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13.03.2017 13:05
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Correcting and Replacing - Kingsway Announces Fourth Quarter and Year-End 2016 Results
Eine Tageszeitung (Symbolbild).
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PR Newswire
TORONTO, March 13, 2017
TORONTO, March 13, 2017 /PRNewswire/ - (TSX: KFS, NYSE: KFS) In a release issued under the same headline on March 8, 2017, the Company failed to include in its net income attributable to shareholders $9.9 million of income tax benefit as a result of its acquisition of CMC Industries, Inc.
The corrected release follows:
Kingsway Financial Services Inc. ("Kingsway" or the "Company") today announced its operating results for the fourth quarter and year ended December 31, 2016. All amounts are in U.S. dollars unless indicated otherwise.
The Company reported net income attributable to common shareholders of $1.1 million, or $0.05 per diluted share, in the fourth quarter of 2016. Significant events during the quarter included the following:
- Insurance Underwriting segment incurred net unfavorable development of $7.6 million related to accident years 2015 and prior.
- The increase in the fair value of the Company's trust preferred debt resulted in a $4.8 million loss.
- Net investment income of $6.2 million included $4.7 million of income related to the Company's investment in 1347 Investors LLC, which owns securities in Limbach Holdings, Inc.
- Completion of the fair value analysis related to the Company's acquisition of CMC resulted in $0.3 million of net income.
- Income tax benefit includes $9.9 million, which reflects the partial release into income of the Company's valuation allowance that it carries against its deferred income tax assets, as a result of its acquisition of CMC.
Management Comments
Larry G. Swets, Jr., President and Chief Executive Officer, stated, "Our fourth quarter earnings were affected meaningfully by the five significant events noted above. One of those events related to historical performance in our non-standard automobile business unit. We announced in July that Steve Harrison had joined our insurance management team as an executive vice president. In August, we promoted Steve to President of our insurance operations. Throughout the year, Steve and his team have launched a number of initiatives intended to improve the operating performance of our insurance operations, particularly with respect to strengthening the management of our Claim Department. We have been aggressively increasing premium rates throughout the second half of 2016 and into 2017 and are actively pursuing initiatives related to increasing policy fee income, reducing bad debt expense, outsourcing the first notice of loss function, outsourcing much of the salvage and subrogation function and entering into an agreement with an outside vendor to migrate to a new policy administration and claim-handling operating platform sometime in 2017. While we are not happy to have to report adverse development on old accident years, we are optimistic about the direction Steve is taking the insurance operations and the potential positive impact to our segment operating income from the implementation of these initiatives. During the quarter, we recorded unfavorable development of approximately $9.1 million related to accident years 2015 and prior in our continuing operations while we recorded favorable development of approximately $1.5 million related to our continuing run-offs of Kingsway Amigo Insurance Company and Mendakota Casualty Company."
Mr. Swets continued, "We also reported a loss of $4.8 million during the quarter related to the increase in the fair value of our $90.5 million principal value of trust preferred debt, maturing from 2032 through 2034, as a result of increases in LIBOR and changes in the estimate of Kingsway's implied credit spread as developed by a third party.
"We are pleased to report another significant gain, related to our investment in 1347 Investors LLC, as a result of the previously announced business combination between 1347 Capital Corp. and Limbach Holdings LLC. We reported $6.2 million of net investment income during the quarter, $4.7 million of which relates to our investment exposure to Limbach by virtue of our interest in 1347 Investors. We are extremely satisfied with this investment which we initiated in July of 2014. Since the combination between 1347 Capital Corp. and Limbach closed this past July, Kingsway has recorded an $8.8 million increase in its shareholders' equity as a result of this investment."
Mr. Swets concluded, "We have completed the fair value analysis of our acquisition of CMC for purposes of recording the assets and liabilities acquired. The completion of the CMC exercise has resulted in our reporting a large income tax benefit as well as some reallocation of previously reported results between Leased Real Estate segment operating earnings and amortization expense, which is reported separately from segment results. As a result, we are reporting a loss of $0.1 million during the fourth quarter for the Leased Real Estate segment, which includes CMC; we are separately reversing $0.4 million of amortization expense previously recorded during the third quarter; and we are reporting $9.9 million of income tax benefit related to the partial release of the valuation allowance we carry against our deferred income tax assets. As a result, CMC contributed $10.2 million to our net income during the fourth quarter and $10.4 million to our net income since the time of the acquisition in July. We feel that this income recognition reflects only a part of the long-term value we have an opportunity to create over the next 17 years from our acquisition of CMC. We encourage you to read our 2016 Form 10-K once it is filed for more information about each of these events."
Operating Results
The Company reported net income attributable to common shareholders of $1.1 million, or $0.05 per diluted share, in the fourth quarter of 2016, compared to net loss attributable to common shareholders of $2.3 million, or $0.12 per diluted share, in the fourth quarter of 2015.
For the year ended December 31, 2016, Kingsway reported net income attributable to common shareholders of $0.4 million, or $0.02 per diluted share, compared to net income attributable to common shareholders of $0.8 million, or $0.04 per diluted share, in the prior year period.
Following are highlights of Kingsway's fourth quarter 2016 results. Operating income reflects the Company's core operating activities, including its reportable segments, passive investment portfolio, merchant banking activities and corporate operating expenses.
- Operating loss was $2.6 million for the fourth quarter of 2016 compared to operating loss of $0.9 million for the fourth quarter of 2015.
- Insurance Underwriting segment operating loss was $8.0 million for the fourth quarter of 2016 compared to $0.8 million for the fourth quarter of 2015.
- Insurance Services segment operating income was $0.9 million for the fourth quarter of 2016 compared to segment operating loss of $0.2 million for the fourth quarter of 2015.
- Operating loss attributable to the Leased Real Estate segment was $0.1 million for the fourth quarter of 2016 compared to zero for the fourth quarter of 2015.
- Net investment income of $6.2 million was reported for the fourth quarter of 2016 compared to $0.3 million for the fourth quarter of 2015.
- Net realized gains of $0.4 million were reported for the fourth quarter of 2016 compared to $1.1 million for the fourth quarter of 2015.
- Other operating income and expense was a net expense of $2.0 million for the fourth quarter of 2016 compared to $1.3 million for the fourth quarter of 2015.
- Adjusted operating loss was $1.1 million for the fourth quarter of 2016 compared to $0.2 million for the fourth quarter of 2015.
- Book value increased to $2.65 per share at December 31, 2016 from $2.22 per share at December 31, 2015, and from $2.15 per share at September 30, 2016. The Company also carries a valuation allowance, in the amount of $12.89 per share at December 31, 2016, against the deferred tax asset, primarily related to its loss carryforwards.
Management Change
Kingsway is also taking this opportunity to announce that John T. Fitzgerald, currently Executive Vice President, will become President and Chief Operating Officer. Larry G. Swets, Jr., currently Kingsway's President and Chief Executive Officer, will remain as the Company's Chief Executive Officer. Mr. Swets stated, "We have been impressed with JT since he joined us last April. We are pleased with the turnaround of the Insurance Services segment, which reported segment operating income for the second consecutive quarter since we announced in July that we had restructured the segment with the appointment of JT to lead our Company's warranty businesses. We expect continued evidence of profitable growth from this segment during 2017. Recently, JT has also assumed responsibility for supervising our non-standard automobile business unit. It gives me great pleasure to recognize JT's contributions to our Company with this promotion."
About the Company
Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. The Company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS."
| Consolidated Statements of Operations | |||||||||
| (in thousands, except per share data) | |||||||||
| | |||||||||
| | Three months ended December 31, | Years ended December 31, | |||||||
| | 2016 | 2015 | 2016 | 2015 | |||||
| Revenues: | (unaudited) | | (unaudited) | | |||||
| | Net premiums earned | $ | 33,419 | $ | 29,006 | $ | 127,608 | $ | 117,433 |
| | Service fee and commission income | 7,186 | 5,536 | 24,232 | 22,966 | ||||
| | Rental income | 2,993 | — | 5,419 | — | ||||
| | Net investment income | 6,164 | 286 | 8,200 | 2,918 | ||||
| | Net realized gains | 418 | 1,061 | 360 | 1,197 | ||||
| | Other-than-temporary impairment loss | (157) | — | (157) | (10) | ||||
| | Other income | 2,765 | 2,288 | 10,968 | 15,462 | ||||
| Total revenues | 52,788 | 38,177 | 176,630 | 159,966 | |||||
| Operating expenses: | | | | | |||||
| | Loss and loss adjustment expenses | 34,470 | 23,758 | 109,609 | 92,812 | ||||
| | Commissions and premium taxes | 6,933 | 5,574 | 24,562 | 22,773 | ||||
| | Cost of services sold | 1,269 | 915 | 4,193 | 4,044 | ||||
| | General and administrative expenses | 11,303 | 10,012 | 41,629 | 41,760 | ||||
| | Leased real estate segment interest expense | 1,579 | — | 2,899 | — | ||||
| | Amortization of intangible assets | (139) | 307 | 1,242 Werbung Mehr Nachrichten zur Kingsway Financial Services Aktie kostenlos abonnieren
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