Navigators Reports Fourth Quarter Earnings, Operating Earnings Up 89%

The Navigators Group, Inc. Logo

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 Operations 2013 2012 Change 2013 2012 Change
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 Ratio 94.0% 100.2% 94.8% 99.3%
Balance Sheet Data Dec. 31, Sept. 30, Dec. 31, Dec. 31,
2013 2013 2013 2012
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,
2013 2012
(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: 2013 2012 Change 2013 2012 Change
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: 2013 2012 Change 2013 2012 Change
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: 2013 2012 Change 2013 2012 Change
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)
Insurance Lloyd's
Companies Operations Corporate (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 ratio 96.8% 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)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 240,562 $ 81,025 $ -- $ 321,587
Net written premiums 165,493 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 ratio 109.0% 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)
Insurance Lloyd's
Companies Operations Corporate (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 ratio 96.0% 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)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 921,325 $ 365,140 $ -- $ 1,286,465
Net written premiums 622,956 210,699 -- 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 ratio 106.4% 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
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
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
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
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: 2013 2012 2013 2012
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: 2013 2012 2013 2012
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
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
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
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
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: 2013 2012 2013 2012
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: 2013 2012 2013 2012
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)
Case IBNR
Net Loss Reserves, December 31, 2013: Reserves Reserves Total
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
Case IBNR
Net Loss Reserves, December 31, 2012 Reserves 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
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 $1.9 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.7 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of December 31, 2013:
Gross Gross
Fair Unrealized Unrealized Amortized
December 31, 2013 Value Gains (Losses) Cost
($ 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.com www.navg.com

Source:The Navigators Group, Inc.