TORONTO, Aug 7 (Reuters) - Kingsway Financial Services (KFS.TO) said profit fell in the second quarter, as premiums written declined and its underwriting loss climbed.
Kingsway, which sells nonstandard auto and truck policies, said it earned $6.3 million, or 11 cents a diluted share, in the three-month period ended June 30.
That compared with a profit of $41.7 million, or 74 cents a share, in the same 2007 period.
Results were below analysts’ expectations for profit of 30 cents a share before items, and 35 cents a share on a GAAP basis, according to Reuters Estimates.
Profits “are not yet at an acceptable level,” but the quarter marked a step in the right direction, Chief Executive Shaun Jackson said on a conference call.
The company lost $34.4 million in the first quarter.
U.S. underwriting results were “disappointing,” but were almost entirely attributable to lower written premiums at its subsidiary Lincoln General, Jackson said.
The company has struggled in recent quarters due to reserve issues at Lincoln General, but it has made executive changes at that unit, Jackson noted.
Its U.S. underwriting results should improve, the company is raising rates in Canada, and an “ongoing positive return” from its investment portfolio should lead to better overall profitability in future, Jackson said.
Shares of Kingsway were up 19 Canadian cents, or 2.7 percent, to C$7.24 in early Toronto Stock Exchange trading. The stock is down about 40 percent year-to-date.
In the latest quarter, its underwriting loss was $29.3 million, versus a loss of $3.7 million a year earlier.
The combined ratio rose to 107.0 percent, from 100.8 percent in the same 2007 period. The ratio indicates how much was spent on claims and expenses for each dollar of premium received. A number over 100 indicates that underwriting was unprofitable.
On the investment side, income excluding net realized gains was $33.6 million, little changed from $33.8 million a year ago.
“The company’s securities portfolio continued to provide steady income despite challenging economic trends and volatile financial markets in the U.S. and Canada,” Kingsway said in a statement. (Reporting by Lynne Olver; editing by Janet Guttsman)