Kingsway ‘disappointed’ with Lincoln General results

Kingsway Financial Services Inc. (TSE:KFS, NYSE:KFS) has reported a 2007 Q1 profit of US$19.6 million, compared to US$28.9 million in 2006 Q1.
The company’s combined ratio was 105% in 2007 Q1, compared to 96.2% in 2006 Q1.
Changes in estimated unpaid claims for prior years at Lincoln General of US$47.5 million increased the combined ratio by 11.4%, reduced diluted earnings per share by 55 cents and net income and operating earnings by [US]$30.9 million, the company said in a statement.
“Although Kingsway’s income for this quarter exceeded that of the prior quarter, we are very disappointed with the results from our Lincoln General subsidiary, Kingsway president and CEO Bill Star said in a press release. At Lincoln General, we have significantly strengthened our estimates for unpaid claims in each of the last three quarters primarily related to its trucking and contractors business.
Star added that: We believe the reserve increases and other steps we have taken at Lincoln have positioned the company to improve its results going forward. Despite the disappointing results from Lincoln, the results from our other U.S. and Canadian subsidiaries were strong and we continue to experience increased levels of investment income and net realized gains.
Star said Kingsway anticipated the recently completed acquisition of Mendota will be accretive to our earnings in the second quarter.”
Kingsway reported an underwriting loss of US$20.7 million compared to a profit of US$16.4 million last year.
Gross premiums written in 2007 Q1 were US$479.4 million compared to US$507.2 million in 2006 Q1.
The companys investment income increased to US$31.6 million in 2007 Q1 compared to US$26.6 million in 2006 Q1.
The return on equity [ROE] during the years first quarter was 8.5%.