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Navigators Reports Third Quarter Earnings

The Navigators Group, Inc. Logo

STAMFORD, Conn., Nov. 7, 2013 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $21.3 million, or $1.48 per diluted share, for the three months ended September 30, 2013 compared to $12.9 million, or $0.90 per diluted share, for the comparable period in 2012. Operating earnings were $23.1 million, or $1.60 per diluted share, for the third quarter of 2013 compared to operating earnings of $9.8 million, or $0.69 per diluted share, for the comparable period in 2012.

For the nine months ended September 30, 2013, the Company reported net income of $49.1 million, or $3.42 per diluted share, compared to $35.7 million, or $2.51 per diluted share, for the comparable period in 2012. Operating earnings were $45.7 million, or $3.18 per diluted share, for the nine months ended September 30, 2013 compared to $29.1 million, or $2.04 per diluted share, for the comparable period in 2012.

Gross written premiums and net written premiums for the three months ended September 30, 2013 were $312.1 million and $196.6 million, respectively, an increase of 4.5% and 4.5% from the comparable period in 2012. Gross written premiums and net written premiums for the nine months ended September 30, 2013 were $1,037.4 million and $664.5 million, respectively, an increase of 7.5% and 6.9% from the comparable period in 2012.

The combined loss and expense ratio for the three and nine months ended September 30, 2013 were 89.8% and 95.1%, respectively, compared to 99.1% and 99.0% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to report a combined ratio of 89.8% for the quarter, which has resulted in record quarterly operating earnings per share of $1.60. Our quarterly results were led by strong underwriting performance in our global marine, global energy and U.S. excess and surplus lines units. We experienced solid premium growth, led by double digit growth in our Navigators Specialty division. We continue to focus on controlling operating expenses in the aggregate while investing in expanding our intellectual capital and technology initiatives."

Stockholders' equity was $899.9 million, or $63.61 per share, as of September 30, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and nine months ended September 30, 2013 was $14.1 million and $42.0 million, respectively, an increase of 3.7% and 3.4% from the comparable periods in 2012. Net investment income for the nine months ended September 30, 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 2.4% for both the three and nine months ended September 30, 2013, compared to 2.4% and 2.7% for each of the comparable periods in 2012. The effective tax rate on net investment income was 27.5% and 27.9% for the three and nine months ended September 30, 2013, respectively, compared to 26.6% 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 3.9 years as of September 30, 2013. As of September 30, 2013, net unrealized gains within our investment portfolio were $51.1 million, a decrease of $52.2 million compared to December 31, 2012.

There were $2.8 million of net realized losses including other-than-temporary impairment losses recognized in earnings for the three months ended September 30, 2013 compared to $4.8 million of net realized gains for the same period in 2012. For the nine months ended September 30, 2013, there were $5.3 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $10.2 million for the same period in 2012.

Consolidated net cash flow from operations for the three and nine months ended September 30, 2013 was $81.5 million and $130.0 million, respectively, compared to $54.1 million and $69.1 million for the comparable periods in 2012.

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

http://www.media-server.com/m/p/6q4eew4g

Operating earnings, or net income excluding after-tax net realized gains (losses) and net other-than-temporary impairment losses recognized in earnings, 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
September 30,
Nine Months Ended
September 30,
Results of Operations 2013 2012 Change 2013 2012 Change
Gross written premiums $ 312,076 $ 298,742 4.5% $ 1,037,426 $ 964,878 7.5%
Net written premiums 196,556 188,046 4.5% 664,477 621,343 6.9%
Revenues:
Net earned premiums 213,895 201,262 6.3% 622,037 580,398 7.2%
Net investment income 14,094 13,597 3.7% 41,997 40,632 3.4%
Total other-than-temporary impairment losses (1,821) -- NM (1,863) (693) NM
Portion of loss recognized in other comprehensive income (before tax) -- -- NM -- 43 NM
Net other-than-temporary impairment losses recognized in earnings (1,821) -- NM (1,863) (650) NM
Net realized gains (losses) (988) 4,761 NM 7,171 10,820 -33.7%
Other income (210) 789 NM (507) 2,087 NM
Total revenues 224,970 220,409 2.1% 668,835 633,287 5.6%
Expenses:
Net losses and loss adjustment expenses 125,086 128,850 -2.9% 387,576 370,242 4.7%
Commission expenses 27,685 31,258 -11.4% 82,631 90,211 -8.4%
Other operating expenses 39,056 40,112 -2.6% 120,608 116,238 3.8%
Interest expense 2,053 2,049 0.2% 6,156 6,147 0.1%
Total expenses 193,880 202,269 -4.1% 596,971 582,838 2.4%
Income before income taxes 31,090 18,140 71.4% 71,864 50,449 42.4%
Income tax expense (benefit) 9,804 5,225 87.6% 22,731 14,731 54.3%
Net income (loss) $ 21,286 $ 12,915 64.8% $ 49,133 $ 35,718 37.6%
Per Share Data
Net income per common share:
Basic $ 1.50 $ 0.92 63.4% $ 3.48 $ 2.55 36.4%
Diluted $ 1.48 $ 0.90 63.3% $ 3.42 $ 2.51 36.4%
Average common shares outstanding:
Basic 14,144,478 14,026,855 14,120,788 14,004,302
Diluted 14,408,413 14,272,477 14,379,943 14,255,301
Underwriting Ratios
Loss Ratio 58.5% 64.0% 62.3% 63.8%
Expense Ratio 31.3% 35.1% 32.8% 35.2%
Combined Ratio 89.8% 99.1% 95.1% 99.0%
Balance Sheet Data
Sept. 30,
2013
June 30,
2013
Sept. 30,
2013
Dec. 31,
2012
Stockholders' equity $ 899,882 $ 873,952 3.0% $ 899,882 $ 879,485 2.3%
Book value per share $ 63.61 $ 61.83 2.9% $ 63.61 $ 62.61 1.6%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
September 30,
2013
December 31,
2012
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $1,958,434; 2012, $2,034,765) $ 1,981,731 $ 2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $131,046; 2012, $85,004) 158,890 101,297
Short-term investments, at cost which approximates fair value 152,987 153,788
Cash 130,513 45,336
Total investments and cash 2,424,121 2,422,254
Premiums receivable 355,578 320,182
Prepaid reinsurance premiums 253,435 221,015
Reinsurance recoverable on paid losses 44,955 49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses 796,289 880,139
Deferred policy acquisition costs 63,171 61,005
Accrued investment income 13,746 12,587
Goodwill and other intangible assets 7,065 7,093
Deferred income tax, net 22,639 3,216
Receivable for investments sold 59,453 4,310
Other assets 34,124 26,587
Total assets $ 4,074,576 $ 4,007,670
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,050,720 $ 2,097,048
Unearned premiums 716,236 642,407
Reinsurance balances payable 180,563 165,813
Senior notes 114,542 114,424
Current income tax payable, net 5,449 2,133
Payable for investments purchased 48,855 58,345
Accounts payable and other liabilities 58,329 48,015
Total liabilities 3,174,694 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 17,658,292 shares for 2013 and 17,558,046 shares for 2012 1,765 1,755
Additional paid-in capital 334,421 329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012) (155,801) (155,801)
Retained earnings 678,004 628,871
Accumulated other comprehensive income 41,493 75,208
Total stockholders' equity 899,882 879,485
Total liabilities and stockholders' equity $ 4,074,576 $ 4,007,670
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Nine Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 38,912 $ 44,879 -13.3% $ 132,836 $ 156,640 -15.2%
Property Casualty 156,228 139,948 11.6% 527,287 426,494 23.6%
Professional Liability 32,469 33,534 -3.2% 97,679 97,629 0.1%
227,609 218,361 4.2% 757,802 680,763 11.3%
Lloyd's Operations:
Marine 36,009 37,716 -4.5% 135,546 146,528 -7.5%
Property Casualty 35,869 32,789 9.4% 102,144 106,063 -3.7%
Professional Liability 12,589 9,876 27.5% 41,934 31,524 33.0%
84,467 80,381 5.1% 279,624 284,115 -1.6%
Total $ 312,076 $ 298,742 4.5% $1,037,426 $ 964,878 7.5%
Net Written Premiums: Three Months Nine Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 26,437 $ 32,615 -18.9% $ 94,944 $ 107,266 -11.5%
Property Casualty 97,553 83,449 16.9% 338,215 274,823 23.1%
Professional Liability 25,300 26,084 -3.0% 75,830 75,374 0.6%
149,290 142,148 5.0% 508,989 457,463 11.3%
Lloyd's Operations:
Marine 26,795 27,939 -4.1% 100,413 109,489 -8.3%
Property Casualty 13,761 11,633 18.3% 33,254 36,693 -9.4%
Professional Liability 6,710 6,326 6.1% 21,821 17,698 23.3%
47,266 45,898 3.0% 155,488 163,880 -5.1%
Total $ 196,556 $ 188,046 4.5% $ 664,477 $ 621,343 6.9%
Net Earned Premiums: Three Months Nine Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 31,490 $ 40,592 -22.4% $ 100,013 $ 111,402 -10.2%
Property Casualty 105,759 83,993 25.9% 297,954 240,536 23.9%
Professional Liability 25,713 24,505 4.9% 75,873 70,277 8.0%
162,962 149,090 9.3% 473,840 422,215 12.2%
Lloyd's Operations:
Marine 34,264 34,002 0.8% 102,932 101,538 1.4%
Property Casualty 10,472 11,870 -11.8% 26,913 41,644 -35.4%
Professional Liability 6,197 6,300 -1.6% 18,352 15,001 22.3%
50,933 52,172 -2.4% 148,197 158,183 -6.3%
Total $ 213,895 $ 201,262 6.3% $ 622,037 $ 580,398 7.2%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2013
($ in thousands)
Insurance
Companies
Lloyd's
Operations

Corporate (1)

Total
Gross written premiums $ 227,609 $ 84,467 $ -- $ 312,076
Net written premiums 149,290 47,266 -- 196,556
Net earned premiums 162,962 50,933 -- 213,895
Net losses and loss adjustment expenses (95,315) (29,771) -- (125,086)
Commission expenses (20,039) (8,289) 643 (27,685)
Other operating expenses (28,510) (10,546) -- (39,056)
Other income (expense) 955 (522) (643) (210)
Underwriting profit (loss) 20,053 1,805 -- 21,858
Net investment income 12,285 1,807 2 14,094
Net realized gains (losses) (1,890) (919) -- (2,809)
Interest expense -- -- (2,053) (2,053)
Income (loss) before income taxes 30,448 2,693 (2,051) 31,090
Income tax expense (benefit) 9,355 878 (429) 9,804
Net income (loss) $ 21,093 $ 1,815 $ (1,622) $ 21,286
Losses and loss adjustment expenses ratio 58.5% 58.5% 58.5%
Commission expense ratio 12.3% 16.3% 12.9%
Other operating expense ratio (2) 16.9% 21.7% 18.4%
Combined ratio 87.7% 96.5% 89.8%
(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
Three Months Ended
September 30, 2012
($ in thousands)
Insurance
Companies
Lloyd's
Operations

Corporate (1)

Total
Gross written premiums $ 218,361 $ 80,381 $ -- $ 298,742
Net written premiums 142,148 45,898 -- 188,046
Net earned premiums 149,090 52,172 -- 201,262
Net losses and loss adjustment expenses (113,303) (15,547) -- (128,850)
Commission expenses (20,827) (10,911) 480 (31,258)
Other operating expenses (29,387) (10,725) -- (40,112)
Other income (expense) 1,229 40 (480) 789
Underwriting profit (loss) (13,198) 15,029 -- 1,831
Net investment income 12,004 1,552 41 13,597
Net realized gains (losses) 2,609 2,152 -- 4,761
Interest expense -- -- (2,049) (2,049)
Income (loss) before income taxes 1,415 18,733 (2,008) 18,140
Income tax expense (benefit) (377) 6,525 (923) 5,225
Net income (loss) $ 1,792 $ 12,208 $ (1,085) $ 12,915
Losses and loss adjustment expenses ratio 76.0% 29.8% 64.0%
Commission expense ratio 14.0% 20.9% 15.5%
Other operating expense ratio (2) 18.9% 20.5% 19.6%
Combined ratio 108.9% 71.2% 99.1%
(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
Nine Months Ended
September 30, 2013
($ in thousands)
Insurance
Companies
Lloyd's
Operations

Corporate (1)

Total
Gross written premiums $ 757,802 $ 279,624 $ -- $ 1,037,426
Net written premiums 508,989 155,488 -- 664,477
Net earned premiums 473,840 148,197 -- 622,037
Net losses and loss adjustment expenses (308,968) (78,608) -- (387,576)
Commission expenses (59,129) (25,245) 1,743 (82,631)
Other operating expenses (87,682) (32,926) -- (120,608)
Other income (expense) 2,303 (1,067) (1,743) (507)
Underwriting profit (loss) 20,364 10,351 -- 30,715
Net investment income 36,751 5,237 9 41,997
Net realized gains (losses) 6,001 (697) 4 5,308
Interest expense -- -- (6,156) (6,156)
Income (loss) before income taxes 63,116 14,891 (6,143) 71,864
Income tax expense (benefit) 19,554 5,120 (1,943) 22,731
Net income (loss) $ 43,562 $ 9,771 $ (4,200) $ 49,133
Losses and loss adjustment expenses ratio 65.2% 53.0% 62.3%
Commission expense ratio 12.5% 17.0% 13.3%
Other operating expense ratio (2) 18.0% 23.0% 19.5%
Combined ratio 95.7% 93.0% 95.1%
(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
Nine Months Ended
September 30, 2012
($ in thousands)
Insurance
Companies
Lloyd's
Operations

Corporate (1)

Total
Gross written premiums $ 680,763 $ 284,115 $ -- $ 964,878
Net written premiums 457,463 163,880 -- 621,343
Net earned premiums 422,215 158,183 -- 580,398
Net losses and loss adjustment expenses (304,483) (65,759) -- (370,242)
Commission expenses (61,245) (30,735) 1,769 (90,211)
Other operating expenses (83,646) (32,592) -- (116,238)
Other income (expense) 3,750 106 (1,769) 2,087
Underwriting profit (loss) (23,409) 29,203 -- 5,794
Net investment income 34,225 6,289 118 40,632
Net realized gains (losses) 6,809 3,361 -- 10,170
Interest expense -- -- (6,147) (6,147)
Income (loss) before income taxes 17,625 38,853 (6,029) 50,449
Income tax expense (benefit) 3,603 13,458 (2,330) 14,731
Net income (loss) $ 14,022 $ 25,395 $ (3,699) $ 35,718
Losses and loss adjustment expenses ratio 72.1% 41.6% 63.8%
Commission expense ratio 14.5% 19.4% 15.5%
Other operating expense ratio (2) 18.9% 20.5% 19.7%
Combined ratio 105.5% 81.5% 99.0%
(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 September 30, 2013
Insurance Companies: Net
Earned
Premiums
Losses
and LAE
Incurred

Underwriting
Expenses
Underwriting
Profit
(Loss)

Loss
Ratio

Expense
Ratio

Combined
Ratio
Marine $ 31,490 $ 14,745 $ 10,997 $ 5,748 46.8% 34.9% 81.7%
Property Casualty 105,759 64,156 28,203 13,400 60.7% 26.6% 87.3%
Professional Liability 25,713 16,414 8,394 905 63.8% 32.7% 96.5%
Total Insurance Companies 162,962 95,315 47,594 20,053 58.5% 29.2% 87.7%
Lloyd's Operations:
Marine 34,264 22,129 13,240 (1,105) 64.6% 38.6% 103.2%
Property Casualty 10,472 3,661 4,428 2,383 35.0% 42.2% 77.2%
Professional Liability 6,197 3,981 1,689 527 64.3% 27.2% 91.5%
Total Lloyd's 50,933 29,771 19,357 1,805 58.5% 38.0% 96.5%
Total All $ 213,895 $ 125,086 $ 66,951 $ 21,858 58.5% 31.3% 89.8%
Three Months Ended September 30, 2012
Insurance Companies: Net
Earned
Premiums
Losses
and LAE
Incurred

Underwriting
Expenses
Underwriting
Profit
(Loss)

Loss
Ratio

Expense
Ratio

Combined
Ratio
Marine $ 40,592 $ 29,187 $ 14,200 $ (2,795) 71.9% 35.0% 106.9%
Property Casualty 83,993 67,474 25,753 (9,234) 80.3% 30.7% 111.0%
Professional Liability 24,505 16,642 9,032 (1,169) 67.9% 36.9% 104.8%
Total Insurance Companies 149,090 113,303 48,985 (13,198) 76.0% 32.9% 108.9%
Lloyd's Operations:
Marine 34,002 10,936 14,543 8,523 32.2% 42.7% 74.9%
Property Casualty 11,870 5,441 4,750 1,679 45.8% 40.1% 85.9%
Professional Liability 6,300 (830) 2,303 4,827 -13.2% 36.6% 23.4%
Total Lloyd's Operations 52,172 15,547 21,596 15,029 29.8% 41.4% 71.2%
Total All $ 201,262 $ 128,850 $ 70,581 $ 1,831 64.0% 35.1% 99.1%
Amounts Loss Ratio
Net Incurred Loss Activity
For the Three Months Ended:
Sept. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
Insurance Companies:
Loss and LAE payments $ 83,008 $ 98,857 50.9% 66.3%
Change in reserves 12,307 14,446 7.6% 9.7%
Net incurred loss and LAE 95,315 113,303 58.5% 76.0%
Lloyd's Operations:
Loss and LAE payments 27,038 24,019 53.1% 46.0%
Change in reserves 2,733 (8,472) 5.4% -16.2%
Net incurred loss and LAE 29,771 15,547 58.5% 29.8%
Total
Loss and LAE payments 110,046 122,876 51.5% 61.0%
Change in reserves 15,040 5,974 7.0% 3.0%
Net incurred loss and LAE $ 125,086 $ 128,850 58.5% 64.0%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development
For the Three Months Ended:
Sept. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
Insurance Companies $ 3,094 $ (3,607) 1.4% -1.8%
Lloyd's Operations 4,591 9,084 2.1% 4.5%
Total $ 7,685 $ 5,477 3.5% 2.7%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Nine Months Ended September 30, 2013
Insurance Companies: Net
Earned
Premiums
Losses
and LAE
Incurred

Underwriting
Expenses
Underwriting
Profit
(Loss)

Loss
Ratio

Expense
Ratio

Combined
Ratio
Marine $ 100,013 $ 55,425 $ 36,949 $ 7,639 55.4% 37.0% 92.4%
Property Casualty 297,954 196,151 82,844 18,959 65.8% 27.8% 93.6%
Professional Liability 75,873 57,392 24,715 (6,234) 75.6% 32.6% 108.2%
Total Insurance Companies 473,840 308,968 144,508 20,364 65.2% 30.5% 95.7%
Lloyd's Operations:
Marine 102,932 59,184 41,266 2,482 57.5% 40.1% 97.6%
Property Casualty 26,913 11,207 12,109 3,597 41.6% 45.0% 86.6%
Professional Liability 18,352 8,217 5,863 4,272 44.8% 31.9% 76.7%
Total Lloyd's 148,197 78,608 59,238 10,351 53.0% 40.0% 93.0%
Total All $ 622,037 $ 387,576 $ 203,746 $ 30,715 62.3% 32.8% 95.1%
Nine Months Ended September 30, 2012
Insurance Companies: Net
Earned
Premiums
Losses
and LAE
Incurred

Underwriting
Expenses
Underwriting
Profit
(Loss)

Loss
Ratio

Expense
Ratio

Combined
Ratio
Marine $ 111,402 $ 87,240 $ 40,371 $ (16,209) 78.3% 36.3% 114.6%
Property Casualty 240,536 165,346 75,235 (45) 68.7% 31.3% 100.0%
Professional Liability 70,277 51,897 25,535 (7,155) 73.8% 36.4% 110.2%
Total Insurance Companies 422,215 304,483 141,141 (23,409) 72.1% 33.4% 105.5%
Lloyd's Operations:
Marine 101,538 45,224 42,587 13,727 44.5% 42.0% 86.5%
Property Casualty 41,644 17,213 14,421 10,010 41.3% 34.7% 76.0%
Professional Liability 15,001 3,322 6,213 5,466 22.1% 41.5% 63.6%
Total Lloyd's Operations 158,183 65,759 63,221 29,203 41.6% 39.9% 81.5%
Total All $ 580,398 $ 370,242 $ 204,362 $ 5,794 63.8% 35.2% 99.0%
Amounts Loss Ratio
Net Incurred Loss Activity
For the Nine Months Ended:
Sept. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
Insurance Companies:
Loss and LAE payments $ 263,832 $ 282,820 55.7% 67.0%
Change in reserves 45,136 21,663 9.5% 5.1%
Net incurred loss and LAE 308,968 304,483 65.2% 72.1%
Lloyd's Operations:
Loss and LAE payments 84,928 79,304 57.3% 50.2%
Change in reserves (6,320) (13,545) -4.3% -8.6%
Net incurred loss and LAE 78,608 65,759 53.0% 41.6%
Total
Loss and LAE payments 348,760 362,124 56.1% 62.4%
Change in reserves 38,816 8,118 6.2% 1.4%
Net incurred loss and LAE $ 387,576 $ 370,242 62.3% 63.8%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development
For the Nine Months Ended:
Sept. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
Insurance Companies $ (12,383) $ (1,517) -2.0% -0.3%
Lloyd's Operations 14,072 19,232 2.3% 3.4%
Total $ 1,689 $ 17,715 0.3% 3.1%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Net Loss Reserves, September 30, 2013: Case
Reserves
IBNR
Reserves

Total
Insurance Companies:
Marine $ 136,292 $ 105,123 $ 241,415
Property Casualty 198,658 335,065 533,723
Professional Liability 74,600 81,596 156,196
Total Insurance Companies 409,550 521,784 931,334
Lloyd's Operations:
Marine 131,982 89,023 221,005
Property Casualty 25,979 21,816 47,795
Professional Liability 12,620 41,677 54,297
Total Lloyd's Operations 170,581 152,516 323,097
Total Net Loss Reserves $ 580,131 $ 674,300 $ 1,254,431
Net Loss Reserves, December 31, 2012 Case
Reserves
IBNR
Reserves

Total
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
September 30, 2013
As of September 30, 2013, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.9 years. The Company does not own any collateralized debt obligations (CDO's) or asset backed commercial paper.
As of September 30, 2013, the Company owned two asset-backed securities approximating $0.6 million with subprime mortgage exposures. The securities have an effective maturity of 4.0 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.0 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.0 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of September 30, 2013:
September 30, 2013
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Cost or
Amortized
Cost
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 445,969 $ 3,683 $ (5,694) $ 447,980
States, municipalities and political subdivisions 445,281 9,752 (12,240) 447,769
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 300,347 7,966 (3,925) 296,306
Residential mortgage obligations 35,277 1,107 (224) 34,394
Asset-backed securities 88,714 795 (190) 88,109
Commercial mortgage-backed securities 173,069 8,386 (365) 165,048
Subtotal 597,407 18,254 (4,704) 583,857
Corporate bonds 493,074 17,104 (2,858) 478,828
Total fixed maturities 1,981,731 48,793 (25,496) 1,958,434
Equity securities - common stocks 158,890 29,548 (1,704) 131,046
Short-term investments 152,987 -- -- 152,987
Cash 130,513 -- -- 130,513
Total $ 2,424,121 $ 78,341 $ (27,200) $ 2,372,980
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 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 September 30, 2013:
Agency mortgage-backed securities:
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Cost or
Amortized
Cost
GNMA $ 128,321 $ 3,086 $ (2,653) $ 127,888
FNMA 139,022 3,979 (1,207) 136,250
FHLMC 33,004 901 (65) 32,168
Total $ 300,347 $ 7,966 $ (3,925) $ 296,306
Residential mortgage obligations:
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Cost or
Amortized
Cost
Prime $ 11,174 $ 371 $ (181) $ 10,984
Alt-A 1,968 70 (43) 1,941
Subprime 583 18 -- 565
Non-US RMBS 21,552 648 -- 20,904
Total $ 35,277 $ 1,107 $ (224) $ 34,394

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

Source:The Navigators Group, Inc.