TORONTO, Aug. 13, 2012 /PRNewswire/ - (TSX: KFS, NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced its financial results for the second quarter and six months ended June 30, 2012. All amounts are in U.S. dollars unless indicated otherwise.
The Company reported a second quarter net loss of $7.7 million ($20.2 million year to date), or a loss of $0.59 ($1.54 year to date) per diluted share. The book value has decreased from $8.90 per share at December 31, 2011 to $7.35 per share at June 30, 2012. The Company also carries a valuation allowance, in the amount of $20.43 per share at June 30, 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.
The following are the highlights of the second quarter of 2012:
- Net operating loss of $3.9 million was recorded in the Insurance Underwriting segment for the second quarter ($7.1 million year to date).
- Net operating income of $0.9 million was recorded in the Insurance Services segment for the second quarter ($2.6 million year to date).
- Net investment income and realized gains of $0.8 million were recorded for the second quarter ($1.9 million year to date).
- Other-than-temporary impairment loss of $0.5 million was recorded for the second quarter ($0.5 million year to date).
- Net loss of $5.0 million not allocated to any segment was recorded in the second quarter ($17.1 million year to date). This includes loss on change in fair value of debt of $2.4 million ($6.7 million year to date); equity in net income of investees of $0.1 million (loss of $2.2 million year to date); and interest expense of $1.1 million ($2.2 million year to date) related to the Company's subordinated debt and currently being deferred. None of these three items impacted the Company's cash flows during the second quarter and six months ended June 30, 2012.
On July 3, 2012, the Company announced that the board of directors of the Company authorized the implementation of a share consolidation at a ratio of one post-consolidation share for every four pre-consolidation shares. The share consolidation, which was approved by the stockholders at the Company's Annual and Special Meeting held on May 31, 2012, was effective as of July 3, 2012. The consolidation had the effect of reducing the number of common shares of the Company issued and outstanding from 52,595,828 shares pre-consolidation to 13,148,971 shares post-consolidation. The issued and outstanding shares reported in the consolidated balance sheets and the loss per share computations reported in the consolidated statements of operations have been restated for all periods presented to reflect the impact of the share consolidation.
The Board of Directors declared no dividend for the second quarter of 2012.
About the Company
Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. The Company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS."
|Consolidated Statements of Operations|
|(in thousands, except per share data)|
|Three months ended June 30,||Six months ended June 30,|
|Net premiums earned||$||30,985||$||42,575||$||60,252||$||88,211|
|Service fee and commission income||8,138||7,806||17,667||16,778|
|Net investment income||802||1,152||1,632||2,229|
|Net realized (losses) gains||(23)||(3)||250||(2)|
|Other-than-temporary impairment loss||(488)||—||(488)||—|
|(Loss) gain on change in fair value of debt||(2,418)||11,237||(6,749)||8,632|
|Loss and loss adjustment expenses||23,616||37,014||$||45,391||$||78,591|
|Commissions and premiums taxes||4,747||6,908||9,166||14,286|
|General and administrative expenses||17,154||22,810||35,955||44,381|
|Amortization of other intangible assets||—||18||—||36|
|Loss before gain on buy-back of debt, equity in net income (loss) of investees and income tax expense (benefit)||(7,693)||(4,505)||(17,886)||(21,960)|
|Gain on buy-back of debt||—||553||—||553|
|Equity in net income (loss) of investees||92||(529)||(2,178)||(529)|
|Loss from continuing operations before income tax expense (benefit)||(7,601)||(4,481)||(20,064)||(21,936)|
|Income tax expense (benefit)||116||267||175||(141)|
|Loss from continuing operations||(7,717)||(4,748)||$||(20,239)||$||(21,795)|
|Loss on disposal of discontinued operations, net of taxes||—||—||—||(1,293)|
|Less: net loss attributable to noncontrolling interests in consolidated subsidiaries||(1,700)||(2,190)||(3,214)||(2,724)|
|Net loss attributable to common shareholders||$||(6,017)||$||(2,558)||$||(17,025)||$||(20,364)|
|Loss per share - continuing operations:|
|Loss per share - net loss:|
|Weighted average shares outstanding (in '000s):|
Loss from Continuing Operations and Loss Per Share - Continuing Operations
In the second quarter of 2012, the Company reported a loss from continuing operations of $7.7 million ($20.2 million year to date) compared to a loss from continuing operations of $4.7 million in the second quarter of last year ($21.8 million prior year to date). Diluted loss per share was $0.59 for the quarter ($1.54 year to date) compared to diluted loss per share of $0.36 for the second quarter of 2011 ($1.67 prior year to date). The current quarter and year to date 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 income (loss) of investees.
Loss on Disposal of Discontinued Operations
For the second quarter and six months ended June 30, 2012, the Company reported no loss on disposal of discontinued operations, compared to a loss of zero and $1.3 million for the three and six months ended June 30, 2011, respectively.
Net Loss and Loss Per Share - Net Loss
In the second quarter of 2012, the Company reported net loss of $7.7 million ($20.2 million year to date) compared to net loss of $4.7 million in the second quarter of 2011 ($23.1 million prior year to date). Diluted loss per share was $0.59 for the quarter ($1.54 year to date) compared to diluted loss per share of $0.36 for the second quarter of 2011 ($1.77 prior year to date).
|Consolidated Balance Sheets|
|(in thousands, except per share data)|
|June 30, 2012||December 31, 2011|
|Fixed maturities, at fair value (amortized cost of $101,091 and $91,344, respectively)||$||102,963||$||93,651|
|Equity investments, at fair value (cost of $2,689 and $2,689, respectively)||3,225||2,960|
|Other investments, at cost which approximates fair value||—||488|
|Short-term investments, at cost which approximates fair value||335||20,334|
|Investment in investees||47,904||48,689|
|Cash and cash equivalents||63,101||85,486|
|Accrued investment income||2,652||1,999|
|Premiums receivable, net of allowance for doubtful accounts of $3,779 and $3,653, respectively||27,608||28,732|
|Service fee receivable||18,752||12,947|
|Other receivables, net of allowance for doubtful accounts of $806 and $806, respectively||5,789||6,322|
|Prepaid reinsurance premiums||3,188||2,024|
|Deferred policy acquisition costs, net||7,634||8,116|
|Income taxes recoverable||7,132||8,134|
|Property and equipment, net of accumulated depreciation of $28,799 and $27,736||12,479||13,040|
|LIABILITIES AND EQUITY|
|Unpaid loss and loss adjustment expenses||$||99,650||$||120,258|
|LROC preferred units||11,778||8,845|
|Senior unsecured debentures||27,947||28,337|
|Deferred income tax liability||2,653||2,653|
|Accrued expenses and other liabilities||28,437||26,269|
|Common stock, no par value; unlimited number authorized; 13,148,971 and 13,086,471 issued and outstanding at June 30, 2012 and December 31, 2011, respectively||$||296,621||$||296,489|
|Additional paid-in capital||15,504||15,403|
|Accumulated deficit||(218,230 )||(201,208 )|
|Accumulated other comprehensive income||13,047||12,749|
|Shareholders' equity attributable to common shareholders||106,942||123,433|
|Noncontrolling interests in consolidated subsidiaries||(10,346 )||(7,028 )|
|TOTAL LIABILITIES AND EQUITY||$||349,909||$||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. 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, see Kingsway's securities filings, including its Annual Report on Form 10-K for the year ended December 31, 2011 ("2011 Annual Report") and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. The Company's securities filings can be accessed on the Canadian Securities Administrators' website at www.sedar.com, and 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. 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
SOURCE Kingsway Financial Services Inc.