|
Ontario, Canada
|
|
Not Applicable
|
|
|
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
|
|
|
45 St. Clair Avenue West, Suite 400
Toronto, Ontario
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M4V 1K9
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|
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(Address of principal executive offices)
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(Zip Code)
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|
Title of Each Class
|
Name of Each Exchange on Which Registered
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Common Stock, no par value
|
New York Stock Exchange
|
Large accelerated filer
o
|
Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller Reporting Company
o
|
Emerging Growth Company
o
|
|
|
|
|
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KINGSWAY FINANCIAL SERVICES INC.
|
Table Of Contents
|
||
Caution Regarding Forward-Looking Statements
|
|
|
PART I
|
|
|
Item 1. Business
|
|
|
Item 1A. Risk Factors
|
|
|
Item 1B. Unresolved Staff Comments
|
|
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Item 2. Properties
|
|
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Item 3. Legal Proceedings
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|
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Item 4. Mine Safety Disclosures
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|
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PART II
|
|
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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
|
Item 6. Selected Financial Data
|
|
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
|
|
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Item 8. Financial Statements and Supplementary Data
|
|
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
|
|
Item 9A. Controls and Procedures
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Item 9B. Other Information
|
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PART III
|
|
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Item 10. Directors, Executive Officers, and Corporate Governance
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Item 11. Executive Compensation
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|
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13. Certain Relationships and Related Transactions, and Director Independence
|
|
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Item 14. Principal Accounting Fees and Services
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|
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PART IV
|
|
|
Item 15. Exhibits, Financial Statement Schedules
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|
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Item 16. Form 10-K Summary
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|
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SIGNATURES
|
|
|
EXHIBIT INDEX
|
|
|
2
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
its results of operations and financial condition (including, among other things, premium volume, premium rates, net and operating income, investment income and performance, return on equity, and expected current returns and combined ratios);
|
•
|
changes in facts and circumstances affecting assumptions used in determining the provision for unpaid loss and loss adjustment expenses;
|
•
|
the number and severity of insurance claims (including those associated with catastrophe losses) and their impact on the adequacy of the provision for unpaid loss and loss adjustment expenses;
|
•
|
the impact of emerging claims issues as well as other insurance and non-insurance litigation;
|
•
|
orders, interpretations or other actions by regulators that impact the reporting, adjustment and payment of claims;
|
•
|
changes in industry trends and significant industry developments;
|
•
|
uncertainties related to regulatory approval of insurance rates, policy forms, license applications and similar matters;
|
•
|
the impact of certain guarantees made by the Company;
|
•
|
the ability to complete current or future acquisitions successfully;
|
•
|
the ability to successfully implement our restructuring activities; and
|
•
|
strategic initiatives.
|
|
3
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
4
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
2017
|
|
% of Total
|
|
2016
|
|
% of Total
|
|
2015
|
|
% of Total
|
|
Private passenger auto liability
|
87,222
|
|
68.7
|
%
|
90,114
|
|
67.9
|
%
|
78,811
|
|
67.7
|
%
|
Auto physical damage
|
39,737
|
|
31.3
|
%
|
42,575
|
|
32.1
|
%
|
37,592
|
|
32.3
|
%
|
Total gross premiums written
|
126,959
|
|
100.0
|
%
|
132,689
|
|
100.0
|
%
|
116,403
|
|
100.0
|
%
|
|
2017
|
|
% of Total
|
|
2016
|
|
% of Total
|
|
2015
|
|
% of Total
|
|
Florida
|
35,534
|
|
28.0
|
%
|
36,378
|
|
27.4
|
%
|
27,935
|
|
24.0
|
%
|
Texas
|
21,314
|
|
16.8
|
%
|
23,525
|
|
17.7
|
%
|
18,989
|
|
16.3
|
%
|
California
|
16,923
|
|
13.3
|
%
|
14,429
|
|
10.9
|
%
|
12,046
|
|
10.3
|
%
|
Nevada
|
15,406
|
|
12.1
|
%
|
15,015
|
|
11.3
|
%
|
11,572
|
|
9.9
|
%
|
Illinois
|
13,301
|
|
10.5
|
%
|
17,644
|
|
13.3
|
%
|
18,265
|
|
15.7
|
%
|
Colorado
|
11,982
|
|
9.4
|
%
|
11,122
|
|
8.4
|
%
|
10,027
|
|
8.6
|
%
|
Other
|
12,499
|
|
9.9
|
%
|
14,576
|
|
11.0
|
%
|
17,569
|
|
15.2
|
%
|
Total gross premiums written
|
126,959
|
|
100.0
|
%
|
132,689
|
|
100.0
|
%
|
116,403
|
|
100.0
|
%
|
|
5
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
6
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
identify markets that are most likely to produce an underwriting profit;
|
•
|
operate with a disciplined underwriting approach;
|
•
|
practice prudent claims management;
|
•
|
establish an appropriate provision for unpaid loss and loss adjustment expenses;
|
•
|
strive for cost containment and the economics of shared support functions where deemed appropriate; and
|
•
|
provide our independent agents and brokers with competitive commissions, an ease of doing business and additional value-added products and services for them and their customers.
|
|
7
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
8
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
9
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
10
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
11
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
trends in jury awards;
|
•
|
changes in the underlying court system and its philosophy;
|
•
|
changes in case law;
|
•
|
litigation trends;
|
•
|
frequency of claims with payment capped by policy limits;
|
•
|
change in average severity of accidents, or proportion of severe accidents;
|
•
|
subrogation opportunities;
|
•
|
degree of patient responsiveness to treatment;
|
•
|
changes in claim handling philosophies;
|
•
|
effectiveness of no-fault laws;
|
•
|
frequency of visits to health providers;
|
•
|
number of medical procedures given during visits to health providers;
|
•
|
types of health providers used;
|
•
|
types of medical treatments received;
|
•
|
changes in cost of medical treatments;
|
•
|
changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.);
|
•
|
changes in underwriting standards; and
|
•
|
changes in the use of credit data for rating and underwriting.
|
|
12
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period, gross
|
|
53,795
|
|
|
55,471
|
|
|
63,895
|
|
Less reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
681
|
|
|
1,207
|
|
|
3,203
|
|
Balance at beginning of period, net
|
|
53,114
|
|
|
54,264
|
|
|
60,692
|
|
Incurred related to:
|
|
|
|
|
|
|
|
||
Current year
|
|
100,097
|
|
|
96,289
|
|
|
86,439
|
|
Prior years
|
|
20,694
|
|
|
8,095
|
|
|
616
|
|
Paid related to:
|
|
|
|
|
|
|
|||
Current year
|
|
(57,983
|
)
|
|
(62,978
|
)
|
|
(54,415
|
)
|
Prior years
|
|
(52,444
|
)
|
|
(42,556
|
)
|
|
(39,068
|
)
|
Balance at end of period, net
|
|
63,478
|
|
53,114
|
|
54,264
|
|||
Plus reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
174
|
|
|
681
|
|
|
1,207
|
|
Balance at end of period, gross
|
|
63,652
|
|
|
53,795
|
|
|
55,471
|
|
|
13
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
A+
|
52.7
|
%
|
A-
|
47.3
|
%
|
Total
|
100.0
|
%
|
|
14
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
15
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing could be limited;
|
•
|
our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our debt may be impaired in the future;
|
•
|
a large portion of our cash flow must be dedicated to the payment of interest on our debt, thereby reducing the funds available to us for other purposes;
|
|
16
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
we are exposed to the risk of increased interest rates because our outstanding subordinated debt, representing $90.5 million of principal value, bears interest directly related to the London interbank offered interest rate for three-month U.S. dollar deposits ("LIBOR");
|
•
|
it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt;
|
•
|
we may be more vulnerable to general adverse economic and industry conditions;
|
•
|
we may be at a competitive disadvantage compared to our competitors with proportionately less debt or with comparable debt on more favorable terms and, as a result, they may be better positioned to withstand economic downturns;
|
•
|
our ability to refinance debt may be limited or the associated costs may increase;
|
•
|
our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and
|
•
|
we may be prevented from carrying out capital spending that is, among other things, necessary or important to our growth strategy and efforts to improve the operating results of our businesses.
|
|
17
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
18
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
19
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
rate-setting;
|
•
|
risk-based capital and solvency standards;
|
•
|
restrictions on the amount, type, nature, quality and quantity of investments;
|
•
|
the maintenance of adequate provisions for unearned premiums and unpaid loss and loss adjustment expenses;
|
•
|
restrictions on the types of terms that can be included in insurance policies;
|
•
|
standards for accounting;
|
•
|
marketing practices;
|
•
|
claims-settlement practices;
|
•
|
the examination of insurance companies by regulatory authorities, including periodic financial and market conduct examinations;
|
•
|
the licensing of insurers and their agents;
|
•
|
limitations on dividends and transactions with affiliates;
|
•
|
approval of certain reinsurance transactions; and
|
•
|
insolvency proceedings.
|
•
|
requesting additional capital contributions from Kingsway to its insurance subsidiaries;
|
•
|
requiring certain actions be taken with respect to the investment portfolios of the insurance companies;
|
•
|
requiring certain analyses be undertaken and plans be developed for submission to the insurance regulators;
|
•
|
prohibiting certain actions of the insurance companies without the approval of the insurance regulators; and
|
•
|
requiring more frequent reporting, including with respect to capital and liquidity positions.
|
|
20
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
disputes over coverage or claims adjudication;
|
•
|
disputes regarding sales practices, disclosure, premium refunds, licensing, regulatory compliance and compensation arrangements;
|
•
|
disputes with agents, producers or network providers over compensation and termination of contracts and related claims;
|
•
|
disputes with taxing authorities regarding our tax liabilities; and
|
•
|
disputes relating to certain businesses acquired or disposed of by us.
|
|
21
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
22
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
difficulties in the integration of the acquired business;
|
•
|
assumption of unknown material liabilities, including deficient provisions for unpaid loss and loss adjustment expenses;
|
•
|
diversion of management's attention from other business concerns;
|
•
|
failure to achieve financial or operating objectives; and
|
•
|
potential loss of policyholders or key employees of acquired companies.
|
•
|
identification of appropriate management to run the new business;
|
•
|
understanding the strategic, competitive and marketplace dynamics of the new business and, perhaps, industry;
|
•
|
establishment of proper financial and operational controls;
|
•
|
diversion of management's attention from other business concerns; and
|
•
|
failure to achieve financial or operating objectives.
|
|
23
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
actuarial projections of the cost of settlement and administration of claims reflecting facts and circumstances then known;
|
•
|
estimates of future trends in claims severity and frequency;
|
•
|
legal theories of liability;
|
•
|
variability in claims-handling procedures;
|
•
|
economic factors such as inflation;
|
•
|
judicial and legislative trends, actions such as class action lawsuits, and judicial interpretation of coverages or policy exclusions; and
|
•
|
the level of insurance fraud.
|
|
24
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
25
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
the availability of reliable data and our ability to properly analyze available data;
|
•
|
the uncertainties that inherently characterize estimates and assumptions;
|
•
|
our selection and application of appropriate pricing techniques; and
|
•
|
changes in applicable legal liability standards and in the civil litigation system generally.
|
|
26
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
27
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
TSX
|
|
NYSE
|
||||||||||||
|
|
High - C$
|
|
|
Low - C$
|
|
|
High - US$
|
|
|
Low - US$
|
|
||||
2017
|
|
|
|
|
|
|
|
|
||||||||
Quarter 4
|
|
C$
|
7.57
|
|
|
C$
|
6.25
|
|
|
$
|
6.05
|
|
|
$
|
4.95
|
|
Quarter 3
|
|
7.95
|
|
|
6.66
|
|
|
6.20
|
|
|
5.45
|
|
||||
Quarter 2
|
|
8.56
|
|
|
7.29
|
|
|
6.30
|
|
|
5.35
|
|
||||
Quarter 1
|
|
8.56
|
|
|
7.38
|
|
|
6.50
|
|
|
5.40
|
|
||||
2016
|
|
|
|
|
|
|
|
|
||||||||
Quarter 4
|
|
8.36
|
|
|
7.42
|
|
|
6.25
|
|
|
5.45
|
|
||||
Quarter 3
|
|
7.63
|
|
|
6.65
|
|
|
5.79
|
|
|
5.23
|
|
||||
Quarter 2
|
|
6.90
|
|
|
5.59
|
|
|
5.37
|
|
|
4.48
|
|
||||
Quarter 1
|
|
6.34
|
|
|
5.33
|
|
|
4.79
|
|
|
3.72
|
|
|
28
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
Years ended December 31,
|
|
||||||||||||||||
Company/Index
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
||||||||||||
Kingsway
|
$
|
100
|
|
$
|
102
|
|
$
|
146
|
|
$
|
120
|
|
$
|
164
|
|
$
|
133
|
|
Russell MicroCap
|
$
|
100
|
|
$
|
146
|
|
$
|
151
|
|
$
|
143
|
|
$
|
172
|
|
$
|
195
|
|
SNL Micro Cap U.S. Financial Services
|
$
|
100
|
|
$
|
121
|
|
$
|
120
|
|
$
|
88
|
|
$
|
87
|
|
$
|
118
|
|
|
29
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated Statements of Operations Data
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|||||
Net premiums earned
|
|
130,443
|
|
|
127,608
|
|
|
117,433
|
|
|
117,593
|
|
|
109,608
|
|
Service fee and commission income
|
|
31,909
|
|
|
24,232
|
|
|
22,966
|
|
|
24,659
|
|
|
49,543
|
|
Rental income
|
|
13,384
|
|
|
5,436
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net investment income
|
|
2,669
|
|
|
8,244
|
|
|
2,955
|
|
|
1,616
|
|
|
2,186
|
|
Net realized gains
|
|
3,771
|
|
|
360
|
|
|
1,197
|
|
|
5,041
|
|
|
3,505
|
|
Loss from continuing operations
|
|
(11,655
|
)
|
|
(733
|
)
|
|
(11,415
|
)
|
|
(14,666
|
)
|
|
(43,311
|
)
|
Basic loss per share - continuing operations
|
|
(0.76
|
)
|
|
(0.05
|
)
|
|
(0.61
|
)
|
|
(0.95
|
)
|
|
(3.12
|
)
|
Diluted loss per share - continuing operations
|
|
(0.76
|
)
|
|
(0.05
|
)
|
|
(0.61
|
)
|
|
(0.95
|
)
|
|
(3.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and invested assets
|
|
145,853
|
|
|
164,912
|
|
|
160,830
|
|
|
159,210
|
|
|
168,677
|
|
Total Assets
|
|
484,600
|
|
|
501,021
|
|
|
241,022
|
|
|
301,722
|
|
|
324,639
|
|
Note payable
|
|
186,469
|
|
|
190,074
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Bank loan
|
|
4,917
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
LROC preferred units, at fair value
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,618
|
|
|
14,854
|
|
Senior unsecured debentures, at fair value
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,356
|
|
Subordinated debt, at fair value
|
|
52,105
|
|
|
43,619
|
|
|
39,898
|
|
|
40,659
|
|
|
28,471
|
|
Total Liabilities
|
|
435,290
|
|
|
437,759
|
|
|
190,925
|
|
|
253,526
|
|
|
287,719
|
|
Total Shareholders' Equity
|
|
43,849
|
|
|
56,835
|
|
|
43,703
|
|
|
41,866
|
|
|
36,920
|
|
|
30
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
31
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
32
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
•
|
identifying all unrealized loss positions that have existed for at least six months;
|
•
|
identifying other circumstances 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
|
|
33
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
•
|
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.
|
|
34
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
35
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
36
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
2017
|
|
2016
|
|
Change
|
|
Segment operating (loss) income
|
|
|
|
|||
Insurance Underwriting
|
(20,606
|
)
|
(8,202
|
)
|
(12,404
|
)
|
Extended Warranty
|
3,957
|
|
506
|
|
3,451
|
|
Leased Real Estate
|
3,099
|
|
627
|
|
2,472
|
|
Total segment operating loss
|
(13,550
|
)
|
(7,069
|
)
|
(6,481
|
)
|
Net investment income
|
2,669
|
|
8,244
|
|
(5,575
|
)
|
Net realized gains
|
3,771
|
|
360
|
|
3,411
|
|
Other-than-temporary impairment loss
|
(316
|
)
|
(157
|
)
|
(159
|
)
|
Amortization of intangible assets
|
(1,152
|
)
|
(1,242
|
)
|
90
|
|
Contingent consideration benefit
|
212
|
|
657
|
|
(445
|
)
|
Impairment of intangible assets
|
(250
|
)
|
—
|
|
(250
|
)
|
Interest expense not allocated to segments
|
(4,977
|
)
|
(4,496
|
)
|
(481
|
)
|
Other income and expenses not allocated to segments, net
|
(9,436
|
)
|
(7,640
|
)
|
(1,796
|
)
|
Foreign exchange losses, net
|
(15
|
)
|
(15
|
)
|
—
|
|
Loss on change in fair value of debt
|
(8,487
|
)
|
(3,721
|
)
|
(4,766
|
)
|
Gain on deconsolidation of subsidiary
|
—
|
|
5,643
|
|
(5,643
|
)
|
Equity in net income (loss) of investees
|
2,115
|
|
(1,017
|
)
|
3,132
|
|
Loss from continuing operations before income tax benefit
|
(29,416
|
)
|
(10,453
|
)
|
(18,963
|
)
|
Income tax benefit
|
(17,761
|
)
|
(9,720
|
)
|
(8,041
|
)
|
Loss from continuing operations
|
(11,655
|
)
|
(733
|
)
|
(10,922
|
)
|
Loss on liquidation of subsidiary, net of taxes
|
(494
|
)
|
—
|
|
(494
|
)
|
Gain on disposal of discontinued operations, net of taxes
|
1,017
|
|
1,255
|
|
(238
|
)
|
Net (loss) income
|
(11,132
|
)
|
522
|
|
(11,654
|
)
|
|
37
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
38
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
39
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
40
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
2016
|
2015
|
Change
|
|||
Segment operating (loss) income
|
|
|
|
|||
Insurance Underwriting
|
(8,202
|
)
|
(1,147
|
)
|
(7,055
|
)
|
Extended Warranty
|
506
|
|
(628
|
)
|
1,134
|
|
Leased Real Estate
|
627
|
|
—
|
|
627
|
|
Total segment operating loss
|
(7,069
|
)
|
(1,775
|
)
|
(5,294
|
)
|
Net investment income
|
8,244
|
|
2,955
|
|
5,289
|
|
Net realized gains
|
360
|
|
1,197
|
|
(837
|
)
|
Other-than-temporary impairment loss
|
(157
|
)
|
(10
|
)
|
(147
|
)
|
Amortization of intangible assets
|
(1,242
|
)
|
(1,244
|
)
|
2
|
|
Contingent consideration benefit
|
657
|
|
1,139
|
|
(482
|
)
|
Interest expense not allocated to segments
|
(4,496
|
)
|
(5,278
|
)
|
782
|
|
Other income and expenses not allocated to segments, net
|
(7,640
|
)
|
(3,790
|
)
|
(3,850
|
)
|
Foreign exchange losses, net
|
(15
|
)
|
(1,215
|
)
|
1,200
|
|
(Loss) gain on change in fair value of debt
|
(3,721
|
)
|
1,458
|
|
(5,179
|
)
|
Gain (loss) on deconsolidation of subsidiaries
|
5,643
|
|
(4,420
|
)
|
10,063
|
|
Equity in net loss of investees
|
(1,017
|
)
|
(339
|
)
|
(678
|
)
|
Loss from continuing operations before income tax (benefit) expense
|
(10,453
|
)
|
(11,322
|
)
|
869
|
|
Income tax (benefit) expense
|
(9,720
|
)
|
93
|
|
(9,813
|
)
|
Loss from continuing operations
|
(733
|
)
|
(11,415
|
)
|
10,682
|
|
Income from discontinued operations, net of taxes
|
—
|
|
1,417
|
|
(1,417
|
)
|
Gain on disposal of discontinued operations, net of taxes
|
1,255
|
|
11,267
|
|
(10,012
|
)
|
Net income
|
522
|
|
1,269
|
|
(747
|
)
|
|
41
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
42
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
43
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
44
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
Type of investment
|
|
2017
|
|
|
% of Total
|
|
|
2016
|
|
|
% of Total
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||
U.S. government, government agencies and authorities
|
|
25,244
|
|
|
17.3
|
%
|
|
28,148
|
|
|
17.1
|
%
|
States, municipalities and political subdivisions
|
|
3,783
|
|
|
2.6
|
%
|
|
3,088
|
|
|
1.9
|
%
|
Mortgage-backed
|
|
7,663
|
|
|
5.3
|
%
|
|
8,506
|
|
|
5.2
|
%
|
Asset-backed securities and collateralized mortgage obligations
|
|
2,269
|
|
|
1.5
|
%
|
|
3,467
|
|
|
2.1
|
%
|
Corporate
|
|
14,255
|
|
|
9.8
|
%
|
|
18,555
|
|
|
11.3
|
%
|
Total fixed maturities
|
|
53,214
|
|
|
36.5
|
%
|
|
61,764
|
|
|
37.6
|
%
|
Equity investments:
|
|
|
|
|
|
|
|
|
||||
Common stock
|
|
7,419
|
|
|
5.0
|
%
|
|
21,426
|
|
|
13.0
|
%
|
Warrants
|
|
1,575
|
|
|
1.1
|
%
|
|
1,804
|
|
|
1.1
|
%
|
Total equity investments
|
|
8,994
|
|
|
6.1
|
%
|
|
23,230
|
|
|
14.1
|
%
|
Limited liability investments
|
|
25,173
|
|
|
17.3
|
%
|
|
22,974
|
|
|
13.9
|
%
|
Limited liability investment, at fair value
|
|
10,314
|
|
|
7.0
|
%
|
|
10,700
|
|
|
6.5
|
%
|
Other investments
|
|
3,721
|
|
|
2.6
|
%
|
|
9,368
|
|
|
5.7
|
%
|
Short-term investments
|
|
151
|
|
|
0.1
|
%
|
|
401
|
|
|
0.2
|
%
|
Total investments
|
|
101,567
|
|
|
69.6
|
%
|
|
128,437
|
|
|
78.0
|
%
|
Cash and cash equivalents
|
|
44,286
|
|
|
30.4
|
%
|
|
36,475
|
|
|
22.0
|
%
|
Total
|
|
145,853
|
|
|
100.0
|
%
|
|
164,912
|
|
|
100.0
|
%
|
|
45
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
|
Carrying Value
|
|
|||
|
|
2017
|
|
|
2016
|
|
Triple net lease limited liability investments
|
|
13,010
|
|
|
12,190
|
|
Other real estate related limited liability investments
|
|
4,167
|
|
|
3,904
|
|
Non-real estate limited liability investments
|
|
7,996
|
|
|
6,880
|
|
Total
|
|
25,173
|
|
|
22,974
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Income from triple net lease limited liability investments
|
|
1,852
|
|
|
1,381
|
|
|
1,701
|
|
Income from CMC operations
|
|
2,517
|
|
|
519
|
|
|
—
|
|
Non-recurring income tax benefit related to CMC
|
|
17,302
|
|
|
9,915
|
|
|
—
|
|
Total income included in loss from continuing operations
as a result of triple net lease investments and CMC acquisition
|
|
21,671
|
|
|
11,815
|
|
|
1,701
|
|
|
46
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
47
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
48
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
Accident Year
|
Non-standard Automobile
|
|
Commercial Automobile
|
|
Other
|
|
Total
|
|
2011 & prior
|
(193
|
)
|
201
|
|
17
|
|
25
|
|
2012
|
338
|
|
325
|
|
—
|
|
663
|
|
2013
|
205
|
|
(224
|
)
|
—
|
|
(19
|
)
|
2014
|
1,524
|
|
—
|
|
—
|
|
1,524
|
|
2015
|
5,902
|
|
—
|
|
—
|
|
5,902
|
|
Total
|
7,776
|
|
302
|
|
17
|
|
8,095
|
|
|
49
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
50
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
51
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
52
|
|
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Note payable
|
2,981
|
|
3,337
|
|
3,712
|
|
4,108
|
|
4,526
|
|
157,472
|
|
176,136
|
|
Bank loan
|
1,000
|
|
1,000
|
|
1,000
|
|
1,000
|
|
917
|
|
—
|
|
4,917
|
|
Subordinated debt
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
90,500
|
|
90,500
|
|
Interest payments on outstanding debt
|
12,760
|
|
12,581
|
|
12,388
|
|
12,180
|
|
11,955
|
|
110,956
|
|
172,820
|
|
Unpaid loss and loss adjustment expenses
|
44,662
|
|
13,307
|
|
5,244
|
|
2,022
|
|
690
|
|
506
|
|
66,431
|
|
Future minimum lease payments
|
1,496
|
|
1,215
|
|
525
|
|
422
|
|
424
|
|
234
|
|
4,316
|
|
Total
|
62,899
|
|
31,440
|
|
22,869
|
|
19,732
|
|
18,512
|
|
359,668
|
|
515,120
|
|
|
53
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
2017
|
|
|
% of Total
|
|
|
2016
|
|
|
% of Total
|
|
Due in less than one year
|
|
11,154
|
|
|
21.0
|
%
|
|
6,561
|
|
|
10.6
|
%
|
Due in one through five years
|
|
33,791
|
|
|
63.5
|
%
|
|
40,750
|
|
|
66.0
|
%
|
Due after five through ten years
|
|
3,780
|
|
|
7.1
|
%
|
|
4,552
|
|
|
7.4
|
%
|
Due after ten years
|
|
4,489
|
|
|
8.4
|
%
|
|
9,901
|
|
|
16.0
|
%
|
Total
|
|
53,214
|
|
|
100.0
|
%
|
|
61,764
|
|
|
100.0
|
%
|
|
|
100 Basis Point Decrease in Interest Rates
|
|
No Change
|
|
100 Basis Point Increase in Interest Rates
|
||||||
As of December 31, 2017
|
|
|
|
|
|
|
||||||
Estimated fair value
|
|
$
|
54,411
|
|
|
$
|
53,214
|
|
|
$
|
52,017
|
|
Estimated increase (decrease) in fair value
|
|
$
|
1,197
|
|
|
$
|
—
|
|
|
$
|
(1,197
|
)
|
|
|
|
|
|
|
|
||||||
As of December 31, 2016
|
|
|
|
|
|
|
||||||
Estimated fair value
|
|
$
|
63,303
|
|
|
$
|
61,764
|
|
|
$
|
60,225
|
|
Estimated increase (decrease) in fair value
|
|
$
|
1,539
|
|
|
$
|
—
|
|
|
$
|
(1,539
|
)
|
|
54
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Rating (S&P/Moody's)
|
2017
|
|
2016
|
|
AAA/Aaa
|
70.6
|
%
|
69.5
|
%
|
AA/Aa
|
7.4
|
|
6.4
|
|
A/A
|
12.1
|
|
14.3
|
|
Percentage rated A/A2 or better
|
90.1
|
%
|
90.2
|
%
|
BBB/Baa
|
2.6
|
|
3.8
|
|
BB/Ba
|
1.1
|
|
1.0
|
|
Not rated
|
6.2
|
|
5.0
|
|
Total
|
100.0
|
%
|
100.0
|
%
|
|
55
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Balance Sheets at December 31, 2017 and 2016
|
|
|
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015
|
|
|
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2017, 2016 and 2015
|
|
|
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2017, 2016 and 2015
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015
|
|
|
Notes to the Consolidated Financial Statements
|
|
|
Note 1-Business
|
|
|
Note 2-Summary of Significant Accounting Policies
|
|
|
Note 3-Recently Issued Accounting Standards
|
|
|
Note 4-Acquisitions
|
|
|
Note 5-Deconsolidations, Discontinued Operations and Liquidation
|
|
|
Note 6-Investments
|
|
|
Note 7-Investment in Investee
|
|
|
Note 8-Reinsurance
|
|
|
Note 9-Deferred Acquisition Costs
|
|
|
Note 10-Goodwill
|
|
|
Note 11-Intangible Assets
|
|
|
Note 12-Property and Equipment
|
|
|
Note 13-Unpaid Loss and Loss Adjustment Expenses
|
|
|
Note 14-Debt
|
|
|
Note 15-Finance Lease Obligation Liability
|
|
|
Note 16-Leases
|
|
|
Note 17-Income Taxes
|
|
|
Note 18-Loss from Continuing Operations per Share
|
|
|
Note 19-Stock-Based Compensation
|
|
|
Note 20-Employee Benefit Plan
|
|
|
Note 21-Class A Preferred Stock
|
|
|
Note 22-Shareholders' Equity
|
|
|
Note 23-Accumulated Other Comprehensive Loss
|
|
|
Note 24-Segmented Information
|
|
|
Note 25-Fair Value of Financial Instruments
|
|
|
Note 26-Related Party Transactions
|
|
|
Note 27-Commitments and Contingent Liabilities
|
|
|
Note 28-Regulatory Capital Requirements and Ratios
|
|
|
Note 29-Statutory Information and Policies
|
|
|
Note 30-Selected Quarterly Financial Data (Unaudited)
|
|
|
56
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
57
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
||
Assets
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturities, at fair value (amortized cost of $53,746 and $62,136, respectively)
|
|
$
|
53,214
|
|
|
$
|
61,764
|
|
Equity investments, at fair value (cost of $9,146 and $19,099, respectively)
|
|
8,994
|
|
|
23,230
|
|
||
Limited liability investments
|
|
25,173
|
|
|
22,974
|
|
||
Limited liability investment, at fair value
|
|
10,314
|
|
|
10,700
|
|
||
Other investments, at cost which approximates fair value
|
|
3,721
|
|
|
9,368
|
|
||
Short-term investments, at cost which approximates fair value
|
|
151
|
|
|
401
|
|
||
Total investments
|
|
101,567
|
|
|
128,437
|
|
||
Cash and cash equivalents
|
|
44,286
|
|
|
36,475
|
|
||
Investment in investee
|
|
5,230
|
|
|
3,116
|
|
||
Accrued investment income
|
|
526
|
|
|
790
|
|
||
Premiums receivable, net of allowance for doubtful accounts of $115 and $115, respectively
|
|
27,855
|
|
|
31,564
|
|
||
Service fee receivable, net of allowance for doubtful accounts of $318 and $274, respectively
|
|
4,286
|
|
|
1,320
|
|
||
Other receivables, net of allowance for doubtful accounts of zero and $806, respectively
|
|
7,139
|
|
|
3,299
|
|
||
Deferred acquisition costs, net
|
|
13,045
|
|
|
13,609
|
|
||
Property and equipment, net of accumulated depreciation of $13,600 and $10,603, respectively
|
|
108,230
|
|
|
116,961
|
|
||
Goodwill
|
|
80,112
|
|
|
71,061
|
|
||
Intangible assets, net of accumulated amortization of $8,333 and $7,181, respectively
|
|
87,615
|
|
|
89,017
|
|
||
Other assets
|
|
4,709
|
|
|
5,372
|
|
||
Total Assets
|
|
$
|
484,600
|
|
|
$
|
501,021
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
||||
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
||||
Unpaid loss and loss adjustment expenses:
|
|
|
|
|
||||
Property and casualty
|
|
$
|
63,652
|
|
|
$
|
53,795
|
|
Vehicle service agreements
|
|
2,779
|
|
|
2,915
|
|
||
Total unpaid loss and loss adjustment expenses
|
|
66,431
|
|
|
56,710
|
|
||
Unearned premiums
|
|
36,686
|
|
|
40,176
|
|
||
Note payable
|
|
186,469
|
|
|
190,074
|
|
||
Bank loan
|
|
4,917
|
|
|
—
|
|
||
Subordinated debt, at fair value
|
|
52,105
|
|
|
43,619
|
|
||
Net deferred income tax liabilities
|
|
30,331
|
|
|
48,720
|
|
||
Deferred service fees
|
|
39,741
|
|
|
35,822
|
|
||
Income taxes payable
|
|
2,644
|
|
|
2,051
|
|
||
Accrued expenses and other liabilities
|
|
15,966
|
|
|
20,587
|
|
||
Total Liabilities
|
|
435,290
|
|
|
437,759
|
|
||
|
|
|
|
|
||||
Class A preferred stock, no par value; unlimited number authorized; 222,876 and 262,876 issued and outstanding at December 31, 2017 and December 31, 2016, respectively; redemption amount of $5,572
|
|
5,461
|
|
|
6,427
|
|
||
|
|
|
|
|
||||
Shareholders' Equity:
|
|
|
|
|
||||
Common stock, no par value; unlimited number authorized; 21,708,190 and 21,458,190 issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
356,021
|
|
|
353,882
|
|
||
Accumulated deficit
|
|
(313,487
|
)
|
|
(297,668
|
)
|
||
Accumulated other comprehensive loss
|
|
(3,852
|
)
|
|
(208
|
)
|
||
Shareholders' equity attributable to common shareholders
|
|
38,682
|
|
|
56,006
|
|
||
Noncontrolling interests in consolidated subsidiaries
|
|
5,167
|
|
|
829
|
|
||
Total Shareholders' Equity
|
|
43,849
|
|
|
56,835
|
|
||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
484,600
|
|
|
$
|
501,021
|
|
|
58
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Revenues:
|
|
|
|
|
|
|
||||||
Net premiums earned
|
|
$
|
130,443
|
|
|
$
|
127,608
|
|
|
$
|
117,433
|
|
Service fee and commission income
|
|
31,909
|
|
|
24,232
|
|
|
22,966
|
|
|||
Rental income
|
|
13,384
|
|
|
5,436
|
|
|
—
|
|
|||
Net investment income
|
|
2,669
|
|
|
8,244
|
|
|
2,955
|
|
|||
Net realized gains
|
|
3,771
|
|
|
360
|
|
|
1,197
|
|
|||
Other-than-temporary impairment loss
|
|
(316
|
)
|
|
(157
|
)
|
|
(10
|
)
|
|||
Other income
|
|
11,334
|
|
|
10,907
|
|
|
15,425
|
|
|||
Total revenues
|
|
193,194
|
|
|
176,630
|
|
|
159,966
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Loss and loss adjustment expenses
|
|
125,982
|
|
|
109,609
|
|
|
92,812
|
|
|||
Commissions and premium taxes
|
|
25,006
|
|
|
24,562
|
|
|
22,773
|
|
|||
Cost of services sold
|
|
6,535
|
|
|
4,193
|
|
|
4,044
|
|
|||
General and administrative expenses
|
|
46,269
|
|
|
41,629
|
|
|
41,760
|
|
|||
Leased real estate segment interest expense
|
|
6,264
|
|
|
2,899
|
|
|
—
|
|
|||
Amortization of intangible assets
|
|
1,152
|
|
|
1,242
|
|
|
1,244
|
|
|||
Contingent consideration benefit
|
|
(212
|
)
|
|
(657
|
)
|
|
(1,139
|
)
|
|||
Impairment of intangible assets
|
|
250
|
|
|
—
|
|
|
—
|
|
|||
Total operating expenses
|
|
211,246
|
|
|
183,477
|
|
|
161,494
|
|
|||
Operating loss
|
|
(18,052
|
)
|
|
(6,847
|
)
|
|
(1,528
|
)
|
|||
Other expenses (revenues), net:
|
|
|
|
|
|
|
|
|
||||
Interest expense not allocated to segments
|
|
4,977
|
|
|
4,496
|
|
|
5,278
|
|
|||
Foreign exchange losses, net
|
|
15
|
|
|
15
|
|
|
1,215
|
|
|||
Loss (gain) on change in fair value of debt
|
|
8,487
|
|
|
3,721
|
|
|
(1,458
|
)
|
|||
(Gain) loss on deconsolidation of subsidiaries
|
|
—
|
|
|
(5,643
|
)
|
|
4,420
|
|
|||
Equity in net (income) loss of investees
|
|
(2,115
|
)
|
|
1,017
|
|
|
339
|
|
|||
Total other expenses, net
|
|
11,364
|
|
|
3,606
|
|
|
9,794
|
|
|||
Loss from continuing operations before income tax (benefit) expense
|
|
(29,416
|
)
|
|
(10,453
|
)
|
|
(11,322
|
)
|
|||
Income tax (benefit) expense
|
|
(17,761
|
)
|
|
(9,720
|
)
|
|
93
|
|
|||
Loss from continuing operations
|
|
(11,655
|
)
|
|
(733
|
)
|
|
(11,415
|
)
|
|||
Loss on liquidation of subsidiary, net of taxes
|
|
(494
|
)
|
|
—
|
|
|
—
|
|
|||
Income from discontinued operations, net of taxes
|
|
—
|
|
|
—
|
|
|
1,417
|
|
|||
Gain on disposal of discontinued operations, net of taxes
|
|
1,017
|
|
|
1,255
|
|
|
11,267
|
|
|||
Net (loss) income
|
|
(11,132
|
)
|
|
522
|
|
|
1,269
|
|
|||
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
4,337
|
|
|
(281
|
)
|
|
162
|
|
|||
Less: dividends on preferred stock, net of tax
|
|
350
|
|
|
565
|
|
|
394
|
|
|||
Net (loss) income attributable to common shareholders
|
|
$
|
(15,819
|
)
|
|
$
|
238
|
|
|
$
|
713
|
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
||||||
Basic:
|
|
$
|
(0.76
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.61
|
)
|
Diluted:
|
|
$
|
(0.76
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.61
|
)
|
Earnings per share - discontinued operations:
|
|
|
|
|
|
|
||||||
Basic:
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.64
|
|
Diluted:
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.64
|
|
(Loss) earnings per share – net (loss) income attributable to common shareholders:
|
|
|
|
|
|
|
||||||
Basic:
|
|
$
|
(0.73
|
)
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Diluted:
|
|
$
|
(0.73
|
)
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Weighted average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
||||||
Basic:
|
|
21,547
|
|
|
20,003
|
|
|
19,710
|
|
|||
Diluted:
|
|
21,547
|
|
|
20,003
|
|
|
19,710
|
|
|
59
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(11,132
|
)
|
|
$
|
522
|
|
|
$
|
1,269
|
|
Other comprehensive (loss) income, net of taxes
(1)
:
|
|
|
|
|
|
|
||||||
Unrealized gains (losses) on fixed maturities and equity investments:
|
|
|
|
|
|
|
||||||
Unrealized (losses) gains arising during the period
|
|
(5,213
|
)
|
|
2,764
|
|
|
(3,505
|
)
|
|||
Reclassification adjustment for amounts included in net (loss) income
|
|
1,076
|
|
|
(494
|
)
|
|
1,564
|
|
|||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
858
|
|
|||
Recognition of currency translation loss on liquidation of subsidiary
|
|
494
|
|
|
—
|
|
|
—
|
|
|||
Recognition of currency translation loss on deconsolidation of subsidiary
|
|
—
|
|
|
—
|
|
|
1,243
|
|
|||
Other comprehensive (loss) income
|
|
(3,643
|
)
|
|
2,270
|
|
|
160
|
|
|||
Comprehensive (loss) income
|
|
$
|
(14,775
|
)
|
|
$
|
2,792
|
|
|
$
|
1,429
|
|
Less: comprehensive income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
4,338
|
|
|
(289
|
)
|
|
(308
|
)
|
|||
Comprehensive (loss) income attributable to common shareholders
|
|
$
|
(19,113
|
)
|
|
$
|
3,081
|
|
|
$
|
1,737
|
|
(1) Net of income tax (benefit) expense of $0, $0 and $0 in 2017, 2016 and 2015, respectively
|
|
|
|
|
|
60
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Shareholders' Equity Attributable to Common Shareholders
|
|
Noncontrolling Interests in Consolidated Subsidiaries
|
|
Total Shareholders' Equity
|
|||||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, January 1, 2015
|
|
19,709,706
|
|
|
$
|
—
|
|
|
$
|
340,844
|
|
|
$
|
(301,008
|
)
|
|
$
|
(2,372
|
)
|
|
$
|
37,464
|
|
|
$
|
4,402
|
|
|
$
|
41,866
|
|
Correction of prior period error
|
|
—
|
|
|
—
|
|
|
—
|
|
|
744
|
|
|
(744
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Deconsolidation of noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,342
|
|
|
—
|
|
|
2,342
|
|
|
(2,342
|
)
|
|
—
|
|
|||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,107
|
|
|
—
|
|
|
1,107
|
|
|
162
|
|
|
1,269
|
|
|||||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
630
|
|
|
630
|
|
|
(470
|
)
|
|
160
|
|
|||||||
Preferred stock dividends, net of tax
|
|
|
|
|
|
|
|
(394
|
)
|
|
—
|
|
|
(394
|
)
|
|
—
|
|
|
(394
|
)
|
||||||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
802
|
|
|
—
|
|
|
—
|
|
|
802
|
|
|
—
|
|
|
802
|
|
|||||||
Balance, December 31, 2015
|
|
19,709,706
|
|
|
$
|
—
|
|
|
$
|
341,646
|
|
|
$
|
(297,209
|
)
|
|
$
|
(2,486
|
)
|
|
$
|
41,951
|
|
|
$
|
1,752
|
|
|
$
|
43,703
|
|
Deconsolidation of 1347 Investors LLC
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(572
|
)
|
|
—
|
|
|
(572
|
)
|
|
(933
|
)
|
|
(1,505
|
)
|
|||||||
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
803
|
|
|
—
|
|
|
803
|
|
|
(281
|
)
|
|
522
|
|
|||||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,278
|
|
|
2,278
|
|
|
(8
|
)
|
|
2,270
|
|
|||||||
Common stock issued, net
|
|
1,775,384
|
|
|
—
|
|
|
11,221
|
|
|
—
|
|
|
—
|
|
|
11,221
|
|
|
—
|
|
|
11,221
|
|
|||||||
Repurchases of common stock for cancellation
|
|
(26,900
|
)
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|
(125
|
)
|
|||||||
Consolidation of CMC Industries, Inc.
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
299
|
|
|
299
|
|
|||||||
Preferred stock dividends, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(565
|
)
|
|
—
|
|
|
(565
|
)
|
|
—
|
|
|
(565
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
1,015
|
|
|
—
|
|
|
—
|
|
|
1,015
|
|
|
—
|
|
|
1,015
|
|
|||||||
Balance, December 31, 2016
|
|
21,458,190
|
|
|
$
|
—
|
|
|
$
|
353,882
|
|
|
$
|
(297,668
|
)
|
|
$
|
(208
|
)
|
|
$
|
56,006
|
|
|
$
|
829
|
|
|
$
|
56,835
|
|
Common stock issuance expenses
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|
(47
|
)
|
|||||||
Conversion of Class A preferred stock to common stock
|
|
250,000
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
|
1,000
|
|
|||||||
Net (loss) income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,469
|
)
|
|
—
|
|
|
(15,469
|
)
|
|
4,337
|
|
|
(11,132
|
)
|
|||||||
Preferred stock dividends, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
|||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,644
|
)
|
|
(3,644
|
)
|
|
1
|
|
|
(3,643
|
)
|
|||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
1,186
|
|
|
—
|
|
|
—
|
|
|
1,186
|
|
|
—
|
|
|
1,186
|
|
|||||||
Balance, December 31, 2017
|
|
21,708,190
|
|
|
$
|
—
|
|
|
$
|
356,021
|
|
|
$
|
(313,487
|
)
|
|
$
|
(3,852
|
)
|
|
$
|
38,682
|
|
|
$
|
5,167
|
|
|
$
|
43,849
|
|
|
61
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Cash provided by (used in):
|
|
|
|
|
|
|
||||||
Operating activities:
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(11,132
|
)
|
|
$
|
522
|
|
|
$
|
1,269
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
||||||
Gain on disposal of discontinued operations, net of taxes
|
|
(1,017
|
)
|
|
(1,255
|
)
|
|
(11,267
|
)
|
|||
Equity in net (income) loss of investees
|
|
(2,115
|
)
|
|
1,017
|
|
|
339
|
|
|||
Equity in net income of limited liability investments
|
|
(1,797
|
)
|
|
(1,157
|
)
|
|
(1,596
|
)
|
|||
Loss (gain) on change in fair value of investments
|
|
678
|
|
|
(5,100
|
)
|
|
216
|
|
|||
Depreciation and amortization expense
|
|
5,572
|
|
|
2,780
|
|
|
1,845
|
|
|||
Contingent consideration benefit
|
|
(212
|
)
|
|
(657
|
)
|
|
(1,139
|
)
|
|||
Stock-based compensation expense, net of forfeitures
|
|
1,186
|
|
|
1,015
|
|
|
802
|
|
|||
Net realized gains
|
|
(3,771
|
)
|
|
(360
|
)
|
|
(1,197
|
)
|
|||
Loss (gain) on change in fair value of debt
|
|
8,487
|
|
|
3,721
|
|
|
(1,458
|
)
|
|||
Deferred income taxes
|
|
(18,389
|
)
|
|
(9,807
|
)
|
|
87
|
|
|||
Intangible asset impairment
|
|
250
|
|
|
—
|
|
|
—
|
|
|||
Other-than-temporary impairment loss
|
|
316
|
|
|
157
|
|
|
10
|
|
|||
Amortization of fixed maturities premiums and discounts
|
|
220
|
|
|
218
|
|
|
323
|
|
|||
Amortization of note payable premium
|
|
(960
|
)
|
|
(447
|
)
|
|
—
|
|
|||
(Gain) loss on deconsolidation of subsidiaries
|
|
—
|
|
|
(5,643
|
)
|
|
4,420
|
|
|||
Loss on liquidation of subsidiary
|
|
494
|
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Premiums and service fee receivable, net, adjusted for PWSC assets acquired
|
|
2,165
|
|
|
(4,883
|
)
|
|
1,848
|
|
|||
Other receivables, net, adjusted for PWSC assets acquired
|
|
(3,789
|
)
|
|
1,068
|
|
|
1,356
|
|
|||
Deferred acquisition costs, net
|
|
564
|
|
|
(1,466
|
)
|
|
54
|
|
|||
Unpaid loss and loss adjustment expenses
|
|
9,721
|
|
|
(1,736
|
)
|
|
(8,424
|
)
|
|||
Unearned premiums
|
|
(3,490
|
)
|
|
4,942
|
|
|
(1,198
|
)
|
|||
Deferred service fees, adjusted for PWSC liabilities acquired
|
|
1,840
|
|
|
1,503
|
|
|
(777
|
)
|
|||
Other, net, adjusted for PWSC assets acquired and liabilities assumed
|
|
(3,798
|
)
|
|
(21
|
)
|
|
(18,318
|
)
|
|||
Net cash used in operating activities
|
|
(18,977
|
)
|
|
(15,589
|
)
|
|
(32,805
|
)
|
|||
Investing activities:
|
|
|
|
|
|
|
||||||
Proceeds from sales and maturities of fixed maturities
|
|
16,784
|
|
|
26,063
|
|
|
27,480
|
|
|||
Proceeds from sales of equity investments
|
|
18,266
|
|
|
7,807
|
|
|
819
|
|
|||
Purchases of fixed maturities
|
|
(8,576
|
)
|
|
(32,297
|
)
|
|
(26,351
|
)
|
|||
Purchases of equity investments
|
|
(5,040
|
)
|
|
(3,178
|
)
|
|
(9,564
|
)
|
|||
Net acquisitions of limited liability investments
|
|
(404
|
)
|
|
(3,118
|
)
|
|
(10,312
|
)
|
|||
Net proceeds from (purchases of) other investments
|
|
5,646
|
|
|
(3,898
|
)
|
|
(600
|
)
|
|||
Net proceeds from (purchases of) short-term investments
|
|
250
|
|
|
(264
|
)
|
|
4
|
|
|||
Net proceeds from sale of discontinued operations
|
|
1,017
|
|
|
1,255
|
|
|
44,919
|
|
|||
Acquisition of business, net of cash acquired
|
|
(7,929
|
)
|
|
(494
|
)
|
|
—
|
|
|||
Net disposals (purchases) of property and equipment and intangible assets, adjusted for PWSC assets acquired
|
|
4,549
|
|
|
(645
|
)
|
|
(203
|
)
|
|||
Net cash provided by (used in) investing activities
|
|
24,563
|
|
|
(8,769
|
)
|
|
26,192
|
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock, net
|
|
(47
|
)
|
|
10,477
|
|
|
—
|
|
|||
Repurchase of common stock for cancellation
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|||
Proceeds from bank loan, net of principal payments
|
|
4,917
|
|
|
—
|
|
|
—
|
|
|||
Principal payments on note payable assumed in CMC acquisition
|
|
(2,645
|
)
|
|
(1,220
|
)
|
|
—
|
|
|||
Redemption of LROC preferred units
|
|
—
|
|
|
—
|
|
|
(12,920
|
)
|
|||
Net cash provided by (used in) financing activities
|
|
2,225
|
|
|
9,132
|
|
|
(12,920
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
7,811
|
|
|
(15,226
|
)
|
|
(19,533
|
)
|
|||
Cash and cash equivalents at beginning of period
|
|
36,475
|
|
|
51,701
|
|
|
71,234
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
44,286
|
|
|
$
|
36,475
|
|
|
$
|
51,701
|
|
|
62
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Supplemental disclosures of cash flows information:
|
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
|
||||||
Interest
|
|
$
|
12,134
|
|
|
$
|
7,298
|
|
|
$
|
24,249
|
|
Income taxes
|
|
$
|
37
|
|
|
$
|
10
|
|
|
$
|
—
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
||||||
Conversion of Class A preferred stock to common stock
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of common stock in connection with acquisition of Argo
|
|
$
|
—
|
|
|
$
|
744
|
|
|
$
|
—
|
|
Fixed maturities received in connection with termination of PIH management services agreement
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
Equity investments received in connection with termination of PIH management services agreement
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
960
|
|
Accrued dividends on Class A preferred stock issued
|
|
$
|
350
|
|
|
$
|
565
|
|
|
$
|
394
|
|
|
63
|
|
(a)
|
Principles of consolidation:
|
(b)
|
Use of estimates:
|
|
64
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(d)
|
Business combinations:
|
(e)
|
Investments:
|
|
65
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(f)
|
Derivative financial instruments:
|
(g)
|
Cash and cash equivalents:
|
(h)
|
Investment in investee:
|
(i)
|
Premiums and service fee receivables:
|
|
66
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(j)
|
Reinsurance:
|
(k)
|
Deferred acquisition costs, net:
|
(l)
|
Property and equipment:
|
(m)
|
Goodwill and intangible assets:
|
|
67
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(n)
|
Unpaid loss and loss adjustment expenses:
|
(o)
|
Debt:
|
(p)
|
Contingent consideration:
|
(q)
|
Income taxes:
|
|
68
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(r)
|
Leases
|
(s)
|
Revenue recognition:
|
|
69
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(t)
|
Cost of services sold:
|
(u)
|
Stock-based compensation:
|
(v)
|
Fair value of financial instruments:
|
|
70
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
71
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
72
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
||
|
|
July 14, 2016
|
|
|
Cash and cash equivalents
|
|
$
|
1,006
|
|
Other receivables
|
|
1,971
|
|
|
Property and equipment
|
|
113,008
|
|
|
Intangible asset - subject to amortization
|
|
1,125
|
|
|
Intangible asset - not subject to amortization
|
|
73,667
|
|
|
Other assets
|
|
1,385
|
|
|
Goodwill
|
|
60,983
|
|
|
Total assets
|
|
$
|
253,145
|
|
|
|
|
||
Note payable
|
|
$
|
191,741
|
|
Deferred income tax liability
|
|
55,603
|
|
|
Income taxes payable
|
|
2,018
|
|
|
Accrued expenses and other liabilities
|
|
1,984
|
|
|
Noncontrolling interest in CMC
|
|
299
|
|
|
Total liabilities and noncontrolling interest
|
|
$
|
251,645
|
|
|
|
|
||
Purchase price
|
|
$
|
1,500
|
|
(in thousands, except per share data)
|
|
Years ended December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
Revenues
|
|
$
|
183,294
|
|
|
$
|
172,320
|
|
Income (loss) from continuing operations attributable to common shareholders
|
|
$
|
538
|
|
|
$
|
(10,884
|
)
|
Basic earnings (loss) per share - continuing operations
|
|
$
|
0.03
|
|
|
$
|
(0.55
|
)
|
Diluted earnings (loss) per share - continuing operations
|
|
$
|
0.03
|
|
|
$
|
(0.55
|
)
|
|
73
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
74
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Revenues:
|
|
|
|
|
|
|
||||||
Service fee and commission income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,342
|
|
Other (expense) income
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|||
Total revenues
|
|
—
|
|
|
—
|
|
|
8,322
|
|
|||
Expenses:
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
|
—
|
|
|
—
|
|
|
6,462
|
|
|||
Income from discontinued operations before income tax expense
|
|
—
|
|
|
—
|
|
|
1,860
|
|
|||
Income tax expense
|
|
—
|
|
|
—
|
|
|
443
|
|
|||
Income from discontinued operations, net of taxes
|
|
—
|
|
|
—
|
|
|
1,417
|
|
|||
Gain on disposal of discontinued operations before income tax benefit
|
|
1,017
|
|
|
1,255
|
|
|
11,177
|
|
|||
Income tax benefit
|
|
—
|
|
|
—
|
|
|
(90
|
)
|
|||
Gain on disposal of discontinued operations, net of taxes
|
|
1,017
|
|
|
1,255
|
|
|
11,267
|
|
|||
Total gain/income from discontinued operations, net of taxes
|
|
$
|
1,017
|
|
|
$
|
1,255
|
|
|
$
|
12,684
|
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Liquidation:
|
|
|
|
|
|
|
||||||
Loss on liquidation before income taxes
|
|
$
|
(494
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Income tax benefit
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
||
Loss on liquidation of subsidiary, net of taxes
|
|
$
|
(494
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
75
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
December 31, 2017
|
|
|||||||||||||
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Estimated Fair Value
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
25,519
|
|
|
$
|
—
|
|
|
$
|
275
|
|
|
$
|
25,244
|
|
States, municipalities and political subdivisions
|
|
3,826
|
|
|
3
|
|
|
46
|
|
|
3,783
|
|
||||
Mortgage-backed
|
|
7,784
|
|
|
7
|
|
|
128
|
|
|
7,663
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
2,279
|
|
|
1
|
|
|
11
|
|
|
2,269
|
|
||||
Corporate
|
|
14,338
|
|
|
22
|
|
|
105
|
|
|
14,255
|
|
||||
Total fixed maturities
|
|
53,746
|
|
|
33
|
|
|
565
|
|
|
53,214
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
7,583
|
|
|
199
|
|
|
363
|
|
|
7,419
|
|
||||
Warrants - publicly traded
|
|
603
|
|
|
266
|
|
|
142
|
|
|
727
|
|
||||
Warrants - not publicly traded
|
|
960
|
|
|
173
|
|
|
285
|
|
|
848
|
|
||||
Total equity investments
|
|
9,146
|
|
|
638
|
|
|
790
|
|
|
8,994
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
62,892
|
|
|
$
|
671
|
|
|
$
|
1,355
|
|
|
$
|
62,208
|
|
(in thousands)
|
|
December 31, 2016
|
|
|||||||||||||
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Estimated Fair Value
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
28,312
|
|
|
$
|
22
|
|
|
$
|
186
|
|
|
$
|
28,148
|
|
States, municipalities and political subdivisions
|
|
3,131
|
|
|
1
|
|
|
44
|
|
|
3,088
|
|
||||
Mortgage-backed
|
|
8,610
|
|
|
12
|
|
|
116
|
|
|
8,506
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
3,468
|
|
|
4
|
|
|
5
|
|
|
3,467
|
|
||||
Corporate
|
|
18,615
|
|
|
94
|
|
|
154
|
|
|
18,555
|
|
||||
Total fixed maturities
|
|
62,136
|
|
|
133
|
|
|
505
|
|
|
61,764
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
17,701
|
|
|
4,156
|
|
|
431
|
|
|
21,426
|
|
||||
Warrants - publicly traded
|
|
438
|
|
|
279
|
|
|
53
|
|
|
664
|
|
||||
Warrants - not publicly traded
|
|
960
|
|
|
180
|
|
|
—
|
|
|
1,140
|
|
||||
Total equity investments
|
|
19,099
|
|
|
4,615
|
|
|
484
|
|
|
23,230
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
81,235
|
|
|
$
|
4,748
|
|
|
$
|
989
|
|
|
$
|
84,994
|
|
|
76
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
December 31, 2017
|
|
|||||
|
|
Amortized Cost
|
|
|
Estimated Fair Value
|
|
||
Due in one year or less
|
|
$
|
11,194
|
|
|
$
|
11,154
|
|
Due after one year through five years
|
|
34,172
|
|
|
33,791
|
|
||
Due after five years through ten years
|
|
3,818
|
|
|
3,780
|
|
||
Due after ten years
|
|
4,562
|
|
|
4,489
|
|
||
Total
|
|
$
|
53,746
|
|
|
$
|
53,214
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|||||||||||||
|
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
|
$
|
17,067
|
|
|
$
|
136
|
|
|
$
|
8,177
|
|
|
$
|
139
|
|
|
$
|
25,244
|
|
|
$
|
275
|
|
States, municipalities and political subdivisions
|
2,092
|
|
|
25
|
|
|
893
|
|
|
21
|
|
|
2,985
|
|
|
46
|
|
||||||
Mortgage-backed
|
5,550
|
|
|
86
|
|
|
1,789
|
|
|
42
|
|
|
7,339
|
|
|
128
|
|
||||||
Asset-backed securities and collateralized mortgage obligations
|
1,158
|
|
|
5
|
|
|
660
|
|
|
6
|
|
|
1,818
|
|
|
11
|
|
||||||
Corporate
|
6,807
|
|
|
62
|
|
|
2,201
|
|
|
43
|
|
|
9,008
|
|
|
105
|
|
||||||
Total fixed maturities
|
32,674
|
|
|
314
|
|
|
13,720
|
|
|
251
|
|
|
46,394
|
|
|
565
|
|
||||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
4,515
|
|
|
363
|
|
|
—
|
|
|
—
|
|
|
4,515
|
|
|
363
|
|
||||||
Warrants
|
896
|
|
|
427
|
|
|
—
|
|
|
—
|
|
|
896
|
|
|
427
|
|
||||||
Total equity investments
|
5,411
|
|
|
790
|
|
|
—
|
|
|
—
|
|
|
5,411
|
|
|
790
|
|
||||||
Total
|
$
|
38,085
|
|
|
$
|
1,104
|
|
|
$
|
13,720
|
|
|
$
|
251
|
|
|
$
|
51,805
|
|
|
$
|
1,355
|
|
|
77
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|||||||||||||
|
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
|
$
|
18,509
|
|
|
$
|
186
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,509
|
|
|
$
|
186
|
|
States, municipalities and political subdivisions
|
2,594
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
2,594
|
|
|
44
|
|
||||||
Mortgage-backed
|
7,709
|
|
|
116
|
|
|
58
|
|
|
—
|
|
|
7,767
|
|
|
116
|
|
||||||
Asset-backed securities and collateralized mortgage obligations
|
1,830
|
|
|
5
|
|
|
44
|
|
|
—
|
|
|
1,874
|
|
|
5
|
|
||||||
Corporate
|
10,956
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
10,956
|
|
|
154
|
|
||||||
Total fixed maturities
|
41,598
|
|
|
505
|
|
|
102
|
|
|
—
|
|
|
41,700
|
|
|
505
|
|
||||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
900
|
|
|
293
|
|
|
868
|
|
|
138
|
|
|
1,768
|
|
|
431
|
|
||||||
Warrants
|
31
|
|
|
20
|
|
|
—
|
|
|
33
|
|
|
31
|
|
|
53
|
|
||||||
Total equity investments
|
931
|
|
|
313
|
|
|
868
|
|
|
171
|
|
|
1,799
|
|
|
484
|
|
||||||
Total
|
$
|
42,529
|
|
|
$
|
818
|
|
|
$
|
970
|
|
|
$
|
171
|
|
|
$
|
43,499
|
|
|
$
|
989
|
|
•
|
identifying all unrealized loss positions that have existed for at least six months;
|
•
|
identifying other circumstances 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.
|
|
78
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
79
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Gross realized gains
|
|
$
|
4,406
|
|
|
$
|
764
|
|
|
$
|
1,198
|
|
Gross realized losses
|
|
(635
|
)
|
|
(404
|
)
|
|
(1
|
)
|
|||
Total
|
|
$
|
3,771
|
|
|
$
|
360
|
|
|
$
|
1,197
|
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Investment income
|
|
|
|
|
|
|
||||||
Interest from fixed maturities
|
|
$
|
809
|
|
|
$
|
794
|
|
|
$
|
907
|
|
Dividends
|
|
500
|
|
|
682
|
|
|
702
|
|
|||
Income from limited liability investments
|
|
1,797
|
|
|
1,157
|
|
|
1,596
|
|
|||
(Loss) gain on change in fair value of limited liability investment, at fair value
|
|
(386
|
)
|
|
4,720
|
|
|
—
|
|
|||
(Loss) gain on change in fair value of warrants - not publicly traded
|
|
(292
|
)
|
|
380
|
|
|
(216
|
)
|
|||
Other
|
|
428
|
|
|
653
|
|
|
223
|
|
|||
Gross investment income
|
|
2,856
|
|
|
8,386
|
|
|
3,212
|
|
|||
Investment expenses
|
|
(187
|
)
|
|
(142
|
)
|
|
(257
|
)
|
|||
Net investment income
|
|
$
|
2,669
|
|
|
$
|
8,244
|
|
|
$
|
2,955
|
|
|
80
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Ceded premiums written
|
|
$
|
—
|
|
|
$
|
141
|
|
|
$
|
165
|
|
Ceded premiums earned
|
|
7
|
|
|
141
|
|
|
166
|
|
|||
Ceded loss and loss adjustment expenses
|
|
(248
|
)
|
|
111
|
|
|
(571
|
)
|
|||
Ceded unpaid loss and loss adjustment expenses
|
|
174
|
|
|
681
|
|
|
1,207
|
|
|||
Ceded unearned premiums
|
|
—
|
|
|
7
|
|
|
7
|
|
|||
Ceding commissions
|
|
226
|
|
|
—
|
|
|
(138
|
)
|
(in thousands)
|
|
|
|
December 31, 2017
|
|
|||
|
|
Unearned Premium Reserve
|
|
|
Commission Equity
|
|
||
Assumed
|
|
$
|
5,160
|
|
|
$
|
801
|
|
Ceded
|
|
7
|
|
|
—
|
|
||
Net
|
|
$
|
5,153
|
|
|
$
|
801
|
|
|
81
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Balance at January 1, net
|
|
$
|
13,609
|
|
|
$
|
12,143
|
|
|
$
|
12,197
|
|
Additions
|
|
27,864
|
|
|
29,288
|
|
|
26,307
|
|
|||
Amortization
|
|
(28,428
|
)
|
|
(27,822
|
)
|
|
(26,361
|
)
|
|||
Balance at December 31, net
|
|
$
|
13,045
|
|
|
$
|
13,609
|
|
|
$
|
12,143
|
|
(in thousands)
|
|
|
December 31, 2017
|
|
||||||||
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
Intangible assets subject to amortization
|
|
|
|
|
|
|
||||||
Database
|
|
$
|
4,918
|
|
|
$
|
2,521
|
|
|
$
|
2,397
|
|
Vehicle service agreements in-force
|
|
3,680
|
|
|
3,640
|
|
|
40
|
|
|||
Customer relationships
|
|
3,611
|
|
|
1,965
|
|
|
1,646
|
|
|||
In-place lease
|
|
1,125
|
|
|
92
|
|
|
1,033
|
|
|||
Contract-based revenues
|
|
731
|
|
|
115
|
|
|
616
|
|
|||
Intangible assets not subject to amortization
|
|
|
|
|
|
|
||||||
Tenant relationship
|
|
73,667
|
|
|
—
|
|
|
73,667
|
|
|||
Insurance licenses
|
|
7,553
|
|
|
—
|
|
|
7,553
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
95,948
|
|
|
$
|
8,333
|
|
|
$
|
87,615
|
|
|
82
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
December 31, 2016
|
|
||||||||
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
Intangible assets subject to amortization
|
|
|
|
|
|
|
||||||
Database
|
|
$
|
4,918
|
|
|
$
|
2,029
|
|
|
$
|
2,889
|
|
Vehicle service agreements in-force
|
|
3,680
|
|
|
3,554
|
|
|
126
|
|
|||
Customer relationships
|
|
3,611
|
|
|
1,521
|
|
|
2,090
|
|
|||
In-place lease
|
|
1,125
|
|
|
29
|
|
|
1,096
|
|
|||
Contract-based revenues
|
|
731
|
|
|
48
|
|
|
683
|
|
|||
Intangible assets not subject to amortization
|
|
|
|
—
|
|
|
|
|||||
Tenant relationship
|
|
73,667
|
|
|
—
|
|
|
73,667
|
|
|||
Insurance licenses
|
|
7,803
|
|
|
—
|
|
|
7,803
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
96,198
|
|
|
$
|
7,181
|
|
|
$
|
89,017
|
|
|
83
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
December 31, 2017
|
|
||||||||
|
|
Cost
|
|
Accumulated Depreciation
|
|
Carrying Value
|
||||||
Land
|
|
$
|
21,371
|
|
|
$
|
—
|
|
|
$
|
21,371
|
|
Site improvements
|
|
91,308
|
|
|
6,028
|
|
|
85,280
|
|
|||
Buildings
|
|
968
|
|
|
53
|
|
|
915
|
|
|||
Leasehold improvements
|
|
522
|
|
|
433
|
|
|
89
|
|
|||
Furniture and equipment
|
|
2,281
|
|
|
2,155
|
|
|
126
|
|
|||
Computer hardware
|
|
5,380
|
|
|
4,931
|
|
|
449
|
|
|||
Total
|
|
$
|
121,830
|
|
|
$
|
13,600
|
|
|
$
|
108,230
|
|
(in thousands)
|
|
|
|
|
December 31, 2016
|
|
||||||
|
|
Cost
|
|
Accumulated Depreciation
|
|
Carrying Value
|
||||||
Land
|
|
$
|
23,355
|
|
|
$
|
—
|
|
|
$
|
23,355
|
|
Site improvements
|
|
91,308
|
|
|
1,894
|
|
|
89,414
|
|
|||
Buildings
|
|
5,533
|
|
|
1,828
|
|
|
3,705
|
|
|||
Leasehold improvements
|
|
540
|
|
|
392
|
|
|
148
|
|
|||
Furniture and equipment
|
|
2,149
|
|
|
1,952
|
|
|
197
|
|
|||
Computer hardware
|
|
4,679
|
|
|
4,537
|
|
|
142
|
|
|||
Total
|
|
$
|
127,564
|
|
|
$
|
10,603
|
|
|
$
|
116,961
|
|
|
84
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
December 31,
|
|
|||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Balance at beginning of period, gross
|
|
$
|
53,795
|
|
|
$
|
55,471
|
|
|
$
|
63,895
|
|
Less reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
681
|
|
|
1,207
|
|
|
3,203
|
|
|||
Balance at beginning of period, net
|
|
53,114
|
|
|
54,264
|
|
|
60,692
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
|
|||||
Current year
|
|
100,097
|
|
|
96,289
|
|
|
86,439
|
|
|||
Prior years
|
|
20,694
|
|
|
8,095
|
|
|
616
|
|
|||
Paid related to:
|
|
|
|
|
|
|
|
|||||
Current year
|
|
(57,983
|
)
|
|
(62,978
|
)
|
|
(54,415
|
)
|
|||
Prior years
|
|
(52,444
|
)
|
|
(42,556
|
)
|
|
(39,068
|
)
|
|||
Balance at end of period, net
|
|
63,478
|
|
|
53,114
|
|
|
54,264
|
|
|||
Plus reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
174
|
|
|
681
|
|
|
1,207
|
|
|||
Balance at end of period, gross
|
|
$
|
63,652
|
|
|
$
|
53,795
|
|
|
$
|
55,471
|
|
|
85
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
86
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
Non-standard automobile insurance
|
|
|
|
|
|
|
|
|
|||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||
|
|
For the Years Ended December 31,
|
|||||||||||||||||||
Accident Year
|
|
2008 Unaudited
|
|
2009 Unaudited
|
|
2010 Unaudited
|
|
2011 Unaudited
|
|
2012 Unaudited
|
|
2013 Unaudited
|
|
2014 Unaudited
|
|
2015 Unaudited
|
|
2016 Unaudited
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2008
|
|
105,842
|
|
156,504
|
|
175,729
|
|
183,505
|
|
185,724
|
|
188,974
|
|
189,505
|
|
189,767
|
|
189,948
|
|
190,032
|
|
2009
|
|
|
103,882
|
|
157,090
|
|
172,990
|
|
176,305
|
|
183,064
|
|
184,807
|
|
185,175
|
|
185,315
|
|
185,406
|
|
|
2010
|
|
|
|
95,490
|
|
148,631
|
|
161,756
|
|
169,129
|
|
172,291
|
|
173,449
|
|
173,661
|
|
173,768
|
|
||
2011
|
|
|
|
|
63,908
|
|
90,303
|
|
97,368
|
|
99,846
|
|
101,088
|
|
101,421
|
|
101,629
|
|
|||
2012
|
|
|
|
|
|
34,045
|
|
54,040
|
|
60,637
|
|
62,991
|
|
64,007
|
|
65,309
|
|
||||
2013
|
|
|
|
|
|
|
39,983
|
|
61,082
|
|
65,915
|
|
69,021
|
|
70,110
|
|
|||||
2014
|
|
|
|
|
|
|
|
44,897
|
|
67,964
|
|
74,954
|
|
77,877
|
|
||||||
2015
|
|
|
|
|
|
|
|
|
44,828
|
|
71,048
|
|
79,314
|
|
|||||||
2016
|
|
|
|
|
|
|
|
|
|
52,687
|
|
84,988
|
|
||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
50,339
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
1,078,772
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Liabilities for non-standard automobile unpaid loss and loss adjustment expenses prior to 2008, net of reinsurance
|
39
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Total liabilities for non-standard automobile unpaid loss and loss adjustment expenses, net of reinsurance
|
58,231
|
|
(in thousands)
|
|
December 31, 2017
|
|
|
|
|
|
Liabilities for property and casualty loss and loss adjustment expenses, net of reinsurance
|
|
|
|
Non-standard automobile
|
|
58,231
|
|
Commercial automobile and other
|
|
1,347
|
|
Total
|
|
59,578
|
|
|
|
|
|
Reinsurance recoverable on unpaid loss and loss adjustment expenses
|
|
|
|
Non-standard automobile
|
|
166
|
|
Commercial automobile and other
|
|
8
|
|
Total
|
|
174
|
|
|
|
|
|
Unallocated loss adjustment expenses
|
|
3,900
|
|
|
|
|
|
Total gross liability for property and casualty unpaid loss and loss adjustment expenses
|
|
63,652
|
|
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (Unaudited)
|
|||||||||||||||||||
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Year 7
|
Year 8
|
Year 9
|
Year 10
|
|
|||||||||
Non-standard automobile
|
|
68.2
|
%
|
19.8
|
%
|
7.5
|
%
|
2.8
|
%
|
0.9
|
%
|
0.5
|
%
|
0.2
|
%
|
0.1
|
%
|
—
|
%
|
—
|
%
|
|
87
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
December 31,
|
|
|||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Balance at beginning of period
|
|
$
|
2,915
|
|
|
$
|
2,975
|
|
|
$
|
2,975
|
|
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
5,191
|
|
|
5,225
|
|
|
5,757
|
|
|||
Prior years
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(5,377
|
)
|
|
(5,321
|
)
|
|
(5,757
|
)
|
|||
Prior years
|
|
50
|
|
|
36
|
|
|
—
|
|
|||
Balance at end of period
|
|
$
|
2,779
|
|
|
$
|
2,915
|
|
|
$
|
2,975
|
|
(in thousands)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
||||||
Note payable
|
|
$
|
176,136
|
|
|
$
|
186,469
|
|
|
$
|
168,477
|
|
|
$
|
178,781
|
|
|
$
|
190,074
|
|
|
$
|
190,074
|
|
Bank loan
|
|
4,917
|
|
|
4,917
|
|
|
4,864
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Subordinated debt
|
|
90,500
|
|
|
52,105
|
|
|
52,105
|
|
|
90,500
|
|
|
43,619
|
|
|
43,619
|
|
||||||
Total
|
|
$
|
271,553
|
|
|
$
|
243,491
|
|
|
$
|
225,446
|
|
|
$
|
269,281
|
|
|
$
|
233,693
|
|
|
$
|
233,693
|
|
Issuer
|
Principal
(in thousands)
|
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
|
|
5/22/2003
|
annual interest rate equal to LIBOR, plus 4.20% payable quarterly
|
5/22/2033
|
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
|
|
88
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
89
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
As of December 31,
|
||
|
|
2017
|
||
Land
|
|
$
|
21,183
|
|
Site improvements
|
|
91,308
|
|
|
Buildings
|
|
811
|
|
|
Gross property and equipment leased
|
|
113,302
|
|
|
Accumulation depreciation
|
|
(6,068
|
)
|
|
Net property and equipment leased
|
|
$
|
107,234
|
|
(in thousands)
|
|
Lease Commitments
|
|
Lease Receipts
|
||||
2018
|
|
$
|
1,496
|
|
|
$
|
11,331
|
|
2019
|
|
1,215
|
|
|
11,572
|
|
||
2020
|
|
525
|
|
|
11,832
|
|
||
2021
|
|
422
|
|
|
12,099
|
|
||
2022
|
|
424
|
|
|
12,371
|
|
||
Thereafter
|
|
234
|
|
|
162,546
|
|
|
90
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
|
|
|
|
|
|
|
||||||
Current income tax expense
|
|
$
|
628
|
|
|
$
|
87
|
|
|
$
|
6
|
|
Deferred income tax (benefit) expense
|
|
(18,389
|
)
|
|
(9,807
|
)
|
|
87
|
|
|||
Income tax (benefit) expense
|
|
$
|
(17,761
|
)
|
|
$
|
(9,720
|
)
|
|
$
|
93
|
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Income tax benefit at U.S. statutory income tax rate
|
|
$
|
(10,001
|
)
|
|
$
|
(3,554
|
)
|
|
$
|
(3,849
|
)
|
Tax Act adjustment
|
|
(19,022
|
)
|
|
—
|
|
|
—
|
|
|||
Valuation allowance
|
|
9,092
|
|
|
(6,743
|
)
|
|
1,033
|
|
|||
Indefinite life intangibles
|
|
1,071
|
|
|
108
|
|
|
88
|
|
|||
Change in unrecognized tax benefits
|
|
490
|
|
|
51
|
|
|
—
|
|
|||
Non-deductible compensation
|
|
403
|
|
|
345
|
|
|
273
|
|
|||
Foreign operations subject to different tax rates
|
|
32
|
|
|
145
|
|
|
223
|
|
|||
Deconsolidation of subsidiary
|
|
—
|
|
|
—
|
|
|
2,384
|
|
|||
Non-taxable dividend income
|
|
—
|
|
|
—
|
|
|
(415
|
)
|
|||
Other
|
|
174
|
|
|
(72
|
)
|
|
356
|
|
|||
Income tax (benefit) expense for continuing operations
|
|
$
|
(17,761
|
)
|
|
$
|
(9,720
|
)
|
|
$
|
93
|
|
|
91
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
December 31,
|
|
|||||
|
|
2017
|
|
|
2016
|
|
||
Deferred income tax assets:
|
|
|
|
|
||||
Losses carried forward
|
|
$
|
193,498
|
|
|
$
|
301,339
|
|
Unpaid loss and loss adjustment expenses and unearned premiums
|
|
3,391
|
|
|
5,609
|
|
||
Intangible assets
|
|
2,490
|
|
|
1,135
|
|
||
Debt issuance costs
|
|
988
|
|
|
1,621
|
|
||
Investments
|
|
842
|
|
|
1,828
|
|
||
Deferred rent
|
|
807
|
|
|
1,395
|
|
||
Deferred revenue
|
|
394
|
|
|
385
|
|
||
Other
|
|
461
|
|
|
1,134
|
|
||
Valuation allowance
|
|
(181,222
|
)
|
|
(276,590
|
)
|
||
Deferred income tax assets
|
|
$
|
21,649
|
|
|
$
|
37,856
|
|
Deferred income tax liabilities:
|
|
|
|
|
||||
Indefinite life intangibles
|
|
$
|
(18,005
|
)
|
|
$
|
(28,079
|
)
|
Depreciation and amortization
|
|
(16,916
|
)
|
|
(28,620
|
)
|
||
Fair value of debt
|
|
(5,894
|
)
|
|
(12,100
|
)
|
||
Land
|
|
(4,435
|
)
|
|
(7,181
|
)
|
||
Investments
|
|
(3,991
|
)
|
|
(5,969
|
)
|
||
Deferred acquisition costs
|
|
(2,739
|
)
|
|
(4,627
|
)
|
||
Deferred income tax liabilities
|
|
(51,980
|
)
|
|
(86,576
|
)
|
||
Net deferred income tax liabilities
|
|
$
|
(30,331
|
)
|
|
$
|
(48,720
|
)
|
|
92
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
Year of net operating loss
|
|
Expiration date
|
|
Net operating loss
(in thousands)
|
|
|
2006
|
|
2026
|
|
8,321
|
|
|
2007
|
|
2027
|
|
62,308
|
|
|
2008
|
|
2028
|
|
53,895
|
|
|
2009
|
|
2029
|
|
512,499
|
|
|
2010
|
|
2030
|
|
92,058
|
|
|
2011
|
|
2031
|
|
45,238
|
|
|
2012
|
|
2032
|
|
33,756
|
|
|
2013
|
|
2033
|
|
30,780
|
|
|
2014
|
|
2034
|
|
7,245
|
|
|
2016
|
|
2036
|
|
17,389
|
|
|
2017
|
|
2037
|
|
18,897
|
|
|
(in thousands)
|
|
December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Unrecognized tax benefits - beginning of year
|
|
$
|
1,274
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Gross additions - current year tax positions
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Gross additions - prior year tax positions
|
|
93
|
|
|
1,274
|
|
|
—
|
|
|||
Gross reductions - prior year tax positions
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Gross reductions - settlements with taxing authorities
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Impact due to expiration of statute of limitations
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Unrecognized tax benefits - end of year
|
|
$
|
1,367
|
|
|
$
|
1,274
|
|
|
$
|
—
|
|
|
93
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands, except per share data)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Numerator:
|
|
|
|
|
|
|
||||||
Loss from continuing operations
|
|
$
|
(11,655
|
)
|
|
$
|
(733
|
)
|
|
$
|
(11,415
|
)
|
(Less) plus: net (income) loss attributable to noncontrolling interests
|
|
(4,337
|
)
|
|
281
|
|
|
(162
|
)
|
|||
Less: dividends on preferred stock, net of tax
|
|
(350
|
)
|
|
(565
|
)
|
|
(394
|
)
|
|||
Loss from continuing operations attributable to common shareholders
|
|
$
|
(16,342
|
)
|
|
$
|
(1,017
|
)
|
|
$
|
(11,971
|
)
|
Denominator:
|
|
|
|
|
|
|
||||||
Weighted average basic shares
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
21,547
|
|
|
20,003
|
|
|
19,710
|
|
|||
Weighted average diluted shares
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
21,547
|
|
|
20,003
|
|
|
19,710
|
|
|||
Effect of potentially dilutive securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total weighted average diluted shares
|
|
21,547
|
|
|
20,003
|
|
|
19,710
|
|
|||
Basic loss from continuing operations per common share
|
|
$
|
(0.76
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.61
|
)
|
Diluted loss from continuing operations per common share
|
|
$
|
(0.76
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.61
|
)
|
|
94
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|||||||
|
|
Number of Options Outstanding
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value
(in thousands)
|
||||||
Outstanding at December 31, 2016
|
|
651,875
|
|
|
$
|
4.51
|
|
|
1.4
|
|
|
$
|
1,134
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
||
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
||
Expired or Forfeited
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
||
Outstanding at December 31, 2017
|
|
651,875
|
|
|
$
|
4.51
|
|
|
0.4
|
|
|
$
|
352
|
|
Exercisable at December 31, 2017
|
|
651,875
|
|
|
$
|
4.51
|
|
|
0.4
|
|
|
$
|
352
|
|
|
|
Year ended December 31, 2016
|
|
Risk-free interest rate
|
|
1.1
|
%
|
Dividend yield
|
|
—
|
|
Expected volatility
|
|
0.5
|
%
|
Expected term (in years)
|
|
4.0
|
|
|
|
|
|
|
|||
|
|
Number of Restricted Stock Awards
|
|
Weighted-Average Grant Date Fair Value (per Share)
|
|||
Unvested at December 31, 2016
|
|
1,952,665
|
|
|
$
|
4.14
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Unvested at December 31, 2017
|
|
1,952,665
|
|
|
$
|
4.14
|
|
|
95
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|||
|
|
Number of Restricted Stock Units
|
|
Weighted-Average Grant Date Fair Value (per Share)
|
|||
Unvested at December 31, 2016
|
|
500,000
|
|
|
$
|
5.73
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Unvested at December 31, 2017
|
|
500,000
|
|
|
$
|
5.73
|
|
|
96
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
December 31, 2017
|
||||||||||||
|
Exercise Price
|
|
Date of Issue
|
|
Expiry Date
|
|
Remaining Contractual Life (in years)
|
|
Number Outstanding
|
|
|||
|
$
|
5.00
|
|
|
16-Sep-13
|
|
15-Sep-23
|
|
5.7
|
|
3,280,790
|
|
|
|
$
|
5.00
|
|
|
3-Feb-14
|
|
15-Sep-23
|
|
5.7
|
|
1,642,975
|
|
|
|
|
|
|
Total:
|
|
5.7
|
|
4,923,765
|
|
|
|
97
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
|
||||||||
|
|
Unrealized Gains (Losses) on Fixed Maturities and Equity Investments
|
|
Foreign Currency Translation Adjustments
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||
Balance, January 1, 2015
|
|
$
|
3,580
|
|
|
$
|
(5,952
|
)
|
|
$
|
(2,372
|
)
|
|
|
|
|
|
|
|
||||||
Correction of prior period error
|
|
(744
|
)
|
|
—
|
|
|
(744
|
)
|
|||
Other comprehensive (loss) income before reclassifications
|
|
(2,884
|
)
|
|
929
|
|
|
(1,955
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
1,342
|
|
|
1,243
|
|
|
2,585
|
|
|||
Net current-period other comprehensive (loss) income
|
|
(2,286
|
)
|
|
2,172
|
|
|
(114
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance, December 31, 2015
|
|
$
|
1,294
|
|
|
$
|
(3,780
|
)
|
|
$
|
(2,486
|
)
|
|
|
|
|
|
|
|
||||||
Other comprehensive income before reclassifications
|
|
2,772
|
|
|
—
|
|
|
2,772
|
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
(494
|
)
|
|
—
|
|
|
(494
|
)
|
|||
Net current-period other comprehensive income
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|||
|
|
|
|
|
|
|
||||||
Balance, December 31, 2016
|
|
$
|
3,572
|
|
|
$
|
(3,780
|
)
|
|
$
|
(208
|
)
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss before reclassifications
|
|
(5,214
|
)
|
|
—
|
|
|
(5,214
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
1,076
|
|
|
494
|
|
|
1,570
|
|
|||
Net current-period other comprehensive (loss) income
|
|
$
|
(4,138
|
)
|
|
$
|
494
|
|
|
$
|
(3,644
|
)
|
|
|
|
|
|
|
|
||||||
Balance, December 31, 2017
|
|
$
|
(566
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
(3,852
|
)
|
|
98
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Reclassification of accumulated other comprehensive income from unrealized (losses) gains on fixed maturities and equity investments to:
|
|
|
|
|
|
|
||||||
Net realized gains
|
|
$
|
(760
|
)
|
|
$
|
527
|
|
|
$
|
(1,332
|
)
|
Other-than-temporary impairment loss
|
|
(316
|
)
|
|
(33
|
)
|
|
(10
|
)
|
|||
Loss from continuing operations before income tax (benefit) expense
|
|
(1,076
|
)
|
|
494
|
|
|
(1,342
|
)
|
|||
Income tax (benefit) expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net (loss) income
|
|
(1,076
|
)
|
|
494
|
|
|
(1,342
|
)
|
|||
|
|
|
|
|
|
|
||||||
Reclassification of accumulated other comprehensive loss from foreign currency translation adjustments to:
|
|
|
|
|
|
|
||||||
Loss on liquidation of subsidiary, net of taxes
|
|
(494
|
)
|
|
—
|
|
|
—
|
|
|||
Loss on deconsolidation of subsidiary
|
|
—
|
|
|
—
|
|
|
(1,243
|
)
|
|||
Loss from continuing operations before income tax (benefit) expense
|
|
(494
|
)
|
|
—
|
|
|
(1,243
|
)
|
|||
Income tax (benefit) expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net (loss) income
|
|
(494
|
)
|
|
—
|
|
|
(1,243
|
)
|
|||
Total reclassification from accumulated other comprehensive loss to net (loss) income
|
|
$
|
(1,570
|
)
|
|
$
|
494
|
|
|
$
|
(2,585
|
)
|
|
99
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Revenues:
|
|
|
|
|
|
|
||||||
Insurance Underwriting:
|
|
|
|
|
|
|
||||||
Net premiums earned
|
|
$
|
130,443
|
|
|
$
|
127,608
|
|
|
$
|
117,433
|
|
Other income
|
|
9,901
|
|
|
10,272
|
|
|
8,937
|
|
|||
Total Insurance Underwriting
|
|
140,344
|
|
|
137,880
|
|
|
126,370
|
|
|||
Extended Warranty:
|
|
|
|
|
|
|
||||||
Service fee and commission income
|
|
31,909
|
|
|
24,232
|
|
|
22,966
|
|
|||
Other income
|
|
191
|
|
|
283
|
|
|
368
|
|
|||
Total Extended Warranty
|
|
32,100
|
|
|
24,515
|
|
|
23,334
|
|
|||
Leased Real Estate:
|
|
|
|
|
|
|
||||||
Rental income
|
|
13,364
|
|
|
5,419
|
|
|
—
|
|
|||
Other income
|
|
493
|
|
|
50
|
|
|
—
|
|
|||
Total Leased Real Estate
|
|
13,857
|
|
|
5,469
|
|
|
—
|
|
|||
Total segment revenues
|
|
186,301
|
|
|
167,864
|
|
|
149,704
|
|
|||
Rental income not allocated to segments
|
|
20
|
|
|
17
|
|
|
—
|
|
|||
Net investment income
|
|
2,669
|
|
|
8,244
|
|
|
2,955
|
|
|||
Net realized gains
|
|
3,771
|
|
|
360
|
|
|
1,197
|
|
|||
Other-than-temporary impairment loss
|
|
(316
|
)
|
|
(157
|
)
|
|
(10
|
)
|
|||
Other income not allocated to segments
|
|
749
|
|
|
302
|
|
|
6,120
|
|
|||
Total revenues
|
|
$
|
193,194
|
|
|
$
|
176,630
|
|
|
$
|
159,966
|
|
|
100
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Segment operating (loss) income
|
|
|
|
|
|
|
||||||
Insurance Underwriting
|
|
$
|
(20,606
|
)
|
|
$
|
(8,202
|
)
|
|
$
|
(1,147
|
)
|
Extended Warranty
|
|
3,957
|
|
|
506
|
|
|
(628
|
)
|
|||
Leased Real Estate
|
|
3,099
|
|
|
627
|
|
|
—
|
|
|||
Total segment operating loss
|
|
(13,550
|
)
|
|
(7,069
|
)
|
|
(1,775
|
)
|
|||
Net investment income
|
|
2,669
|
|
|
8,244
|
|
|
2,955
|
|
|||
Net realized gains
|
|
3,771
|
|
|
360
|
|
|
1,197
|
|
|||
Other-than-temporary impairment loss
|
|
(316
|
)
|
|
(157
|
)
|
|
(10
|
)
|
|||
Amortization of intangible assets
|
|
(1,152
|
)
|
|
(1,242
|
)
|
|
(1,244
|
)
|
|||
Contingent consideration benefit
|
|
212
|
|
|
657
|
|
|
1,139
|
|
|||
Impairment of intangible assets
|
|
(250
|
)
|
|
—
|
|
|
—
|
|
|||
Interest expense not allocated to segments
|
|
(4,977
|
)
|
|
(4,496
|
)
|
|
(5,278
|
)
|
|||
Other income and expenses not allocated to segments, net
|
|
(9,436
|
)
|
|
(7,640
|
)
|
|
(3,790
|
)
|
|||
Foreign exchange losses, net
|
|
(15
|
)
|
|
(15
|
)
|
|
(1,215
|
)
|
|||
(Loss) gain on change in fair value of debt
|
|
(8,487
|
)
|
|
(3,721
|
)
|
|
1,458
|
|
|||
Gain (loss) on deconsolidation of subsidiaries
|
|
—
|
|
|
5,643
|
|
|
(4,420
|
)
|
|||
Equity in net income (loss) of investees
|
|
2,115
|
|
|
(1,017
|
)
|
|
(339
|
)
|
|||
Loss from continuing operations before income tax (benefit) expense
|
|
(29,416
|
)
|
|
(10,453
|
)
|
|
(11,322
|
)
|
|||
Income tax (benefit) expense
|
|
(17,761
|
)
|
|
(9,720
|
)
|
|
93
|
|
|||
Loss from continuing operations
|
|
$
|
(11,655
|
)
|
|
$
|
(733
|
)
|
|
$
|
(11,415
|
)
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Insurance Underwriting:
|
|
|
|
|
|
|
||||||
Private passenger auto liability
|
|
$
|
89,235
|
|
|
$
|
69,086
|
|
|
$
|
79,258
|
|
Auto physical damage
|
|
41,208
|
|
|
58,522
|
|
|
38,175
|
|
|||
Total net premiums earned
|
|
$
|
130,443
|
|
|
$
|
127,608
|
|
|
$
|
117,433
|
|
|
101
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
102
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
|
|
December 31, 2017
|
|
|||||||||
|
|
|
|
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
|
|
$
|
25,244
|
|
|
$
|
—
|
|
|
$
|
25,244
|
|
|
$
|
—
|
|
States, municipalities and political subdivisions
|
|
3,783
|
|
|
—
|
|
|
3,783
|
|
|
—
|
|
||||
Mortgage-backed
|
|
7,663
|
|
|
—
|
|
|
7,663
|
|
|
—
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
2,269
|
|
|
—
|
|
|
2,269
|
|
|
—
|
|
||||
Corporate
|
|
14,255
|
|
|
—
|
|
|
14,255
|
|
|
—
|
|
||||
Total fixed maturities
|
|
53,214
|
|
|
—
|
|
|
53,214
|
|
|
—
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
7,419
|
|
|
7,419
|
|
|
—
|
|
|
—
|
|
||||
Warrants
|
|
1,575
|
|
|
727
|
|
|
848
|
|
|
—
|
|
||||
Total equity investments
|
|
8,994
|
|
|
8,146
|
|
|
848
|
|
|
—
|
|
||||
Limited liability investment, at fair value
|
|
10,314
|
|
|
—
|
|
|
10,314
|
|
|
—
|
|
||||
Other investments
|
|
3,721
|
|
|
—
|
|
|
3,721
|
|
|
—
|
|
||||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|
—
|
|
||||
Total assets
|
|
$
|
76,394
|
|
|
$
|
8,146
|
|
|
$
|
68,248
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Subordinated debt
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
103
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
|
|
|
|
December 31, 2016
|
|
|||||||||
|
|
|
|
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
|
|
$
|
28,148
|
|
|
$
|
—
|
|
|
$
|
28,148
|
|
|
$
|
—
|
|
States, municipalities and political subdivisions
|
|
3,088
|
|
|
—
|
|
|
3,088
|
|
|
—
|
|
||||
Mortgage-backed
|
|
8,506
|
|
|
—
|
|
|
8,506
|
|
|
—
|
|
||||
Asset-backed securities and collateralized mortgage obligations
|
|
3,467
|
|
|
—
|
|
|
3,467
|
|
|
—
|
|
||||
Corporate
|
|
18,555
|
|
|
—
|
|
|
18,555
|
|
|
—
|
|
||||
Total fixed maturities
|
|
61,764
|
|
|
—
|
|
|
61,764
|
|
|
—
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
21,426
|
|
|
21,426
|
|
|
—
|
|
|
—
|
|
||||
Warrants
|
|
1,804
|
|
|
664
|
|
|
1,140
|
|
|
—
|
|
||||
Total equity investments
|
|
23,230
|
|
|
22,090
|
|
|
1,140
|
|
|
—
|
|
||||
Limited liability investment, at fair value
|
|
10,700
|
|
|
—
|
|
|
10,700
|
|
|
—
|
|
||||
Other investments
|
|
9,368
|
|
|
—
|
|
|
9,368
|
|
|
—
|
|
||||
Short-term investments
|
|
401
|
|
|
—
|
|
|
401
|
|
|
—
|
|
||||
Total assets
|
|
$
|
105,463
|
|
|
$
|
22,090
|
|
|
$
|
83,373
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Subordinated debt
|
|
$
|
43,619
|
|
|
$
|
—
|
|
|
$
|
43,619
|
|
|
$
|
—
|
|
Contingent consideration
|
|
325
|
|
|
—
|
|
|
—
|
|
|
325
|
|
||||
Total liabilities
|
|
$
|
43,944
|
|
|
$
|
—
|
|
|
$
|
43,619
|
|
|
$
|
325
|
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Liabilities:
|
|
|
|
|
|
|
||||||
Contingent consideration:
|
|
|
|
|
|
|
||||||
Beginning balance
|
|
$
|
325
|
|
|
$
|
1,982
|
|
|
$
|
3,121
|
|
Settlements of contingent consideration liabilities
|
|
(113
|
)
|
|
(1,000
|
)
|
|
—
|
|
|||
Change in fair value of contingent consideration included in net (loss) income
|
|
(212
|
)
|
|
(657
|
)
|
|
(1,139
|
)
|
|||
Ending balance
|
|
$
|
—
|
|
|
$
|
325
|
|
|
$
|
1,982
|
|
|
104
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
105
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
|
106
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands)
|
|
December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Combined net (loss) income, statutory basis
|
|
$
|
(15,379
|
)
|
|
$
|
(7,528
|
)
|
|
$
|
6,298
|
|
Combined capital and surplus, statutory basis
|
|
$
|
26,222
|
|
|
$
|
41,330
|
|
|
$
|
42,387
|
|
|
107
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements
|
(in thousands, except per share data)
|
|
2017
|
||||||||||||||
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
||||||||
Net premiums earned
|
|
$
|
31,447
|
|
|
$
|
32,556
|
|
|
$
|
33,518
|
|
|
$
|
32,922
|
|
Service fee and commission income
|
|
10,451
|
|
|
8,023
|
|
|
6,873
|
|
|
6,562
|
|
||||
Rental income
|
|
3,346
|
|
|
3,344
|
|
|
3,347
|
|
|
3,347
|
|
||||
Total revenues
|
|
49,536
|
|
|
52,002
|
|
|
44,915
|
|
|
46,741
|
|
||||
Total operating expenses
|
|
65,503
|
|
|
50,104
|
|
|
48,260
|
|
|
47,379
|
|
||||
Operating (loss) income
|
|
(15,967
|
)
|
|
1,898
|
|
|
(3,345
|
)
|
|
(638
|
)
|
||||
Income (loss) from continuing operations
|
|
50
|
|
|
(1,562
|
)
|
|
(8,659
|
)
|
|
(1,484
|
)
|
||||
Net loss
|
|
(444
|
)
|
|
(1,562
|
)
|
|
(7,642
|
)
|
|
(1,484
|
)
|
||||
Net loss attributable to common shareholders
|
|
(4,634
|
)
|
|
(1,526
|
)
|
|
(7,896
|
)
|
|
(1,763
|
)
|
||||
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
(0.19
|
)
|
|
(0.07
|
)
|
|
(0.42
|
)
|
|
(0.08
|
)
|
||||
Diluted:
|
|
(0.18
|
)
|
|
(0.07
|
)
|
|
(0.42
|
)
|
|
(0.08
|
)
|
||||
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
(0.21
|
)
|
|
(0.07
|
)
|
|
(0.37
|
)
|
|
(0.08
|
)
|
||||
Diluted:
|
|
(0.20
|
)
|
|
(0.07
|
)
|
|
(0.37
|
)
|
|
(0.08
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
(in thousands, except per share data)
|
|
2016
|
||||||||||||||
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
||||||||
Net premiums earned
|
|
$
|
33,419
|
|
|
$
|
32,949
|
|
|
$
|
31,813
|
|
|
$
|
29,427
|
|
Service fee and commission income
|
|
7,186
|
|
|
6,330
|
|
|
5,394
|
|
|
5,322
|
|
||||
Rental income
|
|
2,998
|
|
|
2,432
|
|
|
3
|
|
|
3
|
|
||||
Total revenues
|
|
52,788
|
|
|
45,825
|
|
|
41,137
|
|
|
36,880
|
|
||||
Total operating expenses
|
|
55,415
|
|
|
46,161
|
|
|
42,187
|
|
|
39,714
|
|
||||
Operating loss
|
|
(2,627
|
)
|
|
(336
|
)
|
|
(1,050
|
)
|
|
(2,834
|
)
|
||||
Income (loss) from continuing operations
|
|
1,174
|
|
|
1,587
|
|
|
(1,999
|
)
|
|
(1,495
|
)
|
||||
Net income (loss)
|
|
1,305
|
|
|
1,587
|
|
|
(875
|
)
|
|
(1,495
|
)
|
||||
Net income (loss) attributable to common shareholders
|
|
1,042
|
|
|
1,370
|
|
|
(621
|
)
|
|
(1,553
|
)
|
||||
Earnings (loss) per share - continuing operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
0.04
|
|
|
0.07
|
|
|
(0.09
|
)
|
|
(0.08
|
)
|
||||
Diluted:
|
|
0.04
|
|
|
0.06
|
|
|
(0.09
|
)
|
|
(0.08
|
)
|
||||
Earnings (loss) per share – net income (loss) attributable to common shareholders:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
0.05
|
|
|
0.07
|
|
|
(0.03
|
)
|
|
(0.08
|
)
|
||||
Diluted:
|
|
0.05
|
|
|
0.06
|
|
|
(0.03
|
)
|
|
(0.08
|
)
|
|
108
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
109
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
110
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
111
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
112
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
113
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
114
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
December 31, 2017
|
|
|||||||||
|
|
Cost or Amortized Cost
|
|
|
Fair Value
|
|
|
Amount Shown on Consolidated Balance Sheet
|
|
|||
Fixed maturities:
|
|
|
|
|
|
|
||||||
U.S. government, government agencies and authorities
|
|
$
|
25,519
|
|
|
$
|
25,244
|
|
|
$
|
25,244
|
|
States, municipalities and political subdivisions
|
|
3,826
|
|
|
3,783
|
|
|
3,783
|
|
|||
Mortgage-backed
|
|
7,784
|
|
|
7,663
|
|
|
7,663
|
|
|||
Asset-backed securities and collateralized mortgage obligations
|
|
2,279
|
|
|
2,269
|
|
|
2,269
|
|
|||
Corporate
|
|
14,338
|
|
|
14,255
|
|
|
14,255
|
|
|||
Total fixed maturities
|
|
53,746
|
|
|
53,214
|
|
|
53,214
|
|
|||
Equity investments:
|
|
|
|
|
|
|
||||||
Common stock
|
|
7,583
|
|
|
7,419
|
|
|
7,419
|
|
|||
Warrants
|
|
1,563
|
|
|
1,575
|
|
|
1,575
|
|
|||
Total equity investments
|
|
9,146
|
|
|
8,994
|
|
|
8,994
|
|
|||
Limited liability investments
|
|
25,173
|
|
|
—
|
|
|
25,173
|
|
|||
Limited liability investments, at fair value
|
|
10,314
|
|
|
10,314
|
|
|
10,314
|
|
|||
Other investments
|
|
3,721
|
|
|
—
|
|
|
3,721
|
|
|||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|||
Total investments
|
|
$
|
102,251
|
|
|
$
|
72,522
|
|
|
$
|
101,567
|
|
|
115
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
||
|
|
|
|
|
||||
Assets
|
|
|
|
|
||||
Investments in subsidiaries
|
|
$
|
41,951
|
|
|
$
|
47,729
|
|
Equity investments
|
|
491
|
|
|
—
|
|
||
Cash and cash equivalents
|
|
688
|
|
|
11,469
|
|
||
Investment in investee
|
|
5,230
|
|
|
3,116
|
|
||
Other assets
|
|
3,134
|
|
|
2,254
|
|
||
Total Assets
|
|
$
|
51,494
|
|
|
$
|
64,568
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
||||
Accrued expenses and other liabilities
|
|
$
|
2,184
|
|
|
$
|
1,306
|
|
Total Liabilities
|
|
2,184
|
|
|
1,306
|
|
||
|
|
|
|
|
||||
Class A preferred stock
|
|
5,461
|
|
|
6,427
|
|
||
|
|
|
|
|
||||
Shareholders' Equity:
|
|
|
|
|
||||
Common stock
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
356,021
|
|
|
353,882
|
|
||
Accumulated deficit
|
|
(313,487
|
)
|
|
(297,668
|
)
|
||
Accumulated other comprehensive loss
|
|
(3,852
|
)
|
|
(208
|
)
|
||
Shareholders' equity attributable to common shareholders
|
|
38,682
|
|
|
56,006
|
|
||
Noncontrolling interests in consolidated subsidiaries
|
|
5,167
|
|
|
829
|
|
||
Total Shareholders' Equity
|
|
43,849
|
|
|
56,835
|
|
||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
51,494
|
|
|
$
|
64,568
|
|
|
116
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Revenues:
|
|
|
|
|
|
|
||||||
Net investment income
|
|
$
|
35
|
|
|
$
|
6
|
|
|
$
|
5
|
|
Net realized gains
|
|
—
|
|
|
47
|
|
|
—
|
|
|||
Total revenues
|
|
35
|
|
|
53
|
|
|
5
|
|
|||
Expenses:
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
|
3,796
|
|
|
2,147
|
|
|
2,715
|
|
|||
Foreign exchange (gains) losses, net
|
|
(165
|
)
|
|
(58
|
)
|
|
553
|
|
|||
Equity in net (income) loss of investee
|
|
(2,115
|
)
|
|
74
|
|
|
—
|
|
|||
Total expenses
|
|
1,516
|
|
|
2,163
|
|
|
3,268
|
|
|||
Loss from continuing operations before income tax benefit and equity in (loss) income of subsidiaries
|
|
(1,481
|
)
|
|
(2,110
|
)
|
|
(3,263
|
)
|
|||
Income tax (benefit) expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Equity in (loss) income of subsidiaries
|
|
(9,651
|
)
|
|
2,632
|
|
|
4,532
|
|
|||
Net (loss) income
|
|
$
|
(11,132
|
)
|
|
$
|
522
|
|
|
$
|
1,269
|
|
|
117
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(11,132
|
)
|
|
$
|
522
|
|
|
$
|
1,269
|
|
Other comprehensive (loss) income, net of taxes
(1)
:
|
|
|
|
|
|
|
||||||
Unrealized (losses) gains on fixed maturities and equity investments:
|
|
|
|
|
|
|
||||||
Unrealized (losses) gains arising during the period
|
|
(139
|
)
|
|
588
|
|
|
(588
|
)
|
|||
Reclassification adjustment for amounts included in net (loss) income
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other comprehensive (loss) income - parent only
|
|
(139
|
)
|
|
588
|
|
|
(588
|
)
|
|||
Equity in other comprehensive (loss) income of subsidiaries
|
|
(3,504
|
)
|
|
1,682
|
|
|
748
|
|
|||
Other comprehensive (loss) income
|
|
(3,643
|
)
|
|
2,270
|
|
|
160
|
|
|||
Comprehensive (loss) income
|
|
$
|
(14,775
|
)
|
|
$
|
2,792
|
|
|
$
|
1,429
|
|
(1) Net of income tax (benefit) expense of $0, $0 and $0 in 2017, 2016 and 2015
|
|
|
|
|
|
118
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
Years ended December 31,
|
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Cash provided by (used in):
|
|
|
|
|
|
|
||||||
Operating activities:
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(11,132
|
)
|
|
$
|
522
|
|
|
$
|
1,269
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
||||||
Equity in net loss (income) of subsidiaries
|
|
9,651
|
|
|
(2,632
|
)
|
|
(4,532
|
)
|
|||
Equity in net (income) loss of investee
|
|
(2,115
|
)
|
|
74
|
|
|
—
|
|
|||
Stock-based compensation expense, net of forfeitures
|
|
1,186
|
|
|
1,015
|
|
|
802
|
|
|||
Net realized gains
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|||
Other, net
|
|
(368
|
)
|
|
(147
|
)
|
|
1,242
|
|
|||
Net cash used in operating activities
|
|
(2,778
|
)
|
|
(1,215
|
)
|
|
(1,219
|
)
|
|||
Investing activities:
|
|
|
|
|
|
|
||||||
Purchases of equity investments
|
|
(630
|
)
|
|
—
|
|
|
(3,143
|
)
|
|||
Net cash used in investing activities
|
|
(630
|
)
|
|
—
|
|
|
(3,143
|
)
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock, net
|
|
(47
|
)
|
|
10,477
|
|
|
—
|
|
|||
Repurchase of common stock for cancellation
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|||
Capital contributions to subsidiaries
|
|
(7,326
|
)
|
|
—
|
|
|
(500
|
)
|
|||
Cash dividends received from subsidiaries
|
|
—
|
|
|
—
|
|
|
500
|
|
|||
Net cash (used in) provided by financing activities
|
|
(7,373
|
)
|
|
10,352
|
|
|
—
|
|
|||
Net (decrease) increase in cash and cash equivalents
|
|
(10,781
|
)
|
|
9,137
|
|
|
(4,362
|
)
|
|||
Cash and cash equivalents at beginning of period
|
|
11,469
|
|
|
2,332
|
|
|
6,694
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
688
|
|
|
$
|
11,469
|
|
|
$
|
2,332
|
|
|
119
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
December 31,
|
|
Years ended December 31,
|
||||||||||||||||||||||||||||
|
|
Deferred Acquisition Costs
|
|
|
Unpaid Loss and Loss Adjustment Expenses
|
|
|
Unearned Premiums
|
|
|
Net Premiums Earned
|
|
|
Loss and Loss Adjustment Expenses
|
|
|
Amortization of Deferred Acquisition Costs
|
|
|
Other Operating Expenses
|
|
|
Net Premiums Written
|
|
||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance Underwriting
|
|
$
|
6,720
|
|
|
$
|
63,652
|
|
|
$
|
36,686
|
|
|
$
|
130,443
|
|
|
$
|
120,791
|
|
|
$
|
24,203
|
|
|
$
|
15,956
|
|
|
$
|
126,959
|
|
Amounts not allocated to segments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
$
|
6,720
|
|
|
$
|
63,652
|
|
|
$
|
36,686
|
|
|
$
|
130,443
|
|
|
$
|
120,791
|
|
|
$
|
24,203
|
|
|
$
|
15,956
|
|
|
$
|
126,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance Underwriting
|
|
$
|
7,782
|
|
|
$
|
53,795
|
|
|
$
|
40,176
|
|
|
$
|
127,608
|
|
|
$
|
104,384
|
|
|
$
|
24,154
|
|
|
$
|
17,543
|
|
|
$
|
132,550
|
|
Amounts not allocated to segments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
$
|
7,782
|
|
|
$
|
53,795
|
|
|
$
|
40,176
|
|
|
$
|
127,608
|
|
|
$
|
104,384
|
|
|
$
|
24,154
|
|
|
$
|
17,543
|
|
|
$
|
132,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Insurance Underwriting
|
|
$
|
6,696
|
|
|
$
|
55,471
|
|
|
$
|
35,234
|
|
|
$
|
117,433
|
|
|
$
|
87,055
|
|
|
$
|
23,333
|
|
|
$
|
17,130
|
|
|
$
|
116,239
|
|
Amounts not allocated to segments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
$
|
6,696
|
|
|
$
|
55,471
|
|
|
$
|
35,234
|
|
|
$
|
117,433
|
|
|
$
|
87,055
|
|
|
$
|
23,333
|
|
|
$
|
17,130
|
|
|
$
|
116,239
|
|
|
120
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands, except for percentages)
|
|
|
|
Years ended December 31,
|
|
||||||||||||||
|
|
Direct Premiums Written
|
|
|
Premiums Ceded to Other Companies
|
|
|
Premiums Assumed from Other Companies
|
|
|
Net Premiums Written
|
|
|
Percentage of Premiums Assumed to Net
|
|
||||
2017
|
|
$
|
105,647
|
|
|
$
|
—
|
|
|
$
|
21,312
|
|
|
$
|
126,959
|
|
|
16.8
|
%
|
2016
|
|
$
|
109,165
|
|
|
$
|
141
|
|
|
$
|
23,526
|
|
|
$
|
132,550
|
|
|
17.7
|
%
|
2015
|
|
$
|
97,414
|
|
|
$
|
165
|
|
|
$
|
18,990
|
|
|
$
|
116,239
|
|
|
16.3
|
%
|
|
121
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
|
|
|
||||||||||||||||
|
|
Balance at Beginning of Year
|
|
|
Charged to Income Tax (Benefit) Expense
|
|
|
Tax Act Rate Change
|
|
Disposals and Other
|
|
|
Balance at End of Year
|
|
||||||
Valuation Allowance for Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2017
|
|
$
|
276,590
|
|
|
$
|
9,092
|
|
|
$
|
(108,179
|
)
|
|
$
|
3,719
|
|
|
$
|
181,222
|
|
Year Ended December 31, 2016
|
|
$
|
283,636
|
|
|
$
|
(6,743
|
)
|
|
$
|
—
|
|
|
$
|
(303
|
)
|
|
$
|
276,590
|
|
Year Ended December 31, 2015
|
|
$
|
287,151
|
|
|
$
|
1,033
|
|
|
$
|
—
|
|
|
$
|
(4,548
|
)
|
|
$
|
283,636
|
|
|
122
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
Loss and Loss Adjustment Expenses Related to
|
|
|
|
|||||||||||||||||||||
Affiliation with Registrant (1)
|
Deferred Acquisition Costs
|
|
Unpaid Loss and Loss Adjustment Expenses
|
|
Unearned Premiums
|
|
Net Earned Premiums
|
|
Net Investment Income
|
|
Current Year
|
|
Prior Years
|
|
Amortization of Deferred Acquisition Costs
|
|
Paid Loss and Loss Adjustment Expenses
|
|
Net Premiums Written
|
|
||||||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
$
|
6,720
|
|
$
|
63,652
|
|
$
|
36,686
|
|
$
|
130,443
|
|
$
|
1,784
|
|
$
|
100,097
|
|
$
|
20,694
|
|
$
|
24,203
|
|
$
|
110,427
|
|
$
|
126,959
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
$
|
7,782
|
|
$
|
53,795
|
|
$
|
40,176
|
|
$
|
127,608
|
|
$
|
5,530
|
|
$
|
96,289
|
|
$
|
8,095
|
|
$
|
24,154
|
|
$
|
105,534
|
|
$
|
132,550
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
$
|
6,696
|
|
$
|
55,471
|
|
$
|
35,234
|
|
$
|
117,433
|
|
$
|
2,811
|
|
$
|
86,439
|
|
$
|
616
|
|
$
|
23,333
|
|
$
|
93,483
|
|
$
|
116,239
|
|
|
123
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
|
|
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
|
Date:
|
March 16, 2018
|
By:
|
/s/ Larry G. Swets, Jr.
|
|
|
Name:
|
Larry G. Swets, Jr.
|
|
|
Title:
|
Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
/s/ Larry G. Swets, Jr.
Larry G. Swets, Jr.
|
Chief Executive Officer and Director
(principal executive officer)
|
March 16, 2018
|
|
|
|
/s/ John T. Fitzgerald
John T. Fitzgerald |
President, Chief Operating Officer and Director
|
March 16, 2018
|
|
|
|
/s/ William A. Hickey, Jr.
William A. Hickey, Jr.
|
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
|
March 16, 2018
|
|
|
|
/s/ Terence Kavanagh
Terence Kavanagh
|
Chairman of the Board and Director
|
March 16, 2018
|
|
|
|
/s/ Gregory Hannon
Gregory Hannon
|
Director
|
March 16, 2018
|
|
|
|
/s/ Gary Schaevitz
Gary Schaevitz
|
Director
|
March 16, 2018
|
|
|
|
/s/ Joseph Stilwell
Joseph Stilwell
|
Director
|
March 16, 2018
|
|
|
|
|
124
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Exhibit
|
Description
|
2.1
|
Stock Purchase Agreement, dated April 1, 2015, by and between National General Holdings Corp., as Buyer, and Kingsway America Inc. and Mendota Insurance Company, as Sellers
(included as Exhibit 2.1 to the Form 8-K, filed April 7, 2015, and incorporated herein by reference).
|
|
|
2.2
|
Stock Purchase Agreement, dated as of May 17, 2016 by and among CMC Acquisition, LLC, CRIC TRT Acquisition LLC and BNSF-Delpres Investments Ltd.
(included as Exhibit 2.1 to the Form 8-K, filed July 20, 2016, and incorporated herein by reference).
|
|
|
2.3
|
Amendment to Stock Purchase Agreement, dated as of June 17, 2016, by and among CMC Acquisition, LLC, CRIC TRT Acquisition LLC, and BNSF-Delpres Investments Ltd
. (included as Exhibit 2.1 to the Form 8-K, filed June 17, 2016, and incorporated herein by reference).
|
|
|
3.1
|
Certificate of Amendment to the Articles of Incorporation of Kingsway Financial Services Inc
. (included as Exhibit 3.1 to the Form 10-Q, filed November 7, 2013, and incorporated herein by reference).
|
|
|
3.2
|
By-law No. 5 of Kingsway Financial Services Inc.
(included as Exhibit 3.2 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
|
|
|
4.1
|
Indenture dated December 4, 2002 between Kingsway America Inc. and State Street Bank and Trust Company of Connecticut, National Association
(included as Exhibit 4.3 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
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|
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4.2
|
Indenture dated May 15, 2003 between Kingsway America Inc. and U.S. Bank National Association
(included as Exhibit 4.4 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
|
|
|
4.3
|
Indenture dated October 29, 2003 between Kingsway America Inc. and U.S. Bank National Association
(included as Exhibit 4.5 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
|
|
|
4.4
|
Indenture dated May 22, 2003 between Kingsway America Inc., Kingsway Financial Services Inc., and Wilmington Trust Company
(included as Exhibit 4.6 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
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|
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4.5
|
Junior Subordinated Indenture dated September 30, 2003 between Kingsway America Inc. and J.P Morgan Chase Bank
(included as Exhibit 4.7 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
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|
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4.6
|
Indenture dated December 16, 2003 between Kingsway America Inc., Kingsway Financial Services Inc., and Wilmington Trust Company
(included as Exhibit 4.8 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference).
|
|
|
4.7
|
Excerpt of the Articles of Amendment to the Articles of Incorporation of the Company
(included as Exhibit 4.1 to the Form 8-K, filed December 27, 2013, and incorporated herein by reference).
|
|
|
4.8
|
Amended and Restated Common Stock Series B Warrant Agreement, dated July 8, 2014
(included as Exhibit 4.1 to the Form 8-K, filed July 10, 2014, and incorporated herein by reference).
|
|
|
10.1
|
Kingsway Financial Services Inc. 2013 Equity Incentive Plan
(included as Schedule B to the Definitive Proxy Statement on Schedule 14A filed with the SEC on April 11, 2013, and incorporated herein by reference). *
|
|
|
10.2
|
Form of Subscription Agreement
(included as Exhibit 10.1 to the Form 8-K, filed December 27, 2013, and incorporated herein by reference).
|
|
|
10.3
|
Registration Rights Agreement, dated February 3, 2014, by and among the Company and the other parties signatory thereto
(included as Exhibit 10.2 to the Form 8-K, filed February 4, 2014, and incorporated herein by reference).
|
|
|
10.4
|
Kingsway America Inc. Employee Share Purchase Plan
(included as Schedule B to the Definitive Proxy Statement on Schedule 14A filed with the SEC on April 30, 2014 and incorporated herein by reference). *
|
|
|
|
125
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
126
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
127
|
|
1.
|
INTRODUCTION AND SCOPE
4
|
2.
|
WHO IS COVERED 4
|
3.
|
DIRECTOR, OFFICER AND EMPLOYEE OBLIGATIONS
5
|
4.
|
CONFLICTS OF INTEREST
5
|
5.
|
USE OF INFORMATION
6
|
6.
|
CONFIDENTIALITY OF INFORMATION
6
|
7.
|
CONFIDENTIALITY OF INTELLECTUAL PROPERTY
7
|
8.
|
CORPORATE OPPORTUNITIES
7
|
9.
|
USE OF INSIDE INFORMATION (INSIDER TRADING)
7
|
10.
|
FAIR DEALING
7
|
11.
|
ANTI-RETALIATION
8
|
12.
|
PROTECTION AND USE OF COMPANY ASSETS
8
|
13.
|
OFFERING OF GIFTS
8
|
14.
|
ACCOUNTING PRACTICES
8
|
15.
|
RECORDS RETENTION
9
|
16.
|
COMPLIANCE WITH LAWS, RULES & REGULATIONS
9
|
17.
|
COMMUNICATING WITH REGULATORS AND OTHERS
9
|
18.
|
DUTY TO REPORT AND CONSEQUENCE
10
|
19.
|
CONTACT US
10
|
1.
|
INTRODUCTION AND SCOPE
|
2.
|
WHO IS COVERED
|
3.
|
DIRECTOR, OFFICER AND EMPLOYEE OBLIGATIONS
|
4.
|
CONFLICTS OF INTEREST
|
1.
|
Employees may not use their affiliation with the Company for improper personal benefit.
|
2.
|
Employees may not be employed by or affiliated with a competitor.
|
3.
|
Directors, officers and employees have a responsibility to disclose actual, perceived or potential conflicts or any activity that appears to be in conflict with policy or procedure.
|
5.
|
USE OF INFORMATION
|
6.
|
CONFIDENTIALITY OF INFORMATION
|
7.
|
CONFIDENTIALITY OF INTELLECTUAL PROPERTY
|
8.
|
CORPORATE OPPORTUNITIES
|
9.
|
USE OF INSIDE INFORMATION (INSIDER TRADING)
|
10.
|
FAIR DEALING
|
11.
|
ANTI-RETALIATION
|
12.
|
PROTECTION AND USE OF COMPANY ASSETS
|
13.
|
OFFERING OF GIFTS
|
14.
|
ACCOUNTING PRACTICES
|
15.
|
RECORDS RETENTION
|
16.
|
COMPLIANCE WITH LAWS, RULES & REGULATIONS
|
17.
|
COMMUNICATING WITH REGULATORS AND OTHERS
|
18.
|
NO LOANS TO DIRECTORS OR OFFICERS
|
19.
|
AMENDMENT, MODIFICATION AND WAIVER
|
20.
|
DUTY TO REPORT
|
21.
|
CONTACT US
|
1.
|
Significant deficiencies in the design or operation of internal controls which could adversely affect Kingsway’s ability to record, process, summarize and report financial data or
|
2.
|
Any fraud, whether material or not, involving management or other employees who have a role in the company’s financial reporting, disclosures or internal controls.
|
Subsidiaries
|
Jurisdiction of Incorporation/Organization
|
Kingsway America II Inc.
|
Delaware
|
1347 Advisors LLC
|
Delaware
|
1347 Capital LLC
|
Delaware
|
Itasca Investors LLC
|
Delaware
|
Itasca Capital Corp.
|
Delaware
|
IWS Acquisition Corporation
|
Florida
|
Trinity Warranty Solutions LLC
|
Delaware
|
Professional Warranty Services LLC
|
Delaware
|
Professional Warranty Service Corporation
|
Virginia
|
American Country Underwriting Agency Inc.
|
Illinois
|
Advantage Auto, Inc.
|
Illinois
|
Argo Management Group, LLC
|
Delaware
|
ARM Holdings, Inc.
|
Illinois
|
Mattoni Insurance Brokerage, Inc.
|
Washington
|
Appco Finance Corporation
|
Pennsylvania
|
CMC Acquisition LLC
|
Delaware
|
CMC Industries Inc.
|
Texas
|
Texas Rail Terminal LLC
|
Delaware
|
TRT Leaseco, LLC
|
Delaware
|
Insurance Management Services Inc.
|
Florida
|
Itasca Real Estate Investors, LLC
|
Illinois
|
KAI Advantage Auto, Inc.
|
Illinois
|
KFS Capital LLC
|
Delaware
|
Kingsway America Inc.
|
Delaware
|
Kingsway LGIC Holdings, LLC
|
Delaware
|
Mendota Insurance Company
|
Minnesota
|
Congress General Agency, Inc.
|
Texas
|
Kingsway Amigo Insurance Company
|
Florida
|
Mendakota Casualty Company
|
Illinois
|
Mendakota Insurance Company
|
Minnesota
|
Mendota Insurance Agency, Inc.
|
Texas
|
MIC Insurance Agency Inc.
|
Texas
|
Kingsway America Agency Inc.
|
Illinois
|
Kingsway General Insurance Company
|
Ontario
|
Kingsway Reinsurance Corporation
|
Barbados
|