An anonymous director reports
KINGSWAY REPORTS FOURTH QUARTER AND YEAR-END RESULTS
Kingsway
Financial Services Inc. has provided its financial results for the fourth quarter and year ended Dec. 31, 2011, prepared in accordance with accounting principles generally
accepted in the United States. All amounts are in U.S.
dollars unless indicated otherwise.
The company reported a net loss of $10.6-million, or a loss of 20 cents per
diluted share, for the fourth quarter and a net loss of $27.4-million,
or a loss of 52 cents per diluted share, for the year. The book value has
decreased from $2.78 per share at Dec. 31, 2010, to $2.22 per share
at Dec. 31, 2011. The company also carries a valuation allowance,
in the amount of $4.97 per share at Dec. 31, 2011, against the
deferred tax asset, primarily related to its loss carryforwards.
The following are the highlights of the fourth quarter of 2011.
Operational results
-
Net operating loss of $8.9-million was recorded in the insurance
underwriting segment for the fourth quarter (net operating loss of
$37.1-million year to date).
-
Net operating income of $200,000 was recorded in the insurance
services segment for the fourth quarter (net operating income of $1.7-million year to date).
-
Net investment income and realized gains of $1.8-million were recorded
for the fourth quarter ($5.2-million year to date).
-
Net loss of $3.7-million was recorded in the fourth quarter (net income
of $4.1-million year to date) that is not allocated to any segment.
This includes gain from change in fair value of debt of $100,000 for the fourth quarter (gain of $25.9-million year to date).
-
The company recorded no income or loss from discontinued operations for
the fourth quarter (net loss of $1.3-million year to date).
Effective July 1, 2011, the company ceased to be a foreign private
issuer as defined in Rule 3b-4 of the Securities Exchange Act of 1934,
as amended, and became subject to the rules and
regulations under the exchange act applicable to domestic issuers. As a
result, the company is required to prepare and file its annual report
on Form 10-K for the fiscal year ended Dec. 31, 2011, whereas its
annual reports were previously filed on Form 40-F. While the company does not
believe this change will impact the value of the company, shareholders
will now have to adapt to filings made pursuant to the exchange act.
Separately, as required by Ontario Securities Commission National
Instrument 51-102 continuous disclosure obligations, the company has
restated its interim financial reports, previously filed under
international financial reporting standards, in accordance with U.S.
GAAP (generally accepted accounting principles). The company remains an Ontario, Canada, corporation.
Dividend
The board of directors declared no dividend for the fourth quarter of
2011.
Subsequent events
On Jan. 27, 2012, the company announced that it is implementing an
action to effect a reverse stock split of the company's common stock.
The action is intended to ensure that Kingsway remains in compliance
with the New York Stock Exchange continued listing standards.
The action has been approved in principal by the company's board of
directors and remains subject to final board action and shareholder
approval. The company has notified the NYSE of its intention to address
through a reverse stock split its non-compliance with the NYSE
continued listing requirement that the average closing price of a
security not be lower than $1 per share over a consecutive 30-trading-day period, which is the minimum share price requirement. The
company's common stock continues to be listed on the NYSE and trades as
usual subject to the NYSE's continued listing standards and monitoring.
The company plans to submit the reverse stock split for shareholder
approval at its annual and special meeting of shareholders to be held
May 31, 2012.
On Feb. 21, 2012, the company and its subsidiary, 1347 Capital LLC,
announced that the company has signed a definitive agreement to acquire
the tangible and intangible assets and liabilities of a specialty
insurance business in a highly structured transaction for total
consideration consisting of cash at closing, future contingent payments
and common equity in the newly formed entity. The transaction, which is
subject to customary closing conditions including regulatory approval,
is expected to close during the second quarter of 2012. The company
intends to disclose more information about the specialty insurance
business being acquired following the closing of the transaction.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years ended Dec. 31,
2011 2010
Revenue
Net premiums earned $156,382 $220,011
Service fee and commission income 31,607 13,008
Net investment income 4,086 12,819
Net realized gains 1,095 9,257
Gain (loss) on change in fair value of debt 25,876 (107,269)
Other income 9,501 17,055
-------- --------
Total revenues 228,547 164,881
Expenses
Loss and loss adjustment expenses 143,145 214,045
Commissions and premiums taxes 24,305 36,688
General and administrative expenses 77,936 101,644
Restructuring costs - 4,803
Interest expense 7,478 14,825
Amortization of other intangible assets 73 4,369
Goodwill impairment 2,830 -
-------- --------
Total expenses 255,767 376,374
(Loss) before gains on debt, equity in net income of investees and income tax benefit (27,220) (211,493)
Gain on buyback of debt 556 3,110
Gain on consolidation of debt - 17,821
Equity in net income of investees 417 -
(Loss) from continuing operations before income tax benefit (26,247) (190,562)
Income tax benefit (169) (6,118)
-------- --------
(Loss) from continuing operations (26,078) (184,444)
(Loss) from discontinued operations, net of taxes - (7,508)
(Loss) gain on disposal of discontinued operations, net of taxes (1,293) 30,390
-------- --------
Net (loss) $(27,371) $(161,562)
======== ========
Attributable to
Common shareholders (20,138) (165,276)
Non-controlling interests in consolidated subsidiaries (7,233) 3,714
-------- --------
Total $(27,371) $(161,562)
======== ========
(Loss) per share -- continuing operations
Basic and diluted $(0.50) $(3.54)
(Loss) earnings per share -- discontinued operations
Basic and diluted $(0.02) $0.44
(Loss) per share -- net (loss)
Basic and diluted $(0.52) $(3.10)
Income (loss) from continuing operations and earnings (loss) per share -
continuing operations
In the fourth quarter of 2011, the company reported a loss from
continuing operations of $10.6-million (loss of $26.1-million year to
date), compared with a loss from continuing operations of $47.3-million
in the fourth quarter of last year (loss of $184.4-million prior year
to date). Diluted loss per share was 20 cents for the quarter (diluted
loss per share of 50 cents year to date), compared with diluted loss per
share of 91 cents for the fourth quarter of 2010 (diluted loss per share
of $3.54 prior year to date). As noted above, the current quarter's
loss is primarily due to operating losses generated in the company's insurance
underwriting segment.
Income (loss) from discontinued operations
For the fourth quarter and year to date ended Dec. 31, 2011, the
company reported no loss from discontinued operations, compared with a
loss of $3.6-million in the fourth quarter of 2010 (loss of $7.5-million prior year to date). For the fourth quarter of 2011, the
company realized no gain or loss related to the disposals of
discontinued operations (loss of $1.3-million year to date), compared
with no gain or loss in the fourth quarter of 2010 (gain of $30.4-million
prior year to date).
Net income (loss) and earnings (loss) per share -- net income (loss)
In the fourth quarter of 2011, the company reported net loss of $10.6-million (loss of $27.4-million year to date), compared with net loss of
$50.8-million in the fourth quarter of last year (loss of $161.6-million prior year to date). Diluted loss per share was 20 cents for the
quarter (diluted loss per share of 52 cents year to date) compared with diluted loss per share of 97 cents for the fourth quarter of 2010 (diluted
loss per share of $3.10 prior year to date).
We seek Safe Harbor.
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