Canadian Underwriter

Kingsway continues to soar

February 21, 2002   by Canadian Underwriter

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Specialty insurer Kingsway Financial Services (TSE, NYSE: KFS) capped off a successful 2001 with record earnings and revenue in the fourth quarter, ending December 31. The company has been on a winning streak, in the face of disastrous results in the rest of the industry.
In the last quarter of 2001, Kingsway reports net income increased 36% to $10 million, up from $7.4 million for the same period last year. Diluted earnings per share rose to a record $0.23 during the same period, up from $0.22 last year. Gross premiums written increased a whopping 68% to $291.6 million from $173.7 million last year, and earned premiums grew 86% to $278.4 million for the quarter.
Yearend results were similarly impressive, with net income rising 64% to $44.9 million from $27.5 million in 2000. Earnings per share were up to $1.19 from $0.80 the year prior.
Gross written premiums grew for both the company’s U.S. and Canadian operations, but was most significant in the U.S. where they doubled to $709.2 million from $353.6 million. Earned premiums were $872.8 million overall, up 62% over 2000.
Perhaps the biggest turnaround is the company’s underwriting profit of $7.6 million in 2001, as compared with a loss of $5.3 million last year. While the combined ratio grew for Canadian operations, to 103.1% from 101.1%, U.S. operations saw this number improve to 96.8% from 100.9% the year prior.
Canadian operations did see an increase in loss ratio, up to 73.5% from 70.1% the year prior, mainly due to bodily injury claims. The company increased its reserves in 2001 in response to this trend and will seek rate increases to offset these claims.
Kingsway was also one of the rare companies to see investment income rise during the year, up 18% to $52.5 million from $44.6 million in 2000.
“In 2001 we reported record earnings for each quarter, producing an underwriting profit for the year which is particularly satisfying given the deteriorating results of our industry in Canada and the United States,” says Kingsway president and CEO Bill Star. “We have built a strong foundation on which to profitably grow the company in these times of opportunity. We accomplished a great deal in 2001, and I look forward to 2002 with optimism and the expectation of continued growth and increased profitability.”

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