* Unloads money-losing Lincoln General unit to charity
* To pay US$10 mln in return for debt pay-off
* Does not see any further material impact
TORONTO, Oct 19 (Reuters) - Canadian property and casualty insurer Kingsway Financial Services KFS.TO finally off-loaded U.S. unit Lincoln General, giving the money-losing business to charity and agreeing to pay off US$10 million in debt.
After a long attempt to sell Lincoln General, and spurred by an activist shareholder group that forced management changes at Kingsway earlier this year, Kingsway said on Monday it had disposed of its entire interest in the group by donating stock of its controlling company to charity.
“Kingsway is of the view that disposing of Lincoln General at this time will provide all stakeholders, including policyholders, shareholders and creditors with improved long-term value and is consistent with Kingsway’s prior determination that it will not continue to voluntarily fund Lincoln General’s reserve shortfalls,” the company said in a statement.
Kingsway, which sells high-risk auto and truck insurance, has been struggling to right itself for months, divesting non-core businesses and shuffling management as it fights it way through the global financial crisis.
To eject Lincoln General from the company, Kingsway disposed of its entire interest in its wholly owned unit Walshire General Assurance Company, which is the sole shareholder of Lincoln General, donating all of the Walshire stock to charity.
Lincoln is being run by a run-off management team, which was seeking buyers for claims connected to old policies. In its announcement on Monday, Kingsway said it would continue some support of that run-off team and for Lincoln’s obligations, which were not considered material.
In August, after reporting its fourth straight quarterly loss, Kingsway said it expected to return to profitability in 2010 -- but part of that strategy has been to rid itself of Lincoln and other unprofitable businesses.
Kingsway said it would continue to meet is regulatory and contractual obligations with respect to Lincoln General, including the payment to Lincoln for a US$10 million surplus note facility agreement and compliance with a run-off management agreement.
“Other than the surplus note facility, quantification of the remaining Lincoln General obligations on Kingsway has not been completed but does not appear to be material to Kingsway at this time,” Kingsway said.
Kingsway’s results have been hampered for several quarters by underwriting losses at Lincoln General, and it announced plans to put all but the strongest of Lincoln’s programs into run-off to the Pennsylvania Insurance Department. (Reporting by Andrea Hopkins; editing by Janet Guttsman)