Ratings Downgrades for Kingsway, Subsidiaries

Terri Goveia | November 24, 2009

Just one day after Kingsway Financial Services Inc. announced plans to divest its stake in Jevco, the company and its subsidiaries faced ratings downgrades from A.M. Best.

The ratings agency said the downgrades—which affect Kingsway Financial Services, Kingsway America and several subsidiaries---“reflect the continued deteriorating financial condition of the parent company through the first nine months of 2009. This is attributed to significant operating losses, primarily within discontinued
or run-off operations,” according to A.M. Best analysts. “As a result, it is A.M. Best’s opinion that this has contributed to a further diminution of Kingsway’s business profile and that of its insurance operating companies.

The ratings agency downgraded Kingsway Financial Services and Kingsway America’s issuer credit ratings and senior debt ratings from “b-“ to “ccc,” and downgraded the financial strength rating for several Kingsway subsidiaries from “B” to “B-,” and their issuer credit rating from “bb” to “bb-.”

The downgraded subsidiaries include: American Service Insurance Company, Inc.
JEVCO Insurance Company, Mendota Insurance Company, Mendakota Insurance Company, Southern United Fire Insurance Company, U.S. Security Insurance Company, Inc. and Universal Casualty Company

The ratings for all companies, except Lincoln General, are under review with negative Implications “based upon KFSI’s actions to dispose of its indirect ownership of Lincoln,” the analysts note in a November 24 statement, citing the company’s public debt and the risks that follow Lincoln General’s liquidation while still part of Kingsway.