Kingsway Announces First Quarter 2018 Results

TORONTO, May 14, 2018

Management Comments
Larry G. Swets, Jr., Chief Executive Officer, stated, "This is our first full quarter with PWSC, and the results reaffirm our interest and desire to acquire further warranty assets.  Trinity reported strong revenues during the quarter as it continues its turnaround to being a consistent contributor to our earnings and holding company cash flow.  IWS maintained its steady contribution to our earnings.  As we stated in last week's announcement of our letter of intent to sell our non-standard auto business, we intend to shift our focus and resources toward future warranty acquisitions and merchant banking activity."

Operating Results
The Company reported net loss attributable to common shareholders of $2.3 million (including a non-cash loss of $0.9 million attributable to change in fair value of debt), or $0.11 per diluted share, in the first quarter of 2018, compared to net loss attributable to common shareholders of $1.8 million (including a non-cash loss of $1.9 million attributable to change in fair value of debt), or $0.08 per diluted share, in the first quarter of 2017.  

Following are highlights of Kingsway's first quarter 2018 results.  Operating income (loss) reflects the Company's core operating activities, including its reportable segments, passive investment portfolio, merchant banking activities and corporate operating expenses. 

• Operating income was $0.4 million for the first quarter of 2018 compared to operating loss of $0.6 million for the first quarter of 2017.
• Insurance Underwriting segment operating loss was $0.3 million for the first quarter of 2018 compared to $0.7 million for the first quarter of 2017. 
• Extended Warranty segment operating income was $1.6 million for the first quarter of 2018 compared to $0.6 million for the first quarter of 2017.
• Leased Real Estate segment operating income was $0.9 million for the first quarter of 2018 compared to $0.9 million for the first quarter of 2017.
• Net investment loss of $0.7 million was reported for the first quarter of 2018 compared to net investment income $0.7 million for the first quarter of 2017.
• Net realized gains of $0.0 million were reported for the first quarter of 2018 compared to $0.4 million for the first quarter of 2017.
• Gain on change in fair value of equity investments was $1.2 million for the first quarter of 2018 compared to zero for the first quarter of 2017.  See Recently Adopted Accounting Standard section below. 
• Other operating income and expense was a net expense of $2.3 million for the first quarter of 2018 compared to $2.5 million for the first quarter of 2017.
• Adjusted operating income was $2.5 million for the first quarter of 2018 compared to $4.1 million for the first quarter of 2017.
• Book value decreased to $1.90 per share at March 31, 2018 from $2.02 per share at December 31, 2017. The Company also carries a valuation allowance, in the amount of $8.37 per share at March 31, 2018, against the deferred tax asset, primarily related to its loss carryforwards.

Recently Adopted Accounting Standard
On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01").  As required by ASU 2016-01, the Company recorded a gain on change in fair value of equity investments of $1.2 million during the first quarter of 2018 as a result of the increase in the fair value of its equity investments since December 31, 2017.  Prior to the adoption of ASU 2016-01, changes in the fair value of the Company's equity investments were included in other comprehensive income (loss).  In addition, as required by ASU 2016-01, the Company recorded an other comprehensive loss of $0.4 million related to the portion of the change in fair value of subordinated debt related to the instrument-specific credit risk.  Prior to the adoption of ASU 2016-01, the total change in fair value of subordinated debt was reported in net income (loss).    

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 subsidiaries primarily in the insurance, extended warranty, asset management and real estate industries and pursues non-control investments and other 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."