|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 today's digital world, change is the one constant. Disruptive innovations like cloud, mobility, social media, and the Internet of Things have reshaped the market and set new standards in customer expectations. To remain competitive, businesses must tap the potential of emerging technologies and markets through the rapid release of new products and services. However, the rigid and siloed structures of traditional IT platforms and processes are slowing them down – resulting in lengthy delivery ...
Sep. 4, 2015 01:45 PM EDT Reads: 646
The Internet of Things is in the early stages of mainstream deployment but it promises to unlock value and rapidly transform how organizations manage, operationalize, and monetize their assets. IoT is a complex structure of hardware, sensors, applications, analytics and devices that need to be able to communicate geographically and across all functions. Once the data is collected from numerous endpoints, the challenge then becomes converting it into actionable insight.
Sep. 4, 2015 12:30 PM EDT Reads: 121
SYS-CON Events announced today that Micron Technology, Inc., a global leader in advanced semiconductor systems, will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Micron’s broad portfolio of high-performance memory technologies – including DRAM, NAND and NOR Flash – is the basis for solid state drives, modules, multichip packages and other system solutions. Backed by more than 35 years of tech...
Sep. 4, 2015 12:00 PM EDT Reads: 295
With the Apple Watch making its way onto wrists all over the world, it’s only a matter of time before it becomes a staple in the workplace. In fact, Forrester reported that 68 percent of technology and business decision-makers characterize wearables as a top priority for 2015. Recognizing their business value early on, FinancialForce.com was the first to bring ERP to wearables, helping streamline communication across front and back office functions. In his session at @ThingsExpo, Kevin Roberts...
Sep. 4, 2015 12:00 PM EDT Reads: 110
SYS-CON Events announced today that IceWarp will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. IceWarp, the leader of cloud and on-premise messaging, delivers secured email, chat, documents, conferencing and collaboration to today's mobile workforce, all in one unified interface
Sep. 4, 2015 12:00 PM EDT Reads: 499
U.S. companies are desperately trying to recruit and hire skilled software engineers and developers, but there is simply not enough quality talent to go around. Tiempo Development is a nearshore software development company. Our headquarters are in AZ, but we are a pioneer and leader in outsourcing to Mexico, based on our three software development centers there. We have a proven process and we are experts at providing our customers with powerful solutions. We transform ideas into reality.
Sep. 4, 2015 11:45 AM EDT Reads: 584
As more and more data is generated from a variety of connected devices, the need to get insights from this data and predict future behavior and trends is increasingly essential for businesses. Real-time stream processing is needed in a variety of different industries such as Manufacturing, Oil and Gas, Automobile, Finance, Online Retail, Smart Grids, and Healthcare. Azure Stream Analytics is a fully managed distributed stream computation service that provides low latency, scalable processing of ...
Sep. 4, 2015 11:45 AM EDT Reads: 398
SYS-CON Events announced today the Containers & Microservices Bootcamp, being held November 3-4, 2015, in conjunction with 17th Cloud Expo, @ThingsExpo, and @DevOpsSummit at the Santa Clara Convention Center in Santa Clara, CA. This is your chance to get started with the latest technology in the industry. Combined with real-world scenarios and use cases, the Containers and Microservices Bootcamp, led by Janakiram MSV, a Microsoft Regional Director, will include presentations as well as hands-on...
Sep. 4, 2015 11:00 AM EDT Reads: 427
17th Cloud Expo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterprises ar...
Sep. 4, 2015 11:00 AM EDT Reads: 1,615
Everyone talks about continuous integration and continuous delivery but those are just two ends of the pipeline. In the middle of DevOps is continuous testing (CT), and many organizations are struggling to implement continuous testing effectively. After all, without continuous testing there is no delivery. And Lab-As-A-Service (LaaS) enhances the CT with dynamic on-demand self-serve test topologies. CT together with LAAS make a powerful combination that perfectly serves complex software developm...
Sep. 4, 2015 11:00 AM EDT Reads: 250
In 2014, the market witnessed a massive migration to the cloud as enterprises finally overcame their fears of the cloud’s viability, security, etc. Over the past 18 months, AWS, Google and Microsoft have waged an ongoing battle through a wave of price cuts and new features. For IT executives, sorting through all the noise to make the best cloud investment decisions has become daunting. Enterprises can and are moving away from a "one size fits all" cloud approach. The new competitive field has ...
Sep. 4, 2015 11:00 AM EDT Reads: 191
SYS-CON Events announced today that the "Second Containers & Microservices Expo" will take place November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Containers and microservices have become topics of intense interest throughout the cloud developer and enterprise IT communities.
Sep. 4, 2015 10:45 AM EDT Reads: 662
Moving an existing on-premise infrastructure into the cloud can be a complex and daunting proposition. It is critical to understand the benefits as well as the challenges associated with either a full or hybrid approach. In his session at 17th Cloud Expo, Richard Weiss, Principal Consultant at Pythian, will present a roadmap that can be leveraged by any organization to plan, analyze, evaluate and execute on a cloud migration solution. He will review the five major cloud transformation phases a...
Sep. 4, 2015 10:15 AM EDT Reads: 128
Mobile, social, Big Data, and cloud have fundamentally changed the way we live. “Anytime, anywhere” access to data and information is no longer a luxury; it’s a requirement, in both our personal and professional lives. For IT organizations, this means pressure has never been greater to deliver meaningful services to the business and customers.
Sep. 4, 2015 10:00 AM EDT Reads: 870
WebRTC services have already permeated corporate communications in the form of videoconferencing solutions. However, WebRTC has the potential of going beyond and catalyzing a new class of services providing more than calls with capabilities such as mass-scale real-time media broadcasting, enriched and augmented video, person-to-machine and machine-to-machine communications. In his session at @ThingsExpo, Luis Lopez, CEO of Kurento, will introduce the technologies required for implementing thes...
Sep. 4, 2015 10:00 AM EDT Reads: 136