UPDATE 2-Kingsway Financial loss widens, shares drop
* First-quarter loss $1.06/shr vs loss $0.62/shr
* Gross premiums written falls 40 pct
* New management repurchases debt, speeds up cost-cutting
* Shares down 5.1 percent (Adds company, analyst comment, details; in U.S. dollars unless noted)
TORONTO, May 8 (Reuters) - Kingsway Financial Services (KFS.TO) said on Friday its first-quarter loss nearly doubled from a year earlier, but touted a new leadership team intent on cutting costs and divesting non-core business.
Kingsway, which sells high-risk auto and truck insurance, said transition costs, a huge drop in trucking premiums and a drop in investment returns pushed its loss to $58.3 million, or $1.06 a share, in the first quarter.
That's nearly double the net loss of $34.4 million, or 62 cents a share, in the first quarter of 2009, and above the 82 cent loss per share expected by Reuters Estimates.
Gross premiums written decreased a whopping 40 percent to $259.0 million in the quarter, while investment income dropped 25 percent to $27.0 million, mainly due to lower yields, the repayment of debt and the impact of lower premium volumes.
"They can ill-afford to have another quarter like this," said Scotia Capital analyst Tom MacKinnon. "Their decision to increase the cost cuts going forward, buy back a little of the debt -- they are all positive. But we haven't seen anything happen yet."
Kingsway shares were down 5.1 percent at C$2.95 Friday morning in Toronto, bucking the trend of the overall S&P/TSX financial index of banks and insurance companies, which was up 1.3 percent.
Boasting new leadership, Mississauga, Ontario-based Kingsway said it is now well-positioned to get serious about restructuring, having ousted its previous chief executive and filled the board with directors who support the goals of activist shareholder Stilwell Group.
"We've a smaller, more focused management team determined to hold ourselves accountable," Chief Executive Colin Simpson told a conference call following the earnings report.
"The leadership team is backed by a new board of directors that is both supportive and demanding ... They are looking for less talk, more action and accountability, and excellence through execution. We intend to deliver."
The board appointed Simpson in April after ousting Shaun Jackson just hours after the annual general meeting. Simpson had been the chief operating officer and in charge of the transformation program.
Stilwell Group, which owns about 10 percent of the company, had long pressured Kingsway to cut costs and sell anything not related to nonstandard auto insurance. Continued...
