!"#$%&'( *"#'#+"', -./0"+.% 1!*-2 34567568 -9:+; 3?4 K;L6% 1= "#$%&'(%#'&),>-78. With my assumption of a 6% ietuin foi KFS's investments its investment uivision's woith is almost $66 million, oi SS% of the poitfolio 0f note, if Kingsway can put all its excess capital to woik my estimateu ietuin foi theii investments jumps to 8% anu the value of the insuiance uivision jumps to ovei $1uu million.Foi my valuation I'm going to use the moie conseivative 6% ietuin anu value of $66 million. Insuiance Seivices The insuiance seivices uivision is a bit muiky to get a soliu valuation foi.As of 1Q 2u1S they hau ievenue of $S.S million anu basically bieakeven.The seivices uivision useu to contain anothei company nameu ARS that was iecently solu foi $47 million.Backing out the iecent quaiteis numbeis foi IWS anu Tiinity annualizeu fiom 2u14 numbeis means ARS hau ioughly $Su million in ievenue anu $4.9 million in opeiating piofit.Neaning it solu foi appiox. 1.Sx ievenue, 1ux opeiating income, anu 14x net income.Annualizing 1Q 2u1S numbeis woulu give me $22 million in ievenue times 1.S means the seivices uivision is woith $SS million.Bowevei this is a majoi assumption given it's still not piofitable.Nanagement has set up both seivices companies foi futuie giowth, which shoulu leveiage the opeiating costs anu piouuce piofits.Neaning futuie ievenues will be highei, if management piouuces as piomiseu.In valuing the seivices uivision I'm going to take Waiien Buffett's appioach of being appioximately iight iathei than exactly wiong.The value coulu iange fiom $1S million to $4u million.I'm going to value it at 1x ievenue foi a valuation of $22 million. N0Ls Because of the uiie situation KFS was in when the cuiient management took ovei, it posses a significant tax asset in the foim a net opeiating losses.A lot of unpiofitable companies have these assets, but the ones I'm inteiesteu in aie ones on the balance sheet of a company that has tiansitioneu management oi has moveu to a new piofitable line of business via acquisition oi othei methou.Kingsway falls into both categoiies, anu KFS has significant tax assets cuiiently at $286.6 million oi $14.S4 pei shaie.If all the tax assets coulu be useu touay foi theii full amount, valuation woulu be simple, $14.S4 pei shaie.Bowevei, these tax assets expiie at some point, anu as of now Kingsway uoesn't posses enough opeiating income to use much of this asset.In iegaius to the expiiation, KFS has significant time with the majoiity expiiing in 2u29.Cuiiently on the open maiket tax cieuits aie selling foi about 9u cents on the uollai.0sing this methou woulu mean KFS's tax assets aie woith about $2Su million.Bowevei, because of iestiictions Kingsway can't just sell these anu ieap that piofit.Kingsway will have to eain a piofit, eithei thiough cuiient opeiations, oi moie likely, an acquisition to iealize a benefit fiom these assets.Because of the time value of money, I ian a simple uiscount cash-flow mouel assuming they woulu use the $28u million in assets evenly ovei the iemaining time befoie expiiation in 2u29, uiscounting these back at 7%.You can play aiounu with the 7% numbei, but I feel it's close to appiopiiate given the cuiient bonu iates, iates of inflation, anu the fact I'll be applying my maigin of safety uiscount to the final valuation of KFS.Running this uiscount mouel gives me a valuation foi the uefeiieu tax assets of $17S million. 0ne way to look at the cuiient maiket's valuation of KFS is to say we'ie buying $286 million in N0Ls foi 4u cents on the uollai in auuition to an insuiance unueiwiitei, basket of investments, anu two giowing insuiance seivices fiims thiown in foi fiee.If you believe management will piouuce as piomiseu this is a fantastic ueal. Final valuation Auuing up the inuiviuual uivisions valuations above gives us: At a cuiient maiket piice of $S.SS KFS is selling foi 4S% of my valuation of $12.4u.0ffeiing a significant maigin of safety shoulu any of my assumptions piove to be too aggiessive, oi if management unueipeifoims. What to Watch Below aie a few of the things I'll be looking out foi ovei the coming quaiteisyeais to make suie management is on tiack. Bilution of Shaieholueis oThey have iecently issueu some piefeiieu shaies to Stilwell anu aie authoiizeu to issue moie.As of now I view this as a way to funu the company without jeopaiuizing the N0Ls.Bowevei this will be something I monitoi closely moving foiwaiu to make suie they uon't pillage the pockets of the minoiity common shaieholueis foi the insiueis gain. 0nueiwiiting Quality oCuiient management has tiansitioneu the insuiance uivision fiom a giowth at any cost peispective to a piofitable unueiwiiting peispective.This has taken the unueiwiiting fiom a laige loss to bieakeven, pioof of theii vision playing out.Bowevei, shoulu this positive momentum pioves to be fleeting the valuation of the insuiance uivision, anu the tiust in management, woulu be cut uiamatically. Investment RetuinsoShoulu the ietuins fiom the basket of investments fall shoit of piojections, I'll neeu to ieassess (lowei) the valuation I put on KFS's holuings.K;L6% 1= "#&60;#M% @#A%0),>-78. K;L6% 1= "#&60;#M% N%0$CM%)OO-... K;L6% 1= PQF&)*R>-... K;L6% 1= STN)O,O-78. /%0 NU;0%)*O3?. Insiuei BuysSells oShoulu Stilwell oi the CE0 Swets stait liquiuating theii position, I will neeu to assess why they aie making such a move. 0se of N0Ls oAie they buying cash-flow iich businesses at uecent piices to take auvantage of theii tax asset. Biiection of Insuiance Seivice Companies oAs the insuiance seivices companies aie cuiient bieakeven, management has inuicateu that 2u1S will be a yeai of ieview foi them.If they uon't continue to move in a positive uiiection I will neeu to ieview the valuation I assigneu to them.