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U.S. SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 6-K
REPORT OF FOREIGN
PRIVATE ISSUER
PURSUANT TO RULE
13a-16 OR 15d-16 OF
THE SECURITIES
EXCHANGE ACT OF 1934
For the month of February, 2006.
KINGSWAY
FINANCIAL SERVICES INC.
(Exact
name of Registrant as specified in its charter)
ONTARIO, CANADA
(Province or other
jurisdiction of incorporation or organization)
5310 Explorer Drive,
Suite 200, Mississauga, Ontario, Canada L4W 5H8
(Address of principal
executive offices)
[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:]
Form 20-F Form 40-F X
[Indicate by check mark whether the Registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:]
Yes No X
[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):]
N/A
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KINGSWAY FINANCIAL SERVICES INC.
Table of Contents
| Item | Description | Sequential Page Number |
|---|---|---|
| 1. | Press Release dated February 8, 2006 | 4 |
| 2. | Press Release dated February 16, 2006 | 16 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KINGSWAY FINANCIAL SERVICES INC.
Dated: February 17, 2006
By: /s/ W. Shaun
Jackson
W. Shaun Jackson
Executive Vice President and
Chief Financial Officer
KINGSWAY INCREASES NET INCOME BY 24% FOR THE YEAR AND ITS DIVIDEND BY 25%
Toronto, Ontario (February 8, 2006) – Kingsway Financial Services Inc. (TSE:KFS, NYSE:KFS) today announced financial results for the fourth quarter and year ended December 31, 2005 (Cdn dollars except where indicated).
Q4 2005 Highlights
| • | Diluted earnings per share increased 16% to a Q4 record $0.74 (19% to U$0.63) |
| • | Income before income taxes increased 16% to $42.0 million (20% to U$35.8 million) |
| • | Net income increased 16% to $42.1 million (20% to U$35.9 million) |
| • | Net operating income increased 18% to $34.6 million (23% to U$29.5 million) |
| • | Combined ratio improved to 97.7% compared to 98.2% in Q4 2004 |
| • | Underwriting profit increased 21% to $11.9 million (24% to U$10.1 million) |
| • | Annualized return on equity improved to 18.4% |
For the Year
| • | Diluted earnings per share increased 23% to $2.86 (32% to U$2.37) |
| • | Income before income taxes increased 28% to $186.8 million (37% to U$154.3) |
| • | Net income increased 24% to $163.1 million (34% to U$135.0) |
| • | Combined ratio improved to 97.2% from 97.8% in 2004 |
| • | Underwriting profit increased 18% to record $60.6 million (26% to U$49.8 million) |
| • | Return on equity of 18.8% |
| • | Book value per share increased 16% to $16.57 (20% to U$14.25) |
| • | Fair value of investment portfolio increased 7% to $60.39 per share (10% to U$51.93) |
Net income for the quarter increased 16% to $42.1 million compared to $36.3 million in the fourth quarter of 2004 and in U.S. dollars increased 20% to U$35.9 million from U$29.8 million. Net income for the year increased 24% to a record $163.1 million (increased 34% to U$135.0 million), over the $131.0 million (U$101.0 million) reported last year.
Return on equity (annualized) was 18.4% in the quarter compared to 18.2% in the fourth quarter of 2004, and was 18.8% for the year compared to 17.4% in 2004. Diluted earnings per share increased 16% to $0.74 (19% to U$0.63), compared to $0.64 (U$0.53) for the same quarter of 2004. For the year, diluted earnings per share increased by 23% to a record $2.86 (32% to U$2.37) over $2.32 (U$1.79) last year.
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“I am very pleased to again report record earnings. 2005 was an outstanding year in which we delivered record earnings for each quarter and for the year,” said Bill Star, President & Chief Executive Officer. “Our disciplined underwriting approach has led to an improved combined ratio and record underwriting profits in 2005 on lower premium volume than 2004. During the year we continued to build our book value per share and strengthen our capital position, and as a result I am pleased to announce that the Board has today approved a [25%] increase in our quarterly dividend. Pricing is generally stable and we continue to see growth opportunities in the extremely fragmented U.S. markets. Our diversification in the U.S. and Canada together with our dominant niche market positions provide us with a strong foundation as we enter 2006.”
Net Operating Income
Net operating income for the quarter increased 18% to $34.6 million (23% to U$29.5 million) or $0.61 (U$0.52) diluted earnings per share compared with $29.4 million (U$24.1 million) or $0.52 (U$0.43) diluted earnings per share for the fourth quarter of 2004. For the year, net operating income increased 18% to $128.7 million (26% to U$106.4 million) or $2.26 (U$1.87) diluted earnings per share compared with $109.2 million (U$84.3 million) or $1.93 (U$1.49) for 2004. Net operating income is a non-GAAP measure defined by the Company as net income excluding after-tax net realized gains and losses on investments.
Premiums
During the fourth quarter, gross premiums written declined 11% to $515.3 million (7% to U$439.3 million), compared with $579.0 million (U$474.0 million) in the same quarter last year. Gross premiums written were $2.30 billion (U$1.89 billion) for 2005, compared to $2.61 billion (U$2.00 billion) for 2004. U.S. operations represented 68% of gross premiums written in 2005, compared with 71% last year. Trucking, non-standard automobile and commercial automobile premiums represented 31%, 29% and 12%, respectively, of gross premiums written for the year compared with 29%, 35% and 12%, respectively, last year.
For the quarter gross premiums written from U.S. operations decreased 11% to $357.5 million (8% to U$304.8 million) compared with $403.2 million (U$330.0 million) last year. For the year, gross premiums written by U.S. operations were $1.56 billion (U$1.28 billion) compared to $1.85 billion (U$1.42 billion) last year. The decline in premiums written by our U.S. operations compared to the previous year is mainly attributable to competitive pricing in some non-standard automobile markets and the termination of certain programs. Gross premiums written from Canadian operations were $157.8 million (U$134.5 million) for the quarter compared to $175.8 million (U$144.0 million) last year and for the year were $740.1 million (U$609.9 million) compared to $760.6 million (U$583.5 million) last year. The decline in gross premiums written by our Canadian operations is mainly attributable to Alberta non-standard automobile where the majority of our premiums are now ceded to the residual market facility.
Net premiums written decreased 7% to $473.3 million (U$403.5 million) compared with $506.4 million (U$414.6 million) for the same quarter of last year, and were $2.21 billion (U$1.82 billion) for the year compared to $2.27 billion (U$1.74 billion) for 2004. Premiums ceded to reinsurers represented 8% of gross premiums written (4% for the year) compared to 13% in the same quarter last year (13% for the year). Premiums ceded to reinsurers included $10.8 million (U$9.2 million) related to Zephyr Insurance in Hawaii which was acquired in the fourth quarter of 2005.
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Net premiums earned declined 5% to $522.4 million (1% to U$445.4 million) for the quarter compared with $550.9 million (U$451.3 million) for the same quarter last year. For 2005, net premiums earned were $2.17 billion (U$1.79 billion) compared with $2.31 billion (U$1.78 billion) in the same period last year. For U.S. operations, net premiums earned decreased 9% to $356.7 million (U$304.1 million) compared with $390.2 million (U$319.6 million) in the same quarter of 2004. Net premiums earned from Canadian operations increased by 3% to $165.7 million (U$141.3 million) compared with $160.8 million (U$131.8 million) in the same quarter last year. For the year, net premiums earned from U.S. operations were $1.47 billion (U$1.21 billion) compared to $1.66 billion (U$1.28 billion) last year, and for the Canadian operations were $705.5 million (U$582.5 million) and $652.4 million (U$501.9 million), respectively.
Underwriting Profit & Combined Ratio
The combined ratio was 97.7% (97.2% for the year) resulting in an underwriting profit of $11.9 million (U$10.1 million) in the quarter and $60.6 million (U$49.8 million) year to date. For the quarter, the U.S. operations combined ratio was 100.1% (95.3% last year). The Canadian operations combined ratio improved to 92.7% (105.4% last year) which produced an underwriting profit of $12.1 million (loss of $8.6 million last year). For the year, U.S. operations combined ratio was 97.7% (97.7% last year) which produced an underwriting profit of $33.5 million ($37.7 million last year), and for Canadian operations was 96.1% (97.9% last year), with an underwriting profit of $27.2 million ($13.6 million last year). For the year, the loss ratio for Canadian operations improved to 68.3% compared to 72.2% last year and for the U.S. operations improved to 68.3% compared to 70.3% last year.
Investment Income
For the quarter, investment income increased 16% to $29.2 million (21% to U$24.9 million) compared with $25.1 million (U$20.6 million) for the same quarter of 2004. For the year, investment income increased by 17% to $112.6 million (25% to U$93.0 million) compared to $96.4 million (U$74.3 million) last year. Net realized gains amounted to $9.6 million (U$8.2 million) compared with $8.5 million (U$7.0 million) in the same quarter of 2004. Net realized gains after-tax were $7.4 million (U$6.4 million) or $0.13 (U$0.11) diluted earnings per share compared with $6.9 million (U$5.7 million) or $0.12 (U$0.10) diluted earnings per share in the same quarter of 2004.
For the year, net realized gains were $45.9 million (U$38.2 million) compared with $26.7 million (U$20.4 million) last year. On an after-tax basis, net realized gains were $34.4 million (U$28.7 million) or $0.60 (U$0.50) diluted earnings per share compared with $21.9 million (U$16.7 million) or $0.39 (U$0.30) diluted earnings per share last year.
Net unrealized gains at December 31, 2005 on the investment portfolio were $21.2 million (U$18.2 million) or $0.37 (U$0.32) per share outstanding as compared to $73.7 million (U$61.3 million) or $1.31 (U$1.09) per share outstanding at the end of 2004. Net unrealized gains on the common shares portfolio were $46.6 million (U$40.1 million) or $0.83 (U$0.71) per share outstanding at December 31, 2005 compared to $67.6 million (U$56.3 million) or $1.20 (U$1.00) per share outstanding at the end of 2004.
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Duration is a measure used to estimate the extent market values of fixed maturity investments change with changes in interest rates. Using this measure, it is estimated that an immediate hypothetical 100 basis point parallel increase in interest rates would decrease the market value of our fixed maturity investments by $77.8 million at December 31, 2005, representing 2.8% of the $2,757.5 million fair value fixed maturity investment portfolio.
Balance Sheet
Total assets as at December 31, 2005 are $4.41 billion (U$3.80 billion) compared to $4.23 billion (U$3.52 billion) at the end of 2004. Despite unrealized currency translation adjustment decreasing book value per share by $0.40 in the year, book value per share increased by 16% since the beginning of the year to $16.57 (20% to U$14.25).
The carrying value of the investment portfolio, including cash increased 9% to $3,389.9 million (13% to U$2,914.8 million), compared to $3,104.5 million (U$2,582.8 million) as at December 31, 2004. At December 31, 2005, 30% of the fixed income portfolio matures in less than one year and 45% matures after one year and in less than five years. The fair value of the investment portfolio including cash represents $60.39 (U$51.93) per common share at December 31, 2005.
Provisions for unpaid claims increased by 6% to $2,144.8 million (9% to U$1,844.2 million) compared to $2,030.4 million (U$1,689.2 million) at the end of 2004. At December 31, 2005 the provision for unpaid claims comprised case reserves for individual claims amounting to $1,335.9 million ($1,218.7 million last year) and a provision for Incurred But Not Reported claims of $808.9 million ($811.8 million last year). For each of our insurance subsidiaries the provision for unpaid claims are at least 100% of the point estimate recommended by their independent appointed actuary as at December 31, 2005.
U.S. Dollar Reporting
As previously announced, the Company will report its results in U.S. dollars commencing with the 2005 Annual Report. Quarterly results will be reported in U.S. dollars commencing with the first quarter of 2006.
Increase in Quarterly Dividend
The Board of Directors today approved a 25% increase in the payment of the Company’s quarterly dividend to an amount of $0.0625 per share. The first dividend payment at this rate will be made on March 31, 2006 to shareholders of record as at March 15, 2006.
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Further Information
The discussion and analysis of our results of operation and information in this press release is an update of the information set forth in our 2004 Annual Report. Further information about our financial results and condition can be found in the Company’s Annual Report and other filings.
Conference Call
The Company will have its quarterly conference call today at 5:00pm (EST). The call may be accessed by telephone at 1-800-814-4857. A live broadcast of the conference call can be accessed at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=21172617# or through a link from our website at www.kingsway-financial.com. A rebroadcast of the conference call will also be available and can be accessed through our website.
Forward Looking Statements
This press release includes “forward looking statements” that are subject to risks and uncertainties. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see Kingsway’s securities filings, including its 2004 Annual Report under the heading Risks and Uncertainties in the Management’s Discussion and Analysis section. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
About the Company
Kingsway Financial Services Inc. is the largest truck insurer in North America and the seventh largest non-standard automobile insurer in North America according to A.M. Best. Kingsway’s primary business is trucking insurance and the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The Company currently operates through eleven wholly-owned insurance subsidiaries in Canada and the U.S. Canadian subsidiaries include Kingsway General Insurance Company, York Fire & Casualty Insurance Company and Jevco Insurance Company. U.S. subsidiaries include 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, Zephyr Insurance Company and Avalon Risk Management, Inc. The Company also operates reinsurance subsidiaries in Barbados and Bermuda. Lincoln General Insurance Company, Universal Casualty Insurance Company, Jevco Insurance Company and Kingsway Reinsurance (Bermuda) are all rated “A-” Excellent by A.M. Best. Kingsway General, York Fire and American Service are rated “B++” (very good). The Company’s senior debt is rated investment grade “BBB-"(stable) by Standard and Poor’s and “BBB” (stable) by Dominion Bond Rating Services. The common shares of Kingsway Financial Services Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange, under the trading symbol “KFS”.
— 30 —
For further information, please contact:
Shaun Jackson
Executive Vice President and Chief Financial Officer
Tel: (905) 629-7888
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KINGSWAY FINANCIAL
SERVICES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and year ended December 31, 2005 and 2004
(In thousands of Canadian dollars, except for per share amounts)
| Quarter to Dec 31: | 12 Months to Dec 31: | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | 2005 | 2004 | |||||||||||
| (unaudited) | ||||||||||||||
| Gross premiums written | $ | 515,304 | $ | 578,989 | $ | 2,297,899 | $ | 2,610,070 | ||||||
| Net premiums written | $ | 473,259 | $ | 506,399 | $ | 2,214,182 | $ | 2,265,956 | ||||||
| Revenue: | ||||||||||||||
| Net premiums earned | $ | 522,439 | $ | 550,943 | $ | 2,170,860 | $ | 2,314,103 | ||||||
| Investment income | 29,221 | 25,109 | 112,563 | 96,429 | ||||||||||
| Net realized gains | 9,601 | 8,474 | 45,929 | 26,658 | ||||||||||
| 561,261 | 584,526 | 2,329,352 | 2,437,190 | |||||||||||
| Expenses: | ||||||||||||||
| Claims incurred | 360,226 | 396,898 | 1,483,343 | 1,639,094 | ||||||||||
| Commissions and premium taxes | 97,338 | 98,988 | 438,760 | 431,070 | ||||||||||
| General and administrative expenses | 52,956 | 45,229 | 188,130 | 192,641 | ||||||||||
| Interest expense | 8,288 | 6,948 | 31,345 | 27,494 | ||||||||||
| Amortization of intangibles | 474 | 161 | 950 | 690 | ||||||||||
| 519,282 | 548,224 | 2,142,528 | 2,290,989 | |||||||||||
| Income before income taxes | 41,979 | 36,302 | 186,824 | 146,201 | ||||||||||
| Income taxes (recovery) | (99 | ) | (42 | ) | 23,749 | 15,196 | ||||||||
| Net income | $ | 42,078 | $ | 36,344 | $ | 163,075 | $ | 131,005 | ||||||
| Earnings per share: | ||||||||||||||
| Basic: | $ | 0.75 | $ | 0.65 | $ | 2.89 | $ | 2.33 | ||||||
| Diluted: | $ | 0.74 | $ | 0.64 | $ | 2.86 | $ | 2.32 | ||||||
| Weighted average shares outstanding in (‘000s): | ||||||||||||||
| Basic: | 56,476 | 56,194 | 56,423 | 56,124 | ||||||||||
| Diluted: | 57,057 | 56,639 | 56,963 | 56,549 | ||||||||||
| Claims ratio | 68.9 | % | 72.0 | % | 68.3 | % | 70.8 | % | ||||||
| Expense ratio | 28.8 | % | 26.2 | % | 28.9 | % | 27.0 | % | ||||||
| Combined ratio | 97.7 | % | 98.2 | % | 97.2 | % | 97.8 | % | ||||||
| Underwriting profit | $ | 11,919 | $ | 9,828 | $ | 60,627 | $ | 51,298 | ||||||
| Return on equity (annualized) | 18.4 | % | 18.2 | % | 18.8 | % | 17.4 | % | ||||||
| Book value per share | $ | 16.57 | $ | 14.25 | ||||||||||
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KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
| Dec. 31 2005 |
Dec. 31 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash & cash equivalents | $ | 129,133 | $ | 104,698 | ||||
| Investments | 3,260,808 | 2,999,841 | ||||||
| Accrued investment income | 29,222 | 25,297 | ||||||
| Accounts receivable and other assets | 328,854 | 395,241 | ||||||
| Due from reinsurers and other insurers | 259,318 | 312,996 | ||||||
| Deferred policy acquisition costs | 173,088 | 170,576 | ||||||
| Income taxes recoverable | -- | 12,535 | ||||||
| Future income taxes | 67,383 | 57,871 | ||||||
| Capital assets | 83,280 | 70,336 | ||||||
| Goodwill and intangible assets | 82,724 | 80,919 | ||||||
| $ | 4,413,810 | $ | 4,230,310 | |||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| LIABILITIES | ||||||||
| Bank indebtedness | $ | 13,685 | $ | 72,002 | ||||
| Loans payable | 77,016 | -- | ||||||
| Accounts payable and accrued liabilities | 150,802 | 132,635 | ||||||
| Fund withheld payable to reinsurer | -- | 94,586 | ||||||
| Income taxes payable | 7,929 | -- | ||||||
| Unearned premium | 755,052 | 762,472 | ||||||
| Unpaid claims | 2,144,817 | 2,030,449 | ||||||
| Senior unsecured indebtedness | 223,375 | 228,250 | ||||||
| Subordinated indebtedness | 105,251 | 108,781 | ||||||
| 3,477,927 | 3,429,175 | |||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Share capital | 475,498 | 471,886 | ||||||
| Issued and outstanding number of common shares | ||||||||
| 56,480,453 – December 31, 2005 | ||||||||
| 56,210,250 – December 31, 2004 | ||||||||
| Contributed surplus | 4,029 | 2,285 | ||||||
| Currency translation adjustment | (156,359 | ) | (133,967 | ) | ||||
| Retained earnings | 612,715 | 460,931 | ||||||
| 935,883 | 801,135 | |||||||
| $ | 4,413,810 | $ | 4,230,310 | |||||
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KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the three months and year ended December 31, 2005 and 2004
(In thousands of Canadian dollars)
| Quarter to Dec. 31: | 12 months to Dec. 31: | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | 2005 | 2004 | |||||||||||
| (unaudited) | ||||||||||||||
| Retained earnings, beginning of period | $ | 573,461 | $ | 424,587 | $ | 460,931 | $ | 329,926 | ||||||
| Net income for the period | 42,078 | 36,344 | 163,075 | 131,005 | ||||||||||
| Common share dividends | (2,824 | ) | -- | (11,291 | ) | -- | ||||||||
| Retained earnings, end of period | $ | 612,715 | $ | 460,931 | $ | 612,715 | $ | 460,931 | ||||||
Page 12 of 16
KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
As at December 31, 2005 and 2004
(In thousands of Canadian dollars)
| 1. | Investments: |
| December 31, 2005 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Carrying Amount |
Fair value | |||||||
| Term deposits | $ | 445,511 | $ | 443,957 | ||||
| Bonds: | ||||||||
| Government | 498,131 | 497,533 | ||||||
| Corporate | 1,839,376 | 1,815,958 | ||||||
| Preferred shares | 1,500 | 1,572 | ||||||
| Common shares | 376,616 | 423,280 | ||||||
| Financed premiums | 99,674 | 99,674 | ||||||
| $ | 3,260,808 | $ | 3,281,974 | |||||
| December 31, 2004 | ||||||||
| Carrying Amount |
Fair value | |||||||
| Term deposits | $ | 317,853 | $ | 317,626 | ||||
| Bonds: | ||||||||
| Government | 590,050 | 592,693 | ||||||
| Corporate | 1,662,783 | 1,666,447 | ||||||
| Common shares | 324,323 | 391,964 | ||||||
| Financed premiums | 104,832 | 104,832 | ||||||
| $ | 2,999,841 | $ | 3,073,562 | |||||
Page 13 of 16
KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
For the three months and year ended December 31, 2005 and 2004
(In thousands of Canadian dollars)
| 2. | Underwriting Results: |
The underwriting results for the Company’s operations were as follows:
| Quarter to Dec. 31: | 12 months to Dec. 31: | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | 2005 | 2004 | |||||||||||
| Underwriting Profit | ||||||||||||||
| Canada | $ | 12,094 | $ | (8,619 | ) | $ | 27,163 | $ | 13,575 | |||||
| U.S | (175 | ) | 18,447 | 33,464 | 37,723 | |||||||||
| Total | $ | 11,919 | $ | 9,828 | $ | 60,627 | $ | 51,298 | ||||||
| Combined Ratio | ||||||||||||||
| Canada | 92 | .7% | 105 | .4% | 96 | .1% | 97 | .9% | ||||||
| U.S | 100 | .1% | 95 | .3% | 97 | .7% | 97 | .7% | ||||||
| Total | 97 | .7% | 98 | .2% | 97 | .2% | 97 | .8% | ||||||
| Expense Ratio | ||||||||||||||
| Canada | 30 | .1% | 27 | .8% | 27 | .8% | 25 | .7% | ||||||
| U.S | 28 | .2% | 25 | .5% | 29 | .4% | 27 | .4% | ||||||
| Total | 28 | .8% | 26 | .2% | 28 | .9% | 27 | .0% | ||||||
| Loss Ratio | ||||||||||||||
| Canada | 62 | .6% | 77 | .6% | 68 | .3% | 72 | .2% | ||||||
| U.S | 71 | .9% | 69 | .8% | 68 | .3% | 70 | .3% | ||||||
| Total | 68 | .9% | 72 | .0% | 68 | .3% | 70 | .8% | ||||||
| Favourable (Unfavourable) change | ||||||||||||||
| in estimated unpaid claims for | ||||||||||||||
| prior accident years (note 1): | ||||||||||||||
| Canada | $ | 2,954 | $ | (20,235 | ) | $ | (2,811 | ) | $ | (39,252 | ) | |||
| U.S | (25,579 | ) | (8,038 | ) | (26,191 | ) | (28,530 | ) | ||||||
| Total | $ | (22,625 | ) | $ | (28,273 | ) | $ | (29,002 | ) | $ | (67,782 | ) | ||
| As a % of net premiums earned (note 2): | ||||||||||||||
| Canada | (1 | .8%) | 12 | .6% | 0 | .4% | 6 | .0% | ||||||
| U.S | 7 | .2% | 2 | .1% | 1 | .8% | 1 | .7% | ||||||
| Total | 4 | .3% | 5 | .1% | 1 | .3% | 2 | .9% | ||||||
| As a % of unpaid claims (note 3): | ||||||||||||||
| Canada | 0 | .4% | 7 | .4% | ||||||||||
| U.S | 2 | .1% | 2 | .5% | ||||||||||
| Total | 1 | .4% | 4 | .1% | ||||||||||
Note 1 – (Increase) decrease in estimates for unpaid claims from prior accident years reflected in current financial year results.
Note 2 – Increase (decrease) in current financial year reported combined ratio.
Note 3 – Increase (decrease) compared to estimated unpaid claims at the end of the preceding fiscal year.
Page 14 of 16
KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
As at December 31, 2005 and 2004
(In thousands of Canadian dollars, except for per share amount)
| 3. | Financial Strength: |
| Some of the key indicators of the Company’s financial strength are as follows: |
| December 31, 2005 |
December 31, 2004 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rolling four quarter calculations: | ||||||||||||
| Net Premiums Written to Estimated Statutory Surplus Ratio | 2.0x | 2.2x | ||||||||||
| Interest Coverage Ratio | 7.2x | 6.7x | ||||||||||
| Total Bank and Senior Debt to Capitalization Ratio | 23.5 | % | 25.1 | % | ||||||||
| 4. | Summary of Quarterly Results in U.S. dollars over the previous five quarters |
| The selected financial information disclosed below has been translated using the Bank of Canada monthly average exchange rate for the income statement and the month end rate for the balance sheet. Readers should be cautioned as to the limited usefulness of the selected financial information presented below. |
| 2005 | 2004 | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||||||
| Gross premiums written | $ | 439,267 | $ | 452,341 | $ | 478,446 | $ | 524,606 | $ | 473,951 | ||||||||||||||||
| Net premiums earned | 445,372 | 461,446 | 469,300 | 415,825 | 451,332 | |||||||||||||||||||||
| Total revenue | 478,502 | 495,557 | 497,305 | 451,853 | 478,843 | |||||||||||||||||||||
| Net realized gains (after tax) | 6,358 | 8,011 | 3,188 | 11,094 | 5,748 | |||||||||||||||||||||
| Underwriting profit | 10,102 | 10,023 | 14,296 | 15,369 | 8,122 | |||||||||||||||||||||
| Net income | 35,901 | 31,339 | 29,647 | 38,121 | 29,828 | |||||||||||||||||||||
| Book value per share | $ | 14.25 | $ | 13.65 | $ | 12.93 | $ | 12.47 | $ | 11.86 | ||||||||||||||||
| Earnings per share | ||||||||||||||||||||||||||
| Basic | $ | 0.64 | $ | 0.55 | $ | 0.52 | $ | 0.68 | $ | 0.53 | ||||||||||||||||
| Diluted | 0.63 | 0.55 | 0.52 | 0.67 | 0.53 | |||||||||||||||||||||
Page 15 of 16
KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the three months and year ended December 31, 2005 and 2004
(In thousands of Canadian dollars)
| Quarter to Dec. 31: | 12 months to Dec. 31: | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | 2005 | 2004 | |||||||||||
| (unaudited) | ||||||||||||||
| Cash provided by (used in): | ||||||||||||||
| Operating activities: | ||||||||||||||
| Net income | $ | 42,078 | $ | 36,344 | $ | 163,075 | $ | 131,005 | ||||||
| Items not affecting cash: | ||||||||||||||
| Amortization | 1,992 | 2,171 | 9,317 | 10,377 | ||||||||||
| Future income taxes | (2,695 | ) | (8,886 | ) | (8,153 | ) | 10,508 | |||||||
| Net realized gains | (9,601 | ) | (8,474 | ) | (45,929 | ) | (26,658 | ) | ||||||
| Amortization of bond premiums & discounts | 1,473 | 4,531 | 13,227 | 25,965 | ||||||||||
| 33,247 | 25,686 | 131,537 | 151,197 | |||||||||||
| Net change in other non-cash balances: | 7,355 | 111,668 | 170,294 | 353,966 | ||||||||||
| 40,602 | 137,354 | 301,831 | 505,163 | |||||||||||
| Financing activities: | ||||||||||||||
| Increase of share capital | 619 | 276 | 3,612 | 3,218 | ||||||||||
| Common share dividends | (2,824 | ) | -- | (11,291 | ) | -- | ||||||||
| Increase (decrease) in bank indebtedness | ||||||||||||||
| and loans payable | 7,483 | (738 | ) | 21,731 | (82,808 | ) | ||||||||
| Increase in senior unsecured indebtedness | -- | -- | -- | 163,284 | ||||||||||
| 5,278 | (462 | ) | 14,052 | 83,694 | ||||||||||
| Investing activities: | ||||||||||||||
| Purchase of investments | (911,370 | ) | (663,831 | ) | (3,130,950 | ) | (3,145,974 | ) | ||||||
| Proceeds from sale of investments | 906,702 | 542,743 | 2,844,058 | 2,559,877 | ||||||||||
| Financed premiums receivable, net | 6,452 | (15,838 | ) | 4,365 | (22,283 | ) | ||||||||
| Purchase of subsidiaries, net of cash | ||||||||||||||
| acquired | 14,004 | -- | 14,004 | -- | ||||||||||
| Net change to capital assets | (13,149 | ) | (4,299 | ) | (22,925 | ) | (16,662 | ) | ||||||
| 2,639 | (141,225 | ) | (291,448 | ) | (625,042 | ) | ||||||||
| Increase (decrease) in cash during period | 48,519 | (4,333 | ) | 24,435 | (36,185 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 80,614 | 109,031 | 104,698 | 140,883 | ||||||||||
| Cash and cash equivalents, end of period | $ | 129,133 | $ | 104,698 | $ | 129,133 | $ | 104,698 | ||||||
Page 16 of 16
Page 16 of 16
KINGSWAY ENTERS INTO $150 MILLION CREDIT FACILITY
Toronto, Ontario (February 16, 2006) – (TSX:KFS, NYSE:KFS) Kingsway Financial Services Inc. today announced that it has entered into a new Cdn $150 million 364 day revolving credit facility with a syndicate of banks. This credit facility replaces the existing Cdn $150 million 364 day revolving credit facility which matures on March 3, 2006. In the new facility, The Bank of Nova Scotia is acting as Administrative Agent, Co-Lead Arranger and Book Runner and LaSalle Bank National Association is acting as Syndicated Agent and Co-Lead Arranger.
About the Company
Kingsway Financial Services Inc. is the largest truck insurer in North America and the seventh largest non-standard automobile insurer in North America according to A.M. Best. Kingsway’s primary business is trucking insurance and the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The Company currently operates through eleven wholly-owned insurance subsidiaries in Canada and the U.S. Canadian subsidiaries include Kingsway General Insurance Company, York Fire & Casualty Insurance Company and Jevco Insurance Company. U.S. subsidiaries include 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, Zephyr Insurance Company and Avalon Risk Management, Inc. The Company also operates reinsurance subsidiaries in Barbados and Bermuda. Lincoln General Insurance Company, Universal Casualty Insurance Company, Jevco Insurance Company and Kingsway Reinsurance (Bermuda) are all rated “A-” Excellent by A.M. Best. Kingsway General, York Fire and American Service are rated “B++” (very good). The Company’s senior debt is rated investment grade “BBB-” (stable) by Standard and Poor’s and “BBB” (stable) by Dominion Bond Rating Services. The common shares of Kingsway Financial Services Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange, under the trading symbol “KFS”.
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