Kingsway reports fourth quarter loss

Kingsway Financial Services Inc. (TSE: KFS) has announced a fourth quarter 1999 loss of 40 to 45 cents per share.

The company expects to report a combined ratio of approximately 102% for fiscal 1999, a marked increase from 1998’s year-end 93.9%. Gross premiums written are on the rise, from 1998’s $409 million to $500 million in 1999. Net premiums written is expected to exceed $450 million, an increase over 1998’s $320 million.

The factor contributing most to the fourth quarter performance was a reserve increase of approximately $13 million relating to a residual value program at the company’s Kingsway General subsidiary.

The company has taken a conservative position by reserving for claims at the policy limit for the initial policy period and has issued notice of cancellation to insureds pending further review of the future viability of the residual value program.

“We have reacted quickly and decisively to minimize the impact from the residual value program on future results,” says Bill Star, Kingsway president. “Although we are disappointed to have broken our record of nine consecutive years of underwriting profit, we believe the actions we have taken will allow the company to continue producing excellent underwriting results within our target range in the year 2000.” He says the strengthening of reserves in the fourth quarter added 5% to the combined ratio for the year, the difference between underwriting profitability.

Despite the fourth quarter, the company expects to report a profit for the year, as well as an increase in book value per share and a combined ratio that is better than industry averages in both Canada and the U.S. Book value per share, after adjusting for the estimated fourth quarter results, is expected to be between $7.04 and $7.11, compared with $6.96 at the end of 1998. As of press time, Kingsway was trading at $4.75.