News Column

Navigators Reports Fourth Quarter Earnings, Operating Earnings Up 89%

February 13, 2014

STAMFORD, Conn., Feb. 13, 2014 (GLOBE NEWSWIRE) -- The Navigators Group, Inc.(Nasdaq:NAVG) reported net income of $14.3 million, or $1.00 per diluted share, for the three months ended December 31, 2013 compared to $28.0 million, or $1.96 per diluted share, for the comparable period in 2012. Operating earnings were $16.1 million, or $1.13 per diluted share, for the fourth quarter of 2013 compared to $8.5 million, or $0.59 per diluted share, for the comparable period in 2012.

For the twelve months ended December 31, 2013, the Company reported net income of $63.5 million, or $4.42 per diluted share, compared to $63.8 million, or $4.45 per diluted share, for the comparable period in 2012. Operating earnings were $61.7 million, or $4.30 per diluted share, for the twelve months ended December 31, 2013 compared to $37.6 million, or $2.63 per diluted share, for the comparable period in 2012.

The results for the fourth quarter and year include an after-tax charge of $11.6 million for the payment of call premium in connection with the redemption of outstanding 7.0% Senior Notes due 2016. Excluding the call premium, net income for the fourth quarter would be $25.9 million, or $1.80 per diluted share, and for the year, would be $75.1 million, or $5.23 per diluted share.

Gross written premiums and net written premiums for the three months ended December 31, 2013 were $333.1 million and $223.4 million, respectively, an increase of 3.6% and 5.2% from the comparable period in 2012. Gross written premiums and net written premiums for the twelve months ended December 31, 2013 were $1.371 billion and $887.9 million, respectively, an increase of 6.5% for both from the comparable period in 2012.

The combined loss and expense ratio for the three and twelve months ended December 31, 2013 were 94.0% and 94.8%, respectively, compared to 100.2% and 99.3% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to report strong operating performance with significantly improved underwriting profitability for the fourth quarter and for the full year of 2013, by both our Insurance Companies and Lloyd's Operations. Operating earnings were up 89% for the fourth quarter of 2013 compared to 2012 and 64% for the twelve months. We produced profitable and improved combined ratios of 94% for the fourth quarter and 94.8% for the full year, with a meaningful contribution from our Insurance Company Marine business. We continue to experience strong premium growth in targeted specialty classes, most notably in Navigators Specialty, our U.S. excess & surplus lines unit, and in international D&O. We have continued to emphasize cost control, limiting the growth in non-commission operating expenses. During the quarter, we raised $265 million of capital through the issuance of 10 year, 5.75% senior notes, which allowed us to retire existing 7.00% senior notes due 2016. This debt issuance provided $131 million of incremental capital after redeeming the outstanding notes to enhance our capital efficiency. We believe this action effectively enhances Navigators' position to continue to pursue targeted growth strategies in specialty classes, both in the U.S. and internationally."

Stockholders' equity was $902.2 million, or $63.54 per share, as of December 31, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and twelve months ended December 31, 2013 was $14.3 million and $56.3 million, respectively, an increase of 4.7% and 3.7% from the comparable periods in 2012. Net investment income for the twelve months ended December 31, 2012 was reduced by $4.5 million as a result of the settlement of our dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses, net other-than-temporary impairment losses recognized in earnings, and for 2012 the $4.5 million in interest expense for the settlement of our dispute with Equitas, was 2.3% and 2.4% for the three and twelve months ended December 31, 2013, respectively, compared to 2.3% and 2.6% for the comparable periods in 2012. The effective tax rate on net investment income was 27.8% for both the three and twelve months ended December 31, 2013, respectively, compared to 26.7% and 26.8% for the comparable periods in 2012.

The Company's investment portfolio mainly consists of fixed income securities with an average quality rating of "AA/Aa" as defined by Standard & Poor's and Moody's, respectively, and an average effective duration of 3.7 years as of December 31, 2013. As of December 31, 2013, net unrealized gains within our investment portfolio were $36.0 million, a decrease of $67.3 million compared to December 31, 2012.

There were $15.2 million and $20.5 million of net realized gains including other-than-temporary impairment losses recognized in earnings for the three and twelve months ended December 31, 2013, respectively, compared to $30.0 million and $40.2 million for the same periods in 2012.

Consolidated net cash flow from operations for the three and twelve months ended December 31, 2013 was $6.9 million and $136.9 million, respectively, compared to $27.6 million and $96.7 million for the comparable periods in 2012.

The Company will hold a conference call on Friday, February 14, 2014 starting at 8:30 a.m. ET to discuss the 2013 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 connect to the webcast at:

http://www.media-server.com/m/p/n8ezzwb2

Operating earnings, or net income excluding after-tax net realized gains (losses), net other-than-temporary impairment losses recognized in earnings, and the after-tax call premium charge in connection with the redemption of our 7.0% Senior Notes due May 1, 2016, is a non-GAAP financial measure that is a common performance measurement for insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies and operations at Lloyd's. With its corporate headquarters in Connecticut and insurance operations based in New York and London, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe, as well as representatives in China and Brazil.

The Navigators Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7778

This press release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words "estimate", "expect", "believe" or similar expressions are intended to identify such forward-looking statements. Forward-looking statements are derived from information that we currently have and assumptions that we make. We cannot assure that results that we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties that we face. Please refer to Navigators' most recent reports on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors that may affect that business. Navigators' undertakes no obligation to publicly update or revise any forward-looking statement.

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except share and per share data)
(unaudited)
 
 Three Months Ended  Twelve Months Ended  
 December 31,  December 31,  
Results of Operations20132012Change20132012Change
             
Gross written premiums $ 333,091  $ 321,587 3.6% $ 1,370,517  $ 1,286,465 6.5%
Net written premiums 223,445  212,312 5.2% 887,922  833,655 6.5%
             
Revenues:            
Net earned premiums  219,902  201,566 9.1%  841,939  781,964 7.7%
Net investment income  14,254  13,616 4.7%  56,251  54,248 3.7%
Total other-than-temporary impairment losses  (530)  (208) NM  (2,393)  (902) NM
Portion of loss recognized in other comprehensive income (before tax)  --   --  NM  --   44 NM
Net other-than-temporary impairment losses recognized in earnings  (530)  (208) NM  (2,393)  (858) NM
Net realized gains (losses)  15,768  30,254 -47.9%  22,939  41,074 -44.2%
Other income  (665)  (599) 11.0%  (1,172)  1,488 NM
Total revenues 248,729  244,629 1.7% 917,564  877,916 4.5%
             
Expenses:            
Net losses and loss adjustment expenses  131,385  127,191 3.3%  518,961  497,433 4.3%
Commission expenses  30,863  31,259 -1.3%  113,494  121,470 -6.6%
Other operating expenses  43,826  42,841 2.3%  164,434  159,079 3.4%
Call premium on Senior Notes  17,895  --  NM  17,895  --  NM
Interest expense  4,351  2,051 112.1%  10,507  8,198 28.2%
Total expenses 228,320  203,342 12.3% 825,291  786,180 5.0%
             
Income before income taxes 20,409  41,287 -50.6% 92,273  91,736 0.6%
             
Income tax expense (benefit) 6,076  13,243 -54.1% 28,807  27,974 3.0%
             
Net income (loss) $ 14,333  $ 28,044 -48.9% $ 63,466  $ 63,762 -0.5%
             
             
Per Share Data            
Net income per common share:            
Basic $ 1.01  $ 2.00 -49.4% $ 4.49  $ 4.54 -1.0%
Diluted $ 1.00  $ 1.96 -48.7% $ 4.42  $ 4.45 -0.6%
             
Average common shares outstanding:            
Basic 14,172,908  14,042,553   14,133,925  14,052,311  
Diluted 14,434,137  14,340,057   14,345,553  14,327,820  
             
Underwriting Ratios            
Loss Ratio 59.7% 63.1%   61.6% 63.6%  
Expense Ratio 34.3% 37.1%   33.2% 35.7%  
Combined Ratio94.0%100.2%  94.8%99.3%  
             
             
Balance Sheet DataDec. 31,Sept. 30,  Dec. 31,Dec. 31,  
 20132013  20132012  
Stockholders' equity $ 902,212  $ 899,882 0.3% $ 902,212  $ 879,485 2.6%
Book value per share $ 63.54  $ 63.61 -0.1% $ 63.54  $ 62.61 1.5%
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
 
 December 31,December 31,
 20132012
 (unaudited)  
ASSETS
Investments and cash:    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $2,036,999; 2012, $2,034,765)  $ 2,047,873  $ 2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $118,804; 2012, $85,004)  143,954  101,297
Short-term investments, at cost which approximates fair value  296,250  153,788
Cash  86,509  45,336
Total investments and cash 2,574,586  2,422,254
     
Premiums receivable  325,025  320,182
Prepaid reinsurance premiums  247,822  221,015
Reinsurance recoverable on paid losses  38,384  49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses  822,438  880,139
Deferred policy acquisition costs  67,007  61,005
Accrued investment income  13,866  12,587
Goodwill and other intangible assets  7,177  7,093
Current income tax receivable, net  9,918  --
Deferred income tax, net  28,187  3,216
Receivable for investments sold  3  4,310
Other assets  35,039  26,587
Total assets $ 4,169,452  $ 4,007,670
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:    
Reserves for losses and loss adjustment expenses  $ 2,045,071  $ 2,097,048
Unearned premiums  714,606  642,407
Reinsurance balances payable  167,252  165,813
Senior notes  263,308  114,424
Payable for investments purchased  7,624  58,345
Accounts payable and other liabilities  69,379  48,015
Total liabilities 3,267,240  3,128,185
     
Stockholders' equity:    
Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued  --   -- 
Common stock, $.10 par value, authorized 50,000,000 shares, issued 17,709,876 shares for 2013 and 17,558,046 shares for 2012  1,770  1,755
Additional paid-in capital  335,546  329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012)  (155,801)  (155,801)
Retained earnings  692,337  628,871
Accumulated other comprehensive income  28,360  75,208
Total stockholders' equity 902,212  879,485
     
Total liabilities and stockholders' equity $ 4,169,452  $ 4,007,670
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
 
Gross Written Premiums:Three Months  Twelve Months  
Insurance Companies:20132012Change20132012Change
Marine  $ 38,986  $ 43,455 -10.3%  $ 171,822  $ 200,095 -14.1%
Property Casualty  172,800  164,247 5.2%  700,087  590,741 18.5%
Professional Liability  32,687  32,860 -0.5%  130,366  130,489 -0.1%
Total Insurance Companies  244,473  240,562 1.6%  1,002,275  921,325 8.8%
Lloyd's Operations:            
Marine  45,500  47,895 -5.0%  181,046  194,423 -6.9%
Property Casualty  27,378  20,965 30.6%  129,522  127,028 2.0%
Professional Liability  15,740  12,165 29.4%  57,674  43,689 32.0%
Total Lloyd's Operations  88,618  81,025 9.4%  368,242  365,140 0.8%
Total $ 333,091  $ 321,587 3.6% $1,370,517  $1,286,465 6.5%
             
Net Written Premiums:Three Months  Twelve Months  
Insurance Companies:20132012Change20132012Change
Marine  $ 24,893  $ 25,944 -4.1%  $ 119,837  $ 133,210 -10.0%
Property Casualty  124,727  115,345 8.1%  462,942  390,168 18.7%
Professional Liability  21,399  24,204 -11.6%  97,229  99,578 -2.4%
Total Insurance Companies  171,019  165,493 3.3%  680,008  622,956 9.2%
Lloyd's Operations:            
Marine  34,214  34,111 0.3%  134,627  143,600 -6.2%
Property Casualty  9,080  7,131 27.3%  42,334  43,824 -3.4%
Professional Liability  9,132  5,577 63.8%  30,953  23,275 33.0%
Total Lloyd's Operations  52,426  46,819 12.0%  207,914  210,699 -1.3%
Total $ 223,445  $ 212,312 5.2% $ 887,922  $ 833,655 6.5%
             
Net Earned Premiums:Three Months  Twelve Months  
Insurance Companies:20132012Change20132012Change
Marine  $ 29,263  $ 30,779 -4.9%  $ 129,276  $ 142,181 -9.1%
Property Casualty  111,526  92,246 20.9%  409,480  332,782 23.0%
Professional Liability  24,709  26,199 -5.7%  100,582  96,476 4.3%
Total Insurance Companies  165,498  149,224 10.9%  639,338  571,439 11.9%
Lloyd's Operations:            
Marine  35,758  35,360 1.1%  138,690  136,898 1.3%
Property Casualty  10,809  11,307 -4.4%  37,722  52,951 -28.8%
Professional Liability  7,837  5,675 38.1%  26,189  20,676 26.7%
Total Lloyd's Operations  54,404  52,342 3.9%  202,601  210,525 -3.8%
Total $ 219,902  $ 201,566 9.1% $ 841,939  $ 781,964 7.7%
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
December 31, 2013
 
($ in thousands)
 
 InsuranceLloyd's    
 CompaniesOperationsCorporate (1)Total
Gross written premiums $ 244,473  $ 88,618  $ -- $ 333,091
Net written premiums 171,019  52,426  --  223,445
         
Net earned premiums  165,498  54,404 --   219,902
Net losses and loss adjustment expenses  (106,445)  (24,940) --   (131,385)
Commission expenses  (22,003)  (9,465)  605  (30,863)
Other operating expenses  (32,238)  (11,588) --   (43,826)
Other income (expense)  461  (521)  (605)  (665)
         
Underwriting profit (loss) 5,273  7,890  --  13,163
         
Net investment income  12,332  1,923  (1)  14,254
Net realized gains (losses)  14,599  639  --   15,238
Call premium on Senior Notes  --   --   (17,895)  (17,895)
Interest expense  --   --   (4,351)  (4,351)
         
Income (loss) before income taxes  32,204  10,452  (22,247)  20,409
         
Income tax expense (benefit)  10,411  3,608  (7,943)  6,076
Net income (loss) $ 21,793  $ 6,844  $ (14,304) $ 14,333
         
Losses and loss adjustment expenses ratio 64.3% 45.8%   59.7%
Commission expense ratio 13.3% 17.4%   14.0%
Other operating expense ratio (2) 19.2% 22.3%   20.3%
Combined ratio96.8%85.5%  94.0%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
December 31, 2012
 
($ in thousands)
 
 InsuranceLloyd's    
 CompaniesOperationsCorporate (1)Total
Gross written premiums $ 240,562  $ 81,025  $ -- $ 321,587
Net written premiums165,493 46,819  --212,312
         
Net earned premiums 149,224 52,342  -- 201,566
Net losses and loss adjustment expenses (112,599) (14,592)  -- (127,191)
Commission expenses (20,125) (11,714)  580 (31,259)
Other operating expenses (29,979) (12,862)  -- (42,841)
Other income (expense) 40 (59)  (580) (599)
         
Underwriting profit (loss)(13,439)13,115  --(324)
         
Net investment income 12,324 1,262 30 13,616
Net realized gains (losses) 29,659 194  193 30,046
Interest expense  --  --  (2,051) (2,051)
         
Income (loss) before income taxes 28,544 14,571 (1,828) 41,287
         
Income tax expense (benefit) 9,083 5,162 (1,002) 13,243
Net income (loss) $ 19,461  $ 9,409  $ (826) $ 28,044
         
Losses and loss adjustment expenses ratio 75.5% 27.9%   63.1%
Commission expense ratio 13.5% 22.4%   15.5%
Other operating expense ratio (2) 20.0% 24.6%   21.6%
Combined ratio109.0%74.9%  100.2%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Twelve Months Ended
December 31, 2013
 
($ in thousands)
 
 InsuranceLloyd's    
 CompaniesOperationsCorporate (1)Total
Gross written premiums $ 1,002,275  $ 368,242  $ -- $ 1,370,517
Net written premiums 680,008 207,914  --887,922
         
Net earned premiums 639,338 202,601  -- 841,939
Net losses and loss adjustment expenses (415,413) (103,548)  -- (518,961)
Commission expenses (81,132) (34,710)  2,348 (113,494)
Other operating expenses (119,920) (44,514)  -- (164,434)
Other income (expense) 2,764 (1,588)  (2,348) (1,172)
         
Underwriting profit (loss)25,637 18,241  --43,878
         
Net investment income 49,083 7,160 8 56,251
Net realized gains (losses) 20,600 (58) 4 20,546
Call premium on Senior Notes  --  -- (17,895) (17,895)
Interest expense  --  --  (10,507) (10,507)
         
Income (loss) before income taxes 95,320 25,343 (28,390) 92,273
         
Income tax expense (benefit) 29,965 8,728 (9,886) 28,807
Net income (loss) $ 65,355  $ 16,615  $ (18,504) $ 63,466
         
Losses and loss adjustment expenses ratio 65.0% 51.1%   61.6%
Commission expense ratio 12.7% 17.1%   13.5%
Other operating expense ratio (2) 18.3% 22.8%   19.7%
Combined ratio96.0%91.0%  94.8%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Twelve Months Ended
December 31, 2012
 
($ in thousands)
 
 InsuranceLloyd's    
 CompaniesOperationsCorporate (1)Total
Gross written premiums $ 921,325  $ 365,140  $ -- $ 1,286,465
Net written premiums622,956 210,699  --833,655
         
Net earned premiums 571,439 210,525  -- 781,964
Net losses and loss adjustment expenses (417,082) (80,351)  -- (497,433)
Commission expenses (81,370) (42,449)  2,349 (121,470)
Other operating expenses (113,625) (45,454)  -- (159,079)
Other income (expense) 3,790 47  (2,349) 1,488
         
Underwriting profit (loss)(36,848)42,318  -- 5,470
         
Net investment income 46,549 7,551 148 54,248
Net realized gains (losses) 36,468 3,555  193 40,216
Interest expense  --  --  (8,198) (8,198)
         
Income (loss) before income taxes 46,169 53,424 (7,857) 91,736
         
Income tax expense (benefit) 12,686 18,620 (3,332) 27,974
Net income (loss) $ 33,483  $ 34,804  $ (4,525) $ 63,762
         
Losses and loss adjustment expenses ratio 73.0% 38.2%   63.6%
Commission expense ratio 14.2% 20.2%   15.5%
Other operating expense ratio (2) 19.2% 21.5%   20.2%
Combined ratio106.4%79.9%  99.3%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
 
 Three Months Ended December 31, 2013
 NetLosses          
 Earnedand LAEUnderwritingUnderwritingLossExpenseCombined
Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio
Marine  $ 29,263  $ 7,192  $ 13,257  $ 8,814 24.6% 45.3% 69.9%
Property Casualty  111,526  84,379  31,816  (4,669) 75.7% 28.5% 104.2%
Professional Liability  24,709  14,874  8,707  1,128 60.2% 35.2% 95.4%
Total Insurance Companies  165,498  106,445  53,780  5,273 64.3% 32.5% 96.8%
Lloyd's Operations:              
Marine  35,758  17,270  15,111  3,377 48.3% 42.3% 90.6%
Property Casualty  10,809  2,645  3,957  4,207 24.5% 36.6% 61.1%
Professional Liability  7,837  5,025  2,506  306 64.1% 32.0% 96.1%
Total Lloyd's Operations  54,404  24,940  21,574  7,890 45.8% 39.7% 85.5%
Total All $ 219,902  $ 131,385  $ 75,354  $ 13,163 59.7%34.3%94.0%
               
 Three Months Ended December 31, 2012
 NetLosses          
 Earnedand LAEUnderwritingUnderwritingLossExpenseCombined
Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio
Marine  $ 30,779  $ 22,879  $ 15,048  $ (7,148) 74.3% 48.9% 123.2%
Property Casualty  92,246  70,394  25,535  (3,683) 76.3% 27.7% 104.0%
Professional Liability  26,199  19,326  9,481  (2,608) 73.8% 36.2% 110.0%
Total Insurance Companies  149,224  112,599  50,064  (13,439) 75.5% 33.5% 109.0%
Lloyd's Operations:              
Marine  35,360  5,892  16,523  12,945 16.7% 46.7% 63.4%
Property Casualty  11,307  6,476  5,609  (778) 57.3% 49.6% 106.9%
Professional Liability  5,675  2,224  2,503  948 39.2% 44.1% 83.3%
Total Lloyd's Operations  52,342  14,592  24,635  13,115 27.9% 47.0% 74.9%
Total All $ 201,566  $ 127,191  $ 74,699  $ (324)63.1%37.1%100.2%
               
               
   Amounts  Loss Ratio  
Net Incurred Loss Activity  Dec. 31,Dec. 31,  Dec. 31,Dec. 31,  
For the Three Months Ended:  20132012  20132012  
Insurance Companies:              
Loss and LAE payments    $ 135,161  $ 120,293   81.7% 80.7%  
Change in reserves    (28,716)  (7,694)   -17.4% -5.2%  
Net incurred loss and LAE    106,445  112,599   64.3% 75.5%  
               
Lloyd's Operations:              
Loss and LAE payments    29,424  35,341   54.1% 67.5%  
Change in reserves    (4,484)  (20,749)   -8.3% -39.6%  
Net incurred loss and LAE    24,940  14,592   45.8% 27.9%  
               
Total              
Loss and LAE payments    164,585  155,634   74.8% 77.2%  
Change in reserves    (33,200)  (28,443)   -15.1% -14.1%  
Net incurred loss and LAE   $ 131,385  $ 127,191  59.7%63.1%  
               
               
Impact of Prior Years Reserves  Amounts  Loss Ratio Impact  
Favorable / (Unfavorable) Development  Dec. 31,Dec. 31,  Dec. 31,Dec. 31,  
For the Three Months Ended:  20132012  20132012  
Insurance Companies    $ (1,047)  $ (379)   -0.5% -0.2%  
Lloyd's Operations    624  27,955   0.3% 13.9%  
Total   $ (423) $ 27,576  -0.2%13.7%  
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
 
 Twelve Months Ended December 31, 2013
 NetLosses          
 Earnedand LAEUnderwritingUnderwritingLossExpenseCombined
Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio
Marine  $ 129,276  $ 62,617  $ 50,206  $ 16,453 48.4% 38.9% 87.3%
Property Casualty  409,480  280,530  114,660  14,290 68.5% 28.0% 96.5%
Professional Liability  100,582  72,266  33,422  (5,106) 71.8% 33.3% 105.1%
Total Insurance Companies  639,338  415,413  198,288  25,637 65.0% 31.0% 96.0%
Lloyd's Operations:              
Marine  138,690  76,454  56,377  5,859 55.1% 40.7% 95.8%
Property Casualty  37,722  13,852  16,066  7,804 36.7% 42.6% 79.3%
Professional Liability  26,189  13,242  8,369  4,578 50.6% 31.9% 82.5%
Total Lloyd's Operations  202,601  103,548  80,812  18,241 51.1% 39.9% 91.0%
Total All $ 841,939  $ 518,961  $ 279,100  $ 43,878 61.6%33.2%94.8%
               
 Twelve Months Ended December 31, 2012
 NetLosses          
 Earnedand LAEUnderwritingUnderwritingLossExpenseCombined
Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio
Marine  $ 142,181  $ 110,119  $ 55,419  $ (23,357) 77.4% 39.0% 116.4%
Property Casualty  332,782  235,740  100,770  (3,728) 70.8% 30.3% 101.1%
Professional Liability  96,476  71,223  35,016  (9,763) 73.8% 36.3% 110.1%
Total Insurance Companies  571,439  417,082  191,205  (36,848) 73.0% 33.4% 106.4%
Lloyd's Operations:              
Marine  136,898  51,116  59,110  26,672 37.3% 43.2% 80.5%
Property Casualty  52,951  23,689  20,030  9,232 44.7% 37.9% 82.6%
Professional Liability  20,676  5,546  8,716  6,414 26.8% 42.2% 69.0%
Total Lloyd's Operations  210,525  80,351  87,856  42,318 38.2% 41.7% 79.9%
Total All $ 781,964  $ 497,433  $ 279,061  $ 5,470 63.6%35.7%99.3%
               
               
   Amounts  Loss Ratio  
Net Incurred Loss Activity  Dec. 31,Dec. 31,  Dec. 31,Dec. 31,  
For the Twelve Months Ended:  20132012  20132012  
Insurance Companies:              
Loss and LAE payments    $ 398,993  $ 403,113   62.4% 70.6%  
Change in reserves    16,420  13,969   2.6% 2.4%  
Net incurred loss and LAE    415,413  417,082   65.0% 73.0%  
               
Lloyd's Operations:              
Loss and LAE payments    114,350  114,645   56.4% 54.5%  
Change in reserves    (10,802)  (34,294)   -5.3% -16.3%  
Net incurred loss and LAE    103,548  80,351   51.1% 38.2%  
               
Total              
Loss and LAE payments    513,343  517,758   61.0% 66.2%  
Change in reserves    5,618  (20,325)   0.6% -2.6%  
Net incurred loss and LAE   $ 518,961  $ 497,433  61.6%63.6%  
               
               
Impact of Prior Years Reserves  Amounts  Loss Ratio Impact  
Favorable / (Unfavorable) Development  Dec. 31,Dec. 31,  Dec. 31,Dec. 31,  
For the Twelve Months Ended:  20132012  20132012  
Insurance Companies    $ (13,430)  $ (1,896)   -1.6% -0.2%  
Lloyd's Operations    14,696  47,187   1.7% 6.0%  
Total   $ 1,266  $ 45,291  0.1%5.8%  
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
 
 CaseIBNR  
Net Loss Reserves, December 31, 2013:ReservesReservesTotal
Insurance Companies:      
Marine  $ 122,909  $ 101,077  $ 223,986
Property Casualty  150,477  377,173  527,650
Professional Liability  61,117  89,865  150,982
Total Insurance Companies  334,503  568,115  902,618
Lloyd's Operations:      
Marine  133,060  85,685  218,745
Property Casualty  25,870  18,271  44,141
Professional Liability  14,013  43,116  57,129
Total Lloyd's Operations  172,943  147,072  320,015
       
Total Net Loss Reserves $ 507,446  $ 715,187  $ 1,222,633
       
       
 CaseIBNR  
Net Loss Reserves, December 31, 2012ReservesReservesTotal
Insurance Companies:      
Marine  $ 137,934  $ 114,236  $ 252,170
Property Casualty  204,988  290,455  495,443
Professional Liability  54,092  84,493  138,585
Total Insurance Companies  397,014  489,184  886,198
Lloyd's Operations:      
Marine  125,884  95,122  221,006
Property Casualty  27,903  28,463  56,366
Professional Liability  14,694  38,645  53,339
Total Lloyd's Operations  168,481  162,230  330,711
       
Total Net Loss Reserves $ 565,495  $ 651,414  $ 1,216,909
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 2013
 
 
As of December 31, 2013, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.7 years. The Company does not own any collateralized debt obligations (CDO's) or asset backed commercial paper.
 
As of December 31, 2013, the Company owned two asset-backed securities approximating $0.5 million with subprime mortgage exposures. The securities have an effective maturity of 2.3 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $1.9 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.7 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
 
The following table sets forth our cash and investments as of December 31, 2013:
 
 
 
   GrossGross  
 FairUnrealizedUnrealizedAmortized
December 31, 2013ValueGains(Losses)Cost
  ($ in thousands)
Fixed maturities:        
U.S.Treasury bonds, agency bonds and foreign government bonds  $ 441,685  $ 2,854  $ (8,855)  $ 447,686
States, municipalities and political subdivisions  460,422  9,298  (13,651)  464,775
Mortgage- and asset-backed securities:        
Agency mortgage-backed securities  301,274  6,779  (6,016)  300,511
Residential mortgage obligations  41,755  1,212  (161)  40,704
Asset-backed securities  125,133  653  (480)  124,960
Commercial mortgage-backed securities  172,750  7,656  (374)  165,468
Subtotal  640,912  16,300  (7,031)  631,643
Corporate bonds  504,854  15,402  (3,443)  492,895
         
Total fixed maturities  2,047,873  43,854  (32,980)  2,036,999
         
Equity securities - common stocks  143,954  25,700  (550)  118,804
         
Short-term investments  296,250  --   --   296,250
         
Cash  86,509  --   --   86,509
         
Total  $ 2,574,586  $ 69,554  $ (33,530)  $ 2,538,562
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 2013
($ in thousands)
 
 
The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at December 31, 2013:
         
    Gross  Gross   
  Fair  Unrealized  Unrealized  Amortized 
Agency mortgage-backed securities: Value  Gains  (Losses)  Cost 
GNMA  $ 122,079  $ 2,707  $ (3,645)  $ 123,017
FNMA  132,731  3,232  (2,058)  131,557
FHLMC  46,464  840  (313)  45,937
Total  $ 301,274  $ 6,779  $ (6,016)  $ 300,511
         
         
    Gross  Gross   
  Fair  Unrealized  Unrealized  Amortized 
Residential mortgage obligations: Value  Gains  (Losses)  Cost 
Prime   $ 17,932  $ 500  $ (137)  $ 17,569
Alt-A  1,885  77  (24)  1,832
Subprime  543  14  --  529
Non-US RMBS  21,395  621  --  20,774
Total  $ 41,755  $ 1,212  $ (161)  $ 40,704

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



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