|By PR Newswire||
|March 31, 2014 08:06 PM EDT||
TORONTO, March 31, 2014 /PRNewswire/ - (TSX: KFS) (NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") is pleased to announce our earnings for the fourth quarter and year ended December 31, 2013. All amounts are in U.S. dollars unless indicated otherwise.
"This was an important year for Kingsway. We made significant progress on our strategic plans in each of our business segments, strengthened our balance sheet and laid a firm foundation for future growth," stated Larry G. Swets, Jr., the Company's President and Chief Executive Officer.
Perhaps our most important strategic progress during the year was with respect to our one remaining legacy business - our collection of non-standard automobile insurance companies which comprise most of our Insurance Underwriting Segment. Currently, we write our continuing business through Mendota Insurance Company and Mendakota Insurance Company (collectively "Mendota"), while Universal Casualty Company ("UCC") and Kingsway Amigo Insurance Company ("Amigo") are being operated in voluntary run-offs. Mendota has been reorganized to focus only on insurance premium which we believe can be written at a profit. We believe we have positioned the company to begin to achieve a breakeven or better underwriting result during 2014. Furthermore, our two run-off companies, UCC and Amigo, are operating well within our expectations. UCC is no longer expected to negatively affect future operating results, and Amigo is well along that same path.
An important action which has helped position Mendota, UCC and Amigo to achieve materially improved results beginning in 2014 relates to how we have recorded our provisions for unpaid loss and loss adjustment expenses. Both Mendota and UCC have recorded at December 31, 2013 their provisions for unpaid loss and loss adjustment expenses at the highest level within the ranges of estimates provided by our outside actuarial firm for each of those companies. We feel comfortable that our strong provisions for unpaid loss and loss adjustment expenses will allow our future results to be determined principally by the profitable business we believe we are writing.
Strengthening Our Balance Sheet
For several years, beginning in late 2008, the Company embarked on an extensive plan to reduce its indebtedness. The instruments comprising the Company's indebtedness and the outstanding principal at each of December 31, 2008 and 2013 are:
|Instrument||Principal at December 31, 2008||Principal at December 31, 2013|
|Senior notes due 2012||$82.1 million||$0.00|
|Senior notes due 2014||$107.5 million||$14.4 million|
|LROC preferred units||$60.9 million||$14.9 million|
|Subordinated debt||$90.5 million||$90.5 million|
|Total||$341.0 million||$119.8 million|
Subsequent to December 31, 2013, the Company repaid the $14.4 million principal outstanding on its senior notes due 2014. As a result, the current principal outstanding related to the Company's indebtedness is $105.4 million.
Also subsequent to December 31, 2013, the Company closed on its previously announced private placement totaling $6.6 million. At closing, on February 3, 2014, the Company received gross proceeds of $6.6 million, resulting from the sale and issuance of 262,876 units for a purchase price of $25.00 per unit. Each unit consists of one class A convertible preferred share, series 1 (the "Preferred Shares"), and 6.25 common share class C purchase warrants. Each Preferred Share is convertible into 6.25 common shares at a conversion price of $4.00 per common share any time at the option of the holder prior to April 1, 2021. The maximum number of common shares issuable upon conversion of the Preferred Shares is 1,642,975 common shares. Each warrant will entitle the subscriber to purchase one common share of Kingsway at a price of $5.00 per common share at any time after September 16, 2016 and prior to expiry on September 15, 2023.
Laying a Foundation for Future Growth
The Company's management team and its board of directors are extremely focused on the following key initiatives for 2014:
- Achieve break-even underwriting results before net investment income and net realized gains in its non-standard automobile group of insurance subsidiaries while making conservative loss reserve allocations;
- Continue to reduce operating and interest expense at the holding company;
- Modestly grow each of the Insurance Services Segment businesses;
- Complete our previously announced plan to conduct an initial public offering ("IPO") of the common stock of our wholly owned subsidiary, 1347 Property Insurance Holdings, Inc., formerly known as Maison Insurance Holdings, Inc. ("1347 PIH"). On March 27, 2014, 1347 PIH filed a registration statement on Form S-1 with the Securities and Exchange Commission for the IPO; and
- Preserve the value of our substantial tax net operating losses.
The Company that your current management team and lead shareholders assumed control of at the end of 2008 is vastly different from the Company we present to you today. Through a mixture of creative financings, strategic acquisitions and the careful preservation of capital in our underwriting entities, we are in a much greater position to seize upon the opportunities we see in each of our segments and shall utilize our mix of talent and industry knowledge to build a lasting, profitable entity that can deliver reasonable returns to all stakeholders. Both the management team and the board of directors believe that the Company has the right mixture of assets, including financial, strategic and personnel, to execute on its stated plan to create long-term shareholder value. This is evidenced by our large ownership stake and alignment of interests.
For a detailed discussion of our capital allocation strategy and plan to create and sustain long-term shareholder value, we invite you to review our Annual Letter to Shareholders, which may be accessed at the Company's website or directly at http://bit.ly/kfs2013.
With respect to earnings, we reported a net loss of $10.7 million, or a loss of $0.75 per diluted share, for the fourth quarter and a net loss of $36.1 million, or a loss of $2.56 per diluted share for the year. The book value has decreased from $4.97 per share at December 31, 2012 to $2.25 per share at December 31, 2013. We also carry a valuation allowance, in the amount of $17.30 per share at December 31, 2013, against the deferred tax asset, primarily related to our loss carryforwards. For a detailed discussion of our earnings for the fourth quarter and year ended December 31, 2013 as well as other important information, please refer to our 2013 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 31, 2014.
About the Company
Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. The Company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS."
Consolidated Statements of Operations
|Years ended December 31,|
|Net premiums earned||$||109,608||$||114,937|
|Service fee and commission income||49,543||35,491|
|Net investment income||2,395||3,165|
|Net realized gains||3,505||1,084|
|Other-than-temporary impairment loss||(1,800)||(2,703)|
|Loss and loss adjustment expenses||87,553||100,184|
|Commissions and premium taxes||23,134||15,422|
|Cost of services sold||1,843||—|
|General and administrative expenses||79,812||73,856|
|Amortization of intangible assets||2,186||959|
|Contingent consideration expense||785||75|
|Impairment of asset held for sale||2,390||—|
Loss from continuing operations before loss on change in fair value of
debt, (loss) gain
on buy-back of debt, equity in net income (loss) of investee and income tax (benefit)
|Loss on change in fair value of debt||(9,060)||(9,234)|
|(Loss) gain on buy-back of debt||(24)||500|
|Equity in net income (loss) of investee||255||(1,004)|
|Loss from continuing operations before income tax (benefit) expense||(43,378)||(50,261)|
|Income tax (benefit) expense||(67)||3,017|
|Loss from continuing operations||(43,311)||(53,278)|
|Gain on liquidation of subsidiaries, net of taxes||7,227||—|
Less: net income (loss) attributable to noncontrolling interests in
|Net loss attributable to common shareholders||$||(36,861)||$||(52,083)|
|Loss per share - continuing operations:|
|Loss per share - net loss:|
|Weighted average shares outstanding (in '000s):|
Consolidated Balance Sheets
(in thousands, except per share data)
|December 31, 2013||December 31, 2012|
|Fixed maturities, at fair value (amortized cost of $53,455 and $77,858, respectively)||$||54,151||$||79,534|
|Equity investments, at fair value (cost of $3,554 and $2,305, respectively)||7,137||3,548|
|Limited liability investments||4,406||2,333|
|Other investments, at cost which approximates fair value||3,000||2,000|
|Short-term investments, at cost which approximates fair value||501||585|
|Cash and cash equivalents||98,589||80,813|
|Investment in investee||—||41,733|
|Accrued investment income||614||2,263|
|Premiums receivable, net of allowance for doubtful accounts of $2,123 and $4,040 respectively||32,035||35,598|
|Service fee receivable||19,012||15,173|
|Other receivables, net of allowance for doubtful accounts of $1,062 and $1,002, respectively||4,097||4,750|
|Prepaid reinsurance premiums||6,816||7,316|
|Deferred acquisition costs, net||12,392||14,102|
|Property and equipment, net of accumulated depreciation of $15,848 and $22,887, respectively||1,662||2,709|
|Intangible assets, net of accumulated amortization of $18,583 and $16,397, respectively||48,918||50,583|
|Asset held for sale||6,347||8,737|
|Liabilities and Shareholders' Equity|
|Unpaid loss and loss adjustment expenses:|
|Property and casualty||$||84,534||$||103,116|
|Vehicle service agreements||3,128||3,448|
|Total unpaid loss and loss adjustment expenses||87,662||106,564|
|LROC preferred units, at fair value||14,854||13,655|
|Senior unsecured debentures, at fair value||14,356||23,730|
|Subordinated debt, at fair value||28,471||23,774|
|Deferred income tax liability||4,173||3,054|
|Deferred service fees||48,788||48,987|
|Income taxes payable||2,984||2,879|
|Accrued expenses and other liabilities||36,821||34,740|
Class A preferred stock, no par value; unlimited number authorized; zero
issued and outstanding at
December 31, 2013
Common stock, no par value; unlimited number authorized; 16,429,761 and
13,148,971 issued and
outstanding at December 31, 2013 and December 31, 2012, respectively
|Additional paid-in capital||324,803||312,378|
|Accumulated other comprehensive income||9,601||14,762|
|Shareholders' equity attributable to common shareholders||35,474||65,071|
|Noncontrolling interests in consolidated subsidiaries||1,446||343|
|Total Shareholders' Equity||36,920||65,414|
|Total Liabilities and Shareholders' Equity||$||324,639||$||372,800|
Forward Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as "expects", "believes", "anticipates", "intends", "estimates", "seeks" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect Kingsway management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, please refer to the section entitled "Risk Factors" in the Company's 2013 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 31, 2014. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.
Additional information about Kingsway, including a copy of its 2013 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 31, 2014, can be accessed on the Canadian Securities Administrators' website at www.sedar.com, on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov or through the Company's website at www.kingsway-financial.com. We also invite you to review a detailed discussion of our capital allocation strategy and plan to create and sustain long-term shareholder value by reading our Annual Letter to Shareholders, which can be accessed through the Company's website or directly at http://bit.ly/kfs2013.
SOURCE Kingsway Financial Services Inc.
In his session at @ThingsExpo, Chris Klein, CEO and Co-founder of Rachio, will discuss next generation communities that are using IoT to create more sustainable, intelligent communities. One example is Sterling Ranch, a 10,000 home development that – with the help of Siemens – will integrate IoT technology into the community to provide residents with energy and water savings as well as intelligent security. Everything from stop lights to sprinkler systems to building infrastructures will run ef...
May. 3, 2016 08:30 AM EDT Reads: 1,085
SYS-CON Events announced today that Ericsson has been named “Gold Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. Ericsson is a world leader in the rapidly changing environment of communications technology – providing equipment, software and services to enable transformation through mobility. Some 40 percent of global mobile traffic runs through networks we have supplied. More than 1 billion subscribers around the world re...
May. 3, 2016 08:15 AM EDT Reads: 1,132
Increasing IoT connectivity is forcing enterprises to find elegant solutions to organize and visualize all incoming data from these connected devices with re-configurable dashboard widgets to effectively allow rapid decision-making for everything from immediate actions in tactical situations to strategic analysis and reporting. In his session at 18th Cloud Expo, Shikhir Singh, Senior Developer Relations Manager at Sencha, will discuss how to create HTML5 dashboards that interact with IoT devic...
May. 3, 2016 07:45 AM EDT Reads: 1,142
Artificial Intelligence has the potential to massively disrupt IoT. In his session at 18th Cloud Expo, AJ Abdallat, CEO of Beyond AI, will discuss what the five main drivers are in Artificial Intelligence that could shape the future of the Internet of Things. AJ Abdallat is CEO of Beyond AI. He has over 20 years of management experience in the fields of artificial intelligence, sensors, instruments, devices and software for telecommunications, life sciences, environmental monitoring, process...
May. 3, 2016 07:45 AM EDT Reads: 1,035
Internap Corporation has expanded its OpenStack-based bare-metal Infrastructure-as-a-Service offering, AgileSERVER 2.0, to its data centers in Amsterdam, Dallas and Santa Clara, Calif. Launched in 2015 out of Internap’s New York Metro data center in Secaucus, N.J., AgileSERVER 2.0 is now available in four locations globally, enabling enterprises and devops teams running mission-critical applications and big data workloads to build scale-out infrastructure environments that are higher performing ...
May. 3, 2016 07:15 AM EDT Reads: 1,361
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
May. 3, 2016 07:00 AM EDT Reads: 1,047
Much of the value of DevOps comes from a (renewed) focus on measurement, sharing, and continuous feedback loops. In increasingly complex DevOps workflows and environments, and especially in larger, regulated, or more crystallized organizations, these core concepts become even more critical. In his session at @DevOpsSummit at 18th Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, will show how, by focusing on 'metrics that matter,' you can provide objective, transparent, and meaningfu...
May. 3, 2016 06:45 AM EDT Reads: 808
If there is anything we have learned by now, is that every business paves their own unique path for releasing software- every pipeline, implementation and practices are a bit different, and DevOps comes in all shapes and sizes. Software delivery practices are often comprised of set of several complementing (or even competing) methodologies – such as leveraging Agile, DevOps and even a mix of ITIL, to create the combination that’s most suitable for your organization and that maximize your busines...
May. 2, 2016 07:45 PM EDT Reads: 1,897
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus inter...
May. 2, 2016 06:30 PM EDT Reads: 1,322
In the world of DevOps there are ‘known good practices’ – aka ‘patterns’ – and ‘known bad practices’ – aka ‘anti-patterns.' Many of these patterns and anti-patterns have been developed from real world experience, especially by the early adopters of DevOps theory; but many are more feasible in theory than in practice, especially for more recent entrants to the DevOps scene. In this power panel at @DevOpsSummit at 18th Cloud Expo, moderated by DevOps Conference Chair Andi Mann, panelists will dis...
May. 2, 2016 06:00 PM EDT Reads: 736
Up until last year, enterprises that were looking into cloud services usually undertook a long-term pilot with one of the large cloud providers, running test and dev workloads in the cloud. With cloud’s transition to mainstream adoption in 2015, and with enterprises migrating more and more workloads into the cloud and in between public and private environments, the single-provider approach must be revisited. In his session at 18th Cloud Expo, Yoav Mor, multi-cloud solution evangelist at Cloudy...
May. 2, 2016 05:30 PM EDT Reads: 1,604
See storage differently! Storage performance problems have only gotten worse and harder to solve as applications have become largely virtualized and moved to a cloud-based infrastructure. Storage performance in a virtualized environment is not just about IOPS, it is about how well that potential performance is guaranteed to individual VMs for these apps as the number of VMs keep going up real time. In his session at 18th Cloud Expo, Dhiraj Sehgal, in product and marketing at Tintri, will discu...
May. 2, 2016 04:00 PM EDT Reads: 927
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
May. 2, 2016 03:45 PM EDT Reads: 1,384
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
May. 2, 2016 03:30 PM EDT Reads: 1,096