Kingsway Reports Fourth Quarter and Year-End Results
For best results when printing this announcement, please click on the link below: http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130322:nPnTO603 TORONTO, March 22, 2013 /PRNewswire/ - (TSX: KFS, NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced its financial results for the fourth quarter and year ended December 31, 2012. All amounts are in U.S. dollars unless indicated otherwise. The Company reported a net loss of $13.0 million, or a loss of $0.99 per diluted share, for the fourth quarter and a net loss of $53.3 million, or a loss of $4.05 per diluted share, for the year. The book value has decreased from $8.90 per share at December 31, 2011 to $4.97 per share at December 31, 2012. The Company also carries a valuation allowance, in the amount of $20.20 per share at December 31, 2012, against the deferred tax asset, primarily related to its loss carryforwards. All per share amounts have been adjusted for all periods to reflect the share consolidation implemented as of July 3, 2012, whereby every four of the Company's common shares that were issued and outstanding were automatically combined into one issued and outstanding common share, without any change in the par value of such shares. The following are the highlights of the fourth quarter of 2012: Operational results * Net operating loss of $5.7 million was recorded in the Insurance Underwriting segment for the fourth quarter ($29.5 million year to date). * Net operating income of $0.6 million was recorded in the Insurance Services segment for the fourth quarter ($3.5 million year to date). * Net investment income and realized gains of $0.5 million were recorded for the fourth quarter ($4.3 million year to date). * Other-than-temporary impairment loss of $2.2 million was recorded for the fourth quarter ($2.7 million year to date). * Net loss of $6.2 million not allocated to any segment was recorded in the fourth quarter ($28.9 million year to date). This includes gain on change in fair value of debt of $0.7 million (loss of $9.2 million year to date); equity in net income of investee of $1.1 million (loss of $1.0 million year to date); and interest expense of $1.2 million ($4.5 million year to date) related to the Company's subordinated debt and currently being deferred. None of these three items impacted the Company's cash flows during the fourth quarter and year ended December 31, 2012. On September 17, 2012, the Company announced that it was restructuring its Insurance Underwriting and Insurance Services segments. As part of the restructuring, the Company intends to streamline its non-standard automobile property and casualty insurance business operations. Specific to Insurance Underwriting, during the fourth quarter of 2012, the Company began taking steps to place all of Kingsway Amigo Insurance Company, one of the Company's property and casualty insurance subsidiaries, into voluntary run-off. On November 19, 2012, the Florida Office of Insurance Regulation ("OIR") approved Amigo's plan to withdraw from the business of offering commercial lines insurance in Florida. On January 30, 2013, the OIR approved Amigo's plan to withdraw from the business of offering personal lines insurance in Florida. Kingsway has commenced discussions with the OIR to outline plans for Amigo's run-off. Any comprehensive run-off plan would be subject to OIR approval. 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, 2012 2011 Revenue: Net premiums earned $ 114,937 $ 156,382 Service fee and commission income 35,491 31,607 Net investment income 3,179 4,083 Net realized gains 1,084 1,095 Other-than-temporary impairment loss (2,703) - (Loss) gain on change in fair value of debt (9,234) 25,876 Other income 7,617 9,504 Total revenues 150,371 228,547 Expenses: Loss and loss adjustment expenses 100,184 143,145 Commissions and premium taxes 15,422 24,305 General and administrative expenses 73,931 77,936 Restructuring expense 1,980 - Interest expense 7,638 7,478 Amortization of intangible assets 959 73 Goodwill impairment - 2,830 Total expenses 200,114 255,767 Loss before gain on buy-back of debt, equity in net (loss) income of (49,743) (27,220) investee and income tax expense (benefit) Gain on buy-back of debt 500 556 Equity in net (loss) income of investee (1,018) 417 Loss from continuing operations before income tax expense (benefit) (50,261) (26,247) Income tax expense (benefit) 3,017 (169) Loss from continuing operations (53,278) (26,078) Loss on disposal of discontinued operations, net of taxes - (1,293) Net loss $ (53,278) $ (27,371) Less: net loss attributable to noncontrolling interests in consolidated (1,195) (7,233) subsidiaries Net loss attributable to common shareholders $ (52,083) $ (20,138) Loss per share - continuing operations: Basic: $ (4.05) $ (1.99) Diluted: $ (4.05) $ (1.99) Loss per share - net loss: Basic: $ (4.05) $ (2.09) Diluted: $ (4.05) $ (2.09) Weighted average shares outstanding (in '000s): Basic: 13,149 13,086 Diluted: 13,149 13,086 Loss from Continuing Operations and Diluted Loss Per Share In the fourth quarter of 2012, the Company reported a loss from continuing operations of $13.0 million ($0.99 per diluted share) compared to $10.6 million ($0.81 per diluted share) in the fourth quarter of 2011. For the year ended December 31, 2012, the Company reported a loss from continuing operations of $53.3 million ($4.05 per diluted share) compared to $26.1 million ($1.99 per diluted share) for the same period in 2011. The loss from continuing operations for the three months and year ended December 31, 2012 is attributable to operating losses in Insurance Underwriting, corporate general expenses, interest expense and, specific to the year ended December 31, 2012, loss on the change in fair value of debt. The loss from continuing operations for the three months and year ended December 31, 2011 is due to operating losses in Insurance Underwriting, corporate general expenses and interest expense, offset by gain on the change in fair value of debt. Loss on Disposal of Discontinued Operations For the fourth quarter and year ended December 31, 2012, the Company reported no loss on disposal of discontinued operations, compared to a loss of zero and $1.3 million for the fourth quarter and year ended December 31, 2011, respectively. Net Loss and Loss Per Share - Net Loss In the fourth quarter of 2012, the Company reported a net loss of $13.0 million ($0.99 per diluted share) compared to $10.6 million ($0.81 per diluted share) in the fourth quarter of 2011. For the year ended December 31, 2012, the Company reported a net loss of $53.3 million ($4.05 per diluted share) compared to $27.4 million ($2.09 per diluted share) for the year ended December 31, 2011. Consolidated Balance Sheets (in thousands, except per share data) December 31,2012 December 31,2011 ASSETS Investments: Fixed maturities, at fair value (amortized cost of $77,858 and $91,344, $ 79,534 $ 93,651 respectively) Equity investments, at fair value (cost of $2,305 and $2,689, 3,548 2,960 respectively) Limited liability investments 2,333 97 Other investments, at cost which approximates fair value 2,000 488 Short-term investments, at cost which approximates fair value 585 20,334 Total investments 88,000 117,530 Cash and cash equivalents 80,813 85,486 Investment in investee 41,733 48,592 Accrued investment income 2,263 1,999 Premiums receivable, net of allowance for doubtful accounts of $4,040 35,598 28,732 and $3,653, respectively Service fee receivable 15,173 12,947 Other receivables, net of allowance for doubtful accounts of $1,002 and 4,750 6,322 $806, respectively Reinsurance recoverable 8,557 697 Prepaid reinsurance premiums 7,316 2,024 Deferred acquisition costs, net 14,102 8,116 Income taxes recoverable - 8,134 Property and equipment, net of accumulated depreciation of $22,887 and 2,709 13,040 $27,736, respectively Goodwill 8,421 510 Intangible assets, net of amortization of $19,263 and $18,304, 50,583 39,121 respectively Other assets 4,045 831 Asset held for sale 8,737 - TOTAL ASSETS $ 372,800 $ 374,081 LIABILITIES AND EQUITY LIABILITIES Unpaid loss and loss adjustment expenses: Property and casualty $ 103,116 $ 120,258 Vehicle service agreements 3,448 - Total unpaid loss and loss adjustment expenses 106,564 120,258 Unearned premiums 45,047 39,423 Reinsurance payable 4,956 1,913 LROC preferred units 13,655 8,845 Senior unsecured debentures 23,730 28,337 Subordinated debt 23,774 16,432 Deferred income tax liability 3,054 2,653 Notes payable - 2,418 Deferred service fees 48,987 11,128 Income taxes payable 2,879 - Accrued expenses and other liabilities 34,740 26,269 TOTAL LIABILITIES $ 307,386 $ 257,676 EQUITY Common stock, no par value; unlimited number authorized; 13,148,971 and $ 296,621 $ 296,489 13,086,471 issued and outstanding at December 31, 2012 and December 31, 2011, respectively Additional paid-in capital 15,757 15,403 Accumulated deficit (262,069) (201,208) Accumulated other comprehensive income 14,762 12,749 Shareholders' equity attributable to common shareholders 65,071 123,433 Noncontrolling interests in consolidated subsidiaries 343 (7,028) TOTAL EQUITY 65,414 116,405 TOTAL LIABILITIES AND EQUITY $ 372,800 $ 374,081 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, including, without limitation, our potential inability to complete current or future acquisitions successfully, our inability to successfully implement our restructuring activities, and our inability to adequately estimate and provide for an appropriate level of reserving at our insurance company subsidiaries. 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 2012 Annual Report. 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 press 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 2012 Annual Report. SOURCE Kingsway Financial Services Inc. Additional Information Additional information about Kingsway, including a copy of its 2012 Annual Report, 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 .
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