EX-99.1 2 ex991.htm NEWS RELEASE DATED NOVEMBER 14, 2011 ex991.htm
 
 
Exhibit 99.1

 
Kingsway Reports Third Quarter Results
 
TORONTO, Nov. 14, 2011 /CNW/ - (TSX: KFS) (NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced its financial results for the third quarter and nine months ended September 30, 2011. All amounts are in U.S. dollars unless indicated otherwise.
 
The Company reported third quarter net income of $6.2 million (loss of $17.1 million year to date) or income of $0.12 (loss per share of $0.33 year to date) per share diluted. The book value has decreased from $2.78 per share at December 31, 2010 to $2.42 per share at September 30, 2011.  The Company also carries a valuation allowance, in the amount of $4.69 per share at September 30, 2011, against the deferred tax asset primarily related to its loss carryforwards.
 
The following are the highlights of the third quarter of 2011:
 
Operational results
 
·  
Net loss of $8.2 million was recorded in the Underwriting segment for the third quarter ($25.6 million year to date).
 
·  
Net income of $0.5 million was recorded in the Agency and Non-underwriting segment for the third quarter ($1.2 million year to date).
 
·  
Net income of $13.9 million was recorded in the Corporate and Other segment for the third quarter ($8.6 million year to date).
 
·  
Included in the Corporate and Other segment net income for the third quarter (net loss year to date) above is an unrealized gain on fair value of debt of $17.2 million ($25.8 million year to date).
 
·  
The Company recognized no loss on disposal of discontinued operations for the third quarter (after-tax loss of $1.3 million year to date).
 
Dividend
 
The Board of Directors has decided a quarterly dividend will not be declared for the third quarter of 2011.
 
Subsequent Event
 
Subsequent to the third quarter, on October 17, 2011, the Company closed its previously announced acquisition of a minority position in a newly formed holding company which acquired 100% of the common stock of Walshire Assurance Company ("Walshire"), the sole shareholder of Lincoln General Insurance Company ("Lincoln").  Kingsway also reached a settlement and release ending all legal disputes with the Pennsylvania Insurance Department and obtained releases from Walshire and Lincoln.
 
About the Company
 
Kingsway focuses on non-standard automobile insurance in the United States of America. The Company's primary businesses are the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The common shares of the Company are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS".
 
Statement of Operations
 
(in thousands of U.S. dollars, except per share amounts)
 
                     
(unaudited)
Three months ended
September 30,
Nine months ended
September 30,
   
2011
  
2010
  
2011
  
2010
Gross premiums written
$
33,206
$
51,906
$
107,607
$
166,917
Net premiums written
$
30,943
$
49,500
$
100,726
$
159,510
Revenue:
                
 
Net premiums earned
$
36,614
$
52,269
$
124,825
$
170,370
 
Commission income
  
5,807
  
4,246
  
18,124
  
8,544
 
Investment income
  
999
  
825
  
3,228
  
6,232
 
Net realized gain
  
110
  
6,029
  
128
  
6,501
 
Unrealized gain (loss) on fair value of debt
  
17,189
  
(7,351)
  
25,821
  
(89,008)
 
Share of loss of associate
  
84
  
-
  
(584)
  
-
 
Miscellaneous income (loss)
  
3,469
  
(822)
  
1,422
  
5,792
   
64,272
  
55,196
  
172,964
  
108,431
Expenses:
                
 
Claims incurred
$
33,329
$
47,432
$
109,349
$
144,382
 
Commissions and premium taxes
  
5,405
  
7,289
  
19,684
  
28,180
 
General and administrative expenses
  
14,826
  
23,854
  
51,393
  
65,943
 
Restructuring costs
  
-
  
-
  
-
  
4,898
 
Interest expense
  
1,874
  
2,738
  
5,610
  
11,393
 
Amortization of intangibles
  
211
  
1,743
  
979
  
5,114
   
55,645
  
83,056
  
187,015
  
259,910
Income (loss) before unusual item and income taxes
  
8,627
  
(27,860)
  
(14,051)
  
(151,479)
Gain (loss) on buy-back of debt
  
1
  
(3,159)
  
534
  
(139)
Income (loss) from continuing operations before income taxes
  
8,628
  
(31,019)
  
(13,517)
  
(151,618)
Income tax expense (benefit)
  
2,433
  
(1,540)
  
     2,292
  
(4,552)
Income (loss) from continuing operations
$
6,195
$
(29,479)
$
(15,809)
$
(147,066)
Loss from discontinued operations, net of tax
  
-
  
(1,651)
  
-
  
(3,938)
(Loss) income on disposal of discontinued operations, net of taxes
  
-
  
-
  
(1,293)
  
6,093
Net Income (loss)
$
6,195
$
(31,130)
$
(17,102)
$
(144,911)
Attributable to:
                
   
Shareholders of Kingsway
  
7,155
  
(10,445)
  
(13,419)
  
(127,148)
   
Non-controlling interests
  
(960)
  
(20,685)
  
(3,683)
  
(17,763)
Total
$
6,195
$
(31,130)
$
(17,102)
$
(144,911)
Earnings (loss) per share - continuing operations
                
   
Basic:
$
0.12
$
(0.57)
$
(0.30)
$
(2.82)
   
Diluted:
$
0.12
$
(0.57)
$
(0.30)
$
(2.82)
Earnings (loss) per share - net income (loss)
                
   
Basic:
$
0.12
$
(0.60)
$
(0.33)
$
(2.78)
   
Diluted:
$
0.12
$
(0.60)
$
(0.33)
$
(2.78)
Weighted average shares outstanding (in 000's)
                
   
Basic:
  
52,346
  
52,096
  
52,283
  
52,090
   
Diluted:
  
52,346
  
52,096
  
52,283
  
52,090
 
Income (Loss) from Continuing Operations and Earnings (Loss) Per Share - Continuing Operations
 
In the third quarter of 2011, the Company reported income from continuing operations of $6.2 million (loss of $15.8 million year to date), compared to a loss from continuing operations of $29.5 million in the third quarter of last year ($147.1 million prior year to date). Diluted income per share was $0.12 for the quarter (loss per share of $0.30 year to date), compared to diluted loss per share of $0.57 for the third quarter of 2010 ($2.82 prior year to date). As noted above, the current quarter's income is primarily due to unrealized gain on fair value of debt and investment income, offset by underwriting losses and corporate expenses.
 
Income (Loss) from Discontinued Operations
 
For the third quarter and year to date ended September 30, 2011, the Company reported no income from discontinued operations, compared to a loss of $1.7 million in the third quarter of 2010 ($3.9 million prior year to date).
 
As a result of the disposal of Jevco Insurance Company on March 29, 2010, the Company realized an after-tax loss of nil in the third quarter of 2011 ($1.9 million year to date) and an after-tax loss of nil in the third quarter of 2010 (after-tax gain of $6.1 million prior year to date).
 
As a result of the disposal of American Country Insurance Company and American Service Insurance Company, Inc. on December 31, 2010, the Company realized an after-tax gain of nil in the third quarter of 2011 ($0.6 million year to date).
 
Net Income (Loss) and Earnings (Loss) Per Share - Net Income (Loss)
 
In the third quarter of 2011, the Company reported net income of $6.2 million (loss of $17.1 million year to date), compared to net loss of $31.1 million in the third quarter of last year ($144.9 million prior year to date). Diluted income per share was $0.12 for the quarter (loss per share of $0.33 year to date) compared to diluted loss per share of $0.60 for the third quarter of 2010 ($2.78 prior year to date).
 
Consolidated Balance Sheets
 
(in thousands of U.S. dollars, except share amounts)
 
               
(unaudited)
  September 30,
2011
  December 31,
2010
  January 1,
2010
ASSETS
            
 
Cash and cash equivalents
$
82,462
$
140,567
$
65,562
 
Investment in securities
  
139,596
  
146,684
  
506,080
 
Investment in associate
  
48,554
  
49,079
  
-
 
Accrued investment income
  
1,660
  
1,957
  
3,942
 
Financed premiums
  
5,714
  
13,572
  
15,237
 
Accounts receivable
  
44,047
  
46,394
  
85,765
 
Funds held in escrow
  
-
  
22,259
  
-
 
Due from reinsurers and other insurers
  
555
  
7,651
  
4,938
 
Deferred policy acquisition costs
  
9,339
  
13,952
  
29,088
 
Income taxes recoverable
  
12,389
  
17,991
  
16,138
 
Deferred income taxes
  
-
  
503
  
9,481
 
Property and equipment
  
11,656
  
12,469
  
30,308
 
Goodwill and intangible assets
  
43,862
  
43,959
  
37,573
 
Other assets
  
1,152
  
2,544
  
4,786
 
Assets held for sale
  
-
  
-
  
1,145,481
 
TOTAL ASSETS
$
400,986
$
519,581
$
1,954,379
             
LIABILITIES AND SHAREHOLDERS' EQUITY
            
LIABILITIES
            
 
Loans payable
$
2,418
$
-
$
-
 
Accounts payable and accrued expenses
  
40,755
  
42,385
  
60,910
 
Unearned premiums
  
42,780
  
66,879
  
120,657
 
Unpaid claims
  
132,200
  
174,708
  
368,501
 
Deferred tax liability
  
2,653
  
-
  
-
 
LROC preferred units
  
8,829
  
13,076
  
22,388
 
Senior unsecured debentures
  
27,622
  
37,177
  
103,512
 
Subordinated indebtedness
  
17,218
  
40,480
  
23,966
 
Liabilities held for sale
  
-
  
-
  
907,416
 
TOTAL LIABILITIES
$
274,475
$
374,705
$
1,607,350
SHAREHOLDERS' EQUITY
            
 
Share capital
$
296,489
$
296,139
$
295,291
 
   
Issued and outstanding number of common shares
            
 
        
  
52,345,828 - September 30, 2011
            
 
        
  
52,095,828 - December 31, 2010
            
 
        
  
51,595,828 - January 1, 2010
            
 
Contributed surplus
  
15,835
  
15,894
  
20,549
 
Retained deficit
  
(204,336)
  
(190,918)
  
(19,520)
 
Accumulated other comprehensive income
  
22,012
  
23,804
  
32,468
 
Shareholders' equity attributable to shareholders of Kingsway
  
130,000
  
144,919
  
328,788
 
Non-controlling interests
  
(3,489)
  
(43)
  
18,241
 
TOTAL SHAREHOLDERS' EQUITY
  
126,511
  
144,876
  
347,029
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
400,986
$
519,581
$
1,954,379
 
Forward Looking Statements
 
This press release includes "forward looking statements" that are subject to risks and uncertainties.  Such forward looking statements relate to future events or future performance, but reflect Kingsway management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see Kingsway's securities filings, including its 2010 Annual Report under the heading Risk Factors in the Management's Discussion and Analysis section.  The securities filings can be accessed on the Canadian Securities Administrators' website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov or through the Company's website at www.kingsway-financial.com.  Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.
 
Non-IFRS Financial Measures
 
This news release contains certain non-IFRS financial measures. Please refer to the section entitled "Non-IFRS Financial Measures" in the Company's third quarter 2011 Management's Discussion and Analysis.
 
Additional Information
 
Additional information about Kingsway, including a copy of its Quarterly Report for the quarter ended September 30, 2011, can be accessed on the Canadian Securities Administrators' website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov or through the Company's website at www.kingsway-financial.com
 
 
%CIK: 0001072627
 
CO: Kingsway Financial Services Inc.
 
 
CNW 16:30e 14-NOV-11