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What changed in KINGSWAY FINANCIAL SERVICES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KINGSWAY FINANCIAL SERVICES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+258 added−291 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-05)

Top changes in KINGSWAY FINANCIAL SERVICES INC's 2024 10-K

258 paragraphs added · 291 removed · 175 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs an example, our first Searcher, who was hired in May 2020, identified Ravix as a potential acquisition, which the Company closed on in October 2021. The CEO Accelerator focuses on identifying and acquiring privately-held businesses with EBITDA between $1 and $3 million where the owner/operator is looking to transition from day-to-day operating responsibilities.
Biggest changeThe CEO Accelerator focuses on identifying and acquiring privately-held businesses with EBITDA between $1 and $3 million where the owner/operator is looking to transition from day-to-day operating responsibilities. The CEO Accelerator utilizes the proven framework and characteristics of the Search Fund acquisition model and targets industries and companies with pre-defined characteristics.
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 commercial 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.
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 commercial 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.
INVESTMENTS The Company manages its investments to support its liabilities, preserve capital, maintain adequate liquidity and maximize after-tax investment returns within acceptable risks: ● The fixed maturities portfolios are managed by a third-party firm and are comprised predominantly of high-quality fixed maturities with relatively short durations. ● Equity, limited liability and other investments are generally overseen by corporate. ● Limited liability investments, at fair value and investments in private companies are generally overseen by corporate, who engages third-party managers for certain holdings.
INVESTMENTS The Company manages its investments to support its liabilities, preserve capital, maintain adequate liquidity and maximize after-tax investment returns within acceptable risks: ● The fixed maturities portfolios are managed by a third-party firm and are comprised predominantly of high-quality fixed maturities with relatively short durations. ● Equity, limited liability and other investments a re generally overseen by corporate. ● Limited liability investment, at fair value and investments in private companies are generally overseen by corporate, who engages third-party managers for certain holdings.
PWI does operate within a highly competitive environment where product pricing and product options are important. Most of its competitors have a comprehensive menu of products and services to offer the independent and franchise dealers. PWI’s strategy will drive additional competitiveness by adding new products to its existing menu of VSAs and GAP.
PWI does operate within a highly competitive environment where product pricing and product options are important. Most of its competitors have a comprehensive menu of products and services to offer the independent and franchise dealers. PWI’s strategy will drive additional competitiveness by adding new products to its existing menu of VSAs.
In addition to marketing vehicle service agreements, IWS, Geminus and PWI also administer and broker a GAP product through their distribution channels. GAP generally covers a consumer's out-of-pocket amount, related to an automobile loan or lease, if the vehicle is stolen or damaged beyond repair.
In addition to marketing vehicle service agreements, IWS and Geminus also administer and broker a GAP product through their distribution channels. GAP generally covers a consumer's out-of-pocket amount, related to an automobile loan or lease, if the vehicle is stolen or damaged beyond repair.
Penn and Prime focus exclusively on the automotive finance market with its core VSA and related product offerings, while much of its competition is employee based or agent centric. Penn and Prime operate within a highly competitive environment where product pricing and options are important.
Penn and Prime focus exclusively on the automotive finance market with its core VSA and GAP related product offerings, while much of its competition is employee based or agent centric. Penn and Prime operate within a highly competitive environment where product pricing and options are important.
All services are delivered by employees who are located in the United States. Ravix offers its services across four different practices: ● Operational Accounting. Offers services oriented around day-to-day financial stewardship of its clients, such as bookkeeping, accounting, financial reporting and analysis and strategic finance. ● Technical Accounting.
All services are delivered by employees who are located primarily in the United States. Ravix offers its services across four different practices: ● Operational Accounting. Offers services oriented around day-to-day financial stewardship of its clients, such as bookkeeping, accounting, financial reporting and analysis and strategic finance. ● Technical Accounting.
The Company currently has four full-t ime Searchers as of December 31, 2023. The Company intends to maintain this level – and potentially expand it – as business opportunities permit. PRICING AND PRODUCT MANAGEMENT Responsibility for pricing and product management rests with the Company's individual operating subsidiaries in Extended Warranty and Kingsway Search Xcelerator .
The Company currently has four full-t ime Searchers as of December 31, 2024. The Company intends to maintain this level – and potentially expand it – as business opportunities permit. PRICING AND PRODUCT MANAGEMENT Responsibility for pricing and product management rests with the Company's individual operating subsidiaries in Extended Warranty and Kingsway Search Xcelerator .
The average term of a VSA is b etween four and five years. ● Geminus goes to market through its subsidiaries, Penn and Prime. Penn and Prime serve as the administrator on all contracts they originate and its VSAs range from three months to sixty months and/or 3,000 miles to 165,000 miles.
The average term of a VSA is b etween four and five years. ● Geminus goes to market through its subsidiaries, Penn and Prime. Penn and Prime serve as the administrator on all contracts they originate and its VSAs range from three months to sixty months and/or 3,000 miles to 200,000 miles.
Financial information about Kingsway's reportable business segments for the years ended December 31, 2023 and December 31, 2022 is contained in the following sections of this 2023 Annual Report: (i ) Note 22, "Segmented Information," to the Consolidated Financial Statements; and (ii) "Results of Continuing Operations" section of MD&A.
Financial information about Kingsway's reportable business segments for the years ended December 31, 2024 and December 31, 2023 is contained in the following sections of this 2024 Annual Report: (i ) Note 22, "Segmented Information," to the Consolidated Financial Statements; and (ii) "Results of Continuing Operations" section of MD&A.
IWS distributes and markets its product s in 24 states and the District of Columbia. IWS focuses exclusively on the automotive finance market with its core VSA and related product offerings, while much of its competition in the credit union channel has a less targeted product approach.
IWS distributes and markets its product s in 26 states and the District of Columbia. IWS focuses exclusively on the automotive finance market with its core VSA and related product offerings, while much of its competition in the credit union channel has a less targeted product approach.
Healthcare Services SNS primarily relies on word-of-mouth to recruit nurses to help meet the demands of the hospitals and SNS actively market its services through third-party lead generation channels to better meet the hospitals’ clinician demand.
Healthcare Services SNS primarily relies on word-of-mouth and seasoned healthcare recruiters to recruit nurses to help meet the demands of the hospitals, and SNS actively market its services through third-party lead generation channels to better meet the hospitals’ clinician demand.
Vertical Market Software SPI provides software products created exclusively to serve the management needs of all types of shared-ownership properties throughout the United States, Europe, Asia, Mexico and the Caribbean. Marketing, Distribution and Competition No Kingsway Search Xcelerator customer or group of affiliated customers accounts for 10% or m ore of the Company's consolidated revenues.
Vertical Market Software SPI provides software products created exclusively to serve the management needs of all types of shared-ownership properties throughout the United States, Europe, Asia, Mexico and the Caribbean. Marketing, Distribution and Competition No Kingsway Search Xcelerator customer or group of af filiated customers accounts for 10% or m ore of the Company's consolidated revenues.
Penn and Prime solely focuses on the suite of VSAs it offers, which allows the proper attention required for healthy profitability and risk management. PWI markets, sells and administers VSAs to used car buyers in all fifty states, primarily through a network of approved automobile dealer partners.
Penn and Prime solely focuses on the suite of VSA and GAP products it offers, which allows the proper attention required for healthy profitability and risk management. PWI markets, sells and administers VSAs to used car buyers in all fifty states, primarily through a network of approved automobile dealer partners.
("SNS") ● SPI Kingsway Search Xcelerator's r evenue is derived from the provision of various services. Business Services CSuite is a professional services firm that provides experienced chief financial officer and other finance professionals to its clients through a variety of flexible offerings.
("SNS") ● Systems Products International, Inc. ("SPI") Kingsway Search Xcelerator's r evenue is derived from the provision of various services. Business Services CSuite is a professional services firm that provides experienced chief financial officer and other finance professionals to its clients through a variety of flexible offerings.
DDI has been operating for over 10 years and currently has a presence in 42 states. DDI offers its services as follows: ● LTAC. DDI connects to the hospital’s existing installed telemetry system and outsources the telemetry department for the hospital 24/7. ● Inpatient R ehabilitation Hospitals.
DDI has been operating for over 10 years and currently has a presence in 39 states and Puerto Rico. DDI offers its services as follows: ● LTAC. DDI connects to the hospital’s existing installed telemetry system and outsources the telemetry department for the hospital 24/7. ● Inpatient R ehabilitation Hospitals.
Geminus primarily sells and administers vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care Inc. ("Prime"). Penn and Prime distribute these products in 47 and 40 states, respectively, via independent used car dealerships and franchised car dealerships.
Geminus primarily sells and administers vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care Inc. ("Prime"). Penn and Prime distribute these products in 46 and 34 states, respectively, via independent used car dealerships and franchised car dealerships.
IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unio ns in 24 states and the District of Columbia to their members , with customers in all 50 states .
IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unio ns in 26 states and the District of Columbia to their members , with customers in all fifty states .
Healthcare Services SNS provides healthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California. Today, SNS is focused on providing temporary registered nurses to hospitals; however, SNS maintains contracts to provide allied healthcare professionals to hospitals. SNS offers its services across two different practices: ● Travel Staffing.
Healthcare Services SNS provides healthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California. Today, SNS is primarily focused on providing temporary registered nurses and allied healthcare professionals to hospitals. SNS offers its services across two different practices: ● Travel Staffing.
The dealer base is serviced by the Company's employees located throughout the United States in close geographical proximity to the dealers they serve. Penn and Prime distribute and market their products in 47 and 40 states, respectively.
The dealer base is serviced by the Company's employees located throughout the United States in close geographical proximity to the dealers they serve. Penn and Prime distribute and market their products in 46 and 34 states, respectively.
Trinity competes on two important facets: its belief that it provides superior customer service relative to its competitors and its ability, through the support of its insurance company partners, to provide warranty solutions to a wider range of HVAC, standby generator, commercial LED lighting and commercial refrigeration equipment customers than that of its competitors.
Trinity competes on two important facets: its belief that it provides superior customer service relative to its competitors and its ability, through the support of its insurance company partners, to provide warranty solutions to a wider range of HVAC, standby generator, commercial LED lighting and commercial refrigeration equipment customers than that of its competitors. 6 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
KINGSWAY SEARCH XCELERATOR SEGMENT Kingsway Search Xcelerator includes the following subsidiaries of the Company (collectively, “ Kingsway Search Xcelerator ” ), and includes the Company’s unique CEO Accelerator program. ● CSuite Financial Partners, LLC ("CSuite") ● DDI ● Ravix Group, Inc. ("Ravix") ● Secure Nursing Service Inc.
KINGSWAY SEARCH XCELERATOR SEGMENT Kingsway Search Xcelerator includes the following subsidiaries of the Company (collectively, “ Kingsway Search Xcelerator ” ), and includes the Company’s unique CEO Accelerator program. ● CSuite Financial Partners, LLC ("CSuite") ● Digital Diagnostics Imaging, Inc. ("DDI") ● Image Solutions, LLC ("Image Solutions") ● Ravix Group, Inc. ("Ravix") ● Secure Nursing Service Inc.
DDI has primarily grown through word-of-mouth referrals and also actively markets its services through traditional channels and via sponsorship of industry events and conferences. 7 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Vertical Market Software SPI markets its services via industry trade shows and industry conferences.
DDI has primarily grown through word-of-mouth referrals and also actively markets its services through traditional channels and via sponsorship of industry events and conferences. Vertical Market Software SPI markets its services via industry trade shows and industry conferences.
Trinity claims on warranty products are managed by the insurance companies with which Trinity partners. Trinity may, at times, act as a third-party administrator of such claims; however, at no time does Trinity bear the loss of claims on warranty products. 6 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Trinity claims on warranty products are managed by the insurance companies with which Trinity partners. Trinity may, at times, act as a third-party administrator of such claims; however, at no time does Trinity bear the loss of claims on warranty products.
The business models are supported by an internal sales and operations team. PWI markets, sells and administers vehicle service agreements to used car buyers in all fifty states via independent used car and franchise networks of approved automobile and motorcycle dealer partners.
Penn also sells and administers a guaranteed asset protection product ("GAP") in states where Penn is approved. The business models are supported by an internal sales and operations team. PWI markets, sells and administers vehicle service agreements to used car buyers in all fifty states via independent used car and franchise networks of approved automobile and motorcycle dealer partners.
Trinity sells heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercial refrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States.
PWI’s business model is supported by an internal sales and operations team and partners with American Auto Shield ("AAS") in three states with a "white label" agreement. Trinity sells heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercial refrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States.
Instead, Ravix focuses primarily on venture-capital-funded startups and receives most of its new business as a result of business networking activities, referrals from service providers and former clients.
Business Services CSuite and Ravix actively markets their services via sponsorships of industry events and conferences targeted at private equity and venture capital. Ravix and CSuite receives most of their new business as a result of business networking activities, referrals from service providers and former clients.
None of our employees is subject to a collective bargaining agreement and we consider our relationship with our employees to be good. 8 Table of Contents KINGSWAY FINANCIAL SERVICES INC. We believe the skills and experience of our employees are an essential driver of our business and important to our future prospects.
We believe the skills and experience of our employees are an essential driver of our business and important to our future prospects.
Certain, but not all, states regulate the sale of HVAC and equipment warranty contracts. Trinity is licensed as a service contract provider in those states where it is required. HUMAN CAPITAL MANAGEMENT At December 31, 2023, the Company employe d 397 per sonnel supporting its operations, all of which were full-time employees.
Certain, but not all, states regulate the sale of HVAC and equipment warranty contracts. Trinity is licensed as a service contract provider in those states where it is required. Certain, but not all, states regulate nursing registries and supplemental healthcare staffing agencies. SNS is licensed as a nursing registry in those states where it is required.
DDI Acquisition, LLC and DDI, subsidiaries of Kingsway, borrowed a total of $5.6 million, in the form of a term loan, and established a $0.4 million revolver (together, the “DDI Loan”) that was undrawn at close. The DDI Loan has a variable interest rate equal to the Prime Rate plus 0.50%, with a floor of 5.00%.
The closing purchase price was financed with a combination of debt financing provided by Signature Bank and cash on hand. Steel Bridge Acquisition, LLC and Image Solutions, subsidiaries of Kingsway, borrowed a total of $7.75 million, in the form of a term loan, and established a $0.5 million revolver (together, the “Image Solutions Loan”) that was undrawn at close.
All of the dollar amounts in this 2023 Annual Report are expressed in U.S. dollars. GENERAL DEVELOPMENT OF BUSINESS Acquisition of Systems Products International, Inc. On September 7, 2023, the Company acquired 100% of the outstanding equity interests of Systems Products International, Inc. ("SPI").
All of the dollar amounts in this 2024 Annual Report are expressed in U.S. dollars.
DDI, base d in Wall, New Jersey, is a provider of fully managed outsourced cardiac telemetry services. DDI is included in the Kingsway Search Xcelerator segment. The Company acquired DDI for aggregate cash consideration of approximately $11.0 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments.
The Company acquired Image Solutions for aggregate cash consideration of $20.4 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. Further information is containe d in Note 4 , "Acquisitions ," to the Consolidated Financial Statements.
The DDI Loan requires monthly interest payments. Monthly principal payments begin in December 2024, and the term loan matures on October 26, 2029. EXTENDED WARRANTY SEGMENT Extended Warranty includes the following subsidiaries of the Company (collectively, "Extended Warranty"): ● IWS Acquisition Corporation ("IWS") ● Geminus Holding Company, Inc. ("Geminus") ● PWI Holdings, Inc.
EXTENDED WARRANTY SEGMENT Extended Warranty includes the following subsidiaries of the Company (collectively, "Extended Warranty"): ● IWS Acquisition Corporation ("IWS") ● Geminus Holding Company, Inc. ("Geminus") ● PWI Holdings, Inc. ("PWI") ● Trinity Warranty Solutions LLC ("Trinity") 4 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
IWS, Geminus and PWI earn a commission when a consumer purchases a GAP certificate but do not take on any insurance risk. Home PWSC had two insured home warranty products: ● The primary product was designed for new home construction companies, and the warranty was issued to new home buyers.
IWS earns a commission when a consumer purchases a GAP certificate but does not take on any insurance risk. HVAC Trinity sells HVAC, standby generator, commercial LED lighting and commercial refrigeration warranty products.
As discussed in Note 5, "Disposal and Discontinued Operations" to the Consolidated Financial Statements , the Company disposed of PWSC on July 29, 2022. The earnings of PWSC are included in the consolidated statements of operations and the segment disclosures through the disposal date.
Further information is containe d in Note 5 , "Disposal and Discontinued Operations," to the Consolidated Financial Statements.
Removed
Prior to the fourth quarter of 2022, the Company conducted its business through a third reportable segment, Leased Real Estate, which included the following subsidiaries of the Company: CMC Industries, Inc.
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FILER STATUS On the last business day of the second quarter in 2023, the aggregate market value of the Company’s shares of common stock held by non-affiliate stockholders was between $75 million and $250 million and the Company’s revenue for the year ended December 31, 2023 was more than $100 million.
Removed
("CMC") and VA Lafayette, LLC ("VA Lafayette"): ● CMC owned, through an indirect wholly owned subsidiary (the "Property Owner"), a parcel of real property consisting of approximately 192 acres located in the State of Texas (the "Real Property"), which was subject to a long-term triple net lease agreement. The Real Property was also subject to two mortgages.
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As a result, the Company was deemed to be an accelerated filer as defined in Rule 12b-2 under the Exchange Act as of January 1, 2024.
Removed
On December 22, 2022, the Company announced a definitive agreement for the sale of the Real Property, for gross cash proceeds of $44.5 million and the assumption of the two mortgages.
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Due to the change in filer status, the Company is no longer exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, and the Company’s independent registered public accounting firm has evaluated and reported on the effectiveness of internal control over financial reporting at December 31, 2024.
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On December 29, 2022, the sale was completed. ● VA Lafayette owns real property consisting of approximately 6.5 acres and a 29,224 square foot single-tenant medical office building located in the State of Louisiana (the "LA Real Property").
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GENERAL DEVELOPMENT OF BUSINESS Acquisition of Image Solutions, LLC On September 26, 2024, the Company acquired 100% of the outstanding membership interests of Image Solutions, LLC ("Image Solutions"). Image Solutions, based in Fletcher, North Carolina, is an information technology managed services provider. Image Solutions is included in the Kingsway Search Xcelerator segment.
Removed
The LA Real Property serves as a medical and dental clinic for the Department of Veteran Affairs and is subject to a long-term lease. The LA Real Property is also subject to a mortgage (the "LA Mortgage").
Added
The Image Solutions Loan has a variable interest rate equal to the greater of the Prime Rate plus 0.50%, or 7.25%. The Image Solutions Loan requires monthly payments of principal and interest. The revolver matures on September 26, 2026 and the term loan matures on September 26, 2030.
Removed
During the fourth quarter of 2022, the Company began executing a plan to sell VA Lafayette, and as a result, VA Lafayette is reported as held for sale at December 31, 2022 and December 31, 2023 . ● Both CMC and VA Lafayette have been classified as discontinued operations and the results of their operations are reported separately for all periods presented.
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Sale of VA Lafayette, LLC On August 16, 2024, the Company completed the sale of its subsidiary, VA Lafayette, LLC ("VA Lafayette"), to an entity associated with a current holder of the Company's Class B Preferred Stock (the sale occurred prior to negotiations regarding the issuance of the Class B Preferred Stock).
Removed
All segmented information has been restated to exclude the Leased Real Estate segment for all periods presented.
Added
VA Lafayette owned a single asset, real estate property, which was subject to a mortgage (the "LA Mortgage").
Removed
SPI, based in Miami, Florida, is a vertical market software company, created exclusively to serve the management needs of all types of shared-ownership properties. SPI is included in the Kingsway Search Xcelerator segment. The Company acquired SPI for aggregate cash consideration of $2.8 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments.
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The purchase price paid by the purchaser at the closing consisted of $1.3 million in cash plus the assumption of the unpaid principal balance as of the closing of the LA Mortgage of approximately $11.8 million, netting cash proceeds of $1.1 million to Kingsway after expenses.
Removed
The closing purchase price was paid with cash on hand. Further information is containe d in Note 4 , "Acquisitions ," to the Consolidated Financial Statements. Acquisition of Digital Diagnostics Imaging, Inc. On October 26, 2023, the Company acquired 100% of the outstanding equity interests of Digital Diagnostics Imaging, Inc. ("DDI").
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Private Placement On September 24, 2024, the Company closed on a private placement for aggregate proceeds totaling $8.3 million, resulting from the sale and issuance of 330,000 shares of a new series of Class B Preferred Stock, par value $0.01 per share ("Class B Preferred Stock") for a purchase price of $25.00 per share.
Removed
Further information is containe d in Note 4 , "Acquisitions ," to the Consolidated Financial Statements. The closing purchase price was financed with a combination of debt financing provided by Signature Bank and cash on hand.
Added
The Class B Preferred Stock ranks senior to the Company's common shares. Each share of Class B Preferred Stock is convertible into 2.6316 common shares at any time at the option of the holder prior to September 24, 2031.
Removed
("PWI") ● Professional Warranty Service Corporation ("PWSC"), up until its sale on July 29, 2022 ● Trinity Warranty Solutions LLC ("Trinity") 4 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Added
Subject to certain adjustments set forth in the certificate of designations for the Class B Preferred Stock, the maximum number of common shares issuable upon conversion of the Class B Preferred Stock is 868,421 common shares. Further information is containe d in Note 19, " Redeemable Class B Preferred Stock," to the Consolidated Financial Statements.
Removed
PWI’s business model is supported by an internal sales and operations team and partners with American Auto Shield ("AAS") in three states with a "white label" agreement. PWI also sells and administers a guaranteed asset protection product ("GAP"), under the Penn name, in states where Penn is approved.
Added
Image Solutions provides comprehensive information technology ("IT") managed services primarily in North Carolina, Kansas, Georgia, Kentucky and Tennessee. Image Solutions' services encompass a full suite of IT solutions including: ● Equipment Sales. Supplying cutting-edge technology and hardware tailored to the customer's business needs. ● Service and Maintenance.
Removed
PWSC sold home warranty products and provided administration services to homebuilders and homeowners across the United States. PWSC distributed its products and services through an in-house sales team and through insurance brokers and insurance carriers throughout all states except Alaska and Louisiana.
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Working to keep the customer's IT infrastructure operating at peak performance with proactive support and timely repairs. ● Helpdesk Support. Delivering responsive, expert assistance designed to resolve the customer's IT challenges quickly and efficiently. 7 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
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The warranty coverage was provided nationwide by a single, A+ rated insurance carrier. ● The second insured warranty product was designed for existing homes and covered major systems and appliances. PWSC designed the product specifications, but the administration was conducted by an independent third party. PWSC also had an uninsured warranty administration services program.
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Image Solutions actively promotes its services by partnering with local businesses, sponsoring regional events, and participating in industry-focused conferences. These efforts are strategically aimed at building relationships with small and medium-sized enterprises seeking reliable technology solutions. Additionally, competition from both regional and national managed service providers poses a constant challenge.
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This program enabled construction defects to be efficiently and amicably resolved by the homebuilder through mediation and mandatory binding arbitration to avoid costly litigation. HVAC Trinity sells HVAC, standby generator, commercial LED lighting and commercial refrigeration warranty products.
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Larger competitors may have access to broader resources and pricing advantages, while smaller providers may target niche markets, impacting Image Solutions' ability to expand its client base.
Removed
Business Services CSuite actively markets its services via sponsorship of industry events and conferences typically targeted at private equity and related service providers. Ravix does not actively market its services through traditional channels.
Added
As an example, our first Searcher, who was hired in May 2020, identified Ravix as a potential acquisition, which the Company closed on in October 2021. 8 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Removed
The CEO Accelerator utilizes the proven framework and characteristics of the Search Fund acquisition model and targets industries and companies with pre-defined characteristics.
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HUMAN CAPITAL MANAGEMENT At December 31, 2024, the Company employe d 433 per sonnel supporting its operations, all of which were full-time employees. None of our employees is subject to a collective bargaining agreement, and we consider our relationship with our employees to be good. 9 Table of Contents KINGSWAY FINANCIAL SERVICES INC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

31 edited+6 added−11 removed91 unchanged
Biggest changeWorldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which has been exacerbated by the COVID-19 pandemic, resulting in heightened credit risk, reduced valuation of investments and decreased economic activity. Moreover, many companies have experienced reduced liquidity and uncertainty as to their ability to raise capital during such periods of market disruption and volatility.
Biggest changeThe COVID-19 pandemic has led to, and a future adverse change in market condition could lead to, instability in the global credit markets, including heightened credit risk, reduced valuation of investments and decreased economic activity.
Our business, financial condition and results of operations could be materially and adversely affected by changes in international and national economic and industry conditions . The COVID-19 pandemic has created significant disruption and uncertainty in the global economy and has negatively impacted our business and results of operations and financial condition.
Our business, financial condition and results of operations could be materially and adversely affected by changes in international and national economic and industry conditions . The COVID-19 pandemic created significant disruption and uncertainty in the global economy and negatively impacted our business and results of operations and financial condition.
Over the past several years, we have restructured our operating insurance subsidiaries, including exiting states and lines of business, placing subsidiaries into voluntary run-off, terminating managing general agent relationships, hiring a new management team, selling Mendota and CMC and acquiring PWI, Ravix, CSuite, SNS, SPI and DDI with the objective of focusing on our Extended Warranty and Kingsway Search Xcelerator segments, creating a more effective and efficient operating structure and focusing on profitability.
Over the past several years, we have restructured our operating insurance subsidiaries, including exiting states and lines of business, placing subsidiaries into voluntary run-off, terminating managing general agent relationships, hiring a new management team, selling Mendota and CMC and acquiring PWI, Ravix, CSuite, SNS, SPI, DDI and Image Solutions with the objective of focusing on our Extended Warranty and Kingsway Search Xcelerator segments, creating a more effective and efficient operating structure and focusing on profitability.
Change management may result in disruptions to the operations of the business or may cause employees to act in a manner that is inconsistent with our objectives. Any of these events could negatively affect our performance. We may not always achieve the expected cost savings and other benefits of our initiatives. 12 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Change management may result in disruptions to the operations of the business or may cause employees to act in a manner that is inconsistent with our objectives. Any of these events could negatively affect our performance. We may not always achieve the expected cost savings and other benefits of our initiatives. 13 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
As of December 31, 2023, we had $15.0 million principal value of outstanding recourse subordinated debt in the form of trust preferred securities, with a redemption date of May 2033. Additionally, we incurred indebtedness in connection with our acquisitions of PWI Holdings, Inc. and its various subsidiaries (collectively, "PWI") on December 1, 2020, Ravix Financial, Inc.
As of December 31, 2024, we had $15.0 million principal value of outstanding recourse subordinated debt in the form of trust preferred securities, with a redemption date of May 2033. Additionally, we incurred indebtedness in connection with our acquisitions of PWI Holdings, Inc. and its various subsidiaries (collectively, "PWI") on December 1, 2020, Ravix Financial, Inc.
The consequence of this limitation would be the potential loss of a significant future cash flow benefit because we would no longer be able to substantially offset future taxable income with U.S. NOLs. There can be no assurance that such ownership change will not occur in the future. 11 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The consequence of this limitation would be the potential loss of a significant future cash flow benefit because we would no longer be able to substantially offset future taxable income with U.S. NOLs. There can be no assurance that such ownership change will not occur in the future. 12 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
As a result, increases in CME Term SOFR, SOFR and the Prime Rate would increase the cost of servicing our debt and could adversely affect our results of operations. Each one hundred basis point increase in CME Term SOFR, SOFR or the Prime Rate would result in an approx imately $0.4 million in crease in our annual interest expense.
As a result, increases in CME Term SOFR, SOFR and the Prime Rate would increase the cost of servicing our debt and could adversely affect our results of operations. Each one hundred basis point increase in CME Term SOFR, SOFR or the Prime Rate would result in an approx imately $0.6 million in crease in our annual interest expense.
The covenants under our debt agreements could limit our ability to plan for or react to market conditions or to meet our capital needs. No assurances can be given that we will be able to maintain compliance with these covenants. 9 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The covenants under our debt agreements could limit our ability to plan for or react to market conditions or to meet our capital needs. No assurances can be given that we will be able to maintain compliance with these covenants. 10 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Any of these circumstances could adversely affect our reputation, business, financial condition, results of operation and cash flows. 14 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Our success depends on our ability to price accurately the risks we underwrite. Our results of operation or financial condition depend on our ability to price accurately for a wide variety of risks.
Any of these circumstances could adversely affect our reputation, business, financial condition, results of operation and cash flows. 15 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Our success depends on our ability to price accurately the risks we underwrite. Our results of operation or financial condition depend on our ability to price accurately for a wide variety of risks.
Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” Furthermore, if the conflict between Russia and Ukraine continues for a long period of time, or if other countries, including the U.S., become further involved in the conflict, we could face material adverse effects on our business, financial condition, results of operations and/or liquidity.
Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” Furthermore, if the conflict between Russia and Ukraine continues for a long period of time, or if other countries, including the U.S., become further involved in the conflict and any other military conflicts, we could face material adverse effects on our business, financial condition, results of operations and/or liquidity.
Investors are advised to consider these factors along with the other information included in this 2023 Annual Report and to consult any further disclosures Kingsway makes in its filings with the SEC.
Investors are advised to consider these factors along with the other information included in this 2024 Annual Report and to consult any further disclosures Kingsway makes in its filings with the SEC.
Additionally, actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, high inflation and trade protection measures and creditworthiness of our customers, may negatively affect consumer preferences, perceptions, spending patterns or demographic trends, any of which could adversely affect our business, financial condition, results of operations and/or liquidity.
Additionally, actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, high inflation, changing interest rates and actual or threatened trade protection measures and creditworthiness of our customers, may negatively affect consumer preferences, perceptions, spending patterns or demographic trends, any of which could adversely affect our business, financial condition, results of operations and/or liquidity.
These effects, individually or in the aggregate, will continue to adversely impact our businesses, financial condition, operating results and cash flows, and such adverse impacts may be material.
These effects, individually or in the aggregate, may adversely impact our businesses, financial condition, operating results and cash flows, and such adverse impacts may be material.
These economic conditions make it more difficult for us to accurately forecast and plan our future business activities. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from U.S. and European leaders. These events may escalate and have created increasingly volatile global economic conditions.
Any such economic, business, financial or political conditions may make it more difficult for us to accurately forecast and plan our future business activities. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from U.S. and European leaders. These events may escalate and have created increasingly volatile global economic conditions.
From 2020 to 2023, the Company made reimbursement payments to Aegis totaling $1.5 million in connection with the Settlement Agreement. The timing and severity of our future payments pursuant to this Settlement Agreement are not reasonably determinable.
From 2020 to 2024, the Company made reimbursement payments to Aegis totaling $1.7 million in connection with the Settlement Agreement. The timing and severity of our future payments pursuant to this Settlement Agreement are not reasonably determinable.
As of December 31, 2023, our investments includ ed $36.5 million o f fixed maturities, at fair value. General economic conditions can adversely affect the markets for interest rate-sensitive instruments, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the fair value of fixed maturities.
As of December 31, 2024, our investments includ ed $37.0 million o f fixed maturities, at fair value. General economic conditions can adversely affect the markets for interest rate-sensitive instruments, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the fair value of fixed maturities.
("Ravix") on October 1, 2021, CSuite Financial Partners, LLC ("CSuite") on November 1, 2022, Secure Nursing Service Inc. ("SNS") on November 18, 2022 and Digital Diagnostics Inc. ("DDI") on October 26, 2023.
("Ravix") on October 1, 2021, CSuite Financial Partners, LLC ("CSuite") on November 1, 2022, Secure Nursing Service Inc. ("SNS") on November 18, 2022, Digital Diagnostics Inc. ("DDI") on October 26, 2023 and Image Solutions, LLC on September 26, 2024.
The value of collateral could fall below the levels required under these agreements putting the subsidiary or subsidiaries in breach of the agreements which could expose us to damages or otherwise adversely impact our business, financial condition, operating results or cash flows. 10 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The value of collateral could fall below the levels required under these agreements putting the subsidiary or subsidiaries in breach of the agreements which could expose us to damages or otherwise adversely impact our business, financial condition, operating results or cash flows.
Our outstanding recourse subordinate debt as of December 31, 2023 of $15.0 million principal value bears interest directly related to CME Term SOFR and our outstanding acquisition financing of $31.3 million related to the acquisitions of PWI, Ravix, CSuite, SNS and DDI bears interest directly related to either SOFR or the Prime Rate.
Our outstanding recourse subordinate debt as of December 31, 2024 of $15.0 million principal value bears interest directly related to CME Term SOFR and our outstanding acquisition financing of $44.6 million related to the acquisitions of PWI, Ravix, CSuite, SNS, DDI and Image Solutions bears interest directly related to either SOFR or the Prime Rate.
As of as of December 31, 2023, we ha ve $31.3 million principal value of such acquisition financing outstanding; however, such acquisition financing is non-recourse to other Kingsway entities.
As of December 31, 2024, we ha ve $44.6 million principal value of such acquisition financing outstanding; however, such acquisition financing is non-recourse to other Kingsway entities.
There can be no assurance that, if and when we generate taxable income in the future from operations or the sale of assets or businesses, we will generate such taxable income before our U.S. NOLs expire. We have generated U.S. NOLs, but our ability to preserve and use these U.S. NOLs could be limited or impaired by future ownership changes.
Also, almost all of our U.S. NOLs have expiration dates. There can be no assurance that, if and when we generate taxable income in the future from operations or the sale of assets or businesses, we will generate such taxable income before our U.S. NOLs expire. We have generated U.S. NOLs, but our ability to preserve and use these U.S.
As of December 31, 2023, our investments also included$0.1 million of equity investments, $0.8 million of limited liability investments, $3.5 million of limited liability investments, at fair value and $0.9 million of investments in private companies, at adjusted cost . The se investments are less liquid than fixed maturities.
As of December 31, 2024, our investments also included $0.7 million of limited liability investments, $2.9 million of limited liability investment, at fair value and $0.7 million of investments in private companies, at adjusted cost . The se investments are less liquid than fixed maturities.
Our ability to utilize the U.S. NOLs after an "ownership change" is subject to the rules of Section 382 of the U.S. Internal Revenue Code of 1986, as amended ("Section 382").
NOLs could be limited or impaired by future ownership changes. Our ability to utilize the U.S. NOLs after an "ownership change" is subject to the rules of Section 382 of the U.S. Internal Revenue Code of 1986, as amended ("Section 382").
In addition to adverse United States domestic and global macroeconomic effects, including the adverse impacts on various industries' supply chains and automobile sales, which has decreased, and may continue to decrease, consumer demand for our products and services, reduce our ability to access capital, and otherwise adversely impact the operation of our businesses, the COVID-19 pandemic has caused, and will continue to cause, substantial disruption to our employees, distribution channels, investors, tenants, and customers through self-isolation, travel limitations, business restrictions, and other means, all of which has resulted in declines in sales.
Pandemics, including the emergence of new COVID-19 variants, may lead to adverse United States domestic and global macroeconomic effects, including adverse impacts on various industries' supply chains and automobile sales, consumer demand for our products and services, our ability to access capital, and may otherwise adversely impact the operation of our businesses, cause substantial disruption to our employees, distribution channels, investors, tenants, and customers through self-isolation, travel limitations, business restrictions, and/or other means.
Although we have remediated material weaknesses previously identified and are actively engaged in developing and implementing remediation plans as described Item 9A, Controls and Procedures, of this 2023 Annual Report, but we can provide no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future and that such material weaknesses, if identified, will not result in material misstatements in our consolidated financial statements STRATEGIC RISK The achievement of our strategic objectives is highly dependent on effective change management.
Although we have remediated material weaknesses previously identified, we can provide no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future and that such material weaknesses, if identified, will not result in material misstatements in our consolidated financial statements STRATEGIC RISK The achievement of our strategic objectives is highly dependent on effective change management.
If financing is available, it may only be available at an unattractive cost of capital, which would decrease our profitability or result in our inability to consummate such acquisitions. There can be no assurance that market conditions will not deteriorate in the future. Financial disruption or a prolonged economic downturn could materially and adversely affect our business.
If financing is available, it may only be available at an unattractive cost of capital, which would decrease our profitability or result in our inability to consummate such acquisitions. There can be no assurance that market conditions will not deteriorate in the future. 11 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
We have generated net operating loss carryforwards for U.S. income tax purposes, but our ability to use these net operating losses could be limited by our inability to generate future taxable income. Our U.S. businesses have generated consolidated net operating loss carryforwards ("U.S.
We have generated net operating loss carryforwards for U.S. income tax purposes, but our ability to use these net operating losses could be limited by our inability to generate future taxable income. Our U.S. businesses have generated consolidated net operating loss carryforwards ("U.S. NOLs") for U.S. federal income tax purposes of approximately $622.3 million as o f December 31, 2024.
There can be no assurance that we will generate the taxable income in the future necessary to utilize these U.S. NOLs and realize the positive cash flow benefit. Also, almost all of our U.S. NOLs have expiration dates.
These U.S. NOLs can be available to reduce income taxes that might otherwise be incurred on future U.S. taxable income and would have a positive effect on our cash flow. There can be no assurance that we will generate the taxable income in the future necessary to utilize these U.S. NOLs and realize the positive cash flow benefit.
We market and distribute our warranty products and equipment breakdown and maintenance support services through a limited number of customers and clients across the United States. Loss of all or a substantial portion of our existing customers and clients could have a material adverse effect on our business, results of operations or financial condition.
We market and distribute our warranty products and equipment breakdown and maintenance support services through a limited number of customers and clients across the United States.
Depending on market conditions going forward, we could incur substantial realized and unrealized losses in future periods, which could have an adverse effect on our results of operations or financial condition. Certain trust accounts for the benefit of related companies and third parties have been established with collateral on deposit under the terms and conditions of the relevant trust agreements.
Depending on market conditions going forward, we could incur substantial realized and unrealized losses in future periods, which could have an adverse effect on our results of operations or financial condition. These market conditions may affect the Company's ability to access debt and equity capital markets.
A difficult economy generally could materially adversely affect the credit, investment and financial markets which, in turn, could materially adversely affect our business, results of operations or financial condition. An adverse change in market conditions, including changes caused by the COVID-19 pandemic, leading to instability in the global credit markets presents additional risks and uncertainties for our business.
Financial disruption or a prolonged economic downturn could materially and adversely affect the credit, investment and financial markets which, in turn, could materially adversely affect our business, results of operations or financial condition .
Removed
We continue to take steps to assess the effects, and mitigate the adverse consequences to our businesses, of the COVID-19 pandemic; however, though the magnitude of the impact continues to develop and change as new variants of COVID-19 emerge, our businesses have been and will continue to be adversely impacted by the outbreak of COVID-19.
Added
Additionally, certain trust accounts for the benefit of related companies and third parties have been established with collateral on deposit under the terms and conditions of the relevant trust agreements.
Removed
We are subject to macro-economic fluctuations in the U.S. and worldwide economy. Concerns about consumer and investor confidence, volatile corporate profits and reduced capital spending, international conflicts, terrorist and military activity, civil unrest and pandemic illness could reduce customer orders or cause customer order cancellations.
Added
We have outstanding preferred stock with rights senior to our common stock, and may issue additional preferred stock in the future. Our Certificate of Incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share, without stockholder approval and on terms established by our board of directors.
Removed
In the event that these conditions recur or result in a prolonged economic downturn, our results of operations, financial position and/or liquidity could be materially and adversely affected. These market conditions may affect the Company's ability to access debt and equity capital markets.
Added
We have outstanding shares of Class B Preferred Stock which have, and we may issue additional shares of preferred stock in the future which have, rights and preferences that are senior to the rights of our common stock.
Removed
NOLs") for U.S. federal income tax purposes of approximate ly $623.1 million as o f December 31, 2023. These U.S. NOLs can be available to reduce income taxes that might otherwise be incurred on future U.S. taxable income and would have a positive effect on our cash flow.
Added
Loss of all or a substantial portion of our existing customers and clients could have a material adverse effect on our business, results of operations or financial condition. 14 Table of Contents KINGSWAY FINANCIAL SERVICES INC. CSuite ’ s focus on serving private equity backed businesses creates exposure to general mergers and acquisitions ("M&A") activity.
Removed
As described in Item 9A, Controls and Procedures, of this 2023 Annual Report, we have identified the existence of material weaknesses in internal control over financial reporting related to the accounting for debt at fair value and the presentation of the repurchase of its subordinated debt in the statement of cash flows.
Added
Image Solutions may be unable to recruit and retain enough quality IT professionals to meet the demand. Difficulties in finding and retaining skilled talent in the IT and managed services sector remains a critical risk.
Removed
We have reclassified certain assets and discontinued a portion of our operations which could adversely affect our business and operations.
Added
The demand for qualified professionals often outpaces supply, particularly in competitive markets, which could hinder Image Solutions’ ability to scale its operations or maintain service quality. This could significantly and adversely impact Image Solutions' growth trajectory, operational performance, and financial outcomes.
Removed
As discussed in Note 5, "Disposal and Discontinued Operations" to our Consolidated Financial Statements, all operations related to CMC and VA Lafayette, which serves as a medical and dental clinic for the Department of Veteran Affairs, are included as discontinued operations.
Removed
In the future, it may be necessary to write-off charges and other costs or incur additional expenses in connection with our discontinued operations, which could have a material adverse effect on our business, results of operations or financial condition. 13 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Removed
Additionally, as of December 31, 2022 and December 31, 2023, we have classified VA Lafayette as an asset “held for sale”.
Removed
We can provide no assurances that we will successfully sell VA Lafayette, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the assets, which could have a material adverse effect on our business, results of operations or financial condition.
Removed
Additionally, any decisions made regarding our deployment or use of any sales proceeds we receive in any sale involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term stockholder value. CSuite ’ s focus on serving private equity backed businesses creates exposure to general mergers and acquisitions ("M&A") activity.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed10 unchanged
Biggest changeIt is the responsibility of each subsidiary to communicate any items required by the IT policy to the parent company. 15 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Biggest changeIt is the responsibility of each subsidiary to communicate any items required by the IT policy to the parent company. 16 Table of Contents KINGSWAY FINANCIAL SERVICES INC.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed0 unchanged
Biggest changeItem 2. Properties Leased Properties Extended Warranty leases facilities with an aggregate square footage of approximately 28,035 at five l ocations in three states. The latest expiration date of the existing leases is in January 2029. Kingsway Search Xcelerator leases facilities with an aggregate square footage of approxim ately 6,499 at three locations in two states.
Biggest changeItem 2. Properties Leased Properties Extended Warranty leases facilities with an aggregate square footage of approximately 22,936 at five l ocations in three states. The latest expiration date of the existing leases is in March 2032. Kingsway Search Xcelerator leases facilities with an aggregate square footage of approxim ately 11,717 at five loca tions in four states.
The latest expiration date of the existing leases is in January 2027. The Company leases a facility for its corporate office with an aggregate square footage of approximately 3,219 a t one location in one state. The expiration date of the existing lease is in February 2028. The properties described above are in good condition.
The latest expiration date of the existing leases is in May 2029. The Company leases a facility for its corporate office with an aggregate square footage of approximately 3,219 a t one location in one state. The expiration date of the existing lease is in February 2028. The properties described above are in good condition.
Removed
We consider our office facilities suitable and adequate for our current levels of operations. Owned Properties The LA Real Property is subject to a long-term lease agreement and is currently held for sale. The LA Real Property consists of approximately 6.5 acres and contains a 29,224 square foot single-tenant medical office building.
Added
We consider our office facilities suitable and adequate for our current levels of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+8 added−3 removed2 unchanged
Biggest changeNYSE High - US$ Low - US$ 2023 Quarter 4 $ 8.61 $ 6.46 Quarter 3 9.01 7.55 Quarter 2 9.16 8.09 Quarter 1 10.27 7.85 2022 Quarter 4 $ 8.08 $ 5.88 Quarter 3 7.81 5.69 Quarter 2 5.70 5.15 Quarter 1 5.60 5.08 Shareholders of Record As of March 4, 2024 the closing sales price of our common shares as reported by the NYSE was $9.25 per share.
Biggest changeNYSE High - US$ Low - US$ 2024 Quarter 4 $ 9.55 $ 8.17 Quarter 3 8.78 7.69 Quarter 2 9.29 7.86 Quarter 1 9.34 8.01 2023 Quarter 4 $ 8.61 $ 6.46 Quarter 3 9.01 7.55 Quarter 2 9.16 8.09 Quarter 1 10.27 7.85 Shareholders of Record As of March 14, 2025 th e closing sales price of our common shares as reported by the NYSE was $7.29 per share.
Securities Authorized for Issuance under Equity Compensation Plans The information required related to securities authorized for issuance under equity compensation plans is incorporated herein by reference to the Proxy Statement for our 2023 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2023.
Securities Authorized for Issuance under Equity Compensation Plans The information required related to securities authorized for issuance under equity compensation plans is incorporated herein by reference to the Proxy Statement for our 2024 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2024.
The number of shareholders of record includes one single shareholder, Cede & Co., for all of the shares held by our shareholders in individual brokerage accounts maintained at banks, brokers and institutions. 16 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Dividends The Company has not declared a dividend since the first quarter of 2009.
The number of shareholders of record includes one single shareholder, Cede & Co., for all of the shares held by our shareholders in individual brokerage accounts maintained at banks, brokers and institutions. 17 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Dividends The Company has not declared a dividend on its common shares since the first quarter of 2009.
Issuer Purchases of Equity Securities On March 21, 2023, the Company's Board of Directors approved a security repurchase program under which the Company is authorized to repurchase up to $10.0 million of its currently issued and outstanding securities through March 22, 202 4. See Note 20 ," Shareholders' Equity ," fo r further discussion of the share repurchase program.
Issuer Purchases of Equity Securities On March 21, 2023, the Company's Board of Directors approved a security repurchase program under which the Company is authorized to repurchase up to $10.0 million of its currently issued and outstanding securities through March 22, 202 4.
As of March 5, 2024 , we had 28,121,271 common shares issued and outstanding. As of March 5, 2024 , th ere we re 10 shareholders of r ecord of our common stock.
As of March 17, 2025 , we had 27,537,151 common shares issued and outstanding. As of March 17, 2025 , th ere we r e 10 shareholders of r ecord of our common stock.
Removed
Recent Sales of Unregistered Securities During the year ended December 31, 2023, we did not have any unregistered sales of our equity securities.
Added
Recent Sales of Unregistered Securities During the year ended December 31, 2024 and through the date of this 2024 Annual Report, the Company issued equity securities that were not registered under the Securities Act of 1933, as amended (the "Securities Act"), as described below. These transactions did not involve any underwriters, underwriting discounts or commissions, or any public offering.
Removed
The following table provides information about our repurchases of our securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended December 31, 2023.
Added
The transactions described below were exempt from the registration requirements of the Securities Act either under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder. All recipients had adequate access, through their relationships with the Company, to information about the Company.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) October 1 - 31, 2023 137,231 $ 7.27 137,231 $ 4,221 November 1 - 30, 2023 143,800 $ 7.45 143,800 $ 3,150 December 1- 31, 2023 42,000 $ 7.55 42,000 $ 2,833 Total 323,031 $ 7.38 323,031 During the quarter ended December 31, 2023, all repurchases of our securities were common stock.
Added
On September 24, 2024, the Company entered into certain Subscription Agreements pursuant to which the Company issued and sold in a private placement to accredited investors in the aggregate 330,000 shares of a newly created class of preferred stock designated Class B Preferred Stock, with a liquidation preference of $25.00 per share ("Class B Preferred Stock"), for aggregate proceeds of $8.3 million.
Added
The Company's Chief Executive Officer and President, certain members of the Company's Board of Directors, members of the KSX Advisory Board and another related party invested a total of $5.2 million in the Class B Preferred Stock private placement transaction.
Added
On February 12 through February 24, 2025, the Company entered into certain Subscription Agreements pursuant to which the Company issued and sold in a private placement to accredited investors in the aggregate 240,000 shares of a newly created class of preferred stock designated Class C Preferred Stock, with a liquidation preference of $25.00 per share ("Class C Preferred Stock"), for aggregate proceeds of $6.0 million.
Added
Certain members of the Company's Board of Directors and another related party invested a total of $3.7 million in the Class C Preferred Stock private placement transaction.
Added
On March 22, 2024, the Company entered into a one year extension of its existing share repurchase program. As amended, the share repurchase program will now expire on March 21, 2025; however, all the authorized amount was fully utilized as of the end of January 2025.
Added
See Note 20 ," Shareholders' Equity ," fo r further discussion of the share repurchase program. There were no repurchases by us of our securities during the quarter ended December 31, 2024. Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

101 edited+51 added−84 removed76 unchanged
Biggest changeRESULTS OF CONTINUING OPERATIONS A reconciliation of total segment operating income to net income for the years ended December 31, 2023 and December 31, 2022 is presented in Table 1 below: Table 1 Segment Operating Income for the Years Ended December 31, 2023 and December 31, 2022 For the years ended December 31 (in thousands of dollars) 2023 2022 Change Segment operating income Extended Warranty 6,983 9,879 (2,896 ) Kingsway Search Xcelerator 5,252 3,548 1,704 Total segment operating income 12,235 13,427 (1,192 ) Net investment income 1,804 2,305 (501 ) Net realized gains 761 1,209 (448 ) Net gain (loss) on equity investments 3,397 (26 ) 3,423 Gain (loss) on change in fair value of limited liability investments, at fair value 78 (1,754 ) 1,832 Net change in unrealized gain on private company investments 63 — 63 Gain on change in fair value of real estate investments — 1,488 (1,488 ) Impairment losses (229 ) — (229 ) (Loss) gain on change in fair value of derivative asset option contracts (1,366 ) 16,730 (18,096 ) Interest expense (6,250 ) (8,092 ) 1,842 Other revenue and expenses not allocated to segments, net (12,823 ) (17,206 ) 4,383 Amortization of intangible assets (5,909 ) (6,133 ) 224 Loss on change in fair value of debt (68 ) (4,908 ) 4,840 Gain on disposal of subsidiary 342 37,917 (37,575 ) Gain on extinguishment of debt 31,616 — 31,616 Income from continuing operations before income tax (benefit) expense 23,651 34,957 (11,306 ) Income tax (benefit) expense (1,899 ) 4,825 (6,724 ) Income from continuing operations 25,550 30,132 (4,582 ) Income (loss) from discontinued operations, net of taxes 450 (12,805 ) 13,255 Loss on disposal of discontinued operations, net of taxes (1,988 ) (2,262 ) 274 Net income 24,012 15,065 8,947 Segment Operating Income, Income from Continuing Operations and Ne t I ncome For the year ended December 31, 2023, we reported segment operating income o f $12.2 million compared to $13.4 million for the year ended December 31, 2022.
Biggest changeRESULTS OF CONTINUING OPERATIONS A reconciliation of total segment operating income to net (loss) income for the years ended December 31, 2024 and December 31, 2023 is presented in Table 1 below: Table 1 Segment Operating Income for the Years Ended December 31, 2024 and December 31, 2023 For the years ended December 31 (in thousands of dollars) 2024 2023 Change Segment operating income Extended Warranty 5,942 6,983 (1,041 ) Kingsway Search Xcelerator 5,662 5,252 410 Total segment operating income 11,604 12,235 (631 ) Net investment income 1,432 1,804 (372 ) Net realized gains 1,557 761 796 Net (loss) gain on equity investments (3 ) 3,397 (3,400 ) Gain on change in fair value of limited liability investments, at fair value 342 78 264 Net change in unrealized gain on private company investments — 63 (63 ) Impairment losses on investments — (229 ) 229 Loss on change in fair value of derivative asset option contracts — (1,366 ) 1,366 Interest expense (4,790 ) (6,250 ) 1,460 General and administrative expenses and other revenue not allocated to segments, net (8,892 ) (12,823 ) 3,931 Amortization of intangible assets (6,304 ) (5,909 ) (395 ) Impairment of goodwill and intangible assets (2,848 ) — (2,848 ) Loss on change in fair value of debt (198 ) (68 ) (130 ) Gain on disposal of subsidiary — 342 (342 ) (Loss) gain on extinguishment of debt (160 ) 31,616 (31,776 ) (Loss) income from continuing operations before income tax benefit (8,260 ) 23,651 (31,911 ) Income tax benefit (147 ) (1,899 ) 1,752 (Loss) income from continuing operations (8,113 ) 25,550 (33,663 ) Income from discontinued operations, net of taxes 438 450 (12 ) Loss on disposal of discontinued operations, net of taxes (620 ) (1,988 ) 1,368 Net (loss) income (8,295 ) 24,012 (32,307 ) Segment Operating Income, (Loss) Income from Continuing Operations and Ne t (Loss) I ncome For the year ended December 31, 2024, we reported segment operating income o f $11.6 million compared to $12.2 million for the year ended December 31, 2023. 24 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Gain on Extinguishment of Debt During 2023, gain on extinguishment of debt consists of a $31.6 million gain related to the repurchase of TruPs debt having a principal amount of $75.5 million.
During 2023, gain on extinguishment of debt consists of a $31.6 million gain related to the repurchase of TruPs debt having a principal amount of $75.5 million.
The difference between the end of the reporting period of the limited liability investments, at fair value and that of the Company is no more than three months. • 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 difference between the end of the reporting period of the limited liability investment, at fair value and that of the Company is no more than three months. • 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.
OVERVIEW Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty and business services industries. Kingsway conducts its business through the following two reportable segments: Extended Warranty and Kingsway Search Xcelerator .
OVERVIEW Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty and business services industries. Kingsway conducts its business through two reportable segments: Extended Warranty and Kingsway Search Xcelerator .
The liquidity requirements of the Company and its subsidiaries have historically been met primarily by funds generated from operations, capital raising, disposal of subsidiaries, investment maturities and investment income, and other returns received on investments and from the sale of investments.
The liquidity requirements of the Company and its subsidiaries have been met primarily by funds generated from operations, capital raising, disposal of subsidiaries, investment maturities and investment income, and other returns received on investments and from the sale of investments.
Further information regarding our detailed analysis and factors considered in establishing an impairment loss on an investment is discussed within the "Significant Accounting Policies and Critical Estimates" section of MD&A. The Company's fixed maturities are subject to declines in fair value below amortized cost that may result in the recognition of impairment losses.
Further information regarding our detailed analysis and factors considered in establishing an impairment loss on an investment is discussed within the "Significant Accounting Policies and Critical Estimates" section of MD&A. The Company's fixed maturities are subject to declines in fair value below amortized cost that may result in the recognition of impairment losses in net (loss) income.
The amount of excess cash flow which the Company is entitled to retain is dependent upon the leverage ratio (as defined in the 2020 KWH Loan document): Percent of excess cash flow If leverage ratio is retained by the Company Greater than 1.75:1.00 50% Less than 1.75:1.00 but greater than 0.75:1.00 75% Less than 0.75:1.0 100% The holding company’s liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was $4.3 million and $48.9 million at December 31, 2023 and December 31, 2022, respectively, which excludes future actions available to the holding company that could be taken to generate liquidity.
The amount of excess cash flow which the Company is entitled to retain is dependent upon the leverage ratio (as defined in the 2020 KWH Loan document): Percent of excess cash flow If leverage ratio is retained by the Company Greater than 1.75:1.00 50% Less than 1.75:1.00 but greater than 0.75:1.00 75% Less than 0.75:1.0 100% The holding company’s liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was $0.9 million and $4.3 million at December 31, 2024 and December 31, 2023, respectively, which excludes future actions available to the holding company that could be taken to generate liquidity.
NON U.S.-GAAP FINANCIAL MEASURE Throughout this 2023 Annual Report, we present our operations in the way we believe will be most meaningful, useful and transparent to anyone using this financial information to evaluate our performance. In addition to the U.S. GAAP presentation of net income, we present segment operating income a s a non-U.S.
NON U.S.-GAAP FINANCIAL MEASURE Throughout this 2024 Annual Report, we present our operations in the way we believe will be most meaningful, useful and transparent to anyone using this financial information to evaluate our performance. In addition to the U.S. GAAP presentation of net income, we present segment operating income a s a non-U.S.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis ("MD&A") of our financial condition and results of operations should be read together with the Consolidated Financial Statements included in Part II, Item 8 of this 2023 Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis ("MD&A") of our financial condition and results of operations should be read together with the Consolidated Financial Statements included in Part II, Item 8 of this 2024 Annual Report.
During the first quarter of 2023, the underlying common stock price of Limbach increased, resulting in an increase in the fair value of the warrants held at March 31, 2023. During the second quarter of 2023, the Company completed a cashless exercise of its Limbach warrants.
Prior to the second quarter of 2023, the Company held warrants in Limbach. During the first quarter of 2023, the underlying common stock price of Limbach increased, resulting in an increase in the fair value of the warrants held at March 31, 2023. During the second quarter of 2023, the Company completed a cashless exercise of its Limbach warrants.
Cash Flows from Continuing Operations During 2023 , the Company reported $26.8 million of net cash used in operating activities from continuing operations, primarily due to: • Payment of deferred interest on the trust preferred debt instruments that were repurchased during the year ($16.1 million) and payment of deferred interest on the remaining trust preferred debt instrument ($5.0 million); • Outflows related to the payment of management fees to the managers of Net Lease and Flowers ($1.8 million) ; and • An indemnity payment to the buyer of Mendota related to loss and loss adjustment expenses ($2.0 million); all of which were partially offset by: • Gain on equity investments; and • Operating income from the Extended Warranty and Kingsway Search Xcelerator segments.
During 2023 , the Company reported $26.8 million of net cash used in operating activities from continuing operations, primarily due to: • Payment of deferred interest on the trust preferred debt instruments that were repurchased during the year ($16.1 million) and payment of deferred interest on the remaining trust preferred debt instrument ($5.0 million); • Outflows related to the payment of management fees to the managers of Net Lease and Flowers ($1.8 million) ; and • An indemnity payment to the buyer of the Company's former subsidiary, Mendota Insurance Company, related to loss and loss adjustment expenses ($2.0 million); all of which were partially offset by • Gain on equity investments; and • Operating income from the Extended Warranty and Kingsway Search Xcelerator segments .
The Company recorded impairment write-downs related to limited liability investments of $0.1 million and zero for the years ended December 31, 2023 and December 31, 2022, respectively, which are included in impairment losses in the consolidated statements of operations. 28 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The Company recorded impairment write-downs related to limited liability investments of zero and $0.1 million for the years ended December 31, 2024 and December 31, 2023, respectively, which are included in impairment losses on investments in the consolidated statements of operations. 28 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Revenue Recognition Service fee and commission revenue represents vehicle service agreement fees, guaranteed asset protection products ("GAP") commissions, maintenance support service fees, warranty product commissions, homebuilder warranty service fees, homebuilder warranty commissions, business services consulting revenue, healthcare services revenue and software license and support revenue based on terms of various agreements with credit unions, consumers, businesses and homebuilders.
Revenue Recognition Service fee and commission revenue represents vehicle service agreement fees, guaranteed asset protection products ("GAP") commissions, maintenance support service fees, warranty product commissions, business services consulting revenue, healthcare services revenue and software license and support revenue. Revenue is based on terms of various agreements with credit unions, consumers and businesses.
The following summarizes the impacts: Impact of Rate Change on Fair Value 2023 Result 2022 Result Libor/SOFR: increase causes fair value to increase; decrease causes fair value to decrease Increase to fair value Increase to fair value Risk free rate: increase causes fair value to decrease; decrease causes fair value to increase Increase to fair value Decrease to fair value The other primary variable affecting the fair value of debt calculation is the passage of time, which will always have the effect of increasing the fair value of debt.
The following summarizes the impacts: Impact of Rate Change on Fair Value 2024 Result 2023 Result SOFR: increase causes fair value to increase; decrease causes fair value to decrease Decrease to fair value Increase to fair value Risk free rate: increase causes fair value to decrease; decrease causes fair value to increase Increase to fair value Increase to fair value The other primary variable affecting the fair value of debt calculation is the passage of time, which will always have the effect of increasing the fair value of debt.
Outsourcing cardiac monitoring is intended to allow hospitals to eliminate personnel callouts and human resources issues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care. DDI has been operating for over 10 years and currently has a presence in 42 states.
Outsourcing cardiac monitoring is intended to allow hospitals to eliminate personnel callouts and human resources issues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care. DDI has been operating for over 10 years and currently has a presence in 39 states and Puerto Rico.
For the GAP and homebuilder warranty contracts, the Company has applied the expected cost plus a margin approach to develop models to estimate the SASP for each of its performance obligations in order to allocate the transaction price to the two separate performance obligations identified.
For the GAP contracts, the Company has applied the expected cost plus a margin approach to develop models to estimate the SASP for each of its performance obligations in order to allocate the transaction price to the two separate performance obligations identified.
Management's Discussion and Analysis See Note 15 , "Income Taxes," t o the Consolidated Financial Statements, for additional detail of the income tax (benefit ) expense rec orded for the years ended December 31, 2023 and December 31, 2022, respectively.
Management's Discussion and Analysis See Note 15 , "Income Taxes," t o the Consolidated Financial Statements, for additional detail of the income tax benefit rec orded for the years ended December 31, 2024 and December 31, 2023, respectively.
Kingsway Search Xcelerator includes the Company's subsidiaries, CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"), Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI") and Digital Diagnostics Imaging, Inc. ("DDI"). Throughout this 2023 Annual Report, the term "Kingsway Search Xcelerator" is used to refer to this segment.
Kingsway Search Xcelerator includes the Company's subsidiaries, CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"), Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI"), Digital Diagnostics Imaging, Inc. ("DDI") and Image Solutions, LLC ("Image Solutions"). Throughout this 2024 Annual Report, the term "Kingsway Search Xcelerator" is used to refer to this segment.
Management's Discussion and Analysis IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 24 sta tes and the District of Columbia to their members, with customers in all 50 states.
Management's Discussion and Analysis IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 26 sta tes and the District of Columbia to their members, with customers in all fifty states.
For Kingsway Search Xcelerator, the Company estimates the fair value using a valuation technique based on observed market capitalization multiples of EBITDA from its recent acquisitions of similar businesses.
For the reporting units within Kingsway Search Xcelerator, the Company estimates the fair value using a valuation technique based on observed market capitalization multiples of EBITDA from its recent acquisitions of similar businesses.
The loss for 2023 and 2022 reflects changes in the fair value of the subordinated debt resulting primarily from changes in interest rates used (not related to instrument-specific credit risk). See "Debt" section below for further information. Gain on Disposal of Subsidiary On July 29, 2022, the Company sold its 80% majority-owned subsidiary, PWSC.
The loss for 2024 and 2023 reflects changes in the fair value of the subordinated debt resulting primarily from changes in interest rates used (not related to instrument-specific credit risk). See "Debt" section below for further information. Gain on Disposal of Subsidiary On July 29, 2022, the Company sold its 80% majority-owned subsidiary, Professional Warranty Service Corporation ("PWSC").
Holding Company Liquidity The liquidity of the holding company is managed separately from its subsidiaries. The obligations of the holding company primarily consist of holding company operating expenses; transaction-related expenses; investments; stock repurchases; and any other extraordinary demands on the holding company.
Management's Discussion and Analysis Holding Company Liquidity The liquidity of the holding company is managed separately from its subsidiaries. The obligations of the holding company primarily consist of holding company operating expenses; transaction-related expenses; investments; stock repurchases; and any other extraordinary demands on the holding company.
Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"). Penn and Prime distribute these products in 47 and 40 states, respectively, via independent used car dealerships and franchised car dealerships.
Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"). Penn and Prime distribute these products in 46 and 34 states, respectively, via independent used car dealerships and franchised car dealerships.
Revenue from GAP commissions, homebuilder warranty service fees and software license and support contain multiple distinct performance obligations that are accounted for separately. Judgment is required to determine the standalone selling price ("SASP") for each distinct performance obligation. Revenue is allocated to each performance obligation based on the relative SASP.
Revenue from GAP commissions and software license and support contain multiple distinct performance obligations that are accounted for separately. Judgment is required to determine the standalone selling price ("SASP") for each distinct performance obligation. Revenue is allocated to each performance obligation based on the relative SASP.
SASP are not directly observable in the GAP, homebuilder warranty and software license and support contracts for the separate performance obligations.
SASP are not directly observable in the GAP and software license and support contracts for the separate performance obligations.
The 2023 and 2022 income tax (benefit) expense is primarily related to: • An income tax benefit of zero and an expense of $1.0 million in 2023 and 2022 , respectively, for the partial release of the Company’s deferred income tax valuation allowance associated with business interest expense with an indefinite life; • An income tax benefit of $2.1 million and $0.2 million in 2023 and 2022 , respectively, for the partial release of the Company’s deferred tax valuation allowance related to acquired deferred tax liabilities and change in future income assumptions, respectively; • An income tax expense of $0.2 million and $0.1 million in 2023 and 2022 , respectively, relating to a change in indefinite life deferred income tax liabilities; and • An income tax benefit of less than $0.1 million and an expense of $3.9 million in 2023 and 2022 , respectively, for state income taxes. 27 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The 2024 and 2023 income tax benefit is primarily related to: • An income tax benefit of $0.2 million and zero in 2024 and 2023 , respectively, for the partial release of the Company’s deferred income tax valuation allowance associated with business interest expense with an indefinite life; • An income tax expense of $0.1 million and an income tax benefit of $2.1 million in 2024 and 2023 , respectively, for the change in the Company’s deferred tax valuation allowance related to acquired deferred tax liabilities; • An income tax benefit of $0.2 million and an income tax expense of $0.2 million in 2024 and 2023 , respectively, relating to a change in indefinite life deferred income tax liabilities; and • An income tax expense of $0.2 million and an income tax benefit of less than $0.1 million in 2024 and 2023 , respectively, for state income taxes. 27 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Such future actions include, but are not limited to, distributions from the Extended Warranty and Kingsway Search Xcelerator operating companies subject to certain loan covenants that may be in place at each operating company.
Such future actions include, but are not limited to, issuance of equity securities and distributions from the Extended Warranty and Kingsway Search Xcelerator operating companies subject to certain loan covenants that may be in place at each operating company.
LIQUIDITY AND CAPITAL RESOURCES The purpose of liquidity management is to ensure there is sufficient cash to meet all financial commitments and obligations as they fall due.
LIQUIDITY AND C APITAL RESOURCES The purpose of liquidity management is to ensure there is sufficient cash to meet all financial commitments and obligations as they fall due.
During 2023 , the net cash used in financing activities from continuing operations was $39.4 million, primarily attributed to: • The repurchase of five of the TruPs for 40.3 million; • Principal repayments on bank loans of $9.1 million; • Distributions to noncontrolling interest holders of $4.0 million; and • Cash paid for repurchase of warrants of $4.0 million and common stock of $3.2 milion, partially offset by • Proceeds from the exercise of warrants (reducing the use of cash) of $16.7 million and net proceeds from bank loans of $5.5 million related to the DDI Loan.
During 2023, the net cash used in financing activities from continuing operations was $39.4 million, primarily attributed to: • The repurchase of five of the TruPs for 40.3 million; • Principal repayments on bank loans of $9.1 million; • Distributions to noncontrolling interest holders of $4.0 million; and • Cash paid for repurchase of warrants of $4.0 million and common stock of $3.2 million, partially offset by • Proceeds from the exercise of warrants (reducing the use of cash) of $16.7 million and net proceeds from bank loans of $5.5 million related to the DDI Loan . 31 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Interest payments on outstanding debt in Table 3 related to the subordinated debt, the 2020 KWH Loan, the 2021 Ravix Loan, the 2022 Ravix Loan, the SNS Loan and the DDI Loan assume the variable rates remain constant throughout the projection period.
Interest payments on outstanding debt in Table 3 related to the subordinated debt, the 2024 KWH Loan, the 2021 Ravix Loan, the 2022 Ravix Loan, the SNS Loan, the DDI Loan and the Image Solutions Loan assume the variable rates remain constant throughout the projection period.
At December 31, 2023, we held cash and cash equivalents, restricted cash and investments with a carrying value of $59.4 million. Our U.S. operations typically invest in U.S. dollar-denominated instruments to mitigate their exposure to currency rate fluctuations. Table 2 below summarizes the carrying value of investments, including cash and cash equivalents and restricted cash, at the dates indicated.
At December 31, 2024, we held cash and cash equivalents, restricted cash and investments with a carrying value of $54.5 million. Our operations typically invest in U.S. dollar-denominated instruments to mitigate their exposure to currency rate fluctuations. Table 2 below summarizes the carrying value of investments, including cash and cash equivalents and restricted cash, at the dates indicated.
For fixed maturities, we use observable inputs such as 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.
Valuation of Fixed Maturity Investments For fixed maturity investments, we use observable inputs such as 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.
Management's Discussion and Analysis Under the qualitative approach, the impairment test consists of an assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired.
Under the qualitative approach, the impairment test consists of an assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired.
(Loss) Gain on Change in Fair Value of Derivative Asset Option Contracts Loss on change in fair value of derivative asset option contracts was $1.4 million in 2023 compared to a gain of $16.7 million in 2022. The derivative contract relates to three trust preferred debt repurchase option agreements the Company entered into during the third quarter of 2022.
Loss on Change in Fair Value of Derivative Asset Option Contracts Loss on change in fair value of derivative asset option contracts was zero in 2024 compared to $1.4 million in 2023. The derivative contract relates to three trust preferred debt repurchase option agreements the Company entered into during the third quarter of 2022.
Loss on Change in Fair Value of Debt The loss on change in fair value of debt amounted to $0.1 million in 2023 compared to $4.9 million in 2022. During the first quarter of 2023, the Company repurchased TruPs debt having a principal amount of $75.5 million.
Loss on Change in Fair Value of Debt The loss on change in fair value of debt amounted to $0.2 million in 2024 compared to $0.1 million in 2023. During the first quarter of 2023, the Company repurchased TruPs debt having a principal amount of $75.5 million.
The holding company cash amounts are reflected in the cash and cash equivalents o f $9.1 million and $64.2 million rep orted at December 31, 2023 and December 31, 2022, respectively, on the Company’s consolidated balance sheets.
The holding company cash amounts are reflected in the cash and cash equivalents o f $5.5 million and $9.1 million rep orted at December 31, 2024 and December 31, 2023, respectively, on the Company’s consolidated balance sheets.
While refunds vary depending on the term and type of product offered, historically refunds have averaged5.75% to 14% of t he original amount of the vehicle service agreement fee. Revenues recorded by the Company are net of variable consideration related to refunds and the associated refund liability is included in accrued expenses and other liabilities.
While refunds vary depending on the term and type of product offered, historically refunds have averaged 5.83% to 12.00% of t he original amount of the vehicle service agreement fee. Revenues recorded by the Company are net of variable consideration related to refunds and the associated refund liability is included in accrued expenses and other liabilities.
During the third quarter of 2023, the Company sold all of its shares of Limbach common stock. Gain (Loss) on Change in Fair Value of Limited Liability Investments, at Fair Value Gain on change in fair value of limited liability investments, at fair value was $0.1 million in 2023 compared to a loss of $1.8 million in 2022.
During the third quarter of 2023, the Company sold all of its shares of Limbach common stock. Gain on Change in Fair Value of Limited Liability Investments, at Fair Value Gain on change in fair value of limited liability investments, at fair value was $0.3 million in 2024 compared to $0.1 million in 2023.
As a result of the sale, the Company recognized a net gain on disposal of $37.9 million during 2022. During 2023, the Company recorded an additional gain on disposal of PWSC of $0.3 million related to the working capital true-up and release of indemnity funds that were held in escrow.
At the time of the sale, the Company recognized a net gain on disposal. During 2023, the Company recorded an additional gain on disposal of PWSC of $0.3 million related to the working capital true-up and release of indemnity funds that were held in escrow.
S ee Note 12 , "Debt ," t o the Consolidated Financial Statements, for further details. Other Revenue and Expenses not Allocated to Segments, Net Other revenue and expenses not allocated to segments was a net expense of $12.8 million in 2023 compared to $17.2 million in 2022.
S ee Note 12 , "Debt ," t o the Consolidated Financial Statements, for further details. General and Administrative Expenses and Other Revenue not Allocated to Segments, Net General and administrative expenses and other revenue not allocated to segments was a net expense of $8.9 million in 2024 compared to $12.8 million in 2023.
Kingsway Search Xcelerator The Kingsway Search Xcelerator revenue increased to $35.0 million for the year ended December 31, 2023 compared wit h $19.2 million for the year ended December 31, 2022. Kingsway Search Xcelerator operating income was $5.3 million for the year ended December 31, 2023 compared with $3.5 million for the year ended December 31, 2022.
Kingsway Search Xcelerator The Kingsway Search Xcelerator revenue increased to $40.5 million for the year ended December 31, 2024 compared wit h $35.0 million for the year ended December 31, 2023. Kingsway Search Xcelerator operating income was $5.7 million for the year ended December 31, 2024 compared with $5.3 million for the year ended December 31, 2023.
The Company may perform its impairment test for any indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company may resume a qualitative assessment in any subsequent period if facts and circumstances permit. 22 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The Company may perform its impairment test for any indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test; however, the Company may resume a qualitative assessment in any subsequent period if facts and circumstances permit.
The fair value of the Company’s subordinated debt will eventually equal the principal value totaling $15.0 million of the subordinated debt by the time of the stated redemption date of the remaining trust, which matures on May 22, 2033. 29 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
The fair value of the Company’s subordinated debt will eventually equal the principal value totaling $15.0 million of the subordinated debt by the time of the stated redemption date of the remaining trust, which matures on May 22, 2033.
Also, beginning in 2022, the holding company is permitted to receive a portion of the excess cash flow (as defined in the 2020 KWH Loan document) generated by the KWH subsidiaries in the previous year. In 2022, the Company was entitled to 50% of the excess cash flow with the other 50% used to pay down the 2020 KWH Loan.
Also, beginning in 2022, the holding company is permitted to receive a portion of the excess cash flow (as defined in the 2020 KWH Loan document) generated by the KWH subsidiaries in the previous year.
Future minimum lease payments in Table 3 include payments on leases for office space that are included in total lease liabilities in Note 13," Leases," to the Consolidated Financial Statements, as well as payments for short-term leases, equipment leases and a lease with an effective date of January 1 2024.
Future minimum lease payments in Table 3 include payments on leases for office space that are included in total lease liabilities in Note 13," Leases," to the Consolidated Financial Statements, as well as payments for short-term leases and equipment leases.
Effective January 1, 2023, as a result of the adoption of ASU 2016-13, if the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated.
If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated.
This source of cash was primarily attributed to: • Distributions received by Net Lease from one of its limited liability investment companies of $13.3 million; • Proceeds from sales and maturities of fixed maturities and sales of equity securities in excess of purchases of fixed maturities; and • The acquisitions of SPI and DDI in 2023, which totaled $13.6 million, net of cash acquired. 30 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
This source of cash was primarily attributed to: • Distributions received by the Company's former subsidiary, Net Lease, from one of its limited liability investment companies of $13.3 million ; • Proceeds from sales and maturities of fixed maturities and sales of equity securities in excess of purchases of fixed maturities; and • The a cquisitions of SPI and DDI in 2023, which totaled $13.6 million, net of cash acquired.
T he fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a third-party. For a description of the market observable inputs and inputs developed by a third-party used in determining fair value of debt, se e Note 23, "Fair Value of Financial Instruments," to the Consolidated Financial Statements.
For a description of the market observable inputs and inputs developed by a third-party used in determining fair value of debt, se e Note 23, "Fair Value of Financial Instruments," to the Consolidated Financial Statements.
Valuation of Limited Liability Investments, at Fair Value Limited liability investments, at fair value represent 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 Company accounts for these investments at fair value with changes in fair value reported in the consolidated statements of operations.
Valuation of Limited Liability Investment, at Fair Value Limited liability investment, at fair value represents the underlying investments of the Company’s consolidated entity, Argo Holdings Fund I, LLC ("Argo Holdings"). The Company accounts for this investment at fair value with changes in fair value reported in the consolidated statements of operations.
The difference between the end of the reporting period of the limited liability investments and that of the Company is no more than three months. • Limited liability investments, at fair value represent the underlying investments of the Company’s consolidated entities Net Lease (December 31, 2022 only) and Argo Holdings.
The difference between the end of the reporting period of the limited liability investments and that of the Company is no more than three months. • Limited liability investment, at fair value represents the underlying investments of the Company’s consolidated entity, Argo Holdings.
Refer to Note 23 , "Fair Value of Financial Instruments," to the Consolidated Financial Statements for further information. Valuation of Deferred Income Taxes The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in our consolidated financial statements.
Valuation of Deferred Income Taxes The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in our consolidated financial statements.
TABLE 2 Carrying value of investments, including cash and cash equivalents and restricted cash As of December 31 (in thousands of dollars, except for percentages) Type of investment 2023 % of Total 2022 % of Total Fixed maturities: U.S. government, government agencies and authorities 12,997 21.9 % 15,080 11.2 % States, municipalities and political subdivisions 2,783 4.7 % 2,232 1.7 % Mortgage-backed 9,253 15.6 % 8,412 6.3 % Asset-backed 1,210 2.0 % 1,610 1.2 % Corporate 10,230 17.2 % 10,257 7.6 % Total fixed maturities 36,473 61.4 % 37,591 28.0 % Equity investments 79 0.1 % 153 0.1 % Limited liability investments 812 1.4 % 983 0.7 % Limited liability investments, at fair value 3,496 5.9 % 17,059 12.7 % Investments in private companies 854 1.4 % 790 0.6 % Other investments 6 0.0 % 201 0.2 % Short-term investments 161 0.3 % 157 0.1 % Total investments 41,881 70.5 % 56,934 42.4 % Cash and cash equivalents 9,098 15.4 % 64,168 47.9 % Restricted cash 8,400 14.1 % 13,064 9.7 % Total 59,379 100.0 % 134,166 100.0 % Investment Impairment The Company performs a quarterly analysis of its investments to determine if declines in fair value may result in the recognition of impairment losses in net income.
TABLE 2 Carrying value of investments, including cash and cash equivalents and restricted cash As of December 31 (in thousands of dollars, except for percentages) Type of investment 2024 % of Total 2023 % of Total Fixed maturities: U.S. government, government agencies and authorities 13,354 24.5 % 12,997 21.9 % States, municipalities and political subdivisions 2,775 5.1 % 2,783 4.7 % Mortgage-backed 9,886 18.1 % 9,253 15.6 % Asset-backed 1,326 2.4 % 1,210 2.0 % Corporate 9,622 17.7 % 10,230 17.2 % Total fixed maturities 36,963 67.9 % 36,473 61.4 % Equity investments — — % 79 0.1 % Limited liability investments 650 1.2 % 812 1.4 % Limited liability investment, at fair value 2,859 5.2 % 3,496 5.9 % Investments in private companies 696 1.3 % 854 1.4 % Other investments — — % 6 0.0 % Short-term investments 169 0.3 % 161 0.3 % Total investments 41,337 75.9 % 41,881 70.5 % Cash and cash equivalents 5,493 10.1 % 9,098 15.4 % Restricted cash 7,643 14.0 % 8,400 14.1 % Total 54,473 100.0 % 59,379 100.0 % Investment Impairment The Company performs a quarterly analysis of its investments to determine if declines in fair value may result in the recognition of impairment losses in net (loss) income.
To the extent a valuation allowance is established in a period, an expense must be recorded within the income tax provision in the consolidated statements of operations. As of December 31, 2023, the Company maintains a valuation allowan ce of $129.4 million, all of which relates to its U.S. deferred income taxes.
To the extent a valuation allowance is established in a period, an expense must be recorded within the income tax provision in the consolidated statements of operations. As of December 31, 2024, the Company maintains a valuation allowan ce of $130.7 million .
Bank Loans As part of the acquisition of DDI on October 26, 2023, DDI became a wholly owned subsidiary of DDI Acquisition, LLC ("DDI LLC"), and together they borrowed from a bank a principal amount of $5.6 million in the form of a term loan, and established a $0.4 million revolver to finance the acquisition of DDI (together, the "DDI Loan").
As part of the acquisition of Image Solutions on September 26, 2024, Image Solutions became a wholly owned subsidiary of Steel Bridge Acquisition, LLC ("SB LLC"), and together they borrowed from a bank a principal amount of $7.75 million in the form of a term loan, and established a $0.5 million revolver to finance the acquisition of Image Solutions (together, the "Image Solutions Loan").
Effective January 1, 2023, as a result of the adoption of ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") , if the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated.
If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated.
Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both. No impairment charges were recorded against goodwill in 2023 or 2022, as the estimated fair values of the reporting units exceeded their respective carrying values.
Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both.
Net Gain (Loss) on Equity Investments Net gain on equity investments was $3.4 million in 2023 compared to a net loss of less than $0.1 million in 2022. The net gain for 2023 primarily relates to the Company's investment in Limbach. Prior to the second quarter of 2023, the Company held warrants in Limbach.
Management's Discussion and Analysis Net ( Loss) Gain on Equity Investments Net loss on equity investments was less than $0.1 million in 2024 compared to a net gain of $3.4 million in 2023. The net gain for 2023 primarily relates to the Company's former investment in Limbach Holdings, Inc. ("Limbach").
There were no write-downs recorded for impairments related to investments in private companies for the years ended December 31, 2023 and December 31, 2022. At December 31, 2023 and December 31, 2022, the gross unrealized losses for fixed maturities amounted to $1.7 million and $2.5 million, and there were no unrealized losses attributable to non-investment grade fixed maturities.
At December 31, 2024 and December 31, 2023, the gross unrealized losses for fixed maturities amounted to $1.2 million and $1.7 million, and there were no unrealized losses attributable to non-investment grade fixed maturities.
Included are revenue and expenses associated with our various other investments that are accounted for on a consolidated basis, our former insurance company that has been in run-off since 2012, and expenses associated with our corporate holding company.
Included are primarily expenses associated with our corporate holding company, as well as revenue and expenses associated with our various other investments that are accounted for on a consolidated basis.
Income Tax (Benefit) Expense Income tax benefit for 2023 was $1.9 million compared to income tax expense of $4.8 million in 2022.
Income Tax Benefit Income tax benefit for 2024 was $0.1 million compared to $1.9 million in 2023.
Factors that could trigger a quantitative impairment review include, but are not limited to, significant under performance relative to historical or projected future operating results and significant negative industry or economic trends. As of November 30, 2023 , the Company conducted its annual qualitative assessment.
Factors that could trigger a quantitative impairment review include, but are not limited to, significant under performance relative to historical or projected future operating results and significant negative industry or economic trends. 22 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
As a result of the analysis performed, the Company recorded an impairment loss related to other investments for the year ended December 31, 2023. There were no impairment losses recorded related to available-for-sale fixed maturity investments during the year ended December 31, 2023.
As a result of the analysis performed, the Company recorded no impairment losses related to available-for-sale fixed maturity investments or other investments during the year ended December 31, 2024. See "Investments" s ection below an d Note 7, "Investments," to the Consolidated Financial Statements for further information.
Additional information regarding our contingent consideration liabilities is included in Note 23 , " Fair Value of Financial Instruments ," to the Consolidated Financial Statements. Valuation and Impairment Assessment of Intangible Assets Intangible assets are recorded at their estimated fair values at the date of acquisition. Intangible assets with definite useful lives consist of developed technology and customer relationships.
Valuation and Impairment Assessment of Intangible Assets Intangible assets are recorded at their estimated fair values at the date of acquisition. Intangible assets with definite useful lives consist of developed technology and customer relationships.
Software support revenue is recognized ratably over the contract period as services are rendered. The SASP of software support is consistent with the stand-alone pricing of subsequent software support renewals.
Software support revenue is recognized ratably over the contract period as services are rendered. The SASP of software support is consistent with the stand-alone pricing of subsequent software support renewals. For certain SPI contracts, the transaction price of the software license is billed in installments, typically over a three to five year period.
Management's Discussion and Analysis CONTRACTUAL OBLIGATIONS Table 3 summarizes cash disbursements related to the Company's contractual obligations projected by period, including debt maturities, interest payments on outstanding debt and future minimum payments under operating leases.
However, the Company’s assessment could also be affected by various risks and uncertainties, including, but not limited to, the developing macro-economic environment. CONTRACTUAL OBLIGATIONS Table 3 summarizes cash disbursements related to the Company's contractual obligations projected by period, including debt maturities, interest payments on outstanding debt and future minimum payments under operating leases.
A consistent and systematic process is followed for determining and recording an impairment loss, including the evaluation of securities in an unrealized loss position and securities with an allowance for credit losses. We perform a quarterly analysis of our investments classified as available-for-sale fixed maturity investments and other investments to determine if an impairment loss has occurred.
We perform a quarterly analysis of our investments classified as available-for-sale fixed maturity investments and other investments to determine if an impairment loss has occurred.
The Flower debt was repaid in the third quarter of 2022; • A decrease of $0.2 million related to the 2021 Ravix Loan, which was effective October 1, 2021, and has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 3.75% (current rate of 9.00%) • An increase of $0.8 million related to the $6.0 million 2022 Ravix Loan, which was effective November 16, 2022 and has an annual interest rate equal to the Prime Rate plus 0.75% (current rate of 9.25%) ; • An increase of $0.6 million related to the 2020 KWH Loan, as a result of a decrease in fair value of the interest rate swap related to the 2020 KWH bank loan; • An increase of $0.5 million related to the $6.5 million SNS Loan, which was effective November 18, 2022 and has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00% (current rate of 9.00%); and • A n increase of $0.1 million related to the new $6.0 million DDI Loan, which was effective October 26, 2023 and has an annual interest rate equal to the Prime Rate plus 0.5%, or 5.00% (current rate of 9.00%).
Effective July 3, 2023, the index used for determining the interest rate for the remaining trust preferred debt instrument converted from LIBOR to CME Term SOFR ; • A decrease of $0.1 million related to the 2021 Ravix Loan, which has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 3.75% (current rate of 8.00%); • A decrease of $0.1 million related to the 2022 Ravix Loan, which has an annual interest rate equal to the Prime Rate plus 0.75% (current rate of 8.25%); • A decrease of $0.2 million related to the SNS Loan, which has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00% (current rate of 8.00%); • An increase of $0.4 million related to the $6.0 million DDI Loan, which was effective October 26, 2023 and has an annual interest rate equal to the Prime Rate plus 0.5%, or 5.00% (current rate of 8.00%); • An increase of $0.2 million related to the 2020 KWH Loan.
DEBT The principal and carrying value of the Company’s debt instruments at December 31, 2023 and December 31, 2022 are as follows: (in thousands) December 31, 2023 December 31, 2022 Principal Carrying Value Principal Carrying Value Bank loans: 2021 Ravix Loan $ 4,650 $ 4,650 $ 5,300 $ 5,300 2022 Ravix Loan 4,925 4,769 5,950 5,754 SNS Loan 5,142 5,063 6,850 6,755 DDI Loan 5,600 5,534 — — 2020 KWH Loan 10,979 10,806 16,708 16,472 Total bank loans 31,296 30,822 34,808 34,281 Subordinated debt 15,000 13,594 90,500 67,811 Total $ 46,296 $ 44,416 $ 125,308 $ 102,092 See Note 12 , " Debt ," to the Consolidated Financial Statements for a detailed discussion of the Company’s debt instruments.
DEBT The principal and carrying value of the Company’s debt instruments at December 31, 2024 and December 31, 2023 are as follows: (in thousands) December 31, 2024 December 31, 2023 Principal Carrying Value Principal Carrying Value Bank loans: 2021 Ravix Loan $ 2,288 $ 2,288 $ 4,650 $ 4,650 2022 Ravix Loan 4,300 4,182 4,925 4,769 2022 Ravix Revolver 500 500 — — SNS Term Loan 3,842 3,779 5,142 5,063 SNS Revolver 450 450 — — DDI Loan 5,507 5,452 5,600 5,534 Image Solutions Loan 7,556 7,399 — — 2020 KWH Term Loan — — 10,479 10,306 2024 KWH Term Loan 13,313 13,228 — — 2024 KWH DDTL 5,850 5,850 — — KWH Revolver 1,000 1,000 500 500 Total bank loans 44,606 44,128 31,296 30,822 Subordinated debt 15,000 13,409 15,000 13,594 Total $ 59,606 $ 57,537 $ 46,296 $ 44,416 See Note 12 , " Debt ," to the Consolidated Financial Statements for a detailed discussion of the Company’s debt instruments.
Management's Discussion and Analysis The Company recorded impairment losses related to limited liability investments, at fair value of $0.1 million and less than $0.1 million for the years ended December 31, 2023 and December 31, 2022, respectively, which are included in gain (loss) on change in fair value of limited liability investments, at fair value in the consolidated statements of operations.
As a result of the analysis performed, the Company recorded an impairment loss related to other investments of zero and $0.2 million for the years ended December 31, 2024 and December 31, 2023, respectively, which are included in impairment losses on investments in the consolidated statements of operations.
SNS and DDI had combined operating income of $1.9 million for 2023, respectively. 24 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Management's Discussion and Analysis For the year ended December 31, 2023, we reported income from continuing operations of $25.6 million c ompared to $30.1 million for the year ended December 31, 2022.
Management's Discussion and Analysis For the year ended December 31, 2024, we reported loss from continuing operations of $8.1 million c ompared to income from continuing operations of $25.6 million for the year ended December 31, 2023.
The DDI Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00% (current rate of 9.00% ). Monthly principal payments on the term loan begin on December 15, 2024. The revolver matures on September 1, 2024 and the term loan matures on October 26, 2029.
The Image Solutions Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 7.25%. At December 31, 2024, the interest rate was 8.00%. The revolver matures on September 26, 2026 and the term loan matures on September 26, 2030.
Throughout this 2023 Annual Report, the term "Extended Warranty" is used to refer to this segment. 18 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
Extended Warranty includes the following subsidiaries of the Company: IWS Acquisition Corporation ("IWS"), Geminus Holding Company, Inc. ("Geminus"), PWI Holdings, Inc. ("PWI") and Trinity Warranty Solutions LLC ("Trinity"). Throughout this 2024 Annual Report, the term "Extended Warranty" is used to refer to this segment. 18 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
These inputs include credit spread assumptions developed by a third-party and market observable swap rates.
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.
Refer to Note 11, "Derivatives," to t he Consolidated Financial Statements, for further information on the option agreements. 26 Table of Contents KINGSWAY FINANCIAL SERVICES INC. Management's Discussion and Analysis Interest Expense Interest expense for 2023 was $6.3 million compared to $8.1 million in 2022.
The Company exercised the repurchase options during the first quarter of 2023. Refer to Note 11, "Derivatives," to t he Consolidated Financial Statements, for further information on the option agreements. Interest Expense Interest expense for 2024 was $4.8 million compared to $6.4 million in 2023.
As a result of the analysis performed, the Company recorded an impairment loss related to other investments of $0.2 million for the year ended December 31, 2023 . There were no impairment losses recorded related to available-for-sale fixed maturity investments during the year ended December 31, 2023 .
There were no impairment losses recorded related to available-for-sale fixed maturity investments during the years ended December 31, 2024 and December 31, 2023.
Refer t o Note 2 , " Summary of Significant Accounting Policies ," to the Consolidated Financial Statements for information about our revenue recognition accounting policies. Valuation of Fixed Maturities and Equity Investments Our equity investments are recorded at fair value with changes in fair value recognized in n et income.
Refer t o Note 2 , " Summary of Significant Accounting Policies ," to the Consolidated Financial Statements for information about our revenue recognition accounting policies.
For the year ended December 31, 2023, the income from discontinued operations is related to the operations of VA Lafayette.
For the year ended December 31, 2024, we reported net loss of $8.3 million compared to net income of $24.0 million for the year ended December 31, 2023. For the years ended December 31, 2024 and December 31, 2023, the income from discontinued operations and the loss on disposal of discontinued operations is related to VA Lafayette.
We saw an increase in claims paid at our auto Extended Warranty companies – both sequentially and year over year – primarily due to inflationary pressures on the cost of parts and labor. 25 Table of Contents KINGSWAY FINANCIAL SERVICES INC.
We saw an increase in claims paid at our auto Extended Warranty companies, primarily due to inflationary pressures on the cost of parts and labor; however, the year-over-year increase was lower in the second half of 2024 than the first half. The total number of claims was down 4.6% in 2024 compared to 2023.
The sale of PWSC did not represent a strategic shift that would have a major effect on the Company's operations or financial results; therefore, PWSC is not presented as a discontinued operation. Se e Note 5, "Disposal and Discontinued Operations," to the Consolidated Financial Statements, for further discussion of the PWSC disposal.
The sale of PWSC did not represent a strategic shift that would have a major effect on the Company's operations or financial results; therefore, PWSC is not presented as a discontinued operation. (Loss) Gain on Extinguishment of Debt During the second quarter of 2024, there was a modification to the 2020 KWH Loan.
Accordingly, it is reasonably possible that changes in the fair values of the Company’s investments reported at fair value will occur in the near term and such changes could materially affect the amounts reported in the consolidated financial statements. Impairment Assessment of Investments The establishment of an impairment loss on an investment requires a number of judgments and estimates.
Fixed maturity investments are exposed to various risks, such as interest rate risk, credit risk and overall market volatility risk. Accordingly, it is reasonably possible that changes in the fair values of the Company’s investments reported at fair value will occur in the near term and such changes could materially affect the amounts reported in the consolidated financial statements.

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