Welcome!

News Feed Item

Kingsway Reports Fourth Quarter and Year-End Results and Provides Shareholder Update

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.

Strategic Progress

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
(in thousands, except per share data)

    Years ended December 31,
    2013   2012
Revenues:        
   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)
   Other income   9,027   7,617
Total revenues   172,278   159,591
Expenses:        
   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
   Restructuring expense   1,861   1,980
   Interest expense   7,263   7,638
   Amortization of intangible assets   2,186   959
   Contingent consideration expense   785   75
   Impairment of asset held for sale   2,390   —  
Total expenses   206,827   200,114
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)
expense
  (34,549)   (40,523)
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    —  
Net loss   $ (36,084)   $ (53,278)
   Less: net income (loss) attributable to noncontrolling interests in consolidated
   subsidiaries
  777   (1,195)
   Net loss attributable to common shareholders   $ (36,861)   $ (52,083)
Loss per share -  continuing operations:        
  Basic:   $ (3.07)   $ (4.05)
  Diluted:   $ (3.07)   $ (4.05)
Loss per share - net loss:        
  Basic:   $ (2.56)   $ (4.05)
  Diluted:   $ (2.56)   $ (4.05)
Weighted average shares outstanding (in '000s):        
  Basic:   14,111   13,149
  Diluted:   14,111   13,149


Consolidated Balance Sheets
(in thousands, except per share data)

    December 31, 2013   December 31, 2012
         
Assets        
Investments:        
     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
Total investments   69,195   88,000
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
Reinsurance recoverable   10,335   8,557
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
Goodwill   10,588   8,421
Intangible assets, net of accumulated amortization of $18,583 and $16,397, respectively   48,918   50,583
Other assets   4,039   4,045
Asset held for sale   6,347   8,737
Total Assets   $ 324,639   $ 372,800
Liabilities and Shareholders' Equity        
Liabilities:        
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
Unearned premiums   48,577   45,047
Reinsurance payable   1,033   4,956
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
Total Liabilities   $ 287,719   $ 307,386
Shareholders' Equity:        
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 deficit   (298,930)   (262,069)
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

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.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Mobile device usage has increased exponentially during the past several years, as consumers rely on handhelds for everything from news and weather to banking and purchases. What can we expect in the next few years? The way in which we interact with our devices will fundamentally change, as businesses leverage Artificial Intelligence. We already see this taking shape as businesses leverage AI for cost savings and customer responsiveness. This trend will continue, as AI is used for more sophistica...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
In his session at 21st Cloud Expo, Raju Shreewastava, founder of Big Data Trunk, provided a fun and simple way to introduce Machine Leaning to anyone and everyone. He solved a machine learning problem and demonstrated an easy way to be able to do machine learning without even coding. Raju Shreewastava is the founder of Big Data Trunk (www.BigDataTrunk.com), a Big Data Training and consulting firm with offices in the United States. He previously led the data warehouse/business intelligence and B...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
In his general session at 21st Cloud Expo, Greg Dumas, Calligo’s Vice President and G.M. of US operations, discussed the new Global Data Protection Regulation and how Calligo can help business stay compliant in digitally globalized world. Greg Dumas is Calligo's Vice President and G.M. of US operations. Calligo is an established service provider that provides an innovative platform for trusted cloud solutions. Calligo’s customers are typically most concerned about GDPR compliance, application p...
Digital transformation is about embracing digital technologies into a company's culture to better connect with its customers, automate processes, create better tools, enter new markets, etc. Such a transformation requires continuous orchestration across teams and an environment based on open collaboration and daily experiments. In his session at 21st Cloud Expo, Alex Casalboni, Technical (Cloud) Evangelist at Cloud Academy, explored and discussed the most urgent unsolved challenges to achieve f...
Continuous Delivery makes it possible to exploit findings of cognitive psychology and neuroscience to increase the productivity and happiness of our teams. In his session at 22nd Cloud Expo | DXWorld Expo, Daniel Jones, CTO of EngineerBetter, will answer: How can we improve willpower and decrease technical debt? Is the present bias real? How can we turn it to our advantage? Can you increase a team’s effective IQ? How do DevOps & Product Teams increase empathy, and what impact does empath...
DevOps promotes continuous improvement through a culture of collaboration. But in real terms, how do you: Integrate activities across diverse teams and services? Make objective decisions with system-wide visibility? Use feedback loops to enable learning and improvement? With technology insights and real-world examples, in his general session at @DevOpsSummit, at 21st Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, explored how leading organizations use data-driven DevOps to close th...
As many know, the first generation of Cloud Management Platform (CMP) solutions were designed for managing virtual infrastructure (IaaS) and traditional applications. But that's no longer enough to satisfy evolving and complex business requirements. In his session at 21st Cloud Expo, Scott Davis, Embotics CTO, explored how next-generation CMPs ensure organizations can manage cloud-native and microservice-based application architectures, while also facilitating agile DevOps methodology. He expla...
"Digital transformation - what we knew about it in the past has been redefined. Automation is going to play such a huge role in that because the culture, the technology, and the business operations are being shifted now," stated Brian Boeggeman, VP of Alliances & Partnerships at Ayehu, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
You know you need the cloud, but you're hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You're looking at private cloud solutions based on hyperconverged infrastructure, but you're concerned with the limits inherent in those technologies. What do you do?
"I focus on what we are calling CAST Highlight, which is our SaaS application portfolio analysis tool. It is an extremely lightweight tool that can integrate with pretty much any build process right now," explained Andrew Siegmund, Application Migration Specialist for CAST, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that Synametrics Technologies will exhibit at SYS-CON's 22nd International Cloud Expo®, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Synametrics Technologies is a privately held company based in Plainsboro, New Jersey that has been providing solutions for the developer community since 1997. Based on the success of its initial product offerings such as WinSQL, Xeams, SynaMan and Syncrify, Synametrics continues to create and hone inn...
"We started a Master of Science in business analytics - that's the hot topic. We serve the business community around San Francisco so we educate the working professionals and this is where they all want to be," explained Judy Lee, Associate Professor and Department Chair at Golden Gate University, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.