Kingsway Financial Services Inc. announced financial results (in U.S. dollars) for the second quarter ended June 30, 2008 that rebounded from a first quarter loss. The Company reported net income of $6.3 million or $0.11 diluted per share for the quarter, marking a significant improvement over the net loss of $34.4 million reported in the first quarter of 2008, but below net income of $41.7 million reported in the second quarter of 2007. Gross premiums written were $443.2 million, 16 percent lower than a year ago.
Kingsway said its “securities portfolio continued to provide steady income despite challenging economic trends and volatile financial markets in the U.S. and Canada. Investment income, excluding net realized gains, was $33.6 million, virtually unchanged from a year ago.
“During the quarter, the investment portfolio produced net realized gains of $10.9 million which is net of an adjustment of $9.9 million for the write-down of securities held which were deemed to be other than temporarily impaired. Book value per share decreased 4 percent during the quarter to $15.49 (Cdn$15.80) as a result of the change in the market value of the securities portfolio which decreased book value by $0.81.”
The report noted the improving financial results, despite “challenging industry conditions.” The bulletin said “quarterly results reflect improved reserving experience and the benefit of the termination of unprofitable programs since year-end. There was estimated net unfavorable reserve development of $7.3 million ($4.6 million in Canada and $2.7 million in the U.S.) or $0.14 per share on an after-tax basis in the second quarter of 2008, 88 percent lower than in the first quarter of 2008 which compares with net favorable reserve development of $1.4 million in the second quarter of 2007.
“The combined ratio was 107.0 percent in the second quarter, marking an improvement over the first quarter but above the 100.8 percent reported in Q2 2007. Lincoln General’s claims management has been steadily moved in-house in recent years, and the benefit of the completion of this transition is being reflected in improved pricing and claims management. U.S. operations reported a combined ratio of 106.7 percent in the second quarter and, excluding terminated programs at Lincoln General, would have reported a combined ratio of 101.0 percent in the second quarter of 2008.
“Gross premiums declined $92.4 million (or 26 percent) in the quarter and by $118.4 million (or 16 percent) year to date in the U.S., reflecting the impact of termination of unprofitable programs and also the soft market conditions for commercial automobile business. Lincoln General’s premium volume declined by $90.7 million in the quarter and $160.0 million year to date compared to the same periods last year. In Canada, premiums were 2 percent lower when adjusted for the stronger Canadian dollar, reflecting slowness in the trucking line of business as fleet operators have been reducing their cross border operations due to the slowing of the U.S. economy.
“Motorcycle premiums in Canada were $56.5 million, an increase of 18 percent for the first six months of 2008 compared to the same period last year. This reflects consumers movement to more fuel efficient vehicles. For the quarter, U.S. operations represented 59 percent of gross premiums compared with 68 percent a year ago, while Canadian operations represented 41 percent compared with 32 percent a year ago.”
President and CEO Shaun Jackson, who succeeded Company founder William G. Star in December [See IJ web site – https://www.insurancejournal.com/news/international/2007/12/18/85746.htm] , noted that the “return to overall profitability in the second quarter resulted from consistent income from our investment portfolio, despite challenging market conditions, and improving performance in our insurance operations, where we have established more conservative reserving practices.”
He added that Kingsway has “moved decisively to identify and remedy underperforming businesses in order to stabilize and then improve the future performance of our insurance operations. During the quarter, we made several executive changes to strengthen our leadership team, to better align management responsibilities and to involve the broader management group in developing the corporate strategy. Kingsway will continue to focus on its core profitable business lines and will exit non-core underperforming businesses, thus better positioning it to restore profitability to acceptable levels while building a solid foundation for future growth.”
The complete earnings report and details on accessing the Company’s earnings conference call may be obtained on its web site at: www.kingsway-financial.com.
Source: Kingsway Financial
Topics USA Profit Loss Canada
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