Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Kingsway Financial Services Inc. second-quarter results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press the star key followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, Thursday, August 7, 2008, at 8.30 am Eastern Time. I would now like to turn the conference over to Mr. Shaun Jackson, President. Mr. Jackson, please go ahead.

Okay, thank you, and good morning, everyone. Thank you for joining us today for our earnings call following the release of our second-quarter and year-to-date results earlier this morning. Here with me today are Shelly Gobin, our Senior Vice President and Chief Financial Officer, and also Scott Wollney, President and Chief Executive Officer of our largest subsidiary, Lincoln General. Shelly and I will present the results for the second quarter and the year to date, and also our view of markets and future prospects of the company. Following that, we will be available to answer questions. I thought it would be helpful to have Scott with us today so that he can specifically respond to any questions regarding Lincoln and can share with you the initiatives that he has undertaken since he took over the company approximately three months ago. I've been very pleased with the progress that Scott and his team have made in a very short time, and they are very focused on moving the company in a positive direction. Before getting into the formal part of the presentation, I would like to ask Shelly to read our forward-looking statement. Shelly?

Thanks, Shaun. The remarks that Shaun, Scott, and I will make in today's discussion contain certain forward-looking information with respect to the company's operating and financial plans and performance. These forward-looking statements are based on management's current assumptions, beliefs, and expectations and are subject to a number of risks, uncertainty, and other factors beyond the company's ability to control or predict. We caution you that the actual results or developments may differ materially from those contemplated by these forward-looking statements. Additional information on the material risk factors and material assumptions that could cause actual results or developments to differ from expectations are contained in our second-quarter press release and our Canadian and US securities filings, including our 2007 annual report, under the heading Risk Factors in Management's Discussion and Analysis section. Any forward-looking information provided in the context of today's discussions represents the company's views only as of today's date. While subsequent events and developments may cause the company to change its views, the company does not undertake to update any forward-looking information except to the extent required by applicable securities laws. Certain non-GAAP financial measures may be discussed or referred to today. Please refer to our second-quarter press release and other securities filings for a reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure.

Okay, thanks, Shelly. Second-quarter 2008 marked a return to profitability for the Kingsway Group. While the profitability is not yet at an acceptable level, it is nevertheless an important step in the right direction. Profitability in the second quarter is primarily as a result of consistent income from our investment portfolio, which has weathered the very challenging securities market conditions in 2008 extremely well. We have also seen improving performance in our insurance operations, where we have established more conservative reserving practices. We have moved decisively and effectively to identify and remedy underperforming business lines and programs, in order to stabilize and then improve the future underwriting performance. Overall, our gross premiums written declined by 16% in the quarter and 10% year to date. The decline is almost entirely attributable to the actions at Lincoln over the last year in response to the soft market conditions of the trucking business and the impact of the termination and placing into run-off of unprofitable noncore programs. In Canada, our underwriting results were disappointing but were in line with the overall industry, primarily reflecting softer market conditions and deterioration in results from personal automobile. The winter weather also contributed to poor results through April; however, we did see much improved results in our Canadian operations in the months of May and June. However, we like many companies are raising rates, which suggests some modest firming of markets, which should bode well for improved profitability in the future. One area of particular strength was our motorcycle premiums, which increased by 18% compared to the same period last year as cost-conscious consumers are choosing to buy more fuel-efficient vehicles. In the US, the underwriting results were disappointing, primarily as a result of discontinued programs that are now in run-off. Overall, our written premiums in the…

Thanks, Shaun. Our return to profitability for the first time in several quarters reflects progress and stabilization in a number of areas. The following are the key components of our results for the second quarter. For the quarter, the company reported net income of $6.3 million compared to net income of $41.7 million in Q2 last year and a net loss of $28.1 million for the first half of the year compared to a net income of $61.4 million in the same period last year. Diluted earnings per share were $0.11 for the quarter compared to earnings of $0.74 per share in the second quarter last year, and diluted loss per share of $0.51 for the first half of 2008 compared to diluted earnings per share of $1.09 for the same period last year. For the quarter and year to date, the company reported operating losses of $0.4 million and $30 million respectively compared to operating income in Q2 of last year of $20.6 million and $32.5 million last year to date. Gross premiums written decreased 16% to $443.2 million in the quarter compared to $525.2 million in Q2 last year and for the first half of the year were $900.3 million compared to $1 billion for the same period last year. Almost all of the consolidated premium decline in the quarter came from Lincoln General, as part of our strategy to focus on core profitable business lines going forward. Non-standard automobile continued to become a more significant percentage of our total premiums written, representing 39% of the total premiums for the six months compared to 31% for the same period last year. Non-standard automobile premiums increased 13% to $351.4 million for the year to date. Trucking premiums continued to decline and were down 37% to $139.7 million for the…

Okay, thanks, Shelly. A number of positive initiatives have been undertaken at Kingsway since the start of the year. During this quarter, we made several executive changes to strengthen our leadership, better align management responsibilities, and to involve the broader management group in developing our corporate strategy going forward. This has involved the creation of the executive leadership team, Senior Vice Presidents at Kingsway Financial, and the key operating functions of finance, administration, and strategy. As well, we have made executive changes at Lincoln General as well as at American Country. At Lincoln, Scott was appointed President and he has during the quarter formed his executive management team. I've been very pleased with the way that Scott has re-energized the company and created a more stabilized and rigorous reserving environment. We have also continued the initiatives to terminate and put non-core programs into run-off. At the end of the quarter, despite significant declining premium volumes, we continue to hold high levels of IBNR, which at Lincoln exceeded the amount of cash reserves. I am confident that Scott and his team will successfully execute the remedial plan to improve underwriting results and return the company to profitability over the next few quarters as the discontinued businesses run off. During the quarter, we also made the decision to combine American Service and American Country platforms under the leadership of Tom Ossmann. We expect this transition will be as seamless as possible for our producers and policyholders and will enable us to focus on pricing and marketing of our taxi, livery, paratransit, and commercial automobile business, together with American Services core non-standard automobile business in the United States. We anticipate this will enable the combined entity to have a broader presence and deploy more vigorous marketing and product development to the claims handling…

(Operator instructions) Amit Kumar, Fox-Pitt Kelton. Amit Kumar – Fox-Pitt Kelton: Good morning. Thanks for taking my questions. Just going to the motorcycle premium growth of I think 16% – I'm sorry, 18%. I am just trying to understand this a bit better. If motorcycle's space grew 30% from 2001 to 2007, I am talking about the entire marketplace and then I look at your growth, can you sort of just help us with maybe what is the rate component and what is the new business component?

Well, I think our rates – I'm not sure where you got the 30% from Amit. Is that in North America, Canada, US? Amit Kumar – Fox-Pitt Kelton: That is in North America.

Okay, well, we are only – we don't provide motorcycle business very much in the United States, so we are really just talking about Canada. Amit Kumar – Fox-Pitt Kelton: Right.

But overall, our rates increased single digits, 4% to 5% this year compared to last year. So the majority of the increase is attributable to basically volume increases. We are up roughly about 8% in Quebec. Ontario, we are up, I think in terms of volume premium certainly over 30% (inaudible) combined together it equates to about 18%.

18%, yes.

Again, as we said, I think it reflects the fact that people are certainly in Canada buying more motorcycles, buying more scooters that are more fuel-efficient. Amit Kumar – Fox-Pitt Kelton: Absolutely. I guess a follow-up to that would be if you look at the fatality rate, obviously there is a huge delta between motorcycles and usually cars. So would it be fair to say that the profitability in this line would be much lower going forward even though premium volume is much higher right now?

I'm not sure that would follow Amit for a couple of reasons. Number one, motorcycle mainly in Canada, particularly in Ontario, is subject to the loss transfer provisions, which you may not be familiar with. So essentially how that works is that although it's a no-fault system here in Ontario, if a motorcyclist is injured and the accident is caused by a larger vehicle i.e., a car, truck, or whatever, then the accident benefit portion, which is the major part of the loss, is essentially transferred to the larger vehicle. And in most cases, we find at least 70% of the accidents are caused by the other vehicle. The other thing this summer also is, I don't know what the experience has been in New York, but certainly in Ontario, it has probably been one of the wettest summers that we have had on record. We have had record rainfall. And typically when it rains, although people insure their motorcycles, they don't tend to ride them as much. Amit Kumar – Fox-Pitt Kelton: That makes sense. I guess my second question and then I will re-queue, in terms of reserve additions, we have seen meaningful reserve additions in the past. To me, I guess what your commentary is indicating is that we might perhaps be at the end of reserve additions. Would it be fair to say that chances of reserve additions going forward would be minimal?

We certainly have done a lot of activity in the reserving field. I think Scott has – we have a much more rigorous process at Lincoln. I think the nature of any insurance business, Amit, is there are always going to be reserve changes quarter-to-quarter, pluses and minuses. Obviously a lot of ours over the last couple of quarters have been in pluses, and we have done a lot of work to try and remedy that. But I think we have a much more rigorous process as I said earlier at Lincoln. Now the level of IBNR despite a significantly declining business is no higher than the case reserves. Amit Kumar – Fox-Pitt Kelton: Okay, that's helpful. I will re-queue.

Your next question comes from Chuck Hamilton at FTN Midwest Securities Corp. Please proceed. Chuck Hamilton – FTN Midwest Securities Corp:

Yes, Chuck, if you don't mind, I will let Scott comment on that, because he is here and he is very close to it. Chuck Hamilton – FTN Midwest Securities Corp: Good morning, Scott.

Sure, good morning, Chuck. In terms of the changes in premium, the bulk of the reduction in premium was actually a result of the terminated programs. Year to date, approximately two-thirds of the total premium reduction was the result of terminated programs. Almost all of our reduction in Q2 was a result of that. We are estimating that the overall impact of the A.M. Best rating change for the year will probably be somewhere between $40 million and $50 million, which is essentially about 10% of our estimated written premium for the year. So hopefully that gives you a little bit of a sense. A big part of the shift also, as was mentioned earlier by Shaun and Shelly, is the balance of business, where last year approximately 70% of our business was commercial; but as of Q2, that number dropped down to about 56%. So the personal lines business is really unaffected by the A.M. Best rating change, so virtually all of the premium change there is affecting the commercial. But what we are finding is the market conditions for a lot of the A.M. Best rating-sensitive business is tending to produce very soft premium levels as well. So as we are assessing that $40 million or $50 million that may be at risk or lost because of the A.M. Best rating change, at least half of those risks probably would have been either non-renewed or we wouldn't have reduced our price to the point where the market is at, at renewal. So that mitigates really the ultimate impact of that. So we're very confident going forward that we can continue to grow the book by focusing on more of the small to midsize fleet business on the commercial side, and continuing to focus our efforts on the personal lines business as well. Chuck Hamilton – FTN Midwest Securities Corp: Sure, sure. Without doing the math in my head here, Scot, do you have a sense of the overall premium reduction year-over-year for Lincoln General?

From a written premium standpoint? Chuck Hamilton – FTN Midwest Securities Corp: Yes.

The reduction will probably be around $250 million, again where the bulk of that is going to come on the commercial side. The earned premium number will be much less because of the nature of the earning process. We are estimating a written of around $500 million this year with an earned just over $600 million.

Yes, but I think, just clarifying some of Scott's comments Chuck, the $250 million approximately that we think will be down for the year, we are down $160 million in the first six months. The other comment I would make about Lincoln's current mix today, as Scott said, it is much more personal lines than it was, say a year ago. But also I think importantly, approximately 20% to 25% of Lincoln's business is actually business that we directly control through The Robert Plan and Avalon. So again we have a much better control over Lincoln's business going forward. Chuck Hamilton – FTN Midwest Securities Corp: Sure, sure. Second question I guess is just looking at the components of gross written premiums for the quarter, I guess you're typically asked these questions, but what would be the gross written for Mendota, Robert Plan, and Zephyr in the quarter?

I am ready for you, Scott. Mendota was $33.3 million, Zephyr was $19.4 million, and the Robert Plan was $25.6 million, and The Robert Plan as you know is the combined, where they – because we own the agency and the business (inaudible) through Lincoln. Chuck Hamilton – FTN Midwest Securities Corp: Right. Great, thank you for that and I will re- queue.

Thanks Chuck. Chuck Hamilton – FTN Midwest Securities Corp: You bet.

Your next question comes from Tom MacKinnon at Scotia Capital. Please proceed. Tom MacKinnon – Scotia Capital: Thanks very much, good morning. Just a question on these terminated programs. The $26.9 million earned in the quarter classified, what amount of that is the artisan and what amount of that would be other programs that were terminated? And then, how long before these terminated programs would actually run off the books? Then I've got a follow-up.

As far as the artisan program, I will give you as a starting point a year-to-date number. For the artisan, it was about $17.5 million; approximately half of that was in the second quarter. As was mentioned, that program has been terminated, and it is in the process of run-off. Between now and the end of the year we're expecting an additional written premium of $3 million to $5 million on that, just because of the nature of the process. We will not have an obligation to renew policies after expiration on that commercial line of business and obviously our going to be keeping a very careful watch from an audit perspective to ensure that all the runoff provisions are satisfied. So that program in 2007 represented almost $70 million in premium. So again, if you are wanting to sort of tie back our projections for written this year with last year that will hopefully help to give you some perspective. Tom MacKinnon – Scotia Capital: I am wondering how long before the earned on that runs off the book? Is this a seven-year type business, this artisan contractors?

They are all annual premium policies, so they will earn evenly across 12 months.

And that is the same for all of our terminated business. I don't know of any of them, Scott, we have an obligation to offer renewals, terminated?

No, not on any of the commercial terminations. Tom MacKinnon – Scotia Capital: Okay, so we are going to get all this artisan earned right off the books by the end of this year or into the first quarter next year?

It will probably be the end of second quarter next year, just based on the contractual provisions that we have in terms of the program. But within 12 months from today, it will definitely have been earned off the books in terms of the premium. Tom MacKinnon – Scotia Capital: Why was it not classified then as – certainly you had some poor claims experience on this terminated stuff. Why didn't you just book it as any kind of reserve development and just get it done with? Like would we continue to see this kind of bleeding with this terminated business in the next quarter and in the next quarter until we reach Q2 '09?

We are matching the premiums with the reserves, Tom. So once the business is run off, and if it is reserved appropriately, there is no further premium. As long as the reserves are accurate there shouldn't be any impact. There will be adjustments, obviously; there always is because you are changing estimates all the time. But once the business runs off it should have a diminishing impact. Tom MacKinnon – Scotia Capital: But should we expect this artisan terminated business to be running at a combined I can't remember what it was, 140 or something, 160?

Once all the premiums run off, Tom that should be the end of that. Tom MacKinnon – Scotia Capital: Right, but is this an anomaly that happens as a result of putting this artisan into runoff or terminated, did the combined ratio spike specifically in this quarter or what should be the outlook as this artisan business runs off the books over the next four quarters, in terms of a combined ratio for that run-off terminated business?

Well, I think the way to look at it is if you look at the combined ratio based on the earned premium and the losses and carried reserves, which as Shaun mentioned are intended to be predictive of the future obligations, the 2008 year-to-date combined is about $148 million. You would expect that to be constant. But again, the reserves in terms of case reserve and IBNR are already incorporated into current numbers. So you wouldn't expect it to deteriorate because the program is in runoff and we at this point are obviously looking very closely at those results to make sure that we have got it sufficiently reserved.

But you will have, Tom, a diminishing amount of earned premium. Tom MacKinnon – Scotia Capital: Understood, but we still would have the same kind of combined on it until it runs off?

Till the premiums run off. Tom MacKinnon – Scotia Capital: Yes.

So the combined though is a result of the program itself, not the decision to put it into run-off. Tom MacKinnon – Scotia Capital: Okay.

We put it into run-off because the program results were what they were. Tom MacKinnon – Scotia Capital: Understood.

Exactly. These programs that we have put into run-off, Tom, represent ones that are unprofitable and they are non-core. Tom MacKinnon – Scotia Capital: Okay. Then the Canadian business seemed to be a little weaker than what I think people might have been expecting. Is this just a function of a tougher environment? Or was there any kind of an increase in weather-related type claims in the quarter?

Well, I think, as I said on the notes, the comments, Tom, I think we saw, like most of the industry, the winter did see an escalation in claims. We obviously saw poor results in Canada in the first quarter that continued into April. We started to see much improved results in Canada in both May and June, so that seems to be – and July so far seems to be holding up fairly well as well. So I think it was just the winter but I think if you are looking at the overall results in Canada as an industry, I think you yourself said in your comment earlier this week, we are seeing a deterioration. We are seeing companies apply for rate increases and get them. In fact, I heard something that I don't think I have ever heard before that I heard that one company actually applied for a rate increase and was told that they weren't asking for enough, which I think is a first in Ontario. Tom MacKinnon – Scotia Capital: Okay, thanks for that.

Your next question comes from John Reucassel of BMO Capital Markets. Please proceed. John Reucassel – BMO Capital: Shaun, just wanted to clarify, the $110 million in short-term debt repayment that all came out of the excess capital in the reinsurance subs; is that right?

Yes, it did. John Reucassel – BMO Capital: Okay. And you're paying off the other $50 million by the end of the year?

By the end of the year, yes. John Reucassel – BMO Capital: Okay. What would your undrawn credit line be at the end of the year or right now?

It is fully drawn at $48 million. John Reucassel – BMO Capital: Fully drawn at the $48 million so then you would have the $48 million available, in theory, at the end of the year?

In theory. But it is a 365-day facility, so it does mature in December. So again that would be whether ourselves and the institution choose to renew this facility. John Reucassel – BMO Capital: Okay. In the past, you have mentioned your RBC at Lincoln General, are you willing to disclose that for this quarter?

Shelly?

200 and –

249.

Yes, the 249 number. John Reucassel – BMO Capital: Oh, 249? Did you disclose that?

Yes. John Reucassel – BMO Capital: Okay, I'm sorry.

We gave the range, but Lincoln itself is 249. John Reucassel – BMO Capital: Okay, okay. The interest coverage in the quarter, I know it is a backward-looking number, but are you able to disclose that for us?

Yes, it was negative 1.7 times. I mean it is –

It is a trailing quarter.

I mean, it is trailing. John Reucassel – BMO Capital: I totally understand; it is not a forward looking and I assume with the lower – outstanding and all that, that will get better.

That's right. John Reucassel – BMO Capital: Okay, all right. Thank you.

Your next question comes from Michael Goldberg of Desjardins Securities. Please proceed. Michael Goldberg – Desjardins Securities: Good morning. A couple of questions, there is obviously a lot of transition going on, can you give us some idea of what the normalized level of US gross written premium would be excluding terminations, run-off, etc.? Where do you expect combined ratio to stabilize on the ongoing business? I guess the third portion of that question is how long do you think it is going to take to get there and for overall profitability to return to a more normal, more acceptable level?

There's a lot of questions there, Michael. I think the transition, I think the level of premium that you have seen, I think as Scott said earlier, if you break out Lincoln we are pretty much, I think, we are flat to modestly up in Canada. Right, Shelly, I think, for the year to date?

Yes, correct. Yes.

In the US, if you take out Lincoln, obviously the first-quarter comparable is also affected by Mendota, because we didn't own Mendota in the third quarter of last year. I think as Scott said, we expect Lincoln's run rate year-on-year to be about $250 million down from last year. We are already about $160 million down for the half year. So for next couple of quarters, probably $45 millionish, I know it is a guess, so that should sort of stabilize the level of written premium. But also remember Michael that the second quarter there is a little bit of seasonality because of motorcycle etc. So without putting a number on it, I think you can sort of work through all those sort of things. In terms of the run-off, I think Scott already responded to that. I think these programs have been put into run-off. Some were put into run-off in the second quarter. Some were terminated in the first quarter. And some business did go off the books earlier in the year, because of the A.M. Best downgrade. So once all of those premiums come up for renewal, they won't be there. In fact some, because of the A.M. Best rating, I think Scott were terminated midterm. So again, they are already rolled off the books. So, we are very focused. So the terminated programs should be gone within four quarters and a sort of diminishing amount of impact each quarter in terms of premium. So we are looking at that. I think we have disclosed in the results the US operations' results without the terminated programs and without the reserve development. Again, we are also focusing on operational efficiencies. We are combining the entities of American Country and American Service. So we are working, we are looking at all aspects, looking at ways we can get cost savings and efficiencies. So we are very focused on improving, and I think we expect to see improvement each quarter as we move forward from here. Michael Goldberg – Desjardins Securities: Okay. So you've obviously done some budgeting going forward. How long do you think – how many quarters – I guess what you are saying is we should expect to see steady improvement. Okay, maybe I will just move on. My second question is about your tax position. Can you discuss the US tax position? The level of the tax pool at quarter end, what is being done to benefit from the pools and when and over what period of time do you think that that is likely to happen?

By tax and pools, Michael, are you referring to the valuation allowance that we took in the fourth and first quarters? Is that what you are referring to? Just want to make sure I understand your question. Michael Goldberg – Desjardins Securities: Well, what I am really referring to is the fact that in your onshore US business, because of the losses you weren't able to fully tax-effect those losses.

Right. Based on, yes, correct, based on the losses, the loss carry-forwards we had, we could not demonstrate our ability to utilize those within a shorter period of time than what they actually expire in. So we currently have what I would call a provision of $28 million against those losses. There was no change to the provision in the quarter. As the results are stabilizing, we do expect that provision to be able to come back onto the books. We have to demonstrate profitability onshore, and then that asset that is sitting there will effectively come back through the income statement. Michael Goldberg – Desjardins Securities: So there is $28 million of tax loss carry-forward is what you are saying; am I interpreting that correctly?

No, there is actually more tax loss carry-forwards on the books. We had to write down the assets by $28 million until we could demonstrate profitability in our US-domiciled companies. Michael Goldberg – Desjardins Securities: So how much actual tax loss carry-forward is there now?

It is probably – I am just going to –

While Shelly is looking for that, Michael, I think the test from a GAAP accounting perspective is the strategy for recoverability of those losses over a relatively short period, no longer than five years whereas those tax losses are available for recovery over the next 20 years.

20 years, yes. Michael Goldberg – Desjardins Securities: So this is what I am really getting at. Can you talk about the actions that you are taking or expect to take in order to be able to reflect those tax pools in your results to bring them into income, and when you think that is likely to happen?

Well, one of the strategies that will improve the results in the US is the repayment of our debt. That will generate savings from the US position, as well as returning the US operations, returning Lincoln to profitability. That will definitely impact the overall results of the US and be in a position to demonstrate profitability and write that asset back onto the –

At the appropriate time.

At the appropriate time.

Michael, maybe trying to tie that back to your first set of questions, there is some information on page 4 of the MD&A that might put some things into perspective. The combined ratio on the terminated commercial programs at Lincoln was 160.3% as compared to a combined ratio of 99.4% on the active programs. So as those terminated programs are earning off over the next 12 months, we are going to see, obviously, a more significant impact from the active programs, which are running at very acceptable loss ratios, certainly from an industry standpoint. We are obviously going to be working hard to expand on the profitability there and also grow those programs. Michael Goldberg – Desjardins Securities: Right. What I am getting at, though, is ideally it would be nice to get those tax pools into earnings and into book value as soon as possible. So in addition to repaying debt and returning Lincoln to profitability, are there other things that you can do in order to accelerate the recovery of those tax pools?

We do, Michael, have tax planning strategies that we are working on but at this point we have nothing that we can comment on. But it's definitely a goal that we have, is to get those back into the book value. Michael Goldberg – Desjardins Securities: So, just to tie it up, assuming that you were successful in completing all of those goals, how much would the recovery of the tax pools increase your book value by?

About $0.50. Michael Goldberg – Desjardins Securities: Thank you.

(Operator instructions) your next question is a follow-up from Amit Kumar of Fox-Pitt Kelton. Amit Kumar – Fox-Pitt Kelton: Thanks. Just going back to the discussion on capital management, I think you mentioned that you plan to repay $50 million by year end. I don't know if you talked about it, but did you have any discussion on future stock repurchase?

We have a program in place, Amit and that is again part of our capital strategy along with our dividend policy. So yes, we have a normal course issuer bid in place and anticipate that we will be buying back stock once that blackout period ends. Amit Kumar – Fox-Pitt Kelton: Okay. I'm sorry, did you say when the blackout period ends?

We have enforced blackout periods because of earnings releases, etc. We blackout at the end of a fiscal quarter and then have a period subsequent to this release where we can't, as a policy, we won't buy back. Amit Kumar – Fox-Pitt Kelton: Okay. Based on where the stock is trading at, would it be fair to say that we could see a return to the Q1 levels or –

You will see some – I mean we were buying back stock in the last year at significantly higher levels than the stock is currently trading, and we felt that it was a good purchase at those levels. Amit Kumar – Fox-Pitt Kelton: Right. Okay. Then I guess it is fair to assume that you don't plan to sort of go back or seek a B++ rating based on your capital management actions.

We plan to work with the rating agencies to improve our ratings over time, Amit, but I think, as we said earlier in the call, obviously we want to get our ratings back to where we feel they should be. But in terms of the (inaudible) affecting our business, the majority of our business is not sensitive to the A.M. Best rating. Non-standard automobile in the States is not; most of our Canadian business is not affected by the A.M. Best rating that we have on the company. It is just not a major factor in the Canadian marketplace. Amit Kumar – Fox-Pitt Kelton: Okay, that's helpful. My second question is, I don't know if you – do you want to elaborate on sort of the M&A environment and where you see yourself I guess both in terms of buyer of small books or maybe a seller in these markets?

Well, I think you have seen transactions, I think recently, even one in the last couple of weeks, where I think in my view the public market valuations of the companies in our sector is not reflective of strategic and industry valuations. You saw that in a very big way, I think, with the Philadelphia Consolidated transaction just a few weeks ago. So whether there will be a lot of M&A activity, it is difficult to comment on because valuations just seem to be out – public market valuations are a little bit out of kilter with private market. Amit Kumar – Fox-Pitt Kelton: Okay. I'm sorry, say that again.

No, it just remains to be seen, Amit. Amit Kumar – Fox-Pitt Kelton: Okay, okay, that's helpful. Thanks so much.

Okay, thank you.

Your next question comes from Ian Gillespie [ph], a private investor. Please proceed.

As I recall, in the May call you mentioned that you would be meeting with the board to discuss various strategic options going forward. I think I have got that right. In any event, could you share a little bit of what your future plans are for Kingsway, perhaps in conjunction with those board discussions over the course of the next several years, pig-picture kinds of ideas?

Yes, I mean, I think you are starting to see that sort of in the LGN [ph] we made some executive changes, alignments. I think there will be more as we move forward as we align and focus on what we consider to be our core products. You're seeing a little bit of that as well when we are exiting non-core businesses and really focusing, I believe, on those lines of business where we really have a competitive market advantage and we have the expertise. And getting out of programs like the artisan contractor business I think is sort of part of the execution of that strategy. I am sort of pleased as we are emerging, the mix of business has changed over the last year. Non-standard automobile, which has been a major line of business for us, a very successful line of business for us in both Canada and the US over the years, is now becoming a larger part of our operation. We just recently in this quarter, as you saw, announced the combining of two of our entities, American Service and American Country, which previously were competing with each other in the same marketplace. So again, we are looking at many aspects and facets in our operation and really looking at how we can go to market in a more focused manner, look for operational synergies in the back office, and really reposition the company to produce better results in the short term; but in the longer term be ready when the market conditions do turn and they traditionally do in our market space, and we want to be well prepared for that. But I don't see, as I said I think in the prepared comments, much change in general market conditions in Canada and the US for the next several quarters. So that gives us that opportunity to position ourselves, while at the same time continuing to have our conservative investment philosophy and build book value per share in that manner, and be well positioned for the future.

Some of those changes that you highlight are more sort of operational requirements than sort of a real strategic sense as to where you want to take the company. Did I understand then that non-standard is really where you want to make your mark going forward? Be a bigger player than that?

Well, we are a big player in non-standard automobile. We are also a big player in motorcycle in Canada. We are a large writer of commercial business and other specialty surety-type lines. So we are really focusing on those lines, Ian, both in Canada and the US. There is a much deeper market for those products and a much more fragmented market for those products in the US. But I think in a lot of ways, some of our challenges over the last several quarters have been attributable to Lincoln, and I think Scott is well on the way to fixing that. Whereas many of our other platforms have performed very well and I think provide a good base to move forward in those core products.

Are you going to be describing in some greater detail in that sort of investor day in the fall just where you are looking to take the company?

I think we will be further down the road at that point, Ian, in terms of executing on some of these strategies. So absolutely we plan to do that.

Lastly, one of the elements of the directors' compensation, as I recall, is the issuance of certain stock options. Are those based on market price or book value?

They are based on the market price at the time that they are granted; and they are granted every year at the same time.

Is that not something that should be reviewed or discussed with the board on the basis of the significant dilution that that creates when the market is about half the book value?

I am not sure, well they are not exercising their options, Ian, so they are out of the money. The director options I think are relatively modest at about 5,000.

Right, and they are not vested at this point either.

No, but certainly –

They are modest. I mean, we have 55 million approximately shares outstanding. I mean, the level granted to the company is fairly small. It certainly doesn't have a dilution effect.

No, relatively small. But I think there is an important principle when the stock is trading where it is, for reasons that both certain of the management and the board were involved in, they shouldn't necessarily benefit from having extremely cheap options going forward that are well below the so-called intrinsic value of the company.

That's fair, Ian. I think you would find that most of the options that the directors and the executives have given the current level of share price are underwater.

They're not in the money.

And like yourselves, many of the executives like Shelly and myself are large shareholders in the company. So we are obviously feeling that pain along with everybody else.

Lastly, Shaun, are you comfortable with the dividend policy of Kingsway at the present time and for the foreseeable future?

Well, we are certainly comfortable with the level of dividend. Obviously over time, Ian, we have increased it. I think it would be a goal over time to continue with that sort of policy, as increasing it at the appropriate time.

Had you considered reducing or eliminating the deficit – the dividend until such time as you got things back on track, as a way of preserving capital?

We did not consider eliminating the dividend. I think it's appropriate to pay it at this level, and it's a sign of confidence in the company that we continue to feel that way.

Okay. Thanks, Shaun.

Okay. Thanks, Ian.

The next question is a follow-up question from Chuck Hamilton at FTN Midwest Securities Corp. Please proceed. Chuck Hamilton – FTN Midwest Securities Corp: Just a quick couple of follow-ups. I guess, firstly, when I take a look at the US expense ratio, we saw 34% in this quarter compared to 30% last year; and I think on a sequential basis the expense ratio was 29% in the first quarter. I know that earned premiums year over year have declined by $60 million from $340 million down to $280 million. But when you take a look at the dollars for the expense ratio in the US, it went from $103 million down to $95 million or only an $8 million decrease in expenses relative to the $60 million decrease in the earned premium level. Maybe, Scott, this is a question for you. I realize when premium volumes decline it is hard to hit the fixed cost structure quickly enough to be able to move down. But I guess the question is, is that 34% just a one-quarter or two-quarter issue or can we expect that to remain at that elevated level?

Chuck, I think I will just start by answering. I mean it is definitely something we are focusing on, is expense management. I think one of the steps – American Country has experienced declining premium volumes and a high expense ratio as a result of those declining volumes, so obviously the step of transitioning it into American Service is going to assist on that. Then I will let Scott follow up in terms of his response on expense ratio.

Well, in terms of Lincoln, there are really two important things to look at. One is that historic expense ratio have been very low because of the nature of the distribution channel. Candidly at this point, I think one of the things we are recognizing is it is important to invest in some of our key disciplines to ensure that we don't repeat history in terms of some of the loss results. So we are expecting to see an increase in the percentage of general expenses. But to put that into context, it will be a couple of points. We are not talking about a substantial increase. At this stage, if an investment of a couple of points on the combined is going to help us to bring down 20 points or more, I think that we would all agree that that would be money well spent. It also will then position us well for a firming or hardening market where we are then able to build in a more managed way. But to get more specifically to the question, when you look at the components of the overall expenses, the acquisition costs are going to remain fairly constant as they're a percentage of earned premiums. So as the earned premium goes down it is not a fixed cost; it's going to go down along with it as a percentage. The general expenses that I mentioned, we're expecting to go up a couple of points, primarily because we do want to continue to invest in the key disciplines. The other two major components, the unallocated and allocated loss adjustment expense, are really variable costs that are driven by claim volume as opposed to premium volume. So the nature of most of our businesses, we'd expect the bulk of claims to be reported within 12 to 18 months; so we are going to see an increase in the percentage, because we are going to have to carry the resources necessary to manage the claims load as it runs off. That said, in Q2 of '08 we are already seeing a decline in new claims presented. So we will continue to manage our expenses as the claims volume goes down. So I think over the next four quarters you will start to see those percentages start to go back to a range that was more consistent, again with the caveat that we do want to invest in some of the key disciplines to ensure our future success from a profitability standpoint. Chuck Hamilton – FTN Midwest Securities Corp: Great, I think that's helpful, Scott. Perhaps again throwing this question back to you as well, in terms of the terminated programs I think you had identified that the artisans program was discontinued and put into run-off. You have also alluded to the fact that the reduction in the A.M. Best rating had also affected your commercial business. Are there specific commercial programs that have been discontinued as a result of that?

Not specifically as a result of the A.M. Best rating, but it is the case that we are working with our key partners to identify business opportunities that are not as A.M. Best rating-specific. As I think I mentioned earlier as well, the business that is most sensitive today in A.M. Best rating in the commercial auto arena tend to be the larger fleets. Those are the ones right now that are attracting the lowest price in the marketplace. So it really does make sense for us, notwithstanding the A.M. Best rating, to want to focus more on writing a larger number of smaller fleet business. It attracts a higher price per power unit, and they are also areas where some of the core value-added attributes that we can attach to the product, things like loss control, safety management tend to have, I think, more value to some of those size users of our product, because of the fact that they don't have as much infrastructure as some of the larger fleets. So certainly we would like to see the A.M. Best rating return. I think the reality of it is it is going to be driven by our underwriting profit and us demonstrating the ability to create surplus within the operating businesses. So while it's going to be an ongoing exercise, we are going to grow the business and generate profitable business by focusing strategically in those areas where our current A.M. Best rating and our current core competencies are going to have value in the marketplace. Chuck Hamilton – FTN Midwest Securities Corp: Sure, great. Thanks for that, Scott. Just a quick follow-up to that is I guess my question specifically is related to the cab or the tax livery type service, has that program been affected by the A.M. Best reduction or by the actual review of the profitability and the determination of potential run-off candidates?

I don't want to speak for American Country and American Service. But American Country had always been a leading cab rider and carried a Best rating of B or B+ really forever. So I don't think that that business is nearly as sensitive as some of the larger fleet commercial business that Lincoln had been involved in. But again, we are really estimating it in terms of the total written premiums. For Lincoln, the Best rating is probably impacting about 10% of the book. I would guess that is the majority of the US business that is going to be affected across all the subsidiaries.

Yes, I mean I think it's been kind of interesting, Chuck, where you may recall when we – the downgrade from A to B was sort of the point earlier this year, and at that point we did put in place an arrangement where we could in fact avail ourselves of A paper. We found that a lot of businesses that purportedly needed A paper were in fact, when it really came down to it, a lot of the business really didn't need it. So that has been selectively used. We have not had to put it into place for very much of our business. But obviously if there is a piece of business that absolutely has to have the A rating, and it meets our criteria of profitability and being a core line of business, then we will do everything we can obviously to maintain that business.

To that point, one of the things we are finding is most of our business partners are communicating the fact that they don't need the A paper across their entire portfolio of business; but they do need it for select key accounts. So it is important that we have access to it; but really we are able to use it selectively and really balance that. Obviously we want to maintain a more positive relationship with A.M. Best and achieve the better rating going forward.

Your next question is a follow-up question from Michael Goldberg of Desjardins Securities. Please proceed. Michael Goldberg – Desjardins Securities: Thank you. Shaun, I am wondering what your preference would be now with capital that you generate, debt reduction or stock buyback? And does the existing Canadian bank facility in any way limit your flexibility to buy back stock?

Well, I think, Michael, looking at our capital, I think we would look at both of those. The existing bank facility now, as we move forward, in the past we were dealing with a syndicate of banks, we are now dealing with one bank which has been our major business partner for several years. There are no restrictions – well, there is a limited restriction. We can buy up to $20 million of stock, which has been one of the carve-outs [ph] in that facility for forever. And again that doesn't mean that if we got to that level we wouldn't reach their agreement. But as I said the facility only runs to the end of the year. So we have a lot of flexibility to buy back our stock. So I think looking at both of those, Michael, looking obviously where the stock is trading right now, anytime you can buy back your own stock at about a half of its book value, I think it is a good buy for shareholders. Michael Goldberg – Desjardins Securities: Okay. I just want to clarify one other thing. Shelly, you said that excluding terminated programs at Lincoln, US combined is 101.0%. What would this be in the current accident year, on this basis?

Michael, I don't have that information in front of me. I will have to follow up with you on that comment. Michael Goldberg – Desjardins Securities: Okay, great. Thanks very much.

Okay, we will follow up; we will circle back, Michael.

Mr. Jackson, there are no further questions at this time. Please continue.

Okay, well thank you very much for participating this morning. We appreciate your comments and interest and look forward to updating you as we progress through the balance of the year. Thank you.

Ladies and gentlemen, this concludes our conference call for today. Thank you for participating. You may now disconnect your lines.