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Navigators Reports Third Quarter 2016 Earnings

STAMFORD, Conn., Nov. 03, 2016 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $22.0 million, or $1.46 per diluted share, for the three months ended September 30, 2016 compared to $18.2 million, or $1.23 per diluted share, for the comparable period in 2015. Operating earnings were $21.1 million, or $1.40 per diluted share, for the three months ended September 30, 2016 compared to $20.3 million, or $1.37 per diluted share, for the comparable period in 2015.

For the nine months ended September 30, 2016, our Company reported Net income of $61.1 million, or $4.08 per diluted share, compared to $63.3 million, or $4.29 per diluted share, for the comparable period in 2015. Operating earnings were $53.5 million, or $3.57 per diluted share, for the nine months ended September 30, 2016 compared to $60.7 million, or $4.11 per diluted share, for the comparable period in 2015.

Gross written premiums and Net written premiums for the three months ended September 30, 2016 were $374.9 million and $277.0 million, respectively, increasing 5.9% and 9.9% from the comparable period in 2015.

Gross written premiums and Net written premiums for the nine months ended September 30, 2016 were $1.2 billion and $0.9 billion, respectively, increasing 6.3% and 13.0% from the comparable period in 2015.

The combined ratio for the three and nine months ended September 30, 2016 was 95.6% and 96.7%, respectively, compared to 93.4% and 93.0% for the comparable periods in 2015.

Stan Galanski, President and Chief Executive Officer, commented, “We are very pleased with our third quarter results. It is our 15th consecutive quarter of profitable underwriting results with net income up 20.9% from third quarter 2015 and a healthy combined ratio of 95.6%. Our investment portfolio performed well, with net investment income up 14.4% over third quarter 2015. Premium growth remained strong, with net written premium up nearly 10% for the quarter. Encouragingly, non-commission operating expenses were about flat with the third quarter of 2015, reflecting our efforts to control operating costs. Book value per share increased to $82.71 and was up nearly 9% from year end.”

Stockholders’ equity was $1.2 billion, or $82.71 per share, as of September 30, 2016 compared to $1.1 billion, or $75.96 per share, as of December 31, 2015.

On November 3, 2016, the Board of Directors declared a quarterly cash dividend of $0.09 per share of Common stock to be paid on December 29, 2016 to stockholders of record at the close of business on November 18, 2016.

Net investment income for the three and nine months ended September 30, 2016 was $19.9 million and $59.3 million, respectively, increases of 14.4% and 18.2% as compared to the same 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 2.5% and 2.6% for the three and nine months ended September 30, 2016, compared to 2.5% and 2.4%, respectively, for the 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 September 30, 2016. As of September 30, 2016, Net unrealized gains within our investment portfolio were $106.1 million, an increase of $68.8 million compared to December 31, 2015.

We recognized $1.6 million of Net realized gains (losses) for the three months ended September 30, 2016, compared to ($0.8) million of Net realized losses for the same period in 2015. For the nine months ended September 30, 2016, we recognized $5.0 million of Net realized gains, compared to $8.8 million for the same period in 2015.

Other income (loss) for the three months ended September 30, 2016 was ($0.2) million of loss, compared to ($2.5) million of loss for the same period in 2015. For the nine months ended September 30, 2016 Other income (loss) was $6.8 million of income, compared to ($4.6) 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, November 4, 2016 starting at 8:30 a.m. (EDT) to discuss the 2016 third quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is 800-850-2903 and the international dial-in is 224-357-2399. Participants may connect to the webcast at:

http://edge.media-server.com/m/p/ok7hgnmv

Net operating earnings, comprised of 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 Nine Months Ended
September 30, September 30,
Results of Operations 2016 2015 Change 2016 2015 Change
Gross written premiums $374,930 $354,062 5.9% $1,201,372 $1,129,993 6.3%
Net written premiums 277,001 251,939 9.9% 903,356 799,141 13.0%
Revenues:
Net earned premiums $284,010 $254,082 11.8% $816,360 $732,542 11.4%
Net investment income 19,875 17,371 14.4% 59,344 50,219 18.2%
Net realized gains (losses):
Total other-than-temporary impairment losses 23 (1,298) NM (248) (1,747) (85.8%)
Portion of loss recognized in other comprehensive income (before tax) (23) 23 NM 98 49 100.2%
Net other-than-temporary impairment losses recognized in earnings - (1,275) NM (150) (1,698) (91.2%)
Other realized gains (losses) 1,586 518 NM 5,143 10,453 (50.8%)
Net realized gains (losses) 1,586 (757) NM 4,993 8,755 (43.0%)
Other income (loss) (183) (2,518) (92.7%) 6,796 (4,638) NM
Total revenues $305,288 $268,178 13.8% $887,493 $786,878 12.8%
Expenses:
Net losses and loss adjustment expenses 172,793 146,546 17.9% 492,955 418,717 17.7%
Commission expenses 42,611 34,253 24.4% 120,891 98,638 22.6%
Other operating expenses 56,137 56,599 (0.8%) 176,020 164,297 7.1%
Interest expense 3,859 3,856 0.1% 11,575 11,567 0.1%
Total expenses $275,400 $241,254 14.2% $801,441 $693,219 15.6%
Income before income taxes 29,888 26,924 11.0% 86,052 93,659 (8.1%)
Income tax expense (benefit) 7,875 8,723 (9.7%) 24,917 30,345 (17.9%)
Net income (loss) $22,013 $18,201 20.9% $61,135 $63,314 (3.4%)
Per Share Data
Net income per common share:
Basic $1.51 $1.26 19.7% $4.21 $4.40 -4.4%
Diluted $1.46 $1.23 18.9% $4.08 $4.29 -4.9%
Average common shares outstanding:
Basic 14,557,376 14,411,927 14,528,917 14,384,291
Diluted 15,070,422 14,811,095 14,998,385 14,767,949
Underwriting Ratios
Loss Ratio 60.8% 57.7% 60.4% 57.2%
Expense Ratio 34.8% 35.7% 36.3% 35.8%
Combined Ratio 95.6% 93.4% 96.7% 93.0%
Balance Sheet Data September 30, June 30, September 30, December 31,
2016 2016 2016 2015
Stockholders' equity $1,204,281 $1,181,558 1.9% $1,204,281 $1,096,148 9.9%
Book value per share $82.71 $81.24 1.8% $82.71 $75.96 8.9%
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 September 30, 2016 Three Months Ended September 30, 2015 % Change
Pre-Tax Tax After Tax Pre-Tax Tax After Tax QTD
Net income $29,888 $(7,875) $22,013 $26,924 $(8,723) $18,201 20.9%
Adjustments to Net income:
Realized losses (gains) (1,586) 555 (1,031) 757 (265) 492 NM
FX losses (gains) 227 (80) 147 2,451 (858) 1,593 (90.8%)
Net operating earnings $28,529 $(7,400) $21,129 $30,132 $(9,846) $20,286 4.2%
Net operating earnings per common share:
Basic $1.45 $1.41
Diluted $1.40 $1.37
Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 % Change
Pre-Tax Tax After Tax Pre-Tax Tax After Tax YTD
Net income $86,052 $(24,917) $61,135 $93,659 $(30,345) $63,314 (3.4%)
Adjustments to Net income:
Realized losses (gains) (4,993) 1,747 (3,246) (8,755) 3,064 (5,691) (43.0%)
FX losses (gains) (6,679) 2,337 (4,342) 4,754 (1,664) 3,090 NM
Net operating earnings $74,380 $(20,833) $53,547 $89,658 $(28,945) $60,713 (11.8%)
Net operating earnings per common share:
Basic $3.69 $4.22
Diluted $3.57 $4.11
NM - Percentage change not meaningful



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
amounts in thousands, except share and per share amounts.
September 30, December 31,
2016 2015
ASSETS
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $2,591,050; 2015: $2,400,245) $2,660,417 $2,414,210
Equity securities, available-for-sale, at fair value (cost: 2016: $305,906; 2015: $281,943) 342,677 305,271
Other invested assets 2,021
Short-term investments, at fair value (amortized cost: 2016: $134,273; 2015: $217,743) 134,273 217,745
Total investments $3,139,388 $2,937,226
Cash 147,515 69,901
Premiums receivable 320,429 276,616
Prepaid reinsurance premiums 222,891 232,588
Reinsurance recoverable on paid losses 73,331 49,506
Reinsurance recoverable on unpaid losses and loss adjustment expenses 787,917 809,518
Deferred policy acquisition costs 116,295 91,983
Accrued investment income 16,840 16,001
Goodwill and other intangible assets 6,568 6,807
Current income tax receivable, net 15,879 22,323
Deferred income tax, net 3,900
Other assets 50,343 67,643
Total assets $4,897,396 $4,584,012
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $2,268,127 $2,202,644
Unearned premiums 897,975 820,676
Reinsurance balances payable 123,702 107,411
Senior notes 263,690 263,580
Deferred income tax, net 8,703
Payable for investments purchased 42,783 1,495
Accounts payable and other liabilities 88,135 92,058
Total liabilities $3,693,115 $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
18,070,815 shares for 2016 and 17,942,269 shares for 2015
1,806 1,793
Additional paid-in capital 368,860 357,829
Treasury stock, at cost (3,511,380 shares for 2016 and 2015) (155,801) (155,801)
Retained earnings 927,239 868,723
Accumulated other comprehensive income 62,177 23,604
Total stockholders' equity $1,204,281 $1,096,148
Total liabilities and stockholders' equity $4,897,396 $4,584,012


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended September 30, 2016
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $234,647 $104,484 $35,799 $ $374,930
Ceded written premiums (61,359) (35,194) (1,376) (97,929)
Net written premiums 173,288 69,290 34,423 277,001
Net earned premiums $161,722 $79,761 $42,527 $ $284,010
Net losses and LAE (106,320) (45,043) (21,430) (172,793)
Commission expenses (18,630) (15,348) (8,951) 318 (42,611)
Other operating expenses (31,517) (20,183) (4,437) (56,137)
Other underwriting income (expense) 240 122 (318) 44
Underwriting profit (loss) $5,495 $(813) $7,831 $ $12,513
Net investment income 19,875 19,875
Net realized gains (losses) 1,586 1,586
Interest expense (3,859) (3,859)
Other income (loss) (227) (227)
Income before income taxes $5,495 $(813) $7,831 $17,375 $29,888
Income tax (expense) benefit (7,875) (7,875)
Net income (loss) $22,013
Losses and LAE ratio 65.7% 56.5% 50.4% 60.8%
Commission expense ratio 11.5% 19.2% 21.0% 15.0%
Other operating expense ratio (2) 19.4% 25.3% 10.2% 19.8%
Combined ratio 96.6% 101.0% 81.6% 95.6%

(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 September 30, 2015
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $218,783 $98,788 $36,491 $ $354,062
Ceded written premiums (63,753) (37,804) (566) (102,123)
Net written premiums 155,030 60,984 35,925 251,939
Net earned premiums $142,409 $68,533 $43,140 $ $254,082
Net losses and LAE (85,140) (39,182) (22,224) (146,546)
Commission expenses (15,157) (12,780) (7,705) 1,389 (34,253)
Other operating expenses (32,948) (19,937) (3,714) (56,599)
Other underwriting income (expense) 1,013 395 (1,389) 19
Underwriting profit (loss) $10,177 $(3,366) $9,892 $ $16,703
Net investment income 17,371 17,371
Net realized gains (losses) (757) (757)
Interest expense (3,856) (3,856)
Other income (loss) (2,537) (2,537)
Income before income taxes $10,177 $(3,366) $9,892 $10,221 $26,924
Income tax (expense) benefit (8,723) (8,723)
Net income (loss) $18,201
Losses and LAE ratio 59.8% 57.2% 51.5% 57.7%
Commission expense ratio 10.6% 18.6% 17.9% 13.5%
Other operating expense ratio (2) 22.5% 29.1% 7.7% 22.2%
Combined ratio 92.9% 104.9% 77.1% 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
Nine Months Ended September 30, 2016
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $689,218 $384,367 $127,787 $ $1,201,372
Ceded written premiums (178,474) (112,075) (7,467) (298,016)
Net written premiums 510,744 272,292 120,320 903,356
Net earned premiums $462,446 $235,602 $118,312 $ $816,360
Net losses and LAE (291,260) (133,519) (68,176) (492,955)
Commission expenses (50,379) (47,524) (24,188) 1,200 (120,891)
Other operating expenses (96,848) (64,997) (14,175) (176,020)
Other underwriting income (expense) 943 374 (1,200) 117
Underwriting profit (loss) $24,902 $(10,438) $12,147 $ $26,611
Net investment income 59,344 59,344
Net realized gains (losses) 4,993 4,993
Interest expense (11,575) (11,575)
Other income (loss) 6,679 6,679
Income (loss) before income taxes $24,902 $(10,438) $12,147 $59,441 $86,052
Income tax (expense) benefit (24,917) (24,917)
Net income (loss) $61,135
Losses and LAE ratio 63.0% 56.7% 57.6% 60.4%
Commission expense ratio 10.9% 20.2% 20.4% 14.8%
Other operating expense ratio (2) 20.7% 27.5% 11.7% 21.5%
Combined ratio 94.6% 104.4% 89.7% 96.7%

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended September 30, 2015
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $658,097 $330,005 $141,891 $ $1,129,993
Ceded written premiums (211,365) (113,681) (5,806) (330,852)
Net written premiums 446,732 216,324 136,085 799,141
Net earned premiums $410,804 $197,244 $124,494 $ $732,542
Net losses and LAE (247,094) (101,236) (70,387) (418,717)
Commission expenses (41,777) (35,491) (23,042) 1,672 (98,638)
Other operating expenses (98,010) (54,312) (11,975) (164,297)
Other underwriting income (expense) 1,330 441 (1,672) 99
Underwriting profit (loss) $25,253 $6,205 $19,531 $ $50,989
Net investment income 50,219 50,219
Net realized gains (losses) 8,755 8,755
Interest expense (11,567) (11,567)
Other income (loss) (4,737) (4,737)
Income (loss) before income taxes $25,253 $6,205 $19,531 $42,670 $93,659
Income tax (expense) benefit (30,345) (30,345)
Net income (loss) $63,314
Losses and LAE ratio 60.1% 51.3% 56.5% 57.2%
Commission expense ratio 10.2% 18.0% 18.5% 13.5%
Other operating expense ratio (2) 23.6% 27.6% 9.3% 22.3%
Combined ratio 93.9% 96.9% 84.3% 93.0%

(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 September 30, 2016 Three Months Ended September 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $40,271 $161,600 $32,776 $234,647 $35,529 $154,009 $29,245 $218,783 7.3%
Ceded written premiums (17,636) (36,011) (7,712) (61,359) (13,865) (34,902) (14,986) (63,753) (3.8%)
Net written premiums 22,635 125,589 25,064 173,288 21,664 119,107 14,259 155,030 11.8%
Net earned premiums $25,465 $115,971 $20,286 $161,722 $24,292 $104,473 $13,644 $142,409 13.6%
Net losses and LAE (14,974) (74,129) (17,217) (106,320) (7,349) (69,054) (8,737) (85,140) 24.9%
Commission expenses (2,117) (13,664) (2,849) (18,630) (2,412) (11,711) (1,034) (15,157) 22.9%
Other operating expenses (6,767) (19,997) (4,753) (31,517) (6,754) (20,581) (5,613) (32,948) (4.3%)
Other underwriting income (expense) 126 104 10 240 214 735 64 1,013 (76.3%)
Underwriting profit (loss) $1,733 $8,285 $(4,523) $5,495 $7,991 $3,862 $(1,676) $10,177 (46.0%)
Losses and LAE ratio 58.8% 63.9% 84.9% 65.7% 30.3% 66.1% 64.0% 59.8%
Commission expense ratio 8.3% 11.8% 14.0% 11.5% 9.9% 11.2% 7.6% 10.6%
Other operating expense ratio (1) 26.1% 17.2% 23.4% 19.4% 26.9% 19.0% 40.7% 22.5%
Combined ratio 93.2% 92.9% 122.3% 96.6% 67.1% 96.3% 112.3% 92.9%

(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 September 30, 2016 Three Months Ended September 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $38,453 $38,077 $27,954 $104,484 $41,002 $37,449 $20,337 $98,788 5.8%
Ceded written premiums (12,631) (15,331) (7,232) (35,194) (10,985) (20,034) (6,785) (37,804) (6.9%)
Net written premiums 25,822 22,746 20,722 69,290 30,017 17,415 13,552 60,984 13.6%
Net earned premiums $34,794 $25,584 $19,383 $79,761 $36,792 $16,879 $14,862 $68,533 16.4%
Net losses and LAE (17,289) (16,080) (11,674) (45,043) (23,002) (8,051) (8,129) (39,182) 15.0%
Commission expenses (8,358) (3,502) (3,488) (15,348) (8,227) (2,779) (1,774) (12,780) 20.1%
Other operating expenses (7,654) (7,913) (4,616) (20,183) (8,233) (6,604) (5,100) (19,937) 1.2%
Other underwriting income (expense) NM
Underwriting profit (loss) $1,493 $(1,911) $(395) $(813) $(2,670) $(555) $(141) $(3,366) (75.8%)
Losses and LAE ratio 49.7% 62.8% 60.2% 56.5% 62.5% 47.7% 54.7% 57.2%
Commission expense ratio 24.0% 13.7% 18.0% 19.2% 22.4% 16.5% 11.9% 18.6%
Other operating expense ratio (1) 22.0% 31.0% 23.8% 25.3% 22.4% 39.1% 34.4% 29.1%
Combined ratio 95.7% 107.5% 102.0% 101.0% 107.3% 103.3% 101.0% 104.9%

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
Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $129,621 $471,532 $88,065 $689,218 $118,167 $458,371 $81,559 $658,097 4.7%
Ceded written premiums (53,823) (103,286) (21,365) (178,474) (45,177) (123,765) (42,423) (211,365) (15.6%)
Net written premiums 75,798 368,246 66,700 510,744 72,990 334,606 39,136 446,732 14.3%
Net earned premiums $73,636 $335,342 $53,468 $462,446 $74,193 $291,648 $44,963 $410,804 12.6%
Net losses and LAE (35,448) (217,898) (37,914) (291,260) (28,952) (194,910) (23,232) (247,094) 17.9%
Commission expenses (5,775) (38,337) (6,267) (50,379) (8,873) (29,018) (3,886) (41,777) 20.6%
Other operating expenses (20,956) (61,568) (14,324) (96,848) (20,129) (60,976) (16,905) (98,010) (1.2%)
Other underwriting income (expense) 357 550 36 943 389 876 65 1,330 (29.1%)
Underwriting profit (loss) $11,814 $18,089 $(5,001) $24,902 $16,628 $7,620 $1,005 $25,253 (1.4%)
Losses and LAE ratio 48.1% 65.0% 70.9% 63.0% 39.0% 66.8% 51.7% 60.1%
Commission expense ratio 7.8% 11.4% 11.7% 10.9% 12.0% 9.9% 8.6% 10.2%
Other operating expense ratio (1) 28.1% 18.2% 26.8% 20.7% 26.6% 20.7% 37.5% 23.6%
Combined ratio 84.0% 94.6% 109.4% 94.6% 77.6% 97.4% 97.8% 93.9%

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
Int'l Insurance
Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $151,548 $145,125 $87,694 $384,367 $149,844 $112,014 $68,147 $330,005 16.5%
Ceded written premiums (33,274) (57,025) (21,776) (112,075) (30,933) (60,676) (22,072) (113,681) (1.4%)
Net written premiums 118,274 88,100 65,918 272,292 118,911 51,338 46,075 216,324 25.9%
Net earned premiums $109,746 $70,608 $55,248 $235,602 $114,716 $43,112 $39,416 $197,244 19.4%
Net losses and LAE (54,398) (49,174) (29,947) (133,519) (63,945) (17,015) (20,276) (101,236) 31.9%
Commission expenses (26,124) (11,427) (9,973) (47,524) (26,912) (3,961) (4,618) (35,491) 33.9%
Other operating expenses (24,794) (25,686) (14,517) (64,997) (21,677) (18,754) (13,881) (54,312) 19.7%
Other underwriting income (expense) NM
Underwriting profit (loss) $4,430 $(15,679) $811 $(10,438) $2,182 $3,382 $641 $6,205 NM
Losses and LAE ratio 49.6% 69.6% 54.2% 56.7% 55.7% 39.5% 51.4% 51.3%
Commission expense ratio 23.8% 16.2% 18.1% 20.2% 23.5% 9.2% 11.7% 18.0%
Other operating expense ratio (1) 22.6% 36.4% 26.2% 27.5% 18.9% 43.5% 35.3% 27.6%
Combined ratio 96.0% 122.2% 98.5% 104.4% 98.1% 92.2% 98.4% 96.9%

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 September 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
US Insurance:
Loss and LAE payments $81,461 $67,327 50.4% 47.3%
Change in reserves 24,859 17,813 15.3% 12.5%
Net incurred loss and LAE $106,320 $85,140 65.7% 59.8%
Int'l Insurance:
Loss and LAE payments $43,848 $29,306 55.0% 42.8%
Change in reserves 1,195 9,876 1.5% 14.4%
Net incurred loss and LAE $45,043 $39,182 56.5% 57.2%
GlobalRe:
Loss and LAE payments $20,770 $16,899 48.8% 39.2%
Change in reserves 660 5,325 1.6% 12.3%
Net incurred loss and LAE $21,430 $22,224 50.4% 51.5%
Total
Loss and LAE payments $146,079 $113,532 51.4% 44.7%
Change in reserves 26,714 33,014 9.4% 13.0%
Net incurred loss and LAE $172,793 $146,546 60.8% 57.7%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves September 30, September 30, September 30, September 30,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
US Insurance $(4,903) $7,057 -1.7% 2.8%
Int'l Insurance 2,860 2,794 1.0% 1.1%
GlobalRe 3,074 4,264 1.1% 1.7%
Total $1,031 $14,115 0.4% 5.6%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
For the Nine Months Ended September 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
US Insurance:
Loss and LAE payments $226,742 $186,780 49.0% 45.4%
Change in reserves 64,518 60,314 14.0% 14.7%
Net incurred loss and LAE $291,260 $247,094 63.0% 60.1%
Int'l Insurance:
Loss and LAE payments $106,087 $98,734 45.0% 50.0%
Change in reserves 27,432 2,502 11.7% 1.3%
Net incurred loss and LAE $133,519 $101,236 56.7% 51.3%
GlobalRe:
Loss and LAE payments $63,829 $58,148 53.9% 46.7%
Change in reserves 4,347 12,239 3.7% 9.8%
Net incurred loss and LAE $68,176 $70,387 57.6% 56.5%
Total
Loss and LAE payments $396,658 $343,662 48.6% 47.0%
Change in reserves 96,297 75,055 11.8% 10.2%
Net incurred loss and LAE $492,955 $418,717 60.4% 57.2%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves September 30, September 30, September 30, September 30,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
US Insurance $1,768 $21,295 0.2% 2.9%
Int'l Insurance 5,359 8,404 0.7% 1.1%
GlobalRe 4,517 4,270 0.6% 0.6%
Total $11,644 $33,969 1.5% 4.6%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
As of September 30, 2016
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
US Insurance:
Marine $58,332 $53,462 $111,794
Property Casualty 188,495 584,581 773,076
Professional Liability 29,482 63,105 92,587
Total US Insurance $276,309 $701,148 $977,457
Int'l Insurance:
Marine $175,133 $42,824 $217,957
Property Casualty 58,360 20,414 78,774
Professional Liability 27,635 65,947 93,582
Total Int'l Insurance $261,128 $129,185 $390,313
GlobalRe $47,448 $64,992 $112,440
Total Net Loss Reserves $584,885 $895,325 $1,480,210
As of December 31, 2015
Case IBNR
Net Loss Reserves: Reserves Reserves Total
US Insurance:
Marine $68,677 $55,408 $124,085
Property Casualty 170,988 514,777 685,765
Professional Liability 42,546 60,528 103,074
Total US Insurance $282,211 $630,713 $912,924
Int'l Insurance:
Marine $167,157 $61,409 $228,566
Property Casualty 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 September 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 September 30, 2016:

As of September 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 $262,030 $3,691 $(3,981) $262,320
States, municipalities and political subdivisions 580,324 29,288 (769) 551,805
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities 526,069 11,778 (105) 514,396
Residential mortgage obligations 27,055 455 (97) 26,697
Asset-backed securities 288,636 1,503 (458) 287,591
Commercial mortgage-backed securities 165,405 6,392 (423) 159,436
Subtotal $1,007,165 $20,128 $(1,083) $988,120
Corporate bonds 810,898 23,447 (1,354) 788,805
Total fixed maturities $2,660,417 $76,554 $(7,187) $2,591,050
Equity securities 342,677 38,538 (1,767) 305,906
Other invested assets 2,021 2,021
Short-term investments 134,273 134,273
Total investments $3,139,388 $115,092 $(8,954) $3,033,250


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.