Acquisition, Deconsolidation and Discontinued Operations (Notes)

6 Months Ended

Jun. 30, 2016

Acquisition, Deconsolidation and Discontinued Operations [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

ACQUISITION, DECONSOLIDATION AND DISCONTINUED OPERATIONS

(a)     Acquisition

Effective April 21, 2016, the Company issued 160,000 shares of its common stock to acquire Argo Management Group LLC ("Argo"). The Argo purchase price of $0.7 million was determined using the closing price of Kingsway common stock on the date the 160,000 shares were issued. The consolidated statements of operations include the earnings of Argo from the date of acquisition. No supplemental proforma revenue and earnings information related to the acquisition has been presented for the three and six months ended June 30, 2016, as the impact is immaterial. Argo’s primary business is to act as the Managing Member of Argo Holdings Fund I, LLC, an investment fund organized for purposes of making control-oriented equity investments in established lower middle market companies based in North America, with a focus on search fund investments.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was allocated to the assets purchased and liabilities assumed based upon their estimated fair values at the date of acquisition. During the second quarter of 2016, the Company completed its fair value analysis on the assets acquired and liabilities assumed. Separately identifiable intangible assets of $0.7 million were recognized resulting from the valuations of contract-based management fee and promote fee revenues. Refer to Note 9, "Intangible Assets," for further disclosure of the intangible assets related to this acquisition.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)
	April 21, 2016
Cash and cash equivalents	$	5
Other receivables	17
Intangible assets - subject to amortization	731
Other assets	5
Total assets	$	758
Accrued expenses and other liabilities	$	14
Total liabilities	$	14
Purchase price	$	744

(b)     Deconsolidation

On July 14, 2005, Kingsway Linked Return of Capital Trust ("KLROC Trust") completed its public offering of C$78.0 million through the issuance of 3,120,000 LROC 5% preferred units due June 30, 2015 ("LROC preferred units"), of which the Company was a promoter. KLROC Trust’s net proceeds of the public offering was C$74.1 million.

Beginning in 2009, the Company began purchasing LROC preferred units. During 2009, the Company acquired 833,715 LROC preferred units. During the second quarter of 2010, the Company commenced the take-over bid (the "KLROC Offer") to acquire up to 1,500,000 units at a price per unit of C$20.00 in cash. The KLROC Offer expired on July 23, 2010, and 1,525,150 units were tendered, of which 1,500,000 were purchased on a pro-rata basis. The tender was paid for using available cash.

As a result of these acquisitions, the Company beneficially owned and controlled 2,333,715 units, representing 74.8% of the issued and outstanding LROC preferred units and began consolidating the financial statements of KLROC Trust effective July 23, 2010. In the consolidated financial statements, the par value of the units owned was netted against the liability related to the LROC preferred units due June 30, 2015. At December 31, 2014, the Company's outstanding net obligation was C$15.8 million.

During the second quarter of 2015, the Company's controlling interest in KLROC Trust was reduced to zero upon the Company's repayment of its C$15.8 million outstanding on its LROC preferred units due June 30, 2015. As a result, the Company recorded a non-cash loss on deconsolidation of KLROC Trust of $4.4 million. This reported loss results from removing the net assets and accumulated other comprehensive loss of KLROC Trust from the Company’s consolidated balance sheets.

(c)     Discontinued Operations

On April 1, 2015, the Company closed on the sale of its subsidiary, Assigned Risk Solutions Ltd. ("ARS") for $47.0 million in cash.  During the second quarter of 2015, the Company received additional post-closing cash consideration of $2.0 million.  The terms of the sale also provide for potential receipt by the Company of future earnout payments equal to 1.25% of ARS' written premium and fee income during the earnout periods. The earnout payments are payable in three annual installments beginning in April 2016 through April 2018. During the second quarter of 2016, the Company received cash consideration of $1.4 million, representing the first annual installment earnout payment. Net of expenses, the Company recorded an additional gain on disposal of ARS of $1.1 million for the three and six months ended June 30, 2016. As a result of the sale, ARS, previously disclosed as part of the Insurance Services segment, has been classified as a discontinued operation.  The earnings of ARS are disclosed as discontinued operations in the unaudited consolidated statements of operations for all periods presented. Summary financial information included in income from discontinued operations, net of taxes for the three and six months ended June 30, 2016 and June 30, 2015 is presented below:

(in thousands)	Three months ended June 30,					Six months ended June 30,
	2016		2015			2016		2015
Revenues:
Service fee and commission income	$	—	$	—		$	—	$	8,342
Other expense	—		—			—		(20		)
Total revenues	—		—			—		8,322
Expenses:
General and administrative expenses	—		—			—		6,462
Income from discontinued operations before income tax expense	—		—			—		1,860
Income tax expense	—		—			—		434
Income from discontinued operations, net of taxes	—		—			$	—	$	1,426
Gain on disposal of discontinued operations before income tax benefit	1,124		11,010			1,124		11,010
Income tax benefit	—		(249		)	—		(249		)
Gain on disposal of discontinued operations, net of taxes	1,124		11,259			1,124		11,259
Total gain from discontinued operations, net of taxes	$	1,124	$	11,259		$	1,124	$	12,685

For the six months ended June 30, 2016 and June 30, 2015, ARS' net cash used in operating activities was zero and $0.2 million, respectively. ARS had no cash flows from investing activities for the six months ended June 30, 2016 and June 30, 2015.