Northbridge Financial Corporation

Northbridge Financial Corporation

November 02, 2006 17:03 ET

Northbridge Announces Third Quarter Financial Results, Dividend Declaration and Normal Course Issuer Bid

TORONTO, ONTARIO--(CCNMatthews - Nov. 2, 2006) -

(Note: All dollar amounts in this news release are expressed in Canadian dollars)

Northbridge Financial Corporation (TSX:NB) today announced net earnings of $30.9 million ($0.61 per share) for the third quarter of 2006, which compares to net earnings of $43.3 million ($0.85 per share) for the third quarter of 2005. Underwriting profit increased by $1.2 million for the third quarter of 2006 to $18.6 million, from underwriting profit of $17.4 million for the third quarter of 2005, and resulted in a combined ratio1 of 93.6% for the third quarter of 2006 compared to 94.1% for the same period one year earlier. During the third quarter of 2006, the Company did not have any 2006 catastrophe losses, nor did it have any significant development from the 2005 hurricane season. Several new non-catastrophe large losses were experienced in the quarter at its Commonwealth Insurance Company subsidiary, largely in exited segments of its Energy & International division. Total investment income was $34.9 million for the third quarter of 2006 compared to $47.6 million for the third quarter of 2005, and included net realized gains on sales of portfolio investments of $3.8 million compared to $30.7 million for the third quarter of 2005.

Net earnings for the first nine months of 2006 were $130.0 million ($2.56 per share), which compares to net earnings of $168.5 million ($3.31 per share) for the first nine months of 2005. Underwriting profit for the first nine months was $6.6 million, which compares to underwriting profit of $76.6 million for the same period in 2005, and resulted in a combined ratio of 99.2% for the first nine months of 2006 compared to 91.3% for the same period in 2005. The underwriting results for the first nine months of 2006 were significantly impacted by increased claims reserves relating to the 2005 hurricane season. Total investment income was $202.5 million for the first nine months of 2006 compared to $168.6 million for the first nine months of 2005, and included net realized gains on sales of portfolio investments of $121.3 million compared to $110.9 million for the first nine months of 2005.

Northbridge also announced that its Board of Directors has declared a dividend of $0.165 per share on its outstanding common shares, payable on December 29, 2006 to shareholders of record on November 30, 2006.

Northbridge also intends to make a normal course issuer bid, subject to regulatory approval, for up to 2,542,565 of its outstanding common shares through the facilities of the TSX at the prevailing market price at the time of purchase. Northbridge believes that in appropriate circumstances its common shares represent an attractive investment opportunity and that consequently purchases under the bid will enhance the value of the shares held by the remaining shareholders.

The normal course issuer bid will begin on November 6, 2006 and will end on the earlier of the date on which purchases under the bid have been completed and November 5, 2007. Up to 220,000 of the common shares available for repurchase under the bid may be purchased and held by an affiliate of Northbridge in respect of outstanding and future stock option grants. All common shares purchased by Northbridge under the bid, other than those purchased and held by such affiliate, will be cancelled. All purchases under the bid will be made through the facilities, and in accordance with the requirements, of the TSX.

As of November 2, 2006, Northbridge had 50,851,306 common shares outstanding. The 2,542,565 common shares available for repurchase under the normal course issuer bid represent 5% of Northbridge's issued and outstanding shares, the maximum permitted under the TSX's normal course issuer bid policy. Northbridge has not purchased any of its common shares in the past 12 months.

Northbridge may enter into a pre-determined plan with its broker to allow for the purchase of shares at times when it would normally not be trading in the market due to its own internal trading blackout periods and applicable insider trading rules. Any such plans will be adopted in accordance with the requirements of applicable Canadian securities laws. Northbridge may also make purchases at management's discretion from time to time, subject to market conditions, stock prices, its cash position and compliance with applicable regulatory requirements.

The following table presents a summary of financial results for the third quarter and nine months ended September 30:

For the Periods Ended September 30
(in $ millions except per share Third Quarter Nine Months
amounts and percentages) 2006 2005 2006 2005

Total revenue(2) 326.4 341.6 1,070.7 1,049.0
Underwriting profit 18.6 17.4 6.6 76.6
Combined ratio(1) 93.6% 94.1% 99.2% 91.3%
Net earnings 30.9 43.3 130.0 168.5
Net earnings per share $ 0.61 $ 0.85 $ 2.56 $ 3.31
Net earnings per diluted share $ 0.61 $ 0.85 $ 2.55 $ 3.30

(1) The combined ratio is the sum of two components: the loss ratio, which represents claims and loss adjustment expenses incurred, net of reinsurance, expressed as a percentage of net premiums earned, and the expense ratio, which represents expenses including commissions, premium taxes and all general and administrative expenses incurred in operating the business during a period, expressed as a percentage of net premiums earned during that period. A combined ratio below 100% indicates profitable underwriting, while a combined ratio over 100% indicates unprofitable underwriting. The combined ratio does not include consideration of investment income. The underwriting ratios (the loss and expense ratios and the combined ratio) are all non-GAAP measures and do not have standard meanings prescribed by GAAP. They may not be comparable to similar measures used by other companies.

(2) Total revenue consists of net premiums earned, interest and dividend income, net realized gains on the sale of investments and, in the nine months ended September 30, 2005, a net pre-tax gain on the sale of our Federated Life subsidiary.

As previously announced, Northbridge will hold a conference call and webcast at 9:30 am (Toronto time) on Friday, November 3, 2006 to discuss its third quarter results, available on the Company's website at under "Financial Information". The call, consisting of a presentation by management followed by a question period, will be broadcast live on the internet through the Company's website or may be accessed by telephone at (416) 695-6622 or (877) 888-3490. Presentation materials will be posted on the Company's website under "Financial Information" prior to the call. A replay will be available following the call on the same website or via telephone at (416) 695-5275 or (888) 509-0081 (passcode 632870) until midnight on Friday, November 17, 2006.

Northbridge is the leading commercial property and casualty insurance group in Canada, providing property and casualty insurance products through its subsidiaries primarily in the Canadian market as well as in selected U.S. and international markets. Northbridge common shares are listed and traded under the symbol NB on the Toronto Stock Exchange. Visit Northbridge's website at for more information.

This release includes product names, trade names, trademarks, service marks and registered trademarks and service marks of Northbridge, Lombard, Commonwealth, Markel, Federated and other companies, each of which is the property of its respective owner.

Forward-Looking Information

Statements in this release about future plans, intentions, results, levels of activity, performance, goals, achievements or other future events constitute forward-looking statements. In some cases forward-looking statements may be identified by the use of words such as "may", "will", "should", "would", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts" or "potential" or the negative or other variations of these words, or other comparable words or phrases. Although Northbridge believes that the expectations reflected in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements or other future events. Readers should not place undue reliance on forward-looking statements as they involve known and unknown risks, uncertainties and other factors about Northbridge, the business environment in which it operates, the economy and the insurance industry generally that may cause actual results or events to differ materially from those expressed, implied or anticipated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following factors which are more fully described in Northbridge's Annual Information Form and other filings with Canadian securities regulators (accessible on SEDAR - System for Electronic Document Analysis and Retrieval - at; the adequacy of claims reserves; unpredictable catastrophic events; ability to alleviate risk through reinsurance coverage; credit risks associated with reinsurers and certain insureds; ability to achieve investment returns; the cyclical nature of the property and casualty insurance industry; subsidiaries' ability to maintain their financial strength ratings; competitive market environment; changes in the business, economic and political environment; changes in government regulation; periodic negative publicity regarding the insurance industry; litigation and regulatory actions; reliance on independent brokers and third parties to sell certain products; reliance on information technology and telecommunications systems; dependence on operating management; dependence on the financial performance of subsidiaries; uncertainties associated with critical accounting estimates; and foreign currency fluctuations. Northbridge is under no obligation and has no intention to update or alter any of its forward-looking statements as a result of new information, future events or otherwise, except as required by law.

In addition, the preparation of Northbridge's financial statements in accordance with Canadian generally accepted accounting principles requires it to make estimates and assumptions about future events which affect certain amounts reported in the financial statements and amounts derived therefrom, including amounts presented in this release. Those critical accounting estimates and assumptions principally relate to the establishment of provisions for claims and expenses, other than temporary impairments of investments, amounts receivable and recoverable from reinsurers and income taxes. As more information becomes known, these estimates and assumptions could change and impact future results. For a more complete discussion of critical accounting estimates, please see pages 51 to 54 of Northbridge's 2005 Annual Report.

Contact Information

  • Northbridge Financial Corporation
    John Varnell
    Chief Financial Officer
    (416) 350-4300
    (416) 350-4307 (FAX)