Standard & Poor’s Ratings Services announced that it has placed its counterparty credit and senior unsecured debt ratings on Toronto, Ont.-based Kingsway Financial Services Inc. on CreditWatch with negative implications.
“The CreditWatch placement follows the announcement by Kingsway that it had identified a shortfall in its previous years’ claims reserving for its Canadian operating company, Kingsway General Insurance Co.,” said S&P. “This shortfall will result in the company increasing provisions for unpaid claims occurring before Dec. 31, 2002, by about C$30 million [U.S. $22.2 million] and will reduce net income by about C$20 million [U.S.$14.8 million] in the third quarter of 2003.”
The bulletin also noted that “The adverse development of Kingsway General’s previous years’ claims for the six months ended June 30, 2003, was approximately C$30 million, reducing net income for the six-month period by C$20 million, which has been accounted for in the company’s year-to-date financial statements. These adjustments are mainly a result of Kingsway General’s Alberta-based nonstandard automobile business, its Ontario-based commercial automobile business, and its trucking business.”
S&P indicated it plans to “meet with Kingsway in the upcoming month to further review the company’s reserving practices and internal controls, and the reporting structure of Kingsway’s operating subsidiaries. The CreditWatch placement is expected to be resolved within a month. If ratings actions are required at the end of this review, Standard & Poor’s does not expect more than a one-notch adjustment to the ratings on Kingsway.”
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