Northbridge Financial Corp. announced on Thursday net earnings of $37.3 million for the second quarter of 2006, which compares to net earnings of $68.4 million for the second quarter of 2005.

Contributing to this year-over-year decline was an underwriting loss of $38.3 million for the second quarter of 2006, which represents a decrease of $73.0 million from an underwriting profit of $34.7 million for the second quarter of 2005, and results in a combined ratio1 of 113.4% for the second quarter of 2006 compared to 88.3% for the same period one year earlier.

This change in underwriting profit is largely due to unfavourable results at its Commonwealth Insurance Company subsidiary. Following receipt of new information and further investigation regarding new and existing claims in its Marine Energy unit, Commonwealth increased its claims provisions related to 2005 hurricanes Katrina, Rita and Wilma by $73.7 million in the second quarter. Northbridge’s other insurance subsidiaries, Lombard Canada Ltd., Markel Insurance Company of Canada and Federated Insurance Company of Canada, recorded combined ratios of 91.6%, 88.0% and 86.0%, respectively, for the second quarter of 2006. Total investment income was $99.4 million for the second quarter of 2006 compared to $63.8 million for the second quarter of 2005, and included net realized gains on sales of portfolio investments of $73.5 million compared to $40.2 million for the second quarter of 2005.

Net earnings for the first six months of 2006 were $99.0 million, which compares to net earnings of $125.2 million for the first six months of 2005. Underwriting loss for the first six months was $12.0 million, which compares to an underwriting profit of $59.3 million for the same period in 2005, and resulted in a combined ratio of 102.1% for the first six months of 2006 compared to 89.8% for the same period in 2005. Total investment income was $167.6 million for first six months of 2006 compared to $120.9 million for the first six months of 2005, and included net realized gains on sales of portfolio investments of $117.5 million compared to $80.1 million for the first six months of 2005.

Northbridge also announced that its board of directors has declared a dividend of $0.165 per share on its outstanding common shares, payable on Sept. 29 to shareholders of record on Aug. 31.