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During a conference call, Colin Simpson, president and chief executive officer, said Kingsway's staff had spent "most of the year looking in the rear view mirror" in order to get Kingsway's "financial house in order." Although it was critical work, it distracted from the company's operating businesses, which are showing signs of emerging as a "strong core," he said.
Simpson said Kingsway is well ahead of schedule in cutting expenses, shedding $11.3 million during the third quarter. Kingsway has accumulated $45 million in expense reductions this year through staff reductions and expense management, Simpson said. About 850 jobs have been eliminated this year on the way to a goal of 1,000 by the end of next year. Staff reductions will represent a $22 million saving in 2009, Simpson said.
Kingsway said the loss during the third quarter represented a loss of $128.8 million from run-off and discontinued business, including a loss of $95.5 million from Lincoln General Insurance Co. Kingsway disposed of its interest in U.S. unit Lincoln General by donating stock in the company to charity. Kingsway explained that its indirect wholly owned subsidiary, Kingsway America Inc., got rid of its interest in its wholly owned subsidiary, Walshire General Assurance Co. -- the sole shareholder of Lincoln General (BestWire, Oct. 20, 2009). Kingsway also sold Zephyr Insurance Co. for about $31.5 million (BestWire, Oct. 30, 2009).
Simpson said the Lincoln General transaction was a "major step in our drive to restore financial stability." Losses for the quarter, he said, are from businesses that are "not part of our ongoing operations."
Kingsway outlined a plan in February to cut costs, which included consolidating operations in the United States and Canada. Kingsway consolidated two of its Canadian units in September. Jevco Insurance Co. assumed the assets and liabilities of Kingsway General Insurance Co., effective Oct. 1. Both subsidiaries are wholly owned by Kingsway, which said folding KGIC into Jevco will contribute to a reduction in the company's operating expenses (BestWire, Sept. 23, 2009).
Kingsway General Insurance Co. has a current Best's Financial Strength Rating of B (Fair).
In morning trading on Nov. 6, shares of Kingsway Financial Services (NYSE: KFS | Quote | Chart | News | PowerRating) were selling at $3.60, down 7.2% from the previous close.
(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)
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