Specialty insurer Kingsway Financial Services swung to a loss in the first quarter as it increased reserves at its Lincoln General and Kingsway General subsidiaries, the company said Wednesday.
Kingsway, which sells non-standard truck and auto policies, said it lost $34.4 million, or 62 cents a share, in the three-month period ended March 31. That compared with a profit of $19.6 million, or 35 cents a share, in the same 2007 period.
Analysts had expected earnings of 38 cents a share before items, according to Reuters Estimates.
Kingsway, which had a disappointing year in 2007, once again increased reserves at its largest subsidiary, Pennsylvania-based Lincoln General Insurance Company.
The parent company had to increase reserves repeatedly last year at Lincoln, which caused a 2007 loss of $18.5 million.
“Our results for the first quarter of 2008 are unacceptable and we are working expeditiously to deal with problem areas and return to profitability as soon as possible,” Shaun Jackson, Kingsway’s president and chief executive, said in a release. “Only by establishing more conservative reserving practices throughout the organization can we more quickly identify and remedy under performing business.”
In a separate news release, Kingsway said it has appointed Scott Wollney to the position of president and CEO at Lincoln General, replacing John Clark, who retired. Wollney was president and a co-founder of insurance agency Avalon Risk Management Inc, which is a Kingsway subsidiary.
The additional reserves at Lincoln General in the latest period related primarily to trucking policies written for the 2007 accident year.
First-quarter results were also hurt by “exceptionally bad winter weather” in some operating regions, Kingsway said.
The company’s underwriting loss grew to $69.1 million from $20.7 million a year earlier. Its combined ratio rose to 115.6 percent from 105 percent in the same 2007 period. The ratio indicates how much was spent on claims and expenses for each dollar of premium received, and a number over 100 indicates that underwriting was unprofitable.
“We expect that industry combined ratios will continue to deteriorate throughout 2008 which, coupled with weak equity markets and potential impairments of assets, we believe will lead to firmer pricing in many of the markets before the end of 2008,” Kingsway said.
Kingsway shares ended down 49 Canadian cents, or 3.3 percent, at C$14.26 Wednesday. The results were issued after markets closed.
The stock is up 19 percent so far in 2008, after plunging 51 percent in 2007.
(Reporting by Lynne Olver; Editing by Peter Galloway)
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