Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Shareholder Meeting (2006)
57 slides from Kingsway's shareholder meeting presentation, Aug 19, 2006
Slide 1: Into A New Decade of Opportunity
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Slide 2: Bill Star, President & CEO
Il Star ident & C.E.O. Into A New Decade of Opportunity
Slide 3: 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 4: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Slide 5: Our Strategic Vision
Our Strategic Vision “To be recognized as a North American leader in non-standard auto, trucking, taxi and motorcycle insurance markets and deliver consistent earnings growth and a return on equity of 15% or more”
Slide 6: Our Strategic Vision Scorecard
Our Strategic Vision Scorecard Vision Actual North American leader in: Non-standard auto Seventh largest in North Insurance America Trucking Insurance Largest in North America
Slide 7: Our Strategic Vision Scorecard
Our Strategic Vision Scorecard Vision Actual North American leader in: Taxi Insurance Largest writer in Chicago and Las Vegas Motorcycle Insurance Largest writer in Canada
Slide 8: Our Strategic Vision Scorecard
Our Strategic Vision Scorecard Vision Actual Consistent earnings 49% compound annual growth growth in net income over the last five years Return on Equity of 15% Averaged 15% over the last or more five years
Slide 9: Our Strategic Vision
Our Strategic Vision We will achieve this by developing: Strong claims operations tailored to local markets Distinctive underwriting capabilities in target specialty markets Rigorous industry leading program management capabilities An extensive network of independent agents focused on spec
Slide 10: Canadian Operations
Canadian Operations Kingsway General Insurance Company John McGlynn, President & Chief Executive Officer York Fire & Casualty Insurance Company Colin Simpson, Vice President & Chief Operating Officer Jevco Insurance Company Serge Lavoie, Vice President & General Manager
Slide 11: U.S. Operations
U.S. Operations American Service Insurance Company Tom Ossmann, President & Chief Executive Officer American Country Insurance Company Roger Beck, President & Chief Executive Officer Universal Casualty Insurance Company Marshall Romanz, President & Chief Executive Officer
Slide 12: U.S. Operations
U.S. Operations Lincoln General Insurance Company John Clark, President & Chief Executive Officer Southern United Fire Insurance Company Richard Murray, President & Chief Executive Officer Hamilton Risk/U.S. Security Insurance Company Roberto Espin, Jr., President
Slide 13: U.S. Operations
U.S. Operations Zephyr Insurance Company Richard Toyama, President & Chief Executive Officer Avalon Risk Management Scott Wollney, President
Slide 14: 2005 Operating Highlights (US$)
2005 Operating Highlights (US$) Gross Premiums Written 5% $1.89B Net Premiums Earned 1% $1.79B Net Income 34% $135M Diluted Earnings Per Share 32% $2.37 Book Value Per Share 20% $14.25 Return on Equity 1.8% 18.4%
Slide 15: 2005 Operating Highlights
2005 Operating Highlights Completed acquisition of Zephyr Insurance Company Entered into agreement with the Robert Plan Completed C$78 million public offering of Linked Return of Capital Preferred Units
Slide 16: 2005 Operating Highlights – cont'd
2005 Operating Highlights – cont’d Renewed $150 million unsecured credit facility Initiated quarterly dividend to shareholders in Q1 2005 Increased quarterly dividend by 25% in Q1 2006
Slide 17: Diversified by Product Line
Diversified by Product Line (Gross Premiums Written) Commercial Auto 12% Property & Liability 13% Trucking Motorcycle 31% 3% Other 5% Personal Auto 36% Year ended December 31, 2005
Slide 18: Geographic Area – Gross Premiums Written
Geographic Area – Gross Premiums Written 2004 2005 Canada Canada 29% 32% United States United States 71% 68%
Slide 19: Diversified by Geographical Area
Diversified by Geographical Area (Gross Premiums Written) Illinois 11% Florida 10% Alberta 5% Texas 6% Quebec 5% Alabama 2% New Jersey 3% Pennsylvania 2% Ontario 20% California 14% Year ended December 31, 2005 Other 22%
Slide 20: Corporate Governance
Corporate Governance The Globe and Mail Report on Business Corporate Governance Rankings Rankings based on board composition, compensation, shareholder rights and disclosure Kingsway ranked 42nd out of 209 companies listed on the S&P/TSX Perfect score on disclosure criteria 2005 was the high
Slide 21: In 2005 and early 2006
In 2005 and early 2006: Kingsway delivered: Strong earnings Improved balance sheet strength Strengthened ratings from A.M. Best
Slide 22: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Slide 23: Shaun Jackson, EVP & CFO
Shaun Jackson Executive Vice President & C.F.O.
Slide 24: Record Earnings 2005
2005 rd Earnings Into A New Decade of Opportunity
Slide 25: Record Earnings
Record Earnings (In US$) 2004 2005 Gross Premiums Written $2,002M 5% $1,895M Net Premiums Earned $1,778M 1% $1,792M Underwriting Profit $39M 26% $50M Income Before Income Taxes $112M 37% $154M Net Income $101M 34% $135M
Slide 26: Record Earnings
Record Earnings (In US$) 2004 2005 Earnings Per Share (diluted) $1.79 32% $2.37 Return on Equity 16.6% 1.8% 18.4% Combined Ratio 97.8% 0.6% 97.2% Book Value Per Share $11.86 20% $14.25
Slide 27: Combined Ratio
Combined Ratio 2004 2005 Commission Ratio 1.6% 18.6% 20.2% General Expense Ratio 0.4% 8.3% 8.7% Loss Ratio 70.9% 2.6% 68.3% Combined Ratio 97.8% 0.6% 97.2%
Slide 28: Segmented Numbers 2005 – Canadian Operations
Segmented Numbers 2005 Canadian Operations - (US$ Millions) 2004 2005 % change Gross Premiums Written 5% $584M $610M Net Premiums Earned 16% $502M $582M Combined Ratio 98.1% 96.1% 2.0% Loss Ratio 72.3% 68.3% 4.0% Net Income 96% $27M $53M
Slide 29: Segmented Numbers 2005 – U.S. Operations
Segmented Numbers 2005 U.S. Operations - (US$) 2004 2005 % change Gross Premiums Written $1,418M $1,285M 9% 5% Net Premiums Earned $1,276M $1,209M Combined Ratio 97.7% 97.7% Loss Ratio 70.3% 68.4% 1.9% 11% Net Income $74M $82M
Slide 30: Investment Portfolio (Fair Value)
Investment Portfolio (Fair Value) At December 31, 2005 Accrued Interest & Term Deposits 14% Cash 4% Government Bonds 14% Premium Finance Receivables 3% Equities 12% Corporate Bonds 53%
Slide 31: Maturity Profile of Fixed Income Portfolio
Maturity Profile of Fixed Income Portfolio December 31, 2005 0 – 1 year 30% 1 – 5 years 45% 75% Over 5 years 25% 100%
Slide 32: Investment Portfolio (US$) 2006 – Q1
Investment Portfolio (US$) Investment Portfolio* Investment Portfolio Cash Flow Generated At Fair Value Per Share From Operations (in millions) (in millions) 1996 $138 $5.22 $33 1997 $244 $6.82 $33 1998 $409 $11.40 $43 1999 $457 $13.43 $23 2000 $522 $15.32 $62 2001 $775 $15.92 $134 2002 $1,346 $27.5
Slide 33: Investment Leverage
Investment Leverage Invested Assets (book value including cash)/Shareholders’ equity Kingsway Financial 3.7x Northbridge 2.5x ING Canada 2.4x
Slide 34: Financial Strength – Rolling Four Quarters
Financial Strength – Rolling Four Quarters Years ended December 31 2002 2003 2004 2005 Q1 2006 NPW to Stat. Surplus 3.1x 2.9x 2.2x 1.9x 1.8x Interest Coverage 7.6x 5.2x 6.7x 7.2x 6.5x Senior Debt to Cap 28% 22% 25% 23% 24%
Slide 35: Financial Position at December 31, 2005
Financial Position at December 31, 2005 (US$) Total Assets 8% $3.8B Investment Portfolio 13% $2.9B 2.0% Unearned Premiums $649M Unpaid Claims 9% $1.8B Book Value/Share 20% $14.25
Slide 36: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Slide 37: Growth in Gross Premiums Written
Growth in Gross Premiums Written (US$ Millions) AGR $2,002 4% C $1,887 $1,895 3 $1,353 $688 $433 2000 2001 2002 2003 2004 2005 Years ended December 31
Slide 38: Growth in Net Income
Growth in Net Income (US$ Millions) $135.0 AGR 9% C $101.0 4 $60.9 $50.6 $29.0 $18.5 2000 2001 2002 2003 2004 2005 Years ended December 31
Slide 39: Book Value Per Share
Book Value Per Share (US$) $14.25 $11.86 $9.91 $8.01 $6.92 $5.35 22% CAGR 2000 2001 2002 2003 2004 2005 Years ended December 31
Slide 40: Diluted Earnings Per Share
Diluted Earnings Per Share (US$) $2.37 $1.79 $1.15 $1.02 $0.77 $0.54 34% CAGR 2000 2001 2002 2003 2004 2005 Years ended December 31
Slide 41: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Slide 42: First Quarter Results 2006
First Quarter Results 2006 (US$) 2005 2006 Gross Premiums Written $525M 3% $507M Net Premiums Earned $416M 3% $427M Underwriting Profit $15.4M 6% $16.4M Operating Income $27.0M 11% $30.0M Realized Gains (Losses) after tax $11.1M ($1.1M) Net Income $38.1M 24% $28.9M
Slide 43: First Quarter Results 2006 – cont'd
First Quarter Results 2006 – cont’d (US$) 2005 2006 EPS (Operating) 47¢ 11% 53¢ EPS (Diluted) 67¢ 24% 51¢ Return on Equity 22.3% 8.1% 14.2% Combined Ratio 96.3% 0.1% 96.2%
Slide 44: Bill Star, President & CEO
Il Star ident & C.E.O. Into A New Decade of Opportunity
Slide 45: Our First Decade
ur First ecade Into A New Decade of Opportunity
Slide 46: Annual Report 1995
f YX oN Kingsway Financial Services Inc. . \ KINGSWAY FINANCIAL SERVICES INC. ANNUAL REPORT 1995 A proven performer in niche property and casualty insurance markets
Slide 47: Our First Decade on the TSX!
Our First Decade on the TSX! (US $) 1995 2005 CAGR 46% Gross Premiums Written $44M $1.9B Net Income $2.8M $135.0M 48% Shareholders Equity $27M $805M 40%
Slide 48: Our First Decade on the TSX!
Our First Decade on the TSX! Change in (US $) Return on Equity Combined Ratio Net Premiums Earned 1995 19.8% 96.6% 9% 1996 21.4% 95.6% 134% 1997 16.5% 95.8% 62% 1998 13.4% 93.9% 66% 1999 5.5% 102.6% 41% 2000 10.6% 101.0% 21% 2001 13.3% 99.1% 55% 2002 13.9% 99.8% 96% 2003 12.9% 101.6% 55% 2004 16.6%
Slide 49: Share Price (C$) 25% CAGR
Share Price (C$) $23.50 $23.90 $20.00 $19.00 $14.60 $13.50 $13.69 $12.00 $8.25 $7.25 $7.90 $2.50 25% CAGR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006* Years ended December 31 * At May 1, 2006 Adjusted for prior years stock splits
Slide 50: Gross Premiums Written
Gross Premiums Written (U$ Millions) Years ended December 31 $2,002 $1,895 $1,887 $1,353 $688 $342 $433 $276 $103 $152 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Acquisition Growth/Soft Market Organic Growth/Hard Market Softer Market
Slide 51: Share Performance
Share Performance Relative M arket Performance for the period December 29,1995 to December 31,2005 900 800 700 600 500 400 300 200 100 0 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Kingsway Financi
Slide 52: Return on Investment
Return on Investment If $100 was invested in December 1995, assuming all dividends are reinvested, it would be worth today: KFS $968 S&P/TSX Composite Index $309 KFS delivered a 868% return compared to a 209% return for the S&P/TSX Composite Index
Slide 53: Outlook – Canadian Market for 2006
Outlook – Canadian Market for 2006 Personal Lines Automobile: Continued government activism in Alberta and Ontario Continued supply tightening in non-standard segment Trucking Opportunities to grow in owner-operator segment Price pressure to continue in fleet segment Motorcycle Very
Slide 54: Outlook – U.S. Markets
Outlook – U.S. Markets Non-standard Automobile: Competitive conditions in certain markets Growth in assigned risk markets The Robert Plan Trucking Rates holding firm Reinsurance capacity shortage “Kingsway will maintain disciplined pricing and expand our distribution platform”
Slide 55: Prepared for Change
Prepared for Change Philosophy of: Not sacrificing profitability for top-line growth Making selective acquisitions during soft market
Slide 56: New Corporate Headquarters, Mississauga, Ontario
| < | KINGSWAY FINANCIAL SERVICES INC. New Corporate Headquarters, Mississauga, Ontario Archxes Design Inc., Architects Into A New Decade of Opportunity
Slide 57: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. Into A New Decade of Opportunity
Kingsway Financial Services — Shareholder Meeting (2006) on 6ix