TORONTO, Feb. 15 /PRNewswire-FirstCall/ - Kingsway Financial Services Inc. (TSE:KFS, NYSE:KFS) today announced financial results in U.S. dollars for the fourth quarter and year ended December 31, 2007. The Company reported a net loss of $103.5 million for the fourth quarter ($1.84 diluted loss per share) and a net loss of $18.5 million for the year ($0.33 diluted loss per share). The net loss was primarily attributable to the reserve increase for estimated unfavourable reserve development for prior accident years at its Lincoln General ("Lincoln") subsidiary previously announced on December 18, 2007. Details of the results for the fourth quarter and 2007 are included in the Management's Discussion and Analysis and Consolidated Financial Statements which are attached."Overall, 2007 was an extremely disappointing year for the Company due to the significant reserve increases which were necessary at our largest subsidiary, Lincoln", said Shaun Jackson, President and Chief Executive Officer. "The reserve increase of $124.8 million in the quarter significantly reduced earnings, however, it now places the Company on a sound footing for future growth in profitability. During 2007, we implemented many improvements and corrective actions at Lincoln, which we expect will result in much improved performance. Not only have reserves been greatly increased, but we are also eliminating or repricing underperforming insurance programs and have enhanced several operational procedures."
Mr. Jackson continued, "The increase in reserves at Lincoln has overshadowed the strong operating performance from most of our U.S. subsidiaries and all of our Canadian subsidiaries, as well as healthy investment returns from our securities portfolio. We ended the year with net premiums written of approximately $1.8 billion and statutory surplus in our operating insurance subsidiaries of approximately $1.2 billion. This is a conservative level of premium leverage which we anticipate will further strengthen in 2008, providing us with significant flexibility to benefit from improving insurance market conditions. Book value per share grew by 5% during 2007 due to currency fluctuations and disappointing operating results. Over the last five years book value has grown at a compound annual growth rate of 16%, illustrating the benefits of Kingsway's diverse operations."
Property and casualty insurance markets in Canada and the U.S. continue to be very price competitive as the industry is experiencing slow premium growth while at the same time reporting increases in capital and surplus. We expect that industry combined ratios will continue to deteriorate throughout 2008. However, this deteriorating performance together with low interest rates, weak equity markets and potential impairments of assets will lead, we believe, to firmer pricing in many of our markets before the end of 2008.
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