Northbridge Financial Corporation: Financial Results for Fourth Quarter and Fiscal Year 2004 and Declaration of 2005 First Quarter Dividend

Business Wire, Feb 10, 2005

TORONTO -- Northbridge Financial Corporation (TSX:NB)

Disciplined underwriting by our operating management teams and favourable market conditions combined to produce record results for Northbridge Financial Corporation in 2004. Net earnings for fiscal year 2004 were $162.2 million ($3.19 per share) compared to $153.0 million ($3.07 per share) for the prior year. Underwriting profit of $150.7 million in 2004 more than doubled relative to $73.8 million earned in the prior year, with Northbridge's combined ratio1 improving to 87.7% from 92.6%.

Fourth quarter results were similarly improved in comparison to those of the prior year period, with net earnings of $48.1 million ($0.95 per share) compared to $43.7 million ($0.86 per share), underwriting profit of $68.7 million compared to $29.7 million, and an improvement in the combined ratio to 78.9% from 89.1%.

Northbridge Financial Corporation also announces that it has declared a dividend of $0.165 per share on its outstanding common shares, payable on March 31, 2005 to shareholders of record on February 28, 2005. The $0.165 per share reflects an annual rate of $0.66 per share, representing a 10% increase over the previous annual rate of $0.60 per share.

The following table presents a summary of the fourth quarter and full year financial results:

THREE MONTHS ENDED       YEAR ENDED
                                  DECEMBER 31          DECEMBER 31
                          ----------------------  -------------------
                          ($ millions except per share amounts and %)

                                 2004     2003      2004       2003
                                -----   ------   -------     --------

Total revenue                   335.7    311.1   1,335.1    1,162.4
Underwriting profit              68.7     29.7     150.7       73.8
Combined ratio                   78.9%    89.1%     87.7%      92.6%
Net earnings                     48.1     43.7     162.2      153.0
Net earnings per share          $0.95    $0.86     $3.19      $3.07
Net earnings per diluted share  $0.94    $0.86     $3.18      $3.07

Fourth Quarter Highlights

- Net earnings of $48.1 million ($0.95 per share) compared to $43.7 million ($0.86 per share) in the fourth quarter of 2003, an increase of 10.1%.

- Combined ratio of 78.9% in the fourth quarter of 2004, compared to 89.1% in the fourth quarter of 2003.

- Underwriting profit of $68.7 million compared to $29.7 million in the fourth quarter of 2003, an increase of 132.0%.

- Growth in net premiums written of 11.6% and net premiums earned of 20.2% compared to the fourth quarter of 2003.

2004 Highlights

- Net earnings of $162.2 million ($3.19 per share) compared to $153.0 million ($3.07 per share) in 2003, an increase of 6.1%.

- Return on average equity for 2004 was 20.3% compared to 23.6% in 2003.

- Combined ratio of 87.7% for 2004 compared to 92.6% in 2003.

- Underwriting profit of $150.7 million compared to $73.8 million in 2003, an increase of 104.2%.

- Growth in net premiums written of 10.4% and net premiums earned of 23.5% compared to 2003.

- Interest and dividend income of $79.5 million compared to $74.6 million in 2003, and net realized gains of $29.5 million compared to $94.9 million in 2003.

- Cash flow generated from operations of $327.1 million in 2004 compared to $234.3 million in 2003.

- Debt-free, with cash and short-term investments at year-end of $566.7 million.

- Portfolio investments at carrying value increased by $321.8 million to $2,110.6 million at December 31, 2004 from $1,788.8 million at December 31, 2003, with pre-tax unrealized gains of $179.5 million at year-end 2004 compared to $125.7 million at year-end 2003.

- Reserve strength, with a conservative approach to setting reserves that has produced favourable reserve development averaging 1.8% during the last ten years.

- Capital strength, with all four insurance subsidiaries having statutory capital in excess of 200% MCT at year-end; consolidated net premiums written to equity of 1.5x.

- Shareholders' equity increased to $861.7 million, resulting in BVPS of $16.94 at December 31, 2004 compared to $14.44 at year-end 2003, an increase of 17.3%.

All financial data in this release has been prepared using Canadian generally accepted accounting principles ("GAAP"), unless indicated otherwise. Certain totals, subtotals and percentages may not reconcile due to rounding. Unless otherwise indicated, all dollar amounts in this release are in Canadian dollars.

This release includes product names, trade names, trademarks, service marks and registered trademarks and service marks of Northbridge Financial Corporation ("Northbridge", "we" or similar expressions), Lombard Canada Ltd. ("Lombard"), Commonwealth Insurance Company ("Commonwealth"), Markel Insurance Company of Canada ("Markel"), Federated Holdings of Canada Ltd. ("Federated"), each of which is the property of its respective owner.

Earnings

Improved underwriting results were the primary contributor to increased earnings in the fourth quarter and full year 2004 for Northbridge. Our operating company management teams continued to produce strong financial results while adhering to stringent underwriting standards during 2004's largely favourable market conditions. Reported pre-tax income increased to $75.9 million in the fourth quarter of 2004 from $66.6 million in the fourth quarter of 2003, an increase of 14.0%, and increased to $248.9 million in 2004 from $237.1 million in 2003, an increase of 5.0%. Net earnings of $48.1 million in the fourth quarter of 2004 grew by 10.1% compared to net earnings of $43.7 million in the fourth quarter of 2003. For the full year, net earnings of $162.2 million increased by 6.1% over net earnings of $153.0 million in 2003.