KINGSWAY Corp (KWY) Business

Item 1. BUSINESS

In this report, the terms "Kingsway," the "Company," "we," "us" or "our" mean Kingsway Financial Services Inc. and all entities included in our Consolidated Financial Statements.

Kingsway Financial Services Inc. 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. The Company's registered office is located at 10 S. Riverside Plaza, Suite 1520, Chicago, Illinois 60606.  The common shares of Kingsway are listed on the NYSE under the trading symbol "KFS."

Kingsway is a holding company with operating subsidiaries located in the United States and is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses. The Company owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, and that have recurring revenues.  Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure.

The Company owns or controls subsidiaries primarily in the business services and extended warranty industries. Kingsway conducts its business through two reportable segments - Kingsway Search Xcelerator and Extended Warranty - that conduct their business and distribute their products and services primarily in the United States.

Financial information about Kingsway's reportable business segments for the years ended December 31, 2025 and December 31, 2024 is contained in the following sections of this 2025 Annual Report: (i) Note 22, "Segmented Information," to the Consolidated Financial Statements; and (ii) "Results of Continuing Operations" section of MD&A.

All of the dollar amounts in this 2025 Annual Report are expressed in U.S. dollars.

GENERAL DEVELOPMENT OF BUSINESS

Acquisition of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing)

On March 14, 2025, the Company acquired 100% of the outstanding membership interests of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing"). Bud's Plumbing, based in Evansville, Indiana, is a provider of various plumbing installation, service and repair services to residential and commercial customers.  Bud's Plumbing is included in the Kingsway Search Xcelerator segment.

The Company acquired Bud's Plumbing for aggregate consideration consisting of cash and a seller note, of approximately $5.0 million, less certain escrowed amounts for purposes of indemnification claims. The closing purchase price was paid with cash on hand. Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.

Acquisition of Roundhouse Electric & Equipment Co., Inc.

On July 1, 2025, the Company acquired 100% of the outstanding equity interests of Roundhouse Electric & Equipment Co., Inc. ("Roundhouse"). Roundhouse, based in Odessa, Texas, is a provider of industrial-scale electric motor maintenance, repair, testing, and sales solutions primarily to midstream natural gas pipeline operators and utilities across the Permian Basin. Roundhouse is included in the Kingsway Search Xcelerator segment.

The Company acquired Roundhouse for aggregate consideration consisting of cash and phantom equity awards to the selling stockholders, of approximately $22.7 million, less certain escrowed amounts for purposes of indemnification claims. Further information is containe
d in Note 4
, "Acquisitions
," to the Consolidated Financial Statements.

The closing purchase price was financed with a combination of debt financing provided by Mainstreet Bank and cash on hand. Longhorns Acquisition LLC and Roundhouse, subsidiaries of Kingsway, borrowed a total of $11.0 million, in the form of a term loan, and established a $0.5 million revolver that was undrawn at close. The Roundhouse term loan requires monthly payments of principal and interest and has a variable interest rate equal to the greater of the one-month term Secured Overnight Financing Rate ("SOFR") plus 3.3%, or 5.0%. The Roundhouse term loan and revolver mature on July 1, 2035.

Acquisition of AAA Flexible Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain)

On August 1, 2025, the Company (through its newly formed subsidiary, Advanced Plumbing & Drain LLC) acquired substantially all of the assets and certain specified liabilities of AAA Flexible Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain, "Advanced Plumbing").  Advanced Plumbing, based in Cleveland, Ohio, is a provider of various plumbing installation, service and repair services to residential and commercial customers. Advanced Plumbing is included in the Kingsway Search Xcelerator segment.

The Company acquired Advanced Plumbing for aggregate consideration consisting of cash, a seller note and contingent consideration, of approximately $3.7 million, less certain escrowed amounts for purposes of indemnification claims. The closing purchase price was paid with cash on hand. Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.

Acquisition of Efficient Plumbing, LLC (d/b/a Southside Plumbing)

On August 14, 2025, the Company acquired 80% of the outstanding membership interests of Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing"). Southside Plumbing, based in Omaha, Nebraska, is a provider of various plumbing installation, service and repair services to residential and commercial customers. Southside Plumbing is included in the Kingsway Search Xcelerator segment.

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KINGSWAY FINANCIAL SERVICES INC.

The Company acquired Southside Plumbing for aggregate consideration consisting of cash, a seller note and contingent consideration, of approximately $4.6 million, less certain escrowed amounts for purposes of indemnification claims.  Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.

The closing purchase price was financed with a combination of debt financing provided by Newburyport Bank and cash on hand. Kingsway Plumbing Holdco LLC ("KPH"), a subsidiary of Kingsway, and its subsidiaries, Bud's Plumbing, Advanced Plumbing and Southside Plumbing, borrowed a total of $3.75 million, in the form of a term loan, and established a $0.5 million revolver that was undrawn at close. The KPH term loan requires monthly payments of interest, has an annual fixed interest rate of 7.5% and matures on August 14, 2032. Monthly principal payments on the KPH term loan begin September 14, 2026.   The revolver matures on August 14, 2026.

Private Placements

During 2025, the Company closed on two separate private placements to accredited investors for aggregate proceeds totaling $8.0 million, resulting from the sale and issuance of 320,000 shares of redeemable preferred stock with a par value $0.01 per share for a purchase price of $25.00 per share, including 240,000 shares of a newly created class of preferred stock designated Class C Preferred Stock, for aggregate proceeds of $6.0 million and 80,000 shares of a newly created class of preferred stock designated Class D Preferred Stock, for aggregate proceeds of $2.0 million. Each share of redeemable preferred stock is convertible into 2.6316 common shares at any time at the option of the holder.  Further information is contained in Note 18, " Redeemable Preferred Stock," to the Consolidated Financial Statements.

Common Stock Sale

On June 24, 2025, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain third-parties. Pursuant to the Purchase Agreement, the Company sold an aggregate of 1,336,264 shares of its Common Stock, par value $0.01 per share for aggregate gross proceeds of $15.7 million.  The purchase price for each share of Common Stock was $11.75 per share.  Net proceeds to the Company were $15.6 million after deducting offering expenses.

KINGSWAY SEARCH XCELERATOR SEGMENT

Kingsway Search Xcelerator includes the following subsidiaries of the Company (collectively, “Kingsway Search Xcelerator”), and includes the Company’s unique CEO Accelerator program.

Kingsway Search Xcelerator's revenue is derived from the provision of various services and equipment sales.

Business Services

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, fractional, and interim staffing of senior finance professionals, CFO mentoring, board advisory services, and executive search services for permanent placements for its clients throughout the United States.

Ravix provides outsourced finance and human resources consulting services to its clients on a fractional basis for both projects with definitive endpoints and ongoing engagements of indeterminate length for customers throughout the United States.  All services are delivered by employees who are located primarily in the United States. Ravix offers its services across four different practices:

Image Solutions provides comprehensive information technology ("IT") managed services primarily in North Carolina, Kansas, Georgia, Kentucky and Tennessee.  Image Solutions' services encompass a full suite of IT solutions including:

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Healthcare Staffing and Monitoring Services

SNS provides healthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California. SNS is focused on providing temporary registered nurses to hospitals; however, SNS maintains contracts to provide allied healthcare professionals to hospitals. SNS offers its services across two different practices:

DDI provides outsourced 24 hours a day and 7 days per week ("24/7") cardiac telemetry services for general acute care, long-term acute care ("LTAC") and inpatient rehabilitation hospitals. Outsourcing cardiac monitoring allows 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 15 years and currently has a presence in 42 states and Puerto Rico.  DDI offers its services as follows:

Vertical Market Software

SPI provides software products created exclusively to serve the management needs of all types of shared-ownership properties globally.

Electric Motor Solutions

Roundhouse is a provider of industrial-scale electric motor solutions, including field maintenance, in-shop repair, testing, and new motor sales. The Company's primary customers are midstream natural gas pipeline operators and utilities across the Permian Basin.

Kingsway Skilled Trades

Kingsway Skilled Trades includes Bud's Plumbing, Advanced Plumbing and Southside Plumbing.  Kingsway Skilled Trades provides a comprehensive range of plumbing services, including emergency repairs, drain cleaning, water heater installations, and water treatment solutions to residential and commercial customers, primarily in Evansville, Indiana (Bud's Plumbing), Cleveland, Ohio (Advanced Plumbing) and Omaha, Nebraska (Southside Plumbing).

Marketing, Distribution and Competition

No Kingsway Search Xcelerator customer or group of affiliated customers accounts for 10% or more of the Company's consolidated revenues.

Business Services

CSuite and Ravix actively market their services via sponsorships of industry events and conferences targeted at private equity and venture capital. Ravix and CSuite receives most of their new business as a result of business networking activities, referrals from service providers and former clients.

Image Solutions actively promotes its services by partnering with local businesses, sponsoring regional events, and participating in industry-focused conferences. These efforts are strategically aimed at building relationships with small and medium-sized enterprises seeking reliable technology solutions.  Additionally, competition from both regional and national managed service providers poses a constant challenge. Larger competitors may have access to broader resources and pricing advantages, while smaller providers may target niche markets, impacting Image Solutions' ability to expand its client base.

Healthcare Staffing and Monitoring Services

SNS primarily relies on word-of-mouth to recruit nurses to help meet the demands of the hospitals, and SNS actively markets its services through third-party lead generation channels to better meet the hospitals’ clinician demand.

DDI has primarily grown through word-of-mouth referrals and also actively markets its services through traditional channels and via sponsorship of industry events and conferences.

Vertical Market Software

SPI markets its services via industry trade shows and industry conferences.  Because the SPI product is a business to business software solution, SPI's target market is a subset of a larger travel market; therefore, competition is limited.

Electric Motor Solutions

Roundhouse has primarily grown through word-of-mouth referrals, but also actively markets its services through traditional channels, including email marketing and sales calls.

Kingsway Skilled Trades

Kingsway Skilled Trades actively markets its services via online and traditional advertising channels.

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CEO Accelerator

The Company has developed a unique program, whereby it employs dedicated Operator-in-residence (or "Searcher") personnel whose sole function is to search for an appropriate business for Kingsway to acquire and then to ultimately run that business.  As an example, our first Searcher, who was hired in May 2020, identified Ravix as a potential acquisition, which the Company closed on in October 2021.

The CEO Accelerator focuses on identifying and acquiring privately-held businesses with EBITDA between $1 and $3 million where the owner/operator is looking to transition from day-to-day operating responsibilities.  The CEO Accelerator utilizes the proven framework and characteristics of the Search Fund acquisition model and targets industries and companies with pre-defined characteristics.

The Company believes that having a dedicated Searcher(s) – whose background includes a mix of real-world work experience and a graduate degree (usually a master’s of business administration) – who is ready to transition into the role of CEO gives it a competitive advantage over traditional private equity firms and other potential acquirers of businesses in the lower middle market.

When a search ends with a successful acquisition, the Searcher transitions into an operational role as CEO of the acquired company and receives a financial incentive, in the form of various stock-based grants, in the acquired company.  The awards have both time and performance vesting requirements, which aligns the incentives with those of the overall Company.

The Company currently has three full-time Searchers as of December 31, 2025.  The Company intends to maintain this level – and potentially expand it – as business opportunities permit.

EXTENDED WARRANTY SEGMENT

Extended Warranty includes the following subsidiaries of the Company (collectively, "Extended Warranty"):

IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unio
ns in
28
states and the District of Columbia to their members, with customers in all fifty states
.

Geminus primarily sells and administers vehicle service agreements to used car buyers across the United States, mainly through its subsidiary, The Penn Warranty Corporation ("Penn"). Penn distributes these products in
46 states via independent used car dealerships and franchised car dealerships. The business models are supported by an internal sales and operations team.

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

Trinity sells heating, ventilation, air conditioning ("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 the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not 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.

Extended Warranty Products

Automotive

IWS, Geminus and PWI market and administer vehicle service agreements ("VSAs") and related products for new and used automobiles throughout the United States. IWS and PWI also market and administer VSAs for motorcycles and ATV’s.  A VSA is an agreement between the Company and the vehicle purchaser under which the Company agrees to replace or repair, for a specific term, designated vehicle parts in the event of a mechanical breakdown. VSAs supplement, or are in lieu of, manufacturers' warranties and provide a variety of extended coverage options. The cost of the VSA is a function of the contract term, coverage limits and type of vehicle.

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HVAC

Trinity sells HVAC, standby generator, commercial LED lighting and commercial refrigeration warranty products. 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 the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells.

Trinity also provides equipment breakdown and maintenance support services to companies across the United States. As a provider of such 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.

Marketing, Distribution and Competition

No Extended Warranty customer or group of affiliated customers accounts for 10% or more of the Company's consolidated revenues, and no loss of a customer or group of affiliated customers would have a material adverse effect on the Company.

Automotive

IWS markets its products primarily through credit unions. IWS enters into an exclusive agreement with each credit union whereby the credit union receives a stipulated access fee for each vehicle service agreement issued to its members. The credit unions are served by IWS employee representatives located throughout the United States in close geographical proximity to the credit unions they serve. IWS distributes and markets its product
s in
28
states and the District of Columbia.

IWS focuses exclusively on the automotive finance market with its core VSA and related product offerings, while much of its competition in the credit union channel has a less targeted product approach. IWS' typical competitor takes a generalist approach to market by providing credit unions with a variety of different product offerings. They might be unable to deliver specialty expertise on par with IWS and may not give VSA products the attention they require for healthy profitability and strong risk management.

Geminus goes to market through its subsidiary, Penn, who markets its products primarily through independent automotive dealerships and franchise automotive dealerships. Penn enters into dealer wholesale agreements that allow the dealer to resell Penn vehicle service agreements at a retail rate that varies by state as they earn potential commission on the remarketing. The dealer base is serviced by the Company's employees located throughout the United States in close geographical proximity to the dealers they serve. Penn distributes and markets its products in
46 states.

Penn focuses exclusively on the automotive finance market with its core VSA related product offerings, while much of its competition is employee based or agent centric.  Penn operates within a highly competitive environment where product pricing and options are important. Many of its competitors have a comprehensive menu of products and services available to offer the independent and franchise dealers. Penn's typical competitor’s approach to market is by working through employees or agents with a variety of different product offerings. Penn solely focuses on the suite of VSA products it offers, which allows the proper attention required for healthy profitability and risk management.

PWI markets, sells and administers VSAs to used car buyers in
47 states, primarily through a network of approved automobile dealer partners. PWI enters into an agreement with dealer partners that permits dealers to legally sell PWI products to its customers. The distribution of PWI VSAs is supported by an internal sales team geographically located around the country and in close proximity to its dealer partners.

PWI operates exclusively in the automotive finance market with its sole focus on VSAs. PWI does operate within a highly competitive environment where product pricing and product options are important. Most of its competitors have a comprehensive menu of products and services to offer the independent and franchise dealers. PWI’s strategy will drive additional competitiveness by adding new products to its existing menu of VSAs. PWI’s competitors are a blend of national and regional competitors implementing employee and agent-based sales models.

HVAC

Trinity directly markets and distributes its warranty products to manufacturers, distributors and installers of HVAC, standby generator, commercial LED lighting and commercial refrigeration equipment. As a provider of equipment breakdown and maintenance support, Trinity directly markets and distributes its products through its clients, which are primarily companies that directly own and operate numerous locations across the United States.

Trinity operates in an environment with few market competitors. Trinity competes on two important facets: its belief that it provides superior customer service relative to its competitors and its ability, through the support of its insurance company partners, to provide warranty solutions to a wider range of HVAC, standby generator, commercial LED lighting and commercial refrigeration equipment customers than that of its competitors.

Claims Management

Claims management is the process by which Extended Warranty determines the validity and amount of a claim. The Company believes that claims management is fundamental to its operating results. The Company's goal is to settle claims fairly for the benefit of policyholders in a manner that is consistent with the policy language and the Company's regulatory and legal obligations.

IWS, Geminus and PWI effectively and efficiently manage claims by utilizing in-house expertise and information systems. They employ an experienced claims staff, in some cases comprised of Automotive Service Excellence certified mechanics, knowledgeable in all aspects of vehicle repairs and potential claims. Additionally, each owns a proprietary database of historical claims information that has been compiled over several years. Management utilizes these databases to drive real-time pricing adjustments and strategic decision-making.

Trinity claims on warranty products are managed by the insurance companies with which Trinity partners. Trinity may, at times, act as a third-party administrator of such claims; however, at no time does Trinity bear the loss of claims on warranty products.

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PRICING AND PRODUCT MANAGEMENT

Responsibility for pricing and product management rests with the Company's individual operating subsidiaries in Kingsway Search Xcelerator and Extended Warranty. For the Kingsway Search Xcelerator companies, reviews of billing rates and product prices are performed regularly, and rates can be adjusted to reflect prevailing marketing expectations. In Extended Warranty, teams typically comprised of pricing actuaries, product managers and business development managers work together by territory to develop policy forms and language, rating structures, regulatory filings and new product ideas. Data solutions and claims groups within the individual operating subsidiaries track loss performance monthly to alert the operating subsidiaries' management teams to the potential need to adjust forms or rates.

INVESTMENTS

The Company manages its investments to support its liabilities, preserve capital, maintain adequate liquidity and maximize after-tax investment returns within acceptable risks:

The Investment Committee of the Board of Directors is responsible for monitoring the performance of the Company's investments and compliance with the Company's investment policies and guidelines, which it reviews annually.

For further descriptions of the Company's investments, see "Investments" and "Significant Accounting Policies and Critical Estimates" in MD&A and Note 7, "Investments," and Note 23, "Fair Value of Financial Instruments," to the Consolidated Financial Statements.

REGULATORY ENVIRONMENT

Kingsway Search Xcelerator

Certain, but not all, states regulate nursing registries and supplemental healthcare staffing agencies. SNS is licensed as a nursing registry in those states where it is required.

Extended Warranty

Vehicle service agreements are regulated in all states in the United States, and IWS, Geminus and PWI are subject to these regulations. Most states utilize the approach of the Uniform Service Contract Act that was adopted by the National Association of Insurance Commissioners in the early 1990's. Under that approach, states regulate vehicle service contract companies by requiring them annually to file documentation, together with a copy of the contract of insurance covering their liability under the service contracts, which complies with the particular state's regulatory requirements. IWS, Geminus and PWI are in compliance with the regulations of each state where it sells vehicle service agreements.

Certain, but not all, states regulate the sale of HVAC and equipment warranty contracts. Trinity is licensed as a service contract provider in those states where it is required.

HUMAN CAPITAL MANAGEMENT

At December 31, 2025, the Company employed 607 personnel supporting its operations, consisting of approximately 569 full-time employees and 38 part-time employees. At December 31, 2025, 29 of our employees were represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

We believe the skills and experience of our employees are an essential driver of our business and important to our future prospects. To attract qualified applicants and retain our employees, we offer our employees what we believe to be competitive salaries, comprehensive benefit packages, equity compensation awards, and discretionary bonuses based on a combination of seniority, individual performance and corporate performance. The principal purposes of these employee benefits are to attract, retain, reward and motivate our personnel and to provide long-term incentives that align the interests of employees with the interests of our stockholders.

ACCESS TO REPORTS

The Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge through its website at www.kingsway-financial.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC").