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Navigators Reports Second Quarter 2017 Earnings

STAMFORD, Conn., Aug. 03, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $20.5 million, or $0.69 per diluted share, for the three months ended June 30, 2017 compared to $16.2 million, or $0.54 per diluted share, for the same period in 2016. Net Operating Earnings1 were $19.7 million, or $0.66 per diluted share, for the three months ended June 30, 2017 compared to $12.2 million, or $0.41 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended June 30, 2017 were $452.2 million and $333.3 million, respectively, increasing 9.6% and 8.7%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended June 30, 2017 was 97.3%, compared to 99.6% for the same period in 2016.

Net Investment Income for the three months ended June 30, 2017 was $22.3 million, an increase of 12.0% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.8% for the three months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the three months ended June 30, 2017 was $(0.4) million, compared to $4.4 million for the same period in 2016. Other Income (Loss) primarily consists of realized and unrealized foreign exchange gains and losses.

For the six months ended June 30, 2017, our Company reported Net Income of $41.6 million, or $1.39 per diluted share, compared to $39.1 million, or $1.31 per diluted share, for the same period in 2016. Net Operating Earnings were $40.1 million, or $1.34 per diluted share, for the six months ended June 30, 2017 compared to $32.4 million, or $1.08 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the six months ended June 30, 2017 were $902.5 million and $670.4 million, respectively, increasing 9.2% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the six months ended June 30, 2017 was 96.9%, compared to 97.4% for the same period in 2016.

Net Investment Income for the six months ended June 30, 2017 was $43.7 million, an increase of 10.8% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the six months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income for the six months ended June 30, 2017 was $0.7 million, compared to $7.0 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report continued profitable underwriting results and good premium growth in the second quarter, led by strong performance from our US Insurance and Global Reinsurance segments and improvement in our International Insurance results. Second quarter Net Income was up 26.6% over the prior year as a result of improved Underwriting Profit and Investment Income, contributing to an increase in Book Value per Share of 3.1% during the quarter. We continue to invest in expanding our business, with a commitment to cost control as reflected in our year to date 2.1 point decrease in our Other Operating Expense Ratio.”

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 3.8 years as of June 30, 2017. As of June 30, 2017, Net Unrealized Gains within our investment portfolio were $74.3 million, an increase of $22.2 million compared to March 31, 2017 and an increase of $45.4 million compared to December 31, 2016. We recognized $1.7 million of Net Realized Gains for the three months ended June 30, 2017, compared to $1.8 million of Net Realized Gains for the same period in 2016 (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings). For the six months ended June 30, 2017 we recognized $1.7 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $3.4 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016.

Stockholders’ Equity was $1.2 billion, or $42.21 per share, as of June 30, 2017 compared to $40.94 per share, as of March 31, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended June 30, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On August 3, 2017 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.06 per share, payable on September 14, 2017 to stockholders of record on August 24, 2017.

Our Company will hold a conference call on Friday, August 4, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: http://edge.media-server.com/m/p/gvxmqq2j

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.

The Navigators Group, Inc. is an international specialty insurance holding company with operations in the United States, the United Kingdom, Continental Europe and Asia.

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.

1 Net Operating Earnings is a “non-GAAP financial measure” as defined in Regulation G. A reconciliation of Net income (the nearest GAAP financial measure) to Net Operating Earnings is provided on page 4 of this release, as is a discussion of the rationale for the presentation of this item.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended Six Months Ended
amounts in thousands, except per share amounts June 30, June 30,
Results of Operations 2017 2016 Change 2017 2016 Change
Gross Written Premiums $452,179 $412,565 9.6% $902,484 $826,442 9.2%
Net Written Premiums 333,282 306,535 8.7% 670,445 626,355 7.0%
Revenues:
Net Earned Premiums $293,835 $267,992 9.6% $579,966 $532,350 8.9%
Net Investment Income 22,265 19,875 12.0% 43,713 39,469 10.8%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment
Losses
29 (162) NM (1,048) (271) NM
Portion of Loss Recognized in Other
Comprehensive Income (Before Tax)
(29) 12 NM (45) 121 NM
Net Other-Than-Temporary Impairment Losses
Recognized In Earnings
(150) NM (1,093) (150) NM
Other Realized Gains 1,694 1,960 (13.6%) 2,743 3,557 (22.9%)
Net Realized Gains 1,694 1,810 (6.4%) 1,650 3,407 (51.6%)
Other Income (Loss) (411) 4,430 NM 657 6,979 (90.6%)
Total Revenues $317,383 $294,107 7.9% $625,986 $582,205 7.5%
Expenses:
Net Losses and Loss Adjustment Expenses $177,110 $167,206 5.9% $346,710 $320,162 8.3%
Commission Expenses 48,173 40,726 18.3% 96,017 78,280 22.7%
Other Operating Expenses 60,766 59,074 2.9% 119,304 119,883 (0.5%)
Interest Expense 3,861 3,858 0.1% 7,722 7,716 0.1%
Total Expenses $289,910 $270,864 7.0% $569,753 $526,041 8.3%
Income Before Income Taxes $27,473 $23,243 18.2% $56,233 $56,164 0.1%
Income Tax Expense 6,971 7,053 (1.2%) 14,621 17,042 (14.2%)
Net Income $20,502 $16,190 26.6% $41,612 $39,122 6.4%
Per Share Data (1)
Net Income Per Common Share:
Basic $0.70 $0.56 24.9% $1.42 $1.35 5.1%
Diluted $0.69 $0.54 26.8% $1.39 $1.31 6.3%
Average Common Shares Outstanding:
Basic 29,470 29,074 29,377 29,029
Diluted 29,918 29,953 29,897 29,884
Underwriting Ratios
Loss Ratio 60.3% 62.4% 59.8% 60.1%
Expense Ratio 37.0% 37.2% 37.1% 37.3%
Combined Ratio 97.3% 99.6% 96.9% 97.4%
Balance Sheet Data June 30, March 31, June 30, December 31,
2017 2017 2017 2016
Stockholders' Equity $1,244,168 $1,206,136 3.2% $1,244,168 $1,178,188 5.6%
Book Value per Share (1) $42.21 $40.94 3.1% $42.21 $40.45 4.3%

(1) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 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
(Unaudited)

In this release, we present Net Operating Earnings, which is a “non-GAAP financial measure” as defined in Regulation G.

Net Operating Earnings is 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). We believe that showing Net Income exclusive of Realized Gains and Losses, Net Other-Than-Temporary Impairment Losses Recognized in Earnings, and Foreign Exchange Gains and Losses reflects the underlying fundamentals of our business.

We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our business and enables investors and other users of our financial information to analyze underlying business performance in a manner similar to management. We also believe this measure follows industry practice and, therefore facilitates comparison of our performance with our peer group.

The following tables provide a reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings:

Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 % Change
amounts in thousands, except per share amounts Pre-Tax Tax (1) After-Tax Pre-Tax Tax (1) After-Tax QTD
Net Income $27,473 $(6,971) $20,502 $23,243 $(7,053) $16,190 26.6%
Adjustments to Net Income:
Realized Losses (Gains) (1,694) 593 (1,101) (1,810) 634 (1,176) (6.4%)
FX Losses (Gains) 463 (162) 301 (4,367) 1,529 (2,838) NM
Net Operating Earnings $26,242 $(6,540) $19,702 $17,066 $(4,890) $12,176 61.8%
Average Common Shares Outstanding: (2)
Basic 29,470 29,074
Diluted 29,918 29,953
Net Operating Earnings per Common Share: (2)
Basic $0.67 $0.42
Diluted $0.66 $0.41


Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 % Change
amounts in thousands, except per share amounts Pre-Tax Tax (1) After-Tax Pre-Tax Tax (1) After-Tax YTD
Net Income $56,233 $(14,621) $41,612 $56,164 $(17,042) $39,122 6.4%
Adjustments to Net Income:
Realized Losses (Gains) (1,650) 578 (1,072) (3,407) 1,193 (2,214) (51.6%)
FX Losses (Gains) (660) 231 (429) (6,907) 2,417 (4,490) (90.4%)
Net Operating Earnings $53,923 $(13,812) $40,111 $45,850 $(13,432) $32,418 23.7%
Average Common Shares Outstanding: (2)
Basic 29,377 29,029
Diluted 29,897 29,884
Net Operating Earnings per Common Share: (2)
Basic $1.37 $1.12
Diluted $1.34 $1.08

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.
NM - Percentage change not meaningful.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2017 2016
amounts in thousands, except per share amounts (Unaudited)
ASSETS
Investments:
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2017: $2,715,910;
2016: $2,628,225)
$2,750,404 $2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $312,511; 2016: $327,911) 352,062 349,142
Other Invested Assets 1,781 1,960
Short-Term Investments, at fair value (amortized cost: 2017: $130,598; 2016: $143,451) 130,881 143,539
Total Investments $3,235,128 $3,130,523
Cash 69,222 64,643
Premiums Receivable 423,767 306,686
Prepaid Reinsurance Premiums 238,359 213,377
Reinsurance Recoverable on Paid Losses 67,567 82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses 782,864 779,276
Deferred Policy Acquisition Costs 132,796 119,660
Accrued Investment Income 18,196 17,315
Goodwill and Other Intangible Assets 6,499 6,451
Current Income Tax Receivable, Net 16,113 20,556
Deferred Income Tax, Net 15,430 20,938
Other Assets 57,953 52,030
Total Assets $5,063,894 $4,814,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses $2,346,327 $2,289,727
Unearned Premiums 1,002,855 887,344
Reinsurance Balances Payable 125,357 108,980
Senior Notes 263,806 263,728
Payable for Investments Purchased 12,000
Accounts Payable and Other Liabilities 69,381 86,070
Total Liabilities $3,819,726 $3,635,849
Stockholders' Equity: (1)
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued) $ $
Common Stock ($.10 par value per share, authorized 50,000 shares, issued
36,498 shares for 2017 and 36,147 shares for 2016)
3,647 3,612
Additional Paid-In Capital 371,410 373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016) (155,801) (155,801)
Retained Earnings 986,039 947,519
Accumulated Other Comprehensive Income 38,873 8,875
Total Stockholders' Equity $1,244,168 $1,178,188
Total Liabilities and Stockholders' Equity $5,063,894 $4,814,037

(1) - We completed a two-for-one stock split on January 20, 2017. All share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
Three Months Ended June 30, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $257,186 $131,193 $63,800 $ $452,179
Ceded Written Premiums (73,857) (43,809) (1,231) (118,897)
Net Written Premiums 183,329 87,384 62,569 333,282
Net Earned Premiums $167,087 $82,100 $44,648 $ $293,835
Net Losses and LAE (105,270) (44,095) (27,745) (177,110)
Commission Expenses (20,460) (19,001) (8,970) 258 (48,173)
Other Operating Expenses (33,140) (22,506) (5,120) (60,766)
Other Underwriting Income (Expense) 100 169 (258) 11
Underwriting Profit (Loss) $8,317 $(3,502) $2,982 $ $7,797
Net Investment Income 22,265 22,265
Net Realized Gains 1,694 1,694
Interest Expense (3,861) (3,861)
Other Loss (422) (422)
Income (Loss) Before Income Taxes $8,317 $(3,502) $2,982 $19,676 $27,473
Income Tax Expense (6,971) (6,971)
Net Income $20,502
Losses and LAE Ratio 63.0% 53.7% 62.1% 60.3%
Commission Expense Ratio 12.2% 23.1% 20.1% 16.4%
Other Operating Expense Ratio (2) 19.8% 27.5% 11.1% 20.6%
Combined Ratio 95.0% 104.3% 93.3% 97.3%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
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 1,810 1,810
Interest Expense (3,858) (3,858)
Other Income 4,366 4,366
Income (Loss) Before Income Taxes $10,834 $(10,097) $313 $22,193 $23,243
Income Tax Expense (7,053) (7,053)
Net Income $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
(Unaudited)
Six Months Ended June 30, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $494,791 $273,053 $134,640 $ $902,484
Ceded Written Premiums (135,344) (90,402) (6,293) (232,039)
Net Written Premiums 359,447 182,651 128,347 670,445
Net Earned Premiums $331,091 $166,186 $82,689 $ $579,966
Net Losses and LAE (204,096) (94,800) (47,814) (346,710)
Commission Expenses (40,844) (38,234) (17,462) 523 (96,017)
Other Operating Expenses (66,612) (42,299) (10,393) (119,304)
Other Underwriting Income (Expense) 210 345 (523) 32
Underwriting Profit (Loss) $19,749 $(9,147) $7,365 $ $17,967
Net Investment Income 43,713 43,713
Net Realized Gains 1,650 1,650
Interest Expense (7,722) (7,722)
Other Income 625 625
Income (Loss) Before Income Taxes $19,749 $(9,147) $7,365 $38,266 $56,233
Income Tax Expense (14,621) (14,621)
Net Income $41,612
Losses and LAE Ratio 61.6% 57.0% 57.8% 59.8%
Commission Expense Ratio 12.3% 23.0% 21.1% 16.6%
Other Operating Expense Ratio (2) 20.1% 25.5% 12.2% 20.5%
Combined Ratio 94.0% 105.5% 91.1% 96.9%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
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 3,407 3,407
Interest Expense (7,716) (7,716)
Other Income 6,906 6,906
Income (Loss) Before Income Taxes $19,407 $(9,625) $4,316 $42,066 $56,164
Income Tax Expense (17,042) (17,042)
Net Income $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
Reportable Segment Results
(Unaudited)
U.S. Insurance
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $41,687 $187,492 $28,007 $257,186 $46,187 $168,654 $29,083 $243,924 5.4%
Ceded Written Premiums (19,451) (51,147) (3,259) (73,857) (18,540) (36,768) (7,310) (62,618) 17.9%
Net Written Premiums 22,236 136,345 24,748 183,329 27,647 131,886 21,773 181,306 1.1%
Net Earned Premiums $21,812 $121,226 $24,049 $167,087 $24,921 $110,212 $17,251 $152,384 9.6%
Net Losses and LAE (12,767) (77,858) (14,645) (105,270) (10,699) (72,172) (10,557) (93,428) 12.7%
Commission Expenses (1,575) (15,232) (3,653) (20,460) (2,176) (12,821) (1,897) (16,894) 21.1%
Other Operating Expenses (6,798) (21,645) (4,697) (33,140) (6,817) (20,049) (4,704) (31,570) 5.0%
Other Underwriting Income 82 9 9 100 152 178 12 342 (70.6%)
Underwriting Profit $754 $6,500 $1,063 $8,317 $5,381 $5,348 $105 $10,834 (23.2%)
Losses and LAE Ratio 58.5% 64.2% 60.9% 63.0% 42.9% 65.5% 61.2% 61.3%
Commission Expense Ratio 7.2% 12.6% 15.2% 12.2% 8.7% 11.6% 11.0% 11.1%
Other Operating Expense Ratio (1) 30.8% 17.8% 19.5% 19.8% 26.8% 18.0% 27.2% 20.5%
Combined Ratio 96.5% 94.6% 95.6% 95.0% 78.4% 95.1% 99.4% 92.9%

(1) - Includes Other Operating Expenses and Other Underwriting Income.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
Int'l Insurance
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $49,597 $46,663 $34,933 $131,193 $41,147 $63,002 $31,591 $135,740 (3.3%)
Ceded Written Premiums (12,536) (20,362) (10,911) (43,809) (9,554) (24,465) (7,891) (41,910) 4.5%
Net Written Premiums 37,061 26,301 24,022 87,384 31,593 38,537 23,700 93,830 (6.9%)
Net Earned Premiums $39,525 $23,337 $19,238 $82,100 $36,096 $23,815 $17,922 $77,833 5.5%
Net Losses and LAE (23,848) (8,867) (11,380) (44,095) (17,021) (21,878) (9,167) (48,066) (8.3%)
Commission Expenses (9,517) (4,577) (4,907) (19,001) (8,361) (5,150) (3,310) (16,821) 13.0%
Other Operating Expenses (9,226) (7,946) (5,334) (22,506) (8,698) (9,065) (5,280) (23,043) (2.3%)
Underwriting Profit (Loss) $(3,066) $1,947 $(2,383) $(3,502) $2,016 $(12,278) $165 $(10,097) (65.3%)
Losses and LAE Ratio 60.3% 38.0% 59.2% 53.7% 47.2% 91.9% 51.2% 61.8%
Commission Expense Ratio 24.1% 19.6% 25.5% 23.1% 23.2% 21.6% 18.5% 21.6%
Other Operating Expense Ratio (1) 23.4% 34.1% 27.7% 27.5% 24.0% 38.1% 29.4% 29.6%
Combined Ratio 107.8% 91.7% 112.4% 104.3% 94.4% 151.6% 99.1% 113.0%

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
U.S. Insurance
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $82,637 $358,126 $54,028 $494,791 $89,350 $309,932 $55,289 $454,571 8.8%
Ceded Written Premiums (36,971) (89,345) (9,028) (135,344) (36,187) (67,275) (13,653) (117,115) 15.6%
Net Written Premiums 45,666 268,781 45,000 359,447 53,163 242,657 41,636 337,456 6.5%
Net Earned Premiums $44,506 $240,349 $46,236 $331,091 $48,171 $219,371 $33,182 $300,724 10.1%
Net Losses and LAE (26,542) (149,607) (27,947) (204,096) (20,474) (143,769) (20,697) (184,940) 10.4%
Commission Expenses (3,047) (30,598) (7,199) (40,844) (3,658) (24,673) (3,418) (31,749) 28.6%
Other Operating Expenses (13,619) (43,459) (9,534) (66,612) (14,189) (41,571) (9,571) (65,331) 2.0%
Other Underwriting Income 165 27 18 210 231 446 26 703 (70.1%)
Underwriting Profit (Loss) $1,463 $16,712 $1,574 $19,749 $10,081 $9,804 $(478) $19,407 1.8%
Losses and LAE Ratio 59.6% 62.2% 60.4% 61.6% 42.5% 65.5% 62.4% 61.5%
Commission Expense Ratio 6.8% 12.7% 15.6% 12.3% 7.6% 11.2% 10.3% 10.6%
Other Operating Expense Ratio (1) 30.3% 18.1% 20.6% 20.1% 29.0% 18.8% 28.7% 21.4%
Combined Ratio 96.7% 93.0% 96.6% 94.0% 79.1% 95.5% 101.4% 93.5%

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
Int'l Insurance
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $118,430 $87,031 $67,592 $273,053 $113,095 $107,048 $59,740 $279,883 (2.4%)
Ceded Written Premiums (23,462) (50,008) (16,932) (90,402) (20,643) (41,694) (14,544) (76,881) 17.6%
Net Written Premiums 94,968 37,023 50,660 182,651 92,452 65,354 45,196 203,002 (10.0%)
Net Earned Premiums $77,020 $45,517 $43,649 $166,186 $74,952 $45,024 $35,865 $155,841 6.6%
Net Losses and LAE (44,449) (24,736) (25,615) (94,800) (37,109) (33,094) (18,273) (88,476) 7.1%
Commission Expenses (19,058) (8,319) (10,857) (38,234) (17,766) (7,925) (6,485) (32,176) 18.8%
Other Operating Expenses (17,666) (14,369) (10,264) (42,299) (17,140) (17,773) (9,901) (44,814) (5.6%)
Underwriting Profit (Loss) $(4,153) $(1,907) $(3,087) $(9,147) $2,937 $(13,768) $1,206 $(9,625) (5.0%)
Losses and LAE Ratio 57.7% 54.3% 58.7% 57.0% 49.5% 73.5% 50.9% 56.8%
Commission Expense Ratio 24.7% 18.3% 24.9% 23.0% 23.7% 17.6% 18.1% 20.6%
Other Operating Expense Ratio (1) 23.0% 31.6% 23.5% 25.5% 22.9% 39.5% 27.6% 28.8%
Combined Ratio 105.4% 104.2% 107.1% 105.5% 96.1% 130.6% 96.6% 106.2%

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Three Months Ended June 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $86,792 $72,246 51.9% 47.4%
Change in Reserves 18,478 21,182 11.1% 13.9%
Net Incurred Loss and LAE $105,270 $93,428 63.0% 61.3%
Int'l Insurance:
Loss and LAE Payments $46,050 $32,996 56.1% 42.4%
Change in Reserves (1,955) 15,070 (2.4%) 19.4%
Net Incurred Loss and LAE $44,095 $48,066 53.7% 61.8%
GlobalRe:
Loss and LAE Payments $21,279 $17,928 47.6% 47.5%
Change in Reserves 6,466 7,784 14.5% 20.6%
Net Incurred Loss and LAE $27,745 $25,712 62.1% 68.1%
Total
Loss and LAE Payments $154,121 $123,170 52.5% 46.0%
Change in Reserves 22,989 44,036 7.8% 16.4%
Net Incurred Loss and LAE $177,110 $167,206 60.3% 62.4%
For the Three Months Ended June 30,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $(295) $4,002 (0.1%) 1.5%
Int'l Insurance (4,743) 3,354 (1.6%) 1.3%
GlobalRe (2,992) 1,423 (1.0%) 0.5%
Total $(8,030) $8,779 (2.7%) 3.3%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Six Months Ended June 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $156,563 $145,281 47.2% 48.3%
Change in Reserves 47,533 39,659 14.4% 13.2%
Net Incurred Loss and LAE $204,096 $184,940 61.6% 61.5%
Int'l Insurance:
Loss and LAE Payments $90,958 $62,239 54.7% 39.9%
Change in Reserves 3,842 26,237 2.3% 16.9%
Net Incurred Loss and LAE $94,800 $88,476 57.0% 56.8%
GlobalRe:
Loss and LAE Payments $49,609 $43,059 60.0% 56.8%
Change in Reserves (1,795) 3,687 (2.2%) 4.9%
Net Incurred Loss and LAE $47,814 $46,746 57.8% 61.7%
Total
Loss and LAE Payments $297,130 $250,579 51.3% 47.1%
Change in Reserves 49,580 69,583 8.5% 13.0%
Net Incurred Loss and LAE $346,710 $320,162 59.8% 60.1%
For the Six Months Ended June 30,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $177 $6,671 0.0% 1.3%
Int'l Insurance (11,359) 2,499 (2.0%) 0.5%
GlobalRe (3,933) 1,443 (0.7%) 0.3%
Total $(15,115) $10,613 (2.7%) 2.1%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
As of June 30, 2017
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $56,618 $48,212 $104,830
P&C 185,454 644,771 830,225
Professional Liability 28,417 74,481 102,898
Total U.S. Insurance $270,489 $767,464 $1,037,953
Int'l Insurance:
Marine $168,472 $33,258 $201,730
P&C 74,719 23,213 97,932
Professional Liability 40,838 71,095 111,933
Total Int'l Insurance $284,029 $127,566 $411,595
GlobalRe $42,542 $71,373 $113,915
Total Net Loss Reserves $597,060 $966,403 $1,563,463
As of December 31, 2016
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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
(Unaudited)

As of June 30, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an average duration of 3.8 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2017:

As of June 30, 2017
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
$264,511 $2,888 $(2,660) $264,283
States, Municipalities and Political Subdivisions 655,064 19,306 (2,004) 637,762
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities 455,133 3,849 (5,389) 456,673
Residential Mortgage Obligations 18,037 506 (25) 17,556
Asset-Backed Securities 315,945 1,915 (478) 314,508
Commercial Mortgage-Backed Securities 145,573 2,883 (1,432) 144,122
Subtotal $934,688 $9,153 $(7,324) $932,859
Corporate Exposures 896,141 17,490 (2,355) 881,006
Total Fixed Maturities $2,750,404 $48,837 $(14,343) $2,715,910
Equity Securities:
Common Stocks $172,456 $30,985 $(1,023) $142,494
Preferred Stocks 179,606 10,088 (499) 170,017
Total Equity Securities $352,062 $41,073 $(1,522) $312,511
Short-Term Investments 130,881 283 130,598
Total Investments $3,233,347 $90,193 $(15,865) $3,159,019




Contact: Ciro M. DeFalco Executive Vice President and Chief Financial Officer (203) 905-6343 cdefalco@navg.com www.navg.com

Source:The Navigators Group, Inc.