Non-standard auto insurer Kingsway Financial reports second consecutive quarter of profitability

Kingsway Financial Services Inc. of Toronto, whose offerings include non-standard auto insurance in the United States, reported Thursday its second consecutive quarter of profitability after losing $36 million and $11.2 million in 2013 and 2014 respectively.

Kingsway reported net income of $3.4 million in the first three months of 2015, compared to a loss of $1 million in Q1 2014. All figures are in U.S. dollars. [click image below to enlarge]

The company earlier reported net income of $1.35 million in Q4 2014.

Kingsway provides property & casualty insurance in 15 U.S. states, with more than half its premiums from Florida, Texas and Illinois. It writes primarily through Mendota Insurance Company, Mendakota Insurance Company, Universal Casualty Company, Kingsway Amigo Insurance Company and Kingsway Reinsurance Corp. Amigo and UCC are in voluntary run-off.

 In Canada, Kingsway used to operate York Fire & Casualty Insurance Company (which it sold in 2008 to La Capitale General Insurance Inc.) and Jevco Insurance Company (which Kingsway sold in 2010 to The Westaim Corp. and which Westaim sold in 2012 to Intact Financial Corp.)

On Thursday, Kingsway reported its net premiums earned dropped 9.1%, from $31.92 million in Q1 2014 to $29 million in the most recent quarter. Total revenues were up 8%, from $40.5 million in Q1 2014 to $43.7 million in the three months ending March 31, 2015. Q1 net investment income more than doubled, from $413,000 in 2014 to $1.31 million this year.

Kingsway shares are publicly traded, though more than a third of voting shares were held by seven directors and officers as of April, 2014, the company reported in its management information circular at the time. Joseph Stilwell, an independent director of Kingsway and owner of a New York City-based investment advisor firm, owned 19.7% of Kingsway shares as of April of 2014.

During the first quarter if this year, Kingsway terminated its management services agreement with 1347 Property Insurance Holdings Inc., a former subsidiary. As a result of the termination, Kingsway “recorded a gain of $6.0 million during the first quarter of 2015, which is included in net income not allocated to any segment,” the firm said Thursday.

1347 Property, which provides home insurance in Louisiana, is formerly known as Maison Insurance Holdings Inc. Kingsway last year completed an initial public offering of 1347 Property, reducing Kingsway’s stake in 1347 Property to 16.9% of voting shares as of Dec. 31, 2014. 

“Last year put us on a path to start realizing the benefits from actions taken by us during the past several years,” stated Larry G. Swets Jr., president and chief executive officer of Kingsway, in a press release Thursday. “The buy-back of the Management Services Agreement from 1347 Property Insurance Holdings, Inc. is a good example of the type of outcome we look to achieve with our value-building philosophy.” [click image below to enlarge]

Kingway also owns IWS Acquisition Corp., Assigned Risk Solutions Ltd. (ARS) and Trinity Warranty Solutions LLC.

IWS administers vehicle service agreements, under which IWS agrees to replace or repair designated vehicle parts in the event of a mechanical breakdown. Those agreements are distributed by 26 credit unions.

ARS is a managing general agent and third-party administrator which is licensed in 22 sates “but generates its revenues primarily by operating in the states of New York and New Jersey.”

Trinity provides warranty products and maintenance support for refrigeration and heating, ventilation, air conditioning (HVAC) equipment.

In 2014, Florida accounted for18.9% of Kingsway Financial’s insurance underwriting gross written premiums. Texas, Illinois, California, Colorado and Nevada accounted for 17.7%, 15.5%, 10%, 9.7% and 9.6% of GWP respectively.