Kingsway Financial Services Inc. announced that its net income increased by 36% in the second quarter ended June 30 to US$40.2 million (C$44.9 million), compared to US$29.6 million (C$36.7 million) in the second quarter of last year. Net income for the six months ended June 30 increased 2% to US$69.1 million (C$78.3 million) compared to US$67.8 million (C$83.5 million) reported last year.
Operating earnings increased 25% to US$33.2 million (C$37.2 million) compared to US$26.5 million (C$32.8 million) in the same quarter last year. Operating earnings for the first six months of 2006 increased 18% to US$63.1 million (C$71.7 million) compared to US$53.5 million (C$66.0 million) for the first half of 2005.
Annualized return on equity was 18.9% in the quarter compared to 16.5% in the same quarter of 2005, and 16.5% for the year to date compared to 19.4% for the same period last year.
“We are pleased to report record quarterly income and a very positive first half of 2006,” said Bill Star, president and CEO. “Our Canadian underwriting results were very strong and we are pleased with the profitable U.S. growth that Robert Plan and Zephyr have provided this year. We continue to benefit from growth in our investment portfolio and improving yields as we reinvest maturing bonds. Our underwriting discipline is being maintained in all our markets. The capacity constraints and increased pricing in U.S. reinsurance markets is leading to rational competition and firming market conditions. These trends bode well for continued strong results and future growth for Kingsway.”
During the second quarter of 2006, gross premiums written increased 11% to US$532.5 million (C$597.4 million), compared with US$478.4 million (C$595.1 million) in the second quarter last year. Gross premiums written increased 4% to US$1.04 billion (C$1.18 billion) for the first six months of 2006, compared to US$1 billion (C$1.24 billion) for the same period last year.
In the quarter, U.S. operations comprised 65% (70% year to date) of gross premiums written, compared with 62% (69% year to date) in the second quarter last year. Trucking, non-standard automobile and commercial automobile premiums comprised 31%, 26% and 15%, respectively, of gross premiums written compared with 29%, 29% and 15%, respectively, last year.
For the quarter, gross premiums written from U.S. operations increased 16% to US$344.3 million (C$386.4 million) compared with US$297.4 million (C$369.9 million) last year. For the six months, gross premiums written by U.S. operations increased 5% to US$724.5 million (C$825.4 million) compared to US$687.7 million (C$848.9 million) last year.
Gross premiums written increased by US$41.1 million (C$46.0 million) in the second quarter and by US$80 million (C$90.9 million) year-to-date as a result of business written with The Robert Plan Corporation (which commenced in 2006) and Zephyr Insurance Company (which was acquired during Q4 of 2005). Gross premiums written from Canadian operations increased 4% to US$188.2 million (decreased 6% to C$211.0 million) for the quarter, compared to US$181.1 million (C$225.2 million) in Q2 last year and for the year to date were US$315.2 million (C$357.7 million) compared to US$315.3 million (C$389.8 million) for the same period last year.
Net premiums written decreased 2% to US$502.3 million (C$563.5 million) compared with US$512.4 million (C$636.9 million) for the second quarter of last year and were US$978.3 million (C$1.11 billion) for the first half compared to US$978.4 million (C$1.21 billion) for the first six months of 2005. Zephyr’s ceded premiums to reinsurers amounted to US$32.0 million (C$36.4 million) for the year to date under their reinsurance agreements. Excluding the impact of Zephyr’s ceded premiums, the Company’s reinsurance costs year to date were 2.7% (2.5% last year) of gross premiums written.
Net premiums earned decreased 3% to US$456.2 million (C$511.8 million) for the quarter, compared with US$469.3 million (C$583.8 million) for the second quarter last year. For the first half of 2006, net premiums earned were US$883.2 million (C$1.00 billion) compared with US$885.1 million (C$1.09 billion) in the same period last year. For the U.S. operations, net premiums earned decreased 3% to US$307.7 million (C$345.2 million) compared with US$316.8 million (C$394.0 million) in the second quarter of 2005. Net premiums earned from Canadian operations decreased by 3% to US$148.5 million (C$166.6 million) compared with US$152.5 million (C$189.8 million) last year. For the year to date, net premiums earned from U.S. operations were US$600.6 million (C$683.4 million) compared to US$607.6 million (C$750.7 million) last year, and for the Canadian operations were US$282.6 million (C$321.4 million) and US$277.5 million (C$343.1 million), respectively.