Northbridge Combined Ratio Drops for 2-Q

Northbridge Financial (TSX: NB), the Canadian operational holding company of Fairfax Financial, saw net earnings decline to $43.3 million (85 a share) for the second quarter of 2004 from $57.5 million ($1.16 a share) for the same period a year earlier – and this, despite the company turning in a combined ratio of 90.6% during the quarter, versus 93.7% a year ago.

Northbridge posted an underwriting profit of $28.7 million for the most recent quarter, up from $15.2 million a year earlier. While the loss ratio remained relatively flat at 65.7%, the expense ratio dropped more than 3.5 percentage points to 24.9%. Net written premiums rose by 14.7% year-on-year to $354.1 million for the second quarter of this year, from $308.8 million the year before.

Northbridge CEO Byron Messier sees many challenges in the Canadian market, including personal auto, which represents 9% of the company’s gross written premiums. “For our part, Northbridge pledges to continue to focus on maintaining underwriting profitability in order to maximize the value of the enterprise for our shareholders,” says Messier. “Our second quarter operating results have contributed to a return on average equity (on a trailing four quarters basis) of 19.1% for our shareholders.”

For the first half of 2004, net earnings grew to $75.5 million from $86.5 million a year ago. Net written premiums clocked in at $617.4 million from the $547.4 million produced for the first six months of 2003. Northbridge also posted an underwriting profit of $48.9 million for the latest six-month period, showing significant improvement on the $25.3 million posted a year ago. For the latest six month period, the company brought its combined ratio down to 91.7% from 94.5%. Northbridge has declared a quarterly dividend of 15 a common share.