Kingsway Financial Services, Inc. :KFS-US: Earnings Analysis: Q3, 2016 By the Numbers : October 25, 2016

Kingsway Financial Services, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Kingsway Financial Services, Inc. – Progressive Corporation (PGR-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 42.02 million, Net Earnings of USD 1.54 million.
  • Earnings growth due to the contribution of unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 36.78 8.42 36.7 39.72 42.02
Revenue Growth (%YOY) -16.06 -80.06 1.61 4.92 14.25
Earnings (mil) -0.81 -2.19 -1.46 -1.64 1.54
Earnings Growth (%YOY) 88.24 -448.89 -285.71 82.5 290.47
Net Margin (%) -2.2 -26.04 -3.97 -4.12 3.66
EPS -0.05 -0.12 -0.08 -0.09 0.06
Return on Equity (%) -6.67 -17.83 -12.47 -14.13 12.51
Return on Assets (%) -1.19 -3.3 -2.31 -2.71 1.81

Access our Ratings and Scores for Kingsway Financial Services, Inc.

Market Share Versus Profits

Revenues History
Earnings History

KFS-US‘s change in revenue this period compared to the same period last year of 14.25% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that KFS-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.80% and earnings by 193.96% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s earnings have gone up year-on-year. But this growth has not come as a result of improvement in premiums earned as a percent of total revenues or any underwriting policy improvements in its operations – premiums earned as percent of revenues are currently at 78.42%, while the loan loss ratio is 81.35%. For comparison, these were 80.10% and 78.08% respectively in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Margins

The company’s operating margins after interest fell from 0.39% to -9.32%. In spite of this, the company’s earnings rose, influenced primarily by one-time items, which contributed to an improvement in pretax margins from -2.37% to 3.91%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Kingsway Financial Services, Inc.

Company Profile

Kingsway Financial Services, Inc. operates as a holding company, through its subsidiaries it engages in the property and casualty insurance business. The company operates through two segments: Insurance Underwriting and Insurance Services. The Insurance Underwriting segment provides non-standard automobile and homeowners insurance to individuals. It offers personal automobile insurance to drivers who do not meet the criteria for coverage by standard automobile insurers. The Insurance Services segment includes the following subsidiaries: IWS Acquisition Corp. and Trinity Warranty Solutions LLC. The IWS Acquisition Corp. is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions. The Trinity Warranty Solutions LLC provides warranty products and maintenance support to consumers and businesses in the heating, ventilation, air conditioning and refrigeration industry. Kingsway Financial Services was founded on September 19, 1989 and is headquartered in Toronto, Canada.

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