Kingsway’s 2009 Q2 result reflects major transition

Kingsway Financial Services Inc. (TSX/NYSE: KFS) reported a net loss of US$38.4 million in 2009 Q2, compared with a US$6.3-million profit in 2008 Q2.
The result reflects a company in the middle of a major transformation strategy — including a previously announced withdrawal from the Canadian cross-border trucking business and the placing of its U.S. subsidiary Lincoln General Insurance Company into run-off.
“The second quarter’s poor financial results reflect the legacy of past business strategies and practices that we are rapidly eliminating or changing through our ongoing transformation work,” Kingsway president and CEO Colin Simpson said in a press release. “Since being appointed to the role of CEO early in the second quarter, I have restructured the senior management team to get the right talent in key roles and taken steps to put the company back on a solid financial footing.
“The team has reached out to regulators to explain the new directions we’re taking and seek their support.
“We believe the Kingsway that emerges from the transformation — considerably streamlined, with less complexity, and with strengthened relationships with key stakeholders — will succeed, over time, in delivering solid results to shareholders.”
As a result of its withdrawal from Canada’s cross-border trucking business, gross premiums written for the Canadian operations decreased 25% in the quarter (25% year to date) compared to the same periods last year.
The company notes it has incurred restructuring costs of US$10 million in 2009 Q2 and US$12.9 million year to date. “Of the total restructuring costs, severance costs associated with the company’s corporate restructuring accounts for [US]$6.1 million in the quarter and (US)$8.1 million year to date,” the company announced.
Kingsway says it has thus far achieved more than 60% (610) of the 1,000 total position eliminations targeted to be complete by the end of 2010. “Approximately 400 of these reductions were in U.S. operations and 200 in Canada,” the company announced.
The company says it has achieved US$14 million (or 40.2%) of its 2009 expense savings target of US$34.8 million.