Kingsway ROE jumps to 18.2% in second quarter

Reporting record results for the second-quarter and first half of 2003, Kingsway Financial Service Inc. (TSE, NYSE: KFS) says its annualized return on equity of 18.2% for the quarter, versus 11.8% for Q2 2002.
Net income for the quarter grew 68% to $27.3 million, versus $16.2 million in Q2 2002. Earnings per share are $0.55 for the quarter, compared to $0.33 a year earlier.
For the first six months of 2003, net income was $51.7 million, or versus $32.5 million in first-half 2002. Diluted earnings per share grew 58% to $1.04 for the first half of 2003.
“We are pleased to report record net income and earnings per share for the fourth consecutive quarter”, says Bill Star, president and CEO of Kingsway. “We are very pleased with the results of our U.S. operations, and in particular, our non-standard auto results in Illinois which were exceptional. We achieved record earnings despite the impact of currency translation of our U.S. dollar earnings and the results of our Canadian operations.”
During the quarter, Canadian operations posted a combined ratio of 108.4% (Q2 2002: 105.4%) compared to a combined ratio of 96.1% (Q2 2002: 96.6%) for the U.S. operations. Overall, the combined ratio was 99.2% (Q2 2002: 99.7%), producing an underwriting profit of $4.7 million for the quarter (Q2 2002: $0.3 million). For the six-month period, the combined ratio is 98.1%, for an underwriting profit of $22.5 million. This compares with a combined ratio of 99.7% and underwriting profit of $2.5 million in the first half last year.
Gross written premiums (GWP) were up for the most recent quarter, to $629.9 million from $362.2 million a year prior. On a year-to-date basis, GWP was up to $1.3 billion from $919.0 million last year. Similar premium growth was seen in both the Canadian and U.S. operations, although for the first six months, U.S. operations posted $1.0 billion GWP while Canadian operations posted just $303.1 million.
Much of the growth was in the trucking and commercial auto lines, where premiums grew 69% between first-half 2002 and 2003. Non-standard auto GWP rose just 19% during the same period.
Net earned premiums rose 65% for the first half of this year, to $1.2 billion from $709.6 million last year.
Investment income was up, to $19.2 million for the quarter (YTD: $34.9 million), versus $17.0 million in Q2 2002 (2002 YTD: $30.8 million). Realized gains were up to $9.5 million in the quarter (YTD: $8.8 million), versus $1.6 million in Q2 2002 (2002 YTD: 5.3 million). Unrealized gains also rose to $66.6 million, or $1.36 per outstanding share, at the end of the second quarter 2003, against $21.9 million at the end of the first quarter due to the company’s investment in common shares.