Kingsway Announces Fourth Quarter and Year-End 2017 Results

TORONTO, Feb. 20, 2018

The Company reported net loss attributable to common shareholders of $4.6 million, or $0.20 per diluted share, in the fourth quarter of 2017.  Significant events during the fourth quarter included the following:

• Insurance Underwriting segment incurred net unfavorable development related to accident years 2016 and prior.
• Income tax benefit includes $19.0 million related to the Tax Cuts and Jobs Act.

Management Comments
Larry G. Swets, Jr., Chief Executive Officer, stated, "Although the 2016 and prior reserve development in the Insurance Underwriting segment is extremely disappointing, we are pleased with the continued improvement of the other segments of our business.  We made significant changes to the NSA business in 2017 that give us confidence that the business has turned the corner, but we remain mindful we won't be able to declare success until we are able to provide full year positive underwriting results in this business."

Mr. Swets continued, "The increase in our shareholders' equity resulting from the change in our deferred income tax liability highlights the value that can be created from investments like CMC Industries, Inc. and reminds us of the need to identify more such opportunities."

Operating Results
The Company reported net loss attributable to common shareholders of $4.6 million (including a non-cash loss of $2.7 million attributable to change in fair value of debt), or $0.20 per diluted share, in the fourth quarter of 2017, compared to net income attributable to common shareholders of $1.0 million (including a non-cash loss of $4.8 million attributable to change in fair value of debt), or $0.05 per diluted share, in the fourth quarter of 2016.  

For the year ended December 31, 2017, Kingsway reported net loss attributable to common shareholders of $15.8 million (including a non-cash loss of $8.5 million attributable to change in fair value of debt), or $0.73 per diluted share, compared to net income attributable to $0.2 million (including a non-cash loss of $3.7 million attributable to change in fair value of debt), or $0.01 per diluted share, in the prior year period. 

Following are highlights of Kingsway's fourth quarter 2017 results.  Operating loss reflects the Company's core operating activities, including its reportable segments, passive investment portfolio, merchant banking activities and corporate operating expenses. 

• Operating loss was $16.0 million for the fourth quarter of 2017 compared to operating loss of $2.6 million for the fourth quarter of 2016.
• Insurance Underwriting segment operating loss was $17.0 million for the fourth quarter of 2017 compared to $8.0 million for the fourth quarter of 2016.
• Extended Warranty segment (formerly Insurance Services segment) operating income was $1.8 million for the fourth quarter of 2017 compared to $0.9 million for the fourth quarter of 2016.
• Leased Real Estate segment operating income was $0.8 million for the fourth quarter of 2017 compared to segment operating loss of $0.1 million for the fourth quarter of 2016.
• Net investment income of $1.4 million was reported for the fourth quarter of 2017 compared to $6.2 million for the fourth quarter of 2016.
• Net realized gains of $0.7 million were reported for the fourth quarter of 2017 compared to $0.4 million for the fourth quarter of 2016.
• Other operating income and expense was a net expense of $3.7 million for the fourth quarter of 2017 compared to $2.0 million for the fourth quarter of 2016.
• Adjusted operating loss was $13.1 million for the fourth quarter of 2017 compared to $1.1 million for the fourth quarter of 2016.
• Book value decreased to $2.02 per share at December 31, 2017 from $2.65 per share at December 31, 2016. The Company also carries a valuation allowance, in the amount of $8.35 per share at December 31, 2017, against the deferred tax asset, primarily related to its loss carryforwards.

Investor Presentation
The Company also announced the availability of a new investor presentation starting today.  The presentation will be available via the "Investor Relations" section of Kingsway's website at http://kingsway-financial.com/investor-relations/.