Kingsway Financial Services Inc. announced late Monday that it has reached a definitive agreement to acquire HI Holdings, Inc. The transaction includes HI’s wholly owned Zephyr Insurance Company Inc.

HI and Zephyr were formed in 2000 by its current shareholders that include Everest Reinsurance Company, Guy Carpenter & Company, Inc., Hannover Ruckversicherung AG, and Island Holdings, Inc. Subject to regulatory approval, HI and Kingsway expect the sale to close in the fourth quarter of this year.

“We are extremely pleased with the acquisition of Zephyr Insurance Company,” said Bill Star, president and chief executive of Toronto-based Kingsway. “This transaction is consistent with our niche business strategy and our interest in acquiring profitable businesses that
provide geographic and product diversification. Zephyr is a well run
organization and we look forward to the company’s continued success as part of Kingsway.”

Zephyr is the leading provider of residential hurricane insurance
coverage in the State of Hawaii. For the first six months of 2005, Zephyr
generated gross premiums written of U$24 million and is projected to write approximately U$50 million for 2005.

Kingsway Financial Services Inc. is the largest truck insurer in North
America and the sixth largest non-standard automobile insurer in North America, according to A.M. Best.