Kingsway Posts 36% Q2 Net Income Gain to $40.2 Million

August 7, 2006

Toronto-based Kingsway Financial Services Inc. announced that net income for the second quarter of 2006 rose 36 percent to *US$40.2 million from $29.6 million in the same period of 2005.

Other highlights in the report include the following:
— Operating earnings increased 25 percent to a quarterly record $33.2 million
— Diluted earnings per share increased 37 percent to a record 71 cents compared with 52 cents in Q2, 2005
— Combined ratio was 97.9 percent compared to 97.0 percent in Q2 2005
— Underwriting profit of $9.7 million compared to $14.3 million last year
— Gross premiums written increased 11 percent to $532.5 million –
— Investment income increased 37 percent to $32.4 million
— Annualized return on equity of 18.9 percent –
— Book value per share increased 20 percent to $15.54 from $12.93 at Q2 2005
— Net income for the six months ended June 30, 2006 increased 2 percent to $69.1 million (C$78.3 million) compared to $67.8 million (C$83.5 million) reported last year.

“We are pleased to report record quarterly income and a very positive first half of 2006,” stated President and CEO Bill Star. “Our Canadian underwriting results were very strong and we are pleased with the profitable U.S. growth that Robert Plan and Zephyr have provided this year. We continue to benefit from growth in our investment portfolio and improving yields as we reinvest maturing bonds. Our underwriting discipline is being maintained in all our markets. The capacity constraints and increased pricing in U.S. reinsurance markets is leading to rational competition and firming market conditions. These trends bode well for continued strong results and future growth for Kingsway.”

The full report and a Webcast link to the Company’s earnings conference call may be obtained on its Website at:

*All figures are given in US $, unless otherwise noted.

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