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Navigators Reports Second Quarter 2017 Earnings

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STAMFORD, Conn., Aug. 03, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $20.5 million, or $0.69 per diluted share, for the three months ended June 30, 2017 compared to $16.2 million, or $0.54 per diluted share, for the same period in 2016. Net Operating Earnings1 were $19.7 million, or $0.66 per diluted share, for the three months ended June 30, 2017 compared to $12.2 million, or $0.41 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended June 30, 2017 were $452.2 million and $333.3 million, respectively, increasing 9.6% and 8.7%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended June 30, 2017 was 97.3%, compared to 99.6% for the same period in 2016.

Net Investment Income for the three months ended June 30, 2017 was $22.3 million, an increase of 12.0% 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 2.8% for the three months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the three months ended June 30, 2017 was $(0.4) million, compared to $4.4 million for the same period in 2016. Other Income (Loss) primarily consists of realized and unrealized foreign exchange gains and losses.

For the six months ended June 30, 2017, our Company reported Net Income of $41.6 million, or $1.39 per diluted share, compared to $39.1 million, or $1.31 per diluted share, for the same period in 2016. Net Operating Earnings were $40.1 million, or $1.34 per diluted share, for the six months ended June 30, 2017 compared to $32.4 million, or $1.08 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the six months ended June 30, 2017 were $902.5 million and $670.4 million, respectively, increasing 9.2% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the six months ended June 30, 2017 was 96.9%, compared to 97.4% for the same period in 2016.

Net Investment Income for the six months ended June 30, 2017 was $43.7 million, an increase of 10.8% 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 six months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income for the six months ended June 30, 2017 was $0.7 million, compared to $7.0 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to report continued profitable underwriting results and good premium growth in the second quarter, led by strong performance from our US Insurance and Global Reinsurance segments and improvement in our International Insurance results. Second quarter Net Income was up 26.6% over the prior year as a result of improved Underwriting Profit and Investment Income, contributing to an increase in Book Value per Share of 3.1% during the quarter. We continue to invest in expanding our business, with a commitment to cost control as reflected in our year to date 2.1 point decrease in our Other Operating Expense Ratio."

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 3.8 years as of June 30, 2017. As of June 30, 2017, Net Unrealized Gains within our investment portfolio were $74.3 million, an increase of $22.2 million compared to March 31, 2017 and an increase of $45.4 million compared to December 31, 2016. We recognized $1.7 million of Net Realized Gains for the three months ended June 30, 2017, compared to $1.8 million of Net Realized Gains for the same period in 2016 (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings). For the six months ended June 30, 2017 we recognized $1.7 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $3.4 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016.

Stockholders' Equity was $1.2 billion, or $42.21 per share, as of June 30, 2017 compared to $40.94 per share, as of March 31, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended June 30, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On August 3, 2017 our Board of Directors declared a cash dividend on our Company's Common Stock of $0.06 per share, payable on September 14, 2017 to stockholders of record on August 24, 2017.

Our Company will hold a conference call on Friday, August 4, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: http://edge.media-server.com/m/p/gvxmqq2j

On December 6, 2016, our Board of Directors declared a two-for-one stock split of The Navigators Group, Inc. Common Stock, to be effected in the form of a stock dividend. Stockholders of record at the close of business on December 30, 2016 received one additional share of Common Stock for every share of Common Stock held. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the stock split for all periods presented. The additional shares of Common Stock were issued on January 20, 2017. 

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. 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.

                             
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
                             
    Three Months Ended             Six Months Ended          
amounts in thousands, except per share amounts   June 30,             June 30,          
Results of Operations   2017     2016     Change     2017     2016     Change  
                                                 
Gross Written Premiums   $ 452,179     $ 412,565       9.6 %   $ 902,484     $ 826,442       9.2 %
Net Written Premiums     333,282       306,535       8.7 %     670,445       626,355       7.0 %
                                                 
Revenues:                                                
Net Earned Premiums   $ 293,835     $ 267,992       9.6 %   $ 579,966     $ 532,350       8.9 %
Net Investment Income     22,265       19,875       12.0 %     43,713       39,469       10.8 %
Net Realized Gains (Losses):                                                
Total Other-Than-Temporary Impairment
  Losses
    29       (162 )   NM       (1,048 )     (271 )   NM  
Portion of Loss Recognized in Other
  Comprehensive Income (Before Tax)
    (29 )     12     NM       (45 )     121     NM  
Net Other-Than-Temporary Impairment Losses
  Recognized In Earnings
          (150 )   NM       (1,093 )     (150 )   NM  
Other Realized Gains     1,694       1,960       (13.6 %)     2,743       3,557       (22.9 %)
Net Realized Gains     1,694       1,810       (6.4 %)     1,650       3,407       (51.6 %)
Other Income (Loss)     (411 )     4,430     NM       657       6,979       (90.6 %)
Total Revenues   $ 317,383     $ 294,107       7.9 %   $ 625,986     $ 582,205       7.5 %
                                                 
Expenses:                                                
Net Losses and Loss Adjustment Expenses   $ 177,110     $ 167,206       5.9 %   $ 346,710     $ 320,162       8.3 %
Commission Expenses     48,173       40,726       18.3 %     96,017       78,280       22.7 %
Other Operating Expenses     60,766       59,074       2.9 %     119,304       119,883       (0.5 %)
Interest Expense     3,861       3,858       0.1 %     7,722       7,716       0.1 %
Total Expenses   $ 289,910     $ 270,864       7.0 %   $ 569,753     $ 526,041       8.3 %
                                                 
Income Before Income Taxes   $ 27,473     $ 23,243       18.2 %   $ 56,233     $ 56,164       0.1 %
                                                 
Income Tax Expense     6,971       7,053       (1.2 %)     14,621       17,042       (14.2 %)
                                                 
Net Income   $ 20,502     $ 16,190       26.6 %   $ 41,612     $ 39,122       6.4 %
                                                 
                                                 
Per Share Data (1)                                                
                                                 
Net Income Per Common Share:                                                
Basic   $ 0.70     $ 0.56       24.9 %   $ 1.42     $ 1.35       5.1 %
Diluted   $ 0.69     $ 0.54       26.8 %   $ 1.39     $ 1.31       6.3 %
                                                 
Average Common Shares Outstanding:                                                
Basic     29,470       29,074               29,377       29,029          
Diluted     29,918       29,953               29,897       29,884          
                                                 
Underwriting Ratios                                                
Loss Ratio     60.3 %     62.4 %             59.8 %     60.1 %        
Expense Ratio     37.0 %     37.2 %             37.1 %     37.3 %        
Combined Ratio     97.3 %     99.6 %             96.9 %     97.4 %        
                                                 
Balance Sheet Data   June 30,     March 31,             June 30,     December 31,          
    2017     2017             2017     2016          
Stockholders' Equity   $ 1,244,168     $ 1,206,136       3.2 %   $ 1,244,168     $ 1,178,188       5.6 %
Book Value per Share (1)   $ 42.21     $ 40.94       3.1 %   $ 42.21     $ 40.45       4.3 %

(1) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.
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, 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). We believe that showing Net Income exclusive of Realized Gains and Losses, Net Other-Than-Temporary Impairment Losses Recognized in Earnings, and Foreign Exchange Gains and Losses reflects the underlying fundamentals of our business.

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 June 30, 2017     Three Months Ended June 30, 2016     % Change  
amounts in thousands, except per share amounts   Pre-Tax     Tax (1)     After-Tax     Pre-Tax     Tax (1)     After-Tax     QTD  
Net Income   $ 27,473     $ (6,971 )   $ 20,502     $ 23,243     $ (7,053 )   $ 16,190       26.6 %
Adjustments to Net Income:                                                        
Realized Losses (Gains)     (1,694 )     593       (1,101 )     (1,810 )     634       (1,176 )     (6.4 %)
FX Losses (Gains)     463       (162 )     301       (4,367 )     1,529       (2,838 )   NM  
Net Operating Earnings   $ 26,242     $ (6,540 )   $ 19,702     $ 17,066     $ (4,890 )   $ 12,176       61.8 %
                                                         
Average Common Shares Outstanding: (2)                                                        
Basic                     29,470                       29,074          
Diluted                     29,918                       29,953          
                                                         
Net Operating Earnings per Common Share: (2)                                                        
Basic                   $ 0.67                     $ 0.42          
Diluted                   $ 0.66                     $ 0.41          


    Six Months Ended June 30, 2017     Six Months Ended June 30, 2016     % Change  
amounts in thousands, except per share amounts   Pre-Tax     Tax (1)     After-Tax     Pre-Tax     Tax (1)     After-Tax     YTD  
Net Income   $ 56,233     $ (14,621 )   $ 41,612     $ 56,164     $ (17,042 )   $ 39,122       6.4 %
Adjustments to Net Income:                                                        
Realized Losses (Gains)     (1,650 )     578       (1,072 )     (3,407 )     1,193       (2,214 )     (51.6 %)
FX Losses (Gains)     (660 )     231       (429 )     (6,907 )     2,417       (4,490 )     (90.4 %)
Net Operating Earnings   $ 53,923     $ (13,812 )   $ 40,111     $ 45,850     $ (13,432 )   $ 32,418       23.7 %
                                                         
Average Common Shares Outstanding: (2)                                                        
Basic                     29,377                       29,029          
Diluted                     29,897                       29,884          
                                                         
Net Operating Earnings per Common Share: (2)                                                        
Basic                   $ 1.37                     $ 1.12          
Diluted                   $ 1.34                     $ 1.08          

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.
NM - Percentage change not meaningful.

                 
                 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                 
    June 30,     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:  $2,715,910;
  2016: $2,628,225)
  $ 2,750,404     $ 2,635,882  
Equity Securities, available-for-sale, at fair value (cost: 2017: $312,511; 2016: $327,911)     352,062       349,142  
Other Invested Assets     1,781       1,960  
Short-Term Investments, at fair value (amortized cost: 2017: $130,598; 2016: $143,451)     130,881       143,539  
Total Investments   $ 3,235,128     $ 3,130,523  
Cash     69,222       64,643  
Premiums Receivable     423,767       306,686  
Prepaid Reinsurance Premiums     238,359       213,377  
Reinsurance Recoverable on Paid Losses     67,567       82,582  
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses     782,864       779,276  
Deferred Policy Acquisition Costs     132,796       119,660  
Accrued Investment Income     18,196       17,315  
Goodwill and Other Intangible Assets     6,499       6,451  
Current Income Tax Receivable, Net     16,113       20,556  
Deferred Income Tax, Net     15,430       20,938  
Other Assets     57,953       52,030  
Total Assets   $ 5,063,894     $ 4,814,037  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities:                
Reserves for Losses and Loss Adjustment Expenses   $ 2,346,327     $ 2,289,727  
Unearned Premiums     1,002,855       887,344  
Reinsurance Balances Payable     125,357       108,980  
Senior Notes     263,806       263,728  
Payable for Investments Purchased     12,000        
Accounts Payable and Other Liabilities     69,381       86,070  
Total Liabilities   $ 3,819,726     $ 3,635,849  
                 
Stockholders' Equity: (1)                
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
  36,498 shares for 2017 and 36,147 shares for 2016)
    3,647       3,612  
Additional Paid-In Capital     371,410       373,983  
Treasury Stock, at cost (7,023 shares for 2017 and 2016)     (155,801 )     (155,801 )
Retained Earnings     986,039       947,519  
Accumulated Other Comprehensive Income     38,873       8,875  
Total Stockholders' Equity   $ 1,244,168     $ 1,178,188  
Total Liabilities and Stockholders' Equity   $ 5,063,894     $ 4,814,037  

(1) - We completed a two-for-one stock split on January 20, 2017. All share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

       
       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
       
    Three Months Ended June 30, 2017  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 257,186     $ 131,193     $ 63,800     $     $ 452,179  
Ceded Written Premiums     (73,857 )     (43,809 )     (1,231 )           (118,897 )
Net Written Premiums     183,329       87,384       62,569             333,282  
                                         
Net Earned Premiums   $ 167,087     $ 82,100     $ 44,648     $     $ 293,835  
Net Losses and LAE     (105,270 )     (44,095 )     (27,745 )           (177,110 )
Commission Expenses     (20,460 )     (19,001 )     (8,970 )     258       (48,173 )
Other Operating Expenses     (33,140 )     (22,506 )     (5,120 )           (60,766 )
Other Underwriting Income (Expense)     100             169       (258 )     11  
                                         
Underwriting Profit (Loss)   $ 8,317     $ (3,502 )   $ 2,982     $     $ 7,797  
                                         
Net Investment Income                             22,265       22,265  
Net Realized Gains                             1,694       1,694  
Interest Expense                             (3,861 )     (3,861 )
Other Loss                             (422 )     (422 )
Income (Loss) Before Income Taxes   $ 8,317     $ (3,502 )   $ 2,982     $ 19,676     $ 27,473  
Income Tax Expense                             (6,971 )     (6,971 )
Net Income                                   $ 20,502  
                                         
Losses and LAE Ratio     63.0 %     53.7 %     62.1 %             60.3 %
Commission Expense Ratio     12.2 %     23.1 %     20.1 %             16.4 %
Other Operating Expense Ratio (2)     19.8 %     27.5 %     11.1 %             20.6 %
Combined Ratio     95.0 %     104.3 %     93.3 %             97.3 %

(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 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                             1,810       1,810  
Interest Expense                             (3,858 )     (3,858 )
Other Income                             4,366       4,366  
Income (Loss) Before Income Taxes   $ 10,834     $ (10,097 )   $ 313     $ 22,193     $ 23,243  
Income Tax Expense                             (7,053 )     (7,053 )
Net Income                                   $ 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
(Unaudited)
       
       
    Six Months Ended June 30, 2017  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 494,791     $ 273,053     $ 134,640     $     $ 902,484  
Ceded Written Premiums     (135,344 )     (90,402 )     (6,293 )           (232,039 )
Net Written Premiums     359,447       182,651       128,347             670,445  
                                         
Net Earned Premiums   $ 331,091     $ 166,186     $ 82,689     $     $ 579,966  
Net Losses and LAE     (204,096 )     (94,800 )     (47,814 )           (346,710 )
Commission Expenses     (40,844 )     (38,234 )     (17,462 )     523       (96,017 )
Other Operating Expenses     (66,612 )     (42,299 )     (10,393 )           (119,304 )
Other Underwriting Income (Expense)     210             345       (523 )     32  
                                         
Underwriting Profit (Loss)   $ 19,749     $ (9,147 )   $ 7,365     $     $ 17,967  
                                         
Net Investment Income                             43,713       43,713  
Net Realized Gains                             1,650       1,650  
Interest Expense                             (7,722 )     (7,722 )
Other Income                             625       625  
Income (Loss) Before Income Taxes   $ 19,749     $ (9,147 )   $ 7,365     $ 38,266     $ 56,233  
Income Tax Expense                             (14,621 )     (14,621 )
Net Income                                   $ 41,612  
                                         
Losses and LAE Ratio     61.6 %     57.0 %     57.8 %             59.8 %
Commission Expense Ratio     12.3 %     23.0 %     21.1 %             16.6 %
Other Operating Expense Ratio (2)     20.1 %     25.5 %     12.2 %             20.5 %
Combined Ratio     94.0 %     105.5 %     91.1 %             96.9 %

(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)
       
    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                             3,407       3,407  
Interest Expense                             (7,716 )     (7,716 )
Other Income                             6,906       6,906  
Income (Loss) Before Income Taxes   $ 19,407     $ (9,625 )   $ 4,316     $ 42,066     $ 56,164  
Income Tax Expense                             (17,042 )     (17,042 )
Net Income                                   $ 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
Reportable Segment Results
(Unaudited)
       
    U.S. Insurance  
    Three Months Ended June 30, 2017     Three Months Ended June 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 41,687     $ 187,492     $ 28,007     $ 257,186     $ 46,187     $ 168,654     $ 29,083     $ 243,924       5.4 %
Ceded Written Premiums     (19,451 )     (51,147 )     (3,259 )     (73,857 )     (18,540 )     (36,768 )     (7,310 )     (62,618 )     17.9 %
Net Written Premiums     22,236       136,345       24,748       183,329       27,647       131,886       21,773       181,306       1.1 %
                                                                         
Net Earned Premiums   $ 21,812     $ 121,226     $ 24,049     $ 167,087     $ 24,921     $ 110,212     $ 17,251     $ 152,384       9.6 %
Net Losses and LAE     (12,767 )     (77,858 )     (14,645 )     (105,270 )     (10,699 )     (72,172 )     (10,557 )     (93,428 )     12.7 %
Commission Expenses     (1,575 )     (15,232 )     (3,653 )     (20,460 )     (2,176 )     (12,821 )     (1,897 )     (16,894 )     21.1 %
Other Operating Expenses     (6,798 )     (21,645 )     (4,697 )     (33,140 )     (6,817 )     (20,049 )     (4,704 )     (31,570 )     5.0 %
Other Underwriting Income     82       9       9       100       152       178       12       342       (70.6 %)
                                                                         
Underwriting Profit   $ 754     $ 6,500     $ 1,063     $ 8,317     $ 5,381     $ 5,348     $ 105     $ 10,834       (23.2 %)
                                                                         
Losses and LAE Ratio     58.5 %     64.2 %     60.9 %     63.0 %     42.9 %     65.5 %     61.2 %     61.3 %        
Commission Expense Ratio     7.2 %     12.6 %     15.2 %     12.2 %     8.7 %     11.6 %     11.0 %     11.1 %        
Other Operating Expense Ratio (1)     30.8 %     17.8 %     19.5 %     19.8 %     26.8 %     18.0 %     27.2 %     20.5 %        
Combined Ratio     96.5 %     94.6 %     95.6 %     95.0 %     78.4 %     95.1 %     99.4 %     92.9 %        

(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 June 30, 2017     Three Months Ended June 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 49,597     $ 46,663     $ 34,933     $ 131,193     $ 41,147     $ 63,002     $ 31,591     $ 135,740       (3.3 %)
Ceded Written Premiums     (12,536 )     (20,362 )     (10,911 )     (43,809 )     (9,554 )     (24,465 )     (7,891 )     (41,910 )     4.5 %
Net Written Premiums     37,061       26,301       24,022       87,384       31,593       38,537       23,700       93,830       (6.9 %)
                                                                         
Net Earned Premiums   $ 39,525     $ 23,337     $ 19,238     $ 82,100     $ 36,096     $ 23,815     $ 17,922     $ 77,833       5.5 %
Net Losses and LAE     (23,848 )     (8,867 )     (11,380 )     (44,095 )     (17,021 )     (21,878 )     (9,167 )     (48,066 )     (8.3 %)
Commission Expenses     (9,517 )     (4,577 )     (4,907 )     (19,001 )     (8,361 )     (5,150 )     (3,310 )     (16,821 )     13.0 %
Other Operating Expenses     (9,226 )     (7,946 )     (5,334 )     (22,506 )     (8,698 )     (9,065 )     (5,280 )     (23,043 )     (2.3 %)
                                                                         
Underwriting Profit (Loss)   $ (3,066 )   $ 1,947     $ (2,383 )   $ (3,502 )   $ 2,016     $ (12,278 )   $ 165     $ (10,097 )     (65.3 %)
                                                                         
Losses and LAE Ratio     60.3 %     38.0 %     59.2 %     53.7 %     47.2 %     91.9 %     51.2 %     61.8 %        
Commission Expense Ratio     24.1 %     19.6 %     25.5 %     23.1 %     23.2 %     21.6 %     18.5 %     21.6 %        
Other Operating Expense Ratio (1)     23.4 %     34.1 %     27.7 %     27.5 %     24.0 %     38.1 %     29.4 %     29.6 %        
Combined Ratio     107.8 %     91.7 %     112.4 %     104.3 %     94.4 %     151.6 %     99.1 %     113.0 %        

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

       
       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
       
    U.S. Insurance  
    Six Months Ended June 30, 2017     Six Months Ended June 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 82,637     $ 358,126     $ 54,028     $ 494,791     $ 89,350     $ 309,932     $ 55,289     $ 454,571       8.8 %
Ceded Written Premiums     (36,971 )     (89,345 )     (9,028 )     (135,344 )     (36,187 )     (67,275 )     (13,653 )     (117,115 )     15.6 %
Net Written Premiums     45,666       268,781       45,000       359,447       53,163       242,657       41,636       337,456       6.5 %
                                                                         
Net Earned Premiums   $ 44,506     $ 240,349     $ 46,236     $ 331,091     $ 48,171     $ 219,371     $ 33,182     $ 300,724       10.1 %
Net Losses and LAE     (26,542 )     (149,607 )     (27,947 )     (204,096 )     (20,474 )     (143,769 )     (20,697 )     (184,940 )     10.4 %
Commission Expenses     (3,047 )     (30,598 )     (7,199 )     (40,844 )     (3,658 )     (24,673 )     (3,418 )     (31,749 )     28.6 %
Other Operating Expenses     (13,619 )     (43,459 )     (9,534 )     (66,612 )     (14,189 )     (41,571 )     (9,571 )     (65,331 )     2.0 %
Other Underwriting Income     165       27       18       210       231       446       26       703       (70.1 %)
                                                                         
Underwriting Profit (Loss)   $ 1,463     $ 16,712     $ 1,574     $ 19,749     $ 10,081     $ 9,804     $ (478 )   $ 19,407       1.8 %
                                                                         
Losses and LAE Ratio     59.6 %     62.2 %     60.4 %     61.6 %     42.5 %     65.5 %     62.4 %     61.5 %        
Commission Expense Ratio     6.8 %     12.7 %     15.6 %     12.3 %     7.6 %     11.2 %     10.3 %     10.6 %        
Other Operating Expense Ratio (1)     30.3 %     18.1 %     20.6 %     20.1 %     29.0 %     18.8 %     28.7 %     21.4 %        
Combined Ratio     96.7 %     93.0 %     96.6 %     94.0 %     79.1 %     95.5 %     101.4 %     93.5 %        

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

       
       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
 
       
    Int'l Insurance  
    Six Months Ended June 30, 2017     Six Months Ended June 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 118,430     $ 87,031     $ 67,592     $ 273,053     $ 113,095     $ 107,048     $ 59,740     $ 279,883       (2.4 %)
Ceded Written Premiums     (23,462 )     (50,008 )     (16,932 )     (90,402 )     (20,643 )     (41,694 )     (14,544 )     (76,881 )     17.6 %
Net Written Premiums     94,968       37,023       50,660       182,651       92,452       65,354       45,196       203,002       (10.0 %)
                                                                         
Net Earned Premiums   $ 77,020     $ 45,517     $ 43,649     $ 166,186     $ 74,952     $ 45,024     $ 35,865     $ 155,841       6.6 %
Net Losses and LAE     (44,449 )     (24,736 )     (25,615 )     (94,800 )     (37,109 )     (33,094 )     (18,273 )     (88,476 )     7.1 %
Commission Expenses     (19,058 )     (8,319 )     (10,857 )     (38,234 )     (17,766 )     (7,925 )     (6,485 )     (32,176 )     18.8 %
Other Operating Expenses     (17,666 )     (14,369 )     (10,264 )     (42,299 )     (17,140 )     (17,773 )     (9,901 )     (44,814 )     (5.6 %)
                                                                         
Underwriting Profit (Loss)   $ (4,153 )   $ (1,907 )   $ (3,087 )   $ (9,147 )   $ 2,937     $ (13,768 )   $ 1,206     $ (9,625 )     (5.0 %)
                                                                         
Losses and LAE Ratio     57.7 %     54.3 %     58.7 %     57.0 %     49.5 %     73.5 %     50.9 %     56.8 %        
Commission Expense Ratio     24.7 %     18.3 %     24.9 %     23.0 %     23.7 %     17.6 %     18.1 %     20.6 %        
Other Operating Expense Ratio (1)     23.0 %     31.6 %     23.5 %     25.5 %     22.9 %     39.5 %     27.6 %     28.8 %        
Combined Ratio     105.4 %     104.2 %     107.1 %     105.5 %     96.1 %     130.6 %     96.6 %     106.2 %        

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

       
       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
 
       
    For the Three Months Ended June 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2017     2016     2017     2016  
U.S. Insurance:                                
Loss and LAE Payments   $ 86,792     $ 72,246       51.9 %     47.4 %
Change in Reserves     18,478       21,182       11.1 %     13.9 %
Net Incurred Loss and LAE   $ 105,270     $ 93,428       63.0 %     61.3 %
                                 
Int'l Insurance:                                
Loss and LAE Payments   $ 46,050     $ 32,996       56.1 %     42.4 %
Change in Reserves     (1,955 )     15,070       (2.4 %)     19.4 %
Net Incurred Loss and LAE   $ 44,095     $ 48,066       53.7 %     61.8 %
                                 
GlobalRe:                                
Loss and LAE Payments   $ 21,279     $ 17,928       47.6 %     47.5 %
Change in Reserves     6,466       7,784       14.5 %     20.6 %
Net Incurred Loss and LAE   $ 27,745     $ 25,712       62.1 %     68.1 %
                                 
Total                                
Loss and LAE Payments   $ 154,121     $ 123,170       52.5 %     46.0 %
Change in Reserves     22,989       44,036       7.8 %     16.4 %
Net Incurred Loss and LAE   $ 177,110     $ 167,206       60.3 %     62.4 %
                                 
                                 
    For the Three Months Ended June 30,  
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   2017     2016     2017     2016  
U.S. Insurance   $ (295 )   $ 4,002       (0.1 %)     1.5 %
Int'l Insurance     (4,743 )     3,354       (1.6 %)     1.3 %
GlobalRe     (2,992 )     1,423       (1.0 %)     0.5 %
Total   $ (8,030 )   $ 8,779       (2.7 %)     3.3 %


       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
       
    For the Six Months Ended June 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2017     2016     2017     2016  
U.S. Insurance:                                
Loss and LAE Payments   $ 156,563     $ 145,281       47.2 %     48.3 %
Change in Reserves     47,533       39,659       14.4 %     13.2 %
Net Incurred Loss and LAE   $ 204,096     $ 184,940       61.6 %     61.5 %
                                 
Int'l Insurance:                                
Loss and LAE Payments   $ 90,958     $ 62,239       54.7 %     39.9 %
Change in Reserves     3,842       26,237       2.3 %     16.9 %
Net Incurred Loss and LAE   $ 94,800     $ 88,476       57.0 %     56.8 %
                                 
GlobalRe:                                
Loss and LAE Payments   $ 49,609     $ 43,059       60.0 %     56.8 %
Change in Reserves     (1,795 )     3,687       (2.2 %)     4.9 %
Net Incurred Loss and LAE   $ 47,814     $ 46,746       57.8 %     61.7 %
                                 
Total                                
Loss and LAE Payments   $ 297,130     $ 250,579       51.3 %     47.1 %
Change in Reserves     49,580       69,583       8.5 %     13.0 %
Net Incurred Loss and LAE   $ 346,710     $ 320,162       59.8 %     60.1 %
                                 
                                 
    For the Six Months Ended June 30,  
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   2017     2016     2017     2016  
U.S. Insurance   $ 177     $ 6,671       0.0 %     1.3 %
Int'l Insurance     (11,359 )     2,499       (2.0 %)     0.5 %
GlobalRe     (3,933 )     1,443       (0.7 %)     0.3 %
Total   $ (15,115 )   $ 10,613       (2.7 %)     2.1 %


       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
       
    As of June 30, 2017  
amounts in thousands   Case     IBNR          
Net Loss Reserves:   Reserves     Reserves     Total  
U.S. Insurance:                        
Marine   $ 56,618     $ 48,212     $ 104,830  
P&C     185,454       644,771       830,225  
Professional Liability     28,417       74,481       102,898  
Total U.S. Insurance   $ 270,489     $ 767,464     $ 1,037,953  
Int'l Insurance:                        
Marine   $ 168,472     $ 33,258     $ 201,730  
P&C     74,719       23,213       97,932  
Professional Liability     40,838       71,095       111,933  
Total Int'l Insurance   $ 284,029     $ 127,566     $ 411,595  
                         
GlobalRe   $ 42,542     $ 71,373     $ 113,915  
                         
Total Net Loss Reserves   $ 597,060     $ 966,403     $ 1,563,463  
                         
                         
    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 June 30, 2017, the average quality of the investment portfolio as rated by S&P and Moody's was "AA-/Aa3", respectively, with an average duration of 3.8 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2017:

    As of June 30, 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
  $ 264,511     $ 2,888     $ (2,660 )   $ 264,283  
States, Municipalities and Political Subdivisions     655,064       19,306       (2,004 )     637,762  
Mortgage-Backed and Asset-Backed Securities:                                
Agency Mortgage-Backed Securities     455,133       3,849       (5,389 )     456,673  
Residential Mortgage Obligations     18,037       506       (25 )     17,556  
Asset-Backed Securities     315,945       1,915       (478 )     314,508  
Commercial Mortgage-Backed Securities     145,573       2,883       (1,432 )     144,122  
Subtotal   $ 934,688     $ 9,153     $ (7,324 )   $ 932,859  
Corporate Exposures     896,141       17,490       (2,355 )     881,006  
Total Fixed Maturities   $ 2,750,404     $ 48,837     $ (14,343 )   $ 2,715,910  
Equity Securities:                                
Common Stocks   $ 172,456     $ 30,985     $ (1,023 )   $ 142,494  
Preferred Stocks     179,606       10,088       (499 )     170,017  
Total Equity Securities   $ 352,062     $ 41,073     $ (1,522 )   $ 312,511  
Short-Term Investments     130,881       283             130,598  
Total Investments   $ 3,233,347     $ 90,193     $ (15,865 )   $ 3,159,019  


 

 

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

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