The Canadian Press

Kingsway Financial Services Inc. said Thursday it has asked a Pennsylvania court to declare its donation of shares of the holding company of Lincoln General Insurance Co. was lawful.

The company is seeking a ruling from the Commonwealth Court of Pennsylvania that it did not require prior approval of the Pennsylvania Insurance Department to make the donation.

Kingsway shares were hammered earlier this week after the company said authorities in Pennsylvania will seek to unwind the donation.

The troubled insurance company donated all of its holdings in Walshire General Assurance Co. — sole shareholder of Lincoln General Insurance — to a number of charities last month.

Kingsway, which has endured several quarters of poor financial results as well as a revolt by dissident shareholders, has said the donation will help it meet regulatory and contractual obligations, including servicing a US$10-million surplus note facility agreement.

Kingsway, headquartered in Mississauga, Ont., deals principally in non-standard insurance for individual and businesses in Canada and the United States.