Kingsway Financial Downgraded Following Disappointing 4Q Results

Kingsway Financial Services Inc. (KFS) kicked off fourth quarter earnings season for Canada’s property and casualty (P&C) insurers on Thursday with disappointing numbers, particularly for the company’s U.S. operations.

This weakness has led CIBC World Markets analyst Stephen Boland to reduce his price target on Kingsway shares to $26 from $31, while lowering his rating to “sector performer” from “sector outperformer.”

He expects the market reaction on Friday will initially push the stock down at least 10%, although he does not think the negative momentum will cause the shares to reach their book value of $18.22, unless a material shareholder moves to make a sale, Mr. Boland said in a research note.

“Unfortunately, we believe the valuation discount will widen once again and remain over the medium term,” he said, adding that “the better multiples seen lately are in the past, in our view.”

RBC Capital Markets analyst Soami Kohly was among those expecting good things from P&C insurers, forecasting earnings per share growth of 22% for the group that also includes ING Canada Ltd. [TSE: IIC], Northbridge Financial Corp. [TSE: NB] and EGI Financial Holdings Inc. [TSE; EFH].

Mr. Kohly expected a positive earnings surprise from Kingsway, but will likely be disappoint by news that the company’s fourth quarter net income fell to $16.8-million from $35.9-million a year earlier.

He previously had a $29 price target on the company’s shares and an “outperform” rating.

KFS 1-yr chart:

Comments

[Peter K]

as a resident of York pa, with several friends and aquaintances at Lincoln, I can understand their problem(s), based on the stories I have heard about top and middle mgmt. It is a wonder, that if these things I have heardare true, that Lincoln still exists.