Kingsway Financial Services Inc. records loss for 2015 Q4 compared to 2014 Q4, but posts US$1.3 million net income for 2015

Toronto-based Kingsway Financial Services Inc. posted net income of about US$1.3 million for 2015 compared to a loss of US$11.2 million for 2014, offering what senior executives regard as positive indicators for the company’s long-term potential.

Kingsway Financial’s unaudited results show the company recorded a loss of US$2.1 million for 2015 Q4, down from the US$1.4 million income in the same quarter of 2014. However, results for the full year were more positive, returning the company to profitability with the net income of US$1.3 million.

For the three months ended Dec. 31, Kingsway Financial saw an operating loss of US$886,000 compared to operating income of US$3.6 million in the same quarter of 2014. For the full year, the operating loss was US$1.5 million in 2015 compared to operating income of US$2.7 million in 2014.

“Operating (loss) income reflects the company’s core operating activities, including its reportable segments, passive investment portfolio, merchant banking activities and corporate operating expenses,” notes a statement Thursday evening from Kingsway Financial, a holding company functioning as a merchant bank with a focus on long-term value-creation that owns or controls stakes in several insurance industry assets.

Still, the 2015 year-end numbers offer promise. “2015 was an excellent year for the company,” Larry G. Swets, Jr., president and CEO of Kingsway Financial, says in the statement. Specifically, Swets points out, Kingsway Financial improved the balance sheet considerably through the sale of Assigned Risk Solutions Ltd. in April, the buy-out of the Management Services Agreement from 1347 Property Insurance Holdings, Inc. (while maintaining a position in the company), repaying the company’s Kingsway Linked Return of Capital Trust debt, and becoming current on the outstanding Trust Preferred indentures. 

“This has Kingsway positioned to both pursue new growth opportunities while also allowing our company to initiate a share buy-back plan,” Swets says. “We are now in the strongest financial position since our management team joined in 2010,” he reports.

Kingsway Financial’s Insurance Underwriting segment had an operating loss of US$0.8 million for 2015 Q4 compared to operating income of US$1.2 million for the same period in 2014. For the company’s Insurance Services segment, its operating loss was US$0.2 million for the fourth quarter of 2015 compared to income of US$0.2 million for the fourth quarter of 2014.

With regard to premiums, net premiums earned (NPE) rose slightly to US$29.0 million in 2015 Q4 compared to US$28.5 million in 2014 Q4. Year-end results show the company posting NPE of US$117.4 million for 2015 compared to US$117.6 million for 2014.

Other financial results for Kingsway Financial include the following:

• net loss attributable to common shareholders of US$2.3 million in 2015 Q4 compared to a net income attributable to common shareholders of US$0.5 million for 2014 Q4;
• net income attributable to common shareholders of US$0.8 million for 2015 compared to a net loss attributable to common shareholders of US$13.1 million for the prior year period;
• net realized gains of US$1.1 million were reported in 2015 Q4 compared to net realized losses of US$0.4 million in 2014 Q4; and
• adjusted operating loss was US$0.2 million in 2015 Q4 compared to income of US$1.2 million in 2014 Q4.

“In the fourth quarter, our concentration was on effectively managing our existing operations,” Swets reports. “Kingsway is actively pursuing expansion opportunities where we can leverage our expertise and track record to seek long-term value creation through investments, acquisitions and financings. We will leverage our unique position with the company’s deferred tax asset to execute on these opportunities throughout the remainder of the year,” he adds.