Hold Kingsway, Buy Northbridge

Article Excerpt

NORTHBRIDGE FINANCIAL CORP. $31 (Toronto symbol NB; SI Rating: Speculative) (416-366- 9544; no web site; Shares outstanding: 47.7 million; Market cap: $1.5 billion) is one of the largest commercial property and casualty insurers in Canada. This includes commercial businesses, homes and vehicles. Around 88% of Northbridge’s business is with commercial clients and 12% is in personal lines. Commercial lines are the most profitable part of the insurance business and are Northbridge’s main focus. In the three months ended September 30, 2008, Northbridge’s revenues rose 34.9%, to $442.9 million from $328.4 million a year earlier. Earnings rose 38.4%, to $74.6 million from $53.9 million. Earnings per share rose 43.4%, to $1.52 from $1.06 on 3.2% fewer shares outstanding. In the latest quarter, investment gains jumped to $125.2 million from $16.4 million a year earlier, boosting revenues and earnings. The increase was primarily due to $94.4 million in gains from timely investments in credit default/equity index swaps. Competition in the insurance industry remains intense, but…