Canadian Underwriter

Kingsway seeks acquisition opportunities

April 17, 2006   by Canadian Underwriter

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Kingsway Financial Services is seeking opportunities for growth through acquisitions in 2006, the company reported in its 2005 annual report.
Kingsway’s primary business is the insuring of automobiles for drivers who do not meet the criteria for coverage by standard automobile insurers. It also operates in the standard automobile, property, motorcycle and other specialty markets.
“We rely on our detailed understanding of our regional markets to take advantage of favorable conditions or trends,” the company’s 2005 annual report reads. “We look for opportunities to expand our specialty focus into selected regional markets and to increase the distribution of our core products in our existing territories.
“We may also look for opportunities to acquire books of business or other companies which are in line with our specialty focus.”
In its 2005 report, the company outlined its acquisition of the Zephyr Insurance Company and its contract with the Robert Plan, a company that arranges contracts with other insurance companies to assume their automobile assigned risk exposures for a fee. The deals were in addition to seeking other suitable merger partners in the United States.
“During the year we looked at several opportunities to acquire other insurance companies in the United States,” Kingsway reported. “In most cases we were not successful in completing the purchases on terms we considered practical. However, we were successful in acquiring Zephyr Insurance Company in Hawaii on suitable terms.
“Zephyr fits the Kingsway profile being a specialty company. Its specialty is providing homeowners with protection against wind damage. They work closely with other insurers that provide basic homeowners protection, excluding wind exposure.”
The Robert Plan also fits into Kingsway’s basic business concept, Kingsway noted. “Many [U.S.] states have a method of assigning non-standard automobile risks to companies in proportion to their automobile insurance premiums in the state,” the company says. “Since most companies are not experienced in providing coverage for such risks, they prefer to pay the Robert Plan a buyout fee to assume the exposure.”
The Zephyr and Robert Plan opportunities did not figure in the company’s 2005 financial statements.
Kingsway noted the softening market in Canada and recalled its 2005 strategy of maintaining rate levels at the expense of reduced premium income. “This has been the case during the year, as we reduced our gross premiums written by 5% but increased profit by 34% to US$135.0 million,” the 2005 report says. “The combined ratio improved to 97.2% resulting in a record underwriting profit of $49.8 million.”

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