Navigators Reports Second Quarter 2016 Earnings

STAMFORD, Conn., Aug. 04, 2016 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $16.2 million, or $1.08 per diluted share, for the three months ended June 30, 2016 compared to $19.2 million, or $1.30 per diluted share, for the comparable period in 2015. Operating earnings were $12.2 million, or $0.81 per diluted share, for the three months ended June 30, 2016 compared to $19.7 million, or $1.34 per diluted share, for the comparable period in 2015.

For the six months ended June 30, 2016, our Company reported Net income of $39.1 million, or $2.62 per diluted share, compared to $45.1 million, or $3.06 per diluted share, for the comparable period in 2015. Operating earnings were $32.4 million, or $2.17 per diluted share, for the six months ended June 30, 2016 compared to $40.6 million, or $2.76 per diluted share, for the comparable period in 2015.

Gross written premiums and Net written premiums for the three months ended June 30, 2016 were $412.6 million and $306.5 million, respectively, increases of 8.7% and 18.7% from the comparable period in 2015.

Gross written premiums and Net written premiums for the six months ended June 30, 2016 were $826.4 million and $626.4 million, respectively, increases of 6.5% and 14.5% from the comparable period in 2015.

The combined ratio for the three and six months ended June 30, 2016 was 99.6% and 97.4%, respectively, compared to 93.4% and 92.8% for the comparable periods in 2015.

Stan Galanski, President and Chief Executive Officer commented, “We are pleased to have produced our fourteenth consecutive quarter of profitable underwriting results despite absorbing $18.3 million of property catastrophe loss in the second quarter. Our U.S. Insurance business had another solidly profitable quarter, while our International Insurance business was adversely impacted by property catastrophe activity, largely stemming from the Fort McMurray fires. We achieved double digit Net written premium growth for the second quarter and first six months of 2016, driven by strong growth in both the P&C and Professional Liability operating segments within International Insurance. Net investment income was up nearly 20.0% over the second quarter of 2015, leading to a 3.2% increase in Book value per share from March 31, 2016. Given the turmoil in the global financial markets and the level of natural catastrophe loss activity impacting the industry during the second quarter, we believe our results reflect a well balanced risk portfolio and a sound investment philosophy.”

Stockholders’ equity was $1.182 billion, or $81.24 per share, as of June 30, 2016 compared to $1.096 billion, or $75.96 per share, as of December 31, 2015.

On August 4, 2016, the Board of Directors declared a quarterly cash dividend of $0.09 per share of common stock to be paid on September 30, 2016 to stockholders of record at the close of business on August 19, 2016.

Net investment income for the three and six months ended June 30, 2016 was $19.9 million and $39.5 million, respectively, increases of 19.8% and 20.2% from the comparable periods in 2015. The annualized pre-tax investment yield, excluding net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.6% for both the three and six months ended June 30, 2016, compared to 2.4% for both comparable periods in 2015.

Our Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by S&P and Moody’s, respectively, with an average effective duration of 3.9 years as of June 30, 2016. As of June 30, 2016, Net unrealized gains within our investment portfolio were $110.6 million, an increase of $73.3 million compared to December 31, 2015.

There were $1.8 million of Net realized gains recognized in earnings for the three months ended June 30, 2016, compared to $3.9 million for the same period in 2015. For the six months ended June 30, 2016, there were $3.4 million of Net realized gains, compared to $9.5 million for the same period in 2015.

Other income (loss) for the three months ended June 30, 2016 was $4.4 million of income, compared to $4.4 million of loss for the same period in 2015. For the six months ended June 30, 2016 Other income (loss) was $7.0 million of income, compared to $2.1 million of loss for the same period in 2015. Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses.

Our Company will hold a conference call on Friday, August 5, 2016 starting at 8:30 a.m. (EDT) to discuss the 2016 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 800-850-2903 and the international dial-in is 224-357-2399. Participants may connect to the webcast at:

http://edge.media-server.com/m/p/bx9cyqqq

Net operating earnings, or net income excluding after-tax net realized gains (losses), after-tax 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.

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 2016 2015 Change 2016 2015 Change
Gross written premiums $412,565 $379,471 8.7% $826,442 $775,931 6.5%
Net written premiums 306,535 258,244 18.7% 626,355 547,202 14.5%
Revenues:
Net earned premiums 267,992 242,328 10.6% 532,350 478,460 11.3%
Net investment income 19,875 16,595 19.8% 39,469 32,848 20.2%
Net realized gains (losses):
Total other-than-temporary impairment losses (162) (472) -65.7% (271) (450) -39.8%
Portion of loss recognized in other comprehensive income (before tax) 12 49 -75.5% 121 27 NM
Net other-than-temporary impairment losses recognized in earnings (150) (423) -64.6% (150) (423) -64.6%
Other realized gains (losses) 1,960 4,339 -54.8% 3,557 9,935 -64.2%
Net realized gains (losses) 1,810 3,916 -53.8% 3,407 9,512 -64.2%
Other income (loss) 4,430 (4,362) NM 6,979 (2,120) NM
Total revenues $294,107 $258,477 13.8% $582,205 $518,700 12.2%
Expenses:
Net losses and loss adjustment expenses 167,206 141,973 17.8% 320,162 272,171 17.6%
Commission expenses 40,726 31,480 29.4% 78,280 64,385 21.6%
Other operating expenses 59,074 52,789 11.9% 119,883 107,698 11.3%
Interest expense 3,858 3,856 0.1% 7,716 7,711 0.1%
Total expenses $270,864 $230,098 17.7% $526,041 $451,965 16.4%
Income before income taxes $
23,243 $28,379 -18.1% $56,164 $66,735 -15.8%
Income tax expense (benefit) 7,053 9,195 -23.3% 17,042 21,622 -21.2%
Net income (loss) $16,190 $19,184 -15.6% $39,122 $45,113 -13.3%
Per Share Data
Net income per common share:
Basic $1.11 $1.33 -16.5% $2.70 $3.14 -14.1%
Diluted $1.08 $1.30 -16.8% $2.62 $3.06 -14.5%
Average common shares outstanding:
Basic 14,536,849 14,396,048 14,514,532 14,370,123
Diluted 14,976,593 14,763,002 14,942,193 14,726,282
Underwriting Ratios
Loss Ratio 62.4% 58.6% 60.1% 56.9%
Expense Ratio 37.2% 34.8% 37.3% 35.9%
Combined Ratio 99.6% 93.4% 97.4% 92.8%
Balance Sheet Data June 30, March 31, June 30, Dec. 31,
2016 2016 2016 2015
Stockholders' equity $1,181,558 $1,143,879 3.3% $1,181,558 $1,096,148 7.8%
Book value per share $81.24 $78.72 3.2% $81.24 $75.96 6.9%

NM- Percentage change not meaningful






THE NAVIGATORS GROUP, INC AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
($ in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
% Change
amounts in thousands 2016 2015 2016 2015 QTD YTD
Net income $16,190 $19,184 $39,122 $45,113 (15.6%) (13.3%)
After-tax realized losses (gains) (1,176) (2,398) (2,214) (6,035) (50.9%) (63.3%)
After-tax FX losses (gains) (2,838) 2,915 (4,490) 1,497 NM NM
Net operating earnings $12,176 $19,701 $32,418 $40,575 (38.2%) (20.1%)
Net operating earnings per common share:
Basic $0.84 $1.37 $2.23 $2.82
Diluted $0.81 $1.34 $2.17 $2.76
NM - Percentage change not meaningful






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
amounts in thousands, except share and per share amounts.
June 30, December 31,
2016 2015
ASSETS
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $2,558,621; 2015: $2,400,245) $2,632,313 $2,414,210
Equity securities, available-for-sale, at fair value (cost: 2016: $292,698; 2015: $281,943) 329,635 305,271
Short-term investments, at fair value (amortized cost: 2016: $144,845; 2015: $217,743) 144,843 217,745
Total investments $3,106,791 $2,937,226
Cash 121,868 69,901
Premiums receivable 363,343 276,616
Prepaid reinsurance premiums 222,414 232,588
Reinsurance recoverable on paid losses 59,950 49,506
Reinsurance recoverable on unpaid losses and loss adjustment expenses 814,261 809,518
Deferred policy acquisition costs 113,394 91,983
Accrued investment income 16,176 16,001
Goodwill and other intangible assets 6,579 6,807
Current income tax receivable, net 18,522 22,323
Deferred income tax, net - 3,900
Other assets 53,323 67,643
Total assets $4,896,621 $4,584,012
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $2,268,763 $2,202,644
Unearned premiums 904,507 820,676
Reinsurance balances payable 127,742 107,411
Senior notes 263,653 263,580
Deferred income tax, net 14,475 -
Payable for investments purchased 48,558 1,495
Accounts payable and other liabilities 87,365 92,058
Total liabilities $3,715,063 $3,487,864
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
18,055,818 shares for 2016 and 17,942,269 shares for 2015
1,805 1,793
Additional paid-in capital 363,588 357,829
Treasury stock, at cost (3,511,380 shares for 2016 and 2015) (155,801) (155,801)
Retained earnings 906,536 868,723
Accumulated other comprehensive income 65,430 23,604
Total stockholders' equity $1,181,558 $1,096,148
Total liabilities and stockholders' equity $4,896,621 $4,584,012






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended June 30, 2016
U.S. Int’l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $243,924 $135,740 $32,901 $- $412,565
Ceded written premiums (62,618) (41,910) (1,502) - (106,030)
Net written premiums 181,306 93,830 31,399 - 306,535
Net earned premiums 152,384 77,833 37,775 - 267,992
Net losses and LAE (93,428) (48,066) (25,712) - (167,206)
Commission expenses (16,894) (16,821) (7,492) 481 (40,726)
Other operating expenses (31,570) (23,043) (4,461) - (59,074)
Other underwriting income (expense) 342 - 203 (481) 64
Underwriting profit (loss) $10,834 $(10,097) $313 $- $1,050
Net investment income 19,875 19,875
Net realized gains (losses) 1,810 1,810
Interest expense (3,858) (3,858)
Other income (loss) 4,366 4,366
Income before income taxes $10,834 $(10,097) $313 $22,193 $23,243
Income tax (expense) benefit (7,053) (7,053)
Net income (loss) $16,190
Losses and LAE ratio 61.3% 61.8% 68.1% 62.4%
Commission expense ratio 11.1% 21.6% 19.8% 15.2%
Other operating expense ratio (2) 20.5% 29.6% 11.3% 22.0%
Combined ratio 92.9% 113.0% 99.2% 99.6%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended June 30, 2015
U.S. Int’l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $239,987 $108,790 $30,694 $- $379,471
Ceded written premiums (78,882) (41,621) (724) - (121,227)
Net written premiums 161,105 67,169 29,970 - 258,244
Net earned premiums 137,304 63,186 41,838 - 242,328
Net losses and LAE (84,155) (32,363) (25,455) - (141,973)
Commission expenses (12,275) (11,298) (8,039) 132 (31,480)
Other operating expenses (31,374) (17,366) (4,049) - (52,789)
Other underwriting income (expense) 121 - 36 (132) 25
Underwriting profit (loss) $9,621 $2,159 $4,331 $- $16,111
Net investment income 16,595 16,595
Net realized gains (losses) 3,916 3,916
Interest expense (3,856) (3,856)
Other income (loss) (4,387) (4,387)
Income before income taxes $9,621 $2,159 $4,331 $12,268 $28,379
Income tax (expense) benefit (9,195) (9,195)
Net income (loss) $19,184
Losses and LAE ratio 61.3% 51.2% 60.8% 58.6%
Commission expense ratio 8.9% 17.9% 19.2% 13.0%
Other operating expense ratio (2) 22.8% 27.5% 9.6% 21.8%
Combined ratio 93.0% 96.6% 89.6% 93.4%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended June 30, 2016
U.S. Int’l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $454,571 $279,883 $91,988 $- $826,442
Ceded written premiums (117,115) (76,881) (6,091) - (200,087)
Net written premiums 337,456 203,002 85,897 - 626,355
Net earned premiums 300,724 155,841 75,785 - 532,350
Net losses and LAE (184,940) (88,476) (46,746) - (320,162)
Commission expenses (31,749) (32,176) (15,237) 882 (78,280)
Other operating expenses (65,331) (44,814) (9,738) - (119,883)
Other underwriting income (expense) 703 - 252 (882) 73
Underwriting profit (loss) $19,407 $(9,625) $4,316 $- $14,098
Net investment income 39,469 39,469
Net realized gains (losses) 3,407 3,407
Interest expense (7,716) (7,716)
Other income (loss) 6,906 6,906
Income (loss) before income taxes $19,407 $(9,625) $4,316 $42,066 $56,164
Income tax (expense) benefit (17,042) (17,042)
Net income (loss) $39,122
Losses and LAE ratio 61.5% 56.8% 61.7% 60.1%
Commission expense ratio 10.6% 20.6% 20.1% 14.7%
Other operating expense ratio (2) 21.4% 28.8% 12.5% 22.6%
Combined ratio 93.5% 106.2% 94.3% 97.4%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).





THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended June 30, 2015
U.S. Int’l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $439,314 $231,217 $105,400 $- $775,931
Ceded written premiums (147,612) (75,877) (5,240) - (228,729)
Net written premiums 291,702 155,340 100,160 - 547,202
Net earned premiums 268,395 128,711 81,354 - 478,460
Net losses and LAE (161,954) (62,054) (48,163) - (272,171)
Commission expenses (26,620) (22,711) (15,337) 283 (64,385)
Other operating expenses (65,062) (34,375) (8,261) - (107,698)
Other underwriting income (expense) 317 - 46 (283) 80
Underwriting profit (loss) $15,076 $9,571 $9,639 $- $34,286
Net investment income 32,848 32,848
Net realized gains (losses) 9,512 9,512
Interest expense (7,711) (7,711)
Other income (loss) (2,200) (2,200)
Income (loss) before income taxes $15,076 $9,571 $9,639 $32,449 $66,735
Income tax (expense) benefit (21,622) (21,622)
Net income (loss) $45,113
Losses and LAE ratio 60.3% 48.2% 59.2% 56.9%
Commission expense ratio 9.9% 17.6% 18.9% 13.5%
Other operating expense ratio (2) 24.2% 26.8% 10.1% 22.4%
Combined ratio 94.4% 92.6% 88.2% 92.8%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).







THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
U.S. Insurance
Three Months Ended June 30, 2016 Three Months Ended June 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $46,187 $168,654 $29,083 $243,924 $41,803 $170,216 $27,968 $239,987 1.6%
Ceded written premiums (18,540) (36,768) (7,310) (62,618) (15,026) (49,305) (14,551) (78,882) -20.6%
Net written premiums 27,647 131,886 21,773 181,306 26,777 120,911 13,417 161,105 12.5%
Net earned premiums $24,921 $110,212 $17,251 $152,384 $25,977 $96,440 $14,887 $137,304 11.0%
Net losses and LAE (10,699) (72,172) (10,557) (93,428) (11,415) (67,809) (4,931) (84,155) 11.0%
Commission expenses (2,176) (12,821) (1,897) (16,894) (2,429) (8,751) (1,095) (12,275) 37.6%
Other operating expenses (6,817) (20,049) (4,704) (31,570) (6,402) (19,661) (5,311) (31,374) 0.6%
Other underwriting income (expense) 152 178 12 342 24 97 - 121 NM
Underwriting profit (loss) $5,381 $5,348 $105 $10,834 $5,755 $316 $3,550 $9,621 12.6%
Losses and LAE ratio 42.9% 65.5% 61.2% 61.3% 43.9% 70.3% 33.1% 61.3%
Commission expense ratio 8.7% 11.6% 11.0% 11.1% 9.4% 9.1% 7.4% 8.9%
Other operating expense ratio (1) 26.8% 18.0% 27.2% 20.5% 24.5% 20.3% 35.7% 22.8%
Combined ratio 78.4% 95.1% 99.4% 92.9% 77.8% 99.7% 76.2% 93.0%

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).




THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
Int’l Insurance
Three Months Ended June 30, 2016 Three Months Ended June 30, 2015
amounts in thousands Marine�� P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $41,147 $63,002 $31,591 $135,740 $41,432 $41,615 $25,743 $108,790 24.8%
Ceded written premiums (9,554) (24,465) (7,891) (41,910) (9,126) (24,513) (7,982) (41,621) 0.7%
Net written premiums 31,593 38,537 23,700 93,830 32,306 17,102 17,761 67,169 39.7%
Net earned premiums $36,096 $23,815 $17,922 $77,833 $40,132 $10,199 $12,855 $63,186 23.2%
Net losses and LAE (17,021) (21,878) (9,167) (48,066) (21,432) (4,084) (6,847) (32,363) 48.5%
Commission expenses (8,361) (5,150) (3,310) (16,821) (9,495) (155) (1,648) (11,298) 48.9%
Other operating expenses (8,698) (9,065) (5,280) (23,043) (6,749) (6,166) (4,451) (17,366) 32.7%
Other underwriting income (expense) - - - - - - - - NM
Underwriting profit (loss) $2,016 $(12,278) $165 $(10,097) $2,456 $(206) $(91) $2,159 NM
Losses and LAE ratio 47.2% 91.9% 51.2% 61.8% 53.4% 40.0% 53.3% 51.2%
Commission expense ratio 23.2% 21.6% 18.5% 21.6% 23.7% 1.5% 12.8% 17.9%
Other operating expense ratio (1) 24.0% 38.1% 29.4% 29.6% 16.8% 60.5% 34.6% 27.5%
Combined ratio 94.4% 151.6% 99.1% 113.0% 93.9% 102.0% 100.7% 96.6%

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
U.S. Insurance
Six Months Ended June 30, 2016 Six Months Ended June 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $89,350 $309,932 $55,289 $454,571 $82,638 $304,362 $52,314 $439,314 3.5%
Ceded written premiums (36,187) (67,275) (13,653) (117,115) (31,312) (88,863) (27,437) (147,612) -20.7%
Net written premiums 53,163 242,657 41,636 337,456 51,326 215,499 24,877 291,702 15.7%
Net earned premiums $48,171 $219,371 $33,182 $300,724 $49,901 $187,175 $31,319 $268,395 12.0%
Net losses and LAE (20,474) (143,769) (20,697) (184,940) (21,603) (125,856) (14,495) (161,954) 14.2%
Commission expenses (3,658) (24,673) (3,418) (31,749) (6,461) (17,307) (2,852) (26,620) 19.3%
Other operating expenses (14,189) (41,571) (9,571) (65,331) (13,375) (40,720) (10,967) (65,062) 0.4%
Other underwriting income (expense) 231 446 26 703 175 141 1 317 121.7%
Underwriting profit (loss) $10,081 $9,804 $(478) $19,407 $8,637 $3,433 $3,006 $15,076 28.7%
Losses and LAE ratio 42.5% 65.5% 62.4% 61.5% 43.3% 67.2% 46.3% 60.3%
Commission expense ratio 7.6% 11.2% 10.3% 10.6% 12.9% 9.2% 9.1% 9.9%
Other operating expense ratio (1) 29.0% 18.8% 28.7% 21.4% 26.5% 21.8% 35.0% 24.2%
Combined ratio 79.1% 95.5% 101.4% 93.5% 82.7% 98.2% 90.4% 94.4%

(1) - Includes Other operating expenses and Other underwriting income (expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
Int’l Insurance
Six Months Ended June 30, 2016 Six Months Ended June 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $113,095 $107,048 $59,740 $279,883 $108,842 $74,565 $47,810 $231,217 21.0%
Ceded written premiums (20,643) (41,694) (14,544) (76,881) (19,948) (40,642) (15,287) (75,877) 1.3%
Net written premiums 92,452 65,354 45,196 203,002 88,894 33,923 32,523 155,340 30.7%
Net earned premiums $74,952 $45,024 $35,865 $155,841 $77,924 $26,233 $
24,554 $
128,711 21.1%
Net losses and LAE (37,109) (33,094) (18,273) (88,476) (40,943) (8,964) (12,147) (62,054) 42.6%
Commission expenses (17,766) (7,925) (6,485) (32,176) (18,685) (1,182) (2,844) (22,711) 41.7%
Other operating expenses (17,140) (17,773) (9,901) (44,814) (13,444) (12,150) (8,781) (34,375) 30.4%
Other underwriting income (expense) - - - - - - - - NM
Underwriting profit (loss) $2,937 $(13,768) $1,206 $(9,625) $4,852 $3,937 $782 $9,571 NM
Losses and LAE ratio 49.5% 73.5% 50.9% 56.8% 52.5% 34.2% 49.5% 48.2%
Commission expense ratio 23.7% 17.6% 18.1% 20.6% 24.0% 4.5% 11.6% 17.6%
Other operating expense ratio (1) 22.9% 39.5% 27.6% 28.8% 17.3% 46.3% 35.7% 26.8%
Combined ratio 96.1% 130.6% 96.6% 106.2% 93.8% 85.0% 96.8% 92.6%

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
For the Three Months Ended June 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
U.S. Insurance:
Loss and LAE payments $72,246 $56,719 47.4% 41.3%
Change in reserves 21,182 27,436 13.9% 20.0%
Net incurred loss and LAE $
93,428 $84,155 61.3% 61.3%
Int’l Insurance:
Loss and LAE payments 32,996 33,891 42.4% 53.6%
Change in reserves 15,070 (1,528) 19.4% -2.4%
Net incurred loss and LAE $
48,066 $32,363 61.8% 51.2%
GlobalRe:
Loss and LAE payments 17,928 20,037 47.5% 47.9%
Change in reserves 7,784 5,418 20.6% 12.9%
Net incurred loss and LAE $
25,712 $
25,455 68.1% 60.8%
Total
Loss and LAE payments 123,170 110,647 46.0% 45.7%
Change in reserves 44,036 31,326 16.4% 12.9%
Net incurred loss and LAE $167,206 $141,973 62.4% 58.6%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves June 30, June 30, June 30, June 30,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
U.S. Insurance $4,002 $7,829 1.5% 3.2%
Int’l Insurance 3,354 (581) 1.3% -0.2%
GlobalRe 1,423 7 0.5% 0.0%
Total $8,779 $7,255 3.3% 3.0%






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
For the Six Months Ended June 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
U.S. Insurance:
Loss and LAE payments $145,281 $119,453 48.3% 44.5%
Change in reserves 39,659 42,501 13.2% 15.8%
Net incurred loss and LAE $
184,940 $161,954 61.5% 60.3%
Int’l Insurance:
Loss and LAE payments 62,239 69,428 39.9% 53.9%
Change in reserves 26,237 (7,374) 16.9% -5.7%
Net incurred loss and LAE $88,476 $62,054 56.8% 48.2%
GlobalRe:
Loss and LAE payments 43,059 41,249 56.8% 50.7%
Change in reserves 3,687 6,914 4.9% 8.5%
Net incurred loss and LAE $46,746 $
48,163 61.7% 59.2%
Total
Loss and LAE payments 250,579 230,130 47.1% 48.1%
Change in reserves 69,583 42,041 13.0% 8.8%
Net incurred loss and LAE $320,162 $272,171 60.1% 56.9%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves June 30, June 30, June 30, June 30,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
U.S. Insurance $6,671 $14,238 1.3% 3.0%
Int’l Insurance 2,499 5,610 0.5% 1.2%
GlobalRe 1,443 6 0.3% 0.0%
Total $10,613 $19,854 2.1% 4.2%






THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
As of June 30, 2016
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $57,895 $52,573 $110,468
P&C
192,440 555,945 748,385
Professional Liability 30,150 63,592 93,742
Total U.S. Insurance $
280,485 $
672,110 $
952,595
Int’l Insurance:
Marine 162,364 59,347 221,711
P&C 55,811 19,815 75,626
Professional Liability 28,850 63,843 92,693
Total Int’l Insurance $247,025 $
143,005 $390,030
GlobalRe $45,705 $66,172 $111,877
Total Net Loss Reserves $573,215 $881,287 $1,454,502
As of December 31, 2015
Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $68,677 $55,408 $124,085
P&C 170,988 514,777 685,765
Professional Liability 42,546 60,528 103,074
Total U.S. Insurance $
282,211 $630,713 $912,924
Int’l Insurance:
Marine 167,157 61,409 228,566
P&C 40,313 19,735 60,048
Professional Liability 19,583 63,229 82,812
Total Int’l Insurance $227,053 $144,373 $371,426
GlobalRe $32,160 $76,616 $108,776
Total Net Loss Reserves $541,424 $851,702 $1,393,126



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

As of June 30, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was "AA-/Aa3" with an average duration of 3.9 years. Our Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2016:

As of June 30, 2016
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
amounts in thousands Value Gains (Losses) Cost
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign
government bonds
$353,579 $6,019 $(3,860) $351,420
States, municipalities and political subdivisions 553,824 34,183 (602) 520,243
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities 504,731 11,203 (183) 493,711
Residential mortgage obligations 28,258 470 (130) 27,918
Asset-backed securities 262,903 1,339 (836) 262,400
Commercial mortgage-backed securities 172,579 6,581 (1,028) 167,026
Subtotal $968,471 $19,593 $(2,177) $951,055
Corporate bonds 756,439 22,172 (1,636) 735,903
Total fixed maturities $2,632,313 $81,967 $(8,275) $2,558,621
Equity securities 329,635 39,159 (2,222) 292,698
Short-term investments 144,843 - (2) 144,845
Total investments $3,106,791 $121,126 $(10,499) $2,996,164


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.