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Navigators Reports Record Third Quarter Earnings

STAMFORD, Conn., Nov. 6, 2014 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $31.2 million, or $2.14 per diluted share, for the three months ended September 30, 2014 compared to $21.3 million, or $1.48 per diluted share, for the comparable period in 2013. Operating earnings were $26.1 million, or $1.79 per diluted share, for the third quarter of 2014 compared to $23.1 million, or $1.60 per diluted share, for the comparable period in 2013.

For the nine months ended September 30, 2014, the Company reported net income of $76.1 million, or $5.22 per diluted share compared to $49.1 million, or $3.42 per diluted share, for the comparable period in 2013. Operating earnings were $62.0 million, or $4.25 per diluted share, for the nine months ended September 30, 2014 compared to $45.7 million, or $3.18 per diluted share, for the comparable period in 2013.

Gross written premiums and net written premiums for the three months ended September 30, 2014 were $327.5 million and $228.4 million, respectively, an increase of 4.9% and 16.2% from the comparable period in 2013.

Gross written premiums and net written premiums for the nine months ended September 30, 2014 were $1,099.1 million and $772.1 million, respectively, an increase of 5.9% and 16.2% from the comparable period in 2013.

The combined loss and expense ratio for the three and nine months ended September 30, 2014 was 89.5% and 92.3%, respectively, compared to 89.8% and 95.1% for the comparable periods in 2013.

"We are pleased to report excellent underwriting results, continued premium growth, increased book value per share and strong cash flow for the quarter and first nine months of 2014. Despite increasingly challenging competitive conditions, our underwriters continue to focus on risk selection and achieving appropriate rates for exposures" stated Stan Galanski, President and Chief Executive Officer.

Stockholders' equity was $996.6 million, or $69.85 per share, as of September 30, 2014 compared to $902.2 million, or $63.54 per share, as of December 31, 2013.

Net investment income for the three and nine months ended September 30, 2014 was $15.8 million and $48.1 million, respectively, an increase of 12.4% and 14.5% 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 2.2% and 2.4% for the three and nine months ended September 30, 2014, compared to 2.4% for each of the comparable periods in 2013. The effective tax rate on net investment income was 27.5% for both the three and nine months ended September 30, 2014, compared to 27.5% and 27.9% 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 3.7 years as of September 30, 2014. As of September 30, 2014, net unrealized gains within our investment portfolio were $59.5 million, an increase of $23.5 million compared to December 31, 2013.

There were $6.7 million of net realized gains recognized in earnings for the three months ended September 30, 2014, compared to $2.8 million of net realized losses for the same period in 2013. For the nine months ended September 30, there were $12.0 million of net realized gains, compared to $5.3 million of net realized gains for the same period in 2013.

Other income for the nine months ended September 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 nine months ended September 30, 2014 was $103.2 million and $181.4 million, respectively, compared to $81.5 million and $130.0 million for the comparable periods in 2013.

The Company will hold a conference call on Friday, November 7, 2014 starting at 8:30 a.m. ET to discuss the 2014 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 (888-438-5535) and the international dial-in is (719) 325-2215. 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 Nine Months Ended
September 30, September 30,
Results of Operations 2014 2013 Change 2014 2013 Change
Gross written premiums $ 327,469 $ 312,076 4.9% $ 1,099,054 $ 1,037,426 5.9%
Net written premiums 228,417 196,556 16.2% 772,131 664,477 16.2%
Revenues:
Net earned premiums 245,367 213,895 14.7% 701,723 622,037 12.8%
Net investment income 15,839 14,094 12.4% 48,097 41,997 14.5%
Total other-than-temporary impairment losses (41) (1,821) -97.7% 158 (1,863) NM
Portion of loss recognized in other comprehensive income (before tax) 41 -- NM (158) -- NM
Net other-than-temporary impairment losses recognized in earnings -- (1,821) NM -- (1,863) NM
Net realized gains (losses) 6,718 (988) NM 12,024 7,171 67.7%
Other income 1,336 (210) NM 10,070 (507) NM
Total revenues 269,260 224,970 19.7% 771,914 668,835 15.4%
Expenses:
Net losses and loss adjustment expenses 135,284 125,086 8.2% 410,571 387,576 5.9%
Commission expenses 33,943 27,685 22.6% 91,820 82,631 11.1%
Other operating expenses 50,388 39,056 29.0% 145,526 120,608 20.7%
Interest expense 3,388 2,053 65.0% 11,559 6,156 87.8%
Total expenses 223,003 193,880 15.0% 659,476 596,971 10.5%
Income before income taxes 46,257 31,090 48.8% 112,438 71,864 56.5%
Income tax expense (benefit) 15,032 9,804 53.3% 36,384 22,731 60.1%
Net income (loss) $ 31,225 $ 21,286 46.7% $ 76,054 $ 49,133 54.8%
Per Share Data
Net income per common share:
Basic $ 2.19 $ 1.50 45.5% $ 5.34 $ 3.48 53.4%
Diluted $ 2.14 $ 1.48 44.6% $ 5.22 $ 3.42 52.7%
Average common shares outstanding:
Basic 14,265,260 14,144,478 14,252,910 14,120,788
Diluted 14,613,744 14,408,413 14,577,297 14,379,943
Underwriting Ratios
Loss Ratio 55.1% 58.5% 58.5% 62.3%
Expense Ratio 34.4% 31.3% 33.8% 32.8%
Combined Ratio 89.5% 89.8% 92.3% 95.1%
Balance Sheet Data Sept. 30, June 30, Sept. 30, Dec. 31,
2014 2014 2014 2013
Stockholders' equity $ 996,593 $ 972,080 2.5% $ 996,593 $ 902,212 10.5%
Book value per share $ 69.85 $ 68.16 2.5% $ 69.85 $ 63.54 9.9%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
September 30, December 31,
2014 2013
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2014, $2,277,384; 2013, $2,036,999) $ 2,310,195 $ 2,047,873
Equity securities, available-for-sale, at fair value (cost: 2014, $136,762; 2013, $118,804) 163,473 143,954
Short-term investments, at fair value (amortized cost: 2014: $255,434; 2013: $296,250) 255,445 296,250
Cash 74,408 86,509
Total investments and cash 2,803,521 2,574,586
Premiums receivable 363,053 325,025
Prepaid reinsurance premiums 237,094 247,822
Reinsurance recoverable on paid losses 49,327 38,384
Reinsurance recoverable on unpaid losses and loss adjustment expenses 850,582 822,438
Deferred policy acquisition costs 76,268 67,007
Accrued investment income 15,075 13,866
Goodwill and other intangible assets 7,089 7,177
Current income tax receivable, net 2,506 9,918
Deferred income tax, net 14,531 28,187
Other assets 44,267 35,042
Total assets $ 4,463,313 $ 4,169,452
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,168,974 $ 2,045,071
Unearned premiums 772,755 714,606
Reinsurance balances payable 157,900 167,252
Senior notes 263,406 263,308
Payable for investments purchased 35,757 7,624
Accounts payable and other liabilities 67,928 69,379
Total liabilities 3,466,720 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 17,778,131 shares for 2014 and 17,709,876 shares for 2013 1,777 1,770
Additional paid-in capital 343,407 335,546
Treasury stock, at cost (3,511,380 shares for 2014 and 2013) (155,801) (155,801)
Retained earnings 768,391 692,337
Accumulated other comprehensive income 38,819 28,360
Total stockholders' equity 996,593 902,212
Total liabilities and stockholders' equity $ 4,463,313 $ 4,169,452
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Nine Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 38,726 $ 38,912 -0.5% $ 139,078 $ 132,836 4.7%
Property Casualty 174,868 156,228 11.9% 572,821 527,287 8.6%
Professional Liability 28,888 32,469 -11.0% 86,110 97,679 -11.8%
242,482 227,609 6.5% 798,009 757,802 5.3%
Lloyd's Operations:
Marine 38,568 36,009 7.1% 147,530 135,546 8.8%
Property Casualty 31,172 35,869 -13.1% 101,413 102,144 -0.7%
Professional Liability 15,247 12,589 21.1% 52,102 41,934 24.2%
84,987 84,467 0.6% 301,045 279,624 7.7%
Total $ 327,469 $ 312,076 4.9% $ 1,099,054 $ 1,037,426 5.9%
Net Written Premiums: Three Months Nine Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 24,166 $ 26,437 -8.6% $ 100,647 $ 94,944 6.0%
Property Casualty 126,665 97,553 29.8% 418,659 338,215 23.8%
Professional Liability 21,653 25,300 -14.4% 61,170 75,830 -19.3%
172,484 149,290 15.5% 580,476 508,989 14.0%
Lloyd's Operations:
Marine 32,245 26,795 20.3% 113,938 100,413 13.5%
Property Casualty 13,758 13,761 0.0% 44,684 33,254 34.4%
Professional Liability 9,930 6,710 48.0% 33,033 21,821 51.4%
55,933 47,266 18.3% 191,655 155,488 23.3%
Total $ 228,417 $ 196,556 16.2% $ 772,131 $ 664,477 16.2%
Net Earned Premiums: Three Months Nine Months
Insurance Companies: 2014 2013 Change 2014 2013 Change
Marine $ 31,123 $ 31,490 -1.2% $ 95,635 $ 100,013 -4.4%
Property Casualty 129,547 105,759 22.5% 365,068 297,954 22.5%
Professional Liability 21,381 25,713 -16.8% 65,644 75,873 -13.5%
182,051 162,962 11.7% 526,347 473,840 11.1%
Lloyd's Operations:
Marine 39,368 34,264 14.9% 110,468 102,932 7.3%
Property Casualty 12,980 10,472 23.9% 37,401 26,913 39.0%
Professional Liability 10,968 6,197 77.0% 27,507 18,352 49.9%
63,316 50,933 24.3% 175,376 148,197 18.3%
Total $ 245,367 $ 213,895 14.7% $ 701,723 $ 622,037 12.8%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2014
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 242,482 $ 84,987 $ -- $ 327,469
Net written premiums 172,484 55,933 -- 228,417
Net earned premiums 182,051 63,316 -- 245,367
Net losses and loss adjustment expenses (108,425) (26,859) -- (135,284)
Commission expenses (22,705) (11,788) 550 (33,943)
Other operating expenses (35,161) (15,227) -- (50,388)
Other underwriting income (expense) 656 1 (550) 107
Underwriting profit (loss) 16,416 9,443 -- 25,859
Net investment income 13,971 1,849 19 15,839
Net realized gains (losses) 6,673 45 -- 6,718
Interest expense -- -- (3,388) (3,388)
Other income (expense) (1,100) 2,329 -- 1,229
Income (loss) before income taxes 35,960 13,666 (3,369) 46,257
Income tax expense (benefit) 11,489 4,787 (1,244) 15,032
Net income (loss) $ 24,471 $ 8,879 $ (2,125) $ 31,225
Losses and loss adjustment expenses ratio 59.6% 42.4% 55.1%
Commission expense ratio 12.5% 18.6% 13.8%
Other operating expense ratio (2) 18.9% 24.1% 20.6%
Combined ratio 91.0% 85.1% 89.5%
(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
September 30, 2013
($ in thousands)
Insurance Lloyd's
Companies 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 underwriting 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)
Other income (expense) -- -- -- --
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
Nine Months Ended
September 30, 2014
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 798,009 $ 301,045 $ -- $1,099,054
Net written premiums 580,476 191,655 -- 772,131
Net earned premiums 526,347 175,376 -- 701,723
Net losses and loss adjustment expenses (323,354) (87,217) -- (410,571)
Commission expenses (62,436) (30,989) 1,605 (91,820)
Other operating expenses (102,963) (42,563) -- (145,526)
Other underwriting income (expense) 2,082 20 (1,605) 497
Underwriting profit (loss) 39,676 14,627 -- 54,303
Net investment income 42,553 5,488 56 48,097
Net realized gains (losses) 12,368 (344) -- 12,024
Interest expense -- -- (11,559) (11,559)
Other income (expense) (1,119) 10,692 -- 9,573
Income (loss) before income taxes 93,478 30,463 (11,503) 112,438
Income tax expense (benefit) 29,650 10,753 (4,019) 36,384
Net income (loss) $ 63,828 $ 19,710 $ (7,484) $ 76,054
Losses and loss adjustment expenses ratio 61.4% 49.7% 58.5%
Commission expense ratio 11.9% 17.7% 13.1%
Other operating expense ratio (2) 19.2% 24.3% 20.7%
Combined ratio 92.5% 91.7% 92.3%
(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
Nine Months Ended
September 30, 2013
($ in thousands)
Insurance Lloyd's
Companies 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 underwriting 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)
Other income (expense) -- -- -- --
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
Underwriting Results
($ in thousands)
Three Months Ended September 30, 2014
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 31,123 $ 13,080 $ 12,014 $ 6,029 42.0% 38.6% 80.6%
Property Casualty 129,547 81,682 37,171 10,694 63.1% 28.6% 91.7%
Professional Liability 21,381 13,663 8,025 (307) 63.9% 37.5% 101.4%
Total Insurance Companies 182,051 108,425 57,210 16,416 59.6% 31.4% 91.0%
Lloyd's Operations:
Marine 39,368 16,389 15,629 7,350 41.6% 39.7% 81.3%
Property Casualty 12,980 4,260 7,105 1,615 32.8% 54.8% 87.6%
Professional Liability 10,968 6,210 4,280 478 56.6% 39.0% 95.6%
Total Lloyd's 63,316 26,859 27,014 9,443 42.4% 42.7% 85.1%
Total All $ 245,367 $ 135,284 $ 84,224 $ 25,859 55.1% 34.4% 89.5%
Three Months Ended September 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio 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%
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2014 2013 2014 2013
Insurance Companies:
Loss and LAE payments $ 84,899 $ 83,008 46.7% 50.9%
Change in reserves 23,526 12,307 12.9% 7.6%
Net incurred loss and LAE 108,425 95,315 59.6% 58.5%
Lloyd's Operations:
Loss and LAE payments 23,181 27,038 36.6% 53.1%
Change in reserves 3,678 2,733 5.8% 5.4%
Net incurred loss and LAE 26,859 29,771 42.4% 58.5%
Total
Loss and LAE payments 108,080 110,046 44.0% 51.5%
Change in reserves 27,204 15,040 11.1% 7.0%
Net incurred loss and LAE $ 135,284 $ 125,086 55.1% 58.5%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2014 2013 2014 2013
Insurance Companies $ 9,970 $ 3,094 4.1% 1.4%
Lloyd's Operations 5,500 4,591 2.2% 2.1%
Total $ 15,470 $ 7,685 6.3% 3.5%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Nine Months Ended September 30, 2014
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 95,635 $ 41,654 $ 34,943 $ 19,038 43.6% 36.5% 80.1%
Property Casualty 365,068 244,202 104,024 16,842 66.9% 28.5% 95.4%
Professional Liability 65,644 37,498 24,350 3,796 57.1% 37.1% 94.2%
Total Insurance Companies 526,347 323,354 163,317 39,676 61.4% 31.1% 92.5%
Lloyd's Operations:
Marine 110,468 60,032 45,492 4,944 54.3% 41.2% 95.5%
Property Casualty 37,401 14,015 17,110 6,276 37.5% 45.7% 83.2%
Professional Liability 27,507 13,170 10,930 3,407 47.9% 39.7% 87.6%
Total Lloyd's 175,376 87,217 73,532 14,627 49.7% 42.0% 91.7%
Total All $ 701,723 $ 410,571 $ 236,849 $ 54,303 58.5% 33.8% 92.3%
Nine Months Ended September 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio 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%
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2014 2013 2014 2013
Insurance Companies:
Loss and LAE payments $ 237,109 $ 263,832 45.0% 55.7%
Change in reserves 86,245 45,136 16.4% 9.5%
Net incurred loss and LAE 323,354 308,968 61.4% 65.2%
Lloyd's Operations:
Loss and LAE payments 75,256 84,928 42.9% 57.3%
Change in reserves 11,961 (6,320) 6.8% -4.3%
Net incurred loss and LAE 87,217 78,608 49.7% 53.0%
Total
Loss and LAE payments 312,365 348,760 44.5% 56.1%
Change in reserves 98,206 38,816 14.0% 6.2%
Net incurred loss and LAE $ 410,571 $ 387,576 58.5% 62.3%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2014 2013 2014 2013
Insurance Companies $ 23,274 $ (12,383) 3.3% -2.0%
Lloyd's Operations 12,749 14,072 1.8% 2.3%
Total $ 36,023 $ 1,689 5.1% 0.3%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Case IBNR
Net Loss Reserves, September 30, 2014: Reserves Reserves Total
Insurance Companies:
Marine $ 115,304 $ 91,775 $ 207,079
Property Casualty 167,328 471,193 638,521
Professional Liability 56,937 86,326 143,263
Total Insurance Companies 339,569 649,294 988,863
Lloyd's Operations:
Marine 138,062 85,430 $ 223,492
Property Casualty 26,914 16,679 43,593
Professional Liability 16,246 46,198 62,444
Total Lloyd's Operations 181,222 148,307 329,529
Total Net Loss Reserves $ 520,791 $ 797,601 $ 1,318,392
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
September 30, 2014
As of September 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 3.7 years. The Company does not own any collateralized debt obligations (CDO's) or asset backed commercial paper.
As of September 30, 2014, the Company owned two collateralized mortgage obligations approximating $0.4 million with subprime mortgage exposures. The securities have an effective maturity of 3.2 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $1.8 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.3 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of September 30, 2014:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
September 30, 2014 Value Gains (Losses) Cost
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 414,348 $ 2,712 $ (6,215) $ 417,851
States, municipalities and political subdivisions 550,327 16,585 (1,360) 535,102
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 296,198 7,201 (2,363) 291,360
Residential mortgage obligations 34,738 1,238 (133) 33,633
Asset-backed securities 195,180 414 (519) 195,285
Commercial mortgage-backed securities 210,712 6,244 (588) 205,056
Subtotal 736,828 15,097 (3,603) 725,334
Corporate bonds 608,692 11,945 (2,350) 599,097
Total fixed maturities 2,310,195 46,339 (13,528) 2,277,384
Equity securities - common stocks 113,250 26,251 (772) 87,771
Equity securities - preferred stocks 50,223 1,481 (249) 48,991
Short-term investments 255,445 11 -- 255,434
Cash 74,408 -- -- 74,408
Total $ 2,803,521 $ 74,082 $ (14,549) $ 2,743,988
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 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 September 30, 2014:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 87,953 $ 2,917 $ (1,341) $ 86,377
FNMA 150,283 3,144 (953) 148,092
FHLMC 57,962 1,140 (69) 56,891
Total $ 296,198 $ 7,201 $ (2,363) $ 291,360
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 13,970 $ 574 $ (112) $ 13,508
Alt-A 1,777 115 (21) 1,683
Subprime 429 15 -- 414
Non-US RMBS 18,562 534 -- 18,028
Total $ 34,738 $ 1,238 $ (133) $ 33,633

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.