TORONTO, May 14, 2012 /CNW/ - (TSX: KFS, NYSE: KFS) Kingsway Financial
Services Inc. ("Kingsway" or the "Company") today announced its
financial results for the first quarter ended March 31, 2012. All
amounts are in U.S. dollars unless indicated otherwise.
The Company reported a first quarter net loss of $12.5 million, or a
loss of $0.24 per diluted share. The book value has decreased from
$2.22 per share at December 31, 2011 to $2.01 per share at March 31,
2012. The Company also carries a valuation allowance, in the amount of
$5.05 per share at March 31, 2012, against the deferred tax asset,
primarily related to its loss carryforwards.
The following are the highlights of the first quarter of 2012:
Operational results
-
Net operating loss of $3.2 million was recorded in the Insurance
Underwriting segment for the first quarter.
-
Net operating income of $1.7 million was recorded in the Insurance
Services segment for the first quarter.
-
Net investment income and realized gains of $1.1 million were recorded
for the first quarter.
-
Net loss of $12.1 million not allocated to any segment was recorded in
the first quarter. This includes loss on change in fair value of debt
of $4.3 million; equity in net loss of investees of $2.3 million; and
interest expense of $1.1 million related to the Company's subordinated
debt and currently being deferred. None of these three items impacted
the Company's cash flows during the first quarter.
Dividend
The Board of Directors declared no dividend for the first quarter of
2012.
Subsequent Events
Effective April 2, 2012, the Company and United Insurance Holdings Corp.
("United") mutually agreed to terminate their management services
agreement which had been entered into between the Company and United in
August of 2011.
During April of 2012, Larry G. Swets, Jr., the Company's President and
Chief Executive Officer, adopted an automatic stock purchase plan in
accordance with Canadian securities regulations and the guidelines
specified under Rule 10b5-1 of the Securities Exchange Act of 1934.
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)
(unaudited) |
|
|
|
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|
Three months ended March 31,
|
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|
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2012
|
|
|
|
2011
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
|
|
$
|
29,267
|
|
|
$
|
45,636
|
|
|
Service fee and commission income
|
|
|
|
|
9,529
|
|
|
|
8,972
|
|
|
Net investment income
|
|
|
|
|
830
|
|
|
|
1,077
|
|
|
Net realized gains
|
|
|
|
|
273
|
|
|
|
1
|
|
|
Loss on change in fair value of debt
|
|
|
|
|
(4,331)
|
|
|
|
(2,605)
|
|
|
Other income
|
|
|
|
|
1,083
|
|
|
|
1,911
|
|
Total revenues
|
|
|
|
|
36,651
|
|
|
|
54,992
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expenses
|
|
|
|
|
21,775
|
|
|
|
41,577
|
|
|
Commissions and premiums taxes
|
|
|
|
|
4,419
|
|
|
|
7,378
|
|
|
General and administrative expenses
|
|
|
|
|
18,801
|
|
|
|
21,571
|
|
|
Interest expense
|
|
|
|
|
1,849
|
|
|
|
1,903
|
|
|
Amortization of other intangible assets
|
|
|
|
|
—
|
|
|
|
18
|
|
Total expenses
|
|
|
|
|
46,844
|
|
|
|
72,447
|
|
Loss before equity in net loss of investees and income tax expense
(benefit)
|
|
|
|
|
(10,193)
|
|
|
|
(17,455)
|
|
Equity in net loss of investees
|
|
|
|
|
(2,270)
|
|
|
|
—
|
|
Loss from continuing operations before income tax expense (benefit)
|
|
|
|
|
(12,463)
|
|
|
|
(17,455)
|
|
Income tax expense (benefit)
|
|
|
|
|
59
|
|
|
|
(408)
|
|
Loss from continuing operations
|
|
|
|
|
(12,522)
|
|
|
|
(17,047)
|
|
Loss on disposal of discontinued operations, net of taxes
|
|
|
|
|
—
|
|
|
|
(1,293)
|
|
Net loss
|
|
|
|
|
(12,522)
|
|
|
|
(18,340)
|
|
|
Less: net loss attributable to noncontrolling interests in consolidated
subsidiaries
|
|
|
|
|
(1,514)
|
|
|
|
(534)
|
|
|
Net loss attributable to common shareholders
|
|
|
|
$
|
(11,008)
|
|
|
$
|
(17,806)
|
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted:
|
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.33)
|
|
Loss per share - net loss:
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted:
|
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.35)
|
|
Weighted average shares outstanding (in '000s):
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted:
|
|
|
|
|
52,406
|
|
|
|
52,156
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations and Loss Per Share - Continuing
Operations
In the first quarter of 2012, the Company reported a loss from
continuing operations of $12.5 million compared to a loss from
continuing operations of $17.0 million in the first quarter of last
year. Diluted loss per share was $0.24 for the quarter compared to
diluted loss per share of $0.33 for the first quarter of 2011. The
current quarter's loss is primarily due to operating losses generated
in our Insurance Underwriting segment, corporate general expenses,
interest expense, loss on change in fair value of debt, and equity in
net loss of investees.
Loss on Disposal of Discontinued Operations
For the first quarter ended March 31, 2012, the Company reported no loss
on disposal of discontinued operations, compared to a loss of $1.3
million in the first quarter of 2011.
Net Loss and Loss Per Share - Net Loss
In the first quarter of 2012, the Company reported net loss of $12.5
million compared to net loss of $18.3 million in the first quarter of
2011. Diluted loss per share was $0.24 for the quarter compared to
diluted loss per share of $0.35 for the first quarter of 2011.
Consolidated Balance Sheets
(in thousands, except per share data) |
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March 31, 2012
(unaudited)
|
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December 31, 2011
|
| ASSETS |
|
|
|
|
|
|
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Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, at fair value (amortized cost of $103,107 and
$91,344, respectively)
|
|
|
|
$
|
|
|
105,032
|
|
|
$
|
93,651
|
|
|
Equity investments, at fair value (cost of $2,689 and $2,689,
respectively)
|
|
|
|
|
|
|
3,264
|
|
|
|
2,960
|
|
|
Other investments, at cost which approximates fair value
|
|
|
|
|
|
|
488
|
|
|
|
488
|
|
|
Short-term investments, at cost which approximates fair value
|
|
|
|
|
|
|
3,335
|
|
|
|
20,334
|
|
Total investments
|
|
|
|
|
|
|
112,119
|
|
|
|
117,433
|
|
Investment in investees
|
|
|
|
|
|
|
46,730
|
|
|
|
48,689
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
72,646
|
|
|
|
85,486
|
|
Accrued investment income
|
|
|
|
|
|
|
1,921
|
|
|
|
1,999
|
|
Premiums receivable, net of allowance for doubtful accounts of $3,671
and $3,653, respectively
|
|
|
|
|
|
|
40,016
|
|
|
|
28,732
|
|
Service fee receivable
|
|
|
|
|
|
|
14,569
|
|
|
|
12,947
|
|
Other receivables, net of allowance for doubtful accounts of $806 and
$806, respectively
|
|
|
|
|
|
|
5,883
|
|
|
|
6,322
|
|
Reinsurance recoverable
|
|
|
|
|
|
|
1,293
|
|
|
|
697
|
|
Prepaid reinsurance premiums
|
|
|
|
|
|
|
3,650
|
|
|
|
2,024
|
|
Deferred policy acquisition costs, net
|
|
|
|
|
|
|
8,403
|
|
|
|
8,116
|
|
Income taxes recoverable
|
|
|
|
|
|
|
7,416
|
|
|
|
8,134
|
|
Property and equipment, net of accumulated depreciation of $28,628 and
$27,736 |
|
|
|
|
|
|
12,856
|
|
|
|
13,040
|
|
Goodwill and intangible assets
|
|
|
|
|
|
|
39,631
|
|
|
|
39,631
|
|
Other assets
|
|
|
|
|
|
|
372
|
|
|
|
831
|
|
TOTAL ASSETS
|
|
|
|
$
|
|
|
367,505
|
|
|
$
|
374,081
|
| LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss adjustment expenses
|
|
|
|
$
|
|
|
106,057
|
|
|
$
|
120,258
|
|
Unearned premiums
|
|
|
|
|
|
|
45,641
|
|
|
|
39,423
|
|
Reinsurance payable
|
|
|
|
|
|
|
2,443
|
|
|
|
1,913
|
|
LROC preferred units
|
|
|
|
|
|
|
10,789
|
|
|
|
8,845
|
|
Senior unsecured debentures
|
|
|
|
|
|
|
27,982
|
|
|
|
28,337
|
|
Subordinated debt
|
|
|
|
|
|
|
19,174
|
|
|
|
16,432
|
|
Deferred income tax liability
|
|
|
|
|
|
|
2,653
|
|
|
|
2,653
|
|
Notes payable
|
|
|
|
|
|
|
2,418
|
|
|
|
2,418
|
|
Deferred revenue
|
|
|
|
|
|
|
12,331
|
|
|
|
11,128
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
32,275
|
|
|
|
26,269
|
|
TOTAL LIABILITIES
|
|
|
|
$
|
|
|
261,763
|
|
|
$
|
257,676
|
| EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Common stock, no par value; unlimited number authorized; 52,595,828 and
52,345,828 issued
and outstanding at March 31, 2012 and December 31, 2011, respectively
|
|
|
|
$
|
|
|
296,621
|
|
|
$
|
296,489
|
|
Additional paid-in capital
|
|
|
|
|
|
|
15,372
|
|
|
|
15,403
|
|
Accumulated deficit
|
|
|
|
|
|
|
(212,214)
|
|
|
|
(201,208)
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
14,588
|
|
|
|
12,749
|
|
Shareholders' equity attributable to common shareholders
|
|
|
|
|
|
|
114,367
|
|
|
|
123,433
|
|
Noncontrolling interests in consolidated subsidiaries
|
|
|
|
|
|
|
(8,625)
|
|
|
|
(7,028)
|
|
TOTAL EQUITY
|
|
|
|
|
|
|
105,742
|
|
|
|
116,405
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
$
|
|
|
367,505
|
|
|
$
|
374,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Looking Statements
This press release includes "forward looking statements" which are
subject to risks and uncertainties. Such forward looking statements
relate to future events or 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, including: our high level of
indebtedness; our ability to service our debt and comply with debt
covenants; our ability to improve our operating performance; our
ability to implement our long-term growth strategies and to identify
and execute on strategic initiatives; our ability to maintain share
price and trading activities at acceptable levels; and our ability to
comply with regulatory requirements and the requirements of stock
exchanges.
For information identifying additional 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 2011 Annual Report on Form 10-K. 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.
Non-U.S. GAAP Financial Measures
This news release contains certain non-U.S. GAAP financial measures.
Please refer to the section entitled "Non-U.S. GAAP Financial Measures"
in the Management's Discussion and Analysis section of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
<p> Additional information about Kingsway, including a copy of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, can be accessed on the Canadian Securities Administrators' website at <a href="http://www.sedar.com">www.sedar.com</a>, on the EDGAR section of the U.S. Securities and Exchange Commission's website at <a href="http://www.sec.gov">www.sec.gov</a> or through the Company's website at <a href="http://www.kingsway-financial.com">www.kingsway-financial.com</a>. </p>