(Mark One)
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|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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September 30, 2013
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Ontario, Canada
(State or other jurisdiction of
incorporation or organization)
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Not Applicable (I.R.S. Employer
Identification No.)
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45 St. Clair Avenue West, Suite 400 Toronto, Ontario M4V 1K9
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(Address of principal executive offices and zip code)
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1-416-848-1171
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(Registrant's telephone number, including area code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
x
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KINGSWAY FINANCIAL SERVICES INC.
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Table Of Contents
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||
PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012
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Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)
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Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)
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Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (unaudited)
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Notes to Consolidated Financial Statements (unaudited)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4. CONTROLS AND PROCEDURES
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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ITEM 1A. RISK FACTORS
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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ITEM 4. MINE SAFETY DISCLOSURES
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ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
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SIGNATURES
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2
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KINGSWAY FINANCIAL SERVICES INC.
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3
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KINGSWAY FINANCIAL SERVICES INC.
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Three months ended September 30,
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Nine months ended September 30,
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|||||||||||
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2013
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2012
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2013
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2012
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||||
Revenue:
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||||||||
Net premiums earned
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$
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26,041
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$
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26,501
|
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$
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82,406
|
|
|
$
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86,753
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Service fee and commission income
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12,156
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7,648
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37,332
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25,315
|
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||||
Net investment income
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528
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|
|
777
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1,924
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2,400
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||||
Net realized gains (losses)
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321
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|
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1,109
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(1,056
|
)
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1,359
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||||
Other-than-temporary impairment loss
|
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—
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|
|
—
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(1,800
|
)
|
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(488
|
)
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||||
Gain (loss) on change in fair value of debt
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3,801
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|
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(3,177
|
)
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(2,812
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)
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(9,926
|
)
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||||
Other income
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2,604
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1,940
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6,996
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5,767
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||||
Total revenues
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45,451
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34,798
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122,990
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111,180
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||||
Expenses:
|
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||||||||
Loss and loss adjustment expenses
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21,343
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33,348
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67,789
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78,739
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||||
Commissions and premium taxes
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6,683
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2,458
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18,566
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11,624
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||||
General and administrative expenses
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20,136
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16,819
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60,184
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52,774
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||||
Restructuring expense
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223
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1,972
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1,150
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1,972
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Interest expense
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1,808
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1,887
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5,568
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5,652
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Amortization of intangible assets
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508
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—
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1,574
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—
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||||
Impairment of asset held for sale
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—
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—
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1,446
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—
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Total expenses
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50,701
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56,484
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156,277
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150,761
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||||
Loss from continuing operations before (loss) gain on buy-back of debt, equity in net income (loss) of investee and income tax expense (benefit)
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(5,250
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)
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(21,686
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)
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(33,287
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)
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(39,581
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)
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(Loss) gain on buy-back of debt
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—
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500
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(24
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)
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500
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Equity in net income (loss) of investee
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—
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98
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255
|
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(2,071
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)
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Loss from continuing operations before income tax expense (benefit)
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(5,250
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)
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(21,088
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)
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(33,056
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)
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(41,152
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)
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Income tax expense (benefit)
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403
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(1,054
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)
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(398
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)
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(879
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)
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Loss from continuing operations
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(5,653
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)
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(20,034
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)
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(32,658
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)
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(40,273
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)
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||||
Gain on liquidation of subsidiaries, net of taxes
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7,227
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—
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7,227
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—
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||||
Net income (loss)
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|
1,574
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|
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(20,034
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)
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(25,431
|
)
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(40,273
|
)
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||||
Less: net (loss) income attributable to noncontrolling interests in consolidated subsidiaries
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(305
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)
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(1,165
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)
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407
|
|
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(1,888
|
)
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||||
Net income (loss) attributable to common shareholders
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$
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1,879
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|
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$
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(18,869
|
)
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$
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(25,838
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)
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$
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(38,385
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)
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Loss per share - continuing operations:
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||||||||
Basic:
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$
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(0.41
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)
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$
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(1.52
|
)
|
|
$
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(2.45
|
)
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$
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(3.07
|
)
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Diluted:
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(0.41
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)
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(1.52
|
)
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(2.45
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)
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(3.07
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)
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||||
Earnings (loss) per share – net income (loss):
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|
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||||||||
Basic:
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$
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0.12
|
|
|
$
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(1.52
|
)
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|
$
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(1.91
|
)
|
|
$
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(3.07
|
)
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Diluted:
|
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0.12
|
|
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(1.52
|
)
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(1.91
|
)
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(3.07
|
)
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||||
Weighted average shares outstanding (in ‘000s):
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||||||||
Basic:
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13,684
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|
|
13,149
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|
13,329
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|
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13,133
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||||
Diluted:
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13,684
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13,149
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13,329
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13,133
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4
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KINGSWAY FINANCIAL SERVICES INC.
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Three months ended September 30,
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Nine months ended September 30,
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||||||||||
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2013
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2012
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2013
|
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2012
|
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||||
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||||||||
Net income (loss)
|
|
$
|
1,574
|
|
|
$
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(20,034
|
)
|
|
$
|
(25,431
|
)
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|
$
|
(40,273
|
)
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Other comprehensive (loss) income, net of taxes
(1)
:
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|
|
|
|
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||||||||
Unrealized (losses) gains on fixed maturities and equity investments:
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|
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||||||||
Unrealized (losses) gains arising during the period
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|
(281
|
)
|
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(1,337
|
)
|
|
855
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(1,140
|
)
|
||||
Reclassification adjustment for losses included in net income (loss)
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|
1,860
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|
1,090
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|
|
2,142
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|
|
723
|
|
||||
Foreign currency translation adjustments
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|
1
|
|
|
539
|
|
|
—
|
|
|
566
|
|
||||
Recognition of currency translation gain on liquidation of subsidiaries
|
|
(7,227
|
)
|
|
—
|
|
|
(7,227
|
)
|
|
—
|
|
||||
Equity in other comprehensive income of investee
|
|
—
|
|
|
310
|
|
|
642
|
|
|
649
|
|
||||
Other comprehensive (loss) income
|
|
(5,647
|
)
|
|
602
|
|
|
(3,588
|
)
|
|
798
|
|
||||
Comprehensive loss
|
|
(4,073
|
)
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|
(19,432
|
)
|
|
(29,019
|
)
|
|
(39,475
|
)
|
||||
Less: comprehensive (loss) income attributable to noncontrolling interests in consolidated subsidiaries
|
|
(312
|
)
|
|
1,474
|
|
|
359
|
|
|
(1,844
|
)
|
||||
Comprehensive loss attributable to common shareholders
|
|
$
|
(3,761
|
)
|
|
$
|
(20,906
|
)
|
|
$
|
(29,378
|
)
|
|
$
|
(37,631
|
)
|
(1) Net of income tax expense (benefit) of $0 and $0 for the three and nine months ended September 30, 2013 and September 30, 2012, respectively.
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|
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|
5
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KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Nine months ended September 30,
|
|
|||||
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|
2013
|
|
|
2012
|
|
||
Cash provided by (used in):
|
|
|
|
|
||||
Operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(25,431
|
)
|
|
$
|
(40,273
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
||||
Gain on liquidation of subsidiaries, net of taxes
|
|
(7,227
|
)
|
|
—
|
|
||
Equity in net (income) loss of investee
|
|
(255
|
)
|
|
2,071
|
|
||
Equity in net (income) loss of limited liability investments
|
|
(133
|
)
|
|
14
|
|
||
Depreciation and amortization
|
|
2,786
|
|
|
1,042
|
|
||
Stock based compensation expense, net of forfeitures
|
|
198
|
|
|
228
|
|
||
Net realized losses (gains)
|
|
1,056
|
|
|
(1,359
|
)
|
||
Loss on change in fair value of debt
|
|
2,812
|
|
|
9,926
|
|
||
Deferred income taxes
|
|
144
|
|
|
—
|
|
||
Other than temporary impairment loss
|
|
1,800
|
|
|
488
|
|
||
Amortization of fixed maturities premiums and discounts
|
|
2,302
|
|
|
2,679
|
|
||
Impairment of asset held for sale
|
|
1,446
|
|
|
—
|
|
||
Realized loss (gain) on buy-back of debt
|
|
24
|
|
|
(500
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Premiums and service fee receivable
|
|
8
|
|
|
(7,926
|
)
|
||
Reinsurance recoverable
|
|
(6,751
|
)
|
|
(9,775
|
)
|
||
Deferred acquisition costs
|
|
3,411
|
|
|
77
|
|
||
Income taxes recoverable
|
|
—
|
|
|
8,134
|
|
||
Unpaid loss and loss adjustment expenses
|
|
(13,696
|
)
|
|
(15,305
|
)
|
||
Unearned premiums
|
|
2,799
|
|
|
4,647
|
|
||
Reinsurance payable
|
|
(721
|
)
|
|
7,194
|
|
||
Deferred service fees
|
|
255
|
|
|
2,903
|
|
||
Other, net
|
|
(3,502
|
)
|
|
(4,955
|
)
|
||
Net cash used in operating activities
|
|
(38,675
|
)
|
|
(40,690
|
)
|
||
Investing activities:
|
|
|
|
|
||||
Proceeds from sales and maturities of fixed maturities
|
|
18,725
|
|
|
64,578
|
|
||
Proceeds from sales of equity investments
|
|
8,799
|
|
|
2,459
|
|
||
Proceeds from sales of investment in investee
|
|
13,638
|
|
|
—
|
|
||
Purchase of fixed maturities
|
|
(4,725
|
)
|
|
(44,555
|
)
|
||
Purchase of equity investments
|
|
(286
|
)
|
|
—
|
|
||
Net acquisition of limited liability investments
|
|
(919
|
)
|
|
(2,403
|
)
|
||
Purchase of other investments
|
|
(1,031
|
)
|
|
—
|
|
||
Net purchases of short-term investments
|
|
(325
|
)
|
|
—
|
|
||
Acquisition of business, net of cash acquired
|
|
(1,052
|
)
|
|
—
|
|
||
Net purchases of property and equipment and intangible assets
|
|
(455
|
)
|
|
(62
|
)
|
||
Net cash provided by investing activities
|
|
32,369
|
|
|
20,017
|
|
||
Financing activities:
|
|
|
|
|
||||
Proceeds from issuance of common stock, net
|
|
12,113
|
|
|
132
|
|
||
Payment of notes payable
|
|
—
|
|
|
(2,418
|
)
|
||
Redemption of senior unsecured debentures
|
|
(583
|
)
|
|
(1,656
|
)
|
||
Net cash provided by (used in) financing activities
|
|
11,530
|
|
|
(3,942
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
5,224
|
|
|
(24,615
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
80,813
|
|
|
85,486
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
86,037
|
|
|
$
|
60,871
|
|
|
6
|
|
|
7
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
8
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Liquidations:
|
|
|
|
|
|
|
|
|
||||
Gain on liquidations before income taxes
|
|
7,227
|
|
|
—
|
|
|
7,227
|
|
|
—
|
|
Income tax benefit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain on liquidation of subsidiaries, net of taxes
|
|
7,227
|
|
|
—
|
|
|
7,227
|
|
|
—
|
|
|
9
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
September 30, 2013
|
|
|||||||||||||
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Estimated Fair Value
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
24,647
|
|
|
$
|
697
|
|
|
$
|
6
|
|
|
$
|
25,338
|
|
Canadian government
|
|
4,372
|
|
|
—
|
|
|
130
|
|
|
4,242
|
|
||||
States municipalities and political subdivisions
|
|
7,134
|
|
|
113
|
|
|
—
|
|
|
7,247
|
|
||||
Mortgage-backed
|
|
722
|
|
|
14
|
|
|
—
|
|
|
736
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
318
|
|
|
1
|
|
|
—
|
|
|
319
|
|
||||
Corporate
|
|
27,169
|
|
|
234
|
|
|
10
|
|
|
27,393
|
|
||||
Total fixed maturities
|
|
64,362
|
|
|
1,059
|
|
|
146
|
|
|
65,275
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
11,520
|
|
|
5,016
|
|
|
13
|
|
|
16,523
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
75,882
|
|
|
$
|
6,075
|
|
|
$
|
159
|
|
|
$
|
81,798
|
|
(in thousands)
|
|
December 31, 2012
|
|
|||||||||||||
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Estimated Fair Value
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
23,954
|
|
|
$
|
962
|
|
|
$
|
1
|
|
|
$
|
24,915
|
|
Canadian government
|
|
3,822
|
|
|
—
|
|
|
40
|
|
|
3,782
|
|
||||
States municipalities and political subdivisions
|
|
7,158
|
|
|
187
|
|
|
—
|
|
|
7,345
|
|
||||
Mortgage-backed
|
|
4,850
|
|
|
193
|
|
|
—
|
|
|
5,043
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
1,084
|
|
|
8
|
|
|
—
|
|
|
1,092
|
|
||||
Corporate
|
|
36,990
|
|
|
391
|
|
|
24
|
|
|
37,357
|
|
||||
Total fixed maturities
|
|
77,858
|
|
|
1,741
|
|
|
65
|
|
|
79,534
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
2,305
|
|
|
1,256
|
|
|
13
|
|
|
3,548
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
80,163
|
|
|
$
|
2,997
|
|
|
$
|
78
|
|
|
$
|
83,082
|
|
|
10
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
September 30, 2013
|
|
|||||
|
|
Amortized Cost
|
|
|
Estimated Fair Value
|
|
||
Due in one year or less
|
|
$
|
21,812
|
|
|
$
|
21,881
|
|
Due after one year through five years
|
|
40,530
|
|
|
41,274
|
|
||
Due after five years through ten years
|
|
1,328
|
|
|
1,417
|
|
||
Due after ten years
|
|
692
|
|
|
703
|
|
||
Total
|
|
$
|
64,362
|
|
|
$
|
65,275
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|||||||||||||
|
Less than 12 Months
|
|
Greater than 12 Months
|
|
Total
|
||||||||||||||||||
|
Estimated Fair Value
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Unrealized Loss
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government, government agencies and authorities
|
$
|
1,699
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,699
|
|
|
$
|
6
|
|
Canadian government
|
4,241
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
4,241
|
|
|
130
|
|
||||||
Mortgage-backed
|
582
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
582
|
|
|
—
|
|
||||||
Corporate
|
2,028
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
2,028
|
|
|
10
|
|
||||||
Total fixed maturities
|
8,550
|
|
|
136
|
|
|
—
|
|
|
10
|
|
|
8,550
|
|
|
146
|
|
||||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock
|
180
|
|
|
2
|
|
|
2
|
|
|
11
|
|
|
182
|
|
|
13
|
|
||||||
Total
|
$
|
8,730
|
|
|
$
|
138
|
|
|
$
|
2
|
|
|
$
|
21
|
|
|
$
|
8,732
|
|
|
$
|
159
|
|
|
11
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|||||||||||||
|
Less than 12 Months
|
|
Greater than 12 Months
|
|
Total
|
||||||||||||||||||
|
Estimated Fair Value
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Unrealized Loss
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government, government agencies and authorities
|
$
|
4,612
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,612
|
|
|
$
|
1
|
|
Canadian government
|
3,782
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
3,782
|
|
|
40
|
|
||||||
Mortgage-backed
|
—
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
267
|
|
|
—
|
|
||||||
Corporate
|
4,169
|
|
|
14
|
|
|
—
|
|
|
10
|
|
|
4,169
|
|
|
24
|
|
||||||
Total fixed maturities
|
12,563
|
|
|
55
|
|
|
267
|
|
|
10
|
|
|
12,830
|
|
|
65
|
|
||||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
8
|
|
|
1
|
|
|
38
|
|
|
12
|
|
|
46
|
|
|
13
|
|
||||||
Total
|
$
|
12,571
|
|
|
$
|
56
|
|
|
$
|
305
|
|
|
$
|
22
|
|
|
$
|
12,876
|
|
|
$
|
78
|
|
•
|
identifying all unrealized loss positions that have existed for at least six months;
|
•
|
identifying other circumstances which management believes may impact the recoverability of the unrealized loss positions;
|
•
|
obtaining a valuation analysis from third-party investment managers regarding the intrinsic value of these investments based on their knowledge and experience together with market-based valuation techniques;
|
•
|
reviewing the trading range of certain investments over the preceding calendar period;
|
•
|
assessing if declines in market value are other-than-temporary for debt instruments based on the investment grade credit ratings from third-party rating agencies;
|
•
|
assessing if declines in market value are other-than-temporary for any debt instrument with a non-investment grade credit rating based on the continuity of its debt service record;
|
•
|
determining the necessary provision for declines in market value that are considered other-than-temporary based on the analyses performed; and
|
•
|
assessing the Company's ability and intent to hold these investments at least until the investment impairment is recovered.
|
•
|
the opinions of professional investment managers could be incorrect;
|
•
|
the past trading patterns of individual investments may not reflect future valuation trends;
|
•
|
the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company's financial situation; and
|
•
|
the debt service pattern of non-investment grade instruments may not reflect future debt service capabilities and may not reflect a company's unknown underlying financial problems.
|
|
12
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Gross realized gains
|
|
$
|
321
|
|
|
$
|
1,109
|
|
|
$
|
694
|
|
|
$
|
1,433
|
|
Gross realized losses
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
(74
|
)
|
||||
Total
|
|
$
|
321
|
|
|
$
|
1,109
|
|
|
$
|
662
|
|
|
$
|
1,359
|
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Investment income
|
|
|
|
|
|
|
|
|
||||||||
Interest from fixed maturities
|
|
$
|
314
|
|
|
$
|
529
|
|
|
$
|
964
|
|
|
$
|
1,647
|
|
Dividends
|
|
101
|
|
|
239
|
|
|
591
|
|
|
743
|
|
||||
(Loss) income from limited liability investments
|
|
(22
|
)
|
|
(5
|
)
|
|
133
|
|
|
(14
|
)
|
||||
Other
|
|
170
|
|
|
121
|
|
|
429
|
|
|
350
|
|
||||
Gross investment income
|
|
563
|
|
|
884
|
|
|
2,117
|
|
|
2,726
|
|
||||
Investment expenses
|
|
(35
|
)
|
|
(107
|
)
|
|
(193
|
)
|
|
(326
|
)
|
||||
Net investment income
|
|
$
|
528
|
|
|
$
|
777
|
|
|
$
|
1,924
|
|
|
$
|
2,400
|
|
|
13
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Beginning balance, net
|
|
$
|
11,797
|
|
|
$
|
7,634
|
|
|
$
|
14,102
|
|
|
$
|
8,116
|
|
Additions
|
|
4,952
|
|
|
5,804
|
|
|
20,719
|
|
|
14,662
|
|
||||
Amortization
|
|
(6,058
|
)
|
|
(5,399
|
)
|
|
(24,130
|
)
|
|
(14,739
|
)
|
||||
Balance at September 30, net
|
|
$
|
10,691
|
|
|
$
|
8,039
|
|
|
$
|
10,691
|
|
|
$
|
8,039
|
|
|
14
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
|
|
|
||||
|
|
September 30, 2013
|
|
|
December 31, 2012
|
|
||
Intangible assets subject to amortization
|
|
|
|
|
||||
Database
|
|
$
|
4,487
|
|
|
$
|
4,907
|
|
VSA in-force
|
|
1,788
|
|
|
2,770
|
|
||
Customer-related relationships
|
|
3,953
|
|
|
3,056
|
|
||
Non-compete agreement
|
|
49
|
|
|
66
|
|
||
Intangible assets not subject to amortization
|
|
|
|
|
||||
Insurance licenses
|
|
7,803
|
|
|
7,803
|
|
||
Renewal rights
|
|
31,318
|
|
|
31,318
|
|
||
Trade name
|
|
663
|
|
|
663
|
|
||
Intangible assets
|
|
$
|
50,061
|
|
|
$
|
50,583
|
|
|
15
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
||
Balance at beginning of period, gross
|
|
$
|
103,116
|
|
|
$
|
120,258
|
|
Less reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
5,478
|
|
|
298
|
|
||
Balance at beginning of period, net
|
|
97,638
|
|
|
119,960
|
|
||
Incurred related to:
|
|
|
|
|
|
|||
Current year
|
|
63,347
|
|
|
67,510
|
|
||
Prior years
|
|
(427
|
)
|
|
11,229
|
|
||
Paid related to:
|
|
|
|
|
|
|||
Current year
|
|
(35,653
|
)
|
|
(36,751
|
)
|
||
Prior years
|
|
(43,092
|
)
|
|
(60,530
|
)
|
||
Balance at end of period, net
|
|
81,813
|
|
|
101,418
|
|
||
Plus reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
8,173
|
|
|
3,535
|
|
||
Balance at end of period, gross
|
|
$
|
89,986
|
|
|
$
|
104,953
|
|
(in thousands)
|
|
September 30, 2013
|
|
|
Balance at beginning of period
|
|
$
|
3,448
|
|
Incurred related to:
|
|
|
||
Current year
|
|
4,869
|
|
|
Prior years
|
|
—
|
|
|
Paid related to:
|
|
|
||
Current year
|
|
(5,354
|
)
|
|
Prior years
|
|
(81
|
)
|
|
Balance at end of period
|
|
$
|
2,882
|
|
(in thousands)
|
|
September 30, 2013
|
|
December 31, 2012
|
||||||||||||
|
|
Principal
|
|
|
Fair Value
|
|
|
Principal
|
|
|
Fair Value
|
|
||||
7.5% senior notes due 2014
|
|
$
|
26,356
|
|
|
$
|
26,356
|
|
|
$
|
26,966
|
|
|
$
|
23,730
|
|
LROC preferred units due 2015
|
|
15,334
|
|
|
14,286
|
|
|
15,879
|
|
|
13,655
|
|
||||
Subordinated debt
|
|
90,500
|
|
|
22,790
|
|
|
90,500
|
|
|
23,774
|
|
||||
Total
|
|
$
|
132,190
|
|
|
$
|
63,432
|
|
|
$
|
133,345
|
|
|
$
|
61,159
|
|
|
16
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
Issuer
|
Principal
|
|
Issue date
|
Interest
|
Redemption date
|
Kingsway CT Statutory Trust I
|
15,000
|
|
12/4/2002
|
annual interest rate equal to LIBOR, plus 4.00% payable quarterly
|
12/4/2032
|
Kingsway CT Statutory Trust II
|
17,500
|
|
5/15/2003
|
annual interest rate equal to LIBOR, plus 4.10% payable quarterly
|
5/15/2033
|
Kingsway CT Statutory Trust III
|
20,000
|
|
10/29/2003
|
annual interest rate equal to LIBOR, plus 3.95% payable quarterly
|
10/29/2033
|
Kingsway DE Statutory Trust III
|
15,000
|
|
5/23/2003
|
annual interest rate equal to LIBOR, plus 4.20% payable quarterly
|
5/23/2033
|
Kingsway DE Statutory Trust IV
|
10,000
|
|
9/30/2003
|
annual interest rate equal to LIBOR, plus 3.85% payable quarterly
|
9/30/2033
|
Kingsway DE Statutory Trust VI
|
13,000
|
|
1/8/2004
|
annual interest rate equal to LIBOR, plus 4.00% payable quarterly
|
1/8/2034
|
|
17
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
18
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Beginning balance
|
|
$
|
16,862
|
|
|
$
|
13,047
|
|
|
$
|
14,762
|
|
|
$
|
12,749
|
|
Unrealized (losses) gains on fixed maturities and equity investments arising during the period
|
|
(274
|
)
|
|
(1,191
|
)
|
|
878
|
|
|
(888
|
)
|
||||
Reclassification adjustment for losses included in net income (loss)
|
|
1,860
|
|
|
1,090
|
|
|
2,142
|
|
|
723
|
|
||||
Foreign currency translation adjustments
|
|
1
|
|
|
496
|
|
|
25
|
|
|
519
|
|
||||
Recognition of currency translation gain on liquidation of subsidiaries
|
|
(7,227
|
)
|
|
—
|
|
|
(7,227
|
)
|
|
—
|
|
||||
Equity in other comprehensive income of investee
|
|
—
|
|
|
310
|
|
|
642
|
|
|
649
|
|
||||
Balance at September 30
|
|
$
|
11,222
|
|
|
$
|
13,752
|
|
|
$
|
11,222
|
|
|
$
|
13,752
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Reclassification of accumulated other comprehensive income from unrealized (losses) gains on fixed maturities and equity investments to:
|
|
|
|
|
|
|
|
|
||||||||
Net realized gains (losses)
|
|
$
|
(1,860
|
)
|
|
$
|
(1,090
|
)
|
|
$
|
(2,142
|
)
|
|
$
|
(723
|
)
|
Other-than-temporary impairment loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Loss from continuing operations before income tax expense (benefit)
|
|
(1,860
|
)
|
|
(1,090
|
)
|
|
(2,142
|
)
|
|
(723
|
)
|
||||
Income tax expense (benefit)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss)
|
|
$
|
(1,860
|
)
|
|
$
|
(1,090
|
)
|
|
$
|
(2,142
|
)
|
|
$
|
(723
|
)
|
|
19
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
20
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Insurance Underwriting:
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
26,041
|
|
|
$
|
26,501
|
|
|
$
|
82,406
|
|
|
$
|
86,753
|
|
Other income
|
|
2,314
|
|
|
1,926
|
|
|
6,970
|
|
|
5,679
|
|
||||
Total Insurance Underwriting
|
|
28,355
|
|
|
28,427
|
|
|
89,376
|
|
|
92,432
|
|
||||
Insurance Services:
|
|
|
|
|
|
|
|
|
||||||||
Service fee and commission income
|
|
12,156
|
|
|
7,648
|
|
|
37,332
|
|
|
25,315
|
|
||||
Total Insurance Services
|
|
12,156
|
|
|
7,648
|
|
|
37,332
|
|
|
25,315
|
|
||||
Total segment revenues
|
|
40,511
|
|
|
36,075
|
|
|
126,708
|
|
|
117,747
|
|
||||
Net investment income
|
|
528
|
|
|
777
|
|
|
1,924
|
|
|
2,400
|
|
||||
Net realized gains (losses)
|
|
321
|
|
|
1,109
|
|
|
(1,056
|
)
|
|
1,359
|
|
||||
Other-than-temporary impairment loss
|
|
—
|
|
|
—
|
|
|
(1,800
|
)
|
|
(488
|
)
|
||||
Gain (loss) on change in fair value of debt
|
|
3,801
|
|
|
(3,177
|
)
|
|
(2,812
|
)
|
|
(9,926
|
)
|
||||
Other income not allocated to segments
|
|
290
|
|
|
14
|
|
|
26
|
|
|
88
|
|
||||
Total revenues
|
|
$
|
45,451
|
|
|
$
|
34,798
|
|
|
$
|
122,990
|
|
|
$
|
111,180
|
|
|
21
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Segment operating (loss) income
|
|
|
|
|
|
|
|
|
||||||||
Insurance Underwriting
|
|
$
|
(4,900
|
)
|
|
$
|
(16,742
|
)
|
|
$
|
(14,625
|
)
|
|
$
|
(23,705
|
)
|
Insurance Services
|
|
(871
|
)
|
|
414
|
|
|
418
|
|
|
3,138
|
|
||||
Total segment operating loss
|
|
(5,771
|
)
|
|
(16,328
|
)
|
|
(14,207
|
)
|
|
(20,567
|
)
|
||||
Net investment income
|
|
528
|
|
|
777
|
|
|
1,924
|
|
|
2,400
|
|
||||
Net realized gains (losses)
|
|
321
|
|
|
1,109
|
|
|
(1,056
|
)
|
|
1,359
|
|
||||
Other-than-temporary impairment loss
|
|
—
|
|
|
—
|
|
|
(1,800
|
)
|
|
(488
|
)
|
||||
Gain (loss) on change in fair value of debt
|
|
3,801
|
|
|
(3,177
|
)
|
|
(2,812
|
)
|
|
(9,926
|
)
|
||||
Other income and expenses not allocated to segments, net
|
|
(2,140
|
)
|
|
(2,180
|
)
|
|
(7,729
|
)
|
|
(6,707
|
)
|
||||
Interest expense
|
|
(1,808
|
)
|
|
(1,887
|
)
|
|
(5,568
|
)
|
|
(5,652
|
)
|
||||
Amortization of intangible assets not allocated to segments
|
|
(181
|
)
|
|
—
|
|
|
(593
|
)
|
|
—
|
|
||||
Impairment of asset held for sale
|
|
—
|
|
|
—
|
|
|
(1,446
|
)
|
|
—
|
|
||||
(Loss) gain on buy-back of debt
|
|
—
|
|
|
500
|
|
|
(24
|
)
|
|
500
|
|
||||
Equity in net income (loss) of investee
|
|
—
|
|
|
98
|
|
|
255
|
|
|
(2,071
|
)
|
||||
Loss from continuing operations before income tax expense (benefit)
|
|
$
|
(5,250
|
)
|
|
$
|
(21,088
|
)
|
|
$
|
(33,056
|
)
|
|
$
|
(41,152
|
)
|
Income tax expense (benefit)
|
|
403
|
|
|
(1,054
|
)
|
|
(398
|
)
|
|
(879
|
)
|
||||
Loss from continuing operations
|
|
$
|
(5,653
|
)
|
|
$
|
(20,034
|
)
|
|
$
|
(32,658
|
)
|
|
$
|
(40,273
|
)
|
(in thousands)
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Insurance Underwriting:
|
|
|
|
|
|
|
|
|
||||||||
Private passenger auto liability
|
|
$
|
16,926
|
|
|
$
|
17,211
|
|
|
$
|
54,763
|
|
|
$
|
57,031
|
|
Auto physical damage
|
|
8,269
|
|
|
6,914
|
|
|
24,442
|
|
|
21,733
|
|
||||
Total non-standard automobile
|
|
25,195
|
|
|
24,125
|
|
|
$
|
79,205
|
|
|
$
|
78,764
|
|
||
Commercial auto liability
|
|
17
|
|
|
2,378
|
|
|
763
|
|
|
7,991
|
|
||||
Allied lines
|
|
2,387
|
|
|
—
|
|
|
2,387
|
|
|
—
|
|
||||
Homeowners
|
|
(1,559
|
)
|
|
—
|
|
|
50
|
|
|
—
|
|
||||
Other
|
|
1
|
|
|
(2
|
)
|
|
1
|
|
|
(2
|
)
|
||||
Total net premiums earned
|
|
$
|
26,041
|
|
|
$
|
26,501
|
|
|
$
|
82,406
|
|
|
$
|
86,753
|
|
|
22
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
Three months ended September 30, 2013
|
|
|||||||||
|
|
Severance
|
|
Lease abandonment
|
|
Total
|
||||||
Restructuring liability, beginning of period
|
|
$
|
44
|
|
|
$
|
1,071
|
|
|
$
|
1,115
|
|
Restructuring expense
|
|
203
|
|
|
20
|
|
|
223
|
|
|||
Cash payments
|
|
(131
|
)
|
|
(89
|
)
|
|
(220
|
)
|
|||
Restructuring liability, end of period
|
|
$
|
116
|
|
|
$
|
1,002
|
|
|
$
|
1,118
|
|
(in thousands)
|
|
Nine months ended September 30, 2013
|
|
|||||||||
|
|
Severance
|
|
Lease abandonment
|
|
Total
|
||||||
Restructuring liability, beginning of period
|
|
$
|
214
|
|
|
$
|
1,207
|
|
|
$
|
1,421
|
|
Restructuring expense
|
|
1,089
|
|
|
61
|
|
|
1,150
|
|
|||
Cash payments
|
|
(1,187
|
)
|
|
(266
|
)
|
|
(1,453
|
)
|
|||
Restructuring liability, end of period
|
|
$
|
116
|
|
|
$
|
1,002
|
|
|
$
|
1,118
|
|
(in thousands)
|
|
Three and nine months ended September 30, 2012
|
|
|||||||||
|
|
Severance
|
|
Lease abandonment
|
|
Total
|
||||||
Restructuring liability, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring expense
|
|
668
|
|
|
1,304
|
|
|
1,972
|
|
|||
Cash payments
|
|
—
|
|
|
(29
|
)
|
|
(29
|
)
|
|||
Restructuring liability, end of period
|
|
$
|
668
|
|
|
$
|
1,275
|
|
|
$
|
1,943
|
|
|
23
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
|
|
|
|
September 30, 2013
|
|
|||||||||
|
|
|
|
Fair Value Measurements at the End of the Reporting Period Using
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Assets(Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs (Level 3)
|
|
||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
25,338
|
|
|
$
|
—
|
|
|
$
|
25,338
|
|
|
$
|
—
|
|
Canadian government
|
|
4,242
|
|
|
—
|
|
|
4,242
|
|
|
—
|
|
||||
States municipalities and political subdivisions
|
|
7,247
|
|
|
—
|
|
|
7,247
|
|
|
—
|
|
||||
Mortgage-backed
|
|
736
|
|
|
—
|
|
|
736
|
|
|
—
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
319
|
|
|
—
|
|
|
319
|
|
|
—
|
|
||||
Corporate
|
|
27,393
|
|
|
—
|
|
|
27,393
|
|
|
—
|
|
||||
Total fixed maturities
|
|
65,275
|
|
|
—
|
|
|
65,275
|
|
|
—
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|||||||
Common stock
|
|
16,523
|
|
|
16,523
|
|
|
—
|
|
|
—
|
|
||||
Preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total equity investments
|
|
16,523
|
|
|
16,523
|
|
|
—
|
|
|
—
|
|
||||
Other investments
|
|
3,107
|
|
|
—
|
|
|
3,107
|
|
|
—
|
|
||||
Short-term investments
|
|
586
|
|
|
—
|
|
|
586
|
|
|
—
|
|
||||
Total assets
|
|
$
|
85,491
|
|
|
$
|
16,523
|
|
|
$
|
68,968
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
LROC preferred units
|
|
14,286
|
|
|
14,286
|
|
|
—
|
|
|
—
|
|
||||
Senior unsecured debentures
|
|
26,356
|
|
|
—
|
|
|
26,356
|
|
|
—
|
|
||||
Subordinated debt
|
|
22,790
|
|
|
—
|
|
|
22,790
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
63,432
|
|
|
$
|
14,286
|
|
|
$
|
49,146
|
|
|
$
|
—
|
|
|
24
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
(in thousands)
|
|
|
|
|
|
December 31, 2012
|
|
|||||||||
|
|
|
|
Fair Value Measurements at the End of the Reporting Period Using
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs (Level 3)
|
|
||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
24,915
|
|
|
$
|
—
|
|
|
$
|
24,915
|
|
|
$
|
—
|
|
Canadian government
|
|
3,782
|
|
|
—
|
|
|
3,782
|
|
|
—
|
|
||||
States municipalities and political subdivisions
|
|
7,345
|
|
|
—
|
|
|
7,345
|
|
|
—
|
|
||||
Mortgage-backed
|
|
5,043
|
|
|
—
|
|
|
5,043
|
|
|
—
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
1,092
|
|
|
—
|
|
|
1,092
|
|
|
—
|
|
||||
Corporate
|
|
37,357
|
|
|
—
|
|
|
37,357
|
|
|
—
|
|
||||
Total fixed maturities
|
|
79,534
|
|
|
—
|
|
|
79,534
|
|
|
—
|
|
||||
Common stock
|
|
3,548
|
|
|
3,548
|
|
|
—
|
|
|
—
|
|
||||
Other investments
|
|
2,000
|
|
|
—
|
|
|
2,000
|
|
|
—
|
|
||||
Short-term investments
|
|
585
|
|
|
—
|
|
|
585
|
|
|
—
|
|
||||
Total assets
|
|
$
|
85,667
|
|
|
$
|
3,548
|
|
|
$
|
82,119
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
LROC preferred units
|
|
13,655
|
|
|
13,655
|
|
|
—
|
|
|
—
|
|
||||
Senior unsecured debentures
|
|
23,730
|
|
|
—
|
|
|
23,730
|
|
|
—
|
|
||||
Subordinated debt
|
|
23,774
|
|
|
—
|
|
|
23,774
|
|
|
—
|
|
||||
Total liabilities
|
|
$
|
61,159
|
|
|
$
|
13,655
|
|
|
$
|
47,504
|
|
|
$
|
—
|
|
|
25
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
26
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Statement of Operations
|
|
||||||||||||
|
For the nine months ended September 30, 2013
|
|
|||||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
$
|
—
|
|
$
|
82,406
|
|
$
|
—
|
|
$
|
82,406
|
|
Service fee and commission income
|
|
|
37,332
|
|
—
|
|
37,332
|
|
|||||||
Net investment income, net realized losses, other-than-temporary impairment loss and other income
|
(177
|
)
|
(2,558
|
)
|
8,799
|
|
—
|
|
6,064
|
|
|||||
Loss on change in fair value of debt
|
—
|
|
(2,179
|
)
|
(633
|
)
|
—
|
|
(2,812
|
)
|
|||||
Total revenues
|
(177
|
)
|
(4,737
|
)
|
127,904
|
|
—
|
|
122,990
|
|
|||||
Expenses:
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
—
|
|
—
|
|
67,789
|
|
—
|
|
67,789
|
|
|||||
Commissions and premium taxes
|
—
|
|
—
|
|
18,566
|
|
—
|
|
18,566
|
|
|||||
Other expenses
|
2,287
|
|
4,689
|
|
57,378
|
|
—
|
|
64,354
|
|
|||||
Interest expense
|
—
|
|
8,480
|
|
(2,912
|
)
|
—
|
|
5,568
|
|
|||||
Total expenses
|
2,287
|
|
13,169
|
|
140,821
|
|
—
|
|
156,277
|
|
|||||
Loss from continuing operations before loss on buy-back of debt, equity in net income (loss) of investee and income tax expense (benefit)
|
(2,464
|
)
|
(17,906
|
)
|
(12,917
|
)
|
—
|
|
(33,287
|
)
|
|||||
Loss on buy-back of debt
|
—
|
|
(24
|
)
|
—
|
|
—
|
|
(24
|
)
|
|||||
Equity in net income of investee
|
—
|
|
255
|
|
—
|
|
—
|
|
255
|
|
|||||
Loss from continuing operations before income tax expense (benefit)
|
(2,464
|
)
|
(17,675
|
)
|
(12,917
|
)
|
—
|
|
(33,056
|
)
|
|||||
Income tax expense (benefit)
|
(710
|
)
|
—
|
|
312
|
|
—
|
|
(398
|
)
|
|||||
Equity in undistributed net (loss) income of subsidiaries
|
(23,675
|
)
|
(13,017
|
)
|
—
|
|
36,692
|
|
—
|
|
|||||
Loss from continuing operations
|
(25,429
|
)
|
(30,692
|
)
|
(13,229
|
)
|
36,692
|
|
(32,658
|
)
|
|||||
Gain on liquidation of subsidiaries, net of taxes
|
—
|
|
7,227
|
|
—
|
|
—
|
|
7,227
|
|
|||||
Net (loss) income
|
$
|
(25,429
|
)
|
$
|
(23,465
|
)
|
$
|
(13,229
|
)
|
$
|
36,692
|
|
$
|
(25,431
|
)
|
|
27
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Statement of Operations
|
|
||||||||||||
|
For the nine months ended September 30, 2012
|
|
|||||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||||||
Net premiums earned
|
$
|
—
|
|
$
|
—
|
|
$
|
86,753
|
|
$
|
—
|
|
$
|
86,753
|
|
Service fee and commission income
|
—
|
|
—
|
|
25,315
|
|
—
|
|
25,315
|
|
|||||
Net investment income, net realized gains, other-than-temporary impairment loss and other income
|
937
|
|
2,289
|
|
5,812
|
|
—
|
|
9,038
|
|
|||||
Loss on change in fair value of debt
|
—
|
|
(2,284
|
)
|
(7,642
|
)
|
—
|
|
(9,926
|
)
|
|||||
Total revenues
|
937
|
|
5
|
|
110,238
|
|
—
|
|
111,180
|
|
|||||
Expenses:
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
—
|
|
—
|
|
78,739
|
|
—
|
|
78,739
|
|
|||||
Commissions and premium taxes
|
—
|
|
—
|
|
11,624
|
|
—
|
|
11,624
|
|
|||||
Other expenses
|
2,827
|
|
3,223
|
|
48,696
|
|
—
|
|
54,746
|
|
|||||
Interest expense
|
—
|
|
10,710
|
|
(5,058
|
)
|
—
|
|
5,652
|
|
|||||
Total expenses
|
2,827
|
|
13,933
|
|
134,001
|
|
—
|
|
150,761
|
|
|||||
Loss from continuing operations before gain on buy-back of debt, equity in net loss of investee and income tax expense (benefit)
|
(1,890
|
)
|
(13,928
|
)
|
(23,763
|
)
|
—
|
|
(39,581
|
)
|
|||||
Gain on buy-back of debt
|
—
|
|
—
|
|
500
|
|
—
|
|
500
|
|
|||||
Equity in net loss of investee
|
—
|
|
(2,067
|
)
|
(4
|
)
|
—
|
|
(2,071
|
)
|
|||||
Loss from continuing operations before income tax expense (benefit)
|
(1,890
|
)
|
(15,995
|
)
|
(23,267
|
)
|
—
|
|
(41,152
|
)
|
|||||
Income tax (benefit) expense
|
(1,211
|
)
|
—
|
|
332
|
|
—
|
|
(879
|
)
|
|||||
Equity in undistributed net (loss) income of subsidiaries
|
(33,888
|
)
|
(21,479
|
)
|
—
|
|
55,367
|
|
—
|
|
|||||
Net (loss) income
|
$
|
(34,567
|
)
|
$
|
(37,474
|
)
|
$
|
(23,599
|
)
|
$
|
55,367
|
|
$
|
(40,273
|
)
|
|
28
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Balance Sheets
|
|
||||||||||||
|
|
|
|
As of September 30, 2013
|
|
||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
||||||||||
Investments in subsidiaries
|
$
|
31,826
|
|
$
|
220,524
|
|
$
|
—
|
|
$
|
(252,350
|
)
|
$
|
—
|
|
Total investments
|
—
|
|
2,175
|
|
133,256
|
|
(47,361
|
)
|
88,070
|
|
|||||
Cash and cash equivalents
|
14,140
|
|
7,841
|
|
64,056
|
|
—
|
|
86,037
|
|
|||||
Goodwill
|
—
|
|
—
|
|
9,484
|
|
—
|
|
9,484
|
|
|||||
Intangible assets
|
—
|
|
7,803
|
|
42,258
|
|
—
|
|
50,061
|
|
|||||
Other assets
|
3,630
|
|
246,675
|
|
458,149
|
|
(604,031
|
)
|
104,423
|
|
|||||
Asset held for sale
|
—
|
|
—
|
|
7,291
|
|
|
7,291
|
|
||||||
Total assets
|
49,596
|
|
485,018
|
|
714,494
|
|
(903,742
|
)
|
345,366
|
|
|||||
Liabilities and Equity:
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
||||||||||
Unpaid loss and loss adjustment expenses
|
—
|
|
—
|
|
92,868
|
|
—
|
|
92,868
|
|
|||||
Unearned premiums
|
—
|
|
—
|
|
47,846
|
|
—
|
|
47,846
|
|
|||||
LROC preferred units
|
—
|
|
—
|
|
14,286
|
|
—
|
|
14,286
|
|
|||||
Senior unsecured debentures
|
—
|
|
26,356
|
|
—
|
|
—
|
|
26,356
|
|
|||||
Subordinated debt
|
—
|
|
22,790
|
|
—
|
|
—
|
|
22,790
|
|
|||||
Notes payable
|
—
|
|
70,222
|
|
(70,222
|
)
|
—
|
|
—
|
|
|||||
Other liabilities
|
508
|
|
19,265
|
|
80,197
|
|
(7,838
|
)
|
92,132
|
|
|||||
Total liabilities
|
508
|
|
138,633
|
|
164,975
|
|
(7,838
|
)
|
296,278
|
|
|||||
|
|
|
|
|
|
||||||||||
Equity:
|
|
|
|
|
|
||||||||||
Common stock
|
308,734
|
|
829,681
|
|
482,397
|
|
(1,312,078
|
)
|
308,734
|
|
|||||
Additional paid-in capital
|
15,955
|
|
—
|
|
—
|
|
—
|
|
15,955
|
|
|||||
Accumulated deficit
|
(287,906
|
)
|
(456,576
|
)
|
57,601
|
|
398,975
|
|
(287,906
|
)
|
|||||
Accumulated other comprehensive income (loss)
|
11,222
|
|
(26,720
|
)
|
9,521
|
|
17,199
|
|
11,222
|
|
|||||
Shareholders' equity attributable to common shareholders
|
48,005
|
|
346,385
|
|
549,519
|
|
(895,904
|
)
|
48,005
|
|
|||||
Noncontrolling interests in consolidated subsidiaries
|
1,083
|
|
—
|
|
—
|
|
—
|
|
1,083
|
|
|||||
Total equity
|
49,088
|
|
346,385
|
|
549,519
|
|
(895,904
|
)
|
49,088
|
|
|||||
Total liabilities and equity
|
$
|
49,596
|
|
$
|
485,018
|
|
$
|
714,494
|
|
$
|
(903,742
|
)
|
$
|
345,366
|
|
|
29
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Balance Sheets
|
|
||||||||||||
|
|
|
|
As of December 31, 2012
|
|
||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
||||||||||
Investments in subsidiaries
|
$
|
58,709
|
|
$
|
185,079
|
|
$
|
—
|
|
$
|
(243,788
|
)
|
$
|
—
|
|
Total investments
|
—
|
|
—
|
|
142,499
|
|
(54,499
|
)
|
88,000
|
|
|||||
Investment in investee
|
—
|
|
36,723
|
|
—
|
|
5,010
|
|
41,733
|
|
|||||
Cash and cash equivalents
|
1,932
|
|
6,371
|
|
72,510
|
|
—
|
|
80,813
|
|
|||||
Goodwill
|
—
|
|
—
|
|
8,421
|
|
—
|
|
8,421
|
|
|||||
Intangible assets
|
—
|
|
7,803
|
|
42,780
|
|
—
|
|
50,583
|
|
|||||
Other assets
|
5,004
|
|
229,206
|
|
452,199
|
|
(591,896
|
)
|
94,513
|
|
|||||
Asset held for sale
|
—
|
|
—
|
|
8,737
|
|
—
|
|
8,737
|
|
|||||
Total assets
|
65,645
|
|
465,182
|
|
727,146
|
|
(885,173
|
)
|
372,800
|
|
|||||
Liabilities and Equity:
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
||||||||||
Unpaid loss and loss adjustment expenses
|
—
|
|
—
|
|
106,564
|
|
—
|
|
106,564
|
|
|||||
Unearned premiums
|
—
|
|
—
|
|
45,047
|
|
—
|
|
45,047
|
|
|||||
LROC preferred units
|
—
|
|
—
|
|
13,655
|
|
—
|
|
13,655
|
|
|||||
Senior unsecured debentures
|
—
|
|
23,730
|
|
—
|
|
—
|
|
23,730
|
|
|||||
Subordinated debt
|
—
|
|
23,774
|
|
—
|
|
—
|
|
23,774
|
|
|||||
Notes payable
|
—
|
|
70,222
|
|
(70,222
|
)
|
—
|
|
—
|
|
|||||
Other liabilities
|
231
|
|
16,374
|
|
92,145
|
|
(14,134
|
)
|
94,616
|
|
|||||
Total liabilities
|
231
|
|
134,100
|
|
187,189
|
|
(14,134
|
)
|
307,386
|
|
|||||
Equity:
|
|
|
|
|
|
||||||||||
Common stock
|
296,621
|
|
829,681
|
|
572,079
|
|
(1,401,760
|
)
|
296,621
|
|
|||||
Additional paid-in capital
|
15,757
|
|
—
|
|
—
|
|
—
|
|
15,757
|
|
|||||
Accumulated deficit
|
(262,069
|
)
|
(474,768
|
)
|
(35,045
|
)
|
509,813
|
|
(262,069
|
)
|
|||||
Accumulated other comprehensive income (loss)
|
14,762
|
|
(23,831
|
)
|
2,923
|
|
20,908
|
|
14,762
|
|
|||||
Shareholders' equity attributable to common shareholders
|
65,071
|
|
331,082
|
|
539,957
|
|
(871,039
|
)
|
65,071
|
|
|||||
Noncontrolling interests in consolidated subsidiaries
|
343
|
|
—
|
|
—
|
|
—
|
|
343
|
|
|||||
Total equity
|
65,414
|
|
331,082
|
|
539,957
|
|
(871,039
|
)
|
65,414
|
|
|||||
Total liabilities and equity
|
$
|
65,645
|
|
$
|
465,182
|
|
$
|
727,146
|
|
$
|
(885,173
|
)
|
$
|
372,800
|
|
|
30
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
||||||||||||
|
For the nine months ended September 30, 2013
|
|
|||||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
||||||||||
Operating activities:
|
|
|
|
|
|
||||||||||
Net (loss) income
|
$
|
(25,429
|
)
|
$
|
(23,465
|
)
|
$
|
(13,229
|
)
|
$
|
36,692
|
|
$
|
(25,431
|
)
|
Gain on liquidation of subsidiaries, net of taxes
|
—
|
|
(7,227
|
)
|
—
|
|
—
|
|
(7,227
|
)
|
|||||
Equity in undistributed net income (loss) of subsidiaries
|
23,675
|
|
13,017
|
|
—
|
|
(36,692
|
)
|
—
|
|
|||||
Gain on change in fair value of debt
|
—
|
|
2,179
|
|
633
|
|
—
|
|
2,812
|
|
|||||
Other
|
1,849
|
|
4,029
|
|
(14,707
|
)
|
—
|
|
(8,829
|
)
|
|||||
Net cash provided by (used in) operating activities
|
95
|
|
(11,467
|
)
|
(27,303
|
)
|
—
|
|
(38,675
|
)
|
|||||
Investing activities:
|
|
|
|
|
|
||||||||||
Proceeds from sales and maturities of fixed maturities, equity investments and investment in investee
|
—
|
|
21,920
|
|
19,242
|
|
—
|
|
41,162
|
|
|||||
Purchase of investments
|
—
|
|
(2,744
|
)
|
(4,542
|
)
|
—
|
|
(7,286
|
)
|
|||||
Acquisition of business
|
—
|
|
—
|
|
(1,052
|
)
|
—
|
|
(1,052
|
)
|
|||||
Other
|
—
|
|
(5,656
|
)
|
5,201
|
|
—
|
|
(455
|
)
|
|||||
Net cash provided by investing activities
|
—
|
|
13,520
|
|
18,849
|
|
—
|
|
32,369
|
|
|||||
Financing activities:
|
|
|
|
|
|
||||||||||
Proceeds from issuance of common stock, net
|
12,113
|
|
—
|
|
—
|
|
—
|
|
12,113
|
|
|||||
Redemption of senior unsecured debentures
|
—
|
|
(583
|
)
|
—
|
|
—
|
|
(583
|
)
|
|||||
Net cash provided by (used in) financing activities
|
12,113
|
|
(583
|
)
|
—
|
|
—
|
|
11,530
|
|
|||||
Net increase (decrease) in cash and cash equivalents
|
12,208
|
|
1,470
|
|
(8,454
|
)
|
—
|
|
5,224
|
|
|||||
Cash and cash equivalents at beginning of period
|
1,932
|
|
6,371
|
|
72,510
|
|
—
|
|
80,813
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
14,140
|
|
$
|
7,841
|
|
$
|
64,056
|
|
$
|
—
|
|
$
|
86,037
|
|
|
31
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
||||||||||||
|
For the nine months ended September 30, 2012
|
|
|||||||||||||
|
KFSI
|
KAI
|
Other subsidiaries
|
Consolidation adjustments
|
Total
|
||||||||||
|
(a "Guarantor")
|
(an "Issuer")
|
(the "Non-Guarantor subsidiaries")
|
|
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
||||||||||
Operating activities:
|
|
|
|
|
|
||||||||||
Net (loss) income
|
$
|
(34,567
|
)
|
$
|
(37,474
|
)
|
$
|
(23,599
|
)
|
$
|
55,367
|
|
$
|
(40,273
|
)
|
Equity in undistributed net income (loss) of subsidiaries
|
33,888
|
|
21,479
|
|
—
|
|
(55,367
|
)
|
—
|
|
|||||
Loss on change in fair value of debt
|
—
|
|
2,284
|
|
7,642
|
|
—
|
|
9,926
|
|
|||||
Other
|
(11,244
|
)
|
654
|
|
(19,937
|
)
|
20,184
|
|
(10,343
|
)
|
|||||
Net cash (used in) provided by operating activities
|
(11,923
|
)
|
(13,057
|
)
|
(35,894
|
)
|
20,184
|
|
(40,690
|
)
|
|||||
Investing activities:
|
|
|
|
|
|
||||||||||
Proceeds from sales and maturities of fixed maturities
|
—
|
|
—
|
|
67,037
|
|
—
|
|
67,037
|
|
|||||
Purchase of investments
|
—
|
|
—
|
|
(44,555
|
)
|
—
|
|
(44,555
|
)
|
|||||
Acquisitions of limited liability investments
|
—
|
|
—
|
|
(2,403
|
)
|
—
|
|
(2,403
|
)
|
|||||
Other
|
—
|
|
(6,994
|
)
|
6,932
|
|
—
|
|
(62
|
)
|
|||||
Net cash provided by (used in) investing activities
|
—
|
|
(6,994
|
)
|
27,011
|
|
—
|
|
20,017
|
|
|||||
Financing activities:
|
|
|
|
|
|
||||||||||
Proceeds from issuance of common stock, net
|
132
|
|
20,184
|
|
—
|
|
(20,184
|
)
|
132
|
|
|||||
Proceeds from issuance of notes payable
|
—
|
|
—
|
|
(2,418
|
)
|
—
|
|
(2,418
|
)
|
|||||
Redemption of senior unsecured debentures
|
—
|
|
—
|
|
(1,656
|
)
|
—
|
|
(1,656
|
)
|
|||||
Net cash provided by (used in) financing activities
|
132
|
|
20,184
|
|
(4,074
|
)
|
(20,184
|
)
|
(3,942
|
)
|
|||||
Net (decrease) increase in cash and cash equivalents
|
(11,791
|
)
|
133
|
|
(12,957
|
)
|
—
|
|
(24,615
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
22,389
|
|
873
|
|
62,224
|
|
—
|
|
85,486
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
10,598
|
|
$
|
1,006
|
|
$
|
49,267
|
|
$
|
—
|
|
$
|
60,871
|
|
|
32
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) September 30, 2013
|
|
33
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
34
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
35
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
For the three months ended September 30,
|
|
For the nine months ended September 30,
|
|
||||||||
|
2013
|
|
2012
|
|
Change
|
|
2013
|
|
2012
|
|
Change
|
|
Segment operating (loss) income
|
|
|
|
|
|
|
||||||
Insurance Underwriting
|
(4.9
|
)
|
(16.7
|
)
|
11.8
|
|
(14.6
|
)
|
(23.7
|
)
|
9.1
|
|
Insurance Services
|
(0.9
|
)
|
0.4
|
|
(1.3
|
)
|
0.4
|
|
3.1
|
|
(2.7
|
)
|
Total segment operating loss
|
(5.8
|
)
|
(16.3
|
)
|
10.5
|
|
(14.2
|
)
|
(20.6
|
)
|
6.4
|
|
Net investment income
|
0.5
|
|
0.8
|
|
(0.3
|
)
|
1.9
|
|
2.4
|
|
(0.5
|
)
|
Net realized gains (losses)
|
0.3
|
|
1.1
|
|
(0.8
|
)
|
(1.1
|
)
|
1.4
|
|
(2.5
|
)
|
Other-than-temporary impairment loss
|
—
|
|
—
|
|
—
|
|
(1.8
|
)
|
(0.5
|
)
|
(1.3
|
)
|
Gain (loss) on change in fair value of debt
|
3.8
|
|
(3.2
|
)
|
7.0
|
|
(2.8
|
)
|
(9.9
|
)
|
7.1
|
|
Other income and expenses not allocated to segments, net
|
(2.0
|
)
|
(2.2
|
)
|
0.2
|
|
(7.7
|
)
|
(6.7
|
)
|
(1.0
|
)
|
Interest expense
|
(1.8
|
)
|
(1.9
|
)
|
0.1
|
|
(5.6
|
)
|
(5.7
|
)
|
0.1
|
|
Amortization of intangible assets not allocated to segments
|
(0.2
|
)
|
—
|
|
(0.2
|
)
|
(0.6
|
)
|
—
|
|
(0.6
|
)
|
Impairment of asset held for sale
|
—
|
|
—
|
|
—
|
|
(1.4
|
)
|
—
|
|
(1.4
|
)
|
(Loss) gain on buy-back of debt
|
—
|
|
0.5
|
|
(0.5
|
)
|
—
|
|
0.5
|
|
(0.5
|
)
|
Equity in net income (loss) of investee
|
—
|
|
0.1
|
|
(0.1
|
)
|
0.3
|
|
(2.1
|
)
|
2.4
|
|
Loss from continuing operations before income tax expense (benefit)
|
(5.2
|
)
|
(21.1
|
)
|
15.9
|
|
(33.0
|
)
|
(41.2
|
)
|
8.2
|
|
Income tax expense (benefit)
|
0.4
|
|
(1.1
|
)
|
1.5
|
|
(0.4
|
)
|
(0.9
|
)
|
0.5
|
|
Loss from continuing operations
|
(5.6
|
)
|
(20.0
|
)
|
14.4
|
|
(32.6
|
)
|
(40.3
|
)
|
7.7
|
|
Gain on liquidation of subsidiaries, net of taxes
|
7.2
|
|
—
|
|
7.2
|
|
7.2
|
|
—
|
|
7.2
|
|
Net income (loss)
|
1.6
|
|
(20.0
|
)
|
21.6
|
|
(25.4
|
)
|
(40.3
|
)
|
14.9
|
|
|
36
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
37
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
38
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
39
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Type of investment
|
|
September 30, 2013
|
|
|
% of Total
|
|
|
December 31, 2012
|
|
|
% of Total
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||
U.S. government, government agencies and authorities
|
|
25.3
|
|
|
14.5
|
%
|
|
24.9
|
|
|
14.8
|
%
|
Canadian government
|
|
4.3
|
|
|
2.5
|
%
|
|
3.8
|
|
|
2.2
|
%
|
States municipalities and political subdivisions
|
|
7.3
|
|
|
4.2
|
%
|
|
7.3
|
|
|
4.3
|
%
|
Mortgage-backed
|
|
0.7
|
|
|
0.4
|
%
|
|
5.0
|
|
|
2.9
|
%
|
Asset-backed securities and collateralized mortgage obligations
|
|
0.3
|
|
|
0.2
|
%
|
|
1.1
|
|
|
0.6
|
%
|
Corporate
|
|
27.4
|
|
|
15.7
|
%
|
|
37.4
|
|
|
22.2
|
%
|
Total fixed maturities
|
|
65.3
|
|
|
37.5
|
%
|
|
79.5
|
|
|
47.0
|
%
|
Common stock
|
|
16.5
|
|
|
9.5
|
%
|
|
3.6
|
|
|
2.1
|
%
|
Limited liability investments
|
|
2.6
|
|
|
1.5
|
%
|
|
2.3
|
|
|
1.4
|
%
|
Other investments
|
|
3.1
|
|
|
1.8
|
%
|
|
2.0
|
|
|
1.2
|
%
|
Short-term investments
|
|
0.6
|
|
|
0.3
|
%
|
|
0.6
|
|
|
0.4
|
%
|
Total investments
|
|
88.1
|
|
|
50.6
|
%
|
|
88.0
|
|
|
52.1
|
%
|
Cash and cash equivalents
|
|
86.0
|
|
|
49.4
|
%
|
|
80.8
|
|
|
47.9
|
%
|
Total
|
|
174.1
|
|
|
100.0
|
%
|
|
168.8
|
|
|
100.0
|
%
|
|
|
September 30, 2013
|
|
|
% of Total
|
|
|
December 31, 2012
|
|
|
% of Total
|
|
Due in less than one year
|
|
21.9
|
|
|
33.5
|
%
|
|
16.3
|
|
|
20.5
|
%
|
Due in one through five years
|
|
41.3
|
|
|
63.2
|
%
|
|
56.2
|
|
|
70.7
|
%
|
Due after five through ten years
|
|
1.4
|
|
|
2.2
|
%
|
|
2.1
|
|
|
2.6
|
%
|
Due after ten years
|
|
0.7
|
|
|
1.1
|
%
|
|
4.9
|
|
|
6.2
|
%
|
Total
|
|
65.3
|
|
|
100.0
|
%
|
|
79.5
|
|
|
100.0
|
%
|
|
40
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Rating (S&P/Moody's)
|
September 30, 2013
|
|
December 31, 2012
|
|
AAA/Aaa
|
48.6
|
%
|
45.2
|
%
|
AA/Aa
|
9.3
|
|
15.8
|
|
A/A
|
30.9
|
|
22.8
|
|
Percentage rated A/A2 or better
|
88.8
|
%
|
83.8
|
%
|
BBB/Baa
|
11.2
|
|
16.2
|
|
Total
|
100.0
|
%
|
100.0
|
%
|
|
41
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Unfunded Commitment
|
|
Carrying Value
|
|||||
Limited liability investments:
|
|
September 30, 2013
|
|
September 30, 2013
|
|
December 31, 2012
|
|||
Real estate held through LLC
|
|
—
|
|
|
—
|
|
|
1.0
|
|
Real estate held through LP
|
|
3.7
|
|
|
2.3
|
|
|
1.2
|
|
Other
|
|
—
|
|
|
0.3
|
|
|
0.1
|
|
Total
|
|
3.7
|
|
|
2.6
|
|
|
2.3
|
|
Line of Business
|
September 30, 2013
|
|
December 31, 2012
|
|
Non-standard automobile
|
74.6
|
|
80.3
|
|
Commercial automobile
|
12.7
|
|
19.9
|
|
Other
|
2.7
|
|
2.9
|
|
Total
|
90.0
|
|
103.1
|
|
|
42
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Line of Business
|
September 30, 2013
|
|
December 31, 2012
|
|
Non-standard automobile
|
66.8
|
|
75.6
|
|
Commercial automobile
|
12.3
|
|
19.1
|
|
Other
|
2.7
|
|
2.9
|
|
Total
|
81.8
|
|
97.6
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Unfavorable (favorable) change in provision for property and casualty unpaid loss and loss adjustment expenses for prior accident years:
|
0.4
|
|
10.9
|
|
(0.4
|
)
|
11.2
|
|
|
43
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
44
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
45
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
46
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
47
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
48
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
49
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
|
Date:
|
November 7, 2013
|
By:
|
/s/ Larry G. Swets, Jr.
|
|
|
|
Larry G. Swets, Jr., President and Chief Executive Officer
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date:
|
November 7, 2013
|
By:
|
/s/ William A. Hickey, Jr.
|
|
|
|
William A. Hickey, Jr., Chief Financial Officer and Executive Vice President
|
|
|
|
(principal financial officer)
|
|
|
|
|
|
50
|
|
1.
|
The name of the corporation is: (Set out in BLOCK CAPITAL LETTERS)
|
2.
|
The name of the corporation is changed to (if applicable): (Set out in BLOCK CAPITAL LETTERS)
|
3.
|
Date of incorporation/amalgamation:
|
4.
|
Complete only if there is a change in the number of directors of the minimum / maximum number of directors.
|
5.
|
The articles of the corporation are amended as follows:
|
1.
|
To create an unlimited number of Class A Preferred Shares issuable in series (the Preferred Shares).
|
2.
|
To provide that the Preferred Shares, issuable in series, and the common shares shall have attached thereto the following rights, privileges, restrictions and conditions:
|
1.
|
PREFERRED SHARES
|
1.1
|
The preferred shares shall be issuable in series and the Board of Directors of the Corporation shall have the right, from time to time, to fix the number of shares in, and to determine the designation, rights, privileges, restrictions and conditions attaching to, the preferred shares of each series subject to the limitations, if any, set out in the Articles of the Corporation.
|
1.2
|
The holders of any series of the preferred shares shall be entitled to receive in priority to the holders of common shares and of shares of any other class of the Corporation ranking subordinate to the preferred shares, as and when declared by the Board of Directors of the Corporation, dividends in the amounts specified or determinable in accordance with the rights, privileges, restrictions and conditions attaching to the series of which such preferred shares form part.
|
1.3
|
Upon any liquidation, dissolution or winding-up of the Corporation or other distribution of the assets of the Corporation among shareholders for the purpose of winding up its affairs, before any amount shall be paid to or any assets distributed among the holders of common shares or of shares of any other class of the Corporation ranking subordinate to the preferred shares, the holders of the preferred shares shall be entitled to receive with respect to the shares of each series therof all amounts which may be provided in the Articles of the Corporation to be payable thereon in respect of return of capital, premium and accumulated dividends remaining unpaid, including all cumulative dividends, whether or not declared. Unless the Articles of the Corporation otherwise provide with respect to any series of the preferred shares, after payment to the holders of the preferred shares of the amounts provided in the Articles of the Corporation to be payable to them, such holders shall not be entitled to share in any further distribution of the assets of the Corporation.
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1.4
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Unless the Articles of the Corporation otherwise provide with respect to any series of the preferred shares, the holders of the preferred shares shall not be entitled to receive any notice of or attend any meeting of shareholders of the Corporation and shall not be entitled to vote at any such meeting: provided that at any meeting of shareholders at which, notwithstanding the foregoing, the holders of the preferred shares are required or entitled by law to vote separately as a class or a series, each holder of the preferred shares of any series thereof shall be entitled to cast one vote in respect of each such share held.
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1.5
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The holders of the preferred shares shall not be entitled to vote separately as a class and, unless the Articles of the Corporation otherwise provide, the holders of any series of the preferred shares shall not be entitled to vote separately as a series, pursuant to subsection 170(1) of the
Business Corporations Act
(Ontario), upon a proposal to amend the Articles of the Corporation in the case of an amendment of a kind referred to in paragraphs (a), (b) and (e) of such subsection.
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1.6
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Any meeting of shareholders at which the holders of the preferred shares are required or entitled by law to vote separately as a class or a series shall, unless the Articles of the Corporation otherwise provide, be called and conducted in accordance with the by-laws of the Corporation; provided that no amendment to or repeal of the provisions of such by-laws made after the date of the first issue of any of the preferred shares by the Corporation shall be applicable to the calling and conduct of meetings of holders of the preferred shares voting separately as a class or as a series unless such amendment or repeal has been theretofore approved by an ordinary resolution adopted by the holders of the preferred shares voting separately as a class.
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2.
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COMMON SHARES
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6.
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The amendment has been duly authorized as required by Sections 168 & 170 (as applicable) of the Business Corporations Act
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7.
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The resolution authorizing the amendment was approved by the shareholders/directors (as applicable) of the corporation on
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