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Navigators Reports Fourth Quarter 2017 Earnings

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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.
 

 

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