February 9, 2009 / 2:26 PM / in 9 years

UPDATE 3-Kingsway warns of loss, aims to sell assets

* Sees 4th quarter loss of $5.88-$6.24 per share

* Says 750 additional job cuts over 18-24 months

* Stock plunges as much as 22 percent (Adds analyst quote, details, updates share price; in U.S. dollars unless noted)

By Jennifer Kwan

TORONTO, Feb 9 (Reuters) - Kingsway Financial Services Inc KFS.TO KFS.N said on Monday it expects to report a “material” loss and would seek to sell non-core assets to shore up its finances, sending shares of the property and casualty insurer tumbling.

Kingsway, which specializes in selling insurance to high-risk drivers, estimated that it would cut about 750 more jobs over the next 18 to 24 months as it overhauls its operations in Canada and the United States.

The company, which suffered a string of losses last year on poor underwriting income and the impact of the global financial crisis on its investment portfolio, warned that it expects to post a fourth-quarter loss of $324 million to $344 million, or $5.88 to $6.24 a share.

Analysts, on average, had expected a loss of 1 cent a share before items, according to Reuters Estimates.

The profit warning comes after shareholders have stepped up pressure on Kingsway to shake up management.

Last week, a major shareholder group, Joseph Stilwell and affiliates, urged the company to sell or run-off non-core businesses and focus on its core business of non-standard auto insurance.

Going forward, the company needs to get “leaner,” said Tom MacKinnon, an analyst at Scotia Capital.

“They’ve got a lot of businesses that are unprofitable and non-core so they need to shed those,” he said.

Shares of Kingsway dropped 19.4 percent to C$5.04 on Monday afternoon the Toronto Stock Exchange, after earlier plunging as much as 22 percent.

On Monday, Kingsway said the reasons for the weaker results included underwriting losses at its subsidiary Lincoln General Insurance Co, as well as impairments to goodwill, and losses on investments.

Kingsway will seek to reduce risk in its business portfolio by exiting non-core and unprofitable lines of business at its Lincoln and Southern United subsidiaries, subject to the necessary regulatory approvals, it said in a statement.

The company said it was looking at strategic alternatives and anticipates changes there will reduce written premiums by about $350 million in 2009.

Kingsway said it will consolidate operations in both the United States and Canada to streamline its management structure. It estimates the plan will account for annual savings of more than $80 million by the end of 2010.

In December, Kingsway said it will cut jobs and freeze salaries as part of its plan to save about $20 million in 2009.

Kingsway is expected to report results on Feb. 20. ($1=$1.22 Canadian)

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