Kingsway Financial Services Q3 2026 Earnings Results & Report

Kingsway Financial Services EPS Results

• Actual EPS: -$0.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Kingsway Financial Services Revenue Results

• Actual Revenue: $38.85 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Kingsway Financial Services (NYSE:KWY). (NYSE:KWY) is a Canadian-based holding company that owns and operates businesses in the specialty insurance and insurance-services sectors. Its portfolio includes companies providing specialty insurance products, extended warranty programs, and related administrative and claims services.

Historically, Kingsway operated primarily as a specialty insurance provider, including nonstandard automobile insurance businesses in the United States and Canada. The company has since focused on managing and developing a diversified group of insurance and non-insurance subsidiaries, with operations serving customers principally in North America.

Kingsway was founded in 1989 and is headquartered in Toronto, Ontario. Its businesses include providers of vehicle service contracts, warranty products, and other specialty services, in addition to insurance-related operations. John T. Fitzgerald serves as the company’s president and chief executive officer.

Kingsway Financial Services Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Portfolio EBITDA topped $6 million, up 29% year over year, while reported organic segment revenue and adjusted EBITDA grew about 8% and 54%, respectively. Management cautioned that the profit growth was unusually strong and expects results to normalize over time toward its long-term double-digit growth target.
• Positive Sentiment: KSX adjusted EBITDA rose 24.5% to $3.3 million, and Extended Warranty adjusted EBITDA increased to $1.4 million; excluding the sold Trinity business, Extended Warranty revenue grew 5.9%. Cash from operations was $4.1 million, and net debt declined to $60.3 million from $62.4 million at year-end 2025.
• Negative Sentiment: Consolidated net loss widened to $3.2 million from $2.4 million, while consolidated adjusted EBITDA was $2.0 million versus $2.1 million a year earlier. Results included a $900,000 Argo investment-value decrease and about $600,000 in non-cash revenue re-deferrals; management said segment profitability would have been broadly in line with Q2 absent the re-deferrals.
• Neutral Sentiment: Performance varied across the portfolio: Penn PWI, Kingsway Skilled Trades, and SNS were highlighted for improvement, while DDI remained a detractor as it invests ahead of anticipated business implementations. Management expects DDI’s investments to support better results in 2027.
• Positive Sentiment: Image Solutions completed its acquisition of Romeo Computer Company using financing at the subsidiary level, which management described as progress toward self-funding acquisition platforms. Kingsway’s deal pipeline remains active, though the company now expects to complete two deals this year rather than three and aims to return to three to five deals in 2027.

Presentation

[Operator]

Good day, and welcome to the Kingsway Third Quarter 2026 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. With me on the call are J.T. Fitzgerald, Chief Executive Officer, and Kent Hansen, Chief Financial Officer. Before we begin, I want to remind everyone that today's call may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses, and future business outlook. Actual results could materially differ from those contemplated by these forward-looking statements.

[Operator]

For a discussion of such risk and uncertainties which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see the risk factors detailed in the company's annual report on the Forms 10-K and subsequent Forms 10-Q and Forms 8-K filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non-GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release, as well as in the company's periodic filings with the SEC. Now, I would like to hand the call over to J.T. Fitzgerald, CEO of Kingsway. J.T., please proceed.

[J.T. Fitzgerald, CEO at Kingsway]

Thank you, John. Good afternoon, everyone, and welcome to the Kingsway Earnings Call for the third quarter of 2026. To our knowledge, Kingsway is the only publicly traded U.S. company employing the search fund model to acquire and build great businesses. We own and operate a diversified collection of high-quality services companies that are asset-light, profitable, growing, and that generate recurring revenue. Our goal is to compound long-term shareholder value on a per-share basis, and we believe our business can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax-efficient public company framework. Kingsway delivered another exceptional result in the third quarter of 2026, with strong profitability, organic growth, and cash flow.

[J.T. Fitzgerald, CEO at Kingsway]

For the quarter, KSX adjusted EBITDA was $3.3 million, and Extended Warranty adjusted EBITDA was $1.4 million. Modified Cash adjusted EBITDA in the Extended Warranty business, which is a lender-defined term used as the basis for financial covenants under the company's credit agreement, was $2.7 million. Portfolio EBITDA was therefore just over $6 million, up 29% against the prior year period. This represents the second strongest quarter of operating performance since my tenure began as Kingsway's CEO, and yet another proof point that Kingsway is delivering on our strategy. I'd also note that this quarter's reported results absorb several non-cash revenue re-deferrals at our operating companies. These are accounting timing items that shift revenue into future periods and don't reflect a change in the underlying performance of our businesses. Normalizing for these non-cash accounting items, profitability in the quarter would have been broadly consistent with Kingsway's strong second quarter result.

[J.T. Fitzgerald, CEO at Kingsway]

Kent will walk through the specifics in a moment. Let's now turn to organic growth. As we have discussed in the past, we view Kingsway as a compounder, a business that can consistently grow its intrinsic value on a per-share basis over a long period of time and at an above-average rate. Proven compounders have generated significant long-term returns for shareholders. Our strategy is to employ the Search Fund model and our Kingsway Business System for operational excellence to grow Kingsway's intrinsic value both inorganically and organically. While in the past we have talked qualitatively about the company's organic growth, I am pleased to share that today, for the first time, we are providing investors with quantitative organic growth numbers for our operating companies, along with a reconciliation table included in our earnings release. We believe this improved transparency will help investors better understand and track Kingsway's operating performance.

[J.T. Fitzgerald, CEO at Kingsway]

We will be providing organic growth numbers for our operating companies each quarter going forward. In the third quarter, organic segment revenue growth was roughly 8%, and organic segment adjusted EBITDA growth was roughly 54%. We are encouraged by these numbers, which demonstrate the strong commercial momentum and value creation we are seeing across the company. A couple comments on Kingsway's organic growth during the quarter. First, it is difficult to achieve 54% organic adjusted EBITDA growth across nine businesses without broad-based contributions from all of our operating subsidiaries. Such was the case for Kingsway in the quarter. Most of our operating businesses experienced solid or exceptional year-on-year organic growth, with several standout performances and one meaningful detractor. On the positive side of the ledger, standout performances came from Penn PWI, Kingsway Skilled Trades, and SNS.

[J.T. Fitzgerald, CEO at Kingsway]

Penn PWI is an Extended Warranty business focused on automobile warranties distributed through the independent dealership channel. Its President, Robbie Humble, is a KSX-style leader who participates in our KSX programs, including our KSX advisory board meetings, and his incentives are structured similarly to our KSX operator CEOs. Penn and PWI previously were operated as two separate companies, even though they shared similar end markets and complementary products. In 2026, under Robbie's leadership, Penn and PWI have consolidated to a one-company culture, and most recently to the same modern cloud-based ERP system as PWI retired its legacy 30-year-old operating system. With a simpler and more nimble structure, Penn PWI's financial results have improved as the year has progressed. We are confident in Robbie and his team and believe that there is significant further opportunity ahead for both top-line and bottom-line growth at Penn PWI.

[J.T. Fitzgerald, CEO at Kingsway]

At Kingsway Skilled Trades, we have been pleased by the strides made under the leadership of Colter Hansen. Bud's continues to do well. AAA appears to have turned the corner by implementing key pillars of the KBS framework, leading to lower expenses, better tracking of KPIs, and enhanced marketing processes that are beginning to drive incremental growth. Southside, which has been impacted by repeat write-downs related to a legacy one-off construction project, finally has completed that project and is now redeploying its team to more profitable and consistent work. Kingsway Skilled Trades lost money in the year-ago period, but returned to profitability this year, even before the full benefits from AAA's operating improvements and from exiting the legacy project at Southside start to show through. SNS similarly lost money in the year-ago period, but was profitable in the third quarter of 2026.

[J.T. Fitzgerald, CEO at Kingsway]

SNS President Paul Vidal has migrated the company to a more streamlined cloud-based IT environment, reorganized the operations team under a single leader with clear standard operating procedures, worked to improve SNS's cash position via better cash collection, and is now driving growth via additional per diem and travel nurse assignments within a more constructive industry backdrop. The early results are encouraging, with better profitability, cash flow, and growth. Much of the work to date has been to set up SNS for better quarters ahead. We are excited to see Paul and his team at SNS continue to build as we enter the higher demand winter months. A notable detractor in the quarter was DDI, which remains in its J-curve. As we've shared previously, DDI has made significant investments in its technology and operations to build a scalable, world-class offering with market-leading reliability, accuracy, and response times.

[J.T. Fitzgerald, CEO at Kingsway]

More recently, DDI has added to its sales force, taking on extra costs ahead of an expected acceleration in new business implementations. DDI's sales funnel is building nicely, and we believe these investments position the company for improved results in 2027. Second, it's worth spending a couple minutes on the 54% organic adjusted EBITDA growth number achieved in the quarter. At our Investor Day in May, we committed to disclosing organic growth numbers later in the year. The third quarter was a natural starting point, as four of our businesses, Roundhouse, AAA, Southside, and The HR Team, all entered the comp set during the quarter. Our long-term target is to deliver consistent double-digit organic segment adjusted EBITDA growth, with profit growth underpinned by our Kingsway Business System for operating excellence.

[J.T. Fitzgerald, CEO at Kingsway]

We would expect to normalize towards this level over time as our portfolio broadens and more of our companies reach steady state growth profiles. In the near term, however, a confluence of factors is leading to exceptionally strong organic profit growth. One, our current mix of business leans higher growth. Two, a number of our operating companies are exiting their J-curves in 2026 and 2027 after periods of investment. Three, with nine operating platforms, it doesn't require many large winners to generate outsized growth. Four, most importantly, we have a high-caliber group of operator CEOs who are steadfastly implementing the principles of KBS. Our organic segment adjusted EBITDA growth would have been similarly robust in Q2, and we expect organic profit growth to continue to be strong in the fourth quarter and into 2027 based on the current operating momentum we're seeing across our business.

[J.T. Fitzgerald, CEO at Kingsway]

Next, let's turn to cash flow. Kingsway's solid operating performance in the third quarter translated into healthy cash flow, with cash from operations reaching $4.1 million in the quarter. The asset-light nature of Kingsway's services businesses allows Kingsway to translate growing EBITDA into strong cash flow as the company scales. The incremental cash flow is then available to reinvest in additional attractive acquisitions, the Kingsway flywheel in action. Next, to inorganic growth. As we mentioned on our last call, Image Solutions completed its acquisition of Romeo Computer Company, or RCC, in August. What I'd highlight is how that deal was financed, entirely at the Image Solutions level without any additional equity capital from Kingsway. That's an important milestone in building self-funding acquisition platforms within our portfolio. RCC is performing well so far, and the integrations with Image Solutions is on track, providing confidence in where this business is headed.

[J.T. Fitzgerald, CEO at Kingsway]

Our deal pipeline remains active with opportunities for both new platforms and further tuck-in acquisitions, with numerous IOIs, LOIs, and management meetings in recent weeks and months. That said, our throughput was reduced earlier this year when two of our Operators-in-Residence took over leadership positions at SNS and Kingsway Skilled Trades, and after a couple tuck-in deals fell through in the later stages of diligence. It is becoming more likely that we end the year with two completed deals and not three. We expect to be back on track with our target of three to five deals per year in 2027. Before turning the call over to Kent for a financial review, I would like to highlight that LTM Portfolio EBITDA increased to a range of $23 million-$24 million.

[J.T. Fitzgerald, CEO at Kingsway]

Given the momentum in our business, I am confident in the continued positive trajectory of this key metric in the fourth quarter and into 2027. With that, I'll hand the call over to Kent to walk through the financial results in more detail.

[Kent Hansen, CFO at Kingsway]

Thanks, J.T., and good afternoon, everyone. For the third quarter of 2026, consolidated revenue increased 4.5% to $38.9 million, compared with $37.2 million in the third quarter of 2025. KSX revenue increased 18.2% to $22.4 million, compared with $19 million in the prior year quarter. Extended Warranty revenue was $16.4 million, compared with $18.2 million in the third quarter of 2025, a decrease of 9.8%. Excluding the sale of Trinity, Extended Warranty revenue increased 5.9% to $16.4 million from $15.5 million in the third quarter of 2025. Extended Warranty cash sales, excluding Trinity, were up 6.3% in the quarter. Consolidated net loss for the quarter was $3.2 million, compared with a net loss of $2.4 million in the prior year quarter. Consolidated adjusted EBITDA for the quarter was $2 million, compared with $2.1 million in the third quarter of 2025.

[Kent Hansen, CFO at Kingsway]

Turning to segment profitability, KSX adjusted EBITDA increased by 24.5% to $3.3 million, compared with $2.7 million in the third quarter of 2025. Extended Warranty adjusted EBITDA increased by 88.3% to $1.4 million, compared to $800,000 a year ago. Excluding Trinity, Extended Warranty adjusted EBITDA was $1.4 million, compared to $400,000 a year ago. Portfolio LTM EBITDA for the operating companies was $23 million-$24 million as of September 30, 2026. We continue to view Portfolio LTM EBITDA as a useful measure of the trailing earnings capacity of our operating portfolio and one that aligns with how we assess the business internally. Turning to the balance sheet, total net debt was $60.3 million as of September 30, 2026, compared with $62.4 million as of December 31, 2025. Before I turn the call back over to J.T., there are a couple of accounting items worth highlighting during the quarter.

[Kent Hansen, CFO at Kingsway]

First, a note on Argo. In the second quarter, Argo Holdings received distributions from search fund investments that remain active, funded by debt recapitalizations at those businesses. Argo recorded a $1.7 million gain in the second quarter, primarily related to those distributions. Because Argo's investees report the results after our quarter closes, we value those investments using the most recent financials available, which are generally as of the prior quarter end. As a result, the impact of the investee's higher debt level showed up this quarter as a $900,000 net decrease in the value of Argo's remaining investments. We consider search fund investing to be core to Kingsway, so while Argo's results are not included in segment-level performance, they are included in our consolidated adjusted EBITDA figures.

[Kent Hansen, CFO at Kingsway]

That means the second quarter benefited from the gain on a consolidated basis, and the third quarter absorbed the $900,000 decrease. Excluding this item, Kingsway consolidated EBITDA would have been $2.9 million in the third quarter. Second, as J.T. previously called out, during the quarter, Kingsway had approximately $600,000 of revenue re-deferrals at its operating subsidiaries, with the most significant impact at SPI and Penn PWI. While these type of accounting items occur nearly every quarter, write-downs or write-ups of legacy assets or inventories, bad debt expense or recoveries, acceleration or deferral of recognized revenue, it was unusual to have multiple large revenue re-deferrals in a single quarter without other offsetting items, which is why we felt it important to call out these specific items in the quarter.

[Kent Hansen, CFO at Kingsway]

Adjusting for these non-cash revenue re-deferrals, combined segment profitability in the quarter would have been broadly consistent with Kingsway's strong second quarter results. With that, I'll turn the call back over to J.T.

[J.T. Fitzgerald, CEO at Kingsway]

Thanks, Kent. To recap, Kingsway reported another exceptional result in the third quarter, with strong profitability, organic growth, and cash flow. These results provide another data point that Kingsway is delivering on our strategy. While each of our operating businesses is at a different stage in its journey, we have a consistent strategy across all of them, matching high-quality service companies with high-attribute and motivated operator CEOs, and then implementing the Kingsway Business System to improve operations every single day through steps both big and small to build high-performing and durable enterprises. Our process is repeatable, and it's gratifying to see our hard work showing up in the numbers. With an active deal pipeline plus clear momentum in our operating businesses, Kingsway is positioned to continue driving significant inorganic and organic growth in the quarters ahead.

[J.T. Fitzgerald, CEO at Kingsway]

Our focus remains on building earnings and cash flow over time, staying disciplined on new acquisitions, and compounding long-term value for our shareholders. With that, operator, we are ready to take questions.

[Operator]

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. Okay, we have a question from Douglas Ott with Andvari. Please proceed.

[Douglas Ott, Analyst at Andvari]

Hi, J.T. and Kent. I hope you are both doing well.

[J.T. Fitzgerald, CEO at Kingsway]

Hi, Doug.

[Kent Hansen, CFO at Kingsway]

Hi, Doug. Thank you.

[Douglas Ott, Analyst at Andvari]

Yeah. My question, I don't know if we've spoken about this before, but when it comes to one of the KSX businesses that has the financial bandwidth and perhaps the tenure and experience to be able to make a tuck-in acquisition for themselves, could you go over kind of the process that happens between you and the operator? How does the discussion go? What happens if there are frictions or disagreements between whether a tuck-in acquisition makes sense for one of the platform businesses, and also just whether if J.T. has veto power in situations that might arise?

[J.T. Fitzgerald, CEO at Kingsway]

Yeah, sure. Well, the good news is, first and foremost, every one of these operator CEOs has already been through the comprehensive underwriting process as an OIR. They understand the important criteria and what matters to us. As a result, it matters to them.

[Douglas Ott, Analyst at Andvari]

Yeah.

[J.T. Fitzgerald, CEO at Kingsway]

There's a lot of coaching around those things, and so they come armed with that education. There is still a robust underwriting process for any tuck-in. I meet with every one of our operator CEOs every week, and when they have an active deal, that's an important component of those conversations, and we go through all of the important criteria, first, kind of on the underwrite, and also on due diligence and where to focus and core gotta believes about the business and trying to invalidate some of those beliefs. It's a very active and collaborative process. We are the capital provider to the businesses. We have governance both at the board level of those businesses and ultimately at the TopCo with an investment committee.

[J.T. Fitzgerald, CEO at Kingsway]

All of our acquisitions go through that natural sort of, as you would expect, chain of governance as well.

[Douglas Ott, Analyst at Andvari]

Got it. Yeah. I am very much looking forward to the more self-funding possibility of Kingsway Corporation. It is hard to predict, but maybe you can just give us a general level of confidence in the next two or three years. Will more of the acquisitions be able to be self-funded and Kingsway Corporation not having to raise capital as much as it has in the past?

[J.T. Fitzgerald, CEO at Kingsway]

Yeah. I think you are touching on an important point, which is pacing, right?

[Douglas Ott, Analyst at Andvari]

Yeah

[J.T. Fitzgerald, CEO at Kingsway]

We like to say you have got to go slow in order to go fast, right? Part of that is the operator has to get in, learn the business, start to improve the business, and during that period of time, they are delevering and, in the case of Image Solutions, sort of building some cash. The two things kind of converge somewhere around year two or, you know, something between year two and year three, where you have got an operator who really understands his business, his industry, his market, what good looks like, and has, through delevering and building cash, created capacity to tuck in acquisitions. I mentioned earlier that all of these businesses are at different levels or points on their journey, and some of that is the pacing. But yes, it is a very important component of what we are trying to build here.

[J.T. Fitzgerald, CEO at Kingsway]

Kingsway itself as an equity-efficient serial acquirer, but then at the platform level, sort of what I describe as nesting dolls of a handful of other programmatic serial acquirers that are going to do that in an extremely equity-efficient way.

[Douglas Ott, Analyst at Andvari]

Got it. One more question I want to ask, what has one or two moments or situations so far this year that you've been most proud of? You don't have to go into specifics or details. You can use general, but I'm truly curious, what are the moments that you've been the most happy about this year so far when it comes to Kingsway Corporation or specific, not specific, but unnamed operators or businesses at KSX?

[J.T. Fitzgerald, CEO at Kingsway]

That's a wonderful question. I would say, and I don't know if you saw the fireside chat with Tyler Gordy, but listening to Tyler describe the way his involvement at Kingsway transformed his life as an operator, as a leader, as a person.

[Douglas Ott, Analyst at Andvari]

Yeah

[J.T. Fitzgerald, CEO at Kingsway]

Also sort of financially. You know, a big part of my motivation and aspiration is really more around the changing people's lives. I said, like, my own, it sounds corny, but my own sort of personal BHAG is to transform 50 lives. So sort of unscripted, having Tyler describe the impact that that had on him made me very proud.

[Douglas Ott, Analyst at Andvari]

That's a great answer, J.T. I can see how it sounds corny, but it truly isn't. You know, one of the things I've learned slowly over time as an investor and a tiny allocator of capital, like most of the businesses that I've looked at, I mean, you can almost all businesses revolve around people, and I think that's underappreciated, and I think that's a great answer that you gave. Doing well for your people and doing well for customers and clients is really one of the most important things.

[J.T. Fitzgerald, CEO at Kingsway]

I would just add, you know, watching the development of the rest of our team on their journey and seeing them growing into that and being able to extrapolate their future is, yeah, it's fun to be a part of.

[Douglas Ott, Analyst at Andvari]

Great. All right. That's it for me for now. Thanks for your answers.

[J.T. Fitzgerald, CEO at Kingsway]

Thank you.

[Kent Hansen, CFO at Kingsway]

Thanks, Doug.

[Operator]

If there are any remaining questions, please press star one on your touch tone phone. Once again, if you have a question, please indicate so by pressing star one. there are currently no questions in the queue. I would like to turn the floor over to James. James, do you have any questions from your side?

[James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR]

Yes, we had a few come in on email. I think one or more J.T. might have answered. The first one I am seeing here is, Penn PWI hasn't been discussed much on prior calls. Can you please share more on Penn PWI, including the background of the operator and why you like this business?

[J.T. Fitzgerald, CEO at Kingsway]

I will take those in reverse order. Penn PWI, vehicle service contracts and ancillary products on predominantly used autos sold through independent dealer channel. I like really attractive revenue quality, so diversified contractual prepaid revenue at good margins when run well. And great working capital dynamics. It is paid in advance, claims emerge years down the road, and so really attractive working capital dynamics. The operator who we touched on in the prepared remarks, Robbie Humble, is humble, like his name, deeply curious and has a really strong will to win. I think that he has got a great set of attributes. Robbie was academically, went to a great undergrad institution, got his MBA from Harvard Business School, and coincidentally spent a big chunk of his professional career before coming to run these businesses in the auto Extended Warranty industry.

[J.T. Fitzgerald, CEO at Kingsway]

A combination of attributes and already formed experience that he's bringing to bear on these companies that we own. That's pretty exciting.

[James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR]

Great. Thank you. The next question, you said the acquisition pipeline is active or very active. Can you share some color on what you are seeing in the market for new deal opportunities?

[J.T. Fitzgerald, CEO at Kingsway]

Yeah, I don't know if this is a broad market commentary, but I sort of maybe myopically think about what we've done internally to improve our acquisition pipeline. We spent the last several quarters, Charlie Joyce, who's running our KSX program, and I have been building an AI-enabled process to source, aggregate, screen and score, and assign deals here at Kingsway. You can imagine deal flow used to come in through a variety of ways, and still does in some cases, email and broker listings and things. Leveraging AI for consistent outreach across our 10,000 or so brokers and intermediaries to remind them what we're looking for, and then very rapidly ingesting and screening and scoring first pass on those deals has allowed us to be incredibly efficient and sort of see more deals.

[J.T. Fitzgerald, CEO at Kingsway]

That's why we would say the acquisition pipeline is active or very active. More recently, we just in the last week have hired a new business development associate who joined the team and will be focused on deal flow, not only for our OIRs, but also for tuck-in acquisitions for a handful of our platforms. Yeah, pretty excited about that too.

[James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR]

Great. Thank you. Looking at the next one, it's about Argo. I'm not sure if it was mentioned or answered in the script or not. It says, "You mentioned there was a $1.7 million gain for Argo in the second quarter and a $0.9 million loss for Argo in the third. What accounts for the difference in those two numbers, and why wouldn't they offset?

[Kent Hansen, CFO at Kingsway]

Yeah. Hey, James, it's Kent. I'll take that one. Argo has a collection of companies, so it's not one or two. There's still several investments in there. The gain in Q2 represents some cash that we received in a couple of those companies from recapitalization, as well as just sort of the mark-to-market fair value gains that we had on the portfolio as a whole. For the third quarter, we didn't get any such distributions, but a couple of those investments, because their debt went up, we re-fair valued those, but some of the other investments offset some of those losses. So, it's not just one or two investments, and so you're going to have the exact offset one quarter versus the next. It's sort of the change in value of the collection of investments that we still own.

[James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR]

Great. Thank you, Kent. The next one we have is, you've talked about the Kingsway Business System for several quarters now. Which practices are proving most useful across businesses in different industries?

[J.T. Fitzgerald, CEO at Kingsway]

Yeah, I would say that the core tenets, pillars of the Kingsway Business System, we like to say common sense vigorously applied. The core pillars are what I would say generally universally applicable around leadership, data and daily management, talent, enterprise excellence, planning and policy deployment, and growth. Those are pretty universal beliefs, behaviors, and tools. Obviously, we have lots of different tools. Not all of those are applicable to every business, but I would say the core fundamentals of Kingsway Business System are sort of common sense vigorously applied, and therefore universally applicable. Not just to business, believe it or not.

[James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR]

Excellent. Well, thank you for that. I'll go back to the operator, because it does appear like we have a follow-up question in the queue.

[Operator]

Thank you. We have a follow-up question coming from Douglas Ott with Andvari. Douglas, please proceed.

[Douglas Ott, Analyst at Andvari]

Hello again, J.T. When you were talking about Robbie and you mentioned a will to win, that reminded me of an experience I recently had in the last two days. I was at a banking symposium, a collection of community regional bankers. Obviously, I'm not a banker, but I was very interested in this. One of the CEOs of a publicly traded bank, when he was talking about how he selects for people, talent, he shared with us that one of the questions that he asked whomever he was interviewing was this: Choose one of the two phrases.

[Douglas Ott, Analyst at Andvari]

One was, "Do you love to win?" And the other was, "Do you hate to lose?" This banker, his preferred answer was to hear someone say they hate to lose, and I think the reason behind that was that when you win or do well in whatever competition, business, life, whatever, that feeling is pretty effervescent. The joy of winning lasts very shortly, as opposed to the feeling of defeat, which can last a long, long time. I'm just posing this as a general question for you. What do you think of those two questions? Can you expound upon that in any sort of way?

[J.T. Fitzgerald, CEO at Kingsway]

Yeah. To most people, I think that that would feel like two sides of the same coin, but I tend to agree with the hate to lose preference. We talk a lot about our five H's as the sort of broad buckets of attributes that we're looking for in our operator CEOs. The hate to lose, to me, evokes images of scar tissue and the grit, tenacity, perseverance that comes from sort of loss avoidance in the future. I think those are hallmarks of the attributes that we're looking for in the five H's, right? This hunger and hustle, right? So grit and tenacity, perseverance, and I think that that's often forged through hardship, AKA-

[Douglas Ott, Analyst at Andvari]

Yeah

[J.T. Fitzgerald, CEO at Kingsway]

-losing.

[Douglas Ott, Analyst at Andvari]

Yeah. I don't think it's entirely an either/or proposition. Of course, you want people that love to win, and at the same time, like when you said, two sides of the same coin, I think the scar tissue, the loss aversion, but you don't want anyone to be totally afraid of taking a risk at the same time. A will to win, but also perhaps maybe a stronger desire to never lose. It's a hard question to answer, but I appreciate you chatting about it.

[J.T. Fitzgerald, CEO at Kingsway]

Well, thank you for sharing it, and certainly gives us more to think about. Yeah, I love it. Love the.

[Douglas Ott, Analyst at Andvari]

Yeah, you're welcome. Thank you. All right, that's it for me.

[Operator]

Okay, I'm showing no further questions in the queue. This concludes the Q&A portion of the call. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Kent Hansen, CFO

Analysts

• J.T. Fitzgerald, CEO at Kingsway
• Douglas Ott, Analyst at Andvari
• James Carbonara, Partner of Investor Relations Strategy and Operations at Hayden IR