Kingsway Comments on Best’s Rating Action

March 8, 2004

Kingsway Financial Services Inc. issued an announcement following the actions taken by A.M. Best, which lowered is ratings on two of the group’s subsidiaries, Kingsway General Insurance Company and York Fire & Casualty Insurance Company from A- (Excellent) to B++ (Very Good) and assigned a negative outlook (See IJ Website March 5).

“We are disappointed with the rating action taken by A.M. Best, particularly after the actions taken to reduce claim costs, strengthen reserves and increase premiums”, stated President and CEO Bill Star. “Kingsway Financial continues to provide capital support to our Canadian companies to ensure they meet required capitalization standards. A.M. Best has expressed concerns regarding the impact of the regulatory changes to the automobile insurance product in Ontario and Alberta and has taken rating action on several major companies operating in the Canadian market, some of whom have requested that A.M. Best not publish their financial strength ratings”.

Best said it took the rating action as a result of the operating and underwriting performance of the subsidiary companies in 2002 and 2003. Kingsway’s bulletin noted, however, that the rating agency had indicated that these factors were “partially offset by rate increases, the strengthening of loss reserves, the progress made to reduce claim costs as well as the explicit financial support of Kingsway. A.M. Best further commented that Kingsway Financial has demonstrated its continued commitment to raising capital to provide support for the ongoing operations of its Canadian subsidiaries.”

On Saturday Kingsway announced that it had entered into an agreement with a syndicate of three Canadian banks for a C$150 million (U.S.$113 million) revolving credit facility, replacing a previous credit facility placed in February 1999.

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