Kingsway Financial Services, Inc. :KFS-US: Earnings Analysis: Q4, 2016 By the Numbers : March 27, 2017

Kingsway Financial Services, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Kingsway Financial Services, Inc. – Progressive Corporation, Mercury General Corporation, Atlas Financial Holdings, Inc., Allstate Corporation, First Acceptance Corporation and Infinity Property and Casualty Corporation (PGR-US, MCY-US, AFH-US, ALL-US, FAC-US and IPCC-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 46 million, Net Earnings of USD -8.81 million.
  • Year-on-year change in operating cash flow of 80.53% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity – pretax margins improved from -24.82% to -18.81%.

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):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 46 43.93 39.72 36.7 8.42
Revenue Growth (%YOY) 446.64 19.44 4.92 1.61 -80.06
Earnings (mil) -8.81 1.54 -1.64 -1.46 -2.19
Earnings Growth (%YOY) -302.19 290.47 82.5 -285.71 -448.89
Net Margin (%) -19.16 3.5 -4.12 -3.97 -26.04
EPS -0.43 0.06 -0.09 -0.08 -0.12
Return on Equity (%) -63.68 11.69 -14.13 -12.47 -17.83
Return on Assets (%) -7.21 1.81 -2.71 -2.31 -3.3

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 446.64% 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 4.72% and earnings by -672.58% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

KFS-US‘s change in operating cash flow of 80.53% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The fall in the company’s earnings is largely a result of non-operational activity. Actually, the company showed improvements in operating margins after interest and pretax margins. Operating margins after interest widened from -373.48% to -13.25% and pretax margins expanded from -24.82% to -18.81%.

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 which 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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