Kingsway Financial Services Inc. reported a 29% drop in fourth-quarter earnings, the result of the strong Canadian dollar relative to the U.S. dollar. Even with the rising C$, the Toronto-based high-risk vehicle insurer posted a record profit for the year.

The said late Thursday it earned $18 million (32¢ a share) for the three months ended Dec. 31, off from a profit of $25.4 million (51¢) for the same period a year earlier. For the full year, Kingsway earned $85.3 million ($1.62) on revenue of $2.52 billion. That compared with a profit of $75.9 million ($1.61) on revenue of $1.82 billion in 2002.

“During the fourth quarter and for the year the Canadian dollar appreciated significantly against the U.S. dollar thereby affecting the comparability to the same periods of 2002,”” the company said in a release. “Had the results of the U.S. operations been translated at the same exchange rates as the same periods last year, net income for the year would have been further increased by $10.5 million and by $3.2 million for the quarter.”

Revenues for the quarter increased to $668.2 million, from $567.9 million in 2002.

Bill Star, president and CEO of Kingsway, said in a release the company has strengthened its reserves “significantly” to ensure that unpaid claims reserves at each subsidiary are at the independent actuaries point estimate or higher.

“In 2003 we took decisive steps to ensure that we achieved our stated commitment to reach claim reserve levels recommended by independent actuaries by year-end. Despite the challenges that we faced in 2003 it still turned out to be the most profitable in our history. As a result, we are well positioned to produce much better results in 2004 and to reach our targeted underwriting profit goals.”