Toronto-based Kingsway Financial Services Inc. said Friday its quarterly loss came in even deeper than it had estimated a week ago, leading the company to chop its dividend and sending its shares 15 percent lower.
The loss — three times wider than in the same period a year earlier — reflected weak underwriting results, net realized losses on investments, as well as a non-cash charge for future tax allowances.
For the year, Kingsway said problems at its largest unit, Lincoln General Insurance Co., was a major source of its “disappointing results.”
Kingsway, which specializes in insurance for high-risk drivers, reported fourth-quarter net loss of $360.4 million, or $6.53 a share, compared with a loss of $103.5 million, or $1.84, a year ago.
The company issued a profit warning earlier this month, saying it expected to report a fourth-quarter loss of up to $344 million, or $6.24 a share.
The reported loss is steeper than originally forecast largely due to a “higher-than-expected valuation allowance against the future tax asset,” the company said.
When it issued the profit warning, Kingsway also said it would seek to sell non-core assets and reaffirmed its restructuring plan, estimating it would cut about 750 more jobs over the next 18 to 24 months.
“Results underline that we still have a lot of work to do to restore the company to an acceptable level of profitability,” Chief Executive Shaun Jackson said during a conference call Friday.
“Our goal for 2009 and 2010 is to reduce volatility of our results by focusing on our core lines of business and streamlining our operations to aggressively reduce costs.”
Kingsway said it was cutting income from non-core and unprofitable lines of business, and lowering volatility of the balance sheet by divesting its common share equity portfolio.
It is also looking at strategic alternatives in conjunction with the Pennsylvania Insurance Department regarding the future of Lincoln, and the outcome of these discussions may have a bearing on the company’s capital position, Jackson added.
The company lowered its dividend to 2 Canadian cents from 75 Canadian cents in the previous quarter.
Kingsway shares dropped 19 Canadian cents, or 6.03 percent, to C$2.96 midmorning Friday on the Toronto Stock Exchange. At one point, the stock was down 15 percent to C$2.68.
Kingsway, which operates in Canada and the United States, said its underwriting loss for the quarter was $99.7 million, versus a loss of $141.3 million in the year-earlier period.
The combined ratio, a measure of profitability, was 132.6 percent in the quarter, compared with 132.7 percent in the comparable period a year earlier.
Gross premiums written dropped to $295.6 million from $420.6 million in part because of soft insurance markets, while investment income fell to $28.3 million from $37.3 million.
(Reporting by Supantha Mukherjee in Bangalore and Jennifer Kwan in Toronto; Editing by Frank McGurty)
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