Kingsway enjoys record underwriting profit for 1-Q

Kingsway Financial Services Inc. (TSX: KFS) saw net income rise by 50% year-on-year to $24.4 million for the first quarter of the current financial year compared with the $16.3 million reported for the same period in 2002. This translates to a 48% increase in diluted earnings of 49c a share against the 33c a share made for the first quarter of 2002. As a result, the insurer was able to deliver to its shareholders an annualized return on equity (ROE) for the first quarter of this year of 16% compared with a 11.9% ROE reported for the same period a year ago.
Net written and net earned premiums for the latest reporting period rose year-on-year by 67% to $666.7 million (2002 1-Q: $400.3 million) and by 78% to $551.3 million (2002 1-Q: $310.4 million), respectively. Based on gross premiums, the company’s U.S.-related business grew to account for 82% of total business compared with 78% of business from 12 months ago. The U.S. operations achieved a 78% increase in net written premiums to $575.6 million (2002 1-Q: $324.1 million) for the latest reporting period, while net earned premiums rose by 94% to $439.1 million (2002 1-Q: $226.7 million). The Canadian operations saw net written premiums rise year-on-year by 38% to $127 million compared with the $92.3 million reported for the same period a year ago. Net earned premiums on the Canadian side increased by 34% to $112.2 million (2002 1-Q: $83.7 million).
Kingsway’s biggest gain was on the underwriting side, which produced a record underwriting profit of $17.9 million for the latest reporting period – more than an eight times increase on the $2.2 million underwriting profit shown for the first quarter of 2002. As a result, the insurer’s combined ratio fell to 96.8% for the first quarter of this year from the 99.3% level reported 12 months ago. The combined ratio for the U.S. operations remained almost static year-on-year at 96% while the Canadian operations were able to reduce the combined ratio to 99.9% for the latest reporting period compared with the 107.6% ratio reflected at the end of the 2002 first quarter.
The most significant improvement in underwriting occurred in the company’s Ontario personal auto product, which saw the combined ratio drop to 109.3% for the first quarter of this year against the 134.3% ratio reported a year ago. “We are very pleased with the results for the first quarter of 2003 which produced record levels of underwriting profit, net income and earnings per share. It is particularly pleasing to see the substantial improvement in the results from our Ontario private passenger automobile product as a result of remedial actions that were started in late 2002,” says Kingsway president Bill Star.
In contrast, the company’s investment income earnings for the latest reporting period show modest growth to $15.8 million compared with the $13.8 million reported a year prior. Kingsway also produced a net realized capital loss of $688,000 for the first quarter of this year versus the $3.7 million realized gain made for the same period in 2002. The company’s total assets at the end of March this year stood at $3.1 billion.