Kingsway Reports Record Quarterly Earnings and Revenues
TORONTO--Aug. 9, 2001--Kingsway Financial Services Inc. today announced record financial results for the quarter and six months ended June 30, 2001.Q2 2001 Summary
| -- | Earnings per share increased 57% to a quarterly record of 33 cents (fully diluted and basic) |
| -- | Trailing 12 month earnings per share (fully diluted) increased from 98 cents to $1.10 |
| -- | Net income increased 59% to a quarterly record of $11.4 million |
| -- | Combined ratio of 98.4% |
| -- | Annualized return on equity was 15.6% |
| -- | Gross premiums written increased 51% to a quarterly record of $260 million |
Net income for the second quarter increased by 59% to a quarterly record of $11.4 million compared to $7.2 million reported last year. Net income for the six month period was $20.6 million, an increase of 98% over the $10.4 million reported last year. Net income before goodwill was $12.9 million for the second quarter compared to $8.5 million last year, an increase of 51%. For the six month period, net income before goodwill was $23.5 million, an increase of 81% over $13.0 million last year.
Fully diluted and basic earnings per share for the second quarter increased by 57% to a new quarterly record of 33 cents, compared to 21 cents last year. For the six month period, fully diluted and basic earnings per share doubled to 60 cents compared to 30 cents last year. Fully diluted earnings per share for the twelve month trailing period increased by 12 cents to $1.10. For the first six months, earnings per share before goodwill amortization increased 79% to 68 cents on a fully diluted basis, compared to 38 cents last year.
"I am very pleased to report record levels of earnings and premiums this quarter," said Bill Star, President and Chief Executive Officer. "We have made an extremely good start to the year achieving record profits, earnings per share and premium levels. For the third consecutive quarter we have reported record written premiums which will translate into higher levels of earned premiums in future quarters."
Premium Growth
During the second quarter of 2001 gross premiums written increased 51% to a quarterly record of $260.1 million compared with $172.1 million last year. Gross premiums written were $44.1 million or 20% higher than the first quarter of 2001 which was the previous quarterly record. For the year-to-date, gross premiums written increased by 56% to $476.2 million compared to $306.1 million last year.
For the quarter, gross premiums written grew by 19% to $105.3 million for the Company's Canadian operations, and by 86% to $154.8 million for the U.S. operations compared to last year. For the six months, gross premiums written from Canadian operations were $172.8 million, an increase of 19% compared to $144.8 million last year, and for the U.S. operations increased by 88% to $303.4 million compared to $161.3 million last year.
Net premiums earned for the first half of 2001 were a record $357.1 million, an increase of 48% over the $241.8 million last year. Net premiums earned for the first half of the year represented 78% of net premiums written, reflecting the substantial increase in premiums to be earned during the remainder of the current year and early 2002. As a result of the continued quarter over quarter growth in written premiums, the unearned premiums as at June 30, 2001 increased 37% to $368.4 million over the $268.2 million reported at the end of 2000.
Underwriting Profit and Combined Ratio
The combined ratio continued to improve on a quarter over quarter basis, and for the second quarter 2001 was 98.4% (99.0% year-to-date) compared to 100.6% (102.9% year-to-date) last year. The combined ratio for the Company's Canadian operations improved to 97.7% (100.5% year-to-date) compared to the 100.1% (104.3% year-to-date) last year. The combined ratio of the Company's U.S. operations improved to 98.9% (98.0% year-to-date) for the quarter compared to 101.1% (101.7% year-to-date) last year.
The expense ratio for the quarter improved to 29.1% (28.9% year-to-date) compared with 31.3% (32.2% year-to-date) last year. The general expense ratio improved to 10.7% (11.2% year-to-date) compared with 12.2% (13.4% year-to-date) last year, as a result of the increasing earned premium base.
Investment Income
Investment income increased to $11.6 million ($25.1 million year-to-date) compared to $11.2 million ($20.9 million year-to-date) last year. During the quarter, realized gains amounted to $3.2 million ($5.0 million year-to-date) compared to $2.3 million ($4.0 million year-to-date) last year.
Balance Sheet
Total assets at June 30, 2001 grew to $1.3 billion. Book value per share increased by 16% to $8.69 from $7.50 a year ago. The investment portfolio increased to $868.2 million (market value $872.4 million), compared to $787.5 million (market value $787.1 million) as at December 31, 2000. The investment portfolio represents $25.38 per common share at June 30, 2001 compared to $23.12 at December 31, 2000.
Subsequent Event
The Company completed its previously announced public offering on July 12, 2001. In total, 5,750,000 common shares were issued for total gross proceeds of $71,875,000. Following the offering, the proforma book value per share was $9.10, and the total shares outstanding were 39,953,579.
Conference Call
The Company will have a conference call starting at 4:00 p.m. (Eastern time) on August 9, 2001. If interested in participating, please dial 1-888-740-8120 about five minutes before the start of the call. A live broadcast of the conference call can be accessed through the Kingsway's website at www.kingsway-financial.com and at www.q1234.com.
KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 2001 and 2000
(In thousands of Canadian dollars, except for per share amounts)
Quarter to June 30: 6 months to June 30:
2001 2000 2001 2000
(unaudited)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Gross premiums
written $260,127 $172,108 $476,162 $306,110
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net premiums
written $249,838 $163,452 $456,852 $290,527
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Revenue:
Net premiums earned $194,867 $133,436 $357,073 $241,818
Investment income 11,567 11,248 25,076 20,939
Net realized gains 3,187 2,345 5,045 4,022
-----------------------------------------------------------------------
209,621 147,029 387,194 266,779
Expenses:
Claims incurred 135,032 92,491 250,243 170,941
Commissions and
premium taxes 35,865 25,468 63,174 45,659
General and administrative
expenses 20,909 16,291 40,091 32,340
Interest expense 3,301 2,693 5,866 5,166
-----------------------------------------------------------------------
195,107 136,943 359,374 254,106
-----------------------------------------------------------------------
Income before income
taxes 14,514 10,086 27,820 12,673
Income taxes 1,639 1,586 4,300 (298)
-----------------------------------------------------------------------
Net income before
goodwill 12,875 8,500 23,520 12,971
Amortization of goodwill,
net of applicable
income tax 1,445 1,317 2,928 2,592
-----------------------------------------------------------------------
Net income $11,430 $7,183 $20,592 $10,379
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Earnings per share before goodwill:
Basic: $0.38 $0.25 $0.69 $0.38
Fully diluted: $0.37 $0.25 $0.68 $0.38
Earnings per share:
Basic: $0.33 $0.21 $0.60 $0.30
Fully diluted: $0.33 $0.21 $0.60 $0.30
Weighted average shares
outstanding:
Basic: 34,112 33,999 34,092 34,005
Fully diluted: 34,701 34,094 34,594 34,249
Claims ratio 69.3% 69.3% 70.1% 70.7%
Expense ratio 29.1% 31.3% 28.9% 32.2%
Combined ratio 98.4% 100.6% 99.0% 102.9%
Underwriting profit
(loss) $3,061 $(814) $3,565 $(7,122)
Return on equity
(annualized) 15.6% 11.5% 14.5% 8.4%
Book value per share $8.69 $7.50
KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED BALANCE SHEETS
As at June 30, 2001 and December 31, 2000
(In thousands of Canadian dollars)
2001 2000
(unaudited) (audited)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
ASSETS
Cash $ 31,638 $ 29,840
Investments 828,763 750,670
Accrued investment income 7,783 6,960
Accounts receivable and other assets 147,387 92,343
Due from reinsurers and other insurers 110,823 112,510
Deferred policy acquisition costs 75,384 53,467
Income taxes recoverable 978 -
Future income taxes 18,361 21,149
Capital assets 33,905 28,229
Goodwill 76,234 78,758
-----------------------------------------------------------------------
$1,331,256 $1,173,926
-----------------------------------------------------------------------
-----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Bank indebtedness $ 140,900 $ 143,129
Accounts payable and accrued liabilities 48,179 42,462
Income taxes payable - 1,837
Unearned premiums 368,397 268,208
Unpaid claims 470,317 435,322
Other liabilities 6,075 10,255
-----------------------------------------------------------------------
1,033,868 901,213
-----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 149,218 148,481
Currency translation adjustment 7,398 4,052
Retained earnings 140,772 120,180
-----------------------------------------------------------------------
297,388 272,713
-----------------------------------------------------------------------
$1,331,256 $1,173,926
-----------------------------------------------------------------------
-----------------------------------------------------------------------
KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
As at June 30, 2001 and December 31, 2000
(In thousands of Canadian dollars)
1. Investments:
--------------------------------------------------------------------
June 30, 2001
--------------------------------------------------------------------
Carrying Fair
Amount value
--------------------------------------------------------------------
Term deposits $ 126,996 $ 126,996
Bonds:
Government 248,994 248,499
Corporate 258,486 256,936
Preferred shares 12,241 10,963
Common shares 86,454 93,942
Financed premiums 95,592 95,592
--------------------------------------------------------------------
$ 828,763 $ 832,928
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
December 31, 2000
--------------------------------------------------------------------
Carrying Fair
Amount value
--------------------------------------------------------------------
Term deposits: $ 114,912 $ 114,861
Bonds:
Government 219,819 219,278
Corporate 236,506 233,883
Preferred shares 12,778 11,862
Common shares 83,332 87,056
Financed premiums 83,323 83,323
--------------------------------------------------------------------
$ 750,670 $ 750,263
--------------------------------------------------------------------
--------------------------------------------------------------------
KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the six months ended June 30, 2001 and 2000
(In thousands of Canadian dollars)
2001 2000
(unaudited)
-----------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income $20,592 $10,379
Items not affecting cash:
Amortization 5,754 4,714
Future income taxes 4,314 178
Net realized gains (5,045) (4,022)
Amortization of bond premiums and discounts (3,352) (1,147)
-----------------------------------------------------------------------
22,263 10,102
Net change in non-cash balances: 52,079 17,993
-----------------------------------------------------------------------
74,342 28,095
Financing activities:
Increase (cancellation) of share capital, net 737 (402)
Decrease in bank indebtedness (3,797) (2,499)
-----------------------------------------------------------------------
(3,060) (2,901)
Investing activities:
Purchase of investments (994,308) (487,495)
Proceeds from sale of investments 944,384 485,624
Financed premiums receivable, net (12,105) (9,559)
Additions to capital assets (7,455) (1,316)
-----------------------------------------------------------------------
(69,484) (12,746)
Increase in cash during period 1,798 12,448
Cash, beginning of period 29,840 12,062
-----------------------------------------------------------------------
Cash, end of period $31,638 $24,510
-----------------------------------------------------------------------
-----------------------------------------------------------------------
