S&P’s downgrades Kingsway Financial Services to a ‘B’

Standard & Poor’s (S&P’s) lowered its long-term counterparty credit and senior unsecured debt ratings of Kingsway Financial Services Inc. (TSX: KFS) three notches to ‘B’ from ‘BB.’
The company’s subsidiaries also received downgrades for their debt ratings to ‘B’ from ‘BB.’
“The downgrade follows Kingsway’s Feb. 9 announcement that it expects to report a significant fourth-quarter loss due to further underwriting losses at its lead U.S. operating company, Lincoln General Insurance Co., impairments to goodwill, a further reassessment of its tax asset and net realized losses on its investment portfolio,” said S&P’s credit analyst Foster Cheng in a statement.
On the positive side, S&P’s noted that Kingsway also announced several strategic initiatives to help de-risk the company and bring it back to profitability. These initiatives included exiting non-core or unprofitable business units and divesting away its common equity exposure, as well as making significant cost reductions.
“While we view all these initiatives as positive toward rebuilding the company and franchise, we believe Kingsway probably should have made them earlier and are not significant enough to bring it back to profitability in the short term,” the statement said.
“Standard & Poor’s continues to question the quality of governance and senior management oversight at Kingsway, and view the company’s enterprise risk management as “weak”.”