TORONTO, May 14, 2012 /PRNewswire/ - (TSX: KFS, NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced its financial results for the first quarter ended March 31, 2012. All amounts are in U.S. dollars unless indicated otherwise.
The Company reported a first quarter net loss of $12.5 million, or a loss of $0.24 per diluted share. The book value has decreased from $2.22 per share at December 31, 2011 to $2.01 per share at March 31, 2012. The Company also carries a valuation allowance, in the amount of $5.05 per share at March 31, 2012, against the deferred tax asset, primarily related to its loss carryforwards.
The following are the highlights of the first quarter of 2012:
-- Net operating loss of $3.2 million was recorded in the Insurance Underwriting segment for the first quarter. -- Net operating income of $1.7 million was recorded in the Insurance Services segment for the first quarter. -- Net investment income and realized gains of $1.1 million were recorded for the first quarter. -- Net loss of $12.1 million not allocated to any segment was recorded in the first quarter. This includes loss on change in fair value of debt of $4.3 million; equity in net loss of investees of $2.3 million; and interest expense of $1.1 million related to the Company's subordinated debt and currently being deferred. None of these three items impacted the Company's cash flows during the first quarter.
The Board of Directors declared no dividend for the first quarter of 2012.
Effective April 2, 2012, the Company and United Insurance Holdings Corp. ("United") mutually agreed to terminate their management services agreement which had been entered into between the Company and United in August of 2011.
During April of 2012, Larry G. Swets, Jr., the Company's President and Chief Executive Officer, adopted an automatic stock purchase plan in accordance with Canadian securities regulations and the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934.
About the Company
Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. The Company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS."
Consolidated Statements of Operations (in thousands, except per sharedata) (unaudited) Three months ended March 31, 2012 2011 Revenue: Net premiums earned $ 29,267 $ 45,636 Service fee and commission income 9,529 8,972 Net investment income 830 1,077 Net realized gains 273 1 Loss on change in fair value of (4,331) (2,605) debt Other income 1,083 1,911 Total revenues 36,651 54,992 Expenses: Loss and loss adjustment expenses 21,775 41,577 Commissions and premiums taxes 4,419 7,378 General and administrative 18,801 21,571 expenses Interest expense 1,849 1,903 Amortization of other intangible -- 18 assets Total expenses 46,844 72,447 Loss before equity in net loss of (10,193) (17,455) investees and income tax expense (benefit) Equity in net loss of investees (2,270) -- Loss from continuing operations (12,463) (17,455) before income tax expense (benefit) Income tax expense (benefit) 59 (408) Loss from continuing operations (12,522) (17,047) Loss on disposal of discontinued -- (1,293) operations, net of taxes Net loss (12,522) (18,340) Less: net loss attributable to (1,514) (534) noncontrolling interests in consolidated subsidiaries Net loss attributable to common $ (11,008) $ (17,806) shareholders Loss per share - continuing operations: Basic and diluted: $ (0.24) $ (0.33) Loss per share - net loss: Basic and diluted: $ (0.24) $ (0.35) Weighted average shares outstanding (in '000s): Basic and diluted: 52,406 52,156
Loss from Continuing Operations and Loss Per Share - Continuing Operations
In the first quarter of 2012, the Company reported a loss from continuing operations of $12.5 million compared to a loss from continuing operations of $17.0 million in the first quarter of last year. Diluted loss per share was $0.24 for the quarter compared to diluted loss per share of $0.33 for the first quarter of 2011. The current quarter's loss is primarily due to operating losses generated in our Insurance Underwriting segment, corporate general expenses, interest expense, loss on change in fair value of debt, and equity in net loss of investees.
Loss on Disposal of Discontinued Operations
For the first quarter ended March 31, 2012, the Company reported no loss on disposal of discontinued operations, compared to a loss of $1.3 million in the first quarter of 2011.
Net Loss and Loss Per Share - Net Loss
In the first quarter of 2012, the Company reported net loss of $12.5 million compared to net loss of $18.3 million in the first quarter of 2011. Diluted loss per share was $0.24 for the quarter compared to diluted loss per share of $0.35 for the first quarter of 2011.
Consolidated Balance Sheets (in thousands, except pershare data) March 31, 2012 (unaudited) December 31, 2011 ASSETS Investments: Fixed maturities, at fair value (amortized cost of $103,107 and $91,344, respectively) $ 105,032 $ 93,651 Equity investments, at fair value (cost of $2,689 and $2,689, respectively) 3,264 2,960 Other investments, at cost which approximates fair value 488 488 Short-term investments, at cost which approximates fair value 3,335 20,334 Total investments 112,119 117,433 Investment in investees 46,730 48,689 Cash and cash equivalents 72,646 85,486 Accrued investment income 1,921 1,999 Premiums receivable, net of allowance for doubtful accounts of $3,671 and $3,653, respectively 40,016 28,732 Service fee receivable 14,569 12,947 Other receivables, net of allowance for doubtful accounts of $806 and $806, respectively 5,883 6,322 Reinsurance recoverable 1,293 697 Prepaid reinsurance premiums 3,650 2,024 Deferred policy acquisition costs, net 8,403 8,116 Income taxes recoverable 7,416 8,134 Property and equipment, net of accumulated depreciation of $28,628 and $27,736 12,856 13,040 Goodwill and intangible assets 39,631 39,631 Other assets 372 831 TOTAL ASSETS $ 367,505 $ 374,081 LIABILITIES ANDEQUITY LIABILITIES Unpaid loss and loss adjustment expenses $ 106,057 $ 120,258 Unearned premiums 45,641 39,423 Reinsurance payable 2,443 1,913 LROC preferred units 10,789 8,845 Senior unsecured debentures 27,982 28,337 Subordinated debt 19,174 16,432 Deferred income tax liability 2,653 2,653 Notes payable 2,418 2,418 Deferred revenue 12,331 11,128 Accrued expenses and other liabilities 32,275 26,269 TOTAL LIABILITIES $ 261,763 $ 257,676 EQUITY Common stock, no par value; unlimited number authorized; 52,595,828 and 52,345,828 issued and outstanding at March 31, 2012 and December 31, 2011, respectively $ 296,621 $ 296,489 Additional paid-in capital 15,372 15,403 Accumulated deficit (212,214) (201,208) Accumulated other comprehensive income 14,588 12,749 Shareholders' equity attributable to common shareholders 114,367 123,433 Noncontrolling interests in consolidated subsidiaries (8,625) (7,028) TOTAL EQUITY 105,742 116,405 TOTAL LIABILITIES AND EQUITY $ 367,505 $ 374,081
Forward Looking Statements
This press release includes "forward looking statements" which are subject to risks and uncertainties. Such forward looking statements relate to future events or 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, including: our high level of indebtedness; our ability to service our debt and comply with debt covenants; our ability to improve our operating performance; our ability to implement our long-term growth strategies and to identify and execute on strategic initiatives; our ability to maintain share price and trading activities at acceptable levels; and our ability to comply with regulatory requirements and the requirements of stock exchanges.
For information identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, please refer to the section entitled "Risk Factors" in the Company's 2011 Annual Report on Form 10-K. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.
Non-U.S. GAAP Financial Measures
This news release contains certain non-U.S. GAAP financial measures. Please refer to the section entitled "Non-U.S. GAAP Financial Measures" in the Management's Discussion and Analysis section of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
SOURCE Kingsway Financial Services Inc.