Segmented Information

3 Months Ended

Mar. 31, 2013

Segmented Information [Abstract]

Segment Information

SEGMENTED INFORMATION

The Company is primarily engaged, through its subsidiaries, in the property and casualty insurance business. The Company conducts its business through the following two reportable segments: Insurance Underwriting and Insurance Services.

On September 17, 2012, the Company announced that it was restructuring its Insurance Underwriting and Insurance Services segments under two separate management teams. As a result of the Company's intent to streamline its non-standard property and casualty insurance business operations under one management team, KAI Advantage Auto, Inc. ("Advantage Auto"), formerly included in Insurance Services, is now part of Insurance Underwriting. All segmented information has been restated for all periods presented to include Advantage Auto in Insurance Underwriting.

Insurance Underwriting Segment

Insurance Underwriting includes the following subsidiaries of the Company: Mendota Insurance Company, Mendakota Insurance Company, Universal Casualty Company, Maison Insurance Company ("Maison"), Kingsway Amigo Insurance Company ("Amigo"), Advantage Auto, Kingsway Reinsurance Corporation and Kingsway Reinsurance (Bermuda) Ltd. (collectively, "Insurance Underwriting"). In November 2012, the Company formed Maison, a Louisiana-domiciled property and casualty insurance company, which provides homeowners policies for wind and hail-related property losses of residential dwellings and certain contents. Insurance Underwriting principally offers personal automobile insurance to drivers who do not meet the criteria for coverage by standard automobile insurers and actively conducts business in 18 states.

During the fourth quarter of 2012, the Company began taking steps to place all of Amigo into voluntary run-off. On November 19, 2012, the Florida Office of Insurance Regulation (“OIR”) approved Amigo's plan to withdraw from the business of offering commercial lines insurance in Florida. On January 30, 2013, the OIR approved Amigo's plan to withdraw from the business of offering personal lines insurance in Florida. In April 2013, Kingsway filed a comprehensive run-off plan with the OIR, which outlines plans for Amigo's run-off. The comprehensive run-off plan is subject to OIR approval.

Insurance Services Segment

Insurance Services includes the following subsidiaries of the Company: Assigned Risk Solutions Ltd. ("ARS") and IWS (collectively, "Insurance Services"). During the first quarter of 2013, Northeast Alliance Insurance Agency, LLC, formerly included in Insurance Services, was merged into ARS. Insurance Services is organized under ARS and IWS.

ARS is a licensed property and casualty agent, full service managing general agent and third-party administrator focused primarily on the assigned risk market. ARS is licensed to administer business in 22 states but generates its revenues primarily by operating in the states of New York and New Jersey.

IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 26 states and Puerto Rico to their members.

Results for the Company's reportable segments are based on the Company's internal financial reporting systems and are consistent with those followed in the preparation of the unaudited consolidated interim financial statements. The following tables provide financial data used by management. Segment assets are not allocated for management use and, therefore, are not included in the segment disclosures below.

Segment revenues for the three months ended March 31, 2013 and 2012 were:

(in thousands)	Three months ended March 31,
	2013			2012
Revenues:
Insurance Underwriting:
Net premiums earned	$	28,068		$	29,267
Other income	2,298			1,786
Total Insurance Underwriting	30,366			31,053
Insurance Services:
Service fee and commission income	13,124			9,529
Total Insurance Services	13,124			9,529
Total segment revenues	43,490			40,582
Net investment income	580			826
Net realized (losses) gains	(1,409		)	273
Loss on change in fair value of debt	(8,951		)	(4,331		)
Other income not allocated to segments	(80		)	(703		)
Total revenues	$	33,630		$	36,647

The operating (loss) income of each segment is before income taxes and includes revenues and direct segment costs. For the three months ended March 31, 2013 and 2012, Insurance Services operating income includes amortization expense of $0.3 million and zero. respectively, related to its VSA in-force intangible asset.

Segment (loss) income for the three months ended March 31, 2013 and 2012 were:

	Three months ended March 31,
	2013			2012
Segment operating (loss) income
Insurance Underwriting	$	(4,529	)	$	(3,226	)
Insurance Services	1,349			1,733
Total segment operating loss	(3,180		)	(1,493		)
Net investment income	580			826
Net realized (losses) gains	(1,409		)	273
Loss on change in fair value of debt	(8,951		)	(4,331		)
Other income and expenses not allocated to segments, net	(2,819		)	(3,623		)
Interest expense	(1,833		)	(1,849		)
Amortization of intangible assets not allocated to segments	(231		)	—
Loss on buy-back of debt	(24		)	—
Equity in net income (loss) of investee	255			(2,266		)
Loss before income tax (benefit) expense	$	(17,612	)	$	(12,463	)
Income tax (benefit) expense	(276		)	59
Net loss	$	(17,336	)	$	(12,522	)

Net premiums earned by line of business for the three months ended March 31, 2013 and 2012 were:

(in thousands)	Three months ended March 31,
	2013		2012
Insurance Underwriting:
Private passenger auto liability	$	18,661	$	19,405
Auto physical damage	7,843		7,304
Total non-standard automobile	26,504		26,709
Commercial auto liability	649		2,556
Homeowners	915		—
Other	—		2
Total net premiums earned	$	28,068	$	29,267