Northbridge Financial Corporation, the Canadian property and casualty insurance group consisting of Northbridge Insurance, Federated Insurance and TruShield Insurance, reported an underwriting profit of $51.3 million ($M) in Q3 2020. This amounts to growth of 362.2% or $40.2 million from $11.1 million in the third quarter of 2019.
Northbridge's combined ratio also improved by 7.6 percentage points from 97.5% in the third quarter of 2019 to 89.9% in Q3 2020.
Reasons for this improvement
Northbridge's parent company Fairfax Financial says the increase in the insurer's underwriting result in the third quarter of 2020 mainly reflects lower non-catastrophe losses. The improvement, seen across most lines of business, is primarily due to lower claims as a result of closures and a weaker economy, linked to the COVID-19 pandemic.
Fairfax also explains the increase in Northbridge's earnings by improved pricing, a lower underwriting expense ratio and a favourable reserve development.
However, the holding company reports that performance was partially offset by higher catastrophe losses and losses related to COVID-19:
Northbridge's COVID-19 losses were $25.5 million for Q3 2020, bringing the total for the first nine months of the year to $60.5 million.
Catastrophic losses were $6.2 million in Q3 2020 and $2.7 million in the third quarter of 2019.
Northbridge's operating income was $71 million in third quarter 2020 and $40.5 million in Q3 2019, for an increase of 75.3% or $30.5 million.
In terms of sales, Northbridge reported gross premiums written of $610.3 million in Q3 2020. They thus climbed 11.1% or $60.8 million from $549.5 million in the third quarter of 2019.
Fairfax attributes the premium growth primarily to "price increases across the group and strong retention of renewal business and new business writings.” However, the results were partially offset by returned premium, primarily in auto insurance, due to the COVID-19 pandemic.
Net premiums written were $505.1 million compared with $442.8 million in the third quarter of 2019. They are up 14.1% or $62.3 million.
Net premiums earned were $504.1 million versus $439.2 million in Q3 2019. The corresponding increase is 14.8% or $64.9 million.
Fairfax net income increases
Fairfax Financial reported net earnings attributable to shareholders of US$133.7 million in the third quarter of 2020. This amounts to an increase of 94.9% or US$65.1 million from the US$68.6 million reported in Q3 2019.
Fairfax says the increase primarily reflects lower net losses on investments, but was partially offset by lower operating income in the insurance and reinsurance operations.
We cannot pinpoint Northbridge's net income because Fairfax Financial does not provide details of its consolidated net income.
Northbridge is the only Canadian insurance and reinsurance company owned by Fairfax. The international holding company owns other companies in Canada such as Toys ''R'' Us Canada and the Quebec restaurant chain St-Hubert.
Desjardins, Manulife, Empire Life, Economical, Great-West Lifeco, Sun Life Financial, iA Financial Corporation, Intact Financial Corporation and The Co-operators also released their financial results for third quarter 2020.