EX-99.2
4
pro-formafinancialstatemen.htm
EXHIBIT 99.2
Pro-forma Financial Statements
Kingsway Financial Services Inc.
Unaudited Pro Forma Consolidated Financial Statements
On April 1, 2015, Kingsway Financial Services Inc. (the "Company" or "Kingsway") completed the sale of Assigned Risk Solutions Ltd. ("ARS") to National General Holdings Corp. for cash and certain additional consideration. ARS, which had been included in the Insurance Services segment, will be accounted for as a discontinued operation of the Company. The accompanying pro forma consolidated financial statements are presented to show the effects of the disposition of ARS, including the receipt of proceeds from the sale, on the Company's consolidated financial statements.
The following unaudited pro forma consolidated balance sheet of Kingsway as of December 31, 2014 is presented as if the disposition, as described in the notes to these unaudited pro forma consolidated financial statements, had occurred at December 31, 2014. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2014 is presented as if the disposition had occurred on January 1, 2014. The unaudited pro forma consolidated financial statements are based on the historical financial statements of Kingsway for each period presented and in the opinion of the Company's management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made.
These unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had the disposition been completed as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma consolidated financial statements and the notes thereto should be read together with Kingsway's consolidated financial statements and the notes thereto as of and for the year ended December 31, 2014, and Management's Discussion and Analysis included in Kingsway's Annual Report on Form 10-K for the year ended December 31, 2014.
Unaudited Pro Forma Consolidated Balance Sheet
(in thousands, except per share data)
As of December 31, 2014 (a)
Adjustments for ARS
Pro Forma
Assets
Investments:
Fixed maturities, at fair value
$
56,195
$
-
$
56,195
Equity investments, at fair value
19,618
-
19,618
Limited liability investments
7,294
-
7,294
Other investments, at cost which approximates fair value
3,576
-
3,576
Short-term investments, at cost which approximates fair value
400
-
400
Total investments
87,083
-
87,083
Cash and cash equivalents
74,026
40,208
(b)
114,234
Investment in investee
2,115
-
2,115
Accrued investment income
141
-
141
Premiums receivable, net of allowance for doubtful accounts
28,885
-
28,885
Service fee receivable, net of allowance for doubtful accounts
19,970
(19,006
)
(c)
964
Other receivables, net of allowance for doubtful accounts
5,402
(257
)
(c)
5,145
Reinsurance recoverable
3,652
-
3,652
Prepaid reinsurance premiums
8
-
8
Deferred acquisition costs, net
12,197
-
12,197
Income taxes recoverable
223
(149
)
(c)
74
Property and equipment, net of accumulated depreciation
6,169
(193
)
(c)
5,976
Goodwill
10,588
(510
)
(c)
10,078
Intangible assets, net of accumulated amortization
47,298
(31,318
)
(c)
15,980
Other assets
3,965
(328
)
(c)
3,637
Total Assets
$
301,722
$
(11,553
)
$
290,169
Liabilities and Shareholders' Equity
Liabilities:
Unpaid loss and loss adjustment expenses:
Property and casualty
$
63,895
$
-
$
63,895
Vehicle service agreements
2,975
-
2,975
Total unpaid loss and loss adjustment expenses
66,870
-
66,870
Unearned premiums
36,432
-
36,432
Reinsurance payable
525
-
525
LROC preferred units, at fair value
13,618
-
13,618
Subordinated debt, at fair value
40,659
-
40,659
Deferred income tax liability
5,386
(2,550
)
(c)
2,836
Deferred service fees
49,454
(14,358
)
(c)
35,096
Accrued expenses and other liabilities
40,582
(4,745
)
(c)
35,837
Total Liabilities
253,526
(21,653
)
231,873
Class A preferred stock, no par value; unlimited number authorized; 262,876 issued and outstanding at December 31, 2014
6,330
-
6,330
Shareholders' Equity:
Common stock, no par value; unlimited number authorized; 19,709,706 issued and outstanding at December 31, 2014
-
-
-
Additional paid-in capital
340,844
-
340,844
Accumulated deficit
(312,050
)
10,100
(d)
(301,950
)
Accumulated other comprehensive income
8,670
-
8,670
Shareholders' equity attributable to common shareholders
37,464
10,100
47,564
Noncontrolling interests in consolidated subsidiaries
4,402
-
4,402
Total Shareholders' Equity
41,866
10,100
51,966
Total Liabilities and Shareholders' Equity
$
301,722
$
(11,553
)
$
290,169
See notes to unaudited pro forma consolidated financial statements.
Unaudited Pro Forma Consolidated Statement of Operations
(in thousands, except per share data)
Year Ended December 31, 2014 (a)
Adjustments for ARS (b)
Pro Forma
Revenues:
Net premiums earned
$
117,593
$
-
$
117,593
Service fee and commission income
54,848
(30,189
)
24,659
Net investment income
1,616
(1
)
1,615
Net realized gains
5,041
-
5,041
Other income
8,920
(26
)
8,894
Total revenues
188,018
(30,216
)
157,802
Expenses:
Loss and loss adjustment expenses
86,227
-
86,227
Commissions and premium taxes
23,238
-
23,238
Cost of services sold
3,880
-
3,880
General and administrative expenses
67,233
(25,610
)
41,623
Restructuring expense
(13
)
-
(13
)
Interest expense
5,645
-
5,645
Amortization of intangible assets
1,620
-
1,620
Contingent consideration benefit
(2,223
)
-
(2,223
)
Impairment of asset held for sale
1,180
-
1,180
Total expenses
186,787
(25,610
)
161,177
Gain (loss) from continuing operations before loss on change in fair value of debt, loss on disposal of subsidiary, loss on disposal of asset held for sale, equity in net loss of investee and income tax benefit
1,231
(4,606
)
(3,375
)
Loss on change in fair value of debt
(10,953
)
-
(10,953
)
Loss on disposal of subsidiary
(1,244
)
-
(1,244
)
Loss on disposal of asset held for sale
(125
)
-
(125
)
Equity in net loss of investee
(190
)
-
(190
)
Loss from continuing operations before income tax benefit
(11,281
)
(4,606
)
(15,887
)
Income tax benefit
(57
)
(1,164
)
(1,221
)
Loss from continuing operations
$
(11,224
)
$
(3,442
)
$
(14,666
)
Loss per share - continuing operations:
Basic:
$
(0.75
)
$
(0.95
)
Diluted:
$
(0.75
)
$
(0.95
)
Weighted average shares outstanding (in '000s):
Basic:
17,398
17,398
Diluted:
17,398
17,398
See notes to unaudited pro forma consolidated financial statements.
Kingsway Financial Services Inc.
Unaudited Notes to Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2014
a.
Reflects the Company's historical consolidated balance sheet as of December 31, 2014.
b.
Reflects the proceeds, net of estimated transaction expenses, received from the sale of ARS less any cash on hand at ARS as of December 31, 2014.
c.
Reflects the Company's disposition of ARS. Amounts represent the adjustments necessary to remove the historical assets and liabilities of ARS.
d.
Reflects the adjustments related to the disposition of ARS and the gain on sale.
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2014
a.
Reflects the Company's historical consolidated statement of operations for the year ended December 31, 2014.
b.
Reflects the Company's disposition of ARS. Amounts represent the adjustments necessary to remove the historical revenues and expenses of ARS. Such adjustments exclude the effect of the gain on sale, as this represents a non-recurring transaction.

EX - 99 . 2 4 pro - formafinancialstatemen . htm EXHIBIT 99 . 2 Pro - forma Financial Statements Kingsway Financial Services Inc . Unaudited Pro Forma Consolidated Financial Statements On April 1 , 2015 , Kingsway Financial Services Inc . ( the " Company " or " Kingsway " ) completed the sale of Assigned Risk Solutions Ltd . ( " ARS " ) to National General Holdings Corp . for cash and certain additional consideration . ARS , which had been included in the Insurance Services segment , will be accounted for as a discontinued operation of the Company . The accompanying pro forma consolidated financial statements are presented to show the effects of the disposition of ARS , including the receipt of proceeds from the sale , on the Company 's consolidated financial statements . The following unaudited pro forma consolidated balance sheet of Kingsway as of December 31 , 2014 is presented as if the disposition , as described in the notes to these unaudited pro forma consolidated financial statements , had occurred at December 31 , 2014 . The unaudited pro forma consolidated statement of operations for the year ended December 31 , 2014 is presented as if the disposition had occurred on January 1 , 2014 . The unaudited pro forma consolidated financial statements are based on the historical financial statements of Kingsway for each period presented and in the opinion of the Company 's management , all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made . These unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had the disposition been completed as of the dates indicated or of the results that may be obtained in the future . These unaudited pro forma consolidated financial statements and the notes thereto should be read together with Kingsway 's consolidated financial statements and the notes thereto as of and for the year ended December 31 , 2014 , and Management 's Discussion and Analysis included in Kingsway 's Annual Report on Form 10 - K for the year ended December 31 , 2014 . Unaudited Pro Forma Consolidated Balance Sheet ( in thousands , except per share data ) As of December 31 , 2014 ( a ) Adjustments for ARS Pro Forma Assets Investments : Fixed maturities , at fair value $ 56,195 $ - $ 56,195 Equity investments , at fair value 19,618 - 19,618 Limited liability investments 7,294 - 7,294 Other investments , at cost which approximates fair value 3,576 - 3,576 Short - term investments , at cost which approximates fair value 400 - 400 Total investments 87,083 - 87,083 Cash and cash equivalents 74,026 40,208 ( b ) 114,234 Investment in in vestee 2,115 - 2,115 Accrued investment income 141 - 141 Premiums receivable , net of allowance for doubtful accounts 28,885 - 28,885 Service fee receivable , net of allowance for doubtful accounts 19,970 ( 19,006 ) ( c ) 964 Other receivables , net of allowance for doubtful accounts 5,402 ( 257 ) ( c ) 5,145 Reinsurance recoverable 3,652 - 3,652 Prepaid reinsurance premiums 8 - 8 Deferred acquisition costs , net 12,197 - 12,197 Income taxes recoverable 223 ( 149 ) ( c ) 74 Property and equipment , net of accumulated depreciation 6,169 ( 193 ) ( c ) 5,976 Goodwill 10,588 ( 510 ) ( c ) 10,078 Intangible assets , net of accumulated amortization 47,298 ( 31,318 ) ( c ) 15,980 Other assets 3,965 ( 328 ) ( c ) 3,637 Total Assets $ 301,722 $ ( 11,553 ) $ 290,169 Liabilities and Shareholders ' Equity Liabilities : Unpaid loss and loss adjustment expenses : Property and casualty $ 63,895 $ - $ 63,895 Vehicle service agreements 2,975 - 2,975 Total unpaid loss and loss adjustment expenses 66,870 - 66,870 Unearned premiums 36,432 - 36,432 Reinsurance payable 525 - 525 LROC preferred units , at fair value 13,618 - 13,618 Subordinated debt , at fair value 40,659 - 40,659 Deferred income tax liability 5,386 ( 2,550 ) ( c ) 2,836 Deferred service fees 49,454 ( 14,358 ) ( c ) 35,096 Accrued expenses and other liabilities 40,582 ( 4,745 ) ( c ) 35,837 Total Liabilities 253,526 ( 21,653 ) 231,873 Class A preferred stock , no par value ; unlimited number authorized ; 262,876 issued and outstanding at December 31 , 2014 6,330 - 6,330 Shareholders ' Equity : Common stock , no par value ; unlimited number authorized ; 19,709,706 issued and outstanding at December 31 , 2014 - - - Additional paid - in capital 340,844 - 340,844 Accumulated deficit ( 312,050 ) 10,100 ( d ) ( 301,950 ) Accumulated other comprehensive income 8,670 - 8,670 Shareholders ' equity attributable to common shareholders 37,464 10,100 47,564 Non controlling interests in consolidated subsidiaries 4,402 - 4,402 Total Shareholders ' Equity 41,866 10,100 51,966 Total Liabilities and Shareholders ' Equity $ 301,722 $ ( 11,553 ) $ 290,169 See notes to unaudited pro forma consolidated financial statements . Unaudited Pro Forma Consolidated Statement of Operations ( in thousands , except per share data ) Year Ended December 31 , 2014 ( a ) Adjustments for ARS ( b ) Pro Forma Revenues : Net premiums earned $ 117,593 $ - $ 117,593 Service fee and commission income 54,848 ( 30,189 ) 24,659 Net investment income 1,616 ( 1 ) 1,615 Net realized gains 5,041 - 5,041 Other income 8,920 ( 26 ) 8,894 Total revenues 188,018 ( 30,216 ) 157,802 Expenses : Loss and loss adjustment expenses 86,227 - 86,227 Commissions and premium taxes 23,238 - 23,238 Cost of services sold 3,880 - 3,880 General and administrative expenses 67,233 ( 25,610 ) 41,623 Restructuring expense ( 13 ) - ( 13 ) Interest expense 5,645 - 5,645 Amortization of intangible assets 1,620 - 1,620 Contingent consideration benefit ( 2,223 ) - ( 2,223 ) Impairment of asset held for sale 1,180 - 1,180 Total expenses 186,787 ( 25,610 ) 161,177 Gain ( loss ) from continuing operations before loss on change in fair value of debt , loss on disposal of subsidiary , loss on disposal of asset held for sale , equity in net loss of in vestee and income tax benefit 1,231 ( 4,606 ) ( 3,375 ) Loss on change in fair value of debt ( 10,953 ) - ( 10,953 ) Loss on disposal of subsidiary ( 1,244 ) - ( 1,244 ) Loss on disposal of asset held for sale ( 125 ) - ( 125 ) Equity in net loss of in vestee ( 190 ) - ( 190 ) Loss from continuing operations before income tax benefit ( 11,281 ) ( 4,606 ) ( 15,887 ) Income tax benefit ( 57 ) ( 1,164 ) ( 1,221 ) Loss from continuing operations $ ( 11,224 ) $ ( 3,442 ) $ ( 14,666 ) Loss per share - continuing operations : Basic : $ ( 0 . 75 ) $ ( 0 . 95 ) Diluted : $ ( 0 . 75 ) $ ( 0 . 95 ) Weighted average shares outstanding ( in ' 000s ) : Basic : 17,398 17,398 Diluted : 17,398 17,398 See notes to unaudited pro forma consolidated financial statements . Kingsway Financial Services Inc . Unaudited Notes to Pro Forma Consolidated Financial Statements Unaudited Pro Forma Consolidated Balance Sheet as of December 31 , 2014 a . Reflects the Company ' s historical consolidated balance sheet as of December 31 , 2014 . b . Reflects the proceeds , net of estimated transaction expenses , received from the sale of ARS less any cash on hand at ARS as of December 31 , 2014 . c . Reflects the Company 's disposition of ARS . Amounts represent the adjustments necessary to remove the historical assets and liabilities of ARS . d . Reflects the adjustments related to the disposition of ARS and the gain on sale . Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31 , 2014 a . Reflects the Company ' s historical consolidated statement of operations for the year ended December 31 , 2014 . b . Reflects the Company 's disposition of ARS . Amounts represent the adjustments necessary to remove the historical revenues and expenses of ARS . Such adjustments exclude the effect of the gain on sale , as this represents a non - recurring transaction .