Northbridge Announces Fourth Quarter and Year End Financial Results for 2005 and First Quarter Dividend

Business Wire, Feb 9, 2006

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

Northbridge Financial Corporation (TSX:NB) today announced net earnings for the year ended December 31, 2005 of $198.4 million ($3.90 per share), an increase of 22.3% over net earnings of $162.2 million ($3.19 per share) for the year ended December 31, 2004. Primarily due to several weather-related events, including hurricanes Katrina, Rita and Wilma, underwriting profit in 2005 declined to $82.9 million from $150.7 million in 2004, producing a combined ratio(1) of 92.9% in 2005 compared to 87.7% in 2004. The three hurricanes combined for net pre-tax losses of $81.8 million. Total investment income was $201.6 million for the year ended December 31, 2005 compared to $109.0 million for the year ended December 31, 2004 and included net realized gains on the sale of portfolio investments of $122.0 million compared to $29.5 million in 2004.

Net earnings for the fourth quarter of 2005 were $29.9 million ($0.59 per share), a decrease of 37.8% from net earnings of $48.1 million ($0.95 per share) for the fourth quarter of 2004. Underwriting income in the fourth quarter of 2005 declined to $6.2 million from $68.7 million in the fourth quarter of 2004 due to the fourth quarter impact from hurricanes Katrina, Rita and Wilma in 2005 and the benefit of proceeds received in the fourth quarter of 2004 from certain reinsurance profit sharing agreements. Northbridge's combined ratio for the fourth quarter of 2005 was 97.8% compared to 78.9% for the fourth quarter of 2004. Total investment income was $33.0 million in the fourth quarter of 2005 compared to $9.2 million in the fourth quarter of 2004, and included net realized gains on the sale of portfolio investments of $11.1 million compared to net realized losses on the sale of portfolio investments of $12.0 million in the fourth quarter of 2004.

Northbridge also announced that its Board of Directors has declared a dividend of $0.165 per share on its outstanding common shares, payable on March 31, 2006 to shareholders of record on February 28, 2006.

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

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For the Periods Ended December 31
 (in $ millions except per share  Fourth Quarter      Twelve Months
 amounts and percentages)         2005     2004       2005      2004
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Total revenue                    321.5    335.8    1,370.5   1,335.1
Underwriting profit                6.2     68.7       82.9     150.7
Combined ratio(1)                 97.8%    78.9%      92.9%     87.7%
Net earnings                      29.9     48.1      198.4     162.2
Net earnings per share           $0.59    $0.95      $3.90     $3.19
Net earnings per diluted share   $0.59    $0.94      $3.89     $3.18
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(1)The combined ratio is the sum of two components: the loss ratio, which represents claims and loss adjustment expenses ("LAE") 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.

Fourth Quarter Highlights

- Net earnings of $29.9 million ($0.59 per share) compared to $48.1 million ($0.95 per share) in the fourth quarter of 2004.

- Combined ratio of 97.8% compared to 78.9% in the fourth quarter of 2004.

- Underwriting profit of $6.2 million compared to $68.7 million in the fourth quarter of 2004.

- 5.3% decline in net premiums written and 11.7% decline in net premiums earned compared to the fourth quarter of 2004.

Year End Highlights

- Net earnings of $198.4 million ($3.90 per share) compared to $162.2 million ($3.19 per share) in 2004, an increase of 22.3%.

- Return on average equity for 2005 was 21.0% compared to 20.3% in 2004.

- Combined ratio of 92.9% compared to 87.7% in 2004.

- Underwriting profit of $82.9 million compared to $150.7 million in 2004.

- 5.0% decline in net premiums written and net premiums earned compared to 2004.

- Interest and dividend income of $79.6 million compared to $79.5 million in 2004, and net realized gains on portfolio investments of $122.0 million compared to $29.5 million in 2004.