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Navigators Reports Second Quarter 2016 Earnings

/EIN News/ -- STAMFORD, Conn., Aug. 04, 2016 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $16.2 million, or $1.08 per diluted share, for the three months ended June 30, 2016 compared to $19.2 million, or $1.30 per diluted share, for the comparable period in 2015. Operating earnings were $12.2 million, or $0.81 per diluted share, for the three months ended June 30, 2016 compared to $19.7 million, or $1.34 per diluted share, for the comparable period in 2015. 

For the six months ended June 30, 2016, our Company reported Net income of $39.1 million, or $2.62 per diluted share, compared to $45.1 million, or $3.06 per diluted share, for the comparable period in 2015. Operating earnings were $32.4 million, or $2.17 per diluted share, for the six months ended June 30, 2016 compared to $40.6 million, or $2.76 per diluted share, for the comparable period in 2015.

Gross written premiums and Net written premiums for the three months ended June 30, 2016 were $412.6 million and $306.5 million, respectively, increases of 8.7% and 18.7% from the comparable period in 2015.

Gross written premiums and Net written premiums for the six months ended June 30, 2016 were $826.4 million and $626.4 million, respectively, increases of 6.5% and 14.5% from the comparable period in 2015.

The combined ratio for the three and six months ended June 30, 2016 was 99.6% and 97.4%, respectively, compared to 93.4% and 92.8% for the comparable periods in 2015.

Stan Galanski, President and Chief Executive Officer commented, “We are pleased to have produced our fourteenth consecutive quarter of profitable underwriting results despite absorbing $18.3 million of property catastrophe loss in the second quarter. Our U.S. Insurance business had another solidly profitable quarter, while our International Insurance business was adversely impacted by property catastrophe activity, largely stemming from the Fort McMurray fires. We achieved double digit Net written premium growth for the second quarter and first six months of 2016, driven by strong growth in both the P&C and Professional Liability operating segments within International Insurance. Net investment income was up nearly 20.0% over the second quarter of 2015, leading to a 3.2% increase in Book value per share from March 31, 2016. Given the turmoil in the global financial markets and the level of natural catastrophe loss activity impacting the industry during the second quarter, we believe our results reflect a well balanced risk portfolio and a sound investment philosophy.”

Stockholders’ equity was $1.182 billion, or $81.24 per share, as of June 30, 2016 compared to $1.096 billion, or $75.96 per share, as of  December 31, 2015.

On August 4, 2016, the Board of Directors declared a quarterly cash dividend of $0.09 per share of common stock to be paid on September 30, 2016 to stockholders of record at the close of business on August 19, 2016. 

Net investment income for the three and six months ended June 30, 2016 was $19.9 million and $39.5 million, respectively, increases of 19.8% and 20.2% from the comparable periods in 2015. The annualized pre-tax investment yield, excluding net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.6% for both the three and six months ended June 30, 2016, compared to 2.4% for both comparable periods in 2015.

Our Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by S&P and Moody’s, respectively, with an average effective duration of 3.9 years as of June 30, 2016.  As of June 30, 2016, Net unrealized gains within our investment portfolio were $110.6 million, an increase of $73.3 million compared to December 31, 2015.

There were $1.8 million of Net realized gains recognized in earnings for the three months ended June 30, 2016, compared to $3.9 million for the same period in 2015.  For the six months ended June 30, 2016, there were $3.4 million of Net realized gains, compared to $9.5 million for the same period in 2015.

Other income (loss) for the three months ended June 30, 2016 was $4.4 million of income, compared to $4.4 million of loss for the same period in 2015.  For the six months ended June 30, 2016 Other income (loss) was $7.0 million of income, compared to $2.1 million of loss for the same period in 2015.  Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses.

Our Company will hold a conference call on Friday, August 5, 2016 starting at 8:30 a.m. (EDT) to discuss the 2016 second 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 800-850-2903 and the international dial-in is 224-357-2399. Participants may connect to the webcast at: 

http://edge.media-server.com/m/p/bx9cyqqq

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             Six Months Ended          
    June 30,             June 30,          
Results of Operations   2016     2015     Change     2016     2015     Change  
                                                 
Gross written premiums   $ 412,565     $ 379,471       8.7 %   $ 826,442     $ 775,931       6.5 %
Net written premiums     306,535       258,244       18.7 %     626,355       547,202       14.5 %
                                                 
Revenues:                                                
Net earned premiums     267,992       242,328       10.6 %     532,350       478,460       11.3 %
Net investment income     19,875       16,595       19.8 %     39,469       32,848       20.2 %
Net realized gains (losses):                                                
Total other-than-temporary impairment losses     (162 )     (472 )     -65.7 %     (271 )     (450 )     -39.8 %
Portion of loss recognized in other comprehensive income (before tax)     12       49       -75.5 %     121       27     NM  
Net other-than-temporary impairment losses recognized in earnings     (150 )     (423 )     -64.6 %     (150 )     (423 )     -64.6 %
Other realized gains (losses)     1,960       4,339       -54.8 %     3,557       9,935       -64.2 %
Net realized gains (losses)     1,810       3,916       -53.8 %     3,407       9,512       -64.2 %
Other income (loss)     4,430       (4,362 )   NM       6,979       (2,120 )   NM  
Total revenues   $ 294,107     $ 258,477       13.8 %   $ 582,205     $ 518,700       12.2 %
                                                 
Expenses:                                                
Net losses and loss adjustment expenses     167,206       141,973       17.8 %     320,162       272,171       17.6 %
Commission expenses     40,726       31,480       29.4 %     78,280       64,385       21.6 %
Other operating expenses     59,074       52,789       11.9 %     119,883       107,698       11.3 %
Interest expense     3,858       3,856       0.1 %     7,716       7,711       0.1 %
Total expenses   $ 270,864     $ 230,098       17.7 %   $ 526,041     $ 451,965       16.4 %
                                                 
Income before income taxes   $
23,243     $ 28,379       -18.1 %   $ 56,164     $ 66,735       -15.8 %
                                                 
Income tax expense (benefit)     7,053       9,195       -23.3 %     17,042       21,622       -21.2 %
                                                 
Net income (loss)   $ 16,190     $ 19,184       -15.6 %   $ 39,122     $ 45,113       -13.3 %
                                                 
                                                 
Per Share Data                                                
                                                 
Net income per common share:                                                
Basic   $ 1.11     $ 1.33       -16.5 %   $ 2.70     $ 3.14       -14.1 %
Diluted   $ 1.08     $ 1.30       -16.8 %   $ 2.62     $ 3.06       -14.5 %
                                                 
Average common shares outstanding:                                                
Basic     14,536,849       14,396,048               14,514,532       14,370,123          
Diluted     14,976,593       14,763,002               14,942,193       14,726,282          
                                                 
Underwriting Ratios                                                
Loss Ratio     62.4 %     58.6 %             60.1 %     56.9 %        
Expense Ratio     37.2 %     34.8 %             37.3 %     35.9 %        
Combined Ratio     99.6 %     93.4 %             97.4 %     92.8 %        
                                                 
Balance Sheet Data   June 30,     March 31,             June 30,     Dec. 31,          
    2016     2016             2016     2015          
Stockholders' equity   $ 1,181,558     $ 1,143,879       3.3 %   $ 1,181,558     $ 1,096,148       7.8 %
Book value per share   $ 81.24     $ 78.72       3.2 %   $ 81.24     $ 75.96       6.9 %
                                                 

NM- Percentage change not meaningful






THE NAVIGATORS GROUP, INC AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
 ($ in thousands, except per share data)
 
    Three Months Ended
June 30,
    Six Months Ended
June 30,
    % Change  
amounts in thousands   2016     2015     2016     2015     QTD     YTD  
Net income   $ 16,190     $ 19,184     $ 39,122     $ 45,113       (15.6 %)     (13.3 %)
After-tax realized losses (gains)     (1,176 )     (2,398 )     (2,214 )     (6,035 )     (50.9 %)     (63.3 %)
After-tax FX losses (gains)     (2,838 )     2,915       (4,490 )     1,497     NM     NM  
Net operating earnings   $ 12,176     $ 19,701     $ 32,418     $ 40,575       (38.2 %)     (20.1 %)
                                                 
Net operating earnings per common share:                                                
Basic   $ 0.84     $ 1.37     $ 2.23     $ 2.82                  
Diluted   $ 0.81     $ 1.34     $ 2.17     $ 2.76                  
                                                 
 NM - Percentage change not meaningful                                                






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
 
amounts in thousands, except share and per share amounts.                
    June 30,     December 31,  
    2016     2015  
ASSETS                
Investments:                
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016:  $2,558,621; 2015: $2,400,245)   $ 2,632,313     $ 2,414,210  
Equity securities, available-for-sale, at fair value (cost: 2016: $292,698; 2015: $281,943)     329,635       305,271  
Short-term investments, at fair value (amortized cost: 2016: $144,845; 2015: $217,743)     144,843       217,745  
Total investments   $ 3,106,791     $ 2,937,226  
                 
Cash     121,868       69,901  
Premiums receivable     363,343       276,616  
Prepaid reinsurance premiums     222,414       232,588  
Reinsurance recoverable on paid losses     59,950       49,506  
Reinsurance recoverable on unpaid losses and loss adjustment expenses     814,261       809,518  
Deferred policy acquisition costs     113,394       91,983  
Accrued investment income     16,176       16,001  
Goodwill and other intangible assets     6,579       6,807  
Current income tax receivable, net     18,522       22,323  
Deferred income tax, net     -       3,900  
Other assets     53,323       67,643  
Total assets   $ 4,896,621     $ 4,584,012  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities:                
Reserves for losses and loss adjustment expenses   $ 2,268,763     $ 2,202,644  
Unearned premiums     904,507       820,676  
Reinsurance balances payable     127,742       107,411  
Senior notes     263,653       263,580  
Deferred income tax, net     14,475       -  
Payable for investments purchased     48,558       1,495  
Accounts payable and other liabilities     87,365       92,058  
Total liabilities   $ 3,715,063     $ 3,487,864  
                 
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
  18,055,818 shares for 2016 and 17,942,269 shares for 2015
    1,805       1,793  
Additional paid-in capital     363,588       357,829  
Treasury stock, at cost (3,511,380 shares for 2016 and 2015)     (155,801 )     (155,801 )
Retained earnings     906,536       868,723  
Accumulated other comprehensive income     65,430       23,604  
Total stockholders' equity   $ 1,181,558     $ 1,096,148  
Total liabilities and stockholders' equity   $ 4,896,621     $ 4,584,012  






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
 
    Three Months Ended June 30, 2016  
    U.S.     Int’l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross written premiums   $ 243,924     $ 135,740     $ 32,901     $ -     $ 412,565  
Ceded written premiums     (62,618 )     (41,910 )     (1,502 )     -       (106,030 )
Net written premiums     181,306       93,830       31,399       -       306,535  
                                         
Net earned premiums     152,384       77,833       37,775       -       267,992  
Net losses and LAE     (93,428 )     (48,066 )     (25,712 )     -       (167,206 )
Commission expenses     (16,894 )     (16,821 )     (7,492 )     481       (40,726 )
Other operating expenses     (31,570 )     (23,043 )     (4,461 )     -       (59,074 )
Other underwriting income (expense)     342       -       203       (481 )     64  
                                         
Underwriting profit (loss)   $ 10,834     $ (10,097 )   $ 313     $ -     $ 1,050  
                                         
Net investment income                             19,875       19,875  
Net realized gains (losses)                             1,810       1,810  
Interest expense                             (3,858 )     (3,858 )
Other income (loss)                             4,366       4,366  
Income before income taxes   $ 10,834     $ (10,097 )   $ 313     $ 22,193     $ 23,243  
Income tax (expense) benefit                             (7,053 )     (7,053 )
Net income (loss)                                   $ 16,190  
                                         
Losses and LAE ratio     61.3 %     61.8 %     68.1 %             62.4 %
Commission expense ratio     11.1 %     21.6 %     19.8 %             15.2 %
Other operating expense ratio (2)     20.5 %     29.6 %     11.3 %             22.0 %
Combined ratio     92.9 %     113.0 %     99.2 %             99.6 %
 

(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 June 30, 2015  
    U.S.     Int’l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross written premiums   $ 239,987     $ 108,790     $ 30,694     $ -     $ 379,471  
Ceded written premiums     (78,882 )     (41,621 )     (724 )     -       (121,227 )
Net written premiums     161,105       67,169       29,970       -       258,244  
                                         
Net earned premiums     137,304       63,186       41,838       -       242,328  
Net losses and LAE     (84,155 )     (32,363 )     (25,455 )     -       (141,973 )
Commission expenses     (12,275 )     (11,298 )     (8,039 )     132       (31,480 )
Other operating expenses     (31,374 )     (17,366 )     (4,049 )     -       (52,789 )
Other underwriting income (expense)     121       -       36       (132 )     25  
                                         
Underwriting profit (loss)   $ 9,621     $ 2,159     $ 4,331     $ -     $ 16,111  
                                         
Net investment income                             16,595       16,595  
Net realized gains (losses)                             3,916       3,916  
Interest expense                             (3,856 )     (3,856 )
Other income (loss)                             (4,387 )     (4,387 )
Income before income taxes   $ 9,621     $ 2,159     $ 4,331     $ 12,268     $ 28,379  
Income tax (expense) benefit                             (9,195 )     (9,195 )
Net income (loss)                                   $ 19,184  
                                         
                                         
Losses and LAE ratio     61.3 %     51.2 %     60.8 %             58.6 %
Commission expense ratio     8.9 %     17.9 %     19.2 %             13.0 %
Other operating expense ratio (2)     22.8 %     27.5 %     9.6 %             21.8 %
Combined ratio     93.0 %     96.6 %     89.6 %             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 
 
    Six Months Ended June 30, 2016  
    U.S.     Int’l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross written premiums   $ 454,571     $ 279,883     $ 91,988     $ -     $ 826,442  
Ceded written premiums     (117,115 )     (76,881 )     (6,091 )     -       (200,087 )
Net written premiums     337,456       203,002       85,897       -       626,355  
                                         
Net earned premiums     300,724       155,841       75,785       -       532,350  
Net losses and LAE     (184,940 )     (88,476 )     (46,746 )     -       (320,162 )
Commission expenses     (31,749 )     (32,176 )     (15,237 )     882       (78,280 )
Other operating expenses     (65,331 )     (44,814 )     (9,738 )     -       (119,883 )
Other underwriting income (expense)     703       -       252       (882 )     73  
                                         
Underwriting profit (loss)   $ 19,407     $ (9,625 )   $ 4,316     $ -     $ 14,098  
                                         
Net investment income                             39,469       39,469  
Net realized gains (losses)                             3,407       3,407  
Interest expense                             (7,716 )     (7,716 )
Other income (loss)                             6,906       6,906  
Income (loss) before income taxes   $ 19,407     $ (9,625 )   $ 4,316     $ 42,066     $ 56,164  
Income tax (expense) benefit                             (17,042 )     (17,042 )
Net income (loss)                                   $ 39,122  
                                         
Losses and LAE ratio     61.5 %     56.8 %     61.7 %             60.1 %
Commission expense ratio     10.6 %     20.6 %     20.1 %             14.7 %
Other operating expense ratio (2)     21.4 %     28.8 %     12.5 %             22.6 %
Combined ratio     93.5 %     106.2 %     94.3 %             97.4 %
 

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).





THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
 
    Six Months Ended June 30, 2015  
    U.S.     Int’l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross written premiums   $ 439,314     $ 231,217     $ 105,400     $ -     $ 775,931  
Ceded written premiums     (147,612 )     (75,877 )     (5,240 )     -       (228,729 )
Net written premiums     291,702       155,340       100,160       -       547,202  
                                         
Net earned premiums     268,395       128,711       81,354       -       478,460  
Net losses and LAE     (161,954 )     (62,054 )     (48,163 )     -       (272,171 )
Commission expenses     (26,620 )     (22,711 )     (15,337 )     283       (64,385 )
Other operating expenses     (65,062 )     (34,375 )     (8,261 )     -       (107,698 )
Other underwriting income (expense)     317       -       46       (283 )     80  
                                         
Underwriting profit (loss)   $ 15,076     $ 9,571     $ 9,639     $ -     $ 34,286  
                                         
Net investment income                             32,848       32,848  
Net realized gains (losses)                             9,512       9,512  
Interest expense                             (7,711 )     (7,711 )
Other income (loss)                             (2,200 )     (2,200 )
Income (loss) before income taxes   $ 15,076     $ 9,571     $ 9,639     $ 32,449     $ 66,735  
Income tax (expense) benefit                             (21,622 )     (21,622 )
Net income (loss)                                   $ 45,113  
                                         
Losses and LAE ratio     60.3 %     48.2 %     59.2 %             56.9 %
Commission expense ratio     9.9 %     17.6 %     18.9 %             13.5 %
Other operating expense ratio (2)     24.2 %     26.8 %     10.1 %             22.4 %
Combined ratio     94.4 %     92.6 %     88.2 %             92.8 %
 

(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 June 30, 2016     Three Months Ended June 30, 2015          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross written premiums   $ 46,187     $ 168,654     $ 29,083     $ 243,924     $ 41,803     $ 170,216     $ 27,968     $ 239,987       1.6 %
Ceded written premiums     (18,540 )     (36,768 )     (7,310 )     (62,618 )     (15,026 )     (49,305 )     (14,551 )     (78,882 )     -20.6 %
Net written premiums     27,647       131,886       21,773       181,306       26,777       120,911       13,417       161,105       12.5 %
                                                                         
Net earned premiums   $ 24,921     $ 110,212     $ 17,251     $ 152,384     $ 25,977     $ 96,440     $ 14,887     $ 137,304       11.0 %
Net losses and LAE     (10,699 )     (72,172 )     (10,557 )     (93,428 )     (11,415 )     (67,809 )     (4,931 )     (84,155 )     11.0 %
Commission expenses     (2,176 )     (12,821 )     (1,897 )     (16,894 )     (2,429 )     (8,751 )     (1,095 )     (12,275 )     37.6 %
Other operating expenses     (6,817 )     (20,049 )     (4,704 )     (31,570 )     (6,402 )     (19,661 )     (5,311 )     (31,374 )     0.6 %
Other underwriting income (expense)     152       178       12       342       24       97       -       121     NM  
                                                                         
Underwriting profit (loss)   $ 5,381     $ 5,348     $ 105     $ 10,834     $ 5,755     $ 316     $ 3,550     $ 9,621       12.6 %
                                                                         
Losses and LAE ratio     42.9 %     65.5 %     61.2 %     61.3 %     43.9 %     70.3 %     33.1 %     61.3 %        
Commission expense ratio     8.7 %     11.6 %     11.0 %     11.1 %     9.4 %     9.1 %     7.4 %     8.9 %        
Other operating expense ratio (1)     26.8 %     18.0 %     27.2 %     20.5 %     24.5 %     20.3 %     35.7 %     22.8 %        
Combined ratio     78.4 %     95.1 %     99.4 %     92.9 %     77.8 %     99.7 %     76.2 %     93.0 %        
 

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).




THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
    Int’l Insurance  
    Three Months Ended June 30, 2016     Three Months Ended June 30, 2015          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross written premiums   $ 41,147     $ 63,002     $ 31,591     $ 135,740     $ 41,432     $ 41,615     $ 25,743     $ 108,790       24.8 %
Ceded written premiums     (9,554 )     (24,465 )     (7,891 )     (41,910 )     (9,126 )     (24,513 )     (7,982 )     (41,621 )     0.7 %
Net written premiums     31,593       38,537       23,700       93,830       32,306       17,102       17,761       67,169       39.7 %
                                                                         
Net earned premiums   $ 36,096     $ 23,815     $ 17,922     $ 77,833     $ 40,132     $ 10,199     $ 12,855     $ 63,186       23.2 %
Net losses and LAE     (17,021 )     (21,878 )     (9,167 )     (48,066 )     (21,432 )     (4,084 )     (6,847 )     (32,363 )     48.5 %
Commission expenses     (8,361 )     (5,150 )     (3,310 )     (16,821 )     (9,495 )     (155 )     (1,648 )     (11,298 )     48.9 %
Other operating expenses     (8,698 )     (9,065 )     (5,280 )     (23,043 )     (6,749 )     (6,166 )     (4,451 )     (17,366 )     32.7 %
Other underwriting income (expense)     -       -       -       -       -       -       -       -     NM  
                                                                         
Underwriting profit (loss)   $ 2,016     $ (12,278 )   $ 165     $ (10,097 )   $ 2,456     $ (206 )   $ (91 )   $ 2,159     NM  
                                                                         
Losses and LAE ratio     47.2 %     91.9 %     51.2 %     61.8 %     53.4 %     40.0 %     53.3 %     51.2 %        
Commission expense ratio     23.2 %     21.6 %     18.5 %     21.6 %     23.7 %     1.5 %     12.8 %     17.9 %        
Other operating expense ratio (1)     24.0 %     38.1 %     29.4 %     29.6 %     16.8 %     60.5 %     34.6 %     27.5 %        
Combined ratio     94.4 %     151.6 %     99.1 %     113.0 %     93.9 %     102.0 %     100.7 %     96.6 %        
 

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
    U.S. Insurance  
    Six Months Ended June 30, 2016     Six Months Ended June 30, 2015          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross written premiums   $ 89,350     $ 309,932     $ 55,289     $ 454,571     $ 82,638     $ 304,362     $ 52,314     $ 439,314       3.5 %
Ceded written premiums     (36,187 )     (67,275 )     (13,653 )     (117,115 )     (31,312 )     (88,863 )     (27,437 )     (147,612 )     -20.7 %
Net written premiums     53,163       242,657       41,636       337,456       51,326       215,499       24,877       291,702       15.7 %
                                                                         
Net earned premiums   $ 48,171     $ 219,371     $ 33,182     $ 300,724     $ 49,901     $ 187,175     $ 31,319     $ 268,395       12.0 %
Net losses and LAE     (20,474 )     (143,769 )     (20,697 )     (184,940 )     (21,603 )     (125,856 )     (14,495 )     (161,954 )     14.2 %
Commission expenses     (3,658 )     (24,673 )     (3,418 )     (31,749 )     (6,461 )     (17,307 )     (2,852 )     (26,620 )     19.3 %
Other operating expenses     (14,189 )     (41,571 )     (9,571 )     (65,331 )     (13,375 )     (40,720 )     (10,967 )     (65,062 )     0.4 %
Other underwriting income (expense)     231       446       26       703       175       141       1       317       121.7 %
                                                                         
Underwriting profit (loss)   $ 10,081     $ 9,804     $ (478 )   $ 19,407     $ 8,637     $ 3,433     $ 3,006     $ 15,076       28.7 %
                                                                         
Losses and LAE ratio     42.5 %     65.5 %     62.4 %     61.5 %     43.3 %     67.2 %     46.3 %     60.3 %        
Commission expense ratio     7.6 %     11.2 %     10.3 %     10.6 %     12.9 %     9.2 %     9.1 %     9.9 %        
Other operating expense ratio (1)     29.0 %     18.8 %     28.7 %     21.4 %     26.5 %     21.8 %     35.0 %     24.2 %        
Combined ratio     79.1 %     95.5 %     101.4 %     93.5 %     82.7 %     98.2 %     90.4 %     94.4 %        
 

(1) - Includes Other operating expenses and Other underwriting income (expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
    Int’l Insurance  
    Six Months Ended June 30, 2016     Six Months Ended June 30, 2015          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross written premiums   $ 113,095     $ 107,048     $ 59,740     $ 279,883     $ 108,842     $ 74,565     $ 47,810     $ 231,217       21.0 %
Ceded written premiums     (20,643 )     (41,694 )     (14,544 )     (76,881 )     (19,948 )     (40,642 )     (15,287 )     (75,877 )     1.3 %
Net written premiums     92,452       65,354       45,196       203,002       88,894       33,923       32,523       155,340       30.7 %
                                                                         
Net earned premiums   $ 74,952     $ 45,024     $ 35,865     $ 155,841     $ 77,924     $ 26,233     $
24,554     $
128,711       21.1 %
Net losses and LAE     (37,109 )     (33,094 )     (18,273 )     (88,476 )     (40,943 )     (8,964 )     (12,147 )     (62,054 )     42.6 %
Commission expenses     (17,766 )     (7,925 )     (6,485 )     (32,176 )     (18,685 )     (1,182 )     (2,844 )     (22,711 )     41.7 %
Other operating expenses     (17,140 )     (17,773 )     (9,901 )     (44,814 )     (13,444 )     (12,150 )     (8,781 )     (34,375 )     30.4 %
Other underwriting income (expense)     -       -       -       -       -       -       -       -     NM  
                                                                         
Underwriting profit (loss)   $ 2,937     $ (13,768 )   $ 1,206     $ (9,625 )   $ 4,852     $ 3,937     $ 782     $ 9,571     NM  
                                                                         
Losses and LAE ratio     49.5 %     73.5 %     50.9 %     56.8 %     52.5 %     34.2 %     49.5 %     48.2 %        
Commission expense ratio     23.7 %     17.6 %     18.1 %     20.6 %     24.0 %     4.5 %     11.6 %     17.6 %        
Other operating expense ratio (1)     22.9 %     39.5 %     27.6 %     28.8 %     17.3 %     46.3 %     35.7 %     26.8 %        
Combined ratio     96.1 %     130.6 %     96.6 %     106.2 %     93.8 %     85.0 %     96.8 %     92.6 %        
 

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
 
     For the Three Months Ended June 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2016     2015     2016     2015  
U.S. Insurance:                                
Loss and LAE payments   $ 72,246     $ 56,719       47.4 %     41.3 %
Change in reserves     21,182       27,436       13.9 %     20.0 %
Net incurred loss and LAE   $
93,428     $ 84,155       61.3 %     61.3 %
                                 
Int’l Insurance:                                
Loss and LAE payments     32,996       33,891       42.4 %     53.6 %
Change in reserves     15,070       (1,528 )     19.4 %     -2.4 %
Net incurred loss and LAE   $
48,066     $ 32,363       61.8 %     51.2 %
                                 
GlobalRe:                                
Loss and LAE payments     17,928       20,037       47.5 %     47.9 %
Change in reserves     7,784       5,418       20.6 %     12.9 %
Net incurred loss and LAE   $
25,712     $
25,455       68.1 %     60.8 %
                                 
Total                                
Loss and LAE payments     123,170       110,647       46.0 %     45.7 %
Change in reserves     44,036       31,326       16.4 %     12.9 %
Net incurred loss and LAE   $ 167,206     $ 141,973       62.4 %     58.6 %
                                 
    Amounts     Loss Ratio Impact  
Impact of Prior Years Reserves   June 30,     June 30,     June 30,     June 30,  
Favorable / (Unfavorable) Development   2016     2015     2016     2015  
U.S. Insurance   $ 4,002     $ 7,829       1.5 %     3.2 %
Int’l Insurance     3,354       (581 )     1.3 %     -0.2 %
GlobalRe     1,423       7       0.5 %     0.0 %
Total   $ 8,779     $ 7,255       3.3 %     3.0 %






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
 
     For the Six Months Ended June 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2016     2015     2016     2015  
U.S. Insurance:                                
Loss and LAE payments   $ 145,281     $ 119,453       48.3 %     44.5 %
Change in reserves     39,659       42,501       13.2 %     15.8 %
Net incurred loss and LAE   $
184,940     $ 161,954       61.5 %     60.3 %
                                 
Int’l Insurance:                                
Loss and LAE payments     62,239       69,428       39.9 %     53.9 %
Change in reserves     26,237       (7,374 )     16.9 %     -5.7 %
Net incurred loss and LAE   $ 88,476     $ 62,054       56.8 %     48.2 %
                                 
GlobalRe:                                
Loss and LAE payments     43,059       41,249       56.8 %     50.7 %
Change in reserves     3,687       6,914       4.9 %     8.5 %
Net incurred loss and LAE   $ 46,746     $
48,163       61.7 %     59.2 %
                                 
Total                                
Loss and LAE payments     250,579       230,130       47.1 %     48.1 %
Change in reserves     69,583       42,041       13.0 %     8.8 %
Net incurred loss and LAE   $ 320,162     $ 272,171       60.1 %     56.9 %
                                 
    Amounts     Loss Ratio Impact  
Impact of Prior Years Reserves   June 30,     June 30,     June 30,     June 30,  
Favorable / (Unfavorable) Development   2016     2015     2016     2015  
U.S. Insurance   $ 6,671     $ 14,238       1.3 %     3.0 %
Int’l Insurance     2,499       5,610       0.5 %     1.2 %
GlobalRe     1,443       6       0.3 %     0.0 %
Total   $ 10,613     $ 19,854       2.1 %     4.2 %






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
 
     As of June 30, 2016  
amounts in thousands   Case     IBNR          
Net Loss Reserves:   Reserves     Reserves     Total  
U.S. Insurance:                        
Marine   $ 57,895     $ 52,573     $ 110,468  
P&C
    192,440       555,945       748,385  
Professional Liability     30,150       63,592       93,742  
Total U.S. Insurance   $
280,485     $
672,110     $
952,595  
Int’l Insurance:                        
Marine     162,364       59,347       221,711  
P&C     55,811       19,815       75,626  
Professional Liability     28,850       63,843       92,693  
Total Int’l Insurance   $ 247,025     $
143,005     $ 390,030  
                         
GlobalRe   $ 45,705     $ 66,172     $ 111,877  
                         
Total Net Loss Reserves   $ 573,215     $ 881,287     $ 1,454,502  
                         
                         
    As of December 31, 2015  
    Case     IBNR          
Net Loss Reserves:   Reserves     Reserves     Total  
U.S. Insurance:                        
Marine   $ 68,677     $ 55,408     $ 124,085  
P&C     170,988       514,777       685,765  
Professional Liability     42,546       60,528       103,074  
Total U.S. Insurance   $
282,211     $ 630,713     $ 912,924  
Int’l Insurance:                        
Marine     167,157       61,409       228,566  
P&C     40,313       19,735       60,048  
Professional Liability     19,583       63,229       82,812  
Total Int’l Insurance   $ 227,053     $ 144,373     $ 371,426  
                         
GlobalRe   $ 32,160     $ 76,616     $ 108,776  
                         
Total Net Loss Reserves   $ 541,424     $ 851,702     $ 1,393,126  



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

As of June 30, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was "AA-/Aa3" with an average duration of 3.9 years. Our Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2016:

    As of  June 30, 2016  
            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
  $ 353,579     $ 6,019     $ (3,860 )   $ 351,420  
States, municipalities and political subdivisions     553,824       34,183       (602 )     520,243  
Mortgage-backed and asset-backed securities:                                
Agency mortgage-backed securities     504,731       11,203       (183 )     493,711  
Residential mortgage obligations     28,258       470       (130 )     27,918  
Asset-backed securities     262,903       1,339       (836 )     262,400  
Commercial mortgage-backed securities     172,579       6,581       (1,028 )     167,026  
Subtotal   $ 968,471     $ 19,593     $ (2,177 )   $ 951,055  
Corporate bonds     756,439       22,172       (1,636 )     735,903  
Total fixed maturities   $ 2,632,313     $ 81,967     $ (8,275 )   $ 2,558,621  
Equity securities     329,635       39,159       (2,222 )     292,698  
Short-term investments     144,843       -       (2 )     144,845  
Total investments   $ 3,106,791     $ 121,126     $ (10,499 )   $ 2,996,164  

 

Contact:

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

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