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Navigators Reports Second Quarter Earnings, Net Income up 21%

The Navigators Group, Inc. Logo

STAMFORD, Conn., Aug. 7, 2014 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $16.9 million, or $1.17 per diluted share, for the three months ended June 30, 2014 compared to $13.9 million, or $0.97 per diluted share, for the comparable period in 2013. Operating earnings were $15.0 million, or $1.04 per diluted share, for the second quarter of 2014 compared to $11.8 million, or $0.82 per diluted share, for the comparable period in 2013.

For the six months ended June 30, 2014, the Company reported net income of $44.8 million, or $3.11 per diluted share compared to $27.8 million, or $1.93 per diluted share, for the comparable period in 2013. Operating earnings were $35.9 million, or $2.49 per diluted share, for the six months ended June 30, 2014 compared to $22.6 million, or $1.56 per diluted share, for the comparable period in 2013.

Gross written premiums and net written premiums for the three months ended June 30, 2014 were $348.8 million and $231.9 million, respectively, an increase of 5.0% and 16.8% from the comparable period in 2013.

Gross written premiums and net written premiums for the six months ended June 30, 2014 were $771.6 million and $543.7 million, respectively, an increase of 6.4% and 16.2% from the comparable period in 2013.

The combined loss and expense ratio for the three and six months ended June 30, 2014 was 95.3% and 93.8%, respectively, compared to 97.7% and 97.8% for the comparable periods in 2013.

"We are pleased with our financial performance for the first six months of 2014, with net income up 61% and book value per share growth of 7.3%" stated Stan Galanski, President and Chief Executive Officer. "Despite large loss activity in our marine liability business at Lloyd's, we reported solid underwriting profit, with a combined ratio of 95.3% for the quarter, a more than two point improvement from second quarter 2013. Our U.S. marine business and global management and professional liability units made meaningful earnings contributions to the quarter. We achieved double-digit growth in net written premium, resulting both from ongoing new business success, most notably in our U.S. casualty units and international D&O, and from the restructuring of several ceded reinsurance treaties earlier in the year. We continue to focus on identifying good opportunities for profitable growth."

Stockholders' equity was $972.1 million, or $68.16 per share, as of June 30, 2014 compared to $902.2 million, or $63.54 per share, as of December 31, 2013.

Net investment income for the three and six months ended June 30, 2014 was $15.6 million and $32.3 million, respectively, an increase of 9.8% and 15.6% from the comparable periods in 2013. The annualized pre-tax investment yield, excluding net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.6% for the three and six months ended June 30, 2014, compared to 2.4% for each of the comparable periods in 2013. The effective tax rate on net investment income was 27.0% and 27.5% for the three and six months ended June 30, 2014, respectively, compared to 27.6% and 28.0% for the comparable periods in 2013.

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 3.8 years as of June 30, 2014. As of June 30, 2014, net unrealized gains within our investment portfolio were $75.8 million, an increase of $39.8 million compared to December 31, 2013.

There were $4.5 million of net realized gains recognized in earnings for the three months ended June 30, 2014, compared to $3.3 million for the same period in 2013. For the six months ended June 30, 2014, there were $5.3 million of net realized gains, compared to $8.1 million for the same period in 2013.

Other income for the six months ended June 30, 2014 includes a one-time foreign exchange gain of $10.0 million ($6.6 million after-tax) due to a change in the functional currency of our Lloyd's Operations, which is equally offset by a reversal within the Accumulated Other Comprehensive Income component of stockholders' equity.

Consolidated net cash flow from operations for the three and six months ended June 30, 2014 was $69.3 million and $78.1 million, respectively, compared to $44.2 million and $48.5 million for the comparable periods in 2013.

The Company will hold a conference call on Friday, August 8, 2014 starting at 8:30 a.m. ET to discuss the 2014 second 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 (888) 364-3109 and the international dial-in is (719) 325-2491. Participants may connect to the webcast at:

http://www.media-server.com/m/p/trvmhk48

Operating earnings, or net income excluding after-tax net realized gains (losses), net other-than-temporary impairment losses recognized in earnings, and after-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity's functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity's functional currency), 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. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as representative offices 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 Six Months Ended
June 30, June 30,
Results of Operations 2014 2013 Change 2014 2013 Change
Gross written premiums $ 348,795 $ 332,128 5.0% $ 771,585 $ 725,350 6.4%
Net written premiums 231,864 198,469 16.8% 543,714 467,921 16.2%
Revenues:
Net earned premiums 231,084 205,814 12.3% 456,356 408,142 11.8%
Net investment income 15,648 14,246 9.8% 32,258 27,903 15.6%
Total other-than-temporary impairment losses -- -- NM -- (42) NM
Portion of loss recognized in other comprehensive income (before tax) -- -- NM -- -- NM
Net other-than-temporary impairment losses recognized in earnings -- -- NM -- (42) NM
Net realized gains (losses) 4,473 3,345 33.7% 5,306 8,159 -35.0%
Other income (1,665) (915) 82.0% 8,734 (297) NM
Total revenues 249,540 222,490 12.2% 502,654 443,865 13.2%
Expenses:
Net losses and loss adjustment expenses 140,220 131,148 6.9% 275,287 262,490 4.9%
Commission expenses 32,150 28,391 13.2% 57,877 54,946 5.3%
Other operating expenses 47,992 40,678 18.0% 95,138 81,552 16.7%
Interest expense 4,319 2,052 110.5% 8,171 4,103 99.1%
Total expenses 224,681 202,269 11.1% 436,473 403,091 8.3%
Income before income taxes 24,859 20,221 22.9% 66,181 40,774 62.3%
Income tax expense (benefit) 7,998 6,284 27.3% 21,352 12,927 65.2%
Net income (loss) $ 16,861 $ 13,937 21.0% $ 44,829 $ 27,847 61.0%
Per Share Data
Net income per common share:
Basic $ 1.18 $ 0.99 19.9% $ 3.15 $ 1.97 59.4%
Diluted $ 1.17 $ 0.97 21.4% $ 3.11 $ 1.93 61.3%
Average common shares outstanding:
Basic 14,259,753 14,131,422 14,246,701 14,108,747
Diluted 14,377,476 14,428,117 14,401,740 14,434,232
Underwriting Ratios
Loss Ratio 60.7% 63.7% 60.3% 64.3%
Expense Ratio 34.6% 34.0% 33.5% 33.5%
Combined Ratio 95.3% 97.7% 93.8% 97.8%
Balance Sheet Data June 30, March 31, June 30, Dec. 31,
2014 2014 2014 2013
Stockholders' equity $ 972,080 $ 936,834 3.8% $ 972,080 $ 902,212 7.7%
Book value per share $ 68.16 $ 65.72 3.7% $ 68.16 $ 63.54 7.3%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
June 30, December 31,
2014 2013
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2014, $2,177,094; 2013, $2,036,999) $ 2,220,855 $ 2,047,873
Equity securities, available-for-sale, at fair value (cost: 2014, $148,412; 2013, $118,804) 180,486 143,954
Short-term investments, at cost which approximates fair value 226,237 296,250
Cash 72,604 86,509
Total investments and cash 2,700,182 2,574,586
Premiums receivable 417,122 325,025
Prepaid reinsurance premiums 246,699 247,822
Reinsurance recoverable on paid losses 42,074 38,384
Reinsurance recoverable on unpaid losses and loss adjustment expenses 841,981 822,438
Deferred policy acquisition costs 76,975 67,007
Accrued investment income 14,579 13,866
Goodwill and other intangible assets 7,218 7,177
Current income tax receivable, net 7,149 9,918
Deferred income tax, net 17,307 28,187
Other assets 44,445 35,042
Total assets $ 4,415,731 $ 4,169,452
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,137,802 $ 2,045,071
Unearned premiums 801,302 714,606
Reinsurance balances payable 159,261 167,252
Senior notes 263,373 263,308
Payable for investments purchased 18,615 7,624
Accounts payable and other liabilities 63,298 69,379
Total liabilities 3,443,651 3,267,240
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 17,772,359 shares for 2014 and 17,709,876 shares for 2013 1,776 1,770
Additional paid-in capital 339,523 335,546
Treasury stock, at cost (3,511,380 shares for 2014 and 2013) (155,801) (155,801)
Retained earnings 737,166 692,337
Accumulated other comprehensive income 49,416 28,360
Total stockholders' equity 972,080 902,212
Total liabilities and stockholders' equity $ 4,415,731 $ 4,169,452
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Six Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 48,119 $ 43,077 11.7% $ 100,352 $ 93,924 6.8%
Property Casualty 168,597 152,095 10.8% 397,953 371,059 7.2%
Professional Liability 27,013 33,393 -19.1% 57,222 65,210 -12.2%
243,729 228,565 6.6% 555,527 530,193 4.8%
Lloyd's Operations:
Marine 46,005 45,893 0.2% 108,962 99,537 9.5%
Property Casualty 37,162 41,217 -9.8% 70,241 66,275 6.0%
Professional Liability 21,899 16,453 33.1% 36,855 29,345 25.6%
105,066 103,563 1.5% 216,058 195,157 10.7%
Total $ 348,795 $ 332,128 5.0% $ 771,585 $ 725,350 6.4%
Net Written Premiums: Three Months Six Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 35,357 $ 27,366 29.2% $ 76,481 $ 68,507 11.6%
Property Casualty 119,633 90,711 31.9% 291,994 240,662 21.3%
Professional Liability 19,051 25,303 -24.7% 39,517 50,530 -21.8%
174,041 143,380 21.4% 407,992 359,699 13.4%
Lloyd's Operations:
Marine 29,562 34,060 -13.2% 81,693 73,618 11.0%
Property Casualty 14,392 12,181 18.2% 30,926 19,493 58.7%
Professional Liability 13,869 8,848 56.7% 23,103 15,111 52.9%
57,823 55,089 5.0% 135,722 108,222 25.4%
Total $ 231,864 $ 198,469 16.8% $ 543,714 $ 467,921 16.2%
Net Earned Premiums: Three Months Six Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 31,752 $ 31,798 -0.1% $ 64,512 $ 68,523 -5.9%
Property Casualty 124,695 99,477 25.4% 235,521 192,195 22.5%
Professional Liability 21,965 25,272 -13.1% 44,263 50,160 -11.8%
178,412 156,547 14.0% 344,296 310,878 10.7%
Lloyd's Operations:
Marine 32,213 34,623 -7.0% 71,100 68,668 3.5%
Property Casualty 11,463 8,562 33.9% 24,421 16,441 48.5%
Professional Liability 8,996 6,082 47.9% 16,539 12,155 36.1%
52,672 49,267 6.9% 112,060 97,264 15.2%
Total $ 231,084 $ 205,814 12.3% $ 456,356 $ 408,142 11.8%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2014
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 243,729 $ 105,066 $ -- $ 348,795
Net written premiums 174,041 57,823 -- 231,864
Net earned premiums 178,412 52,672 -- 231,084
Net losses and loss adjustment expenses (108,502) (31,718) -- (140,220)
Commission expenses (23,021) (9,675) 546 (32,150)
Other operating expenses (34,415) (13,577) -- (47,992)
Other underwriting income (expense) 768 13 (546) 235
Underwriting profit (loss) 13,242 (2,285) -- 10,957
Net investment income 13,805 1,824 19 15,648
Net realized gains (losses) 4,458 15 -- 4,473
Interest expense -- -- (4,319) (4,319)
Other income (expense) (68) (1,832) -- (1,900)
Income (loss) before income taxes 31,437 (2,278) (4,300) 24,859
Income tax expense (benefit) 10,049 (672) (1,379) 7,998
Net income (loss) $ 21,388 $ (1,606) $ (2,921) $ 16,861
Losses and loss adjustment expenses ratio 60.8% 60.2% 60.7%
Commission expense ratio 12.9% 18.4% 13.9%
Other operating expense ratio (2) 18.9% 25.7% 20.7%
Combined ratio 92.6% 104.3% 95.3%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other underwriting income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2013
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 228,565 $ 103,563 $ -- $ 332,128
Net written premiums 143,380 55,089 -- 198,469
Net earned premiums 156,547 49,267 -- 205,814
Net losses and loss adjustment expenses (106,668) (24,480) -- (131,148)
Commission expenses (20,573) (8,335) 517 (28,391)
Other operating expenses (29,829) (10,849) -- (40,678)
Other income (expense) 689 (1,087) (517) (915)
Underwriting profit (loss) 166 4,516 -- 4,682
Net investment income 12,515 1,728 3 14,246
Net realized gains (losses) 3,099 242 4 3,345
Interest expense -- -- (2,052) (2,052)
Income (loss) before income taxes 15,780 6,486 (2,045) 20,221
Income tax expense (benefit) 4,785 2,206 (707) 6,284
Net income (loss) $ 10,995 $ 4,280 $ (1,338) $ 13,937
Losses and loss adjustment expenses ratio 68.1% 49.7% 63.7%
Commission expense ratio 13.1% 16.9% 13.8%
Other operating expense ratio (2) 18.7% 24.2% 20.2%
Combined ratio 99.9% 90.8% 97.7%
(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
Six Months Ended
June 30, 2014
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 555,527 $ 216,058 $ -- $ 771,585
Net written premiums 407,992 135,722 -- 543,714
Net earned premiums 344,296 112,060 -- 456,356
Net losses and loss adjustment expenses (214,929) (60,358) -- (275,287)
Commission expenses (39,731) (19,201) 1,055 (57,877)
Other operating expenses (67,802) (27,336) -- (95,138)
Other underwriting income (expense) 1,426 19 (1,055) 390
Underwriting profit (loss) 23,260 5,184 -- 28,444
Net investment income 28,582 3,639 37 32,258
Net realized gains (losses) 5,695 (389) -- 5,306
Interest expense -- -- (8,171) (8,171)
Other income (expense) (19) 8,363 -- 8,344
Income (loss) before income taxes 57,518 16,797 (8,134) 66,181
Income tax expense (benefit) 18,161 5,966 (2,775) 21,352
Net income (loss) $ 39,357 $ 10,831 $ (5,359) $ 44,829
Losses and loss adjustment expenses ratio 62.4% 53.9% 60.3%
Commission expense ratio 11.5% 17.1% 12.7%
Other operating expense ratio (2) 19.3% 24.4% 20.8%
Combined ratio 93.2% 95.4% 93.8%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other underwriting income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended
June 30, 2013
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 530,193 $ 195,157 $ -- $ 725,350
Net written premiums 359,699 108,222 -- 467,921
Net earned premiums 310,878 97,264 -- 408,142
Net losses and loss adjustment expenses (213,653) (48,837) -- (262,490)
Commission expenses (39,090) (16,956) 1,100 (54,946)
Other operating expenses (59,172) (22,380) -- (81,552)
Other income (expense) 1,348 (545) (1,100) (297)
Underwriting profit (loss) 311 8,546 -- 8,857
Net investment income 24,466 3,430 7 27,903
Net realized gains (losses) 7,891 222 4 8,117
Interest expense -- (4,103) (4,103)
Income (loss) before income taxes 32,668 12,198 (4,092) 40,774
Income tax expense (benefit) 10,199 4,242 (1,514) 12,927
Net income (loss) $ 22,469 $ 7,956 $ (2,578) $ 27,847
Losses and loss adjustment expenses ratio 68.7% 50.2% 64.3%
Commission expense ratio 12.6% 17.4% 13.5%
Other operating expense ratio (2) 18.6% 23.6% 20.0%
Combined ratio 99.9% 91.2% 97.8%
(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 June 30, 2014
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 31,752 $ 11,166 $ 12,487 $ 8,099 35.2% 39.3% 74.5%
Property Casualty 124,695 87,415 35,895 1,385 70.1% 28.8% 98.9%
Professional Liability 21,965 9,921 8,286 3,758 45.2% 37.7% 82.9%
Total Insurance Companies 178,412 108,502 56,668 13,242 60.8% 31.8% 92.6%
Lloyd's Operations:
Marine 32,213 24,213 14,738 (6,738) 75.2% 45.7% 120.9%
Property Casualty 11,463 5,129 5,196 1,138 44.7% 45.4% 90.1%
Professional Liability 8,996 2,376 3,305 3,315 26.4% 36.7% 63.1%
Total Lloyd's 52,672 31,718 23,239 (2,285) 60.2% 44.1% 104.3%
Total All $ 231,084 $ 140,220 $ 79,907 $ 10,957 60.7% 34.6% 95.3%
Three Months Ended June 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 31,798 $ 17,295 $ 13,124 $ 1,379 54.4% 41.3% 95.7%
Property Casualty 99,477 70,757 27,999 721 71.1% 28.2% 99.3%
Professional Liability 25,272 18,616 8,590 (1,934) 73.7% 34.0% 107.7%
Total Insurance Companies 156,547 106,668 49,713 166 68.1% 31.8% 99.9%
Lloyd's Operations:
Marine 34,623 18,218 14,914 1,491 52.6% 43.1% 95.7%
Property Casualty 8,562 6,795 3,272 (1,505) 79.4% 38.2% 117.6%
Professional Liability 6,082 (533) 2,085 4,530 -8.8% 34.3% 25.5%
Total Lloyd's 49,267 24,480 20,271 4,516 49.7% 41.1% 90.8%
Total All $ 205,814 $ 131,148 $ 69,984 $ 4,682 63.7% 34.0% 97.7%
Amounts Loss Ratio
Net Incurred Loss Activity June 30, June 30, June 30, June 30,
For the Three Months Ended: 2014 2013 2014 2013
Insurance Companies:
Loss and LAE payments $ 77,300 $ 100,920 43.3% 64.4%
Change in reserves 31,202 5,748 17.5% 3.7%
Net incurred loss and LAE 108,502 106,668 60.8% 68.1%
Lloyd's Operations:
Loss and LAE payments 26,322 27,428 50.0% 55.7%
Change in reserves 5,396 (2,948) 10.2% -6.0%
Net incurred loss and LAE 31,718 24,480 60.2% 49.7%
Total
Loss and LAE payments 103,622 128,348 44.9% 62.3%
Change in reserves 36,598 2,800 15.8% 1.4%
Net incurred loss and LAE $ 140,220 $ 131,148 60.7% 63.7%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development June 30, June 30, June 30, June 30,
For the Three Months Ended: 2014 2013 2014 2013
Insurance Companies $ 13,852 $ (7,747) 6.0% -3.8%
Lloyd's Operations 6,663 5,834 2.9% 2.8%
Total $ 20,515 $ (1,913) 8.9% -1.0%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Six Months Ended June 30, 2014
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 64,512 $ 28,574 $ 22,929 $ 13,009 44.3% 35.5% 79.8%
Property Casualty 235,521 162,520 66,853 6,148 69.0% 28.4% 97.4%
Professional Liability 44,263 23,835 16,325 4,103 53.8% 36.9% 90.7%
Total Insurance Companies 344,296 214,929 106,107 23,260 62.4% 30.8% 93.2%
Lloyd's Operations:
Marine 71,100 43,643 29,863 (2,406) 61.4% 42.0% 103.4%
Property Casualty 24,421 9,755 10,005 4,661 39.9% 41.0% 80.9%
Professional Liability 16,539 6,960 6,650 2,929 42.1% 40.2% 82.3%
Total Lloyd's 112,060 60,358 46,518 5,184 53.9% 41.5% 95.4%
Total All $ 456,356 $ 275,287 $ 152,625 $ 28,444 60.3% 33.5% 93.8%
Six Months Ended June 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 68,523 $ 40,680 $ 25,952 $ 1,891 59.4% 37.8% 97.2%
Property Casualty 192,195 131,995 54,641 5,559 68.7% 28.4% 97.1%
Professional Liability 50,160 40,978 16,321 (7,139) 81.7% 32.5% 114.2%
Total Insurance Companies 310,878 213,653 96,914 311 68.7% 31.2% 99.9%
Lloyd's Operations:
Marine 68,668 37,055 28,026 3,587 54.0% 40.8% 94.8%
Property Casualty 16,441 7,546 7,681 1,214 45.9% 46.7% 92.6%
Professional Liability 12,155 4,236 4,174 3,745 34.9% 34.3% 69.2%
Total Lloyd's 97,264 48,837 39,881 8,546 50.2% 41.0% 91.2%
Total All $ 408,142 $ 262,490 $ 136,795 $ 8,857 64.3% 33.5% 97.8%
Amounts Loss Ratio
Net Incurred Loss Activity June 30, June 30, June 30, June 30,
For the Six Months Ended: 2014 2013 2014 2013
Insurance Companies:
Loss and LAE payments $ 152,210 $ 180,824 44.2% 58.1%
Change in reserves 62,719 32,829 18.2% 10.6%
Net incurred loss and LAE 214,929 213,653 62.4% 68.7%
Lloyd's Operations:
Loss and LAE payments 52,075 57,890 46.5% 59.5%
Change in reserves 8,283 (9,053) 7.4% -9.3%
Net incurred loss and LAE 60,358 48,837 53.9% 50.2%
Total
Loss and LAE payments 204,285 238,714 44.7% 58.5%
Change in reserves 71,002 23,776 15.6% 5.8%
Net incurred loss and LAE $ 275,287 $ 262,490 60.3% 64.3%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development June 30, June 30, June 30, June 30,
For the Six Months Ended: 2014 2013 2014 2013
Insurance Companies $ 13,304 $ (15,477) 2.9% -3.8%
Lloyd's Operations 7,249 9,481 1.6% 2.3%
Total $ 20,553 $ (5,996) 4.5% -1.5%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Case IBNR
Net Loss Reserves, June 30, 2014: Reserves Reserves Total
Insurance Companies:
Marine $ 124,743 $ 92,972 $ 217,715
Property Casualty 174,784 427,244 602,028
Professional Liability 57,892 87,702 145,594
Total Insurance Companies 357,419 607,918 965,337
Lloyd's Operations:
Marine 140,580 85,807 $ 226,387
Property Casualty 29,038 15,567 44,605
Professional Liability 13,227 46,265 59,492
Total Lloyd's Operations 182,845 147,639 330,484
Total Net Loss Reserves $ 540,264 $ 755,557 $ 1,295,821
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
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2014
As of June 30, 2014, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.8 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.
As of June 30, 2014, the Company owned two asset-backed securities approximating $0.5 million with subprime mortgage exposures. The securities have an effective maturity of 3.4 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $1.8 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.4 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of June 30, 2014:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
June 30, 2014 Value Gains (Losses) Cost
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 421,891 $ 4,313 $ (4,339) $ 421,917
States, municipalities and political subdivisions 564,782 15,833 (2,883) 551,832
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 256,407 8,289 (1,753) 249,871
Residential mortgage obligations 60,867 1,832 (101) 59,136
Asset-backed securities 162,529 598 (381) 162,312
Commercial mortgage-backed securities 184,946 8,071 (131) 177,006
Subtotal 664,749 18,790 (2,366) 648,325
Corporate bonds 569,433 15,572 (1,159) 555,020
Total fixed maturities 2,220,855 54,508 (10,747) 2,177,094
Equity securities - common stocks 144,977 31,262 (964) 114,679
Equity securities - preferred stocks 35,509 1,799 (23) 33,733
Short-term investments 226,237 -- -- 226,237
Cash 72,604 -- -- 72,604
Total $ 2,700,182 $ 87,569 $ (11,734) $ 2,624,347
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2014
($ 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 June 30, 2013:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 93,447 $ 3,219 $ (1,233) $ 91,461
FNMA 118,923 3,731 (486) 115,678
FHLMC 44,037 1,339 (34) 42,732
Total $ 256,407 $ 8,289 $ (1,753) $ 249,871
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 38,041 $ 1,106 $ (78) $ 37,013
Alt-A 1,845 117 (23) 1,751
Subprime 465 16 -- 449
Non-US RMBS 20,516 593 -- 19,923
Total $ 60,867 $ 1,832 $ (101) $ 59,136

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.