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Kingsway to consolidate two U.S.-based subsidiaries as part of cost cutting

The Canadian Press
November 7, 2008 - 5:05 p.m.

TORONTO - Kingsway Financial Services Inc. (TSX:KFS) is consolidating the operations of two U.S. subsidiaries as a way to cut costs after reporting a loss in its latest quarter earlier in the week.

Toronto-based Kingsway said Friday it will combine Alabama-based Southern United Fire Insurance Company and Florida-based Hamilton Risk Management.

"This is a further step in Kingsway's strategic plan to ensure that synergies, cost reduction and operational efficiencies are achieved within the U.S. operations and underperforming business is decisively addressed," the company stated.

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Added president and CEO Shaun Jackson: "We are very focused on returning Kingsway's operations to a consistent level of profitability by taking decisive action to address the underperforming parts of our business."

He said Southern United has been "challenged in terms of its size and scope of operation and accordingly has not been able to achieve an underwriting profit."

Kingsway, which has been selling non-core businesses and getting out of unprofitable insurance lines, reported a net loss of US$17.4 million or 32 cents a share for the third quarter ended Sept. 30, primarily reflecting disappointing underwriting results and net realized losses, including the writedown of investments.

That compared with net profits of US$23.6 million or 42 cents a share for the same period last year, which was a much better time for the insurance sector.

Revenue from insurance premiums fell 26 per cent to US$354.5 million from $477.5 million, said the company.

Like most financial companies, Kingsway has been hurt by the credit crunch, stock market meltdown and slumping economy, which has cut into its truck insurance and property and casualty businesses.

Kingsway is one of the largest non-standard automobile insurers and truck insurers in North America, operating through subsidiaries such as Kingsway General, Jevco, Universal Casualty, American Service, Southern United Fire and Lincoln General. The company also operates reinsurance subsidiaries in Barbados and Bermuda.