Canadian Underwriter

Queensway hits investment snag

April 1, 1999   by Canadian Underwriter

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TSE-listed Queensway Financial Holdings (QFH) posted a 59% drop in earnings a share to 52c for the financial year ended December 1998 compared with the previous year. The company’s directors attribute the earnings decline primarily as a result of a once-off cost associated with a claims under-reserve of $13 million disclosed at Paradigm Insurance Co., a U.S.-based insurer acquired by QFH last year.

QFH is a financial services holding company specializing in investment in property and casualty insurance businesses across North America. The group’s main activities are centered in Ontario, Canada and in several U.S. states.

In a statement released prior to the official yearend result announcement, the directors say roughly two-thirds of the under-reserve amount is not recoverable from the former owners of Paradigm. The lower earnings a share shown for 1998 also reflects a 28% increase in the number of outstanding shares to 13.014 million shares due to a share offering undertaken during the year. Furthermore, the directors report that another investment, International Indemnity Group, produced poor results for the year, which added pressure to QFH’s bottom-line.

Total revenue for the year rose by 97% to $183.387 million (1997: $92.984 million) producing net earnings of $8.044 million (1997: $12.688 million). QFH reported an earnings loss of $7.075 million (1997: $4.198 million) for the last quarter of 1998, translating into a 55c a share loss.

The directors say the loss incurred through the Paradigm under-reserve is a one-time event which will not impact on the group’s other operations or its 1999 performance. “loss reserves of Paradigm were strengthened significantly and reserves were established against reinsurance recoveries and other items to ensure that all areas of concern are properly provided for.”

QFH’s total assets for 1998 rose by 79% to $888 million compared with the previous year’s $494 million, mainly due to four acquisitions completed during the period. The group also disclosed a new acquisition, Bermuda-based Bowling Insurance Group, in the current financial year. The value of the deal was not disclosed. The Bowling operation reinsures certain layers of general liability, property and workers’ compensation insurance for bowling centres in Michigan and other states. Bowling’s premium income for the financial year ended October 1998 amounted to US$1.6 million.

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