UPDATE 1-Kingsway Financial to shed Jevco Insurance Co

* To sell stake in Jevco to Westaim Corp

* Westaim expects to pay C$263 mln

* Kingsway to use proceeds to repay debt



Jan 25 (Reuters) - Canadian property and casualty insurer Kingsway Financial Services Inc said it would sell its stake in Jevco Insurance Co to Westaim Corp and use the proceeds to repay debt.

Separately, Westaim said it expects to pay C$263 million for Kingsway's stake in Jevco, after giving effect to a proposed dividend from Jevco to Kingsway to be paid before the completion of the acquisition.

Kingsway, which expects to receive a C$40 million dividend from Jevco before closing, said it plans to immediately purchase debt to ensure it continues to satisfy financial covenants in bond agreements.

In November, Kingsway said it intended to dispose its majority interest in Jevco.

Westaim arranged financing of C$275 million to complete the acquisition.

Kingsway shares closed at C$1.52 Friday on the Toronto Stock Exchange.

(Reporting by Isheeta Sanghi in Bangalore; Editing by Ratul Ray Chaudhuri) Keywords: KINGSWAYFINANCIAL/ ([e-mail]; within U.S. [phone]; outside U.S. [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.