An anonymous director reports

KINGSWAY ANNOUNCES BROAD SETTLEMENT ENDING PENNSYLVANIA LITIGATION

Kingsway Financial Services Inc. has agreed to a settlement and release ending all legal disputes between the company and the Pennsylvania Insurance Department. As previously disclosed, the department sued the company and 20 different charities on Nov. 20, 2009, after Kingsway disposed of its interest in Walshire Assurance Company and Lincoln General Insurance Company in October, 2009, by donating its Walshire shares to the charities. On April 1, 2010, the department's claims that the disposition was improper were dismissed, but the department appealed to the Pennsylvania Supreme Court. The settlement between the parties was reached after nearly a year of negotiations and includes a mutual release of claims arising out of Kingsway's prior 100-per-cent ownership and renewed minority ownership, as described below, of Walshire and Lincoln General, as well as claims relating to the original disposition in October, 2009.

Kingsway also announced that LGIC Holdings LLC has completed its previously announced acquisition of Walshire. Regulatory approval for the change in control of Walshire was obtained Oct. 6, 2011. LGIC Holdings is a joint endeavour between Kingsway, the 49-per-cent owner member, and Tawa PLC, the 51-per-cent owner member. Day-to-day management of Walshire and Lincoln General will be performed by the Tawa Group subject to the oversight of the companies' boards of directors. As a minority and non-controlling investor, Kingsway will not consolidate Walshire or Lincoln General but will account for its investment using the equity accounting method. At closing, Kingsway also obtained releases from Walshire, Lincoln General and the 20 charities.

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