Kingsway Reacts to A.M. Best Rating Actions

February 28, 2003

Toronto-based Kingsway Financial Services Inc. issued a statement following the completion of a review of the financial strength ratings of it operating subsidiaries by A.M. Best Co., which affirmed current ratings on most of its U.S. subsidiaries.

The company does business in the U.S. through Universal Casualty Company, American Service Insurance Company, Southern United Fire Insurance Company, Lincoln General Insurance Company, U.S. Security Insurance Company, American Country Insurance Company and Avalon Risk Management, Inc.

Kingsway acknowledged that Best had lowered the financial strength ratings of its Canadian insurance subsidiaries to A- (Excellent) from A (Excellent), and that “the rating for our largest U.S. insurance subsidiary remains under review with negative implications pending completion of our previously announced capital raising initiatives and effective management of the subsidiary’s premium growth in 2003.”

The bulletin pointed out that “Offsetting the negative rating factors, A.M. Best cited Kingsway’s lead market position as the largest provider of non-standard auto and motorcycle insurance in Canada and the prospect of improved underwriting and operating performance in 2003. It recognized that Kingsway anticipates improved results in Canada in 2003, citing Kingsway’s proactive approach to settling claims and combating fraud in Ontario, significant rate increases that were implemented in late 2002, and new regulatory legislation in Ontario.”

Bill Star, President and CEO commented, “While we continue to take advantage of hard insurance markets, we expect that A.M. Best will look favorably on the completion of our previously announced capital raising initiatives as long as we limit our growth to a sustainable level.”

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