Specialty insurer Kingsway Financial Services Inc. today reported lower profit for the fourth quarter ended Dec. 31, 2006.

Net income in the quarter was US$16.8 million, compared to US$35.9 million in the fourth quarter of last year. Net income for 2006 was US$123.3 million, compared to US$135 million reported last year.

In the fourth quarter, operating earnings amounted to US$4.9 million compared to US$29.5 million in the same quarter last year. Operating earnings for the year were US$99.9 million compared to US$106.4 million last year.

Return on equity was 14.5% for the year compared to 18.4% last year. Diluted earnings per share decreased 52% to 30¢ for the quarter compared to 63¢ the fourth quarter of 2005. For the year diluted earnings per share decreased by 8% to US$2.17 compared to US$2.37 for the same period last year.

“Competitive market conditions have impacted our growth, and consequently our results for the year were disappointing to us, however, we did produce a healthy return on equity of 14.5%,” said Bill Star, president & CEO. “The results from our Canadian operations were very strong and were much improved over last year; however, based on loss trends that emerged and the recommendations of our independent actuaries, we determined that it was appropriate to increase estimated unpaid claims reserves related to prior periods in our U.S. program business. These actions together with the recently announced acquisition of Mendota and the increasing yield on our growing investment portfolio put us in a position to achieve improved profitability for 2007.”

During the fourth quarter, gross premiums written declined 7% to US$409.1 million, compared with US$439.3 million in the same quarter last year. Gross premiums written were US$1.93 billion for 2006, compared to US$1.89 billion for 2005. U.S. operations represented 69% of gross premiums written in 2006, compared with 68% last year. Trucking, non-standard automobile and commercial automobile premiums represented 33%, 26% and 14%, respectively, of gross premiums written for the year compared with 31%, 29% and 12%, respectively, last year.

For the quarter gross premiums written from U.S. operations decreased 5% to US$288.1 million compared with US$304.8 million in the final quarter of 2005. For the year, gross premiums written by U.S. operations increased to US$1.34 billion compared to US$1.28 billion last year. Gross premiums written from Canadian operations were US$121 million for the quarter compared to US$134.5 million Q4 2005 and for the year were US$590.8 million compared to US$609.9 million last year.

Kingsway Financial Services Inc. is one of the largest truck insurers and non-standard automobile insurers in North America. Kingsway reports its financial results in U.S. dollars.