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Navigators Reports Fourth Quarter 2016 Earnings

STAMFORD, Conn., Feb. 16, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $21.6 million, or $0.71 per diluted share, for the three months ended December 31, 2016 compared to $17.7 million, or $0.59 per diluted share, for the comparable period in 2015. Net operating earnings were $17.7 million, or $0.58 per diluted share, for the three months ended December 31, 2016 compared to $16.4 million, or $0.55 per diluted share, for the comparable period in 2015.

For the twelve months ended December 31, 2016, our Company reported Net income of $82.7 million, or $2.75 per diluted share, compared to $81.1 million, or $2.73, for the comparable period in 2015. Net operating earnings were $71.2 million, or $2.37 per diluted share, for the twelve months ended December 31, 2016 compared to $77.1 million, or $2.60 per diluted share, for the comparable period in 2015.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report profitable results for the fourth quarter and full year, led by strong performances in our U.S. Insurance and Global Reinsurance segments. While our International Insurance segment was adversely impacted by property loss activity during the fourth quarter and full year, largely emanating from North American exposures underwritten at Lloyd’s, our Marine and Professional Liability businesses within the segment were profitable. Premium growth remained strong, with Net written premium up 15.6% for the quarter and 13.6% for the full year, reflecting the ongoing development of more recent product initiatives. Net investment income was up 8.7% for the quarter and 15.6% for the full year while maintaining the portfolio’s credit quality.” Mr. Galanski continued, “While we are a growing company, we continue to emphasize cost control. Our Other operating expenses for the quarter were down 1.9% and up only 4.7% for the full year, which is well below our rate of revenue growth. Despite challenging market conditions, we continue to execute on a strategy built around our culture of underwriting excellence, local decision-making and superb customer experiences.”

Gross written premiums and Net written premiums for the three months ended December 31, 2016 were $367.5 million and $282.9 million, respectively, increasing 13.6% and 15.6% from the comparable period in 2015.

Gross written premiums and Net written premiums for the twelve months ended December 31, 2016 were $1.6 billion and $1.2 billion, respectively, increasing 7.9% and 13.6% from the comparable period in 2015.

The combined ratio for the three and twelve months ended December 31, 2016 was 96.7% and 96.7%, respectively, compared to 97.2% and 94.1% for the comparable periods in 2015.

Net investment income for the three and twelve months ended December 31, 2016 was $20.1 million and $79.5 million, respectively, increases of 8.7% and 15.6% 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 twelve months ended December 31, 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 3.7 years as of December 31, 2016. As of December 31, 2016, Net unrealized gains within our investment portfolio were $29.0 million, a decrease of $8.3 million compared to December 31, 2015.

We recognized $4.0 million of Net realized gains (losses) for the three months ended December 31, 2016, compared to ($2.1) million of Net realized losses for the same period in 2015. For the twelve months ended December 31, 2016, we recognized $9.0 million of Net realized gains, compared to $6.7 million for the same period in 2015.

Other income (loss) for the three months ended December 31, 2016 was $1.9 million of income, compared to $4.1 million of income for the same period in 2015. For the twelve months ended December 31, 2016, Other income (loss) was $8.7 million of income, compared to ($0.5) million of loss for the same period in 2015. Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses. Stockholders’ equity was $1.2 billion, or $40.45 per share, as of December 31, 2016 compared to $1.1 billion, or $37.98 per share, as of December 31, 2015.

On February 16, 2017, the Board of Directors declared a quarterly cash dividend of $0.045 per share of Common stock to be paid on March 24, 2017 to stockholders of record at the close of business on March 3, 2017.

Our Company will hold a conference call on Friday, February 17, 2017 starting at 8:30 a.m. (EST) to discuss the 2016 fourth quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

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

http://edge.media-server.com/m/p/5a9fo82i

On December 6, 2016, our Board of Directors declared a two-for-one stock split of The Navigators Group, Inc. Common stock, to be effected in the form of a stock dividend. Stockholders of record at the close of business on December 30, 2016 received one additional share of Common stock for every share of Common stock held. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the stock split for all periods presented. The additional shares of Common stock were issued on January 20, 2017.

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 a representative office in China.

This press release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words “estimate,” “expect,” “believe” or similar expressions are intended to identify such forward-looking statements. Forward-looking statements are derived from information that we currently have and assumptions that we make. We cannot assure that results that we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties that we face. Please refer to Navigators’ most recent reports on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators’ business and the important factors that may affect that business. Navigators’ undertakes no obligation to publicly update or revise any forward-looking statement.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except share and per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
Results of Operations 2016 2015 Change 2016 2015 Change
Gross written premiums $367,539 $323,509 13.6% $1,568,911 $1,453,502 7.9%
Net written premiums 282,868 244,719 15.6% 1,186,224 1,043,860 13.6%
Revenues:
Net earned premiums $283,985 $251,545 12.9% $1,100,345 $984,087 11.8%
Net investment income 20,107 18,499 8.7% 79,451 68,718 15.6%
Net realized gains (losses):
Total other-than-temporary impairment losses 21 (123) NM (227) (1,870) (87.9%)
Portion of loss recognized in other comprehensive income (before tax) (21) 123 NM 77 172 (55.3%)
Net other-than-temporary impairment losses recognized in earnings NM (150) (1,698) (91.2%)
Other realized gains (losses) 4,043 (2,080) NM 9,186 8,373 9.7%
Net realized gains (losses) 4,043 (2,080) NM 9,036 6,675 35.4%
Other income (loss) 1,905 4,147 (54.1%) 8,701 (491) NM
Total revenues $310,040 $272,111 13.9% $1,197,533 $1,058,989 13.1%
Expenses:
Net losses and loss adjustment expenses 172,493 153,881 12.1% 665,448 572,598 16.2%
Commission expenses 44,154 31,339 40.9% 165,045 129,977 27.0%
Other operating expenses 58,076 59,219 (1.9%) 234,096 223,516 4.7%
Interest expense 3,860 3,857 0.1% 15,435 15,424 0.1%
Total expenses $278,583 $248,296 12.2% $1,080,024 $941,515 14.7%
Income before income taxes 31,457 23,815 32.1% 117,509 117,474 0.0%
Income tax expense (benefit) 9,866 6,072 62.5% 34,783 36,417 (4.5%)
Net income (loss) $21,591 $17,743 21.7% $82,726 $81,057 2.1%
Per Share Data(1)
Net income per common share:
Basic $0.74 $0.62 20.5% $2.85 $2.82 1.0%
Diluted $0.71 $0.59 19.9% $2.75 $2.73 0.8%
Average common shares outstanding:
Basic 29,121,376 28,833,895 29,073,803 28,785,044
Diluted 30,282,248 29,835,293 30,031,609 29,651,490
Underwriting Ratios
Loss Ratio 60.7% 61.2% 60.5% 58.2%
Expense Ratio 36.0% 36.0% 36.2% 35.9%
Combined Ratio 96.7% 97.2% 96.7% 94.1%
Balance Sheet Data December 31, September 30, December 31, December 31,
2016 2016 2016 2015
Stockholders' equity $1,178,188 $1,204,281 -2.2% $1,178,188 $1,096,148 7.5%
Book value per share $40.45 $41.36 -2.2% $40.45 $37.98 6.5%
(1) We completed a two-for-one stock split on January 20, 2017. All share and per share data has been retroactively restated on a post-split basis.
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 December 31,
2016
Three Months Ended December 31,
2015
%
Change
Pre-Tax Tax After-Tax Pre-Tax Tax After-Tax QTD
Net income $31,457 $(9,866) $21,591 $23,815 $(6,072) $17,743 21.7%
Adjustments to Net income:
Realized losses (gains) (4,043) 1,416 (2,627) 2,080 (728) 1,352 NM
FX losses (gains) (1,947) 682 (1,265) (4,132) 1,446 (2,686) (52.9%)
Net operating earnings $25,467 $(7,768) $17,699 $21,763 $(5,354) $16,409 7.9%
Net operating earnings per common share:(1)
Basic $0.61 $0.57
Diluted $0.58 $0.55
Twelve Months Ended December 31,
2016
Twelve Months Ended December 31,
2015
%
Change
Pre-Tax Tax After-Tax Pre-Tax Tax After-Tax YTD
Net income $117,509 $(34,783) $82,726 $117,474 $(36,417) $81,057 2.1%
Adjustments to Net income:
Realized losses (gains) (9,036) 3,163 (5,873) (6,675) 2,336 (4,339) 35.4%
FX losses (gains) (8,626) 3,019 (5,607) 622 (218) 404 NM
Net operating earnings $99,847 $(28,601) $71,246 $111,421 $(34,299) $77,122 (7.6%)
Net operating earnings per common share:(1)
Basic $2.45 $2.68
Diluted $2.37 $2.60
(1) We completed a two-for-one stock split on January 20, 2017. All share and per share data has been retroactively restated on a post-split basis.
NM- Percentage change not meaningful



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
amounts in thousands, except share and per share amounts.
December 31, December 31,
2016 2015
ASSETS
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $2,628,225; 2015: $2,400,245) $2,635,882 $2,414,210
Equity securities, available-for-sale, at fair value (cost: 2016: $327,911; 2015: $281,943) 349,142 305,271
Other invested assets (equity method) 1,960
Short-term investments, at fair value (amortized cost: 2016: $143,451; 2015: $217,743) 143,539 217,745
Total investments $3,130,523 $2,937,226
Cash 64,643 69,901
Premiums receivable 306,686 276,616
Prepaid reinsurance premiums 213,377 232,588
Reinsurance recoverable on paid losses 82,582 49,506
Reinsurance recoverable on unpaid losses and loss adjustment expenses 779,276 809,518
Deferred policy acquisition costs 119,660 91,983
Accrued investment income 17,315 16,001
Goodwill and other intangible assets 6,451 6,807
Current income tax receivable, net 23,659 22,323
Deferred income tax, net 17,835 3,900
Other assets 52,030 67,643
Total assets $4,814,037 $4,584,012
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $2,289,727 $2,202,644
Unearned premiums 887,344 820,676
Reinsurance balances payable 108,980 107,411
Senior notes 263,728 263,580
Accounts payable and other liabilities 86,070 93,553
Total liabilities $3,635,849 $3,487,864
Stockholders' equity:(1)
Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued $ $
Common stock, $.10 par value, authorized 50,000,000 shares, issued 36,146,899 shares for 2016 and 35,884,538 shares for 2015 3,612 3,586
Additional paid-in capital 373,983 356,036
Treasury stock, at cost (7,022,760 shares for 2016 and 2015) (155,801) (155,801)
Retained earnings 947,519 868,723
Accumulated other comprehensive income 8,875 23,604
Total stockholders' equity $1,178,188 $1,096,148
Total liabilities and stockholders' equity $4,814,037 $4,584,012
(1) We completed a two-for-one stock split on January 20, 2017. All share data has been retroactively restated on a post-split basis.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended December 31, 2016
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $230,177 $100,104 $37,258 $ $367,539
Ceded written premiums (57,353) (26,429) (889) (84,671)
Net written premiums 172,824 73,675 36,369 282,868
Net earned premiums $166,862 $71,814 $45,309 $ $283,985
Net losses and LAE (106,600) (44,765) (21,128) (172,493)
Commission expenses (20,433) (14,179) (9,820) 278 (44,154)
Other operating expenses (31,260) (21,398) (5,418) (58,076)
Other underwriting income (expense) 149 148 (278) 19
Underwriting profit (loss) $8,718 $(8,528) $9,091 $ $9,281
Net investment income 20,107 20,107
Net realized gains (losses) 4,043 4,043
Interest expense (3,860) (3,860)
Other income (loss) 1,886 1,886
Income before income taxes $8,718 $(8,528) $9,091 $22,176 $31,457
Income tax (expense) benefit (9,866) (9,866)
Net income (loss) $21,591
Losses and LAE ratio 63.9% 62.3% 46.6% 60.7%
Commission expense ratio 12.2% 19.7% 21.7% 15.5%
Other operating expense ratio (2) 18.7% 29.9% 11.6% 20.5%
Combined ratio 94.8% 111.9% 79.9% 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
Three Months Ended December 31, 2015
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $207,684 $81,942 $33,883 $ $323,509
Ceded written premiums (57,410) (20,324) (1,056) (78,790)
Net written premiums 150,274 61,618 32,827 244,719
Net earned premiums $145,032 $62,716 $43,797 $ $251,545
Net losses and LAE (96,403) (33,466) (24,012) (153,881)
Commission expenses (14,542) (8,185) (9,198) 586 (31,339)
Other operating expenses (33,397) (21,555) (4,267) (59,219)
Other underwriting income (expense) 360 249 (586) 23
Underwriting profit (loss) $1,050 $(490) $6,569 $ $7,129
Net investment income 18,499 18,499
Net realized gains (losses) (2,080) (2,080)
Interest expense (3,857) (3,857)
Other income (loss) 4,124 4,124
Income before income taxes $1,050 $(490) $6,569 $16,686 $23,815
Income tax (expense) benefit (6,072) (6,072)
Net income (loss) $17,743
Losses and LAE ratio 66.5% 53.4% 54.8% 61.2%
Commission expense ratio 10.0% 13.1% 21.0% 12.5%
Other operating expense ratio (2) 22.8% 34.3% 9.2% 23.5%
Combined ratio 99.3% 100.8% 85.0% 97.2%
(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Twelve Months Ended December 31, 2016
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $919,395 $484,471 $165,045 $ $1,568,911
Ceded written premiums (235,827) (138,504) (8,356) (382,687)
Net written premiums 683,568 345,967 156,689 1,186,224
Net earned premiums $629,308 $307,416 $163,621 $ $1,100,345
Net losses and LAE (397,860) (178,284) (89,304) (665,448)
Commission expenses (70,812) (61,703) (34,008) 1,478 (165,045)
Other operating expenses (128,108) (86,395) (19,593) (234,096)
Other underwriting income (expense) 1,092 522 (1,478) 136
Underwriting profit (loss) $33,620 $(18,966) $21,238 $ $35,892
Net investment income 79,451 79,451
Net realized gains (losses) 9,036 9,036
Interest expense (15,435) (15,435)
Other income (loss) 8,565 8,565
Income (loss) before income taxes $33,620 $(18,966) $21,238 $81,617 $117,509
Income tax (expense) benefit (34,783) (34,783)
Net income (loss) $82,726
Losses and LAE ratio 63.2% 58.0% 54.6% 60.5%
Commission expense ratio 11.3% 20.1% 20.8% 15.0%
Other operating expense ratio (2) 20.2% 28.1% 11.6% 21.2%
Combined ratio 94.7% 106.2% 87.0% 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
Twelve Months Ended December 31, 2015
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross written premiums $865,781 $411,947 $175,774 $ $1,453,502
Ceded written premiums (268,775) (134,005) (6,862) (409,642)
Net written premiums 597,006 277,942 168,912 1,043,860
Net earned premiums $555,836 $259,960 $168,291 $ $984,087
Net losses and LAE (343,497) (134,702) (94,399) (572,598)
Commission expenses (56,319) (43,676) (32,240) 2,258 (129,977)
Other operating expenses (131,407) (75,867) (16,242) (223,516)
Other underwriting income (expense) 1,690 690 (2,258) 122
Underwriting profit (loss) $26,303 $5,715 $26,100 $ $58,118
Net investment income 68,718 68,718
Net realized gains (losses) 6,675 6,675
Interest expense (15,424) (15,424)
Other income (loss) (613) (613)
Income (loss) before income taxes $26,303 $5,715 $26,100 $59,356 $117,474
Income tax (expense) benefit (36,417) (36,417)
Net income (loss) $81,057
Losses and LAE ratio 61.8% 51.8% 56.1% 58.2%
Commission expense ratio 10.1% 16.8% 19.2% 13.2%
Other operating expense ratio (2) 23.4% 29.2% 9.2% 22.7%
Combined ratio 95.3% 97.8% 84.5% 94.1%
(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 December 31, 2016 Three Months Ended December 31, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $39,784 $160,030 $30,363 $230,177 $40,045 $138,214 $29,425 $207,684 10.8%
Ceded written premiums (17,035) (32,602) (7,716) (57,353) (16,747) (28,395) (12,268) (57,410) (0.1%)
Net written premiums 22,749 127,428 22,647 172,824 23,298 109,819 17,157 150,274 15.0%
Net earned premiums $26,496 $118,331 $22,035 $166,862 $21,976 $109,673 $13,383 $145,032 15.1%
Net losses and LAE (14,639) (77,979) (13,982) (106,600) (14,619) (71,878) (9,906) (96,403) 10.6%
Commission expenses (2,694) (14,146) (3,593) (20,433) (2,254) (11,392) (896) (14,542) 40.5%
Other operating expenses (6,603) (19,901) (4,756) (31,260) (6,953) (20,890) (5,554) (33,397) (6.4%)
Other underwriting income (expense) 108 32 9 149 100 246 14 360 (58.5%)
Underwriting profit (loss) $2,668 $6,337 $(287) $8,718 $(1,750) $5,759 $(2,959) $1,050 NM
Losses and LAE ratio 55.3% 65.9% 63.5% 63.9% 66.5% 65.5% 74.0% 66.5%
Commission expense ratio 10.2% 12.0% 16.3% 12.2% 10.3% 10.4% 6.7% 10.0%
Other operating expense ratio (1) 24.4% 16.7% 21.5% 18.7% 31.2% 18.8% 41.4% 22.8%
Combined ratio 89.9% 94.6% 101.3% 94.8% 108.0% 94.7% 122.1% 99.3%
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 December 31, 2016 Three Months Ended December 31, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $31,680 $35,969 $32,455 $100,104 $33,863 $18,715 $29,364 $81,942 22.2%
Ceded written premiums (6,818) (12,581) (7,030) (26,429) (5,582) (7,046) (7,696) (20,324) 30.0%
Net written premiums 24,862 23,388 25,425 73,675 28,281 11,669 21,668 61,618 19.6%
Net earned premiums $31,847 $18,847 $21,120 $71,814 $34,540 $12,208 $15,968 $62,716 14.5%
Net losses and LAE (12,653) (19,821) (12,291) (44,765) (15,792) (3,463) (14,211) (33,466) 33.8%
Commission expenses (7,894) (3,102) (3,183) (14,179) (5,275) (1,038) (1,872) (8,185) 73.2%
Other operating expenses (8,376) (8,389) (4,633) (21,398) (8,742) (7,540) (5,273) (21,555) (0.7%)
Other underwriting income (expense) NM
Underwriting profit (loss) $2,924 $(12,465) $1,013 $(8,528) $4,731 $167 $(5,388) $(490) NM
Losses and LAE ratio 39.7% 105.2% 58.2% 62.3% 45.7% 28.4% 89.0% 53.4%
Commission expense ratio 24.8% 16.5% 15.1% 19.7% 15.3% 8.5% 11.7% 13.1%
Other operating expense ratio (1) 26.3% 44.4% 21.9% 29.9% 25.3% 61.7% 33.0% 34.3%
Combined ratio 90.8% 166.1% 95.2% 111.9% 86.3% 98.6% 133.7% 100.8%
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
Twelve Months Ended December 31, 2016 Twelve Months Ended December 31, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $169,405 $631,562 $118,428 $919,395 $158,124 $596,673 $110,984 $865,781 6.2%
Ceded written premiums (70,858) (135,888) (29,081) (235,827) (61,916) (152,168) (54,691) (268,775) (12.3%)
Net written premiums 98,547 495,674 89,347 683,568 96,208 444,505 56,293 597,006 14.5%
Net earned premiums $100,132 $453,673 $75,503 $629,308 $96,082 $401,408 $58,346 $555,836 13.2%
Net losses and LAE (50,087) (295,877) (51,896) (397,860) (43,553) (266,806) (33,138) (343,497) 15.8%
Commission expenses (8,469) (52,483) (9,860) (70,812) (11,606) (39,931) (4,782) (56,319) 25.7%
Other operating expenses (27,559) (81,469) (19,080) (128,108) (27,082) (81,866) (22,459) (131,407) (2.5%)
Other underwriting income (expense) 465 582 45 1,092 489 1,122 79 1,690 (35.4%)
Underwriting profit (loss) $14,482 $24,426 $(5,288) $33,620 $14,330 $13,927 $(1,954) $26,303 27.8%
Losses and LAE ratio 50.0% 65.2% 68.7% 63.2% 45.3% 66.5% 56.8% 61.8%
Commission expense ratio 8.5% 11.6% 13.1% 11.3% 12.1% 9.9% 8.2% 10.1%
Other operating expense ratio (1) 27.0% 17.8% 25.2% 20.2% 27.7% 20.1% 38.3% 23.4%
Combined ratio 85.5% 94.6% 107.0% 94.7% 85.1% 96.5% 103.3% 95.3%
(1) - Includes Other operating expenses and Other underwriting income (expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
Int'l Insurance
Twelve Months Ended December 31, 2016 Twelve Months Ended December 31, 2015
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross written premiums $183,228 $181,094 $120,149 $484,471 $183,707 $130,729 $97,511 $411,947 17.6%
Ceded written premiums (40,092) (69,606) (28,806) (138,504) (36,515) (67,722) (29,768) (134,005) 3.4%
Net written premiums 143,136 111,488 91,343 345,967 147,192 63,007 67,743 277,942 24.5%
Net earned premiums $141,593 $89,455 $76,368 $307,416 $149,256 $55,320 $55,384 $259,960 18.3%
Net losses and LAE (67,051) (68,995) (42,238) (178,284) (79,737) (20,478) (34,487) (134,702) 32.4%
Commission expenses (34,018) (14,529) (13,156) (61,703) (32,187) (4,999) (6,490) (43,676) 41.3%
Other operating expenses (33,170) (34,075) (19,150) (86,395) (30,419) (26,294) (19,154) (75,867) 13.9%
Other underwriting income (expense) NM
Underwriting profit (loss) $7,354 $(28,144) $1,824 $(18,966) $6,913 $3,549 $(4,747) $5,715 NM
Losses and LAE ratio 47.4% 77.1% 55.3% 58.0% 53.4% 37.0% 62.3% 51.8%
Commission expense ratio 24.0% 16.2% 17.2% 20.1% 21.6% 9.0% 11.7% 16.8%
Other operating expense ratio (1) 23.4% 38.2% 25.1% 28.1% 20.4% 47.6% 34.6% 29.2%
Combined ratio 94.8% 131.5% 97.6% 106.2% 95.4% 93.6% 108.6% 97.8%
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 December 31,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
U.S. Insurance:
Loss and LAE payments $73,100 $60,750 43.8% 41.9%
Change in reserves 33,500 35,653 20.1% 24.6%
Net incurred loss and LAE $106,600 $96,403 63.9% 66.5%
Int'l Insurance:
Loss and LAE payments $45,011 $27,933 62.6% 44.6%
Change in reserves (246) 5,533 (0.3%) 8.8%
Net incurred loss and LAE $44,765 $33,466 62.3% 53.4%
GlobalRe:
Loss and LAE payments $17,260 $48,320 38.1% 110.3%
Change in reserves 3,868 (24,308) 8.5% (55.5%)
Net incurred loss and LAE $21,128 $24,012 46.6% 54.8%
Total
Loss and LAE payments $135,371 $137,003 47.6% 54.5%
Change in reserves 37,122 16,878 13.1% 6.7%
Net incurred loss and LAE $172,493 $153,881 60.7% 61.2%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves December 31, December 31, December 31, December 31,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
U.S. Insurance $(420) $8,023 (0.1%) 3.2%
Int'l Insurance 19,660 17,812 6.9% 7.1%
GlobalRe (2,356) 4,865 (0.8%) 1.9%
Total $16,884 $30,700 6.0% 12.2%



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
For the Twelve Months Ended December 31,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2016 2015 2016 2015
U.S. Insurance:
Loss and LAE payments $299,842 $247,530 47.6% 44.5%
Change in reserves 98,018 95,967 15.6% 17.3%
Net incurred loss and LAE $397,860 $343,497 63.2% 61.8%
Int'l Insurance:
Loss and LAE payments $151,098 $126,667 49.2% 48.7%
Change in reserves 27,186 8,035 8.8% 3.1%
Net incurred loss and LAE $178,284 $134,702 58.0% 51.8%
GlobalRe:
Loss and LAE payments $81,089 $106,468 49.6% 63.3%
Change in reserves 8,215 (12,069) 5.0% (7.2%)
Net incurred loss and LAE $89,304 $94,399 54.6% 56.1%
Total
Loss and LAE payments $532,029 $480,665 48.4% 48.9%
Change in reserves 133,419 91,933 12.1% 9.3%
Net incurred loss and LAE $665,448 $572,598 �� 60.5% 58.2%
Amounts Loss Ratio Impact
Impact of Prior Years Reserves December 31, December 31, December 31, December 31,
Favorable / (Unfavorable) Development 2016 2015 2016 2015
U.S. Insurance $1,348 $29,319 0.1% 3.0%
Int'l Insurance 25,019 26,216 2.3% 2.7%
GlobalRe 2,161 9,134 0.2% 0.9%
Total $28,528 $64,669 2.6% 6.6%



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
As of December 31, 2016
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $56,701 $54,259 $110,960
P&C 201,368 603,509 804,877
Professional Liability 24,555 70,559 95,114
Total U.S. Insurance $282,624 $728,327 $1,010,951
Int'l Insurance:
Marine $163,124 $36,118 $199,242
P&C 66,496 18,192 84,688
Professional Liability 30,106 70,103 100,209
Total Int'l Insurance $259,726 $124,413 $384,139
GlobalRe $47,505 $67,856 $115,361
Total Net Loss Reserves $589,855 $920,596 $1,510,451
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 December 31, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was AA-/Aa3 with an average duration of 3.7 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 December 31, 2016:
As of December 31, 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 $273,776 $2,192 $(5,128) $276,712
States, municipalities and political subdivisions 547,415 11,542 (4,036) 539,909
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities 487,364 4,016 (6,585) 489,933
Residential mortgage obligations 20,530 453 (55) 20,132
Asset-backed securities 314,601 824 (1,178) 314,955
Commercial mortgage-backed securities 154,139 2,859 (1,904) 153,184
Subtotal $976,634 $8,152 $(9,722) $978,204
Corporate bonds 838,057 10,185 (5,528) 833,400
Total fixed maturities $2,635,882 $32,071 $(24,414) $2,628,225
Equity securities 349,142 27,016 (5,785) 327,911
Short-term investments 143,539 88 143,451
Total investments $3,128,563 $59,175 $(30,199) $3,099,587


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.