(Mark One) | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For Quarterly Period Ended June 30, 2019 | |
or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 98-0475673 (I.R.S. Employer Identification No.) |
150 E. Pierce Road, Itasca, IL 60143 |
(Address of principal executive offices and zip code) |
1-416-848-1171 |
(Registrant's telephone number, including area code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller Reporting Company x | Emerging Growth Company o |
KINGSWAY FINANCIAL SERVICES INC. |
Table Of Contents | ||
PART I - FINANCIAL INFORMATION | ||
ITEM 1. FINANCIAL STATEMENTS | ||
Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 | ||
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) | ||
Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) | ||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited) | ||
Notes to Consolidated Financial Statements (unaudited) | ||
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||
ITEM 4. CONTROLS AND PROCEDURES | ||
PART II - OTHER INFORMATION | ||
ITEM 1. LEGAL PROCEEDINGS | ||
ITEM 1A. RISK FACTORS | ||
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | ||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | ||
ITEM 4. MINE SAFETY DISCLOSURES | ||
ITEM 5. OTHER INFORMATION | ||
ITEM 6. EXHIBITS | ||
SIGNATURES |
2 |
KINGSWAY FINANCIAL SERVICES INC. |
June 30, 2019 | December 31, 2018 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturities, at fair value (amortized cost of $20,771 and $12,432, respectively) | $ | 20,787 | $ | 12,260 | ||||
Equity investments, at fair value (cost of $1,506 and $2,274, respectively) | 202 | 856 | ||||||
Limited liability investments | 3,891 | 4,790 | ||||||
Limited liability investments, at fair value | 33,047 | 26,015 | ||||||
Investments in private companies, at adjusted cost | 2,661 | 3,090 | ||||||
Real estate investments, at fair value (cost of $10,225 and $10,225, respectively) | 10,662 | 10,662 | ||||||
Other investments, at cost which approximates fair value | 895 | 2,079 | ||||||
Short-term investments, at cost which approximates fair value | 154 | 152 | ||||||
Total investments | 72,299 | 59,904 | ||||||
Cash and cash equivalents | 10,899 | 14,619 | ||||||
Restricted cash | 17,320 | 16,959 | ||||||
Investment in investee | 1,119 | 951 | ||||||
Accrued investment income | 417 | 420 | ||||||
Service fee receivable, net of allowance for doubtful accounts of $324 and $191, respectively | 5,246 | 3,434 | ||||||
Other receivables, net of allowance for doubtful accounts of $201 and $184, respectively | 10,554 | 9,523 | ||||||
Deferred acquisition costs, net | 7,724 | 6,904 | ||||||
Property and equipment, net of accumulated depreciation of $18,310 and $15,958, respectively | 101,178 | 103,142 | ||||||
Right-of-use asset | 2,265 | — | ||||||
Goodwill | 82,104 | 74,659 | ||||||
Intangible assets, net of accumulated amortization of $11,791 and $10,594, respectively | 87,775 | 83,266 | ||||||
Other assets | 5,394 | 4,459 | ||||||
Total Assets | $ | 404,294 | $ | 378,240 | ||||
Liabilities and Shareholders' Equity | ||||||||
Liabilities: | ||||||||
Accrued expenses and other liabilities | 16,518 | 14,786 | ||||||
Income taxes payable | 2,482 | 2,400 | ||||||
Deferred service fees | 61,522 | 47,130 | ||||||
Unpaid loss and loss adjustment expenses | 1,937 | 2,073 | ||||||
Bank loans | 11,674 | 3,917 | ||||||
Notes payable | 197,039 | 199,316 | ||||||
Subordinated debt, at fair value | 50,224 | 50,023 | ||||||
Lease liability | 2,410 | — | ||||||
Net deferred income tax liabilities | 28,984 | 28,537 | ||||||
Total Liabilities | 372,790 | 348,182 | ||||||
Redeemable Class A preferred stock, no par value; 1,000,000 and unlimited number authorized at June 30, 2019 and December 31, 2018, respectively; 222,876 and 222,876 issued and outstanding at June 30, 2019 and December 31, 2018, respectively; redemption amount of $7,485 and $7,278 at June 30, 2019 and December 31, 2018, respectively | 6,297 | 5,800 | ||||||
Shareholders' Equity: | ||||||||
Common stock, no par value; 50,000,000 and unlimited number authorized at June 30, 2019 and December 31, 2018, respectively; 21,866,959 and 21,787,728 issued and outstanding at June 30, 2019 and December 31, 2018, respectively | — | — | ||||||
Additional paid-in capital | 353,778 | 353,890 | ||||||
Accumulated deficit | (379,872 | ) | (382,196 | ) | ||||
Accumulated other comprehensive income | 39,325 | 40,768 | ||||||
Shareholders' equity attributable to common shareholders | 13,231 | 12,462 | ||||||
Noncontrolling interests in consolidated subsidiaries | 11,976 | 11,796 | ||||||
Total Shareholders' Equity | 25,207 | 24,258 | ||||||
Total Liabilities, Class A preferred stock and Shareholders' Equity | $ | 404,294 | $ | 378,240 |
3 |
KINGSWAY FINANCIAL SERVICES INC. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Revenues: | |||||||||||||||||
Service fee and commission income | $ | 11,772 | $ | 8,860 | $ | 21,587 | $ | 18,511 | |||||||||
Rental income | 3,341 | 3,345 | 6,682 | 6,693 | |||||||||||||
Other income | 113 | 108 | 258 | 321 | |||||||||||||
Total revenues | 15,226 | 12,313 | 28,527 | 25,525 | |||||||||||||
Operating expenses: | |||||||||||||||||
Claims authorized on vehicle service agreements | 2,506 | 1,392 | 4,393 | 2,764 | |||||||||||||
Loss and loss adjustment expenses | 601 | 1,301 | 708 | 1,647 | |||||||||||||
Commissions | 1,103 | 834 | 2,021 | 1,747 | |||||||||||||
Cost of services sold | 1,160 | 1,464 | 2,519 | 3,716 | |||||||||||||
General and administrative expenses | 9,164 | 7,295 | 17,566 | 14,771 | |||||||||||||
Leased real estate segment interest expense | 1,520 | 1,546 | 3,047 | 3,098 | |||||||||||||
Total operating expenses | 16,054 | 13,832 | 30,254 | 27,743 | |||||||||||||
Operating loss | (828 | ) | (1,519 | ) | (1,727 | ) | (2,218 | ) | |||||||||
Other revenues (expenses), net: | |||||||||||||||||
Net investment income | 749 | — | 1,010 | 1,448 | 1,648 | ||||||||||||
Net realized (losses) gains | (556 | ) | — | 132 | (241 | ) | 397 | ||||||||||
(Loss) gain on change in fair value of equity investments | (63 | ) | — | (421 | ) | 15 | 744 | ||||||||||
Gain (loss) on change in fair value of limited liability investments, at fair value | 2,347 | (525 | ) | 6,612 | (1,461 | ) | |||||||||||
Net change in unrealized gain (loss) on private company investments | — | (155 | ) | 19 | (155 | ) | |||||||||||
Other-than-temporary impairment loss | — | — | — | (75 | ) | — | |||||||||||
Non-operating other income | 19 | — | 14 | 173 | 21 | ||||||||||||
Interest expense not allocated to segments | (2,339 | ) | (1,844 | ) | (4,441 | ) | (3,561 | ) | |||||||||
Amortization of intangible assets | (676 | ) | (254 | ) | (1,197 | ) | (509 | ) | |||||||||
Gain (loss) on change in fair value of debt | 918 | (142 | ) | 1,494 | (1,061 | ) | |||||||||||
Gain on disposal of subsidiary | — | 17 | — | 17 | |||||||||||||
Equity in net income (loss) of investee | 201 | (385 | ) | 168 | (284 | ) | |||||||||||
Total other revenues (expenses), net | 600 | (2,553 | ) | 3,975 | (4,204 | ) | |||||||||||
(Loss) income from continuing operations before income tax expense (benefit) | (228 | ) | (4,072 | ) | 2,248 | (6,422 | ) | ||||||||||
Income tax expense (benefit) | 168 | 190 | (545 | ) | 444 | ||||||||||||
(Loss) income from continuing operations | (396 | ) | (4,262 | ) | 2,793 | (6,866 | ) | ||||||||||
Income from discontinued operations, net of taxes | — | 594 | — | 980 | |||||||||||||
Loss on disposal of discontinued operations, net of taxes | — | (6,628 | ) | — | (6,628 | ) | |||||||||||
Net (loss) income | (396 | ) | (10,296 | ) | 2,793 | (12,514 | ) | ||||||||||
Less: net income attributable to noncontrolling interests in consolidated subsidiaries | 258 | 158 | 469 | 517 | |||||||||||||
Less: dividends on preferred stock, net of tax | 252 | 259 | 498 | 512 | |||||||||||||
Net (loss) income attributable to common shareholders | $ | (906 | ) | $ | (10,713 | ) | $ | 1,826 | $ | (13,543 | ) | ||||||
(Loss) earnings per share - continuing operations: | |||||||||||||||||
Basic: | $ | (0.04 | ) | $ | (0.22 | ) | $ | 0.08 | $ | (0.36 | ) | ||||||
Diluted: | $ | (0.04 | ) | $ | (0.22 | ) | $ | 0.08 | $ | (0.36 | ) | ||||||
Loss per share - discontinued operations: | |||||||||||||||||
Basic: | $ | — | $ | (0.28 | ) | $ | — | $ | (0.26 | ) | |||||||
Diluted: | $ | — | $ | (0.28 | ) | $ | — | $ | (0.26 | ) | |||||||
(Loss) earnings per share – net (loss) income attributable to common shareholders: | |||||||||||||||||
Basic: | $ | (0.04 | ) | $ | (0.49 | ) | $ | 0.08 | $ | (0.62 | ) | ||||||
Diluted: | $ | (0.04 | ) | $ | (0.49 | ) | $ | 0.08 | $ | (0.62 | ) | ||||||
Weighted-average shares outstanding (in ‘000s): | |||||||||||||||||
Basic: | 21,867 | 21,708 | 21,854 | 21,708 | |||||||||||||
Diluted: | 21,867 | 21,708 | 21,854 | 21,708 |
4 |
KINGSWAY FINANCIAL SERVICES INC. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net (loss) income | $ | (396 | ) | $ | (10,296 | ) | $ | 2,793 | $ | (12,514 | ) | |||||
Other comprehensive (loss) income, net of taxes(1): | ||||||||||||||||
Unrealized gains (losses) on available-for-sale investments: | ||||||||||||||||
Unrealized gains (losses) arising during the period | 121 | (72 | ) | 232 | (437 | ) | ||||||||||
Reclassification adjustment for amounts included in net (loss) income | (7 | ) | (4 | ) | (13 | ) | (11 | ) | ||||||||
Change in fair value of debt attributable to instrument-specific credit risk | (750 | ) | 778 | (1,695 | ) | 344 | ||||||||||
Equity in other comprehensive income of limited liability investment | 45 | — | 45 | — | ||||||||||||
Other comprehensive (loss) income | (591 | ) | 702 | (1,431 | ) | (104 | ) | |||||||||
Comprehensive (loss) income | (987 | ) | (9,594 | ) | 1,362 | (12,618 | ) | |||||||||
Less: comprehensive income attributable to noncontrolling interests in consolidated subsidiaries | 264 | 158 | 481 | 511 | ||||||||||||
Comprehensive (loss) income attributable to common shareholders | $ | (1,251 | ) | $ | (9,752 | ) | $ | 881 | $ | (13,129 | ) | |||||
(1) Net of income tax expense (benefit) of $0 and $0 for the three and six months ended June 30, 2019 and June 30, 2018, respectively. |
5 |
KINGSWAY FINANCIAL SERVICES INC. |
Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Shareholders' Equity Attributable to Common Shareholders | Noncontrolling Interests in Consolidated Subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance, April 1, 2019 | 21,866,959 | $ | — | $ | 353,886 | $ | (379,218 | ) | $ | 39,922 | $ | 14,590 | $ | 12,013 | $ | 26,603 | |||||||||||||||
Net (loss) income | — | — | (654 | ) | — | (654 | ) | 258 | (396 | ) | |||||||||||||||||||||
Preferred stock dividends | — | — | (252 | ) | — | — | (252 | ) | — | (252 | ) | ||||||||||||||||||||
Deconsolidation of noncontrolling interest | — | — | — | — | — | — | (301 | ) | (301 | ) | |||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | (597 | ) | (597 | ) | 6 | (591 | ) | ||||||||||||||||||||
Stock-based compensation | — | — | 144 | — | — | 144 | — | 144 | |||||||||||||||||||||||
Balance, June 30, 2019 | 21,866,959 | $ | — | $ | 353,778 | $ | (379,872 | ) | $ | 39,325 | $ | 13,231 | $ | 11,976 | $ | 25,207 |
Three Months Ended June 30, 2018 | |||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Shareholders' Equity Attributable to Common Shareholders | Noncontrolling Interests in Consolidated Subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance, April 1, 2018 | 21,708,190 | $ | — | $ | 356,211 | $ | (354,672 | ) | $ | 35,844 | $ | 37,383 | $ | 10,131 | $ | 47,514 | |||||||||||||||
Net (loss) income | — | — | — | (10,454 | ) | — | (10,454 | ) | 158 | (10,296 | ) | ||||||||||||||||||||
Preferred stock dividends, net of tax | — | — | (259 | ) | — | — | (259 | ) | — | (259 | ) | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | 702 | 702 | — | 702 | |||||||||||||||||||||||
Stock-based compensation | — | — | 295 | — | — | 295 | — | 295 | |||||||||||||||||||||||
Balance, June 30, 2018 | 21,708,190 | $ | — | $ | 356,247 | $ | (365,126 | ) | $ | 36,546 | $ | 27,667 | $ | 10,289 | $ | 37,956 |
6 |
KINGSWAY FINANCIAL SERVICES INC. |
Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Shareholders' Equity Attributable to Common Shareholders | Noncontrolling Interests in Consolidated Subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance, December 31, 2018 | 21,787,728 | $ | — | $ | 353,890 | $ | (382,196 | ) | $ | 40,768 | $ | 12,462 | $ | 11,796 | $ | 24,258 | |||||||||||||||
Vesting of restricted stock awards, net of share settlements for tax withholdings | 79,231 | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | 2,324 | — | 2,324 | 469 | 2,793 | |||||||||||||||||||||||
Preferred stock dividends | — | — | (498 | ) | — | — | (498 | ) | — | (498 | ) | ||||||||||||||||||||
Deconsolidation of noncontrolling interest | — | — | — | — | — | — | (301 | ) | (301 | ) | |||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | (1,443 | ) | (1,443 | ) | 12 | (1,431 | ) | ||||||||||||||||||||
Stock-based compensation | — | — | 386 | — | — | 386 | — | 386 | |||||||||||||||||||||||
Balance, June 30, 2019 | 21,866,959 | $ | — | $ | 353,778 | $ | (379,872 | ) | $ | 39,325 | $ | 13,231 | $ | 11,976 | $ | 25,207 |
Six Months Ended June 30, 2018 | |||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Shareholders' Equity Attributable to Common Shareholders | Noncontrolling Interests in Consolidated Subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance, December 31, 2017 | 21,708,190 | $ | — | $ | 356,171 | $ | (310,953 | ) | $ | (3,852 | ) | $ | 41,366 | $ | 9,361 | $ | 50,727 | ||||||||||||||
Cumulative effect of adoption of ASU 2014-09 | — | — | — | (647 | ) | — | (647 | ) | (7 | ) | (654 | ) | |||||||||||||||||||
Cumulative effect of adoption of ASU 2016-01 | — | — | — | (40,495 | ) | 40,495 | — | — | — | ||||||||||||||||||||||
Balance at January 1, 2018, as adjusted | 21,708,190 | — | 356,171 | (352,095 | ) | 36,643 | 40,719 | 9,354 | 50,073 | ||||||||||||||||||||||
Net (loss) income | — | — | — | (13,031 | ) | — | (13,031 | ) | 517 | (12,514 | ) | ||||||||||||||||||||
Contributions from noncontrolling interest holders | — | — | — | — | — | — | 425 | 425 | |||||||||||||||||||||||
Preferred stock dividends, net of tax | — | — | (512 | ) | — | — | (512 | ) | — | (512 | ) | ||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (97 | ) | (97 | ) | (7 | ) | (104 | ) | |||||||||||||||||||
Stock-based compensation | — | — | 588 | — | — | 588 | — | 588 | |||||||||||||||||||||||
Balance, June 30, 2018 | 21,708,190 | $ | — | $ | 356,247 | $ | (365,126 | ) | $ | 36,546 | $ | 27,667 | $ | 10,289 | $ | 37,956 |
7 |
KINGSWAY FINANCIAL SERVICES INC. |
Six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash provided by (used in): | ||||||||
Operating activities: | ||||||||
Net income (loss) | $ | 2,793 | $ | (12,514 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Income from discontinued operations, net of taxes | — | (980 | ) | |||||
Loss on disposal of discontinued operations, net of taxes | — | 6,628 | ||||||
Equity in net (income) loss of investee | (168 | ) | 284 | |||||
Equity in net income of limited liability investments | (14 | ) | (181 | ) | ||||
Depreciation and amortization expense | 3,373 | 2,678 | ||||||
Stock-based compensation expense, net of forfeitures | 386 | 588 | ||||||
Net realized losses (gains) | 241 | (397 | ) | |||||
Gain on change in fair value of equity investments | (15 | ) | (744 | ) | ||||
(Gain) loss on change in fair value of limited liability investments, at fair value | (6,612 | ) | 1,461 | |||||
Net change in unrealized (gain) loss on private company investments | (19 | ) | 155 | |||||
(Gain) loss on change in fair value of debt | (1,494 | ) | 1,061 | |||||
Deferred income taxes, adjusted for Geminus liabilities assumed | (816 | ) | 56 | |||||
Other-than-temporary impairment loss | 75 | — | ||||||
Amortization of fixed maturities premiums and discounts | (7 | ) | 32 | |||||
Amortization of note payable premium | (461 | ) | (473 | ) | ||||
Gain on disposal of subsidiary | — | (17 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Service fee receivable, net, adjusted for Geminus assets acquired | (1,299 | ) | (787 | ) | ||||
Other receivables, net, adjusted for Geminus assets acquired | (1,019 | ) | (1,617 | ) | ||||
Deferred acquisition costs, net | (820 | ) | (337 | ) | ||||
Unpaid loss and loss adjustment expenses | (136 | ) | 1,265 | |||||
Deferred service fees, adjusted for Geminus liabilities assumed | 3,828 | 3,255 | ||||||
Other, net, adjusted for Geminus assets acquired and liabilities assumed | (270 | ) | (3,566 | ) | ||||
Cash used in operating activities - continuing operations | (2,454 | ) | (4,150 | ) | ||||
Cash used in operating activities - discontinued operations | — | (1,909 | ) | |||||
Net cash used in operating activities | (2,454 | ) | (6,059 | ) | ||||
Investing activities: | ||||||||
Proceeds from sales and maturities of fixed maturities | 5,887 | 4,965 | ||||||
Proceeds from sales of equity investments | 675 | 3,704 | ||||||
Purchases of fixed maturities | (9,794 | ) | (1,885 | ) | ||||
Purchases of equity investments | — | (806 | ) | |||||
Net proceeds from limited liability investments | 282 | 2,199 | ||||||
Net purchases of limited liability investments, at fair value | (336 | ) | (666 | ) | ||||
Net proceeds from investments in private companies | 249 | 95 | ||||||
Net proceeds from other investments | 1,239 | 405 | ||||||
Net proceeds from short-term investments | 30 | — | ||||||
Proceeds from disposal of subsidiary | — | 565 | ||||||
Net proceeds from sale of discontinued operations | — | 1,129 | ||||||
Acquisition of business, net of cash acquired | (4,792 | ) | — | |||||
Net disposals of property and equipment, adjusted for Geminus assets acquired | (134 | ) | 593 | |||||
Cash (used in) provided by investing activities - continuing operations | (6,694 | ) | 10,298 | |||||
Cash used in investing activities - discontinued operations | — | (3,086 | ) | |||||
Net cash (used in) provided by investing activities | (6,694 | ) | 7,212 | |||||
Financing activities: | ||||||||
Taxes paid related to net share settlements of restricted stock awards | (89 | ) | — | |||||
Principal proceeds from bank loan, net of debt issuance costs of $981 | 9,019 | — | ||||||
Principal payments on bank loans | (1,325 | ) | (500 | ) | ||||
Principal payments on notes payable | (1,816 | ) | (1,632 | ) | ||||
Cash provided by (used in) financing activities - continuing operations | 5,789 | (2,132 | ) | |||||
Cash used in financing activities - discontinued operations | — | — | ||||||
Net cash provided by (used in) financing activities | 5,789 | (2,132 | ) | |||||
Net (decrease) increase in cash and cash equivalents and restricted cash from continuing operations | (3,359 | ) | 4,016 | |||||
Cash and cash equivalents and restricted cash at beginning of period | 31,578 | 43,874 | ||||||
Less: cash and cash equivalents and restricted cash of discontinued operations at beginning of period | — | 23,512 | ||||||
Cash and cash equivalents and restricted cash of continuing operations at beginning of period | 31,578 | 20,362 | ||||||
Cash and cash equivalents and restricted cash of continuing operations at end of period | $ | 28,219 | $ | 24,378 |
8 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
9 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
10 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
11 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
12 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | ||||
March 1, 2019 | ||||
Investments | $ | 4,405 | ||
Cash and cash equivalents | 755 | |||
Restricted cash | 2,650 | |||
Accrued investment income | 32 | |||
Service fee receivable | 513 | |||
Other receivables | 12 | |||
Property and equipment, net | 79 | |||
Goodwill | 7,445 | |||
Intangible assets not subject to amortization - trade names | 1,974 | |||
Intangible asset subject to amortization - customer relationships | 3,732 | |||
Other assets | 620 | |||
Total assets | $ | 22,217 | ||
Accrued expenses and other liabilities | $ | 2,018 | ||
Income taxes payable | 1 | |||
Deferred service fees | 10,564 | |||
Net deferred income tax liabilities | 1,263 | |||
Total liabilities | $ | 13,846 | ||
Purchase price | $ | 8,371 |
13 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands, except per share data) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | $ | 15,226 | $ | 15,218 | $ | 30,491 | $ | 30,982 | ||||||||
(Loss) income from continuing operations attributable to common shareholders | $ | (906 | ) | $ | (5,357 | ) | $ | 676 | $ | (8,874 | ) | |||||
Basic (loss) earnings per share - continuing operations | $ | (0.04 | ) | $ | (0.25 | ) | $ | 0.03 | $ | (0.41 | ) | |||||
Diluted (loss) earnings per share - continuing operations | $ | (0.04 | ) | $ | (0.25 | ) | $ | 0.03 | $ | (0.41 | ) |
14 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||
2018 | 2018 | |||||||
Income (loss) from discontinued operations, net of taxes: | ||||||||
Revenues: | ||||||||
Net premiums earned | $ | 22,956 | $ | 51,592 | ||||
Total revenues | 22,956 | 51,592 | ||||||
Other revenues (expenses), net: | ||||||||
Loss and loss adjustment expenses | (18,927 | ) | (41,728 | ) | ||||
Commissions and premium taxes | (2,225 | ) | (6,388 | ) | ||||
General and administrative expenses | (3,825 | ) | (7,778 | ) | ||||
Net investment income | 208 | 434 | ||||||
Net realized losses | (134 | ) | (134 | ) | ||||
Gain on change in fair value of equity investments | 96 | 106 | ||||||
Other income | 2,445 | 4,876 | ||||||
Total other revenue (expenses), net | (22,362 | ) | (50,612 | ) | ||||
Income from discontinued operations before income tax benefit | 594 | 980 | ||||||
Income tax benefit | — | — | ||||||
Income from discontinued operations, net of taxes | 594 | 980 | ||||||
Loss on disposal of discontinued operations before income tax expense | (6,628 | ) | (6,628 | ) | ||||
Income tax expense | — | — | ||||||
Loss on disposal of discontinued operations, net of taxes | (6,628 | ) | (6,628 | ) | ||||
Total loss from discontinued operations, net of taxes | $ | (6,034 | ) | $ | (5,648 | ) |
(in thousands) | June 30, 2019 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. government, government agencies and authorities | $ | 15,007 | $ | 52 | $ | 13 | $ | 15,046 | ||||||||
States, municipalities and political subdivisions | 604 | 1 | 4 | 601 | ||||||||||||
Mortgage-backed | 2,474 | 2 | 22 | 2,454 | ||||||||||||
Corporate | 2,686 | 9 | 9 | 2,686 | ||||||||||||
Total fixed maturities | $ | 20,771 | $ | 64 | $ | 48 | $ | 20,787 |
15 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | December 31, 2018 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. government, government agencies and authorities | $ | 5,594 | $ | 1 | $ | 48 | $ | 5,547 | ||||||||
States, municipalities and political subdivisions | 621 | — | 14 | 607 | ||||||||||||
Mortgage-backed | 3,256 | — | 70 | 3,186 | ||||||||||||
Corporate | 2,961 | — | 41 | 2,920 | ||||||||||||
Total fixed maturities | 12,432 | 1 | 173 | 12,260 |
(in thousands) | June 30, 2019 | |||||||
Amortized Cost | Estimated Fair Value | |||||||
Due in one year or less | $ | 11,652 | $ | 11,672 | ||||
Due after one year through five years | 7,641 | 7,650 | ||||||
Due after five years through ten years | 194 | 192 | ||||||
Due after ten years | 1,284 | 1,273 | ||||||
Total | $ | 20,771 | $ | 20,787 |
(in thousands) | June 30, 2019 | ||||||||||||||||||||||
Less than 12 Months | Greater than 12 Months | Total | |||||||||||||||||||||
Estimated Fair Value | Unrealized Loss | Estimated Fair Value | Unrealized Loss | Estimated Fair Value | Unrealized Loss | ||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||
U.S. government, government agencies and authorities | $ | 2,497 | $ | 2 | $ | 1,950 | $ | 11 | $ | 4,447 | $ | 13 | |||||||||||
States, municipalities and political subdivisions | 75 | — | 453 | 4 | 528 | 4 | |||||||||||||||||
Mortgage-backed | 150 | — | 1,698 | 22 | 1,848 | 22 | |||||||||||||||||
Corporate | 121 | — | 1,123 | 9 | 1,244 | 9 | |||||||||||||||||
Total fixed maturities | $ | 2,843 | $ | 2 | $ | 5,224 | $ | 46 | $ | 8,067 | $ | 48 |
16 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | December 31, 2018 | ||||||||||||||||||||||
Less than 12 Months | Greater than 12 Months | Total | |||||||||||||||||||||
Estimated Fair Value | Unrealized Loss | Estimated Fair Value | Unrealized Loss | Estimated Fair Value | Unrealized Loss | ||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||
U.S. government, government agencies and authorities | $ | 1,497 | $ | 1 | $ | 2,609 | $ | 47 | $ | 4,106 | $ | 48 | |||||||||||
States, municipalities and political subdivisions | — | — | 606 | 14 | 606 | 14 | |||||||||||||||||
Mortgage-backed | 800 | 1 | 2,134 | 69 | 2,934 | 70 | |||||||||||||||||
Corporate | 595 | 1 | 2,151 | 40 | 2,746 | 41 | |||||||||||||||||
Total fixed maturities | $ | 2,892 | $ | 3 | $ | 7,500 | $ | 170 | $ | 10,392 | $ | 173 |
• | identifying all unrealized loss positions that have existed for at least six months; |
• | identifying other circumstances management believes may affect the recoverability of the unrealized loss positions; |
• | obtaining a valuation analysis from third-party investment managers regarding the intrinsic value of these investments based on their knowledge and experience together with market-based valuation techniques; |
• | reviewing the trading range of certain investments over the preceding calendar period; |
• | assessing if declines in market value are other-than-temporary for debt instruments based on the investment grade credit ratings from third-party rating agencies; |
• | assessing if declines in market value are other-than-temporary for any debt instrument with a non-investment grade credit rating based on the continuity of its debt service record; |
• | determining the necessary provision for declines in market value that are considered other-than-temporary based on the analyses performed; and |
• | assessing the Company's ability and intent to hold these investments at least until any potential investment impairment is recovered. |
• | the opinions of professional investment managers could be incorrect; |
• | the past trading patterns of individual investments may not reflect future valuation trends; |
• | the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company's financial situation; and |
• | the debt service pattern of non-investment grade instruments may not reflect future debt service capabilities and may not reflect a company's unknown underlying financial problems. |
17 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
• | the opinions of external investment and portfolio managers; |
• | the financial condition and prospects of the investee; |
• | recent operating trends and forecasted performance of the investee; |
• | current market conditions in the geographic area or industry in which the investee operates; |
• | changes in credit ratings; and |
• | changes in the regulatory environment. |
18 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Investment income: | ||||||||||||||||
Interest from fixed maturities | $ | 122 | $ | 57 | $ | 195 | $ | 90 | ||||||||
Dividends | 70 | 82 | 128 | 156 | ||||||||||||
Income from limited liability investments | 32 | 189 | 14 | 181 | ||||||||||||
Income from limited liability investments, at fair value | 232 | 482 | 467 | 701 | ||||||||||||
Income from real estate investments | 200 | 200 | 400 | 400 | ||||||||||||
Other | 112 | 9 | 290 | 137 | ||||||||||||
Gross investment income | 768 | 1,019 | 1,494 | 1,665 | ||||||||||||
Investment expenses | (19 | ) | (9 | ) | (46 | ) | (17 | ) | ||||||||
Net investment income | $ | 749 | $ | 1,010 | $ | 1,448 | $ | 1,648 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Gross realized gains | $ | 44 | $ | 133 | $ | 359 | $ | 398 | ||||||||
Gross realized losses | (600 | ) | (1 | ) | (600 | ) | (1 | ) | ||||||||
Net realized (losses) gains | $ | (556 | ) | $ | 132 | $ | (241 | ) | $ | 397 |
19 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net (losses) gains recognized on equity investments sold during the period | $ | (101 | ) | $ | (10 | ) | $ | (101 | ) | $ | 545 | |||||
Change in unrealized gains (losses) on equity investments held at end of the period | 38 | (411 | ) | 116 | 199 | |||||||||||
(Loss) gain on change in fair value of equity investments | $ | (63 | ) | $ | (421 | ) | $ | 15 | $ | 744 |
(in thousands, except for percentages) | ||||||||||||||||||||||
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||
Equity Percentage | Estimated Fair Value | Carrying Value | Equity Percentage | Estimated Fair Value | Carrying Value | |||||||||||||||||
ICL | 22.9 | % | $ | 1,542 | $ | 1,119 | 22.9 | % | $ | 951 | $ | 951 |
20 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Beginning balance, net | $ | 7,220 | $ | 6,428 | $ | 6,904 | $ | 6,325 | ||||||||
Additions | 1,500 | 1,256 | 2,701 | 2,498 | ||||||||||||
Amortization | (996 | ) | (1,022 | ) | (1,881 | ) | (2,161 | ) | ||||||||
Balance at June 30, net | $ | 7,724 | $ | 6,662 | $ | 7,724 | $ | 6,662 |
(in thousands) | June 30, 2019 | |||||||||||
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
Intangible assets subject to amortization: | ||||||||||||
Database | $ | 4,918 | $ | 3,259 | $ | 1,659 | ||||||
Vehicle service agreements in-force | 3,680 | 3,675 | 5 | |||||||||
Customer relationships | 12,646 | 4,580 | 8,066 | |||||||||
In-place lease | 1,125 | 186 | 939 | |||||||||
Non-compete | 266 | 91 | 175 | |||||||||
Intangible assets not subject to amortization: | ||||||||||||
Tenant relationship | 73,667 | — | 73,667 | |||||||||
Trade names | 3,264 | — | 3,264 | |||||||||
Total | $ | 99,566 | $ | 11,791 | $ | 87,775 |
21 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | December 31, 2018 | |||||||||||
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||
Intangible assets subject to amortization: | ||||||||||||
Database | $ | 4,918 | $ | 3,013 | $ | 1,905 | ||||||
Vehicle service agreements in-force | 3,680 | 3,671 | 9 | |||||||||
Customer relationships | 8,914 | 3,691 | 5,223 | |||||||||
In-place lease | 1,125 | 155 | 970 | |||||||||
Non-compete | 266 | 64 | 202 | |||||||||
Intangible assets not subject to amortization: | ||||||||||||
Tenant relationship | 73,667 | — | 73,667 | |||||||||
Trade names | 1,290 | — | 1,290 | |||||||||
Total | $ | 93,860 | $ | 10,594 | $ | 83,266 |
(in thousands) | June 30, 2019 | |||||||||||||||||||||||
Total Property and Equipment | Property leased to others under operating leases included in property and equipment | |||||||||||||||||||||||
Cost | Accumulated Depreciation | Carrying Value | Cost | Accumulated Depreciation | Carrying Value | |||||||||||||||||||
Land | $ | 21,120 | $ | — | $ | 21,120 | $ | 21,120 | $ | — | $ | 21,120 | ||||||||||||
Site improvements | 91,308 | 12,228 | 79,080 | 91,308 | 12,228 | 79,080 | ||||||||||||||||||
Buildings | 580 | 43 | 537 | 580 | 43 | 537 | ||||||||||||||||||
Leasehold improvements | 149 | 103 | 46 | — | — | — | ||||||||||||||||||
Furniture and equipment | 1,042 | 953 | 89 | — | — | — | ||||||||||||||||||
Computer hardware | 5,289 | 4,983 | 306 | — | — | — | ||||||||||||||||||
Total | $ | 119,488 | $ | 18,310 | $ | 101,178 | $ | 113,008 | $ | 12,271 | $ | 100,737 |
22 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | December 31, 2018 | |||||||||||||||||||||||
Total Property and Equipment | Property leased to others under operating leases included in property and equipment | |||||||||||||||||||||||
Cost | Accumulated Depreciation | Carrying Value | Cost | Accumulated Depreciation | Carrying Value | |||||||||||||||||||
Land | $ | 21,120 | $ | — | $ | 21,120 | $ | 21,120 | $ | — | $ | 21,120 | ||||||||||||
Site improvements | 91,308 | 10,161 | 81,147 | 91,308 | 10,161 | 81,147 | ||||||||||||||||||
Buildings | 580 | 36 | 544 | 580 | 36 | 544 | ||||||||||||||||||
Leasehold improvements | 104 | 102 | 2 | — | — | — | ||||||||||||||||||
Furniture and equipment | 993 | 901 | 92 | — | — | — | ||||||||||||||||||
Computer hardware | 4,995 | 4,758 | 237 | — | — | — | ||||||||||||||||||
Total | $ | 119,100 | $ | 15,958 | $ | 103,142 | $ | 113,008 | $ | 10,197 | $ | 102,811 |
(in thousands) | June 30, 2019 | June 30, 2018 | ||||||
Balance at January 1, net | $ | 43,734 | $ | 40,794 | ||||
Vehicle service agreement liability acquired during the year related to the purchase of Geminus | 10,792 | — | ||||||
Gross service fees for vehicle service agreements sold | 14,549 | 11,166 | ||||||
Recognition of service fees on vehicle service agreements | (12,703 | ) | (9,588 | ) | ||||
Liability for claims authorized on vehicle service agreements | 4,393 | 2,764 | ||||||
Payments of claims authorized on vehicle service agreements | (2,678 | ) | (2,950 | ) | ||||
Re-estimation of deferred service fees | (321 | ) | (165 | ) | ||||
Balance at June 30, net | $ | 57,766 | $ | 42,021 |
(in thousands) | June 30, | December 31, | ||||||
2019 | 2018 | |||||||
Deferred service fees | $ | 57,182 | $ | 43,495 | ||||
Accrued expenses and other liabilities | 584 | 239 | ||||||
Balance at end of period, net | $ | 57,766 | $ | 43,734 |
23 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | June 30, 2019 | June 30, 2018 | ||||||
Balance at beginning of period, gross | $ | 2,073 | $ | 1,329 | ||||
Less reinsurance recoverable related to unpaid loss and loss adjustment expenses | — | 72 | ||||||
Balance at beginning of period, net | 2,073 | 1,257 | ||||||
Incurred related to: | ||||||||
Current year | — | — | ||||||
Prior years | 708 | 1,647 | ||||||
Paid related to: | ||||||||
Current year | — | — | ||||||
Prior years | (844 | ) | (410 | ) | ||||
Balance at end of period, net | 1,937 | 2,494 | ||||||
Plus reinsurance recoverable related to unpaid loss and loss adjustment expenses | — | 100 | ||||||
Balance at end of period, gross | $ | 1,937 | $ | 2,594 |
24 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Principal | Carrying Value | Fair Value | Principal | Carrying Value | Fair Value | |||||||||||||||||||
Bank loans: | ||||||||||||||||||||||||
PWSC Loan | $ | 2,717 | $ | 2,717 | $ | 2,656 | $ | 3,917 | $ | 3,917 | $ | 3,829 | ||||||||||||
KWH Loan | 9,875 | 8,957 | 12,246 | — | — | — | ||||||||||||||||||
12,592 | 11,674 | 14,902 | 3,917 | 3,917 | 3,829 | |||||||||||||||||||
Notes payable: | ||||||||||||||||||||||||
Mortgage | 171,551 | 180,484 | 181,042 | 173,155 | 182,548 | 174,265 | ||||||||||||||||||
Flower Note | 7,555 | 7,555 | 8,322 | 7,768 | 7,768 | 8,565 | ||||||||||||||||||
Net Lease Note | 9,000 | 9,000 | 9,151 | 9,000 | 9,000 | 9,409 | ||||||||||||||||||
188,106 | 197,039 | 198,515 | 189,923 | 199,316 | 192,239 | |||||||||||||||||||
Subordinated debt | 90,500 | 50,224 | 50,224 | 90,500 | 50,023 | 50,023 | ||||||||||||||||||
Total | $ | 291,198 | $ | 258,937 | $ | 263,641 | $ | 284,340 | $ | 253,256 | $ | 246,091 |
25 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
Issuer | Principal (in thousands) | Issue date | Interest | Redemption date | ||
Kingsway CT Statutory Trust I | $ | 15,000 | 12/4/2002 | annual interest rate equal to LIBOR, plus 4.00% payable quarterly | 12/4/2032 | |
Kingsway CT Statutory Trust II | $ | 17,500 | 5/15/2003 | annual interest rate equal to LIBOR, plus 4.10% payable quarterly | 5/15/2033 | |
Kingsway CT Statutory Trust III | $ | 20,000 | 10/29/2003 | annual interest rate equal to LIBOR, plus 3.95% payable quarterly | 10/29/2033 | |
Kingsway DE Statutory Trust III | $ | 15,000 | 5/22/2003 | annual interest rate equal to LIBOR, plus 4.20% payable quarterly | 5/22/2033 | |
Kingsway DE Statutory Trust IV | $ | 10,000 | 9/30/2003 | annual interest rate equal to LIBOR, plus 3.85% payable quarterly | 9/30/2033 | |
Kingsway DE Statutory Trust VI | $ | 13,000 | 12/16/2003 | annual interest rate equal to LIBOR, plus 4.00% payable quarterly | 1/8/2034 |
26 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
27 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Lease Commitments | |||
2019 | $ | 463 | ||
2020 | 377 | |||
2021 | 388 | |||
2022 | 399 | |||
2023 | 422 | |||
2024 and thereafter | 859 | |||
Total undiscounted lease payments | 2,908 | |||
Imputed interest | 498 | |||
Total lease liabilities | $ | 2,410 |
(in thousands) | As of June 30, 2019 | |||
Property leased to lessees | 113,008 | |||
Accumulation depreciation | (12,271 | ) | ||
Net property and equipment leased | $ | 100,737 |
(in thousands) | |||||
2019 | $ | 5,840 | |||
2020 | 11,832 | ||||
2021 | 12,099 | ||||
2022 | 12,371 | ||||
2023 | 12,649 | ||||
Thereafter | 149,896 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Vehicle service agreement fees - IWS | $ | 4,551 | $ | 4,226 | $ | 9,030 | $ | 8,615 | ||||||||
GAP commissions - IWS | 226 | 200 | 484 | 392 | ||||||||||||
Maintenance support service fees - Trinity | 1,732 | 1,962 | 3,700 | 4,935 | ||||||||||||
Warranty product commissions - Trinity | 817 | 736 | 1,399 | 1,232 | ||||||||||||
Homebuilder warranty service fees - PWSC | 1,475 | 1,548 | 2,898 | 2,975 | ||||||||||||
Homebuilder warranty commissions - PWSC | 198 | 188 | 409 | 362 | ||||||||||||
Vehicle service agreement fees - Geminus | 2,757 | — | 3,644 | — | ||||||||||||
GAP commissions - Geminus | 16 | — | 23 | — | ||||||||||||
Service fee and commission income | $ | 11,772 | $ | 8,860 | $ | 21,587 | $ | 18,511 |
28 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
29 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Income tax (benefit) expense at United States statutory income tax rate | $ | (48 | ) | $ | (855 | ) | $ | 472 | $ | (1,348 | ) | |||||
Valuation allowance | 97 | 822 | (1,234 | ) | 1,354 | |||||||||||
Non-deductible compensation | 25 | 62 | 34 | 123 | ||||||||||||
Disposition of subsidiary | (24 | ) | — | (24 | ) | — | ||||||||||
State income tax | 32 | 67 | 58 | 133 | ||||||||||||
Change in unrecognized tax benefits(1) | 71 | 60 | 141 | 130 | ||||||||||||
Indefinite life intangibles | 54 | 24 | 87 | 46 | ||||||||||||
Foreign operations subject to different tax rates | (20 | ) | (39 | ) | (17 | ) | (54 | ) | ||||||||
Other | (19 | ) | 49 | (62 | ) | 60 | ||||||||||
Income tax expense (benefit) | $ | 168 | $ | 190 | $ | (545 | ) | $ | 444 | |||||||
(1) Includes interest and penalty expense related to unrecognized tax benefits. |
30 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands, except per share data) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Numerator: | ||||||||||||||||
(Loss) income from continuing operations | $ | (396 | ) | $ | (4,262 | ) | $ | 2,793 | $ | (6,866 | ) | |||||
Less: net income attributable to noncontrolling interests | (258 | ) | (158 | ) | (469 | ) | (517 | ) | ||||||||
Less: dividends on preferred stock, net of tax | (252 | ) | (259 | ) | (498 | ) | (512 | ) | ||||||||
(Loss) income from continuing operations attributable to common shareholders | $ | (906 | ) | $ | (4,679 | ) | $ | 1,826 | $ | (7,895 | ) | |||||
Denominator: | ||||||||||||||||
Weighted average basic shares | ||||||||||||||||
Weighted average common shares outstanding | 21,867 | 21,708 | 21,854 | 21,708 | ||||||||||||
Weighted average diluted shares | ||||||||||||||||
Weighted average common shares outstanding | 21,867 | 21,708 | 21,854 | 21,708 | ||||||||||||
Effect of potentially dilutive securities | ||||||||||||||||
Stock options | — | — | — | — | ||||||||||||
Unvested restricted stock awards | — | — | — | — | ||||||||||||
Unvested restricted stock units | — | — | — | — | ||||||||||||
Warrants | — | — | — | — | ||||||||||||
Convertible preferred stock | — | — | — | — | ||||||||||||
Total weighted average diluted shares | 21,867 | 21,708 | 21,854 | 21,708 | ||||||||||||
Basic (loss) earnings from continuing operations per share | $ | (0.04 | ) | $ | (0.22 | ) | $ | 0.08 | $ | (0.36 | ) | |||||
Diluted (loss) earnings from continuing operations per share | $ | (0.04 | ) | $ | (0.22 | ) | $ | 0.08 | $ | (0.36 | ) |
31 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in Thousands) | ||||||||||
Outstanding at December 31, 2018 | 40,000 | $ | 4.67 | 1.3 | $ | — | |||||||
Granted | — | — | |||||||||||
Expired | — | — | |||||||||||
Outstanding at June 30, 2019 | 40,000 | $ | 4.67 | 0.8 | $ | — | |||||||
Exercisable at June 30, 2019 | 40,000 | $ | 4.67 | 0.8 | $ | — |
32 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
Number of Restricted Stock Awards | Weighted-Average Grant Date Fair Value (per Share) | ||||||
Unvested at December 31, 2018 | 1,092,450 | $ | 4.51 | ||||
Vested | (79,231 | ) | 4.14 | ||||
Cancelled for Tax Withholding | (36,269 | ) | 4.14 | ||||
Unvested at June 30, 2019 | 976,950 | $ | 4.55 |
33 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, 2019 | |||||||||||||||||||
Unrealized Gains (Losses) on Available-for-Sale Investments | Foreign Currency Translation Adjustments | Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk | Equity in Other Comprehensive (Loss) Income of Limited Liability Investment | Total Accumulated Other Comprehensive Income | ||||||||||||||||
Balance at April 1, 2019 | $ | (61 | ) | $ | (3,286 | ) | $ | 43,314 | $ | (45 | ) | $ | 39,922 | |||||||
Other comprehensive income (loss) arising during the period | 115 | — | (750 | ) | — | (635 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive income | (7 | ) | — | — | 45 | 38 | ||||||||||||||
Net current-period other comprehensive income (loss) | 108 | — | (750 | ) | 45 | (597 | ) | |||||||||||||
Balance at June 30, 2019 | $ | 47 | $ | (3,286 | ) | $ | 42,564 | $ | — | $ | 39,325 |
(in thousands) | Three months ended June 30, 2018 | |||||||||||||||
Unrealized Gains (Losses) on Available-for-Sale Investments | Foreign Currency Translation Adjustments | Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk | Total Accumulated Other Comprehensive Income | |||||||||||||
Balance at April 1, 2018 | $ | (891 | ) | $ | (3,286 | ) | $ | 40,021 | $ | 35,844 | ||||||
Other comprehensive income (loss) arising during the period | (72 | ) | — | 778 | 706 | |||||||||||
Amounts reclassified from accumulated other comprehensive income | (4 | ) | — | — | (4 | ) | ||||||||||
Net current-period other comprehensive income (loss) | (76 | ) | — | 778 | 702 | |||||||||||
Balance at June 30, 2018 | $ | (967 | ) | $ | (3,286 | ) | $ | 40,799 | $ | 36,546 |
34 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Six months ended June 30, 2019 | |||||||||||||||||||
Unrealized Gains (Losses) on Available-for-Sale Investments | Foreign Currency Translation Adjustments | Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk | Equity in Other Comprehensive (Loss) Income of Limited Liability Investment | Total Accumulated Other Comprehensive Income | ||||||||||||||||
Balance at January 1, 2019 | $ | (160 | ) | $ | (3,286 | ) | $ | 44,259 | $ | (45 | ) | $ | 40,768 | |||||||
Other comprehensive income (loss) arising during the period | 220 | — | (1,695 | ) | — | (1,475 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive income | (13 | ) | — | — | 45 | 32 | ||||||||||||||
Net current-period other comprehensive income (loss) | 207 | — | (1,695 | ) | 45 | (1,443 | ) | |||||||||||||
Balance at June 30, 2019 | $ | 47 | $ | (3,286 | ) | $ | 42,564 | $ | — | $ | 39,325 |
(in thousands) | Six months ended June 30, 2018 | |||||||||||||||
Unrealized Gains (Losses) on Available-for-Sale Investments | Foreign Currency Translation Adjustments | Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk | Total Accumulated Other Comprehensive Income | |||||||||||||
Balance at January 1, 2018 | $ | (566 | ) | $ | (3,286 | ) | $ | — | $ | (3,852 | ) | |||||
Cumulative effect of adoption of ASU 2016-01 | 40 | — | 40,455 | 40,495 | ||||||||||||
Balance at January 1, 2018, as adjusted | (526 | ) | (3,286 | ) | 40,455 | 36,643 | ||||||||||
Other comprehensive loss arising during the period | (430 | ) | — | 344 | (86 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (11 | ) | — | — | (11 | ) | ||||||||||
Net current-period other comprehensive loss | (441 | ) | — | 344 | (97 | ) | ||||||||||
Balance at June 30, 2018 | $ | (967 | ) | $ | (3,286 | ) | $ | 40,799 | $ | 36,546 |
35 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Reclassification of accumulated other comprehensive income from unrealized gains (losses) on available-for-sale investments to: | ||||||||||||||||
Net realized (losses) gains | $ | (38 | ) | $ | 5 | $ | (32 | ) | $ | 8 | ||||||
Other-than-temporary impairment loss | — | — | — | — | ||||||||||||
(Loss) income from continuing operations before income tax expense | (38 | ) | 5 | (32 | ) | 8 | ||||||||||
Income tax expense | — | — | — | — | ||||||||||||
(Loss) income from continuing operations | (38 | ) | 5 | (32 | ) | 8 | ||||||||||
Income from discontinued operations, net of taxes | — | (1 | ) | — | 3 | |||||||||||
Net (loss) income | $ | (38 | ) | $ | 4 | $ | (32 | ) | $ | 11 |
36 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Extended Warranty: | ||||||||||||||||
Service fee and commission income | $ | 11,772 | $ | 8,860 | $ | 21,587 | $ | 18,511 | ||||||||
Other income | 41 | 36 | 116 | 102 | ||||||||||||
Total Extended Warranty | 11,813 | 8,896 | 21,703 | 18,613 | ||||||||||||
Leased Real Estate: | ||||||||||||||||
Rental income | 3,341 | 3,341 | 6,682 | 6,682 | ||||||||||||
Other income | 72 | 72 | 142 | 219 | ||||||||||||
Total Leased Real Estate | 3,413 | 3,413 | 6,824 | 6,901 | ||||||||||||
Total segment revenues | 15,226 | 12,309 | 28,527 | 25,514 | ||||||||||||
Rental income not allocated to segments | — | 4 | — | 11 | ||||||||||||
Total revenues | $ | 15,226 | $ | 12,313 | $ | 28,527 | $ | 25,525 |
37 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Segment operating income: | ||||||||||||||||
Extended Warranty | $ | 1,035 | $ | 1,090 | $ | 1,602 | $ | 1,936 | ||||||||
Leased Real Estate | 753 | 618 | 1,205 | 1,492 | ||||||||||||
Total segment operating income | 1,788 | 1,708 | 2,807 | 3,428 | ||||||||||||
Net investment income | 749 | 1,010 | 1,448 | 1,648 | ||||||||||||
Net realized (losses) gains | (556 | ) | 132 | (241 | ) | 397 | ||||||||||
(Loss) gain on change in fair value of equity investments | (63 | ) | (421 | ) | 15 | 744 | ||||||||||
Gain (loss) on change in fair value of limited liability investments, at fair value | 2,347 | (525 | ) | 6,612 | (1,461 | ) | ||||||||||
Net change in unrealized gain (loss) on private company investments | — | (155 | ) | 19 | (155 | ) | ||||||||||
Other-than-temporary impairment loss | — | — | (75 | ) | — | |||||||||||
Interest expense not allocated to segments | (2,339 | ) | (1,844 | ) | (4,441 | ) | (3,561 | ) | ||||||||
Other income and expenses not allocated to segments, net | (2,597 | ) | (3,213 | ) | (4,361 | ) | (5,625 | ) | ||||||||
Amortization of intangible assets | (676 | ) | (254 | ) | (1,197 | ) | (509 | ) | ||||||||
Gain (loss) on change in fair value of debt | 918 | (142 | ) | 1,494 | (1,061 | ) | ||||||||||
Gain on disposal of subsidiary | — | 17 | — | 17 | ||||||||||||
Equity in net income (loss) of investee | 201 | (385 | ) | 168 | (284 | ) | ||||||||||
(Loss) income from continuing operations before income tax expense (benefit) | (228 | ) | (4,072 | ) | 2,248 | (6,422 | ) | |||||||||
Income tax expense (benefit) | 168 | 190 | (545 | ) | 444 | |||||||||||
(Loss) income from continuing operations | $ | (396 | ) | $ | (4,262 | ) | $ | 2,793 | $ | (6,866 | ) |
• | Level 1 – Quoted prices for identical instruments in active markets. |
• | Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. |
• | Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are not observable. |
38 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
• | U.S. government, government agencies and authorities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets and maturity. |
• | States, municipalities and political subdivisions are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, new issuances and credit spreads. |
• | Mortgage-backed securities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, expected prepayments, expected credit default rates, delinquencies and issue specific information including, but not limited to, collateral type, seniority and vintage. |
• | Corporate securities are generally priced using the market approach using pricing vendors. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity and credit spreads. |
• | The fair value of the Company's investment in 1347 Investors is calculated based on a model that distributes the net equity of 1347 Investors to all classes of membership interests. The model uses quoted market prices and significant market observable inputs. This investment is categorized in Level 2 of the fair value hierarchy. |
• | The fair value of Net Lease's investments in limited liability companies is based upon the net asset values of the underlying investments companies as a practical expedient to estimate fair value. The Company applies the net asset value practical expedient to Net Lease's limited liability investments on an investment-by-investment basis unless it is probable that the Company will sell a portion of an investment at an amount different from the net asset value of the investment. Investments that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy. |
• | The fair value of Argo Holdings' limited liability investments that hold investments in search funds is based on the initial investment in the search funds. The fair value of Argo Holdings' limited liability investments that hold investments in private operating companies is valued using a market approach including valuation multiples applied to corresponding |
39 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
40 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | June 30, 2019 | |||||||||||||||||||
Fair Value Measurements at the End of the Reporting Period Using | ||||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Measured at Net Asset Value | ||||||||||||||||
Recurring fair value measurements: | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. government, government agencies and authorities | $ | 15,046 | $ | — | $ | 15,046 | $ | — | $ | — | ||||||||||
States, municipalities and political subdivisions | 601 | — | 601 | — | — | |||||||||||||||
Mortgage-backed | 2,454 | — | 2,454 | — | — | |||||||||||||||
Corporate | 2,686 | — | 2,686 | — | — | |||||||||||||||
Total fixed maturities | 20,787 | — | 20,787 | — | — | |||||||||||||||
Equity investments: | ||||||||||||||||||||
Common stock | 179 | 179 | — | — | — | |||||||||||||||
Warrants | 23 | 16 | 7 | — | — | |||||||||||||||
Total equity investments | 202 | 195 | 7 | — | — | |||||||||||||||
Limited liability investments, at fair value | 33,047 | — | 6,298 | 4,635 | 22,114 | |||||||||||||||
Real estate investments | 10,662 | — | — | 10,662 | — | |||||||||||||||
Other investments | 895 | — | 895 | — | — | |||||||||||||||
Short-term investments | 154 | — | 154 | — | — | |||||||||||||||
Total assets | $ | 65,747 | $ | 195 | $ | 28,141 | $ | 15,297 | $ | 22,114 | ||||||||||
Liabilities: | ||||||||||||||||||||
Subordinated debt | $ | 50,224 | $ | — | $ | 50,224 | $ | — | $ | — | ||||||||||
Warrant liability | 307 | — | — | 307 | — | |||||||||||||||
Total liabilities | $ | 50,531 | $ | — | $ | 50,224 | $ | 307 | $ | — |
41 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | December 31, 2018 | |||||||||||||||||||
Fair Value Measurements at the End of the Reporting Period Using | ||||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Measured at Net Asset Value | ||||||||||||||||
Recurring fair value measurements: | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. government, government agencies and authorities | $ | 5,547 | $ | — | $ | 5,547 | $ | — | $ | — | ||||||||||
States municipalities and political subdivisions | 607 | — | 607 | — | — | |||||||||||||||
Mortgage-backed | 3,186 | — | 3,186 | — | — | |||||||||||||||
Corporate | 2,920 | — | 2,920 | — | — | |||||||||||||||
Total fixed maturities | 12,260 | — | 12,260 | — | — | |||||||||||||||
Equity investments: | ||||||||||||||||||||
Common stock | 801 | 801 | — | — | — | |||||||||||||||
Warrants | 55 | 19 | 36 | — | — | |||||||||||||||
Total equity investments | 856 | 820 | 36 | — | — | |||||||||||||||
Limited liability investments, at fair value | 26,015 | — | 206 | 4,124 | 21,685 | |||||||||||||||
Real estate investments | 10,662 | — | — | 10,662 | — | |||||||||||||||
Other investments | 2,079 | — | 2,079 | — | — | |||||||||||||||
Short-term investments | 152 | — | 152 | — | — | |||||||||||||||
Total assets | $ | 52,024 | $ | 820 | $ | 14,733 | $ | 14,786 | $ | 21,685 | ||||||||||
Liabilities: | ||||||||||||||||||||
Subordinated debt | $ | 50,023 | $ | — | $ | 50,023 | $ | — | $ | — | ||||||||||
Total liabilities | $ | 50,023 | $ | — | $ | 50,023 | $ | — | $ | — |
42 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Assets: | ||||||||||||||||
Limited liability investments, at fair value: | ||||||||||||||||
Beginning balance | $ | 4,060 | $ | 1,634 | $ | 4,124 | $ | 1,397 | ||||||||
Purchases | 599 | 504 | 674 | 978 | ||||||||||||
Distributions received | (14 | ) | (70 | ) | (338 | ) | (562 | ) | ||||||||
Realized gains included in net (loss) income | 14 | — | 83 | 251 | ||||||||||||
Change in fair value of limited liability investments, at fair value included in net (loss) income | (24 | ) | 15 | 92 | 19 | |||||||||||
Ending balance | $ | 4,635 | $ | 2,083 | $ | 4,635 | $ | 2,083 | ||||||||
Unrealized gains recognized in net (loss) income on limited liability investments, at fair value held at end of period | $ | — | $ | 15 | $ | 116 | $ | 38 | ||||||||
Real estate investments: | ||||||||||||||||
Beginning balance | $ | 10,662 | $ | 10,662 | $ | 10,662 | $ | 10,662 | ||||||||
Change in fair value of real estate investments included in net (loss) income | — | — | — | — | ||||||||||||
Ending balance | $ | 10,662 | $ | 10,662 | $ | 10,662 | $ | 10,662 | ||||||||
Unrealized gains recognized in net (loss) income on real estate investments held at end of period | $ | — | $ | — | $ | — | $ | — | ||||||||
Ending balance - assets | $ | 15,297 | $ | 12,745 | $ | 15,297 | $ | 12,745 | ||||||||
Liabilities: | ||||||||||||||||
Warrant liability: | ||||||||||||||||
Beginning balance | $ | 317 | $ | — | $ | — | $ | — | ||||||||
Issuance of warrants | — | — | 361 | — | ||||||||||||
Change in fair value of warrant liability included in net (loss) income | (10 | ) | — | (54 | ) | — | ||||||||||
Ending balance - liabilities | $ | 307 | $ | — | $ | 307 | $ | — | ||||||||
Unrealized gains recognized in net (loss) income on warrant liability held at end of period | $ | (10 | ) | $ | — | $ | (54 | ) | $ | — |
Categories | Fair Value | Valuation Techniques | Unobservable Inputs | Input Value(s) | |||||||
Limited liability investments, at fair value | $ | 4,635 | Market approach | Valuation multiples | 5.0x-8.8x | ||||||
Real estate investments | $ | 10,662 | Market and income approach | Cap rates | 7.5 | % | |||||
Warrant liability | $ | 307 | Market approach | Valuation multiple | 6.0x |
Categories | Fair Value | Valuation Techniques | Unobservable Inputs | Input Value(s) | |||||||
Limited liability investments, at fair value | $ | 4,124 | Market approach | Valuation multiples | 5.0x-8.8x | ||||||
Real estate investments | $ | 10,662 | Market and income approach | Cap rates | 7.5 | % |
43 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
Category | Fair Value (in thousands) | Unfunded Commitments | Redemption Frequency | Redemption Notice Period | ||||||
Limited liability investments, at fair value | $ | 22,114 | n/a | n/a | n/a |
Category | Fair Value (in thousands) | Unfunded Commitments | Redemption Frequency | Redemption Notice Period | ||||||
Limited liability investments, at fair value | $ | 21,685 | n/a | n/a | n/a |
44 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
Categories | Fair Value | Valuation Techniques | Unobservable Inputs | Input Value(s) | |||||||
Customer relationships | $ | 3,732 | Multi-period excess earnings | Growth rate | 3.0 | % | |||||
Attrition rate | 20.0 | % | |||||||||
Discount rate | 13.0 | % | |||||||||
Trade names | $ | 1,974 | Relief from royalty | Royalty rate | 0.25% - 2.0% | ||||||
Discount rate | 13.0 | % | |||||||||
Deferred service fees - Penn | $ | 8,734 | Bottom-up | Normal profit margin | 15.5 | % | |||||
Total direct costs | 70.3 | % | |||||||||
Discount rate | 5.0 | % | |||||||||
Deferred service fees - Prime | $ | 1,830 | Bottom-up | Normal profit margin | 8.5 | % | |||||
Total direct costs | 69.8 | % | |||||||||
Discount rate | 5.0 | % |
45 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
46 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
47 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
48 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
49 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
50 |
KINGSWAY FINANCIAL SERVICES INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 2019 |
51 |
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For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||
Segment operating income: | ||||||||||||||||||
Extended Warranty | $ | 1,035 | $ | 1,090 | $ | (55 | ) | $ | 1,602 | $ | 1,936 | $ | (334 | ) | ||||
Leased Real Estate | 753 | 618 | 135 | 1,205 | 1,492 | (287 | ) | |||||||||||
Total segment operating income | 1,788 | 1,708 | 80 | 2,807 | 3,428 | (621 | ) | |||||||||||
Net investment income | 749 | 1,010 | (261 | ) | 1,448 | 1,648 | (200 | ) | ||||||||||
Net realized (losses) gains | (556 | ) | 132 | (688 | ) | (241 | ) | 397 | (638 | ) | ||||||||
(Loss) gain on change in fair value of equity investments | (63 | ) | (421 | ) | 358 | 15 | 744 | (729 | ) | |||||||||
Gain (loss) on change in fair value of limited liability investments, at fair value | 2,347 | (525 | ) | 2,872 | 6,612 | (1,461 | ) | 8,073 | ||||||||||
Net change in unrealized gain (loss) on private company investments | — | (155 | ) | 155 | 19 | (155 | ) | 174 | ||||||||||
Other-than-temporary impairment loss | — | — | — | (75 | ) | — | (75 | ) | ||||||||||
Interest expense not allocated to segments | (2,339 | ) | (1,844 | ) | (495 | ) | (4,441 | ) | (3,561 | ) | (880 | ) | ||||||
Other income and expenses not allocated to segments, net | (2,597 | ) | (3,213 | ) | 616 | (4,361 | ) | (5,625 | ) | 1,264 | ||||||||
Amortization of intangible assets | (676 | ) | (254 | ) | (422 | ) | (1,197 | ) | (509 | ) | (688 | ) | ||||||
Gain (loss) on change in fair value of debt | 918 | (142 | ) | 1,060 | 1,494 | (1,061 | ) | 2,555 | ||||||||||
Gain on disposal of subsidiary | — | 17 | (17 | ) | — | 17 | (17 | ) | ||||||||||
Equity in net income (loss) of investee | 201 | (385 | ) | 586 | 168 | (284 | ) | 452 | ||||||||||
(Loss) income from continuing operations before income tax expense (benefit) | (228 | ) | (4,072 | ) | 3,844 | 2,248 | (6,422 | ) | 8,670 | |||||||||
Income tax expense (benefit) | 168 | 190 | (22 | ) | (545 | ) | 444 | (989 | ) | |||||||||
(Loss) income from continuing operations | (396 | ) | (4,262 | ) | 3,866 | 2,793 | (6,866 | ) | 9,659 | |||||||||
Income from discontinued operations, net of taxes | — | 594 | (594 | ) | — | 980 | (980 | ) | ||||||||||
Loss on disposal of discontinued operations, net of taxes | — | (6,628 | ) | 6,628 | — | (6,628 | ) | 6,628 | ||||||||||
Net (loss) income | $ | (396 | ) | $ | (10,296 | ) | $ | 9,900 | $ | 2,793 | $ | (12,514 | ) | $ | 15,307 |
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KINGSWAY FINANCIAL SERVICES INC. |
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KINGSWAY FINANCIAL SERVICES INC. |
Type of investment | June 30, 2019 | % of Total | December 31, 2018 | % of Total | ||||||||
Fixed maturities: | ||||||||||||
U.S. government, government agencies and authorities | 15,046 | 15.0 | % | 5,547 | 6.1 | % | ||||||
States, municipalities and political subdivisions | 601 | 0.6 | % | 607 | 0.6 | % | ||||||
Mortgage-backed | 2,454 | 2.4 | % | 3,186 | 3.5 | % | ||||||
Corporate | 2,686 | 2.7 | % | 2,920 | 3.2 | % | ||||||
Total fixed maturities | 20,787 | 20.7 | % | 12,260 | 13.4 | % | ||||||
Equity investments: | ||||||||||||
Common stock | 179 | 0.2 | % | 801 | 0.9 | % | ||||||
Warrants | 23 | — | % | 55 | — | % | ||||||
Total equity investments | 202 | 0.2 | % | 856 | 0.9 | % | ||||||
Limited liability investments | 3,891 | 3.9 | % | 4,790 | 5.2 | % | ||||||
Limited liability investments, at fair value | 33,047 | 32.9 | % | 26,015 | 28.4 | % | ||||||
Investments in private companies | 2,661 | 2.6 | % | 3,090 | 3.4 | % | ||||||
Real estate investments | 10,662 | 10.6 | % | 10,662 | 11.7 | % | ||||||
Other investments | 895 | 0.9 | % | 2,079 | 2.3 | % | ||||||
Short-term investments | 154 | 0.2 | % | 152 | 0.2 | % | ||||||
Total investments | 72,299 | 72.0 | % | 59,904 | 65.5 | % | ||||||
Cash and cash equivalents | 10,899 | 10.8 | % | 14,619 | 16.0 | % | ||||||
Restricted cash | 17,320 | 17.2 | % | 16,959 | 18.5 | % | ||||||
Total | 100,518 | 100.0 | % | 91,482 | 100.0 | % |
58 |
KINGSWAY FINANCIAL SERVICES INC. |
Line of Business | June 30, 2019 | December 31, 2018 | ||
Non-standard automobile | 516 | 686 | ||
Commercial automobile | 184 | 794 | ||
Other | 1,237 | 593 | ||
Total | 1,937 | 2,073 |
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KINGSWAY FINANCIAL SERVICES INC. |
Line of Business | June 30, 2019 | December 31, 2018 | ||
Non-standard automobile | 516 | 686 | ||
Commercial automobile | 184 | 794 | ||
Other | 1,237 | 593 | ||
Total | 1,937 | 2,073 |
Three months ended June 30, | Six months ended June 30, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Unfavorable change in provision for loss and loss adjustment expenses for prior accident years | 601 | 1,301 | 708 | 1,647 |
60 |
KINGSWAY FINANCIAL SERVICES INC. |
61 |
KINGSWAY FINANCIAL SERVICES INC. |
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KINGSWAY FINANCIAL SERVICES INC. |
63 |
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KINGSWAY FINANCIAL SERVICES INC. |
June 30, 2019 | % of Total | December 31, 2018 | % of Total | |||||||||
Due in less than one year | 11,672 | 56.2 | % | 5,445 | 44.4 | % | ||||||
Due in one through five years | 7,650 | 36.8 | % | 5,233 | 42.7 | % | ||||||
Due after five through ten years | 192 | 0.9 | % | 210 | 1.7 | % | ||||||
Due after ten years | 1,273 | 6.1 | % | 1,372 | 11.2 | % | ||||||
Total | 20,787 | 100.0 | % | 12,260 | 100.0 | % |
100 Basis Point Decrease in Interest Rates | No Change | 100 Basis Point Increase in Interest Rates | ||||||||||
As of June 30, 2019 | ||||||||||||
Estimated fair value | $ | 21,005 | $ | 20,787 | $ | 20,569 | ||||||
Estimated increase (decrease) in fair value | $ | 218 | $ | — | $ | (218 | ) | |||||
As of December 31, 2018 | ||||||||||||
Estimated fair value | $ | 12,436 | $ | 12,260 | $ | 12,084 | ||||||
Estimated increase (decrease) in fair value | $ | 176 | $ | — | $ | (176 | ) |
65 |
KINGSWAY FINANCIAL SERVICES INC. |
Rating (S&P/Moody's) | June 30, 2019 | December 31, 2018 | ||
AAA/Aaa | 71.9 | % | 72.0 | % |
AA/Aa | 10.5 | 16.1 | ||
A/A | 17.6 | 10.9 | ||
Percentage rated A/A2 or better | 100.0 | % | 99.0 | % |
BBB/Baa | — | 1.0 | ||
Total | 100.0 | % | 100.0 | % |
• | the reclassification of investment income, related to equity method investments, from loss from discontinued operations, net of taxes to net investment income in the consolidated statement of operations; |
66 |
KINGSWAY FINANCIAL SERVICES INC. |
• | the identification, accounting and disclosure of investments demonstrating characteristics of variable interest entities, including the consolidation of certain investments; |
• | the adoption and application of ASU 2014-09; |
• | identification, disclosure and accounting for equity-classified warrants; and |
• | purchase accounting, as it relates to the identification and valuation of intangible assets and goodwill. |
• | Perform a comprehensive assessment of all existing accounting policies and revise existing policies and/or introduce new policies, as needed; |
• | Enhance the formality of its review procedures with respect to its accounting for any new investments, as well as the periodic evaluation of existing investments; |
• | Implement additional review procedures with respect to its accounting under ASU 2014-09 to ensure the Company’s accounting will continue to be in accordance with that standard on a go-forward basis; |
• | Implement additional identification, accounting and review controls with respect to complex and nonrecurring transactions, as well as augment existing staff with outside skilled accounting resources, as appropriate, and strengthen the review process to improve the operation of financial reporting and corresponding internal controls; |
• | Enhance the formality and rigor with respect to identifying and tracking all material related party transactions, as well updating its disclosures controls to enhance the focus on related party disclosure requirements; and |
• | Enhance the formality and rigor of review with respect to the collectability of accounts receivable balances, and the account reconciliation procedures. |
67 |
KINGSWAY FINANCIAL SERVICES INC. |
68 |
KINGSWAY FINANCIAL SERVICES INC. |
69 |
KINGSWAY FINANCIAL SERVICES INC. |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
70 |
KINGSWAY FINANCIAL SERVICES INC. |
KINGSWAY FINANCIAL SERVICES INC. | |||
Date: | April 10, 2020 | By: | /s/ John T. Fitzgerald |
John T. Fitzgerald, President, Chief Executive Officer and Director | |||
(principal executive officer) | |||
Date: | April 10, 2020 | By: | /s/ Kent A. Hansen |
Kent A. Hansen, Chief Financial Officer and Executive Vice President | |||
(principal financial officer) | |||
71 |
Segmented Information - Additional Information (Details) |
6 Months Ended |
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Jun. 30, 2019
a
segment
state
| |
Segment Reporting [Abstract] | |
Number of reportable segments | segment | 2 |
Number of states in which entity operates | state | 23 |
Land subject to ground leases | a | 192 |
Investments - Fixed Maturities by Contractual Maturity Periods (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Amortized Cost | ||
Due in one year or less | $ 11,652 | |
Due after one year through five years | 7,641 | |
Due after five years through ten years | 194 | |
Due after ten years | 1,284 | |
Amortized Cost | 20,771 | $ 12,432 |
Estimated Fair Value | ||
Due in one year or less | 11,672 | |
Due after one year through five years | 7,650 | |
Due after five years through ten years | 192 | |
Due after ten years | 1,273 | |
Estimated Fair Value, Fixed Maturities | $ 20,787 | $ 12,260 |
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net change in unrealized gain (loss) on private company investments | $ 0 | $ (155,000) | $ 19,000 | $ (155,000) |
Other-than-temporary impairment loss | 75,000 | 0 | ||
Recurring | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Other-than-temporary impairment loss | $ 0 | $ 0 | $ 0 | $ 0 |
Related Parties - AK Realty I LLC (Details) |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jul. 26, 2017 |
Sep. 21, 2015 |
---|---|---|---|---|
Equity Method Investee | ||||
Related Party Transaction [Line Items] | ||||
Equity method investment, ownership percentage | 47.60% | 47.60% | 51.00% | 33.30% |
Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carrying Values and Estimated Fair Values of Debt Instruments | Debt consists of the following instruments at June 30, 2019 and December 31, 2018:
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Schedule of Subordinated Debt | Subordinated debt consists of the following trust preferred debt instruments:
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Earnings From Continuing Operations Per Share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share | The following table sets forth the reconciliation of numerators and denominators for the basic and diluted (loss) earnings from continuing operations per share computation for the three and six months ended June 30, 2019 and June 30, 2018:
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Earnings From Continuing Operations Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(LOSS) EARNINGS FROM CONTINUING OPERATIONS PER SHARE | (LOSS) EARNINGS FROM CONTINUING OPERATIONS PER SHARE The following table sets forth the reconciliation of numerators and denominators for the basic and diluted (loss) earnings from continuing operations per share computation for the three and six months ended June 30, 2019 and June 30, 2018:
Basic (loss) earnings from continuing operations per share is calculated using weighted-average common shares outstanding. Diluted (loss) earnings from continuing operations per share is calculated using weighted-average diluted shares. Weighted-average diluted shares is calculated by adding the effect of potentially dilutive securities to weighted-average common shares outstanding. Potentially dilutive securities consist of stock options, unvested restricted stock awards, unvested restricted stock units, warrants and convertible preferred stock. Because the Company is reporting a loss from continuing operations for the three months ended June 30, 2019 and June 30, 2018 and the six months ended June 30, 2018, all potentially dilutive securities outstanding were excluded from the calculation of diluted loss from continuing operations per share since their inclusion would have been anti-dilutive. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Debt consists of the following instruments at June 30, 2019 and December 31, 2018:
(a) Bank loans: As part of the acquisition of PWSC on October 12, 2017, the Company borrowed a principal amount of $5.0 million from a bank at a fixed interest rate of 5.0% (the "PWSC Loan"). The carrying value of the PWSC Loan represents its unpaid principal balance. The fair value of the PWSC Loan disclosed in the table above is derived from quoted market prices of B and B minus rated industrial bonds with similar maturities. The PWSC Loan was scheduled to mature on October 12, 2022; however, the principal totaling $0.3 million was fully repaid on January 30, 2020. As part of the acquisition of Geminus on March 1, 2019, the Company formed Kingsway Warranty Holdings LLC ("KWH") and contributed IWS and Trinity to KWH, which then borrowed a principal amount of $10.0 million from a bank at an annual interest rate equal to LIBOR plus 9.25% (the "KWH Loan"), using most of the proceeds to acquire Geminus. The KWH Loan matures on March 1, 2024. As part of the KWH Loan, KWH also issued warrants (the "KWH Warrants") to the lender exercisable to purchase an aggregate 1.25% membership interest in KWH. The Company allocated $0.4 million of the KWH loan proceeds to a liability, recorded as part of accrued expenses and other liabilities in the consolidated balance sheets, to reflect the estimated fair value of the KWH Warrants, as the warrants contain a put right exercisable by the holder. Changes in the estimated fair value of the KWH Warrants are recorded in the consolidated statements of operations. The Company also recorded as a discount to the carrying value of the KWH Loan issuance costs of $1.0 million specifically related to the KWH Loan. The KWH Loan is carried in the consolidated balance sheets at its amortized cost, which reflects the quarterly pay-down of principal as well as the amortization of the discount using the effective interest rate method. The fair value of the KWH Loan disclosed in the table above is derived from quoted market prices of B and BB minus rated industrial bonds with similar maturities. The KWH Loan is secured by certain of the equity interests and assets of KWH and its subsidiaries. (b) Notes payable: As part of the acquisition of CMC Industries, Inc. ("CMC") in July 2016, the Company assumed a mortgage, which is recorded as note payable in the consolidated balance sheets ("the Mortgage"). The Mortgage is nonrecourse indebtedness with respect to CMC and its subsidiaries, and the Mortgage is not, nor will it be, guaranteed by Kingsway or its affiliates. The Mortgage was recorded at its estimated fair value of $191.7 million, which included the unpaid principal amount of $180.0 million as of the date of acquisition plus a premium of $11.7 million. The Mortgage matures on May 15, 2034 and has a fixed interest rate of 4.07%. The Mortgage is carried in the consolidated balance sheets at its amortized cost, which reflects the monthly pay-down of principal as well as the amortization of the premium using the effective interest rate method. The fair value of the Mortgage disclosed in the table above is derived from quoted market prices of A-rated industrial bonds with similar maturities. On January 5, 2015, Flower Portfolio 001, LLC ("Flower") assumed a $9.2 million mortgage in conjunction with the purchase of investment real estate properties, which is recorded as note payable in the consolidated balance sheets ("the Flower Note"). The Flower Note requires monthly payments of principal and interest and is secured by certain investments of Flower. The Flower Note matures on December 10, 2031 and has a fixed interest rate of 4.81%. The carrying value of the Flower Note at June 30, 2019 of $7.6 million represents its unpaid principal balance. The fair value of the Flower Note disclosed in the table above is derived from quoted market prices of A and B rated industrial bonds with similar maturities. On October 15, 2015, Net Lease assumed a $9.0 million mezzanine debt in conjunction with the purchase of investment real estate properties, which is recorded as note payable in the consolidated balance sheets ("the Net Lease Note"). The Net Lease Note requires monthly payments of interest and is secured by certain investments of Net Lease. The Net Lease Note matures on November 1, 2020 and has a fixed interest rate of 10.25%. The carrying value of the Net Lease Note at June 30, 2019 of $9.0 million represents its unpaid principal balance. The fair value of the Net Lease Note disclosed in the table above is derived from quoted market prices of B and B minus rated industrial bonds with similar maturities. (c) Subordinated debt: The subordinated debt is carried in the consolidated balance sheets at fair value. See Note 21, "Fair Value of Financial Instruments," for further discussion of the subordinated debt. Of the $0.2 million increase in fair value of the Company’s subordinated debt between December 31, 2018 and June 30, 2019, $1.7 million is reported as change in fair value of debt attributable to instrument-specific credit risk in the Company's consolidated statements of comprehensive (loss) income, partially offset by $1.5 million reported as gain on change in fair value of debt in the Company’s consolidated statements of operations. During the third quarter of 2018, the Company gave notice to its Trust Preferred trustees of its intention to exercise its voluntary right to defer interest payments for up to 20 quarters, pursuant to the contractual terms of its outstanding Trust Preferred indentures, which permit interest deferral. This action does not constitute a default under the Company's Trust Preferred indentures or any of its other debt indentures. At June 30, 2019, deferred interest payable of $5.7 million is included in accrued expenses and other liabilities in the consolidated balance sheets. Subordinated debt consists of the following trust preferred debt instruments:
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Subsequent Event (Notes) |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in the markets in which we operate. The COVID-19 outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses; "shelter in place" and other governmental regulations; and reduced consumer pending due to both job losses and other effects attributable to COVID-19. The near-term impacts of COVID-19 are primarily with respect to the Company’s Extended Warranty segment. As consumer spending has been impacted, including a decline in the purchase of new and used vehicles, and many businesses through which the Company distributes its products remain closed, the Company has seen cash flows being affected by a reduction in new warranty sales for vehicle service agreements. With respect to homeowner warranties, the Company expects to see a reduction in new enrollments in its home warranty programs associated with the impact of COVID-19 on new home sales in the United States. There remain many unknowns and the Company continues to monitor the expected trends and related demand for its services and has and will continue to adjust its operations accordingly. The Company could experience other potential impacts as a result of COVID-19, including, but not limited to, potential impairment charges to the carrying amounts of goodwill, indefinite-lived intangibles and long-lived assets. Actual results may differ materially from the Company’s current estimates as the scope of COVID-19 evolves or if the duration of business disruptions is longer than initially anticipated. |
Investment in Investee (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value, Estimated Fair Value and Equity Percentage in Investment in Investee | The carrying value, estimated fair value and approximate equity percentage for the Company's investment in investee at June 30, 2019 and December 31, 2018 were as follows:
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Acquisition and Discontinued Operations |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION AND DISCONTINUED OPERATIONS | ACQUISITION AND DISCONTINUED OPERATIONS (a) Acquisition Geminus Holdings Company, Inc.: On March 1, 2019, the Company acquired 100% of the outstanding shares of Geminus Holding Company, Inc. ("Geminus") for total consideration of $8.4 million, comprised of $7.7 million of cash and an installment payable to the seller of $0.7 million due February 15, 2020. The payable to seller was paid in full by February 15, 2020. At June 30, 2019, the balance of the payable to seller was $0.2 million. As further discussed in Note 20, "Segmented Information," Geminus is included in the Extended Warranty segment. Geminus is a specialty, full-service provider of vehicle service agreements and other finance and insurance products to used car buyers around the country. Geminus, headquartered in Wilkes-Barre, Pennsylvania, has been creating, marketing and administering these products on high-mileage used cars through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"), since 1988. Penn and Prime distribute these products via independent used car dealerships and franchised car dealerships, respectively. This acquisition allows the Company to grow its portfolio of warranty companies and further expand into the vehicle service agreement business. This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Goodwill of $7.4 million was recognized, and $5.7 million of separately identifiable intangible assets were recognized resulting from the valuations of acquired customer relationships and trade names. Refer to Note 9, "Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of warranty companies and acquire an assembled workforce. The goodwill is not deductible for tax purposes. During the three months ended June 30, 2019 and June 30, 2018, the Company incurred acquisition-related expenses of zero and $0.0 million, respectively, ($0.0 million year to date compared to $0.0 million prior year to date), which are included in general and administrative expenses in the consolidated statements of operations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
The consolidated statements of operations include the earnings of Geminus from the date of acquisition. From the date of acquisition through June 30, 2019, Geminus earned revenue of $3.7 million and net income of $0.6 million. The following unaudited pro forma summary presents the Company's consolidated financial statements for the three and six months ended June 30, 2019 and June 30, 2018 as if Geminus had been acquired on January 1, 2018. The pro forma summary is presented for illustrative purposes only and does not purport to represent the results of our operations that would have actually occurred had the acquisition occurred on January 1, 2018 or project our results of operations as of any future date or for any future period, as applicable.
(b) Discontinued Operations Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company: On July 16, 2018, the Company announced it had entered into a definitive agreement to sell its non-standard automobile insurance companies Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company (collectively "Mendota"). On October 18, 2018, the Company completed the previously announced sale of Mendota. As a result of this announcement, Mendota, which was previously disclosed as part of the Insurance Underwriting segment, has been classified as a discontinued operation, and the results of their operations are reported separately for all periods presented. The Company recognized a loss on disposal of Mendota of $8.0 million in the second quarter of 2018 as a result of adjusting the net carrying value of Mendota to be equal to the estimated purchase price. For the year ended December 31, 2018, the Company recognized a loss on disposal of Mendota of $8.5 million. The final aggregate purchase price of $28.6 million was redeployed primarily to acquire equity investments, limited liability investments, limited liability investment, at fair value and other investments, which were owned by Mendota at the time of the closing, and to fund $5.0 million into an escrow account to be used to satisfy potential indemnity obligations under the definitive stock purchase agreement. As part of the transaction, the Company will indemnify the buyer for any loss and loss adjustment expenses with respect to open claims and certain specified claims in excess of Mendota's carried unpaid loss and loss adjustment expenses at June 30, 2018. The maximum obligation to the Company with respect to the open claims is $2.5 million. There is no maximum obligation to the Company with respect to the specified claims. During the first quarter of 2019, Mendota settled one of the two specified claims for $0.5 million, resulting in no loss to the Company. During the fourth quarter of 2019, Mendota notified the Company that Mendota had entered into an agreement to settle the remaining specified claim. The Company estimates it will incur a net loss of approximately $1.6 million related to the settlement of the remaining specified claim, which the Company will report in its consolidated statement of operations for the year ended December 31, 2019. The $1.6 million settlement was funded from the $5.0 million escrow account, and the $3.4 million remaining in the escrow account was released to the Company during the first quarter of 2020 consistent with the terms of the escrow agreement. Assigned Risk Solutions Ltd: On April 1, 2015, the Company closed on the sale of its subsidiary, Assigned Risk Solutions Ltd. ("ARS"). The terms of the sale provided for 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 were payable in three annual installments beginning in April 2016 through April 2018. During the second quarter of 2018, the Company received cash consideration, before expenses, of $1.7 million for the third annual installment earnout payment. Net of expenses, the Company recorded an additional gain on disposal of ARS of $1.3 million for the three and six months ended June 30, 2018, respectively. As a result of the sale, ARS, previously disclosed as part of the Extended Warranty segment, has been classified as a discontinued operation. Summary financial information for Mendota and ARS included in income from discontinued operations, net of taxes in the statements of operations for the three and six months ended June 30, 2018 is presented below:
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Business |
6 Months Ended |
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Jun. 30, 2019 | |
Business [Abstract] | |
BUSINESS | BUSINESS Kingsway Financial Services Inc. (the "Company" or "Kingsway") was incorporated under the Business Corporations Act (Ontario) on September 19, 1989. Effective December 31, 2018, the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty, asset management and real estate industries. |
Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | 9 INTANGIBLE ASSETS Intangible assets at June 30, 2019 and December 31, 2018 are comprised as follows:
As further discussed in Note 5, "Acquisition and Discontinued Operations," during the first quarter of 2019, the Company recorded $5.7 million of separately identifiable intangible assets, related to acquired customer relationships and trade names, as part of the acquisition of Geminus. The customer relationships intangible asset of $3.7 million is being amortized over ten years based on the pattern in which the economic benefits of the intangible asset are expected to be consumed. The trade name intangible assets of $2.0 million are deemed to have indefinite useful lives and are not amortized. The Company's other intangible assets with definite useful lives are amortized either based on the patterns in which the economic benefits of the intangible assets are expected to be consumed or using the straight-line method over their estimated useful lives, which range from seven to eighteen years. Amortization of intangible assets was $0.7 million and $0.3 million for the three months ended June 30, 2019 and June 30, 2018, respectively ($1.2 million and $0.5 million for the six months ended June 30, 2019 and June 30, 2018, respectively). The tenant relationship and trade name intangible assets have indefinite useful lives and are not amortized. No impairment charges were taken on intangible assets during the three and six months ended June 30, 2019 and June 30, 2018. |
Stock-Based Compensation - Stock Option Activity (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Number of Options Outstanding | ||
Outstanding, Beginning of Period (in shares) | 40,000 | |
Granted (in shares) | 0 | |
Expired (in shares) | 0 | |
Outstanding, End of Period (in shares) | 40,000 | 40,000 |
Exercisable (in shares) | 40,000 | |
Weighted-Average Exercise Price | ||
Outstanding, Beginning of Period (in dollars per share) | $ 4.67 | |
Granted (in dollars per share) | 0.00 | |
Expired (in dollars per share) | 0.00 | |
Outstanding, End of Period (in dollars per share) | 4.67 | $ 4.67 |
Exercisable (in dollars per share) | $ 4.67 | |
Weighted-Average Remaining Contractual Term (in Years) | ||
Outstanding | 9 months 18 days | 1 year 3 months 18 days |
Exercisable at June 30, 2019 | 9 months 18 days | |
Aggregate Intrinsic Value (in Thousands) | ||
Outstanding | $ 0 | $ 0 |
Exercisable at June 30, 2019 | $ 0 |
Leases - Narrative (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
a
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
a
|
Jun. 30, 2018
USD ($)
|
|
Leases [Abstract] | ||||
Operating lease cost | $ 200,000 | $ 500,000 | ||
Variable lease cost | $ 0 | $ 0 | ||
Weighted average remaining lease term | 6 years 4 months 24 days | 6 years 4 months 24 days | ||
Weighted average discount rate | 5.69% | 5.69% | ||
Cash paid for amounts included in lease liabilities | $ 500,000 | |||
Land subject to ground leases | a | 192 | 192 | ||
Below market lease liabilities, 2019 | $ 100,000 | $ 100,000 | ||
Below market lease liabilities, 2020 | 100,000 | 100,000 | ||
Below market lease liabilities, 2021 | 100,000 | 100,000 | ||
Below market lease liabilities, 2022 | 100,000 | 100,000 | ||
Below market lease liabilities, 2023 | 100,000 | 100,000 | ||
Lease income | $ 3,341,000 | $ 3,345,000 | $ 6,682,000 | $ 6,693,000 |
Leases - Net Book Value of Operating Lease Property (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Property leased to lessees | $ 113,008 | $ 113,008 |
Accumulation depreciation | (12,271) | (10,197) |
Net property and equipment leased | $ 100,737 | $ 102,811 |
Related Parties - Logistics Leasing, LLC (Details) - Equity Method Investee |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jul. 26, 2017 |
Sep. 21, 2015 |
---|---|---|---|---|
Related Party Transaction [Line Items] | ||||
Ownership interest acquired | 50.00% | |||
Equity method investment, ownership percentage | 47.60% | 47.60% | 51.00% | 33.30% |
Vehicle Service Agreement Liability Vehicle Service Agreement Liability - Narrative (Details) |
Mar. 31, 2019 |
---|---|
Minimum | |
Product Warranty Liability [Line Items] | |
Vehicle service agreement fee, percentage of refund on original amount | 9.00% |
Maximum | |
Product Warranty Liability [Line Items] | |
Vehicle service agreement fee, percentage of refund on original amount | 13.00% |
Revenue from Contracts with Customers - Performance Obligations (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Service fee and commission income recognized during the period | $ 7.9 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, expected timing of satisfaction, period | 1 year |
Performance obligation satisfied | 40.50% |
- Other Related Party Transactions (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Feb. 28, 2020 |
Sep. 05, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Related Party Transaction [Line Items] | ||||||
Other income | $ 113,000 | $ 108,000 | $ 258,000 | $ 321,000 | ||
Swets | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Advisor agreement period | 1 year | |||||
Other income | $ 300,000 | |||||
Subsequent Event | Chief Financial Officer | ||||||
Related Party Transaction [Line Items] | ||||||
Consulting agreement, fee | $ 100,000 | |||||
Consulting agreement, hourly fee | $ 165 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets | ||
Fixed maturities, cost | $ 20,771 | $ 12,432 |
Equity investments, cost | 1,506 | 2,274 |
Real estate investments, cost | 10,225 | 10,225 |
Premiums receivable, allowance for doubtful accounts | 0 | 0 |
Other receivables, allowance for doubtful accounts | 324 | 191 |
Service fee receivable, allowance for doubtful accounts | 201 | 184 |
Property and equipment, accumulated depreciation | 18,310 | 15,958 |
Intangible assets, accumulated amortization | $ 11,791 | $ 10,594 |
Liabilities: | ||
Preferred stock authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock issued (in shares) | 222,876 | 222,876 |
Preferred stock outstanding (in shares) | 222,876 | 222,876 |
Redemption amount | $ 7,485 | $ 7,278 |
Shareholders' Equity: | ||
Common stock authorized (in shares) | 50,000,000 | |
Common stock issued (in shares) | 21,866,959 | 21,787,728 |
Common stock outstanding (in shares) | 21,866,959 | 21,787,728 |
Acquisition and Discontinued Operations Acquisition and Discontinued Operations - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Business Combinations [Abstract] | ||||
Revenues | $ 15,226 | $ 15,218 | $ 30,491 | $ 30,982 |
(Loss) income from continuing operations attributable to common shareholders | $ (906) | $ (5,357) | $ 676 | $ (8,874) |
Basic (loss) earnings per share - continuing operations (in dollars per share) | $ (0.04) | $ (0.25) | $ 0.03 | $ (0.41) |
Diluted (loss) earnings per share - continuing operations (in dollars per share) | $ (0.04) | $ (0.25) | $ 0.03 | $ (0.41) |
Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Details) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2021
USD ($)
|
Mar. 31, 2020
USD ($)
shares
|
Sep. 30, 2018
subsidiary_trust
|
Jun. 30, 2019
USD ($)
shares
|
Dec. 31, 2018
USD ($)
shares
|
|
Temporary Equity [Line Items] | |||||
Interest payments deferral period | 5 years | ||||
Number of subsidiary trusts | subsidiary_trust | 6 | ||||
Cash | $ 1,800 | $ 1,900 | |||
Cash and cash equivalents | $ 10,899 | $ 14,619 | |||
Preferred stock issued (in shares) | shares | 222,876 | 222,876 | |||
Preferred stock outstanding (in shares) | shares | 222,876 | 222,876 | |||
Redemption amount | $ 7,485 | $ 7,278 | |||
Subsequent Event | |||||
Temporary Equity [Line Items] | |||||
Preferred stock issued (in shares) | shares | 182,876 | ||||
Preferred stock outstanding (in shares) | shares | 182,876 | ||||
Redemption amount | $ 6,700 | ||||
Interest expense on trust preferred securities | $ 14,900 | $ 10,500 |
Commitment and Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES (a) Legal proceedings: In April 2018, TRT LeaseCo, LLC ("TRT LeaseCo"), an indirect subsidiary of Kingsway, was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of New York relating to CMC and its subsidiaries. Kingsway indirectly owns 81% of CMC. TRT LeaseCo (an indirect wholly owned subsidiary of CMC) entered into a Management Services Agreement (the "MSA") with DGI-BNSF Corp. ("DGI") (an affiliate of the entity that owns the remaining 19% of CMC) in July 2016 pursuant to which, among other things, DGI agreed to provide services to TRT LeaseCo in exchange for the fees specified in the MSA. The complaint filed by DGI alleges that DGI is owed certain fees under the MSA that have not been paid. If the case is decided against TRT LeaseCo, CMC and its subsidiaries (including TRT LeaseCo) would be unable to fulfill certain payment obligations to Kingsway under the transaction documents such that Kingsway may no longer be able to realize a material portion of the economic benefits originally anticipated to result from the CMC transaction, which could have a material adverse effect on Kingsway’s financial position, results of operations and cash flows. Kingsway disagrees with DGI’s allegations and is vigorously defending these claims; however, there can be no assurance that Kingsway will ultimately prevail. The Company’s potential exposure under these agreements is not reasonably determinable, and no liability has been recorded in the audited consolidated financial statements at June 30, 2019. No assurances can be given, however, that the Company will not be required to perform under these agreements in a manner that would have a material adverse effect on the Company’s financial position, results of operations and cash flow. In May 2016, Aegis Security Insurance Company ("Aegis") filed a complaint for breach of contract and declaratory relief against the Company in the Eastern District of Pennsylvania alleging, among other things, that the Company breached a contractual obligation to indemnify Aegis for certain customs bond losses incurred by Aegis under the indemnity and hold harmless agreements provided by the Company to Aegis for certain customs bonds reinsured by Lincoln General Insurance Company ("Lincoln General") during the period of time that Lincoln General was a subsidiary of the Company. Lincoln General was placed into liquidation in November 2015 and Aegis subsequently invoked its rights to indemnity under the indemnity and hold harmless agreements. Effective January 20, 2020, Aegis and the Company entered into a Settlement Agreement with respect to such litigation pursuant to which the Company agreed to pay Aegis a one-time settlement amount of $0.9 million, which the Company will report in its consolidated statement of operations for the three months ended March 31, 2020, and to reimburse Aegis for 60% of future losses that Aegis may sustain in connection with such customs bonds, up to a maximum reimbursement amount of $4.8 million. The Company’s potential exposure under these agreements was not reasonably determinable at June 30, 2019, and no liability has been recorded in the audited consolidated financial statements at June 30, 2019. (b) Guarantee: As further discussed in Note 5, "Acquisition and Discontinued Operations," as part of the transaction to sell Mendota, the Company will indemnify the buyer for loss and loss adjustment expenses with respect to open claims and certain specified claims in excess of Mendota's carried unpaid loss and loss adjustment expenses at June 30, 2018 related to the open claims and specified claims. The Company's potential exposure under these agreements was not reasonably determinable at June 30, 2019, and no liability has been recorded in the unaudited consolidated interim financial statements at June 30, 2019. (c) Commitments: The Company has entered into subscription agreements to commit up to $2.6 million of capital to allow for participation in limited liability investments. At June 30, 2019, the unfunded commitment was $0.6 million, all of which related to the Company’s commitment to Argo Holdings. On December 4, 2019, Argo Management informed members of Argo Holdings that no more Capital Calls are planned. |
Investments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unrealized Loss on Investments | The amortized cost, gross unrealized gains and losses, and estimated fair value of the Company's available-for-sale investments at June 30, 2019 and December 31, 2018 are summarized in the tables shown below:
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Investments Classified by Contractual Maturity Date | The table below summarizes the Company's fixed maturities at June 30, 2019 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of these obligations.
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Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions as of June 30, 2019 and December 31, 2018. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.
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Investment Income | Net investment income for the three and six months ended June 30, 2019 and June 30, 2018 is comprised as follows:
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Schedule of Realized Gain (Loss) | Gross realized gains and losses on available-for-sale investments and limited liability investments for the three and six months ended June 30, 2019 and June 30, 2018 are comprised as follows:
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Schedule of Gain on Change in Fair Value of Equity Investments | (Loss) gain on change in fair value of equity investments for the three and six months ended June 30, 2019 and June 30, 2018 is comprised as follows:
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Property and Equipment |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment at June 30, 2019 and December 31, 2018 are comprised as follows:
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Investments |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS The amortized cost, gross unrealized gains and losses, and estimated fair value of the Company's available-for-sale investments at June 30, 2019 and December 31, 2018 are summarized in the tables shown below:
The table below summarizes the Company's fixed maturities at June 30, 2019 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of these obligations.
The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions as of June 30, 2019 and December 31, 2018. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.
There are approximately 44 and 64 individual available-for-sale investments that were in unrealized loss positions as of June 30, 2019 and December 31, 2018, respectively. The establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:
The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:
As a result of the analysis performed by the Company to determine declines in market value that are other-than-temporary, the Company recorded no write-downs for other-than-temporary impairment related to limited liability investments for the three months ended June 30, 2019 and June 30, 2018, respectively ($0.1 million year to date compared to zero prior year to date). There were no write-downs recorded for other-than-temporary impairments related to available-for sale investments for the three and six months ended June 30, 2019 and June 30, 2018, respectively. The Company has reviewed currently available information regarding investments with estimated fair values less than their carrying amounts and believes these unrealized losses are not other-than-temporary and are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell those investments, and it is not likely it will be required to sell those investments before recovery of its amortized cost. The Company does not have any exposure to subprime mortgage-backed investments. Limited liability investments include investments in limited liability companies and limited partnerships. The Company's interests in these investments are not deemed minor and, therefore, are accounted for under the equity method of accounting. The most recently available financial statements are used in applying the equity method. The difference between the end of the reporting period of the limited liability entities and that of the Company is no more than three months. As of June 30, 2019 and December 31, 2018, the carrying value of limited liability investments totaled $3.9 million and $4.8 million, respectively. Income or loss from limited liability investments is recognized based on the Company's share of the earnings of the limited liability entities and is included in net investment income in the consolidated statements of operations. At June 30, 2019, the Company has no unfunded commitments related to limited liability investments. Limited liability investments, at fair value represents the Company's investment in 26.7% of the outstanding units of 1347 Investors LLC ("1347 Investors") as well as the underlying investments of the Company’s consolidated entities Net Lease Investment Grade Portfolio LLC ("Net Lease") and Argo Holdings Fund I, LLC ("Argo Holdings"). The fair value of the Company's investment in 1347 Investors is calculated based on a model that distributes the net equity of 1347 Investors to all classes of membership interests. The model uses quoted market prices and significant market observable inputs. The most significant input to the model is the observed stock price of Limbach Holdings, Inc. ("Limbach") common stock. During the fourth quarter of 2019, the Company’s investment in 1347 Investors was dissolved, which resulted in the Company holding shares of Limbach common stock directly. During the third and fourth quarters of 2019 and through the first quarter of 2020, the Limbach common stock price has declined, which has resulted in the Company recording loss on change in fair value related to its investment in 1347 Investors and Limbach of $2.7 million, $0.7 million and $0.6 million, respectively. As of June 30, 2019 and December 31, 2018, the carrying value of the Company's limited liability investments, at fair value was $33.0 million and $26.0 million, respectively. The Company recorded impairments related to limited liability investments, at fair value of $0.0 million and zero for the three months ended June 30, 2019 and June 30, 2018, respectively, ($0.0 million and $0.0 million for the six months ended June 30, 2019 and June 30, 2018, respectively), which are included in (loss) gain on change in fair value of limited liability investments, at fair value in the consolidated statements of operations. At June 30, 2019, the Company has unfunded commitments totaling $0.6 million to fund limited liability investments, at fair value, all of which related to the Company’s commitment to Argo Holdings. On December 4, 2019, Argo Management informed members of Argo Holdings that no more requests for funds are planned. Investments in private companies consist of convertible preferred stocks and notes in privately owned companies and investments in limited liability companies in which the Company’s interests are deemed minor. The Company's investments in private companies do not have readily determinable fair values. The Company has elected to record investments in private companies at cost, adjusted for observable price changes and impairments. As of June 30, 2019 and December 31, 2018, the carrying value of the Company's investments in private companies totaled $2.7 million and $3.1 million, respectively. For the three months ended June 30, 2019 and June 30, 2018, the Company recorded adjustments of zero and $0.2 million, respectively, ($0.0 million and $0.2 million for the six months ended June 30, 2019 and June 30, 2018, respectively), to adjust the fair value of certain investments in private companies for observable price changes, which are included in net change in unrealized gain (loss) on private company investments in the consolidated statements of operations. The Company performs a quarterly impairment analysis of its investments in private companies. The analysis includes some or all of the following procedures as deemed appropriate by the Company:
As a result of the analysis performed, the Company recorded no write-downs for other-than-temporary impairments related to investments in private companies for the three and six months ended June 30, 2019 and June 30, 2018. Real estate investments are reported at fair value. As of June 30, 2019 and December 31, 2018, the carrying value of the Company's real estate investments totaled $10.7 million and $10.7 million, respectively. Other investments include collateral loans and are reported at their unpaid principal balance. As of June 30, 2019 and December 31, 2018, the carrying value of other investments totaled $0.9 million and $2.1 million, respectively. The Company had previously entered into two separate performance share grant agreements with 1347 Property Insurance Holdings, Inc. ("PIH"), whereby the Company will be entitled to receive up to an aggregate of 475,000 shares of PIH common stock upon achievement of certain milestones for PIH’s stock price. Pursuant to the performance share grant agreements, if at any time the last sales price of PIH’s common stock equals or exceeds: (i) $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 100,000 shares of PIH common stock; (ii) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 100,000 shares of common stock earned pursuant to clause (i) herein); (iii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 225,000 shares of common stock earned pursuant to clauses (i) and (ii) herein); and (iv) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 350,000 shares of common stock earned pursuant to clauses (i), (ii) and (iii) herein). To the extent shares of PIH common stock are granted to the Company under either of the performance share grant agreements, they will be recorded at the time the shares are granted and will have a valuation equal to the last sales price of PIH common stock on the day prior to such grant. On January 2, 2018, the Company entered into an agreement with PIH to cancel the $10.00 per share performance shares grant agreement in exchange for cash consideration of $0.3 million. For the six months ended June 30, 2018, the Company recorded a gain, included in (loss) gain on change in fair value of equity investments in the consolidated statements of operations, of $0.3 million related to this transaction. No shares were received by the Company under either of the performance share grant agreements as of June 30, 2019. Net investment income for the three and six months ended June 30, 2019 and June 30, 2018 is comprised as follows:
Gross realized gains and losses on available-for-sale investments and limited liability investments for the three and six months ended June 30, 2019 and June 30, 2018 are comprised as follows:
(Loss) gain on change in fair value of equity investments for the three and six months ended June 30, 2019 and June 30, 2018 is comprised as follows:
Short-term investments and fixed maturities with an estimated fair value of $0.2 million and $0.2 million at June 30, 2019 and December 31, 2018, respectively, were on deposit with state and provincial regulatory authorities. The Company also has restricted cash of $17.3 million and $17.0 million at June 30, 2019 and December 31, 2018, respectively. Included in restricted cash are (i) $5.1 million and $5.0 million at June 30, 2019 and December 31, 2018, respectively, held in escrow as part of the transaction to sell Mendota; (ii) $10.0 million and $10.0 million at June 30, 2019 and December 31, 2018, respectively, held as deposits by IWS Acquisition Corporation ("IWS"), Professional Warranty Service Corporation ("PWSC"), and Geminus; (iii) $1.9 million and $1.9 million at June 30, 2019 and December 31, 2018, respectively, on deposit with state and provincial regulatory authorities; and (iv) $0.3 million and $0.1 million at June 30, 2019 and December 31, 2018, respectively, pledged to third-parties as deposits or to collateralize liabilities. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company's standard risk management controls. Impact of COVID-19 on Investments As discussed in Note 24, "Subsequent Event," in March 2020 the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in the markets in which we operate. The COVID-19 outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses; "shelter in place" and other governmental regulations; and reduced consumer spending due to both job losses and other effects attributable to COVID-19. There remain many unknowns. As part of the Company’s March 31, 2020 quarterly impairment analysis of its investments in private companies, the Company determined that it should write-down one of its investments by 90%, or $0.7 million, for other-than-temporary impairments as a result of the impacts of COVID-19 on the investment's underlying business. The Company continues to assess the impact that the COVID-19 pandemic may have on the value of its various investments, which could result in future material decreases in the underlying investment value. Such decreases may be considered temporary or could be deemed to be other-than-temporary and management may be required to record write-downs of the related investments in future reporting periods. |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Basis of Presentation [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements of the Company. In the opinion of management, all adjustments necessary for a fair presentation have been included and are of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the year. Certain prior year amounts have been reclassified to conform to current year presentation. Such reclassifications had no impact on previously reported net loss or total shareholders' equity. The accompanying unaudited consolidated interim financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included within our Annual Report on Form 10-K ("2018 Annual Report") for the year ended December 31, 2018. The unaudited consolidated interim financial statements include the accounts of the Company and its subsidiaries, as well as certain variable interest entities as further described in Note 7, "Variable Interest Entities," to the consolidated financial statements in the 2018 Annual Report. All material intercompany transactions and balances have been eliminated in consolidation. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The critical accounting estimates and assumptions in the accompanying unaudited consolidated interim financial statements include the provision for unpaid loss and loss adjustment expenses; valuation of fixed maturities and equity investments; impairment assessment of investments; valuation of limited liability investments, at fair value; valuation of real estate investments; valuation of deferred income taxes; valuation of mandatorily redeemable preferred stock; valuation and impairment assessment of intangible assets; goodwill recoverability; deferred acquisition costs; fair value assumptions for subordinated debt obligations; and revenue recognition. The fair values of the Company's investments in fixed maturities and equity investments, limited liability investments, at fair value, real estate investments, subordinated debt and warrant liability are estimated using a fair value hierarchy to categorize the inputs it uses in valuation techniques. The fair value of the Company's investment in investee is based on quoted market prices. Fair values for other investments approximate their unpaid principal balance. The carrying amounts reported in the consolidated balance sheets approximate fair values for cash and cash equivalents, restricted cash, short-term investments and certain other assets and other liabilities because of their short-term nature. The Company's financial results contained herein are reported in U.S. dollars unless otherwise indicated. |
Related Parties - 1347 Energy Holdings LLC (Details) - USD ($) |
Feb. 12, 2018 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Principal Owner | |||
Related Party Transaction [Line Items] | |||
Equity method investment, ownership percentage | 0.00% | 45.60% | |
Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Equity method investment, ownership percentage | 0.00% | 0.80% | |
Collateralized Agreements | $ 0 | $ 600,000 | |
Affiliated Entity | |||
Related Party Transaction [Line Items] | |||
Equity method investment, ownership percentage | 0.00% | 0.00% | |
1347 Energy Holdings LLC | Affiliated Entity | |||
Related Party Transaction [Line Items] | |||
Collateralized Agreements | $ 1,800,000 | ||
Proceeds from surety bonds | $ 700,000 |
Leases - Annual Maturities of Lease Liabilities (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 463 |
2020 | 377 |
2021 | 388 |
2022 | 399 |
2023 | 422 |
2024 and thereafter | 859 |
Total undiscounted lease payments | 2,908 |
Imputed interest | 498 |
Total lease liabilities | $ 2,410 |
(Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||||
Balance at beginning of period, gross | $ 2,073 | |||
Paid related to: | ||||
Balance at end of period, gross | 1,937 | $ 2,594 | ||
Property, Liability and Casualty Insurance Product Line | ||||
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||||
Balance at beginning of period, gross | 2,073 | 1,329 | ||
Less reinsurance recoverable related to unpaid loss and loss adjustment expenses | 0 | 100 | ||
Balance at beginning of period, net | 2,073 | 1,257 | ||
Incurred related to: | ||||
Current year | 0 | 0 | ||
Prior years | 708 | 1,647 | ||
Paid related to: | ||||
Current year | 0 | 0 | ||
Prior years | (844) | (410) | ||
Balance at beginning of period, net | 1,937 | 2,494 | ||
Plus reinsurance recoverable related to unpaid loss and loss adjustment expenses | $ 0 | $ 100 | $ 0 | $ 72 |
Commitment and Contingencies (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jan. 20, 2020 |
Jun. 30, 2019 |
|
Loss Contingencies [Line Items] | ||
Subscription agreement amount | $ 2,600,000 | |
Unfunded commitments | $ 600,000 | |
Subsidiaries | CMC | ||
Loss Contingencies [Line Items] | ||
Indirect ownership percentage owned by parent | 81.00% | |
Subsidiaries | CMC | DGI | ||
Loss Contingencies [Line Items] | ||
Remaining ownership percentage owned by noncontrolling interest | 19.00% | |
Breach of contract | Aegis | ||
Loss Contingencies [Line Items] | ||
Loss contingency accrual | $ 0 | |
Breach of contract | Aegis | Subsequent Event | ||
Loss Contingencies [Line Items] | ||
One-time settlement amount | $ 900,000 | |
Percentage of future losses reimbursable | 60.00% | |
Maximum litigation reimbursement amount | $ 4,800,000 |
Revenue from Contracts with Customers - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Contract period | 4 years | |
Service fee receivable, net | $ 5,246 | $ 3,434 |
Service fee and commission income recognized during the period | $ 7,900 |
Leases - Adoption of ASC 842 (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Right-of-use asset | $ 2,265 | ||
Lease liability | 2,410 | ||
Accrued expenses and other liabilities | $ 16,518 | $ 14,786 | |
ASU 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Right-of-use asset | $ 2,700 | ||
Lease liability | 2,900 | ||
Accrued expenses and other liabilities | $ 200 |
Recently Issued Accounting Standards (Details) $ in Thousands |
Jan. 01, 2018
USD ($)
|
---|---|
ASU 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of change on equity or net assets | $ 600 |
Effect of adoption, quantification | 600 |
Cumulative effect of adoption of ASU | (654) |
ASU 2014-09 | Accumulated Deficit | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of adoption of ASU | (647) |
ASU 2016-01 | Accumulated Deficit | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of adoption of ASU | $ (40,495) |
Consolidated Statements of Comprehensive (Loss) Income (Parenthetical) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Other comprehensive income (loss), tax | $ 0 | $ 0 | $ 0 | $ 0 |
Intangible Assets - Additional Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Mar. 01, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | ||||||
Amortization of intangible assets | $ 676,000 | $ 254,000 | $ 1,197,000 | $ 509,000 | ||
Impairment charges | $ 0 | $ 0 | $ 0 | $ 0 | ||
Minimum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Intangible asset useful life | 7 years | |||||
Maximum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Intangible asset useful life | 18 years | |||||
Customer relationships | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Intangible asset useful life | 10 years | |||||
Geminus | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Intangible assets acquired | $ 5,700,000 | |||||
Geminus | Trade names | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Intangible assets acquired | 1,974,000 | |||||
Geminus | Customer relationships | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Recognized identifiable assets acquired and liabilities assumed | $ 3,732,000 |
Related Parties - Itasca Golf Investors, LLC (Details) - Investor - USD ($) $ in Millions |
Sep. 05, 2018 |
Apr. 08, 2014 |
---|---|---|
Related Party Transaction [Line Items] | ||
Equity method investment, ownership percentage | 42.90% | |
Proceeds from sale of equity method investments | $ 1.5 |
Investments - Gain in change fair value of equity investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Investments [Abstract] | ||||
Net (losses) gains recognized on equity investments sold during the period | $ (101) | $ (10) | $ (101) | $ 545 |
Change in unrealized gains (losses) on equity investments held at end of the period | 38 | (411) | 116 | 199 |
(Loss) gain on change in fair value of equity investments | $ (63) | $ (421) | $ 15 | $ 744 |
Fair Value of Financial Instruments - Investments at Fair Value Using Net Asset Value Per Share As Practical Expedient (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Limited liability investments, at fair value | $ 33,047 | $ 26,015 |
Measured at Net Asset Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Limited liability investments, at fair value | $ 22,114 | $ 21,685 |
Stock-Based Compensation - Restricted Stock Awards (Details) - Restricted Stock - $ / shares |
3 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2019 |
Jun. 30, 2019 |
|
Number of Restricted Stock Awards | ||
Unvested, Beginning of Period (in shares) | 1,092,450 | 1,092,450 |
Vested (in shares) | 79,231.000 | |
Cancelled for Tax Withholding (in shares) | (36,269) | |
Unvested, End of Period (in shares) | 976,950 | |
Weighted-Average Grant Date Fair Value (per Share) | ||
Unvested, Beginning of Period (in dollars per share) | $ 4.51 | $ 4.51 |
Vested (in dollars per share) | 4.14 | |
Cancelled for Tax Withholding (in dollars per share) | 4.14 | |
Unvested, End of Period (in dollars per share) | $ 4.55 |
Unpaid Loss and Loss Adjustment Expenses (Tables) |
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Schedule of Liability for Unpaid Claims and Claims Adjustment Expense | The results of this comparison and the changes in the provision for unpaid loss and loss adjustment expenses, net of amounts recoverable from reinsurers, as of June 30, 2019 and June 30, 2018 were as follows:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax (Benefit) Expense | The following table summarizes the differences:
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION (a) Stock Options The following table summarizes the stock option activity during the six months ended June 30, 2019:
The aggregate intrinsic value of stock options outstanding and exercisable is the difference between the June 30, 2019 market price for the Company's common shares and the exercise price of the options, multiplied by the number of options where the fair value exceeds the exercise price. The Company uses the Black-Scholes option pricing model to estimate the fair value of each option on the date of grant. No options were granted during the six months ended June 30, 2019. (b) Restricted Stock Awards Under the 2013 Equity Incentive Plan (the "2013 Plan"), the Company made grants of restricted common stock awards to certain officers of the Company on March 28, 2014 (the "2014 Restricted Stock Awards"). The 2014 Restricted Stock Awards shall become fully vested and the restriction period shall lapse as of March 28, 2024 subject to the officers' continued employment through the vesting date. The 2014 Restricted Stock Awards are amortized on a straight-line basis over the ten-year requisite service period. The grant-date fair value of the 2014 Restricted Stock Awards was determined using the closing price of Kingsway common stock on the date of grant. Total unamortized compensation expense related to unvested 2014 Restricted Stock Awards at June 30, 2019 was $0.5 million. During the third quarter of 2018, the Company modified the terms of the 2014 Restricted Stock Awards for two of its officers. On September 5, 2018, the Company executed an Amended and Restated Restricted Stock Award Agreement ("Amended RSA Agreement") with its former Chief Executive Officer. Under the terms of the Amended RSA Agreement, the former Chief Executive Officer was deemed to have forfeited 1,382,665 shares of the 2014 Restricted Stock Awards. The Company’s accounting policy is to account for forfeitures when they occur. As a result, the Company reversed during the third quarter of 2018 $2.4 million of compensation expense previously recognized from March 28, 2014 through June 30, 2018. Pursuant to the terms of the Amended RSA Agreement, the Company granted to the former Chief Executive Officer a modified award of 350,000 shares of restricted common stock (the "2018 Restricted Stock Award"). The Company deemed the 2018 Restricted Stock Award to be taxable to the former Chief Executive Officer on the modification date. Pursuant to the terms of the 2013 Plan and the Amended RSA Agreement, the former Chief Executive Officer was entitled to satisfy the tax withholding obligation by authorizing the Company to withhold restricted common shares, which would otherwise be deliverable, having an aggregate fair market value, determined as of the tax date, equal to the tax withholding obligation. The former Chief Executive Officer chose to satisfy the tax withholding obligation in this manner. As a result, the Company cancelled 102,550 of the 350,000 shares of the 2018 Restricted Stock Award. The remaining 247,450 shares of the 2018 Restricted Stock Award shall become fully vested after the satisfaction of certain performance conditions, as defined in the Amended RSA Agreement. There is no defined term under which the performance conditions must be completed. The unamortized compensation expense for the 2018 Restricted Stock Award will be recognized at the time the performance condition has been satisfied. The grant-date fair value of the 2018 Restricted Stock Award was determined using the closing price of Kingsway common stock on the modification date. Total unamortized compensation expense related to the unvested 2018 Restricted Stock Award at June 30, 2019 was $0.6 million. During the fourth quarter of 2019, the Company acquired the remaining 247,450 shares of the 2018 Restricted Stock Award as partial consideration in exchange for selling its remaining investment in the common stock of ICL. See Note 22, "Related Parties," for more information. On January 31, 2019, the Company executed an Employee Separation Agreement and Release ("Separation Agreement") with a former officer. The Separation Agreement modified the vesting terms related to 115,500 shares of the original 2014 Restricted Stock Awards ("Modified Restricted Stock Award"), such that they became fully vested on January 31, 2019. The Company deemed the Modified Restricted Stock Award to be taxable to the former officer on the vesting date. Pursuant to the terms of the 2013 Plan and the Separation Agreement, the former officer was entitled to satisfy the tax withholding obligation by authorizing the Company to withhold restricted common shares, which would otherwise be deliverable, having an aggregate fair market value, determined as of the tax date, equal to the tax withholding obligation. The former officer chose to satisfy the tax withholding obligation in this manner. As a result, the Company cancelled 36,269 of the 115,500 shares of the Modified Restricted Stock Award and recognized payroll tax expense of $0.1 million during the first quarter of 2019. The Company also recorded during the first quarter of 2019 $0.1 million of compensation expense equal to the fair value of the remaining 79,231 fully vested shares of the Modified Restricted Stock Award. The grant-date fair value of the Modified Restricted Stock Award was determined using the closing price of Kingsway common stock on the modification date. Total unamortized compensation expense related to the unvested Modified Restricted Stock Award at June 30, 2019 was zero. The Company granted restricted common stock units ("Restricted Stock Units") to an officer of the Company pursuant to a Restricted Stock Unit Agreement dated August 24, 2016. On September 5, 2018, the Restricted Stock Unit Agreement was cancelled and 500,000 restricted common stock awards were granted to the officer (the "2018 Restricted Stock Award"). There was no change to the vesting terms. The 2018 Restricted Stock Award shall become fully vested and the restriction period shall lapse as of March 28, 2024 subject to the officer's continued employment through the vesting date. The 2018 Restricted Stock Award is amortized on a straight-line basis over the requisite service period. The grant-date fair value of the 2018 Restricted Stock Award was determined using the closing price of Kingsway common stock on the date of grant. Total unamortized compensation expense related to unvested 2018 Restricted Stock Award at June 30, 2019 was $1.8 million. The following table summarizes the activity related to unvested 2014 Restricted Stock Awards, 2018 Modified Restricted Stock Award, Modified Restricted Stock Award and 2018 Restricted Stock Award (collectively "Restricted Stock Awards") for the six months ended June 30, 2019:
The unvested balance at June 30, 2019 in the table above is comprised of 229,500 shares of 2014 Restricted Stock Awards, 247,450 shares of 2018 Modified Restricted Stock Award and 500,000 shares of the 2018 Restricted Stock Award. (c) Restricted Stock Awards of PWSC PWSC granted 1,000 restricted common stock awards ("PWSC Restricted Stock Award") to an officer of PWSC pursuant to an agreement dated September 7, 2018. The PWSC Restricted Stock Award contains both a service and a performance condition that affects vesting. The service condition vests according to a graded vesting schedule and shall become fully vested on February 20, 2022 subject to the officer's continued employment through the applicable vesting dates. The service condition component of the PWSC Restricted Stock Award is amortized on a straight-line basis over the requisite service period. The performance condition vests on February 20, 2022 and is based on the internal rate of return of PWSC. Accruals of compensation expense for the performance condition component of the PWSC Restricted Stock Award is estimated based on the probable outcome of the performance condition. The grant-date fair value of the PWSC Restricted Stock Award was estimated using a valuation model. At June 30, 2019, there were 875 unvested shares of the PWSC Restricted Stock Award with a weighted-average grant date fair value of $824.47 per share. Total unamortized compensation expense related to unvested PWSC Restricted Stock Award at June 30, 2019 was $0.7 million. Total stock-based compensation expense, inclusive of Stock Options, Restricted Stock Awards and Restricted Stock Awards of PWSC described above, net of forfeitures, was $0.2 million and $0.3 million for the three months ended June 30, 2019 and June 30, 2018, respectively ($0.4 million and $0.6 million for the six months ended June 30, 2019 and June 30, 2018, respectively). |
Leases |
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LEASES | LEASES Financial Statement Impact of Adopting Accounting Standards Update No. 2016-02 "Leases (Topic 842)" ("ASU 2016-02" or "ASC 842") The Company adopted ASU 2016-02 on January 1, 2019 using the modified retrospective adoption method. The reported results for 2019 reflect the adoption of ASC 842 guidance while the reported results for 2018 were prepared and continue to be reported under the guidance of ASC 840, Leases, referred to herein as "previous guidance." ASC 842 provides guidance for both lessees and lessors. The Company is the lessee where it leases certain office properties from lessors. The Company is the lessor when it leases certain property to lessees. The guidance requires lessees to recognize right-of-use assets and lease liabilities in the balance sheet and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. The amended guidance will require both operating and finance leases to be recognized in the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset ("ROU") representing its right to use the underlying asset for the lease term. The guidance requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is classified as a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is classified as a direct financing lease. All leases that are not classified as sales-type or direct financing leases are classified as operating leases. The Company elected certain of the practical expedients that are permitted under the transition guidance which allowed the Company to carryforward the historical lease classification, not reassess initial direct costs for any existing leases as of January 1, 2019 or reassess whether any expired or existing contracts are or contain leases. In addition, the Company elected to adopt the “hindsight” practical expedient to determine the reasonably certain lease term for existing leases. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of ASC 842 and have updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and prior guidance for lessees is the recognition of right-of-use assets and lease liabilities for those leases classified as operating leases. Recognition of the right-of-use assets and liabilities had a material impact to the Company’s consolidated balance sheet upon adoption. However, since all its leases are operating leases under ASC 840 and the Company will carryforward the historical lease classification, the new standard did not have a material impact on the Company’s consolidated statements of operations, consolidated statements of shareholder’s equity, or consolidated statements of cash flows. The adoption resulted in an increase of the ROU assets of approximately $2.7 million and lease liabilities of $2.9 million. The difference of $0.2 million relates to straight-line rent accruals and lease incentive liabilities that were reclassified to ROU assets for operating leases. The main difference between the guidance in ASU 2016-02 and prior guidance for lessors is a modification of what qualifies as a sales-type and direct financing lease. All the Company’s lessor leases are classified as operating leases. Lease Accounting Policy The Company determines lease classification at commencement date. Leases not classified as sales-type (lessor) or financing leases (lessor and lessee) are classified as operating leases. The primary accounting criteria the Company uses that results in operating lease classification are: (a) the lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease does not grant the lessee a purchase option that the lessee is reasonably certain to exercise, (c) using a seventy-five percent or more threshold, the lease term is not for a major part of the remaining economic life of the underlying asset, (d) using a ninety percent or more threshold, the present value of the sum of the lease payments and residual value guarantee from the lessee does not equal or substantially exceeds all of the fair value of the underlying asset. Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental expense for operating leases is recognized on a straight-line basis over the lease term, net of any applicable lease incentive amortization. Lessee Leases The Company has operating leases for office space which include fixed base rent payments, as well as variable rent payments to reimburse the landlord for operating expenses and taxes. The Company’s variable lease payments do not depend on a published index or rate, and therefore, are expensed as incurred. The Company includes only fixed payments for lease components in the measurement of the right-of-use asset and lease liability. There are no residual value guarantees. The Company does not currently have leases that meet the finance lease classification as defined under ASC 842. The Company treats contracts as a lease when the contract: (1) conveys the right to use a physically distinct asset for a period of time in exchange for consideration, (2) the Company directs the use of the asset and (3) the Company obtains substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases are office leases, the Company is unable to determine an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company includes options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. As an accounting policy, the Company has elected not to apply the recognition requirements in ASC 842 to short-term leases (generally those with terms of twelve months or less). Instead, the Company recognizes the lease payments as expense on a straight-line basis over the lease term and any variable lease payments in the period in which the obligation for those payments is incurred. The ROU assets and lease liability are presented as separate line items on the face of the Company’s consolidated balance sheet as of June 30, 2019. Operating lease costs and variable lease costs included in selling and administrative costs for the three months ended June 30, 2019 were $0.2 million and de minimis, respectively. Operating lease costs and variable lease costs included in selling and administrative costs for the six months ended June 30, 2019 were $0.5 million and de minimis, respectively. The annual maturities of lease liabilities as of June 30, 2019 were as follows:
The weighted-average remaining lease term for our operating leases was 6.40 years as of June 30, 2019. The weighted average discount rate of our operating leases was 5.69% as of June 30, 2019. Cash paid for amounts included in the measurement of lease liabilities was $0.5 million for the six months ended June 30, 2019. Lessor Leases The Company owns a parcel of real property consisting of approximately 192 acres located in the State of Texas (the "Real Property") that is subject to a long-term triple net lease agreement with an unrelated third-party. The lease provides for future rent escalations and renewal options. The initial lease term ends in May 2034. The lessee bears the cost of maintenance and property taxes. Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental income includes a de minimus amount of amortization of below market lease liabilities for the three and six months ended June 30, 2019 and June 30, 2018. The estimated aggregate future amortization of below market lease liabilities is $0.1 million for 2019, $0.1 million for 2020, $0.1 million for 2021, $0.1 million for 2022 and $0.1 million for 2023. Realization of the residual values of the assets under lease is dependent on the future ability to market the assets under prevailing market conditions. The lease is classified as an operating lease and the underlying leased assets are included in Property and Equipment (Note 10, "Property and Equipment"). Lease income related to operating leases for the three months ended June 30, 2019 and June 30, 2018 was $3.3 million and $3.3 million, respectively ($6.7 million year to date compared to $6.7 million prior year to date). The following table provides the net book value of operating lease property included in property and equipment in the consolidated balance sheets:
As of June 30, 2019, future undiscounted cash flows to be received in each of the next five years and thereafter, on non-cancelable operating leases are as follows:
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LEASES | LEASES Financial Statement Impact of Adopting Accounting Standards Update No. 2016-02 "Leases (Topic 842)" ("ASU 2016-02" or "ASC 842") The Company adopted ASU 2016-02 on January 1, 2019 using the modified retrospective adoption method. The reported results for 2019 reflect the adoption of ASC 842 guidance while the reported results for 2018 were prepared and continue to be reported under the guidance of ASC 840, Leases, referred to herein as "previous guidance." ASC 842 provides guidance for both lessees and lessors. The Company is the lessee where it leases certain office properties from lessors. The Company is the lessor when it leases certain property to lessees. The guidance requires lessees to recognize right-of-use assets and lease liabilities in the balance sheet and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. The amended guidance will require both operating and finance leases to be recognized in the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset ("ROU") representing its right to use the underlying asset for the lease term. The guidance requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is classified as a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is classified as a direct financing lease. All leases that are not classified as sales-type or direct financing leases are classified as operating leases. The Company elected certain of the practical expedients that are permitted under the transition guidance which allowed the Company to carryforward the historical lease classification, not reassess initial direct costs for any existing leases as of January 1, 2019 or reassess whether any expired or existing contracts are or contain leases. In addition, the Company elected to adopt the “hindsight” practical expedient to determine the reasonably certain lease term for existing leases. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of ASC 842 and have updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and prior guidance for lessees is the recognition of right-of-use assets and lease liabilities for those leases classified as operating leases. Recognition of the right-of-use assets and liabilities had a material impact to the Company’s consolidated balance sheet upon adoption. However, since all its leases are operating leases under ASC 840 and the Company will carryforward the historical lease classification, the new standard did not have a material impact on the Company’s consolidated statements of operations, consolidated statements of shareholder’s equity, or consolidated statements of cash flows. The adoption resulted in an increase of the ROU assets of approximately $2.7 million and lease liabilities of $2.9 million. The difference of $0.2 million relates to straight-line rent accruals and lease incentive liabilities that were reclassified to ROU assets for operating leases. The main difference between the guidance in ASU 2016-02 and prior guidance for lessors is a modification of what qualifies as a sales-type and direct financing lease. All the Company’s lessor leases are classified as operating leases. Lease Accounting Policy The Company determines lease classification at commencement date. Leases not classified as sales-type (lessor) or financing leases (lessor and lessee) are classified as operating leases. The primary accounting criteria the Company uses that results in operating lease classification are: (a) the lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease does not grant the lessee a purchase option that the lessee is reasonably certain to exercise, (c) using a seventy-five percent or more threshold, the lease term is not for a major part of the remaining economic life of the underlying asset, (d) using a ninety percent or more threshold, the present value of the sum of the lease payments and residual value guarantee from the lessee does not equal or substantially exceeds all of the fair value of the underlying asset. Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental expense for operating leases is recognized on a straight-line basis over the lease term, net of any applicable lease incentive amortization. Lessee Leases The Company has operating leases for office space which include fixed base rent payments, as well as variable rent payments to reimburse the landlord for operating expenses and taxes. The Company’s variable lease payments do not depend on a published index or rate, and therefore, are expensed as incurred. The Company includes only fixed payments for lease components in the measurement of the right-of-use asset and lease liability. There are no residual value guarantees. The Company does not currently have leases that meet the finance lease classification as defined under ASC 842. The Company treats contracts as a lease when the contract: (1) conveys the right to use a physically distinct asset for a period of time in exchange for consideration, (2) the Company directs the use of the asset and (3) the Company obtains substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases are office leases, the Company is unable to determine an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company includes options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. As an accounting policy, the Company has elected not to apply the recognition requirements in ASC 842 to short-term leases (generally those with terms of twelve months or less). Instead, the Company recognizes the lease payments as expense on a straight-line basis over the lease term and any variable lease payments in the period in which the obligation for those payments is incurred. The ROU assets and lease liability are presented as separate line items on the face of the Company’s consolidated balance sheet as of June 30, 2019. Operating lease costs and variable lease costs included in selling and administrative costs for the three months ended June 30, 2019 were $0.2 million and de minimis, respectively. Operating lease costs and variable lease costs included in selling and administrative costs for the six months ended June 30, 2019 were $0.5 million and de minimis, respectively. The annual maturities of lease liabilities as of June 30, 2019 were as follows:
The weighted-average remaining lease term for our operating leases was 6.40 years as of June 30, 2019. The weighted average discount rate of our operating leases was 5.69% as of June 30, 2019. Cash paid for amounts included in the measurement of lease liabilities was $0.5 million for the six months ended June 30, 2019. Lessor Leases The Company owns a parcel of real property consisting of approximately 192 acres located in the State of Texas (the "Real Property") that is subject to a long-term triple net lease agreement with an unrelated third-party. The lease provides for future rent escalations and renewal options. The initial lease term ends in May 2034. The lessee bears the cost of maintenance and property taxes. Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental income includes a de minimus amount of amortization of below market lease liabilities for the three and six months ended June 30, 2019 and June 30, 2018. The estimated aggregate future amortization of below market lease liabilities is $0.1 million for 2019, $0.1 million for 2020, $0.1 million for 2021, $0.1 million for 2022 and $0.1 million for 2023. Realization of the residual values of the assets under lease is dependent on the future ability to market the assets under prevailing market conditions. The lease is classified as an operating lease and the underlying leased assets are included in Property and Equipment (Note 10, "Property and Equipment"). Lease income related to operating leases for the three months ended June 30, 2019 and June 30, 2018 was $3.3 million and $3.3 million, respectively ($6.7 million year to date compared to $6.7 million prior year to date). The following table provides the net book value of operating lease property included in property and equipment in the consolidated balance sheets:
As of June 30, 2019, future undiscounted cash flows to be received in each of the next five years and thereafter, on non-cancelable operating leases are as follows:
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DEFERRED ACQUISITION COSTS | DEFERRED ACQUISITION COSTS Deferred acquisition costs consist primarily of commissions and agency expenses incurred related to successful efforts to acquire vehicle service agreements and are amortized over the period in which the related revenues are earned in accordance with ASC 606. The components of deferred acquisition costs and the related amortization expense for the three and six months ended June 30, 2019 and June 30, 2018 are comprised as follows:
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Recently Issued Accounting Standards |
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Accounting Policies [Abstract] | |
RECENTLY ISSUED ACCOUNTING STANDARDS | RECENTLY ISSUED ACCOUNTING STANDARDS (a) Adoption of New Accounting Standards: Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), and the related amendments, utilizing the modified retrospective approach, which created a new comprehensive revenue recognition standard that serves as the single source of revenue guidance for all contracts with customers to transfer goods or services or contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Insurance contracts, lease contracts and investments are not within the scope of ASU 2014-09. ASU 2014-09 is applicable to the Company's service fee and commission income. Service fee and commission income represents vehicle service agreement fees, GAP commissions, maintenance support service fees, warranty product commissions, homebuilder warranty service fees and homebuilder warranty commissions based on terms of various agreements with credit unions, consumers, businesses and homebuilders. With the exception of GAP commissions and homebuilder warranty service fees, the adoption of ASU 2014-09 did not change the way the Company recognized revenue for the year ended December 31, 2018. The new guidance affects IWS' GAP commissions and PWSC's homebuilder warranty service fees, which will be recognized more slowly as compared to the historic revenue recognition pattern prior to the Company’s adoption of ASU 2014-09. As a result of the adoption of ASU 2014-09, the Company also recorded a cumulative effect adjustment to increase accumulated deficit by $0.6 million and increase deferred service fees by $0.6 million. Prior periods have not been restated to conform to the current presentation. Refer to Note 15, "Revenue from Contracts with Customers," for further details. Effective January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most significantly, ASU 2016-01 requires (1) equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income (loss); however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost, adjusted for observable price changes and impairments; and (2) an entity to present separately in other comprehensive income (loss) the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company has elected to measure its investments in private companies at cost, adjusted for observable price changes and impairments. Previously, the Company recorded its equity investments at fair value with net unrealized gains or losses reported in accumulated other comprehensive income (loss) and its subordinated debt at fair value with the total change in fair value reported in net income (loss). As a result of the adoption of ASU 2016-01, at January 1, 2018 cumulative net unrealized losses on equity investments of $0.0 million were reclassified from accumulated other comprehensive income (loss) into accumulated deficit and a cumulative $40.5 million change in fair value of subordinated debt attributable to instrument-specific credit risk was reclassified from accumulated deficit to accumulated other comprehensive income (loss). Prior periods have not been restated to conform to the current presentation. Effective January 1, 2018, the Company adopted ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). The objective of ASU 2016-15 is to reduce diversity in the classification of cash receipts and payments for specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination and proceeds from the settlement of insurance claims. The adoption of the standard did not affect the Company's consolidated statements of cash flows. Effective January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash ("ASU 2016-18"). The objective of ASU 2016-18 is to explain the change during the period in the total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and cash equivalents should be included with the cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. As a result of the adoption of the standard, the change in restricted cash is included in the consolidated statements of cash flows. Effective July 1, 2018, the Company adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"). ASU 2018-07 was issued to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. During the third quarter of 2018, the Company granted restricted common stock awards to a nonemployee. Refer to Note 18, "Stock-Based Compensation," for further details. Effective January 1, 2019, the Company adopted ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update requires the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be amortized over the lease term on a straight-line basis, with all cash flows included within operating activities in the statement of cash flows. The accounting treatment for lessors will remain relatively unchanged. The Company adopted ASU 2016-02 using the modified retrospective transition method and did not restate comparative periods. The adoption had a significant effect on the Company's consolidated balance sheet. Refer to Note 14, "Leases," for further information regarding the adoption of ASU 2016-02. (b) Accounting Standards Not Yet Adopted: In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 replaces the current incurred loss model used to measure impairment losses with an expected loss model for trade, reinsurance, and other receivables as well as financial instruments measured at amortized cost. ASU 2016-13 will require a financial asset measured at amortized cost, including reinsurance balances recoverable, to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net loss. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale investments is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through irreversible write-downs. On November 15, 2019, the FASB issued ASU 2019-10, which (1) provides a framework to stagger effective dates for future major accounting standards and (2) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, per ASU 2019-10 the Company would adopt ASU 2016-13 beginning January 1, 2023, as the Company is considered to be a smaller reporting company. The Company is currently evaluating ASU 2016-13 to determine the potential impact that adopting this standard will have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 was issued to simplify the subsequent measurement of goodwill. This update changes the impairment test by requiring an entity to compare the fair value of a reporting unit with its carrying amount as opposed to comparing the carrying amount of goodwill with its implied fair value. ASU 2017-04 is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company does not believe the adoption of ASU 2017-04 will have a material effect on its consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). Among other things, ASU 2018-17 changes how all entities that apply the variable interest entity ("VIE") guidance evaluate decision making fees. Under ASU 2018-17, when an entity determines whether a decision-making fee is a variable interest, it considers indirect interests held through related parties under common control on a proportionate basis rather than in their entirety. The new approach is consistent with how indirect interests held by related parties under common control are evaluated when determining whether a reporting entity is the primary beneficiary of a VIE. ASU 2018-17 is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating ASU 2018-17 to determine the potential impact that adopting this standard will have on its consolidated financial statements. |
Deferred Acquisition Costs (Tables) |
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Deferred Policy Acquisition Costs Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Deferred Acquisition Costs and Amortization Expense | The components of deferred acquisition costs and the related amortization expense for the three and six months ended June 30, 2019 and June 30, 2018 are comprised as follows:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market-based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters do not exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. For the Company's financial instruments carried at cost or amortized cost, the book value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company's intention to hold them until there is a recovery of fair value, which may be to maturity. The Company employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1:
The Company classifies its investments in fixed maturities as available-for-sale and reports these investments at fair value. The Company's equity investments, limited liability investments, at fair value, real estate investments and subordinated debt are measured and reported at fair value. Fixed maturities - Fair values of fixed maturities for which no active market exists are derived from quoted market prices of similar instruments or other third party evidence. All classes of the Company’s fixed maturities, primarily consisting of investments in US. Treasury bills and government bonds; obligations of states, municipalities and political subdivisions; mortgage-backed securities; and corporate securities, are classified as Level 2. Level 2 is applied to valuations based upon quoted prices for similar assets in active markets; quoted prices for identical or similar assets in markets that are inactive; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. The Company engages a third-party vendor who utilizes third-party pricing sources and primarily employs a market approach to determine the fair values of our fixed maturities. The market approach includes primarily obtaining prices from independent third-party pricing services as well as, to a lesser extent, quotes from broker-dealers. Our third-party vendor also monitors market indicators, as well as industry and economic events, to ensure pricing is appropriate. All classes of our fixed maturities are valued using this technique. The Company has obtained an understanding of our third-party vendor’s valuation methodologies and inputs. Fair values obtained from our third-party vendor are not adjusted by the Company. The following is a description of the significant inputs, by asset class, used by the third-party pricing services to determine the fair values of our fixed maturities included in Level 2:
Equity investments - Fair values of equity investments, including warrants, reflect quoted market values based on latest bid prices, where active markets exist, or models based on significant market observable inputs, where no active markets exist. Limited liability investments, at fair value - Limited liability investments, at fair value include the Company's investment in 1347 Investors as well as the underlying investments of Net Lease and Argo Holdings. 1347 Investors owns common stock in Limbach Holdings, Inc., a publicly traded company. Net Lease owns investments in limited liability companies that hold investment properties. Argo Holdings makes investments in limited liability companies and limited partnerships that hold investments in search funds and private operating companies.
Real estate investments - The fair value of real estate investments involves a combination of the market and income valuation techniques. Under this approach, a market-based capitalization rate is derived from comparable transactions, adjusted for any unique characteristics of each asset, and applied to the asset under consideration. The cap rates used during underwriting and subsequent valuation incorporate the consideration of risks of vacancy and collection loss, administrative costs of owning net leased assets and possible capital expenditures that could be determined a landlord expense. These investments are categorized in Level 3 of the fair value hierarchy. Subordinated debt - The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a third party. These inputs include credit spread assumptions developed by a third party and market observable swap rates. The subordinated debt is categorized in Level 2 of the fair value hierarchy. Warrant liability - As described in Note 13, "Debt," the Company issued the KWH Warrants on March 1, 2019. The KWH Warrants are measured and reported at fair value and are included in accrued expenses and other liabilities in the consolidated balance sheets. The fair value of the warrant liability is estimated using an internal model without relevant observable market inputs. The significant inputs used in the model include an enterprise value multiple applied to earnings before interest, tax, depreciation and amortization. The implied enterprise value is reduced by the remaining debt associated with the KWH Loan to determine an implied equity value. The liability classified warrants are categorized in Level 3 of the fair value hierarchy. Assets and Liabilities Measured at Fair Value on a Recurring Basis The balances of the Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2019 and December 31, 2018 are as follows. Certain investments in limited liability companies that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy, but are presented in the following tables to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets:
The following table provides a reconciliation of the fair value of recurring Level 3 fair value measurements for the three and six months ended June 30, 2019 and June 30, 2018:
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level 3 at June 30, 2019 :
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level 3 at December 31, 2018:
All transfers are recognized by the Company at the beginning of each reporting period. Transfers between Levels 2 and 3 generally relate to whether significant unobservable inputs are used for the fair value measurements. There were no transfers between levels in 2019 or 2018. Investments Measured Using the Net Asset Value per Share Practical Expedient The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at June 30, 2019:
The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at December 31, 2018:
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are adjusted for observable price changes or written down to fair value as a result of an impairment. For the three months ended June 30, 2019 and June 30, 2018, the Company recorded adjustments to increase the fair value of an certain investments in private companies for observable price changes of zero and $0.2 million, respectively, ($0.0 million and $0.2 million for the six months ended June 30, 2019 and June 30, 2018, respectively), which are included in net change in unrealized gain (loss) on private company investments in the consolidated statements of operations. The Company recorded no write-downs for other-than-temporary impairments related to investments in private companies for the three and six months ended June 30, 2019 and June 30, 2018. To determine the fair value of investments in these private companies, the Company considered rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable transactions, trading multiples and changes in market outlook, among other factors. The Company has classified the fair value measurements of these investments in private companies as Level 3 because they involve significant unobservable inputs. As further discussed in Note 5, "Acquisition and Discontinued Operations," the Company acquired Geminus on March 1, 2019. The fair values of intangible assets and deferred service fees associated with the acquisition of Geminus were determined to be Level 3 under the fair value hierarchy. The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for these Level 3 measurements:
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Recently Issued Accounting Standards (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Accounting Standards | Adoption of New Accounting Standards: Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), and the related amendments, utilizing the modified retrospective approach, which created a new comprehensive revenue recognition standard that serves as the single source of revenue guidance for all contracts with customers to transfer goods or services or contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Insurance contracts, lease contracts and investments are not within the scope of ASU 2014-09. ASU 2014-09 is applicable to the Company's service fee and commission income. Service fee and commission income represents vehicle service agreement fees, GAP commissions, maintenance support service fees, warranty product commissions, homebuilder warranty service fees and homebuilder warranty commissions based on terms of various agreements with credit unions, consumers, businesses and homebuilders. With the exception of GAP commissions and homebuilder warranty service fees, the adoption of ASU 2014-09 did not change the way the Company recognized revenue for the year ended December 31, 2018. The new guidance affects IWS' GAP commissions and PWSC's homebuilder warranty service fees, which will be recognized more slowly as compared to the historic revenue recognition pattern prior to the Company’s adoption of ASU 2014-09. As a result of the adoption of ASU 2014-09, the Company also recorded a cumulative effect adjustment to increase accumulated deficit by $0.6 million and increase deferred service fees by $0.6 million. Prior periods have not been restated to conform to the current presentation. Refer to Note 15, "Revenue from Contracts with Customers," for further details. Effective January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most significantly, ASU 2016-01 requires (1) equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income (loss); however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost, adjusted for observable price changes and impairments; and (2) an entity to present separately in other comprehensive income (loss) the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The Company has elected to measure its investments in private companies at cost, adjusted for observable price changes and impairments. Previously, the Company recorded its equity investments at fair value with net unrealized gains or losses reported in accumulated other comprehensive income (loss) and its subordinated debt at fair value with the total change in fair value reported in net income (loss). As a result of the adoption of ASU 2016-01, at January 1, 2018 cumulative net unrealized losses on equity investments of $0.0 million were reclassified from accumulated other comprehensive income (loss) into accumulated deficit and a cumulative $40.5 million change in fair value of subordinated debt attributable to instrument-specific credit risk was reclassified from accumulated deficit to accumulated other comprehensive income (loss). Prior periods have not been restated to conform to the current presentation. Effective January 1, 2018, the Company adopted ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). The objective of ASU 2016-15 is to reduce diversity in the classification of cash receipts and payments for specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination and proceeds from the settlement of insurance claims. The adoption of the standard did not affect the Company's consolidated statements of cash flows. Effective January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash ("ASU 2016-18"). The objective of ASU 2016-18 is to explain the change during the period in the total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and cash equivalents should be included with the cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. As a result of the adoption of the standard, the change in restricted cash is included in the consolidated statements of cash flows. Effective July 1, 2018, the Company adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"). ASU 2018-07 was issued to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. During the third quarter of 2018, the Company granted restricted common stock awards to a nonemployee. Refer to Note 18, "Stock-Based Compensation," for further details. Effective January 1, 2019, the Company adopted ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update requires the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be amortized over the lease term on a straight-line basis, with all cash flows included within operating activities in the statement of cash flows. The accounting treatment for lessors will remain relatively unchanged. The Company adopted ASU 2016-02 using the modified retrospective transition method and did not restate comparative periods. The adoption had a significant effect on the Company's consolidated balance sheet. Refer to Note 14, "Leases," for further information regarding the adoption of ASU 2016-02. (b) Accounting Standards Not Yet Adopted: In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 replaces the current incurred loss model used to measure impairment losses with an expected loss model for trade, reinsurance, and other receivables as well as financial instruments measured at amortized cost. ASU 2016-13 will require a financial asset measured at amortized cost, including reinsurance balances recoverable, to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net loss. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale investments is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through irreversible write-downs. On November 15, 2019, the FASB issued ASU 2019-10, which (1) provides a framework to stagger effective dates for future major accounting standards and (2) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, per ASU 2019-10 the Company would adopt ASU 2016-13 beginning January 1, 2023, as the Company is considered to be a smaller reporting company. The Company is currently evaluating ASU 2016-13 to determine the potential impact that adopting this standard will have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 was issued to simplify the subsequent measurement of goodwill. This update changes the impairment test by requiring an entity to compare the fair value of a reporting unit with its carrying amount as opposed to comparing the carrying amount of goodwill with its implied fair value. ASU 2017-04 is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company does not believe the adoption of ASU 2017-04 will have a material effect on its consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). Among other things, ASU 2018-17 changes how all entities that apply the variable interest entity ("VIE") guidance evaluate decision making fees. Under ASU 2018-17, when an entity determines whether a decision-making fee is a variable interest, it considers indirect interests held through related parties under common control on a proportionate basis rather than in their entirety. The new approach is consistent with how indirect interests held by related parties under common control are evaluated when determining whether a reporting entity is the primary beneficiary of a VIE. ASU 2018-17 is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating ASU 2018-17 to determine the potential impact that adopting this standard will have on its consolidated financial statements. |
Lease Accounting Policy | Lease Accounting Policy The Company determines lease classification at commencement date. Leases not classified as sales-type (lessor) or financing leases (lessor and lessee) are classified as operating leases. The primary accounting criteria the Company uses that results in operating lease classification are: (a) the lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease does not grant the lessee a purchase option that the lessee is reasonably certain to exercise, (c) using a seventy-five percent or more threshold, the lease term is not for a major part of the remaining economic life of the underlying asset, (d) using a ninety percent or more threshold, the present value of the sum of the lease payments and residual value guarantee from the lessee does not equal or substantially exceeds all of the fair value of the underlying asset. The Company has operating leases for office space which include fixed base rent payments, as well as variable rent payments to reimburse the landlord for operating expenses and taxes. The Company’s variable lease payments do not depend on a published index or rate, and therefore, are expensed as incurred. The Company includes only fixed payments for lease components in the measurement of the right-of-use asset and lease liability. There are no residual value guarantees. The Company does not currently have leases that meet the finance lease classification as defined under ASC 842. The Company treats contracts as a lease when the contract: (1) conveys the right to use a physically distinct asset for a period of time in exchange for consideration, (2) the Company directs the use of the asset and (3) the Company obtains substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases are office leases, the Company is unable to determine an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company includes options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. As an accounting policy, the Company has elected not to apply the recognition requirements in ASC 842 to short-term leases (generally those with terms of twelve months or less). Instead, the Company recognizes the lease payments as expense on a straight-line basis over the lease term and any variable lease payments in the period in which the obligation for those payments is incurred. |
Lease Accounting Policy | Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental expense for operating leases is recognized on a straight-line basis over the lease term, net of any applicable lease incentive amortization. |
Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | June 30, 2019 and December 31, 2018 are as follows. Certain investments in limited liability companies that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy, but are presented in the following tables to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets:
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Schedule of Reconciliation of Fair Value of Recurring Level 3 Measurements | The following table provides a reconciliation of the fair value of recurring Level 3 fair value measurements for the three and six months ended June 30, 2019 and June 30, 2018:
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Schedule of Fair Value Valuation Techniques Used to Measure Investments | The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level 3 at June 30, 2019 :
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level 3 at December 31, 2018:
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Schedule of Investments at Fair Value Using Net Asset Value Per Share as Practical Expedient | The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at June 30, 2019:
The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at December 31, 2018:
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- Atlas Financial Holdings, Inc. (Details) $ in Millions |
Nov. 30, 2010
USD ($)
employee
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Jun. 30, 2019
USD ($)
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Related Party Transactions [Abstract] | ||
Number of employees | employee | 5 | |
Notes receivable, related parties | $ 1.1 | $ 0.7 |
Receivable interest rate | 3.00% | |
Market value of pledged shares | $ 0.0 |
Leases - Lease payments and receipts (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
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Operating Leases, Future Minimum Payments Receivable [Abstract] | |
2019 | $ 5,840 |
2020 | 11,832 |
2021 | 12,099 |
2022 | 12,371 |
2023 | 12,649 |
Thereafter | $ 149,896 |
Vehicle Service Agreement Liability - Reconciliation of the Changes in the Vehicle Service Agreement (Details) - USD ($) $ in Thousands |
6 Months Ended | |
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Jun. 30, 2019 |
Jun. 30, 2018 |
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Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Recognition of service fees on vehicle service agreements | $ (7,900) | |
Vehicle service agreement fees | ||
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance at January 1, net | 43,734 | $ 40,794 |
Vehicle service agreement liability acquired during the year related to the purchase of Geminus | 10,792 | 0 |
Gross service fees for vehicle service agreements sold | 14,549 | 11,166 |
Recognition of service fees on vehicle service agreements | (12,703) | (9,588) |
Liability for claims authorized on vehicle service agreements | 4,393 | 2,764 |
Payments of claims authorized on vehicle service agreements | (2,678) | (2,950) |
Re-estimation of deferred service fees | (321) | (165) |
Balance at June 30, net | $ 57,766 | $ 42,021 |
Income Taxes - Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Income Tax Disclosure [Abstract] | ||||
Income tax (benefit) expense at United States statutory income tax rate | $ (48) | $ (855) | $ 472 | $ (1,348) |
Valuation allowance | 97 | 822 | (1,234) | 1,354 |
Non-deductible compensation | 25 | 62 | 34 | 123 |
Disposition of subsidiary | (24) | 0 | (24) | 0 |
State income tax | 32 | 67 | 58 | 133 |
Change in unrecognized tax benefits | 71 | 60 | 141 | 130 |
Indefinite life intangibles | 54 | 24 | 87 | 46 |
Foreign operations subject to different tax rates | (20) | (39) | (17) | (54) |
Other | (19) | 49 | (62) | 60 |
Income tax expense (benefit) | $ 168 | $ 190 | $ (545) | $ 444 |
Stock-Based Compensation (Tables) |
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Schedule of Stock Option Activity | The following table summarizes the stock option activity during the six months ended June 30, 2019:
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Schedule of Unvested Restricted Stock Award Activity | The following table summarizes the activity related to unvested 2014 Restricted Stock Awards, 2018 Modified Restricted Stock Award, Modified Restricted Stock Award and 2018 Restricted Stock Award (collectively "Restricted Stock Awards") for the six months ended June 30, 2019:
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and equipment at June 30, 2019 and December 31, 2018 are comprised as follows:
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Leases (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Maturities of Lease Liabilities | The annual maturities of lease liabilities as of June 30, 2019 were as follows:
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Schedule of Net Book Value of Operating Lease Property | The following table provides the net book value of operating lease property included in property and equipment in the consolidated balance sheets:
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Future Undiscounted Cash Flows to be Received | As of June 30, 2019, future undiscounted cash flows to be received in each of the next five years and thereafter, on non-cancelable operating leases are as follows:
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Deferred Acquisition Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Deferred Acquisition Costs | ||||
Beginning balance, net | $ 7,220 | $ 6,428 | $ 6,904 | $ 6,325 |
Additions | 1,500 | 1,256 | 2,701 | 2,498 |
Amortization | (996) | (1,022) | (1,881) | (2,161) |
Balance at June 30, net | $ 7,724 | $ 6,662 | $ 7,724 | $ 6,662 |
Investments - Gross Realized Gains and Losses on Fixed Maturities (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Investments [Abstract] | ||||
Gross realized gains | $ 44 | $ 133 | $ 359 | $ 398 |
Gross realized losses | (600) | (1) | (600) | (1) |
Net realized (losses) gains | $ (556) | $ 132 | $ (241) | $ 397 |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES The Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act makes broad and complex changes to the U.S. tax code, including a permanent reduction in the U.S. federal corporate income tax rate to 21% starting in 2018. Previously, the Company was subject to a 34% U.S. federal corporate income tax rate. Income tax expense (benefit) for the three and six months ended June 30, 2019 and June 30, 2018 varies from the amount that would result by applying the applicable U.S. federal corporate income tax rate of 21% to loss from continuing operations before income tax expense (benefit). The following table summarizes the differences:
The Company maintains a valuation allowance for its gross deferred tax assets at June 30, 2019 and December 31, 2018. The Company's operations have generated substantial operating losses in prior years. These losses can be available to reduce income taxes that might otherwise be incurred on future taxable income; however, it is uncertain whether the Company will generate the taxable income necessary to utilize these losses or other reversing temporary differences. This uncertainty has caused management to place a full valuation allowance on its June 30, 2019 and December 31, 2018 net deferred tax asset, excluding the deferred income tax asset and liability amounts set forth in the paragraph below. In the quarter ended March 31, 2019, the Company released into income $0.8 million of its valuation allowance, as a result of its acquisition of Geminus, due to net deferred income tax liabilities that are expected to reverse during the period in which the Company will have deferred income tax assets available. The Company carries net deferred income tax liabilities of $29.0 million and $28.5 million at June 30, 2019 and December 31, 2018, respectively. At June 30, 2019, $8.0 million relates to deferred income tax liabilities scheduled to reverse in periods after the expiration of the Company's consolidated U.S. net operating loss carryforwards, $21.7 million relates to deferred income tax liabilities associated with land and indefinite lived intangible assets, $0.6 million relates to deferred income tax assets associated with state income taxes and $0.1 million relates to deferred income tax assets associated with alternative minimum tax credits. At December 31, 2018, $8.0 million relates to deferred income tax liabilities scheduled to reverse in periods after the expiration of the Company's consolidated U.S. net operating loss carryforwards, $21.1 million relates to deferred income tax liabilities associated with land and indefinite lived intangible assets, $0.5 million relates to deferred income tax assets associated with state income taxes and $0.1 million relates to deferred income tax assets associated with alternative minimum tax credits. The Company considered a tax planning strategy in arriving at its December 31, 2018 net deferred income tax liabilities. As of June 30, 2019 and December 31, 2018, the Company carried a liability for unrecognized tax benefits of $1.4 million and $1.4 million, respectively, which is included in income taxes payable in the consolidated balance sheets. The Company classifies interest and penalty accruals, if any, related to unrecognized tax benefits as income tax expense. The Company recorded income tax expense of $0.1 million and $0.1 million related to interest and penalty accruals for the three months ended June 30, 2019 and June 30, 2018, respectively ($0.1 million and $0.1 million for the six months ended June 30, 2019 and June 30, 2018, respectively). At June 30, 2019 and December 31, 2018, the Company carried an accrual for the payment of interest and penalties of $1.2 million and $1.1 million, respectively, included in income taxes payable in the consolidated balance sheets. |
Unpaid Loss and Loss Adjustment Expenses |
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Insurance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES | UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES The establishment of the provision for unpaid loss and loss adjustment expenses is based on known facts and interpretation of circumstances and is, therefore, a complex and dynamic process influenced by a large variety of factors. These factors include the Company's experience with similar cases and historical trends involving loss payment patterns, pending levels of unpaid loss and loss adjustment expenses, product mix or concentration, loss severity and loss frequency patterns. Other factors include the continually evolving and changing regulatory and legal environment; actuarial studies; professional experience and expertise of the Company's claims departments' personnel and independent adjusters retained to handle individual claims; the quality of the data used for projection purposes; existing claims management practices including claims-handling and settlement practices; the effect of inflationary trends on future loss settlement costs; court decisions; economic conditions; and public attitudes. Consequently, the process of determining the provision for unpaid loss and loss adjustment expenses necessarily involves risks that the actual loss and loss adjustment expenses incurred by the Company will deviate, perhaps materially, from the estimates recorded. The Company's evaluation of the adequacy of unpaid loss and loss adjustment expenses includes a re-estimation of the liability for unpaid loss and loss adjustment expenses relating to each preceding financial year compared to the liability that was previously established. The results of this comparison and the changes in the provision for unpaid loss and loss adjustment expenses, net of amounts recoverable from reinsurers, as of June 30, 2019 and June 30, 2018 were as follows:
The Company reported unfavorable development on unpaid loss and loss adjustment expenses of $0.7 million and $1.6 million for the six months ended June 30, 2019 and June 30, 2018, respectively. The unfavorable development for the six months ended June 30, 2019 and June 30, 2018 was primarily related to an increase in loss and loss adjustment expenses at Amigo. |
Segmented Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENTED INFORMATION | SEGMENTED INFORMATION The Company conducts its business through the following two reportable segments: Extended Warranty and Leased Real Estate. The Company previously conducted its business through a third reportable segment, Insurance Underwriting. Insurance Underwriting included the following subsidiaries of the Company: Mendota, Amigo and Kingsway Reinsurance Corporation ("Kingsway Re"). As further discussed in Note 5, "Acquisition and Discontinued Operations," on October 18, 2018, the Company announced that it had completed the sale of Mendota. As a result, Mendota has been classified as discontinued operations and the results of their operations are reported separately for all periods presented. As a result of classifying Mendota as discontinued operations, the composition of the Insurance Underwriting segment has changed such that it no longer meets the criteria of a reportable segment. As such, all segmented information has been restated to exclude the Insurance Underwriting segment for all periods presented. Extended Warranty Segment Extended Warranty includes the following subsidiaries of the Company: IWS, Trinity, PWSC and Geminus (collectively, "Extended Warranty"). IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 23 states and the District of Columbia to their members. Trinity sells HVAC, standby generator, commercial LED lighting and refrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers. PWSC sells new home warranty products and provides administration services to home builders and homeowners across the United States. PWSC distributes its products and services through an in house sales team and through insurance brokers and insurance carriers throughout all states except Alaska and Louisiana. Geminus sells vehicle service agreements and other finance and service products to used car buyers across the United States. Penn and Prime distribute these products via independent used car dealerships and franchised car dealerships, respectively. Leased Real Estate Segment Leased Real Estate includes the Company's subsidiary, CMC, which was acquired on July 14, 2016. CMC owns a parcel of real property consisting of approximately 192 acres located in the State of Texas (the "Real Property") that is leased to a third party pursuant to a long-term triple net lease. The Real Property is also subject to the Mortgage. When assessing and measuring the operational and financial performance of the Leased Real Estate segment, interest expense related to the Mortgage is included in Leased Real Estate's segment operating income. Revenues and Operating Income by Reportable Segment 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. Revenues by reportable segment reconciled to consolidated revenues for the three and six months ended June 30, 2019 and June 30, 2018 were:
The operating income by reportable segment in the following table is before income taxes and includes revenues and direct segment costs. Total segment operating income reconciled to the consolidated (loss) income from continuing operations for the three and six months ended June 30, 2019 and June 30, 2018 were:
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Vehicle Service Agreement Liability (Tables) |
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Guarantees and Product Warranties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | A reconciliation of the changes in the vehicle service agreement liability, including deferred service fees related to vehicle service agreements, as of June 30, 2019 and June 30, 2018 were as follows:
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Components of Vehicle Service Agreement Liability | The vehicle service agreement liability is presented as components of deferred services fees and accrued expenses and other liabilities in the consolidated balance sheets as follows:
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Revenue from Contracts with Customers (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table disaggregates revenues from contracts with customers by revenue type:
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Accumulated Other Comprehensive Income (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | On the other hand, the unaudited consolidated statements of comprehensive (loss) income present the components of other comprehensive (loss) income, net of tax, only for the three and six months ended June 30, 2019 and June 30, 2018 and inclusive of the components attributable to noncontrolling interests in consolidated subsidiaries.
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Reclassification out of Accumulated Other Comprehensive Income | Components of accumulated other comprehensive income were reclassified to the following lines of the unaudited consolidated statements of operations for the three and six months ended June 30, 2019 and June 30, 2018:
|
Related Parties - Insurance Income Strategies Ltd. (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Aug. 10, 2018 |
---|---|---|
Equity Method Investee | ||
Related Party Transaction [Line Items] | ||
Percentage of assets | 0.90% | |
Percentage of net profits | 9.00% | |
Percentage of future fees | 50.00% | |
Preferred stock issued | $ 15.0 | |
IIS Re Ltd | ||
Related Party Transaction [Line Items] | ||
Ownership percentage by parent | 100.00% |
Investment in Investee (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Sep. 30, 2018 |
|
Schedule of Equity Method Investments [Line Items] | ||||||
Carrying Value | $ 1,119 | $ 1,119 | $ 951 | |||
Equity in net loss of investees | $ 201 | $ (385) | $ 168 | $ (284) | ||
Itasca Capital Ltd | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity Percentage | 22.90% | 22.90% | 22.90% | 22.90% | ||
Estimated Fair Value | $ 1,542 | $ 951 | $ 1,542 | $ 951 | 1,000 | |
Carrying Value | $ 1,119 | $ 951 | $ 1,119 | $ 951 | $ 2,700 | |
Write-down of carrying value of investment | $ 1,700 |
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