(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For Quarterly Period Ended
June 30, 2018 |
|
or
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Ontario, Canada
(State or other jurisdiction of
incorporation or organization)
|
|
Not Applicable (I.R.S. Employer
Identification No.)
|
45 St. Clair Avenue West, Suite 400 Toronto, Ontario M4V 1K9
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(Address of principal executive offices and zip code)
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1-416-848-1171
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(Registrant's telephone number, including area code)
|
Large accelerated filer
o
|
Accelerated filer
x
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller Reporting Company
o
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Emerging Growth Company
o
|
|
|
|
|
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KINGSWAY FINANCIAL SERVICES INC.
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Table Of Contents
|
||
PART I - FINANCIAL INFORMATION
|
|
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ITEM 1. FINANCIAL STATEMENTS
|
|
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Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017
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|
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
|
|
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Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
|
|
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)
|
|
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Notes to Consolidated Financial Statements (unaudited)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4. CONTROLS AND PROCEDURES
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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ITEM 1A. RISK FACTORS
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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ITEM 4. MINE SAFETY DISCLOSURES
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ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
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SIGNATURES
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2
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|
KINGSWAY FINANCIAL SERVICES INC.
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|
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June 30, 2018
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|
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December 31, 2017
|
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||
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(unaudited)
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|||
Assets
|
|
|
|
|
||||
Investments:
|
|
|
|
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||||
Fixed maturities, at fair value (amortized cost of $11,605 and $14,707, respectively)
|
|
$
|
11,361
|
|
|
$
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14,541
|
|
Equity investments, at fair value (cost of $2,325 and $4,854, respectively)
|
|
2,189
|
|
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4,476
|
|
||
Limited liability investments
|
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5,217
|
|
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4,922
|
|
||
Limited liability investment, at fair value
|
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4,869
|
|
|
5,771
|
|
||
Other investments, at cost which approximates fair value
|
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1,916
|
|
|
2,321
|
|
||
Short-term investments, at cost which approximates fair value
|
|
151
|
|
|
151
|
|
||
Total investments
|
|
25,703
|
|
|
32,182
|
|
||
Cash and cash equivalents
|
|
24,713
|
|
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20,781
|
|
||
Investment in investee
|
|
4,947
|
|
|
5,230
|
|
||
Accrued investment income
|
|
161
|
|
|
331
|
|
||
Service fee receivable, net of allowance for doubtful accounts of $315 and $318, respectively
|
|
5,173
|
|
|
4,286
|
|
||
Other receivables, net of allowance for doubtful accounts of zero and zero, respectively
|
|
7,907
|
|
|
6,536
|
|
||
Deferred acquisition costs, net
|
|
6,662
|
|
|
6,325
|
|
||
Property and equipment, net of accumulated depreciation of $13,794 and $11,633, respectively
|
|
105,246
|
|
|
107,327
|
|
||
Goodwill
|
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80,112
|
|
|
80,112
|
|
||
Intangible assets, net of accumulated amortization of $8,876 and $8,333, respectively
|
|
79,519
|
|
|
80,062
|
|
||
Other assets
|
|
3,592
|
|
|
4,302
|
|
||
Assets held for sale
|
|
138,804
|
|
|
137,126
|
|
||
Total Assets
|
|
$
|
482,539
|
|
|
$
|
484,600
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
||||
Unpaid loss and loss adjustment expenses:
|
|
|
|
|
||||
Property and casualty
|
|
$
|
2,594
|
|
|
$
|
1,329
|
|
Vehicle service agreements
|
|
2,615
|
|
|
2,779
|
|
||
Total unpaid loss and loss adjustment expenses
|
|
5,209
|
|
|
4,108
|
|
||
Note payable
|
|
184,567
|
|
|
186,469
|
|
||
Bank loan
|
|
4,417
|
|
|
4,917
|
|
||
Subordinated debt, at fair value
|
|
52,822
|
|
|
52,105
|
|
||
Net deferred income tax liabilities
|
|
28,796
|
|
|
28,745
|
|
||
Deferred service fees
|
|
41,221
|
|
|
39,741
|
|
||
Income taxes payable
|
|
2,801
|
|
|
2,644
|
|
||
Accrued expenses and other liabilities
|
|
10,946
|
|
|
10,612
|
|
||
Liabilities held for sale
|
|
112,866
|
|
|
105,949
|
|
||
Total Liabilities
|
|
443,645
|
|
|
435,290
|
|
||
|
|
|
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|
||||
Class A preferred stock, no par value; unlimited number authorized; 222,876 and 222,876 issued and outstanding at June 30, 2018 and December 31, 2017, respectively; redemption amount of $5,572
|
|
5,477
|
|
|
5,461
|
|
||
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|
|
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|
||||
Shareholders' Equity:
|
|
|
|
|
||||
Common stock, no par value; unlimited number authorized; 21,708,190 and 21,708,190 issued and outstanding at June 30, 2018 and December 31, 2017, respectively
|
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—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
356,609
|
|
|
356,021
|
|
||
Accumulated deficit
|
|
(364,917
|
)
|
|
(313,487
|
)
|
||
Accumulated other comprehensive income (loss)
|
|
36,322
|
|
|
(3,852
|
)
|
||
Shareholders' equity attributable to common shareholders
|
|
28,014
|
|
|
38,682
|
|
||
Noncontrolling interests in consolidated subsidiaries
|
|
5,403
|
|
|
5,167
|
|
||
Total Shareholders' Equity
|
|
33,417
|
|
|
43,849
|
|
||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
482,539
|
|
|
$
|
484,600
|
|
|
3
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KINGSWAY FINANCIAL SERVICES INC.
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Three months ended June 30,
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Six months ended June 30,
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||||||||||
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2018
|
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2017
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2018
|
|
|
2017
|
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Service fee and commission income
|
|
$
|
9,479
|
|
|
$
|
6,584
|
|
|
$
|
19,670
|
|
|
$
|
12,946
|
|
Rental income
|
|
3,341
|
|
|
3,341
|
|
|
6,682
|
|
|
6,682
|
|
||||
Net investment income (loss)
|
|
18
|
|
|
(1,347
|
)
|
|
(613
|
)
|
|
(1,163
|
)
|
||||
Net realized (losses) gains
|
|
(1
|
)
|
|
(1
|
)
|
|
9
|
|
|
(1
|
)
|
||||
(Loss) gain on change in fair value of equity investments
|
|
(248
|
)
|
|
—
|
|
|
614
|
|
|
—
|
|
||||
Other income
|
|
1,081
|
|
|
242
|
|
|
1,308
|
|
|
569
|
|
||||
Total revenues
|
|
13,670
|
|
|
8,819
|
|
|
27,670
|
|
|
19,033
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expenses
|
|
2,625
|
|
|
1,338
|
|
|
4,247
|
|
|
2,557
|
|
||||
Commissions
|
|
932
|
|
|
811
|
|
|
1,817
|
|
|
1,579
|
|
||||
Cost of services sold
|
|
1,464
|
|
|
1,291
|
|
|
3,716
|
|
|
2,595
|
|
||||
General and administrative expenses
|
|
7,305
|
|
|
6,508
|
|
|
14,702
|
|
|
12,245
|
|
||||
Leased real estate segment interest expense
|
|
1,546
|
|
|
1,569
|
|
|
3,098
|
|
|
3,143
|
|
||||
Total operating expenses
|
|
13,872
|
|
|
11,517
|
|
|
27,580
|
|
|
22,119
|
|
||||
Operating (loss) income
|
|
(202
|
)
|
|
(2,698
|
)
|
|
90
|
|
|
(3,086
|
)
|
||||
Other expenses (revenues), net:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense not allocated to segments
|
|
1,519
|
|
|
1,216
|
|
|
2,905
|
|
|
2,375
|
|
||||
Amortization of intangible assets
|
|
271
|
|
|
289
|
|
|
543
|
|
|
580
|
|
||||
Contingent consideration benefit
|
|
—
|
|
|
(212
|
)
|
|
—
|
|
|
(212
|
)
|
||||
Loss on change in fair value of debt
|
|
142
|
|
|
2,702
|
|
|
1,061
|
|
|
4,591
|
|
||||
Equity in net loss (income) of investee
|
|
385
|
|
|
145
|
|
|
284
|
|
|
(2,240
|
)
|
||||
Total other expenses, net
|
|
2,317
|
|
|
4,140
|
|
|
4,793
|
|
|
5,094
|
|
||||
Loss from continuing operations before income tax expense
|
|
(2,519
|
)
|
|
(6,838
|
)
|
|
(4,703
|
)
|
|
(8,180
|
)
|
||||
Income tax expense
|
|
187
|
|
|
1,251
|
|
|
438
|
|
|
1,516
|
|
||||
Loss from continuing operations
|
|
(2,706
|
)
|
|
(8,089
|
)
|
|
(5,141
|
)
|
|
(9,696
|
)
|
||||
Income (loss) from discontinued operations, net of taxes
|
|
911
|
|
|
(570
|
)
|
|
1,318
|
|
|
(447
|
)
|
||||
(Loss) gain on disposal of discontinued operations, net of taxes
|
|
(6,611
|
)
|
|
1,017
|
|
|
(6,611
|
)
|
|
1,017
|
|
||||
Net loss
|
|
(8,406
|
)
|
|
(7,642
|
)
|
|
(10,434
|
)
|
|
(9,126
|
)
|
||||
Less: net income attributable to noncontrolling interests in consolidated subsidiaries
|
|
108
|
|
|
100
|
|
|
243
|
|
|
205
|
|
||||
Less: dividends on preferred stock, net of tax
|
|
130
|
|
|
154
|
|
|
259
|
|
|
328
|
|
||||
Net loss attributable to common shareholders
|
|
$
|
(8,644
|
)
|
|
$
|
(7,896
|
)
|
|
$
|
(10,936
|
)
|
|
$
|
(9,659
|
)
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
$
|
(0.14
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.48
|
)
|
Diluted:
|
|
$
|
(0.14
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.48
|
)
|
(Loss) earnings per share - discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
$
|
(0.26
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.03
|
|
Diluted:
|
|
$
|
(0.26
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.03
|
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
$
|
(0.40
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.45
|
)
|
Diluted:
|
|
$
|
(0.40
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.45
|
)
|
Weighted-average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
21,708
|
|
|
21,458
|
|
|
21,708
|
|
|
21,458
|
|
||||
Diluted:
|
|
21,708
|
|
|
21,458
|
|
|
21,708
|
|
|
21,458
|
|
|
4
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
$
|
(8,406
|
)
|
|
$
|
(7,642
|
)
|
|
$
|
(10,434
|
)
|
|
$
|
(9,126
|
)
|
Other comprehensive loss, net of taxes
(1)
:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized (losses) gains on available-for-sale investments:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized losses arising during the period
|
|
(72
|
)
|
|
(1,064
|
)
|
|
(437
|
)
|
|
(1,227
|
)
|
||||
Reclassification adjustment for amounts included in net loss
|
|
(4
|
)
|
|
478
|
|
|
(11
|
)
|
|
(29
|
)
|
||||
Change in fair value of debt attributable to instrument-specific credit risk
|
|
778
|
|
|
—
|
|
|
344
|
|
|
—
|
|
||||
Equity in other comprehensive loss of limited liability investment
|
|
(224
|
)
|
|
—
|
|
|
(224
|
)
|
|
—
|
|
||||
Other comprehensive income (loss)
|
|
478
|
|
|
(586
|
)
|
|
(328
|
)
|
|
(1,256
|
)
|
||||
Comprehensive loss
|
|
(7,928
|
)
|
|
(8,228
|
)
|
|
(10,762
|
)
|
|
(10,382
|
)
|
||||
Less: comprehensive income attributable to noncontrolling interests in consolidated subsidiaries
|
|
108
|
|
|
102
|
|
|
237
|
|
|
208
|
|
||||
Comprehensive loss attributable to common shareholders
|
|
$
|
(8,036
|
)
|
|
$
|
(8,330
|
)
|
|
$
|
(10,999
|
)
|
|
$
|
(10,590
|
)
|
(1) Net of income tax expense of $0 and $0 for the three and six months ended June 30, 2018 and June 30, 2017, respectively.
|
|
5
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Six months ended June 30,
|
|
|||||
|
|
2018
|
|
|
2017
|
|
||
Cash provided by (used in):
|
|
|
|
|
||||
Operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(10,434
|
)
|
|
$
|
(9,126
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
||||
(Income) loss from discontinued operations, net of taxes
|
|
(1,318
|
)
|
|
447
|
|
||
Loss (gain) on disposal of discontinued operations, net of taxes
|
|
6,611
|
|
|
(1,017
|
)
|
||
Equity in net loss (income) of investee
|
|
284
|
|
|
(2,240
|
)
|
||
Equity in net income of limited liability investments
|
|
(164
|
)
|
|
166
|
|
||
Loss on change in fair value of limited liability investment
|
|
1,152
|
|
|
1,473
|
|
||
Depreciation and amortization expense
|
|
2,704
|
|
|
3,187
|
|
||
Contingent consideration benefit
|
|
—
|
|
|
(212
|
)
|
||
Stock-based compensation expense, net of forfeitures
|
|
588
|
|
|
588
|
|
||
Net realized (gains) losses
|
|
(9
|
)
|
|
1
|
|
||
Gain on change in fair value of equity investments
|
|
(614
|
)
|
|
—
|
|
||
Loss on change in fair value of debt
|
|
1,061
|
|
|
4,591
|
|
||
Deferred income taxes
|
|
51
|
|
|
1,090
|
|
||
Amortization of fixed maturities premiums and discounts
|
|
32
|
|
|
47
|
|
||
Amortization of note payable premium
|
|
(473
|
)
|
|
(483
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Service fee receivable, net
|
|
(887
|
)
|
|
(88
|
)
|
||
Other receivables, net
|
|
(1,371
|
)
|
|
(1,647
|
)
|
||
Deferred acquisition costs, net
|
|
(337
|
)
|
|
(227
|
)
|
||
Unpaid loss and loss adjustment expenses
|
|
1,101
|
|
|
(523
|
)
|
||
Deferred service fees
|
|
1,480
|
|
|
2,061
|
|
||
Other, net
|
|
(1,193
|
)
|
|
(817
|
)
|
||
Cash used in operating activities - continuing operations
|
|
(1,736
|
)
|
|
(2,729
|
)
|
||
Cash used in operating activities - discontinued operations
|
|
(4,651
|
)
|
|
(5,118
|
)
|
||
Net cash used in operating activities
|
|
(6,387
|
)
|
|
(7,847
|
)
|
||
Investing activities:
|
|
|
|
|
||||
Proceeds from sales and maturities of fixed maturities
|
|
4,965
|
|
|
145
|
|
||
Proceeds from sales of equity investments
|
|
3,704
|
|
|
—
|
|
||
Purchases of fixed maturities
|
|
(1,885
|
)
|
|
(192
|
)
|
||
Purchases of equity investments
|
|
(806
|
)
|
|
(506
|
)
|
||
Net acquisitions of limited liability investments
|
|
(606
|
)
|
|
(1,000
|
)
|
||
Net proceeds from other investments
|
|
405
|
|
|
373
|
|
||
Net proceeds from short-term investments
|
|
—
|
|
|
250
|
|
||
Net proceeds from sale of discontinued operations
|
|
1,900
|
|
|
1,017
|
|
||
Net purchases of property and equipment
|
|
(80
|
)
|
|
(450
|
)
|
||
Cash provided by (used in) investing activities - continuing operations
|
|
7,597
|
|
|
(363
|
)
|
||
Cash (used in) provided by investing activities - discontinued operations
|
|
(337
|
)
|
|
6,772
|
|
||
Net cash provided by investing activities
|
|
7,260
|
|
|
6,409
|
|
||
Financing activities:
|
|
|
|
|
||||
Principal payments on bank loan
|
|
(500
|
)
|
|
—
|
|
||
Principal payments on note payable
|
|
(1,429
|
)
|
|
(1,264
|
)
|
||
Cash used in financing activities - continuing operations
|
|
(1,929
|
)
|
|
(1,264
|
)
|
||
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
||
Net cash used in financing activities
|
|
(1,929
|
)
|
|
(1,264
|
)
|
||
Net increase (decrease) in cash and cash equivalents from continuing operations
|
|
3,932
|
|
|
(4,356
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
44,286
|
|
|
36,475
|
|
||
Less: cash and cash equivalents of discontinued operations at begininng of period
|
|
23,505
|
|
|
4,513
|
|
||
Cash and cash equivalents of continuing operations at beginning of period
|
|
20,781
|
|
|
31,962
|
|
||
Cash and cash equivalents of continuing operations at end of period
|
|
$
|
24,713
|
|
|
$
|
27,606
|
|
|
6
|
|
|
7
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
8
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
9
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
10
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Income (loss) from discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
22,956
|
|
|
$
|
33,518
|
|
|
$
|
51,592
|
|
|
$
|
66,440
|
|
Rental income
|
|
4
|
|
|
6
|
|
|
10
|
|
|
12
|
|
||||
Net investment income (loss)
|
|
570
|
|
|
(1,008
|
)
|
|
519
|
|
|
(478
|
)
|
||||
Net realized (losses) gains
|
|
(1
|
)
|
|
735
|
|
|
2
|
|
|
1,133
|
|
||||
(Loss) gain on change in fair value of equity investments
|
|
(77
|
)
|
|
—
|
|
|
237
|
|
|
—
|
|
||||
Other income
|
|
2,445
|
|
|
2,556
|
|
|
4,876
|
|
|
5,027
|
|
||||
Total revenues
|
|
25,897
|
|
|
35,807
|
|
|
57,236
|
|
|
72,134
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expenses
|
|
18,927
|
|
|
26,130
|
|
|
41,728
|
|
|
51,321
|
|
||||
Commissions
|
|
2,251
|
|
|
5,375
|
|
|
6,442
|
|
|
10,688
|
|
||||
General and administrative expenses
|
|
3,808
|
|
|
4,872
|
|
|
7,748
|
|
|
10,407
|
|
||||
Impairment of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
||||
Total expenses
|
|
24,986
|
|
|
36,377
|
|
|
55,918
|
|
|
72,666
|
|
||||
Income (loss) from discontinued operations before income tax benefit
|
|
911
|
|
|
(570
|
)
|
|
1,318
|
|
|
(532
|
)
|
||||
Income tax benefit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
||||
Income (loss) from discontinued operations, net of taxes
|
|
911
|
|
|
(570
|
)
|
|
1,318
|
|
|
(447
|
)
|
||||
(Loss) gain on disposal of discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
||||||||
(Loss) gain on disposal of discontinued operations before income tax expense
|
|
(6,611
|
)
|
|
1,017
|
|
|
(6,611
|
)
|
|
1,017
|
|
||||
Income tax expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
(Loss) gain on disposal of discontinued operations, net of taxes
|
|
(6,611
|
)
|
|
1,017
|
|
|
(6,611
|
)
|
|
1,017
|
|
||||
Total (loss) income from discontinued operations, net of taxes
|
|
$
|
(5,700
|
)
|
|
$
|
447
|
|
|
$
|
(5,293
|
)
|
|
$
|
570
|
|
|
11
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Assets
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturities, at fair value
|
|
$
|
42,714
|
|
|
$
|
38,673
|
|
Equity investments, at fair value
|
|
3,681
|
|
4,518
|
||||
Limited liability investments
|
|
18,427
|
|
20,251
|
||||
Limited liability investment, at fair value
|
|
3,629
|
|
4,543
|
||||
Other investments, at cost which approximates fair value
|
|
1,400
|
|
1,400
|
||||
Total investments
|
|
69,851
|
|
69,385
|
||||
Cash and cash equivalents
|
|
18,517
|
|
23,505
|
||||
Accrued investment income
|
|
239
|
|
|
195
|
|
||
Premiums receivable, net
|
|
27,673
|
|
|
27,855
|
|
||
Other receivables
|
|
174
|
|
|
603
|
|
||
Reinsurance recoverable
|
|
6,509
|
|
|
108
|
|
||
Prepaid reinsurance premiums
|
|
13,493
|
|
|
—
|
|
||
Deferred acquisition costs, net
|
|
2,048
|
|
|
6,720
|
|
||
Property and equipment, net
|
|
162
|
|
|
903
|
|
||
Intangible assets, net
|
|
—
|
|
|
7,553
|
|
||
Other assets
|
|
138
|
|
|
299
|
|
||
Assets held for sale
|
|
$
|
138,804
|
|
|
$
|
137,126
|
|
Liabilities
|
|
|
|
|
||||
Unpaid loss and loss adjustment expenses
|
|
$
|
58,817
|
|
|
$
|
62,323
|
|
Unearned premiums
|
|
34,969
|
|
|
36,686
|
|
||
Reinsurance payable
|
|
14,869
|
|
|
82
|
|
||
Deferred income tax liability
|
|
—
|
|
|
1,586
|
|
||
Accrued expenses and other liabilities
|
|
4,211
|
|
|
5,272
|
|
||
Liabilities held for sale
|
|
$
|
112,866
|
|
|
$
|
105,949
|
|
(in thousands)
|
|
June 30, 2018
|
|
|||||||||||||
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Estimated Fair Value
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government, government agencies and authorities
|
|
$
|
5,503
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
$
|
5,427
|
|
States, municipalities and political subdivisions
|
|
624
|
|
|
—
|
|
|
19
|
|
|
605
|
|
||||
Mortgage-backed
|
|
2,902
|
|
|
—
|
|
|
91
|
|
|
2,811
|
|
||||
Corporate
|
|
2,576
|
|
|
—
|
|
|
58
|
|
|
2,518
|
|
||||
Total fixed maturities
|
|
$
|
11,605
|
|
|
$
|
—
|
|
|
$
|
244
|
|
|
$
|
11,361
|
|
|
12
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(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
|
|
$
|
5,671
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
5,612
|
|
States, municipalities and political subdivisions
|
|
639
|
|
|
—
|
|
|
13
|
|
|
626
|
|
||||
Mortgage-backed
|
|
2,933
|
|
|
—
|
|
|
57
|
|
|
2,876
|
|
||||
Corporate
|
|
5,464
|
|
|
—
|
|
|
37
|
|
|
5,427
|
|
||||
Total fixed maturities
|
|
14,707
|
|
|
—
|
|
|
166
|
|
|
14,541
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
3,883
|
|
|
—
|
|
|
313
|
|
|
3,570
|
|
||||
Warrants - publicly traded
|
|
11
|
|
|
47
|
|
|
—
|
|
|
58
|
|
||||
Warrants - not publicly traded
|
|
960
|
|
|
173
|
|
|
285
|
|
|
848
|
|
||||
Total equity investments
|
|
4,854
|
|
|
220
|
|
|
598
|
|
|
4,476
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
19,561
|
|
|
$
|
220
|
|
|
$
|
764
|
|
|
$
|
19,017
|
|
(in thousands)
|
|
June 30, 2018
|
|
|||||
|
|
Amortized Cost
|
|
|
Estimated Fair Value
|
|
||
Due in one year or less
|
|
$
|
4,924
|
|
|
$
|
4,899
|
|
Due after one year through five years
|
|
5,378
|
|
|
5,219
|
|
||
Due after five years through ten years
|
|
132
|
|
|
125
|
|
||
Due after ten years
|
|
1,171
|
|
|
1,118
|
|
||
Total
|
|
$
|
11,605
|
|
|
$
|
11,361
|
|
|
13
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|||||||||||||
|
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
|
$
|
3,502
|
|
|
$
|
34
|
|
|
$
|
1,925
|
|
|
$
|
42
|
|
|
$
|
5,427
|
|
|
$
|
76
|
|
States, municipalities and political subdivisions
|
86
|
|
|
2
|
|
|
519
|
|
|
17
|
|
|
605
|
|
|
19
|
|
||||||
Mortgage-backed
|
690
|
|
|
13
|
|
|
2,121
|
|
|
78
|
|
|
2,811
|
|
|
91
|
|
||||||
Corporate
|
410
|
|
|
5
|
|
|
2,108
|
|
|
53
|
|
|
2,518
|
|
|
58
|
|
||||||
Total fixed maturities
|
$
|
4,688
|
|
|
$
|
54
|
|
|
$
|
6,673
|
|
|
$
|
190
|
|
|
$
|
11,361
|
|
|
$
|
244
|
|
(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
|
$
|
4,067
|
|
|
$
|
50
|
|
|
$
|
1,545
|
|
|
$
|
9
|
|
|
$
|
5,612
|
|
|
$
|
59
|
|
States, municipalities and political subdivisions
|
626
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
626
|
|
|
13
|
|
||||||
Mortgage-backed
|
2,876
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
2,876
|
|
|
57
|
|
||||||
Corporate
|
2,427
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
2,427
|
|
|
37
|
|
||||||
Total fixed maturities
|
9,996
|
|
|
157
|
|
|
1,545
|
|
|
9
|
|
|
11,541
|
|
|
166
|
|
||||||
Equity investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
3,570
|
|
|
313
|
|
|
—
|
|
|
—
|
|
|
3,570
|
|
|
313
|
|
||||||
Warrants
|
675
|
|
|
285
|
|
|
—
|
|
|
—
|
|
|
675
|
|
|
285
|
|
||||||
Total equity investments
|
4,245
|
|
|
598
|
|
|
—
|
|
|
—
|
|
|
4,245
|
|
|
598
|
|
||||||
Total
|
$
|
14,241
|
|
|
$
|
755
|
|
|
$
|
1,545
|
|
|
$
|
9
|
|
|
$
|
15,786
|
|
|
$
|
764
|
|
•
|
identifying all unrealized loss positions that have existed for at least six months;
|
•
|
identifying other circumstances management believes may affect 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;
|
|
14
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
•
|
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.
|
|
15
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Investment income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Interest from fixed maturities
|
|
$
|
57
|
|
|
$
|
49
|
|
|
$
|
90
|
|
|
$
|
83
|
|
Dividends
|
|
53
|
|
|
102
|
|
|
108
|
|
|
196
|
|
||||
Income (loss) from limited liability investments
|
|
120
|
|
|
(100
|
)
|
|
164
|
|
|
(166
|
)
|
||||
Loss on change in fair value of limited liability investment, at fair value
|
|
(280
|
)
|
|
(1,292
|
)
|
|
(1,152
|
)
|
|
(1,520
|
)
|
||||
(Loss) gain on change in fair value of warrants - not publicly traded
|
|
—
|
|
|
(198
|
)
|
|
—
|
|
|
47
|
|
||||
Other
|
|
77
|
|
|
100
|
|
|
194
|
|
|
212
|
|
||||
Gross investment income (loss)
|
|
27
|
|
|
(1,339
|
)
|
|
(596
|
)
|
|
(1,148
|
)
|
||||
Investment expenses
|
|
(9
|
)
|
|
(8
|
)
|
|
(17
|
)
|
|
(15
|
)
|
||||
Net investment income (loss)
|
|
$
|
18
|
|
|
$
|
(1,347
|
)
|
|
$
|
(613
|
)
|
|
$
|
(1,163
|
)
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Gross realized gains
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
Gross realized losses
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Net realized (losses) gains
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
9
|
|
|
$
|
(1
|
)
|
|
16
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Net (losses) gains recognized on equity investments sold during the period
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
$
|
545
|
|
|
$
|
—
|
|
Change in unrealized (losses) gains on equity investments held at end of the period
|
|
(238
|
)
|
|
—
|
|
|
69
|
|
|
—
|
|
||||
(Loss) gain on change in fair value of equity investments
|
|
$
|
(248
|
)
|
|
$
|
—
|
|
|
$
|
614
|
|
|
$
|
—
|
|
(in thousands, except for percentages)
|
|
|
|
|
||||||||||||||||||
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||
|
|
Equity Percentage
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Equity Percentage
|
|
Estimated Fair Value
|
|
Carrying Value
|
||||||||||
ICL
|
|
31.2
|
%
|
|
$
|
3,531
|
|
|
$
|
4,947
|
|
|
31.2
|
%
|
|
$
|
3,816
|
|
|
$
|
5,230
|
|
|
17
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
June 30, 2018
|
|
||||||||
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
Intangible assets subject to amortization:
|
|
|
|
|
|
|
||||||
Database
|
|
$
|
4,918
|
|
|
$
|
2,767
|
|
|
$
|
2,151
|
|
Vehicle service agreements in-force
|
|
3,680
|
|
|
3,656
|
|
|
24
|
|
|||
Customer relationships
|
|
3,611
|
|
|
2,183
|
|
|
1,428
|
|
|||
In-place lease
|
|
1,125
|
|
|
123
|
|
|
1,002
|
|
|||
Contract-based revenues
|
|
731
|
|
|
147
|
|
|
584
|
|
|||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
||||||
Tenant relationship
|
|
73,667
|
|
|
—
|
|
|
73,667
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
88,395
|
|
|
$
|
8,876
|
|
|
$
|
79,519
|
|
(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
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
88,395
|
|
|
$
|
8,333
|
|
|
$
|
80,062
|
|
|
18
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
||
Balance at beginning of period, gross
|
|
$
|
1,329
|
|
|
$
|
2,201
|
|
Less reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
72
|
|
|
354
|
|
||
Balance at beginning of period, net
|
|
1,257
|
|
|
1,847
|
|
||
Incurred related to:
|
|
|
|
|
|
|||
Current year
|
|
—
|
|
|
—
|
|
||
Prior years
|
|
1,647
|
|
|
(1
|
)
|
||
Paid related to:
|
|
|
|
|
|
|||
Current year
|
|
—
|
|
|
—
|
|
||
Prior years
|
|
(410
|
)
|
|
(379
|
)
|
||
Balance at end of period, net
|
|
2,494
|
|
|
1,467
|
|
||
Plus reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses
|
|
100
|
|
|
332
|
|
||
Balance at end of period, gross
|
|
$
|
2,594
|
|
|
$
|
1,799
|
|
|
19
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
||
Balance at beginning of period
|
|
$
|
2,779
|
|
|
$
|
2,915
|
|
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
2,600
|
|
|
2,558
|
|
||
Prior years
|
|
—
|
|
|
—
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
(2,502
|
)
|
|
(2,616
|
)
|
||
Prior years
|
|
(262
|
)
|
|
(63
|
)
|
||
Balance at end of period
|
|
$
|
2,615
|
|
|
$
|
2,794
|
|
(in thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
||||||
Note payable
|
|
$
|
174,707
|
|
|
$
|
184,567
|
|
|
$
|
163,059
|
|
|
$
|
176,136
|
|
|
$
|
186,469
|
|
|
$
|
168,477
|
|
Bank loan
|
|
4,417
|
|
|
4,417
|
|
|
4,163
|
|
|
4,917
|
|
|
4,917
|
|
|
4,864
|
|
||||||
Subordinated debt
|
|
90,500
|
|
|
52,822
|
|
|
52,822
|
|
|
90,500
|
|
|
52,105
|
|
|
52,105
|
|
||||||
Total
|
|
$
|
269,624
|
|
|
$
|
241,806
|
|
|
$
|
220,044
|
|
|
$
|
271,553
|
|
|
$
|
243,491
|
|
|
$
|
225,446
|
|
|
20
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
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
|
|
12/16/2003
|
annual interest rate equal to LIBOR, plus 4.00% payable quarterly
|
1/8/2034
|
(in thousands)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Vehicle service agreement fees - IWS
|
|
$
|
4,474
|
|
|
$
|
4,333
|
|
|
$
|
9,024
|
|
|
$
|
8,611
|
|
Maintenance support service fees - Trinity
|
|
1,962
|
|
|
1,818
|
|
|
4,935
|
|
|
3,572
|
|
||||
Warranty product commissions - Trinity
|
|
736
|
|
|
433
|
|
|
1,232
|
|
|
763
|
|
||||
Homebuilder warranty service fees and commissions - PWSC
|
|
2,307
|
|
|
—
|
|
|
4,479
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Service fee and commission income
|
|
$
|
9,479
|
|
|
$
|
6,584
|
|
|
$
|
19,670
|
|
|
$
|
12,946
|
|
|
21
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
22
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands, except per share data)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
2017
|
||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations
|
|
$
|
(2,706
|
)
|
|
$
|
(8,089
|
)
|
|
$
|
(5,141
|
)
|
|
$
|
(9,696
|
)
|
Less: net income attributable to noncontrolling interests
|
|
(108
|
)
|
|
(100
|
)
|
|
(243
|
)
|
|
(205
|
)
|
||||
Less: dividends on preferred stock, net of tax
|
|
(130
|
)
|
|
(154
|
)
|
|
(259
|
)
|
|
(328
|
)
|
||||
Loss from continuing operations attributable to common shareholders
|
|
$
|
(2,944
|
)
|
|
$
|
(8,343
|
)
|
|
$
|
(5,643
|
)
|
|
$
|
(10,229
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average basic shares
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
21,708
|
|
|
21,458
|
|
|
21,708
|
|
|
21,458
|
|
||||
Weighted average diluted shares
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
21,708
|
|
|
21,458
|
|
|
21,708
|
|
|
21,458
|
|
||||
Effect of potentially dilutive securities
|
|
—
|
|
|
—
|
|
|
|
|
|
||||||
Total weighted average diluted shares
|
|
21,708
|
|
|
21,458
|
|
|
21,708
|
|
|
21,458
|
|
||||
Basic loss from continuing operations per share
|
|
$
|
(0.14
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.48
|
)
|
Diluted loss from continuing operations per share
|
|
$
|
(0.14
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.48
|
)
|
|
23
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
|
|
|
|
|
|
|
|||||||
|
|
Number of Options Outstanding
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (in Years)
|
|
Aggregate Intrinsic Value (in Thousands)
|
||||||
Outstanding at December 31, 2017
|
|
651,875
|
|
|
$
|
4.51
|
|
|
0.4
|
|
|
$
|
352
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
||||
Expired
|
|
—
|
|
|
—
|
|
|
|
|
|
||||
Outstanding at June 30, 2018
|
|
651,875
|
|
|
$
|
4.51
|
|
|
0.1
|
|
|
$
|
—
|
|
Exercisable at June 30, 2018
|
|
651,875
|
|
|
$
|
4.51
|
|
|
0.1
|
|
|
$
|
—
|
|
|
|
|
|
|
|||
|
|
Number of Restricted Stock Awards
|
|
Weighted-Average Grant Date Fair Value (per Share)
|
|||
Unvested at December 31, 2017
|
|
1,952,665
|
|
|
$
|
4.14
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Unvested at June 30, 2018
|
|
1,952,665
|
|
|
$
|
4.14
|
|
|
24
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
|
|
|
|
|||
|
|
Number of Restricted Stock Units
|
|
Weighted-Average Grant Date Fair Value (per Share)
|
|||
Unvested at December 31, 2017
|
|
500,000
|
|
|
$
|
5.73
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Unvested at June 30, 2018
|
|
500,000
|
|
|
$
|
5.73
|
|
|
25
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
Three months ended June 30, 2018
|
|
|||||||||||||||
|
|
Unrealized Gains (Losses) on Available-for-Sale Investments
|
|
Foreign Currency Translation Adjustments
|
|
Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk
|
|
Equity in Other Comprehensive Loss of Limited Liability Investment
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at April 1, 2018
|
|
$
|
(891
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,021
|
|
|
$
|
—
|
|
|
$
|
35,844
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) arising during the period
|
|
(72
|
)
|
|
—
|
|
|
778
|
|
|
(224
|
)
|
|
482
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
|
(76
|
)
|
|
—
|
|
|
778
|
|
|
(224
|
)
|
|
478
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at June 30, 2018
|
|
$
|
(967
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,799
|
|
|
$
|
(224
|
)
|
|
$
|
36,322
|
|
(in thousands)
|
|
|
|
Three months ended June 30, 2017
|
|
|||||||
|
|
Unrealized Gains (Losses) on Available-for-Sale Investments
|
|
Foreign Currency Translation Adjustments
|
|
Total Accumulated Other Comprehensive Loss
|
||||||
|
|
|
|
|
|
|
||||||
Balance at April 1, 2017
|
|
$
|
2,901
|
|
|
$
|
(3,780
|
)
|
|
$
|
(879
|
)
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss arising during the period
|
|
(1,066
|
)
|
|
—
|
|
|
(1,066
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
478
|
|
|
—
|
|
|
478
|
|
|||
Net current-period other comprehensive loss
|
|
(588
|
)
|
|
—
|
|
|
(588
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance at June 30, 2017
|
|
$
|
2,313
|
|
|
$
|
(3,780
|
)
|
|
$
|
(1,467
|
)
|
|
26
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
Six months ended June 30, 2018
|
|
|||||||||||||||
|
|
Unrealized Gains (Losses) on Available-for-Sale Investments
|
|
Foreign Currency Translation Adjustments
|
|
Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk
|
|
Equity in Other Comprehensive Loss of Limited Liability Investment
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at January 1, 2018
|
|
$
|
(566
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,852
|
)
|
Cumulative effect of adoption of ASU 2016-01
|
|
40
|
|
|
—
|
|
|
40,455
|
|
|
—
|
|
|
40,495
|
|
|||||
Balance at January 1, 2018, as adjusted
|
|
(526
|
)
|
|
(3,286
|
)
|
|
40,455
|
|
|
—
|
|
|
36,643
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) arising during the period
|
|
(430
|
)
|
|
—
|
|
|
344
|
|
|
(224
|
)
|
|
(310
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|||||
Net current-period other comprehensive income (loss)
|
|
(441
|
)
|
|
—
|
|
|
344
|
|
|
(224
|
)
|
|
(321
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at June 30, 2018
|
|
$
|
(967
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,799
|
|
|
$
|
(224
|
)
|
|
$
|
36,322
|
|
(in thousands)
|
|
|
|
Six months ended June 30, 2017
|
|
|||||||
|
|
Unrealized Gains (Losses) on Available-for-Sale Investments
|
|
Foreign Currency Translation Adjustments
|
|
Total Accumulated Other Comprehensive Loss
|
||||||
|
|
|
|
|
|
|
||||||
Balance at January 1, 2017
|
|
$
|
3,572
|
|
|
$
|
(3,780
|
)
|
|
$
|
(208
|
)
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss arising during the period
|
|
(1,230
|
)
|
|
—
|
|
|
(1,230
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
|||
Net current-period other comprehensive loss
|
|
(1,259
|
)
|
|
—
|
|
|
(1,259
|
)
|
|||
|
|
|
|
|
|
|
||||||
Balance at June 30, 2017
|
|
$
|
2,313
|
|
|
$
|
(3,780
|
)
|
|
$
|
(1,467
|
)
|
|
27
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Reclassification of accumulated other comprehensive income (loss) from unrealized gains (losses) on available-for-sale investments to:
|
|
|
|
|
|
|
|
|
||||||||
Net realized gains
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
8
|
|
|
$
|
2
|
|
Other-than-temporary impairment loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Loss from continuing operations before income tax expense
|
|
5
|
|
|
2
|
|
|
8
|
|
|
2
|
|
||||
Income tax expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Loss from continuing operations
|
|
5
|
|
|
2
|
|
|
8
|
|
|
2
|
|
||||
Income (loss) from discontinued operations, net of taxes
|
|
(1
|
)
|
|
(480
|
)
|
|
3
|
|
|
27
|
|
||||
Net loss
|
|
$
|
4
|
|
|
$
|
(478
|
)
|
|
$
|
11
|
|
|
$
|
29
|
|
|
28
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Extended Warranty:
|
|
|
|
|
|
|
|
|
||||||||
Service fee and commission income
|
|
9,479
|
|
|
6,584
|
|
|
19,670
|
|
|
12,946
|
|
||||
Other income
|
|
36
|
|
|
51
|
|
|
102
|
|
|
136
|
|
||||
Total Extended Warranty
|
|
9,515
|
|
|
6,635
|
|
|
19,772
|
|
|
13,082
|
|
||||
Leased Real Estate:
|
|
|
|
|
|
|
|
|
||||||||
Rental income
|
|
3,341
|
|
|
3,341
|
|
|
6,682
|
|
|
6,682
|
|
||||
Other income
|
|
72
|
|
|
160
|
|
|
219
|
|
|
372
|
|
||||
Total Leased Real Estate
|
|
3,413
|
|
|
3,501
|
|
|
6,901
|
|
|
7,054
|
|
||||
Total segment revenues
|
|
12,928
|
|
|
10,136
|
|
|
26,673
|
|
|
20,136
|
|
||||
Net investment income (loss)
|
|
18
|
|
|
(1,347
|
)
|
|
(613
|
)
|
|
(1,163
|
)
|
||||
Net realized (losses) gains
|
|
(1
|
)
|
|
(1
|
)
|
|
9
|
|
|
(1
|
)
|
||||
(Loss) gain on change in fair value of equity investments
|
|
(248
|
)
|
|
—
|
|
|
614
|
|
|
—
|
|
||||
Other income not allocated to segments
|
|
973
|
|
|
31
|
|
|
987
|
|
|
61
|
|
||||
Total revenues
|
|
$
|
13,670
|
|
|
$
|
8,819
|
|
|
$
|
27,670
|
|
|
$
|
19,033
|
|
|
29
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Segment operating income:
|
|
|
|
|
|
|
|
|
||||||||
Extended Warranty
|
|
1,659
|
|
|
685
|
|
|
3,230
|
|
|
1,271
|
|
||||
Leased Real Estate
|
|
618
|
|
|
872
|
|
|
1,492
|
|
|
1,790
|
|
||||
Total segment operating income
|
|
2,277
|
|
|
1,557
|
|
|
4,722
|
|
|
3,061
|
|
||||
Net investment income (loss)
|
|
18
|
|
|
(1,347
|
)
|
|
(613
|
)
|
|
(1,163
|
)
|
||||
Net realized (losses) gains
|
|
(1
|
)
|
|
(1
|
)
|
|
9
|
|
|
(1
|
)
|
||||
(Loss) gain on change in fair value of equity investments
|
|
(248
|
)
|
|
—
|
|
|
614
|
|
|
—
|
|
||||
Interest expense not allocated to segments
|
|
(1,519
|
)
|
|
(1,216
|
)
|
|
(2,905
|
)
|
|
(2,375
|
)
|
||||
Other income and expenses not allocated to segments, net
|
|
(2,248
|
)
|
|
(2,907
|
)
|
|
(4,642
|
)
|
|
(4,983
|
)
|
||||
Amortization of intangible assets
|
|
(271
|
)
|
|
(289
|
)
|
|
(543
|
)
|
|
(580
|
)
|
||||
Contingent consideration benefit
|
|
—
|
|
|
212
|
|
|
—
|
|
|
212
|
|
||||
Loss on change in fair value of debt
|
|
(142
|
)
|
|
(2,702
|
)
|
|
(1,061
|
)
|
|
(4,591
|
)
|
||||
Equity in net (loss) income of investee
|
|
(385
|
)
|
|
(145
|
)
|
|
(284
|
)
|
|
2,240
|
|
||||
Loss from continuing operations before income tax expense
|
|
(2,519
|
)
|
|
(6,838
|
)
|
|
(4,703
|
)
|
|
(8,180
|
)
|
||||
Income tax expense
|
|
187
|
|
|
1,251
|
|
|
438
|
|
|
1,516
|
|
||||
Loss from continuing operations
|
|
$
|
(2,706
|
)
|
|
$
|
(8,089
|
)
|
|
$
|
(5,141
|
)
|
|
$
|
(9,696
|
)
|
•
|
Level 1 – Quoted prices for identical instruments in active markets.
|
•
|
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
|
•
|
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are not observable.
|
|
30
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
•
|
U.S. government, government agencies and authorities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets and maturity.
|
•
|
States, municipalities and political subdivisions are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, new issuances and credit spreads.
|
•
|
Mortgage-backed securities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, expected prepayments, expected credit default rates, delinquencies and issue specific information including, but not limited to, collateral type, seniority and vintage.
|
•
|
Corporate securities are generally priced using the market approach using pricing vendors. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity and credit spreads.
|
|
31
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
June 30, 2018
|
|
|||||||||
|
|
|
|
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
|
|
$
|
5,427
|
|
|
$
|
—
|
|
|
$
|
5,427
|
|
|
$
|
—
|
|
States, municipalities and political subdivisions
|
|
605
|
|
|
—
|
|
|
605
|
|
|
—
|
|
||||
Mortgage-backed
|
|
2,811
|
|
|
—
|
|
|
2,811
|
|
|
—
|
|
||||
Corporate
|
|
2,518
|
|
|
—
|
|
|
2,518
|
|
|
—
|
|
||||
Total fixed maturities
|
|
11,361
|
|
|
—
|
|
|
11,361
|
|
|
—
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
1,264
|
|
|
1,264
|
|
|
—
|
|
|
—
|
|
||||
Warrants
|
|
925
|
|
|
54
|
|
|
871
|
|
|
—
|
|
||||
Total equity investments
|
|
2,189
|
|
|
1,318
|
|
|
871
|
|
|
—
|
|
||||
Limited liability investment, at fair value
|
|
4,869
|
|
|
—
|
|
|
4,869
|
|
|
—
|
|
||||
Other investments
|
|
1,916
|
|
|
—
|
|
|
1,916
|
|
|
—
|
|
||||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|
—
|
|
||||
Total assets
|
|
$
|
20,486
|
|
|
$
|
1,318
|
|
|
$
|
19,168
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Subordinated debt
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
52,822
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
32
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(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
|
|
$
|
5,612
|
|
|
$
|
—
|
|
|
$
|
5,612
|
|
|
$
|
—
|
|
States municipalities and political subdivisions
|
|
626
|
|
|
—
|
|
|
626
|
|
|
—
|
|
||||
Mortgage-backed
|
|
2,876
|
|
|
—
|
|
|
2,876
|
|
|
—
|
|
||||
Corporate
|
|
5,427
|
|
|
—
|
|
|
5,427
|
|
|
—
|
|
||||
Total fixed maturities
|
|
14,541
|
|
|
—
|
|
|
14,541
|
|
|
—
|
|
||||
Equity investments:
|
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
3,570
|
|
|
3,570
|
|
|
—
|
|
|
—
|
|
||||
Warrants
|
|
906
|
|
|
58
|
|
|
848
|
|
|
—
|
|
||||
Total equity investments
|
|
4,476
|
|
|
3,628
|
|
|
848
|
|
|
—
|
|
||||
Limited liability investment, at fair value
|
|
5,771
|
|
|
—
|
|
|
5,771
|
|
|
—
|
|
||||
Other investments
|
|
2,321
|
|
|
—
|
|
|
2,321
|
|
|
—
|
|
||||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|
—
|
|
||||
Total assets
|
|
$
|
27,260
|
|
|
$
|
3,628
|
|
|
$
|
23,632
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Subordinated debt
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
33
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
34
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
35
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
36
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
•
|
Paid Loss Development - we use historical loss and loss adjustment expense payments over discrete periods of time to estimate future loss and loss adjustment expense payments. Paid development methods assume that the patterns of paid loss and loss adjustment expenses that occurred in past periods will be similar to loss and loss adjustment expense payment patterns that will occur in future periods.
|
•
|
Incurred Loss Development - we use historical case incurred loss and loss adjustment expenses (the sum of cumulative loss and loss adjustment expense payments plus outstanding unpaid case losses) over discrete periods of time to estimate future loss and loss adjustment expenses. Incurred development methods assume that the case loss and loss adjustment expenses reserving practices are consistently applied over time.
|
•
|
Frequency and Severity - we use historical claim count development over discrete periods of time to estimate future claim counts. We divide projected ultimate claim counts by an exposure base (earned premiums or exposures), select expected claim frequencies from the results, and adjust them for trends based on internal and external information. Concurrently, we divide projected ultimate losses by the projected ultimate claim counts to select expected loss severities. We use internal and external information to trend the severities and combine them with the trended, projected frequencies to develop ultimate loss projections.
|
|
37
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
38
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
For the three months ended June 30,
|
|
For the six months ended June 30,
|
|
||||||||
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
Segment operating income:
|
|
|
|
|
|
|
||||||
Extended Warranty
|
1,659
|
|
685
|
|
974
|
|
3,230
|
|
1,271
|
|
1,959
|
|
Leased Real Estate
|
618
|
|
872
|
|
(254
|
)
|
1,492
|
|
1,790
|
|
(298
|
)
|
Total segment operating income
|
2,277
|
|
1,557
|
|
720
|
|
4,722
|
|
3,061
|
|
1,661
|
|
Net investment income (loss)
|
18
|
|
(1,347
|
)
|
1,365
|
|
(613
|
)
|
(1,163
|
)
|
550
|
|
Net realized (losses) gains
|
(1
|
)
|
(1
|
)
|
—
|
|
9
|
|
(1
|
)
|
10
|
|
(Loss) gain on change in fair value of equity investments
|
(248
|
)
|
—
|
|
(248
|
)
|
614
|
|
—
|
|
614
|
|
Interest expense not allocated to segments
|
(1,519
|
)
|
(1,216
|
)
|
(303
|
)
|
(2,905
|
)
|
(2,375
|
)
|
(530
|
)
|
Other income and expenses not allocated to segments, net
|
(2,248
|
)
|
(2,907
|
)
|
659
|
|
(4,642
|
)
|
(4,983
|
)
|
341
|
|
Amortization of intangible assets
|
(271
|
)
|
(289
|
)
|
18
|
|
(543
|
)
|
(580
|
)
|
37
|
|
Contingent consideration benefit
|
—
|
|
212
|
|
(212
|
)
|
—
|
|
212
|
|
(212
|
)
|
Loss on change in fair value of debt
|
(142
|
)
|
(2,702
|
)
|
2,560
|
|
(1,061
|
)
|
(4,591
|
)
|
3,530
|
|
Equity in net (loss) income of investee
|
(385
|
)
|
(145
|
)
|
(240
|
)
|
(284
|
)
|
2,240
|
|
(2,524
|
)
|
Loss from continuing operations before income tax expense
|
(2,519
|
)
|
(6,838
|
)
|
4,319
|
|
(4,703
|
)
|
(8,180
|
)
|
3,477
|
|
Income tax expense
|
187
|
|
1,251
|
|
(1,064
|
)
|
438
|
|
1,516
|
|
(1,078
|
)
|
Loss from continuing operations
|
(2,706
|
)
|
(8,089
|
)
|
5,383
|
|
(5,141
|
)
|
(9,696
|
)
|
4,555
|
|
Income (loss) from discontinued operations, net of taxes
|
911
|
|
(570
|
)
|
1,481
|
|
1,318
|
|
(447
|
)
|
1,765
|
|
(Loss) gain on disposal of discontinued operations, net of taxes
|
(6,611
|
)
|
1,017
|
|
(7,628
|
)
|
(6,611
|
)
|
1,017
|
|
(7,628
|
)
|
Net loss
|
(8,406
|
)
|
(7,642
|
)
|
(764
|
)
|
(10,434
|
)
|
(9,126
|
)
|
(1,308
|
)
|
|
39
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
40
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
41
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Type of investment
|
|
June 30, 2018
|
|
|
% of Total
|
|
|
December 31, 2017
|
|
|
% of Total
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||
U.S. government, government agencies and authorities
|
|
5,427
|
|
|
10.8
|
%
|
|
5,612
|
|
|
10.6
|
%
|
States, municipalities and political subdivisions
|
|
605
|
|
|
1.2
|
%
|
|
626
|
|
|
1.2
|
%
|
Mortgage-backed
|
|
2,811
|
|
|
5.6
|
%
|
|
2,876
|
|
|
5.4
|
%
|
Corporate
|
|
2,518
|
|
|
5.0
|
%
|
|
5,427
|
|
|
10.3
|
%
|
Total fixed maturities
|
|
11,361
|
|
|
22.6
|
%
|
|
14,541
|
|
|
27.5
|
%
|
Equity investments:
|
|
|
|
|
|
|
|
|
||||
Common stock
|
|
1,264
|
|
|
2.5
|
%
|
|
3,570
|
|
|
6.7
|
%
|
Warrants
|
|
925
|
|
|
1.8
|
%
|
|
906
|
|
|
1.7
|
%
|
Total equity investments
|
|
2,189
|
|
|
4.3
|
%
|
|
4,476
|
|
|
8.4
|
%
|
Limited liability investments
|
|
5,217
|
|
|
10.3
|
%
|
|
4,922
|
|
|
9.3
|
%
|
Limited liability investment, at fair value
|
|
4,869
|
|
|
9.7
|
%
|
|
5,771
|
|
|
10.9
|
%
|
Other investments
|
|
1,916
|
|
|
3.8
|
%
|
|
2,321
|
|
|
4.4
|
%
|
Short-term investments
|
|
151
|
|
|
0.3
|
%
|
|
151
|
|
|
0.3
|
%
|
Total investments
|
|
25,703
|
|
|
51.0
|
%
|
|
32,182
|
|
|
60.8
|
%
|
Cash and cash equivalents
|
|
24,713
|
|
|
49.0
|
%
|
|
20,781
|
|
|
39.2
|
%
|
Total
|
|
50,416
|
|
|
100.0
|
%
|
|
52,963
|
|
|
100.0
|
%
|
|
42
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Carrying Value
|
|
|||
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
Triple net lease limited liability investments
|
|
—
|
|
|
1,082
|
|
Other real estate related limited liability investments
|
|
1,784
|
|
|
110
|
|
Non-real estate limited liability investments
|
|
3,433
|
|
|
3,730
|
|
Total
|
|
5,217
|
|
|
4,922
|
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Income from triple net lease limited liability investments
|
|
1
|
|
|
—
|
|
|
35
|
|
|
—
|
|
Income from CMC operations
|
|
513
|
|
|
679
|
|
|
1,206
|
|
|
1,352
|
|
Total income included in loss from continuing operations as a result of triple net lease investments and CMC operations
|
|
514
|
|
|
679
|
|
|
1,241
|
|
|
1,352
|
|
|
43
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Line of Business
|
June 30, 2018
|
|
December 31, 2017
|
|
Non-standard automobile
|
945
|
|
572
|
|
Commercial automobile
|
949
|
|
580
|
|
Other
|
700
|
|
177
|
|
Total
|
2,594
|
|
1,329
|
|
Line of Business
|
June 30, 2018
|
|
December 31, 2017
|
|
Non-standard automobile
|
861
|
|
508
|
|
Commercial automobile
|
933
|
|
572
|
|
Other
|
700
|
|
177
|
|
Total
|
2,494
|
|
1,257
|
|
|
44
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Unfavorable (favorable) change in provision for property and casualty loss and loss adjustment expenses for prior accident years
|
1,301
|
|
(1
|
)
|
1,647
|
|
(1
|
)
|
|
45
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
46
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
47
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
48
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
June 30, 2018
|
|
|
% of Total
|
|
|
December 31, 2017
|
|
|
% of Total
|
|
Due in less than one year
|
|
4,899
|
|
|
43.1
|
%
|
|
3,605
|
|
|
24.8
|
%
|
Due in one through five years
|
|
5,219
|
|
|
45.9
|
%
|
|
9,310
|
|
|
64.0
|
%
|
Due after five through ten years
|
|
125
|
|
|
1.1
|
%
|
|
345
|
|
|
2.4
|
%
|
Due after ten years
|
|
1,118
|
|
|
9.9
|
%
|
|
1,281
|
|
|
8.8
|
%
|
Total
|
|
11,361
|
|
|
100.0
|
%
|
|
14,541
|
|
|
100.0
|
%
|
|
49
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
100 Basis Point Decrease in Interest Rates
|
|
No Change
|
|
100 Basis Point Increase in Interest Rates
|
||||||
As of June 30, 2018
|
|
|
|
|
|
|
||||||
Estimated fair value
|
|
$
|
11,561
|
|
|
$
|
11,361
|
|
|
$
|
11,161
|
|
Estimated increase (decrease) in fair value
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
(200
|
)
|
|
|
|
|
|
|
|
||||||
As of December 31, 2017
|
|
|
|
|
|
|
||||||
Estimated fair value
|
|
$
|
14,840
|
|
|
$
|
14,541
|
|
|
$
|
14,242
|
|
Estimated increase (decrease) in fair value
|
|
$
|
299
|
|
|
$
|
—
|
|
|
$
|
(299
|
)
|
Rating (S&P/Moody's)
|
June 30, 2018
|
|
December 31, 2017
|
|
AAA/Aaa
|
73.4
|
%
|
59.6
|
%
|
AA/Aa
|
17.4
|
|
8.8
|
|
A/A
|
9.2
|
|
10.9
|
|
Percentage rated A/A2 or better
|
100.0
|
%
|
79.3
|
%
|
Not rated
|
—
|
|
20.7
|
|
Total
|
100.0
|
%
|
100.0
|
%
|
|
50
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
51
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
Stock Purchase Agreement By and Among Premier Holdings, LLC, Advantage Auto MGA, LLC, Mendota Insurance Company, Kingsway America Inc. and Kingsway Financial Services Inc., Dated as of July 16, 2018 (included as Exhibit 2.1 to the Form 8-K, filed July 20, 2018, and incorporated herein by reference).
|
|
|
|
Amendment No. 1 to the Kingsway Financial Services Inc. 2013 Equity Incentive Plan
|
|
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
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
|
|
52
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
|
Date:
|
August 8, 2018
|
By:
|
/s/ Larry G. Swets, Jr.
|
|
|
|
Larry G. Swets, Jr., Chief Executive Officer and Director
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date:
|
August 8, 2018
|
By:
|
/s/ William A. Hickey, Jr.
|
|
|
|
William A. Hickey, Jr., Chief Financial Officer and Executive Vice President
|
|
|
|
(principal financial officer)
|
|
|
|
|
|
53
|
|