Navigators Reports Third Quarter Earnings

STAMFORD, Conn., Nov. 05, 2015 (GLOBE NEWSWIRE) — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $18.2 million, or $1.23 per diluted share, for the three months ended September 30, 2015 compared to $31.2 million, or $2.14 per diluted share, for the comparable period in 2014. Operating earnings were $20.3 million, or $1.37 per diluted share, for the three months ended September 30, 2015 compared to $26.1 million, or $1.79 per diluted share, for the comparable period in 2014. 

For the nine months ended September 30, 2015, the Company reported net income of $63.3 million, or $4.29 per diluted share compared to $76.1 million, or $5.22 per diluted share, for the comparable period in 2014. 2014 results included a one-time foreign exchange gain of $10.0 million ($6.6 million after-tax) due to a change in the functional currency of our Lloyd’s Syndicate, which was equally offset by a reversal within the Accumulated Other Comprehensive Income component of stockholders’ equity.  Excluding this gain, the nine months ended September 30, 2014 net income per diluted share would have been $4.77. Operating earnings were $60.7 million, or $4.11 per diluted share, for the nine months ended September 30, 2015 compared to $62.0 million, or $4.25 per diluted share, for the comparable period in 2014. The one-time foreign exchange gain discussed above had no impact on operating earnings.

Gross written premiums and net written premiums for the three months ended September 30, 2015 were $354.1 million and $251.9 million, respectively, an increase of 8.1% and 10.3% from the comparable period in 2014.

Gross written premiums and net written premiums for the nine months ended September 30, 2015 were $1.1 billion and $799.1 million, respectively, an increase of 2.8% and 3.5% from the comparable period in 2014.

The combined ratio for the three and nine months ended September 30, 2015 was 93.4% and 93.0%, respectively, compared to 89.5% and 92.3% for the comparable periods in 2014.

Stan Galanski, President and Chief Executive Officer commented, “We are pleased to report profitable underwriting results and good premium growth for the third quarter and for the first nine months of 2015. The U.S. Insurance and GlobalRe segments generated excellent results for the quarter. We remain optimistic about targeted growth initiatives across all three of our operating segments. Net investment income increased 9.7% for the quarter, contributing to an increase in book value per share to $74.70.”

Stockholders’ equity was $1.1 billion, or $74.70 per share, as of September 30, 2015 compared to $1.0 billion, or $71.93 per share, as of December 31, 2014.

Net investment income for the three and nine months ended September 30, 2015 was $17.4 million and $50.2 million, respectively, an increase of 9.7% and 4.4% from the comparable periods in 2014. The annualized pre-tax investment yield, excluding net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.4% for the three and nine months ended September 30, 2015, compared to 2.2% and 2.4%, respectively for the comparable periods in 2014.

The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by Standard & Poor’s and Moody’s, respectively, and an average effective duration of 3.8 years as of September 30, 2015.  As of September 30, 2015, net unrealized gains within our investment portfolio were $39.0 million, a decrease of $32.4 million compared to December 31, 2014.

There were $0.8 million of net realized losses recognized in earnings for the three months ended September 30, 2015, compared to $6.7 million of net realized gains for the same period in 2014.  For the nine months ended September 30, 2015, there were $8.8 million of net realized gains, compared to $12.0 million for the same period in 2014.

Other income (loss) for the three months ended September 30, 2015 was a $2.5 million loss, compared to $1.3 million of income for the same period in 2014. For the nine months ended September 30, 2015, Other income (loss) was a $4.6 million loss compared to $10.1 million of income for the same period in the prior year, largely impacted by a one-time foreign exchange gain in the first quarter of 2014.  Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses.

The Company will hold a conference call on Friday, November 6, 2015 starting at 8:30 a.m. EST to discuss the 2015 third quarter results.  The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is (888) 572-7033 and the international dial-in is (719) 325-2454. Participants may connect to the webcast at: 

http://edge.media-server.com/m/p/rtf74zgm

Net operating earnings, or net income excluding after-tax net realized gains (losses), after-tax net other-than-temporary impairment losses recognized in earnings, and after-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency), is a non-GAAP financial measure that is a common performance measurement for insurance companies.  We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies and operations at Lloyd’s. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as representative offices in China and Brazil.

This press release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.  Whenever used in this release, the words “estimate,” “expect,” “believe” or similar expressions are intended to identify such forward-looking statements.  Forward-looking statements are derived from information that we currently have and assumptions that we make. We cannot assure that results that we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties that we face.   Please refer to Navigators’ most recent reports on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators’ business and the important factors that may affect that business.  Navigators’ undertakes no obligation to publicly update or revise any forward-looking statement.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except share and per share data)
(unaudited)
 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
Results of Operations     2015     2014   Change     2015     2014   Change
                 
Gross written premiums   $    354,062   $    327,469     8.1 %   $    1,129,993   $    1,099,054     2.8 %
Net written premiums       251,939       228,417     10.3 %       799,141       772,131     3.5 %
                 
Revenues:                
Net earned premiums       254,082       245,367     3.6 %       732,542       701,723     4.4 %
Net investment income       17,371       15,839     9.7 %       50,219       48,097     4.4 %
Net realized gains (losses):                
Total other-than-temporary impairment losses       (1,298 )     (41 )   NM         (1,747 )     158     NM  
Portion of loss recognized in other comprehensive                    
income (before tax)       23       41     -43.9 %       49       (158 )   NM  
Net other-than-temporary impairment losses                     
recognized in earnings       (1,275 )     –      NM         (1,698 )     –      NM  
Other realized gains (losses)       518       6,718     -92.3 %       10,453       12,024     -13.1 %
Net realized gains (losses)       (757 )     6,718     NM         8,755       12,024     -27.2 %
Other income (loss)       (2,518 )     1,336     NM         (4,638 )     10,070     NM  
Total revenues       268,178       269,260     -0.4 %       786,878       771,914     1.9 %
                 
Expenses:                
Net losses and loss adjustment expenses       146,546       135,284     8.3 %       418,717       410,571     2.0 %
Commission expenses       34,253       33,943     0.9 %       98,638       91,820     7.4 %
Other operating expenses       56,599       50,388     12.3 %       164,297       145,526     12.9 %
Interest expense       3,856       3,388     13.8 %       11,567       11,559     0.1 %
Total expenses       241,254       223,003     8.2 %       693,219       659,476     5.1 %
                 
Income before income taxes       26,924       46,257     -41.8 %       93,659       112,438     -16.7 %
                 
Income tax expense (benefit)       8,723       15,032     -42.0 %       30,345       36,384     -16.6 %
                 
Net income (loss)   $    18,201   $    31,225     -41.7 %   $    63,314   $    76,054     -16.8 %
                 
                 
Per Share Data                
                 
Net income per common share:                
Basic   $    1.26   $    2.19     -42.3 %   $    4.40   $    5.34     -17.5 %
Diluted   $    1.23   $    2.14     -42.5 %   $    4.29   $    5.22     -17.8 %
                 
Average common shares outstanding:                
Basic       14,411,927       14,265,260           14,384,291       14,252,910    
Diluted       14,811,095       14,613,744           14,767,949       14,577,297    
                 
Underwriting Ratios                
Loss Ratio     57.7 %   55.1 %       57.2 %   58.5 %  
Expense Ratio     35.7 %   34.4 %       35.8 %   33.8 %  
Combined Ratio     93.4 %   89.5 %       93.0 %   92.3 %  
                 
                 
Balance Sheet Data   Sept. 30, June 30,     Sept. 30, Dec. 31,  
      2015     2015         2015     2014    
Stockholders’ equity   $    1,076,855   $    1,053,629     2.2 %   $    1,076,855   $    1,027,224     4.8 %
Book value per share   $    74.70   $    73.18     2.1 %   $    74.70   $    71.93     3.9 %
                 

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS (Unaudited)  
           
amounts in thousands, except share and per share amounts  
    September 30,    December 31,  
      2015       2014    
ASSETS          
Investments and cash:          
Fixed maturities, available-for-sale, at fair value (amortized cost: 2015: $2,367,172; 2014: $2,323,959)   $   2,396,987     $   2,365,934    
Equity securities, available-for-sale, at fair value (cost: 2015: $265,760; 2014: $154,843)       274,928         184,295    
Short-term investments, at fair value (amortized cost: 2015: $233,109; 2014: $179,527)       233,142         179,506    
Cash       69,483         90,751    
Total investments and cash   $  2,974,540     $ 2,820,486    
           
Premiums receivable       343,214     $   342,479    
Prepaid reinsurance premiums       252,488         237,851    
Reinsurance recoverable on paid losses       53,174         51,347    
Reinsurance recoverable on unpaid losses and loss adjustment expenses       794,235         851,498    
Deferred policy acquisition costs       88,959         79,452    
Accrued investment income       16,130         14,791    
Goodwill and other intangible assets       6,906         7,013    
Current income tax receivable, net       14,011         14,549    
Deferred income tax, net       9,955         –    
Receivable  for investments sold       2,727         326    
Other assets       40,188         44,384    
Total assets   $  4,596,527     $  4,464,176    
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Liabilities:          
Reserves for losses and loss adjustment expenses   $  2,175,317     $  2,159,634    
Unearned premiums       847,403         766,167    
Reinsurance balances payable       133,542         152,774    
Senior notes       263,544         263,440    
Deferred income tax, net       –          1,467    
Payable for investments purchased       31,000         134    
Accounts payable and other liabilities       68,866         93,336    
Total liabilities   $  3,519,672     $  3,436,952    
           
Stockholders’ equity:          
Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued   $   –     $   –    
Common stock, $.10 par value, authorized 50,000,000 shares, issued 17,926,323 shares for 2015          
  and 17,792,846 shares for 2014       1,792         1,778    
Additional paid-in capital       354,527         347,022    
Treasury stock, at cost (3,511,380 shares for 2015 and 2014)       (155,801 )       (155,801 )  
Retained earnings       850,980         787,666    
Accumulated other comprehensive income       25,357         46,559    
Total stockholders’ equity   $   1,076,855     $   1,027,224    
Total liabilities and stockholders’ equity   $   4,596,527     $   4,464,176    
           

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
                     
    Three Months Ended September 30, 2015
    U.S.    Int’l            
amounts in thousands   Insurance   Insurance   GlobalRe   Corporate (1)   Total
Gross written premiums   $   218,783     $   98,788     $   36,491           $   354,062  
Ceded written premiums     (63,753 )     (37,804 )     (566 )           (102,123 )
Net written premiums     155,030       60,984       35,925             251,939  
                     
Net earned premiums     142,409       68,533       43,140             254,082  
Net losses and LAE     (85,140 )     (39,182 )     (22,224 )           (146,546 )
Commission expenses     (15,157 )     (12,780 )     (7,705 )     1,389       (34,253 )
Other operating expenses     (32,948 )     (19,937 )     (3,714 )           (56,599 )
Other underwriting income (expense)     1,013             395       (1,389 )     19  
                     
Underwriting profit (loss)   $   10,177     $   (3,366 )   $   9,892     $   –     $   16,703  
                     
Net investment income                 17,371       17,371  
Net realized gains (losses)                 (757 )     (757 )
Interest expense                 (3,856 )     (3,856 )
Other income (loss)                 (2,537 )     (2,537 )
Income before income taxes   $   10,177     $   (3,366 )   $   9,892     $   10,221     $   26,924  
Income tax (expense) benefit                 (8,723 )     (8,723 )
Net income (loss)                    $   18,201  
                     
                     
Losses and LAE ratio     59.8 %     57.2 %     51.5 %         57.7 %
Commission expense ratio     10.6 %     18.6 %     17.9 %         13.5 %
Other operating expense ratio (2)     22.5 %     29.1 %     7.7 %         22.2 %
Combined ratio     92.9 %     104.9 %     77.1 %         93.4 %
                     
 (1) – Includes Corporate segment intercompany eliminations. 
 (2) – Includes Other operating expenses and Other underwriting income (expense). 
                     
                     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
                     
    Three Months Ended September 30, 2014
    U.S.    Int’l            
amounts in thousands   Insurance   Insurance   GlobalRe   Corporate (1)   Total
Gross written premiums   $   199,723     $   94,161     $   33,585     $   –     $   327,469  
Ceded written premiums       (61,654 )       (36,607 )       (791 )       –         (99,052 )
Net written premiums       138,069         57,554         32,794         –         228,417  
                     
Net earned premiums       130,420         66,278         48,669         –         245,367  
Net losses and LAE     (80,722 )     (24,910 )     (29,652 )       –       (135,284 )
Commission expenses     (12,870 )     (12,792 )     (8,831 )     550       (33,943 )
Other operating expenses     (29,160 )     (17,288 )     (3,940 )       –       (50,388 )
Other underwriting income (expense)     534       1       122       (550 )     107  
                     
Underwriting profit (loss)   $   8,202     $   11,289     $   6,368     $   –      $   25,859  
                     
Net investment income                 15,839       15,839  
Net realized gains (losses)                   6,718       6,718  
Interest expense                   (3,388 )     (3,388 )
Other income (loss)                   1,229       1,229  
Income before income taxes   $   8,202     $   11,289     $   6,368     $   20,398     $   46,257  
Income tax (expense) benefit                 (15,032 )     (15,032 )
Net income (loss)                    $   31,225  
                     
                     
Losses and LAE ratio     61.9 %     37.6 %     60.9 %         55.1 %
Commission expense ratio     9.9 %     19.3 %     18.1 %         13.8 %
Other operating expense ratio (2)     21.9 %     26.1 %     7.9 %         20.6 %
Combined ratio     93.7 %     83.0 %     86.9 %         89.5 %
_______________                    
 (1) – Includes Corporate segment intercompany eliminations. 
 (2) – Includes Other operating expenses and Other underwriting income (expense). 
                     
                     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
                     
    Nine Months Ended September 30, 2015
    U.S.    Int’l            
amounts in thousands   Insurance   Insurance   GlobalRe   Corporate (1)   Total
Gross written premiums   $   658,097     $   330,005     $   141,891           $   1,129,993  
Ceded written premiums     (211,365 )     (113,681 )     (5,806 )           (330,852 )
Net written premiums     446,732       216,324       136,085             799,141  
                     
Net earned premiums     410,804       197,244       124,494             732,542  
Net losses and LAE     (247,094 )     (101,236 )     (70,387 )           (418,717 )
Commission expenses     (41,777 )     (35,491 )     (23,042 )     1,672       (98,638 )
Other operating expenses     (98,010 )     (54,312 )     (11,975 )           (164,297 )
Other underwriting income (expense)     1,330             441       (1,672 )     99  
                     
Underwriting profit (loss)   $   25,253     $   6,205     $   19,531     $   –     $   50,989  
                     
Net investment income                 50,219       50,219  
Net realized gains (losses)                 8,755       8,755  
Interest expense                 (11,567 )     (11,567 )
Other income (loss)                 (4,737 )     (4,737 )
Income (loss) before income taxes   $   25,253     $   6,205     $   19,531     $   42,670     $   93,659  
Income tax (expense) benefit                 (30,345 )     (30,345 )
Net income (loss)                    $   63,314  
                     
                     
Losses and LAE ratio     60.1 %     51.3 %     56.5 %         57.2 %
Commission expense ratio     10.2 %     18.0 %     18.5 %         13.5 %
Other operating expense ratio (2)     23.6 %     27.6 %     9.3 %         22.3 %
Combined ratio     93.9 %     96.9 %     84.3 %         93.0 %
                     
 (1) – Includes Corporate segment intercompany eliminations. 
 (2) – Includes Other operating expenses and Other underwriting income (expense). 
                     
                     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
                     
    Nine Months Ended September 30, 2014
    U.S.    Int’l            
amounts in thousands   Insurance   Insurance   GlobalRe   Corporate (1)   Total
Gross written premiums   $   604,774     $   334,085     $   160,195     $   –     $   1,099,054  
Ceded written premiums       (186,724 )       (135,534 )       (4,665 )       –         (326,923 )
Net written premiums     418,050       198,551       155,530         –       772,131  
                     
Net earned premiums     370,864       187,993       142,866         –       701,723  
Net losses and LAE     (226,817 )     (91,423 )     (92,331 )       –       (410,571 )
Commission expenses     (35,598 )     (32,656 )     (25,171 )     1,605       (91,820 )
Other operating expenses     (85,993 )     (47,783 )     (11,750 )       –       (145,526 )
Other underwriting income (expense)     1,783       18       301       (1,605 )     497  
                     
Underwriting profit (loss)   $   24,239     $   16,149     $   13,915     $   –      $   54,303  
                     
Net investment income                 48,097       48,097  
Net realized gains (losses)                   12,024       12,024  
Interest expense                   (11,559 )     (11,559 )
Other income (loss)                   9,573       9,573  
Income (loss) before income taxes   $   24,239     $   16,149     $   13,915     $   58,135     $   112,438  
Income tax (expense) benefit                 (36,384 )     (36,384 )
Net income (loss)                    $   76,054  
                     
                     
Losses and LAE ratio     61.2 %     48.6 %     64.6 %         58.5 %
Commission expense ratio     9.6 %     17.4 %     17.6 %         13.1 %
Other operating expense ratio (2)     22.7 %     25.4 %     8.1 %         20.7 %
Combined ratio     93.5 %     91.4 %     90.3 %         92.3 %
                     
 (1) – Includes Corporate segment intercompany eliminations. 
 (2) – Includes Other operating expenses and Other underwriting income (expense). 
                     

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
     
    U.S. Insurance
    Three months ended September 30, 2015 Three months ended September 30, 2014  
        Professional       Professional   % Change
amounts in thousands   Marine P&C Liability Total Marine P&C Liability Total Total
Gross written premiums   $   35,529   $   154,009   $   29,245   $   218,783   $   34,576   $   138,181   $   26,966   $   199,723     9.5 %
Ceded written premiums     (13,865 )   (34,902 )   (14,986 )   (63,753 )   (13,338 )   (41,180 )   (7,136 )   (61,654 )   3.4 %
Net written premiums     21,664     119,107     14,259     155,030     21,238     97,001     19,830     138,069     12.3 %
                     
Net earned premiums     24,292     104,473     13,644     142,409     27,207     82,635     20,578     130,420     9.2 %
Net losses and LAE     (7,349 )   (69,054 )   (8,737 )   (85,140 )   (13,581 )   (53,955 )   (13,186 )   (80,722 )   5.5 %
Commission expenses     (2,412 )   (11,711 )   (1,034 )   (15,157 )   (3,486 )   (6,697 )   (2,687 )   (12,870 )   17.8 %
Other operating expenses     (6,754 )   (20,581 )   (5,613 )   (32,948 )   (6,086 )   (17,935 )   (5,139 )   (29,160 )   13.0 %
Other underwriting income (expense)     214     735     64     1,013     168     331     35     534     89.7 %
                     
Underwriting profit (loss)   $   7,991   $   3,862     (1,676 ) $   10,177   $   4,222   $   4,379     (399 ) $   8,202     24.1 %
                     
Losses and LAE ratio     30.3 %   66.1 %   64.0 %   59.8 %   49.9 %   65.3 %   64.1 %   61.9 %  
Commission expense ratio     9.9 %   11.2 %   7.6 %   10.6 %   12.8 %   8.1 %   13.1 %   9.9 %  
Other operating expense ratio (1)     26.9 %   19.0 %   40.7 %   22.5 %   21.8 %   21.3 %   24.7 %   21.9 %  
Combined ratio     67.1 %   96.3 %   112.3 %   92.9 %   84.5 %   94.7 %   101.9 %   93.7 %  
                     
 (1) – Includes Other operating expenses and Other underwriting income (expense). 
                     
     
    Int’l Insurance
    Three months ended September 30, 2015 Three months ended September 30, 2014  
        Professional       Professional   % Change
amounts in thousands    Marine   P&C   Liability   Total  Marine P&C Liability Total Total
Gross written premiums   $   41,002   $   37,449   $   20,337   $   98,788   $   41,593   $   35,399   $   17,169   $   94,161     4.9 %
Ceded written premiums     (10,985 )   (20,034 )   (6,785 )   (37,804 )   (6,924 )   (24,267 )   (5,416 )   (36,607 )   3.3 %
Net written premiums     30,017     17,415     13,552     60,984     34,669     11,132     11,753     57,554     6.0 %
                     
Net earned premiums     36,792     16,879     14,862     68,533     40,207     14,300     11,771     66,278     3.4 %
Net losses and LAE     (23,002 )   (8,051 )   (8,129 )   (39,182 )   (14,657 )   (3,565 )   (6,688 )   (24,910 )   57.3 %
Commission expenses     (8,227 )   (2,779 )   (1,774 )   (12,780 )   (9,755 )   (2,565 )   (472 )   (12,792 )   -0.1 %
Other operating expenses     (8,233 )   (6,604 )   (5,100 )   (19,937 )   (7,573 )   (5,675 )   (4,040 )   (17,288 )   15.3 %
Other underwriting income (expense)                     1             1     NM  
                     
Underwriting profit (loss)     (2,670 )   (555 )   (141 )   (3,366 ) $   8,223   $   2,495   $   571   $   11,289     NM  
                     
Losses and LAE ratio     62.5 %   47.7 %   54.7 %   57.2 %   36.5 %   24.9 %   56.8 %   37.6 %  
Commission expense ratio     22.4 %   16.5 %   11.9 %   18.6 %   24.3 %   17.9 %   4.0 %   19.3 %  
Other operating expense ratio (1)     22.4 %   39.1 %   34.4 %   29.1 %   18.7 %   39.8 %   34.4 %   26.1 %  
Combined ratio     107.3 %   103.3 %   101.0 %   104.9 %   79.5 %   82.6 %   95.2 %   83.0 %  
                     
 NM – Percentage change not meaningful 
 (1) – Includes Other operating expenses and Other underwriting income (expense). 
                     
 
     
    U.S. Insurance
    Nine months ended September 30, 2015 Nine months ended September 30, 2014  
        Professional       Professional   % Change
amounts in thousands   Marine P&C Liability Total Marine P&C Liability Total Total
Gross written premiums   $   118,167   $   458,371   $   81,559   $   658,097   $   120,149   $   400,437   $   84,188   $   604,774     8.8 %
Ceded written premiums     (45,177 )   (123,765 )   (42,423 )   (211,365 )   (34,095 )   (127,788 )   (24,841 )   (186,724 )   13.2 %
Net written premiums     72,990     334,606     39,136     446,732     86,054     272,649     59,347     418,050     6.9 %
                     
Net earned premiums     74,193     291,648     44,963     410,804     81,920     224,151     64,793     370,864     10.8 %
Net losses and LAE     (28,952 )   (194,910 )   (23,232 )   (247,094 )   (38,873 )   (150,924 )   (37,020 )   (226,817 )   8.9 %
Commission expenses     (8,873 )   (29,018 )   (3,886 )   (41,777 )   (10,134 )   (16,737 )   (8,727 )   (35,598 )   17.4 %
Other operating expenses     (20,129 )   (60,976 )   (16,905 )   (98,010 )   (17,720 )   (52,923 )   (15,350 )   (85,993 )   14.0 %
Other underwriting income (expense)     389     876     65     1,330     691     971     121     1,783     -25.4 %
                     
Underwriting profit (loss)   $   16,628   $   7,620   $   1,005   $   25,253   $   15,884   $   4,538   $   3,817   $   24,239     4.2 %
                     
Losses and LAE ratio     39.0 %   66.8 %   51.7 %   60.1 %   47.5 %   67.3 %   57.1 %   61.2 %  
Commission expense ratio     12.0 %   9.9 %   8.6 %   10.2 %   12.4 %   7.5 %   13.5 %   9.6 %  
Other operating expense ratio (1)     26.6 %   20.7 %   37.5 %   23.6 %   20.7 %   23.2 %   23.5 %   22.7 %  
Combined ratio     77.6 %   97.4 %   97.8 %   93.9 %   80.6 %   98.0 %   94.1 %   93.5 %  
                     
 (1) – Includes Other operating expenses and Other underwriting income (expense). 
                     
     
    Int’l Insurance
    Nine months ended September 30, 2015 Nine months ended September 30, 2014  
        Professional       Professional   % Change
amounts in thousands    Marine   P&C   Liability   Total  Marine P&C Liability Total Total
Gross written premiums   $   149,844   $   112,014   $   68,147   $   330,005   $   151,107   $   128,954   $   54,024   $   334,085     -1.2 %
Ceded written premiums     (30,933 )   (60,676 )   (22,072 )   (113,681 )   (36,351 )   (80,015 )   (19,168 )   (135,534 )   -16.1 %
Net written premiums     118,911     51,338     46,075     216,324     114,756     48,939     34,856     198,551     9.0 %
                     
Net earned premiums     114,716     43,112     39,416     197,244     112,428     47,207     28,358     187,993     4.9 %
Net losses and LAE     (63,945 )   (17,015 )   (20,276 )   (101,236 )   (57,316 )   (20,460 )   (13,647 )   (91,423 )   10.7 %
Commission expenses     (26,912 )   (3,961 )   (4,618 )   (35,491 )   (29,763 )   (2,370 )   (523 )   (32,656 )   8.7 %
Other operating expenses     (21,677 )   (18,754 )   (13,881 )   (54,312 )   (20,454 )   (16,526 )   (10,803 )   (47,783 )   13.7 %
Other underwriting income (expense)                     9     5     4     18     NM  
                     
Underwriting profit (loss)   $   2,182   $   3,382   $   641   $   6,205   $   4,904   $   7,856   $   3,389   $   16,149     -61.6 %
                     
Losses and LAE ratio     55.7 %   39.5 %   51.4 %   51.3 %   51.0 %   43.3 %   48.1 %   48.6 %  
Commission expense ratio     23.5 %   9.2 %   11.7 %   18.0 %   26.5 %   5.0 %   1.8 %   17.4 %  
Other operating expense ratio (1)     18.9 %   43.5 %   35.3 %   27.6 %   18.1 %   35.1 %   38.2 %   25.4 %  
Combined ratio     98.1 %   92.2 %   98.4 %   96.9 %   95.6 %   83.4 %   88.1 %   91.4 %  
                     
 NM – Percentage change not meaningful 
 (1) – Includes Other operating expenses and Other underwriting income (expense). 

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES  
Net Incurred Loss Activity  
($ in thousands)  
             
    For the Three Months Ended September 30,  
    Amounts Loss Ratio  
Net Incurred Loss Activity     2015     2014     2015     2014    
US Insurance:            
Loss and LAE payments   $   67,327   $   64,436     47.3 %   49.4 %  
Change in reserves     17,813       16,286     12.5 %   12.5 %  
Net incurred loss and LAE     85,140       80,722     59.8 %   61.9 %  
             
International Insurance:            
Loss and LAE payments     29,306       27,018     42.8 %   40.8 %  
Change in reserves     9,876       (2,108 )   14.4 %   -3.2 %  
Net incurred loss and LAE     39,182       24,910     57.2 %   37.6 %  
             
Global Reinsurance:            
Loss and LAE payments     16,899       16,626     39.2 %   34.1 %  
Change in reserves     5,325       13,026     12.3 %   26.8 %  
Net incurred loss and LAE     22,224       29,652     51.5 %   60.9 %  
             
Total            
Loss and LAE payments     113,532       108,080     44.7 %   44.0 %  
Change in reserves     33,014       27,204     13.0 %   11.1 %  
Net incurred loss and LAE   $   146,546   $   135,284     57.7 %   55.1 %  
             
    Amounts Loss Ratio Impact  
Impact of Prior Years Reserves   Sept. 30, Sept. 30, Sept. 30, Sept. 30,  
Favorable / (Unfavorable) Development     2015     2014     2015     2014    
US Insurance   $   7,057   $   4,831     2.8 %   2.0 %  
International Insurance     2,794       10,139     1.1 %   4.1 %  
Global Reinsurance     4,264       500     1.7 %   0.2 %  
Total   $   14,115   $   15,470     5.6 %   6.3 %  
             

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES  
Net Incurred Loss Activity  
($ in thousands)  
             
    For the Nine Months Ended September 30,  
    Amounts Loss Ratio  
Net Incurred Loss Activity     2015     2014     2015     2014    
US Insurance:            
Loss and LAE payments   $   186,780   $   163,863     45.4 %   44.2 %  
Change in reserves     60,314       62,954     14.7 %   17.0 %  
Net incurred loss and LAE     247,094       226,817     60.1 %   61.2 %  
             
International Insurance:            
Loss and LAE payments     98,734       90,254     50.0 %   48.0 %  
Change in reserves     2,502       1,169     1.3 %   0.6 %  
Net incurred loss and LAE     101,236       91,423     51.3 %   48.6 %  
             
Global Reinsurance:            
Loss and LAE payments     58,148       58,248     46.7 %   40.8 %  
Change in reserves     12,239       34,083     9.8 %   23.8 %  
Net incurred loss and LAE     70,387       92,331     56.5 %   64.6 %  
             
Total            
Loss and LAE payments     343,662       312,365     47.0 %   44.5 %  
Change in reserves     75,055       98,206     10.2 %   14.0 %  
Net incurred loss and LAE   $   418,717   $   410,571     57.2 %   58.5 %  
             
    Amounts Loss Ratio Impact  
Impact of Prior Years Reserves   Sept. 30, Sept. 30, Sept. 30, Sept. 30,  
Favorable / (Unfavorable) Development   2015     2014     2015     2014    
US Insurance   $   21,295   $   16,965     2.9 %   2.4 %  
International Insurance     8,404       21,096     1.1 %   3.0 %  
Global Reinsurance     4,270       (2,038 )   0.6 %   -0.3 %  
 Total   $   33,969   $   36,023     4.6 %   5.1 %  
             

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
 
  As of September 30, 2015
  Case   IBNR  
Net Loss Reserves:   Reserves   Reserves   Total
US Insurance:  
Marine   $   69,067     $   61,475     $   130,542  
Property Casualty     162,634       478,821       641,455  
Professional Liability     38,642       66,637       105,279  
Total US Insurance     270,343       606,933       877,276  
International Insurance:            
Marine     171,492       71,114       242,606  
Property Casualty     37,906       17,793       55,699  
Professional Liability     10,347       61,648       71,995  
Total International Insurance     219,745       150,555       370,300  
           
Global Reinsurance     27,907       105,601       133,508  
           
Total Net Loss Reserves   $   517,995     $   863,089     $   1,381,084  
 
  As of December 31, 2014
  Case   IBNR  
Net Loss Reserves:   Reserves   Reserves   Total
US Insurance:  
Marine   $   74,699     $   64,390     $   139,089  
Property Casualty     144,334       391,643       535,977  
Professional Liability     56,501       85,369       141,870  
Total US Insurance     275,534       541,402       816,936  
International Insurance:            
Marine     168,575       75,673       244,248  
Property Casualty     41,695       21,391       63,086  
Professional Liability     12,466       49,712       62,178  
Total International Insurance     222,736       146,776       369,512  
           
Global Reinsurance     31,108       90,580       121,688  
           
Total Net Loss Reserves   $   529,378     $   778,758     $   1,308,136  

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES 
Investment Data

As of September 30, 2015, the average quality of the investment portfolio as rated by S&P and Moody’s was AA-/Aa3 with an average duration of 3.8 years. The Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of September 30, 2015:

                 
  As of September 30, 2015 
      Gross   Gross   Cost or
  Fair   Unrealized   Unrealized   Amortized
amounts in thousands   Value   Gains   (Losses)   Cost
Fixed maturities:    
U.S. Treasury bonds, agency bonds and     
foreign government bonds   $   301,915     $   4,327     $   (8,812 )   $   306,400  
States, municipalities and political subdivisions     571,104       17,402       (927 )     554,629  
Mortgage-backed and asset-backed securities:                                
Agency mortgage-backed securities     360,198       7,200       (912 )     353,910  
Residential mortgage obligations     31,568       854       (104 )     30,818  
Asset-backed securities     197,934       591       (846 )     198,189  
Commercial mortgage-backed securities     204,876       5,335       (958 )     200,499  
Subtotal   $   794,576     $   13,980     $   (2,820 )   $   783,416  
Corporate bonds     729,392       10,776       (4,111 )     722,727  
Total fixed maturities   $   2,396,987     $   46,485     $   (16,670 )   $   2,367,172  
Equity securities     274,928       16,486       (7,318 )     265,760  
Short-term investments     233,142       33               233,109  
Total investments   $   2,905,057     $   63,004     $   (23,988 )   $   2,866,041  

 

 

CONTACT: Contact: Ciro M. DeFalco
Senior Vice President and Chief Financial Officer
(203) 905-6343
cdefalco@navg.com
www.navg.com