The Canadian Press

Kingsway Financial Services Inc. (TSX:KFS) said Monday that the Pennsylvania Department of Insurance wants to unwind a donation by the company of its indirect interest in Lincoln General Insurance Co. to a charity.

Kingsway said the donations of the Lincoln shares to the charities were lawfully made and that the department has no basis for demanding the unwinding of the donations.

“While Kingsway is open to continuing discussions with the DOI with a view to reaching a mutually agreeable solution, Kingsway is prepared to defend its lawful right to dispose of the Lincoln shares as it has done,” the company said.

Last month, Kingsway, which has endured several quarters of poor financial results as well as a revolt by dissident shareholders, said the donation will also help it meet regulatory and contractual obligations, including servicing a US$10-million surplus note facility agreement.

Other than the surplus note facility, other Lincoln General obligations on Kingsway were not considered material, Kingsway said.

Kingsway, headquartered in Mississauga, Ont., deals principally in non-standard insurance for individual and businesses in Canada and the United States.