Market Overview

Navigators Reports Third Quarter 2017 Results

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STAMFORD, Conn., Nov. 02, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported a Net Loss of $(28.0) million, or $(0.95) per diluted share, for the three months ended September 30, 2017 compared to Net Income of $22.0 million, or $0.73 per diluted share, for the same period in 2016. Net Operating Earnings (Loss)1 were $(29.6) million, or $(1.00) per diluted share, for the three months ended September 30, 2017 compared to $21.1 million, or $0.70 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended September 30, 2017 were $402.0 million and $296.0 million, respectively, increasing 7.2% and 6.9%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended September 30, 2017 was 121.9%, compared to 95.6% for the same period in 2016.

The current quarter includes Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums of $75.1 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $29.5 million primarily within our U.S. and International Insurance reporting segments.

Net Investment Income for the three months ended September 30, 2017 was $22.6 million, an increase of 13.7% 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 September 30, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended September 30, 2017 was $(1.7) million, compared to $(0.2) million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the nine months ended September 30, 2017, our Company reported Net Income of $13.6 million, or $0.45 per diluted share, compared to $61.1 million, or $2.04 per diluted share, for the same period in 2016. Net Operating Earnings were $10.5 million, or $0.35 per diluted share, for the nine months ended September 30, 2017 compared to $53.5 million, or $1.79 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the nine months ended September 30, 2017 were $1.3 billion and $1.0 billion, respectively, increasing 8.6% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the nine months ended September 30, 2017 was 105.5%, compared to 96.7% for the same period in 2016, mostly due to the net loss activity noted above.

Net Investment Income for the nine months ended September 30, 2017 was $66.3 million, an increase of 11.7% 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 nine months ended September 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the nine months ended September 30, 2017 was $(1.0) million, compared to $6.8 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, "Navigators' financial impact from our exposure to multiple natural catastrophe events in the third quarter was well within our tolerance and expectations, reflected in the modest decline in Book Value per Share of 1.7% for the quarter and increase of 2.6% for the nine month period. Our underwriting teams are well positioned to respond to anticipated improvement in regional property markets. Premium volume was up across all three segments, led by strong growth in GlobalRe, our global reinsurance segment. Our investment portfolio continued to perform well, with Net Investment Income up 13.7% for the quarter. During the quarter, we made a modest strengthening of prior year loss reserves across a number of lines of business, reflecting our commitment to maintaining prudent levels of loss reserving and a solid balance sheet."

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 3.6 years as of September 30, 2017. As of September 30, 2017, Net Unrealized Gains within our investment portfolio were $87.2 million, an increase of $12.9 million compared to June 30, 2017 and an increase of $58.2 million compared to December 31, 2016. We recognized $4.2 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the three months ended September 30, 2017, compared to $1.6 million of Net Realized Gains for the same period in 2016. For the nine months ended September 30, 2017 we recognized $5.9 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $5.0 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 $41.49 per share, as of September 30, 2017 compared to $42.21 per share, as of June 30, 2017 and $40.45 per share, as of December 31, 2016.

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

On November 2, 2017 our Board of Directors declared a cash dividend on our Company's Common Stock of $0.06 per share, payable on December 15, 2017 to stockholders of record on November 24, 2017.

Our Company will hold a conference call on Friday, November 3, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 third quarter results. The call will be available via live webcast on Navigators' website (www.navg.com).

To participate by telephone, the domestic dial-in number is 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/on47jdtw.

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 (Loss) is a "non-GAAP financial measure" as defined in Regulation G. A reconciliation of Net Income (Loss) (the nearest GAAP financial measure) to Net Operating Earnings (Loss) 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             Nine Months Ended          
amounts in thousands, except per share amounts   September 30,             September 30,          
Results of Operations   2017     2016     Change     2017     2016     Change  
                                                 
Gross Written Premiums   $ 402,038     $ 374,930       7.2 %   $ 1,304,522     $ 1,201,372       8.6 %
Net Written Premiums     296,016       277,001       6.9 %     966,461       903,356       7.0 %
                                                 
Revenues:                                                
Net Earned Premiums   $ 301,355     $ 284,010       6.1 %   $ 881,321     $ 816,360       8.0 %
Net Investment Income     22,598       19,875       13.7 %     66,311       59,344       11.7 %
Net Realized Gains (Losses):                                                
   Total Other-Than-Temporary Impairment Losses     (957 )     23     NM       (2,005 )     (248 )   NM  
   Portion of Loss Recognized in Other Comprehensive Income (Before Tax)     (15 )     (23 )     (34.8 %)     (60 )     98     NM  
Net Other-Than-Temporary Impairment Losses Recognized In Earnings     (972 )         NM       (2,065 )     (150 )   NM  
Other Realized Gains     5,190       1,586     NM       7,933       5,143       54.2 %
Net Realized Gains     4,218       1,586     NM       5,868       4,993       17.5 %
Other Income (Loss)     (1,699 )     (183 )   NM       (1,042 )     6,796     NM  
Total Revenues   $ 326,472     $ 305,288       6.9 %   $ 952,458     $ 887,493       7.3 %
                                                 
Expenses:                                                
Net Losses and Loss Adjustment Expenses   $ 276,171     $ 172,793       59.8 %   $ 622,881     $ 492,955       26.4 %
Commission Expenses     45,509       42,611       6.8 %     141,526       120,891       17.1 %
Other Operating Expenses     45,773       56,137       (18.5 %)     165,077       176,020       (6.2 %)
Interest Expense     3,862       3,859       0.1 %     11,584       11,575       0.1 %
Total Expenses   $ 371,315     $ 275,400       34.8 %   $ 941,068     $ 801,441       17.4 %
                                                 
Income (Loss) Before Income Taxes   $ (44,843 )   $ 29,888     NM     $ 11,390     $ 86,052       (86.8 %)
                                                 
Income Tax Expense (Benefit)     (16,864 )     7,875     NM       (2,243 )     24,917     NM  
                                                 
Net Income (Loss)   $ (27,979 )   $ 22,013     NM     $ 13,633     $ 61,135       (77.7 %)
                                                 
                                                 
Per Share Data (1)                                                
                                                 
Net Income (Loss)  Per Common Share:                                                
Basic   $ (0.95 )   $ 0.76     NM     $ 0.46     $ 2.10       (78.0 %)
Diluted   $ (0.95 )   $ 0.73     NM     $ 0.45     $ 2.04       (77.7 %)
                                                 
Average Common Shares Outstanding:                                                
Basic     29,500       29,115               29,419       29,058          
Diluted     29,500       30,141               30,006       29,997          
                                                 
Underwriting Ratios                                                
Loss Ratio     91.6 %     60.8 %             70.7 %     60.4 %        
Expense Ratio     30.3 %     34.8 %             34.8 %     36.3 %        
Combined Ratio     121.9 %     95.6 %             105.5 %     96.7 %        
                                                 
Balance Sheet Data   September 30,     June 30,             September 30,     December 31,          
    2017     2017             2017     2016          
Stockholders' Equity   $ 1,224,191     $ 1,244,168       (1.6 %)   $ 1,224,191     $ 1,178,188       3.9 %
Book Value per Share (1)   $ 41.49     $ 42.21       (1.7 %)   $ 41.49     $ 40.45       2.6 %

(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 (LOSS) TO NET OPERATING EARNINGS (LOSS)
(Unaudited)

In this release, we present Net Operating Earnings (Loss), which is a "non-GAAP financial measure" as defined in Regulation G.

Net Operating Earnings (Loss) is comprised of Net Income (Loss) 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 recognized in our Consolidated Statements of Income (Loss).

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 (Loss) (the nearest GAAP financial measure) to Net Operating Earnings (Loss):

                 
    Three Months Ended September 30, 2017     Three Months Ended September 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 (Loss)   $ (44,843 )   $ 16,864     $ (27,979 )   $ 29,888     $ (7,875 )   $ 22,013     NM
Adjustments to Net Income (Loss):                                                    
Realized Losses (Gains)     (4,218 )     1,477       (2,741 )     (1,586 )     555       (1,031 )   NM
FX Losses (Gains)     1,675       (586 )     1,089       227       (80 )     147     NM
Net Operating Earnings (Loss)   $ (47,386 )   $ 17,755     $ (29,631 )   $ 28,529     $ (7,400 )   $ 21,129     NM
                                                     
Average Common Shares Outstanding: (2)                                                    
Basic                     29,500                       29,115      
Diluted                     29,500                       30,141      
                                                     
Net Operating Earnings (Loss) per Common Share: (2)                                                    
Basic                   $ (1.00 )                   $ 0.73      
Diluted                   $ (1.00 )                   $ 0.70      
                                                     


    Nine Months Ended September 30, 2017     Nine Months Ended September 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   $ 11,390     $ 2,243     $ 13,633     $ 86,052     $ (24,917 )   $ 61,135       (77.7 %)
Adjustments to Net Income:                                                        
Realized Losses (Gains)     (5,868 )     2,055       (3,813 )     (4,993 )     1,747       (3,246 )     17.5 %
FX Losses (Gains)     1,015       (355 )     660       (6,679 )     2,337       (4,342 )   NM  
Net Operating Earnings   $ 6,537     $ 3,943     $ 10,480     $ 74,380     $ (20,833 )   $ 53,547       (80.4 %)
                                                         
Average Common Shares Outstanding: (2)                                                        
Basic                     29,419                       29,058          
Diluted                     30,006                       29,997          
                                                         
Net Operating Earnings per Common Share: (2)                                                        
Basic                   $ 0.36                     $ 1.84          
Diluted                   $ 0.35                     $ 1.79          

(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
                 
    September 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:  $2,752,102; 2016: $2,628,225)   $ 2,798,185     $ 2,635,882  
Equity Securities, available-for-sale, at fair value (cost: 2017: $334,739; 2016: $327,911)     375,876       349,142  
Other Invested Assets     1,751       1,960  
Short-Term Investments, at fair value (amortized cost: 2017: $247,602; 2016: $143,451)     247,607       143,539  
Total Investments   $ 3,423,419     $ 3,130,523  
Cash     56,471       64,643  
Premiums Receivable     361,272       306,686  
Prepaid Reinsurance Premiums     231,174       213,377  
Reinsurance Recoverable on Paid Losses     61,054       82,582  
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses     847,505       779,276  
Deferred Policy Acquisition Costs     134,625       119,660  
Accrued Investment Income     20,420       17,315  
Goodwill and Other Intangible Assets     6,591       6,451  
Current Income Tax Receivable, Net     48,186       20,556  
Deferred Income Tax, Net     13,080       20,938  
Other Assets     71,751       52,030  
Total Assets   $ 5,275,548     $ 4,814,037  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities:                
Reserves for Losses and Loss Adjustment Expenses   $ 2,558,134     $ 2,289,727  
Unearned Premiums     990,518       887,344  
Reinsurance Balances Payable     129,306       108,980  
Senior Notes     263,845       263,728  
Payable for Investments Purchased     21,862        
Accounts Payable and Other Liabilities     87,692       86,070  
Total Liabilities   $ 4,051,357     $ 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 36,526 shares for 2017 and 36,147 shares for 2016)     3,650       3,612  
Additional Paid-In Capital     371,512       373,983  
Treasury Stock, at cost (7,023 shares for 2017 and 2016)     (155,801 )     (155,801 )
Retained Earnings     956,290       947,519  
Accumulated Other Comprehensive Income     48,540       8,875  
Total Stockholders' Equity   $ 1,224,191     $ 1,178,188  
Total Liabilities and Stockholders' Equity   $ 5,275,548     $ 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 September 30, 2017  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 235,052     $ 113,601     $ 53,385     $     $ 402,038  
Ceded Written Premiums     (64,328 )     (38,966 )     (2,728 )           (106,022 )
Net Written Premiums     170,724       74,635       50,657             296,016  
                                         
Net Earned Premiums   $ 169,150     $ 84,407     $ 47,798     $     $ 301,355  
Net Losses and LAE     (135,340 )     (81,713 )     (59,118 )           (276,171 )
Commission Expenses     (18,286 )     (16,201 )     (11,233 )     211       (45,509 )
Other Operating Expenses     (25,375 )     (16,388 )     (4,010 )           (45,773 )
Other Underwriting Income (Expense)     125             94       (211 )     8  
                                         
Underwriting Loss   $ (9,726 )   $ (29,895 )   $ (26,469 )   $     $ (66,090 )
                                         
Net Investment Income                             22,598       22,598  
Net Realized Gains                             4,218       4,218  
Interest Expense                             (3,862 )     (3,862 )
Other Loss                             (1,707 )     (1,707 )
Loss Before Income Taxes   $ (9,726 )   $ (29,895 )   $ (26,469 )   $ 21,247     $ (44,843 )
Income Tax Benefit                             16,864       16,864  
Net Loss                                   $ (27,979 )
                                         
Losses and LAE Ratio     80.0 %     96.8 %     123.7 %             91.6 %
Commission Expense Ratio     10.8 %     19.2 %     23.5 %             15.1 %
Other Operating Expense Ratio (2)     14.9 %     19.4 %     8.2 %             15.2 %
Combined Ratio     105.7 %     135.4 %     155.4 %             121.9 %

(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)
 
    Three Months Ended September 30, 2016  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 234,647     $ 104,484     $ 35,799     $     $ 374,930  
Ceded Written Premiums     (61,359 )     (35,194 )     (1,376 )           (97,929 )
Net Written Premiums     173,288       69,290       34,423             277,001  
                                         
Net Earned Premiums   $ 161,722     $ 79,761     $ 42,527     $     $ 284,010  
Net Losses and LAE     (106,320 )     (45,043 )     (21,430 )           (172,793 )
Commission Expenses     (18,630 )     (15,348 )     (8,951 )     318       (42,611 )
Other Operating Expenses     (31,517 )     (20,183 )     (4,437 )           (56,137 )
Other Underwriting Income (Expense)     240             122       (318 )     44  
                                         
Underwriting Profit (Loss)   $ 5,495     $ (813 )   $ 7,831     $     $ 12,513  
                                         
Net Investment Income                             19,875       19,875  
Net Realized Gains                             1,586       1,586  
Interest Expense                             (3,859 )     (3,859 )
Other Loss                             (227 )     (227 )
Income (Loss) Before Income Taxes   $ 5,495     $ (813 )   $ 7,831     $ 17,375     $ 29,888  
Income Tax Expense                             (7,875 )     (7,875 )
Net Income                                   $ 22,013  
                                         
Losses and LAE Ratio     65.7 %     56.5 %     50.4 %             60.8 %
Commission Expense Ratio     11.5 %     19.2 %     21.0 %             15.0 %
Other Operating Expense Ratio (2)     19.4 %     25.3 %     10.2 %             19.8 %
Combined Ratio     96.6 %     101.0 %     81.6 %             95.6 %

(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)
 
    Nine Months Ended September 30, 2017  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 729,843     $ 386,654     $ 188,025     $     $ 1,304,522  
Ceded Written Premiums     (199,672 )     (129,368 )     (9,021 )           (338,061 )
Net Written Premiums     530,171       257,286       179,004             966,461  
                                         
Net Earned Premiums   $ 500,241     $ 250,593     $ 130,487     $     $ 881,321  
Net Losses and LAE     (339,436 )     (176,513 )     (106,932 )           (622,881 )
Commission Expenses     (59,130 )     (54,435 )     (28,695 )     734       (141,526 )
Other Operating Expenses     (91,987 )     (58,687 )     (14,403 )           (165,077 )
Other Underwriting Income (Expense)     335             439       (734 )     40  
                                         
Underwriting Profit (Loss)   $ 10,023     $ (39,042 )   $ (19,104 )   $     $ (48,123 )
                                         
Net Investment Income                             66,311       66,311  
Net Realized Gains                             5,868       5,868  
Interest Expense                             (11,584 )     (11,584 )
Other Loss                             (1,082 )     (1,082 )
Income (Loss) Before Income Taxes   $ 10,023     $ (39,042 )   $ (19,104 )   $ 59,513     $ 11,390  
Income Tax Benefit                             2,243       2,243  
Net Income                                   $ 13,633  
                                         
Losses and LAE Ratio     67.9 %     70.4 %     81.9 %             70.7 %
Commission Expense Ratio     11.8 %     21.7 %     22.0 %             16.1 %
Other Operating Expense Ratio (2)     18.3 %     23.5 %     10.7 %             18.7 %
Combined Ratio     98.0 %     115.6 %     114.6 %             105.5 %

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
(Unaudited)
 
    Nine Months Ended September 30, 2016  
    U.S.     Int'l                          
amounts in thousands   Insurance     Insurance     GlobalRe     Corporate (1)     Total  
Gross Written Premiums   $ 689,218     $ 384,367     $ 127,787     $     $ 1,201,372  
Ceded Written Premiums     (178,474 )     (112,075 )     (7,467 )           (298,016 )
Net Written Premiums     510,744       272,292       120,320             903,356  
                                         
Net Earned Premiums   $ 462,446     $ 235,602     $ 118,312     $     $ 816,360  
Net Losses and LAE     (291,260 )     (133,519 )     (68,176 )           (492,955 )
Commission Expenses     (50,379 )     (47,524 )     (24,188 )     1,200       (120,891 )
Other Operating Expenses     (96,848 )     (64,997 )     (14,175 )           (176,020 )
Other Underwriting Income (Expense)     943             374       (1,200 )     117  
                                         
Underwriting Profit (Loss)   $ 24,902     $ (10,438 )   $ 12,147     $     $ 26,611  
                                         
Net Investment Income                             59,344       59,344  
Net Realized Gains                             4,993       4,993  
Interest Expense                             (11,575 )     (11,575 )
Other Income                             6,679       6,679  
Income (Loss) Before Income Taxes   $ 24,902     $ (10,438 )   $ 12,147     $ 59,441     $ 86,052  
Income Tax Expense                             (24,917 )     (24,917 )
Net Income                                   $ 61,135  
                                         
Losses and LAE Ratio     63.0 %     56.7 %     57.6 %             60.4 %
Commission Expense Ratio     10.9 %     20.2 %     20.4 %             14.8 %
Other Operating Expense Ratio (2)     20.7 %     27.5 %     11.7 %             21.5 %
Combined Ratio     94.6 %     104.4 %     89.7 %             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 September 30, 2017     Three Months Ended September 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 36,403     $ 166,097     $ 32,552     $ 235,052     $ 40,271     $ 161,600     $ 32,776     $ 234,647       0.2 %
Ceded Written Premiums     (18,859 )     (39,952 )     (5,517 )     (64,328 )     (17,636 )     (36,011 )     (7,712 )     (61,359 )     4.8 %
Net Written Premiums     17,544       126,145       27,035       170,724       22,635       125,589       25,064       173,288       (1.5 %)
                                                                         
Net Earned Premiums   $ 20,129     $ 125,931     $ 23,090     $ 169,150     $ 25,465     $ 115,971     $ 20,286     $ 161,722       4.6 %
Net Losses and LAE     (18,325 )     (89,568 )     (27,447 )     (135,340 )     (14,974 )     (74,129 )     (17,217 )     (106,320 )     27.3 %
Commission Expenses     (967 )     (13,515 )     (3,804 )     (18,286 )     (2,117 )     (13,664 )     (2,849 )     (18,630 )     (1.8 %)
Other Operating Expenses     (4,661 )     (16,897 )     (3,817 )     (25,375 )     (6,767 )     (19,997 )     (4,753 )     (31,517 )     (19.5 %)
Other Underwriting Income     105       18       2       125       126       104       10       240       (47.9 %)
                                                                         
Underwriting Profit (Loss)   $ (3,719 )   $ 5,969     $ (11,976 )   $ (9,726 )   $ 1,733     $ 8,285     $ (4,523 )   $ 5,495     NM  
                                                                         
Losses and LAE Ratio     91.0 %     71.1 %     118.9 %     80.0 %     58.8 %     63.9 %     84.9 %     65.7 %        
Commission Expense Ratio     4.8 %     10.7 %     16.5 %     10.8 %     8.3 %     11.8 %     14.0 %     11.5 %        
Other Operating Expense Ratio (1)     22.7 %     13.5 %     16.5 %     14.9 %     26.1 %     17.2 %     23.4 %     19.4 %        
Combined Ratio     118.5 %     95.3 %     151.9 %     105.7 %     93.2 %     92.9 %     122.3 %     96.6 %        

(1) - Includes Other Operating Expenses and Other Underwriting Income.
NM – Percentage change not meaningful

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
 
    Int'l Insurance  
    Three Months Ended September 30, 2017     Three Months Ended September 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 41,689     $ 37,415     $ 34,497     $ 113,601     $ 38,453     $ 38,077     $ 27,954     $ 104,484       8.7 %
Ceded Written Premiums     (9,948 )     (19,772 )     (9,246 )     (38,966 )     (12,631 )     (15,331 )     (7,232 )     (35,194 )     10.7 %
Net Written Premiums     31,741       17,643       25,251       74,635       25,822       22,746       20,722       69,290       7.7 %
                                                                         
Net Earned Premiums   $ 39,038     $ 21,775     $ 23,594     $ 84,407     $ 34,794     $ 25,584     $ 19,383     $ 79,761       5.8 %
Net Losses and LAE     (39,457 )     (29,918 )     (12,338 )     (81,713 )     (17,289 )     (16,080 )     (11,674 )     (45,043 )     81.4 %
Commission Expenses     (8,532 )     (2,666 )     (5,003 )     (16,201 )     (8,358 )     (3,502 )     (3,488 )     (15,348 )     5.6 %
Other Operating Expenses     (6,788 )     (5,614 )     (3,986 )     (16,388 )     (7,654 )     (7,913 )     (4,616 )     (20,183 )     (18.8 %)
                                                                         
Underwriting Profit (Loss)   $ (15,739 )   $ (16,423 )   $ 2,267     $ (29,895 )   $ 1,493     $ (1,911 )   $ (395 )   $ (813 )   NM  
                                                                         
Losses and LAE Ratio     101.1 %     137.4 %     52.3 %     96.8 %     49.7 %     62.8 %     60.2 %     56.5 %        
Commission Expense Ratio     21.9 %     12.2 %     21.2 %     19.2 %     24.0 %     13.7 %     18.0 %     19.2 %        
Other Operating Expense Ratio     17.3 %     25.8 %     16.9 %     19.4 %     22.0 %     31.0 %     23.8 %     25.3 %        
Combined Ratio     140.3 %     175.4 %     90.4 %     135.4 %     95.7 %     107.5 %     102.0 %     101.0 %        

NM- Percentage change not meaningful

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
 
    U.S. Insurance  
    Nine Months Ended September 30, 2017     Nine Months Ended September 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 119,040     $ 524,223     $ 86,580     $ 729,843     $ 129,621     $ 471,532     $ 88,065     $ 689,218       5.9 %
Ceded Written Premiums     (55,830 )     (129,297 )     (14,545 )     (199,672 )     (53,823 )     (103,286 )     (21,365 )     (178,474 )     11.9 %
Net Written Premiums     63,210       394,926       72,035       530,171       75,798       368,246       66,700       510,744       3.8 %
                                                                         
Net Earned Premiums   $ 64,635     $ 366,280     $ 69,326     $ 500,241     $ 73,636     $ 335,342     $ 53,468     $ 462,446       8.2 %
Net Losses and LAE     (44,867 )     (239,175 )     (55,394 )     (339,436 )     (35,448 )     (217,898 )     (37,914 )     (291,260 )     16.5 %
Commission Expenses     (4,014 )     (44,113 )     (11,003 )     (59,130 )     (5,775 )     (38,337 )     (6,267 )     (50,379 )     17.4 %
Other Operating Expenses     (18,280 )     (60,356 )     (13,351 )     (91,987 )     (20,956 )     (61,568 )     (14,324 )     (96,848 )     (5.0 %)
Other Underwriting Income     270       45       20       335       357       550       36       943       (64.5 %)
                                                                         
Underwriting Profit (Loss)   $ (2,256 )   $ 22,681     $ (10,402 )   $ 10,023     $ 11,814     $ 18,089     $ (5,001 )   $ 24,902       (59.8 %)
                                                                         
Losses and LAE Ratio     69.4 %     65.3 %     79.9 %     67.9 %     48.1 %     65.0 %     70.9 %     63.0 %        
Commission Expense Ratio     6.2 %     12.0 %     15.9 %     11.8 %     7.8 %     11.4 %     11.7 %     10.9 %        
Other Operating Expense Ratio (1)     27.9 %     16.5 %     19.2 %     18.3 %     28.1 %     18.2 %     26.8 %     20.7 %        
Combined Ratio     103.5 %     93.8 %     115.0 %     98.0 %     84.0 %     94.6 %     109.4 %     94.6 %        

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

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
 
    Int'l Insurance  
    Nine Months Ended September 30, 2017     Nine Months Ended September 30, 2016          
amounts in thousands   Marine     P&C     Professional
Liability
    Total     Marine     P&C     Professional
Liability
    Total     %
Change
Total
 
Gross Written Premiums   $ 160,119     $ 124,446     $ 102,089     $ 386,654     $ 151,548     $ 145,125     $ 87,694     $ 384,367       0.6 %
Ceded Written Premiums     (33,410 )     (69,780 )     (26,178 )     (129,368 )     (33,274 )     (57,025 )     (21,776 )     (112,075 )     15.4 %
Net Written Premiums     126,709       54,666       75,911       257,286       118,274       88,100       65,918       272,292       (5.5 %)
                                                                         
Net Earned Premiums   $ 116,058     $ 67,292     $ 67,243     $ 250,593     $ 109,746     $ 70,608     $ 55,248     $ 235,602       6.4 %
Net Losses and LAE     (83,906 )     (54,654 )     (37,953 )     (176,513 )     (54,398 )     (49,174 )     (29,947 )     (133,519 )     32.2 %
Commission Expenses     (27,590 )     (10,985 )     (15,860 )     (54,435 )     (26,124 )     (11,427 )     (9,973 )     (47,524 )     14.5 %
Other Operating Expenses     (24,454 )     (19,983 )     (14,250 )     (58,687 )     (24,794 )     (25,686 )     (14,517 )     (64,997 )     (9.7 %)
                                                                         
Underwriting Profit (Loss)   $ (19,892 )   $ (18,330 )   $ (820 )   $ (39,042 )   $ 4,430     $ (15,679 )   $ 811     $ (10,438 )   NM  
                                                                         
Losses and LAE Ratio     72.3 %     81.2 %     56.4 %     70.4 %     49.6 %     69.6 %     54.2 %     56.7 %        
Commission Expense Ratio     23.8 %     16.3 %     23.6 %     21.7 %     23.8 %     16.2 %     18.1 %     20.2 %        
Other Operating Expense Ratio     21.0 %     29.7 %     21.2 %     23.5 %     22.6 %     36.4 %     26.2 %     27.5 %        
Combined Ratio     117.1 %     127.2 %     101.2 %     115.6 %     96.0 %     122.2 %     98.5 %     104.4 %        

NM- Percentage change not meaningful

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
 
    For the Three Months Ended September 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2017     2016     2017     2016  
U.S. Insurance:                                
Loss and LAE Payments   $ 68,454     $ 81,461       40.5 %     50.4 %
Change in Reserves     66,886       24,859       39.5 %     15.3 %
Net Incurred Loss and LAE   $ 135,340     $ 106,320       80.0 %     65.7 %
                                 
Int'l Insurance:                                
Loss and LAE Payments   $ 55,148     $ 43,848       65.3 %     55.0 %
Change in Reserves     26,565       1,195       31.5 %     1.5 %
Net Incurred Loss and LAE   $ 81,713     $ 45,043       96.8 %     56.5 %
                                 
GlobalRe:                                
Loss and LAE Payments   $ 13,659     $ 20,770       28.6 %     48.8 %
Change in Reserves     45,459       660       95.1 %     1.6 %
Net Incurred Loss and LAE   $ 59,118     $ 21,430       123.7 %     50.4 %
                                 
Total                                
Loss and LAE Payments   $ 137,261     $ 146,079       45.5 %     51.4 %
Change in Reserves     138,910       26,714       46.1 %     9.4 %
Net Incurred Loss and LAE   $ 276,171     $ 172,793       91.6 %     60.8 %
                                 
                                 
    For the Three Months Ended September 30,  
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   2017     2016     2017     2016  
U.S. Insurance   $ (18,383 )   $ (4,903 )     (6.0 %)     (1.7 %)
Int'l Insurance     (10,714 )     2,860       (3.6 %)     1.0 %
GlobalRe     (397 )     3,074       (0.1 %)     1.1 %
Total   $ (29,494 )   $ 1,031       (9.7 %)     0.4 %
                                 


 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
 
    For the Nine Months Ended September 30,  
amounts in thousands   Amounts     Loss Ratio  
Net Incurred Loss Activity   2017     2016     2017     2016  
U.S. Insurance:                                
Loss and LAE Payments   $ 225,017     $ 226,742       45.0 %     49.0 %
Change in Reserves     114,419       64,518       22.9 %     14.0 %
Net Incurred Loss and LAE   $ 339,436     $ 291,260       67.9 %     63.0 %
                                 
Int'l Insurance:                                
Loss and LAE Payments   $ 146,106     $ 106,087       58.3 %     45.0 %
Change in Reserves     30,407       27,432       12.1 %     11.7 %
Net Incurred Loss and LAE   $ 176,513     $ 133,519       70.4 %     56.7 %
                                 
GlobalRe:                                
Loss and LAE Payments   $ 63,268     $ 63,829       48.5 %     53.9 %
Change in Reserves     43,664       4,347       33.4 %     3.7 %
Net Incurred Loss and LAE   $ 106,932     $ 68,176       81.9 %     57.6 %
                                 
Total                                
Loss and LAE Payments   $ 434,391     $ 396,658       49.3 %     48.6 %
Change in Reserves     188,490       96,297       21.4 %     11.8 %
Net Incurred Loss and LAE   $ 622,881     $ 492,955       70.7 %     60.4 %
                                 
                                 
    For the Nine Months Ended September 30,  
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   2017     2016     2017     2016  
U.S. Insurance   $ (18,206 )   $ 1,768       (2.1 %)     0.2 %
Int'l Insurance     (22,073 )     5,359       (2.5 %)     0.7 %
GlobalRe     (4,330 )     4,517       (0.5 %)     0.6 %
Total   $ (44,609 )   $ 11,644       (5.1 %)     1.5 %
                                 


 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
 
    As of September 30, 2017  
amounts in thousands   Case     IBNR          
Net Loss Reserves:   Reserves     Reserves     Total  
U.S. Insurance:                        
Marine   $ 62,475     $ 47,364     $ 109,839  
P&C     197,009       680,855       877,864  
Professional Liability     32,385       84,753       117,138  
Total U.S. Insurance   $ 291,869     $ 812,972     $ 1,104,841  
Int'l Insurance:                        
Marine   $ 170,658     $ 51,094     $ 221,752  
P&C     64,255       42,680       106,935  
Professional Liability     40,178       76,618       116,796  
Total Int'l Insurance   $ 275,091     $ 170,392     $ 445,483  
                         
GlobalRe   $ 50,351     $ 109,954     $ 160,305  
                         
Total Net Loss Reserves   $ 617,311     $ 1,093,318     $ 1,710,629  
                         
                         
    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 September 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 3.6 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

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

    As of September 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   $ 269,851     $ 8,169     $ (607 )   $ 262,289  
States, Municipalities and Political Subdivisions     684,792       20,643       (1,481 )     665,630  
Mortgage-Backed and Asset-Backed Securities:                                
Agency Mortgage-Backed Securities     426,441       3,365       (4,298 )     427,374  
Residential Mortgage Obligations     34,748       570       (27 )     34,205  
Asset-Backed Securities     331,646       2,503       (426 )     329,569  
Commercial Mortgage-Backed Securities     140,601       2,742       (1,308 )     139,167  
   Subtotal   $ 933,436     $ 9,180     $ (6,059 )   $ 930,315  
Corporate Exposures     910,106       18,221       (1,983 )     893,868  
Total Fixed Maturities   $ 2,798,185     $ 56,213     $ (10,130 )   $ 2,752,102  
Equity Securities:                                
Common Stocks   $ 180,771     $ 35,179     $ (815 )   $ 146,407  
Preferred Stocks     195,105       7,418       (645 )     188,332  
Total Equity Securities   $ 375,876     $ 42,597     $ (1,460 )   $ 334,739  
Short-Term Investments     247,607       5             247,602  
Total Investments   $ 3,421,668     $ 98,815     $ (11,590 )   $ 3,334,443  

 

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