KINGSWAY FINANCIAL SERVICES INC

Previous wording

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 all fifty states.

Current wording

IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 25 states and the District of Columbia to their members, with customers in all fifty states.

Previous wording

Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"). Penn and Prime distribute these products in 46 and 37 states, respectively, via independent used car dealerships and franchised car dealerships.

Current wording

Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"). Penn and Prime distribute these products in 47 and 34 states, respectively, via independent used car dealerships and franchised car dealerships.

Previous wording

Kingsway Search Xcelerator includes the Company's subsidiaries, CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"), Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI") and Digital Diagnostics Imaging, Inc. ("DDI"). Throughout Management's Discussion and Analysis, the term the term "Kingsway Search Xcelerator" is used to refer to this segment.

Current wording

Kingsway Search Xcelerator includes the Company's subsidiaries, CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"), Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI"), Digital Diagnostics Imaging, Inc. ("DDI") and Image Solutions, LLC ("Image Solutions"). Throughout Management's Discussion and Analysis, the term the term "Kingsway Search Xcelerator" is used to refer to this segment.

Previous wording

DDI provides outsourced 24 hours a day and 7 days per week ("24/7") cardiac telemetry services for long-term acute care 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 over 10 years and currently has a presence in 42 states.

Current wording

DDI provides outsourced 24 hours a day and 7 days per week ("24/7") cardiac telemetry services for long-term acute care 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 over 10 years and currently has a presence in 39 states.

Previous wording

Segment operating income represents one measure of the pretax profitability of our segments and is derived by subtracting direct segment expenses from direct segment revenues. Revenues and expenses are presented in the unaudited consolidated statements of operations, but are not subtotaled by segment; however, this information is available in total and by segment in Note 19, "Segmented Information," to the unaudited consolidated interim financial statements, regarding reportable segment information. The nearest comparable U.S. GAAP measure to total segment operating income is (loss) income from continuing operations before income tax expense that, in addition to segment operating income, includes net investment income, net realized gains, net (loss) gain on equity investments, gain (loss) on change in fair value of limited liability investments, at fair value, impairment losses, loss on change in fair value of derivative asset option contracts, interest expense, other revenue and expenses not allocated to segments, net, amortization of intangible assets, impairment of intangible assets, loss on change in fair value of debt and (loss) gain on extinguishment of debt. A reconciliation of total segment operating income to (loss) income from continuing operations before income tax expense for the three and six months ended June 30, 2024 and June 30, 2023 is presented below in Table 1 of the "Results of Continuing Operations" section of Management's Discussion and Analysis.

Current wording

Segment operating income represents one measure of the pretax profitability of our segments and is derived by subtracting direct segment expenses from direct segment revenues. Revenues and expenses are presented in the unaudited consolidated statements of operations, but are not subtotaled by segment; however, this information is available in total and by segment in Note 20, "Segmented Information," to the unaudited consolidated interim financial statements, regarding reportable segment information. The nearest comparable U.S. GAAP measure to total segment operating income is (loss) income from continuing operations before income tax expense (benefit) that, in addition to segment operating income, includes net investment income, net realized gains, net gain (loss) on equity investments, gain on change in fair value of limited liability investments, at fair value, net change in unrealized gains on private company investments, impairment losses on investments, loss on change in fair value of derivative asset option contracts, interest expense, other revenue and expenses not allocated to segments, net, amortization of intangible assets, impairment of intangible assets, gain (loss) on change in fair value of debt, gain on disposal of subsidiary and (loss) gain on extinguishment of debt. A reconciliation of total segment operating income to (loss) income from continuing operations before income tax expense (benefit) for the three and nine months ended September 30, 2024 and September 30, 2023 is presented below in Table 1 of the "Results of Continuing Operations" section of Management's Discussion and Analysis.

Previous wording

A reconciliation of total segment operating income to net (loss) income for the three and six months ended June 30, 2024 and June 30, 2023 is presented in Table 1 below:

Current wording

A reconciliation of total segment operating income to net (loss) income for the three and nine months ended September 30, 2024 and September 30, 2023 is presented in Table 1 below:

Previous wording

In the second quarter of 2024, we reported segment operating income of $2.7 million, a decrease of $0.3 million from the same period in 2023 ($5.1 million year to date, a decrease of $0.9 million compared to prior year to date). See further discussion below related to the decrease for the three and six months ended June 30, 2024.

Current wording

In the third quarter of 2024, we reported segment operating income of $2.8 million, an increase of $0.1 million from the same period in 2023 ($8.0 million year to date, a decrease of $0.8 million compared to prior year to date).

Previous wording

For the six months ended June 30, 2024, we reported loss from continuing operations of $4.5 million compared to income from continuing operations of $26.0 million for the six months ended June 30, 2023 . The loss from continuing operations for the six months ended June 30, 2024 is primarily due to:

Current wording

In the third quarter of 2024, we reported loss from continuing operations of $2.2 million compared to $0.8 million in the third quarter of 2023. For the nine months ended September 30, 2024, we reported loss from continuing operations of $6.6 million compared to income from continuing operations of $25.2 million for the nine months ended September 30, 2023.

Previous wording

In the second quarter of 2024, we reported a net loss of $2.2 million compared to $1.7 million in the second quarter of 2023 (net loss of $4.5 million year to date compared to net income of $26.2 million prior year to date). In addition to the items described above impacting (loss) income from continuing operations, the net (loss) income includes:

Current wording

In the third quarter of 2024, we reported a net loss of $2.3 million compared to $0.7 million in the third quarter of 2023 (net loss of $6.8 million year to date compared to net income of $25.5 million prior year to date).

Previous wording

The Extended Warranty service fee and commission revenue was $17.1 million for the three months ended June 30, 2024 compared with $17.0 million for the three months ended June 30, 2023 ($33.8 million year to date compared to $33.7 million prior year to date).

Current wording

The Extended Warranty service fee and commission revenue was $17.8 million for the three months ended September 30, 2024 compared with $17.3 million for the three months ended September 30, 2023 ($51.6 million year to date compared to $51.0 million prior year to date). Service fee and commission revenue was impacted by the following for the three and nine months ended September 30, 2024:

Previous wording

The Kingsway Search Xcelerator revenue increased to $9.3 million for the three months ended June 30, 2024 compared to $9.2 million for the three months ended June 30, 2023 (a decrease to $18.8 million year to date compared to $18.9 million prior year to date). Kingsway Search Xcelerator operating income was $1.4 million for the three months ended June 30, 2024 compared to $1.6 million for the three months ended June 30, 2023 ($2.8 million year to date compared to $3.2 million prior year to date). Revenue and operating income were primarily impacted by the following:

Current wording

The Kingsway Search Xcelerator revenue increased to $9.3 million for the three months ended September 30, 2024 compared to $7.5 million for the three months ended September 30, 2023 (an increase to $28.1 million year to date compared to $26.4 million prior year to date). Kingsway Search Xcelerator operating income was $1.1 million for the three months ended September 30, 2024 compared to $1.0 million for the three months ended September 30, 2023 ($3.9 million year to date compared to $4.2 million prior year to date). Revenue and operating income were primarily impacted by the following:

Previous wording

Net investment income was $0.3 million in the second quarter of 2024 compared to $0.3 million in the second quarter of 2023 ($0.6 million year to date compared to $1.1 million prior year to date). The decrease in investment income for the six months ended June 30, 2024 primarily relates to less income from cash equivalents, as a result of a decrease in the cash equivalents balance (in the first quarter of 2023 the Company was holding cash that was used to repurchase some of its subordinated debt) and more equity pick-up loss related to limited liability investments. These decreases were partially offset by an increase in investment income from fixed maturities and interest income related to the significant financing component for certain SPI contracts.

Current wording

Net investment income was $0.4 million in the third quarter of 2024 and 2023 ($1.0 million year to date compared to $1.4 million prior year to date). The decrease in investment income for the nine months ended September 30, 2024 primarily relates to less income from cash equivalents, as a result of a decrease in the cash equivalents balance (in the first quarter of 2023 the Company was holding cash that was used to repurchase some of its subordinated debt) and more equity pick-up loss related to limited liability investments. These decreases were partially offset by an increase in investment income from fixed maturities and interest income related to the significant financing component for certain SPI contracts.

Previous wording

Net realized gains were $0.3 million in the second quarter of 2024 compared to $0.1 million in the second quarter of 2023 ($0.4 million year to date compared to $0.3 million prior year to date). The net realized gains for the three months ended June 30, 2024 and June 30, 2023 and the six months ended June 30, 2024 primarily relate to realized gains recognized by Argo Holdings Fund I, LLC ("Argo Holdings"). The net realized gains for the six months ended June 30, 2023 primarily relate to realized gains recognized by Argo Holdings and net realized gains on sales of limited liability investments.

Current wording

Net realized gains were $1.0 million in the third quarter of 2024 compared to $0.2 million in the third quarter of 2023 ($1.4 million year to date compared to $0.5 million prior year to date). The net realized gains for the three and nine months ended September 30, 2024 primarily relate to realized gains recognized by Argo Holdings Fund I, LLC ("Argo Holdings") and a net realized gain related to the sale of one of the private company investments. The net realized gains for the three months ended September 30, 2023 primarily relate to realized gains recognized by Argo Holdings. The net realized gains for the nine months ended September 30, 2023 primarily relate to realized gains recognized by Argo Holdings and net realized gains on sales of limited liability investments.

Previous wording

Gain on equity investments was zero in the second quarter of 2024 compared to $1.7 million in the second quarter of 2023 (loss of less than $0.1 million year to date compared to a gain of $2.8 million prior year to date). The gain for the three and six months ended June 30, 2023 relates to the Company's former investment in Limbach Holdings, Inc. ("Limbach"). Prior to the second quarter of 2023, the Company held warrants in Limbach. During the first quarter of 2023, the underlying common stock price of Limbach increased, resulting in an increase in the fair value of the warrants held at March 31, 2023. During the second quarter of 2023, the Company completed a cashless exercise of its Limbach warrants. The change in fair value for the second quarter of 2023 is a result of the increased common stock price of Limbach as of June 30, 2023. During the third quarter of 2023, the Company sold all of its investment in Limbach.

Current wording

Net gain on equity investments was zero in the third quarter of 2024 compared to $0.6 million in the third quarter of 2023 (net loss of less than $0.1 million year to date compared to a net gain of $3.4 million prior year to date). The net gain for the three and nine months ended September 30, 2023 relates to the Company's former investment in Limbach. Prior to the second quarter of 2023, the Company held warrants in Limbach. During the first quarter of 2023, the underlying common stock price of Limbach increased, resulting in an increase in the fair value of the warrants held at March 31, 2023. During the second quarter of 2023, the Company completed a cashless exercise of its Limbach warrants. During the third quarter of 2023, the Company sold all of its investment in Limbach.

Previous wording

Interest expense for the second quarter of 2024 was $1.2 million compared to $1.1 million in the second quarter of 2023 ($2.3 million year to date compared to $4.1 million prior year to date). Interest expense was impacted by the following for the three and six months ended June 30, 2024:

Current wording

Interest expense for the third quarter of 2024 was $1.2 million compared to $1.1 million in the third quarter of 2023 ($3.5 million year to date compared to $5.1 million prior year to date). Interest expense was impacted by the following for the three and nine months ended September 30, 2024:

Previous wording

Other revenue and expenses not allocated to segments, net was a net expense of $2.1 million in the second quarter of 2024 compared to $3.8 million in the second quarter of 2023 ($3.8 million year to date compared to $6.4 million prior year to date). Included are revenue and expenses associated with our various other investments that are accounted for on a consolidated basis and expenses associated with our corporate holding company.

Current wording

Other revenue and expenses not allocated to segments, net was a net expense of $3.3 million in the third quarter of 2024 compared to $2.8 million in the third quarter of 2023 ($7.1 million year to date compared to $9.3 million prior year to date). Included are revenue and expenses associated with our various other investments that are accounted for on a consolidated basis and expenses associated with our corporate holding company.

Previous wording

The decrease in net expense for the three months ended June 30, 2024 is primarily attributable to a management fee paid to the external manager of a previously consolidated entity in the second quarter of 2023; as well as lower salary-related expenses, stock-based compensation expenses and expense related to the Ravix contingent consideration liability during the three months ended June 30, 2024 compared to the same period in 2023.

Current wording

The increase in net expense for the three months ended September 30, 2024 is primarily attributable to higher acquisition related expenses and stock-based compensation expenses, partially offset by a decrease in general expenses during the three months ended September 30, 2024 compared to the same period in 2023, as the corporate holding company continues to scrutinize its spending.

Previous wording

The decrease in net expense for the six months ended June 30, 2024 is primarily attributable to management fees paid to the external managers of two previously consolidated entities during the six months ended June 30, 2023; as well as lower salary-related expenses, partially offset by more expense related to the Ravix contingent consideration liability during the six months ended June 30, 2024 compared to the same period in 2023.

Current wording

The decrease in net expense for the nine months ended September 30, 2024 is primarily attributable to management fees paid to the external managers of two previously consolidated entities during the nine months ended September 30, 2023; as well as lower general expenses, partially offset by higher acquisition related expenses, stock-based compensation expenses, and more expense related to the Ravix contingent consideration liability during the nine months ended September 30, 2024 compared to the same period in 2023.

Previous wording

Impairment of intangible assets was $0.7 million in the second quarter of 2024 compared to zero in the second quarter of 2023 ($1.2 year to date compared to zero prior year to date). The Company's indefinite-lived intangible assets consist of trade names, which are assessed for impairment annually as of November 30, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. At both March 31, 2024 and June 30, 2024, the Company determined that certain of its trade name intangible assets should be further examined under a quantitative approach due to actual revenue coming in lower than previous projections. Based upon this assessment, the Company recorded an impairment charge of $0.7 million during the second quarter of 2024 ($1.2 million for the year to date), related to the SNS and CSuite indefinite-lived trade names. The reduction in value is primarily due to higher discount rates and reduction in projected revenue.

Current wording

Impairment of intangible assets was $0.6 million in the third quarter of 2024 compared to zero in the third quarter of 2023 ($1.8 million year to date compared to zero prior year to date). The Company's indefinite-lived intangible assets consist of trade names, which are assessed for impairment annually as of November 30, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. At March 31, 2024, June 30, 2024 and September 30, 2024, the Company determined that certain of its trade name intangible assets should be further examined under a quantitative approach due to actual revenue coming in lower than previous projections. Based upon this assessment, the Company recorded an impairment charge of $0.6 million during the third quarter of 2024 related to the CSuite and Ravix indefinite-lived trade names ($1.8 million for the year to date, related to the SNS, CSuite and Ravix indefinite-lived trade names). The reduction in value is primarily due to higher discount rates and a reduction in projected revenue. The valuation of these assets is not dependent on the underlying profit or loss generated by the respective business. Therefore, even if a change in revenue does not have a significant impact on operating results, it could significantly impact the fair value of the trade name.

Previous wording

Loss on change in fair value of debt was less than $0.1 million in the second quarter of 2024 compared to $0.3 million in the second quarter of 2023 ( $0.1 million year to date compared to less than $0.1 million prior year to date).

Current wording

Gain on change in fair value of debt was $0.1 million in the third quarter of 2024 compared to a loss of $0.2 million in the third quarter of 2023 (loss of less than $0.1 million year to date compared to a loss of $0.2 million prior year to date).

Previous wording

During the first quarter of 2023, the Company repurchased TruPs debt having a principal amount of $75.5 million. The change in fair value related to the repurchased TruPs debt was a gain of $0.3 million and the change in fair value related to the remaining TruPs debt instrument was a loss of $0.3 million during the six months ended June 30, 2023.

Current wording

During the first quarter of 2023, the Company repurchased TruPs debt having a principal amount of $75.5 million. The change in fair value related to the repurchased TruPs debt was a gain of $0.3 million and the change in fair value related to the remaining TruPs debt instrument was a loss of $0.5 million during the nine months ended September 30, 2023.

Previous wording

The loss for the three and six months ended June 30, 2024 and June 30, 2023 reflects changes in the fair value of the subordinated debt resulting primarily from changes in interest rates used (not related to instrument-specific credit risk). See "Debt" section below for further information.

Current wording

The gain or loss for the three and nine months ended September 30, 2024 and September 30, 2023 reflects changes in the fair value of the subordinated debt resulting primarily from changes in interest rates used (not related to instrument-specific credit risk). See "Debt" section below for further information.

Previous wording

During the second quarter of 2024, there was a modification to the 2020 KWH Loan. For the three and six months ended June 30, 2024, loss on extinguishment of debt of $0.2 million relates to the write-down of the unamortized debt discount and issuance costs from the 2020 KWH Loan at the modification date, since the original debt was fully repaid as part of the modification.

Current wording

During the second quarter of 2024, there was a modification to the 2020 KWH Loan. For the nine months ended September 30, 2024, loss on extinguishment of debt of $0.2 million relates to the write-down of the unamortized debt discount and issuance costs from the 2020 KWH Loan at the modification date, since the original debt was fully repaid as part of the modification.

Previous wording

For the six months ended June 30, 2023, gain on extinguishment of debt consists of a $31.6 million gain related to the repurchase of TruPs debt having a principal amount of $75.5 million. The gain on extinguishment of debt results from removing the fair value of the debt, trust preferred debt repurchase options, deferred interest payable and accumulated other comprehensive income related to the repurchased TruPs from the Company's consolidated balance sheet at the repurchase date.

Current wording

For the nine months ended September 30, 2023, gain on extinguishment of debt consists of a $31.6 million gain related to the repurchase of TruPs debt having a principal amount of $75.5 million. The gain on extinguishment of debt results from removing the fair value of the debt, trust preferred debt repurchase options, deferred interest payable and accumulated other comprehensive income related to the repurchased TruPs from the Company's consolidated balance sheet at the repurchase date.

Previous wording

Income tax expense for the second quarter of 2024 was $0.1 million compared to $0.2 million in the second quarter of 2023 ($0.2 million year to date compared to $0.9 million prior year to date). For the three and six months ended June 30, 2024 and June 30, 2023, the Company reported income tax expense primarily due to state tax expense. See Note 14, "Income Taxes," to the unaudited consolidated interim financial statements, for additional detail of the income tax expense recorded for the three and six months ended June 30, 2024 and June 30, 2023.

Current wording

Income tax expense for the third quarter of 2024 was less than $0.1 million compared to a benefit of $0.1 million in the third quarter of 2023 (expense of $0.2 million year to date compared to expense of $0.8 million prior year to date). For the three and nine months ended September 30, 2024 and the nine months ended September 30, 2023, the Company reported income tax expense primarily due to state tax expense. For the three months ended September 30, 2023, the Company reported income tax benefit primarily due to the partial release of its valuation allowance related to deferred tax liabilities from acquisitions. See Note 14, "Income Taxes," to the unaudited consolidated interim financial statements, for additional detail of the income tax (benefit) expense recorded for the three and nine months ended September 30, 2024 and September 30, 2023.

Previous wording

At June 30, 2024, we held cash and cash equivalents, restricted cash and investments with a carrying value of $58.8 million. Our U.S. operations typically invest in U.S. dollar-denominated instruments to mitigate their exposure to currency rate fluctuations.

Current wording

At September 30, 2024, we held cash and cash equivalents, restricted cash and investments with a carrying value of $56.2 million. Our U.S. operations typically invest in U.S. dollar-denominated instruments to mitigate their exposure to currency rate fluctuations.

Previous wording

As a result of the analysis performed, the Company recorded an impairment loss related to other investments of zero for the three and six months ended June 30, 2024 ($0.1 million for the three and six months ended June 30, 2023). There were no impairment losses recorded related to available for-sale fixed maturity investments during the three and six months ended June 30, 2024 and June 30, 2023.

Current wording

As a result of the analysis performed, the Company recorded an impairment loss related to other investments of zero for the three and nine months ended September 30, 2024 ($0.1 million and $0.2 million for the three and nine months ended September 30, 2023, respectively). There were no impairment losses recorded related to available for-sale fixed maturity investments during the three and nine months ended September 30, 2024 and September 30, 2023.

Previous wording

At June 30, 2024 and December 31, 2023, the gross unrealized losses for fixed maturities amounted to $1.6 million and $1.7 million, respectively, and there were no unrealized losses attributable to non-investment grade fixed maturities.

Current wording

At September 30, 2024 and December 31, 2023, the gross unrealized losses for fixed maturities amounted to $1.0 million and $1.7 million, respectively, and there were no unrealized losses attributable to non-investment grade fixed maturities.

Previous wording

See Note 11, "Debt," to the Consolidated Financial Statements for a detailed discussion of the Company’s debt instruments. Changes related to the Company’s debt during the six months ended June 30, 2024 are further described below.

Current wording

See Note 11, "Debt," to the Consolidated Financial Statements for a detailed discussion of the Company’s debt instruments. Changes related to the Company’s debt during the nine months ended September 30, 2024 are further described below.

Previous wording

On May 24, 2024, KWH entered into a third amendment to the 2020 KWH Loan that provides for: (1) a new 2024 term loan in the principal amount of $15.0 million, with a maturity date of May 24, 2029 (the “2024 KWH Loan”); and (2) a new 2024 delayed draw term loan in a principal amount of up to $6.0 million, with a maturity date of May 24, 2029 (the “2024 KWH DDTL”). All or any portion of the 2024 KWH DDTL, subject to a $2.0 million minimum draw amount, could be requested at any time in up to three advances through May 24, 2026. In connection with the third amendment, KWH used the proceeds from the 2024 KWH Loan to repay the following outstanding balances under the 2020 KWH Loan: (1) $9.6 million related to the original 2020 term loan; (2) $1.0 million related to the revolver; and (3) $3.1 million related to the KWH DDTL.

Current wording

On May 24, 2024, KWH entered into a third amendment to the 2020 KWH Loan that provides for: (1) a new 2024 term loan in the principal amount of $15.0 million, with a maturity date of May 24, 2029 (the “2024 KWH Loan”); and (2) a new 2024 delayed draw term loan in a principal amount of up to $6.0 million, with a maturity date of May 24, 2029 (the “2024 KWH DDTL”). All or any portion of the 2024 KWH DDTL, subject to a $2.0 million minimum draw amount, could be requested at any time in up to three advances through May 24, 2026. In connection with the third amendment, KWH used the proceeds from the 2024 KWH Loan to repay the following outstanding balances under the 2020 KWH Loan: (1) $9.6 million related to the original 2020 term loan; (2) $1.0 million related to the KWH Revolver; and (3) $3.1 million related to the KWH DDTL.

Previous wording

The 2020 KWH Loan and the 2024 KWH Loan were not deemed to be substantially different; therefore, the 2024 KWH Loan is accounted for as a modification of the 2020 KHW Loan. The unamortized debt discount and issuance costs from the 2020 KWH Loan at the modification date of $0.2 million were recorded as loss on extinguishment of debt during the three months ended June 30, 2024 since the original debt was fully repaid as part of the modification.

Current wording

The 2020 KWH Loan and the 2024 KWH Loan were not deemed to be substantially different; therefore, the 2024 KWH Loan is accounted for as a modification of the 2020 KHW Loan. The unamortized debt discount and issuance costs from the 2020 KWH Loan at the modification date of $0.2 million were recorded as loss on extinguishment of debt during the nine months ended September 30, 2024 since the original debt was fully repaid as part of the modification.

Previous wording

During the first quarter of 2024, the Company borrowed $3.5 million under the KWH Delayed Draw Term Loan ("DDTL"), $0.5 million under the KWH Loan revolver and $0.2 million under the SNS Loan Revolver. During the second quarter of 2024, the SNS Loan Revolver of $0.2 million was repaid.

Current wording

During the first quarter of 2024, the Company borrowed $0.2 million under the SNS Loan Revolver. During the second quarter of 2024, the SNS Loan Revolver of $0.2 million was repaid.

Previous wording

On July 23, 2024, Ravix and Ravix LLC entered into a second amendment to the 2021 Ravix Loan that provides for: (1) a principal prepayment of the 2021 Ravix term loan of $1.5 million, partially financed by borrowing $0.5 million under the 2022 Revolver and the remainder to be paid with available cash; and (2) amending the loan amortization payment schedule to provide for equal monthly payments through the loan maturity date.

Current wording

On July 23, 2024, Ravix and Ravix LLC entered into a second amendment to the 2021 Ravix Loan that provides for: (1) a principal prepayment of the 2021 Ravix term loan of $1.5 million, partially financed by borrowing $0.5 million under the 2022 Revolver and the remainder to be paid with available cash; and (2) amending the loan amortization payment schedule to provide for equal monthly payments through the loan maturity date. The original 2021 Ravix Loan and the amended 2021 Ravix Loan were not deemed to be substantially different; therefore, the amended 2021 Ravix Loan is accounted for as a modification of the original 2021 Ravix Loan.

Previous wording

During the six months ended June 30, 2024, the Company reported $0.5 million of net cash provided by operating activities from continuing operations, primarily due to operating income from the Extended Warranty and Kingsway Search Xcelerator segments. During the six months ended June 30, 2023, the Company reported $24.7 million of net cash used in operating activities from continuing operations, primarily due to outflows related to the payment of management fees to the managers of Net Lease and Flowers ($1.8 million), an indemnity payment to the buyer of Mendota related to loss and loss adjustment expenses ($2.0 million) and payment of deferred interest on the remaining trust preferred debt instrument; partially offset by operating income from the Extended Warranty and Kingsway Search Xcelerator segments.

Current wording

During the nine months ended September 30, 2024, the Company reported $0.7 million of net cash provided by operating activities from continuing operations, primarily due to operating income from the Extended Warranty and Kingsway Search Xcelerator segments. During the nine months ended September 30, 2023, the Company reported $25.7 million of net cash used in operating activities from continuing operations, primarily due to outflows related to the payment of management fees to the managers of Net Lease and Flowers ($1.8 million), an indemnity payment to the buyer of Mendota related to loss and loss adjustment expenses ($2.0 million) and payment of deferred interest on the remaining trust preferred debt instrument; partially offset by gain on equity investments and operating income from the Extended Warranty and Kingsway Search Xcelerator segments.

Previous wording

During the six months ended June 30, 2024, the net cash provided by investing activities from continuing operations was $0.9 million. This source of cash is primarily attributed to distributions received by Argo Holdings from two of its underlying limited liability investment companies, partially offset by purchases of fixed maturities and property and equipment, net in excess of proceeds from sales and maturities of fixed maturities and sales of equity securities. During the six months ended June 30, 2023, the net cash provided by investing activities from continuing operations was $15.1 million. This source of cash was primarily attributed to distributions received by Net Lease from one of its limited liability investment companies of $13.3 million, as well as proceeds from sales and maturities of fixed maturities in excess of purchases of fixed maturities.

Current wording

During the nine months ended September 30, 2024, the net cash used in investing activities from continuing operations was $16.4 million. This use of cash is primarily attributed to the acquisition of Image Solutions, net of cash acquired and purchases of fixed maturities in excess of proceeds from sales and maturities of fixed maturities, distributions received by Argo Holdings from three of its underlying limited liability investment companies, proceeds from the sale of a private company investment and proceeds from the sale of VA Lafayette. During the nine months ended September 30, 2023, the net cash provided by investing activities from continuing operations was $16.7 million. This source of cash is primarily attributed to distributions received by Net Lease from one of its limited liability investment companies of $13.3 million, as well as proceeds from sales and maturities of fixed maturities and sales of equity securities in excess of purchases of fixed maturities and acquisition of business, net of cash acquired.

Previous wording

During the six months ended June 30, 2024, the net cash used in financing activities from continuing operations was $1.0 million. This use of cash was primarily attributed to principal repayment on bank loans of $16.6 million, taxes paid related to net share settlements of restricted stock awards of $1.8 million, cash paid for repurchases of common stock of $1.0 million and distributions to noncontrolling interest holders of $0.7 million, partially offset by principal proceeds from bank loans of $19.1 million. During the six months ended June 30, 2023, the net cash used in financing activities from continuing operations was $43.9 million. This use of cash was primarily attributed to the repurchase of five of the TruPs for $40.3 million, principal repayment on bank loans of $4.8 million, distributions to noncontrolling interest holders of $3.6 million and cash paid for repurchase of warrants of $1.6 million, partially offset by cash proceeds from the exercise of warrants of $6.6 million.

Current wording

During the nine months ended September 30, 2024, the net cash provided by financing activities from continuing operations was $13.3 million. This source of cash was primarily attributed to principal proceeds from bank loans of $33.7 million and proceeds from the issuance of Class B preferred stock of $8.3 million, partially offset by principal repayment on bank loans of $20.0 million, taxes paid related to net share settlements of restricted stock awards of $2.2 million, cash paid for repurchases of common stock of $2.5 million, cash paid to acquire the IWS noncontrolling interest of $2.5 million and distributions to noncontrolling interest holders of $1.4 million. During the nine months ended September 30, 2023, the net cash used in financing activities from continuing operations was $39.0 million. This use of cash was primarily attributed to the repurchase of five of the TruPs for $40.3 million, principal repayment on bank loans of $6.1 million, distributions to noncontrolling interest holders of $4.0 million and cash paid for repurchase of warrants of $4.0 million, partially offset by cash proceeds from the exercise of warrants of $16.7 million.

Previous wording

The holding company’s liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was $2.3 million and $4.3 million at June 30, 2024 and December 31, 2023, respectively, which excludes future actions available to the holding company that could be taken to generate liquidity. Such future actions include, but are not limited to, distributions from the Extended Warranty and Kingsway Search Xcelerator operating companies subject to certain loan covenants that may be in place at each operating company. The holding company cash amounts are reflected in the cash and cash equivalents of $9.6 million and $9.1 million reported at June 30, 2024 and December 31, 2023, respectively, on the Company’s consolidated balance sheets.

Current wording

The holding company’s liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was $1.4 million and $4.3 million at September 30, 2024 and December 31, 2023, respectively, which excludes future actions available to the holding company that could be taken to generate liquidity. Such future actions include, but are not limited to, distributions from the Extended Warranty and Kingsway Search Xcelerator operating companies subject to certain loan covenants that may be in place at each operating company. The holding company cash amounts are reflected in the cash and cash equivalents of $6.5 million and $9.1 million reported at September 30, 2024 and December 31, 2023, respectively, on the Company’s consolidated balance sheets.