Kingsway Financial Q2 2024: Assets Up, Net Income Down

TL;DR

Kingsway Financial's assets grew to $31B, but Q2 net income dipped to $1.16B. Debt issuance of $50M.

AI Summary

Kingsway Financial Services Inc. reported total assets of $31.008 billion as of June 30, 2024, a slight increase from $28.137 billion at the end of 2023. The company's net income for the six months ended June 30, 2024, was $1.158 billion, down from $1.444 billion in the same period of the prior year. The filing also notes a $50 million debt issuance.

Why It Matters

This filing provides insight into Kingsway Financial's financial health and performance, with changes in assets and net income potentially impacting investor confidence and stock valuation.

Risk Assessment

Risk Level: medium — The decrease in net income and the presence of debt issuance suggest potential financial headwinds or strategic financial management that warrants closer examination.

Key Numbers

• $31.008B — Total Assets (As of June 30, 2024, showing growth from prior periods.)
• $1.158B — Net Income (YTD) (For the six months ended June 30, 2024, indicating a decrease from the prior year.)
• $50,000,000 — Debt Issuance (A significant financial transaction noted in the filing.)

Key Players & Entities

• Kingsway Financial Services Inc. (company) — Filer of the 10-Q report
• June 30, 2024 (date) — End of the reporting period for assets
• $31.008 billion (dollar_amount) — Total assets as of June 30, 2024
• $28.137 billion (dollar_amount) — Total assets as of December 31, 2023
• $1.158 billion (dollar_amount) — Net income for the six months ended June 30, 2024
• $1.444 billion (dollar_amount) — Net income for the six months ended June 30, 2023
• $50,000,000 (dollar_amount) — Debt issuance

FAQ

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share KFS New York Stock Exchange
• $0 — 1 ) (1) Net of income tax expense of $0 for the three and six months ended June

Filing Documents

• kfs20240630_10q.htm (10-Q) — 3060KB
• ex_674064.htm (EX-31.1) — 8KB
• ex_674065.htm (EX-31.2) — 8KB
• ex_674066.htm (EX-32.1) — 5KB
• ex_674067.htm (EX-32.2) — 5KB
• 0001437749-24-024868.txt ( ) — 15421KB
• kfs-20240630.xsd (EX-101.SCH) — 99KB
• kfs-20240630_cal.xml (EX-101.CAL) — 95KB
• kfs-20240630_def.xml (EX-101.DEF) — 759KB
• kfs-20240630_lab.xml (EX-101.LAB) — 637KB
• kfs-20240630_pre.xml (EX-101.PRE) — 810KB
• kfs20240630_10q_htm.xml (XML) — 3450KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 3

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 3 Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) 4 Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) 5 Consolidated Statements of Shareholder's Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited) 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 9

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 44

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 44

- OTHER INFORMATION

PART II - OTHER INFORMATION 45

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 45

RISK FACTORS

ITEM 1A. RISK FACTORS 45

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 45

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 45

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 45

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 45

EXHIBITS

ITEM 6. EXHIBITS 46

SIGNATURES

SIGNATURES 47 2 Table of Contents KINGSWAY FINANCIAL SERVICES INC.

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets (in thousands, except share data) June 30, 2024 December 31, 2023 (unaudited) Assets Investments: Fixed maturities, at fair value (amortized cost of $ 37,903 and $ 38,107 , respectively) $ 36,274 $ 36,473 Equity investments, at fair value (cost of $ 10 and $ 73 , respectively) — 79 Limited liability investments 650 812 Limited liability investment, at fair value 2,908 3,496 Investments in private companies, at adjusted cost 854 854 Other investments, at cost which approximates fair value (net of allowance of $ 179 and $ 179 , respectively) — 6 Short-term investments, at cost which approximates fair value 165 161 Total investments 40,851 41,881 Cash and cash equivalents 9,594 9,098 Restricted cash 8,362 8,400 Accrued investment income 970 914 Service fee receivable, net of allowance for credit losses of $ 200 and $ 243 , respectively 9,842 10,083 Other receivables, net of allowance of $ 5 and $ 5 , respectively 375 726 Deferred contract costs 13,993 13,734 Income taxes recoverable 652 1,299 Property and equipment, net of accumulated depreciation of $ 1,444 and $ 1,158 , respectively 1,530 1,850 Right-of-use asset 1,186 886 Goodwill 50,770 50,358 Intangible assets, net of accumulated amortization of $ 31,008 and $ 28,137 , respectively 31,798 35,670 Other assets 5,088 5,066 Assets held for sale 17,332 17,752 Total Assets $ 192,343 $ 197,717 Liabilities and Shareholders' Equity Liabilities: Accrued expenses and other liabilities $ 20,871 $ 22,342 Deferred service fees 84,869 83,995 Bank loans 33,554 30,822 Subordinated debt, at fair value 13,715 13,594 Lease liability 1,469 1,198 Net deferred income tax liabilities 4,800 5,041 Liabilities held for sale 15,848 16,114 Total Liabilities 175,126 173,106 Shareholders' Equity: Common stock, no par value; 50,000,000 authorized; 28,050,686 and 27,771,790 issued at

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 NOTE 1 BUSINESS Kingsway Financial Services Inc. (the "Company" or "Kingsway") was incorporated under the Business Corporations Act (Ontario) on September 19, 1989. Effective December 31, 2018, the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty and business services industries. NOTE 2 BASIS OF PRESENTATION The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10 -Q and Article 10 of Regulation S- X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements of the Company. In the opinion of management, all adjustments necessary for a fair presentation have been included and are of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the year. The accompanying unaudited consolidated interim financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included within our Annual Report on Form 10 -K (" 2023 Annual Report") for the year ended December 31, 2023 . The unaudited consolidated interim financial statements include the accounts of the Company and its subsidiaries, as well as certain variable interest entities as further described in Note 6, "Variable Interest Entities," to the consolidated financial statements in the 2023 Annual Report. All material intercompany transactions and balances have been eliminated in consolidation. The preparation of consolidated fina

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 In November 2023, the FASB issued ASU No. 2023 - 07, Improvements to Reportable Segment Disclosures ("ASU 2023 - 07" ), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. ASU 2023 - 07 is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within annual period beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on the Company's consolidated financial statements. In March 2024, the FASB issued ASU 2024 - 02, Codification Improvements - Amendments to Remove References to the Concepts Statements ("ASU 2024 - 02" ). ASU 2024 - 02 amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024 - 02 are not intended to result in significant accounting changes for most entities. ASU 2024 - 02 is effective January 1, 2025. The Company does not expect ASU 2024 - 02 to have a significant impact on its consolidated financial statements. NOTE 5 ACQUISITIONS A ND DISCO

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