Lincoln General Affirmed

A.M. Best affirmed the financial strength rating of “A-” (excellent) of York, Pa.-based Lincoln General Insurance Co., a subsidiary of Kingsway Financial Services Inc. (Ontario). The rating has been removed from under review and assigned a negative outlook. Lincoln General’s rating action is a result of its strengthened capital position, following Kingsway’s successful capital raising initiatives and infusion of new capital into Lincoln General in the second quarter of 2003. Additionally, Lincoln General’s underwriting results have shown significant improvement and are expected to produce an underwriting profit for the year. A.M. Best remains concerned about Lincoln General’s underwriting leverage position as well as its ability to effectively manage the additional volume of business.

Lincoln General’s capital position has been greatly improved and is supportive of the company’s financial strength rating. Furthermore, Kingsway has successfully completed several capital raising initiatives and added $50 million to Lincoln General’s surplus. In addition, Lincoln General’s underwriting results through June 2003 have shown a marked improvement over the prior year.

The negative outlook reflects Best’s concern that Lincoln General may need additional capital by year-end if the company continues to strain surplus through premium growth or if loss reserves continue to adversely develop.