For initial gross proceeds of $31.5m plus contingent, deferred earn-out amount

Kingsway Financial Services has completed the sale of Zephyr Insurance to Zephyr Acquisition Company (ZAC), an acquisition vehicle of Ocean Harbor Holding and MP Holdings, a Hawaiian-based investor group, for initial gross proceeds of $31.5m, plus a contingent, deferred earn-out amount.

Zephyr is a specialty property insurance company founded specifically to protect Hawaii homeowners and residents from catastrophic loss due to hurricanes.

For the first six months of 2009, Zephyr had gross premiums written of approximately US$36m, or 7% of the premiums of the Kingsway group of companies, and produced an underwriting profit.

Kingsway Financial Services is a non-standard and commercial automobile insurer. It operates through wholly-owned insurance subsidiaires in Canada and the US which it is currently consolidating into three operating units to reduce overhead.

Piper Jaffray & Co. acted as the exclusive financial advisor and Cassels Brock & Blackwell acted as legal counsel to Kingsway. de Jonge and FL Advisors acted as financial advisors and Joseph Jacobs, George Matlock and Sullivan & Worcester acted as legal counsel to ZAC.