Kingsway Financial Services Inc.
TSX : KFS
NYSE : KFS

Kingsway Financial Services Inc.

October 29, 2015 10:43 ET

Kingsway's Proven Track Record Means Long-Term Value and Liquidity for Kobex Shareholders

- Kingsway's proven track record of success demonstrates its plan for value creation will be implemented at Kobex, including providing shareholders with an option for more fulsome liquidity.

- The current Kobex board has generated on average total shareholder returns of -2.9% while Kingsway's nominees, on the same basis, have generated on average total shareholder returns of over 23% year over year. (1)

- Over $7.6 million in shareholder value has been eroded while Kobex's current board and management have claimed fees of over $2.4 million from shareholders.

- Kingsway's plan implemented by the independent nominees will align the Kobex board with shareholders, create long-term value, and provide the option for liquidity shareholders have been denied.

TORONTO, ONTARIO--(Marketwired - Oct. 29, 2015) - Kingsway Financial Services Inc. ("Kingsway") (TSX:KFS)(NYSE:KFS) reaffirms its commitment to Kobex Capital Corp. ("Kobex") shareholders that its nominees will move forward to implement the Kingsway plan for value creation and liquidity at Kobex.

"We want to thank our fellow Kobex shareholders who are supporting Kingsway's nominees," said Larry Swets, President and Chief Executive Officer of Kingsway. "Shareholders recognize Kingsway's strong track record of creating long-term value for all shareholders in each of the investments we have been part of. It is this proven track record that gives them confidence that Kingsway's independent nominees will be responsive to the concerns Kobex shareholders have shared and will take immediate action to implement a plan to create value and provide the option for more fulsome liquidity they have been denied under the current board."

1 Calculated based on average Total Shareholder Returns of all Kobex directors and Kingsway nominees. Total Shareholder Return by director represents the total shareholder returns compounded annually over their respective tenures at their respective board or management positions as sourced from Bloomberg as of Sept. 17, 2015.

KINGSWAY'S TRACK RECORD OF SUCCESS: WE MEAN IT, WE DELIVER

The management team at Kingsway and our independent director nominees have a proven track record of value creation for shareholders. Below are a few examples:

  • Principals now in charge of Kingsway led a special purpose acquisition company (SPAC) launched in 2007 and completed a merger transaction with a target during the financial crisis of 2008. FMG Acquisition Corp. merged with United Insurance Holdings, L.C., resulting in United Insurance Holdings Corp. (NASDAQ: UIHC) that trades on the NASDAQ and has a market cap of approximately US$330 million and a stock price of US$15. This transaction is one of the most successful SPAC mergers and has provided shareholders a return in excess of 100% with dividends reinvested and exceeding the S&P 500.
  • Kingsway in 2009 identified a unique opportunity to invest in a commercial auto business that was previously written off. The business was reorganized at Atlas Financial Holdings, Inc. and merged with a Canadian Capital Pool Company (CPC) in a merger that resulted in Atlas being public on the TSXV in January 2011. JJR VI Acquisition Corp sold subscription rights for C$2.00 which today represents .33 shares of the Nasdaq traded AFH or US$4.56 per full share. AFH trades today for over US$19 providing a return over 300% while the S&P 500 was up approximately 60%.
  • Kingsway was involved in providing the capital to Concordia Healthcare (TSX: CXR) to help it prepare for a merger with a CPC and providing an approximate return of 600% for subscription right buyers.
  • Kingsway acquired JBA Associates, Inc. in 2010, and combined it with an existing subsidiary (resulting in Assigned Risk Solutions Ltd.), which transformed a money-losing subsidiary into a profitable, cash flow generating enterprise. The disposition of Assigned Risk Solutions Ltd. in 2015 for US$47 million in cash and potential future earnouts resulted in significant realized gain and conversion of US$31.8 million of goodwill and intangible assets into cash.
  • Kingsway formed a Louisiana based homeowners insurer in 2012, 1347 Property Insurance Holdings, Inc. (NASDAQ:PIH), and within two years completed its successful IPO in April 2014 and a follow-on offering in June 2014 raising in excess of US$40 million in gross proceeds.

Kingsway has made numerous other successful investments which span several industries and demonstrate Kingsway's access to deal flow on both sides of the border providing shareholders with a range of opportunities.

KINGSWAY'S PLAN

Kingsway's plan to upgrade Kobex will mean a long-term strategy with positive, value creating results in the near and medium term. Here's our plan:

  1. Replace the conflicted, self‐interested incumbent Directors with five highly‐qualified, independent Directors.
  2. Leverage Kingsway's strong, proven track record to create value for all shareholders.
  3. Reduce expenses and ensure alignment with all shareholders by reducing Director pay from current levels to $10,000 per Director annually and committing to vote against any compensation package that provides stock below intrinsic value.
  4. Explore strategic alternatives that will eliminate the discount between share price and intrinsic value.
  5. Support an immediate plan to provide an option for more fulsome liquidity such as a share repurchase program at $0.65 to assist shareholders seeking immediate liquidity. (Kingsway does not intend to participate in any such buyback.)

"We've heard from shareholders that they want the option for liquidity they have been denied under the current board as soon as possible. Under our plan we will support that more fulsome liquiditys," Swets added.

KINGSWAY'S NOMINEES WILL GET THE JOB DONE

The current board lacks the experience needed to create value for all shareholders and most do not own any shares themselves. In fact, the only director who holds any shares, the current Chairman, Paul van Eden rather than increasing his alignment with shareholders, has been decreasing his alignment with shareholders, selling off over 5 million shares as recently as April 1, 2015 which was most of his controlled position.

While the current Kobex board's expertise is limited to investing in minerals, the Kingsway nominees have the extensive skill set and experience needed to create value across multiple industries and at Kobex. While the incumbent directors have limited M&A experience, Kingsway's nominees collectively have over 40 years of M&A experience, led by Michael Powell who himself has 20 years of expertise.

Nominees Investment
Management
M&A Governance Business
Management
John T. Fitzgerald X X X X
Gregory P. Hannon X X X
Joshua S. Horowitz X X
Andrew McIntyre X X X X
R. Michael Powell X X X

It is important you vote your BLUE proxy or voting instruction form by 9:00 am (Toronto time) on Friday, November 13, 2015. If you need help voting or want to participate in our $0.65 per share premium tender offer, please call Kingsway's proxy solicitation agent and depositary Kingsdale Shareholder Services at 1-855-683-3113 (North American Toll Free Number) or 1-416-867-2272 (collect outside North America) or email at contactus@kingsdaleshareholder.com.

Certain statements contained in this press release constitute forward-looking statements. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to Kingsway, Kobex, and Kobex's current or future board or management, are intended to identify forward-looking statements. Such statements reflect Kingsway's current views and intentions with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements that may be expressed or implied by such forward-looking statements to vary from those described herein should one or more of these risks or uncertainties materialize. Such factors include, but are not limited to, economic, business and regulatory factors, the implementation of specific initiatives proposed by Kingsway and/or the Kingsway nominees, and other factors that are not within the control of Kingsway. Any such forward-looking statements are expressly qualified in their entirety by this cautionary statement. Moreover, Kingsway does not assume responsibility for the accuracy or completeness of such forward-looking statements. The forward-looking statements included in this press release are made as of the date of this press release and Kingsway undertakes no obligation to publicly update or revise forward-looking statements, other than as required by applicable law.

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