A little birdie told me that Kingsway's outside auditor is going to call it a day. The controversy surrounding the divestiture of Walshire stock to charity along with the protracted battle with the Pennsylvania Department of Insurance is giving KPMG a giant headache. Rumor has it that they don't want to certify Kingsway's annual report and would prefer to distance themselves from Kingway's management. The Walshire "thing", and the scheme that was devised by Kingway's management is becoming a public relations nightmare that KPMG does not want.
The Pennsylvania DOI would like to get rid of the Lincoln General problem once and for all by the end of this month. Further to this, we have heard that the disposition of the claims inventory has been called to question, due in large part to a lack of adequate funding of claims payments by Kingsway. The Pennsylvania DOI doesn't want a melt down like Reliance Holdings and needs to do something quickly.
Watch for California, Illinois and Arizona to come down hard on Kingsway and Lincoln General if Pennsylvania doesn't get things done. Most of the adverse development is the result of California and Arizona business - particularly business booked by a San Diego program administrator.
Nervous? Who'd be nervous about certifying the annual statement of a company that could soon be indicted in New York Federal Court for racketeering, mail fraud, and a host of other niceties - so the rumor mongers tell us. Only the local U.S. knows for sure! KMPG is used to this kind of nonsense - I'd hate to be a partner in that firm.
Incidentally, as of today's date, the Chartis (formerly AIG) pooled rating is "A - XV", which was affirmed on 12/16/09 with a "negative" outlook".
It's pretty simple; Kingsway management grossly under reserved the claims (for years), Underwriters used the low ball claims amounts to base their future years Renewals, thereby creating a vicious cycle of multi years of losses.
The agents just shopped the market for their clients. IMO
That would certainly explain today's large percentage loss. It is a critical time but the failure of current management and the Board of Directors to adequately discharge their fiduciary duties to the shareholders is stunning. They should all be forced to resign.