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

Market Wire, October, 2008

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

Northbridge Financial Corporation (TSX: NB) today announced net earnings of $74.6 million ($1.52 per share) for the third quarter of 2008, which compares to net earnings of $53.9 million ($1.06 per share) for the third quarter of 2007. Underwriting loss for the third quarter of 2008 was $37.8 million, compared to an underwriting profit of $32.7 million for the same period in 2007, producing a combined ratio of 113.0% for the third quarter of 2008 compared to 88.4% for the same period in 2007 (108.7% and 95.6%, respectively, after adjusting to exclude the foreign exchange translation impact on U.S. dollar - denominated claims liabilities for those periods). Total net investment income was $151.7 million for the third quarter of 2008 compared to $47.6 million for the third quarter of 2007. Investment results for the third quarter of 2008 included net gains on portfolio investments of $125.2 million compared to net gains of $16.4 million for the third quarter of 2007.

Net earnings for the first nine months of 2008 were $97.7 million ($1.98 per share), which compares to net earnings of $215.6 million ($4.24 per share) for the first nine months of 2007. Underwriting loss for the first nine months of 2008 was $33.4 million, compared to an underwriting profit of $86.3 million for the same period in 2007, producing a combined ratio of 103.9% for the first nine months of 2008 compared to 89.6% for the same period in 2007 (101.6% and 95.7%, respectively, after adjusting to exclude the foreign exchange translation impact). Total net investment income was $188.5 million for first nine months of 2008 compared to $199.6 million for the first nine months of 2007. Investment results for the first nine months of 2008 included net gains on portfolio investments of $101.6 million compared to net gains of $104.7 million for the first nine months of 2007.

For the period of October 1, 2008 to October 25, 2008, Northbridge had $19.3 million of net losses on investments related to its credit default swap portfolio. Proceeds on sales of credit default swaps were $20.0 million for the same period. As at October 25, 2008, the fair market value of Northbridge's credit default swaps was $53.4 million compared to $92.7 million as at September 30, 2008, while the cost of the credit default swaps was $8.1 million, compared to $10.1 million as at September 30, 2008, reflecting sales for that period. The values of the credit default swaps can be volatile and may, along with their liquidity, vary dramatically either up or down in short periods. Ultimate proceeds will therefore only be known upon their disposition.

The following table presents a summary of the third quarter and year-to-date financial results:

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For the Periods Ended September 30
(in $ millions except per share           Third Quarter        Nine Months
 amounts and percentages)                 2008     2007      2008     2007
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Total revenue(1)                         442.9    328.4   1,040.8   1026.0
Underwriting profit (loss)               (37.8)    32.7     (33.4)    86.3
Combined ratio(2)                        113.0%    88.4%    103.9%    89.6%
Net earnings                              74.6     53.9      97.7    215.6
Net earnings per share                   $1.52    $1.06     $1.98    $4.24
Net earnings per diluted share           $1.52    $1.06     $1.98    $4.23
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(1)Total revenue consists of net premiums earned, interest and dividend
   income and net gains (losses) on investments.
(2)The loss, expense and combined ratios 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. 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.

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 31, 2008 to shareholders of record on November 28, 2008.

As of October 30, 2008, Northbridge had completed the normal course issuer bid which it commenced on November 6, 2007. Under the bid, Northbridge purchased 2,340,000 of its common shares for cancellation at an average price per share of $29.04.