Kingsway Financial Services to exit Canadian cross-border trucking business

Kingsway Financial Services Inc. (TSX: KFS, NYSE: KFS) has announced it intends to exit the Canadian cross-border trucking business and further reduce its staff head count in the wake of a 2009 Q1 loss.The company reported a 2009 Q1 net loss of US$58.3 million, compared with a net loss of US$34.4 million in 2008 Q1.”The loss primarily reflects transition costs related to the company’s transformation program, in addition to a significant drop in trucking premiums on both sides of the border and a reduced return on investments,” Kingsway announced in a press release.The company said its first-quarter results “clearly indicate we need to move faster to exit unprofitable lines of business, reduce organization complexity and cost.” Kingsway president and CEO Colin Simpson said the company was planning to return to its roots and focus on core competencies of non-standard auto and commercial automobile. “[On May7] we announced our intent to exit the Canadian cross-border trucking business effective July 1 and made further staff reductions,” Simpson noted. “Including [May 7’s] announcement, we have already taken action that has reduced our run-rate head count by 445 since the beginning of this year.”Kingsway has also submitted its plans to put all but the strongest of Lincoln General Insurance Company’s programs into run-off to the Pennsylvania Insurance Department. “While losses incurred at Lincoln have taken their toll, Kingsway’s capital ratios exceed regulatory minimums for all subsidiaries except Lincoln,” Kingsway said in its release.Kingsway said it was confident its plans would “increase the overall target for savings delivered through this initiative to a run-rate of US$120 million by the end of 2010 from the previously announced US$80 million.” In Canada, gross premiums written were down 33% in U.S. dollars, however only 17% in Canadian dollars. “The decline was mainly attributable to the trucking line of business, which fell 47% due to planned premium reductions in this line of business where profits have been eroded due to aggressive pricing,” the company said.Excluding the effect of Lincoln, Canadian operations had a combined ratio of 119.3%.