Kingsway net jumps 96% on underwriting gains

Kingsway Financial Services Inc. (TSX, NYSE: KFS) saw its net income jump an impressive 96% in the third quarter of 2004 on underwriting gains, specifically with improvement in its Canadian operations. Overall, the Toronto-based insurance holding company produced net income of $30.6 million ($0.54 per share, on a dilute basis) for the quarter ending September 30, 2004. This is up from income of $15.6 million ($0.28 per share) for the third quarter of 2003.For the most recent quarter, the company saw gross written premiums fall to $618.7 million from $652.8 million a year ago, but net earned premiums were up slightly to $592.5 million from $591.8 million the year before. And the company’s claims dropped off significantly in the third quarter of this year, to total $411.4 million, versus $455.3 million in the same period a year earlier. The claims ratio for the most recent quarter dropped to 69.4% (Q3 2003: 76.9%), while the expense ratio was up marginally to 27.6% (Q3 2003: 26.8%).Overall, the company posted an underwriting profit of $17.9 million (combined ratio: 97.0%) for the third quarter of 2004, compared to an underwriting loss of $22.1 million (combined ratio: 103.7%) for the same period a year before. Investment income was up 10% for the quarter to $24.9 million from $22.7 million, with net realized gains of $2.1 million compared to $16.4 million for the same period a year earlier.For the first nine months of 2004, the company produced net income of $94.7 million ($1.68 per share), up from $67.3 million ($1.31 per share) the year prior. Year-to-date gross written premiums were up to $2.03 billion (2003 ytd: $1.99 billion), and net earned premiums held steady at $1.76 billion. The claims ratio in the first nine months of 2004 dropped to 70.4% from 72.9%, and the expense ratio was relatively steady at 27.2%. Overall, in the first nine months of 2004, the company produced an underwriting profit of $41.5 million (combined ratio: 97.6%) compared to an underwriting profit of just $406,000 (combined ratio: 100.0%) at the same point in 2003. Canadian operations saw the combined ratio improve over this comparative period to 95.5% from 109.9% in 2003, while for U.S. operations, the combined ratio crawled up to 98.5% this year from 97.0% last year at the same point.Investment income jumped to $71.3 million (with net realized gains of $18.2 million) in the first nine months of 2004, from $57.6 million (net realized gains: $25.2 million) last year. “I am pleased to report record underwriting results for the quarter and for the first nine months of the year” says Kingsway Financial CEO Bill Star. “Our Canadian operations have produced extremely good underwriting results this year while also delivering strong growth in written premiums. We continue to generate positive cash flow and are well positioned to benefit from increases in short term interest rates”.The company’s annualized return on equity at the end of September, 2004 stood at 16.8%, up from 13.9% a year earlier.