Kingsway Financial Services (KFS) 15th Annual Midwest IDEAS Investor Conference summary

Business overview and strategy

• Operates as a lean holding company with two main segments: extended warranty and Kingsway Search Accelerator (KSX), focusing on recurring revenue, high-margin, asset-light businesses.

• Avoids capital-intensive industries, prioritizing sticky revenue and sectors with growth tailwinds.

• Maintains a significant federal NOL of over $600 million, providing tax advantages for future gains.

• Management and board collectively own about 55% of outstanding stock, aligning interests with shareholders.

• Recent efforts have focused on simplifying capital structure and concentrating on core operations.

Extended warranty segment

• Extended warranty generated $68 million in TTM revenue (66% of total) and 58% of EBITDA as of June 30, 2024.

• Claims inflation, especially labor costs, impacted EBITDA in 2023, but claims have started to moderate in 2024.

• Distribution channels include exclusive credit union relationships, independent auto dealers, and commercial/home equipment warranties.

• Credit union channel boasts long-term, sticky relationships, with a specialized call center increasing close rates to 50%.

• Commercial/home equipment warranties present a potential growth area, with plans to eventually take on risk similar to auto warranties.

Financial management and capital allocation

• Net debt in the warranty segment was $10.7 million as of June 30, 2024, following refinancing activities.

• Cash flow benefits from upfront policy payments and investment of trust funds in fixed income securities, with yields rising as older investments mature.

• Sale of a home warranty business in 2022 generated $50 million, demonstrating successful capital redeployment.

• Ongoing securities repurchase program with $2 million remaining and active sale of non-strategic real estate.