Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Shareholder Meeting (2002)
73 slides from Kingsway's shareholder meeting presentation, 2002
Slide 1: Kingsway Financial Services Inc.
Kingsway Financial Services Inc.
Slide 2: Bill Stam, President & CEO
IC | Bill Stam President & CE.O,
Slide 3: Forward Looking Statements
Forward Looking Statements Certain Certain information information included included in in this this presentation presentation and and statements statements made made by by the the Company Company are are not not historical historical facts facts but but are are forward-looking forward-looking state
Slide 4: A Time of Opportunity
A Time Of Opportunity
Slide 5: Kingsway Financial
Kingsway Financial u Listed on NYSE (as of u July 11, 2001) u Only Canadian P&C u Company on NYSE
Slide 6: Kingsway Financial Licensed in Canada and 48 U.S. States
Kingsway Financial 10 Subsidiaries in U.S. and Canada Kingsway Kingsway York York Fire Fire Jevco Jevco Avalon Avalon Risk Risk General General & & Casualty Casualty Management Management American American Universal Universal Southern Southern Hamilton/ Hamilton/ Lincoln Lincoln American American Se
Slide 7: Canadian Operations
Operations - <n a IE) Se : se ~ > $. > 2 . 7. = ~S . _ ae
Slide 8: Canadian Operations
Canadian Operations Kingsway General York Fire Jevco Steve Smith Eileen Lascelles Jacques Muir Executive Executive Vice Vice President President && C.O.O. C.O.O. Executive Executive Vice Vice President President && G.M. G.M. Vice Vice President President && G.M. G.M.
Slide 9: U.S. Operations
U.S. Operations
Slide 10: U.S. Operations
U.S. Operations American Service Universal Casualty John Clark Marshall Romanz President President
Slide 11: U.S. Operations
U.S. Operations Southern United Hamilton/U.S. Security Lincoln General Craig Lochner Roberto Espin Gary Orndorff President President President President Executive Executive Vice Vice President President && G.M. G.M.
Slide 12: U.S. Operations - Avalon Risk
U.S. Operations Avalon Risk Gary Bhojwani President
Slide 13: U.S. Operations - American Country
U.S. Operations American Country John Dore President
Slide 14: Strong Experienced Team, Outstanding Performance
Strong Experienced Team Outstanding Performance
Slide 15: Operating Highlights
Operating Highlights u Completed share offerings in July and December. u Issued 14,375,000 shares for gross proceeds of approximately $214.3 million u Record gross premiums written of $1.07 billion, an u increase of 66% through internal growth u Record net income of $44.9 million and diluted u earni
Slide 16: Operating Highlights – cont'd
Operating Highlights – cont’d u Achieved underwriting profit and again u outperformed industry by a wide margin u Return on equity of 13.3% u u Unearned premiums increased 58% to $424.1 u million
Slide 17: First Quarter Results 2002
First Quarter Results 2002 Gross Premiums Written 93% $416M Net Income 77% $16.3M Earnings Per Share 22% 33¢
Slide 18: Canadian Operations
Operations - <n a IE) Se : se ~ > $. > 2 . 7. = ~S . _ ae
Slide 19: Key Developments in Canada
Key Developments in Canada u Tightening marketplace u u Outstanding growth u u Rising prices u
Slide 20: Market Leadership: Non-standard Auto, Motorcycle & Trucking
Kingsway Financial Market Leadership Non-standard Auto, Motorcycle & Trucking Insurance
Slide 21: Kingsway's Markets
Kingsway’s Markets u Limited competition u u Market withdrawal u u Restrictive underwriting u practices u Overall price increases u
Slide 22: Kingsway – Canadian Operations: 2001 Gross Premiums Written
Kingsway – Canadian Operations 2001 Gross Premiums Written ($($ Millions) Millions) Standard Standard Automobile Automobile Other Other $33 $33 $20 $20 Non-standard Non-standard Auto Auto Motorcycle Motorcycle $120 $120 $42 $42 Commercial Commercial Auto Auto $19 $19 Trucking Trucking Property Prope
Slide 23: Canadian Operations Gross Premiums Written
Kingsway – Canadian Operations Gross Premiums Written ($ Millions) ($ Millions) $356 $289 $234 $211 $209 5 year CAGR of 20% 1997 1998 1999 2000 2001
Slide 24: Kingsway - Canadian Operations Summary
Kingsway - Canadian Operations Summary u Positive stage in pricing cycle u u Innovative product development u u Focus on underserviced areas u
Slide 25: Positive Outlook Going Forward
Kingsway – Canadian Operations Positive Outlook Going Forward
Slide 26: Jim Zuhlke
Jim Zuhlke President & C.E.O., Kingsway America
Slide 27: U.S. Operations
U.S. Operations Kingsway America Universal Universal American American Lincoln Lincoln Southern Southern Hamilton/ Hamilton/ American American Casualty Casualty Service Service General General United United U.S. U.S. Security Security Country Country
Slide 28: U.S. Operations
U.S. Operations u Exceeded forecast 2001 and Q1 2002 u u Constricted reinsurance & declining investment returns u = Dislocation of Programs u New opportunities for Kingsway u
Slide 29: U.S. Operations
U.S. Operations u Build the Kingsway franchise u u Improve our customer value u u Increase our operational u excellence
Slide 30: Build the Franchise
U.S. Operations Build the Franchise u Provide stability and consistency to agents u u Increase breadth and depth of distribution capability u u Support new products and services u
Slide 31: Customer Value
U.S. Operations Customer Value u Increase our product array u u Easy to use solutions for u producers u Meaningful incentives and u promotions
Slide 32: Operational Excellence
U.S. Operations Operational Excellence u Continue benchmarking improvements u u Maintain pricing discipline u u Emphasize rigorous claims handling u u Improve our management information systems u
Slide 33: Learning Environment
U.S. Operations Learning Environment u Increase critical skills and general u education u Add new underwriting capabilities u u Use technology to improve cost and u service
Slide 34: Cannot Control Marketplace, Can Control Our Own Behavior
Cannot Control Marketplace Can Control Our Own Behavior Within The Market
Slide 35: KiiS & POS System
U.S. Operations KiiS & POS System u Launched at U.S. Security in u January 2002 u Browser based, once and u done u Instant MVR background u checks u Policy delivery in 4 minutes u
Slide 36: A Time of Opportunity
A Time Of Opportunity
Slide 37: U.S. Operations 2001 Results
U.S. Operations 2001 Results u U.S. $458 million Gross Premiums Written u u 96.8% Combined Ratio u u Net Income 3.5 times greater than 2000 u
Slide 38: Lincoln General
U.S. Operations Lincoln General u MGA Programs projected to u produce U.S. $384 million in 2002 u Double digit rate increases in u trucking
Slide 39: Lincoln General – MGA Program
U.S. Operations Lincoln General – MGA Program u Audited regularly u u Limited authority of MGA’s u
Slide 40: The Hamilton Group/U.S. Security
U.S. Operations The Hamilton Group/U.S. Security u Pricing discipline u u Stringent claims control u u u Fraud deterrence u u New management team
Slide 41: American Service
U.S. Operations American Service u Receiving KiiS and POS on July 1 u of 2002
Slide 42: Universal Casualty
U.S. Operations Universal Casualty u KiiS and POS will be u deployed in October 2002
Slide 43: Southern United
U.S. Operations Southern United u Continuous battle to bring loss u ratios under control u Withdrawn from Louisiana u u New Vice President Underwriting u
Slide 44: Avalon
U.S. Operations Avalon u Increased market share to 20% u u Increased focus in truck sector u u Licensing Pet Insurance u
Slide 45: American Country
U.S. Operations American Country u Exciting addition u u Specialized underwriting skill u u Taxis and limousines u u U.S. $83 million in GPW in u 2001
Slide 46: Shaun Jackson, EVP & CFO
Shaun Jackson Executive Vice-President & C.F.O.
Slide 47: Financial Review
Financial Review
Slide 48: 2001 Record Results
2001 Record Results Gross Premiums Written $1.07 billion Net income $45 million Earnings per share $1.19 Shareholders’ Equity $537 million
Slide 49: Financial Review: Record Results - 2001
Financial Review Record Results - 2001 2000 2000 2001 2001 % % Chg Chg Net income $27.5M $44.9M 63% EPS (diluted) $0.80 $1.19 49% (diluted) $0.96 EPS Before Goodwill (diluted) $1.34 40% Return on equity 10.7% 13.3% Combined ratio 101.0% 99.1% Underwriting profit (loss) $(5.3)M $7.6M Gross Premiums W
Slide 50: Gross Premiums ($ Millions)
Gross Premiums ($ Millions) (Years (Years ended ended December December 31) 31) $$ 1,065 1,065 AG R $$ 643 643 C 50% $$ 409 409 $$ 509 509 $$ 211 211 $$ 141 141 $$ 60 60 1995 1996 1997 1998 1999 2000 2001
Slide 51: Geographic Area
Geographic Area Gross Premiums Written Canada United States 33% 67%
Slide 52: Gross Premiums by Geographical Area
Gross Premiums by Geographical Area (Year (Year ended ended December December 31, 31, 2001) 2001) Other Cda Alberta Other Cda Alberta lllinois lllinois 7% 2% 2% Quebec Quebec 7% 15% 15% 8% 8% Florida Florida 13% 13% Ontario Ontario 16% 16% Texas Texas 6% 6% South South Carolina Carolina 5% 5% Alabam
Slide 53: Gross Premiums Written by Business Line
Gross Premiums Written by Business Line (Year (Year ended ended December December 31, 31, 2001) 2001) Non-Standard Automobile 51% Commercial- Other Specialty 2% Commercial- P & L 5% Commercial- Automobile 5% Motorcycle - 4% Standard Automobile - 3% Trucking Personal- P & L - 3% 24% Warranty 2% Perso
Slide 54: Financial Review - Combined Ratio
Financial Review - Combined Ratio 2000 2001 Expense ratio 32.1% 28.5% General Expense ratio 12.4% 9.4% Loss ratio 68.9% 70.6% Combined ratio 101.0% 99.1%
Slide 55: Segmented Numbers: Canadian Operations
Segmented Numbers Canadian Operations ($ ($ Millions) Millions) 2000 2001 % change Gross premiums written $289M $356M 23% Net premiums earned $252M $322M 28% Combined ratio 101.1% 103.1% Loss ratio 70.1% 73.5%
Slide 56: Segmented Numbers: U.S. Operations
Segmented Numbers U.S. Operations (in Cdn $) ($ ($ Millions) Millions) 2000 2001 % change Gross premiums written $354M $709M 101% Net premiums earned $288M $551M 91% Combined ratio 100.9% 96.8% Loss ratio 67.5% 68.9%
Slide 57: Investment Portfolio
Financial Review Investment Portfolio ($ ($ Millions) Millions) $1,235 $788 $634 $693 $354 $188 $75 1995 1996 1997 1998 1999 2000 2001 Years Years ended ended December December 31 31
Slide 58: Investment Portfolio
Financial Review Investment Portfolio Accrued Interest & Money Market 16% Government Bonds 25% Cash 8% Premium Finance Receivables 8% Corporate Bonds 34% Equities 9%
Slide 59: Financial Position - since 31/12/00
Financial Position - since 31/12/00 Total assets 52% $1.8B Unearned premiums 58% $424M Shareholders’ Equity 97% $537M S & P Senior Debt upgraded to ‘BBB’ (stable)
Slide 60: Book Value Per Share
Financial Review Book Value Per Share $11.03 $8.01 $6.96 $7.12 $5.95 $3.26 $1.90 28% CAGR 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 Years Years ended ended December December 31 31
Slide 61: Strong Performance, Above Average Growth
Strong Performance Above Average Growth
Slide 62: First Quarter Results 2002
First Quarter Results 2002 2001 2001 2002 2002 % % Chg Chg Gross Premiums Written $216M $416M 93% Net Income $9.2M $16.3M 77% EPS (diluted) 27¢ 33¢ 22% Return on equity 13.1% 11.9% Combined ratio 99.7% 99.3% Underwriting profit $0.5M $2.2
Slide 63: First Quarter Results 2002
First Quarter Results 2002 GPW Combined Ratio Canada $92M 107.6% United States $324M 96.2% Consolidated $416M 99.3%
Slide 64: Bill Stam, President & CEO
IC | Bill Stam President & CEO,
Slide 65: A Time of Opportunity
A Time Of Opportunity
Slide 66: Kingsway Outperforms Industry
Kingsway Outperforms Industry Combined Ratio U.S. U.S. Industry Industry 117.0% 117.0% 110% 110.3% 110.3% Cdn. Cdn. Industry Industry 100% 99.1% 99.1% Kingsway Kingsway 90% 1995 1996 1997 1998 1999 2000 2001 Years Years ended ended December December 31 31
Slide 67: Our People: Key To Our Success
Key To O ur Success x (ie? , A! ee e ~ oe RD . ee S "3
Slide 68: Growth Opportunities
Growth Opportunities
Slide 69: Growth Opportunities: Current MGA Relationships
Growth Opportunities Current MGA Relationships MGA MGA Start Start Date Date Line Line of of Business Business National National Truck Truck 2001 2001 Trucking Trucking Transportation Transportation Coverage Coverage Specialists Specialists 2001 2001 Trucking Trucking Reliant Reliant April April 200
Slide 70: Criteria for Acquisitions
Growth Opportunities Criteria for Acquisitions u Core lines of business u u Strong management u u Culture of underwriting profitability u
Slide 71: Conclusion
Conclusion u Strong 2002 results u u Proven track record of underwriting profitability u u Poised to benefit from hardening market and U.S. growth u opportunities
Slide 72: A Time of Opportunity
A Time Of Opportunity
Slide 73: Kingsway Financial Services Inc.
Kingsway Financial Services Inc.
Kingsway Financial Services — Shareholder Meeting (2002) on 6ix