Canadian Underwriter

Kingsway earnings up for third quarter (November 08, 2002)

November 8, 2002   by Canadian Underwriter

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Kingsway Financial Services Inc. (TSX, NYSE: KFS) is reporting a record increase in earnings per share for the quarter ending September 30, 2002. The company’s net income for the third quarter increased 51% to $21.7 million from $14.3 million during the same period a year earlier. The result was a 22% jump in earnings per share to $0.44 from $0.35 in Q3 2001, with 24% more shares outstanding.
Bucking the industry average, the company is showing strong returns, with a trailing 12-month ROE of 15.2%.
Gross written premiums were up to $605.6 million from $297.5 million for the third quarter year-on-year, a leap of 104%. “The growth in written premiums for the first nine months of the year is attributable to increases in our core business lines of non-standard automobile of 51%, and trucking of 214%,” states a company release. Net earned premiums were up 102% to $479.4.
Much of the growth comes from the company’s U.S. operations, with Canadian operations showing a 29% rise on gross written premiums to $125.2 million and a 25% rise in earned premiums to $117.1 million.
The company’s combined ratio was up to 101.2% for the quarter, from 96.4% a year earlier. This is the result of Canadian operations turning in a combined ratio of 108.2% for the quarter. Although the combined ratio for U.S. operations was up slightly to 97.5%, this business achieved an underwriting profit of $21.1 million for the quarter.
The company also beat the industry by increasing its investment income, up 39% to $19.6 million from $14.1 million a year earlier. Realized gains were $6.3 million in the third quarter, versus $1.2 million in Q3 2001
“We continue to see many opportunities for profitable growth in this extremely favorable market environment. Our growth in written premiums has led to a significant increase in unearned premium balances, representing revenue to be earned in future periods at progressively higher premium levels,” says Kingsway president and CEO Bill Star. “The actions that we took during the soft market in the late 1990’s by not pursuing unprofitable growth and conservatively managing our investment portfolio have left us in an extremely strong position to take advantage of these unprecedented market opportunities.”

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