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Kingsway Financial Services Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 13, 2012 09:27PM
Kingsway Financial Services Inc. (KFS) filed Quarterly Report for the period ended 2012-06-30. Kingsway Financial Services Inc. (usa) has a market cap of $25.8 million; its shares were traded at around $1.96 with and P/S ratio of 0.1.
Highlight of Business Operations:The decrease in net premiums written and earned is due to significant reductions in premium volumes in the non-standard automobile line of business. Insurance Underwriting has withdrawn from a number of states, increased its rate adequacy in the states where it continues to actively produce business and discontinued unprofitable programs and unaffiliated managing general agent relationships. Furthermore, net premiums written declined by a greater percent than gross premiums written due to a quota share reinsurance arrangement entered into by Amigo for the six months ended June 30, 2012.
The Insurance Underwriting operating loss decreased to $3.9 million for the three months ended June 30, 2012 ($7.1 million year to date) compared with $9.6 million for the three months ended June 30, 2011 ($19.3 million prior year to date). The decrease is primarily attributed to a decrease in loss and loss adjustment expenses, as reflected in the loss ratio, against a smaller volume of net premiums earned. The Insurance Underwriting loss ratio for the second quarter of 2012 was 77.5% compared to 86.9% for the second quarter of 2011 (76.3% for the six months ended June 30, 2012 compared with 89.1% for the same period in 2011). The decrease in the loss ratio reflects the Company's efforts throughout 2011 to improve rate adequacy in the states where it continues to actively produce business; the benefits of having discontinued certain unprofitable programs; and improved outcomes as a result of process initiatives launched in the Company's claims departments.
The Insurance Services service fee and commission income increased 3.8% to $8.1 million for the three months ended June 30, 2012 ($17.6 million year to date) compared with $7.8 million for the three months ended June 30, 2011 ($16.8 million prior year to date). The Insurance Services operating income increased to $0.9 million for the three months ended June 30, 2012 ($2.6 million year to date) compared with $0.3 million for the three months ended June 30, 2011 ($1.3 million prior year to date). These increases are derived from higher revenues and operating income at ARS which are the result of ARS managing higher premium volumes for the three and six months ended June 30, 2012 as compared to the three and six months ended June 30, 2011.
During the six months ended June 30, 2012, the net cash provided by investing activities as reported on the unaudited consolidated statements of cash flows was $8.4 million. This source of cash was driven by proceeds from sales and maturities of fixed maturities in excess of purchases of fixed maturities. As previously explained, the Company's insurance subsidiaries hold investments portfolios comprised primarily of fixed maturities issued by the U.S. Government, government agencies and high quality corporate issuers which are of generally short duration and are highly liquid which enables the insurance subsidiaries to meet their liquidity needs.
Stocks Discussed: KFS,