Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Investor Day (November 2005)
124 slides from Kingsway's investor day presentation, November 2005
Slide 1: Kingsway Financial Services Inc.
A Kingsway Financial Services Inc. From one decade to the next
Slide 2: Bill Star
Bill Star President & C.E.O.
Slide 3: Slide 3
Slide 4: Agenda
Agenda 8:30-9:00 Reception 9:00-10:00 Bill Star, President & CEO, Kingsway Financial ¾Introduction, Kingsway Strategy, Canadian and U.S. Operations John McGlynn, President & CEO, Kingsway General ¾Market Strategy, Claims Management, Outlook John Clark, President & CEO, Lincoln General ¾Disciplined g
Slide 5: Agenda
Agenda 10:45 - 11:20 Shaun Jackson, Executive Vice President & CFO, Kingsway Financial ¾Financial Review Bill Star, President & CEO, Kingsway Financial ¾Outlook for 2006 11:20 – 11:45 Q&A Session
Slide 6: Forward Looking Statements
Forward Looking Statements Certain information included in this presentation and statements made by the Company are not historical facts but are forward-looking statements relating to such matters as anticipated financial performance, business prospects, market conditions, legislative and regulatory
Slide 7: Corporate Overview
Corporate Overview +e —
Slide 8: Evolution
Evolution 1995 – Initial Public Offering 1996 – 1997 – Grow Canadian Platform 1998 – 1999 – U.S. Acquisitions/Formed Kingsway Re 1999 – 2001 – Soft Market Conditions 2001 – 2003 – Organic Growth 2004 – Stabilization 2005 – Selective Acquisitions
Slide 9: Operating Strategy
Operating Strategy Focus on good risks within specialty markets where limited competition allows for a good spread of risk and above-average returns Emphasize positive underwriting margins, conservative investment policies and low combined ratios to achieve above- average earnings Refuse to sa
Slide 10: Kingsway's Strategy
Kingsway’s Strategy Strategic Vision Be recognized as a North American leader in non- standard auto, trucking, taxi and motorcycle insurance markets and deliver consistent earnings growth and an ROE of 15% or more
Slide 11: Kingsway's Strategy
Kingsway’s Strategy Focus on Strengths Strong claims operations tailored to local markets Rigorous, industry leading MGA management capabilities Extensive network of independent agents focused on specialty markets Distinctive underwriting capabilities in target specialty markets
Slide 12: Kingsway's Strategy
Kingsway’s Strategy Groupwide Platform Shared corporate support functions and centralized procurement sourcing Shared competitive IT platform and organization Rigorous talent and performance management
Slide 13: North American Market Leader
North American Market Leader Kingsway is: The largest truck insurer in North America Seventh largest non-standard automobile insurer in North America The largest non-standard automobile insurer in Canada The largest motorcycle insurer in Canada The largest taxi insurer in Chicago and Las V
Slide 14: Head Office Leadership Team
Head Office Leadership Team Yrs in Yrs with Industry Company Bill Star, President & CEO 53 20 Shaun Jackson, Executive Vice President and CFO 20 10 Frank Amodeo, Vice President 30 5 Claude Smith, Vice President and CIO 25 5 Shelly Gobin, Vice President & Treasurer 15 8 Dennis Fielding, Vice Presiden
Slide 15: Head Office Leadership Team
Head Office Leadership Team Yrs in Yrs with Industry Company Andrew Wright, Assistant Vice President, Reinsurance 27 2 Denis Cloutier, Chief Actuary 23 5 Laura Foster, Assistant Vice President, Internal Audit 9 2 TOTAL 209 64 Significant Industry Experience
Slide 16: Canadian Operations
Canadian Operations
Slide 17: Market Leadership
Market Leadership #1 Non-Standard Auto Insurer #1 Motorcycle Insurer #2 Trucking Insurer
Slide 18: Senior Executives
Senior Executives Yrs in Yrs with Industry Company John McGlynn 23 3 Serge Lavoie 21 8 Colin Simpson 10 2 TOTAL 54 13
Slide 19: Canadian Operations - Gross Premiums Written
Canadian Operations - Gross Premiums Written Other Trucking 9% 18% Standard Auto 21% Commercial Auto 6% Property and Liability Non-Standard 13% Auto 22% Motorcycle 11% 9 month period ended September 30, 2005
Slide 20: Canadian Operations - Gross Premiums Written
Canadian Operations - Gross Premiums Written ($ Millions) $761 $655 $582* $491 $356 $289 $585 * 5 year CAGR of 27% 2000 2001 2002 2003 2004 2005 Years ended December 31 * 9 month period ended Sept. 30
Slide 21: Combined Ratio - Canadian Operations
Combined Ratio - Canadian Operations 110% Cdn Industry 100% 97.2% ** Cdn Operations 91.3%* 90% 1998 1999 2000 2001 2002 2003 2004 2005 Years ended December 31 * Source: 1999-2004 IAO, The Quarterly Report, 2nd Quarter, 2005 ** 9 months ended September 30, 2005
Slide 22: Market Conditions Recent Developments
Market Conditions Recent Developments
Slide 23: Facility Association
Facility Association - Ontario and Alberta 10 months to August 2004 10 months to August 2005 GPE ($M) C/R GPE ($M) C/R Ontario $690 124.7% $450 48.6% Alberta $206 93.5% $361 113.8%
Slide 24: Continued Stabilization Going Forward
Continued Stabilization Going Forward
Slide 25: U.S. Operations
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Slide 26: Market Leadership
Market Leadership #1 Taxi in Chicago & Las Vegas #2 Trucking Insurer in U.S.
Slide 27: Regional Presidents
Regional Presidents Yrs in Yrs with CHICAGO Industry Company Marshall Romanz 46 26 John Clark 34 6 Tom Ossmann 15 15 Scott Wollney 14 7 Roger Beck 20 4
Slide 28: Regional Presidents
Regional Presidents Yrs in Yrs with Industry Company Roberto Espin, Jr. 31 22 Richard Murray 25 17 Richard Toyama 34 3 Total U.S. 219 100
Slide 29: U.S. Operations - Gross Premiums Written
U.S. Operations - Gross Premiums Written $1,414 $1,418 (U.S.$ in millions) $1,044 $980* $1,088* $458 $238 5 year CAGR of 56% 2000 2001 2002 2003 2004 2005 Years ended December 31 * 9 months period ended September 30
Slide 30: U.S. Operations - Gross Premiums Written
U.S. Operations - Gross Premiums Written Trucking 36% Property and Liability 12% Non-Standard Auto 33% Commercial Auto 16% Other 3% 9 month period ended Sept 30, 2005
Slide 31: Top Trucking Insurers in N.A. (US$)
Top Trucking Insurers in N.A. (US$) Kingsway $653M Great West Casualty/Old Republic $567M Empire $348M Canal $339M Sentry $306M Northland $306M Continental $289M Markel (Cda) $197M * Source: A.M. Best DWP 2004
Slide 32: Top Non-Standard Auto Writers in N.A. (US$)
Top Non-Standard Auto Writers in N.A. (US$) Progressive Group $7,432M Allstate/Pembridge $3,651M State Farm $2,151M GEICO $1,759M Mid Century (Farmers) $1,617M Infinity $883M Kingsway $745M * Source: A.M. Best DWP 2004
Slide 33: Slide 33
Slide 34: John McGlynn
John McGlynn President & C.E.O
Slide 35: Market Leadership
Market Leadership #1 Non-Standard Auto Insurer #1 Motorcycle Insurer #2 Trucking Insurer
Slide 36: Kingsway's Competitive Market Strategy
Kingsway’s Competitive Market Strategy: 1 Disciplined Pricing 2 Conservative Reserving 3 Proactive Business Development
Slide 37: Experienced Leadership Team
Experienced Leadership Team Yrs in Industry John McGlynn, President & CEO 23 Ralph Golberg, Vice President, Surety 30 Linda Paccanaro, Vice President, Claims 30 Lili Pacevicius, Vice President, Commercial Lines 26 LindaMallozzi, Tom Paccanaro, ViceVice President, President, ClaimsLines Personal 25 3
Slide 38: Kingsway General - Gross Premiums Written
Kingsway General - Gross Premiums Written 2004 2005 Motorcycle 8% Motorcycle 11% Commercial Auto Commercial Auto 8% Long-Haul Trucking 8% Long-Haul Trucking 27% 28% Property/Casualty Property/Casualty Personal Auto Personal Auto 15% 13% 38% 34% Other 4% Other 6% 9 month period ended September 30
Slide 39: Kingsway General - Gross Premiums Written
Kingsway General - Gross Premiums Written 2004 2005 Alberta Alberta Ontario Ontario 16% 9% 56% 63% Quebec Quebec 16% 17% Other Other 12% 11%
Slide 40: Average Premium Per Exposure
Average Premium Per Exposure 36% 76% 30%
Slide 41: Kingsway General – Expense Ratio
Kingsway General – Expense Ratio * Source: IAO Actuarial Consulting Services Inc., The Quarterly Report and IBC, February, 2005
Slide 42: Claims Management Priorities
Claims Management Priorities Conservative Reserving Loss Cost Containment Active Settlement Process
Slide 43: Kingsway General – Pending Claims
Kingsway General – Pending Claims
Slide 44: Kingsway General - Average Paid vs. Average Case Reserves
Kingsway General - Average Paid vs. Average Case Reserves
Slide 45: Kingsway General - Average Time to Close (in days)
Kingsway General - Average Time to Close (in days)
Slide 46: Kingsway General - Loss Reserves
Kingsway General - Loss Reserves IBNR IBNR: Total ($ Millions) Reserves (%) December 31, 2001 $51 29% December 31, 2002 $76 31% December 31, 2003 $134 32% December 31, 2004 $193 34% September 30, 2005 $221 33%
Slide 47: Kingsway General – Reserves
Kingsway General – Reserves ($millions) 2001 & prior 2002 2003 2004 2005 Reserves - 2001 and Prior $177 $122 $120 $90 $76 Total Reserves $177 $247 $421 $568 $668 % relating to 2001 and prior 100% 49% 28% 16% 11% # Pending Claims - N/A N/A 2,437 1,276 707 2001 and prior 18% 10% 6%
Slide 48: Kingsway General – Market/Product Outlook
Kingsway General – Market/Product Outlook Trucking Opportunities to grow in owner operator segment Price pressure to continue in fleet segment Commercial Auto Continued tightness in non-standard segment Pricing to remain stable P&C Shrinkage of non-standard segment Price pressures
Slide 49: Kingsway General – Market/Product Outlook
Kingsway General – Market/Product Outlook Personal Auto Continued supply tightness in non-standard segment Continued government activism Motorcycle Opportunities for growth in mature rider segment Prices to remain stable
Slide 50: Kingsway General - Focus Going Forward
Kingsway General - Focus Going Forward: 1 Quality Underwriting 2 Pricing Discipline 3 Active Fraud Detection 4 Timely Assessment of Loss Costs 5 Respond to Changing Market Conditions 6 Fair Accurate Courteous Timely
Slide 51: Slide 51
Slide 52: John Clark
John Clark President & C.E.O.
Slide 53: Lincoln General products
Commercial Auto Personal Auto Homeowner Motorcycles Pets Health Ins. Surety Bonds Transportation Specialist www.lincolngeneral.com Since 1977 www.lincolngeneral.com www.lincolngeneral.com
Slide 54: Gross Written Premium – Total All Programs
Gross Written Premium – Total All Programs 428% Written Premium $994 $1,025 $1,000 growth between 2001 and $895 2005! $690 $170 $33 $44 1999 2000 2001 2002 2003 2004 2005* 2006* * Projected full year
Slide 55: Gross Written Premium - Mix of Business
Gross Written Premium - Mix of Business U.S. Millions 2005* 10% 2006* 18% * Projected full year
Slide 56: Average Liability Price Per Power Unit
Average Liability Price Per Power Unit 17% 22% 29% 39%
Slide 57: Combined Ratios – Total All Programs
Combined Ratios – Total All Programs Disciplined: 98.3% 97.5% • Pricing 96.3% • Underwriting • Claims Active Programs = Maximized Results 93.2% 2003 2004 2005* 2005* * 9 month period ended September 30, 2005
Slide 58: Gross Premiums Written (U.S.$)
Gross Premiums Written* (U.S.$) Trucking & Direct Total: $566M Commercial Auto Assumed Total: $110M GPW Total: $676M 75% Personal Auto 21% Surety Other 3% 2% * 9 month period ended September 30, 2005
Slide 59: Top Written Premium States
Top 10 Written Premium States* FL – 6% NJ – 5% Top 10 States: $408M Total (All) States: $576M PA – 4% IL – 4% TX – 4% CA – 28% NY – 3% AL – 2% AZ – 2% * % based on Total (All) States GA – 2% * 9 month period ended September 30, 2005
Slide 60: Market/Competitors
Market/Competitors Cincoln General Insurance Company
Slide 61: Top Trucking Insurers – Commercial Auto Premium
Top Trucking Insurers – Commercial Auto Premium (US$) Great West Casualty $533M 1.78% Lincoln General $496M 1.66% Empire $348M 1.16% Canal $339M 1.13% Gross Premium Written & Sentry $306M 1.02% Market Share Northland $306 1.02% Continental $289M 0.96% •Source: A.M. Best DWP 2004 •Premiums represent
Slide 62: Top (5) Non Standard Auto Writers in U.S.
Top (5) Non Standard Auto Writers in U.S. Rank Company Gross Premium ($M) Market Share 1 Progressive (Group) $7,432 4.6% 2 Allstate Indemnity $3,563 1.9% 3 State Farm Fire & Cas. $2,151 1.1% 4 GEICO Indem $1,759 1.1% 5 MidCentury (Farmers) $1,617 1.0% Infinity $883 0.45% Bristol West $745 0.4% Kings
Slide 63: Operations
Kingsway Financial Services Inc. Ip - > Ronayne sietne wl mere er] Operations Cincoln General Insurance Company From one decade to the next
Slide 64: Program Overview
Program Overview 57 Active MGA programs 18 Terminated MGA programs 27 Corporate entities as program partner No reinsurance authority No pricing authority 6 have limited claims authority
Slide 65: Audit Activity
Audit Activity* Disciplined: • Pricing • Underwriting • Claims = Audit Process * number of audits performed
Slide 66: Commercial Auto Closing Ratio
Commercial Auto Closing Ratio 113.6% Disciplined Claim 100.1% 95.6% Handling: 87.6% 86.6% 77.8% • Significant increases in staff • Increased frequency of claim audits • Higher percentage of claims handled internally 2000 2001 2002 2003 2004 YTD 9/30/05 Years ended December 31 * Does not include clai
Slide 67: Number of Claim Department Employees
Number of Claim Department Employees - 2001 thru Sept 2005 A Commitment to Claim Handling Discipline
Slide 68: Claim Staff by Location
Claim Staff by Location* Year Office Opened York York: 1990 Chicago: 2003 72% Tampa: 2004 Phoenix: 2005 Phoenix 6% Tampa 3% Chicago 19% * as of September 2005
Slide 69: Claims Discipline – More Claims Handled In-House
Claims Discipline – More Claims Handled In-House In-House TPA Commercial Lines December 31, 2002 56% 44% December 31, 2003 76% 24% December 31, 2004 80% 20% September 30, 2005 84% 16%
Slide 70: Claims Discipline – More Claims Handled In-House
Claims Discipline – More Claims Handled In-House In-House TPA Personal Lines December 31, 2002 0% 100% December 31, 2003 0% 100% December 31, 2004 9% 91% September 30, 2005 34% 66%
Slide 71: Moving the Business Forward
Moving the Business Forward Cincoln General Insurance Company
Slide 72: Experienced Leadership Team
Experienced Leadership Team Yrs in Industry John Clark, President & CEO 34 Gary Orndorff, Executive Vice President, CFO & Secretary 19 Tim Kirk, Vice President, Claims 24 Shannon Smith, Vice President, Marketing 22 Scott Butler, Vice President, Personal Underwriting 18 Will Brauer, Vice President, C
Slide 73: Experienced Leadership Team
Experienced Leadership Team Yrs in Industry Jim Stephens, Vice President, Pricing, Research 30 Barbara Lukawski, Vice President, Human Resources 13 Jay Edenfield, Vice President, Surety 25 TOTAL 202
Slide 74: 2006 Strategy
2006 Strategy Keep profitable programs Maintain pricing discipline Diligent claims control Eliminate non-performing programs
Slide 75: 2006 Strategy - continued
2006 Strategy - continued Identify new programs, business partners, and products that build on our core competencies and accentuate our profitability Increase our focus on market trends and competitive analysis Maintain audit controls to reinforce underwriting and claim discipline
Slide 76: Slide 76
Slide 77: Shaun Jackson
Shaun Jackson Executive Vice President & C.F.O.
Slide 78: Financial Review
Financial Review Report Card For Our First Decade
Slide 79: Growth in Gross Premiums Written
Growth in Gross Premiums Written (C$ Millions) $2,610 $2,637 AGR % C $2,125 4 4 $1,783* $1,065 $2,031* $643 $409 $509 $141 $211 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Years ended December 31 * as at September 30
Slide 80: Growth in Net Income
Growth in Net Income $131.0 (C$ Millions) $121.0* AGR C 36% $79.5 $85.3 $94.7* $44.9 $31.0 $27.5 $22.2 $11.2 $13.6 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Years ended December 31 * as at September 30
Slide 81: Book Value Per Share
Financial Review Book Value Per Share (C$) $15.87* $14.25 AGR $12.56 $12.63 C $11.03 25% $8.01 $6.96 $7.12 $5.95 $3.26 $1.90 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Years ended December 31 * as at September 30
Slide 82: Diluted Earnings Per Share
Financial Review Diluted Earnings Per Share (C$) $2.32 $2.13* GR $1.61 $1.62 CA 26 % $1.19 $0.86 $0.80 $1.68* $0.73 $0.49 $0.38 $0.30 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Years ended December 31 * as at September 30
Slide 83: Recent Financial Results
Recent Financial Results
Slide 84: Nine Months 2005 (C$)
Nine Months 2005 (C$) 2004 2005 Gross Premiums Written $2,031M 12% $1,783M Net Premiums Earned $1,763M 7% $1,648M Underwriting Profit $41.5M 17% $48.7M Income before income taxes $109.9M 32% $144.8M Net Income $94.7M 28% $121.0M Earnings Per Share $1.68 27% $2.13 Return on Equity 16.8% 2.2% 19.0% Bo
Slide 85: Nine Months Results 2005 – U.S. $
Nine Months Results 2005 – U.S. $ 2004 2005 5% Gross Premiums Written $1,528M $1,455M Net Premiums Earned $1,327M 1% $1,347M Net Income $71.2M 39% $99.1M Earnings Per Share (diluted) $1.26 38% $1.74 Underwriting Profit $31.3M 27% $39.7M Book Value Per Share $11.19 22% $13.65
Slide 86: Combined Ratio
Combined Ratio Nine Months 2004 2005 Commission ratio 18.8% 20.7% General Expense ratio 8.4% 8.2% Loss ratio 70.4% 68.1% Combined ratio 97.6% 97.0%
Slide 87: Geographic Area – Gross Premiums Written
Geographic Area – Gross Premiums Written 2004 2005 Canada Canada 29% 33% United States United States 71% 67% Year ended December 31 9 month period ended September 30
Slide 88: Segmented Numbers: Canadian Operations
Segmented Numbers Canadian Operations – Nine Months (Cdn $ Millions) 2004 2005 % change Gross premiums written $584.9M $582.3M - Net premiums earned $491.6M $539.7M 10% Combined ratio 95.5% 97.2% (1.7%) Loss ratio 70.4% 70.1% (0.3%)
Slide 89: Segmented Numbers: U.S. Operations
Segmented Numbers U.S. Operations – Nine Months 2005 (U.S.$ Millions) 2004 2005 % change Gross premiums written $1,088M $980M (10%) Net premiums earned $957M $905M (5%) Combined ratio 98.5% 97.0% (1.5%) Loss ratio 70.5% 67.2% (3.3%)
Slide 90: Diversified by Product Line
Diversified by Product Line (Gross Premiums Written) Commercial Auto 13% Property & Liability 12% Trucking Motorcycle 30% 4% Other 5% Personal Auto 36% 9 month period ended September 30, 2005
Slide 91: Diversified by Geographical Area
Diversified by Geographical Area (Gross Premiums Written) Illinois 12% Florida 10% Alberta 5% Texas 6% Alabama 2% Quebec 5% New Jersey 3% Pennsylvania 2% Ontario 20% California 14% Other 21% 9 month period ended September 30, 2005
Slide 92: Loss Reserving
Loss Reserving
Slide 93: Significant Reserve Strength
Significant Reserve Strength IBNR: Total Reserves Consolidated Canada U.S. September 30, 2005 37% 35% 39% December 31, 2004 40% 36% 42% December 31, 2003 45% 33% 50%
Slide 94: Significant Reserve Strength
Significant Reserve Strength 2004 2005 Q3 Q4 Q1 Q2 Q3 Gross Premiums Written $619M $579M $644M $595M $544M 12% Net Premiums Earned * $656M $610M $560M $584M $555M 15% Loss Reserves $1,985M $2,030M $2,071M $2,121M $2,103M 6% * Excluding external Q/S reinsurance
Slide 95: Reserve Risk
Reserve Risk Insurance subsidiary company management and actuaries establish reserves quarterly Kingsway staff, independent consultant (Tillinghast) and KPMG, review the reserves on a quarterly basis Annual external independent actuarial certification of all insurance subsidiaries by Tillingha
Slide 96: Investment Portfolio
Investment Portfolio
Slide 97: Investment Portfolio
Investment Portfolio At September 30, 2005 Accrued Interest & Term Deposits 15% Cash 2% Government Bonds 16% Premium Finance Receivables 3% Equities 12% Corporate Bonds 52%
Slide 98: Credit Quality of Investment Portfolio
Credit Quality of Investment Portfolio % of fixed income portfolio Sept 30, 2005 Dec 31, 2004 Dec 31, 2003 AAA 52.8 55.1 60.5 AA 21.2 17.9 17.6 A 21.4 24.2 17.2 % rated A or better 95.4 97.2 95.3
Slide 99: Financial Review – Investment Portfolio (C$)
Financial Review – Investment Portfolio (C$) Investment Portfolio* Investment Portfolio Cash Flow Generated At Fair Value Per Share From Operations (in $ millions) (in $’s) (in $ millions) 1997 $349 $9.74 $48 1998 $625 $17.40 $63 1999 $662 $19.46 $34 2000 $780 $22.91 $93 2001 $1,235 $25.38 $207 2002
Slide 100: Underwriting Float
Underwriting Float (at December 31) Canadian U.S. Total $ Billions Operations Operations 2005* $1.0 $1.5 $2.5 2004 $0.8 $1.6 $2.4 2003 $0.7 $1.4 $2.1 2002 $0.4 $1.2 $1.6 2001 $0.3 $0.5 $0.8 2000 $0.3 $0.3 $0.6 The float is calculated by subtracting amounts due from reinsurers and other insurers and
Slide 101: Investment Portfolio Maturity Profile
Investment Portfolio Maturity Profile of Fixed Income Portfolio 31/12/04 30/9/05 0 – 1 year 22% 29% 1 – 5 years 58% 53% 80% 82% Over 5 years 20% 18% 100% 100%
Slide 102: Contribution of Realized Gains to Investment Income
Contribution of Realized Gains to Investment Income Realized % of % of Reported Gains ($M) Portfolio Investment Income 1999 1.0 0.1% 2% 2000 10.4 1.4% 19% 2001 12.1 1.2% 19% 2002 16.3 1.0% 20% 2003 55.0 2.3% 41% 2004 26.7 0.9% 22% 2005 * 36.3 1.5% 23% * As at September 30 (realized gains annualized
Slide 103: Invested Assets Drive Earnings
Invested Assets Drive Earnings (C$ Millions) 4000 180 3500 160 140 3000 120 2500 100 Invested Assets 2000 80 Total Investment Income 1500 60 1000 40 500 20 0 0 1998 1999 2000 2001 2002 2003 2004 2005* Years ended December 31 * as at September 30 (income annualized)
Slide 104: Key Value Measures
Key Value Measures Share price to book Investment portfolio value per share* to share price** KFS 1.20 3.18 Markel 1.78 2.07 Infinity 1.33 1.89 WR Berkeley 2.31 1.74 Northbridge 1.66 1.55 Direct General 1.59 1.18 ING 2.36 1.16 Philadelphia Consolidated 2.88 0.82 Bristol West 1.74 0.80 Progressive 4.
Slide 105: Investment Yield Summary
Investment Yield Summary Ytd 2005 2004 2003 2002 Annualized investment yield 3.4% 3.3% 3.3% 3.9% Annualized realized yield 4.9% 4.2% 5.6% 4.9% Annualized total return yield 3.8% 5.0% 6.4% 6.1%
Slide 106: Corporate Governance
Corporate Governance
Slide 107: Corporate Governance
Corporate Governance The Globe and Mail Report on Business Corporate Governance Rankings Rankings based on board composition, compensation, shareholder rights and disclosure Kingsway ranked 42nd out of 209 companies listed on the S&P/TSX Perfect score on disclosure criteria 2005 was the high
Slide 108: G&M 2005 Corporate Governance Rankings
G&M 2005 Corporate Governance Rankings RANKING SCORES 2 BMO/BNS 96 8 RBC/Manulife/TD 94 15 Industrial Alliance 92 26 CIBC 90 30 Sunlife 89 36 National Bank 87 42 Kingsway 85 61 Laurentian Bank 82 169 Fairfax 58 170 GWL 57 189 Northbridge 51
Slide 109: Financial Strength
Financial Strength
Slide 110: Financial Strength
Financial Strength Rolling Four Quarters Years ended December 31 2001 2002 2003 2004 2005* 2005** NPW to Stat. Surplus 2.2x 3.1x 2.9x 2.2x 2.1x 2.0x Interest Coverage 7.1x 7.6x 5.2x 6.7x 7.3x 6.6x Senior Debt to Cap 21% 28% 22% 25% 24% 24% * Rolling 12 months as at September 30, 2005 ** annualized Q
Slide 111: Capital Surplus in Excess of Minimum Regulatory Requirement
Capital Surplus in Excess of Minimum Regulatory Requirement- As at June 30, 2005 ($ millions) Statutory Capital Minimum Capital Surplus Over Minimum Required* Canadian Subs 223 164 $59 U.S. Subs 344 183 $161 Captive Reinsurers 500 145 $355 Kingsway Total $575 * OSFI and FSCO require Canadian subsidi
Slide 112: Slide 112
Slide 113: Bill Star
Kingsway Financial Services Inc. From one decade to the next
Slide 114: Zephyr Acquisition
Zephyr Acquisition Zephyr is the leading provider of residential hurricane insurance coverage in Hawaii Acquisition is consistent with our niche business strategy Acquisition provides geographic and product diversification Immediately accretive to earnings
Slide 115: Building Shareholder Value
Building Shareholder Value Return on Equity Combined Ratio Increase/(decrease) in NPE 1995 19.8% 96.6% 9% 1996 21.4% 95.6% 134% 1997 16.5% 95.8% 62% 1998 13.4% 93.9% 80% 1999 5.5% 102.6% 42% 2000 10.7% 101.0% 21% 2001 13.3% 99.1% 62% 2002 13.8% 99.8% 99% 2003 12.9% 101.4% 37% 2004 17.4% 97.8% (3%) 2
Slide 116: Kingsway's Strategy
Kingsway’s Strategy 8 Strategic Vision Be recognized as a North American leader in non-standard auto, trucking, taxi, and motorcycle insurance markets and deliver consistent earnings growth and an ROE of 15% or more. 4 5 6 7 Strong claims Rigorous, Extensive Distinctive operations industry network o
Slide 117: Financial Review: Share Price
Financial Review $20.44 Share Price $20.00 $19.00 $14.60 $13.50 $13.69 $12.00 $8.25 $7.25 $7.90 $2.50 23% CAGR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005* Years ended December 31 * At Nov. 3, 2005 Adjusted for prior years stock splits
Slide 118: Share Performance - Relative to Market
Share Performance - Relative to Market 900.0000 800.0000 700.0000 600.0000 500.0000 KFS S&P/TSX Com pos ite 400.0000 S&P/TSX Com pos ite Index 300.0000 200.0000 100.0000 - 29 29 29 29 29 29 29 29 29 29 2/ 2/ 2/ 2/ 2/ 2/ 2/ 2/ 2/ 2/ /1 /1 /1 /1 /1 /1 /1 /1 /1 /1 95 96 97 98 99 00 01 02 03 04 19 19 19
Slide 119: Stabilization
Building infrastructure Moving on opportunities Correcting mistakes Maintaining discipline Developing key people Stabilization
Slide 120: Outlook
Outlook Future Plans Canada – Ontario/Alberta U.S. – Non-Standard Auto/Trucking Continued stable growth Recognize changes in market conditions Prepared for change
Slide 121: History of Acquisitions During Soft Market
History of Acquisitions During Soft Market * Universal Casualty Southern United American Service American Country Lincoln General Avalon York Fire Hamilton Jevco Group * Gross Premiums Written C$ Millions
Slide 122: Prepared For Change
Prepared For Change Philosophy of: Not sacrificing profitability for top-line growth Making selective acquisitions during soft market
Slide 123: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. | r~ KINGSWAY FINANCIAL SERVICES INC. New Corporate Headquarters, Mississauga, Ontario Archxes Design Inc., Architects From one decade to the next
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Kingsway Financial Services — Investor Day (November 2005) on 6ix