Kingsway Financial Services Inc (KFS) swung to a net profit for the quarter ended Dec. 31, 2016. The company has made a net profit of $1.23 million, or $ 0.05 a share in the quarter, against a net loss of $2.19 million, or $0.12 a share in the last year period. Revenue during the quarter surged 38.27 percent to $52.79 million from $38.18 million in the previous year period. Net premium earned for the quarter increased 15.21 percent or $4.41 million to $33.42 million.
Total expenses increase substantially
Benefits, losses and expenses for the quarter were at $55.42 million, or 165.82 percent of premium earned from $39.06 million or 134.67 percent of premium earned in the last year period. Operating loss for the quarter was $2.63 million, compared with an operating loss of $0.89 million in the previous year period. Net investment income was at $6.16 million for the quarter, up 2,055.24 percent or $5.88 million from year-ago period. Meanwhile, income from fees and commission for the quarter increased by 29.80 percent or $1.65 million to $7.19 million. The company has recorded a gain on investments of $0.26 million in the quarter compared with a gain of $1.06 million for the previous year period.
Larry G. Swets, Jr., President and Chief Executive Officer, stated, “Our fourth quarter earnings were affected meaningfully by the five significant events noted above. One of those events related to historical performance in our non-standard automobile business unit. We announced in July that Steve Harrison had joined our insurance management team as an executive vice president. In August, we promoted Steve to President of our insurance operations. Throughout the year, Steve and his team have launched a number of initiatives intended to improve the operating performance of our insurance operations, particularly with respect to strengthening the management of our Claim Department. We have been aggressively increasing premium rates throughout the second half of 2016 and into 2017 and are actively pursuing initiatives related to increasing policy fee income, reducing bad debt expense, outsourcing the first notice of loss function, outsourcing much of the salvage and subrogation function and entering into an agreement with an outside vendor to migrate to a new policy administration and claim-handling operating platform sometime in 2017. While we are not happy to have to report adverse development on old accident years, we are optimistic about the direction Steve is taking the insurance operations and the potential positive impact to our segment operating income from the implementation of these initiatives. During the quarter, we recorded unfavorable development of approximately $9.1 million related to accident years 2015 and prior in our continuing operations while we recorded favorable development of approximately $1.5 million related to our continuing run-offs of Kingsway Amigo Insurance Company and Mendakota Casualty Company.”
Liabilities outpace assets growth
Total assets increased 107.87 percent or $260 million to $501.02 million on Dec. 31, 2016. On the other hand, total liabilities were at $437.76 million as on Dec. 31, 2016, up 129.28 percent or $246.83 million from year-ago. Return on assets was at 0.23 percent in the quarter against a negative 1.35 percent in the last year period. Return on equity was at 1.95 percent in the quarter against a negative 5.21 percent in the last year period.
Investments move up
Investments stood at $127.04 million as on Dec. 31, 2016, up 17.92 percent or $19.31 million from year-ago. Meanwhile, yield on investments went up 459 basis points to 4.85 percent in the quarter. Meanwhile, reinsurance recoverables moved up 23.83 percent or $0.90 million over the year to $4.69 million on Dec. 31, 2016.
Liability for future policy benefits, unpaid claims and claims adjustment expense was at $56.71 million as on Dec. 31, 2016, down 2.97 percent or $1.74 million from year-ago.
Total debt was at $233.69 million as on Dec. 31, 2016, up 485.73 percent or $193.80 million from year-ago. Shareholders equity stood at $56.84 million as on Dec. 31, 2016, up 30.05 percent or $13.13 million from year-ago. As a result, debt to equity ratio went up 320 basis points to 4.11 percent in the quarter from 0.91 percent in the last year period.
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