Kingsway Financial Services Inc. today announced financial results for the second quarter ended June 30, 2007. The specialty insurer reported net income of US$41.7 million for the quarter or US$0.74 per share diluted, an increase of 4% over the same quarter last year.

“We are pleased with the performance of our Canadian subsidiaries for the quarter and year to date, with each reporting an underwriting profit and increased levels of investment income. Each of our Canadian subsidiaries reported estimated favourable reserve development on unpaid claims recorded at the beginning of the year, however, they prudently did not release this prior period reserve surplus to earnings and instead continued to strengthen their balance sheet provision for unpaid claims,” commented, Bill Star, president and CEO, in a release.

Kingsway reported overall favourable reserve development for the quarter, however, the insurer said it was disappointed with the underwriting results of certain U.S. subsidiaries so far this year. The underwriting results of Lincoln General, although much improved in this quarter, have had a major negative impact on overall underwriting profitability. However, Kingsway’s other U.S. subsidiaries collectively reported an underwriting profit for the quarter and the year to date. Mendota Insurance Company, which was acquired during the quarter, also made a profitable contribution to the results despite absorbing certain non-recurring transition costs.

Kingsway said it continues to experience a significant increase in investment income as a result of the increasing yield on its fixed income portfolio, with U.S. interest rates continuing to be higher than comparable Canadian rates.

Kingsway’s annualized return on equity was 17.3% for the quarter and 13.0% year to date, and its book value per share has grown by 10% since the beginning of the year.