\n\tHigh-risk auto insurer Kingsway Financial Service Inc. (TSX:KFS) announced a settlement Monday in its dispute with Pennsylvania regulators over its divestiture of two financially troubled insurers.<\/p>\n

\tThe settlement, which follows extended litigation and almost a year of negotiations, involves Kingsway’s divestiture of its 100 interest in Walshire General Assurance Co. \u2014 sole shareholder of high-risk U.S. insurer Lincoln General Insurance Co. \u2014 to a number of charities.<\/p>\n

\tThe move was challenged as a “sham transaction” by the Pennsylvania Department of Insurance, which filed a court complaint aimed at forcing the company to unwind the donations.<\/p>\n

\tThe department argued that, if allowed to stand, the divestiture would “undermine the web of laws that protect insurance companies against abandonment by their parent holding companies.”<\/p>\n

\tA lower court ruled in Kingsway’s favour in April 2010, but the department appealed to the Pennsylvania Supreme Court.<\/p>\n

\tUnder the settlement, the two parties dismiss all claims against each other, but Kingsway takes a renewed minority ownership in the companies under LGIC Holdings LLC.<\/p>\n

\tLGIC Holdings is a joint endeavour between Kingsway, with a 49% interest, and U.K.-based Tawa plc, with 51%.<\/p>\n

\tDay-to-day management of Walshire and Lincoln General will be performed by the Tawa group subject to the oversight of the companies’ boards of directors, Kingsway said.<\/p>\n

\tAs a minority and non-controlling investor, Kingsway will not consolidate Walshire or Lincoln General but will account for its investment using the equity accounting method, the company said.<\/p>\n

\tKingsway also obtained releases from Walshire, Lincoln General and the 20 charities.<\/p>\n

\tKingsway Financial’s primary businesses is providing auto insurance to drivers who do not meet the criteria for coverage by standard automobile insurers.<\/p>\n

\tThe company’s stock was down six cents, or 7.69%, at 72 cents Monday on the Toronto Stock Exchange.<\/p>\n","protected":false},"excerpt":{"rendered":"

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