Net Income up 24.4%; Board Approves Dividend Increase

STAMFORD, Conn., Feb. 15, 2018 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $26.9 million, or $0.89 per diluted share, for the three months ended December 31, 2017 compared to $21.6 million, or $0.71 per diluted share, for the same period in 2016. Net Operating Earnings1 were $24.5 million, or $0.81 per diluted share, for the three months ended December 31, 2017 compared to $17.7 million, or $0.58 per diluted share, for the same period in 2016.

The fourth quarter of 2017 was impacted by the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As a result of the Tax Act, The Navigators Group, Inc. (“Navigators” or the “Company”) recognized additional income tax expense of $19.7 million which reduced Net Income in the fourth quarter.

Gross Written Premiums and Net Written Premiums for the three months ended December 31, 2017 were $408.7 million and $304.9 million, respectively, increasing 11.2% and 7.8%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended December 31, 2017 was 96.6%, compared to 96.7% for the same period in 2016.

Net Investment Income for the three months ended December 31, 2017 was $23.0 million, an increase of 14.3% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the three months ended December 31, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended December 31, 2017 was $(3.2) million, compared to $1.9 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the full year ended December 31, 2017, our Company reported Net Income of $40.5 million, or $1.35 per diluted share, compared to $82.7 million, or $2.75 per diluted share, for the same period in 2016. Net Operating Earnings were $35.0 million, or $1.16 per diluted share, for the full year ended December 31, 2017 compared to $71.2 million, or $2.37 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the full year ended December 31, 2017 were $1.7 billion and $1.3 billion, respectively, increasing 9.2% and 7.2%, respectively, from the comparable period in 2016. Our Combined Ratio for the full year ended December 31, 2017 was 103.2%, compared to 96.7% for the same period in 2016.

In addition to the impact of the enactment of the Tax Act in the fourth quarter of 2017, the full year results also include Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums totaling $71.3 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $34.3 million.

Net Investment Income for the full year ended December 31, 2017 was $89.3 million, an increase of 12.4% as compared to the same period in 2016. Our pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the full year ended December 31, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the full year ended December 31, 2017 was $(4.2) million, compared to $8.7 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report solidly profitable results for the fourth quarter.  Both the U.S. Insurance and Global Reinsurance segments produced excellent underwriting results, with combined ratios of 91.3% and 90.9% respectively. We grew Gross Written Premium by 11.2% and are well positioned to capitalize on anticipated growth opportunities emanating from the ongoing strength of the U.S. economy as well as targeted specialty niches globally. Net Investment Income was up 14.3% over fourth quarter 2017. In December, we opted to liquidate our actively managed common equity holdings, realizing pre-tax gains of $37.1 million. While the recently enacted Tax Act adversely impacted our fourth quarter results, we anticipate positive benefits of a lower corporate tax rate beginning in 2018. During the quarter, we announced the proposed acquisition of a Belgium-based specialty underwriting manager and insurance company, which we expect to close in the second quarter, subject to regulatory approval. This is an important part of our post-Brexit strategy.”

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 effective duration of 3.5 years as of December 31, 2017. As of December 31, 2017, Net Unrealized Gains within our investment portfolio were $41.5 million, a decrease of $(45.8) million compared to September 30, 2017. We recognized $37.1 million of Net Realized Gains for the three months ended December 31, 2017, compared to $4.0 million of Net Realized Gains for the same period in 2016. For the full year ended December 31, 2017  we recognized $43.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $9.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016. The increase in Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the fourth quarter and full year 2017 compared to the same periods in 2016 was primarily related to the liquidation of our common equity portfolio in December 2017 as we reassess our actively managed common equity strategy.

Stockholders’ Equity was $1.2 billion, or $41.55 per share, as of December 31, 2017 compared to $41.49 per share, as of September 30, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended December 31, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On February 15, 2018 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.07 per share, payable on March 23, 2018 to stockholders of record on March 2, 2018. This represents an increase of 16.7% over the prior quarter dividend.

Our Company will hold a conference call on Friday, February 16, 2018 starting at 8:30 a.m. (ET) to discuss the 2017 fourth 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 also connect to the webcast at: https://edge.media-server.com/m6/p/o8reaviq.

The Navigators Group, Inc. is an international specialty insurance holding company with operations in the United States, the United Kingdom, Continental Europe and Asia.

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. These forward-looking statements include statements on the financial impact of tax reform. We continue to assess the tax accounting effects of tax reform. 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.

¹ Net Operating Earnings is a “non-GAAP financial measure” as defined in Regulation G. A reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings is provided on page 4 of this release, as is a discussion of the rationale for the presentation of this item.

Contact:

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

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
		Three Months Ended												Years Ended
amounts in thousands, except per share amounts		December 31,												December 31,
Results of Operations		2017				2016				Change				2017				2016				Change
Gross Written Premiums		$	408,743			$	367,539				11.2	%		$	1,713,265			$	1,568,911				9.2	%
Net Written Premiums			304,869				282,868				7.8	%			1,271,330				1,186,224				7.2	%
Revenues:
Net Earned Premiums		$	305,099			$	283,985				7.4	%		$	1,186,420			$	1,100,345				7.8	%
Net Investment Income			22,982				20,107				14.3	%			89,293				79,451				12.4	%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment   Losses			3				21				(87.9	%)			(2,002	)			(227	)		NM
Portion of Loss Recognized in Other   Comprehensive Income (Before Tax)			(3	)			(21	)			(85.7	%)			(62	)			77			NM
Net Other-Than-Temporary Impairment Losses   Recognized In Earnings			—				—			NM					(2,064	)			(150	)		NM
Other Realized Gains			37,141				4,043			NM					45,073				9,186			NM
Net Realized Gains			37,141				4,043			NM					43,009				9,036			NM
Other Income (Loss)			(3,201	)			1,905			NM					(4,243	)			8,701			NM
Total Revenues		$	362,021			$	310,040				16.8	%		$	1,314,479			$	1,197,533				9.8	%
Expenses:
Net Losses and Loss Adjustment Expenses			183,384				172,493				6.3	%			806,265				665,448				21.2	%
Commission Expenses			43,205				44,154				(2.2	%)			184,731				165,045				11.9	%
Other Operating Expenses			68,153				58,076				17.4	%			233,230				234,096				(0.4	%)
Interest Expense			3,863				3,860				0.1	%			15,447				15,435				0.1	%
Total Expenses		$	298,605			$	278,583				7.2	%		$	1,239,673			$	1,080,024				14.8	%
Income Before Income Taxes			63,416				31,457				101.6	%			74,806				117,509				(36.3	%)
Income Tax Expense			36,555				9,866			NM					34,312				34,783				(1.4	%)
Net Income		$	26,861			$	21,591				24.4	%		$	40,494			$	82,726				(51.1	%)
Per Share Data
Net Income Per Common Share:
Basic		$	0.91			$	0.74				22.8	%		$	1.38			$	2.85				(51.7	%)
Diluted		$	0.89			$	0.71				25.2	%		$	1.35			$	2.75				(51.1	%)
Average Common Shares Outstanding:
Basic			29,505				29,121								29,441				29,074
Diluted			30,099				30,282								30,071				30,032
Underwriting Ratios
Loss Ratio			60.1	%			60.7	%							68.0	%			60.5	%
Expense Ratio			36.5	%			36.0	%							35.2	%			36.2	%
Combined Ratio			96.6	%			96.7	%							103.2	%			96.7	%
Balance Sheet Data		December 31,				September 30,								December 31,				December 31,
		2017				2017								2017				2016
Stockholders' Equity		$	1,225,965			$	1,224,191				0.1	%		$	1,225,965			$	1,178,188				4.1	%
Book Value per Share		$	41.55			$	41.49				0.1	%		$	41.55			$	40.45				2.7	%
NM - Percentage change not meaningful.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
(Unaudited)

In this release, we present Net Operating Earnings, which is a “non-GAAP financial measure” as defined in Regulation G.

Net Operating Earnings is comprised of Net Income excluding After-Tax Net Realized Gains (Losses), After-Tax Net Other-Than-Temporary Impairment Losses Recognized in Earnings, After-Tax Foreign Exchange Gains (Losses), and the impact of the passage of the Tax Act at enactment recognized in our Consolidated Statements of Income.

We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our business and enables investors and other users of our financial information to analyze underlying business performance in a manner similar to management. We also believe this measure follows industry practice and, therefore facilitates comparison of our performance with our peer group.

The following tables provide a reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings:

		Three Months Ended December 31, 2017												Three Months Ended December 31, 2016												% Change
amounts in thousands, except per share amounts		Pre-Tax				Tax (1)				After-Tax				Pre-Tax				Tax (1)				After-Tax				QTD
Net Income		$	63,416			$	(36,555	)		$	26,861			$	31,457			$	(9,866	)		$	21,591				24.4	%
Adjustments to Net Income:
Realized Losses (Gains)			(37,141	)			12,999				(24,142	)			(4,043	)			1,416				(2,627	)		NM
FX Losses (Gains)			3,198				(1,119	)			2,079				(1,947	)			682				(1,265	)		NM
Impact of the Tax Act at Enactment (2)			—				19,694				19,694				—				—				—			NM
Net Operating Earnings		$	29,473			$	(4,981	)		$	24,492			$	25,467			$	(7,768	)		$	17,699				38.4	%
Average Common Shares Outstanding:
Basic											29,505												29,121
Diluted											30,099												30,282
Net Operating Earnings per Common Share:
Basic										$	0.83											$	0.61
Diluted										$	0.81											$	0.58

		Year Ended December 31, 2017												Year Ended December 31, 2016												% Change
amounts in thousands, except per share amounts		Pre-Tax				Tax (1)				After-Tax				Pre-Tax				Tax (1)				After-Tax				YTD
Net Income		$	74,806			$	(34,312	)		$	40,494			$	117,509			$	(34,783	)		$	82,726				(51.1	%)
Adjustments to Net Income:
Realized Losses (Gains)			(43,009	)			15,054				(27,955	)			(9,036	)			3,163				(5,873	)		NM
FX Losses (Gains)			4,213				(1,474	)			2,739				(8,626	)			3,019				(5,607	)		NM
Impact of the Tax Act at Enactment (2)			—				19,694				19,694				—				—				—			NM
Net Operating Earnings		$	36,010			$	(1,038	)		$	34,972			$	99,847			$	(28,601	)		$	71,246				(50.9	%)
Average Common Shares Outstanding:
Basic											29,441												29,074
Diluted											30,071												30,032
Net Operating Earnings per Common Share:
Basic										$	1.19											$	2.45
Diluted										$	1.16											$	2.37
(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - As a result of the enactment of the Tax Act, we revalued our deferred tax assets as of December 31, 2017 resulting in a reduction in our deferred tax assets of $17.1 million and we also anticipate incurring a one-time payment of approximately $2.6 million due to tax on previously untaxed accumulated and current earnings and profits on certain foreign subsidiaries.
NM - Percentage change not meaningful.

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
		December 31,				December 31,
		2017				2016
amounts in thousands, except per share amounts		(Unaudited)
ASSETS
Investments:
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2017:  $3,027,408; 2016: $2,628,225)		$	3,057,054			$	2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $224,159; 2016: $327,911)			235,981				349,142
Other Invested Assets (Equity Method)			1,720				1,960
Short-Term Investments, at fair value (amortized cost: 2017: $127,125; 2016: $143,451)			127,128				143,539
Total Investments		$	3,421,883			$	3,130,523
Cash			67,084				64,643
Premiums Receivable			351,393				306,686
Prepaid Reinsurance Premiums			228,569				213,377
Reinsurance Recoverable on Paid Losses			72,494				82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses			809,765				779,276
Deferred Policy Acquisition Costs			135,249				119,660
Accrued Investment Income			19,480				17,315
Goodwill and Other Intangible Assets			6,596				6,451
Current Income Tax Receivable, Net			16,667				20,556
Deferred Income Tax, Net			22,271				20,938
Other Assets			73,171				52,030
Total Assets		$	5,224,622			$	4,814,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses		$	2,515,145			$	2,289,727
Unearned Premiums			987,681				887,344
Reinsurance Balances Payable			136,192				108,980
Senior Notes			263,885				263,728
Accounts Payable and Other Liabilities			95,754				86,070
Total Liabilities		$	3,998,657			$	3,635,849
Stockholders' Equity:
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued)		$	—			$	—
Common Stock ($.10 par value per share, authorized 50,000 shares, issued   36,530 shares for 2017 and 36,147 shares for 2016)			3,650				3,612
Additional Paid-In Capital			376,868				373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016)			(155,801	)			(155,801	)
Retained Earnings			981,380				947,519
Accumulated Other Comprehensive Income			19,868				8,875
Total Stockholders' Equity		$	1,225,965			$	1,178,188
Total Liabilities and Stockholders' Equity		$	5,224,622			$	4,814,037

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
		Three Months Ended December 31, 2017
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross Written Premiums		$	258,450			$	114,476			$	35,817			$	—			$	408,743
Ceded Written Premiums			(67,321	)			(35,910	)			(643	)			—				(103,874	)
Net Written Premiums			191,129				78,566				35,174				—				304,869
Net Earned Premiums		$	174,424			$	83,199			$	47,476			$	—			$	305,099
Net Losses and LAE			(103,917	)			(53,088	)			(26,379	)			—				(183,384	)
Commission Expenses			(18,599	)			(14,389	)			(10,441	)			224				(43,205	)
Other Operating Expenses			(36,918	)			(24,777	)			(6,458	)			—				(68,153	)
Other Underwriting Income (Expense)			126				—				126				(224	)			28
Underwriting Profit (Loss)		$	15,116			$	(9,055	)		$	4,324			$	—			$	10,385
Net Investment Income															22,982				22,982
Net Realized Gains															37,141				37,141
Interest Expense															(3,863	)			(3,863	)
Other Loss															(3,229	)			(3,229	)
Income (Loss) Before Income Taxes		$	15,116			$	(9,055	)		$	4,324			$	53,031			$	63,416
Income Tax Expense															(36,555	)			(36,555	)
Net Income																		$	26,861
Losses and LAE Ratio			59.6	%			63.8	%			55.6	%							60.1	%
Commission Expense Ratio			10.7	%			17.3	%			22.0	%							14.2	%
Other Operating Expense Ratio (2)			21.0	%			29.8	%			13.3	%							22.3	%
Combined Ratio			91.3	%			110.9	%			90.9	%							96.6	%
(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
		Three Months Ended December 31, 2016
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross Written Premiums		$	230,177			$	100,104			$	37,258			$	—			$	367,539
Ceded Written Premiums			(57,353	)			(26,429	)			(889	)			—				(84,671	)
Net Written Premiums			172,824				73,675				36,369				—				282,868
Net Earned Premiums		$	166,862			$	71,814			$	45,309			$	—			$	283,985
Net Losses and LAE			(106,600	)			(44,765	)			(21,128	)			—				(172,493	)
Commission Expenses			(20,433	)			(14,179	)			(9,820	)			278				(44,154	)
Other Operating Expenses			(31,260	)			(21,398	)			(5,418	)			—				(58,076	)
Other Underwriting Income (Expense)			149				—				148				(278	)			19
Underwriting Profit (Loss)		$	8,718			$	(8,528	)		$	9,091			$	—			$	9,281
Net Investment Income															20,107				20,107
Net Realized Gains															4,043				4,043
Interest Expense															(3,860	)			(3,860	)
Other Income															1,886				1,886
Income (Loss) Before Income Taxes		$	8,718			$	(8,528	)		$	9,091			$	22,176			$	31,457
Income Tax Expense															(9,866	)			(9,866	)
Net Income																		$	21,591
Losses and LAE Ratio			63.9	%			62.3	%			46.6	%							60.7	%
Commission Expense Ratio			12.2	%			19.7	%			21.7	%							15.5	%
Other Operating Expense Ratio (2)			18.7	%			29.9	%			11.6	%							20.5	%
Combined Ratio			94.8	%			111.9	%			79.9	%							96.7	%
(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
		Year Ended December 31, 2017
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross Written Premiums		$	988,293			$	501,130			$	223,842			$	—			$	1,713,265
Ceded Written Premiums			(266,993	)			(165,278	)			(9,664	)			—				(441,935	)
Net Written Premiums			721,300				335,852				214,178				—				1,271,330
Net Earned Premiums		$	674,665			$	333,792			$	177,963			$	—			$	1,186,420
Net Losses and LAE			(443,353	)			(229,601	)			(133,311	)			—				(806,265	)
Commission Expenses			(77,729	)			(68,824	)			(39,136	)			958				(184,731	)
Other Operating Expenses			(128,905	)			(83,464	)			(20,861	)			—				(233,230	)
Other Underwriting Income (Expense)			461				—				565				(958	)			68
Underwriting Profit (Loss)		$	25,139			$	(48,097	)		$	(14,780	)		$	—			$	(37,738	)
Net Investment Income															89,293				89,293
Net Realized Gains															43,009				43,009
Interest Expense															(15,447	)			(15,447	)
Other Loss															(4,311	)			(4,311	)
Income (Loss) Before Income Taxes		$	25,139			$	(48,097	)		$	(14,780	)		$	112,544			$	74,806
Income Tax Expense															(34,312	)			(34,312	)
Net Income																		$	40,494
Losses and LAE Ratio			65.7	%			68.8	%			74.9	%							68.0	%
Commission Expense Ratio			11.5	%			20.6	%			22.0	%							15.6	%
Other Operating Expense Ratio (2)			19.1	%			25.0	%			11.4	%							19.6	%
Combined Ratio			96.3	%			114.4	%			108.3	%							103.2	%
(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
		Year Ended December 31, 2016
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross Written Premiums		$	919,395			$	484,471			$	165,045			$	—			$	1,568,911
Ceded Written Premiums			(235,827	)			(138,504	)			(8,356	)			—				(382,687	)
Net Written Premiums			683,568				345,967				156,689				—				1,186,224
Net Earned Premiums		$	629,308			$	307,416			$	163,621			$	—			$	1,100,345
Net Losses and LAE			(397,860	)			(178,284	)			(89,304	)			—				(665,448	)
Commission Expenses			(70,812	)			(61,703	)			(34,008	)			1,478				(165,045	)
Other Operating Expenses			(128,108	)			(86,395	)			(19,593	)			—				(234,096	)
Other Underwriting Income (Expense)			1,092				—				522				(1,478	)			136
Underwriting Profit (Loss)		$	33,620			$	(18,966	)		$	21,238			$	—			$	35,892
Net Investment Income															79,451				79,451
Net Realized Gains															9,036				9,036
Interest Expense															(15,435	)			(15,435	)
Other Income															8,565				8,565
Income (Loss) Before Income Taxes		$	33,620			$	(18,966	)		$	21,238			$	81,617			$	117,509
Income Tax Expense															(34,783	)			(34,783	)
Net Income																		$	82,726
Losses and LAE Ratio			63.2	%			58.0	%			54.6	%							60.5	%
Commission Expense Ratio			11.3	%			20.1	%			20.8	%							15.0	%
Other Operating Expense Ratio (2)			20.2	%			28.1	%			11.6	%							21.2	%
Combined Ratio			94.7	%			106.2	%			87.0	%							96.7	%
(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
(Unaudited)
		U.S. Insurance
		Three Months Ended December 31, 2017																Three Months Ended December 31, 2016
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross Written Premiums		$	37,131			$	189,316			$	32,003			$	258,450			$	39,784			$	160,030			$	30,363			$	230,177				12.3	%
Ceded Written Premiums			(16,601	)			(44,204	)			(6,516	)			(67,321	)			(17,035	)			(32,602	)			(7,716	)			(57,353	)			17.4	%
Net Written Premiums			20,530				145,112				25,487				191,129				22,749				127,428				22,647				172,824				10.6	%
Net Earned Premiums		$	21,970			$	128,980			$	23,474			$	174,424			$	26,496			$	118,331			$	22,035			$	166,862				4.5	%
Net Losses and LAE			(13,232	)			(76,937	)			(13,748	)			(103,917	)			(14,639	)			(77,979	)			(13,982	)			(106,600	)			(2.5	%)
Commission Expenses			(918	)			(13,643	)			(4,038	)			(18,599	)			(2,694	)			(14,146	)			(3,593	)			(20,433	)			(9.0	%)
Other Operating Expenses			(7,221	)			(24,077	)			(5,620	)			(36,918	)			(6,603	)			(19,901	)			(4,756	)			(31,260	)			18.1	%
Other Underwriting Income			104				16				6				126				108				32				9				149				(15.5	%)
Underwriting Profit (Loss)		$	703			$	14,339			$	74			$	15,116			$	2,668			$	6,337			$	(287	)		$	8,718				73.4	%
Losses and LAE Ratio			60.2	%			59.7	%			58.6	%			59.6	%			55.3	%			65.9	%			63.5	%			63.9	%
Commission Expense Ratio			4.2	%			10.6	%			17.2	%			10.7	%			10.2	%			12.0	%			16.3	%			12.2	%
Other Operating Expense Ratio (1)			32.4	%			18.6	%			23.9	%			21.0	%			24.4	%			16.7	%			21.5	%			18.7	%
Combined Ratio			96.8	%			88.9	%			99.7	%			91.3	%			89.9	%			94.6	%			101.3	%			94.8	%
(1) - Includes Other Operating Expenses and Other Underwriting Income.

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
		Int'l Insurance
		Three Months Ended December 31, 2017																Three Months Ended December 31, 2016
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross Written Premiums		$	38,122			$	34,677			$	41,677			$	114,476			$	31,680			$	35,969			$	32,455			$	100,104				14.4	%
Ceded Written Premiums			(8,608	)			(15,518	)			(11,784	)			(35,910	)			(6,818	)			(12,581	)			(7,030	)			(26,429	)			35.9	%
Net Written Premiums			29,514				19,159				29,893				78,566				24,862				23,388				25,425				73,675				6.6	%
Net Earned Premiums		$	36,338			$	21,225			$	25,636			$	83,199			$	31,847			$	18,847			$	21,120			$	71,814				15.9	%
Net Losses and LAE			(30,554	)			(7,137	)			(15,397	)			(53,088	)			(12,653	)			(19,821	)			(12,291	)			(44,765	)			18.6	%
Commission Expenses			(4,951	)			(2,933	)			(6,505	)			(14,389	)			(7,894	)			(3,102	)			(3,183	)			(14,179	)			1.5	%
Other Operating Expenses			(10,424	)			(8,554	)			(5,799	)			(24,777	)			(8,376	)			(8,389	)			(4,633	)			(21,398	)			15.8	%
Underwriting Profit (Loss)			(9,591	)			2,601				(2,065	)			(9,055	)			2,924				(12,465	)			1,013				(8,528	)			6.2	%
Losses and LAE Ratio			84.1	%			33.6	%			60.1	%			63.8	%			39.7	%			105.2	%			58.2	%			62.3	%
Commission Expense Ratio			13.6	%			13.8	%			25.4	%			17.3	%			24.8	%			16.5	%			15.1	%			19.7	%
Other Operating Expense Ratio			28.7	%			40.3	%			22.6	%			29.8	%			26.3	%			44.4	%			21.9	%			29.9	%
Combined Ratio			126.4	%			87.7	%			108.1	%			110.9	%			90.8	%			166.1	%			95.2	%			111.9	%

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
		U.S. Insurance
		Year Ended December 31, 2017																Year Ended December 31, 2016
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross Written Premiums		$	156,171			$	713,539			$	118,583			$	988,293			$	169,405			$	631,562			$	118,428			$	919,395				7.5	%
Ceded Written Premiums			(72,431	)			(173,501	)			(21,061	)			(266,993	)			(70,858	)			(135,888	)			(29,081	)			(235,827	)			13.2	%
Net Written Premiums			83,740				540,038				97,522				721,300				98,547				495,674				89,347				683,568				5.5	%
Net Earned Premiums		$	86,605			$	495,260			$	92,800			$	674,665			$	100,132			$	453,673			$	75,503			$	629,308				7.2	%
Net Losses and LAE			(58,099	)			(316,112	)			(69,142	)			(443,353	)			(50,087	)			(295,877	)			(51,896	)			(397,860	)			11.4	%
Commission Expenses			(4,932	)			(57,756	)			(15,041	)			(77,729	)			(8,469	)			(52,483	)			(9,860	)			(70,812	)			9.8	%
Other Operating Expenses			(25,501	)			(84,433	)			(18,971	)			(128,905	)			(27,559	)			(81,469	)			(19,080	)			(128,108	)			0.6	%
Other Underwriting Income			374				61				26				461				465				582				45				1,092				(57.8	%)
Underwriting Profit (Loss)		$	(1,553	)		$	37,020			$	(10,328	)		$	25,139			$	14,482			$	24,426			$	(5,288	)		$	33,620				(25.2	%)
Losses and LAE Ratio			67.1	%			63.8	%			74.5	%			65.7	%			50.0	%			65.2	%			68.7	%			63.2	%
Commission Expense Ratio			5.7	%			11.7	%			16.2	%			11.5	%			8.5	%			11.6	%			13.1	%			11.3	%
Other Operating Expense Ratio (1)			29.0	%			17.0	%			20.4	%			19.1	%			27.0	%			17.8	%			25.2	%			20.2	%
Combined Ratio			101.8	%			92.5	%			111.1	%			96.3	%			85.5	%			94.6	%			107.0	%			94.7	%
(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
		Int'l Insurance
		Year Ended December 31, 2017																Year Ended December 31, 2016
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross Written Premiums		$	198,241			$	159,123			$	143,766			$	501,130			$	183,228			$	181,094			$	120,149			$	484,471				3.4	%
Ceded Written Premiums			(42,018	)			(85,298	)			(37,962	)			(165,278	)			(40,092	)			(69,606	)			(28,806	)			(138,504	)			19.3	%
Net Written Premiums			156,223				73,825				105,804				335,852				143,136				111,488				91,343				345,967				(2.9	%)
Net Earned Premiums		$	152,396			$	88,517			$	92,879			$	333,792			$	141,593			$	89,455			$	76,368			$	307,416				8.6	%
Net Losses and LAE			(114,460	)			(61,791	)			(53,350	)			(229,601	)			(67,051	)			(68,995	)			(42,238	)			(178,284	)			28.8	%
Commission Expenses			(32,541	)			(13,918	)			(22,365	)			(68,824	)			(34,018	)			(14,529	)			(13,156	)			(61,703	)			11.5	%
Other Operating Expenses			(34,878	)			(28,537	)			(20,049	)			(83,464	)			(33,170	)			(34,075	)			(19,150	)			(86,395	)			(3.4	%)
Underwriting Profit (Loss)		$	(29,483	)		$	(15,729	)		$	(2,885	)		$	(48,097	)		$	7,354			$	(28,144	)		$	1,824			$	(18,966	)		NM
Losses and LAE Ratio			75.1	%			69.8	%			57.4	%			68.8	%			47.4	%			77.1	%			55.3	%			58.0	%
Commission Expense Ratio			21.4	%			15.7	%			24.1	%			20.6	%			24.0	%			16.2	%			17.2	%			20.1	%
Other Operating Expense Ratio			22.8	%			32.3	%			21.6	%			25.0	%			23.4	%			38.2	%			25.1	%			28.1	%
Combined Ratio			119.3	%			117.8	%			103.1	%			114.4	%			94.8	%			131.5	%			97.6	%			106.2	%
NM- Percentage change not meaningful.

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
		For the Three Months Ended December 31,
amounts in thousands		Amounts								Loss Ratio
Net Incurred Loss Activity		2017				2016				2017				2016
U.S. Insurance:
Loss and LAE Payments		$	99,085			$	73,100				56.8	%			43.8	%
Change in Reserves			4,832				33,500				2.8	%			20.1	%
Net Incurred Loss and LAE		$	103,917			$	106,600				59.6	%			63.9	%
Int'l Insurance:
Loss and LAE Payments		$	55,296			$	45,011				66.5	%			62.6	%
Change in Reserves			(2,208	)			(246	)			(2.7	%)			(0.3	%)
Net Incurred Loss and LAE		$	53,088			$	44,765				63.8	%			62.3	%
GlobalRe:
Loss and LAE Payments		$	34,302			$	17,260				72.3	%			38.1	%
Change in Reserves			(7,923	)			3,868				(16.7	%)			8.5	%
Net Incurred Loss and LAE		$	26,379			$	21,128				55.6	%			46.6	%
Total
Loss and LAE Payments		$	188,683			$	135,371				61.8	%			47.6	%
Change in Reserves			(5,299	)			37,122				(1.7	%)			13.1	%
Net Incurred Loss and LAE		$	183,384			$	172,493				60.1	%			60.7	%
		For the Three Months Ended December 31,
Impact of Prior Years Reserves		Amounts								Loss Ratio Impact
Favorable / (Unfavorable) Development		2017				2016				2017				2016
U.S. Insurance		$	1,492			$	(420	)			0.5	%			(0.1	%)
Int'l Insurance			7,239				19,660				2.5	%			6.9	%
GlobalRe			1,568				(2,356	)			0.5	%			(0.8	%)
Total		$	10,299			$	16,884				3.5	%			6.0	%

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
		For the Years Ended December 31,
amounts in thousands		Amounts								Loss Ratio
Net Incurred Loss Activity		2017				2016				2017				2016
U.S. Insurance:
Loss and LAE Payments		$	324,102			$	299,842				48.0	%			47.6	%
Change in Reserves			119,251				98,018				17.7	%			15.6	%
Net Incurred Loss and LAE		$	443,353			$	397,860				65.7	%			63.2	%
Int'l Insurance:
Loss and LAE Payments		$	201,402			$	151,098				60.4	%			49.2	%
Change in Reserves			28,199				27,186				8.4	%			8.8	%
Net Incurred Loss and LAE		$	229,601			$	178,284				68.8	%			58.0	%
GlobalRe:
Loss and LAE Payments		$	97,570			$	81,089				54.8	%			49.6	%
Change in Reserves			35,741				8,215				20.1	%			5.0	%
Net Incurred Loss and LAE		$	133,311			$	89,304				74.9	%			54.6	%
Total
Loss and LAE Payments		$	623,074			$	532,029				52.6	%			48.4	%
Change in Reserves			183,191				133,419				15.4	%			12.1	%
Net Incurred Loss and LAE		$	806,265			$	665,448				68.0	%			60.5	%
		For the Years Ended December 31,
Impact of Prior Years Reserves		Amounts								Loss Ratio Impact
Favorable / (Unfavorable) Development		2017				2016				2017				2016
U.S. Insurance		$	(16,714	)		$	1,348				(1.4	%)			0.1	%
Int'l Insurance			(14,834	)			25,019				(1.3	%)			2.3	%
GlobalRe			(2,762	)			2,161				(0.2	%)			0.2	%
Total		$	(34,310	)		$	28,528				(2.9	%)			2.6	%

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
		As of December 31, 2017
amounts in thousands		Case				IBNR
Net Loss Reserves:		Reserves				Reserves				Total
U.S. Insurance:
Marine		$	58,301			$	45,393			$	103,694
P&C			192,291				700,264				892,555
Professional Liability			26,774				86,649				113,423
Total U.S. Insurance		$	277,366			$	832,306			$	1,109,672
Int'l Insurance:
Marine		$	181,369			$	39,949			$	221,318
P&C			66,412				37,067				103,479
Professional Liability			31,463				87,211				118,674
Total Int'l Insurance		$	279,244			$	164,227			$	443,471
GlobalRe		$	58,962			$	93,275			$	152,237
Total Net Loss Reserves		$	615,572			$	1,089,808			$	1,705,380
		As of December 31, 2016
		Case				IBNR
Net Loss Reserves:		Reserves				Reserves				Total
U.S. Insurance:
Marine		$	56,701			$	54,259			$	110,960
P&C			201,368				603,509				804,877
Professional Liability			24,555				70,559				95,114
Total U.S. Insurance		$	282,624			$	728,327			$	1,010,951
Int'l Insurance:
Marine		$	163,124			$	36,118			$	199,242
P&C			66,496				18,192				84,688
Professional Liability			30,106				70,103				100,209
Total Int'l Insurance		$	259,726			$	124,413			$	384,139
GlobalRe		$	47,505			$	67,856			$	115,361
Total Net Loss Reserves		$	589,855			$	920,596			$	1,510,451

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
(Unaudited)

As of December 31, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.5 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of December 31, 2017:

		As of December 31, 2017
						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		$	393,563			$	2,081			$	(2,014	)		$	393,496
States, Municipalities and Political Subdivisions			814,632				20,136				(1,423	)			795,919
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities			407,619				2,352				(5,414	)			410,681
Residential Mortgage Obligations			54,104				606				(79	)			53,577
Asset-Backed Securities			328,753				2,138				(663	)			327,278
Commercial Mortgage-Backed Securities			160,904				2,354				(1,182	)			159,732
Subtotal		$	951,380			$	7,450			$	(7,338	)		$	951,268
Corporate Exposures (1)			897,479				14,491				(3,737	)			886,725
Total Fixed Maturities		$	3,057,054			$	44,158			$	(14,512	)		$	3,027,408
Equity Securities:
Common Stocks		$	52,439			$	7,423			$	(112	)		$	45,128
Preferred Stocks			183,542				6,071				(1,560	)			179,031
Total Equity Securities		$	235,981			$	13,494			$	(1,672	)		$	224,159
Short-Term Investments			127,128				3				—				127,125
Total Investments		$	3,420,163			$	57,655			$	(16,184	)		$	3,378,692
(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.