Stilwell Group calls for ousting of two more Kingsway board members

A minority shareholder of Kingsway Financial Services Inc. has requisitioned a special election to remove two more ‘legacy’ board members and put an end to “certain payments to board members.”
The Stilwell Group, a New York City-based money management firm, holds 9% of Kingsway’s outstanding shares of common stock. It is also pushing for the sale of Kingsways’s non-core business units — in other words, every business unit but non-standard auto.
The insurer agreed in January 2009 to the removal of two of its board members, Shaun Jackson and Michael Walsh, after the Stilwell Group demanded their ousting. Both Jackson and Walsh’s positions on the board were replaced with hand-picked nominees of the Stilwell Group.
Shortly thereafter, A.M. Best downgraded the issuer credit rating of Kingsway Financial Services and the financial strength rating of its subsidiary, Kingsway General Insurance.
“Since our nominees joined the board three weeks ago, we have been shocked at the deep passivity of many directors,” Joseph Stilwell said in a release.
“Further, with the ratings downgrade last week, the company must move promptly to sell non-core lines of business,” he continued. “The current practice of holding-company board members sitting on subsidiary boards and being paid for doing so creates a perverse incentive which is antithetical to what the company must now do. It is inappropriate and sets a terrible example since KFS must now make meaningful expense reductions.”
Should the board members be removed, Stilwell Group will not nominate replacements. The Group’s current agreement prohibits them from seeking to control the board.
As of press time, a spokesperson for Kingsway was not available for comment.