KINGSWAY FINANCIAL SERVICES INC

Index to the Consolidated Financial Statements of

Kingsway Financial Services Inc.

To the Stockholders and Board of Directors of Kingsway Financial Services, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Kingsway Financial Services, Inc. (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relate.

Revenue Recognition–** Extended Warranty Segment**–** Refer to Note 2 and Note 14 to the financial statements**

Critical Audit Matter Description

The Company's revenue from contracts with customers (ASC 606) includes extended warranty service fee and commission income, which is comprised of multiple revenue streams including: vehicle service agreement fees, guaranteed asset protection commissions, maintenance support service fees, and warranty product commissions. Accordingly, the application of revenue recognition policies for the extended warranty segment requires the Company to exercise significant judgement in the following areas:

For these reasons, we identified revenue recognition for the extended warranty segment as a critical audit matter.

How the Critical Audit Matter was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included the following, among other procedures:

/s/Plante & Moran PLLC

We have served as the Company’s auditor since 2020.

Denver, CO

March 5, 2024

(in thousands, except share data)

(in thousands, except per share data)

Consolidated Statements of Comprehensive (Loss) Income

(in thousands)

(1) Net of income tax (benefit) expense of $0 and $0 in 2023 and 2022, respectively

Consolidated Statements of Shareholders' Equity

(in thousands, except share data)

(in thousands)

NOTE1 BUSINESS

Kingsway Financial Services Inc. (the "Company" or "Kingsway") was incorporated under the Business Corporations Act (Ontario) on* September 19, 1989.Effective December 31, 2018,*the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. Kingsway is a holding company with operating subsidiaries located in the United States. The Company owns or controls subsidiaries primarily in the extended warranty and business services industries.

NOTE*2* SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying information in the2023 Annual Report has been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The accompanying consolidated financial statements include the accounts of Kingsway and its majority owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In addition, the Company evaluates its relationships or investments for consolidation pursuant to authoritative accounting guidance related to the consolidation of a variable interest entity ("VIE") under the Variable Interest Model prescribed by the Financial Accounting Standards Board ("FASB").

The Company’s investments include certain investments, primarily in limited liability companies and limited partnerships in which the Company holds a variable interest. The Company evaluates these investments for the characteristics of a VIE. The Variable Interest Model identifies the characteristics of a VIE to include investments (1) lacking sufficient equity to finance activities without additional subordinated support or (2) in which the holders of equity at risk in the investments lack characteristics of a controlling financial interest, such as the power to direct activities that most significantly impact the legal entity’s economic performance; the obligation to absorb the legal entity’s expected losses; or the right to receive the expected residual returns of the legal entity. The equity investors as a group are considered to lack the power to direct activities that most significantly impact the legal entity’s economic performance when (1) the voting rights of some investors arenot proportional to their obligations to absorb the expected losses of the legal entity or their rights to receive the expected residual returns of the legal entity and (2) substantially all of the activities of the legal entity are conducted on behalf of an investor with disproportionately few voting rights. When evaluating whether an investment lacks characteristics of a controlling financial interest, the Company considers limited liability companies and limited partnerships to lack the power of a controlling financial interest if neither of the following exists: (1) a simple majority or lower threshold of partners or members with equity at risk are able to exercise substantive kick-out rights through voting interest over the general partner(s) or managing member(s) or (2) limited partners with equity at risk are able to exercise substantive participating rights over the general partner(s) or managing member(s).

If the characteristics of a VIE are met, the Company evaluates whether it meets the primary beneficiary criteria. The primary beneficiary is considered to be the entity holding a variable interest that has the power to direct activities that most significantly impact the economic performance of the VIE; the obligation to absorb losses of the VIE; or the right to receive benefits from the VIE that could potentially be significant to the VIE. In instances where the Company is considered to be the primary beneficiary, the Company consolidates the VIE. When the Company isnot considered to be the primary beneficiary of the VIE, the VIE isnot consolidated and the Company uses the equity method to account for the investment. Under this method, the carrying value is generally the Company’s share of the net asset value of the unconsolidated entity, and changes in the Company’s share of the net asset value are recorded in net investment income.

Subsidiaries

The Company's consolidated financial statements include the assets, liabilities, shareholders' equity, revenues, expenses and cash flows of the holding company and its subsidiaries and have been prepared in accordance with U.S. GAAP. A subsidiary is an entity controlled, directly or indirectly, through ownership of more than50% of the outstanding voting rights, or where the Company has the power to govern the financial and operating policies so as to obtain benefits from its activities. Assessment of control is based on the substance of the relationship between the Company and the entity and includes consideration of both existing voting rights and, if applicable, potential voting rights that are currently exercisable and convertible. The operating results of subsidiaries that have been disposed are included up to the date control ceased, and any difference between the fair value of the consideration received and the carrying value of a subsidiary that has been disposed is recognized in the consolidated statements of operations. All intercompany balances and transactions are eliminated in full.

The consolidated financial statements are prepared as of* December 31, 2023* based on individual company financial statements at the same date, or in the case of certain limited liability companies that are consolidated, on athree-month lag basis. Accounting policies of subsidiaries have been aligned where necessary to ensure consistency with those of Kingsway.

The Company's subsidiaries Argo Holdings Fund I, LLC ("Argo Holdings"), Flower Portfolio001, LLC ("Flower") and Net Lease Investment Grade Portfolio LLC ("Net Lease") meet the definition of an investment company and follow the accounting and reporting guidance in Financial Accounting Standards Codification Topic946, Financial Services-Investment Companies. Flower and Net Lease were both dissolved during2023.

Noncontrolling interests

The Company has noncontrolling interests attributable to certain of its subsidiaries. A noncontrolling interest arises where the Company owns less than100% of the voting rights and economic interests in a subsidiary. A noncontrolling interest is initially recognized at the proportionate share of the identifiable net assets of the subsidiary at the acquisition date and is subsequently adjusted for the noncontrolling interest's share of the acquiree's net income (loss) and changes in capital. The effects of transactions with noncontrolling interests are recorded in shareholders' equity where there isno change of control.

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The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined.

The critical accounting estimates and assumptions in the accompanying consolidated financial statements include, but arenot limited to, revenue recognition; valuation of fixed maturities and equity investments; impairment assessment of investments; valuation of limited liability investments, at fair value; valuation of deferred income taxes; accounting for business combinations; contingent consideration; valuation and impairment assessment of intangible assets; goodwill recoverability; deferred contract costs; fair value assumptions for subordinated debt obligations; fair value assumptions for subsidiary stock-based compensation awards; andfair value assumptions forderivative instruments.

The Company evaluates acquisitions in accordance with Accounting Standards Codification ("ASC")805, Business Combinations("ASC805"), to determine if a transaction represents an acquisition of a business or an acquisition of assets. The results of acquired subsidiaries are included in the consolidated statements of operations from the date of acquisition.

An acquisition of a business represents a business combination. The acquisition method of accounting is used to account for a business combination. The cost of an acquired business is measured as the fair value of the assets received, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any noncontrolling interest. The excess of the cost of an acquired business over the fair value of the Company's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquired business is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the consolidated statements of operations. Noncontrolling interests in the net assets of consolidated entities are reported separately in shareholders' equity and initially measured at fair value. Acquisition costs related to a business combination are expensed as incurred.

When an acquisition doesnot meet the definition of a business combination either because: (i) substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset, or group of similar identified assets, or (ii) the acquired entity doesnot have an input and a substantive process that together significantly contribute to the ability to create outputs, the Company accounts for the acquisition as an asset acquisition. In an asset acquisition, goodwill isnot recognized. Any excess of the total purchase price plus transaction costs over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets at the acquisition date.

Investments in fixed maturities are classified as available-for-sale and reported at fair value. Unrealized gains and losses are included in accumulated other comprehensive income, net of tax.

Equity investments include common stocks and are reported at fair value. Changes in fair value of equity investments are reco gnized in net income.

Limited liability investments include investments in limited liability companies and limited partnerships in which the Company's interests arenot deemed minor and, therefore, are accounted for under the equity method of accounting. The most recently available financial statements are used in applying the equity method. The difference between the end of the reporting period of the limited liability entities and that of the Company isno more thanthree months. Income or loss from limited liability investments is recognized based on the Company's share of the earnings of the limited liability entities and is included in net investment income.

Limited liability investments, at fair value are accounted for at fair value with changes in fair value included in gain (loss) on change in fair value of limited liability investments, at fair value. The difference between the end of the reporting period of the limited liability investments, at fair value and that of the Company isno more thanthree 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. These investments donot have readily determinable fair values and, therefore, are reported at cost, adjusted for observable price changes and impairments. Changes in carrying value are included in net change in unrealized gain on private company investments.

Other investments include collateral loans and are reported at their unpaid principal balance, net of an allowance for credit losses, which approximates fair value.

Short-term investments, which consist of investments with original maturities betweenthree months andone year, are reported at cost, which approximates fair value.

Realized gains and losses on sales, determined on afirst-infirst-out basis, are included in net realized gains.

Dividends and interest income are included in net investment income. Investment income is recorded as it accrues.

The Company accounts for all financial instruments using trade date accounting.

The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the consolidated statements of operations if the fair value of an instrument falls below its cost or amortized cost.

When an available-for-sale fixed maturity investment is impaired, it is evaluated to determine whether there is an intent to sell the investment before recovery of amortized cost or whether a credit loss exists.

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For fixed maturity investments that the Company intends to sell or for which it is more likely thannot that the Company will be required to sell before an anticipated recovery of value, the full amount of the impairment is recognized as an impairment loss in the consolidated statements of operations. The investment’s amortized cost is written down to its fair value and isnot adjusted for any subsequent recoveries.

For fixed maturity investments that the Company doesnot intend to sell or for which it is more likely thannot that the Company willnot be required to sell before an anticipated recovery of value, the Company evaluates whether a decline in fair value below the amortized cost basis has occurred from a credit loss or other non-credit related factors.

Considerations in the credit loss assessment include (1) extent to which the fair value has been less than amortized cost, (2) conditions related to the investment, an industry, or a geographic area, (3) payment structure of the investment and the likelihood of the issuer's ability to make contractual cash flows, (4) defaults or other collectability concerns related to the issuer, (5) changes in the ratings assigned by a rating agency and (6) other credit enhancements that affect the investment’s expected performance.

If a credit loss exists, an allowance is established, which is equal to the difference between the present value of cash flows expected to be collected and the amortized cost basis. The expected allowance for credit losses is limited by the amount that the fair value is less than the amortized cost basis and is adjusted in subsequent periods for any additional expected credit losses or subsequent recoveries. Changes in the allowance are reported as impairment losses in the consolidated statements of operations. The amortized cost basis of the investment isnot adjusted for the expected allowance for credit loss. The impairment related to other non-credit related factors is reported in other comprehensive (loss) income.

The Company reports accrued investment income separately for available-for-sale fixed maturity investments and has made a policy election tonot measure an allowance for credit losses on accrued investment income. Accrued investment income is written off against net investment income at the time the issuer of the bond defaults or is expected to default on interest payments.

Prior to* January 1, 2023,*the Company's assessment of whether an impairment loss for a fixed maturity security occurred incorporated both quantitative and qualitative information. Factors considered in determining whether a loss was other-than-temporary included the length of time and extent to which fair value had been below cost; the financial condition and near-term prospects of the issuer; and the Company's ability and intent to hold investments for a period of time sufficient to allow for any anticipated recovery.

Cash and cash equivalents include cash and investments with original maturities ofno more thanthree months when purchased that are readily convertible into cash.

Restricted cash represents certain cash and cash equivalent balances restricted as to withdrawal or use. The Company's restricted cash is comprised primarily of cash held for the payment of vehicle service agreement claims under the terms of certain contractual agreements, funds held in escrow, statutory deposits and amounts pledged tothird-parties as deposits or to collateralize liabilities.

Service fee receivable includes balances due and uncollected from customers. Service fee receivable is reported net of an estimated allowance for credit losses. The Company recognizes credit losses based on a forward-looking current expected credit losses. The Company estimates expected credit losses based upon its assessment of various factors, including historical collection experience, the age of service fee receivable balances, credit quality of its customers, current economic conditions, management’s experience, reasonable and supportable forecasts of future economic conditions, and other factors that* may*affect its ability to collect from customers. Expected credit losses are recorded as general and administrative expenses in the consolidated statements of operations. Amounts are written off against the allowance when determined to be uncollectible. Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered.

Deferred contract costs represent the deferral of incremental costs to obtain or fulfill a contract with a customer. Incremental costs to obtain a contract with a customer primarily include sales commissions. The Company capitalizes costs incurred to fulfill a contract if the costs are identifiable, generate or enhance resources used to satisfy future performance obligations and are expected to be recovered. Costs to fulfill a contract include labor costs for set-up activities directly related to the acquisition of vehicle service agreements. Contract costs are deferred and amortized over the expected customer relationship period consistent with the pattern in which the related revenues are earned. Amortization of incremental costs to obtain a contract are recorded in commissions in the consolidated statements of operations. Changes in estimates, if any, are recorded in the accounting period in which they are determined.

Property and equipment are reported in the consolidated financial statements at cost. Depreciation of property and equipment has been provided using the straight-line method over the estimated useful lives of such assets. Repairs and maintenance are recognized in operations during the period incurred. The Company estimates useful life to bethree toten years for leasehold improvements; three toseven years for furniture and equipment; three toten years for computer hardware; andfive years for medical equipment.

When the Company acquires a subsidiary or other business where it exerts significant influence, the fair value of the net tangible and intangible assets acquired is determined and compared to the amount paid for the subsidiary or business acquired. Any excess of the amount paid over the fair value of those net assets is considered to be goodwill.

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Goodwill is tested for impairment annually as of* November 30,or more frequently if events or circumstances indicate that the carrying value may**not* be recoverable, to ensure that its fair value is greater than or equal to the carrying value. Any excess of carrying value over fair value is charged to the consolidated statements of operations in the period in which the impairment is determined.

When the Company acquires a subsidiary or other business where it exerts significant influence or acquires certain assets, intangible assets* maybe acquired, which are recorded at their fair value at the time of the acquisition. An intangible asset with a definite useful life is amortized in the consolidated statements of operations over its estimated useful life. The Company writes down the value of an intangible asset with a definite useful life when the undiscounted cash flows arenot* expected to allow for full recovery of the carrying value.

Intangible assets with indefinite useful lives arenot subject to amortization and are tested for impairment annually as of* November 30,or more frequently if events or circumstances indicate that the carrying value may**not* be recoverable, to ensure that fair values are greater than or equal to carrying values. Any excess of carrying value over fair value is charged to the consolidated statements of operations in the period in which the impairment is determined. The Company* mayperform 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.

Derivative financial instruments include an interest rate swap contact and the trust preferred debt repurchase options. The Company measures derivative financial instruments at fair value. The fair value of derivative financial instruments is required to be revalued each reporting period, with corresponding changes in fair value recorded in the consolidated statements of operations. Realized gains or losses are recognized upon settlement of the contracts. Refer to Note11, "Derivatives," for further information.

The Company entered into a pay fixed, receive variable interest rate swap contract to reduce its exposure to changes in interest rates. The interest rate swap contract is included in other assets in the consolidated balance sheets. The Company hasnot elected hedge accounting for the interest rate swap, therefore changes in fair value are recorded in current period earnings and are included in interest expense in the consolidated statements of operations.

During thethird quarter of2022, the Company entered intothree trust preferred debt repurchase option agreements. The trust preferred debt repurchase options are included in other assets in the consolidated balance sheet at* December 31, 2022with changes in fair value included in (loss) gain on change in fair value of derivative asset option contracts in the consolidated statement of operations. The Company exercised the repurchase options during thefirst* quarter of2023.

Bank loans are reported in the consolidated balance sheets at par value adjusted for unamortized discount or premium and unamortized issuance costs. Discounts, premiums, and costs directly related to the issuance of debt are capitalized and amortized through the maturity date of the debt using the effective interest rate method and are recorded in interest expense in the consolidated statements of operations. Gains and losses on the extinguishment of debt are recorded in gain on extinguishment of debt.

The Company's subordinated debt is measured and reported at fair value. The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by athird-party. These inputs include credit spread assumptions developed by athird-party and market observable swap rates. The portion of the change in fair value of subordinated debt related to the instrument-specific credit risk is recognized inother comprehensive loss.

The consideration for certain of the Company's acquisitions include future payments to former owners that are contingent upon the achievement of certain targets over future reporting periods. Liabilities for contingent consideration are measured and reported at fair value at the date of acquisition and are included in accrued expenses and other liabilities in the consolidated balance sheets. Changes in the fair value of contingent consideration liabilities can result from changes toone or multiple inputs, including adjustments to the discount rates or changes in the assumed achievement or timing of any targets. These fair value measurements are based on significant inputsnot observable in the market. Changes in assumptions could have an impact on the payout of contingent consideration liabilities. Changes in fair value are reported in the consolidated statements of operations as non-operating other expense.

The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely thannot and a valuation allowance is established for any portion of a deferred tax asset that management believes willnot be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company accounts for uncertain tax positions in accordance with the income tax accounting guidance. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax (benefit) expense.

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The Company records a right of use asset and lease liability for all leases in which the estimated term exceedstwelve months. The Company treats contracts as a lease when the contract: (1) conveys the right to use a physically distinct property or equipment asset for a period of time in exchange for consideration, (2) the Company directs the use of the asset and (3) the Company obtains substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases are office leases, the Company is unable to determine an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company includes options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company determines lease classification at the commencement date. Leasesnot classified as sales-type (lessor) or financing leases (lessor and lessee) are classified as operating leases. The primary accounting criteria the Company uses that results in operating lease classification are: (a) the lease doesnot transfer ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease doesnot grant the lessee a purchase option that the lessee is reasonably certain to exercise, (c) using aseventy-five percent or more threshold in addition to other qualitative factors, the lease term isnot for a major part of the remaining economic life of the underlying asset, (d) using aninety percent or more threshold in addition to other qualitative factors, the present value of the sum of the lease payments and residual value guarantee from the lessee, if any, doesnot equal or substantially exceed the fair value of the underlying asset.

As an accounting policy, the Company has electednot to apply the recognition requirements in ASC842 to short-term leases (generally those with terms oftwelve months or less). Instead, the Company recognizes the lease payments as expense on a straight-line basis over the lease term and any variable lease payments in the period in which the obligation for those payments is incurred.

Rental expense for operating leases is recognized on a straight-line basis over the lease term, net of any applicable lease incentive amortization.

Service fee and commission revenue and contract balances

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. Customers either pay in full at the inception of a warranty contract or commission product sale, or when consulting, healthcare and software license and support services are billed, or on terms subject to the Company’s customary credit reviews.

Vehicle service agreement fees include the fees collected to cover the costs of future automobile mechanical breakdown claims and the associated administration of those claims. Vehicle service agreement fees are earned over the duration of the vehicle service agreement contracts as the single performance obligation is satisfied. Vehicle service agreement fees are initially recorded as deferred service fees with revenues recognized over the term of the contract based on the proportion of expected claims to total overall claims to be incurred over the life of the contract. The Company believes this reasonably represents the transfer of services to the vehicle service contract holder over the warranty term. The Company compares the remaining deferred service fees balance to the estimated amount of expected future claims under the vehicle service agreement contracts and records an additional accrual if the deferred service fees balance is less than expected future claims costs.

In certain jurisdictions the Company is required to refund to a customer a pro-rata share of the vehicle service agreement fees if a customer cancels the agreement prior to the end of the term. Depending on the jurisdiction, the Company* maybe entitled to deduct from the refund a cancellation fee and/or amounts for claims incurred prior to cancellation. While refunds vary depending on the term and type of product offered, historically refunds have averaged5.75%* to14% of the 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. The Company estimates refunds based on the actual historical refund rates by warranty type taking into consideration current observable refund trends in estimating the expected amount of future customer refunds to be paid at each reporting period.

Maintenance support service fees include the service fees collected to administer equipment breakdown and maintenance support services and are earned as services are rendered.

Warranty product commissions include the commissions from the sale of warranty contracts for certain new and used heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercial refrigeration equipment. The Company acts as an agent on behalf of thethird-party insurance companies that underwrite and guaranty these warranty contracts. The Company doesnot guaranty the performance underlying the warranty contracts it sells. Warranty product commissions are earned at the time of the warranty product sales.

Homebuilder warranty service fees and homebuilder warranty commissions related to the Company's former subsidiary Professional Warranty Services Corporation ("PWSC") which was disposed of on* July 22, 2022.*

Business services consulting revenue includes the revenue from providing outsourced finance and human resources consulting services. The Company invoices for business services revenue based on contracted rates. Revenue is earned as services are provided.

Healthcare services revenue includes revenue from providing healthcare professional staffing services andoutsourced cardiac telemetry services for long-term acute care and inpatient rehabilitation hospitals. The Company invoices for healthcare services revenue based on contracted rates. Revenue is earned as services are provided.

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Software license and support revenue includes revenue from the sale or rental of software products created exclusively to serve the management needs of all types of shared-ownership properties. Software licenses are on-premise at customer locations and considered fully functional when made available and delivered to the customer. As the customer can use and benefit from the license on its own, software licenses represent distinct performance obligations. Revenue is recognized upfront at the point in time when control is transferred, which is defined as the point in time when the customer can use and benefit from the license. The Company's software licenses are sold as term licenses, and the contracts include software support services, which are accounted for as separate performance obligations. The Company recognizes the portion of the transaction price allocated to the software license on a residual basis. The residual basis is used to allocate revenue when the contract arrangement includes a software license and has at leastone performance obligation for which the stand-alone selling price ("SASP") is observable, such as the software support services. The residual method is used as the selling price for software licenses in circumstances when the transaction price is highly variable and the SASP isnot discernable from past transactions or other observable evidence. The Company evaluates the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SASP. 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.

Contract balances

The timing of revenue recognition* maydiffer from the timing of billing and cash receipts from customers. A contract asset is established for revenue that is recognized prior to billing the customer and is included in other assets in the consolidated balance sheets. Upon billing, which typically occurs over athree* tofive year installment period, the value of the contract asset is reversed and service fee receivable is recorded. When payment is made prior to satisfaction of performance obligations, a contract liability is established which is recorded as deferred service fees in the consolidated balance sheets. If the satisfaction of the performance obligation occurs over time, the contract liability is reversed over the contract term, as the services are provided to the customer. If the satisfaction of the performance obligation is at a point in time, the contract liability reverses upon delivery to the customer.

The Company uses the fair-value method of accounting for stock-based compensation awards granted to employees. Expense is recognized on a straight-line basis over the requisite service period during which awards are expected to vest, with a corresponding increase to either additional paid-in capital for equity-classified awards or to a liability for liability-classified awards. Liability-classified awards, included in accrued expenses and other liabilities in the consolidated balance sheets, are measured and reported at fair value on the date of grant and are remeasured each reporting period. Compensation expense related to the change in fair value for liability-classified awards is reported in the consolidated statements of operations as general and administrative expenses. For awards with a graded vesting schedule, expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. For awards subject to a performance condition, expense is recognized when the performance condition has been satisfied or is probable of being satisfied. For awards subject to a market condition, compensation expense is recognized on a straight-line basis regardless of whether the market condition is satisfied, provided that the requisite service has been provided. Forfeitures are recognized in the period that the award is forfeited.

The fair values of the Company's investments in fixed maturities and equity investments, limited liability investments, at fair value, subordinated debt, derivative financial instruments and contingent considerationare estimated using a fair value hierarchy to categorize the inputs it uses in valuation techniques. Fair values for other investments approximate their unpaid principal balance. The carrying amounts reported in the consolidated balance sheets approximate fair values for cash and cash equivalents, restricted cash, short-term investments and certain other assets and other liabilities because of their short-term nature.

NOTE3 RECENTLY ISSUED ACCOUNTING STANDARDS

Effective* January 1, 2023,the Company adopted ASU2016*-13, Financial Instruments-Credit Losses (Topic326*): Measurement of Credit Losses on Financial Instruments*("ASU2016-13"). ASU2016-13 replaces the current incurred loss model used to measure impairment losses with an expected loss model for trade, reinsurance, and other receivables as well as financial instruments measured at amortized cost. ASU2016-13 requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. For available-for-sale fixed maturities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturities where there is an intent to sell, impairment will continue to result in a write down of amortized cost.

The Company adopted ASU2016-13 using a modified retrospective method. Prior period amounts havenot been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition approach is required for available-for-sale fixed maturity investments that have recognized an other-than-temporary impairment write down prior to the effective date. The adoption of ASU2016-13 resulted inno cumulative-effect adjustment to accumulated deficit at* January 1, 2023.*

In* March 2023,the Financial Accounting Standards Board ("FASB") issued ASU2023*-02, Investments Equity Method and Joint Ventures (Topic323*): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.* These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after* December 15, 2023.Early adoption is permitted in any interim period. The Company doesnot* expect the adoption of ASU2023-02 to have an impact on its consolidated financial statements.

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In* October 2023,the FASB issued ASU2023*-06,* Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative issued in ** August 2018*("ASU2023-06"), which amends U.S. GAAP to reflect updates and simplifications to certain disclosure requirements referred to FASB by the SEC. The targeted amendments incorporate14 of the27 disclosures referred by the SEC into Codification. Some of the amendments represent clarifications to, or technical corrections of, the current requirements. ASU2023-06 could move certain disclosures from the nonfinancial portions of SEC filings to the financial statement notes. Each amendment in ASU2023-06 will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulation by* June 30, 2027.No amendments were effective at December 31, 2023.The Company is currently evaluating the impact of the adoption of the new standard but doesnot* expect a significant impact on its consolidated financial statements.

In* November 2023,the FASB issued ASUNo.* 2023-07, Improvements to Reportable Segment Disclosures(“ASU2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. ASU2023-07 is effective for public companies with annual periods beginning after* December 15, 2023,and interim periods within annual period beginning after December 15, 2024,*with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In* December 2023,the FASB issued ASUNo.* 2023-09, Improvements to Income Tax Disclosures (“ASU2023-09”), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU2023-09 is effective for public companies with annual periods beginning after* December 15, 2024,*with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

NOTE4 ACQUISITIONS

During the years ended* December 31, 2023and December 31, 2022*, the Company incurred acquisition expenses related to business combinationsof $0.7 million and$1.1 million, respectively, which are included in general and administrative expenses in the consolidated statements of operations.

Systems Products International, Inc.

On* September 7, 2023,the Company acquired 100% of the outstanding equity interests of Systems Products International, Inc. ("SPI") for aggregate cash consideration of $2.8 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. 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. As further discussed in Note22*, "Segmented Information," SPI is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’sfourth acquisition under its novel CEO Accelerator program and itsfirst in the vertical market software space and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition and are subject to adjustment during a measurement period subsequent to the acquisition date,not to exceedone year as permitted under U.S. GAAP. The Company expects to complete its purchase price allocation during thefirst quarter of2024. These estimates, allocations and calculations are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed could change from the estimates included in these consolidated financial statements.

Refer to Note9, "Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill of$0.1 million represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of companies and acquire an assembled workforce. The goodwill isnot deductible for tax purposes.

The following table summarizes the preliminary estimated allocation of the SPI assets acquired and liabilities assumed at the date of acquisition:

The consolidated statements of operations include the earnings of SPI from the date of acquisition. From the date of acquisition through* December 31, 2023*, SPI earned revenue of $0.8 million and had a net income of$0.4 million.

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Digital Diagnostics Imaging, Inc.

On* October 26, 2023,the Company acquired 100% of the outstanding equity interests of Digital Diagnostics Imaging, Inc. ("DDI") for aggregate cash consideration of approximately $11.0 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. DDI, based in Wall, New Jersey, is a provider of fully managed outsourced cardiac telemetry services. As further discussed in Note22*, "Segmented Information," DDI is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’sfifth acquisition under its novel CEO Accelerator program and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition and are subject to adjustment during a measurement period subsequent to the acquisition date,not to exceedone year as permitted under U.S. GAAP. The Company expects to complete its purchase price allocation during thefirst quarter of2024. These estimates, allocations and calculations are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed could change from the estimates included in these consolidated financial statements.

Refer to Note9 , " Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill of $4.8 million represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of companies and acquire an assembled workforce. The goodwill isnot deductible for tax purposes.

The following table summarizes the preliminary estimated allocation of the DDI assets acquired and liabilities assumed at the date of acquisition:

The consolidated statements of operations include the earnings of DDI from the date of acquisition. From the date of acquisition through* December 31, 2023*, DDI earned revenue of$0.9 million and had net income of$1.5 million, primarily related to a tax benefit recognized for the partial release of the Company’s deferred tax valuation allowance related to the acquired deferred tax liabilities.

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CSuite Financial Partners, LLC

On* November**1,* 2022, the Company acquired 100% of the outstanding equity interests of CSuite Financial Partners, LLC ("CSuite"). CSuite, based in Manhattan Beach, California, is a national financial executive services firm providing financial management leadership to companies in every industry, regardless of size, throughout the United States. As further discussed in Note22, "Segmented Information," CSuite is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’ssecond acquisition under its novel CEO Accelerator program and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity.

The Company acquired CSuite for aggregate cash consideration of approximately $8.5 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. The final purchase price was subject to a working capital true-up of less than $0.1 million that was settled during thefirst quarter of2023. The Company will also pay additional contingent consideration, only to the extent earned, in an aggregate amount of up to $3.6 million, which is subject to certain conditions, including the successful achievement of certain financial metrics for CSuite during thethree-year period commencing on thefirst full calendar month following the acquisition date. The estimated fair value of the contingent consideration obligation at* December 31, 2023* and* December 31, 2022* was zero.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition and were subject to adjustment during a measurement period subsequent to the acquisition date,not to exceedone-year as permitted under U.S. GAAP. During thefirst quarter of2023, the Company finalized its fair value analysis of the assets acquired and liabilities assumed with the assistance of athird party.No measurement period adjustments were recorded as a result of finalizing the fair value analysis.

Refer to Note9, "Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill of $4.1 million represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of companies and acquire an assembled workforce. The goodwill isnot deductible for tax purposes. The estimated fair value of the contingent consideration obligation at the acquisition date ofzero was determined using a Monte Carlo simulation based on forecasted future results.

The following table summarizes the estimated allocation of the CSuite assets acquired and liabilities assumed at the date of acquisition:

The consolidated statements of operations include the earnings of CSuite from the date of acquisition. From the date of acquisition through* December 31, 2022*, CSuite earned revenue of$1.3 million and had a net loss of less than$0.1 million.

Secure Nursing Service, Inc.

On* November 18, 2022,the Company acquired substantially all of the assets and assumed certain specified liabilities of Secure Nursing Service, Inc. ("SNS") for aggregate cash consideration of $11.5 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. SNS, based in Los Angeles, California, employs highly skilled and professional per diem and travel Registered Nurses, Licensed Vocational Nurses, Certified Nurse Assistants and Allied Healthcare Professionals with multiple years of acute care hospital experience. SNS places these healthcare professionals in both per diem assignments, and in short-term and long-term travel assignments in a variety of hospitals in southern California. As further discussed in Note22*, "Segmented Information,"SNS is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’sthird acquisition under its novel CEO Accelerator program and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was provisionally allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition and were subject to adjustment during a measurement period subsequent to the acquisition date,not to exceedone-year as permitted under U.S. GAAP. During thefirst quarter of2023, the Company finalized its fair value analysis of the assets acquired and liabilities assumed with the assistance of athird party.No measurement period adjustments were recorded as a result of finalizing the fair value analysis.

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Refer to Note9, "Intangible Assets,"for further disclosure of the intangible assets related to this acquisition. The goodwill of $1.6 million represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of companies and acquire an assembled workforce. The goodwill isnot deductible for tax purposes.

The following table summarizes the estimated allocation of the SNS assets acquired and liabilities assumed at the date of acquisition:

The consolidated statements of operations include the earnings of SNS from the date of acquisition. From the date of acquisition through* December 31, 2022*, SNS earned revenue of$2.4 million and had a net loss of$0.1 million.

Unaudited Pro Forma Summary

The following unaudited pro forma summary presents the Company's consolidated financial statements for the year ended* December 31, 2023and December 31, 2022* as if DDI, CSuite and SNS had been acquired on* January 1of the year prior to the acquisitions. The pro forma summary is presented for illustrative purposes only and doesnot* purport to represent the results of our operations that would have actually occurred had the acquisitions occurred as of the beginning of the period presented or project our results of operations as of any future date or for any future period, as applicable. The pro forma results primarily include purchase accounting adjustments related to the acquisitions of DDI, CSuite and SNS, interest expense and the amortization of debt issuance costs and discounts associated with the related financing obtained in connection with the DDI, CSuite and SNS acquisitions (see Note12, "Debt"), tax related adjustments and acquisition-related expenses. The pro forma effects of the SPI acquisition arenot material to the Company’s consolidated statements of operations for the years ended* December 31, 2023and December 31, 2022*.

NOTE5 DISPOSAL AND DISCONTINUED OPERATIONS

Professional Warranty Service Corporation

On* July 29, 2022,*Professional Warranty Services LLC ("PWS LLC"), a subsidiary of the Company entered into an Equity Purchase Agreement (the "Agreement") with Professional Warranty Service Corporation ("PWSC"), an 80% majority-owned, indirect subsidiary of the Company, Tyler Gordy, the president of PWSC and a 20% owner of PWSC ("Gordy") and PCF Insurance Services of the West, LLC ("Buyer"), pursuant to which PWS LLC and Gordy sold PWSC to Buyer.

The purchase price paid by Buyer to PWS LLC and Gordy consisted of $51.2 million in base purchase price, subject to customary adjustments for net working capital, and non-compensation related transaction expenses of approximately $1.7 million. As a result of the sale, the Company incurred compensation expenses of $5.4 million, primarily related to previously-granted awards to PWSC employees that are accounted for on a fair value basis, which are included in disposal of subsidiary transaction expenses in the consolidated statement of operations for the year ended* December 31, 2022.*

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To the extent the EBITDA of PWSC (as defined in the Agreement) for theone-year period following the sale transaction exceeds 103% of the EBITDA at the closing of the sale transaction (the "Closing EBITDA"), PWS LLC and Gordy will also be entitled to receive an earnout payment in an amount equal tofive times the EBITDA in excess of 103% of Closing EBITDA. The Company has estimated the potential earnout payment to bezero as of* December 31, 2023*.

As a result of the sale, the Company recognized a net gain on disposal of $37.9 million, net of direct selling costs of $1.7 million, during the year ended* December 31, 2022*. The sale of PWSC didnot represent a strategic shift that would have a major effect on the Company's operations or financial results; therefore, PWSC isnot presented as a discontinued operation. The earnings of PWSC, which was included in the Extended Warranty segment, are included in the consolidated statements of operations through the* July 29, 2022disposal date. The assets, liabilities and equity (including the non-controlling interest) of PWSC were deconsolidated effective July 29, 2022.*

The sale of PWSC represents the disposal of a significant subsidiary of the Company, that had contributions to Extended Warranty service fee and commission revenue of$4.9 million for the year ended* December 31, 2022*. Additionally, PWSC had a pre-tax loss of $5.5 million for the year ended* December 31, 2022*, of which $4.4 million was attributable to the controlling interest. At the* July 29, 2022*disposal date, PWSC had service fee receivables totaling $0.7 million, intangible assets, net of $2.3 million, deferred service fees of $7.6 million and a non-controlling interest of ($2.2) million.

During the year ended* December 31, 2023*, the Company recorded an additional gain on disposal of PWSC of $0.3 million related to working capital adjustments and release of escrowed amounts withheld for purposes of indemnification claims.

Leased Real Estate Segment

The Company’s subsidiaries, VA Lafayette and CMC Industries Inc. ("CMC"), which includes CMC’s subsidiaries Texas Rail Terminal LLC and TRT Leaseco, LLC ("TRT"), comprised the Company's entire Leased Real Estate segment. Each of CMC, through indirect wholly owned subsidiary, TRT, and VA Lafayette own a single asset, which is real estate property. As further described below, on* December 29, 2022,TRT sold its assets and at December 31, 2022,*VA Lafayette was classified as held for sale.

In accordance with ASUNo. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal is categorized as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results*.*

Leased Real Estate is a component of Kingsway since its operations and cash flows can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the reporting entity. A component of an entity* mayconsist of multiple disposal groups and doesnot* need to be disposed of in a single transaction. The disposal of the Leased Real Estate segment represents a strategic shift that will have a major effect on the Company's operations and financial results, as the disposal of the Leased Real Estate assets is in excess of20% of the entity's total assets. As a result, the assets, liabilities, operating results and cash flows related to Leased Real Estate have been classified as discontinued operations in the consolidated financial statements for all periods presented.

Sale of CMC Real Property

CMC owned, through its indirect wholly owned subsidiary, TRT, 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 totwo mortgages (the "Mortgages").

On* December 22, 2022,TRT entered into a Purchase and Sale Agreement (the "CMC Agreement") with BNSF Dayton LLC ("Purchaser"), pursuant to which TRT agreed to sell to the Purchaser the Real Property. TRT was also the landlord and an affiliate of the Purchaser was the current tenant under the long-term triple net lease over the Real Property. Under the terms of the CMC Agreement, at the closing on December 29, 2022,*TRT assigned, and the Purchaser assumed, the rights and obligations of the landlord under the existing long-term triple net lease.

The purchase price paid by the Purchaser at the closing consisted of $44.5 million in cash plus the assumption of the unpaid principal balance as of the closing of the Mortgages of approximately $170.7 million, netting cash proceeds of $21.4 million to Kingsway after taxes, fees and distribution to the minority shareholder. The Company recognized a gain on disposal of CMC of $0.2 million which is included in loss on disposal ofdiscontinued operations, net of taxes in the consolidated statement of operations for the year ended* December 31, 2022*.

As discussed above, CMC and TRT are part of the Leased Real Estate disposal group. The sale of the Leased Real Estate's assets represents a strategic shift that will have a major effect on the Company's operations and financial results. As a result, CMC and its subsidiaries, have been classified as a discontinued operation and the results of their operations are reported separately for all periods presented.

VA Lafayette

During thefourth quarter of2022, the Company began executing a plan to sell its subsidiary, VA Lafayette. VA Lafayette owns the LA Real Property, that is subject to a long-term lease and the LA Mortgage. During thefirst quarter of2024, the Company entered into a letter of intent for the sale of VA Lafayette. As part of recognizing the business as held for sale, the Company is required to measure VA Lafayette at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during thefourth quarter of2023, the Company recognized an estimated non-cash, loss on disposal of $2.0 million, which is included in loss on disposal of discontinued operations, net of taxes in the consolidated statements of operations. The loss is a result of adjusting the net carrying value of VA Lafayette to be equal to the estimated selling price and was determined by comparing the expected cash consideration received for the sale of VA Lafayette with the net assets of VA Lafayette.

As discussed above, VA Lafayette is part of the Leased Real Estate disposal group. In conjunction with the sale of the CMC Real Property, the sale of the Leased Real Estate's assets represents a strategic shift that will have a major effect on the Company's operations and financial results. As a result, VA Lafayette has been classified as a discontinued operation and the results of its operations are reported separately for all periods presented. The assets and liabilities of VA Lafayette are presented as held for sale in the consolidated balance sheets at* December 31, 2023and December 31, 2022*.

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Summary financial information for Leased Real Estate included in income(loss)from discontinued operations, net of taxes in the statements of operations for the years ended* December 31, 2023and December 31, 2022* is presented below:

For the years ended* December 31, 2023and December 31, 2022*, pre-tax income from discontinued operations of $0.5 million and pre-tax loss of $10.7 million was attributable to the controlling interest, respectively.

The carrying amounts of the major classes of assets and liabilities of Leased Real Estate presented as held for sale at* December 31, 2023and December 31, 2022* are as follows:

Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company

As part of the* October 18, 2018transaction to sell Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company (collectively "Mendota"), the Company will indemnify the buyer for any loss and loss adjustment expenses with respect to open claims in excess of Mendota's carried unpaid loss and loss adjustment expenses at June 30, 2018*related to the open claims. The maximum obligation to the Company with respect to the open claims is $2.5 million.

During thethird quarter of2022, the buyer provided to the Company an analysis of the claims development that indicated that the Company's potential exposure with respect to the open claims was at the maximum obligation amount. Previous communications from the buyer notedno such development and the buyer wasnot obligated to provide development information to the Company until thefirst quarter of2023. As a result of the newly provided information, the Company recorded a liability of $2.5 million, which is included in accrued expenses and other liabilities in the consolidated balance sheet at* December 31, 2022and loss on disposal of discontinued operations, net of taxes in the consolidated statement of operations for the year ended December 31, 2022.There wereno* payments made by the Company related to the open claims during the year ended* December 31, 2022.During thefirst* quarter of2023, the*$2.0* million that had been previously deposited into an escrow account was released and remitted to the buyer to satisfy the Company's payment with respect to the open claims. The Company hasno remaining exposure with respect to the open claims.

Summary

Loss on disposal of discontinued operations, net of taxes, related to Leased Real Estate and Mendota, in the statements of operations for the years ended* December 31, 2023and December 31, 2022* is comprised of the following:

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NOTE6 VARIABLE INTEREST ENTITIES

Argo Holdings Fund I, LLC

The Company holds a 43.4% investment in Argo Holdings at* December 31, 2023and December 31, 2022*. Argo Holdings makes investments, primarily in established lower middle market companies based in North America, through investments in search funds. The managing member of Argo Holdings is Argo Management Group, LLC ("Argo Management"), a wholly owned subsidiary of the Company. Argo Holdings is considered to be a VIE as the members holding equity at risk lack characteristics of a controlling financial interest. The Company holds a variable interest in Argo Holdings due to its right to absorb significant economics in Argo Holdings and through its controlling interest in Argo Management, through which the Company holds the power to direct the significant activities of Argo Holdings. As such, the Company was the primary beneficiary of Argo Holdings and consolidated Argo Holdings at* December 31, 2023and December 31, 2022*.

Net Lease Investment Grade Portfolio, LLC

The Company held a 71.0% investment in Net Lease at* December 31, 2022*. Net Lease distributed its remaining net assets and was dissolved during thefourth quarter of2023. At* December 31, 2022* Net Lease heldone commercial property under a triple net lease, which was encumbered by a mortgage loan. The property was sold during thefirst quarter of2023. Net Lease was considered to be a VIE as the members holding equity at risk lack characteristics of a controlling financial interest. The Company held a variable interest in Net Lease due to its right to absorb significant economics in Net Lease and to control the management decisions of Net Lease, which allowed the Company to hold the power to direct the significant activities of Net Lease. As such, the Company was the primary beneficiary of Net Lease and consolidated Net Lease at* December 31, 2022*.

The following table summarizes the assets and liabilities related to VIEs consolidated by the Company at* December 31, 2023and December 31, 2022*:

No arrangements exist requiring the Company to provide additional funding to the consolidated VIEs in excess of the Company’s unfunded commitments to its consolidated VIEs. At* December 31, 2023and December 31, 2022*, the Company hadno unfunded commitments. There areno restrictions on assets consolidated by these VIEs. There areno structured settlements of liabilities consolidated by these VIEs. Creditors haveno recourse to the general credit of the Company as the primary beneficiary of these VIEs.

The Company’s investments include certain non-consolidated investments, primarily in limited liability companies and limited partnerships in which the Company holds variable interests, that are considered VIEs due to the legal entities holding insufficient equity; the holders of equity at risk in the legal entities lacking controlling financial interests; and/or the holders of equity at risk having non-proportional voting rights.

The Company’s risk of loss associated with its non-consolidated VIEs is limited and depends on the investment. Limited liability investments accounted for under the equity method are limited to the Company’s initial investments. At* December 31, 2023and December 31, 2022*, the Company hadno unfunded commitments to its non-consolidated VIEs.

The following table summarizes the carrying value and maximum loss exposure of the Company’s non-consolidated VIEs at* December 31, 2023and December 31, 2022*:

The following table summarizes the Company’s non-consolidated VIEs by category at* December 31, 2023and December 31, 2022*:

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The following table presents aggregated summarized financial information of the Company’s non-consolidated VIEs at* December 31, 2023and December 31, 2022*. For certain of the non-consolidated VIEs, the financial information is presented on a lag basis, consistent with how the changes in the Company’s share of the net asset values of these equity method investees are recorded in net investment income. The difference between the end of the reporting period of an equity method investee and that of the Company is typicallyno more thanthree months.

NOTE7 INVESTMENTS

The amortized cost, gross unrealized gains and losses included in accumulated other comprehensive (loss) income, and estimated fair value of the Company's available-for-sale investments at* December 31, 2023and December 31, 2022* are summarized in the tables shown below:

The table below summarizes the Company's fixed maturities at* December 31, 2023* by contractual maturity periods. Actual results* maydiffer as issuers may*have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of these obligations.

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The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions whereno credit loss allowance had been established as of* December 31, 2023and December 31, 2022*. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.

At* December 31, 2023*, there are approximately 181 individual available-for-sale investments that were in unrealized loss positions, for which an allowance for credit losses hadnot been recorded. The Company didnot have the intent to sell these investments, and it wasnot more likely thannot that the Company would be required to sell these investments before recovery of its amortized cost. The Company evaluated these investments for credit losses at* December 31, 2023*. The Company considers many factors in evaluating whether the unrealized losses were credit-related, including, butnot limited to, the extent to which the fair value has been less than amortized cost, conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the issuer’s ability to make contractual cashflows, defaults or other collectability concerns related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affect the investment’s expected performance. The Company determined that the unrealized losses on the fixed maturity investments were due to non-credit related factors at* December 31, 2023*.

At* December 31, 2022*, there are approximately 208 individual available-for-sale investments that were in unrealized loss positions. Prior to the adoption of ASU2016-13, the Company performed an analysis of the individual investments to determine if declines in market value were other-than-temporary. The Company reviewed currently available information, including, butnot limited to, the credit ratings of the issuers of the investments in the fixed maturities with estimated fair values less than their carrying amounts and believes these unrealized losses arenot other-than-temporary and are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company didnot have the intent to sell these investments, and it wasnot more likely thannot that the Company would be required to sell those investments before recovery of its amortized cost.

The establishment of an impairment loss on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments for factors that* may*indicate a decline in fair value below its cost, amortized cost or modified cost. Refer to the "Significant Accounting Policies and Critical Estimates" section of Management's Discussion & Analysis for further information regarding the Company's detailed analysis and factors considered in recording an impairment loss on an investment.

The Company didnot record any write-downs for impairment related to available-for-sale fixed maturity investments for the years ended* December 31, 2023and December 31, 2022*.

The Company doesnot have any exposure to subprime mortgage-backed investments.

As of* December 31, 2023and December 31, 2022*, the carrying value of limited liability investments totaled$0.8 million and$1.0 million, respectively. The Company recorded impairments related to limited liability investments of $0.1 million andzero for the years ended* December 31, 2023and December 31, 2022*, respectively, which are included in impairment losses in the consolidated statements of operations. At* December 31, 2023*, the Company hasno unfunded commitments related to limited liability investments.

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Limited liability investments, at fair value represents the underlying investments of the Company’s consolidated entities Argo Holdings and Net Lease (at* December 31, 2022only). As of December 31, 2023and December 31, 2022*, the carrying value of the Company's limited liability investments, at fair value was $3.5 million and $17.1 million, respectively. The Company recorded impairments related to limited liability investments, at fair value of $0.1 million and less than $0.1 million for the years ended* December 31, 2023and 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. At* December 31, 2023*, the Company hasno unfunded commitments related to limited liability investments, at fair value.

The Company consolidated the financial statements of Net Lease on athree-month lag. Net Lease owned investments in limited liability companies that held investment properties.

As of* December 31, 2023and December 31, 2022*, the carrying value of the Company’s investments in private companies totaled$0.9 million and$0.8 million. For the years ended* December 31, 2023and December 31, 2022*, the Company recorded adjustments of $0.1 million and zero, respectively, to increase the fair value of certain investments in private companies for observable price changes, which are included in unrealized gain on private company investments in the consolidated statements of operations.

The Company performs a quarterly impairment analysis of its investments in private companies. As a result of the analysis performed, the Company didnot record any impairments related to investments in private companies for the years ended* December 31, 2023and December 31, 2022*.

Real estate investments represented investment real estate properties held by the Company’s consolidated subsidiary, Flower. On* September 29, 2022,Flower sold their investment real estate properties for $12.2 million. A portion of the proceeds from the sale were used to repay the Flower note payable with an unpaid principal balance of $5.9 million at the transaction date. Flower recorded a gain of $1.5 million related to the sale, which is included in gain on change in fair value of real estate investments in the consolidated statement of operations for the year ended December 31, 2022.*

Net investment income for the years ended* December 31, 2023and December 31, 2022*, respectively, is comprised as follows:

Net realized gains on investments for the years ended* December 31, 2023and December 31, 2022* are comprised as follows:

Net gain (loss) on equity investments for the years ended* December 31, 2023and December 31, 2022* is comprised as follows:

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Prior to thesecond quarter of2023, the Company held 400,000 warrants in Limbach Holdings, Inc. ("Limbach"). During thefirst quarter of2023, 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 thesecond* quarter of2023, the Company completed a cashless exercise of its Limbach warrants and received 110,036 shares of Limbach common stock. During thethird quarter of2023, the Company sold all of its Limbach common shares. The Company recorded total gains related to Limbach of $3.3 million during the year ended* December 31, 2023*.

NOTE*8* GOODWILL

The following table summarizes goodwill activity for the years ended* December 31, 2023and December 31, 2022*:

As further discussed in Note4, "Acquisitions," during2023 the Company recorded goodwill of$0.1 million related to the acquisition of SPI on* September 7, 2023and$4.8 million related to the acquisition of DDI on October 26, 2023.The goodwill related to these acquisitions is provisional and subject to adjustment during the measurement period. The Company expects to complete its purchase price allocations during thefirst* quarter of2024. The estimates, allocations and calculations recorded at* December 31, 2023* are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed* may**not* agree with the estimates included in these consolidated financial statements.

As further discussed in Note4 , " Acquisitions," during2022, the Company recorded goodwill of $4.1 million related to the acquisition of CSuite on* November 1, 2021and $1.6 million related to the acquisition of SNS on November 18, 2022.Also, during thefirst* quarter of2023 the Company settled the working capital true-up, related to the acquisition of CSuite, that decreased goodwill by less than $0.1 million.

Goodwill is assessed for impairment annually as of* November 30,or more frequently if events or circumstances indicate that the carrying value may**not* be recoverable. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. 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. Based on the assessment performed, no goodwill impairments were recognized in2023 and2022.

NOTE9 INTANGIBLE ASSETS

Intangible assets at* December 31, 2023and December 31, 2022* are comprised as follows:

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As further discussed in Note4, "Acquisitions," during2023 and2022, the Company recorded:

The intangible assets related to the SPI and DDI acquisitions are provisional and subject to adjustment during the measurement period. The Company expects to complete its purchase price during thefirst quarter of2024. The estimates, allocations and calculations recorded at* December 31, 2023* are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed* may**not* agree with the estimates included in these consolidated financial statements.

The Company's other intangible assets with definite useful lives are amortized either based on the patterns in which the economic benefits of the intangible assets are expected to be consumed or using the straight-line method over their estimated useful lives, which range from 7 to 15 years. Amortization of intangible assets was$5.9 million and$6.1 million for the years ended* December 31, 2023and December 31, 2022*, respectively. The estimated aggregate future amortization expense of all intangible assets is$5.7 million for2024, $4.5 million for2025, $3.4 million for2026, $2.5 million for2027, $1.8 million for2028 and $3.1 million thereafter.

The trade names intangible assets have indefinite useful lives and arenot amortized. As of* November 30,*2023 and2022, the Company conducted its annual qualitative assessment. As a result, the Company determined that certain trade names should be further examined under a quantitative approach. Based on the results of the quantitative approach, the Company didnot record any impairment. However, the Company notes that certain of its indefinite-lived intangible assets are sensitive to changes in interest rates, as well as the performance of the underlying business. Changes in interest rates and/or if the business underlying the intangible asset performs below the assumptions used in the original purchase accounting could cause certain intangible assets to become impaired.

NOTE10 PROPERTY AND EQUIPMENT

Property and equipment at* December 31, 2023and December 31, 2022* are comprised as follows:

For the years ended* December 31, 2023and December 31, 2022*, depreciation expense on property and equipment of $0.3 million and$0.3 million, respectively, is included in general and administrative expenses in the consolidated statements of operations.

NOTE11 DERIVATIVES

On* April 1, 2021,the Company entered into an interest rate swap agreement with CIBC Bank USA to convert the variable London interbank offered interest rate forthree*-month U.S. dollar deposits ("LIBOR") interest rate on a portion of its2020 KWH Loan (as defined below in Note12, "Debt") to a fixed interest rate of 1.18%. On* September 15, 2022,the interest rate swap agreement was amended to convert from a variable Secured Overnight Financing Rate ("SOFR") to a fixed interest rate of 1.103%. The interest rate swap had an initial notional amount of $11.9 million and matures on February**29,* 2024.

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The purpose of this interest rate swap, which isnot designated as a cash flow hedge, is to reduce the Company's exposure to variability in cash flows from interest payments attributable to fluctuations in the variable interest rate associated with the2020 KWH Loan. The Company hasnot elected hedge accounting for the interest rate swap. The interest rate swap is recorded in the consolidated balance sheets at fair value with changes in fair value recorded in the consolidated statement of operations.

The notional amount of the interest rate swap contract is$6.8 million at* December 31, 2023*. At* December 31, 2023* and* December 31, 2022*, the fair value of the interest rate swap contract was an asset of less than$0.1 million and $0.3 million, respectively, which is included in other receivables in the consolidated balance sheets. During the years ended* December 31, 2023* and* December 31, 2022*, the Company recognized a loss of$0.3 million and a gain of$0.3 million, respectively, related to the change in fair value of the interest rate swap, which is included in interest expense in the consolidated statements of operations and within cash flows used in operating activities from continuing operations in the consolidated statements of cash flows. Net cash receipts of $0.3 million and$0.1 million were made to the Company during the years ended* December 31, 2023* and* December 31, 2022*, respectively, to settle a portion of the liabilities related to the interest rate swap agreement. These cash receipts are reflected as cash inflows in the consolidated statements of cash flows within net cash used in operating activities from continuing operations.

On* August 2, 2022,the Company entered into an agreement with a holder offour* of the trust preferred debt instruments ("TruPs") that gave the Company the option to repurchase up to 100% of the holder’s principal and deferred interest for a purchase price equal to 63.75% of the outstanding principal and deferred interest (* "AugustOption"). Originally, the agreement called for a repurchase at 63%, which escalated to 63.75% once the September 26, 2022agreement (described below) was signed. The Company agreed that any repurchase made would be forno* less than 50% of the TruPs held by the holder.

Until the earlier of (i) the date that allfour of the preferred debt instruments have been repurchased and (ii) thenine month anniversary of the agreement (* "MayTermination Date"), all interest on thefour* preferred debt instruments continued to accrue. However, with respect to TruPs that were repurchased prior to the* MayTermination Date, the amount of interest accrued during the term of the agreement was treated as an offset and reduced the repurchase price for such TruPs. The Company hadno* obligation to pay any such accrued interest with respect to any of the TruPs that were repurchased prior to the* May*Termination Date.

The Company paid approximately $2.0 million to the holder for this option and the Company had until the* May*Termination Date to execute the repurchases. Given the Company repurchased an amount equal to or greater than $30.0 million, the $2.0 million paid was applied to the repurchases.

On* September 20, 2022,the Company entered into an additional agreement with the same party to the August 2, 2022agreement that gave the Company the option to repurchase up to 100% of the holder’s principal and deferred interest for 63.75% of the outstanding principal and deferred interest relating to a portion of afifth* TruPs held (* "September 20Option"). The September 20, 2022agreement was subject to the same terms and conditions as the August 2, 2022agreement andno* additional consideration was paid.

On* September 26, 2022,the Company entered into an agreement with a holder of a portion ofone* of the TruPs that gave the Company the option to repurchase up to 100% of the holder’s principal and deferred interest for a purchase price equal to 63% of the outstanding principal and deferred interest (* "September 26*Option").

Until the earlier of (i) the date that all of the preferred debt instrument has been repurchased and (ii) the* MayTermination Date, all interest on the preferred debt instrument continued to accrue. However, with respect to TruPs that were repurchased prior to the MayTermination Date, the amount of interest accrued during the term of the agreement was treated as an offset and reduced the repurchase price for such TruPs. The Company hadno* obligation to pay any such accrued interest with respect to the TruPs that were repurchased prior to the* May*Termination Date.

The Company paid approximately $0.3 million to the holder for this option and the Company had until the* May*Termination Date to execute the repurchase. Given the Company repurchased the TruPs, the $0.3 million paid was applied to the repurchases.

In* February 2023,the Company entered into amendments to the repurchase agreements described above that gave the Company an additional discount on the total repurchase price if the Company effected a 100% repurchase on or before March 15, 2023.On March 2, 2023,the Company gave notice to the holders of its intent to exercise its options to repurchase 100% of the principal. On March 22, 2023,the Company completed the repurchases. See Note12*, "Debt," for further discussion.

The* AugustOption, September 20Option and September 26Options (collectively "the TruPs Options") are derivative contracts. The Company's accounting policies donot* apply hedge accounting treatment to derivative instruments. The TruPs options are recorded in the consolidated balance sheet at* December 31, 2022at fair value with changes in fair value recorded in the consolidated statements of operations. See Note23*, "Fair Value of Financial Instruments," for further discussion.

At* December 31, 2022,the fair value of the TruPs Options contracts was$19.0 million, which is included in other assets in the consolidated balance sheet. During the year ended December 31, 2023*, the Company recognized a loss on change in fair value of the TruPs Options contracts of$1.4 million, which is included in (loss) gain on change in fair value of derivative asset option contracts in the consolidated statements of operations and as an adjustment to calculate cash flows used in operating activities in the consolidated statements of cash flows. Cash payments of $56.5 million were made to repurchase the TruPs during theyear ended* December 31, 2023* with respect to the TruPs Options contracts.

During the year ended* December 31, 2022*, the Company recognized an initial gain of $11.4 million, equal to the difference between the fair value of the TruPs Options contracts at the date of inception and the cash consideration paid, and a subsequent gain on change in fair value of $5.3 million, both of which are included in (loss) gain on change in fair value of derivative asset option contracts in the consolidated statements of operations and as an adjustment to calculate cash flows used in operating activities from continuing operations in the consolidated statements of cash flows. No cash payments were made to repurchase any of the TruPs during the year ended* December 31, 2022* with respect to the TruPs Options contracts.

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NOTE12 DEBT

Debt consists of the following instruments at* December 31, 2023and December 31, 2022*:

Subordinated debt mentioned above consists of the following trust preferred debt instrument at* December 31, 2023*:

Subordinated debt mentioned above consists of the following trust preferred debt instruments at* December 31, 2022*:

Ravix

As part of the acquisition of Ravix on* October 1, 2021,Ravix became a wholly owned subsidiary of Ravix Acquisition LLC ("Ravix LLC"), and together they borrowed from a bank a principal amount of $6.0 million in the form of a term loan, and established a $1.0 million revolver to finance the acquisition of Ravix (together, the"2021* Ravix Loan"). The2021 Ravix Loan requires monthly payments of principal and interest. The2021 Ravix Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 3.75%. At* December 31, 2023*, the interest rate was 9.00%. The term loan matures on* October**1,* 2027. The Company also recorded as a discount to the carrying value of the2021 Ravix Loan issuance costs of $0.2 million specifically related to the2021 Ravix Loan. The2021 Ravix Loan is carried in the consolidated balance sheet at* December 31, 2023* at itsunpaid principal balance.

Subsequent to the acquisition of CSuite on* November 1, 2022,CSuite became a wholly owned subsidiary of Ravix LLC. As a result of the acquisition of CSuite, on November 16, 2022,the2021* Ravix Loan was amended to (1) include CSuite as a borrower; (2) borrow an additional principal amount of $6.0 million in the form of a supplemental term loan (the*"2022* Ravix Loan"); and (3) amend the maturity date and interest rate of the $1.0 million revolver (the*"2022* Revolver"). The2022 Ravix Loan requires monthly payments of principal and interest. The2022 Ravix Loan matures on* November 16, 2028and has an annual interest rate equal to the Prime Rate plus 0.75%. At December 31, 2023*, the interest rate was 9.25%. The2022 Revolver matures on* November 16, 2024and has an annual interest rate equal to the Prime Rate plus 0.50%. At December 31, 2023* and* December 31, 2022*, the balance of the2022 Revolver was zero.

The Company also recorded as a discount to the carrying value of the2022 Ravix Loan issuance costs of $0.1 million specifically related to the2022 Ravix Loan. The2022 Ravix Loan is carried in the consolidated balance sheetat* December 31, 2023* at itsamortized cost, which reflects the monthly pay-down of principal as well as the amortization of the debt discount and issuance costs using the effective interest rate method.

The2022 Ravix Loan and the2021 Ravix Loan werenot deemed to be substantially different; therefore, the2022 Ravix Loan is accounted for as a modification of the2021 Ravix Loan and a new effective interest rate was determined based on the carrying amount of the2021 Ravix Loan. The issuance costs related to the2022 Ravix Loan, along with the existing unamortized issuance costs from the2021 Ravix Loan, are being amortized over the remaining term of the2022 Ravix Loan using the effective interest rate.

The fair values of the2021 Ravix Loan and the2022 Ravix Loan disclosed in the table above is derived from quoted market prices of B and BB minus rated industrial bonds with similar maturities and is categorized within Level2 of the fair value hierarchy. The2021 Ravix Loan and the2022 Ravix Loan are secured by certain of the equity interests and assets of Ravix and CSuite.

The2021 Ravix Loan and the2022 Ravix Loan contains a number of covenants, including, butnot limited to, a leverage ratio and a fixed charge ratio, all of which are as defined in and calculated pursuant to the2021 Ravix Loan and2022 Ravix Loan that, among other things, restrict Ravix and CSuite’s ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.

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SNS

As part of the asset acquisition of SNS on* November 18, 2022,the Company formed Secure Nursing Service LLC, which became a wholly owned subsidiary of Pegasus Acquirer Holdings LLC ("Pegasus LLC"), and together they borrowed from a bank a principal amount of $6.5 million in the form of a term loan, and established a $1.0 million revolver to finance the acquisition of SNS (together, the "SNS Loan"). The SNS Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00%. At December 31, 2023*, the interest rate was 9.00%. Monthly principal payments on the term loan began on* November 15, 2023.The revolver matures on May 2, 2025* and the term loan matures on* November 18, 2028*. Subsequent to* November 18, 2022,SNS borrowed under the revolver. During2023,* SNS repaid the amount borrowed under the revolver. The carrying values at* December 31, 2023* and* December 31, 2022* for the SNS Loan includes $5.1 million and$6.4 million, respectively, related to the term loan, andzero and$0.4 million, respectively, related to the revolver.

The Company also recorded as a discount to the carrying value of the SNS Loan issuance costs of $0.1 million specifically related to the SNS Loan. The SNS Loan is carried in the consolidated balance sheet at its amortized cost, which reflects the monthly pay-down of principal starting* November 15, 2023,as well as amortization of the debt discount and issuance costs using the effective interest rate method. The fair value of the SNS Loan disclosed in the table above is derived from quoted market prices of B and BB minus rated industrial bonds with similar maturities and is categorized within Level2* of the fair value hierarchy. The SNS Loan is secured by certain of the equity interests and assets of SNS.

The SNS Loan contains a number of covenants, including, butnot limited to, a leverage ratio and a fixed charge ratio and limits on annual capital expenditures, all of which are as defined in and calculated pursuant to the SNS Loan that, among other things, restrict SNS’s ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.

DDI

As part of the asset 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"). The DDI Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00%. At * December 31, 2023 , the interest rate was 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 carrying value at * December 31, 2023* for the DDI Loan include s $5.5 million r ela ted to the term loan andzero related to the revolver.

The Company also recorded as a discount to the carrying value of the DDI Loan issuance costs of $0.1 million specifically related to the DDI Loan. The DDI Loan is carried in the consolidated balance sheetat its amortized cost, which reflects the amortization of the debt discount and issuance costs using the effective interest rate method. The fair value of the DDI Loan disclosed in the table above is derived from quoted market prices of B and BB minusr ated industrial bonds with similar maturities and is categorized within Level2 of the fair value hierarchy. The DDI Loan is secured by certain of the equity interests and assets of DDI.

The DDI Loan contains a number of covenants, including, butnot limited to, a senior leverage ratio and a fixed charge ratio and limits on annual capital expenditures, all of which are as defined in and calculated pursuant to the DDI Loan that, among other things, restrict DDI’s ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.

KWH

In2019, the Company formed Kingsway Warranty Holdings LLC ("KWH"), whose original subsidiaries included IWS Acquisition Corporation ("IWS"), Geminus Holdings Company, Inc. ("Geminus") and Trinity Warranty Solutions LLC ("Trinity"). As part of the acquisition of PWI on* December 1, 2020,PWI became a wholly owned subsidiary of KWH, which borrowed a principal amount of $25.7 million from a bank, consisting of a $24.7 million term loan and a $1.0 million revolving credit facility (the"2020* KWH Loan"). The proceeds from the2020 KWH Loan were used to partially fund the acquisition of PWI and to fully repay the prior outstanding loan at KWH, which occurred on* December 1, 2020.*

The2020 KWH Loan had an annual interest rate equal to LIBOR having a floor of 0.75%, plus 2.75%. During thesecond quarter of2022, the2020 KWH Loan was amended to change the annual interest rate to be equal to the Secured Overnight Financing Rate ("SOFR"), having a floor of 0.75%, plus spreads ranging from 2.62% to 3.12%. At* December 31, 2023*, the interest rate was 8.22%. The2020 KWH Loan matures on* December 1, 2025.The carrying values at December 31, 2023* and* December 31, 2022* include $10.3 millionand $16.0 million, respectively, related to the term loan and $0.5 millionand $0.5 million, respectively, related to the revolver.

The Company also recorded as a discount to the carrying value of the2020 KWH Loan issuance costs of $0.4 million specifically related to the2020 KWH Loan. The2020 KWH Loan is carried in the consolidated balance sheets at its amortized cost, which reflects the quarterly pay-down of principal as well as the amortization of the debt discount and issuance costs using the effective interest rate method. The fair value of the2020 KWH Loan disclosed in the table above is derived from quoted market prices of BB and BB minus rated industrial bonds with similar maturities and is categorized within Level2 of the fair value hierarchy. The2020 KWH Loan is secured by certain of the equity interests and assets of KWH and its subsidiaries.

The2020 KWH Loan contains a number of covenants, including, butnot limited to, a leverage ratio, a fixed charge ratio and limits on annual capital expenditures, all of which are as defined in and calculated pursuant to the2020 KWH Loan that, among other things, restrict KWH’s ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.

On* February 28, 2023,KWH entered into asecond* amendment to the2020 KWH Loan (the “KWH DDTL”) that provides for an additional delayed draw term loan in the principal amount of up to $10.0 million, with a maturity date of* December 1, 2025.All or any portion of the KWH DDTL, subject to a $2 million minimum draw amount, maybe requested at any time through February 27, 2024.The proceeds are evidenced by an intercompany loan and guarantee between KAI and KWH. Proceeds from certain assets dispositions, as defined, maybe required to be used to repay outstanding draws under the DDTL. The principal amount shall be repaid in quarterly installments in an amount equal to 3.75% of the original amount of the drawn DDTL. Proceeds from certain assets dispositions, as defined, maybe required to be used to repay outstanding draws under the DDTL. The KWH DDTL also increases the senior cash flow leverage ratio maximum permissible for certain periods. The Company didnot draw down on the KWH DDTL during the year ended December 31, 2023*.

During thefirst quarter of2024, the Company borrowed $3.5 million under the KWH DDTL and $0.5 million under the KWH Loan revolver.

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Between* December 4, 2002and December 16, 2003,six subsidiary trusts of the Company issued $90.5 million of 30-year capital securities tothird-parties in separate private transactions. In each instance, a corresponding floating rate junior subordinated deferrable interest debenture was then issued by KAI to the trust in exchange for the proceeds from the private sale. The floating rate debentures bore interest at the rate of LIBOR, plus spreads ranging from 3.85% to 4.20%. 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. The Company has the right to call each of these securities at par value any time afterfive* years from their issuance until their maturity.

The subordinated debt, or TruPs, is carried in the consolidated balance sheets at fair value. See Note23, "Fair Value of Financial Instruments," for further discussion of the subordinated debt. The portion of the change in fair value of subordinated debt related to the instrument-specific credit risk is recognized inother comprehensive loss.

In* February 2023,the Company entered into amendments to the trust preferred option repurchase agreements described in Note11*, "Derivatives," that would give the Company an additional discount on the total repurchase price of the TruPs if the Company effected a100% repurchase on or before* March 15, 2023.On March 2, 2023,the Company gave notice to the holders offive* of its TruPs that it intended to exercise its options to repurchase100% of the principal. On* March 22, 2023,the Company completed the repurchases of thefive* TruPs using available funds from working capital to fund the repurchases. The total amount paid for thefive TruPs was $56.5 million, which included a credit for the $2.3 million that the Company previously paid at the time of entering into the trust preferred option repurchase agreements. As a result, the Company repurchased $75.5 million of TruPs principal and $23.0 million of deferred interest payable. The Company recognized a gain of $31.6 million, which is included in gain on extinguishment of debt in the consolidated statement of operations for the year ended* December 31, 2023*. At* December 31, 2023*, the Company has $15.0 million of principal outstanding related to the remaining trust preferred debt instrument.

The$54.2 million decrease in the Company’s subordinated debt between* December 31, 2022* and* December 31, 2023* is attributed to the following:

Of the $1.9 million increase in fair value of the Company’s subordinated debt between* December 31, 2022* and* December 31, 2023*, $1.8 millionis reported as increase in fair value of debt attributable to instrument-specific credit risk in the Company's consolidated statements of comprehensive (loss) income and$0.1 million is reported as loss on change in fair value of debt in the Company’s consolidated statements of operations. Of the $6.8 million increase in fair value of the Company’s subordinated debt between* December 31, 2021and December 31, 2022*,$1.9 million is reported as increase in fair value of debt attributable to instrument-specific credit risk in the Company's consolidated statements of comprehensive (loss) income and $4.9 million is reported as loss on change in fair value of debt in the Company’s consolidated statements of operations.

The consolidated statements of comprehensive (loss) income for the year ended* December 31, 2023* also includes a reclassification adjustment of $27.2 million from accumulated other comprehensive income to gain on extinguishment of debt related to the instrument-specific credit risk related to the repurchased TruPs.

During thethird quarter of2018, the Company gave notice to its Trust Preferred trustees of its intention to exercise its voluntary right to defer interest payments for up to20 quarters, pursuant to the contractual terms of its outstanding Trust Preferred indentures, which permit interest deferral. This action doesnot constitute a default under the Company's Trust Preferred indentures or any of its other debt indentures. In order to execute the repurchases described above, on* March 13, 2023,the Company paid $5.0 million to the remaining Trust Preferred trustee to be used by the trustee to pay the interest which the Company had been deferring since thethird* quarter of2018. At* December 31, 2023and December 31, 2022*, deferred interest payableofzero and $25.5 million, respectively, is included in accrued expenses and other liabilities in the consolidated balance sheets.

The agreements governing the subordinated debt contain a number of covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, make dividends and distributions, and make certain payments in respect of the Company’s outstanding securities.

NOTE13 LEASES

The Company has operating leases for office space that include fixed base rent payments, as well as variable rent payments to reimburse the landlord for operating expenses and taxes. The Company’s variable lease payments donot depend on a published index or rate, and therefore, are expensed as incurred. The Company includes only fixed payments for lease components in the measurement of the right-of-use asset and lease liability. There areno residual value guarantees.

Operating lease costs and variable lease costs included in general and administrative expenses for the year ended* December 31, 2023* were$0.5 million and$0.2 million, respectively. Operating lease costs and variable lease costs included in general and administrative expenses for the year ended* December 31, 2022* were $0.8 million and $0.2 million, respectively. Short-term lease costs included in general and administrative expenses for the years ended* December 31, 2023* and* December 31, 2022* were$0.2 million and$0.1 million, respectively.

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The annual maturities of lease liabilities as of* December 31, 2023* were as follows:

The weighted-average remaining lease term for operating leases was 3.39 years as of* December 31, 2023*. The weighted average discount rate of operating leases was 6.13% as of* December 31, 2023*. Cash paid for amounts included in the measurement of lease liabilities was$0.5 million and $0.8 million for the years ended* December 31, 2023and December 31, 2022*, respectively.

Supplemental non-cash information related to leases for the year ended* December 31, 2023* includes right-of-use assets of$0.4 million acquired in exchange for$0.4 million of lease obligations.

NOTE14 REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers relates to the Extended Warranty and Kingsway Search Xcelerator segments and includes: vehicle service agreement fees, 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. Revenue is based on terms of various agreements with credit unions, consumers, businesses and homebuilders. Customers either pay in full at the inception of a warranty contract or commission product sale, or when consulting, healthcare and software license and support services are billed, or on terms subject to the Company’s customary credit reviews.

The following table disaggregates revenues from contracts with customers by revenue type:

During thefirst quarter of2022, IWS recorded a net charge of $0.9 million relating to a change in estimate in accounting for deferred revenue and deferred contract costs associated with vehicle service agreement fees, resulting in an increase to deferred service fees of $1.1 million and an increase in deferred contract costs of $0.2 million.

Service fee receivables

Receivables from contracts with customers are reported as service fee receivable, net in the consolidated balance sheets and at* December 31, 2023and December 31, 2022* were$10.1 million and$10.3 million, respectively. The decrease in receivables from contracts with customers is primarily due to the timing difference between the Company's satisfaction of performance obligations and customer payments. At* December 31, 2021,service fee receivable, net was $6.7 million. The increase in receivables from contracts with customers from December**31,* 2021 to* December 31, 2022is primarily due to receivables related to CSuite and SNS, which were acquired on November 1, 2022and November 18, 2022,respectively, and the timing difference between the Company's satisfaction of performance obligations and customer payments; partially offset by a decrease due to the disposal of PWSC on July 29, 2022.*

Service fee receivable is reported net of an estimated allowance for credit losses. During the year ended* December 31, 2023*, the Company recorded an increase to its allowance for credit losses of $0.1 million. Service fee receivables that are deemed to be uncollectible are written off against the allowance for credit losses when identified. There wasno material write-off of service fee receivable that was deemed to be uncollectible during the the year ended* December 31, 2023*.

Contract asset

The Company records a contract asset, which is included in other assets in the consolidated balance sheets, when revenue is recognized prior to billing the customer. Upon billing, which typically occurs over athree tofive year installment period, the value of the contract asset is reversed and service fee receivable is recorded. The Company didnot have a contract asset prior to* December 31, 2022.Thecontract asset was $1.7 million andzero at December 31, 2023and December 31, 2022*, respectively. The increase in the contract asset during the year ended* December 31, 2023* is primarily due to the contract asset acquired related to the acquisition of SPI of $1.8 million which was recorded at a provisional amount subject to finalization of the Company’s purchase price allocation, as further discussed in Note4, "Acquisitions". During the year ended* December 31, 2023*, the contract asset was reduced by $0.1 million as a result of billings to customers.

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No impairment losses related to contract assets were recorded during2023.

Deferred service fees

The Company records deferred service fees resulting from contracts with customers when payment is received in advance of satisfying the performance obligations. Changes in deferred service fees for the years ended* December 31, 2023and December 31, 2022* were as follows:

The increase in deferred service fees during the year ended* December 31, 2023* is primarily due to additions to deferred service fees in excess of deferred service fees recognized during the year ended* December 31, 2023*. The decrease in deferred service fees during the year ended* December 31, 2022* is primarily due to the disposal of PWSC on* July 29, 2022,partially offset by additions to deferred service fees in excess of deferred service fees recognized during the year ended December 31, 2022* as cash sales have begun to increase.

Approximately $44.6 million and$43.2 million of service fee and commission revenue recognized during the years ended* December 31, 2023and December 31, 2022* was included in deferred service fees as of* December 31, 2022* and* December 31, 2021*, respectively.

Remaining performance obligations

The Company expects to recognize withinone year as service fee and commission revenue approximately 51.0% of the outstanding performance obligationsof* December 31, 2023*. The balance relates primarily to vehicle service agreement fees.

Deferred contract costs

Deferred contract costs represent the deferral of incremental costs to obtain or fulfill a contract with a customer. The deferred contract costs balances and related amortization expense for the years ended* December 31, 2023and December 31, 2022* are comprised as follows:

No impairment losses related to deferred contract costs were recorded in2023 or2022.

NOTE15 INCOME TAXES

The Company and all of its eligible U.S. subsidiaries file a U.S. consolidated federal income tax return ("KFSI Tax Group"). The method of allocating federal income taxes among the companies in the KFSI Tax Group is subject to written agreement, approved by each company's Board of Directors. The allocation is made primarily on a separate return basis, with current credit for any net operating losses or other items utilized in the consolidated federal income tax return. The Company’s non-U.S. subsidiaries file separate foreign income tax returns.

Income tax (benefit) expense consists of the following:

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Income tax (benefit) expense varies from the amount that would result by applying the applicable U.S. corporate income tax rate of 21% to income from continuing operations before income tax (benefit) expense. The following table summarizes the differences:

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities are presented as follows:

The Company maintains a valuation allowance for its gross deferred income tax assets of $129.4 million (U.S. operations - $129.4 million; Other - less than $0.1 million) and $130.6 million (U.S. operations - $130.6 million; Other - less than $0.1 million) at* December 31, 2023and December 31, 2022*, respectively. The Company's businesses have generated substantial operating losses in prior years. These losses can be available to reduce income taxes that might otherwise be incurred on future taxable income; however, it is uncertain whether the Company will generate the taxable income necessary to utilize these losses or other reversing temporary differences. This uncertainty has caused management to place a full valuation allowance on its* December 31, 2023and December 31, 2022* net deferred income tax assets, excluding the deferred income tax asset and liability amounts set forth in the paragraph below.

In2023, the Company (i) decreased by $2.1 million its valuation allowance primarily due to deferred tax liabilities assumed from corporate acquisitions; and (ii) increased by $0.3 million its valuation allowance relating to a change in indefinite life deferred income tax liabilities.

In2022, the Company (i) increased by $2.1 million its valuation allowance associated with business interest expense carryforwards with an indefinite life; and (ii) increased by $0.1 million its valuation allowance relating to a change in indefinite life deferred income tax liabilities.

The Company carries net deferred income tax liabilities of$5.0 million and$4.2 millionat* December 31, 2023and December 31, 2022*, respectively, that consists of:

The Tax Cuts and Jobs Act (the "Tax Act") modified the U.S. net operating loss deduction, effective with respect to losses arising in tax years beginning after* December 31, 2017.The Tax Act, however, didnot limit the utilization, in2018* and later tax years, of U.S. net operating losses generated in2017 and prior tax years.

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Amounts, originating dates and expiration dates of the KFSI Tax Group's consolidated U.S. net operating loss carryforwards, totaling $623.1 million, are as follows:

In addition,not reflected in the table above, are net operating loss carryforwards of(i) $6.9 million relating to losses generated in separate U.S. tax return years, which losses will expire over various years through2037 and (ii) $0.1 million relating to non-U.S. operations, which losses will expire over various years through2043.

A reconciliation of the beginning and ending unrecognized tax benefits related to discontinued operations, exclusive of interest and penalties, is as follows:

The amount of unrecognized tax benefits that, if recognized as of* December 31, 2023and December 31, 2022* would affect the Company's effective tax rate on discontinued operations, was a benefit ofzero and $0.1 million, respectively.

During the years ended* December 31, 2023and December 31, 2022*, the Company recorded an income tax benefit ofzero and $0.2 million, respectively, for the release of a liability for unrecognized tax benefits (including interest and penalties) that had been included in income taxes payable in the consolidated balance sheets. The Company classifies interest and penalty accruals, if any, related to unrecognized tax benefits as income tax (benefit) expense. During the years ended* December 31, 2023and December 31, 2022*, the Company recognized a benefit ofzero and $0.1 million, respectively, for interest and penalties, which are included in income (loss) from discontinued operations, net of taxes.

The federal income tax returns of the Company's U.S. operations for the years through2019 are closed for Internal Revenue Service ("IRS") examination. The Company's federal income tax returns arenot currently under examination by the IRS for any open tax years. The federal income tax returns of the Company's Canadian operations for the years through2018 are closed for Canada Revenue Agency ("CRA") examination. The Company's Canadian federal income tax returns arenot currently under examination by the CRA for any open tax years.

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NOTE16 EARNINGS (LOSS) PER SHARE

The following table sets forth the reconciliation of numerators and denominators for the basic and diluted earnings (loss) per share computation for the years ended* December 31, 2023and December 31, 2022*:

Basic earnings (loss) per share excludes dilution and is computed by dividing income attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated using weighted-average diluted shares. Weighted-average diluted shares is calculated by adding the effect of potentially dilutive securities to weighted-average common shares outstanding. Potentially dilutive securities are excluded from the diluted earnings (loss) per share computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive.

The following weighted-average potentially dilutive securities arenot included in the diluted earnings (loss) per share calculations above because they would have had an antidilutive effect on the earnings (loss) per share:

NOTE17 STOCK-BASED COMPENSATION

On* September 21, 2020,the Company's shareholders approved the2020* Equity Incentive Plan (the*"2020* Plan"). The2020 Plan replaced the Company's previous2013 Equity Incentive Plan (the*"2013* Plan") with respect to the granting of future equity awards. The2020 Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Share Awards, Dividend Equivalent Rights, Other Stock-Based Awards and Cash-Based Awards (collectively "Awards"). Under the2020 Plan, an aggregate of 1.6 million common shares will be available for all Awards, subject to adjustment in the event of certain corporate transactions.

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Under the2013 Plan, the Company granted 500,000 restricted common stock awards to an officer on* September 5, 2018 (the"2018* Restricted Stock Award"). The2018 Restricted Stock Award shall become fully vested and the restriction period shall lapse as of* March 28, 2024subject to the officer's continued employment through the vesting date. The2018* Restricted Stock Award is amortized on a straight-line basis over the requisite service period. The grant-date fair value of the2018 Restricted Stock Award was determined using the closing price of Kingsway common stock on the date of grant. Total unamortized compensation expense related to unvested2018 Restricted Stock Award at* December 31, 2023* was$0.1 million.

Under the2020 Plan, the Company has granted restricted common stock awards to certain officers of the Company (the*"2020* Plan Restricted Stock Awards"). The2020 Plan Restricted Stock Awards vest according to a graded vesting schedule and shall become fully vested subject to the officers' continued employment through the applicable vesting dates. The2020 Plan Restricted Stock Awards are amortized on a straight-line basis over the requisite service periods. The grant-date fair values of the2020 Plan Restricted Stock Awards were determined using the closing price of Kingsway common stock on the dates of grant. During the year ended* December 31, 2023*,119,289 shares of the2020 Plan Restricted Stock Awards became fully vested. Total unamortized compensation expense related to unvested2020 Plan Restricted Stock Awards at* December 31, 2023* was $2.3 million.

The following table summarizes the activity related to unvested2020 Plan Restricted Stock Awards and2018 Restricted Stock Award (collectively "Restricted Stock Awards") during the year ended* December 31, 2023*:

The unvested balance at* December 31, 2023* in the table above is comprised of 527,658 shares of the2020 Plan Restricted Stock Awards and 500,000 shares of the2018 Restricted Stock Award.

Stock-based compensation expense related to the Restricted Stock Awards was$1.0 million and$1.0 million for the years ended* December 31, 2023and December 31, 2022*, respectively.

PWSC granted 1,000 restricted Class B common stock awards ("2018 PWSC RSA") to an officer of PWSC pursuant to an agreement dated* September 7, 2018.The2018* PWSC RSA contained both a service and a performance condition that affected vesting. On* December 18, 2020,the2018* PWSC RSA was amended to modify the vesting terms related to the service and performance condition ("Modified PWSC RSA").

PWSC granted 250 restricted Class B common stock awards to an officer of PWSC pursuant to an agreement dated* December 18, 2020 (**"2020* PWSC RSA"). The2020 PWSC RSA contained both a service and a performance condition that affected vesting.

As discussed in Note5, "Disposal and Discontinued Operations,"the Company sold PWSC on* July 29, 2022;therefore there areno outstanding Modified PWSC RSA and2020* PWSC RSA reported in the consolidated balance sheet at* December 31, 2023and December 31, 2022*.

The service condition for the Modified PWSC RSA and the2020 PWSC RSA vested according to a graded vesting schedule. The performance condition was based on the internal rate of return of PWSC. The grant-date fair value of the Modified PWSC RSA and the2020 PWSC RSA were estimated using an internal valuation model.

On* February 20, 2022,both the service condition and performance condition of the Modified PWSC RSA and the2020* PWSC RSA became fully vested. At* December 31, 2023* and* December 31, 2022*, there were zero unvested shares of both the Modified PWSC RSA and the2020 PWSC RSA.

Stock-based compensation expense related to the Restricted Stock Awards of PWSC was $2.8 million for the year ended* December 31, 2022*.

Ravix LLC granted 199,000 restricted Class B common unit awards to an officer of Ravix pursuant to an agreement dated* October 1, 2021 (**"2021* Ravix RUA"). The2021 Ravix RUA vests based on service and the achievement of criteria based on the internal rate of return ("IRR") of Ravix.

The grant-date fair value of the2021 Ravix RUA was estimated using the Black-Scholes option pricing model, using the following assumptions: expected term offour years, expected volatility of 75%, expected dividend yield of zero, and risk-free interest rate of 0.93%.

On* October 1, 2021,83,333 units, representingone* half of the service condition for the2021 Ravix RUA, became fully vested. The remainder of the service condition vests according to a graded vesting schedule and shall become fully vested subject to the officer's continued employment through the applicable vesting dates.

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On* November 1, 2022,the Company modified the inputs related to the IRR portion of the2021* Ravix RUA to be based on the combined internal rate of return of Ravix and CSuite. The modified portion of the awards was probable of vesting both immediately before and after the modification. As a result, the fair value of the award that is subject to the IRR was measured at the modification date and compared to the fair value of the modified portion of the award immediately prior to the modification, with the difference resulting in incremental compensation expense of less than $0.1 million. The incremental fair value was estimated using the Monte Carlo simulation model, using the following assumptions at the modification date: expected term of 2.92 years, expected volatility of 72% and risk-free interest rate of 4.44%; and the following assumptions prior to the modification: expected term of 2.92 years, expected volatility of 58% and risk-free interest rate of 4.44%.

During the year ended* December 31, 2023*,20,833 units of the2021 Ravix RUA became fully vested. At* December 31, 2023and December 31, 2022*, there were 70,528 and 91,361 unvested units, respectively, of the2021 Ravix RUA with a weighted-average grant date fair value of $3.08 per Class B common unit. Total unamortized compensation expense related to unvested2021 Ravix RUA at* December 31, 2023* was$0.2 million.

Stock-based compensation expense related to the2021 Ravix RUA was$0.1 million and$0.1 million for the years ended* December 31, 2023and December 31, 2022*, respectively.

Pegasus LLC granted 75,000 restricted Class B common unit awards to an officer of SNS pursuant to an agreement dated* November 18, 2022 (*"SNS RUA"). The SNS RUA vests based on service and the achievement of criteria based on the IRR of SNS.

The grant-date fair value of the SNS RUA was estimated using the Monte Carlo simulation model, using the following assumptions: expected term offour years, expected volatility of 85% and risk-free interest rate of 4.09%.

On* November 18, 2022,25,000 units, representingone* half of the service condition for the SNS RUA, became fully vested. The remainder of the service condition vests according to a graded vesting schedule and shall become fully vested subject to the officer's continued employment through the applicable vesting dates.

During the year ended* December 31, 2023*,6,771 units of the SNS RUA became fully vested. At* December 31, 2023and December 31, 2022*, there were 43,229 and 50,000 unvested units, respectively, of the SNS RUA with a weighted-average grant date fair value of $5.84 and$5.95 per Class B common unit, respectively. Total unamortized compensation expense related to unvested SNS RUA at* December 31, 2023*was$0.2 million.

Stock-based compensation expense related to the SNS RUA was$0.1 million and $0.2 million for the years ended* December 31, 2023and December 31, 2022*, respectively.

Vertical Market Solutions LLC, a subsidiary of the Company, granted 199,000 restricted Class B common unit awards to an officer of SPI pursuant to an agreement dated* September 7, 2023 (*"SPI RUA"). The SPI RUA vests based on service and the achievement of criteria based on the IRR of SPI.

The grant-date fair value of the SPI RUA was estimated using the Monte Carlo simulation model, using the following assumptions: expected term offive years, expected volatility of 59% and risk-free interest rate of 4.29%.

On* September 7, 2023,83,333 units, representingone* half of the service condition for the SPI RUA, became fully vested. The remainder of the service condition vests according to a graded vesting schedule and shall become fully vested subject to the officer's continued employment through the applicable vesting dates.

At * December 31, 2023* , there were 115,667 unvested units of the SPI RUA with a weighted-average grant date fair value of $1.11 per Class B common unit. Total unamortized compensation expense related to unvested SPI RUA at * December 31, 2023* was $0.1 million.

Stock-based compensation expense related to the SPI RUA was $0.1 million forthe year ended* December 31, 2023*.

DDI LLC granted 199,000 restricted Class B common unit awards to an officer of DDI pursuant to an agreement dated* October 26, 2023 (*"DDI RUA"). The DDI RUA vests based on service and the achievement of criteria based on the IRR of DDI.

The grant-date fair value of the DDI RUA was estimated using the Monte Carlo simulation model, using the following assumptions: expected term offive years, expected volatility of 57% and risk-free interest rate of 4.68%.

On* October 26, 2023,83,333 units, representingone* half of the service condition for the DDI RUA, became fully vested. The remainder of the service condition vests according to a graded vesting schedule and shall become fully vested subject to the officer's continued employment through the applicable vesting dates.

At* December 31, 2023*, there were 115,667 unvested units of the DDI RUA with a weighted-average grant date fair value of $4.16 per Class B common unit. Total unamortized compensation expense related to unvested DDI RUA at * December 31, 2023* was $0.5 million.

Stock-based compensation expense related to the DDI RUA was $0.4 million forthe year ended* December 31, 2023*.

The Company has an employee share purchase plan ("ESPP Plan") whereby qualifying employees can choose each year to have up to 5% of their annual base earnings withheld to purchase the Company's common shares. Afterone year of employment, the Company matches 100% of the employee contribution amount, and the contributions vest immediately. All contributions are used by the plan administrator to purchase common shares in the open market. The Company's contribution is expensed as paid and for the years ended* December 31, 2023and December 31, 2022* totaled $0.2 million and $0.2 million, respectively.

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NOTE18 EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution plan in the United States for all of its qualified employees. Qualifying employees can choose to voluntarily contribute up to 60% of their annual earnings subject to an overall limitation of $22,500 and $20,500 in2023 and2022, respectively. The Company matches an amount equal to 50% of each participant's contribution, limited to the lesser of contributions up to 5% of a participant's earnings or $7,250.

The contributions for the plan vest based on years of service with 100% vesting afterfive years of service. The Company's contribution is expensed as paid and for the years ended* December 31, 2023and December 31, 2022* totaled$0.5 million and $0.5 million, respectively. All Company obligations to the plans were fully funded as of* December 31, 2023*.

NOTE19 REDEEMABLE CLASS A PREFERRED STOCK

On* May 13, 2013,the Company's shareholders approved an amendment to the Company's Articles of Incorporation to create an unlimited number ofzero* par value class A preferred shares. The Company's Board of Directors had the ability to fix the designation, rights, privileges, restrictions and conditions attaching to the shares of each series of preferred shares. The preferred shares had priority over the common shares.

On* March 1, 2023,the Company notified the holders of its outstanding Class A Preferred Shares ("Preferred Shares") of its intention to redeem all the outstanding Preferred Shares on March 15, 2023 (*the “Anticipated Redemption Date”). The Preferred Shares were convertible into shares of the Company’s common stock at the discretion of the holders. Prior to the Anticipated Redemption Date, the Company had received notice from all of the holders of the Preferred Shares of their intention to convert their shares.

There were zero and 149,733 shares of Preferred Shares outstanding at* December 31, 2023and December 31, 2022*, respectively. Each Preferred Share was convertible into 6.25 common shares at a conversion price of $4.00 per common share any time at the option of the holder prior to the redemption date. During2023 and2022,149,733 and 20,000 Preferred Shares, respectively, were converted into 935,831 and 125,000 common shares, respectively, at the conversion price of $4.00 per common share, or $3.7 millionand $0.5 million, respectively, at the option of the holders.

Prior to the redemption, the Company accrued dividends through additional paid-in-capital at the stated coupon. At* December 31, 2023and December 31, 2022*, accrued dividends of zero and$2.3 million were included in Class A preferred stock in the consolidated balance sheets. The redemption amount of the Preferred Shares waszero and$6.0 million at* December 31, 2023and December 31, 2022*, respectively.

In accordance with FASB ASC Topic480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities, redemption featuresnot solely within the control of the issuer are required to be presented outside of permanent equity on the consolidated balance sheets. As described above, the holder had the option to convert the Preferred Shares at any time; however, ifnot converted, they are required to be redeemed when the Company has sufficient legally available funds and isnot otherwise prohibited from doing so. As such, the Preferred Shares are presented in temporary or mezzanine equity on the consolidated balance sheet at* December 31, 2022.*

NOTE20 SHAREHOLDERS' EQUITY

The Company is authorized to issue 50,000,000 shares ofzero par value common stock. There were 27,101,613 and 23,190,080 shares of common stock outstanding at* December 31, 2023and December 31, 2022*, respectively.

There wereno dividends declared during the years ended* December 31, 2023and December 31, 2022*.

As described in Note19, "Redeemable Class A Preferred Stock", during2023 and2022,149,733 and 20,000 Preferred Shares, respectively, were converted into 935,831 and 125,000 common shares, respectively. As a result, $6.1 millionand $0.8 million was reclassified from redeemable Class A preferred stock to additional paid-in capital on the consolidated balance sheets at* December 31, 2023and December 31, 2022*, respectively.

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 22,2024. The timing and amount of any repurchases are determined based on market and economic conditions, share price and other factors, and the program maybe terminated, modified or suspended at any time at the Company's discretion. During the year ended December 31, 2023*, the Company repurchased, in the aggregate,1,516,588 shares of common stock and warrants to purchase common stock for an aggregate purchase price of approximately $7.2 million, including fees and commissions. The repurchased common stock will be held as treasury stock at cost and has been removed from common shares outstanding as of* December 31, 2023*.

There were 670,177 and 247,450 shares of treasury stock outstanding at* December 31, 2023and December 31, 2022*, respectively. The Company records treasury stock at cost.

The Company previously had warrants outstanding that expired on* September 15, 2023.Prior to the expiration thereof, the warrants were recorded in shareholders' equity and entitled each subscriber to purchaseone common share of Kingsway at an exercise price of $5.00 for each warrant. During the years ended December 31, 2023and December 31, 2022*, warrants to purchase 3,331,661 and 109,029 shares of common stock, respectively, were exercised, resulting in cash proceeds of $16.7 million and $0.5 million, respectively. Any warrants that werenot exercised prior to the expiration date became null and void on the expiration date.

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NOTE21 ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The table below details the change in the balance of each component of accumulated other comprehensive (loss) income, net of tax, for the years ended* December 31, 2023and December 31, 2022*, as it relates to shareholders' equity attributable to common shareholders on the consolidated balance sheets.

It should be noted that the consolidated statements of comprehensive (loss) income present the components of other comprehensive loss, net of tax, only for the years ended* December 31, 2023and December 31, 2022* and inclusive of the components attributable to noncontrolling interests in consolidated subsidiaries.

Components of accumulated other comprehensive (loss) income were reclassified to the following lines of the consolidated statements of operations for the years ended* December 31, 2023and December 31, 2022*:

NOTE22 SEGMENTED INFORMATION

The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as a source of the Company’s reportable operating segments. The Company conducts its business through the followingtwo reportable segments: Extended Warranty and Kingsway Search Xcelerator.

Prior to thefourth quarter of2022, the Company conducted its business through athird reportable segment, Leased Real Estate. Leased Real Estate included the following subsidiaries of the Company: CMC and VA Lafayette. As further discussed in Note5, "Disposal and Discontinued Operations," both CMC and VA Lafayette have been classified as discontinued operations and the results of their operations are reported separately for all periods presented. As such, the Leased Real Estate segmentno longer exists and all segmented information has been restated to exclude the Leased Real Estate segment for all periods presented.

Extended Warranty Segment

Extended Warranty includes the following subsidiaries of the Company: IWS, Geminus, PWI, PWSC and Trinity (collectively, "Extended Warranty"). As discussed in Note5, "Disposal and Discontinued Operations," 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.

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 states and the District of Columbia to their members, with customers in all50 states.

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Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiaries, Penn and Prime. Penn and Prime distribute these products in 47 and 40 states, respectively, via independent used car dealerships and franchised car dealerships.

PWI markets, sells and administers vehicle service agreements to used car buyers in allfifty states via independent used car and franchise network of approved automobile and motorcycle dealer partners. PWI’s business model is supported by an internal sales and operations team and partners with American Auto Shield inthree 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.

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.

Trinity sells 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. 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 thethird-party insurance companies that underwrite and guaranty these warranty contracts. Trinity doesnot guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.

Kingsway Search Xcelerator Segment

Kingsway Search Xcelerator includes the Company's subsidiaries CSuite, Ravix, SNS, SPI and DDI.

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. These offerings include project and interim staffing engagements, and contingent search services for permanent placements for its clients throughout the United States.

Ravix provides outsourced financial services and human resources consulting for short or long duration engagements for customers throughout the United States.

SNS provides healthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California.

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.

DDIprovides outsourced24 hours a day and7 days per week ("24/7") cardiac telemetry services for long-term acute care ("LTAC") and inpatient rehabilitation hospitals. 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 over10 years and currently has a presence in 42 states.

Revenues and Operating Income by Reportable Segment

Results for the Company's reportable segments are based on the Company's internal financial reporting systems and are consistent with those followed in the preparation of the consolidated financial statements. The following tables provide financial data used by management. Segment assets arenot allocated for management use and, therefore, arenot included in the segment disclosures below.

Revenues by reportable segment reconciled to consolidated revenues for the years ended* December 31, 2023and December 31, 2022* were:

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The operating income by reportable segment in the following table is before income taxes and includes revenues and direct segment costs. Total segment operating income reconciled to the consolidated income from continuing operations for the years ended* December 31, 2023and December 31, 2022* were:

NOTE23 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices arenot available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices arenot available, the quoted prices of similar financial instruments or valuation models with observable market-based inputs are used to estimate the fair value. These valuation models* mayuse multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters donot* exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and* may**not* be reflective of future fair values. For the Company's financial instruments carried at cost or amortized cost, the book value isnot adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company's intention to hold them until there is a recovery of fair value, which* may*be to maturity.

The Company employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level1:

The Company classifies its investments in fixed maturities as available-for-sale and reports these investments at fair value. The Company's equity investments, limited liability investments, at fair value, subordinated debt, derivative contracts (interest rate swap and trust preferred debt repurchase options) andcontingent consideration are measured and reported at fair value.

Fixed maturities -Fair values of fixed maturities for whichno active market exists are derived from quoted market prices of similar instruments or otherthird-party evidence. All classes of the Company’s fixed maturities, primarily consisting of investments in US. Treasury bills and government bonds; obligations of states, municipalities and political subdivisions; mortgage-backed securities; and corporate securities, are classified as Level2. Level2 is applied to valuations based upon quoted prices for similar assets in active markets; quoted prices for identical or similar assets in markets that are inactive; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data.

The Company engages athird-party vendor who utilizesthird-party pricing sources and primarily employs a market approach to determine the fair values of our fixed maturities. The market approach includes primarily obtaining prices from independentthird-party pricing services as well as, to a lesser extent, quotes from broker-dealers. Ourthird-party vendor also monitors market indicators, as well as industry and economic events, to ensure pricing is appropriate. All classes of our fixed maturities are valued using this technique. The Company has obtained an understanding of ourthird-party vendor’s valuation methodologies and inputs. Fair values obtained from ourthird-party vendor arenot adjusted by the Company.

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The following is a description of the significant inputs, by asset class, used by thethird-party pricing services to determine the fair values of our fixed maturities included in Level2:

Equity investments -Fair values of equity investments reflect quoted market values based on latest bid prices, where active markets exist, or models based on significant market observable inputs, whereno active markets exist.

Limited liability investments, at fair value- Limited liability investments, at fair value* include the underlying investments of Net Lease and Argo Holdings. Prior to thesecond* quarter of2023, Net Lease owned investments in limited liability companies that held investment properties. Net Lease sold its final investment property during itsfirst quarter of2023, and as a result, the Net Lease's investment in its underlying investments iszero at* December 31, 2023*. Argo Holdings makes investments in limited liability companies and limited partnerships that hold investments in search funds and private operating companies.

Subordinated debt -The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by athird-party. These inputs include credit spread assumptions developed by athird-party and market observable swap rates. The subordinated debt is categorized in Level2 of the fair value hierarchy.

Derivative contract- interest rate swap -As described in Note11, "Derivatives," the Company entered into an interest rate swap agreement effective* April 1, 2021to convert the variable interest rate on a portion of the2020* KWH Loan to a fixed interest rate. The interest rate swap contract is measured and reported at fair value and is included in other receivables in the consolidated balance sheets. The fair value of the interest rate swap contract is estimated using inputs which the Company obtains from the counterparty and is determined using a discounted cash flow analysis on the expected cash flows of the derivative. The discounted cash flow valuation technique reflects the contractual term of the derivative contract, including the period to maturity, and uses observable market based inputs, including quoted mid-market prices orthird-party consensus pricing, interest rate curves and implied volatilities. The interest rate swap contract is categorized in Level2 of the fair value hierarchy.

Derivative contracts - trust preferred debt repurchase options - As described in Note11, "Derivatives," the Company entered into three TruPs Options contracts during thethird quarter of2022. During thefirst quarter of2023, the Company executed the TruPs Options contracts. The TruPs Options contracts were measured and reported at fair value and are included in other assets in the consolidated balance sheet at* December 31, 2022.The fair value of the TruPs Options contracts was estimated using the binomial lattice model. Key inputs in the valuation included credit spread assumptions, interest rate volatility, debt coupon interest rate and time to maturity. The TruPs Options contracts are categorized in Level3* of the fair value hierarchy.

Contingent consideration -The consideration for the Company's acquisitions of Ravix and CSuite includes future payments to the former owners that are contingent upon the achievement of certain targets over future reporting periods. Liabilities for contingent consideration are measured and reported at fair value and are included in accrued expenses and other liabilities in the consolidated balance sheets. Contingent consideration liabilities are revalued each reporting period. Changes in the fair value of contingent consideration liabilities can result from changes toone or multiple inputs, including adjustments to the discount rates or changes in the assumed achievement or timing of any targets. Any changes in fair value are reported in the consolidated statements of operations as non-operating other expense. The contingent consideration liabilities are categorized in Level3 of the fair value hierarchy.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The balances of the Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of* December 31, 2023and December 31, 2022* are as follows. Certain investments in limited liability companies that are measured at fair value using the net asset value practical expedient arenot required to be classified using the fair value hierarchy, but are presented in the following tables to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets:

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The following table provides a reconciliation of the fair value of recurring Level3 fair value measurements for the years ended* December 31, 2023and December 31, 2022*:

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level3 at* December 31, 2023*:

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level3 at* December 31, 2022*:

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Investments Measured Using the Net Asset Value per Share Practical Expedient

The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at* December 31, 2023*:

The following table summarizes investments for which fair value is measured using the net asset value per share practical expedient at* December 31, 2022*:

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are adjusted for observable price changes or written down to fair value as a result of an impairment. For the years ended* December 31, 2023and December 31, 2022*, the Company recorded adjustments to increase the fair value of certain investments in private companies for observable price changes of $0.1 million and zero, respectively, which are included in net change in unrealized gain on private company investments in the consolidated statements of operations. The Company didnot record any impairments related to investments in private companies for the years ended* December 31, 2023and December 31, 2022*. To determine the fair value of investments in these private companies, the Company considered rounds of financing andthird-party transactions, discounted cash flow analyses and market-based information, including comparable transactions, trading multiples and changes in market outlook, among other factors. The Company has classified the fair value measurements of these investments in private companies as Level3 because they involve significant unobservable inputs.

As further discussed in Note4, "Acquisitions," the Company acquired CSuite on* November 1, 2022* and allocated the purchase price to the assets acquired and liabilities assumed. The fair values of intangible assets associated with the acquisition of CSuite were determined to be Level3 under the fair value hierarchy.

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for these Level3 measurements:

As further discussed in Note4, "Acquisitions,"the Company acquired SNS on* November 18, 2022and allocated the purchase price to the assets acquired and liabilities assumed. The fair values of intangible assets associated with the acquisition of SNS were determined to be Level3* under the fair value hierarchy.

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for these Level3 measurements:

As further discussed in Note4, "Acquisitions," the Company acquired SPI on* September 7, 2023and provisionally allocated the purchase price to the assets acquired and liabilities assumed. The fair values of intangible assets associated with the acquisition of SPI were determined to be Level3* under the fair value hierarchy.

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Level3 measurements:

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As further discussed in Note4, "Acquisitions," the Company acquired DDI on* October 26, 2023and provisionally allocated the purchase price to the assets acquired and liabilities assumed. The fair values of intangible assets associated with the acquisition of DDI were determined to be Level3* under the fair value hierarchy.

The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Level3 measurements:

NOTE24 RELATED PARTIES

Related party transactions, including services provided to or received by the Company's subsidiaries, are measured in part by the amount of consideration paid or received as established and agreed by the parties. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party relationships and transactions.

Argo Management Group, LLC

The Company acquired Argo Management in* April 2016.Argo Management's primary business is to act as Managing Member of Argo Holdings. At December 31, 2023and December 31, 2022*, each of the Company, John T. Fitzgerald ("Fitzgerald"), the Company's Chief Executive Officer and President, and certain of Fitzgerald’s immediate family members owns equity interests in Argo Holdings, all of which interests were acquired prior to the Company’s acquisition of Argo Management. Subject to certain limitations, Argo Holdings' governing documents require all individuals and entities owning an equity interest in Argo Holdings to fund upon request his/her/its pro rata share of any funding requirements of Argo Holdings up to an aggregate maximum amount equal to his/her/its total capital commitment (each request for funds being referred to as a "Capital Call"). Argo Holdings madeno Capital Calls during the years ended* December 31, 2023* and* December 31, 2022*.

NOTE25 COMMITMENTS AND CONTINGENT LIABILITIES

In* May 2016,Aegis Security Insurance Company ("Aegis") filed a complaint for breach of contract and declaratory relief against the Company in the Eastern District of Pennsylvania alleging, among other things, that the Company breached a contractual obligation to indemnify Aegis for certain customs bond losses incurred by Aegis under the indemnity and hold harmless agreements provided by the Company to Aegis for certain customs bonds reinsured by Lincoln General Insurance Company ("Lincoln General") during the period of time that Lincoln General was a subsidiary of the Company. Lincoln General was placed into liquidation in November 2015and Aegis subsequently invoked its rights to indemnity under the indemnity and hold harmless agreements. Effective January 20, 2020,Aegis and the Company entered into a Settlement Agreement with respect to such litigation pursuant to which the Company agreed to pay Aegis aone*-time settlement amount of $0.9 million, which the Company reported in its consolidated statement of operations during thefirst quarter of2020, and to reimburse Aegis for 60% of future losses that Aegis* maysustain in connection with such customs bonds, up to a maximum reimbursement amount of $4.8 million. From2020* through2021, the Company made reimbursement payments to Aegis of $0.6 million in connection with the Settlement Agreement. During2023 and2022, the Company made reimbursement payments to Aegis of $0.5 million and $0.4 million, respectively, in connection with the Settlement Agreement, which is included in general and administrative expenses in its consolidated statements of operations for the years ended* December 31, 2023* and* December 31, 2022*, respectively. The remaining maximum reimbursement amount is $3.3 million as of* December 31, 2023*. The Company’s potential exposure under these agreements wasnot reasonably determinable at* December 31, 2023*, andno liability has been recorded in the consolidated financial statements at* December 31, 2023*.

Mendota

As part of the* October 18, 2018transaction to sell Mendota, the Company will indemnify the buyer for any loss and loss adjustment expenses with respect to open claims in excess of Mendota's carried unpaid loss and loss adjustment expenses at June 30, 2018*related to the open claims. The maximum obligation to the Company with respect to the open claims was $2.5 million.

During thethird quarter of2022, the buyer provided to the Company an analysis of the claims development that indicated that the Company's potential exposure with respect to the open claims was at the maximum obligation amount. Previous communications from the buyer notedno such development and the buyer wasnot obligated to provide development information to the Company until thefirst quarter of2023. As a result of the newly provided information, the Company recorded a liability of $2.5 million during2022, which is included in accrued expenses and other liabilities in the consolidated balance sheet at* December 31, 2022* and loss on disposal of discontinued operations in the consolidated statement of operations for the year ended* December 31, 2022*. There wereno payments made by the Company related to the open claims during2022. During thefirst quarter of2023, the $2.0 million that had been previously deposited into an escrow account was released and remitted to the buyer to satisfy the Company's payment with respect to the open claims. The Company hasno remaining exposure with respect to the open claims.

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VA Lafayette

The LA Mortgage is nonrecourse indebtedness with respect to the assets of VA Lafayette, and the LA Mortgage isnot, nor will it be, guaranteed by Kingsway or its affiliates unless VA Lafayette acts in bad faith or commits intentional acts with respect to the LA Mortgage. The LA Mortgage is secured in part by a guaranty of recourse liabilities, whereby KAI, as guarantor, would become liable for the recourse liabilities if VA Lafayette, as borrower, violates certain terms of the loan agreement. Under the guarantee, the lender can recover losses from the guarantor for certain bad faith or other intentional acts of the borrower, such as rents retained by the borrower in violation of the loan documents, fraud or intentional misrepresentation, changes to the lease without the lender's consent, willful misconduct, criminal acts and environmental losses sustained by lender. In addition, the guarantee provides that the LA Mortgage will be the full personal recourse obligation of the guarantor, for certain actions, such as prohibited transfers of the collateral or bankruptcy of the borrower.

Short-term investments with an estimated fair value of$0.2 million at* December 31, 2023and December 31, 2022*, were on deposit with state regulatory authorities.

The Company also has restricted cash of $8.4 million and$13.1 million at* December 31, 2023and December 31, 2022*, respectively. Included in restricted cash are: