Kingsway Financial Services Inc. today reported a 37% drop in income for the third quarter ended September 30.

The non-standard automobile insurance company reported net income of $23.6 million, or 42¢ a share. That compared with $37.4 million, 66¢ a share, in the year earlier period.

Kingsway’s annualized return on equity was 9.3% for the quarter and 11.6% year to date.

Book value per share has grown by 17% since the beginning of the year, illustrating the benefits of Kingsway’s diverse operations. The strengthening of the Canadian dollar has accounted for 6% of this increase, Kingsway said.

Bill Star, president and CEO stated, “We are very pleased with the profitability of each of our Canadian subsidiaries for the quarter and the year to date. Our Canadian subsidiaries reported improved levels of underwriting profit and investment income again this quarter compared to both the previous quarter and the same quarter last year. At the same time they continued to strengthen their balance sheet provision for unpaid claims and to report estimated favourable reserve development on the provisions recorded at the beginning of the year.”

“Despite the strong results reported by the majority of our U.S. subsidiaries, we are disappointed with the overall results of our U.S operations,” Star said.

“The results of our U.S operations were heavily influenced by Lincoln General, where estimated unfavourable reserve development led to the company reporting an underwriting loss for the quarter and the year to date. We have implemented corrective actions to our operations at Lincoln which we expect will improve its results in 2008. The investment income continues to increase as a result of increased yields and invested assets,” Star concluded.