Kingsway Corporation · NYSE:KWY
Kingsway — Kingsway Financial Services — Shareholder Meeting (2005)
59 slides from Kingsway's shareholder meeting presentation, Oct 18, 2005
Slide 1: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. From one decade to the next
Slide 2: Bill Star
Kingsway Financial Services Inc. ys From one decade to the next
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: Slide 4
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
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 7: Corporate Profile
Corporate Profile Largest truck insurer in North America Sixth largest non standard automobile insurer in North America Operate in commercial automobile, property, motorcycle, standard automobile and other markets Proven track record of profitability Focused on building operating excellenc
Slide 8: 2004 Operating Highlights
2004 Operating Highlights Record net income of $131.0 million Diluted earnings per share increased 43% to a record $2.32 Return on equity of 17.4% Record underwriting profit of $51.3 million Combined ratio improved to 97.8% Book value per share increased 13% to $14.25
Slide 9: 2004 Operating Highlights – cont'd
2004 Operating Highlights – cont’d Completed US$125 million senior note offering Extended $150 million unsecured credit facility to March 2006 Initiated quarterly dividend to shareholders of 5 cents per share Q1 2005
Slide 10: 2004 Financial Highlights
2004 Financial Highlights Gross Premiums Written 1% $2.61B Net Premiums Earned 3% $2.31B Net Income 54% $131M Diluted Earnings Per Share 43% $2.32 Book Value Per Share 13% $14.25 Return on Equity 4.5% 17.4%
Slide 11: Diversified by Product Line
Diversified by Product Line (Gross Premiums Written) Commercial Auto 12% Property & Liability 12% Trucking Motorcycle 29% 2% Other 4% Personal Auto 41% Year ended December 31, 2004
Slide 12: Market Leadership Position
Market Leadership Position Non Standard Automobile #6 in North America #1 in Canada Trucking #1 in North America #2 in U.S. #2 in Canada
Slide 13: North America Trucking
North America Trucking Cdn $ Millions, 2003 16% Kingsway $809 13% Great West $630 9% Canal Group $471 9% Sentry $451 8% Northland $413 5% Markel $254 Source: A.M. Best
Slide 14: North America Non-Standard Auto
North America Non-Standard Auto Cdn $ Billions, 2003 24% Progressive $11.3 9% Allstate $4.9 6% State Farm $3.0 3% GEICO $2.5 2% Mid-Century $1.0 2% Kingsway $1.0 2% Infinity $1.0 Source: A.M. Best
Slide 15: Market Leadership Position
Market Leadership Position Taxis #1 in Chicago area #1 in Las Vegas Motorcycle #1 in Canada
Slide 16: Canadian Operations
Canadian Operations Kingsway York Fire Jevco General & Casualty
Slide 17: Gross Premiums 2004
Gross Premiums 2004 Trucking 18% Commercial Automobile Personal 6% Automobile 49% Other 5% Motorcycle 8% Property & Liability 14%
Slide 18: Segmented Numbers 2004
Segmented Numbers 2004 (C$ Millions) 2003 2004 % change Gross premiums written $655M $761M 16% Net premiums earned $554M $652M 18% Combined ratio 111.8% 97.9% 13.9% Loss ratio 83.7% 72.2% 11.5%
Slide 19: Canadian Industry Results
Canadian Industry Results * (in $ billions) 2001 2002 2003 2004 Gross Premiums Written $23.9 $28.1 $32.6 $34.6 Combined Ratio 111.4% 105.7% 99.3% 92.0% Return on Equity 2.0% 2.1% 12.2% 20.6% Growth in Gross Premiums Written 12.7% 17.6% 16.0% 6.1% Source: IBC Perspective Publications * Rolling 12 mon
Slide 20: Outlook – Canadian Market
Outlook – Canadian Market Personal Lines Automobile: Poor results and further rate reductions in Alberta in 2005 Premium reductions in Ontario in 2004 take effect in 2005 industry results Trucking Increase competition Pricing holding firm “Kingsway will maintain a disciplined pricing app
Slide 21: U.S. Operations
U.S. American Service Operations Universal Casualty American Avalon Risk Hamilton/ Lincoln Southern Country Management U.S. Security General United
Slide 22: Gross Premiums Written - 2004
Gross Premiums Written - 2004 Trucking 34% Property and Liability 11% Non-standard Auto 39% Commercial Auto 14% Other 2%
Slide 23: Segmented Numbers (in Cdn $) - 2004
Segmented Numbers (in Cdn $) - 2004 (In.$ Millions) 2003 2004 % change 7% Gross premiums written $1,982M $1,849M 9% Net premiums earned $1,828M $1,662M 0.6% Combined ratio 98.3% 97.7% Loss ratio 1.2% 71.5% 70.3%
Slide 24: U.S. Operations - Gross Premiums Written Distribution
U.S. Operations - Gross Premiums Written Distribution (In U.S.$) 2003 2004 Programs Managers $906M 56% $954M 67% Retail Distribution $508M 44% $464M 33%
Slide 25: Outlook – U.S. Markets
Outlook – U.S. Markets Non-standard Automobile: Competitive conditions in Florida and California Trucking Rates holding firm “Kingsway will maintain disciplined pricing and expand our distribution platform”
Slide 26: Shaun Jackson
Shaun Jackson Executive Vice President & C.F.O.
Slide 27: Slide 27
Slide 28: Record Earnings
| < Kingsway Financial Services Inc. From one decade to the next
Slide 29: Record Earnings
Record Earnings (In C$) 2003 2004 Gross Premiums Written $2,637M 1% $2,610M Net Premiums Earned $2,382M 3% $2,314M Underwriting Profit (Loss) ($34M) N/A $51M Income before income taxes $78M 88% $146M Net Income $85M 54% $131M
Slide 30: Record Earnings
Record Earnings (In C$) 2003 2004 Earnings Per Share (diluted) $1.62 43% $2.32 Return on Equity 12.9% 4.5% 17.4% Combined Ratio 101.4% 3.6% 97.8% Book Value Per Share $12.63 13% $14.25
Slide 31: Diversified by Geographical Area
Diversified by Geographical Area (Gross Premiums Written) Illinois 10% Florida 10% Alberta 5% Texas 8% Quebec 5% South Carolina 2% New Jersey 3% Pennsylvania 2% Ontario17% California 14% 12 month period ended December 31, 2004 Other 24%
Slide 32: Combined Ratio 2004
Combined Ratio 2004 2003 2004 2.4% Commission ratio 21.1% 18.7% General Expense ratio 6.0% 2.3% 8.3% 3.5% Loss ratio 74.3% 70.8% 3.6% Combined ratio 101.4% 97.8%
Slide 33: Impact of Currency Fluctuation on Results of 2004
Impact of Currency Fluctuation on Results of 2004 Balance Sheet Book value per share ($0.71) Income Statement: Gross Premiums Written ($144M) Net Income ($7M) Earnings Per Share (12 ¢) * Using same US:Cdn dollar exchange rates as used in 2003
Slide 34: 2004 Results – U.S. $
2004 Results – U.S. $ 2003 2004 Gross Premiums Written $1,887M 6% $2,002M Net Premiums Earned $1,712M 4% $1,778M Income Before Income Taxes $55M 104% $112M Net Income $61M 55% $101M Earnings Per Share (diluted) $1.15 53% $1.78 Underwriting Profit (loss) ($27M) N/A $39M Book Value Per Share $9.91 20%
Slide 35: Investment Portfolio (Carrying Amount)
Investment Portfolio (Carrying Amount) At December 31, 2004 Accrued Interest & Term Deposits 11% Cash 3% Government Bonds 19% Premium Finance Receivables 3% Equities 11% Corporate Bonds 53%
Slide 36: Maturity Profile of Fixed Income Portfolio
Maturity Profile of Fixed Income Portfolio December 31, 2004 March 31, 2005 0 – 1 year 22% 24% 1 – 5 years 58% 59% 80% 83% Over 5 years 20% 17% 100% 100%
Slide 37: Investment Portfolio (C$) 2005 – Q1
Investment Portfolio (C$) Investment Portfolio* Investment Portfolio Cash Flow Generated At Fair Value Per Share From Operations (in $ millions) (in $’s) (in $ millions) 1996 $190 $7.15 $45 1997 $349 $9.74 $46 1998 $625 $17.40 $63 1999 $662 $19.46 $34 2000 $780 $22.91 $93 2001 $1,235 $25.38 $207 200
Slide 38: Financial Strength – Rolling Four Quarters
Financial Strength – Rolling Four Quarters Years ended December 31 March 31 2001 2002 2003 2004 2005 NPW to Stat. Surplus 2.2x 3.1x 2.9x 2.2x 2.1x Interest Coverage 7.1x 7.6x 5.2x 6.7x 7.4x Senior Debt to Cap 21% 28% 22% 25% 25%
Slide 39: Financial Position at December 31, 2004
Financial Position at December 31, 2004 Total assets 17% $4.2B Investment portfolio 17% $3.1B 2% Unearned premiums $762M Unpaid claims 22% $2.0B Book value/share 13% $14.25
Slide 40: Slide 40
Slide 41: Growth in Gross Premiums Written
Growth in Gross Premiums Written (C$ Millions) $2,637 $2,610 AGR 4% C $2,125 4 $1,065 $643 $409 $509 $141 $211 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years ended December 31
Slide 42: Growth in Net Income
Growth in Net Income $131.0 (C$ Millions) AGR 6% C $79.5 $85.3 3 $44.9 $31.0 $27.5 $22.2 $11.2 $13.6 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years ended December 31
Slide 43: Book Value Per Share (C$) 25% CAGR
Book Value Per Share (C$) $14.25 $12.56 $12.63 $11.03 $8.01 $6.96 $7.12 $5.95 $3.26 $1.90 25% CAGR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years ended December 31
Slide 44: Diluted Earnings Per Share (C$) 26% CAGR
Diluted Earnings Per Share (C$) $2.32 $1.61 $1.62 $1.19 $0.86 $0.80 $0.73 $0.49 $0.38 $0.30 26% CAGR 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years ended December 31
Slide 45: Slide 45
Slide 46: First Quarter Results 2005 – C$
First Quarter Results 2005 – C$ 2004 % Chg 2005 Gross Premiums Written $710M 9% 9% $644M 13% Net Premiums Earned $585M $510M Underwriting Profit $10.4M 82% $18.9M Net Income $30.8M 52% $46.8M EPS (diluted) 55¢ 49% 82¢ Return on equity 16.9% 5.7% 22.6% 1.9% Combined ratio 98.2% 96.3%
Slide 47: First Quarter Results 2005 – C$
First Quarter Results 2005 – C$ 2004 2005 GPW Combined GPW Combined Ratio Ratio Canada $164M 98.4% $165M 96.9% United States $546M 98.2% $479M 96.0% Consolidated $710M 98.2% $644M 96.3%
Slide 48: First Quarter Results 2005 – U$
First Quarter Results 2005 – U$ 2004 % Chg 2005 Gross Premiums Written $538M 9% 3% $525M 6% Net Premiums Earned $443M $416M Underwriting profit $8.0M 93% $15.4M Net Income $23.4M 63% $38.1M EPS (diluted) 41¢ 63% 67¢ Return on equity 16.6% 5.7% 22.3% Combined ratio 98.2% 1.9% 96.3%
Slide 49: Bill Star
Kingsway Financial Services Inc. ys From one decade to the next
Slide 50: Kingsway Financial Services Inc.
| < Kingsway Financial Services Inc. KINGSWAY FINANCIAL SERVICES INC. ANNUAL REPORT 1995 A proven pexformer in niche property and casualty inserance markets " From one decade to the next From one decade to the next
Slide 51: One Decade to the Next!
One Decade to the Next! 1995 2004 CAGR Gross Premiums Written $60M $2.6B 52% Net Income $3.8M $131M 48% Shareholders Equity $37M $801M 41% Retained Earnings $15M $461M 47%
Slide 52: Key Objectives - From one decade to the next!
Key Objectives - From one decade to the next! Increase in 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% 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%
Slide 53: Share Price 23% CAGR
Share Price $20.00 $20.20 $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 * At May 4, 2005 Years ended December 31 Adjusted for prior years stock splits
Slide 54: Share Performance
Share Performance * as at November 15, 2004
Slide 55: Return on Investment
Return on Investment If $100 was invested in December 1995, it would be worth today: KFS $808 S&P/TSX Composite Index $201 KFS delivered a 708% return compared to a 101% return for the S&P/TSX Composite Index
Slide 56: Direct Premiums Written
Direct Premiums Written (C$ Millions) Years ended December 31 $2,637 $2,610 $2,125 $1,065 $643 $409 $509 $141 $211 1996 1997 1998 1999 2000 2001 2002 2003 2004 Acquisition Growth/Soft Market Organic Growth/Hard Market
Slide 57: Canadian Operations
Canadian Operations
Slide 58: U.S. Operations
U.S. Operations
Slide 59: Kingsway Financial Services Inc.
Kingsway Financial Services Inc. From one decade to the next
Kingsway Financial Services — Shareholder Meeting (2005) on 6ix