Kingsway Financial Services Inc. reported net income of US$19.6 million in the first quarter of 2007 compared to US$28.9 million the previous year.

In the quarter, operating earnings amounted to US$11.9 million compared to US$30 million in the same quarter last year. Annualized return on equity was 8.5% for the quarter compared to 14.2% last year. Diluted earnings per share were to US$0.35 for the quarter compared to US$0.51 for the first quarter of 2006. The increase in estimates for unpaid claims for prior years at Lincoln General of US$47.5 million reduced net income and operating earnings by US$30.9 million and diluted earnings per share by
US$0.55 in the quarter.

“Although Kingsway’s income for this quarter exceeded that of the prior quarter, we are very disappointed with the results from our Lincoln General subsidiary. At Lincoln General we have significantly strengthened our estimates for unpaid claims in each of the last three quarters primarily related to its trucking and contractors business,” said Bill Star, president and CEO.

“We believe that the reserve increases and other steps we have taken at Lincoln have positioned the company to improve its results going forward,” he added. “Despite the disappointing results from Lincoln, the results from our other U.S. and Canadian subsidiaries were strong and we continue to experience increased levels of investment income and net realized gains. We anticipate that the recently completed acquisition of Mendota will be accretive to our earnings in the second quarter.”

During the quarter, gross premiums written declined 5% to US$479.4 million, compared with US$507.2 million in the same quarter last year. U.S. operations represented 76% of gross premiums written in the quarter, compared with 75% last year. Trucking, non-standard automobile and commercial automobile premiums represented 22%, 31% and 21%, respectively, of gross premiums written for the year compared with 28%, 28% and 19% last year.

Gross premiums written from U.S. operations decreased 4% to US$363.3 million compared with US$380.2 million in the first quarter of 2006. Gross premiums written from Canadian operations decreased 9% to US$116.1 million compared to US$127 million Q1 2006.

Net premiums written decreased 7% to US$444.1 million compared with US$476 million for the same quarter of last year. Net premiums earned declined 2% to US$418.2 million compared with US$427.0 million for the same quarter last year. For U.S. operations, net premiums earned in the first quarter increased 3% to US$300.5 million compared with US$292.9 million in the same quarter of 2006. Net premiums earned from Canadian operations decreased by 12% to US$117.7 million compared with US$134.1 million in the same quarter last year.