Northbridge sees gains from strict underwriting

Northbridge Financial Corp. (TSX: NB), the Canadian arm of Fairfax Financial, is reporting strong underwriting results for 2003. The company posted net earnings of $153.0 million last year, up from $53.7 million in 2002. This translates to earnings per share of $3.07 in 2003, more than double the $1.16 per share reported in 2002.Overall, the four companies that make up Northbridge Lombard, Commonwealth, Markel and Federated came in with an underwriting profit of $73.8 million (2002: $19.5 million), on a combined ratio of 92.6% (2002: 97.4%). The company’s loss ratio dropped to 65.5% in 2003, from 71.6% in 2002.Net written premiums were up 35% in 2003, to $1.13 billion from $837.8 million in 2002, and net earned premiums also jumped 31% year-over-year to $992.9 million from $758.8 million the year prior. “Our management teams continue to produce strong financial results without compromising our stringent underwriting standards in these sustained hard market conditions,” notes a company statement.Each unit of the company produced an underwriting profit in 2003, with Lombard leading the pack at $34.7 million. This represents a swift turnaround for Lombard, which had produced an underwriting loss of $3.4 million in 2002. Improved results in the personal lines product are largely responsible, the company notes. As well, all four insurance companies produced combined ratios below 100%, with Commonwealth at 83.0%. Markel saw the greatest growth in net premiums written, up 58% between 2002 and 2003.Northbridge as a whole produced strong investment results, with realized gains last year of $94.9 million (2002: $20.9 million). Net investment income in 2003 was $169.5, versus $70.0 in 2002.The company’s results for the fourth quarter ending December 31, 2003 show an increase in net written premiums, to $271.7 million (2002 Q4: $213.9 million) and in underwriting profit, to $29.6 million (2002 Q4: $7.5 million). Net earnings for the fourth quarter of 2003 were $43.7 million, or $0.86 per share, up from $16.9 million, or $0.36 per share, in 2002. During the same comparative period, the company’s combined ratio dropped to 89.1% from 96.5%.