Kingsway Reveals $30 Million Reserve Shortfall

Kingsway Financial Services Inc. (TSX: KFS) has disclosed an adverse reserve development totaling $30 million for prior year claims leading up to the end of 2002. The adverse reserve development resulted from the insurer’s Alberta non-standard auto insurance business, as well as Ontario commercial auto and trucking claims, a company statement says.

Kingsway says the increased provision for unpaid claims will reduce its third quarter net income by about $20 million. The company notes, however, that it should still produce “strong growth” in gross and net written premiums for the third quarter reporting period. The insurer also expects to show an underwriting profit for its upcoming quarterly financial statement. And, Kingsway says that, following its claims review which identified the $30 million adverse reserve shortfall, the company has not experienced any significant adverse development on unpaid claims.

Furthermore, the insurer says it has deferred a previously announced U.S. “trust preferred offering” which had been tied to ongoing acquisition discussions. These discussions have been terminated, the company notes. Currently, Kingsway is not looking into any other acquisition opportunities, a statement says.