Kingsway Financial Form 6K August 2003

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2004.

     KINGSWAY FINANCIAL SERVICES INC.     
(Exact name of Registrant as specified in its charter)

ONTARIO, CANADA
(Province or other jurisdiction of incorporation or organization)

     5310 Explorer Drive, Suite 200, Mississauga, Ontario, Canada L4W 5H8     
(Address of principal executive offices)

             [Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:] 

                                          Form 20-F                 Form 40-F   X    

             [Indicate by check mark whether the Registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:]

                                                     Yes                         No   X  

             [If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):]  

                                                        N/A   

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KINGSWAY FINANCIAL SERVICES INC.

Table of Contents

Item Description Sequential
Page
Number
1.Press Release – dated August 5, 2004 4
2. Report to Shareholders – Quarter ended June 30, 2004 14
3. CEO Certification required under Canadian securities legislation 35
4. CFO Certification required under Canadian securities legislation 36

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SIGNATURES

              Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  KINGSWAY FINANCIAL SERVICES INC.
 
Dated: August 6, 2004 By: /s/  W. Shaun Jackson
         W. Shaun Jackson
         Executive Vice President and
         Chief Financial Officer

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Kingsway Logo

        KINGSWAY REPORTS RECORD NET INCOME AND EARNINGS PER SHARE FOR QUARTER AND SIX MONTHS

Toronto, Ontario (August 5, 2004) – Kingsway Financial Services Inc. (TSE:KFS, NYSE:KFS) today announced financial results for the quarter ended June 30, 2004 and year to date.

Q2 2004 Summary

•    Diluted earnings per share increased 7% to a quarterly record 59 cents

•    Net income increased 22% to $33.3 million compared to Q2 2003

•    Combined ratio improved to 97.7% compared to 99.2% for Q2 2003

•    Underwriting profit of $13.2 million compared to $4.7 million in Q2 2003

•    Annualized return on equity 17.2%

•    Book value per share $14.21 an increase of 13% from year end

•    Investment portfolio increased to $3.1 billion or $54.68 per share

Net income increased by 22% to $33.3 million, compared to $27.3 million reported in the second quarter of last year. Net income for the six month period was a record $64.1 million, an increase of 24% over the $51.7 million reported last year. Income before income taxes for the quarter increased by 44% (29% year to date) to $40.4 million ($72.9 million year to date) compared to the same period last year. The income tax provision for the quarter was $7.2 million ($8.8 million year to date) or 17.7% (12.1% year to date) of income before income taxes compared with $0.8 million ($4.7 million year to date) or 2.8% (8.3% year to date) for the same period last year. Return on equity on an annualized basis was 17.2% for the quarter and 17.0% for the six months.

Diluted earnings per share increased 7% to 59 cents for the quarter on 14% more shares outstanding, compared to 55 cents for the second quarter of 2003 last year. For the six month period, diluted earnings per share increased by 10% to $1.14 on 14% more shares outstanding than last year.

“I am again pleased to report record net income and earnings per share for the quarter and six month periods”, said Bill Star, President & Chief Executive Officer. “The results of our Canadian operations are particularly pleasing with each Canadian subsidiary producing an underwriting profit in the quarter. The decisive actions that we have taken in Canada are leading to premium growth and improved underwriting results. The current maturity profile of our fixed income portfolio should also allow us to grow our investment income should interest rates rise. We are well positioned to benefit from the favourable insurance conditions in many of our markets and a rising interest rate climate.”

Premium Growth

During the second quarter of 2004, gross premiums written increased 11% to $702.0 million compared with $629.9 million last year. For the year to date gross premiums written increased by 6% to $1.4 billion compared to $1.3 billion last year.

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For the quarter, gross premiums written from U.S. operations increased 5% to $476.4 million (U.S.$350.6 million) compared with $453.9 million (U.S.$324.4 million) last year and Canadian operations grew 28% to $225.6 million. For the six months, gross premiums written by the U.S. operations were $1.02 billion ($1.03 billion last year). In source currency gross premiums written by U.S. operations increased 8% to U.S.$764.3 million compared to the first half of last year. For the Canadian operations gross premiums written for the first half of 2004 increased by 29% to $390.2 million over $303.1 million last year. Net premiums written were $1.2 billion compared with $1.3 billion for the first six months of last year. Net premiums earned were $1.2 billion for the first six months of this year and $1.2 billion last year.

During the quarter the Company entered into two quota-share reinsurance arrangements in Canada and the United States. Under these treaties the Company ceded $71.6 million of the unearned premiums at the beginning of the quarter and $66.1 million of net premiums written in the quarter to reinsurers rated A+ or better by A.M. Best. As a result, the rolling four quarter net premiums written to surplus ratio declined from 2.8x at March 31, 2004 to 2.5x at June 30, 2004. Under both treaties the Company has the option to vary the amount of premiums ceded in any quarter, which provides flexibility in managing premium leverage. As a result of entering into these treaties, net premiums earned were reduced by $61.4 million, underwriting profit by $2.4 million, net income by $1.6 million and earnings per share by 3 cents for the quarter and year to date.

Underwriting Profit & Combined Ratio

The combined ratio of 97.7% for the second quarter produced an underwriting profit of $13.2 million, compared with 99.2% and $4.7 million of underwriting profit reported in the second quarter of 2003. The combined ratio improved to 98.0% compared with 98.1% in the first six months of 2003, which produced a record six month underwriting profit of $23.6 million compared with $22.5 million in the first half of last year. The U.S. operations combined ratio was 98.5% compared to 96.1% in the first half of last year and for the Canadian operations it improved to 96.5% compared to 105.4% for the same period last year.

Investment Income

Investment income increased 26% to $24.1 million ($46.4 million year to date) compared with $19.2 million ($34.9 million year to date) for the second quarter of 2003. Net realized gains amounted to $9.4 million ($7.9 million after tax) compared with $9.5 million ($8.6 million after tax) for the second quarter last year, and for the year to date were $16.1 million ($13.2 million after tax) compared to $8.8 million ($9.1 million after tax) last year. Net unrealized gains of $23.8 million include net unrealized gains on the common shares portfolio of $43.5 million (77 cents per share outstanding) at June 30, 2004.

Balance Sheet

Total assets as at June 30, 2004 grew to $4.2 billion. The investment portfolio, including cash and accrued investment income, increased to $3,071.4 million (market value $3,095.2 million), compared to $2,674.1 million (market value $2,726.7 million) as at December 31, 2003. Investment portfolio per share increased 14% to $54.68 compared to $47.90 as at December 31, 2003. During the quarter, the incurred but not reported claims (IBNR) provision was increased by $25 million ($76 million year to date) to $822.5 million or 42% of total unpaid claims provisions.

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Book value per share increased by $1.58 or 13% since the beginning of the year to $14.21 at June 30, 2004, which is inclusive of the unrealized currency translation adjustment which increased book value per share 45 cents for the year to date.

Currency

A significant portion of the Company’s operations and net assets are denominated in U.S. dollars whereas the Company reports in Canadian dollars. During the first six months of 2003, the Canadian dollar appreciated significantly against the U.S. dollar thereby affecting the comparability of results for this year to last year. Had the results of the U.S. operations been translated at the same exchange rates as the first half of last year, net income and earnings per share would have been further increased by $3.4 million ($0.2 million in the quarter) and 6 cents, respectively.

The supplementary information contained in this press release contains selected financial information expressed in U.S. dollars. For the six month period to June 30, 2004 net income and earnings per share increased by 38% and 21% to U.S.$49.0 million and U.S.$0.87, respectively. Book value per share grew by 18% from a year ago to U.S.$10.60.

Effective January 1, 2005, the Company will change its reporting currency from Canadian dollars to U.S. dollars and this change will be accounted for on a prospective basis.

Further Information

The discussion and analysis of our results of operation and information in this press release is an update of the information set forth in our 2003 Annual Report. Further information about our financial results and condition can be found in our Annual Report and other filings.

Conference Call

The Company will have a conference call starting today at 5:00pm (Eastern time) on August 5, 2004. If interested in participating, please dial 1-800-814-4860 about five minutes before the start of the call. A live broadcast of the conference call can be accessed at www.newswire.ca/en/webcast/viewEvent.cgi?eventID=863720. You may also link to the broadcast through our website at
www.kingsway-financial.com. A rebroadcast of the conference call will also be available and can be accessed through our website.

Forward Looking Statements

This press release includes “forward looking statements” that are subject to risks and uncertainties. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see Kingsway’s securities filings, including its 2003 Annual Report under the heading Risks and Uncertainties in the Management’s Discussion and Analysis section. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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About the Company

Kingsway’s primary business is trucking insurance and the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The Company currently operates through nine wholly-owned insurance subsidiaries in Canada and the U.S. Canadian subsidiaries include Kingsway General Insurance Company, York Fire & Casualty Insurance Company and Jevco Insurance Company. U.S. subsidiaries include Universal Casualty Company, American Service Insurance Company, Southern United Fire Insurance Company, Lincoln General Insurance Company, U.S. Security Insurance Company, American Country Insurance Company and Avalon Risk Management, Inc. The Company also operates reinsurance subsidiaries in Barbados and Bermuda. Lincoln General Insurance Company, Universal Casualty Insurance Company, Jevco and Kingsway Reinsurance (Bermuda) are all rated “A-” Excellent by A.M. Best. Kingsway General and York Fire are rated “B++” (very good). The Company’s senior debt is rated investment grade “BBB-” by Standard and Poor’s and “BBB” by Dominion Bond Rating Services. The common shares of Kingsway Financial Services Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange, under the trading symbol “KFS”.

– 30 –

For further information, please contact:
Shaun Jackson
Executive Vice President and Chief Financial Officer
Tel: (905) 629-7888
Fax: (905) 629-5008
Web Site: www.kingsway-financial.com

Page 8 of 36

KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars, except for per share amounts)

  Quarter to June 30: 6 months to June 30:
  2004 2003 2004 2003
  (unaudited)
Gross premiums written   $701,980   $629,928   $1,412,425   $1,332,488  
Net premiums written  $556,017   $607,192   $1,240,098   $1,273,855  
Revenue: 
  Net premiums earned  $585,864   $621,280   $1,170,694   $1,172,535  
  Investment income  24,064   19,169   46,393   34,935  
  Net realized gains  9,357   9,477   16,127   8,789  
   619,285   649,926   1,233,214   1,216,259  
Expenses: 
  Claims incurred  408,601   441,451   830,807   830,115  
  Commissions and premium taxes  115,796   141,144   226,351   255,453  
  General and administrative expenses  48,258   33,993   89,920   64,425  
  Interest expense  6,001   5,048   12,931   9,510  
  Amortization of intangibles  180   214   355   444  
   578,836   621,850   1,160,364   1,159,947  
Income before income taxes  40,449   28,076   72,850   56,312  
Income taxes  7,162   812   8,795   4,654  
Net income  $  33,287   $  27,264   $     64,055   $     51,658  
Earnings per share:          
             Basic:  $0.59   $0.56   $1.14   $1.06  
             Diluted:   $0.59   $0.55   $1.14   $1.04  
Weighted average shares outstanding:  
              Basic:   56,160   48,931   56,063   48,880  
              Diluted:   56,488   49,531   56,417   49,507  
Claims ratio   69.7 %  71.0 %  71.0 %  70.8 % 
Expense ratio   28.0 % 28.2 % 27.0 % 27.3 % 
Combined ratio   97.7 %  99.2 %  98.0 %  98.1 % 
 
Underwriting profit   $  13,209   $    4,692   $  23,616   $     22,542  
Return on equity (annualized)   17.2 %  18.2 %  17.0 %  17.2 % 
Book value per share           $14.21   $12.09  

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KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)

    June 30
2004
(unaudited) 		Dec. 31
2003
(audited)
ASSETS      
    Cash   $     82,663   $   140,883  
    Investments   2,960,140   2,512,052  
    Accrued investment income   28,593   21,189  
    Accounts receivable and other assets   497,967   387,052  
    Due from reinsurers and other insurers   217,506   176,295  
    Deferred policy acquisition costs   200,919   167,960  
    Income taxes recoverable   13,195   --  
    Future income taxes   64,693   72,184  
    Capital assets   75,442   66,981  
    Goodwill and intangible assets   89,435   85,840  
    $4,230,553   $3,630,436  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
       
LIABILITIES      
    Bank indebtedness   $     48,691   $   153,895  
    Accounts payable and accrued liabilities   125,861   128,797  
    Income taxes payable   --   2,589  
    Unearned premiums   935,879   776,481  
    Unpaid claims   1,954,952   1,669,734  
    Senior unsecured indebtedness   245,550   78,000  
    Subordinated indebtedness   121,306   115,981  
    3,432,239   2,925,477  
SHAREHOLDERS’ EQUITY      
       
    Share capital   471,546   468,668  
    Issued and outstanding number of common shares  
        56,169,663 - June 30, 2004  
        55,829,794 - December 31, 2003  
    Contributed surplus   1,446   678  
    Currency translation adjustment   (68,659 ) (94,313 )
    Retained earnings   393,981   329,926  
    798,314   704,959  
    $4,230,553   $3,630,436  

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KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
As at June 30, 2004 and December 31, 2003
(In thousands of Canadian dollars)

1.    Investments:

   June 30, 2004
    Carrying
amount 		  Fair
value
Term deposits   $   335,444   $   335,034  
Bonds: 
       Government  909,923   904,013  
       Corporate  1,320,246   1,306,892  
Preferred shares  1,000   938  
Common shares  299,490   343,103  
Financed premiums  94,037   94,037  
   $2,960,140   $2,983,927  
 
   December 31, 2003
    Carrying
amount 		  Fair
value
Term deposits  $   285,715   $   285,500  
Bonds: 
       Government  783,857   787,552  
       Corporate  1,107,515   1,112,386  
Preferred shares  500   512  
Common shares  253,551   297,725  
Financed premiums  80,914   80,914  
   $2,512,052   $2,564,589  

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KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
For the six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars)

2.        Underwriting Results:

            The underwriting results for the Company's operations were as follows:

  Quarter to June 30: 6 months to June 30:
  2004 2003 2004 2003
Underwriting Profit (Loss)  
  Canada   $    8,523   $(13,653 )  $  10,993   $(13,490 ) 
  U.S.   4,686   18,345   12,623   36,032  
  Total   $  13,209   $    4,692   $  23,616   $  22,542  
Combined Ratio  
  Canada   94.7 %  110.0 %  96.5 %  105.4 % 
  U.S.   98.9 %  96.2 %  98.5 %  96.1 % 
  Total   97.7 %  99.2 %  98.0 %  98.1 % 
Expense Ratio  
  Canada   25.1 %  26.8 %  25.5 %  28.1 % 
  U.S.   29.1 %  28.6 %  27.5 %  27.1 % 
  Total   28.0 %  28.2 %  27.0 %  27.3 % 
Loss Ratio  
  Canada   69.6 %  83.2 %  71.0 %  77.3 % 
  U.S.   69.8 %  67.6 %  71.0 %  69.0 % 
  Total   69.7 %  71.0 %  71.0 %  70.8 % 
Change in estimated unpaid claims for prior
    accident years (note 1):		  
  Canada   $(11,170 )  $(25,412 )  $(10,754 )  $(34,287 ) 
  U.S.   (12,233 )  (25,391 )  (19,136 )  (34,453 ) 
  Total   $(23,403 )  $(50,803 )  $(29,890 )  $(68,740 ) 
As a % of net premiums earned (note 2):  
  Canada   6.9 %  18.5 %  3.4 %  13.8 % 
  U.S.   2.9 %  5.2 %  2.2 %  3.7 % 
  Total   4.0 %  8.2 %  2.6 %  5.9 % 
As a % of unpaid claims (note 3):  
  Canada       2.0 %  10.4 % 
  U.S.       1.6 %  4.3 % 
  Total       1.8 %  5.7 % 
Note 1 – (Increase) decrease in estimates for unpaid claims from prior accident years reflected in current financial year results.

Note 2 – Increase (decrease) in current financial year reported combined ratio.

Note 3 – Increase (decrease) compared to estimated unpaid claims at the end of the preceding fiscal year.

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KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION TO PRESS RELEASE
As at June 30, 2004, December 31, 2003 and June 30, 2003
(In thousands of Canadian dollars, except for per share amount)

3.    Financial Strength:

        Some of the key indicators of the Company’s financial strength are as follows:

    June 30,
2004 		December 31,
2003
Rolling four quarter calculations:      
       Net Premiums Written to Estimated Statutory Surplus Ratio   2.5 x  2.9 x 
       Interest Coverage Ratio   5.3 x  5.2 x 
Total Bank and Senior Debt to Capitalization Ratio   24.9 %  22.1 % 

4.    Selected Financial Information expressed in thousands of U.S. dollars, except for per share amounts

  Quarter to June 30: 6 months to June 30:
  2004   2003   2004   2003
Gross Premiums Written   $529,644   $448,005   $1,080,505   $913,954  
Net Premiums Earned   442,034   441,855   895,581   804,242  
Net Income   25,115   19,390   49,002   35,432  
Earnings Per Share - diluted   $0.44   $0.39   $0.87   $0.72  
Underwriting Profit   9,967   3,336   18,066   15,461  
Book Value Per Share   $10.60 $8.97  
  The selected financial information disclosed above has been translated using a foreign exchange rate for the income statement of Canadian $1 = U.S. $0.7545 and Canadian $1 = U.S. $0.7112 for the quarter ended June 30, 2004 and 2003, respectively, and Canadian $1 = U.S. $0.7650 and Canadian $1 = U.S. $0.6859 for the six months ended June 30, 2004 and 2003, respectively. The book value per share was translated at the quarter end rate of Canadian $1 = U.S. $0.7460 and Canadian $1 = U.S. $0.7418 for June 30, 2004 and 2003, respectively. Readers should be cautioned as to the limited usefulness of the selected financial information presented above.

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KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars)

  Quarter to June 30: 6 months to June 30:
  2004   2003   2004   2003
  (unaudited)
Cash provided by (used in):          
Operating activities: 
Net income  $   33,287   $      27,264   $      64,055   $      51,658  
Items not affecting cash: 
  Amortization  3,040   2,023   5,149   3,487  
  Future income taxes  5,117   (4,568 ) 9,428   (4,141 )
  Net realized gains  (9,357 ) (9,477 ) (16,127 ) (8,789 )
  Amortization of bond premiums & discounts   9,288   3,084   16,064   5,681  
    41,375   18,326   78,569   47,896  
Net change in non-cash balances:   97,900   111,107   167,141   178,061  
    139,275   129,433   245,710   225,957  
Financing activities:  
  Increase of share capital, net   214   414   2,878   1,216  
  Increase (decrease) in bank indebtedness   21,655   (6,548 ) (108,808 ) 8,743  
  Increase in senior unsecured indebtedness   2,389   --   169,521   --  
  Increase in subordinated indebtedness   --   44,458   --   44,458  
    24,258   38,324   63,591   54,417  
Investing activities:  
  Purchase of investments   (995,449 ) (2,133,793 ) (1,685,682 ) (4,530,957 )
  Proceeds from sale of investments   819,369   1,859,049   1,340,144   4,109,862  
  Financed premiums receivable, net   (9,078 ) (1,689 ) (12,054 ) (1,756 )
  Purchase of subsidiary, net of cash acquired   --   --   --   --  
  Net change to capital assets   (3,019 ) (20,908 ) (9,929 ) (20,493 )
    (188,177 ) (297,341 ) (367,521 ) (443,344 )
Increase (decrease) in cash during period   (24,644 ) (129,584 ) (58,220 ) (162,970 )
Cash, beginning of period   107,307   211,535   140,883   244,921  
Cash, end of period   $   82,663   $      81,951   $      82,663   $      81,951  

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PRESIDENT’S MESSAGE TO SHAREHOLDERS

Dear Shareholders:

I am pleased to report to you record levels of net income and earnings per share for the second quarter and first six months of 2004.

For the three months ended June 30, 2004, net income increased 22% to $33.3 million, a new quarterly record, compared to $27.3 million reported in the second quarter of last year. Net income for the six month period was a record $64.1 million, an increase of 24% over the $51.7 million reported last year. Return on equity on an annualized basis was 17.2% for the quarter and 17.0% for the six months. Diluted earnings per share increased 7% to 59 cents for the quarter on 14% more shares outstanding, compared to 55 cents for the second quarter of 2003 last year. For the six month period, diluted earnings per share increased by 10% to $1.14 on 14% more shares outstanding than last year.

The combined ratio of 97.7% for the second quarter produced an underwriting profit of $13.2 million, compared with 99.2% and $4.7 million of underwriting profit reported in the second quarter of 2003. For the first half of 2004 the combined ratio improved to 98.0% compared with 98.1% in the first six months of 2003, which produced a record six month underwriting profit of $23.6 million ($22.5 million last year). The results of our Canadian operations are particularly pleasing with each Canadian subsidiary producing an underwriting profit in the quarter and for the year to date. The decisive actions that we have taken in Canada are leading to premium growth and improved underwriting results.

Investment income increased 26% to $24.1 million ($46.4 million year to date) compared with $19.2 million ($34.9 million year to date) for the second quarter of 2003. Realized gains amounted to $9.4 million compared with $9.5 million for the second quarter last year, and for the year to date were $16.1 million compared to $8.8 million last year. At June 30, 2004 24% of the fixed income portfolio matures in less than one year and 87% matures in less than five years. The current maturity profile of our fixed income portfolio should also allow us to grow our investment income should interest rates rise.

Book value per share increased by $1.58 or 13% since the beginning of the year to $14.21 at June 30, 2004, which is inclusive of the unrealized currency translation adjustment which increased book value per share by 45 cents for the year to date.

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Outlook

We continue to see favourable insurance conditions in many of our markets and see good opportunities to grow our business. With interest rates continuing to be at low levels we believe this bodes well for the future underwriting profitability of many of our business segments. In all of our markets, we continue to focus on maintaining underwriting profitability and we plan to selectively grow in markets which are stable and which provide opportunities for profitable growth. We are well positioned to benefit from the favourable insurance conditions in many of our markets and a rising interest rate climate.

Sincerely,

/s/ William G. Star

William G. Star
President and Chief Executive Officer
Kingsway Financial Services Inc.

August 5, 2004

Page 16 of 36

Management’s Discussion and Analysis
Results of Operations
For the Three and Six Month Periods Ended June 30, 2004 and 2003

The following management’s discussion and analysis (MD&A) should be read in conjunction with the Company’s unaudited interim consolidated financial statements for the second quarter of fiscal 2004 and 2003; with the MD&A set out on pages 17 to 54 in the Company’s 2003 Annual Report, including the section on risks and uncertainties; and with the notes to the interim consolidated financial statements for the second quarter of fiscal 2004 and the notes to the audited consolidated financial statements for fiscal 2003 set out on pages 55 to 73 of the Company’s 2003 Annual Report. (All dollar amounts are in Canadian dollars unless otherwise indicated).

For the three months ended June 30, 2004 and 2003

        Gross Premiums Written. During the second quarter of 2004, gross premiums written increased 11% to $702.0 million compared with $629.9 million in the second quarter last year. A significant portion of the Company’s operations and net assets are denominated in U.S. dollars whereas the Company reports in Canadian dollars. In the quarter, U.S. operations represented 68% of gross premiums written compared with 72% in the second quarter last year. Gross premiums written from U.S. operations increased 5% to $476.4 million compared with $453.9 million last year, whereas in source currency they increased by 8% to U.S.$350.6 million from U.S.$324.4 million in the second quarter last year. Gross premiums written from Canadian operations grew 28% to $225.6 million for the quarter compared to $176.0 million in Q2 last year.

        Net Premiums Written. Net premiums written decreased 8% to $556.0 million compared with $607.2 million for the second quarter of last year. Net premiums written from the U.S. operations decreased 18% to $360.0 million compared with $439.4 million last year. Net premiums written from the Canadian operations increased 17% to $196.0 million compared with $167.8 million in the second quarter of last year.

        During the quarter the Company entered into two quota-share reinsurance arrangements in Canada and the United States. Under these treaties the Company ceded $71.6 million of the unearned premiums at the beginning of the quarter and $66.1 million of net premiums written in the quarter to reinsurers rated A+ or better by A.M. Best. As a result, the rolling four quarter net premiums written to surplus ratio declined from 2.8x at March 31, 2004 to 2.5x at June 30, 2004. Under both these treaties the Company has the option to vary the amount of premiums ceded in any quarter, which provides flexibility in managing premium leverage.

        Net Premiums Earned. Net premiums earned were $585.9 million for the quarter, compared with $621.3 million for the second quarter last year. The effect of the quota-share reinsurance arrangements entered into during the second quarter reduced net premiums earned by $61.4 million. Excluding the effect of the quota-share reinsurance arrangements, net premiums earned increased 4% in the second quarter compared to the second quarter of 2003. For U.S. operations, net premiums earned decreased to $424.7 million compared with $484.2 million in the second quarter of 2003. Net premiums earned from Canadian operations increased by 18% to $161.2 million compared with $137.1 million last year.

        Investment Income. Investment income increased 26% to $24.1 million compared with $19.2 million for the second quarter of 2003.

Page 17 of 36

Page 2

        Net Realized Gains. Net realized gains amounted to $9.4 million ($7.9 million after tax) compared with net realized gains of $9.5 million ($8.6 million after tax) in the second quarter of 2003. During the quarter, realized losses of $0.2 million were recognized for adjustments to the carrying value for declines in market value considered other than temporary on investments still held compared to $nil in the same quarter last year.

        Claims Incurred. Our claims ratio for the second quarter of 2004 was 69.7%, compared to 71.0% to last year. The claims ratio for the U.S. operations was 69.8% compared with 67.6% for the second quarter of 2003. The slight deterioration in the U.S. operations claims ratio is a reflection of the change in the mix of the business. The claims ratio for the Canadian operations improved to 69.6% compared to 83.2% in the second quarter of last year and 72.4% for the first quarter of 2004 as a result of the improvement in our Ontario automobile results.

        The results for the quarter include increases in the provision for unpaid claims occurring prior to December 31, 2003 of approximately $23.4 million ($15.3 million after tax) compared with $50.8 million ($33.8 million after tax) in the second quarter of 2003. These increases represent 4.0% of the net premiums earned in the quarter compared with 8.2% in the second quarter of 2003. For the U.S. operations theses increases represented 2.9% of net premiums earned in the quarter compared to 5.2% for the second quarter of 2003. For the Canadian operations these increases represented 6.9% of net premiums earned for the second quarter of 2004 compared to 18.5% in the same period of last year.

        Underwriting Expenses. The combined ratio of 97.7% for the second quarter produced a record second quarter underwriting profit of $13.2 million, compared with the combined ratio of 99.2% and $4.7 million underwriting profit reported in the second quarter of 2003. For the quarter, the U.S. operations combined ratio was 98.9% (96.2% Q2 last year) and for the Canadian operations improved to 94.7% (110.0% Q2 last year). The Canadian operations continued to show improvement in its expense ratio due to the commission actions previously taken to reduce commissions paid on its non-standard automobile product in both the Ontario and Alberta markets, as well as rate increases and fraud controls implemented in 2003.

        As a result of entering into the quota-share reinsurance arrangements during the quarter, underwriting profit was reduced by $2.4 million and the combined ratio was increased by 0.2% for the second quarter.

        Interest Expense. Interest expense in the second quarter of 2004 was $6.0 million, compared to $5.0 million for the second quarter of 2003 reflecting the increase in interest payment obligations on the U.S.$90.5 million of subordinated indebtedness issued during late 2002 and 2003 as well as the U.S.$125 million 7.50% unsecured senior notes issued in January and March of 2004.

        Income Taxes. The income tax provision for the quarter was $7.2 million or 17.7% of income before income taxes compared with $0.8 million or 2.8% for the same period last year. The increase in the tax rate for the quarter is attributable to the improved profitability of the Canadian operations.

Page 18 of 36

Page 3

        Net Income and Earnings Per Share. Net income for the quarter was $33.3 million, a 22% increase over the $27.3 million reported in the second quarter last year. Diluted earnings per share increased 7% to 59 cents for the quarter on 14% more shares outstanding compared to 55 cents for the second quarter of 2003.

        As a result of entering into the quota-share reinsurance arrangements during the quarter, net income and earnings per share were reduced by $1.6 million and 3 cents, respectively for the second quarter.

        Currency. The Company reports in Canadian dollars, whereas 68% of its gross premiums for the quarter were generated from its U.S. operations. During 2003 the Canadian dollar appreciated against the U.S. dollar thereby affecting the comparability of results, however, there was a stabilizing of the exchanges rates for the quarter compared to the second quarter of 2003. When the Company’s results are translated into U.S. dollars, gross premiums written increased by 18%, net income by 30% and earnings per share by 13% compared to the second quarter of 2003.

For the six months ended June 30, 2004 and 2003

        Gross Premiums Written. For the year to date gross premiums written increased by 6% to $1.4 billion compared to $1.3 billion last year. A significant portion of the Company’s operations and net assets are denominated in U.S. dollars whereas the Company reports in Canadian dollars. In the first six months of 2004, U.S. operations represented 72% of gross premiums written compared with 77% in the first half last year. For the six months, gross premiums written by the U.S. operations were $1.0 billion and for the Canadian operations were $390.2 million, an increase of 29% over last year.

        Net Premiums Written. Net premiums written decreased 3% to $1.2 billion compared with $1.3 billion for the first six months of last year. Net premiums written from the U.S. operations decreased 10% to $887.2 million compared with $988.9 million last year. Net premiums written from the Canadian operations increased 24% to $353.0 million compared with $284.9 million for the first half of last year.

        During the second quarter the Company entered into two quota-share reinsurance arrangements in Canada and the United States. Under these treaties the Company ceded $71.6 million of the unearned premiums at the beginning of the quarter and $66.1 million of net premiums written in the quarter to reinsurers rated A+ or better by A.M. Best. As a result, the rolling four quarter net premiums written to surplus ratio declined from 2.9x at December 31, 2003 to 2.5x at June 30, 2004. Under both these treaties the Company has the option to vary the amount of premiums ceded in any quarter, which provides flexibility in managing premium leverage.

        Net Premiums Earned. Net premiums earned were $1.2 billion for the first six months of this year, compared with $1.2 billion last year. The effect of the quota-share reinsurance arrangements entered into during the second quarter reduced net premiums earned by $61.4 million for the six months of 2004. For U.S. operations, net premiums earned decreased 7% to $854.4 million in the first six months compared with $923.3 million in the first half of 2003 and Canadian operations increased by 27% to $316.3 million compared with $249.2 million last year.

Page 19 of 36

Page 4

        Investment Income. Investment income increased 33% to $46.4 million compared with $34.9 million for the first six months last year.

        Net Realized Gains. Net realized gains amounted to $16.1 million ($13.2 million after tax) year to date compared with net realized gains of $8.8 million ($9.1 million after tax) for the same period last year. For the six months of 2004, realized losses of $0.2 million were recognized for adjustments to the carrying value for declines in market value considered other than temporary on investments still held compared to $2.6 million in the same period last year.

        Claims Incurred. Our claims ratio for the first six months of 2004 was 71.0%, compared to 70.8% to last year. The claims ratio for the U.S. operations was 71.0% compared with 69.0% for the first six months of 2003. The claims ratio for the Canadian operations improved to 71.0% compared to 77.3% last year and 72.4% for the first quarter of 2004 as a result of the improvement in our Ontario automobile results.

        The results for the six months of 2004 include increases in the provision for unpaid claims occurring prior to December 31, 2003 of approximately $29.9 million ($19.6 million after tax) compared with $68.7 million ($45.7 million after tax) for the six months of 2003. These increases represent 2.6% of the net premiums earned in the six months of 2004 compared with 5.9% for first half of last year. The increases also represent 1.8% of the unpaid claims recorded as at December 31, 2003 compared with 5.7% for the same period in 2003. For the U.S. operations these increases represented 2.2% of the net premiums earned for the six months of 2004 compared to 3.7% for the same period of 2003. For the Canadian operations these increases represented 3.4% of net premiums earned for the first half of 2004 compared to 13.8% for the same period of last year.

        The Company continued to increase its estimated provision for incurred but not reported claims (IBNR) and specific estimates for each individual claim based on historical settlement patterns (case reserves) and growth in earned premiums. During the six months ended June 30, 2004, the IBNR provision was increased by $76 million or 10% to $822.5 million and the case reserves were increased 23% to $1,132.4 million. The IBNR provision represents 42% of the total unpaid claims provision as at June 30, 2004.

        Underwriting Expenses. The combined ratio improved to 98.0% compared with 98.1% in the first six months of 2003, which produced a six month underwriting profit of $23.6 million compared with $22.5 million in the first half of last year. For the six months, the U.S. operations combined ratio was 98.5% (96.1% last year) and for the Canadian operations improved to 96.5% (105.4% last year). The Canadian operations continued to show improvement in its expense ratio due to the commission actions previously taken to reduce commissions paid on its non-standard automobile product in both the Ontario and Alberta markets, as well as rate increases and fraud controls implemented in 2003.

        As a result of entering into the quota-share reinsurance arrangements during the quarter, underwriting profit was reduced by $2.4 million and the combined ratio increased by 0.1% for the year to date results.

Page 20 of 36

Page 5

        Interest Expense. Interest expense for the first six months of 2004 was $12.9 million, compared to $9.5 million last year, reflecting the increase in the interest payment obligations on the U.S.$90.5 million of subordinated indebtedness issued during late 2002 and 2003 as well as the U.S.$125 million 7.50% unsecured senior notes issued in January and March of 2004.

        Income Taxes. The income tax provision for the six months was $8.8 million or 12.1% of income before income taxes year to date compared with $4.7 million or 8.3% year to date for the same period last year. The increase in the tax rate for the six months is attributable to the improved profitability of the Canadian operations.

        Net Income and Earnings Per Share. Net income for the six months was $64.1 million, a 24% increase over the $51.7 million reported last year. Diluted earnings per share increased 10% to $1.14 for the six months on 14% more shares outstanding compared to $1.04 cents for the same period last year.

        As a result of entering into the quota-share arrangements during the quarter, net income and earnings per share were reduced by $1.6 million and 3 cents, respectively for the year to date results.

        Book Value Per Share and Return on Equity. For the six months, shareholders’ equity was increased by $25.7 million and book value per share by 45 cents as a result of the change in the unrealized currency translation adjustment. As a result of this and the earnings in the quarter, book value per share increased by 13% or $1.58 to $14.21 from $12.63 at December 31, 2003. Our annualized return on equity was 17.0% for the six months of 2004 compared to 17.2% for the same period last year.

        Balance Sheet. Total assets as at June 30, 2004 grew to $4.2 billion. The investment portfolio, including cash and accrued investment income, increased to $3,071.4 million (market value $3,095.2 million), compared to $2,674.1 million (market value $2,726.7 million) as at December 31, 2003. Net unrealized gains on the investment portfolio were $23.8 million (42 cents per share outstanding) at June 30, 2004 compared with $52.5 million (94 cents per share outstanding) at the end of 2003. The upwards movement in interest rates during the quarter had the effect of decreasing the net unrealized gains on the portfolio, however the portfolio continues to be positioned to take advantage of interest rate increases due to the very short maturity profile. At June 30, 2004 24% of the fixed income portfolio matures in less than one year and 63% after one year and in less than five years. Unearned premiums as at June 30, 2004 grew to $935.9 million, an increase of 21% over the $776.5 million reported at the end of 2003.

         Currency. The Company reports in Canadian dollars, whereas 72% of its gross premiums for the six months of 2004 were generated from its U.S. operations. During 2003 the Canadian dollar appreciated against the U.S. dollar thereby affecting the comparability of results. The supplemental information contained in this shareholders’ report contains selected financial information expressed in U.S. dollars. For the six month period to June 30, 2004 gross premiums written increased 18% to U.S.$1.1 billion, net income and earnings per share increased by 38% and 21% to U.S.$49.0 million and U.S.$0.87, respectively, compared to the six months of 2003. Book value per share grew by 18% from a year ago to U.S.$10.60.

        Effective January 1, 2005, the Company will change its reporting currency from Canadian dollars to U.S. dollars and this change will be accounted for on a prospective basis.

Page 21 of 36

Page 6

         Contractual Obligations. Information concerning contractual obligations as at June 30, 2004 is shown below:

(in thousands of Canadian dollars)

Payments Due by Period

2004 2005 &
2006		 2007 2008 Thereafter Total
Bank indebtedness   $48,691   $         --   $       --   $         --   $         --   $  48,691  
Senior unsecured debentures   --   --   78,000   --   167,550   245,550  
Subordinated indebtedness   --   --   --   --   121,306   121,306  
Other liabilities   6,549   --   --   --   --   6,549  
Total   $55,240   $         --   $78,000   $         --   $288,856   $422,096  

For further details on the Company’s long term debt and interest obligations, refer to note 11 to the Company’s 2003 audited consolidated financial statements and page 44 of the 2003 Annual Report which sets out the Company’s contractual obligations as at December 31, 2003.

        Liquidity and Capital Resources. During the first six months of 2004, the net cash provided from operations was $245.7 million compared to $226.0 million last year which increased our investment portfolio. The Company believes that the cash generated from the operating activities and the dividend paying capacity of the insurance and reinsurance subsidiaries will be sufficient to meet our ongoing cash requirements, including interest payment obligations. Net cash provided by financing activities during the six months of 2004 was $63.6 million compared to $54.4 million for the same period last year. The dividend paying capacity is further described on page 44 of the Company’s Annual Report. As discussed on page 43 of the Company’s Annual Report, the proceeds from U.S.$125 million 7.50% unsecured senior notes due 2014 were used to repay existing bank indebtedness. During the first quarter of 2004, the Company entered into a $150 million revolving credit facility to replace the U.S.$100 million and $66.5 million facilities. As of June 30, 2004 $48.7 million had been drawn on this facility. The terms and conditions are further described on page 43 of the Company’s Annual Report. As of June 30, 2004 the Company was in compliance with all of the covenant requirements of the credit facility and we expect to remain in compliance for the remainder of the term of this facility.

        Off-Balance Sheet Financing. The Company does not engage in any off-balance sheet financing arrangements.

Page 22 of 36

Page 7

        Summary of Quarterly Results. The following table presents our financial results over the previous eight quarters:

                 
    2004   2003   2002  
    Q2   Q1   Q4   Q3   Q2   Q1   Q4   Q3  
 
Gross premiums written   $701,980   $710,445   $651,583   $652,751   $629,928   $702,560   $600,081   $605,566  
Net premiums earned   585,864   584,830   617,642   591,807   621,280   551,255   548,701   479,407  
Total revenue   619,285   613,929   668,210   630,916   649,926   566,333   567,857   505,297  
Net income   33,287   30,768   17,992   15,633   27,264   24,394   25,398   21,653  
Earnings per share  
Basic   $0.59   $0.55   $0.32   $0.28   $0.56   $0.50   $0.52   $0.44
Diluted   0.59   0.55   0.32   0.28   0.55   0.49   0.51   0.44

Forward Looking Statements

This shareholders' report includes "forward looking statements" that are subject to risks and uncertainties. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see Kingsway's securities filings, including its 2003 Annual Report under the heading Risks and Uncertainties in the Management's Discussion and Analysis section. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Page 23 of 36

KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars, except for per share amounts)

  Quarter to June 30: 6 months to June 30:
  2004 2003 2004 2003
  (unaudited)
Gross premiums written   $701,980   $   629,928   $1,412,425   $1,332,488  
Net premiums written   $556,017   $   607,192   $1,240,098   $1,273,855  
Revenue:  
  Net premiums earned   $585,864   $   621,280   $1,170,694   $1,172,535  
  Investment income   24,064   19,169   46,393   34,935  
  Net realized gains   9,357   9,477   16,127   8,789  
    619,285   649,926   1,233,214   1,216,259  
Expenses:  
  Claims incurred   408,601   441,451   830,807   830,115  
  Commissions and premium taxes   115,796   141,144   226,351   255,453  
  General and administrative expenses   48,258   33,993   89,920   64,425  
  Interest expense   6,001   5,048   12,931   9,510  
  Amortization of intangibles   180   214   355   444  
    578,836   621,850   1,160,364   1,159,947  
Income before income taxes   40,449   28,076   72,850   56,312  
Income taxes   7,162   812   8,795   4,654  
Net income   $  33,287   $     27,264   $     64,055   $     51,658  
Earnings per share:          
             Basic:   $0.59   $0.56   $1.14   $1.06  
             Diluted:   $0.59   $0.55   $1.14   $1.04  
Weighted average shares outstanding:  
              Basic:   56,160   48,931   56,063   48,880  
              Diluted:   56,488   49,531   56,417   49,507  

Page 24 of 36

KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)

    June 30
2004
(unaudited) 		Dec. 31
2003
ASSETS      
    Cash   $     82,663   $   140,883  
    Investments   2,960,140   2,512,052  
    Accrued investment income   28,593   21,189  
    Accounts receivable and other assets   497,967   387,052  
    Due from reinsurers and other insurers   217,506   176,295  
    Deferred policy acquisition costs   200,919   167,960  
    Income taxes recoverable   13,195   --  
    Future income taxes   64,693   72,184  
    Capital assets   75,442   66,981  
    Goodwill and intangible assets   89,435   85,840  
    $4,230,553   $3,630,436  
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
LIABILITIES      
    Bank indebtedness   $     48,691   $   153,895  
    Accounts payable and accrued liabilities   125,861   128,797  
    Income taxes payable   --   2,589  
    Unearned premiums   935,879   776,481  
    Unpaid claims   1,954,952   1,669,734  
    Senior unsecured indebtedness   245,550   78,000  
    Subordinated indebtedness   121,306   115,981  
    3,432,239   2,925,477  
SHAREHOLDERS' EQUITY      
    Share capital   471,546   468,668  
    Issued and outstanding number of common shares  
        56,169,663 - June 30, 2004  
        55,829,794 - December 31, 2003  
    Contributed surplus   1,446   678  
    Currency translation adjustment   (68,659 ) (94,313 )
    Retained earnings   393,981   329,926  
    798,314   704,959  
    $4,230,553   $3,630,436  

Page 25 of 36

KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars)

    2004 2003
          (unaudited)  
       Retained earnings, beginning of period   $329,926   $244,643  
       Net income for the period   64,055   51,658  
       Retained earnings, end of period   $393,981   $296,301  

Page 26 of 36

KINGSWAY FINANCIAL SERVICES INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the three and six months ended June 30, 2004 and 2003
(In thousands of Canadian dollars)

  Quarter to June 30: 6 months to June 30:
  2004 2003 2004 2003
  (unaudited)
Cash provided by (used in):          
Operating activities:  
Net income   $   33,287   $      27,264   $      64,055   $      51,658  
Items not affecting cash:  
  Amortization   3,040   2,023   5,149   3,487  
  Future income taxes   5,117   (4,568 ) 9,428   (4,141 )
  Net realized gains   (9,357 ) (9,477 ) (16,127 ) (8,789 )
  Amortization of bond premiums & discounts   9,288   3,084   16,064   5,681  
    41,375   18,326   78,569   47,896  
Net change in non-cash balances:   97,900   111,107   167,141   178,061  
    139,275   129,433   245,710   225,957  
Financing activities:  
  Increase of share capital, net   214   414   2,878   1,216  
  Increase (decrease) in bank indebtedness   21,655   (6,548 ) (108,808 ) 8,743  
  Increase in senior unsecured indebtedness   2,389   --   169,521   --  
  Increase in subordinated indebtedness   --   44,458   --   44,458  
    24,258   38,324   63,591   54,417  
Investing activities:  
  Purchase of investments   (995,449 ) (2,133,793 ) (1,685,682 ) (4,530,957 )
  Proceeds from sale of investments   819,369   1,859,049   1,340,144   4,109,862  
  Financed premiums receivable, net   (9,078 ) (1,689 ) (12,054 ) (1,756 )
  Purchase of subsidiary, net of cash acquired   --   --   --   --  
  Net change to capital assets   (3,019 ) (20,908 ) (9,929 ) (20,493 )
    (188,177 ) (297,341 ) (367,521 ) (443,344 )
Dcrease in cash during period   (24,644 ) (129,584 ) (58,220 ) (162,970 )
Cash, beginning of period   107,307   211,535   140,883   244,921  
Cash, end of period   $   82,663   $      81,951   $      82,663   $      81,951  

Page 27 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

1. Basis of presentation

  These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles using the same accounting policies as were used for the Company’s consolidated financial statements for the year ended December 31, 2003. These interim consolidated financial statements do not contain all disclosures required by generally accepted accounting principles and accordingly should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2003 as set out on pages 55 to 73 of the Company’s 2003 Annual Report. The results of the operations for the interim periods are not necessarily indicative of the full-year results.

2. Stock-based compensation

  As reported on pages 62 of the Company’s 2003 Annual Report, effective January 1, 2003 the Company adopted on a prospective basis the fair-value method of accounting for stock-based compensation awards granted to employees and non-employee directors. During the second quarter 2004, the Company recorded $420,000 ($769,000 year to date) of stock-based compensation expense included in employee compensation expense.

  For stock options granted in prior years, the pro forma disclosures of net income and earnings per share as if the Company had measured the additional compensation element of stock options granted based on the fair value on the date of grant are as follows:

Three months ended
June 30,
2004 2003
         Net income      
           As reported   $33,287   $27,264  
           Pro forma   32,832   26,684  
         Basic earnings per share    
           As reported   $    0.59 $    0.56
           Pro forma   0.58 0.55
         Diluted earnings per share    
           As reported   $    0.59 $    0.55
           Pro forma   0.58 0.54

Page 28 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

2. Stock-based compensation - continued:

    Six months ended
June 30,		  
    2004   2003  
         Net income      
           As reported   $64,055   $51,658  
           Pro forma   63,074   50,498  
         Basic earnings per share    
           As reported   $    1.14 $    1.06
           Pro forma   1.13 1.03
         Diluted earnings per share    
           As reported   $    1.14 $    1.04
           Pro forma   1.12 1.02
  The per share weighted average fair value of options granted during 2004 and 2003 was $3.79 and $6.11, respectively. The fair value of the options granted was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

As at June 30
2004 2003
         Risk-free interest rate   4.34 % 5.44 %
         Dividend yield   0.0 % 0.0 %
         Volatility of the expected market price of the Company's common shares   45.7 % 56.0 %
         Expected option life (in years)   4.7  years 5.5  years
  The Black-Scholes option valuation model was developed for use in estimating fair value of traded options which have no vesting restrictions and are fully transferable. As the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the above pro forma adjustments are not necessarily a reliable single measure of the fair value of the Company’s employee stock options.

Page 29 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

3. Segmented information

  The Company provides property and casualty insurance and other insurance related services in three reportable segments, Canada, the United States and corporate and other insurance related services. The Company’s Canadian and United States segments include transactions with the Company’s reinsurance subsidiaries. At the present time, other insurance related services are not significant. Results for the Company’s operating segments are based on the Company’s internal financial reporting systems and are consistent with those followed in the preparation of the consolidated financial statements.

Three Months ended June 30, 2004
Canada United States Corporate
and Other		 Total
         Gross premiums written   $225,576   $476,404   $      --   $701,980  
         Net premiums earned   161,166   424,698   --   585,864  
         Investment income   9,369   14,597   98   24,064  
         Net realized gains   2,048   7,309   --   9,357  
         Interest expense   --   4,236   1,765   6,001  
         Amortization of capital assets   195   1,637   295   2,127  
         Amortization of intangible assets   --   180   --   180  
         Net income tax expense (recovery)   4,602   870   1,690   7,162  
         Net income (loss)   14,043   21,307   (2,063 ) 33,287  
           
         Underwriting profit   8,523   4,686   --   13,209  
           
         Claims ratio   69.6 % 69.8 % --   69.7 %
         Expense ratio   25.1 % 29.1 % --   28.0 %
         Combined ratio   94.7 % 98.9 % --   97.7 %

Page 30 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

3. Segmented information - continued

Three Months ended June 30, 2003
Canada United States Corporate
and Other		 Total
         Gross premiums written   $ 176,069   $453,859   $      --   $629,928  
         Net premiums earned   137,086   484,194   --   621,280  
         Investment income   7,080   11,960   129   19,169  
         Net realized gains (losses)   (211 ) 9,688   --   9,477  
         Interest expense   --   2,962   2,086   5,048  
         Amortization of capital assets   188   1,402   330   1,920  
         Amortization of intangible assets   --   214   --   214  
         Net income tax expense (recovery)   (3,748 ) 5,020   (460 ) 812  
         Net income (loss)   (5,000 ) 31,798   466   27,264  
  
         Underwriting profit (loss)   (13,653 ) 18,345   --   4,692  
  
         Claims ratio   83.2 % 67.6 % --   71.0 %
         Expense ratio   26.8 % 28.6 % --   28.2 %
         Combined ratio   110.0 % 96.2 % --   99.2 %

Six Months ended June 30, 2004
Canada United States Corporate
and Other		 Total
         Gross premiums written   $   390,180   $ 1,022,245   $        --   $1,412,425  
         Net premiums earned   316,323   854,371   --   1,170,694  
         Investment income   19,189   27,146   58   46,393  
         Net realized gains   4,396   11,714   17   16,127  
         Interest expense   --   9,215   3,716   12,931  
         Amortization of capital assets   386   3,196   572   4,154  
         Amortization of intangible assets   --   355   --   355  
         Net income tax  
         Net income tax expense (recovery)   7,549   (684 ) 1,930   8,795  
         Net income (loss)   24,210   42,598   (2,753 ) 64,055  
  
         Total assets   $1,301,414   $ 2,894,454   $ 34,685   $4,230,553  
         Underwriting profit   10,993   12,623   --   23,616  
  
         Claims ratio   71.0 % 71.0 % --   71.0 %
         Expense ratio   25.5 % 27.5 % --   27.0 %
         Combined ratio   96.5 % 98.5 % --   98.0 %

Page 31 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

3. Segmented information - continued:

Six Months ended June 30, 2003
Canada United States Corporate
and Other		 Total
         Gross premiums written   $ 303,077   $1,029,411   $        --   $1,332,488  
         Net premiums earned   249,266   923,269   --   1,172,535  
         Investment income   13,123   21,656   156   34,935  
         Net realized gains (losses)   (1,122 ) 9,913   (2 ) 8,789  
         Interest expense   --   5,426   4,084   9,510  
         Amortization of capital assets   364   2,728   637   3,729  
         Amortization of intangible assets   --   444   --   444  
         Net income tax expense (recovery)   (2,784 ) 7,658   (220 ) 4,654  
         Net income (loss)   (2,008 ) 54,074   (408 ) 51,658  
 
         Total assets   $ 967,716   $2,126,610   $ 20,844   $3,115,170  
 
         Underwriting profit (loss)   (13,490 ) 36,032   --   22,542  
         Claims ratio   77.3 % 69.0 % --   70.8 %
         Expense ratio   28.1 % 27.1 % --   27.3 %
         Combined ratio   105.4 % 96.1 % --   98.1 %

Page 32 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

3. Segmented information - continued:

    Quarter to June 30:   6 months to June 30:  
   2004   2003   2004   2003  
Change in estimated unpaid claims  
for prior accident years (note 1):  
     Canada  $(11,170 ) $(25,412 ) $(10,754 ) $(34,287 )
     U.S.   (12,233 ) (25,391 ) (19,136 ) (34,453 )
     Total  $(23,403 ) $(50,803 ) $(29,890 ) $(68,740 )
As a % of net premiums earned (note 2):  
     Canada  6.9 % 18.5 % 3.4 % 13.8 %
     U.S.   2.9 % 5.2 % 2.2 % 3.7 %
     Total  4.0 % 8.2 % 2.6 % 5.9 %
As a % of unpaid claims (note 3):  
     Canada          2.0 % 10.4 %
     U.S.           1.6 % 4.3 %
     Total          1.8 % 5.7 %

Note 1 – (Increase) decrease in estimates for unpaid claims from prior accident years reflected in current financial year results.

Note 2 – Increase (decrease) in current financial year reported combined ratio.

Note 3 – Increase (decrease) compared to estimated unpaid claims at the end of the preceding fiscal year.

Page 33 of 36

KINGSWAY FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2004 and 2003
(Unaudited – tabular amounts in thousands of Canadian dollars)

4. Investments

  The  carrying amounts and fair values of investments are summarized below:

           
        June 30, 2004  
        Carrying
Amount		   Fair
Value		  
  Term deposits  $   335,444   $   335,034  
  Bonds: 
       Government  909,923   904,013  
       Corporate  1,320,246   1,306,892  
  Preferred shares  1,000   938  
  Common shares  299,490   343,013  
  Financed premiums  94,037   94,037  
      $2,960,140   $2,983,927  
        December 31, 2003  
        Carrying
Amount		   Fair
Value		  
  Term deposits  $   285,715   $   285,500  
  Bonds: 
       Government  783,857   787,552  
       Corporate  1,107,515   1,112,386  
  Preferred shares  500   512  
  Common shares  253,551   297,725  
  Financed premiums  80,914   80,914  
      $2,512,052   $2,564,589  

Page 34 of 36

KINGSWAY FINANCIAL SERVICES INC.
SUPPLEMENTARY INFORMATION
As at June 30, 2004, December 31, 2003 and June 30, 2003
(Unaudited)

Financial Strength Indicators:

Some of the key indicators of the Company's financial strength are as follows:

       
   June 30,
2004 		  December 31,
2003 		 
Rolling four quarter calculations: 
  
     Net Premiums Written to Estimated Statutory Surplus Ratio  2.5 x 2.9 x
  
     Interest Coverage Ratio  5.3 x 5.2 x
  
Total Bank and Senior Debt to Capitalization Ratio  24.9 % 22.1 %

Selected Financial Information expressed in thousands of U.S. dollars, except for per share amounts

           
    Quarter to June 30:   6 months to June 30:  
   2004   2003   2004   2003  
Gross Premiums Written  $529,644   $448,005   $1,080,505   $913,954  
  
Net Premiums Earned  442,034   441,855   895,581   804,242  
  
Net Income  25,115   19,390   49,002   35,432  
  
Earnings Per Share - diluted  $0.44   $0.39   $0.87   $0.72  
  
Underwriting Profit   9,967   3,336   18,066   15,461  
  
Book Value Per Share           $10.60   $8.97  

The selected financial information disclosed above has been translated using a foreign exchange rate for the income statement of Canadian $1 = U.S. $0.7545 and Canadian $1 = U.S. $0.7112 for the quarter ended June 30, 2004 and 2003, respectively, and Canadian $1 = U.S. $0.7650 and Canadian $1 = U.S. $0.6859 for the six months ended June 30, 2004 and 2003, respectively. The book value per share was translated at the quarter end rate of Canadian $1 = U.S. $0.7460 and Canadian $1 = U.S. $0.7418 for June 30, 2004 and 2003, respectively. Readers should be cautioned as to the limited usefulness of the selected financial information presented above.

Page 35 of 36

FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD

I, William G. Star, President and Chief Executive Officer of Kingsway Financial Services Inc, certify that:

1.   I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Kingsway Financial Services Inc., (the issuer) for the interim period ending June 30, 2004;

2.   Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and

3.   Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respect the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings.

Date: August 5, 2004

/s/ William G. Star                             
William G. Star
President and Chief Executive Officer

Page 36 of 36

FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD

I, W. Shaun Jackson, Executive Vice President and Chief Financial Officer of Kingsway Financial Services Inc, certify that:

4.   I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of Kingsway Financial Services Inc., (the issuer) for the interim period ending June 30, 2004;

5.   Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and

6.   Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respect the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings.

Date: August 5, 2004

/s/ W. Shaun Jackson                                     
W. Shaun Jackson
Executive Vice President and Chief Financial Officer