Kingsway Financial Services Inc.

KINGSWAY FINANCIAL SERVICES INC.

CONSOLIDATED STATEMENT OF INCOME

For the three months ended March 31st 1997 and 1996

($ in Thousands, except for per share amounts)                    
                     
                     
            1997     1996  
              (unaudited)      
                     
                     
Gross premiums written           $32,686     $21,856  
                     
Net premiums written           $29,392     $26,336  
                     
Net earned premiums           $33,318     $15,655  
Investment income           2,849     1,280  
Premium finance income           639     328  
            36,806     17,263  
                     
Claims incurred           20,608     10,128  
Commissions & premium taxes           8,175     2,518  
General expenses           2,980     2,063  
            31,763     14,709  
                     
Income before income taxes           5,043     2,554  
Income taxes           852     962  
                     
Net income           $4,191     $1,592  
                     
Earnings per share:                    
  basic:         $0.32     $0.16  
  fully -diluted:         $0.30     $0.16  
                     
Claims ratio           61.9%     64.7%  
Expense ratio           33.4%     29.3%  
Combined ratio           95.3%     94.0%  
                     
Underwriting profit           $1,555     $946  
                     
Return on Equity (Annualized)           18.9%     15.8%  
                     
                     
Per share amounts are after giving effect to the 2 for 1 subdivision of shares in October 1996.                    
KINGSWAY FINANCIAL SERVICES INC.                    
CONSOLIDATED BALANCE SHEET                    
As at March 31st 1997 and 1996                    
($ in Thousands)                    
                     
            1997     1996  
              (unaudited)      
ASSETS                    
                     
  Cash & Investments         $166,650     $82,586  
  Financed premiums receivable         26,262     22,562  
  Deferred policy acquisition costs         16,605     9,077  
  Amounts due from reinsurers         51,918     29,587  
  Amounts due from other insurers         12,541     -  
  Accounts receivable         20,101     10,791  
  Capital assets         5,919     2,338  
  Goodwill (note 1)         4,687     177  
  Other         1,842     1,649  
            $306,525     $158,767  
                     
LIABILITIES AND SHAREHOLDERS' EQUITY                    
                     
LIABILITIES                    
                     
  Unpaid claims         $135,744     $64,695  
  Unearned premiums         76,326     46,966  
  Accounts payable & accrued liabilities         1,937     1,939  
  Other         961     630  
            214,968     114,230  
                     
SHAREHOLDERS' EQUITY                    
                     
  Share capital         59,863     24,222  
  Share warrant         1,553     3,935  
  Retained earnings         30,141     16,380  
            91,557     44,537  
                     
            $306,525     $158,767  
                     
Note 1                    
Contingent consideration is payable for the acquisition of Jevco Insurance Company based on the favourable                    
or adverse development of claims liabilities as recorded at December 31st 1996. The final amount of the                    
contingent consideration cannot be reasonably estimated and therefore, the outcome cannot be                    
determined beyond reasonable doubt. Consequently, the contingent consideration has not been recorded                    
at this time, and will be recorded once it can be determined.                    
KINGSWAY FINANCIAL SERVICES INC.                    
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION                    
For the three months ended March 31st 1997 and 1996                    
($ in Thousands)                    
                     
            1997     1996  
                     
              (unaudited)      
                     
Operating activities:                    
Net income           $4,191     $1,592  
Items not involving cash:                    
  Amortization         150     72  
  Deferred income taxes         (95)     (747)  
  Net realized gain on sale of investments         (932)     (70)  
  Amortization of bond premiums & discounts         (444)     (335)  
            2,870     512  
                     
Net change in non-cash balances:           941     2,930  
            3,811     3,442  
                     
Financing activities                    
  Issuance of share capital, net         826     2,333  
  Share warrant         (95)     3,935  
  Bank demand loan         -     (1,480)  
            731     4,788  
                     
Investing activities:                    
  Purchase of investments         (82,863)     (57,978)  
  Proceeds from sales of investments         106,233     54,129  
  Purchase of subsidiary         (13,000)     (5,209)  
  Additions to capital assets         (189)     (53)  
            10,181     (9,111)  
                     
Increase (decrease) in cash during period           14,723     (881)  
                     
Cash, beginning of period           4,165     1,363  
                     
Cash, end of period           $18,888     $482  

Last Updated on 7/27/97
By Dan Browne