All right, we're going to go ahead and get started with the next presentation. First off, thank you all for joining us today. Up next, we have one of our investor relations clients, Tiptree Inc. Tiptree is roughly a $700 million market cap holding company that's historically operated in two sectors, specialty insurance and investment management. And with us today is the CFO, Scott McKinney. Thanks, Scott.
Thanks, Joe, and welcome everyone. Thanks for joining me today. I'll start today with just an overview of Tiptree, our value drivers and the potential that we see for future growth in the company. If you'd like a follow-up, I can certainly make myself available for one-on-one discussions. Before we get started, just this page contains our legal disclaimers covering the presentation today. We do use non-GAAP measures throughout the presentation, which the reconciliations are in the appendix, and this presentation is also available on our website. Tiptree is a holding company, and we allocate capital to businesses where we believe we can generate long-term growth and returns for our shareholders.
We look for unique, under-the-radar, small and middle-market companies with strong management teams that would benefit from both our capital as well as the experience that our team can bring to the table. Our structure provides us a competitive advantage as it affords us the ability to hold these businesses for longer periods of time, allowing us to focus on optimal value creation. Today, our largest business is The Fortegra Group, an insurance company that was acquired in twenty fourteen. Fortegra is a specialty insurer that focuses on niche property and casualty lines, as well as service offerings. The business has grown dramatically in the 10 years under Tiptree's ownership, all while generating consistent and growing earnings. We manage its investment portfolio with the primary goal of capital preservation while generating consistent yields.
With the current rate environment, we see significant opportunities to increase investment earnings compared to prior years. Our non-insurance businesses are collectively referred to as Tiptree Capital. When allocating capital, we take a diversified strategy. As total return investors, we look for a combination of operational cash returns as well as capital appreciation, and last but not least, we, when we evaluate capital allocation decisions, we do so as owners. Today, insiders own roughly a third of Tiptree. We are in our 17th year of operation and have been public since twenty thirteen. Over that time, we have owned approximately 20 businesses across the insurance and insurance services, specialty finance, asset management, real estate, and infrastructure sectors. The bottom left of this chart highlights our total shareholder return compared to benchmarks. Strong operating performance, combined with our history of strategic transactions, has led to returns above these benchmarks.
It's also worth highlighting, since twenty fourteen, we have repurchased fifteen million shares, or approximately 36% of the shares that were outstanding at year-end twenty fourteen, all of which were at steep discounts to book and intrinsic value at the time of the purchases. As I mentioned previously, we make investment decisions with the objective of providing our investors with access to small and middle-market opportunities, experienced management teams, and the opportunity to generate higher returns and value appreciation with Tiptree support. Since Tiptree's founding in two thousand and seven, we have invested in many sectors with realized investments yielding IRRs in excess of 20%. Although our primary objective today is to grow Fortegra, we will continue to look for opportunities across a broad group of industries. We assess our performance by return on capital as well as return to shareholders.
We believe adjusted net income is the best measure of operating earnings of the operating earnings power of the company. For the latest 12 months, we earned $77 million, or roughly an 18% return on equity on that basis. For a little bit of background, in June of 2022, $200 million of capital was raised at the Fortegra level from Warburg Pincus for approximately 25% of the business. At the time, this provided many strategic benefits, including highlighting the underlying value of Fortegra, as well as raising additional growth capital for the business. In March of this year, we, along with Warburg, invested an additional $40 million of capital into Fortegra to continue to support its growth objectives.
Each quarter, we provide information to calculate Tiptree's sum of the parts value, which includes a valuation range for Fortegra, reflecting the multiple implied by Warburg's investment in 2022, as well as earnings multiples of relevant peers. We believe there is significant value in the business, as evidenced by the $137 million of trailing twelve-month adjusted net income, which increased 42% when compared to the prior year. Today, our share price does not reflect this value. However, we remain focused on growing this intrinsic value and believe over time the discount will narrow, so with that overview of Tiptree, I'll take a deeper dive into our specialty insurance business. Fortegra continues to produce record top-line results with premium and premium equivalents of $2.9 billion on a trailing twelve-month basis.
Fortegra retains just under 50% of the risk that it underwrites, all while producing a combined ratio consistently in the low 90s, or what would represent close to a 10% margin. The key differentiators of the business really come down to three things. Number one, we are an underwriting-first organization. We invest in and continue to hire talented underwriters that have deep domain expertise. Second, we leverage technology to improve our underwriting performance and to create operating efficiencies. By using machine learning and different data analytics principles, our underwriters can better identify and monitor hidden and correlated risks across our $2.9 billion of underwritten volume. We operate a cost-efficient, agent-driven model that seeks to earn a blend of underwriting income and fee income on each of our products.
Third, we ensure alignment with our agents by sharing in the risk through two ways. One, variable commission structures, where commissions paid are adjusted based on the underwriting performance, or two, through traditional reinsurance, much of which is to captives owned by our agents and partners. As you can see in this chart, Fortegra underwrites many specialty lines, which include both insurance and fee-based offerings. Gross written premiums and equivalents have grown at a 22% compounded annual growth rate since 2018, driven by 20% organic growth, in addition to four bolt-on acquisitions in the auto warranty services sector over the past four years. Specialty insurance lines represent 87% of our written premiums and consist primarily of specialty commercial and personal lines.
Examples of underwritten lines include commercial property, professional and general liability, business owners policies, life sciences, contractors, oil and gas services, and hospitality lines. Excess and surplus lines are becoming a very meaningful driver of growth and profitability, with $944 million of premiums over the latest twelve months. We focus on agents or lines of business where the aggregate premium per year is less than $10 million. In fact, roughly 80% of our agents are less than that $10 million figure, which tends to be less competitive compared to the larger lines. Our services side of the business represents the remaining 13%, and these offerings consist primarily of service contracts that provide consumers with extended protection on things like automobiles, appliances, furniture, and mobile phones. We place a premium value on diversification.
That means diversification by product line, agent, partner, risk selection, as well as geography. We believe this approach produces more consistent results over time and limits aggregation and catastrophic exposures in our niche offerings. The hallmark of Fortegra is its consistent performance. That's really three things: consistent growth, delivering 23% compounded annual revenue growth since 2017. Consistent underwriting performance, delivering a 91% combined ratio over that same time. And finally, consistent as well as growing return on equity to shareholders, driven both by our insurance offerings as well as our capital-light, fee-based offerings. You can see in the bottom-right chart, adjusted net income has grown more than five times from $26 million in 2017 to $137 million over the latest twelve months.
In the second quarter, Fortegra posted record results on all fronts, with written premiums, revenues, and net income all high marks for the company. Revenues increased 38% while delivering an adjusted return on equity of 30% in the quarter. We expect this growth and profitability to continue, mostly driven by specialty commercial lines, as well as continuing to add to our services offerings. On the next chart, you can see the components of our investment portfolio, which stood at $1.4 billion at the end of the second quarter. 91% of it is invested in a combination of high credit quality, liquid securities, and cash, with an average S&P rating of double A.
Book yield was 4.1% at quarter end, up nearly 280 basis points from 2021, driven by improving yields on short-duration fixed income securities as well as money market funds. With these short-dated investments offering yields above 5%, we held a higher-than-average cash and short-term investment balance over the past year. The duration of our fixed income portfolio sits at around 2.7 years, which positions us well as maturities roll and the portfolio grows to reinvest at higher yields, all while maintaining high credit quality. There are several reasons we remain bullish on Fortegra's growth prospects. First, since 2017, we have seen unearned premiums and deferred revenues grow at a 27% CAGR. This $2.4 billion currently sitting on our balance sheet represents substantial future revenues.
Second, the markets for specialty P&C risks remain favorable, given inflationary pressures and the frequency and severity of catastrophic events across the market. Given this backdrop, we anticipate the hard market will remain and continue to extend Fortegra's growth profile as it has over the past several years. For context, the excess and surplus market has more than doubled from $50 billion in 2018 to $115 billion in 2023. This is driven by many factors, including favorable pricing trends, as well as an increased number of specialty lines moving from admitted to non-admitted markets. We, along with many of our peers, believe these trends will continue. In the E&S space, Fortegra has made several important hires over the past several years that have a strong track record of profitable underwriting.
In June of this year, we announced that Fortegra obtained its license to write specialty business in Belgium and the European Union. This will serve as an additional catalyst for growth alongside our ongoing efforts to onboard new agents and launch new programs in the U.S. And then finally, the services business has grown substantially, both in the U.S. and Europe over the last several years, and that's driven by a vertically integrated product offering. We believe that providing our agents with a full suite of products, including insurance, administration, premium finance, as well as other ancillary offerings, gives us a strategic advantage versus peers. This next slide is a bit of an eye chart, but it highlights the compelling financial profile against a broader set of specialty commercial peers....
Fortegra is one of two companies with a five-year growth rate above 20% and an average adjusted ROE above 20%. Additionally, the company's underwriting has produced a combined ratio of five points better than the median, with the lowest volatility from quarter to quarter across the peer group. We anticipate that this growth and steady performance will continue as we look ahead. So switching gears to our non-insurance holdings. Today, Tiptree Capital is primarily invested in our mortgage origination and servicing business, cash and short-dated US Treasuries, and then a small allocation to public equities. In our mortgage business, we saw extraordinary returns on capital in the 2020 and 2021 refinancing timeframe, which has obviously subsided over the past two years.
While the broader mortgage markets have experienced significant headwinds, our mortgage business has produced positive returns, most recently in the second quarter, driven by the servicing side of the business, as well as active cost management measures taken over the last year. Even with the volume and margin compression that we've seen over the past two years, over the past four years, the business has grown retained earnings substantially, resulting in a solid balance sheet that includes an MSR asset worth $42 million. As rates decline, we anticipate growth in originations for our mortgage business will increase. With cash balances on hand and no debt at our holding company level, we continue to look for opportunities to generate long-term absolute returns.
Without having set holding periods and able to take long, very long-term views, we believe we have a competitive advantage to others seeking to allocate capital in the small and middle market space. To wrap, before we go to Q&A, look, we have a great, great company in Fortegra. We believe it's well-positioned to continue its growth and value creation for us and our shareholders. Specialty markets remain favorable. Our services business continues to expand both in the U.S. and internationally. And we'll always keep our focus on the underwriting principles that have led to a consistent track record over the last several years. What can you expect from Tiptree going forward?
We will continue to do what we've done for the last 17 years, which is focus on long-term value creation, deploy capital very patiently, invest for total return, and as always, think like owners. Thanks for joining me today, and with that, I'll open it up for Q&A.
Can you talk about the Warburg transaction and why they invested directly in Fortegra versus Tiptree at the Tiptree level? Just conversations around that and what sets up the Warburg connection.
Sure. The question was, can you talk about the Warburg transaction and why they invested at the Fortegra level and how that set the business up? Yeah, the Warburg transaction came about as we were looking for capital for the business, and as I said earlier, it created a lot of strategic benefits as far as creating a valuation level for Tiptree, which has certainly impacted our share price. And Warburg and its portfolio companies have brought a lot of good synergies and opportunities for Fortegra and its growth, both from a cost management perspective as well as top line. As part of that transaction, they put in common equity as well as a convertible preferred that totaled $200 million.
As with any private equity firm, as part of that arrangement, there are certain thresholds contained in the agreement, one of which is that we can seek a qualified IPO, which we did seek and have since pulled the transaction, given market conditions and valuation levels that were presented to us. Then also within that term, within that agreement is an ability for them to exit over a five-year time horizon. The deal closed in 2022, so we certainly have time and runway before any decision that need to be made, but it's certainly something that we consider at the Tiptree level and in looking to different alternatives with Fortegra and how to best realize value for shareholders.
What are some of the ways they could exit besides the IPO, the five-year, five-year one?
Sure, what are the other ways that they could exit? Within the agreement, there is an ability for them in the middle of twenty-six to ask to put the company up for sale. I mean, look, we haven't had any of those conversations yet. As we've said multiple times, I mean, we're very focused on continuing to grow Fortegra. We just put in between us and Warburg $40 million of capital and are evaluating other hybrid forms of capital to potentially continue growing the company. But at some point, obviously, those discussions will be had, as with really any private equity firm that needs to have an exit for their investors. Sure.
Can you talk about your reserves history, the actions taken, any sort of releasing reserves or taking charges?
Sure.
CRs effect.
Yeah, sure. So, the question was reserves history at the insurance company level. What I would say is over the years, prior year favorable or unfavorable development has been within a very narrow range of 1%, dating back all the way to twenty fourteen. In twenty twenty-three, we did have around a $10 million favorable reserve development, which was the most sizable we've had, and that really related to the twenty twenty and twenty twenty-one calendar years where we had done a commutation on a fair amount of our casualty-driven business. But when you think about our reserves, we feel very very solid position.
You know, we review both internally and externally on a quarterly basis with our actuaries, and then Milliman does their own assessment as well. So we feel very good about the reserves and where they sit today.
So, what's the ownership of the chairman owns the investment management company, so how does that work with Tiptree?
Sure. So, the question was, our investment management company, which we've recently renamed to Tiptree Advisors, and what's that ownership structure? So, as of January first of next year, Tiptree will own 51% of that investment manager. Today, their mandate is really two things. One, they, along with Tiptree, manage the investment portfolio of Fortegra, so roughly $1.4 billion, as we went through earlier. And additionally, at the end of last year, we had a small acquisition of a company called Coherence, which manages around $200 million in a long-short credit strategy.
There is that arrangement. Tiptree Advisors' arrangement was set up several years ago in the 2019 timeframe, and the goal of that was really to seed investments into that fund with the goal of raising third-party capital. We've been able to do that through the acquisition of Coherence, but that's been the extent of our third-party capital, although the team has done a great job managing the flow to the insurance company. The following year, January first of 2026, there is a put/call option that we can exercise to buy the remainder of that business. And so we'll obviously evaluate that as that comes closer.