Kingsway 1-Q success driven by U.S. operations

Kingsway Financial Services (TSE, NYSE: KFS) marked yet another record quarter, with net income rising 77% year-on-year for the first three months of 2002. Net income came in at $16.3 million versus $9.2 million for the first quarter 2001. This translates to earnings of 33 a share for the latest quarter compared with 27 posted for the same period a year before.

The jump in the insurer’s revenue and net income largely resulted from stronger performance of its U.S. operations, which now account for about 75% of total business, observes CEO Bill Star. Gross written premiums (GWP) increased 118% for U.S. operations, and 37% for Canadian operations. Overall GWP grew by 93% for the quarter, to $416.4 million, versus the $216.0 million reported for the first quarter of 2001. Non-standard auto premiums grew 57%, while trucking and commercial auto premiums grew 211%, the result of “favorable rate increases and contraction of competitive markets”.

Net premiums written rose 93% for the latest quarter to $400.3 million from $207 million reported a year ago. Net earned premiums rose 91%, to $310.4 million from $162.2 million made last year. Earned premiums for U.S. operations grew 133%, while Canadian operations grew by 29%.

The company’s combined ratio improved to 99.3%, resulting in an underwriting profit of $2.2 million. However, the insurer’s Ontario auto results boosted the Canadian operations’ combined ratio to 107.6% versus the U.S. ratio of 96.2%. Kingsway’s investment income rose slightly during the quarter to $13.7 million from $13.5 million made last year, with realized gains of $3.7 million this year compared with $1.9 million shown for the first quarter of 2001.