable to Fortegra Financial Corporation	$	0.50		$	0.52
Earnings per share - Diluted:
Net income from continuing operations - net of tax	$	0.48		$	0.35
Discontinued operations - net of tax	—			0.15
Net income attributable to Fortegra Financial Corporation	$	0.48		$	0.50
Weighted average anti-dilutive common shares	489,331			762,081

10

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

4. Accumulated Other Comprehensive Income

The following table presents the activity in accumulated other comprehensive income (loss) ("AOCI") for the following periods:

	For the Nine Months Ended September 30, 2014
	Net unrealized gains (losses) on available-for-sale securities			Net unrealized gain (loss) on interest rate swap			Total
Balance at December 31, 2013, net of tax	$	(1,761	)	$	(1,904	)	$	(3,665	)
Other comprehensive income (loss) before reclassifications:
Pre-tax income (loss)	2,530			(133		)	2,397
Income tax (expense) benefit	(885		)	46			(839		)
Other comprehensive income (loss) before reclassifications, net of tax	1,645			(87		)	1,558
Amounts reclassified from accumulated other comprehensive income (loss):
Pre-tax (income) loss	(6		)	858			852
Income tax expense (benefit)	2			(300		)	(298		)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	(4		)	558			554
Current period other comprehensive income, net of tax	1,641			471			2,112
Less: other comprehensive income attributable to non-controlling interest	5			—			5
Balance at September 30, 2014, net of tax	$	(125	)	$	(1,433	)	$	(1,558	)
	For the Nine Months Ended September 30, 2013
	Net unrealized gains (losses) on available-for-sale securities			Net unrealized gain (loss) on interest rate swap			Total
Balance at December 31, 2012, net of tax	$	2,189		$	(2,820	)	$	(631	)
Other comprehensive income (loss) before reclassifications:
Pre-tax (loss) income	(3,495		)	301			(3,194		)
Income tax benefit (expense)	1,223			(105		)	1,118
Other comprehensive (loss) income before reclassifications, net of tax	(2,272		)	196			(2,076		)
Amounts reclassified from accumulated other comprehensive income (loss):
Pre-tax (income) loss	(2,043		)	845			(1,198		)
Income tax expense (benefit)	715			(296		)	419
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	(1,328		)	549			(779		)
Current period other comprehensive (loss) income, net of tax	(3,600		)	745			(2,855		)
Less: other comprehensive (loss) attributable to non-controlling interest	(15		)	—			(15		)
Balance at September 30, 2013, net of tax	$	(1,396	)	$	(2,075	)	$	(3,471	)

11

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the reclassifications out of AOCI for the following periods:

	For the Nine Months Ended September 30,
	2014			2013			Consolidated Statement of Income Location
Unrealized gains (losses) on available-for-sale securities:
Reclassification of gains included in net income	$	6		$	2,043		Net realized investment gains (losses)
Related tax (expense)	(2		)	(715		)	Income taxes
Net of tax	$	4		$	1,328		Net Income
Unrealized gain (loss) on interest rate swap:
Reclassification of (losses) included in net income	$	(858	)	$	(845	)	Interest expense
Related tax benefit	300			296			Income taxes
Net of tax	$	(558	)	$	(549	)	Net Income

5. Investments

The following table presents the Company's available-for-sale fixed maturity and equity securities:

	At September 30, 2014
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	54,868	$	375	$	(331	)	$	54,912
Municipal securities	33,810		215		(29		)	33,996
Corporate securities	67,441		425		(428		)	67,438
Obligations of foreign governments	1,378		14		(3		)	1,389
Total fixed maturity securities	$	157,497	$	1,029	$	(791	)	$	157,735
Common stock - publicly traded	$	39	$	13	$	—		$	52
Preferred stock - publicly traded	5,974		51		(196		)	5,829
Common stock - non-publicly traded	59		6		(12		)	53
Preferred stock - non-publicly traded	1,009		4		—			1,013
Total equity securities	$	7,081	$	74	$	(208	)	$	6,947

	At December 31, 2013
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	51,971	$	142	$	(678	)	$	51,435
Municipal securities	24,856		104		(413		)	24,547
Corporate securities	56,050		210		(900		)	55,360
Obligations of foreign governments	411		—		(2		)	409
Total fixed maturity securities	$	133,288	$	456	$	(1,993	)	$	131,751
Common stock - publicly traded	$	39	$	8	$	—		$	47
Preferred stock - publicly traded	5,974		—		(887		)	5,087
Common stock - non-publicly traded	59		5		(13		)	51
Preferred stock - non-publicly traded	1,009		4		—			1,013
Total equity securities	$	7,081	$	17	$	(900	)	$	6,198

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts. The Company cannot remove invested assets from these accounts without prior approval of the contractual party or regulatory authority, as applicable. The following table presents the Company's restricted investments included in the Company's available-for-sale fixed maturity securities:

12

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At
	September 30, 2014		December 31, 2013
Fair value of restricted investments for special deposits required by state insurance departments	$	10,301	$	10,339
Fair value of restricted investments in trust pursuant to reinsurance agreements	5,665		6,134
Total fair value of restricted investments	$	15,966	$	16,473

The following table presents the amortized cost and fair value of fixed maturity securities by contractual maturity. Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	At September 30, 2014				At December 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	10,556	$	10,602	$	18,766	$	18,771
Due after one year through five years	73,489		73,641		69,380		69,355
Due after five years through ten years	51,856		51,750		22,622		21,731
Due after ten years	21,596		21,742		22,520		21,894
Total fixed maturity securities	$	157,497	$	157,735	$	133,288	$	131,751

The following tables present information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months, and twelve months or greater:

	At September 30, 2014
	Less than Twelve Months					Twelve Months or Greater					Total
Description of Security	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	15,913	$	57	34	$	7,686	$	274	12	$	23,599	$	331	46
Municipal securities	3,120		9		9	1,760		20		4	4,880		29		13
Corporate securities	18,797		110		67	10,121		318		15	28,918		428		82
Obligations of foreign governments	388		3		1	—		—		—	388		3		1
Total fixed maturity securities	$	38,218	$	179	111	$	19,567	$	612	31	$	57,785	$	791	142
Preferred stock - publicly traded	1,776		15		2	3,019		181		6	4,795		196		8
Common stock - non-publicly traded	—		—		—	13		12		1	13		12		1
Total equity securities	$	1,776	$	15	2	$	3,032	$	193	7	$	4,808	$	208	9

	At December 31, 2013
	Less than Twelve Months					Twelve Months or Greater					Total
Description of Security	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	37,385	$	672	67	$	234	$	6	7	$	37,619	$	678	74
Municipal securities	10,080		413		23	—		—		—	10,080		413		23
Corporate securities	27,866		734		55	7,676		166		8	35,542		900		63
Obligations of foreign governments	409		2		1	—		—		—	409		2		1
Total fixed maturity securities	$	75,740	$	1,821	146	$	7,910	$	172	15	$	83,650	$	1,993	161
Preferred stock - publicly traded	5,087		887		9	—		—		—	5,087		887		9
Common stock - non-publicly traded	—		—		—	31		13		2	31		13		2
Total equity securities	$	5,087	$	887	9	$	31	$	13	2	$	5,118	$	900	11

The Company does not intend to sell the investments that were in an unrealized loss position at September 30, 2014, and management believes that it is more likely than not that the Company will be able to hold these securities until full recovery of their amortized cost basis for fixed maturity securities or cost for equity securities. As of September 30, 2014, based on the Company's review, none of the

13

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

fixed maturity or equity securities were deemed to be other-than-temporarily impaired based on the Company's analysis of the securities and its intent to hold the securities until recovery.

The following table presents the total gross proceeds from the sale of available-for-sale investment securities:

	For the Nine Months Ended September 30,
	2014		2013
Gross proceeds from sales	$	3,805	$	54,663

The following table presents the gross realized gains and gross realized losses for both fixed maturity and equity securities and realized losses for other-than-temporary impairments for available-for-sale investment securities:

	For the Nine Months Ended September 30,
	2014		2013
Gross realized gains	$	6	$	2,118
Gross realized losses	—		(75		)
Total net gains from investment sales	6		2,043
Impairment write-downs (other-than-temporary impairments)	—		—
Net realized investment gains	$	6	$	2,043

The following table presents the components of net investment income:	For the Nine Months Ended September 30,
	2014			2013
Fixed income securities	$	2,023		$	2,076
Cash on hand and on deposit	7			47
Common and preferred stock dividends	293			275
Notes receivable	279			239
Other income	5			117
Investment expenses	(292		)	(339		)
Net investment income	$	2,315		$	2,415

6. Reinsurance Receivables

The following table presents the effect of reinsurance on premiums written and earned:

Premiums	For the Nine Months Ended September 30,
	2014						2013
	Written			Earned			Written			Earned
Direct and assumed	$	372,881		$	346,913		$	297,940		$	284,169
Ceded	(267,565		)	(243,635		)	(194,067		)	(183,240		)
Net	$	105,316		$	103,278		$	103,873		$	100,929

The following table presents the effect of reinsurance on losses and loss adjustment expenses ("LAE") incurred:

Losses and LAE incurred	For the Nine Months Ended September 30,
	2014			2013
Direct and assumed	$	83,410		$	66,879
Ceded	(52,440		)	(35,783		)
Net losses and LAE incurred	$	30,970		$	31,096

14

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the components of the reinsurance receivables:	At
	September 30, 2014		December 31, 2013
Prepaid reinsurance premiums:
Life (1)	$	50,368	$	51,355
Accident and health (1)	40,905		36,214
Property	117,131		98,650
Total	208,404		186,219
Ceded claim reserves:
Life	1,584		1,594
Accident and health	7,913		7,826
Property	19,024		12,102
Total ceded claim reserves recoverable	28,521		21,522
Other reinsurance settlements recoverable	4,234		7,343
Reinsurance receivables	$	241,159	$	215,084

⁽¹⁾ Including policyholder account balances ceded.

The following table presents the aggregate amount included in reinsurance receivables that is comprised of the three largest receivable balances from unrelated reinsurers:

	At
	September 30, 2014		December 31, 2013
Total of the three largest receivable balances from unrelated reinsurers	$	145,876	$	136,061

At September 30, 2014 and December 31, 2013, the three unrelated reinsurers from whom the Company has the largest receivable balances were: London Life Reinsurance Company (A. M. Best Rating: A), London Life International Reinsurance Corporation (A. M. Best Rating: Not rated) and Great Western Insurance Company (A. M. Best Rating: B++). The related receivables of London Life International Reinsurance Corporation are collateralized by assets held in trust accounts and letters of credit due to their offshore relationships. At September 30, 2014, the Company does not believe there is a risk of loss as a result of the concentration of credit risk in the reinsurance program.

7. Deferred Acquisition Costs

Deferred Acquisition Costs - Insurance Related

The following table presents the amortization of deferred acquisition costs for the Company's insurance contracts:

	For the Nine Months Ended September 30,
	2014		2013
Total amortization of deferred acquisition costs - insurance related	$	50,011	$	49,223

Deferred Acquisition Costs - Non-insurance Related

The following table presents the amortization of deferred acquisition costs for the Company's non-insurance products:

	For the Nine Months Ended September 30,
	2014		2013
Total amortization of deferred acquisition costs - non-insurance related	$	52,007	$	54,560

8. Divestitures

Discontinued Operations

On December 31, 2013, the Company completed the sale of all of the issued and outstanding stock of its subsidiaries Bliss and Glennon and eReinsure, to AmWINS Holdings, LLC, a North Carolina limited liability company ("AmWINS") (collectively, the "Disposition"), pursuant to the terms of the Stock Purchase Agreement (the "Purchase Agreement"), dated December 2, 2013.

The Company received net cash proceeds of $81.8 million for the Disposition, representing gross proceeds of $83.5 million less $1.0 million in transaction fees paid at the time of closing and $0.7 million of cash held by the disposed entities. The proceeds are subject to certain purchase price adjustments as set forth in the Purchase Agreement to reflect fluctuations in working capital, including

15

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

adjustments for any receivable balances as of the disposition date not collected within one year. During the nine months ended September 30, 2014, , the Company recorded a purchase price adjustment, net of tax, of $42.0 thousand for the settlement of certain components of working capital (excluding receivable and income tax balances), which is recorded on the Consolidated Statements of Income as a Loss on sale of discontinued operations - net of tax.

As a result of the Disposition, the Company no longer operates in the businesses of wholesale insurance brokerage and selling or licensing of a computerized system or platform for the negotiation and/or placement of facultative reinsurance. As of and after December 31, 2013, the Company does not beneficially own the disposed businesses and will no longer consolidate Bliss and Glennon or eReinsure into its financial results. The historical financial results of the disposed businesses for periods prior to the Disposition are presented in the Company's Consolidated Statements of Income as income from discontinued operations - net of tax. The Company allocated interest expense to the discontinued operations based on the anticipated net proceeds that would have been applied to the repayment of the credit facilities outstanding at the respective time, multiplied by the respective interest rate of the credit facilities at the respective time.

The following table presents the assets and liabilities of the discontinued operations included on the Consolidated Balance Sheets:

	At
	September 30, 2014		December 31, 2013
Assets:
Other receivables	$	—	$	791
Assets of discontinued operations	$	—	$	791
Liabilities:
Accrued expenses, accounts payable and other liabilities	$	860	$	2,708
Income taxes payable	—		5,895
Liabilities of discontinued operations	$	860	$	8,603

The following table presents the amounts related to the Company's discontinued operations in the Consolidated Statements of Income for the following periods:

	For the Nine Months Ended
	September 30, 2013
Income from discontinued operations:
Revenues:
Brokerage commissions and fees	$	28,409
Net investment income	18
Other income	30
Total revenues	28,457
Expenses:
Personnel costs	15,240
Other operating expenses	4,363
Depreciation and amortization	454
Amortization of intangibles	1,442
Interest expense	1,767
Total expenses	23,266
Income from discontinued operations before income taxes	5,191
Income taxes - discontinued operations	2,121
Income from discontinued operations - net of tax	$	3,070

16

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

9. Other Intangible Assets

The following table presents finite-lived other intangible assets and their respective amortization periods:

				At September 30, 2014							At December 31, 2013
	Amortization Period (Years)			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer and agent relationships	7	to	15	$	40,075	$	(16,488	)	$	23,587	$	40,075	$	(13,262	)	$	26,813
Tradenames	8	to	10	1,460		(242		)	1,218		1,460		(128		)	1,332
Software	2.25	to	10	5,336		(3,491		)	1,845		5,336		(2,930		)	2,406
Present value of future profits	0.3	to	0.75	548		(548		)	—		548		(548		)	—
Non-compete agreements	1.5	to	6	1,378		(946		)	432		1,378		(895		)	483
Total finite-lived other intangible assets				$	48,797	$	(21,715	)	$	27,082	$	48,797	$	(17,763	)	$	31,034

The following table presents the carrying amount of indefinite-lived other intangible assets:	At
	September 30, 2014		December 31, 2013
Tradenames	$	17,764	$	17,764
Licenses	375		375
Total	$	18,139	$	18,139

The following table presents the activity in finite- and indefinite-lived other intangible assets:

Balance at December 31, 2013	$	49,173
Less: amortization expense	3,952
Balance at September 30, 2014	$	45,221

The following table presents estimated amortization of finite-lived other intangible assets for the next five years and thereafter ending December 31:

	Estimated Amortization Expense
Remainder of 2014	$	1,317
2015	5,115
2016	4,868
2017	3,648
2018	2,230
Thereafter	9,904
Total	$	27,082

10. Variable Interest Entity

In July 2011, the Company sold its 100% interest in CIRG. The consideration included a note receivable, with a first priority lien security interest in the assets of CIRG and other property of the buyers. As previously disclosed, the Company has a variable interest in CIRG. Prior to March 31, 2014, the Company did not consolidate CIRG into its results, because the Company was not the primary beneficiary.

During 2013, the buyers were unable to make the scheduled payments on the note, and the parties executed a forbearance agreement along with a security agreement and a subordination agreement designed to allow more flexibility in timing of repayment. The Company also provided $0.2 million in short term funding.

In March 2014, the Company notified the buyers of the cessation of forbearance, and began to exercise certain of the rights and remedies afforded by the note and related agreements to preserve its economic interest, including steps to protect assets of CIRG. The Company also provided additional short term funding. The Company has not taken ownership of CIRG, but the Company now has power over the VIE and has consolidated the immaterial balances of CIRG as of March 31, 2014 and forward.

In March 2014, the Company established an allowance for the full value of the note and accrued interest, incurring a charge of $1.3 million during the three months ended March 31, 2014. The Company's maximum exposure to further loss in the VIE is limited to the balance of the short term funding.

17

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At
	September 30, 2014
The Company's maximum exposure to loss in the VIE	$	194

11. Notes Payable

The Company's Notes Payable consisted of the following:	At
	September 30, 2014			December 31, 2013
Wells Fargo Bank, N.A. credit facility, maturing August 2019	$	1,500		$	—
Synovus Bank, revolving line of credit, maturing April 2017	8,673			3,273
Total	$	10,173		$	3,273
Maximum balance allowed on the Wells Fargo Bank, N.A. credit facility	$	100,000		$	75,000
Interest rate at the end of the respective period, Wells Fargo Bank, N.A. credit facility (1) (2)	1.80		%	—		%
Maximum balance allowed on the Synovus Bank, revolving line of credit	$	15,000		$	15,000
Interest rate at the end of the respective period, Synovus Bank, revolving line of credit	3.23		%	3.24		%

⁽¹⁾ - At September 30, 2014, the full outstanding balance of the Company's borrowing, under the Revolving Facility (defined below), consisted of a one-month term loan at a rate equaling the one-month LIBOR rate plus 1.65%.

⁽²⁾ - At December 31, 2013, the Company had no borrowings outstanding under the Revolving Facility, thus no interest rate can be defined.

The following table presents the aggregate maturities for the Company's notes payable by year at September 30, 2014:

	Maturities
Remainder of 2014	$	6,292
2015	3,881
2016	—
2017	—
2018	—
Thereafter	—
Total maturities	$	10,173

$100.0 million Secured Credit Agreement - Wells Fargo Bank, N.A.

On April 11, 2014, the Company amended the original credit agreement, entered into on August 2, 2012, (as amended, the "Credit Agreement"), with a syndicate of lenders, among them Wells Fargo Bank, N.A., who also serves as administrative agent ("Wells Fargo" or the "Administrative Agent"). The Credit Agreement matures on August 2, 2019 (subject to earlier termination) and has a revolving credit facility limit of $100.0 million (the "Revolving Facility") with a sub-limit of $10.0 million for swingline loans and $10.0 million for letters of credit. The Credit Agreement includes a provision pursuant to which, from time to time, the Company may request that the lenders in their discretion increase the maximum amount of commitments under the Credit Agreement by an amount not to exceed $50.0 million. The Credit Agreement also contains financial covenants, which the Company must maintain. See the section below, "Financial Covenants" for a presentation of the Company's more significant covenants associated with the Credit Agreement. The amendment to the Credit Agreement reduced the interest rate margin on revolving loans by 0.35% for each pricing level and reduced the unused line fee paid on undrawn revolving commitments by 0.05% for each pricing level. The amendment did not modify the financial covenants.

Financial Covenants - Secured Credit Agreement - Wells Fargo Bank, N.A.

At September 30, 2014 and December 31, 2013, respectively, the Company was required to comply with various financial covenants set forth in the Credit Agreement. The following describes the Credit Agreement's more significant financial covenants in effect at September 30, 2014 and the calculations used to arrive at each ratio (capitalized terms used but not defined in this paragraph are defined in the Credit Agreement or as otherwise provided below):

Total Leverage Ratio- the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the Measurement Period ending on or immediately prior to such date.

18

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Fixed Charge Coverage Ratio - the ratio of (a) Consolidated Adjusted EBITDA less the actual amount paid by the Borrowers and their Subsidiaries in cash on account of Capital Expenditures less cash taxes paid by the Borrowers and their Subsidiaries to (b) Consolidated Fixed Charges, in each case for the Measurement Period ending on or immediately prior to such date.

Reinsurance Ratio - the ratio (expressed as a percentage) of (a) the aggregate amounts recoverable by the Borrowers and its Subsidiaries from reinsurers divided by (b) the sum of (i) policy and claim liabilities plus (ii) unearned premiums, in each case of the Borrowers and their Subsidiaries determined in accordance with U.S. GAAP.

Risk-Based Capital ("RBC") Ratio - the ratio (expressed as a percentage) of NAIC RBC (as defined in the NAIC standards) for any Regulated Insurance Company on an individual basis, calculated at the end of any Fiscal Year, to the "authorized control level" (as defined in the NAIC standards).

The following table presents the Credit Agreement's more significant financial covenants at September 30, 2014, or at December 31, 2013 with respect to the RBC ratios, which under the Credit Agreement reflect the ratios calculated as of the most recent year-end:

		Actual At
Covenant	Covenant Requirement	September 30, 2014
Total leverage ratio	not more than 3.25	0.80
Fixed charge coverage ratio	not less than 2.00	6.16
Reinsurance ratio	not less than 50%	70.0%
		Actual At
		December 31, 2013
RBC Ratios:
RBC Ratio - Bankers Life of Louisiana	not less than 250%	435.0%
RBC Ratio - Southern Financial Life Insurance Company	not less than 250%	2,096.0%
RBC Ratio - Insurance Company of the South	not less than 250%	366.0%
RBC Ratio - Lyndon Southern Insurance Company	not less than 250%	305.0%
RBC Ratio - Life of the South Insurance Company	not less than 250%	430.0%
RBC Ratio - Response Indemnity Company of California	not less than 250%	39,754.0%

$15.0 million Revolving Line of Credit - Synovus Bank

At September 30, 2014, the Company's subsidiary, South Bay, had a $15.0 million revolving line of credit agreement (the "Line of Credit") with Synovus Bank, entered into in October 2013, with a maturity date of April 2017.  The Line of Credit bears interest at a rate of 300 basis points plus 90-day LIBOR, and is available specifically for the South Bay premium financing product. The Line of Credit allows South Bay to finance up to 90% of the eligible receivables, less an applicable reserve of $500,000. At September 30, 2014, the balance of premium financing receivables included in notes receivable, net, on the Consolidated Balance Sheet, totaled $12.6 million, of which $10.7 million were eligible receivables. At September 30, 2014, South Bay was in compliance with the covenants required by the Line of Credit.

12. Derivative Financial Instruments - Interest Rate Swap

The Company has an interest rate swap (the "Swap") with Wells Fargo Bank, N.A., pursuant to which the Company swapped the floating rate portion of its outstanding preferred trust securities to a fixed rate. The Swap, designated as a cash flow hedge, commenced in June 2012 and expires in June 2017.

The following table presents the fair value (including accrued interest) and the related outstanding notional amount of the Company's single derivative instrument and indicates where the Company records each amount within its Consolidated Balance Sheets:

		At
	Balance Sheet Location	September 30, 2014			December 31, 2013
Derivative designated as cash flow hedging instrument:
Interest rate swap - notional value		$	35,000		$	35,000
Fair value of the Swap	Accrued expenses, accounts payable and other liabilities	2,205			2,930
Unrealized loss, net of tax, on the fair value of the Swap	AOCI	1,433			1,904
Variable rate of the interest rate swap		0.23		%	0.24		%
Fixed rate of the interest rate swap		3.47		%	3.47		%

19

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the pretax impact of the Swap on the Consolidated Financial Statements for the following periods:

	For the Nine Months Ended September 30,
	2014			2013
Gain (loss) recognized in AOCI on the derivative-effective portion	$	(133	)	$	301
Loss reclassified from AOCI into income-effective portion	$	858		$	845
Gain (loss) recognized in income on the derivative-ineffective portion	$	—		$	—

The following table presents the estimated amount to be reclassified to earnings from AOCI during the next 12 months. These net losses reclassified into earnings are primarily expected to increase net interest expense related to the respective hedged item.

	At
	September 30, 2014
Estimated loss to be reclassified to earnings from AOCI during the next 12 months	$	1,101

13. Stock-Based Compensation

Stock Options

During the nine months ended September 30, 2014, the Company granted 15,000 time-based stock options, which vest in equal amounts on each of the four anniversaries of the grant date.

The following table presents the Company's time-based and performance-based stock option activity for the current period:

	Time-Based								Performance-Based
	Options Outstanding		Weighted Average Exercise Price (in dollars per share)		Options Exercisable		Weighted Average Exercise Price (in dollars per share)		Options Outstanding		Weighted Average Exercise Price (in dollars per share)		Options Exercisable	Weighted Average Exercise Price (in dollars per share)
Balance, December 31, 2013	1,930,407		$	4.22	1,806,251		$	3.98	289,306		$	8.46	—	$	—
Granted	15,000		8.27		—		—		—		—		—	—
Vested	—		—		50,405		2.89		—		—		—	—
Exercised	(391,389	)	3.10		(391,389	)	3.10		—		—		—	—
Canceled/forfeited	(77,926	)	7.89		(77,926	)	7.89		(28,604	)	8.42		—	—
Balance, September 30, 2014	1,476,092		$	4.36	1,387,341		$	4.14	260,702		$	8.46	—	$	—
Weighted average remaining contractual term at September 30, 2014 (in years)	3.3				2.9				8.0				—

The following table presents the weighted average assumptions used to estimate the fair values of all stock options granted during the nine months ended September 30, 2014:

	Assumptions
Expected term (years)	6.25
Expected volatility	33.83	%
Expected dividends	—	%
Risk-free rate	2.19	%

Restricted Stock Awards

The Company granted 9,944 time-based restricted stock awards to employees during the nine months ended September 30, 2014, which vest in equal amounts on each of the three anniversaries of the grant date. During the nine months ended September 30, 2014, the Company also granted 30,000 time-based restricted stock awards to its Chief Executive Officer and 75,000 time-based restricted stock awards, equally distributed to five of its Directors. These awards will vest in equal amounts on each of the three anniversaries of the grant date.

20

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the Company's time-based and performance-based restricted stock award activity for the current period:

	Time-Based				Performance-Based
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2013	139,680		$	8.59	130,629		$	10.20
Grants	114,944		7.24		—		—
Vests	(56,126	)	8.40		—		—
Forfeitures	(1,714	)	7.80		(4,535	)	8.89
Balance at September 30, 2014	196,784		$	7.87	126,094		$	10.24

Stock-based Compensation Expense

The following table presents the total time-based and performance-based stock-based compensation expense and the related income tax benefit recognized on the Consolidated Statements of Income:

	For the Nine Months Ended September 30,
	2014			2013
Personnel costs	$	440		$	614
Other operating expenses	401			373
Income tax benefit	(322		)	(378		)
Net stock-based compensation expense	$	519		$	609

Additional information on total non-vested stock-based compensation is as follows:	At September 30, 2014
	Stock Options		Restricted Stock Awards
Unrecognized compensation cost related to non-vested awards	$	267	$	1,114
Weighted-average recognition period (in years)	3.0		3.1

For the nine months ended September 30, 2014, the Company did not recognize expense on 135,702 performance-based stock options and 45,233 performance-based restricted stock awards since the attainment of the performance metrics associated with these awards was not probable based on current projections. In accordance with ASC No. 805, Business Combinations, the pending merger with Tiptree is disregarded in the determination of stock-based compensation expense.

Employee Stock Purchase Plan ("ESPP")

The following table presents the information related to the Company's ESPP for the six-month offering period ending on:

	Offering Period ending June 30,
	2014		2013
Common stock issued under the ESPP (in shares)	18,642		26,019
Weighted-average purchase price per share by participant in the ESPP	$	6.04	$	5.83
Total cash proceeds received from the issuance of common shares under the ESPP	$	113	$	152
ESPP compensation costs recognized	$	32	$	46

14. Income Taxes

The following table presents the provision for income taxes for both continuing and discontinued operations:

	For the Nine Months Ended September 30,
	2014			2013
Income taxes - continuing operations	$	4,624		$	3,927
Income (benefit) taxes - discontinued operations	(24		)	2,121
Income taxes	$	4,600		$	6,048

21

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the provision for income taxes from continuing operations:

	For the Nine Months Ended September 30,
	2014			2013
Current	$	(6,186	)	$	5,537
Deferred	10,810			(1,610		)
Income taxes - continuing operations	$	4,624		$	3,927

In 2013, the Company applied for changes in tax accounting methods for certain of its subsidiaries with the Internal Revenue Service ("IRS"), and received approval for those method changes in August 2014. The Company applied the method changes to the 2013 tax returns and the September 30, 2014 tax provision. The application of these method changes is the primary cause of the large, substantially offsetting amounts of current and deferred income taxes for the nine months ended September 30, 2014 disclosed above, and also the primary cause of the $8.7 million in income taxes receivable as of September 30, 2014. In October 2014, the Company received a $6.8 million refund associated with the 2013 federal tax return.

The following table presents a reconciliation of income taxes from continuing operations calculated at the federal statutory rate of 35.0% and the income tax expense attributable to continuing operations for the following periods:

	For the Nine Months Ended September 30,
	2014					2013
	Amount			Percent of Pre-tax Income		Amount			Percent of Pre-tax Income
Income taxes at federal income tax rate	$	5,634		35.00	%	$	4,159		35.00	%
Effect of:
Small life deduction	(414		)	(2.57	)	(388		)	(3.27	)
Non-deductible expenses	68			0.42		61			0.51
Tax exempt interest	(116		)	(0.72	)	(109		)	(0.92	)
State taxes	358			2.22		159			1.34
Prior year tax true up	(528		)	(3.28	)	312			2.63
Non-controlling interest	(586		)	(3.64	)	(304		)	(2.56	)
Other, net	208			1.29		37			0.31
Income taxes - continuing operations	$	4,624		28.72	%	$	3,927		33.04	%

At September 30, 2014, the Company had a net operating loss carry forward of $0.6 million, which is subject to certain limitations under IRC Section 382 and will begin to expire in December 31, 2025. The Company expects to utilize the full amount of the net operating loss carryforward.

The Company has reviewed its uncertain tax positions and management has concluded that there are no additional amounts required to be recorded.

In 2012, the Company was under examination by the IRS for the 2010 and 2009 tax years. In February 2013, the IRS completed its field audit for those tax years and presented its findings.  The Company agreed to those findings and expensed $57.0 thousand in the first quarter of 2013.

The Company's income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statutes of limitations by the IRS for the tax years 2011 through 2013. The years open to examination by state taxing authorities vary by jurisdiction. There are no extensions of the statute of limitations to assess income taxes currently in effect.

22

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

15. Fair Value of Financial Instruments 

The carrying and fair values of financial instruments are as follows:	At
	September 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	2,483	$	2,483	$	21,681	$	21,681
Restricted cash	7,579		7,579		17,293		17,293
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	54,912		54,912		51,435		51,435
Municipal securities	33,996		33,996		24,547		24,547
Corporate securities	67,438		67,438		55,360		55,360
Obligations of foreign governments	1,389		1,389		409		409
Equity securities:
Common stock - publicly traded	52		52		47		47
Preferred stock - publicly traded	5,829		5,829		5,087		5,087
Common stock - non-publicly traded	53		53		51		51
Preferred stock - non-publicly traded	1,013		1,013		1,013		1,013
Notes receivable	19,421		19,421		11,920		11,920
Accounts and premiums receivable, net	31,444		31,444		18,702		18,702
Other receivables	32,048		32,048		33,409		33,409
Short-term investments	871		871		871		871
Total financial assets	$	258,528	$	258,528	$	241,825	$	241,825
Financial liabilities:
Notes payable	$	10,173	$	10,173	$	3,273	$	3,273
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	2,205		2,205		2,930		2,930
Total financial liabilities	$	47,378	$	47,378	$	41,203	$	41,203

The Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy are as follows:

	At September 30, 2014
			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	$	54,912	$	—	$	54,912	$	—
Municipal securities	33,996		—		33,996		—
Corporate securities	67,438		—		67,438		—
Obligations of foreign governments	1,389		—		1,389		—
Equity securities:
Common stock - publicly traded	52		52		—		—
Preferred stock - publicly traded	5,829		5,829		—		—
Common stock - non-publicly traded	53		—		—		53
Preferred stock - non-publicly traded	1,013		—		—		1,013
Short-term investments	871		871		—		—
Total assets	$	165,553	$	6,752	$	157,735	$	1,066
Financial Liabilities:
Interest rate swap	$	2,205	$	—	$	2,205	$	—

23

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At December 31, 2013
			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	$	51,435	$	—	$	51,435	$	—
Municipal securities	24,547		—		24,547		—
Corporate securities	55,360		—		55,360		—
Obligations of foreign governments	409		—		409		—
Equity securities:
Common stock - publicly traded	47		47		—		—
Preferred stock - publicly traded	5,087		5,087		—		—
Common stock - non-publicly traded	51		—		—		51
Preferred stock - non-publicly traded	1,013		—		—		1,013
Short-term investments	871		871		—		—
Total Assets	$	138,820	$	6,005	$	131,751	$	1,064
Financial Liabilities:
Interest rate swap	$	2,930	$	—	$	2,930	$	—

There were no transfers between Level 1, Level 2 or Level 3 during the nine months ended September 30, 2014. The Company's use of Level 3 unobservable inputs included six individual securities that accounted for 0.6% of total investments at September 30, 2014. The Company valued one of the Level 3 equity securities at $1.0 million by taking into account the strength of the issuer's parent company guaranteeing the dividend of the issuer, and another Level 3 equity security at $13.0 thousand, by estimating the total value of the Class-A shares outstanding by the issuer and a review of the company's audited financial statements. The remaining four Level 3 securities, with a combined fair value of $53.0 thousand were valued based on information obtained from a third-party pricing service. At December 31, 2013, the Company had six individual securities valued under Level 3 that accounted for 0.8% of total investments.

The following table presents the changes in Level 3 assets measured at fair value:	For the Nine Months Ended September 30,
	2014		2013
Beginning balance, January 1,	$	1,064	$	1,123
Total investment gains or losses (realized/unrealized):
Included in other comprehensive (loss)	2		(32		)
Transfers (out of) Level 3	—		(27		)
Ending balance, September 30,	$	1,066	$	1,064

16. Statutory Reporting and Insurance Company Subsidiaries Dividend Restrictions

The Company's insurance company subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance department of the applicable state of domicile. The Company eliminated all dividends from its subsidiaries in the Consolidated Financial Statements. The following table presents the dividends paid to the Company by its insurance company subsidiaries for the following periods:

	For the Nine Months Ended September 30,		For the Twelve Months Ended December 31,
	2014		2013
Ordinary dividends	$	—	$	2,383
Extraordinary dividends	—		—
Total dividends	$	—	$	2,383

The following table presents the combined statutory capital and surplus of the Company's insurance company subsidiaries, the required minimum statutory capital and surplus, as required by the laws of the states in which they are domiciled, and the combined amount available for ordinary dividends of the Company's insurance company subsidiaries for the following periods:

24

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At
	September 30, 2014		December 31, 2013
Combined statutory capital and surplus of the Company's insurance company subsidiaries	$	81,292	$	69,269
Required minimum statutory capital and surplus	$	17,200	$	17,200
Amount available for ordinary dividends of the Company's insurance company subsidiaries	$	4,244	$	3,989

At September 30, 2014, the maximum amount of dividends that our regulated insurance company subsidiaries could pay under applicable laws and regulations without regulatory approval was $4.2 million. The Company may seek regulatory approval to pay dividends in excess of this permitted amount, but there can be no assurance that the Company would receive regulatory approval if sought.

Under the NAIC's Risk-Based Capital Act of 1995, a company's Risk-Based Capital ("RBC") is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The Company's insurance company subsidiaries' RBC levels, as calculated in accordance with the NAIC's RBC instructions, exceeded all RBC thresholds as of September 30, 2014 and December 31, 2013.

17. Commitments and Contingencies

Commitments

The Company, in the ordinary course of normal business, may enter from time to time into certain contractual obligations or commitments. The Company's commitments as of September 30, 2014 have not materially changed from those disclosed in the note "Commitments and Contingencies," in the Company's 2013 Form 10-K.

Contingencies

The Company is a party to claims and litigation in the normal course of its operations. Management believes that the ultimate outcome of these matters in existence at September 30, 2014 are reserved against, covered by insurance or would not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

Litigation Relating to the Proposed Merger

On August 18, 2014, a purported class action, entitled Stein v. Fortegra Financial Corporation, et al., Case No. 16-2014-CA-005825-XXXX-MA, was filed against the Company, the members of its Board of Directors, Parent, Holdings and Merger Sub in the Circuit Court of the Fourth Judicial Circuit in and for Duval County, State of Florida (the "Florida Court"). On September 18, 2014, an amended complaint was filed against the same parties. The amended complaint purports to be brought on behalf of all the Company’s stockholders (excluding the defendants and their affiliates). The amended complaint alleges that the Merger Consideration is inadequate, that the members of the Board of Directors breached their fiduciary obligations to the Company’s stockholders by approving the Merger Agreement and related agreements, engaging in an unfair sales process and failing to make adequate disclosures to the Company's stockholders, and that the other named defendants aided and abetted the breach of those duties. The amended complaint seeks various forms of relief, including injunctive relief that would, if granted, prevent or delay the completion of the Merger and an award of attorneys’ fees and expenses.

On September 15, 2014, a purported class action, entitled Hickey v. Fortegra Financial Corporation, et al., Case No. 16-2014-CA-006485-XXXX-MA, was filed against the Company in the Florida Court containing substantially the same allegations as the Stein case. On October 24, 2014, the Florida Court consolidated the Stein and Hickey actions.

On October 13, 2014, the Company and attorneys for both Stein and Hickey executed a memorandum of understanding that provides for a settlement. The terms of the memorandum of understanding did not require any change to the merger agreement, but did require the Company to provide stockholders with supplemental disclosures about the merger, which the Company completed. Before the settlement is finalized it must be approved by the Florida Court.

Accordingly, in management's opinion, based on information available at this time, the ultimate resolution of this litigation will not be materially adverse to the financial position, results of operations or cash flows of the Company.

25

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Other Litigation

The Company is currently a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed on February 2, 2006, in the Pike Circuit Court, in the Commonwealth of Kentucky.  A class was certified on June 25, 2010.  At issue is the duration or term of coverage under certain policies.  The action alleges violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud.  The action seeks compensatory and punitive damages, attorney fees and interest.  The parties are currently involved in the merits discovery phase and discovery disputes have arisen.  Plaintiffs filed a Motion for Sanctions on April 5, 2012 in connection with the Company's efforts to locate and gather certificates and other documents from the Company's agents.  While the court did not award sanctions, it did order the Company to subpoena certain records from its agents.  In an effort to prevent the trial court from enforcing the order, the Company filed a Writ of Prohibition, which the Kentucky Court of Appeals denied on August 31, 2012.  In response, the Company filed a motion for discretionary review of the Writ of Prohibition.  The Company also filed a direct appeal of the same order, on the grounds that the order could be construed as a finding of contempt on the part of the Company.  The Court of Appeals dismissed the direct appeal on September 13, 2013, which prompted the Company to file a motion for discretionary review of the direct appeal.  The Kentucky Supreme Court denied the Writ of Prohibition on November 21, 2013, and subsequently denied the direct appeal in April 2014.  No hearings are currently scheduled and no trial date has been set.

The Company considers such litigation customary in its lines of business.  In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position, results of operations or cash flows of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. The Company may record loss contingencies as developments warrant, although such amounts are not reasonably estimable at this time.

18. Related Party Transactions

In conjunction with the December 31, 2012 acquisition of ProtectCELL, the Company assumed an office space lease between ProtectCELL and 39500 High Pointe, LLC ("High Pointe"). The ownership of High Pointe includes three members who were the founding members of ProtectCELL and are now employees of the Company. The table below presents the lease payments made to High Pointe.

At December 31, 2012, ProtectCELL held a $6.1 million note receivable carrying an interest rate of 8.00% from High Pointe, which was fully secured by a mortgage on the office building owned by High Pointe (see the lease described above). On March 15, 2013, ProtectCELL received $6.1 million from High Pointe, representing the full payoff of the outstanding balance of the note receivable. The Company only recorded interest income on this note receivable during the three months ended March 31, 2013.

An executive officer of ProtectCELL owned multiple wireless retail locations, which sold ProtectCELL protection plans to wireless retail customers. The executive sold these wireless retail locations in February 2014. The table below presents the income recorded on and the commissions paid for this related party agreement through the sale date of the wireless retail locations.

In conjunction with the December 31, 2012 acquisition of 4Warranty, the Company assumed an office space lease between 4Warranty and Source International Incorporated ("Source"), effective January 1, 2013. The ownership of Source is comprised of two individuals who had consulting relationships with the Company. The lease with Source, which expired on December 31, 2013, was not renewed since the operations of 4Warranty were moved to the Company's main office. The table below presents the lease payments made to Source during the nine months ended September 30, 2013.

In December 2011, the Company entered into a marketing and referral agreement (the "Marketing Agreement") with a company in which a member serving on the Company's Board of Directors also serves on the board of the company providing the marketing services (the "Marketer"). The Marketing Agreement has a five year term and requires the Company to pay the Marketer a per account fee per month based on the number of enrolled customers the Marketer obtains for the Company. In conjunction with the Marketing Agreement, during April 2013, the Company entered into an agreement under which the Marketer began selling insurance-related products of the Company to the Marketer's customers. The Company recorded income and paid claims, associated with the sale of the Company's insurance-related products, which are reflected in the table below.

26

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the amounts recorded on the Company's Consolidated Statements of Income resulting from related party transactions:

	For the Nine Months Ended September 30,
	2014		2013
Income recorded by ProtectCELL for protection plans sold	$	307	$	1,639
Income recorded for the sale of the Company's insurance-related products under the Marketing Agreement	972		592
Total related party income recorded by the Company	$	1,279	$	2,231
Interest income recorded on the High Pointe note receivable	$	—	$	21
Lease expense paid to High Pointe	$	310	$	300
Lease expense paid to Source	—		87
Total related party lease expense	$	310	$	387
Commissions paid by ProtectCELL for protection plans sold	$	122	$	651
Claims paid on the Company's insurance-related products under the Marketing Agreement	$	67	$	26
Transportation service expenses paid to the Marketer	$	126	$	—
The following table presents the amounts recorded on the Company's Consolidated Balance Sheets from related party transactions:
	At
	September 30, 2014		December 31, 2013
Accounts receivable from related parties	$	—	$	113

27

EX-99.2

Exhibit 99.2

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors

Fortegra Financial Corporation

Jacksonville, Florida

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Fortegra Financial Corporation and its subsidiaries which comprise the consolidated balance sheet as of December 31, 2013, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fortegra Financial Corporation and its subsidiaries as of December 31, 2013, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ McGladrey LLP

Jacksonville, Florida

March 17, 2015

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Fortegra Financial Corporation

We have audited the consolidated balance sheet as of December 31, 2012 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years ended December 31, 2012 and 2011 of Fortegra Financial Corporation (“the Company”). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fortegra Financial Corporation as of December 31, 2012 and the consolidated results of its operations and cash flows for the years ended December 31, 2012 and 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ Johnson Lambert LLP

Jacksonville, Florida

March 29, 2013 (except for Note 9, as to which is dated March 14, 2014)

2

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(All Amounts in Thousands, Except Share and Per Share Amounts)

	At December 31,
	2013			2012
Assets:
Investments:
Fixed maturity securities available-for-sale, at fair value (amortized cost of $133,288 at December 31, 2013 and $107,095 at December 31, 2012)	$	131,751		$	110,641
Equity securities available-for-sale, at fair value (cost of $7,081 at December 31, 2013 and $6,082 at December 31, 2012)	6,198			6,220
Short-term investments	871			1,222
Total investments	138,820			118,083
Cash and cash equivalents	21,681			15,209
Restricted cash	17,293			31,142
Accrued investment income	1,175			1,235
Notes receivable, net	11,920			11,290
Accounts and premiums receivable, net	18,702			27,302
Other receivables	33,409			13,393
Reinsurance receivables	215,084			203,988
Deferred acquisition costs	78,042			59,320
Property and equipment, net	14,332			17,900
Goodwill	73,701			127,679
Other intangible assets, net	49,173			70,310
Income taxes receivable	—			2,919
Other assets	6,307			7,667
Assets of discontinued operations	791			—
Total assets	$	680,430		$	707,437
Liabilities:
Unpaid claims	$	34,732		$	33,007
Unearned premiums	256,380			235,900
Policyholder account balances	23,486			26,023
Accrued expenses, accounts payable and other liabilities	53,035			58,660
Income taxes payable	2,842			—
Deferred revenue	76,927			55,043
Notes payable	3,273			89,438
Preferred trust securities	35,000			35,000
Deferred income taxes, net	19,659			28,651
Liabilities of discontinued operations	8,603			—
Total liabilities	513,937			561,722
Commitments and Contingencies (Note 25)
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued	—			—
Common stock, par value $0.01; 150,000,000 shares authorized; 20,912,853 and 20,710,370 shares issued at December 31, 2013 and 2012, respectively, including shares in treasury	209			207
Treasury stock, at cost; 1,224,182 shares and 1,024,212 shares at December 31, 2013 and 2012, respectively	(8,014		)	(6,651		)
Additional paid-in capital	99,398			97,641
Accumulated other comprehensive loss, net of tax	(3,665		)	(631		)
Retained earnings	72,532			49,817
Stockholders' equity before non-controlling interests	160,460			140,383
Non-controlling interests	6,033			5,332
Total stockholders' equity	166,493			145,715
Total liabilities and stockholders' equity	$	680,430		$	707,437

See accompanying Notes to Consolidated Financial Statements.

3

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(All Amounts in Thousands, Except Share and Per Share Amounts)

	For the Years Ended December 31,
	2013			2012		2011
Revenues:
Service and administrative fees	$	172,427		$	90,550	$	94,464
Ceding commissions	32,824			34,825		29,495
Net investment income	3,050			3,067		3,368
Net realized investment gains	2,043			3		4,193
Net earned premium	136,787			127,625		115,503
Other income	736			269		170
Total revenues	347,867			256,339		247,193
Expenses:
Net losses and loss adjustment expenses	41,567			40,219		37,949
Member benefit claims	46,019			4,642		4,409
Commissions	154,606			128,741		126,918
Personnel costs	39,487			28,475		26,021
Other operating expenses	35,117			24,233		23,739
Depreciation and amortization	4,858			3,275		2,662
Amortization of intangibles	5,527			2,742		2,819
Interest expense	3,621			4,334		4,690
(Gain) Loss on sale of subsidiary	(402		)	—		477
Total expenses	330,400			236,661		229,684
Income from continuing operations before income taxes	17,467			19,678		17,509
Income taxes - continuing operations	5,660			6,716		5,947
Income from continuing operations before non-controlling interests	11,807			12,962		11,562
Discontinued operations:
Income from discontinued operations - net of tax	3,546			2,275		1,777
Gain on sale of discontinued operations - net of tax	8,844			—		—
Discontinued operations - net of tax	12,390			2,275		1,777
Net income before non-controlling interests	24,197			15,237		13,339
Less: net income (loss) attributable to non-controlling interests	1,482			72		(170		)
Net income attributable to Fortegra Financial Corporation	$	22,715		$	15,165	$	13,509
Earnings per share - Basic:
Net income from continuing operations - net of tax	$	0.53		$	0.65	$	0.57
Discontinued operations - net of tax	0.64			0.12		0.09
Net income attributable to Fortegra Financial Corporation	$	1.17		$	0.77	$	0.66
Earnings per share - Diluted:
Net income from continuing operations - net of tax	$	0.50		$	0.63	$	0.55
Discontinued operations - net of tax	0.61			0.11		0.09
Net income attributable to Fortegra Financial Corporation	$	1.11		$	0.74	$	0.64
Weighted average common shares outstanding:
Basic	19,477,802			19,655,492		20,352,027
Diluted	20,482,652			20,600,362		21,265,801

See accompanying Notes to Consolidated Financial Statements.

4

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(All Amounts in Thousands)

	For the Years Ended December 31,
	2013			2012			2011
Net income attributable to Fortegra Financial Corporation	$	22,715		$	15,165		$	13,509
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding (losses) gains arising during the period	(4,061		)	2,473			1,568
Related tax benefit (expense)	1,421			(865		)	(550		)
Reclassification of (gains) included in net income	(2,043		)	(3		)	(4,193		)
Related tax expense	715			1			1,468
Unrealized (losses) gains on available-for-sale securities, net of tax	(3,968		)	1,606			(1,707		)
Interest rate swap:
Unrealized gain (loss) on interest rate swap	277			(1,007		)	(3,601		)
Related tax (expense) benefit	(97		)	352			1,260
Reclassification of losses included in net income	1,132			270			—
Related tax benefit	(396		)	(94		)	—
Unrealized gain (loss) on interest rate swap, net of tax	916			(479		)	(2,341		)
Other comprehensive (loss) income before non-controlling interests, net of tax	(3,052		)	1,127			(4,048		)
Less: comprehensive (loss) income attributable to non-controlling interests	(18		)	4			(1		)
Other comprehensive (loss) income	(3,034		)	1,123			(4,047		)
Comprehensive income attributable to Fortegra Financial Corporation	$	19,681		$	16,288		$	9,462

See accompanying Notes to Consolidated Financial Statements.

5

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(All Amounts in Thousands, Except Share Amounts)

	Common Stock			Treasury Stock
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Non-controlling Interests			Total Stockholders' Equity
Balance, December 31, 2010	20,256,735	$	203	(44,578	)	$	(176	)	$	95,556		$	2,293		$	21,143	$	682		#VALUE!
Net income (loss)	—	—		—		—			—			—			13,509		(170		)	13,339
Other comprehensive loss	—	—		—		—			—			(4,047		)	—		(1		)	(4,048		)
Stock-based compensation	—	—		—		—			763			—			—		—			763
Shares issued for the Employee Stock Purchase Plan	10,167	—		—		—			58			—			—		—			58
Treasury stock purchased	—	—		(471,554	)	(2,552		)	—			—			—		—			(2,552		)
Options exercised, net of forfeitures	294,426	3		—		—			648			—			—		—			651
Initial public offering costs	—	—		—		—			(826		)	—			—		—			(826		)
Balance, December 31, 2011	20,561,328	$	206	(516,132	)	$	(2,728	)	$	96,199		$	(1,754	)	$	34,652	$	511		$	127,086
Net income	—	—		—		—			—			—			15,165		72			15,237
Other comprehensive income	—	—		—		—			—			1,123			—		4			1,127
Stock-based compensation	87,011	1		—		—			1,043			—			—		—			1,044
Direct stock awards to employees	6,020	—		—		—			49			—			—					49
Shares issued for the Employee Stock Purchase Plan	53,511	—		—		—			330											330
Treasury stock purchased	—	—		(508,080	)	(3,923		)	—			—			—		—			(3,923		)
Options exercised, net of forfeitures	2,500	—		—		—			20			—			—		—			20
Non-controlling interest attributable to ProtectCELL acquisition	—	—		—		—			—			—			—		4,745			4,745
Balance, December 31, 2012	20,710,370	$	207	(1,024,212	)	$	(6,651	)	$	97,641		$	(631	)	$	49,817	$	5,332		$	145,715
Net income	—	—		—		—			—			—			22,715		1,482			24,197
Other comprehensive loss	—	—		—		—			—			(3,034		)	—		(18		)	(3,052		)
Dividends paid to non-controlling interests	—	—		—		—			—			—			—		(43		)	(43		)
Distributions to non-controlling interest partners	—	—		—		—			—			—			—		(720		)	(720		)
Stock-based compensation	130,784	1		—		—			1,329			—			—		—			1,330
Direct stock awards to employees	4,113	—		—		—			31			—			—		—			31
Shares issued for the Employee Stock Purchase Plan	61,336	1		—		—			357			—			—		—			358
Treasury stock purchased, net of issuances	—	—		(199,970	)	(1,363		)	(9		)	—			—		—			(1,372		)
Options exercised, net of forfeitures	6,250	—		—		—			49			—			—		—			49
Balance, December 31, 2013	20,912,853	$	209	(1,224,182	)	$	(8,014	)	$	99,398		$	(3,665	)	$	72,532	$	6,033		$	166,493

See accompanying Notes to Consolidated Financial Statements.

6

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All Amounts in Thousands)

	For the Years Ended December 31,
	2013			2012			2011
Operating Activities
Net income	$	22,715		$	15,165		$	13,509
Adjustments to reconcile net income to net cash flows provided by operating activities:
Change in deferred acquisition costs	(18,722		)	(3,692		)	3,908
Depreciation and amortization	12,930			8,886			8,029
Deferred income tax (benefit) expense - continuing operations	(2,318		)	2,444			1,150
Deferred income tax expense - discontinued operations	428			1,808			571
Net realized investment gains	(2,043		)	(3		)	(4,193		)
Gain on sale of discontinued operations, net of tax	(8,844		)	—			—
(Gain) loss on sale of subsidiary	(402		)	—			477
Stock-based compensation expense	1,330			1,044			763
Direct stock awards to employees	31			49			—
Amortization of premiums and accretion of discounts on investments	1,496			1,283			609
Non-controlling interests	1,482			72			(170		)
Change in allowance for doubtful accounts	(46		)	(90		)	(31		)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:
Accrued investment income	78			(306		)	(16		)
Accounts and premiums receivable, net	(8,338		)	(4,933		)	(898		)
Other receivables	(19,997		)	(4,139		)	(1,769		)
Reinsurance receivables	(10,896		)	(9,248		)	(5,181		)
Income taxes receivable	2,874			(3,628		)	818
Other assets	1,203			865			(389		)
Unpaid claims	1,525			248			(315		)
Unearned premiums	20,480			7,971			14,373
Policyholder account balances	(2,537		)	(2,017		)	(45		)
Accrued expenses, accounts payable and other liabilities	22,758			20,190			(14,909		)
Income taxes payable	2,802			(1,344		)	1,344
Deferred revenue	22,469			1,363			(6,469		)
Net cash flows provided by operating activities	40,458			31,988			11,166
Investing activities
Proceeds from maturities, calls and prepayments of available-for-sale investments	10,297			11,138			9,691
Proceeds from sales of available-for-sale investments	54,663			8,364			62,300
Net change in short-term investments	351			100			100
Purchases of available-for-sale investments	(90,849		)	(40,445		)	(62,147		)
Purchases of property and equipment	(3,268		)	(5,830		)	(6,280		)
Net paid for acquisitions of subsidiaries, net of cash received	(3,112		)	(21,820		)	(49,873		)
Sale of subsidiaries, net of cash received (paid)	83,975			—			(153		)
Net issuance of notes receivable	(6,765		)	(1,346		)	(975		)
Net proceeds from related party note receivable	6,135			—			—
Change in restricted cash, net of restricted cash received (paid) from acquisitions and divestitures	2,683			(9,452		)	1,542
Net cash flows provided by (used in) investing activities	54,110			(59,291		)	(45,795		)
Financing activities
Payments on notes payable	(101,938		)	(130,450		)	(74,263		)
Proceeds from notes payable	15,773			146,888			110,550
Capitalized closing costs for notes payable	(202		)	(1,692		)	—
Payments for initial public offering costs	—			—			(826		)
Payments on redeemable preferred stock	—			—			(11,040		)
Net proceeds from exercise of stock options	49			20			607
Excess tax benefits from stock-based compensation	—			—			45
Purchase of treasury stock	(1,372		)	(3,923		)	(2,552		)
Net proceeds received from stock issued in the Employee Stock Purchase Plan	357			330			58
Distributions to non-controlling interest partners	(720		)	—			—
Dividends paid to non-controlling interests	(43		)	—			—
Net cash flows (used in) provided by financing activities	(88,096		)	11,173			22,579
Net increase (decrease) in cash and cash equivalents	6,472			(16,130		)	(12,050		)
Cash and cash equivalents, beginning of period	15,209			31,339			43,389
Cash and cash equivalents, end of period	$	21,681		$	15,209		$	31,339
Supplemental disclosures of cash payments for:
Interest	$	5,493		$	5,292		$	6,184
Income taxes	3,877			8,684			3,451
Non-cash investing activities
Non-cash consideration received from the sale of subsidiary	$	—		$	—		$	1,143

See accompanying Notes to Consolidated Financial Statements.

7

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Nature of Operations

Fortegra Financial Corporation (references in this Exhibit 99.2 to "Fortegra Financial," "Fortegra," "we," "us," "the Company" or similar terms refer to Fortegra Financial Corporation and its subsidiaries), traded on the New York Stock Exchange under the symbol: FRF, is an insurance services company headquartered in Jacksonville, Florida. Fortegra offers a wide array of revenue enhancing products, including payment protection products, motor club memberships, service contracts, device and warranty services, and administration services, to our business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies. In 2008, the Company changed its name from Life of the South Corporation to Fortegra Financial Corporation. The Company was incorporated in 1981 in the State of Georgia and re-incorporated in the State of Delaware in 2010. Most of the Company's business is generated through networks of small to mid-sized community and regional banks, small loan companies, independent wireless retailers and automobile dealerships. The Company's subsidiaries (100% direct or indirect ownership, unless otherwise noted below) at December 31, 2013, are as follows:

• 4Warranty Corporation ("4Warranty")

• Auto Knight Motor Club, Inc. ("Auto Knight")

• Continental Car Club, Inc. ("Continental")

• CRC Reassurance Company, Ltd. ("CRC") *

• Digital Leash, LLC, d/b/a ProtectCELL ("ProtectCELL"), 62.4% owned

• Insurance Company of the South ("ICOTS") *

• Life of the South Insurance Company ("LOTS") * and its subsidiary, Bankers Life of Louisiana ("Bankers Life") *

• LOTS Intermediate Co. ("LOTS IM")

• LOTS Reassurance Company ("LOTS RE") *

• LOTSolutions, Inc.

• Lyndon Southern Insurance Company ("Lyndon Southern") *

• Pacific Benefits Group Northwest, LLC ("PBG")

• Response Indemnity Company of California ("RICC") *

• South Bay Acceptance Corporation ("South Bay")

• South Bay Financial Services, LLC ("SBFS")

• Southern Financial Life Insurance Company ("SFLAC"), 85.0% owned *

• United Motor Club of America, Inc. ("United")

* = Insurance company subsidiary

1. Basis of Presentation

These Consolidated Financial Statements reflect the consolidated financial statements of Fortegra Financial Corporation and its subsidiaries. The accompanying Consolidated Financial Statements of Fortegra have been prepared in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP") promulgated by the Financial Accounting Standards Board ("FASB") and the Accounting Standards Codification ("ASC").

2. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the Consolidated Financial Statements:

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Fortegra Financial Corporation and its majority-owned and controlled subsidiaries. All material intercompany account balances and transactions have been eliminated.

Non-Controlling Interests

The third-party ownership of the common stock of SFLAC and of the ownership interests of ProtectCELL, which is treated as a partnership for income tax purposes, have been reflected as non-controlling interests on the Consolidated Balance Sheets. The following table shows the amount outstanding and the percentage of non-controlling interest by entity:

	At December 31,
	2013				2012				2011
	Amount		Percent		Amount		Percent		Amount		Percent
ProtectCELL	$	5,471	37.6	%	$	4,745	37.6	%	$	—	—	%
SFLAC	562		15.0	%	587		15.0	%	511		15.0	%
Total non-controlling interests	$	6,033			$	5,332			$	511

8

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Income (loss) attributable to these non-controlling interests has been reflected on the Consolidated Statements of Income as net income (loss) attributable to non-controlling interests and on the Consolidated Statements of Comprehensive Income as comprehensive income (loss) attributable to non-controlling interests.

Certain changes to the Consolidated Balance Sheet amounts for December 31, 2012 have been made in accordance with accounting for business combinations, to reflect the retrospective final valuation adjustments made to the fair values of acquired net assets and the non-controlling interests of ProtectCELL. Please see the Note, "Business Acquisitions," for more information on the final valuation adjustments.

Reportable Segment

The Company reports operating results and financial data in one operating and one reportable segment, Protection Products and Services. Prior to the fourth quarter of 2013, the Company operated in three business segments: (i) Payment Protection, (ii) Business Process Outsourcing and (iii) Brokerage. In connection with the Company's decision to dispose of Bliss and Glennon, Inc. ("Bliss and Glennon") and eReinsure.com, Inc. ("eReinsure") in the fourth quarter of 2013, the Company realigned its reporting structure, to manage its business as a single profit center. Accordingly, we now have one reportable segment. This change is consistent with the Chief Operating Decision Maker's approach to managing the business and related resources. The Company has determined that it's Chief Executive Officer is the Chief Operating Decision Maker. The financial results of the Company's single segment are equal to the net income from continuing operations reported in the Consolidated Statements of Income for all periods presented.

Discontinued Operations

The results of operations of a business of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if: 1) the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and 2) the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. The Company presents the operations of business(es) that meet the criteria for reporting as discontinued operations, and retrospectively reclassifies operating results for all prior periods presented.

On December 31, 2013, the Company completed the sale of its 100% ownership of Bliss and Glennon and eReinsure, and recognized a gain related to the sale of these businesses in the line "Gain on sale of discontinued operations - net of tax" in the Consolidated Statements of Income for the year ended December 31, 2013. The operating results of these businesses are reported in the line "Income from discontinued operations - net of tax" in the Consolidated Statements of Income for all periods presented. In accordance with accounting guidance, the Company has elected to not separately disclose the cash flows related to the Bliss and Glennon and eReinsure discontinued operations.

In addition, certain assets and liabilities associated with the disposition of Bliss and Glennon and eReinsure that are still subject to final settlement have been reclassified into the line items "Assets of discontinued operations" and "Liabilities of discontinued operations," in the Consolidated Balance Sheet at December 31, 2013. See the Note, "Divestitures," for more information on discontinued operations.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and other items of comprehensive income. These other items are generally comprised of unrealized gains and losses on investment securities classified as available-for-sale and unrealized gains and losses on the interest rate swap, net of the related tax effects.

Use of Estimates

Preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications and Revision of Previously Issued Consolidated Financial Statements

Certain items in prior consolidated financial statements have been reclassified to conform to the current presentation, which had no impact on net income, comprehensive income or loss, net cash provided by operating activities or stockholders' equity.

Change in Accounting Estimate - Unearned Premium Reserves

Prior to September 30, 2012, the Company's method of estimating unearned premium reserves in relation to the loss patterns and the related recognition of income for certain types of credit property and vendor single interest payment protection products was based on the pro-rata method.  The use of the pro-rata method was based on the best information available at the time the Company's financial statements were prepared.

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FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

During 2011 and 2012, the Company had increased the volume of business related to these product types, thereby increasing the volume of policy and claims data specific to those product types. During the three months ended September 30, 2012, the Company determined it had accumulated a sufficient volume of policy and claims data to be able to perform an actuarial analysis in order to determine the preferable estimation approach. As a result of the analysis of the additional data, the Company gained better insight into its product loss patterns, resulting in improved judgment and estimation to more accurately calculate the unearned premium reserves and the associated recognition of income. Upon completion of the analysis, Management determined that the Rule of 78's applied on a daily basis provides a more accurate representation of historical loss patterns and the recognition of the related income for these products; as such, the estimation method was changed. The change in approach has been accounted for as a change in accounting estimate that is effected by a change in accounting principle and is justifiable in that it is the preferable approach for income recognition based on the Company's actuarial study.  This change in accounting estimate was applied prospectively. Summarized below is the effect of the change in accounting estimate on the Consolidated Statement of Income for the following period:

	For the Nine Months Ended
	September 30, 2012
Revenues:
Net earned premium	$	1,845
Ceding commissions	2,135
Net increase to total revenues from the change in accounting estimate	3,980
Expenses:
Commissions	2,739
Other operating expenses	(268		)
Net increase to total expenses from the change in accounting estimate	2,471
Net increase to income before income taxes from the change in accounting estimate	1,509
Income taxes	533
Net increase to net income from the change in accounting estimate	$	976
Increase to earnings per share from the change in accounting estimate:
Basic	$	0.05
Diluted	$	0.05

Subsequent Events

The Company reviewed all material events subsequent to December 31, 2013 that occurred up to the date the Company's Consolidated Financial Statements were issued to determine whether any event required recognition or disclosure in these Consolidated Financial Statements and/or disclosure in the notes thereto. For more information, please see the Note, "Subsequent Events."

Fair Value

Fair value is defined in the ASC as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The ASC established a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active

markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted

prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable

for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value

measurement. These unobservable inputs are derived from the Company's internal calculations, estimates and assumptions and

require significant management judgment or estimation.

The Company's policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.

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FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents and restricted cash: The estimated fair value of cash and cash equivalents and restricted cash approximates their carrying value.

Fixed maturity securities: Fair values were obtained from market value quotations provided by an independent pricing service.

Equity securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service. The fair values of non-publicly traded common and preferred stocks were based on prices obtained from an independent pricing service.

Notes receivable: The carrying amounts approximate fair value because the interest rates charged approximate current market rates for similar credit risks. These values are net of allowance for doubtful accounts.

Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets.

Short-term investments:The carrying amounts approximate fair value because of the short maturities of these instruments.

Notes payable and preferred trust securities: The carrying amounts approximate fair value because the applicable interest rates approximate current rates offered to the Company for similar instruments.

Interest rate swap: The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The estimated fair values presented for the Company's investment portfolio are based on prices provided by an independent pricing service and a third party investment manager. The prices provided by these services are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing. The independent pricing service and the third party investment manager provide a single price or quote per security. The Company obtains an understanding of the methods, models and inputs used by the independent pricing service and the third party investment manager, and has controls in place to validate that the amounts provided represent fair values.

Revenue Recognition

The Company's revenues are primarily derived from service and administrative fees, ceding commissions, net investment income and net earned premium.

Service and Administrative Fees

The Company earns service and administrative fees from a variety of activities. Such fees are typically positively correlated with transaction volume and are recognized as revenue as they become both realized and earned.

Service Fees. Service fee revenue is recognized as the services are performed. These services include fulfillment, software development, and claims handling for our customers. Collateral tracking fee income is recognized when the service is performed and billed. Management reviews the financial results under each significant contract on a monthly basis. Any losses that may occur due to a specific contract would be recognized in the period in which the loss is determined probable. During the years ended December 31, 2013, 2012 and 2011, the Company has not incurred a loss with respect to a specific significant service fee contract.

Administrative Fees. Administrative fee revenue includes the administration of credit insurance, debt cancellation programs, motor club programs, and warranty programs. Related administrative fee revenue is recognized consistent with the earnings recognition pattern of the underlying insurance policies, debt cancellation contracts and motor club memberships being administered, using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract. Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available.

Ceding Commissions

Ceding commissions earned under coinsurance agreements are based on contractual formulas that take into account, in part, underwriting performance and investment returns experienced by the assuming companies. As experience changes, adjustments to the ceding commissions are reflected in the period incurred and are based on the claim experience of the related policy.The adjustment is calculated by adding the earned premium and investment income from the assets held in trust for the Company's benefit less earned commissions, incurred claims and the reinsurer's fee for the coverage.

11

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Net Investment Income

The Company earns net investment income from interest and dividends received from the investment portfolio, less portfolio management expenses and interest earned on cash accounts and notes receivable. Investment income also includes any amortization of premiums and accretion of discounts on securities acquired at other than par value.

Net Earned Premium

Net earned premium is from direct and assumed earned premium consisting of revenue generated from the direct sale of payment protection insurance policies by the Company's distributors and premiums written for payment protection insurance policies by another carrier and assumed by the Company. Whether direct or assumed, the premium is earned over the life of the respective policy using methods appropriate to the pattern of losses for the type of business. Methods used include the Rule of 78's, pro rata, and other actuarial methods. Management selects the appropriate method based on available information, and periodically reviews the selections as additional information becomes available. Direct and assumed premiums are offset by premiums ceded to the Company's reinsurers, including producer owned reinsurance companies ("PORCs"), earned in the same manner. The amount ceded is proportional to the amount of risk assumed by the reinsurer.

Net Losses and Loss Adjustment Expenses

Net losses and loss adjustment expenses include actual claims paid and the change in unpaid claim reserves, net of amounts ceded. Incurred claims are impacted by loss frequency, which is the measure of the number of claims per unit of insured exposure, and loss severity, which is based on the average size of claims. Factors affecting loss frequency and loss severity include changes in claims reporting patterns, claims settlement patterns, judicial decisions, legislation, economic conditions, morbidity patterns and the attitudes of claimants towards settlements.

Actual claims paid are claims payments made to the policyholder or beneficiary during the accounting period. The change in unpaid claim reserve is an increase or reduction to the unpaid claim reserve in the accounting period to maintain the unpaid claim reserve at the levels evaluated by our actuaries.

Unpaid claims are reserve estimates that are established in accordance with U.S. GAAP using generally accepted actuarial methods. Credit life and AD&D unpaid claims reserves include claims in the course of settlement and incurred but not reported ("IBNR"). Credit disability unpaid claims reserves also include continuing claim reserves for open disability claims. For all other product lines, unpaid claims reserves are bulk reserves and are entirely IBNR. The Company uses a number of algorithms in establishing its unpaid claims reserves. These algorithms are used to calculate unpaid claims as a function of paid losses, earned premium, target loss ratios, in-force amounts, unearned premium reserves, industry recognized morbidity tables or a combination of these factors.

In arriving at the unpaid claims reserves, the Company conducts an actuarial analysis on a basis gross of reinsurance. The same estimates used as a basis in calculating the gross unpaid claims reserves are then used as the basis for calculating the net unpaid claims reserves, which take into account the impact of reinsurance. Anticipated future loss development patterns form a key assumption underlying these analyses. Our claims are generally reported and settled quickly, resulting in consistent historical loss development patterns. From the anticipated loss development patterns, a variety of actuarial loss projection techniques are employed, such as the chain ladder method, the Bornhuetter-Ferguson method and expected loss ratio method.

The unpaid claims reserves represent the Company's best estimates, generally involving actuarial projections at a given time. Actual claim costs are dependent upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. The Company periodically reviews and updates its methods of making such unpaid claims reserve estimates and establishing the related liabilities based on our actual experience. The Company has not made any changes to its methodologies for determining unpaid claims reserves in the periods presented.

Member Benefit Claims

Member benefit claims represent claims paid on behalf of contract holders directly to third party providers for roadside assistance and for the repair or replacement of covered products.  Claims can also be paid directly to contract holders as a reimbursement payment, provided supporting documentation of loss is submitted to the Company.  Claims are recognized as expense when incurred.

Investments

Both fixed maturity securities and equity securities are classified as available-for-sale and carried at fair value with unrealized gains and losses reflected in other comprehensive income, net of tax. The cost of investments sold and any resulting gain or loss is based on the specific identification method and is recognized as of the trade date.

The Company conducts a quarterly review of all fixed maturity and equity securities with fair values less than their cost basis or amortized cost to determine if the decline in the fair value is other-than-temporary. In estimating other-than-temporary impairment ("OTTI") losses, the Company considers the following factors in assessing OTTI for fixed maturity and equity securities:

• the length of time and the extent to which fair value has been less than cost;

12

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

• the Company's intent and ability to hold the investment for a sufficient period to allow for any anticipated recovery in fair value;

• evidence supporting that the decline is not other-than-temporary. Supporting evidence could include a recovery in the investment's fair value subsequent to the date of the statement of financial position, a return of the investee to profitability and the investee's improved financial performance and future prospects (such as earnings trends or recent dividend payments), or the improvement of financial condition and prospects for the investee's geographic region and industry;

• issuer-specific considerations, including an event of missed or late payment or default, adverse changes in key financial ratios, an increase in nonperforming loans, a decline in earnings substantially below that of the investee's peers, downgrading of the investee's debt rating or suspension of trading in the security;

• the occurrence of a significant economic event that may affect the industry in which an issuer participates, including a change that might adversely impact the investee's ability to achieve profitability in its operations; and

• with regards to commercial mortgage-backed securities ("CMBS"), the Company also evaluates key assumptions such as breakeven constant default rates and credit enhancement levels. The breakeven constant default rate indicates the percentage of the pool's outstanding loans that must default each and every year with 40 percent loss severity (i.e., a recovery rate of 60 percent) for a CMBS class/tranche to experience its first dollar of principal loss. Credit enhancements indicate how much protection, or "cushion," there is to absorb losses in a particular deal before an actual loss would impact a specific security.

When, in the opinion of management, a decline in the estimated fair value of an investment is considered to be other-than-temporary or management intends to sell or is required to sell the investment prior to the recovery of cost, the investment is written down to its estimated fair value with the impairment loss charged to earnings and included in net realized gains (losses) in the Consolidated Statements of Income. OTTI losses on equity securities and losses related to the credit component of the impairment on fixed maturity securities are recorded in the Consolidated Statements of Income as realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. Losses relating to the non-credit component of OTTI losses on fixed maturity securities are recorded in accumulated other comprehensive income (loss) ("AOCI") in the Consolidated Balance Sheets. The determination of OTTI is a subjective process, and different judgments and assumptions could affect the fair value determination and the timing of loss realization.

Short-term Investments

Short-term investments consist of certificates of deposit issued by federally insured depository institutions and normally have maturities of less than one year. At various times throughout the year, the Company may have certificates of deposit with financial institutions that exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit amount of $250,000. The Company did not have any certificates of deposit at December 31, 2013 and 2012, respectively, which exceeded the FDIC insurance limit of $250,000. Management reviews the financial viability of these financial institutions on a periodic basis and does not anticipate nonperformance by the financial institutions.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of highly liquid investments, with original maturities of three months or less when purchased. At various times throughout the year, the Company may have cash deposited with financial institutions that exceed the federally insured deposit amount. Management reviews the financial viability of these financial institutions on a periodic basis and does not anticipate nonperformance by the financial institutions. The Company had approximately $18.9 million and $8.2 million of cash in interest bearing money market accounts at December 31, 2013 and 2012, respectively, which exceeded the FDIC insurance limit of $250,000.

Restricted Cash

Restricted cash primarily represents unremitted premiums received from agents, unremitted claims received from insurers, fiduciary cash for reinsurers and pledged assets for the protection of policy holders in various state jurisdictions. Restricted cash is generally required to be kept in certain bank accounts subject to guidelines, which emphasize capital preservation and liquidity; pursuant to the laws of certain states in which the Company's subsidiaries operate and applicable contractual obligations, such funds are not available to service the Company's debt or for other general corporate purposes. The Company is entitled to retain investment income earned on these fiduciary funds. At December 31, 2013 and 2012, none of the Company's restricted cash was held in interest bearing money market accounts subject to the FDIC insurance limit of $250,000.

Accounts and Premiums Receivable, Net

Accounts and premiums receivable are presented net of the allowance for doubtful accounts and consist primarily of advance commissions and agents' balances in course of collection and billed but not collected policy premiums. For policy premiums that have been billed but not collected, the Company records a receivable on its balance sheet for the full amount of the premium billed, with a corresponding liability, net of its commission, to insurance carriers. The Company earns interest on the premium cash during the period of time between receipt of the funds and payment of these funds to insurance carriers. The Company maintains an allowance for doubtful accounts based on an estimate of uncollectible accounts. The allowance for doubtful accounts totaled $0.5 million and $0.5 million at December 31, 2013 and 2012, respectively,

13

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Other Receivables

Other receivables primarily represent amounts due to the Company from its business partners for retrospective commissions net of allowance and for motor club membership fees.

Reinsurance Receivables

The Company has various reinsurance agreements in place whereby the amount of risk in excess of the Company's retention goals is reinsured by unrelated domestic and foreign insurance companies. The Company remains liable to policyholders in the event that the assuming companies are unable to meet their obligations. Reinsurance receivables include amounts related to paid benefits, unpaid benefits and prepaid reinsurance premiums. Reinsurance receivables are based upon estimates and are reported on the Consolidated Balance Sheets separately as assets, as reinsurance does not relieve the Company of its legal liability to policyholders. The Company is required to pay losses even if a reinsurer fails to meet its obligations under the applicable reinsurance agreement. Management continually monitors the financial condition and agency ratings of the Company's reinsurers and believes that the reinsurance receivables accrued are collectible. Balances recoverable from reinsurers and amounts ceded to reinsurers relating to the unexpired portion of reinsured policies are presented as assets. Experience refunds from reinsurers are recognized based on the underwriting experience of the underlying contracts.

Deferred Acquisition Costs

Deferred Acquisition Costs - Insurance Related

The Company defers certain costs of acquiring new and renewal business. These costs are limited to direct costs that resulted from successful contract transactions and would not have been incurred by the Company's insurance company subsidiaries had the transactions not occurred. These capitalized costs are amortized as the related premium is earned. The following table shows the amortization of deferred acquisition costs for the Company's insurance contracts:

	For the Years Ended December 31,
	2013		2012		2011
Total amortization of deferred acquisition costs - insurance related	$	67,629	$	61,042	$	55,958

The Company evaluates whether deferred acquisition costs-insurance related are recoverable at year-end, and considers investment income in the recoverability analysis. As a result of the Company's evaluations, no write-offs for unrecoverable deferred acquisition costs were recognized during the years ending December 31, 2013, 2012 and 2011.

Deferred Acquisition Costs - Non-insurance Related

The Company defers certain costs of acquiring new and renewal business related to non-insurance subsidiary transactions. These costs are limited to prepaid direct costs, typically commissions and contract transaction fees, that resulted from successful contract transactions and would not have been incurred by the Company had the transactions not occurred. These capitalized costs are amortized as the related service and administrative fees are earned. The following table shows the amortization of deferred acquisition costs for the Company's non-insurance products:

	For the Years Ended December 31,
	2013		2012		2011
Total amortization of deferred acquisition costs - non-insurance related	$	64,009	$	52,539	$	57,358

The Company evaluates whether deferred acquisition costs - non-insurance related are recoverable at year-end. As a result of the Company's evaluations, no write-offs for unrecoverable deferred acquisition costs were recognized during the years ending December 31, 2013, 2012 and 2011.

Inventory

Inventory, which is included in other assets as a result of the 2012 acquisition of ProtectCELL, consists of mobile electronic devices and totaled $2.1 million and $1.4 million at December 31, 2013 and 2012, respectively. All inventoried handsets are recorded at actual cost, using the specific identification method, with the exception of repaired devices received from a single supplier relationship, which are recorded using an average cost method. Damaged or obsolete inventory is adjusted out of inventory on a monthly basis and recorded as an expense for the period. Mobile electronic devices that are either obsolete or beyond economical repair are used for parts in refurbishing other devices, or disposed of.  Devices that are refurbished are recorded into inventory at their repair costs.

Property and Equipment

Property and equipment is carried at cost, net of accumulated depreciation and amortization. Gains and losses on sales and disposals of property and equipment are based on the net book value of the related asset at the disposal date using the specific identification method with the corresponding gain or loss recorded to operations when incurred. Maintenance and repairs, which do not materially extend asset useful life and minor replacements, are charged to earnings when incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of the respective assets with three years for computers and five years for furniture,

14

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

fixtures and equipment. Leasehold improvements are depreciated over the remaining life of the lease.

Leases

The Company leases certain equipment under a single capital lease. The assets and liabilities under the capital lease are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets under the capital lease are depreciated over the lesser of the remaining life of the lease or their estimated productive lives.

The Company also leases certain office space and equipment under operating leases. The Company evaluates its operating leases for the impact of rent escalation clauses, renewal options, lease incentives and rent abatements. Rent escalation clauses, renewal options and lease incentives are considered in determining total rent expense to be recognized during the term of the lease, which begins on the date the Company takes control of the leased space. Rent expense related to lease agreements that contain escalation clauses are recorded on a straight-line basis. Renewal options are considered by evaluating the overall term of the lease. In the event that the Company terminates a lease prior to the expiration, the agreed upon lease termination penalty is charged to expense with a corresponding liability recorded on the Consolidated Balance Sheets. The liability is adjusted for changes, if any, resulting from revisions to the termination amount after the cease-use date.

Internally Developed Software

The Company capitalizes internally developed software costs on a project-by-project basis. Software development costs are carried at unamortized cost and are amortized using the straight-line method over the estimated useful life of the software, typically five years. Amortization begins when the software is ready for its intended use.

Business Combinations and Purchase Price Adjustments

Business Combinations

Business combinations are accounted for using the purchase method with the related net assets and results of operations being included in the Company’s Consolidated Financial Statements as of the respective acquisition date(s).

The assets acquired may consist of a book of business, management contracts, customer relationships, non-compete agreements, trade name, and the excess of purchase price over the fair value of identifiable net assets acquired, or goodwill (see Summary of Significant Accounting Policies, "Goodwill" for more information ). The determination of estimated useful lives and the allocation of the purchase price to the intangible assets requires significant judgment and affects the amount of future amortization and possible impairment charges.

In certain instances, the Company may acquire less than 100% ownership of an entity, resulting in the recording of a non-controlling interest. The non-controlling interest is initially established at a preliminary estimate of fair value, which may be adjusted during the measurement period based upon the results of a valuation study applicable to the business combination. See "Purchase Price Adjustments" below for more information on measurement period adjustments.

Purchase Price Adjustments

The values of certain assets and liabilities acquired in acquisitions are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, fixed assets, deferred taxes and deferred revenue. The valuations will be finalized within one year of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill. A change to the acquisition date value of the identifiable net assets during the measurement period (up to one year from the acquisition date) affects the amount of the purchase price allocated to goodwill. Changes to the purchase price allocation are adjusted retrospectively in the Consolidated Financial Statements.

Goodwill

Goodwill represents the excess cost of an acquisition over the fair value of the net assets acquired in a business combination, and is carried as an asset on the Consolidated Balance Sheets. Goodwill is not amortized, but is reviewed for impairment annually in the fourth quarter, or more frequently if certain indicators arise.

The Company's goodwill impairment analysis typically involves an assessment of qualitative factors to determine whether it is more likely than not that fair value of our reporting unit is less than the recorded book value. If it is more likely than not, management must perform a quantitative test to determine fair value. If that fair value is less than the book value of the reporting unit, an impairment charge is recorded equal to the excess of the carrying amount of goodwill over its implied fair value. At its discretion, management may opt to bypass the qualitative analysis and perform the quantitative test.

15

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The goodwill impairment review is highly judgmental and may involve the use of significant estimates and assumptions impacting the amount of any impairment charge recorded. The estimates and assumptions may have a significant impact on the amount of any impairment charge recorded.

Because the Company changed to one reporting segment in 2013, management bypassed the qualitative analysis, and determined fair value using market based methods including the use of market capitalization plus a control premium. Management assessed goodwill as of December 31, 2013 and 2012, respectively.

Other Intangible Assets

The Company has acquired significant other intangible assets through business acquisitions. The Company's other intangible assets consist indefinite-lived trademarks and licenses, and of finite-lived intangibles, including customer related and contract based assets representing primarily client lists and non-compete arrangements and acquired software. Finite-lived intangible assets are amortized over periods ranging from 0.3 years to 15 years. Certain trademarks are not amortized since these assets have been determined to have indefinite useful lives. The costs to periodically renew other intangible assets are expensed as incurred.

Indefinite-lived intangible assets are tested for impairment at least annually, or whenever events or circumstances indicate that their carrying amount may not be recoverable using an analysis of expected future cash flows. Finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted cash flows expected to be generated by the assets.  If the sum of the expected future undiscounted cash flows is less than the carrying amount, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles.

Management assessed other intangible assets as of December 31, 2013, 2012 and 2011 and determined that no impairment existed as of those dates.

Unpaid Claims

Unpaid claims include estimates for losses reported prior to the close of the accounting period and other estimates, including amounts for incurred but not reported claims. These liabilities are continuously reviewed and updated by management. Management believes that such liabilities are adequate to cover the estimated cost of the related claims. When management determines that changes in estimates are required, such changes are included in current operations.

The liability for unpaid claims includes estimates of the ultimate cost of known claims plus supplemental reserves calculated based upon loss projections utilizing certain actuarial assumptions and historical and industry data. In establishing its liability for unpaid claims, the Company utilizes the findings of actuaries.

Considerable uncertainty and variability are inherent in such estimates, and accordingly, the subsequent development of these reserves may not conform to the assumptions inherent in the determination. Management believes that the amounts recorded as the liability for policy and claim liabilities represent its best estimate of such amounts. However, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Accordingly, such ultimate amounts could be significantly in excess of or less than the amounts indicated in the Consolidated Financial Statements. As adjustments to these estimates become necessary, such adjustments are reflected in the Consolidated Statements of Income.

Unearned Premiums

Premiums written are earned over the life of the respective policy using the Rule of 78's, pro rata, or other actuarial methods as appropriate for the type of business. Unearned premiums represent the portion of premiums that will be earned in the future. A premium deficiency reserve is recorded if anticipated losses, loss adjustment expenses, deferred acquisition costs and policy maintenance costs exceed the recorded unearned premium reserve and anticipated investment income. As of December 31, 2013 and 2012, no deficiency reserve was recorded.

Policyholder Account Balances

Policyholder account balances relate to investment-type individual annuity contracts in the accumulation phase. Policyholder account balances are carried at accumulated account values, which consist of deposits received, plus interest credited, less withdrawals and assessments. Minimum guaranteed interest credited to these contracts ranges from 3.0% to 4.0%.

16

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Commissions

Commissions are paid to distributors and retailers selling credit insurance policies, motor club memberships, mobile device protection, and warranty service contracts, and are generally deferred and expensed in proportion to the earning of related revenue. Credit insurance commission rates, in many instances, are set by state regulators and are also impacted by market conditions. In certain instances, credit insurance commissions are subject to retrospective adjustment based on the profitability of the related policies. Under these retrospective commission arrangements, the producer of the credit insurance policies receives a retrospective commission if the premium generated by that producer in the accounting period exceeds the costs associated with those policies, which includes the Company's administrative fees, claims, reserves, and premium taxes. The Company analyzes the retrospective commission calculation on a monthly basis for each producer and, based on the analysis associated with each such producer, the Company records a liability for any positive net retrospective commission earned and due to the producer or, conversely, records a receivable, net of allowance, for amounts due from such producer for instances where the net result of the retrospective commission calculation is negative.

The settlement of net positive retrospective commission with the producer in a subsequent period (usually the following month), is made through a cash payment to the producer. If the net result is negative, the Company offsets the receivable amount due from the producer by:

• reducing future retrospective commissions earned and payable against the receivable amount due from the producer;

• reducing the producer's up-front commission associated with current period written premium production, which is credited against the receivable amount due from the producer; or

• invoicing the producer for an amount equal to the amount due to the Company.

The Company reviews, on a regular basis, all instances where the retrospective result is a net negative amount (receivable due from the producer) to determine the action to be implemented with respect to such producer in order to collect any receivable amount.

Deferred Revenues

Deferred revenues represent the portion of income that will be earned in the future attributable to motor club memberships, mobile device protection plans, and other non-insurance service contracts that are earned over the respective contract periods using Rule of 78's, modified Rule of 78's, pro rata, or other methods as appropriate for the contract. A deficiency reserve would be recorded if anticipated contract benefits, deferred acquisition costs and contract service costs exceed the recorded deferred revenues and anticipated investment income. As of December 31, 2013 and 2012, no deficiency reserve was recorded.

Derivative Financial Instruments

Cash Flow Hedge

The Company uses interest rate swaps as part of its risk management strategy to manage interest rate risk and cash flow risk that may arise in connection with the variable interest rate provision of the Company's preferred trust securities. The Company's derivative financial instruments are carried at fair value on the balance sheet.

Changes in fair value associated with the effective portion of a derivative instrument designated as a qualifying cash flow hedge are recognized initially in other comprehensive income (loss). When the cash flows for which the derivative is hedging materialize and are recorded in income or expense, the associated gain or (loss) from the hedging derivative previously recorded in AOCI is recognized in earnings. If a cash flow hedge is de-designated because it is no longer highly effective, or if the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative to that date will continue to be reported in AOCI unless the hedged forecasted transaction is no longer expected to occur, at which time the cumulative gain or loss is recorded into earnings.

The Company records the fair value of the derivative instrument in other assets or other liabilities. To the extent a derivative is an effective hedge of the cash flow risk of the hedged debt obligation, any change in the derivative's fair value is recorded in AOCI, net of income tax. To the extent the derivative is an ineffective hedge, that portion of the change in fair value is recorded in other operating expenses or interest expense as appropriate. The Company is not a party to leveraged derivatives and does not enter into derivative financial instruments for trading or speculative purposes.

Income Taxes

Under Internal Revenue Code Section 1501, the Company files a consolidated federal income tax return with its affiliates which are at least 80% owned by the group. The Company has a tax sharing agreement with its subsidiaries where each company is apportioned the amount of tax equal to that which would be reported on a separate company basis. The components of other comprehensive income or loss included on the Consolidated Statements of Comprehensive Income and on the Consolidated Statements of Stockholders' Equity have been computed based upon the 35% federal tax rate.

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

17

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

The Company uses the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company accounts for penalties and interest related to uncertain tax positions as part of its provision for federal and state income taxes.

Stock-Based Compensation

Stock Options and Restricted Stock Awards

The Company has time-based stock options outstanding under its 2005 Equity Incentive Plan (the "2005 Plan") and time-based and performance-based stock options and restricted stock awards outstanding under The 2010 Omnibus Incentive Plan (the "2010 Plan"). Time-based stock options and restricted stock awards are grants that vest based on the passage of time; whereas, performance-based stock options and restricted stock awards are grants that vest based on the Company attaining certain financial metrics.

Stock-based compensation expense is measured using fair value and is recorded over the requisite service or performance period of the awards, or to an employee’s eligible retirement date under the award agreement, if earlier. The Company measures stock-based compensation expense using the calculated value method. Under this method, the Company estimates the fair value of each stock option on the grant date using the Black-Scholes valuation model. The Company uses historical data to estimate expected employee behavior related to stock award exercises and forfeitures. Since there is not sufficient historical market experience for shares of the Company's stock, the Company has chosen to estimate volatility, by using the average volatility of a selected peer group of publicly traded companies operating in the same industry. Expected dividends are based on the assumption that no dividends were expected to be distributed in the near future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options. The fair value of restricted stock awards are based on the market price of Fortegra's common stock at the grant date. The Company typically recognizes stock-based compensation expense for time-based awards on a straight-line basis over the requisite service period and on a graded vesting attribution model for performance-based awards when meeting the performance target is probable. Stock-based compensation expense for time-based and performance-based stock options and restricted stock awards for employee grants is recognized in personnel costs, while expense for restricted stock awards to directors is included in other operating expenses on the Consolidated Statements of Income. The related income tax expense (benefit) on stock-based compensation is recognized in income tax expense on the Consolidated Statements of Income. The Company's current policy is to issue new shares upon the exercise of stock options.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding adjusted to include the effect of potentially dilutive common shares, which includes outstanding stock options and non-vested restricted stock awards, using the treasury stock method. Common shares that are considered anti-dilutive are excluded from the computation of diluted earnings per share.

Treasury Stock

All repurchased common shares are recorded as treasury stock and are accounted for under the cost method.

Variable Interest Entities

The Company's investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as Variable Interest Entities ("VIEs") and the Company is the primary beneficiary, in which case the investments are consolidated. Investments that do not meet the above criteria are accounted for under the cost method.

Advertising and Promotion

Advertising and promotional costs are expensed as incurred. Advertising expense for the following periods is presented below:

	For the Years Ended December 31,
	2013		2012		2011
Advertising expense	$	3,223	$	1,567	$	509

18

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

3. Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). ASU No. 2013-10 allows the use of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a benchmark interest rate for hedge accounting purposes in addition to interest rates on direct Treasury obligations of the United States government and London Interbank Offered Rate and also removes the restriction on using different benchmark rates for similar hedges. ASU No. 2013-10 became effective on a prospective basis for qualifying new or designated hedging relationships entered into on or after July 17, 2013.  The adoption of ASU No. 2013-10 did not have an impact on the Company's consolidated financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU No. 2013-02 requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income ("AOCI") by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. ASU No. 2013-02 is effective for reporting periods beginning after December 15, 2012. Accordingly, the Company has included an enhanced footnote disclosure in the Note, "Other Comprehensive Income." The adoption of ASU No. 2013-02 did not impact the Company's consolidated financial position, results of operations or cash flows.

In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU No. 2012-02 permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. ASU No. 2012-02 is effective for annual and interim impairment tests performed for years beginning after September 15, 2012. The adoption of ASU No. 2012-02 did not impact the Company's consolidated financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU No. 2011-11, Disclosures About Offsetting Assets and Liabilities. ASU No. 2011-11 requires the disclosure of both gross and net information about instruments and transactions eligible for offset in the statement of financial position, as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, ASU No. 2011-11 requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. ASU No. 2011-11 is effective for the Company beginning on January 1, 2013. The adoption of ASU No. 2011-11 did not impact the Company's consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective prospectively for years and interim periods within those years beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

19

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

4. Earnings Per Share

Earnings per share is calculated as follows:	For the Years Ended December 31,
	2013		2012		2011
Numerator: (for both basic and diluted earnings per share)
Income from continuing operations before non-controlling interests	$	11,807	$	12,962	$	11,562
Less: net income (loss) attributable to non-controlling interests	1,482		72		(170		)
Net income from continuing operations - net of tax	10,325		12,890		11,732
Discontinued operations - net of tax	12,390		2,275		1,777
Net income attributable to Fortegra Financial Corporation	$	22,715	$	15,165	$	13,509
Denominator:
Total weighted average basic common shares outstanding	19,477,802		19,655,492		20,352,027
Effect of dilutive stock options and restricted stock awards	1,004,850		944,870		913,774
Total weighted average diluted common shares outstanding	20,482,652		20,600,362		21,265,801
Earnings per share - Basic:
Net income from continuing operations - net of tax	$	0.53	$	0.65	$	0.57
Discontinued operations - net of tax	0.64		0.12		0.09
Net income attributable to Fortegra Financial Corporation	$	1.17	$	0.77	$	0.66
Earnings per share - Diluted:
Net income from continuing operations - net of tax	$	0.50	$	0.63	$	0.55
Discontinued operations - net of tax	0.61		0.11		0.09
Net income attributable to Fortegra Financial Corporation	$	1.11	$	0.74	$	0.64
Weighted average anti-dilutive common shares	509,314		480,795		301,010

20

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

5. Other Comprehensive Income

The following table presents the activity in AOCI for the following periods:	Net unrealized gains (losses) on available-for-sale securities			Net unrealized gain (loss) on interest rate swap			Total
Balance at December 31, 2010, net of tax	$	2,293		$	—		$	2,293
Other comprehensive income (loss) before reclassifications:
Pre-tax income (loss)	1,568			(3,601		)	(2,033		)
Income tax (expense) benefit	(550		)	1,260			710
Other comprehensive income (loss) before reclassifications, net of tax	1,018			(2,341		)	(1,323		)
Amounts reclassified from accumulated other comprehensive income (loss):
Pre-tax (income)	(4,193		)	—			(4,193		)
Income tax expense	1,468			—			1,468
Amounts reclassified from accumulated other comprehensive (loss), net of tax	(2,725		)	—			(2,725		)
Current period other comprehensive (loss), net of tax	(1,707		)	(2,341		)	(4,048		)
Less: comprehensive (loss) attributable to non-controlling interest	(1		)	—			(1		)
Balance at December 31, 2011, net of tax	$	587		$	(2,341	)	$	(1,754	)
Other comprehensive income (loss) before reclassifications:
Pre-tax income (loss)	2,473			(1,007		)	1,466
Income tax (expense) benefit	(865		)	352			(513		)
Other comprehensive income (loss) before reclassifications, net of tax	1,608			(655		)	953
Amounts reclassified from accumulated other comprehensive income (loss):
Pre-tax (income) loss	(3		)	270			267
Income tax expense (benefit)	1			(94		)	(93		)
Amounts reclassified from accumulated other comprehensive (loss)income, net of tax	(2		)	176			174
Current period other comprehensive income (loss), net of tax	1,606			(479		)	1,127
Less: comprehensive income attributable to non-controlling interest	4			—			4
Balance at December 31, 2012, net of tax	$	2,189		$	(2,820	)	$	(631	)
Other comprehensive income (loss) before reclassifications:
Pre-tax (loss) income	(4,061		)	277			(3,784		)
Income tax benefit (expense)	1,421			(97		)	1,324
Other comprehensive (loss) income before reclassifications, net of tax	(2,640		)	180			(2,460		)
Amounts reclassified from accumulated other comprehensive income (loss):
Pre-tax (income) loss	(2,043		)	1,132			(911		)
Income tax expense (benefit)	715			(396		)	319
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	(1,328		)	736			(592		)
Current period other comprehensive (loss) income, net of tax	(3,968		)	916			(3,052		)
Less: comprehensive (loss) attributable to non-controlling interest	(18		)	—			(18		)
Balance at December 31, 2013, net of tax	$	(1,761	)	$	(1,904	)	$	(3,665	)

21

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the reclassifications out of AOCI for the following periods:

	For the Years Ended December 31,
	2013			2012			2011			Consolidated Statement of Income Location
Unrealized gains (losses) on available-for-sale securities:
Reclassification of gains included in net income	$	2,043		$	3		$	4,193		Net realized investment gains (losses)
Related tax (expense)	(715		)	(1		)	(1,468		)	Income taxes
Net of tax	$	1,328		$	2		$	2,725		Net Income
Unrealized gain (loss) on interest rate swap:
Reclassification of (losses) included in net income	$	(1,132	)	$	(270	)	$	—		Interest expense
Related tax benefit	396			94			—			Income taxes
Net of tax	$	(736	)	$	(176	)	$	—		Net Income

6. Consolidation of Operations Charges

Consolidation of Operations Plan

As disclosed on January 18, 2013 in the Company's Current Report on Form 8-K, effective January 14, 2013, the Company committed to a plan to consolidate the Company's fulfillment, claims administration and information technology functions (the "Plan"). Prior to the Plan, such functions resided in the Company's individual business units. The decision is part of the Company's efforts to streamline its operations, focus its resources and provide first in class service to its customers. The following is a summary of the charges incurred by the Company:

	For the Years Ended December 31,
	2013		2012		2011
Severance and benefit costs included in personnel expense	$	1,234	$	—	$	—
Total consolidation of operations costs	$	1,234	$	—	$	—

7. Variable Interest Entity

In July 2011, the Company sold its 100% interest in Creative Investigations Recovery Group, LLC ("CIRG"). The consideration included a note receivable, included on the Consolidated Balance Sheets, with a first priority lien security interest in the assets of CIRG and other property of the buyers. The Company performed a detailed analysis of the CIRG sale transaction and determined that CIRG is considered a VIE because the Company has an interest due to the note financing. The Company further determined that it is not the primary beneficiary because the Company does not have the power to direct the activities of the VIE and has no right to receive the residual returns of CIRG. Therefore, CIRG is not consolidated in the Company's results of operations for any of the periods presented. During 2013, the Company suspended recognition of interest income on the note and engaged the buyer in discussions, because the buyer was experiencing short-term cash flow constraints. The Company determined that it would not pursue remedies available under the note at this time, and the parties executed a forbearance agreement along with a security agreement and a subordination agreement designed to allow more flexibility in timing of repayment; the principal amount and interest rate are unchanged. These contracts do not give the Company control over the business, and the Company may still leverage the remedies of the note should it deem such action necessary. The Company also provided an additional $0.1 million in short term funding, and the buyer has begun to repay that balance.

The Company's maximum exposure to loss in the VIE is limited to the outstanding balance of the note receivable (including accrued interest receivable) and the remaining balance of the short term funding, presented in the table below:

	At December 31,
	2013		2012
The Company's maximum exposure to loss in the VIE	$	1,234	$	1,139

8. Business Acquisitions

Acquisition in 2013

On February 1, 2013, the Company acquired 100% of the outstanding stock of RICC, from subsidiaries of the Kemper Corporation ("Kemper") for $4.8 million.  RICC is a property/casualty insurance company domiciled and licensed in California, which the Company intends to use for geographic expansion. RICC had, at the time of purchase, no policies in force. All remaining claim liabilities for previously issued policies are fully reinsured by Kemper's subsidiary, Trinity Universal Insurance Company.

22

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Acquisitions in 2012

On December 31, 2012, the Company acquired a 62.4% ownership interest of Digital Leash, LLC, d/b/a ProtectCELL for $20.0 million, which amount is deemed a Series A Contribution under the provisions of the related agreements. ProtectCELL provides membership plans for the protection of mobile wireless devices and other benefits including data management and identity theft protection. ProtectCELL is one of the leaders in mobile device protection plans and is spearheading Fortegra's efforts to expand its warranty and service contract business in the mobile and wireless device space. As part of the acquisition, the Company also has an option, commencing after 2014, to acquire the remaining 37.6% ownership interest in ProtectCELL at a price based on a sliding scale multiple of ProtectCELL's trailing twelve-month EBITDA ("Earnings before interest, taxes, depreciation and amortization"), less the Series A Contributions, multiplied by 37.6% ("option price"). The option has no expiration, though the owners of the non-controlling interest have the right to defer the option commencement date for one year under certain conditions. The option must be exercised with respect to not less than all of the non-controlling interest, and is accounted for as an embedded derivative within the value of non-controlling interest.

On December 31, 2012, the Company acquired 100% of the outstanding stock ownership of 4Warranty Corporation, a leading warranty and extended service contract administrator with extensive expertise in the furniture, electronics, appliance, lawn and garden, and fitness equipment markets. 4Warranty complements the Company's expanding warranty business.

The Consolidated Balance Sheets at December 31, 2012, include the accounts of both ProtectCELL and 4Warranty as of December 31, 2012. The financial results for the 2012 acquisitions of ProtectCELL and 4Warranty have not been included in the Company's Consolidated Statements of Income for the year ended December 31, 2012, because both acquisitions closed after business on December 31, 2012.

On April 24, 2012, the Company acquired a 100% ownership interest in MHA & Associates LLC ("MHA"), for $0.3 million, obtaining the renewal rights of the business and hiring the prior owner to maintain and increase the block of business.

The Company did not issue shares of its common stock in connection with any of the acquisitions completed during the years ended December 31, 2013, 2012 and 2011, respectively.

Balance Sheets and Allocation of Purchase Price

During 2013, the Company received the final valuation studies prepared by external valuation experts for identifiable intangible assets, goodwill, deferred revenues, and non-controlling interest for the 2012 acquisitions of ProtectCELL and 4Warranty. Accordingly, the Consolidated Balance Sheet at December 31, 2012, has been retrospectively adjusted to include the effect of the final valuation adjustments and other fair value determinations, for ProtectCELL and 4Warranty. Final valuation adjustments were recorded to the values of intangible assets and deferred revenues based upon completion of valuation models in the studies, and refinement of assumptions supporting those models, using discounted cash flow, relief from royalty, and/or other analytical techniques as presented in the valuation studies. With respect to ProtectCELL, the final valuations of these balances allowed for a determination of the total value of the enterprise at December 31, 2012. Using this enterprise value, and a break-even analysis to determine the relative attribution of the Company's $20.0 million investment between the common and preferred units acquired, the final valuation study assigned values of $7.9 million and $12.1 million to the acquired common and preferred units, respectively, and a fair value of $4.7 million to the non-controlling interest as shown in the table below. The adjustments noted above result in offsetting adjustments to goodwill. Please see the Notes, "Goodwill," and "Other Intangible Assets," for more information.

23

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the allocation of the purchase price recorded for the 2013 acquisition of RICC and the 2012 acquisitions of ProtectCELL and 4Warranty, including the effects of the final valuation adjustments recorded in 2013 for the 2012 acquisitions, as discussed above.

	2012						2013
	Acquisitions						Acquisition
	4Warranty			ProtectCELL			RICC
Assets:
Cash and cash equivalents	$	703		$	350		$	1,893
Restricted cash	72			7,438			—
Investments	—			—			2,488
Short-term investments	—			252			—
Accrued investment income	—			—			38
Notes receivable, net	—			6,341			—
Other receivables	357			2,312			—
Reinsurance receivables	—			—			200
Property and equipment, net	61			628			—
Other intangible assets, net	1,870			18,815			375
Other assets	—			1,470			10
Liabilities:
Unpaid claims	—			(176		)	(200		)
Accrued expenses, accounts payable and other liabilities	(310		)	(2,644		)	(9		)
Deferred revenue	(1,260		)	(30,000		)	—
Income taxes payable	(273		)	—			—
Deferred income taxes, net	(259		)	—			—
Net assets acquired	961			4,786			4,795
Non-controlling interest	—			(4,745		)	—
Purchase consideration (1) (2)	3,625			20,000			4,795
Goodwill	$	2,664		$	19,959		$	—

⁽¹⁾ - The purchase consideration for the 4Warranty acquisition includes $0.3 million of contingent consideration and $0.3 million of hold back reserves, which estimates are unchanged in the current period and are expected to be paid out based on the agreed terms of the Stock Purchase Agreement.

⁽²⁾ - The purchase consideration of $20.0 million for the ProtectCELL acquisition represents the 62.4% ownership interest acquired in the transaction, comprised of 62,400 common units and 20,000 preferred units, valued at $7.9 million and $12.1 million respectively.

Tax Deductible Goodwill Associated with Acquisitions

The following table presents goodwill attributable to acquisitions that is expected to be tax deductible by year of acquisition:

	Year of the Acquisition
	2013		2012		2011
Total	$	—	$	—	$	4,069

9. Divestitures

Discontinued Operations

On December 31, 2013, the Company completed the previously announced sale of all of the issued and outstanding stock of its subsidiaries, Bliss and Glennon and eReinsure.com, to AmWINS Holdings, LLC, a North Carolina limited liability company ("AmWINS") (the "Disposition"), pursuant to the terms of the Stock Purchase Agreement ("Purchase Agreement"), dated December 2, 2013.

The Company received net cash proceeds of $81.8 million for the Disposition, representing gross proceeds of $83.5 million less $1.0 million in transaction fees paid at the time of closing and $0.7 million of cash held by the disposed entities. The proceeds are subject to certain purchase price adjustments as set forth in the Purchase Agreement to reflect fluctuations in working capital, including adjustments for any receivable balances as of the disposition date that are not collected within one year.

As a result of the Disposition, the Company no longer operates in the businesses of wholesale insurance brokerage and selling or licensing of a computerized system or platform for the negotiation and/or placement of facultative reinsurance. Further, the Company has agreed not to compete with the Bliss and Glennon and eReinsure businesses for five years, and has agreed not to solicit former

24

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

employees of the divested businesses. As of and after December 31, 2013, the Company does not beneficially own the disposed businesses and will no longer consolidate Bliss and Glennon or eReinsure into its financial results. The historical financial results of the disposed businesses for periods prior to the Disposition will be reflected in the Company's Consolidated Statements of Income as income from discontinued operations - net of tax. As discussed more fully in the Note, "Notes Payable", the Company was required to repay its debt under the Wells Fargo Credit Agreement from the net proceeds of the Disposition. The Company would have been required to repay its debt under the SunTrust Facility if the Disposition had occurred during the time the SunTrust Facility was in effect. Accordingly, interest expense allocated to the discontinued operations was based on the anticipated net proceeds that would be applied to the repayment of these credit facilities outstanding at the respective time, multiplied by the respective interest rate of the credit facilities at the respective time. The following table provides the amounts related to discontinued operations in the Consolidated Statements of Income for the following periods:

	For the Years Ended December 31,
	2013		2012		2011
Income from discontinued operations:
Revenues:
Brokerage commissions and fees	$	36,823	$	35,306	$	34,396
Net investment income	22		1		—
Other income	40		—		—
Total revenues	36,885		35,307		34,396
Expenses:
Personnel costs	20,251		20,173		18,526
Other operating expenses	5,778		6,121		7,401
Depreciation and amortization	615		658		415
Amortization of intangibles	1,929		2,211		2,133
Interest expense	2,318		2,290		2,951
Total expenses	30,891		31,453		31,426
Income from discontinued operations before income taxes	5,994		3,854		2,970
Income taxes - discontinued operations	2,448		1,579		1,193
Income from discontinued operations - net of tax	3,546		2,275		1,777
Gain on sale of discontinued operations:
Gain on sale of discontinued operations before income taxes	14,739		—		—
Income taxes - gain on sale of discontinued operations	5,895		—		—
Gain on sale of discontinued operations - net of tax	8,844		—		—
Discontinued operations - net of tax	$	12,390	$	2,275	$	1,777

The gain on sale represents the gross proceeds of $83.5 million, plus an estimated $0.8 million adjustment for working capital, less the assets sold and liabilities disposed of $98.6 million and $32.5 million, respectively, and costs of $3.5 million. Costs included $1.0 million of fees paid at the time of closing noted above, retention and bonus compensation, insurance claims-made "tail" coverage, and accruals for the Company's guarantee of accounts receivable and other retained obligations related to the divested businesses.

The following table provides details of the assets and liabilities of the discontinued operations on the Consolidated Balance Sheet at:

	December 31, 2013
Assets:
Other receivables	$	791
Assets of discontinued operations	$	791
Liabilities:
Accrued expenses, accounts payable and other liabilities	$	2,708
Income taxes payable	5,895
Liabilities of discontinued operations	$	8,603

25

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

Other Sales of Subsidiaries

The Company completed the following divestitures that were not considered to be discontinued operations:

In June 2013, the Company sold its wholly owned subsidiary Magna for a gross sales price of $3.0 million, less cash held by Magna, transferred in the sale, of $0.8 million. For the year ended December 31, 2013, the Company recorded a $0.4 million pre-tax gain on the sale of Magna, which is included on the Consolidated Statements of Income line item, "Gain on sale of subsidiary."

In July 2011, the Company sold its wholly owned subsidiary, CIRG, for a sales price of $1.2 million, comprised of cash and a $1.1 million secured note receivable. For the year ended December 31, 2011, the Company recorded a $0.5 million loss on the sale of CIRG. This sale resulted in a non-consolidated VIE. For more information, see the Note, "Variable Interest Entity."

10. Goodwill

In 2012, the Company recorded goodwill in conjunction with the ProtectCELL and 4Warranty acquisitions. During 2013, the Company determined the final valuations for the 2012 acquisitions of ProtectCELL and 4Warranty acquisitions. The following table presents the activity in goodwill and includes the retrospective adjustments made to the balance of goodwill at December 31, 2012 to reflect the effect of the final valuation adjustments made for the acquisitions of ProtectCELL and 4Warranty and the reduction to goodwill attributable to the 2013 Disposition.

	Total
Balance at December 31, 2011	$	104,888
Goodwill acquired - purchased book of business	168
Goodwill acquired - ProtectCELL acquisition	11,732
Goodwill acquired - 4Warranty acquisition	2,724
Balance as originally reported at December 31, 2012	$	119,512
Final valuation adjustments for ProtectCELL	8,227
Final valuation adjustments for 4Warranty	(60		)
Adjusted balance at December 31, 2012	127,679
Goodwill divested - discontinued operations	(53,978		)
Balance at December 31, 2013	$	73,701

11. Other Intangible Assets

The following table shows finite-lived other intangible assets and their respective amortization periods:

				At December 31, 2013							At December 31, 2012
	Amortization Period (Years)			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer and agent relationships	7	to	15	$	40,075	$	(13,262	)	$	26,813	$	52,230	$	(12,340	)	$	39,890
Tradenames	8	to	10	1,460		(128		)	1,332		1,200		—			1,200
Software	2.25	to	10	5,336		(2,930		)	2,406		10,138		(3,385		)	6,753
Present value of future profits	0.3	to	0.75	548		(548		)	—		548		(548		)	—
Non-compete agreements	1.5	to	6	1,378		(895		)	483		3,308		(2,716		)	592
Total finite-lived other intangible assets				$	48,797	$	(17,763	)	$	31,034	$	67,424	$	(18,989	)	$	48,435

The following table shows the carrying amount of indefinite-lived other intangible assets:	At December 31,
	2013		2012
Tradenames	$	17,764	$	21,875
Licenses	375		—
Total	$	18,139	$	21,875

The finite-lived and indefinite-lived other intangible assets acquired in 2012 relate to the acquisition of ProtectCELL and 4Warranty and for the purchase of a book of business. In 2013, the Company determined the final valuations for the 2012 acquisitions of ProtectCELL and 4Warranty and made retrospective adjustments to other intangible assets. See the Note "Business Acquisitions," for more information.

26

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the activity in other intangible assets and includes the final valuation adjustments made to the balance of other intangible assets at December 31, 2012 to reflect the effect of these adjustments made for the acquisitions of ProtectCELL and 4Warranty and the reduction to other intangible assets attributable to the discontinued operations for the 2013 Disposition.

Balance at January 1, 2012	$	54,410
Intangible assets acquired in 2012 - Purchased book of business	168
Intangible assets acquired in 2012 - ProtectCELL acquisition	27,815
Intangible assets acquired in 2012 - 4Warranty acquisition	1,900
Less: amortization expense	2,742
Less: amortization expense - discontinued operations	2,211
Balance as originally reported at December 31, 2012	$	79,340
Final adjustments for ProtectCELL	(9,000		)
Final adjustments for 4Warranty	(30		)
Adjusted balance at December 31, 2012	70,310
Intangible assets acquired in 2013	427
Intangible assets divested - discontinued operations	(14,108		)
Less: amortization expense - discontinued operations	1,929
Less: amortization expense	5,527
Balance at December 31, 2013	$	49,173

Estimated amortization of finite-lived other intangible assets for the next five years and thereafter ending December 31 is presented below:

2014	$	5,270
2015	5,115
2016	4,869
2017	3,648
2018	2,230
Thereafter	9,902
Total	$	31,034

12. Investments

The following table summarizes the Company's available-for-sale fixed maturity and equity securities:

	At December 31, 2013
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	51,971	$	142	$	(678	)	$	51,435
Municipal securities	24,856		104		(413		)	24,547
Corporate securities	56,050		210		(900		)	55,360
Obligations of foreign governments	411		—		(2		)	409
Total fixed maturity securities	$	133,288	$	456	$	(1,993	)	$	131,751
Common stock - publicly traded	$	39	$	8	$	—		$	47
Preferred stock - publicly traded	5,974		—		(887		)	5,087
Common stock - non-publicly traded	59		5		(13		)	51
Preferred stock - non-publicly traded	1,009		4		—			1,013
Total equity securities	$	7,081	$	17	$	(900	)	$	6,198

27

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At December 31, 2012
Description of Security	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Obligations of the U.S. Treasury and U.S. Government agencies	$	22,424	$	761	$	(7	)	$	23,178
Municipal securities	16,636		413		(8		)	17,041
Corporate securities	67,627		2,461		(80		)	70,008
Mortgage-backed securities	285		4		—			289
Asset-backed securities	123		2		—			125
Total fixed maturity securities	$	107,095	$	3,641	$	(95	)	$	110,641
Common stock - publicly traded	$	39	$	3	$	—		$	42
Preferred stock - publicly traded	4,975		133		(1		)	5,107
Common stock - non-publicly traded	59		4		(5		)	58
Preferred stock - non-publicly traded	1,009		4		—			1,013
Total equity securities	$	6,082	$	144	$	(6	)	$	6,220

Pursuant to certain reinsurance agreements and statutory licensing requirements, the Company has deposited invested assets in custody accounts or insurance department safekeeping accounts. The Company is not permitted to remove invested assets from these accounts without prior approval of the contractual party or regulatory authority, as applicable. The following table details the Company's restricted investments included in the Company's available-for-sale fixed maturity securities:

	At December 31,
	2013		2012
Fair value of restricted investments for special deposits required by state insurance departments	$	10,339	$	10,988
Fair value of restricted investments in trust pursuant to reinsurance agreements	6,134		6,954
Fair value of restricted investments	$	16,473	$	17,942

The amortized cost and fair value of fixed maturity securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	At December 31, 2013				At December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	18,766	$	18,771	$	5,557	$	5,608
Due after one year through five years	69,380		69,355		58,378		60,323
Due after five years through ten years	22,622		21,731		24,983		25,900
Due after ten years	22,520		21,894		17,769		18,396
Mortgage-backed securities	—		—		285		289
Asset-backed securities	—		—		123		125
Total fixed maturity securities	$	133,288	$	131,751	$	107,095	$	110,641

The following table provides information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months, and twelve months or greater:

	At December 31, 2013
	Less than Twelve Months					Twelve Months or Greater					Total
Description of Security	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	37,385	$	672	67	$	234	$	6	7	$	37,619	$	678	74
Municipal securities	10,080		413		23	—		—		—	10,080		413		23
Corporate securities	27,866		734		55	7,676		166		8	35,542		900		63
Obligations of foreign governments	409		2		1	—		—		—	409		2		1
Total fixed maturity securities	$	75,740	$	1,821	146	$	7,910	$	172	15	$	83,650	$	1,993	161
Preferred stock - publicly traded	5,087		887		9	—		—		—	5,087		887		9
Common stock - non-publicly traded	—		—		—	31		13		2	31		13		2
Total equity securities	$	5,087	$	887	9	$	31	$	13	2	$	5,118	$	900	11

28

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	At December 31, 2012
	Less than Twelve Months					Twelve Months or Greater					Total
Description of Security	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities
Obligations of the U.S. Treasury and U.S. Government agencies	$	857	$	7	11	$	—	$	—	—	$	857	$	7	11
Municipal securities	734		8		1	—		—		—	734		8		1
Corporate securities	12,625		63		16	183		17		1	12,808		80		17
Total fixed maturity securities	$	14,216	$	78	28	$	183	$	17	1	$	14,399	$	95	29
Preferred stock - publicly traded	198		1		1	—		—		—	198		1		1
Common stock - non-publicly traded	—		—		—	39		5		2	39		5		2
Total equity securities	$	198	$	1	1	$	39	$	5	2	$	237	$	6	3

The Company does not intend to sell the investments that are in an unrealized loss position at December 31, 2013 and it is more likely than not that the Company will be able to hold these securities until full recovery of their amortized cost basis for fixed maturity securities or cost for equity securities. As of December 31, 2013, based on the Company's review, none of the fixed maturity or equity securities were deemed to be other-than-temporarily impaired based on the Company's analysis of the securities and its intent to hold the securities until recovery. At December 31, 2012, based on management's review, the Company deemed that one individual equity security was other than temporarily impaired and recorded an impairment charge of $16.0 thousand for the year ended December 31, 2012.

The following table summarizes the gross proceeds from the sale of available-for-sale investment securities:

	For the Years Ended December 31,
	2013		2012		2011
Gross proceeds from sales	$	54,663	$	8,364	$	62,300

The following table summarizes the gross realized gains and gross realized losses for both fixed maturity and equity securities and realized losses for other-than-temporary impairments for available-for-sale investment securities:

	For the Years Ended December 31,
	2013			2012			2011
Gross realized gains	$	2,118		$	33		$	4,456
Gross realized losses	(75		)	(14		)	(91		)
Total net gains from investment sales	2,043			19			4,365
Impairment write-downs (other-than-temporary impairments)	—			(16		)	(172		)
Net realized investment gains	$	2,043		$	3		$	4,193

The following table details the components of net investment income:	For the Years Ended December 31,
	2013			2012			2011
Fixed income securities	$	2,635		$	2,669		$	3,188
Cash on hand and on deposit	30			193			333
Common and preferred stock dividends	373			275			59
Notes receivable	321			267			155
Other income	119			138			141
Investment expenses	(428		)	(475		)	(508		)
Net investment income	$	3,050		$	3,067		$	3,368

29

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

13. Reinsurance Receivables

The effects of reinsurance on premiums written and earned and on losses and loss adjustment expenses ("LAE") incurred are presented in the tables below:

Premiums	For the Years Ended December 31,
	2013						2012						2011
	Written			Earned			Written			Earned			Written			Earned
Direct and assumed	$	410,243		$	389,763		$	367,791		$	359,820		$	338,869		$	321,412
Ceded	(267,737		)	(252,976		)	(236,121		)	(232,195		)	(214,485		)	(205,909		)
Net	$	142,506		$	136,787		$	131,670		$	127,625		$	124,384		$	115,503

Losses and LAE incurred	For the Years Ended December 31,
	2013			2012			2011
Direct and assumed	$	90,804		$	86,409		$	81,843
Ceded	(49,237		)	(46,190		)	(43,894		)
Net losses and LAE incurred	$	41,567		$	40,219		$	37,949

The following table reflects the components of the reinsurance receivables:	At December 31,
	2013		2012
Prepaid reinsurance premiums:
Life (1)	$	51,355	$	53,117
Accident and health (1)	36,214		34,266
Property	98,650		85,805
Total	186,219		173,188
Ceded claim reserves:
Life	1,594		1,786
Accident and health	7,826		9,263
Property	12,102		8,663
Total ceded claim reserves recoverable	21,522		19,712
Other reinsurance settlements recoverable	7,343		11,088
Reinsurance receivables	$	215,084	$	203,988

⁽¹⁾ Including policyholder account balances ceded.

The following table shows the aggregate amount included in reinsurance receivables that is comprised of the three largest receivable balances from unrelated reinsurers:

	At December 31,
	2013		2012
Total of the three largest receivable balances from unrelated reinsurers	$	136,061	$	126,633

At December 31, 2013 and December 31, 2012, respectively, the three unrelated reinsurers from whom the Company has the largest receivable balances were: London Life Reinsurance Company (A. M. Best Rating: A); London Life International Reinsurance Corporation (A. M. Best Rating: Not rated) and Spartan Property Insurance Company (A. M. Best Rating: Not rated). The related receivables of Spartan Property Insurance Company and London Life International Reinsurance Corporation are collateralized by assets held in trust accounts and letters of credit due to their offshore relationships. At December 31, 2013, the Company does not believe there is a risk of loss as a result of the concentration of credit risk in the reinsurance program.

30

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

14. Property and Equipment

The components of property and equipment are as follows:	At December 31,
	2013		2012
Furniture, fixtures and equipment	$	3,592	$	2,992
Computer equipment	2,862		4,126
Equipment and software under capital lease	229		229
Software (1)	19,057		18,632
Leasehold improvements	888		568
Property and equipment, gross	26,628		26,547
Less: accumulated depreciation and amortization	12,296		8,647
Property and equipment, net	$	14,332	$	17,900
(1) Internally developed software not yet placed in service, included in software	$	657	$	942

The following reflects depreciation on property and equipment and amortization expense related to capitalized software costs:

	For the Years Ended December 31,
	2013		2012		2011
Depreciation expense on property and equipment	$	1,792	$	1,336	$	1,217
Amortization expense on capitalized software	3,066		1,939		1,445
Total depreciation and amortization	$	4,858	$	3,275	$	2,662

15. Leases

Operating Leases

The Company leases certain office space and equipment under operating leases expiring on various dates from 2014 through 2022. The Company assumed operating leases for office space from related parties in conjunction with the ProtectCELL and 4Warranty acquisitions. The terms of the related party leases are substantially the same as those offered for comparable transactions with non-related parties. Please see the Note, "Related Party Transactions," for more information on the amount of related party lease payments made in 2013. The following table shows the Company's future minimum lease payments under operating leases with initial or remaining non-cancelable lease terms in excess of one year at:

	December 31, 2013
2014	$	2,034
2015	2,082
2016	2,111
2017	2,104
2018	1,667
Thereafter	5,419
Total future minimum lease payments	$	15,417

The Company recognized rent expense:	For the Years Ended December 31,
	2013		2012		2011
Total rent expense	$	2,449	$	1,611	$	1,732

Capital Lease

The Company leases equipment and software under a single capital lease expiring in 2014. The following table shows the Company's future minimum lease payments for its capital lease at:

	December 31, 2013
2014	$	134
Amounts representing interest	(7		)
Obligations under capital lease	$	127

31

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

16. Notes Payable

The Company's Notes Payable consisted of the following at:	At December 31,
	2013			2012
Wells Fargo Bank, N.A. credit facility, maturing August 2017	$	—		$	89,438
Synovus Bank, line of credit, maturing April 2017	3,273			—
Total	$	3,273		$	89,438
Maximum balance allowed on the Wells Fargo Bank, N.A. credit facility	$	75,000		$	123,750
Interest rate at the end of the respective period, Wells Fargo Bank, N.A. credit facility (1)	—		%	2.76		%
Maximum balance allowed on the Synovus Bank, line of credit	$	15,000		$	—
Interest rate at the end of the respective period, Synovus Bank, line of credit	3.24		%	—		%

⁽¹⁾ - At December 31, 2013 the Company had no borrowings outstanding under the Revolving Facility, thus no interest rate can be defined.

Aggregate maturities for the Company's notes payable at December 31, 2013, by year, are as follows:	Maturities
2014	$	3,273
Total maturities	$	3,273

$75.0 million Secured Credit Agreement - Wells Fargo Bank, N.A.

At December 31, 2013, the Company had a secured credit agreement (the "Credit Agreement"), entered into on August 2, 2012, with a syndicate of lenders, among them Wells Fargo Bank, N.A., who also serves as administrative agent ("Wells Fargo" or the "Administrative Agent"). The Credit Agreement has a five year term, with an initial capacity of $125.0 million comprised of a $50.0 million term loan facility (the "Term Loan Facility"), and a $75.0 million revolving credit facility (the "Revolving Facility" and collectively with the Term Loan Facility, the "Facilities") with a sub-limit of $10.0 million for swingline loans and $10.0 million for letters of credit. As required by the terms of the Credit Agreement, the Company used the proceeds from the Disposition to pay off the balances of both the Term Loan Facility and the Revolving Facility. Accordingly, the Term Loan Facility is no longer available for future borrowings, while the Revolving Facility remains available. Subject to earlier termination, the Credit Agreement terminates on August 2, 2017. The Credit Agreement includes a provision pursuant to which, from time to time, the Company may request that the lenders in their discretion increase the maximum amount of commitments under the Facilities by an amount not to exceed $50.0 million. 

At the Company's election, borrowings under the Revolving Facility will bear interest either at the base rate plus an applicable interest margin or the adjusted LIBO rate plus an applicable interest margin; provided, however, that all swingline loans will be base rate loans. The base rate is a fluctuating interest rate equal to the highest of: (i) Wells Fargo's publicly announced prime lending rate; (ii) the federal funds rate plus0.50%; and (iii) the adjusted LIBO rate, determined on a daily basis for an interest period of one month, plus1.0%. The adjusted LIBO rate is the rate per annum obtained by dividing (i) the London interbank offered rate ("LIBOR") for such interest period by (ii) a percentage equal to 1.00 minusthe Eurodollar Reserve Percentage (as defined in the Credit Agreement). The interest margin over the adjusted LIBO rate, initially set at 2.75%, may increase (to a maximum amount of 3.0%) or decrease (to a minimum amount of 2.0%) based on changes in the Company's leverage ratio. The interest margin over the base rate, initially set at 1.75%, may increase (to a maximum amount of 2.0%) or decrease (to a minimum amount of 1.0%) based on changes in the Company's leverage ratio.

In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Credit Agreement, the Company is required to pay a commitment fee, initially equal to 0.40% per annum of the unused amount of the Revolving Facility. The percentage rate of such fee may increase (to a maximum amount of 0.45%) or decrease (to a minimum amount of 0.25%) based on changes in the Borrowers' leverage ratio. The amount of outstanding swingline loans is not considered usage of the Revolving Facility for the purpose of calculating the commitment fee. The Company is also required to pay letter of credit participation fees on the undrawn amount of all outstanding letters of credit. The Company paid fees of approximately $1.7 million to Wells Fargo in connection with the execution of the Credit Agreement, which have been capitalized and are being amortized using a straight line method over the life of the Credit Agreement.

The Company, at its option, may prepay any borrowing, in whole or in part, at any time and from time to time without premium or penalty. However, after the end of the Company's fiscal year (commencing with the fiscal year ending December 31, 2015), the Company is required to make mandatory principal prepayments of loans under the Facilities in an amount determined under the Credit Agreement based upon a percentage of the Company's Excess Cash Flow (as defined in the Credit Agreement) minus certain offset amounts relating to permitted acquisitions. In addition, the Company is required to make principal payments upon the occurrence of certain events, including upon certain dispositions of the Company's assets.

32

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The Credit Agreement contains certain customary representations, warranties and covenants applicable to the Company for the benefit of the Administrative Agent and the lenders. The Company may not assign, sell, transfer or dispose of any collateral or effect certain changes to the Company's capital structure and the capital structure of its subsidiaries without the Administrative Agent's prior consent. The Company's obligations under the Facilities may be accelerated or the commitments terminated upon the occurrence of an event of default under the Credit Agreement, including payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults arising in connection with changes in control and other customary events of default. The Credit Agreement also contains financial covenants, which the Company must maintain. See the section below, "Financial Covenants" for a presentation of the Company's more significant covenants associated with the Credit Agreement.

$85.0 million Revolving Credit Facility - SunTrust Bank, N.A.

During 2012 and 2011, the Company had an $85.0 million revolving credit facility with SunTrust Bank, N.A., (the "Facility"). The Facility had an original maturity of June 2013. The Facility bore interest at a variable rate determined based upon the higher of (i) the prime rate, (ii) the federal funds rate plus 0.50% or (iii) LIBOR plus 1%, plus a margin tied to the Company's leverage ratio. The Company could select at its discretion to convert the interest rate for all or a portion of the outstanding balance for a period of up to six months to a fixed EURO Dollar Funding rate which is equal to the adjusted LIBOR rate for the elected interest period in effect at the time of election, plus a margin tied to the Company's leverage ratio.

Termination of the $85.0 million Facility

On August 2, 2012, the Company terminated the Facility and entered into the Credit Agreement. In connection with the termination of the Facility, the Company recorded a charge of $0.7 million to interest expense for the year ending December 31, 2012, for previously capitalized transaction costs associated with the Facility.

Financial Covenants - Secured Credit Agreement - Wells Fargo Bank, N.A.

At December 31, 2013 and December 31, 2012, respectively, the Company was required to comply with various financial covenants set forth in the Credit Agreement. The following describes the Credit Agreement's more significant financial covenants in effect at December 31, 2013 and the calculations used to arrive at each ratio (capitalized terms used but not defined in this paragraph are defined in the Credit Agreement or as otherwise provided below):

Total Leverage Ratio- the ratio of (i) Consolidated Total Debt as of such date to (ii) Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the Measurement Period ending on or immediately prior to such date.

Fixed Charge Coverage Ratio - the ratio of (a) Consolidated Adjusted EBITDA less the actual amount paid by the Borrowers and their Subsidiaries in cash on account of Capital Expenditures less cash taxes paid by the Borrowers and their Subsidiaries to (b) Consolidated Fixed Charges, in each case for the Measurement Period ending on or immediately prior to such date.

Reinsurance Ratio - the ratio (expressed as a percentage) of (a) the aggregate amounts recoverable by the Borrowers and its Subsidiaries from reinsurers divided by (b) the sum of (i) policy and claim liabilities plus (ii) unearned premiums, in each case of the Borrowers and their Subsidiaries determined in accordance with U.S. GAAP.

Risk-Based Capital ("RBC") Ratio - the ratio (expressed as a percentage) of NAIC RBC (as defined in the NAIC standards) for any Regulated Insurance Company on an individual basis, calculated at the end of any Fiscal Year, to the "authorized control level" (as defined in the NAIC standards).

The following is a summary of the Credit Agreement's more significant financial covenants:		Actual At
Covenant	Covenant Requirement	December 31, 2013	December 31, 2012
Total leverage ratio (1)	not more than 3.25	0.70	3.10
Fixed charge coverage ratio	not less than 2.00	3.01	2.33
Reinsurance ratio	not less than 50%	68.0%	69.0%
RBC Ratios:
RBC Ratio - Bankers Life of Louisiana	not less than 250%	435.0%	469.0%
RBC Ratio - Southern Financial Life Insurance Company	not less than 250%	2,096.0%	2,155.0%
RBC Ratio - Insurance Company of the South	not less than 250%	366.0%	378.0%
RBC Ratio - Lyndon Southern Insurance Company	not less than 250%	305.0%	255.0%
RBC Ratio - Life of the South Insurance Company	not less than 250%	430.0%	386.0%
RBC Ratio - Response Indemnity Company of California	not less than 250%	39,754.0%	—%

⁽¹⁾ - The total leverage ratio in effect at December 31, 2012 was "not more than 3.50".

33

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

$15.0 million Revolving Line of Credit - Synovus Bank

At December 31, 2013, the Company's subsidiary, South Bay had a $15.0 million revolving line of credit agreement (the "Line of Credit") with Synovus Bank, entered into in October 2013, with a maturity date of April 2017. The Line of Credit bears interest at a rate of 300 basis points plus the 90-day LIBOR. The Line of Credit is used by South Bay for its premium financing product. The Line of Credit allows South Bay to finance up to 90% of the eligible receivables less an applicable reserve of $500,000. At December 31, 2013, the balance of premium financing receivables included in notes receivable, net on the Consolidated Balance Sheet, totaled $5.4 million. The Company paid fees of approximately $0.2 million to Synovus Bank in connection with the execution of the Line of Credit, which have been capitalized and are being amortized using a straight-line method over the term of the Line of Credit.

17. Derivative Financial Instruments - Interest Rate Swap

The Company has an interest rate swap (the "Swap") with Wells Fargo Bank, N.A., pursuant to which the Company swapped the floating rate portion of its outstanding preferred trust securities to a fixed rate. The Swap, which is designated as a cash flow hedge, commenced in June 2012 and expires in June 2017. The following table summarizes the fair value (including accrued interest) and the related outstanding notional amount of the Company's single derivative instrument and indicates where within the Consolidated Balance Sheets each amount is reported:

	Balance Sheet Location	At December 31,
		2013			2012
Derivatives designated as cash flow hedging instruments:
Interest rate swap - notional value		$	35,000		$	35,000
Fair value of the Swap	Accrued expenses, accounts payable and other liabilities	2,930			4,338
Unrealized loss, net of tax, on the fair value of the Swap	AOCI	1,904			2,820
Variable rate of the interest rate swap		0.24		%	0.31		%
Fixed rate of the interest rate swap		3.47		%	3.47		%

The following table summarizes the pretax impact of the Swap on the Consolidated Financial Statements for the following periods:

	For the Years Ended December 31,
	2013		2012			2011
Gain (loss) recognized in AOCI on the derivative-effective portion	$	277	$	(1,007	)	$	(3,601	)
Loss reclassified from AOCI into income-effective portion	$	1,132	$	270		$	—
Gain (loss) recognized in income on the derivative-ineffective portion	$	—	$	—		$	—

The table below shows the estimated amount to be reclassified to earnings from AOCI during the next 12 months. These net losses reclassified into earnings are expected to primarily increase net interest expense related to the respective hedged item.

	At
	December 31, 2013
Estimated loss to be reclassified to earnings from AOCI during the next 12 months	$	1,122

18. Stock-Based Compensation

At December 31, 2013, the Company had outstanding time-based stock options under its 2005 Plan and outstanding time-based and performance-based stock options and restricted stock awards under its 2010 Plan. The 2005 Plan permits awards of (i) Incentive Stock Options, (ii) Non-qualified Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock and (v) Restricted Stock Units. The 2010 Plan permits awards of (i) Incentive Stock Options, (ii) Non-qualified Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock, (v) Other Stock-Based Awards and (vi) Performance-Based Compensation Awards.

34

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table details the 2005 Plan and the 2010 Plan at December 31, 2013:

	2005 Plan	2010 Plan
Date the plan was established	October 18, 2005	December 13, 2010
Share permitted to be issued under the plan	1,312,500	4,000,000
Maximum contractual term of grants under the plan (in years)	10.0	10.0
Time-based stock options outstanding under the plan	1,545,462	384,945
Performance-based stock options outstanding under the plan	—	289,306
Time-based restricted stock awards under the plan	—	139,680
Performance-based restricted stock awards outstanding under the plan	—	130,629

Stock Options

The Company granted 60,000 time-based stock options to employees during the year ended December 31, 2013, which vest in equal portions on each of the four anniversaries of the grant date. During the year ended December 31, 2013, the Company granted 228,981 performance-based stock options under the Company's Long-Term Incentive Plan ("LTIP"). The performance-based awards will vest, if at all, should the Company achieve three-year performance goals on or before December 31, 2015 for (i) net revenue (Compound Annual Growth Rate), (ii) earnings growth (Net Income) and (iii) profitable growth (Return on Average Equity). The performance metrics are equally weighted such that achievement of any one target results in vesting of one-third of the total equity award. If any of the target(s) are not attained by December 31, 2015, the one-third portion(s) of the award associated with the unattained target(s) will be canceled. The Company's time-based and performance-based stock option activity for the following periods is presented below:

	Time-Based								Performance-Based
	Options Outstanding		Weighted Average Exercise Price (in dollars per share)		Options Exercisable		Weighted Average Exercise Price (in dollars per share)		Options Outstanding (1)		Weighted Average Exercise Price (in dollars per share)		Options Exercisable	Weighted Average Exercise Price (in dollars per share)
Balance, January 1, 2012	1,893,731		$	4.15	1,607,307		$	3.41	—		$	—	—	$	—
Granted	125,000		7.97		—		—		185,000		8.00		—	—
Vested	—		—		85,233		8.50		—		—		—	—
Exercised	(2,500	)	7.84		(2,500	)	7.84		—		—		—	—
Canceled/forfeited	—		—		—		—		—		—		—	—
Balance, December 31, 2012	2,016,231		$	4.38	1,690,040		$	3.66	185,000		$	8.00	—	$	—
Granted	60,000		7.62		—		—		228,981		8.89		—	—
Vested	—		—		122,461		8.50		—		—		—	—
Exercised	(6,250	)	7.84		(6,250	)	7.84		—		—		—	—
Canceled/forfeited	(139,574	)	7.91		—		—		(124,675	)	8.57		—	—
Balance, December 31, 2013	1,930,407		$	4.22	1,806,251		$	3.98	289,306		$	8.46	—	$	—
Weighted average remaining contractual term at December 31, 2013 (in years)	3.8				3.5				8.8				0

⁽¹⁾ The performance-based stock options granted during the year ended December 31, 2012 will begin to vest equally over three years upon the Company's compensation committee determining that the Company has attained an Adjusted EBITDA of $46.0 million.

35

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table presents the Company's outstanding and exercisable time-based and performance-based stock options by exercise price at December 31, 2013:

	Options Outstanding				Options Exercisable
Exercise Price	Option Shares Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price (in dollars per share)		Option Shares Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price (in dollars per share)
$3.03	787,500	1.88	$	3.03	787,500	1.88	$	3.03
3.25	757,963	3.82	3.25		757,963	3.82	3.25
7.62	60,000	9.67	7.62		—	—	—
7.84	195,000	7.50	7.84		135,844	7.50	7.84
7.93	5,000	8.75	7.93		—	—	—
7.97	36,676	8.67	7.97		36,676	8.67	7.97
8.00	140,000	8.50	8.00		—	—	—
8.89	149,306	9.00	8.89		—	—	—
11.00	88,268	6.96	11.00		88,268	6.96	11.00
Totals	2,219,713	4.47	$	4.77	1,806,251	3.50	$	3.98

Information on time-based and performance-based stock options, vested and expected to vest, is as follows:
	At
	December 31, 2013
	Time-Based		Performance-Based
Number of shares vested and expected to vest	1,922,398		133,001
Weighted average remaining contractual life (in years)	3.8		8.5
Weighted average exercise price per option (in dollars)	$	4.20	$	8.00
Intrinsic value (in thousands)	$	8,060	$	36

Additional information on time-based and performance-based options granted, vested and exercised is presented below:

	For the Years Ended December 31,
	2013		2012		2011
Weighted-average grant date fair value of stock options granted (in dollars)	$	2.99	$	2.80	$	2.92
Total stock options granted (in shares)	288,981		310,000		280,000
Total fair value of stock options vested during the year	$	366	$	268	$	268
Total intrinsic value of stock options exercised (1)	$	1	$	—	$	2,920
Cash received from stock option exercises	$	49	$	20	$	607
Tax benefits realized from exercised stock options	$	—	$	—	$	45
Cash used to settle equity instruments granted under stock-based compensation awards	$	—	$	—	$	—
New shares issued upon the exercise of stock options	6,250		2,500		322,061
Outstanding stock options issued outside of existing plans (in shares)	272,338		272,338		272,338

⁽¹⁾ Calculated as the difference between the market value at the exercise date and the exercise price of the shares.

The weighted average assumptions used to estimate the fair values of all stock options granted is as follows:

	For the Years Ended December 31,
	2013		2012		2011
Expected term (years)	6.3		6.2		6.1
Expected volatility	34.14	%	34.34	%	33.95	%
Expected dividends	—	%	—	%	—	%
Risk-free rate	1.22	%	0.91	%	2.22	%

Restricted Stock Awards

The Company granted 6,016 time-based restricted stock awards to employees during the year ended December 31, 2013, which vest in equal portions on each of the four anniversaries of the grant date. During the year ended December 31, 2013, the Company granted 76,326 performance-based restricted stock awards to employees under the LTIP. The performance-based restricted stock awards will vest based on the same criteria as the performance based stock options described in the above section titled, "Stock Options." In addition, during the year ended December 31, 2013, the Company granted 75,000 time-based restricted stock awards, equally distributed to five

36

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

of its Directors, which vest in equal portions on each of the three anniversaries of the grant date. The Company's time-based and performance-based restricted stock award activity for the following periods is presented below:

	Time-Based				Performance-Based
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Shares outstanding at January 1, 2012	33,000		$	10.69	80,861		$	11.00
Grants	88,000		7.48		—		—
Vests	(18,000	)	10.43		—		—
Forfeitures	—		—		—		—
Shares outstanding at December 31, 2012	103,000		8.00		80,861		11.00
Grants	81,016		9.39		76,326		8.89
Vests	(44,336	)	8.67		—		—
Forfeitures	—		—		(26,558	)	8.89
Shares outstanding at December 31, 2013	139,680		$	8.59	130,629		$	10.20

Stock-based Compensation Expense

Total time-based and performance-based stock-based compensation expense and the related income tax (benefit) recognized on the Consolidated Statements of Income is as follows:

	For the Years Ended December 31,
	2013			2012			2011
Personnel costs	$	722		$	661		$	593
Other operating expenses	506			293			154
Income tax benefit	(470		)	(365		)	(286		)
Net stock-based compensation expense	$	758		$	589		$	461

Additional information on total non-vested stock-based compensation is as follows:	At December 31, 2013
	Stock Options		Restricted Stock Awards
Unrecognized compensation cost related to non-vested awards	$	431	$	986
Weighted-average recognition period (in years)	2.4		4.7

For the year ended December 31, 2013, the Company did not recognize expense on 149,306 performance-based stock options and 49,768 performance-based restricted stock awards because the attainment of the performance metrics associated with these awards was not probable based on current projections.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("ESPP"), which allows the Company to issue up to 1,000,000 shares of common stock to all eligible employees, including the Company's named executive officers, under the same offering and eligibility terms. The ESPP qualifies under Section 423 of the Internal Revenue Code and allows eligible employees to contribute, at their discretion, up to 10% of their payroll, up to $25,000 per year, to purchase up to a maximum of 3,500 shares of the Company's common stock per offering period. The purchase price of Fortegra's common stock is equal to 85% of the lesser of the fair market value of the closing stock price of Fortegra's common stock on either the first day of the offering period or the last day of the offering period. Each offering period has a duration of six months and begins on January 1st and July 1st of each year.

Information related to the Company's ESPP is as follows:	For the Years Ended December 31,
	2013		2012		2011 (1)
Common stock issued under the ESPP (in shares)	61,336		53,511		10,167
Weighted-average purchase price per share by participant in the ESPP	$	5.83	$	6.18	$	5.68
Total cash proceeds received from the issuance of common shares under the ESPP	$	357	$	330	$	58
ESPP compensation costs recognized	$	101	$	90	$	15

⁽¹⁾ The Company's ESPP began open enrollment in July 2011.

19. Share Repurchase Plan

Fortegra has an active share repurchase plan, which allows the Company to purchase up to $15.0 million in total of the Company's common stock to be purchased from time to time through open market or private transactions. The Board of Directors approved a $10.0

37

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

million share repurchase plan in November 2011 and in August 2013 increased the size of the plan by $5.0 million. At December 31, 2013, the Company had $7.2 million still available for repurchase under the plan. The share repurchase plan has no expiration date and provides for shares to be repurchased for general corporate purposes, which may include serving as a resource for funding potential acquisitions and employee benefit plans. The timing, price and quantity of purchases are at the discretion of Fortegra. The plan may be discontinued or suspended at any time and has no expiration date. None of the shares repurchased during the years ended December 31, 2013 and 2012, respectively, have been retired. The following table shows the shares repurchased during the following periods:

	For the Years Ended December 31,
	2013		2012
Shares repurchased during the period	200,000		508,080
Total cost of shares repurchased during the period	$	1,357	$	3,923
Average price paid per share for shares purchased during the period	$	6.79	$	7.72

20. 401(k) Profit Sharing Plan

The Company has a 401(k) plan (the "401(k) Plan") available to employees meeting certain eligibility requirements. The 401(k) Plan allows employees to contribute, at their discretion, a percentage of their pre-tax annual compensation and allows employees to select from various investment options based on their individual investment goals and risk tolerances. Under the 401(k) Plan, the Company will match 100% of each dollar of the employee contribution up to the maximum of 5% of the employee's annual compensation. The contributions of the 401(k) Plan are invested at the election of the employee in one or more investment options by a third party plan administrator. In August 2010, the Company suspended the matching contribution and therefore has not recorded a matching contribution expense for the years ending December 31, 2013, 2012 and 2011.

21. Deferred Compensation Plan

The Company has a nonqualified deferred compensation plan for certain officers. Provision has been made for the compensation which is payable upon their retirement or death. The deferred compensation is to be paid to the individual or their beneficiaries over a period of ten years commencing with the first year following retirement or death. As of December 31, 2013, there were no further payments required under the plan.

The Company also has deferred bonus agreements with several key executives whereby funds are contributed to "rabbi" trusts held for the benefit of the executives. The funds held in the rabbi trusts are included in cash and cash equivalents and the corresponding deferred compensation obligation is included in the line item, "Accrued expenses, accounts payable and other liabilities," on the Consolidated Balance Sheets. Pursuant to U.S. GAAP, the portion of the rabbi trusts invested in shares of the Company has been reflected in the treasury stock balance on the Consolidated Balance Sheets at December 31, 2013 and 2012.

22. Income Taxes

The provision for income taxes for both continuing and discontinued operations consisted of the following:

	For the Years Ended December 31,
	2013		2012		2011
Income taxes - continuing operations	$	5,660	$	6,716	$	5,947
Income taxes - discontinued operations	8,343		1,579		1,193
Income taxes	$	14,003	$	8,295	$	7,140

The provision for income taxes from continuing operations consisted of the following:	For the Years Ended December 31,
	2013			2012		2011
Current	$	7,978		$	4,272	$	4,797
Deferred	(2,318		)	2,444		1,150
Income taxes - continuing operations	$	5,660		$	6,716	$	5,947

38

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The following table shows a reconciliation of income taxes from continuing operations calculated at the federal statutory rate of 35% and the income tax expense attributable to continuing operations for the following periods:

	For the Years Ended December 31,
	2013					2012					2011
	Amount			Percent of Pre-tax Income		Amount			Percent of Pre-tax Income		Amount			Percent of Pre-tax Income
Income taxes at federal income tax rate	$	6,113		35.00	%	$	6,887		35.00	%	$	6,129		35.00	%
Effect of:
Small life deduction	(516		)	(2.95	)	(444		)	(2.26	)	(375		)	(2.14	)
Non-deductible expenses	91			0.52		33			0.17		233			1.33
Non-deductible preferred dividends	—			—		—			—		105			0.60
Tax exempt interest	(136		)	(0.78	)	(123		)	(0.63	)	(120		)	(0.69	)
State taxes	414			2.37		324			1.65		219			1.25
Prior year tax true up	247			1.41		98			0.50		(506		)	(2.89	)
Non-controlling interest	(516		)	(2.95	)	—			—		—			—
Other, net	(37		)	(0.21	)	(59		)	(0.30	)	262			1.50
Income taxes - continuing operations	$	5,660		32.41	%	$	6,716		34.13	%	$	5,947		33.96	%

The components of the Company's deferred income taxes are as follows:

	At December 31,
	2013		2012
Gross deferred tax assets
Unearned premiums	$	5,052	$	4,852
Deferred revenue	8,080		7,960
Net operating loss carryforward	245		516
Unrealized losses on investments	796		—
Other basis differences in investments	109		—
Unrealized loss on interest rate swap	1,341		1,636
Research credit	—		671
Unpaid claims	115		146
Deferred compensation	977		483
Bad debt allowance	60		238
Other deferred assets	122		108
Total gross deferred tax assets	16,897		16,610
Gross deferred tax liabilities
Deferred acquisition costs	20,228		20,250
Other intangible assets	7,769		14,165
Advanced commissions	4,524		4,204
Depreciation on property and equipment	4,035		5,250
Unrealized gains on investments	—		1,290
Other basis differences in investments	—		65
Other deferred tax liabilities	—		37
Total gross deferred tax liabilities	36,556		45,261
Deferred income taxes, net	$	19,659	$	28,651

At December 31, 2013, the Company had a net operating loss carry forward of $0.6 million, which is subject to certain limitations under IRC Section 382 and will begin to expire in 2025. The Company expects to fully utilize the net operating loss carryforward.

At December 31, 2012, the Company had research and experimentation (research) tax credit carry forwards for federal and state income tax purposes in the amount of $0.5 million and $0.2 million, respectively that were subject to certain limitations under IRC Section 382 and were to begin to expire in 2019. As part of the valuation determinations of the subsidiary in which the research credit was generated, the Company recorded a $0.2 million liability against the research credit carryforward deferred tax asset. At December 31, 2013, the research credits were no longer available to the Company since they were generated by eReinsure, which was sold on December 31, 2013.

The Company has reviewed its uncertain tax positions and management has concluded that there are no additional amounts required to be recorded.

39

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

In 2012, the Company was under examination by the Internal Revenue Service ("IRS") for the 2010 and 2009 tax years. In February 2013, the IRS completed its field audit for those tax years and presented its findings.  The Company has agreed to those findings and paid $57.0 thousand, which was expensed in the first quarter of 2013.

The Company's income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statutes of limitations by the IRS for the tax years 2011 through 2013. The years open to examination by state taxing authorities vary by jurisdiction. There are no extensions of the statute of limitations to assess income taxes currently in effect.

23. Fair Value of Financial Instruments 

The carrying and fair values of financial instruments are as follows:	At
	December 31, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	21,681	$	21,681	$	15,209	$	15,209
Restricted cash	17,293		17,293		31,142		31,142
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	51,435		51,435		23,178		23,178
Municipal securities	24,547		24,547		17,041		17,041
Corporate securities	55,360		55,360		70,008		70,008
Mortgage-backed securities	—		—		289		289
Obligations of foreign governments	409		409		—		—
Asset-backed securities	—		—		125		125
Equity securities:
Common stock - publicly traded	47		47		42		42
Preferred stock - publicly traded	5,087		5,087		5,107		5,107
Common stock - non-publicly traded	51		51		58		58
Preferred stock - non-publicly traded	1,013		1,013		1,013		1,013
Notes receivable	11,920		11,920		11,290		11,290
Accounts and premiums receivable, net	18,702		18,702		27,302		27,302
Other receivables	33,409		33,409		13,393		13,393
Short-term investments	871		871		1,222		1,222
Total financial assets	$	241,825	$	241,825	$	216,419	$	216,419
Financial liabilities:
Notes payable	$	3,273	$	3,273	$	89,438	$	89,438
Preferred trust securities	35,000		35,000		35,000		35,000
Interest rate swap	2,930		2,930		4,338		4,338
Total financial liabilities	$	41,203	$	41,203	$	128,776	$	128,776

40

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

The Company's financial assets and liabilities accounted for at fair value by level within the fair value hierarchy are as follows:

	At December 31, 2013
			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	$	51,435	$	—	$	51,435	$	—
Municipal securities	24,547		—		24,547		—
Corporate securities	55,360		—		55,360		—
Obligations of foreign governments	409		—		409		—
Equity securities:
Common stock - publicly traded	47		47		—		—
Preferred stock - publicly traded	5,087		5,087		—		—
Common stock - non-publicly traded	51		—		—		51
Preferred stock - non-publicly traded	1,013		—		—		1,013
Short-term investments	871		871		—		—
Total assets	$	138,820	$	6,005	$	131,751	$	1,064
Financial Liabilities:
Interest rate swap	$	2,930	$	—	$	2,930	$	—

	At December 31, 2012
			Fair Value Measurements Using:
			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Fixed maturity securities:
Obligations of the U.S. Treasury and U.S. Government agencies	$	23,178	$	—	$	23,178	$	—
Municipal securities	17,041		—		17,041		—
Corporate securities	70,008		—		69,956		52
Mortgage-backed securities	289		—		289		—
Asset-backed securities	125		—		125		—
Equity securities:
Common stock - publicly traded	42		42				—
Preferred stock - publicly traded	5,107		5,107		—		—
Common stock - non-publicly traded	58		—		—		58
Preferred stock - non-publicly traded	1,013		—		—		1,013
Short-term investments	1,222		1,222		—		—
Total Assets	$	118,083	$	6,371	$	110,589	$	1,123
Financial Liabilities:
Interest rate swap	$	4,338	$	—	$	4,338	$	—

There were no transfers between Level 1 and Level 2 for the year ended December 31, 2013. For the year ended December 31, 2013, one corporate security was transferred from Level 3 to Level 2. This transfer occurred due to the availability of Level 2 pricing for the equity security, which was unavailable in prior periods. The Company's use of Level 3 unobservable inputs included six individual securities that accounted for 0.8% of total investments at December 31, 2013. The Company utilized an independent third party pricing service to value four of the Level 3 securities. The values of two equity securities in Level 3, which are non-publicly traded preferred stocks, were calculated by the Company. One of the equity securities, with a value of $1.0 million was valued by taking into account the strength of the issuer's parent company guaranteeing the dividend of the issuer. While one of the Level 3 equity securities, with a value of $13.0 thousand, was valued by estimating the total value of the Class-A shares outstanding by the issuer and a review of the

41

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

company's audited financial statements. At December 31, 2012, the Company had seven individual securities valued under Level 3 that accounted for 1.0% of total investments.

The following table summarizes the changes in Level 3 assets measured at fair value:	For the Years Ended December 31,
	2013			2012
Beginning balance, January 1,	$	1,123		$	1,204
Total investment gains or losses (realized/unrealized):
Included in net income	—			—
Included in other comprehensive (loss)	(32		)	(31		)
Sales	—			(47		)
Transfers (out of) Level 3	(27		)	(3		)
Ending balance, December 31,	$	1,064		$	1,123

24. Statutory Reporting and Insurance Company Subsidiaries Dividend Restrictions

The Company's insurance company subsidiaries may pay dividends to the Company, subject to statutory restrictions. Payments in excess of statutory restrictions (extraordinary dividends) to the Company are permitted only with prior approval of the insurance department of the applicable state of domicile. All dividends from subsidiaries were eliminated in the Consolidated Financial Statements. The following table sets forth the dividends paid to the Company by its insurance company subsidiaries for the following periods:

	For the Years Ended December 31,
	2013		2012
Ordinary dividends	$	2,383	$	2,783
Extraordinary dividends	—		—
Total dividends	$	2,383	$	2,783

The following table details the combined statutory capital and surplus of the Company's insurance company subsidiaries, the required minimum statutory capital and surplus, as required by the laws of the states in which they are domiciled and the combined amount available for ordinary dividends of the Company's insurance company subsidiaries for the following periods:

	At December 31,
	2013		2012
Combined statutory capital and surplus of the Company's insurance company subsidiaries	$	69,269	$	53,885
Required minimum statutory capital and surplus	$	17,200	$	15,300
Amount available for ordinary dividends of the Company's insurance company subsidiaries	$	3,989	$	4,500

For the year ended December 31, 2013, the maximum amount of dividends that our regulated insurance company subsidiaries could pay under applicable laws and regulations without regulatory approval was $4.0 million. The Company may seek regulatory approval to pay dividends in excess of this permitted amount, but there can be no assurance that the Company would receive regulatory approval if sought.

Under the NAIC's Risk-Based Capital Act of 1995, a company's Risk-Based Capital ("RBC") is calculated by applying certain risk factors to various asset, claim and reserve items. If a company's adjusted surplus falls below calculated RBC thresholds, regulatory intervention or oversight is required. The Company's insurance company subsidiaries' RBC levels, as calculated in accordance with the NAIC's RBC instructions, exceeded all RBC thresholds as of December 31, 2013 and 2012, respectively.

The amount of ordinary dividends available from the Company's two insurance company subsidiaries domiciled in the state of Georgia, Life of the South Insurance Company and The Insurance Company of the South, was impacted in the third quarter of 2013 by a change in Georgia's Insurance Regulations.  Previously, the maximum amount of ordinary dividends payable in any one year by an insurer domiciled in Georgia was defined as the greater of a) 10 percent of the insurer's surplus with regards to policyholders as of December 31 of the preceding year, or b) the net gain from operations of the insurer (for life companies) or the net income not including realized capital gains (for non-life companies) for the 12 month period ending December 31 of the preceding year.  Now, the maximum ordinary dividend is defined as the lesser of these two measures.  This regulation change reduced the amount of ordinary dividends available from these insurance company subsidiaries at December 31, 2013 by $2.2 million.

42

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

25. Commitments and Contingencies

Commitments

The Company may, from time to time and in the ordinary course of normal business, enter into certain contractual obligations or commitments.

As part of the 2012 acquisition of ProtectCELL, the Company has a conditional commitment to provide up to $10.2 million of additional capital ("Additional Fortegra Capital Contributions") to ProtectCELL if the board of directors of ProtectCELL (the "PC Board") determines that ProtectCELL requires additional funds to support expansion and growth, or other appropriate business needs.

The Company is obligated to evaluate any such funding request received from the PC Board in good faith to determine whether in the Company's reasonable business judgment the requested capital should be contributed. Fortegra is not required to honor the funding request from the PC Board if it in good faith deems the request to be imprudent or unjustified.

The benefits of such additional funding would inure to the Company and to the non-controlling ownership interest of ProtectCELL, in proportion to their respective ownership interests. However, in return for each $1,000 of Additional Fortegra Capital Contributions, the Fortegra Members shall receive one Series A Preferred Unit. Any unreturned Series A Preferred contribution is deducted from ProtectCELL's valuation in determining the option price.

Contingencies

The Company is a party to claims and litigation in the normal course of its operations. Management believes that the ultimate outcome of these matters in existence at December 31, 2013 are reserved against, covered by insurance or would not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.

The Company is currently a defendant in Mullins v. Southern Financial Life Insurance Co., which was filed on February 2, 2006, in the Pike Circuit Court, in the Commonwealth of Kentucky.  A class was certified on June 25, 2010.  At issue is the duration or term of coverage under certain policies.  The action alleges violations of the Consumer Protection Act and certain insurance statutes, as well as common law fraud.  The action seeks compensatory and punitive damages, attorney fees and interest.  The parties are currently involved in the merits discovery phase and discovery disputes have arisen.  Plaintiffs filed a Motion for Sanctions on April 5, 2012 in connection with the Company's efforts to locate and gather certificates and other documents from the Company's agents.  While the court did not award sanctions, it did order the Company to subpoena certain records from its agents.  In an effort to prevent the trial court from enforcing the order, the Company filed a Writ of Prohibition, which the Kentucky Court of Appeals denied on August 31, 2012.  In response, the Company filed a motion for discretionary review of the Writ of Prohibition. The Company also filed a direct appeal of the same order, on the grounds that the order could be construed as a finding of contempt on the part of the Company. The Court of Appeals dismissed the direct appeal on September 13, 2013, which prompted the Company to file a motion for discretionary review of the direct appeal. The Kentucky Supreme Court denied the Writ of Prohibition on November 21, 2013, but the direct appeal is still pending. No motions will be heard by the trial court while the direct appeal remains pending. To date, no trial date has been set.

The Company considers such litigation customary in its lines of business.  In management's opinion, based on information available at this time, the ultimate resolution of such litigation, which it is vigorously defending, should not be materially adverse to the financial position, results of operations or cash flows of the Company. It should be noted that large punitive damage awards, bearing little relation to actual damages sustained by plaintiffs, have been awarded in certain states against other companies in the credit insurance business. Loss contingencies may be taken as developments warrant, although such amounts are not reasonably estimable at this time.

26. Related Party Transactions

In conjunction with the December 31, 2012 acquisition of ProtectCELL, the Company assumed an office space lease between ProtectCELL and 39500 High Pointe, LLC ("High Pointe"). The ownership of High Pointe includes three members who were the founding members of ProtectCELL and are now employees of the Company. The Company made lease payments to High Pointe during the year ended December 31, 2013, which are reflected in the table below. The Company did not make any lease payments to High Pointe for the year ended December 31, 2012.

At December 31, 2012, ProtectCELL held a $6.1 million note receivable carrying an interest rate of 8.00% from High Pointe, which is fully secured by a mortgage on the office building owned by High Pointe (see the lease described above). For the year ending December 31, 2012, the Company did not receive payments from High Pointe on the note receivable. On March 15, 2013, ProtectCELL received $6.1 million from High Pointe, representing the full payoff of the outstanding balance of the note receivable. The Company only recorded interest income on this note receivable during the three months ended March 31, 2013.

43

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

An executive officer of ProtectCELL owns multiple wireless retail locations, which sell ProtectCELL protection plans to wireless retail customers. For the year ended December 31, 2013, the Company recorded income from and paid commissions for this related party arrangement, which are reflected in the table below. For the year ending December 31, 2012, the Company did not record income related to this related party arrangement.

In conjunction with the December 31, 2012 acquisition of 4Warranty, the Company assumed an office space lease between 4Warranty and Source International Incorporated ("Source"), effective January 1, 2013. The ownership of Source is comprised of two individuals who have consulting relationships with the Company. The Company made lease payments to Source for the year ended December 31, 2013, which are reflected in the table below. The Company did not make any lease payments to Source for the year ended December 31, 2012.

In January 2012, the Company recorded a note receivable due from an officer of the Company relating to the 2010 acquisition of South Bay Acceptance Corporation, which has a balance of $0.1 million at December 31, 2012.

In December 2011, the Company entered into an information technology support services agreement (the "IT Agreement") with a company for which a member serving on the Company's Board of Directors also serves on the board of the company receiving the information technology support services from the Company. The IT Agreement has no set term and calls for a total of $0.3 million plus reimbursement of expenses to be received by the Company over the duration of the agreement. The Company only recorded income from the IT Agreement during the year ended December 31, 2012, which is reflected in the table below.

In December 2011, the Company entered into a marketing and referral agreement (the "Marketing Agreement") with a company in which a member serving on the Company's Board of Directors also serves on the board of the company providing the marketing services (the "Marketer"). The Marketing Agreement has a five year term and requires the Company to pay the Marketer a per account fee per month based on the number of enrolled customers the Marketer obtains for the Company. In conjunction with this Marketing Agreement, during April 2013, the Company entered into an agreement under which the Marketer began selling insurance-related products of the Company to the Marketer's customers. The Company recorded income and paid claims, associated with the sale of the Company's insurance-related products, for the year ended December 31, 2013, which are reflected in the table below.

The following table details the amounts recorded on the Company's Consolidated Statements of Income resulting from related party transactions:

	For the Years Ended December 31,
	2013		2012		2011
Income recorded by ProtectCELL for protection plans sold	$	2,159	$	—	$	—
Income recorded for the sale of the Company's insurance-related products under the Marketing Agreement	948		—		—
Income recorded from the IT Agreement	—		218		—
Total related party income recorded by the Company	$	3,107	$	218	$	—
Interest income recorded on the High Pointe note receivable	$	21	$	—	$	—
Lease expense paid to High Pointe	$	403	$	—	$	—
Lease expense paid to Source	118		—		—
Total related party lease expense	$	521	$	—	$	—
Commissions paid by ProtectCELL for protection plans sold	$	852	$	—	$	—
Claims paid on the Company's insurance-related products under the Marketing Agreement	$	63	$	—	$	—
The following table details the amounts recorded on the Company's Consolidated Balance Sheets from related party transactions:
			At December 31,
			2013		2012
Accounts receivable from related parties			$	113	$	—
Notes receivable from related parties			$	—	$	6,269

44

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

27. Subsequent Events

Subsequent events have been measured through the date on which the Consolidated Financial Statements were filed. Management has determined that the following events merit disclosure as subsequent events:

Stock-Based Compensation Awards

In February 2014, the Company granted 30,000 time-based restricted stock awards to its Chief Executive Officer and 75,000 time-based restricted stock awards, equally distributed, to five of its Directors. The restricted stock vests equally on each of the three anniversaries of the grant date.

28. Summarized Quarterly Information (Unaudited)

	2013
	First Quarter		Second Quarter(2)		Third Quarter(2)			Fourth Quarter
Revenues	$	79,254	$	82,921	$	88,755		$	91,844
Net investment income	903		746		766			635
Net realized investment gains	7		1,280		756			—
Total revenues	80,164		84,947		90,277			92,479
Total expenses	77,633		79,934		85,939			86,894
Income from continuing operations before income taxes	2,531		5,013		4,338			5,585
Income taxes	482		1,593		1,852			1,733
Income from continuing operations before non-controlling interests	2,049		3,420		2,486			3,852
Discontinued operations - net of tax	1,262		1,207		601			9,320
Net income before non-controlling interests	3,311		4,627		3,087			13,172
Less: net income (loss) attributable to non-controlling interests	818		185		(135		)	614
Net income attributable to Fortegra Financial Corporation	$	2,493	$	4,442	$	3,222		$	12,558
Earnings per share - Basic: (1)
Net income from continuing operations - net of tax	$	0.06	$	0.17	$	0.14		$	0.17
Discontinued operations - net of tax	0.07		0.06		0.03			0.48
Net income attributable to Fortegra Financial Corporation	$	0.13	$	0.23	$	0.17		$	0.65
Earnings per share - Diluted:(1)
Net income from continuing operations - net of tax	$	0.06	$	0.16	$	0.13		$	0.16
Discontinued operations - net of tax	0.06		0.06		0.03			0.46
Net income attributable to Fortegra Financial Corporation	$	0.12	$	0.22	$	0.16		$	0.62
Weighted average common shares outstanding
Basic	19,556,743		19,540,610		19,405,597			19,410,655
Diluted	20,625,041		20,523,090		20,404,508			20,388,890

⁽¹⁾ - Earnings per share amounts may not recalculate due to rounding.

⁽²⁾ - During 2013, certain immaterial reclassifications were identified that impacted amounts for service and administrative fees in total revenues and commissions and other operating expenses in total expenses that were previously reported in the Company's Form 10-Q's for the quarters ended June 30, 2013 and September 30, 2013. These reclassification adjustments, separately and in the aggregate did not have a material impact on results previously reported for those quarterly periods and had no effect on reported net income. For the quarters ended June 30, 2013 and September 30, 2013, total revenues were decreased by $4.9 million and $3.5 million, respectively, while total expenses were reduced by the same amounts for the respective periods.

45

FORTEGRA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Share Amounts, Per Share Amounts or Unless Otherwise Noted)

	2012
	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Revenues	$	61,619		$	60,949	$	67,965		$	62,736
Net investment income	743			732		744			848
Net realized investment gains (losses)	(3		)	13		(16		)	9
Total revenues	62,359			61,694		68,693			63,593
Total expenses	58,731			56,793		62,896			58,241
Income from continuing operations before income taxes	3,628			4,901		5,797			5,352
Income taxes	1,195			1,630		2,130			1,761
Income from continuing operations before non-controlling interests	2,433			3,271		3,667			3,591
Discontinued operations - net of tax	999			688		386			202
Net income before non-controlling interests	3,432			3,959		4,053			3,793
Less: net income attributable to non-controlling interests	18			15		29			10
Net income attributable to Fortegra Financial Corporation	$	3,414		$	3,944	$	4,024		$	3,783
Earnings per share - Basic: (1)
Net income from continuing operations - net of tax	$	0.12		$	0.17	$	0.19		$	0.18
Discontinued operations - net of tax	0.05			0.03		0.02			0.01
Net income attributable to Fortegra Financial Corporation	$	0.17		$	0.20	$	0.21		$	0.19
Earnings per share - Diluted:(1)
Net income from continuing operations - net of tax	$	0.11		$	0.16	$	0.18		$	0.17
Discontinued operations - net of tax	0.05			0.03		0.02			0.01
Net income attributable to Fortegra Financial Corporation	$	0.16		$	0.19	$	0.20		$	0.18
Weighted average common shares outstanding
Basic	19,904,819			19,705,276		19,531,694			19,507,733
Diluted	20,739,196			20,632,233		20,463,238			20,507,329

⁽¹⁾ - Earnings per share amounts may not recalculate due to rounding.

46

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On December 4, 2014 (the "Closing Date"), the merger of Caroline Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and an indirect wholly-owned subsidiary of Tiptree Operating Company, LLC, a Delaware limited liability company (“Parent”), with and into Fortegra Financial Corporation, a Delaware corporation (“Fortegra”) (the “Acquisition”), was consummated in accordance with the Agreement and Plan of Merger, dated as of August 11, 2014, by and among Parent, Caroline Holdings LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“Holdings”), Merger Sub and Fortegra (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, each outstanding share of Fortegra common stock, par value $0.01 per share (the “Fortegra Common Stock”), issued and outstanding immediately prior to the Closing Date (other than shares of Fortegra Common Stock owned by Parent, Holdings, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent, or Fortegra was converted automatically into and entitled the holder thereof to receive $10.00 in cash (the “Merger Consideration”), without interest. The source of funds for such cash payment was Parent’s cash on hand and borrowings of $120 million under a secured credit agreement (the “Credit Agreement”) among Fortegra and its 100% owned subsidiary LOTS Intermediate Co., as borrowers, the initial lenders named therein and Wells Fargo Bank, National Association, as administrative agent, swingline lender, and issuing lender. The amount borrowed under the Credit Agreement consisted of $70 million under a revolving facility and $50 million under a term loan facility (the “Facilities”). Tiptree Financial Inc. ("Tiptree"), Parent and their other business units do not have any obligations under the Facilities, directly or as guarantors, and the Facilities are not secured by their respective property or assets. Upon the closing of the Merger, Fortegra became an indirect wholly-owned subsidiary of Parent and the Fortegra Common Stock, which traded under the symbol “FRF”, ceased trading on, and has been delisted from, the New York Stock Exchange.

The unaudited pro forma combined balance sheet as of September 30, 2014 gives effect to the Acquisition as if it had occurred on September 30, 2014.

The unaudited pro forma combined statement of income for both the nine month period ended September 30, 2014 and fiscal year ended December 31, 2013 give effect to the Acquisition as if it had occurred January 1, 2013, which is the first day of the earliest period presented.

The pro forma adjustments are preliminary and have been made solely for purposes of developing the pro forma financial information for illustrative purposes necessary to comply with the requirements of applicable disclosure and reporting regulations. The actual results reported in periods following the Closing Date may differ significantly from the pro forma financial statements for a number of reasons including, but not limited to, differences in the ordinary course of the business conducted following the Closing Date, differences between the assumptions used to prepare these pro forma financial statements and actual amounts, cost savings from operating efficiencies, potential synergies, and the impact of the incremental costs incurred in integrating Fortegra.

As a result, the pro forma financial information does not purport to be indicative of what the financial condition or results of operations would have been had the transactions been completed on the applicable dates of this pro forma financial information. The pro forma financial statements are based upon the historical financial statements of Tiptree and Fortegra and do not purport to project the future financial condition and results of operations after giving effect to the Acquisition.

The pro forma adjustments and related assumptions are described in the accompanying Notes to the Unaudited Pro Forma Combined Financial Statements presented on the following pages. The pro forma adjustments are based on assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed of Fortegra, based on preliminary estimates of fair value. The values of certain assets and liabilities are preliminary in nature, and are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, receivables, fixed assets and deferred taxes. The valuations will be finalized as soon as practicable. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill.

The following unaudited pro forma combined financial information is derived from the historical financial statements of Tiptree and Fortegra. The pro forma financial information should be read in conjunction with the historical financial statements and the accompanying notes of Tiptree included in the Annual Report on Form 10-K of Tiptree and Fortegra for the year ended December 31, 2013, filed with the SEC on March 18, 2014 and March 14, 2014 respectively and the Quarterly Reports on Form 10-Q of Tiptree and Fortegra for the quarter ended September 30, 2014, both filed with the SEC on November 12, 2014.

1

Unaudited Pro Forma Combined Balance Sheet
September 30, 2014
										Pro Forma
	Historical					Pro Forma				Combined
(All Amounts in Thousands Except Share Amounts)	Tiptree Financial Inc.		Fortegra Financial Corp			Adjustments (Note 4)				Tiptree Financial Inc.
Assets:
Cash and cash equivalents	$	179,892	$	2,483		$	(91,740	)	A	$	90,635
Restricted cash	23,785		7,579			—				31,364
Trading assets at fair value	38,837		—			—				38,837
Available-for-sale securities at fair value	17,064		164,682			—				181,746
Short-term investments	—		871			—				871
Loans held for sale at fair value	32,109		—			—				32,109
Investments in loans at fair value	222,020		—			—				222,020
Loans owned at amortized cost, net of allowance	32,714		—			—				32,714
Notes receivable	—		19,421			—				19,421
Accounts and premiums receivable, net	—		31,444			—				31,444
Reinsurance receivable	—		241,159			—				241,159
Deferred acquisition costs	—		67,713			(66,318		)	B	1,395
Investments in partially-owned entities	2,832		—			—				2,832
Real estate	104,833		—			—				104,833
Policy loans	94,779		—			—				94,779
Property and equipment, net	—		12,400			—				12,400
Goodwill	4,617		73,701			22,696			C	101,014
Other intangibles, net	152,070		45,221			69,279			D	266,570
Deferred tax asset	7,487		8,728			—				16,215
Other assets	46,202		41,891			(7,005		)	E	81,088
Separate account assets	4,461,601		—			—				4,461,601
Assets of consolidated CLOs	1,627,680		—			—				1,627,680
Total assets	$	7,048,522	$	717,293		$	(73,088	)		$	7,692,727
Liabilities:
Derivative assets at fair value	$	460	$	—		$	—			$	460
U. S. treasuries, short position	19,234		—			—				19,234
Debt	425,349		45,173			120,000			F	590,522
Unpaid claims	—		42,427							42,427
Unearned premiums	—		282,348			—				282,348
Policy liabilities	105,956		21,478			—				127,434
Due to brokers, dealer and trustees	18,390		—			—				18,390
Deferred revenue	—		62,748			(25,891		)	G	36,857
Other liabilities and accrued expenses	52,627		83,715			6,105			H	142,447
Separate account liabilities	4,461,601		—			—				4,461,601
Liabilities of consolidated CLOs	1,417,141		—			—				1,417,141
Total liabilities	6,500,758		537,889			100,214				7,138,861
Stockholders’ Equity:
Preferred stock, par value $0.01, none issued	—		—			—				—
Common stock	42		213			(213		)	I	42
Treasury stock, at cost,	—		(8,027		)	8,027			I	—
Additional paid-in capital	225,813		100,380			(100,380		)	I	225,813
Accumulated other comprehensive income, net of tax	107		(1,558		)	1,558			I	107
Retained earnings (deficit)	21,301		82,294			(82,294		)	I	21,301
Stockholders’ equity before non-controlling interest	247,263		173,302			(173,302		)	I	247,263
Non-controlling interest	235,951		6,102			—				242,053
Appropriated retained earnings of consolidated TAMCO	64,550		—			—				64,550
Total stockholders’ equity	547,764		179,404			(173,302		)	I	553,866
Total liabilities and stockholders’ equity	$	7,048,522	$	717,293		$	(73,088	)		$	7,692,727

See accompanying notes to unaudited pro forma combined financial statements.

2

Unaudited Pro Forma Combined Statement of Income
For the Nine Months ended September 30, 2014
	Historical										Pro Forma
(All Amounts in Thousands Except Share and Per Share Amounts)	Tiptree Financial Inc.			Fortegra Financial Corporation			Pro Forma Adjustments (Note 4)				Combined Tiptree Financial Inc.
Net realized gain on investments	$	7,007		$	6		$	—			$	7,013
Change in unrealized appreciation on investments	(1,530		)	—			—				(1,530		)
Income from investments in partially owned entities	2,884			—			—				2,884
Net realized and unrealized gains	8,361			6			—				8,367
Investment income:
Interest income	17,664			2,315							19,979
Separate account fees	16,943			—							16,943
Administrative service fees	37,786			126,633			(6,453		)	K	157,966
Gain on sale of loans held for sale, net	5,117			—							5,117
Ceding commissions	—			32,567							32,567
Net earned premium	—			103,278							103,278
Rental revenue	13,308			—							13,308
Other income	3,404			1,888							5,292
Total investment income	94,222			266,681			(6,453		)		354,450
Total net realized and unrealized gains and investment income	102,583			266,687			(6,453		)		362,817
Expenses:
Interest expense	20,721			2,784			3,082			L	26,587
Payroll expense	35,642			30,444			(482		)	M	65,604
Professional fees	7,334			—			(1,258		)	N	6,076
Change in future policy benefits	3,260			—							3,260
Mortality expenses	7,892			—							7,892
Commission expense	1,837			119,726			(13,446		)	O	108,117
Depreciation and amortization expenses	5,656			7,782			1,199			P	14,637
Member benefit claims	—			31,111							31,111
Net losses and loss adjustment expenses				30,970							30,970
Other expenses	15,562			27,749			(2,313		)	Q	40,998
Total expenses	97,904			250,566			(13,218		)		335,252
Net income before taxes and income attributable to consolidated CLOs from continuing operations	4,679			16,121			6,765				27,565
Results of consolidated CLOs:
Income attributable to consolidated CLOs	20,742			—			—				20,742
Expenses attributable to consolidated CLOs	44,541			—			—				44,541
Net Loss attributable to consolidated CLOs	(23,799		)	—			—				(23,799		)
Income (loss) before taxes from continuing operations	(19,120		)	16,121			6,765				3,766
Provision for income taxes	906			4,624			2,258			R	7,788
(Loss) income from continuing operations	(20,026		)	11,497			4,507				(4,022		)
Discontinued operations:
Loss on sale of discontinued operations, net	—			(42		)					(42		)
Income from discontinued operations, net	—			—							—
Discontinued operations, net of tax	—			(42		)					(42		)
Net (loss) income:	(20,026		)	11,455			4,507				(4,064		)
Less: net income (loss) attributable to non-controlling interest	(2,353		)	1,693			—				(660		)
Less net loss attributable to VIE subordinated noteholders	(20,041		)	—			—				(20,041		)
Net income available to common stockholders:	$	2,368		$	9,762		$	4,507			$	16,637
Less: Discontinued operations, net											(42		)
Income from continuing operations before nonrecurring expenses directly attributable to the transaction											$	16,679
Earnings per share:
Basic, continuing operations, net	$	0.18		$	0.50						$	1.29
Basic, continuing operations before nonrecurring charges directly attributable to the transaction, net											1.29
Diluted, continuing operations, net	0.18			0.48							1.29
Diluted, continuing operations before nonrecurring charges directly attributable to the transaction, net	—			—							1.29
Weighted average number of common shares:
Basic	12,909,949			19,723,995			(19,723,995)			S	12,909,949
Diluted	12,909,949			20,528,052			(20,528,052)				12,909,949

See accompanying notes to unaudited pro forma combined financial statements.

3

Unaudited Pro Forma Combined Statement of Income
For the Year ending December 31, 2013
	Historical									Pro Forma
(All Amounts in Thousands Except Share and Per Share Amounts)	Tiptree Financial Inc.			Fortegra Financial Corporation		Pro Forma Adjustments (Note 4)				Combined Tiptree Financial Inc.
Net realized (loss) gain on investments	$	(833	)	$	2,043	$	(2,646	)	J	$	(1,436	)
Change in unrealized appreciation on investments	2,971			—		—				2,971
Income from investments in partially owned entities	3,250			—		—				3,250
Net realized and unrealized gains	5,388			2,043		—				7,431
Investment income:										—
Interest income	16,477			3,050		—				19,527
Separate account fees	22,248			—		—				22,248
Administrative service fees	49,489			172,427		(19,921		)	K	201,995
Ceding commissions	—			32,824		—				32,824
Net earned premium	—			136,787		—				136,787
Rental revenue	5,760			—		—				5,760
Other income	1,545			736		—				2,281
Total investment income	95,519			345,824		—				441,343
Total net realized and unrealized gains and investment income	100,907			347,867		(22,567		)		426,207
Expenses:
Interest expense	17,517			3,621		4,248			L	25,386
Payroll expense	35,552			39,487		(823		)	M	74,216
Professional fees	8,555			—		—				8,555
Change in future policy benefits	4,710			—		—				4,710
Mortality expenses	10,476			—		—				10,476
Commission expense	2,344			154,606		(52,387		)	O	104,563
Depreciation and amortization expenses	4,467			10,385		28,502			P	43,354
Member benefit claims	—			46,019		—				46,019
Net losses and loss adjustment expenses	—			41,567		—				41,567
Other expenses	15,456			34,715		(6,694		)	Q	43,477
Total expenses	99,077			330,400		(27,154		)		402,323
Net income before taxes and income attributable to consolidated CLOs from continuing operations	1,830			17,467		4,587				23,884
Results of consolidated CLOs:
Income attributable to consolidated CLOs	52,687			—		—				52,687
Expenses attributable to consolidated CLOs	48,268			—		—				48,268
Net Income attributable to consolidated CLOs	4,419			—		—				4,419
Income before taxes from continuing operations	6,249			17,467		4,587				28,303
Provision for income taxes	6,941			5,660		1,880			R	14,481
(Loss) income from continuing operations	(692		)	11,807		2,707				13,822
Discontinued operations:										—
Gain on sale of discontinued operations, net	15,463			8,844		—				24,307
Income from discontinued operations, net	1,647			3,546		—				5,193
Discontinued operations, net	17,110			12,390		—				29,500
Net income	16,418			24,197		2,707				43,322
Less: net income attributable to non-controlling interest	25,617			1,482		—				27,099
Less: net loss attributable to VIE subordinated noteholders	(18,044		)	—		—				(18,044		)
Net income available to common stockholders	$	8,845		$	22,715	$	2,707			$	34,267
Less: Discontinued operations, net										29,500
Income from continuing operations before nonrecurring expenses directly attributable to the transaction										$	4,767
Earnings per share:
Basic, continuing operations, net	$	(0.81	)	$	0.53					$	0.47
Basic, continuing operations before nonrecurring charges directly attributable to the transaction, net										0.47
Diluted, continuing operations, net	(0.81		)	0.50						0.47
Diluted, discontinued operations before nonrecurring charges directly attributable to the transaction, net										0.47
Weighted average number of common shares:
Basic	10,250,438			19,477,802		(19,477,802)			S	10,250,438
Diluted	10,250,438			20,482,652		(20,482,652)				10,250,438

See accompanying notes to unaudited pro forma combined financial statements.

4

Notes to the Unaudited Pro Forma Combined Financial Statements

Note 1 – Description of Transaction

On December 4, 2014, the merger of Caroline Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and an indirect wholly-owned subsidiary of Tiptree Operating Company, LLC, a Delaware limited liability company (“Parent”), with and into Fortegra Financial Corporation, a Delaware corporation (“Fortegra”) (the “Acquisition”), was consummated in accordance with the Agreement and Plan of Merger, dated as of August 11, 2014, by and among Parent, Caroline Holdings LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“Holdings”), Merger Sub and Fortegra (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, each outstanding share of Fortegra common stock, par value $0.01 per share (the “Fortegra Common Stock”), issued and outstanding immediately prior to the Effective Time (other than shares of Fortegra Common Stock owned by (i) Parent, Holdings, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent, (ii) Fortegra or (iii) stockholders who have properly exercised and perfected appraisal rights under Delaware law) was converted automatically into and entitled the holder thereof to receive $10.00 in cash (the “Merger Consideration”), without interest. The source of funds for such cash payment was Parent’s cash on hand and borrowings of $120 million under a secured credit agreement (the “Credit Agreement”) among Fortegra and its 100% owned subsidiary LOTS Intermediate Co., as borrowers, the initial lenders named therein and Wells Fargo Bank, National Association, as administrative agent, swingline lender, and issuing lender. The amount borrowed under the Credit Agreement consisted of $70 million under a revolving facility and $50 million under a term loan facility (the “Facilities”). Tiptree Financial Inc. ("Tiptree"), Parent and their other business units do not have any obligations under the Facilities, directly or as guarantors, and the Facilities are not secured by their respective property or assets. Upon the closing of the Acquisition, Fortegra became an indirect wholly-owned subsidiary of Parent and the Fortegra Common Stock, which traded under the symbol “FRF”, ceased trading on, and is being delisted from, the New York Stock Exchange.

The transaction is being treated as a stock purchase for tax purposes and any goodwill and identified intangible assets recorded by Tiptree in connection with the transaction will not be deductible for tax purposes. For tax purposes Fortegra's assets will reflect their historical adjusted tax basis.

Note 2 – Basis of Presentation

The unaudited pro forma combined financial information were prepared using the acquisition method of accounting under generally accepted accounting principles in the United States ("U.S. GAAP") and are based on the Tiptree audited consolidated financial statements and the audited financial statements of Fortegra for the fiscal year ended December 31, 2013 and the unaudited financial statements for the interim period ended September 30, 2014.

The unaudited pro forma combined balance sheet as of September 30, 2014 gives effect to the Acquisition as if it had occurred on September 30, 2014.

The unaudited pro forma combined statement of income for both the nine month period ended September 30, 2014 and fiscal year ended December 31, 2013 give effect to the Acquisition as if it had occurred January 1, 2013, which is the first day of the earliest period presented.

Under the acquisition method of accounting, the total consideration transferred to consummate the Acquisition will be allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the Acquisition. The principles of acquisition method of accounting require extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Fair value is defined under existing U.S. GAAP as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result of these standards, we may be required to record assets that we do not intend to use or sell and/or to value assets at fair value measurements that do not reflect our intended use of those assets. Many of these fair value measurements can be highly subjective and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. The valuations will be finalized as soon as practicable. Accordingly, the allocation of the consideration transferred in the Pro Forma Financial Statements is preliminary and may be adjusted upon completion of the final valuation of the assets acquired and liabilitiesassumed. When the valuations are finalized, any changes to the preliminary valuation of assets acquired or liabilities assumed may result in adjustments to separately identifiable intangible assets and goodwill. Such adjustments could be material.

5

The pro forma adjustments described in Note 4 are based on management’s judgment, including estimates relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed of Fortegra based on preliminary estimates of fair value.

The unaudited pro forma combined financial statements are provided for illustrative purposes only and do not purport to represent what our actual consolidated results of operations or consolidated financial position would have been had the Acquisition occurred on the date assumed, nor are they necessarily indicative of our future consolidated results of operations or financial position. The unaudited pro forma combined financial statements do not reflect (i) any cost savings from potential operating efficiencies, or any other potential synergies; or (ii) any incremental costs which may be incurred in connection with integrating Fortegra.

The transaction fees for the Acquisition are expensed as incurred and are estimated to be approximately $8.9 million ($6.1 million expensed by Tiptree and $2.8 million expensed by Fortegra). The transaction fees that will be incurred after September 30, 2014 have not been included as an adjustment to the unaudited pro forma combined statement of income as they do not meet the criteria of having a continuing impact.

Note 3 – Preliminary Purchase Price Allocation

Total consideration for the acquisition of Fortegra was funded through Parent's cash on hand of $91.7 million and borrowings of $120.0 million. The purchase price of Fortegra was largely determined on the basis of management’s expectations of future earnings and cash flows, resulting in the recognition of goodwill. The preliminary purchase price allocation below has been developed based on preliminary estimates of fair value using the historical financial statements of Fortegra as of the acquisition date. In addition, the allocation of the purchase price to intangible assets is based on preliminary fair value estimates and subject to the completion of management’s final analysis. Management’s preliminary allocation of the purchase price to the net assets acquired resulted in the recording of intangible assets. Accordingly, Tiptree recorded other intangibles consisting of $8.5 million in software with an estimated weighted average life of 5 years, $50.5 million for customer relationships with an estimated weighted average life of 8.2 years, value of business acquired of $36.5 million with an estimated weighted average life of 2.2 years and $6.0 million in trade names with an estimated weighted average life of 6.6 years. Other intangibles also include $13.0 million in insurance licenses, which are considered indefinite lived assets and are not amortized.

Because valuations of acquired assets and liabilities are still in process, information may become available within the measurement period which may or may not change these valuations and, accordingly, the purchase price allocation is subject to adjustment. The residual amount of the purchase price after preliminary allocation to net assets acquired and identifiable intangibles has been allocated to goodwill. The actual amounts recorded using acquisition date assets and liabilities may differ from the preliminary amounts presented as follows:

(Unaudited, in thousands)	Pro Forma
Fair value of consideration:
Cash	$	91,740
Debt	120,000
Total consideration	211,740
Recognized amounts of identifiable assets acquired and liabilities assumed:
Net assets acquired (excluding intangible assets; property plant and equipment; and Goodwill)	551,325
Intangible assets	114,500
Property, plant and equipment	4,527
Liabilities assumed (excluding debt incurred as consideration)	(545,699		)
Non-controlling interests	(6,355		)
Total identified net assets	118,298
Goodwill	$	93,442

Tiptree has determined that the acquisition of Fortegra did not result in any changes to tax bases of goodwill or other intangibles from prior acquisitions made by Fortegra.

6

Note 4 – Unaudited Pro Forma Adjustments

The following pro forma adjustments related to the Acquisition have been made to the unaudited pro forma combined balance sheet as of September 30, 2014 and the unaudited pro forma combined statements of income for the nine months ended September 30, 2014 and twelve months ended December 31, 2013:

Balance Sheet Adjustments

A. Cash and cash equivalents

The downward adjustment to cash and cash equivalents reflects the utilization of approximately $92.0 million of cash on hand to fund the Acquisition.

B.    Deferred acquisition costs

Deferred acquisition costs were eliminated as there is no future economic value to the asset as the capitalized costs have already been paid and there is neither future value nor obligation related to acquiring the business.  For the insurance policies in force, the intangible asset (value of the business acquired) was valued at $36.5 million.

C.    Goodwill

The upward adjustment to goodwill represents the amount recognized from the preliminary purchase price allocation. Tiptree's goodwill is not amortized but is reviewed annually for impairment or more frequently if certain indicators arise.

D.    Other intangibles

Other intangibles represent the amounts recognized from the preliminary purchase price allocation. Other intangible assets are comprised of $8.5 million in software, $50.5 million in customer relationships, $36.5 million in value of business acquired and $6.0 million in trade names with lives detailed above. Other intangible assets also includes $13.0 million in insurance licenses, which are considered indefinite lived assets and are not amortized. See Note 3 above for the estimated preliminary purchase price allocation.

E.      Other assets

The downward adjustment to other assets relates to the valuing of certain internally developed or significantly modified software as an intangible asset through purchase accounting instead of as a capitalized asset under the historical book basis, partially offset by upward adjustments to fair value for certain personal property.

F.    Debt

The adjustment reflects $120.0 million in borrowings under the Credit Agreement to fund the Acquisition.

G.    Deferred revenue

The downward adjustment of deferred revenue represents the amount above the fair value of the liability needed to satisfy the assumed legal obligation to fulfill the delivery of our various goods or services.

H.    Deferred tax liability

The adjustment reflects the net deferred tax liability associated with the various balance sheet adjustments for which there would be no corresponding change in tax basis, at the approximate blended tax rates specific to the subsidiaries to which the balance sheet adjustments would be attributed.

I.    Stockholders' Equity

The adjustments represent the elimination of Fortegra's equity balances at September 30, 2014.

Income Statement Adjustments

J.    Net realized gain on investments

The adjustment to realized gains represents the revision of investment cost basis to market value as of the assumed acquisition date of January 1, 2013, affecting the calculation of realized gain or loss on subsequent sales of investments held as of the acquisition date.

K.    Administrative service fees

The decrease in administrative service fees of $6.5 million relates to the downward adjustment of deferred revenue from book value to fair value for the liability assumed on the January 1, 2013 acquisition date.  This reduction results in a decrease in revenue to be earned over the period.

7

L.    Interest expense

The adjustment reflects the interest expense attributable to the carrying of an additional $120.0 million on the Credit Agreement as of the acquisition date reduced quarterly by $1.25 million mandatory principal payments, using an estimated annual interest rate of 3.16%, plus $0.5 million of annual amortization of deferred loan origination costs. The credit agreement provides for variable interest; a 1/8^th percentage point change in the interest rate would have resulted in an adjustment to pre-tax income of approximately $148,000 for the twelve months ended December 31, 2013, and an adjustment of approximately $107,000 for the nine months ended September 30, 2014.

M.    Payroll expense

The adjustment reflects the elimination of historically recognized Fortegra stock based compensation expense in the periods presented since all vested and unvested awards were converted to cash upon the Acquisition. Note that certain awards were unvested as of the acquisition date; related vesting expense recognized in the post-acquisition period in accordance with GAAP is a component of the $6.1 million in non-recurring transaction costs discussed in Note 2.

N.    Professional Fees

The adjustment reflects primarily professional legal fees directly attributable to the transaction occurred by Tiptree and Fortegra as of September 30, 2014.

O.    Commission expense

The decrease in commission expense is a direct result of the elimination of deferred acquisition costs assumed on the January 1, 2013 acquisition date.  This elimination results in no commission expense to be amortized into the income statement for the policies and memberships in effect as of the acquisition date.

P.    Depreciation and amortization expense

These adjustments comprise two components; amortization of intangibles and depreciation of capitalized assets. The incremental amortization expense was calculated using estimated weighted average lives of 5 years for the software intangibles, with an estimated value of $8.5 million, 8.2 years for the customer relationships, with an estimated value of $50.5 million, 2.2 years for the value of businesses acquired, with an estimated value of $36.5 million, and 6.6 years for trade names, with an estimated value of $6.0 million.

The amount allocated to identifiable assets and the estimated lives are based on preliminary fair value estimates under existing U.S. GAAP. The purchase price allocation for identifiable intangible assets is preliminary and was made only for the purpose of presenting the pro forma combined financial information.

Because valuations of acquired assets and liabilities are still in process, information may become available within the measurement period which may or may not change these valuations and, accordingly, the purchase price allocation is subject to adjustment. It is possible that the final valuation of identifiable intangible assets could be materially different from our estimates.

The increase in depreciation and amortization expenses was a direct result of the fair value applied to the intangible assets and personal property of Fortegra resulting in a higher value than there was in the historical book basis.  This increase in value resulted in a larger amount to amortize over the period.

Q.    Other expenses

The adjustment reflects the elimination of $1.5 million of changes in deferred premium taxes and deferred administrative costs, a direct result of the elimination of deferred costs assumed on the January 1, 2013 acquisition date, similar to the effect on commissions discussed in item N, above. The adjustment also reflects the elimination of $0.8 million of fees and stock based compensation to Fortegra’s directors, because these outside director positions were eliminated upon the acquisition, and stock based awards were fully resolved.

R.    Income taxes

The adjustment reflects the income tax effect of the pro forma adjustments to income using an effective tax rate of 41% for both the pro forma nine months ended September 30, 2014 and the twelve months ended December 31, 2013, based on Tiptree's historical applicable federal and state statutory tax rates. At this point, management has not yet determined the approximate federal and state statutory effective tax rate of the combined companies and believes 41% remains the current best estimate.

S.Weighted average shares

Fortegra common stock was converted to the right to receive $10 in cash per share upon closing of the Acquisition.

8

CORRESP

Tiptree Financial Inc.

780 Third Avenue, 21st Floor

New York, New York 10017

December 7, 2016

Via EDGAR

Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Mary Beth Breslin

Re: Tiptree Financial Inc. Registration Statement on Form S-3
Filed November 2, 2016 File No. 333-214394 (the “Registration Statement”)

Dear Ms. Breslin:

On behalf of Tiptree Financial Inc. (the “Registrant”), this letter responds to the comments of the Division of Corporation Finance (the “Staff”) by letter dated November 16, 2016 regarding the Registration Statement (the “Comment Letter”). The Registrant has simultaneously filed an Amendment No. 1 to the above referenced Registration Statement (“Amendment No. 1”) addressing the comments contained in the Comment Letter.

For the convenience of the Staff, we have repeated the Staff’s comments in italics immediately above our response to the comments. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in Amendment No. 1.

The Registrant’s responses to the Staff’s comments set forth in the Comment Letter are as follows:

Registration Statement on Form S-3 filed November 2, 2016

Facing Page

1. Please revise to include a Calculation of Registration Fee table as required by Form S-3.

The revisions requested by the Staff have been made.

Selling Stockholders, page 32

2. Please reconcile the sum of the number of shares being offered by the holders reflected in the table with both the number of shares disclosed on the prospectus cover page as being

Securities and Exchange CommissionDecember 7, 2016

Page 2

offered pursuant to this registration statement and the number as to which counsel has provided its opinion in Exhibit 5.1.

The revisions requested by the Staff have been made.

*****

Amendment No. 1 to the Registration Statement was filed in part by the Registrant in response to the comments set forth in the Comment Letter. We respectfully request your prompt review of Amendment No. 1 to the Registration Statement.

If you have any questions or comments or require further information with respect to the foregoing, please do not hesitate to call me at (212) 446-1407.

Very truly yours,        

/s/ Neil C. Rifkind

Neil C. Rifkind                        Vice President, General Counsel and Secretary

cc:    Jonathan Ilany, Chief Executive Officer, Tiptree Financial Inc.

Michael R. Littenberg, Esq., Ropes & Gray LLP