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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kingsway Financial Services Inc (PK) | USOTC:KFSYF | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.77 | 0.0001 | 4.23 | 0.00 | 01:00:00 |
(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
|
Delaware
(State or other jurisdiction of
incorporation or organization)
|
|
98-0475673
(I.R.S. Employer
Identification No.)
|
150 E. Pierce Road Itasca, IL 60143
|
(Address of principal executive offices and zip code)
|
1-416-848-1171
|
(Registrant's telephone number, including area code)
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
(Do not check if a smaller reporting company)
|
Smaller Reporting Company x
|
Emerging Growth Company o
|
|
|
|
|
|
•
|
Part I, Item 1 - Financial Statements;
|
•
|
Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations;
|
•
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Part I, Item 3 - Quantitative and Qualitative Disclosures about Market Risk;
|
•
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Part I, Item 4 - Controls and Procedures; and
|
•
|
Part II, Item 1A - Risk Factors
|
KINGSWAY FINANCIAL SERVICES INC.
|
Table Of Contents
|
||
PART I - FINANCIAL INFORMATION
|
|
|
ITEM 1. FINANCIAL STATEMENTS
|
|
|
Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 (unaudited)
|
|
|
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
|
|
|
Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
2
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
||
|
|
(restated)
|
|
|
(restated)
|
|
||
Assets
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturities, at fair value (amortized cost of $11,605 and $14,707, respectively)
|
|
$
|
11,361
|
|
|
$
|
14,541
|
|
Equity investments, at fair value (cost of $2,340 and $4,868, respectively)
|
|
2,433
|
|
|
4,589
|
|
||
Limited liability investments
|
|
7,078
|
|
|
9,094
|
|
||
Limited liability investments, at fair value
|
|
31,416
|
|
|
32,211
|
|
||
Investments in private companies, at adjusted cost
|
|
4,620
|
|
|
4,870
|
|
||
Real estate investments, at fair value (cost $10,225 and $10,225, respectively)
|
|
10,662
|
|
|
10,662
|
|
||
Other investments, at cost which approximates fair value
|
|
3,316
|
|
|
3,721
|
|
||
Short-term investments, at cost which approximates fair value
|
|
151
|
|
|
151
|
|
||
Total investments
|
|
71,037
|
|
|
79,839
|
|
||
Cash and cash equivalents
|
|
10,618
|
|
|
5,377
|
|
||
Restricted cash
|
|
13,760
|
|
|
14,985
|
|
||
Investment in investee
|
|
4,947
|
|
|
5,230
|
|
||
Accrued investment income
|
|
301
|
|
|
507
|
|
||
Service fee receivable, net of allowance for doubtful accounts of $415 and $318, respectively
|
|
5,218
|
|
|
4,431
|
|
||
Other receivables, net of allowance for doubtful accounts of zero and zero, respectively
|
|
8,864
|
|
|
7,247
|
|
||
Deferred acquisition costs, net
|
|
6,662
|
|
|
6,325
|
|
||
Property and equipment, net of accumulated depreciation of $13,794 and $11,683, respectively
|
|
105,246
|
|
|
108,008
|
|
||
Goodwill
|
|
80,843
|
|
|
80,843
|
|
||
Intangible assets, net of accumulated amortization of $8,729 and $8,218, respectively
|
|
78,935
|
|
|
79,446
|
|
||
Other assets
|
|
3,592
|
|
|
4,302
|
|
||
Assets held for sale
|
|
115,107
|
|
|
110,145
|
|
||
Total Assets
|
|
$
|
505,130
|
|
|
$
|
506,685
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
||||
Accrued expenses and other liabilities
|
|
$
|
11,254
|
|
|
$
|
10,359
|
|
Income taxes payable
|
|
2,801
|
|
|
2,644
|
|
||
Deferred service fees
|
|
44,368
|
|
|
41,113
|
|
||
Unpaid loss and loss adjustment expenses
|
|
2,594
|
|
|
1,329
|
|
||
Bank loan
|
|
4,417
|
|
|
4,917
|
|
||
Notes payable
|
|
201,543
|
|
|
203,648
|
|
||
Subordinated debt, at fair value
|
|
52,822
|
|
|
52,105
|
|
||
Net deferred income tax liabilities
|
|
28,819
|
|
|
28,763
|
|
||
Liabilities held for sale
|
|
112,866
|
|
|
105,900
|
|
||
Total Liabilities
|
|
461,484
|
|
|
450,778
|
|
||
|
|
|
|
|
||||
Redeemable 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 $7,441 and $7,182 at June 30, 2018 and December 31, 2017, respectively
|
|
5,692
|
|
|
5,180
|
|
||
|
|
|
|
|
||||
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
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
356,247
|
|
|
356,171
|
|
||
Accumulated deficit
|
|
(365,128
|
)
|
|
(310,953
|
)
|
||
Accumulated other comprehensive income (loss)
|
|
36,546
|
|
|
(3,852
|
)
|
||
Shareholders' equity attributable to common shareholders
|
|
27,665
|
|
|
41,366
|
|
||
Noncontrolling interests in consolidated subsidiaries
|
|
10,289
|
|
|
9,361
|
|
||
Total Shareholders' Equity
|
|
37,954
|
|
|
50,727
|
|
||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
505,130
|
|
|
$
|
506,685
|
|
|
3
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|||||
|
|
(restated)
|
|
|
(restated)
|
|
|
(restated)
|
|
|
(restated)
|
|
|||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||||
Service fee and commission income
|
|
$
|
8,860
|
|
|
$
|
6,564
|
|
|
$
|
18,511
|
|
|
$
|
13,219
|
|
|
Rental income
|
|
3,345
|
|
|
3,348
|
|
|
6,693
|
|
|
6,695
|
|
|||||
Other income
|
|
108
|
|
|
211
|
|
|
321
|
|
|
508
|
|
|||||
Total revenues
|
|
12,313
|
|
|
10,123
|
|
|
25,525
|
|
|
20,422
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||||
Claims authorized on vehicle service agreements
|
|
1,392
|
|
|
1,318
|
|
|
2,764
|
|
|
2,679
|
|
|||||
Loss and loss adjustment expenses
|
|
1,301
|
|
|
(1
|
)
|
|
1,647
|
|
|
(1
|
)
|
|||||
Commissions
|
|
834
|
|
|
834
|
|
|
1,747
|
|
|
1,629
|
|
|||||
Cost of services sold
|
|
1,464
|
|
|
1,291
|
|
|
3,716
|
|
|
2,595
|
|
|||||
General and administrative expenses
|
|
7,295
|
|
|
6,499
|
|
|
14,771
|
|
|
12,485
|
|
|||||
Leased real estate segment interest expense
|
|
1,546
|
|
|
1,569
|
|
|
3,098
|
|
|
3,143
|
|
|||||
Total operating expenses
|
|
13,832
|
|
|
11,510
|
|
|
27,743
|
|
|
22,530
|
|
|||||
Operating loss
|
|
(1,519
|
)
|
|
(1,387
|
)
|
|
(2,218
|
)
|
|
(2,108
|
)
|
|||||
Other revenues (expenses), net:
|
|
|
|
|
|
|
|
|
|||||||||
Net investment income
|
|
1,010
|
|
|
864
|
|
|
1,648
|
|
|
2,032
|
|
|||||
Net realized gains (losses)
|
13
|
|
132
|
|
|
(1
|
)
|
|
397
|
|
|
(1
|
)
|
||||
(Loss) gain on change in fair value of equity investments
|
1,176
|
|
(421
|
)
|
|
—
|
|
|
744
|
|
|
—
|
|
||||
Loss on change in fair value of limited liability investments, at fair value
|
|
(525
|
)
|
|
(1,713
|
)
|
|
(1,461
|
)
|
|
(1,659
|
)
|
|||||
Net change in unrealized loss on private company investments
|
|
(155
|
)
|
|
(1,512
|
)
|
|
(155
|
)
|
|
(1,265
|
)
|
|||||
Non-operating other income
|
|
14
|
|
|
13
|
|
|
21
|
|
|
26
|
|
|||||
Interest expense not allocated to segments
|
|
(1,844
|
)
|
|
(1,549
|
)
|
|
(3,561
|
)
|
|
(3,048
|
)
|
|||||
Amortization of intangible assets
|
|
(254
|
)
|
|
(272
|
)
|
|
(509
|
)
|
|
(546
|
)
|
|||||
Contingent consideration benefit
|
|
—
|
|
|
212
|
|
|
—
|
|
|
212
|
|
|||||
Loss on change in fair value of debt
|
|
(142
|
)
|
|
(2,702
|
)
|
|
(1,061
|
)
|
|
(4,591
|
)
|
|||||
Gain on disposal of subsidiary
|
|
17
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|||||
Equity in net (loss) income of investee
|
|
(385
|
)
|
|
(145
|
)
|
|
(284
|
)
|
|
2,240
|
|
|||||
Total other revenues (expenses), net
|
|
(2,553
|
)
|
|
(6,805
|
)
|
|
(4,204
|
)
|
|
(6,600
|
)
|
|||||
Loss from continuing operations before income tax expense
|
|
(4,072
|
)
|
|
(8,192
|
)
|
|
(6,422
|
)
|
|
(8,708
|
)
|
|||||
Income tax expense
|
|
190
|
|
|
1,255
|
|
|
444
|
|
|
1,524
|
|
|||||
Loss from continuing operations
|
|
(4,262
|
)
|
|
(9,447
|
)
|
|
(6,866
|
)
|
|
(10,232
|
)
|
|||||
Income (loss) from discontinued operations, net of taxes
|
|
594
|
|
|
358
|
|
|
980
|
|
|
(97
|
)
|
|||||
(Loss) gain on disposal of discontinued operations, net of taxes
|
|
(6,628
|
)
|
|
1,017
|
|
|
(6,628
|
)
|
|
1,017
|
|
|||||
Net loss
|
|
(10,296
|
)
|
|
(8,072
|
)
|
|
(12,514
|
)
|
|
(9,312
|
)
|
|||||
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
158
|
|
|
(338
|
)
|
|
517
|
|
|
(139
|
)
|
|||||
Less: dividends on preferred stock, net of tax
|
|
259
|
|
|
286
|
|
|
512
|
|
|
588
|
|
|||||
Net loss attributable to common shareholders
|
|
$
|
(10,713
|
)
|
|
$
|
(8,020
|
)
|
|
$
|
(13,543
|
)
|
|
$
|
(9,761
|
)
|
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
|||||||||
Basic:
|
|
$
|
(0.22
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.50
|
)
|
|
Diluted:
|
|
$
|
(0.22
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.50
|
)
|
|
(Loss) earnings per share - discontinued operations:
|
|
|
|
|
|
|
|
|
|||||||||
Basic:
|
|
$
|
(0.28
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.04
|
|
|
Diluted:
|
|
$
|
(0.28
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.04
|
|
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|||||||||
Basic:
|
|
$
|
(0.49
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(0.45
|
)
|
|
Diluted:
|
|
$
|
(0.49
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(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
|
|
||||
|
|
(restated)
|
|
|
(restated)
|
|
|
(restated)
|
|
|
(restated)
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
$
|
(10,296
|
)
|
|
$
|
(8,072
|
)
|
|
$
|
(12,514
|
)
|
|
$
|
(9,312
|
)
|
Other comprehensive income (loss), net of taxes(1):
|
|
|
|
|
|
|
|
|
||||||||
Unrealized losses 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
|
|
|
—
|
|
||||
Other comprehensive income (loss)
|
|
702
|
|
|
(586
|
)
|
|
(104
|
)
|
|
(1,256
|
)
|
||||
Comprehensive loss
|
|
(9,594
|
)
|
|
(8,658
|
)
|
|
(12,618
|
)
|
|
(10,568
|
)
|
||||
Less: comprehensive income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
158
|
|
|
(339
|
)
|
|
511
|
|
|
(138
|
)
|
||||
Comprehensive loss attributable to common shareholders
|
|
$
|
(9,752
|
)
|
|
$
|
(8,319
|
)
|
|
$
|
(13,129
|
)
|
|
$
|
(10,430
|
)
|
(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
|
|
||
|
|
(restated)
|
|
|
(restated)
|
|
||
Cash provided by (used in):
|
|
|
|
|
||||
Operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(12,514
|
)
|
|
$
|
(9,312
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
||||
(Income) loss from discontinued operations, net of taxes
|
|
(980
|
)
|
|
97
|
|
||
Loss (gain) on disposal of discontinued operations, net of taxes
|
|
6,628
|
|
|
(1,017
|
)
|
||
Equity in net loss (income) of investee
|
|
284
|
|
|
(2,240
|
)
|
||
Equity in net income of limited liability investments
|
|
(181
|
)
|
|
(600
|
)
|
||
Depreciation and amortization expense
|
|
2,678
|
|
|
3,153
|
|
||
Contingent consideration benefit
|
|
—
|
|
|
(212
|
)
|
||
Stock-based compensation expense, net of forfeitures
|
|
588
|
|
|
588
|
|
||
Net realized (gains) losses
|
|
(397
|
)
|
|
1
|
|
||
Gain on change in fair value of equity investments
|
|
(744
|
)
|
|
—
|
|
||
Loss on change in fair value of limited liability investments, at fair value
|
|
1,461
|
|
|
1,659
|
|
||
Net change in unrealized loss on private company investments
|
|
155
|
|
|
1,265
|
|
||
Loss on change in fair value of debt
|
|
1,061
|
|
|
4,591
|
|
||
Deferred income taxes
|
|
56
|
|
|
1,098
|
|
||
Amortization of fixed maturities premiums and discounts
|
|
32
|
|
|
47
|
|
||
Amortization of note payable premium
|
|
(473
|
)
|
|
(483
|
)
|
||
Gain on disposal of subsidiary
|
|
(17
|
)
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Service fee receivable, net
|
|
(787
|
)
|
|
(88
|
)
|
||
Other receivables, net
|
|
(1,617
|
)
|
|
(1,733
|
)
|
||
Deferred acquisition costs, net
|
|
(337
|
)
|
|
(227
|
)
|
||
Unpaid loss and loss adjustment expenses
|
|
1,265
|
|
|
(402
|
)
|
||
Deferred service fees
|
|
3,255
|
|
|
2,100
|
|
||
Other, net
|
|
(3,566
|
)
|
|
1,578
|
|
||
Cash (used in) provided by operating activities - continuing operations
|
|
(4,150
|
)
|
|
(137
|
)
|
||
Cash used in operating activities - discontinued operations
|
|
(1,909
|
)
|
|
(6,966
|
)
|
||
Net cash used in operating activities
|
|
(6,059
|
)
|
|
(7,103
|
)
|
||
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 proceeds from (acquisitions of) limited liability investments
|
|
2,199
|
|
|
(2,408
|
)
|
||
Net purchases of limited liability investments, at fair value
|
|
(666
|
)
|
|
(484
|
)
|
||
Net proceeds from (purchases of) investments in private companies
|
|
95
|
|
|
(171
|
)
|
||
Net proceeds from other investments
|
|
405
|
|
|
373
|
|
||
Net proceeds from short-term investments
|
|
—
|
|
|
250
|
|
||
Proceeds from disposal of subsidiary
|
|
565
|
|
|
—
|
|
||
Net proceeds from sale of discontinued operations
|
|
1,129
|
|
|
1,017
|
|
||
Net purchases of property and equipment
|
|
593
|
|
|
(439
|
)
|
||
Cash provided by (used in) investing activities - continuing operations
|
|
10,298
|
|
|
(2,415
|
)
|
||
Cash (used in) provided by investing activities - discontinued operations
|
|
(3,086
|
)
|
|
8,612
|
|
||
Net cash provided by investing activities
|
|
7,212
|
|
|
6,197
|
|
||
Financing activities:
|
|
|
|
|
||||
Principal payments on bank loan
|
|
(500
|
)
|
|
—
|
|
||
Principal payments on note payable
|
|
(1,632
|
)
|
|
(1,457
|
)
|
||
Cash used in financing activities - continuing operations
|
|
(2,132
|
)
|
|
(1,457
|
)
|
||
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
||
Net cash used in financing activities
|
|
(2,132
|
)
|
|
(1,457
|
)
|
||
Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations
|
|
4,016
|
|
|
(4,009
|
)
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
|
43,874
|
|
|
36,005
|
|
||
Less: cash and cash equivalents and restricted cash of discontinued operations at beginning of period
|
|
23,512
|
|
|
4,524
|
|
||
Cash and cash equivalents and restricted cash of continuing operations at beginning of period
|
|
20,362
|
|
|
31,481
|
|
||
Cash and cash equivalents and restricted cash of continuing operations at end of period
|
|
$
|
24,378
|
|
|
$
|
27,472
|
|
|
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
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities, at fair value
|
|
$
|
11,361
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,361
|
|
Equity investments, at fair value
|
|
2,189
|
|
|
244
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,433
|
|
||||||
Limited liability investments
|
|
5,217
|
|
|
3,515
|
|
|
(890
|
)
|
|
—
|
|
|
(764
|
)
|
(a), (b)
|
7,078
|
|
||||||
Limited liability investments, at fair value
|
|
4,869
|
|
|
3,629
|
|
|
22,918
|
|
|
—
|
|
|
—
|
|
|
31,416
|
|
||||||
Investments in private companies, at adjusted cost
|
|
—
|
|
|
—
|
|
|
3,865
|
|
|
—
|
|
|
755
|
|
(a)
|
4,620
|
|
||||||
Real estate investments, at fair value
|
|
—
|
|
|
—
|
|
|
10,662
|
|
|
—
|
|
|
—
|
|
|
10,662
|
|
||||||
Other investments, at cost which approximates fair value
|
|
1,916
|
|
|
1,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,316
|
|
||||||
Short-term investments, at cost which approximates fair value
|
|
151
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
151
|
|
||||||
Total investments
|
|
25,703
|
|
|
8,788
|
|
|
36,555
|
|
|
—
|
|
|
(9
|
)
|
|
71,037
|
|
||||||
Cash and cash equivalents
|
|
24,713
|
|
|
—
|
|
|
612
|
|
|
(13,760
|
)
|
|
(947
|
)
|
(c)
|
10,618
|
|
||||||
Restricted cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,760
|
|
|
—
|
|
|
13,760
|
|
||||||
Investment in investee
|
|
4,947
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,947
|
|
||||||
Accrued investment income
|
|
161
|
|
|
—
|
|
|
140
|
|
|
—
|
|
|
—
|
|
|
301
|
|
||||||
Service fee receivable
|
|
5,173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
(d)
|
5,218
|
|
||||||
Other receivables
|
|
7,907
|
|
|
—
|
|
|
(53
|
)
|
|
—
|
|
|
1,010
|
|
(c)
|
8,864
|
|
||||||
Deferred acquisition costs, net
|
|
6,662
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,662
|
|
||||||
Property and equipment
|
|
105,246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
105,246
|
|
||||||
Goodwill
|
|
80,112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
731
|
|
(e)
|
80,843
|
|
||||||
Intangible assets
|
|
79,519
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(584
|
)
|
(e)
|
78,935
|
|
||||||
Other assets
|
|
3,592
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,592
|
|
||||||
Assets held for sale
|
|
138,804
|
|
|
(8,788
|
)
|
|
(14,909
|
)
|
|
—
|
|
|
—
|
|
|
115,107
|
|
||||||
Total Assets
|
|
$
|
482,539
|
|
|
$
|
—
|
|
|
$
|
22,345
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
505,130
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accrued expenses and other liabilities
|
|
$
|
10,946
|
|
|
$
|
—
|
|
|
$
|
437
|
|
|
$
|
—
|
|
|
$
|
(129
|
)
|
(a), (c), (d), (f), (g)
|
$
|
11,254
|
|
Income taxes payable
|
|
2,801
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,801
|
|
||||||
Deferred service fees
|
|
41,221
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,147
|
|
(a), (c), (d), (h)
|
44,368
|
|
||||||
Unpaid loss and loss adjustment expenses
|
|
5,209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,615
|
)
|
(a)
|
2,594
|
|
||||||
Bank loan
|
|
4,417
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,417
|
|
||||||
Notes payable
|
|
184,567
|
|
|
—
|
|
|
16,976
|
|
|
—
|
|
|
—
|
|
|
201,543
|
|
||||||
Subordinated debt, at fair value
|
|
52,822
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,822
|
|
||||||
Net deferred income tax liabilities
|
|
28,796
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
(e)
|
28,819
|
|
||||||
Liabilities held for sale
|
|
112,866
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112,866
|
|
||||||
Total Liabilities
|
|
443,645
|
|
|
—
|
|
|
17,413
|
|
|
—
|
|
|
426
|
|
|
461,484
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Redeemable Class A preferred stock
|
|
5,477
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
(f)
|
5,692
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Additional paid-in capital
|
|
356,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(362
|
)
|
(f)
|
356,247
|
|
|
9
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Accumulated deficit
|
|
(364,917
|
)
|
|
—
|
|
|
(221
|
)
|
|
—
|
|
|
10
|
|
(b), (d)(e), (f), (g), (h)
|
(365,128
|
)
|
||||||
Accumulated other comprehensive income
|
|
36,322
|
|
|
—
|
|
|
224
|
|
|
—
|
|
|
—
|
|
|
36,546
|
|
||||||
Shareholders' equity attributable to common shareholders
|
|
28,014
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
(352
|
)
|
|
27,665
|
|
||||||
Noncontrolling interests in consolidated subsidiaries
|
|
5,403
|
|
|
—
|
|
|
4,929
|
|
|
—
|
|
|
(43
|
)
|
(d), (h)
|
10,289
|
|
||||||
Total Shareholders' Equity
|
|
33,417
|
|
|
—
|
|
|
4,932
|
|
|
—
|
|
|
(395
|
)
|
|
37,954
|
|
||||||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
482,539
|
|
|
$
|
—
|
|
|
$
|
22,345
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
505,130
|
|
|
10
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|||||||||||||
|
|
As Previously
Reported in Exhibit 99.2 to the Form 8-K filed November 7, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities, at fair value
|
|
$
|
14,541
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,541
|
|
Equity investments, at fair value
|
|
4,476
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,589
|
|
||||||
Limited liability investments
|
|
4,922
|
|
|
6,113
|
|
|
(1,091
|
)
|
|
—
|
|
|
(850
|
)
|
(a)
|
9,094
|
|
||||||
Limited liability investments, at fair value
|
|
5,771
|
|
|
4,545
|
|
|
21,895
|
|
|
—
|
|
|
—
|
|
|
32,211
|
|
||||||
Investments in private companies, at adjusted cost
|
|
—
|
|
|
—
|
|
|
4,020
|
|
|
—
|
|
|
850
|
|
(a)
|
4,870
|
|
||||||
Real estate investments, at fair value
|
|
—
|
|
|
—
|
|
|
10,662
|
|
|
—
|
|
|
—
|
|
|
10,662
|
|
||||||
Other investments, at cost which approximates fair value
|
|
2,321
|
|
|
1,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,721
|
|
||||||
Short-term investments, at cost which approximates fair value
|
|
151
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
151
|
|
||||||
Total investments
|
|
32,182
|
|
|
12,171
|
|
|
35,486
|
|
|
—
|
|
|
—
|
|
|
79,839
|
|
||||||
Cash and cash equivalents
|
|
20,774
|
|
|
—
|
|
|
310
|
|
|
(14,985
|
)
|
|
(722
|
)
|
(c)
|
5,377
|
|
||||||
Restricted cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,985
|
|
|
—
|
|
|
14,985
|
|
||||||
Investment in investee
|
|
5,230
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,230
|
|
||||||
Accrued investment income
|
|
331
|
|
|
—
|
|
|
176
|
|
|
—
|
|
|
—
|
|
|
507
|
|
||||||
Service fee receivable
|
|
4,286
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
(c)
|
4,431
|
|
||||||
Other receivables
|
|
6,536
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
759
|
|
(c)
|
7,247
|
|
||||||
Deferred acquisition costs, net
|
|
6,325
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,325
|
|
||||||
Property and equipment
|
|
108,008
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
108,008
|
|
||||||
Goodwill
|
|
80,112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
731
|
|
(e)
|
80,843
|
|
||||||
Intangible assets
|
|
80,062
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(616
|
)
|
(e)
|
79,446
|
|
||||||
Other assets
|
|
4,302
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,302
|
|
||||||
Assets held for sale
|
|
136,452
|
|
|
(12,171
|
)
|
|
(14,136
|
)
|
|
—
|
|
|
—
|
|
|
110,145
|
|
||||||
Total Assets
|
|
$
|
484,600
|
|
|
$
|
—
|
|
|
$
|
21,788
|
|
|
$
|
—
|
|
|
$
|
297
|
|
|
$
|
506,685
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accrued expenses and other liabilities
|
|
$
|
10,924
|
|
|
$
|
—
|
|
|
$
|
432
|
|
|
$
|
—
|
|
|
$
|
(997
|
)
|
(a), (c), (d), (f), (g)
|
$
|
10,359
|
|
Income taxes payable
|
|
2,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,644
|
|
||||||
Deferred service fees
|
|
42,257
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,144
|
)
|
(a), (h)
|
41,113
|
|
||||||
Unpaid loss and loss adjustment expenses
|
|
1,329
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,329
|
|
||||||
Bank loan
|
|
4,917
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,917
|
|
||||||
Notes payable
|
|
186,469
|
|
|
—
|
|
|
17,179
|
|
|
—
|
|
|
—
|
|
|
203,648
|
|
||||||
Subordinated debt, at fair value
|
|
52,105
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,105
|
|
||||||
Net deferred income tax liabilities
|
|
28,745
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
(e)
|
28,763
|
|
||||||
Liabilities held for sale
|
|
105,900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
105,900
|
|
||||||
Total Liabilities
|
|
435,290
|
|
|
—
|
|
|
17,611
|
|
|
—
|
|
|
(2,123
|
)
|
|
450,778
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Redeemable Class A preferred stock
|
|
5,461
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(281
|
)
|
(f)
|
5,180
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Additional paid-in capital
|
|
356,021
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150
|
|
(f)
|
356,171
|
|
||||||
Accumulated deficit
|
|
(313,487
|
)
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
2,585
|
|
(d), (e), (f), (g), (h)
|
(310,953
|
)
|
||||||
Accumulated other comprehensive loss
|
|
(3,852
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,852
|
)
|
||||||
Shareholders' equity attributable to common shareholders
|
|
38,682
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
2,735
|
|
|
41,366
|
|
|
11
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Noncontrolling interests in consolidated subsidiaries
|
|
5,167
|
|
|
—
|
|
|
4,228
|
|
|
—
|
|
|
(34
|
)
|
(d), (h)
|
9,361
|
|
||||||
Total Shareholders' Equity
|
|
43,849
|
|
|
—
|
|
|
4,177
|
|
|
—
|
|
|
2,701
|
|
|
50,727
|
|
||||||
Total Liabilities, Class A preferred stock and Shareholders' Equity
|
|
$
|
484,600
|
|
|
$
|
—
|
|
|
$
|
21,788
|
|
|
$
|
—
|
|
|
$
|
297
|
|
|
$
|
506,685
|
|
|
12
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
13
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Basic:
|
|
$
|
(0.26
|
)
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.28
|
)
|
Diluted:
|
|
$
|
(0.26
|
)
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.28
|
)
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.40
|
)
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.49
|
)
|
Diluted:
|
|
$
|
(0.40
|
)
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
—
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.49
|
)
|
Weighted average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
21,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,708
|
|
||||||
Diluted:
|
|
21,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,708
|
|
|
14
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
|
|
Three months ended June 30, 2017
|
|
|||||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service fee and commission income
|
|
$
|
6,584
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
(a), (c), (h)
|
6,564
|
|
|||||
Rental income
|
|
3,347
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
(c)
|
3,354
|
|
||||||
Other income
|
|
211
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
211
|
|
||||||
Total revenues
|
|
10,142
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
10,129
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Claims authorized on vehicle service agreements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,318
|
|
(a)
|
$
|
1,318
|
|
|||||
Loss and loss adjustment expenses
|
|
1,338
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,339
|
)
|
(a)
|
$
|
(1
|
)
|
|||||
Commissions
|
|
811
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
(c)
|
834
|
|
||||||
Cost of services sold
|
|
1,291
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
1,291
|
|
|||||
General and administrative expenses
|
|
6,522
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
(16
|
)
|
(f)
|
6,513
|
|
||||||
Leased real estate segment interest expense
|
|
1,569
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,569
|
|
||||||
Total operating expenses
|
|
11,531
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
(14
|
)
|
|
11,524
|
|
||||||
Operating (loss) income
|
|
(1,389
|
)
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
1
|
|
|
(1,395
|
)
|
||||||
Other revenues (expenses), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment (loss) income
|
|
(1,347
|
)
|
|
475
|
|
|
444
|
|
|
—
|
|
|
1,292
|
|
(a)
|
864
|
|
||||||
Net realized losses
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
(Loss) gain on change in fair value of limited liability investments, at fair value
|
|
—
|
|
|
(821
|
)
|
|
400
|
|
|
—
|
|
|
(1,292
|
)
|
(a)
|
(1,713
|
)
|
||||||
Net change in unrealized loss on private company investments
|
|
—
|
|
|
—
|
|
|
(1,512
|
)
|
|
—
|
|
|
—
|
|
|
(1,512
|
)
|
||||||
Non-operating other income
|
|
31
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
Interest expense not allocated to segments
|
|
(1,216
|
)
|
|
—
|
|
|
(333
|
)
|
|
—
|
|
|
—
|
|
|
(1,549
|
)
|
||||||
Amortization of intangible assets
|
|
(289
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
(e)
|
(272
|
)
|
||||||
Contingent consideration benefit
|
|
212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
212
|
|
||||||
Loss on change in fair value of debt
|
|
(2,702
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,702
|
)
|
||||||
Equity in net income of investee
|
|
(145
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(145
|
)
|
||||||
Total other revenues (expenses), net
|
|
(5,457
|
)
|
|
(346
|
)
|
|
(1,019
|
)
|
|
—
|
|
|
17
|
|
|
(6,805
|
)
|
||||||
(Loss) income from continuing operations before income tax expense
|
|
(6,846
|
)
|
|
(346
|
)
|
|
(1,026
|
)
|
|
—
|
|
|
18
|
|
|
(8,200
|
)
|
||||||
Income tax expense
|
|
1,251
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
(e)
|
1,255
|
|
||||||
(Loss) income from continuing operations
|
|
(8,097
|
)
|
|
(346
|
)
|
|
(1,026
|
)
|
|
—
|
|
|
14
|
|
|
(9,455
|
)
|
||||||
(Loss) income from discontinued operations, net of taxes
|
|
(562
|
)
|
|
346
|
|
|
573
|
|
|
—
|
|
|
9
|
|
(c)
|
366
|
|
||||||
Gain on disposal of discontinued operations, net of taxes
|
|
1,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
1,017
|
|
|||||
Net (loss) income
|
|
(7,642
|
)
|
|
—
|
|
|
(453
|
)
|
|
—
|
|
|
23
|
|
|
(8,072
|
)
|
||||||
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
100
|
|
|
—
|
|
|
(438
|
)
|
|
—
|
|
|
—
|
|
|
(338
|
)
|
||||||
Less: dividends on preferred stock, net of tax
|
|
154
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
132
|
|
(f)
|
$
|
286
|
|
||||
Net loss attributable to common shareholders
|
|
$
|
(7,896
|
)
|
|
$
|
—
|
|
|
$
|
(15
|
)
|
|
$
|
—
|
|
|
$
|
(109
|
)
|
|
$
|
(8,020
|
)
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.39
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.39
|
)
|
|
15
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Diluted:
|
|
$
|
(0.39
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.44
|
)
|
(Loss) earnings per share - discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.06
|
|
|
Diluted:
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.06
|
|
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.37
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.37
|
)
|
Diluted:
|
|
$
|
(0.37
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.37
|
)
|
Weighted-average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
21,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,458
|
|
||||||
Diluted:
|
|
21,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,458
|
|
|
16
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Six months ended June 30, 2018
|
|
|||||||||||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service fee and commission income
|
|
$
|
19,670
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1,159
|
)
|
(a), (c), (h)
|
$
|
18,511
|
|
|
Rental income
|
|
6,682
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
(c)
|
6,693
|
|
||||||
Other income
|
|
321
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
321
|
|
||||||
Total revenues
|
|
26,673
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,148
|
)
|
|
25,525
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Claims authorized on vehicle service agreements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,764
|
|
(a)
|
2,764
|
|
||||||
Loss and loss adjustment expenses
|
|
4,247
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,600
|
)
|
(a)
|
1,647
|
|
||||||
Commissions
|
|
1,817
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
(c)
|
1,747
|
|
||||||
Cost of services sold
|
|
3,716
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,716
|
|
||||||
General and administrative expenses
|
|
14,702
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
46
|
|
(c),(d), (f)
|
14,771
|
|
||||||
Leased real estate segment interest expense
|
|
3,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,098
|
|
||||||
Total operating expenses
|
|
27,580
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
140
|
|
|
27,743
|
|
||||||
Operating loss
|
|
(907
|
)
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
(1,288
|
)
|
|
(2,218
|
)
|
||||||
Other revenues (expenses), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment (loss) income
|
|
(613
|
)
|
|
(613
|
)
|
|
1,067
|
|
|
—
|
|
|
1,807
|
|
(a), (b)
|
1,648
|
|
||||||
Net realized gains
|
|
9
|
|
|
137
|
|
|
251
|
|
|
—
|
|
|
—
|
|
|
397
|
|
||||||
Gain on change in fair value of equity investments
|
|
614
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
744
|
|
||||||
Gain (loss) on change in fair value of limited liability investments, at fair value
|
|
—
|
|
|
—
|
|
|
355
|
|
|
—
|
|
|
(1,816
|
)
|
(a)
|
(1,461
|
)
|
||||||
Net change in unrealized loss on private company investments
|
|
—
|
|
|
—
|
|
|
(155
|
)
|
|
—
|
|
|
—
|
|
|
(155
|
)
|
||||||
Non-operating other income
|
|
987
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(933
|
)
|
(g)
|
21
|
|
||||||
Interest expense not allocated to segments
|
|
(2,905
|
)
|
|
—
|
|
|
(656
|
)
|
|
—
|
|
|
—
|
|
|
(3,561
|
)
|
||||||
Amortization of intangible assets
|
|
(543
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
(e)
|
(509
|
)
|
||||||
Loss on change in fair value of debt
|
|
(1,061
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,061
|
)
|
||||||
Gain on disposal of subsidiary
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
(c)
|
17
|
|
||||||
Equity in net loss of investee
|
|
(284
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(284
|
)
|
||||||
Total other revenues (expenses), net
|
|
(3,796
|
)
|
|
(346
|
)
|
|
829
|
|
|
—
|
|
|
(891
|
)
|
|
(4,204
|
)
|
||||||
(Loss) income from continuing operations before income tax expense
|
|
(4,703
|
)
|
|
(346
|
)
|
|
806
|
|
|
—
|
|
|
(2,179
|
)
|
|
(6,422
|
)
|
||||||
Income tax expense
|
|
438
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
(e)
|
444
|
|
||||||
(Loss) income from continuing operations
|
|
(5,141
|
)
|
|
(346
|
)
|
|
806
|
|
|
—
|
|
|
(2,185
|
)
|
|
(6,866
|
)
|
||||||
Income (loss) from discontinued operations, net of taxes
|
|
1,318
|
|
|
346
|
|
|
(696
|
)
|
|
—
|
|
|
12
|
|
(c)
|
980
|
|
||||||
Loss on disposal of discontinued operations, net of taxes
|
|
(6,611
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
(c)
|
(6,628
|
)
|
||||||
Net loss
|
|
(10,434
|
)
|
|
—
|
|
|
110
|
|
|
—
|
|
|
(2,190
|
)
|
|
(12,514
|
)
|
||||||
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
243
|
|
|
—
|
|
|
278
|
|
|
—
|
|
|
(4
|
)
|
(d), (h)
|
517
|
|
||||||
Less: dividends on preferred stock, net of tax
|
|
259
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
253
|
|
(f)
|
512
|
|
||||||
Net loss attributable to common shareholders
|
|
$
|
(10,936
|
)
|
|
$
|
—
|
|
|
$
|
(168
|
)
|
|
$
|
—
|
|
|
$
|
(2,439
|
)
|
|
$
|
(13,543
|
)
|
(Loss) earnings per share - continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.26
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.36
|
)
|
Diluted:
|
|
$
|
(0.26
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.36
|
)
|
(Loss) earnings per share - discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.24
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.26
|
)
|
Diluted:
|
|
$
|
(0.24
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.26
|
)
|
|
17
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.50
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.62
|
)
|
Diluted:
|
|
$
|
(0.50
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.62
|
)
|
Weighted average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
21,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,708
|
|
||||||
Diluted:
|
|
21,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,708
|
|
|
18
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
|
|
Six months ended June 30, 2017
|
|
|||||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service fee and commission income
|
|
$
|
12,946
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
273
|
|
(a), (c), (h)
|
$
|
13,219
|
|
Rental income
|
|
6,694
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
(c)
|
6,707
|
|
||||||
Other income
|
|
569
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
569
|
|
||||||
Total revenues
|
|
20,209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
286
|
|
|
20,495
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Claims authorized on vehicle service agreements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,679
|
|
(a)
|
2,679
|
|
||||||
Loss and loss adjustment expenses
|
|
2,557
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,558
|
)
|
(a)
|
(1
|
)
|
||||||
Commissions
|
|
1,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
(c)
|
1,629
|
|
||||||
Cost of services sold
|
|
2,595
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,595
|
|
||||||
General and administrative expenses
|
|
12,273
|
|
|
—
|
|
|
275
|
|
|
—
|
|
|
(35
|
)
|
(c), (f)
|
12,513
|
|
||||||
Leased real estate segment interest expense
|
|
3,143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,143
|
|
||||||
Total operating expenses
|
|
22,147
|
|
|
—
|
|
|
275
|
|
|
—
|
|
|
136
|
|
|
22,558
|
|
||||||
Operating (loss) income
|
|
(1,938
|
)
|
|
—
|
|
|
(275
|
)
|
|
—
|
|
|
150
|
|
|
(2,063
|
)
|
||||||
Other revenues (expenses), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment (loss) income
|
|
(1,163
|
)
|
|
785
|
|
|
890
|
|
|
—
|
|
|
1,520
|
|
(a)
|
2,032
|
|
||||||
Net realized losses
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
(Loss) gain on change in fair value of limited liability investments, at fair value
|
|
—
|
|
|
(960
|
)
|
|
821
|
|
|
—
|
|
|
(1,520
|
)
|
(a)
|
(1,659
|
)
|
||||||
Net change in unrealized loss on private company investments
|
|
—
|
|
|
—
|
|
|
(1,265
|
)
|
|
—
|
|
|
—
|
|
|
(1,265
|
)
|
||||||
Non-operating other loss
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
||||||
Interest expense not allocated to segments
|
|
(2,375
|
)
|
|
—
|
|
|
(673
|
)
|
|
—
|
|
|
—
|
|
|
(3,048
|
)
|
||||||
Amortization of intangible assets
|
|
(580
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
(e)
|
(546
|
)
|
||||||
Contingent consideration benefit
|
|
212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
212
|
|
||||||
Loss on change in fair value of debt
|
|
(4,591
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,591
|
)
|
||||||
Equity in net loss of investee
|
|
2,240
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,240
|
|
||||||
Total other revenues (expenses), net
|
|
(6,258
|
)
|
|
(175
|
)
|
|
(262
|
)
|
|
—
|
|
|
34
|
|
|
(6,661
|
)
|
||||||
(Loss) income from continuing operations before income tax expense
|
|
(8,196
|
)
|
|
(175
|
)
|
|
(537
|
)
|
|
—
|
|
|
184
|
|
|
(8,724
|
)
|
||||||
Income tax expense
|
|
1,516
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
(e)
|
1,524
|
|
||||||
(Loss) income from continuing operations
|
|
(9,712
|
)
|
|
(175
|
)
|
|
(537
|
)
|
|
—
|
|
|
176
|
|
|
(10,248
|
)
|
||||||
(Loss) income from discontinued operations, net of taxes
|
|
(431
|
)
|
|
175
|
|
|
156
|
|
|
—
|
|
|
19
|
|
(c)
|
(81
|
)
|
||||||
Gain on disposal of discontinued operations, net of taxes
|
|
1,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,017
|
|
||||||
Net (loss) income
|
|
(9,126
|
)
|
|
$
|
—
|
|
|
(381
|
)
|
|
—
|
|
|
195
|
|
|
(9,312
|
)
|
|||||
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries
|
|
205
|
|
|
—
|
|
|
(361
|
)
|
|
—
|
|
|
17
|
|
(h)
|
(139
|
)
|
||||||
Less: dividends on preferred stock, net of tax
|
|
328
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
260
|
|
(f)
|
588
|
|
||||||
Net loss attributable to common shareholders
|
|
$
|
(9,659
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
(82
|
)
|
|
$
|
(9,761
|
)
|
Loss per share - continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.48
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.50
|
)
|
Diluted:
|
|
$
|
(0.48
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.50
|
)
|
|
19
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Earnings per share - discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
0.03
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.04
|
|
|
Diluted:
|
|
$
|
0.03
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.04
|
|
|
Loss per share – net loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
$
|
(0.45
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.45
|
)
|
Diluted:
|
|
$
|
(0.45
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.45
|
)
|
Weighted-average shares outstanding (in ‘000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
21,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,458
|
|
||||||
Diluted:
|
|
21,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,458
|
|
|
20
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
Six months ended June 30, 2018
|
|
|||||||||||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (loss) income
|
|
$
|
(10,434
|
)
|
|
$
|
—
|
|
|
$
|
110
|
|
|
$
|
—
|
|
|
$
|
(2,190
|
)
|
(b), (d), (e), (f), (g), (h)
|
$
|
(12,514
|
)
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
||||||||||
(Income) loss from discontinued operations, net of taxes
|
|
(1,318
|
)
|
|
(346
|
)
|
|
696
|
|
|
—
|
|
|
(12
|
)
|
(c)
|
(980
|
)
|
||||||
Loss on disposal of discontinued operations, net of taxes
|
|
6,611
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
(c)
|
6,628
|
|
||||||
Equity in net loss of investee
|
|
284
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
284
|
|
||||||
Equity in net (loss) income of limited liability investments
|
|
(164
|
)
|
|
(51
|
)
|
|
25
|
|
|
—
|
|
|
9
|
|
(b)
|
(181
|
)
|
||||||
Loss on change in fair value of limited liability investment
|
|
1,152
|
|
|
664
|
|
|
—
|
|
|
—
|
|
|
(1,816
|
)
|
(a)
|
—
|
|
||||||
Depreciation and amortization expense
|
|
2,704
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
(e)
|
2,678
|
|
||||||
Stock-based compensation expense, net of forfeitures
|
|
588
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
588
|
|
||||||
Net realized gains
|
|
(9
|
)
|
|
(137
|
)
|
|
(251
|
)
|
|
—
|
|
|
—
|
|
|
(397
|
)
|
||||||
Gain on change in fair value of equity investments
|
|
(614
|
)
|
|
(130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(744
|
)
|
||||||
Loss (gain) on change in fair value of limited liability investments, at fair value
|
|
—
|
|
|
—
|
|
|
(355
|
)
|
|
—
|
|
|
1,816
|
|
(a)
|
1,461
|
|
||||||
Net change in unrealized loss on private company investments
|
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
155
|
|
||||||
Loss on change in fair value of debt
|
|
1,061
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,061
|
|
||||||
Deferred income taxes
|
|
51
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
(e)
|
56
|
|
||||||
Amortization of fixed maturities premiums and discounts
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||
Amortization of note payable premium
|
|
(473
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(473
|
)
|
||||||
Gain on disposal of subsidiary
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
(c)
|
(17
|
)
|
||||||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Service fee receivable, net
|
|
(887
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100
|
|
(d)
|
(787
|
)
|
||||||
Other receivables, net
|
|
(1,371
|
)
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(251
|
)
|
(c)
|
(1,617
|
)
|
||||||
Deferred acquisition costs, net
|
|
(337
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(337
|
)
|
||||||
Unpaid loss and loss adjustment expenses
|
|
1,101
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164
|
|
(a)
|
1,265
|
|
||||||
Deferred service fees
|
|
1,480
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,775
|
|
(a), (c), (d), (h)
|
3,255
|
|
||||||
Other, net
|
|
(1,193
|
)
|
|
—
|
|
|
(2,115
|
)
|
|
—
|
|
|
(258
|
)
|
(a),(c), (d), (f) (g)
|
(3,566
|
)
|
||||||
Cash used in operating activities - continuing operations
|
|
(1,736
|
)
|
|
—
|
|
|
(1,730
|
)
|
|
—
|
|
|
(684
|
)
|
|
(4,150
|
)
|
||||||
Cash (used in) provided by operating activities - discontinued operations
|
|
(4,651
|
)
|
|
2,742
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,909
|
)
|
||||||
Net cash (used in) provided by operating activities
|
|
(6,387
|
)
|
|
2,742
|
|
|
(1,730
|
)
|
|
—
|
|
|
(684
|
)
|
|
(6,059
|
)
|
||||||
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from sales and maturities of fixed maturities
|
|
4,965
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,965
|
|
||||||
Proceeds from sales of equity investments
|
|
3,704
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,704
|
|
||||||
Purchases of fixed maturities
|
|
(1,885
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,885
|
)
|
||||||
Purchases of equity investments
|
|
(806
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(806
|
)
|
||||||
Net (acquisitions of) proceeds from limited liability investments
|
|
(606
|
)
|
|
—
|
|
|
2,805
|
|
|
—
|
|
|
—
|
|
|
2,199
|
|
||||||
Net purchases of limited liability investments, at fair value
|
|
—
|
|
|
—
|
|
|
(666
|
)
|
|
—
|
|
|
—
|
|
|
(666
|
)
|
|
21
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Net proceeds from investments in private companies
|
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
||||||
Net proceeds from other investments
|
|
405
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
405
|
|
||||||
Proceeds from disposal of subsidiary
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
565
|
|
(c)
|
565
|
|
||||||
Net proceeds from sale of discontinued operations
|
|
1,900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(771
|
)
|
(c)
|
1,129
|
|
||||||
Net disposals of property and equipment and intangible assets
|
|
(80
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
673
|
|
(c)
|
593
|
|
||||||
Cash provided by investing activities - continuing operations
|
|
7,597
|
|
|
—
|
|
|
2,234
|
|
|
—
|
|
|
467
|
|
|
10,298
|
|
||||||
Cash used in investing activities - discontinued operations
|
|
(337
|
)
|
|
(2,749
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,086
|
)
|
||||||
Net cash provided by (used in) investing activities
|
|
7,260
|
|
|
(2,749
|
)
|
|
2,234
|
|
|
—
|
|
|
467
|
|
|
7,212
|
|
||||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Principal payments on bank loan
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
||||||
Principal payments on notes payable
|
|
(1,429
|
)
|
|
—
|
|
|
(203
|
)
|
|
—
|
|
|
—
|
|
|
(1,632
|
)
|
||||||
Cash provided by financing activities - continuing operations
|
|
(1,929
|
)
|
|
—
|
|
|
(203
|
)
|
|
—
|
|
|
—
|
|
|
(2,132
|
)
|
||||||
Cash provided by financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net cash provided by financing activities
|
|
(1,929
|
)
|
|
—
|
|
|
(203
|
)
|
|
—
|
|
|
—
|
|
|
(2,132
|
)
|
||||||
Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations
|
|
3,932
|
|
|
—
|
|
|
301
|
|
|
—
|
|
|
(217
|
)
|
|
4,016
|
|
||||||
Cash and cash equivalents and restricted cash at beginning of period
|
|
44,286
|
|
|
—
|
|
|
311
|
|
|
—
|
|
|
(723
|
)
|
(c)
|
43,874
|
|
||||||
Less: cash and cash equivalents and restricted cash of discontinued operations at beginning of period
|
|
23,505
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
(c)
|
23,512
|
|
||||||
Cash and cash equivalents and restricted cash of continuing operations at beginning of period
|
|
20,781
|
|
|
—
|
|
|
311
|
|
|
—
|
|
|
(730
|
)
|
|
20,362
|
|
||||||
Cash and cash equivalents and restricted cash of continuing operations at end of period
|
|
$
|
24,713
|
|
|
$
|
—
|
|
|
$
|
612
|
|
|
$
|
—
|
|
|
$
|
(947
|
)
|
|
$
|
24,378
|
|
|
22
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
|
|
|
|
Six months ended June 30, 2017
|
|
|||||||||||||||||
|
|
As Previously
Reported on Form 10-Q filed August 8, 2018
|
|
Correction of Error 1
|
|
Correction of Error 2
|
|
Correction of Error 3
|
|
Immaterial Accounting Adjustments and Reclassifications
|
|
As Restated
|
||||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (loss) income
|
|
$
|
(9,126
|
)
|
|
$
|
—
|
|
|
$
|
(381
|
)
|
|
$
|
—
|
|
|
$
|
195
|
|
(e), (f), (h)
|
$
|
(9,312
|
)
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss (income) from discontinued operations, net of taxes
|
|
431
|
|
|
(175
|
)
|
|
(156
|
)
|
|
—
|
|
|
(19
|
)
|
(c)
|
81
|
|
||||||
Gain on disposal of discontinued operations, net of taxes
|
|
(1,017
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,017
|
)
|
||||||
Equity in net income of investee
|
|
(2,240
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,240
|
)
|
||||||
Equity in net loss (income) of limited liability investments
|
|
166
|
|
|
(785
|
)
|
|
19
|
|
|
—
|
|
|
—
|
|
|
(600
|
)
|
||||||
Loss on change in fair value of limited liability investment
|
|
1,473
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,473
|
)
|
(a)
|
—
|
|
||||||
Depreciation and amortization expense
|
|
3,187
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
(e)
|
3,153
|
|
||||||
Contingent consideration benefit
|
|
(212
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(212
|
)
|
||||||
Stock-based compensation expense, net of forfeitures
|
|
588
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
588
|
|
||||||
Net realized losses
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Loss (gain) on change in fair value of limited liability investments, at fair value
|
|
—
|
|
|
960
|
|
|
(821
|
)
|
|
—
|
|
|
1,520
|
|
(a)
|
1,659
|
|
||||||
Net change in unrealized loss on private company investments
|
|
—
|
|
|
—
|
|
|
1,265
|
|
|
—
|
|
|
—
|
|
|
1,265
|
|
||||||
Loss on change in fair value of debt
|
|
4,591
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,591
|
|
||||||
Deferred income taxes
|
|
1,090
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
(e)
|
1,098
|
|
||||||
Amortization of fixed maturities premiums and discounts
|
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
||||||
Amortization of note payable premium
|
|
(483
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(483
|
)
|
||||||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service fee receivable, net
|
|
(88
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
||||||
Other receivables, net
|
|
(1,647
|
)
|
|
—
|
|
|
9
|
|
|
—
|
|
|
(95
|
)
|
(c)
|
(1,733
|
)
|
||||||
Deferred acquisition costs, net
|
|
(227
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(227
|
)
|
||||||
Unpaid loss and loss adjustment expenses
|
|
(523
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
121
|
|
(a)
|
(402
|
)
|
||||||
Deferred service fees
|
|
2,061
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
(a), (c), (h)
|
2,100
|
|
||||||
Other, net
|
|
(817
|
)
|
|
—
|
|
|
2,754
|
|
|
—
|
|
|
(359
|
)
|
(a),(c), (d), (f), (g)
|
1,578
|
|
||||||
Cash (used in) provided by operating activities - continuing operations
|
|
(2,745
|
)
|
|
—
|
|
|
2,689
|
|
|
—
|
|
|
(97
|
)
|
|
(153
|
)
|
||||||
Cash used in operating activities - discontinued operations
|
|
(5,118
|
)
|
|
(1,848
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,966
|
)
|
||||||
Net cash (used in) provided by operating activities
|
|
(7,863
|
)
|
|
(1,848
|
)
|
|
2,689
|
|
|
—
|
|
|
(97
|
)
|
|
(7,119
|
)
|
||||||
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from sales and maturities of fixed maturities
|
|
145
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
||||||
Purchases of fixed maturities
|
|
(192
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(192
|
)
|
||||||
Purchases of equity investments
|
|
(506
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(506
|
)
|
||||||
Net acquisitions of limited liability investments
|
|
(1,000
|
)
|
|
—
|
|
|
(1,408
|
)
|
|
—
|
|
|
—
|
|
|
(2,408
|
)
|
||||||
Net purchases of limited liability investments, at fair value
|
|
—
|
|
|
—
|
|
|
(484
|
)
|
|
—
|
|
|
—
|
|
|
(484
|
)
|
||||||
Net purchases of investments in private companies
|
|
—
|
|
|
—
|
|
|
(171
|
)
|
|
—
|
|
|
—
|
|
|
(171
|
)
|
||||||
Net proceeds from other investments
|
|
373
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
373
|
|
||||||
Net proceeds from short-term investments
|
|
250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
||||||
Net proceeds from sale of discontinued operations
|
|
1,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,017
|
|
|
23
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
Net purchases of property and equipment
|
|
(450
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
(c)
|
(439
|
)
|
||||||
Cash (used in) provided by investing activities - continuing operations
|
|
(363
|
)
|
|
—
|
|
|
(2,063
|
)
|
|
—
|
|
|
11
|
|
|
(2,415
|
)
|
||||||
Cash provided by investing activities - discontinued operations
|
|
6,772
|
|
|
1,840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,612
|
|
||||||
Net cash provided by (used in) investing activities
|
|
6,409
|
|
|
1,840
|
|
|
(2,063
|
)
|
|
—
|
|
|
11
|
|
|
6,197
|
|
||||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Principal payments on note payable
|
|
(1,264
|
)
|
|
—
|
|
|
(193
|
)
|
|
—
|
|
|
—
|
|
|
(1,457
|
)
|
||||||
Cash used in financing activities - continuing operations
|
|
(1,264
|
)
|
|
—
|
|
|
(193
|
)
|
|
—
|
|
|
—
|
|
|
(1,457
|
)
|
||||||
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net cash used in financing activities
|
|
(1,264
|
)
|
|
—
|
|
|
(193
|
)
|
|
—
|
|
|
—
|
|
|
(1,457
|
)
|
||||||
Net (decrease) increase in cash and cash equivalents and restricted cash from continuing operations
|
|
(4,372
|
)
|
|
—
|
|
|
433
|
|
|
—
|
|
|
(86
|
)
|
|
(4,025
|
)
|
||||||
Cash and cash equivalents and restricted cash at beginning of period
|
|
36,475
|
|
|
—
|
|
|
325
|
|
|
—
|
|
|
(795
|
)
|
(c)
|
36,005
|
|
||||||
Less: cash and cash equivalents and restricted cash of discontinued operations at beginning of period
|
|
4,513
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
(c)
|
4,524
|
|
||||||
Cash and cash equivalents and restricted cash of continuing operations at beginning of period
|
|
31,962
|
|
|
—
|
|
|
325
|
|
|
—
|
|
|
(806
|
)
|
|
31,481
|
|
||||||
Cash and cash equivalents and restricted cash of continuing operations at end of period
|
|
$
|
27,590
|
|
|
$
|
—
|
|
|
$
|
758
|
|
|
$
|
—
|
|
|
$
|
(892
|
)
|
|
$
|
27,456
|
|
(a)
|
Reclassifications to conform to current presentation. Such reclassifications have no impact on previously reported net loss or total shareholders' equity.
|
(b)
|
Adjustment to record equity-pick up loss related to a limited liability investment, with a corresponding decrease to net investment income and an increase to accumulated deficit.
|
(c)
|
Reclassifications as a result of misclassifications of amounts in a previous filing. Such reclassifications have no impact on previously reported net loss or total shareholders' equity.
|
(d)
|
Adjustments to Extended Warranty segment service fee receivable, accrued expenses and other liabilities and deferred service fees, with offsetting adjustments to accrued expenses and other liabilities, general and administrative expenses and accumulated deficit.
|
(e)
|
Adjustment to increase goodwill, with offsetting decreases to intangible assets, amortization of intangible assets and accumulated deficit, related to the Company's acquisition of Argo Management in 2016. Also includes the related tax impact of these adjustments, resulting in an increase to net deferred income tax liabilities, with offsetting decreases to income tax benefit and accumulated deficit.
|
(f)
|
Adjustment to decrease redeemable Class A preferred stock, with an offsetting increase to additional paid-in capital and an offsetting decrease to general and administrative expenses related to the Company’s issuance of Class A preferred stock and Class C Warrants on February 3, 2014. Also includes the related reclassifications of accrued dividends on equity-classified warrants from accrued expenses and other liabilities to redeemable Class A preferred stock and dividend expense from accumulated deficit to additional paid-in-capital.
|
(g)
|
Adjustment to decrease accrued expenses and other liabilities with an offsetting decrease to accumulated deficit and an offsetting decrease to non-operating other income, related to escheat liability.
|
(h)
|
Adjustment to Extended Warranty deferred service fees, with an offsetting adjustment to service fee and commission income and accumulated deficit, related to revenue recognition.
|
|
24
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
25
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
26
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
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
|
|
||||
Income (loss) from discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
22,956
|
|
|
$
|
33,518
|
|
|
$
|
51,592
|
|
|
$
|
66,440
|
|
Net investment income (loss)
|
|
208
|
|
|
(88
|
)
|
|
434
|
|
|
(145
|
)
|
||||
Net realized (losses) gains
|
|
(134
|
)
|
|
735
|
|
|
(134
|
)
|
|
1,133
|
|
||||
Gain on change in fair value of equity investments
|
|
96
|
|
|
—
|
|
|
106
|
|
|
—
|
|
||||
Other income
|
|
2,445
|
|
|
2,556
|
|
|
4,876
|
|
|
5,027
|
|
||||
Total revenues
|
|
25,571
|
|
|
36,721
|
|
|
56,874
|
|
|
72,455
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expenses
|
|
18,927
|
|
|
26,130
|
|
|
41,728
|
|
|
51,321
|
|
||||
Commissions and premium taxes
|
|
2,225
|
|
|
5,353
|
|
|
6,388
|
|
|
10,636
|
|
||||
General and administrative expenses
|
|
3,825
|
|
|
4,880
|
|
|
7,778
|
|
|
10,430
|
|
||||
Impairment of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
||||
Total expenses
|
|
24,977
|
|
|
36,363
|
|
|
55,894
|
|
|
72,637
|
|
||||
Income (loss) from discontinued operations before income tax benefit
|
|
594
|
|
|
358
|
|
|
980
|
|
|
(182
|
)
|
||||
Income tax benefit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
||||
Income (loss) from discontinued operations, net of taxes
|
|
594
|
|
|
358
|
|
|
980
|
|
|
(97
|
)
|
||||
(Loss) gain on disposal of discontinued operations before income tax expense
|
|
(6,628
|
)
|
|
1,017
|
|
|
(6,628
|
)
|
|
1,017
|
|
||||
Income tax expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
(Loss) gain on disposal of discontinued operations, net of taxes
|
|
(6,628
|
)
|
|
1,017
|
|
|
(6,628
|
)
|
|
1,017
|
|
||||
Total (loss) income from discontinued operations, net of taxes
|
|
$
|
(6,034
|
)
|
|
$
|
1,375
|
|
|
$
|
(5,648
|
)
|
|
$
|
920
|
|
|
28
|
|
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
|
|
3,437
|
|
|
4,405
|
|||
Total investments
|
|
46,151
|
|
|
43,078
|
|||
Cash and cash equivalents
|
|
18,520
|
|
|
23,512
|
|||
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
|
|
|
222
|
|
||
Intangible assets, net
|
|
—
|
|
|
7,553
|
|
||
Other assets
|
|
138
|
|
|
299
|
|
||
Assets held for sale
|
|
$
|
115,107
|
|
|
$
|
110,145
|
|
Liabilities
|
|
|
|
|
||||
Unpaid loss and loss adjustment expenses
|
|
$
|
58,817
|
|
|
$
|
62,323
|
|
Unearned premiums
|
|
34,969
|
|
|
36,686
|
|
||
Reinsurance payable
|
|
14,869
|
|
|
82
|
|
||
Net deferred income tax liabilities
|
|
—
|
|
|
1,586
|
|
||
Accrued expenses and other liabilities
|
|
4,211
|
|
|
5,223
|
|
||
Liabilities held for sale
|
|
$
|
112,866
|
|
|
$
|
105,900
|
|
(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
|
|
|
29
|
|
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
|
|
25
|
|
|
146
|
|
|
—
|
|
|
171
|
|
||||
Warrants - not publicly traded
|
|
960
|
|
|
173
|
|
|
285
|
|
|
848
|
|
||||
Total equity investments
|
|
4,868
|
|
|
319
|
|
|
598
|
|
|
4,589
|
|
||||
Total fixed maturities and equity investments
|
|
$
|
19,575
|
|
|
$
|
319
|
|
|
$
|
764
|
|
|
$
|
19,130
|
|
(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
|
|
|
30
|
|
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;
|
|
31
|
|
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.
|
|
32
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
•
|
the opinions of external investment and portfolio managers;
|
•
|
the financial condition and prospects of the investee;
|
•
|
recent operating trends and forecasted performance of the investee;
|
•
|
current market conditions in the geographic area or industry in which the investee operates;
|
•
|
changes in credit ratings; and
|
•
|
changes in the regulatory environment.
|
|
33
|
|
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:
|
|
|
|
|
|
|
|
|
||||||||
Interest from fixed maturities
|
|
$
|
57
|
|
|
$
|
49
|
|
|
$
|
90
|
|
|
$
|
83
|
|
Dividends
|
|
82
|
|
|
113
|
|
|
156
|
|
|
218
|
|
||||
Income from limited liability investments
|
|
189
|
|
|
365
|
|
|
181
|
|
|
600
|
|
||||
Income from limited liability investments, at fair value
|
|
482
|
|
|
232
|
|
|
701
|
|
|
466
|
|
||||
(Loss) gain on change in fair value of warrants - not publicly traded
|
|
—
|
|
|
(198
|
)
|
|
—
|
|
|
47
|
|
||||
Income from real estate investments
|
|
200
|
|
|
200
|
|
|
400
|
|
|
400
|
|
||||
Other
|
|
9
|
|
|
111
|
|
|
137
|
|
|
233
|
|
||||
Gross investment income
|
|
1,019
|
|
|
872
|
|
|
1,665
|
|
|
2,047
|
|
||||
Investment expenses
|
|
(9
|
)
|
|
(8
|
)
|
|
(17
|
)
|
|
(15
|
)
|
||||
Net investment income
|
|
$
|
1,010
|
|
|
$
|
864
|
|
|
$
|
1,648
|
|
|
$
|
2,032
|
|
(in thousands)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Gross realized gains
|
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
398
|
|
|
$
|
—
|
|
Gross realized losses
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Net realized gains (losses)
|
|
$
|
132
|
|
|
$
|
(1
|
)
|
|
$
|
397
|
|
|
$
|
(1
|
)
|
(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
|
)
|
|
$
|
—
|
|
|
$
|
245
|
|
|
$
|
—
|
|
Change in unrealized (losses) gains on equity investments held at end of the period
|
|
(411
|
)
|
|
—
|
|
|
499
|
|
|
—
|
|
||||
(Loss) gain on change in fair value of equity investments
|
|
$
|
(421
|
)
|
|
$
|
—
|
|
|
$
|
744
|
|
|
$
|
—
|
|
|
34
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(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
|
|
(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
|
|
|||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
||||||
Tenant relationship
|
|
73,667
|
|
|
—
|
|
|
73,667
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
87,664
|
|
|
$
|
8,729
|
|
|
$
|
78,935
|
|
|
35
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(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
|
|
|||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
||||||
Tenant relationship
|
|
73,667
|
|
|
—
|
|
|
73,667
|
|
|||
Trade name
|
|
663
|
|
|
—
|
|
|
663
|
|
|||
Total
|
|
$
|
87,664
|
|
|
$
|
8,218
|
|
|
$
|
79,446
|
|
(in thousands)
|
|
June 30,
|
|
|
December 31,
|
|
||
|
|
2018
|
|
|
2017
|
|
||
Deferred service fees
|
|
$
|
41,758
|
|
|
$
|
40,531
|
|
Accrued expenses and other liabilities
|
|
263
|
|
|
263
|
|
||
Balance at June 30, net
|
|
$
|
42,021
|
|
|
$
|
40,794
|
|
|
36
|
|
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
|
|
|
$
|
2,202
|
|
Less reinsurance recoverable related to unpaid loss and loss adjustment expenses
|
|
72
|
|
|
354
|
|
||
Balance at beginning of period, net
|
|
1,257
|
|
|
1,848
|
|
||
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
|
|
|
1,468
|
|
||
Plus reinsurance recoverable related to unpaid loss and loss adjustment expenses
|
|
100
|
|
|
332
|
|
||
Balance at end of period, gross
|
|
$
|
2,594
|
|
|
$
|
1,800
|
|
|
37
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(in thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Principal
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
||||||
Bank loan
|
|
$
|
4,417
|
|
|
$
|
4,417
|
|
|
$
|
4,163
|
|
|
$
|
4,917
|
|
|
$
|
4,917
|
|
|
$
|
4,864
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage
|
|
174,707
|
|
|
184,567
|
|
|
163,059
|
|
|
176,136
|
|
|
186,469
|
|
|
168,477
|
|
||||||
Flower Note
|
|
7,976
|
|
|
7,976
|
|
|
8,003
|
|
|
8,179
|
|
|
8,179
|
|
|
8,825
|
|
||||||
Net Lease Note
|
|
9,000
|
|
|
9,000
|
|
|
9,745
|
|
|
9,000
|
|
|
9,000
|
|
|
9,870
|
|
||||||
Total notes payable
|
|
191,683
|
|
|
201,543
|
|
|
180,807
|
|
|
193,315
|
|
|
203,648
|
|
|
187,172
|
|
||||||
Subordinated debt
|
|
90,500
|
|
|
52,822
|
|
|
52,822
|
|
|
90,500
|
|
|
52,105
|
|
|
52,105
|
|
||||||
Total
|
|
$
|
286,600
|
|
|
$
|
258,782
|
|
|
$
|
237,792
|
|
|
$
|
288,732
|
|
|
$
|
260,670
|
|
|
$
|
244,141
|
|
|
38
|
|
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
|
|
$
|
4,226
|
|
|
$
|
4,078
|
|
|
$
|
8,615
|
|
|
$
|
8,632
|
|
GAP commissions - IWS
|
|
200
|
|
|
235
|
|
|
392
|
|
|
252
|
|
||||
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
|
|
1,736
|
|
|
—
|
|
|
3,337
|
|
|
—
|
|
||||
Service fee and commission income
|
|
$
|
8,860
|
|
|
$
|
6,564
|
|
|
$
|
18,511
|
|
|
$
|
13,219
|
|
|
39
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
40
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
41
|
|
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
|
|
$
|
(4,262
|
)
|
|
$
|
(9,447
|
)
|
|
$
|
(6,866
|
)
|
|
$
|
(10,232
|
)
|
(Less) plus: net (income) loss attributable to noncontrolling interests
|
|
(158
|
)
|
|
338
|
|
|
(517
|
)
|
|
139
|
|
||||
Less: dividends on preferred stock, net of tax
|
|
(259
|
)
|
|
(286
|
)
|
|
(512
|
)
|
|
(588
|
)
|
||||
Loss from continuing operations attributable to common shareholders
|
|
$
|
(4,679
|
)
|
|
$
|
(9,395
|
)
|
|
$
|
(7,895
|
)
|
|
$
|
(10,681
|
)
|
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
|
|
$
|
(0.22
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.50
|
)
|
Diluted loss from continuing operations per share
|
|
$
|
(0.22
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.50
|
)
|
|
42
|
|
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
|
|
|
43
|
|
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
|
|
(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
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Balance at April 1, 2018
|
|
$
|
(891
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,021
|
|
|
$
|
35,844
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive (loss) income arising during the period
|
|
(72
|
)
|
|
—
|
|
|
778
|
|
|
706
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||
Net current-period other comprehensive (loss) income
|
|
(76
|
)
|
|
—
|
|
|
778
|
|
|
702
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balance at June 30, 2018
|
|
$
|
(967
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,799
|
|
|
$
|
36,546
|
|
|
44
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
(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
|
)
|
(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
|
|
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 (loss) income arising during the period
|
|
(430
|
)
|
|
—
|
|
|
344
|
|
|
(86
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||
Net current-period other comprehensive (loss) income
|
|
(441
|
)
|
|
—
|
|
|
344
|
|
|
(97
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balance at June 30, 2018
|
|
$
|
(967
|
)
|
|
$
|
(3,286
|
)
|
|
$
|
40,799
|
|
|
$
|
36,546
|
|
(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
|
)
|
|
45
|
|
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
|
|
|
46
|
|
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
|
|
8,860
|
|
|
6,564
|
|
|
18,511
|
|
|
13,219
|
|
||||
Other income
|
|
36
|
|
|
51
|
|
|
102
|
|
|
136
|
|
||||
Total Extended Warranty
|
|
8,896
|
|
|
6,615
|
|
|
18,613
|
|
|
13,355
|
|
||||
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
|
|
12,309
|
|
|
10,116
|
|
|
25,514
|
|
|
20,409
|
|
||||
Rental income not allocated to segments
|
|
4
|
|
|
7
|
|
|
11
|
|
|
13
|
|
||||
Total revenues
|
|
$
|
12,313
|
|
|
$
|
10,123
|
|
|
$
|
25,525
|
|
|
$
|
20,422
|
|
|
47
|
|
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
|
|
$
|
1,090
|
|
|
$
|
686
|
|
|
1,936
|
|
|
1,423
|
|
||
Leased Real Estate
|
|
618
|
|
|
872
|
|
|
1,492
|
|
|
1,790
|
|
||||
Total segment operating income
|
|
1,708
|
|
|
1,558
|
|
|
3,428
|
|
|
3,213
|
|
||||
Net investment income
|
|
1,010
|
|
|
864
|
|
|
1,648
|
|
|
2,032
|
|
||||
Net realized gains (losses)
|
|
132
|
|
|
(1
|
)
|
|
397
|
|
|
(1
|
)
|
||||
(Loss) gain on change in fair value of equity investments
|
|
(421
|
)
|
|
—
|
|
|
744
|
|
|
—
|
|
||||
Loss on change in fair value of limited liability investments, at fair value
|
|
(525
|
)
|
|
(1,713
|
)
|
|
(1,461
|
)
|
|
(1,659
|
)
|
||||
Net change in unrealized loss on private company investments
|
|
(155
|
)
|
|
(1,512
|
)
|
|
(155
|
)
|
|
(1,265
|
)
|
||||
Interest expense not allocated to segments
|
|
(1,844
|
)
|
|
(1,549
|
)
|
|
(3,561
|
)
|
|
(3,048
|
)
|
||||
Other income and expenses not allocated to segments, net
|
|
(3,213
|
)
|
|
(2,932
|
)
|
|
(5,625
|
)
|
|
(5,295
|
)
|
||||
Amortization of intangible assets
|
|
(254
|
)
|
|
(272
|
)
|
|
(509
|
)
|
|
(546
|
)
|
||||
Contingent consideration benefit
|
|
—
|
|
|
212
|
|
|
—
|
|
|
212
|
|
||||
Loss on change in fair value of debt
|
|
(142
|
)
|
|
(2,702
|
)
|
|
(1,061
|
)
|
|
(4,591
|
)
|
||||
Gain on disposal of subsidiary
|
|
17
|
|
|
—
|
|
|
17
|
|
|
—
|
|
||||
Equity in net (loss) income of investee
|
|
(385
|
)
|
|
(145
|
)
|
|
(284
|
)
|
|
2,240
|
|
||||
Loss from continuing operations before income tax expense
|
|
(4,072
|
)
|
|
(8,192
|
)
|
|
(6,422
|
)
|
|
(8,708
|
)
|
||||
Income tax expense
|
|
190
|
|
|
1,255
|
|
|
444
|
|
|
1,524
|
|
||||
Loss from continuing operations
|
|
$
|
(4,262
|
)
|
|
$
|
(9,447
|
)
|
|
$
|
(6,866
|
)
|
|
$
|
(10,232
|
)
|
•
|
Level 1 – Quoted prices for identical instruments in active markets.
|
|
48
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
•
|
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.
|
•
|
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.
|
•
|
The fair value of the Company's investment in 1347 Investors is calculated based on a model that distributes the net equity of 1347 Investors to all classes of membership interests. The model uses quoted market prices and significant market observable inputs. This investment is categorized in Level 2 of the fair value hierarchy.
|
•
|
The fair value of Net Lease's investments in limited liability companies is based upon the net asset values of the underlying investments companies as a practical expedient to estimate fair value. The Company applies the net asset value practical expedient to Net Lease's limited liability investments on an investment-by-investment basis unless it is probable that the Company will sell a portion of an investment at an amount different from the net asset value of the investment. Investments that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy.
|
|
49
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
•
|
The fair value of Argo Holdings' limited liability investments that hold investments in search funds is based on the initial investment in the search funds. The fair value of Argo Holdings' limited liability investments that hold investments in private operating companies is valued using a market approach including valuation multiples applied to corresponding performance metrics, such as earnings before interest, tax, depreciation and amortization; revenue; or net earnings. The selected valuation multiples were estimated using multiples provided by the investees and review of those multiples in light of investor updates, performance reports, financial statements and other relevant information. These investments are categorized in Level 3 of the fair value hierarchy.
|
|
50
|
|
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)
|
|
|
Measured at Net Asset Value
|
|
|||||
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
|
|
1,491
|
|
|
1,491
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Warrants
|
|
942
|
|
|
71
|
|
|
871
|
|
|
—
|
|
|
—
|
|
|||||
Total equity investments
|
|
2,433
|
|
|
1,562
|
|
|
871
|
|
|
—
|
|
|
—
|
|
|||||
Limited liability investments, at fair value
|
|
31,416
|
|
|
—
|
|
|
8,498
|
|
|
2,083
|
|
|
20,835
|
|
|||||
Real estate investments
|
|
10,662
|
|
|
—
|
|
|
—
|
|
|
10,662
|
|
|
—
|
|
|||||
Other investments
|
|
3,316
|
|
|
—
|
|
|
3,316
|
|
|
—
|
|
|
—
|
|
|||||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|
—
|
|
|
—
|
|
|||||
Total assets
|
|
$
|
59,339
|
|
|
$
|
1,562
|
|
|
$
|
24,197
|
|
|
$
|
12,745
|
|
|
$
|
20,835
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Subordinated debt
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
52,822
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
51
|
|
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)
|
|
|
Measured at Net Asset Value
|
|
|||||
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
|
|
1,019
|
|
|
171
|
|
|
848
|
|
|
—
|
|
|
—
|
|
|||||
Total equity investments
|
|
4,589
|
|
|
3,741
|
|
|
848
|
|
|
—
|
|
|
—
|
|
|||||
Limited liability investments, at fair value
|
|
32,211
|
|
|
—
|
|
|
10,314
|
|
|
1,397
|
|
|
20,500
|
|
|||||
Real estate investments
|
|
10,662
|
|
|
—
|
|
|
—
|
|
|
10,662
|
|
|
—
|
|
|||||
Other investments
|
|
3,721
|
|
|
—
|
|
|
3,721
|
|
|
—
|
|
|
—
|
|
|||||
Short-term investments
|
|
151
|
|
|
—
|
|
|
151
|
|
|
—
|
|
|
—
|
|
|||||
Total assets
|
|
$
|
65,875
|
|
|
$
|
3,741
|
|
|
$
|
29,575
|
|
|
$
|
12,059
|
|
|
$
|
20,500
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Subordinated debt
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
52,105
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
52
|
|
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
|
|
|||||
Assets:
|
|
|
|
|
|
|
|
|
|||||||||
Limited liability investments, at fair value:
|
|
|
|
|
|
|
|
|
|||||||||
Beginning balance
|
|
$
|
1,634
|
|
|
$
|
1,008
|
|
|
$
|
1,397
|
|
|
$
|
939
|
|
|
Purchases
|
|
504
|
|
|
35
|
|
|
978
|
|
|
104
|
|
|||||
Distributions received
|
|
(70
|
)
|
|
(86
|
)
|
|
(311
|
)
|
|
(86
|
)
|
|||||
Change in fair value of limited liability investments, at fair value included in net loss
|
|
15
|
|
|
(30
|
)
|
|
19
|
|
|
(30
|
)
|
|||||
Ending balance
|
|
2,083
|
|
|
927
|
|
|
2,083
|
|
|
927
|
|
|||||
Real estate investments:
|
|
|
|
|
|
|
|
|
|||||||||
Beginning balance
|
|
10,662
|
|
|
10,662
|
|
|
10,662
|
|
|
10,662
|
|
|||||
Change in fair value of real estate investments included in net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Ending balance
|
|
10,662
|
|
—
|
|
10,662
|
|
|
10,662
|
|
|
10,662
|
|
||||
Total
|
|
$
|
12,745
|
|
|
$
|
11,589
|
|
|
$
|
12,745
|
|
|
$
|
11,589
|
|
Categories
|
|
Fair Value (in thousands)
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Input Value(s)
|
|||
Limited liability investments, at fair value
|
|
$
|
2,083
|
|
|
Market approach
|
|
Valuation multiples
|
|
5.0x-7.0x
|
|
Real estate investments
|
|
$
|
10,662
|
|
|
Market and income approach
|
|
Cap rates
|
|
7.5
|
%
|
Categories
|
|
Fair Value (in thousands)
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Input Value(s)
|
|||
Limited liability investments, at fair value
|
|
$
|
1,397
|
|
|
Market approach
|
|
Valuation multiples
|
|
5.0x -7.0x
|
|
Real estate investments
|
|
$
|
10,662
|
|
|
Market and income approach
|
|
Cap rates
|
|
7.5
|
%
|
June 30, 2018
|
|
Fair Value (in thousands)
|
|
Unfunded Commitments
|
|
Redemption Frequency
|
|
Redemption Notice Period
|
||
Limited liability investments, at fair value
|
|
$
|
20,835
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
53
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
December 31, 2017
|
|
Fair Value (in thousands)
|
|
Unfunded Commitments
|
|
Redemption Frequency
|
|
Redemption Notice Period
|
||
Limited liability investments, at fair value
|
|
$
|
20,500
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
54
|
|
KINGSWAY FINANCIAL SERVICES INC.
Notes to Consolidated Financial Statements (Unaudited) June 30, 2018
|
|
55
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
56
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
57
|
|
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
|
|
58
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
59
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
60
|
|
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
|
1,090
|
|
686
|
|
404
|
|
1,936
|
|
1,423
|
|
513
|
|
Leased Real Estate
|
618
|
|
872
|
|
(254
|
)
|
1,492
|
|
1,790
|
|
(298
|
)
|
Total segment operating income
|
1,708
|
|
1,558
|
|
150
|
|
3,428
|
|
3,213
|
|
215
|
|
Net investment income
|
1,010
|
|
864
|
|
146
|
|
1,648
|
|
2,032
|
|
(384
|
)
|
Net realized gains (losses)
|
132
|
|
(1
|
)
|
133
|
|
397
|
|
(1
|
)
|
398
|
|
(Loss) gain on change in fair value of equity investments
|
(421
|
)
|
—
|
|
(421
|
)
|
744
|
|
—
|
|
744
|
|
Loss on change in fair value of limited liability investments, at fair value
|
(525
|
)
|
(1,713
|
)
|
1,188
|
|
(1,461
|
)
|
(1,659
|
)
|
198
|
|
Net change in unrealized loss on private company investments
|
(155
|
)
|
(1,512
|
)
|
1,357
|
|
(155
|
)
|
(1,265
|
)
|
1,110
|
|
Interest expense not allocated to segments
|
(1,844
|
)
|
(1,549
|
)
|
(295
|
)
|
(3,561
|
)
|
(3,048
|
)
|
(513
|
)
|
Other income and expenses not allocated to segments, net
|
(3,213
|
)
|
(2,932
|
)
|
(281
|
)
|
(5,625
|
)
|
(5,295
|
)
|
(330
|
)
|
Amortization of intangible assets
|
(254
|
)
|
(272
|
)
|
18
|
|
(509
|
)
|
(546
|
)
|
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
|
|
Gain on disposal of subsidiary
|
17
|
|
—
|
|
17
|
|
17
|
|
—
|
|
17
|
|
Equity in net (loss) income of investee
|
(385
|
)
|
(145
|
)
|
(240
|
)
|
(284
|
)
|
2,240
|
|
(2,524
|
)
|
Loss from continuing operations before income tax expense
|
(4,072
|
)
|
(8,192
|
)
|
4,120
|
|
(6,422
|
)
|
(8,708
|
)
|
2,286
|
|
Income tax expense
|
190
|
|
1,255
|
|
(1,065
|
)
|
444
|
|
1,524
|
|
(1,080
|
)
|
Loss from continuing operations
|
(4,262
|
)
|
(9,447
|
)
|
5,185
|
|
(6,866
|
)
|
(10,232
|
)
|
3,366
|
|
Income (loss) from discontinued operations, net of taxes
|
594
|
|
358
|
|
236
|
|
980
|
|
(97
|
)
|
1,077
|
|
(Loss) gain on disposal of discontinued operations, net of taxes
|
(6,628
|
)
|
1,017
|
|
(7,645
|
)
|
(6,628
|
)
|
1,017
|
|
(7,645
|
)
|
Net loss
|
(10,296
|
)
|
(8,072
|
)
|
(2,224
|
)
|
(12,514
|
)
|
(9,312
|
)
|
(3,202
|
)
|
|
61
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
62
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
63
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
64
|
|
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
|
|
|
5.7
|
%
|
|
5,612
|
|
|
5.6
|
%
|
States, municipalities and political subdivisions
|
|
605
|
|
|
0.6
|
%
|
|
626
|
|
|
0.6
|
%
|
Mortgage-backed
|
|
2,811
|
|
|
2.9
|
%
|
|
2,876
|
|
|
2.9
|
%
|
Corporate
|
|
2,518
|
|
|
2.6
|
%
|
|
5,427
|
|
|
5.4
|
%
|
Total fixed maturities
|
|
11,361
|
|
|
11.8
|
%
|
|
14,541
|
|
|
14.5
|
%
|
Equity investments:
|
|
|
|
|
|
|
|
|
||||
Common stock
|
|
1,491
|
|
|
1.6
|
%
|
|
3,570
|
|
|
3.6
|
%
|
Warrants
|
|
942
|
|
|
1.0
|
%
|
|
1,019
|
|
|
1.0
|
%
|
Total equity investments
|
|
2,433
|
|
|
2.6
|
%
|
|
4,589
|
|
|
4.6
|
%
|
Limited liability investments
|
|
7,078
|
|
|
7.4
|
%
|
|
9,094
|
|
|
9.1
|
%
|
Limited liability investments, at fair value
|
|
31,416
|
|
|
32.9
|
%
|
|
32,211
|
|
|
32.1
|
%
|
Investments in private companies
|
|
4,620
|
|
|
4.9
|
%
|
|
4,870
|
|
|
4.9
|
%
|
Real estate investments
|
|
10,662
|
|
|
11.2
|
%
|
|
10,662
|
|
|
10.6
|
%
|
Other investments
|
|
3,316
|
|
|
3.5
|
%
|
|
3,721
|
|
|
3.7
|
%
|
Short-term investments
|
|
151
|
|
|
0.2
|
%
|
|
151
|
|
|
0.2
|
%
|
Total investments
|
|
71,037
|
|
|
74.5
|
%
|
|
79,839
|
|
|
79.7
|
%
|
Cash and cash equivalents
|
|
10,618
|
|
|
11.1
|
%
|
|
5,377
|
|
|
5.4
|
%
|
Restricted cash
|
|
13,760
|
|
|
14.4
|
%
|
|
14,985
|
|
|
14.9
|
%
|
Total
|
|
95,415
|
|
|
100.0
|
%
|
|
100,201
|
|
|
100.0
|
%
|
|
65
|
|
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
|
|
|
66
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Unfavorable (favorable) change in provision for loss and loss adjustment expenses for prior accident years
|
1,301
|
|
(1
|
)
|
1,647
|
|
(1
|
)
|
|
67
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
68
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
69
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
70
|
|
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
|
%
|
|
71
|
|
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
|
)
|
|
72
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
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
|
%
|
•
|
the reclassification of investment income, related to equity method investments, from loss from discontinued operations, net of taxes to net investment income in the consolidated statement of operations;
|
•
|
the identification, accounting and disclosure of investments demonstrating characteristics of variable interest entities, including the consolidation of certain investments;
|
•
|
the adoption and application of ASU 2014-09;
|
•
|
identification, disclosure and accounting for equity-classified warrants; and
|
•
|
purchase accounting, as it relates to the identification and valuation of intangible assets and goodwill.
|
•
|
Perform a comprehensive assessment of all existing accounting policies and revise existing policies and/or introduce new policies, as needed;
|
•
|
Enhance the formality of its review procedures with respect to its accounting for any new investments, as well as the periodic evaluation of existing investments;
|
•
|
Implement additional review procedures with respect to its accounting under ASU 2014-09 to ensure the Company’s accounting will continue to be in accordance with that standard on a go-forward basis;
|
•
|
Implement additional identification, accounting and review controls with respect to complex and nonrecurring transactions, as well as augment existing staff with outside skilled accounting resources, as appropriate, and strengthen the review process to improve the operation of financial reporting and corresponding internal controls;
|
•
|
Enhance the formality and rigor with respect to identifying and tracking all material related party transactions, as well updating its disclosures controls to enhance the focus on related party disclosure requirements; and
|
•
|
Enhance the formality and rigor of review with respect to the collectability of accounts receivable balances, and the account reconciliation procedures.
|
|
73
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
74
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
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
|
|
75
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
KINGSWAY FINANCIAL SERVICES INC.
|
|
|
|
|
Date:
|
February 27, 2020
|
By:
|
/s/ John T. Fitzgerald
|
|
|
|
John T. Fitzgerald, Chief Executive Officer, President and Director
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date:
|
February 27, 2020
|
By:
|
/s/ William A. Hickey, Jr.
|
|
|
|
William A. Hickey, Jr., Chief Financial Officer and Executive Vice President
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(principal financial officer)
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76
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1 Year Kingsway Financial Servi... (PK) Chart |
1 Month Kingsway Financial Servi... (PK) Chart |
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