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Navigators Reports Third Quarter 2017 Results

STAMFORD, Conn., Nov. 02, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported a Net Loss of $(28.0) million, or $(0.95) per diluted share, for the three months ended September 30, 2017 compared to Net Income of $22.0 million, or $0.73 per diluted share, for the same period in 2016. Net Operating Earnings (Loss)1 were $(29.6) million, or $(1.00) per diluted share, for the three months ended September 30, 2017 compared to $21.1 million, or $0.70 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended September 30, 2017 were $402.0 million and $296.0 million, respectively, increasing 7.2% and 6.9%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended September 30, 2017 was 121.9%, compared to 95.6% for the same period in 2016.

The current quarter includes Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums of $75.1 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $29.5 million primarily within our U.S. and International Insurance reporting segments.

Net Investment Income for the three months ended September 30, 2017 was $22.6 million, an increase of 13.7% 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 three months ended September 30, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended September 30, 2017 was $(1.7) million, compared to $(0.2) million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the nine months ended September 30, 2017, our Company reported Net Income of $13.6 million, or $0.45 per diluted share, compared to $61.1 million, or $2.04 per diluted share, for the same period in 2016. Net Operating Earnings were $10.5 million, or $0.35 per diluted share, for the nine months ended September 30, 2017 compared to $53.5 million, or $1.79 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the nine months ended September 30, 2017 were $1.3 billion and $1.0 billion, respectively, increasing 8.6% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the nine months ended September 30, 2017 was 105.5%, compared to 96.7% for the same period in 2016, mostly due to the net loss activity noted above.

Net Investment Income for the nine months ended September 30, 2017 was $66.3 million, an increase of 11.7% 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 nine months ended September 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the nine months ended September 30, 2017 was $(1.0) million, compared to $6.8 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, “Navigators’ financial impact from our exposure to multiple natural catastrophe events in the third quarter was well within our tolerance and expectations, reflected in the modest decline in Book Value per Share of 1.7% for the quarter and increase of 2.6% for the nine month period. Our underwriting teams are well positioned to respond to anticipated improvement in regional property markets. Premium volume was up across all three segments, led by strong growth in GlobalRe, our global reinsurance segment. Our investment portfolio continued to perform well, with Net Investment Income up 13.7% for the quarter. During the quarter, we made a modest strengthening of prior year loss reserves across a number of lines of business, reflecting our commitment to maintaining prudent levels of loss reserving and a solid balance sheet.”

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 3.6 years as of September 30, 2017. As of September 30, 2017, Net Unrealized Gains within our investment portfolio were $87.2 million, an increase of $12.9 million compared to June 30, 2017 and an increase of $58.2 million compared to December 31, 2016. We recognized $4.2 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the three months ended September 30, 2017, compared to $1.6 million of Net Realized Gains for the same period in 2016. For the nine months ended September 30, 2017 we recognized $5.9 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $5.0 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 $41.49 per share, as of September 30, 2017 compared to $42.21 per share, as of June 30, 2017 and $40.45 per share, as of December 31, 2016.

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

On November 2, 2017 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.06 per share, payable on December 15, 2017 to stockholders of record on November 24, 2017.

Our Company will hold a conference call on Friday, November 3, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: https://edge.media-server.com/m6/p/on47jdtw.

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


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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
Three Months Ended Nine Months Ended
amounts in thousands, except per share amounts September 30, September 30,
Results of Operations 2017 2016 Change 2017 2016 Change
Gross Written Premiums $402,038 $374,930 7.2% $1,304,522 $1,201,372 8.6%
Net Written Premiums 296,016 277,001 6.9% 966,461 903,356 7.0%
Revenues:
Net Earned Premiums $301,355 $284,010 6.1% $881,321 $816,360 8.0%
Net Investment Income 22,598 19,875 13.7% 66,311 59,344 11.7%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment Losses (957) 23 NM (2,005) (248) NM
Portion of Loss Recognized in Other Comprehensive Income (Before Tax) (15) (23) (34.8%) (60) 98 NM
Net Other-Than-Temporary Impairment Losses Recognized In Earnings (972) NM (2,065) (150) NM
Other Realized Gains 5,190 1,586 NM 7,933 5,143 54.2%
Net Realized Gains 4,218 1,586 NM 5,868 4,993 17.5%
Other Income (Loss) (1,699) (183) NM (1,042) 6,796 NM
Total Revenues $326,472 $305,288 6.9% $952,458 $887,493 7.3%
Expenses:
Net Losses and Loss Adjustment Expenses $276,171 $172,793 59.8% $622,881 $492,955 26.4%
Commission Expenses 45,509 42,611 6.8% 141,526 120,891 17.1%
Other Operating Expenses 45,773 56,137 (18.5%) 165,077 176,020 (6.2%)
Interest Expense 3,862 3,859 0.1% 11,584 11,575 0.1%
Total Expenses $371,315 $275,400 34.8% $941,068 $801,441 17.4%
Income (Loss) Before Income Taxes $(44,843) $29,888 NM $11,390 $86,052 (86.8%)
Income Tax Expense (Benefit) (16,864) 7,875 NM (2,243) 24,917 NM
Net Income (Loss) $(27,979) $22,013 NM $13,633 $61,135 (77.7%)
Per Share Data (1)
Net Income (Loss) Per Common Share:
Basic $(0.95) $0.76 NM $0.46 $2.10 (78.0%)
Diluted $(0.95) $0.73 NM $0.45 $2.04 (77.7%)
Average Common Shares Outstanding:
Basic 29,500 29,115 29,419 29,058
Diluted 29,500 30,141 30,006 29,997
Underwriting Ratios
Loss Ratio 91.6% 60.8% 70.7% 60.4%
Expense Ratio 30.3% 34.8% 34.8% 36.3%
Combined Ratio 121.9% 95.6% 105.5% 96.7%
Balance Sheet Data September 30, June 30, September 30, December 31,
2017 2017 2017 2016
Stockholders' Equity $1,224,191 $1,244,168 (1.6%) $1,224,191 $1,178,188 3.9%
Book Value per Share (1) $41.49 $42.21 (1.7%) $41.49 $40.45 2.6%

(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 (LOSS) TO NET OPERATING EARNINGS (LOSS)
(Unaudited)

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

Net Operating Earnings (Loss) is comprised of Net Income (Loss) 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 recognized in our Consolidated Statements of Income (Loss).

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 (Loss) (the nearest GAAP financial measure) to Net Operating Earnings (Loss):

Three Months Ended September 30, 2017 Three Months Ended September 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 (Loss) $(44,843) $16,864 $(27,979) $29,888 $(7,875) $22,013 NM
Adjustments to Net Income (Loss):
Realized Losses (Gains) (4,218) 1,477 (2,741) (1,586) 555 (1,031) NM
FX Losses (Gains) 1,675 (586) 1,089 227 (80) 147 NM
Net Operating Earnings (Loss) $(47,386) $17,755 $(29,631) $28,529 $(7,400) $21,129 NM
Average Common Shares Outstanding: (2)
Basic 29,500 29,115
Diluted 29,500 30,141
Net Operating Earnings (Loss) per Common Share: (2)
Basic $(1.00) $0.73
Diluted $(1.00) $0.70


Nine Months Ended September 30, 2017 Nine Months Ended September 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 $11,390 $2,243 $13,633 $86,052 $(24,917) $61,135 (77.7%)
Adjustments to Net Income:
Realized Losses (Gains) (5,868) 2,055 (3,813) (4,993) 1,747 (3,246) 17.5%
FX Losses (Gains) 1,015 (355) 660 (6,679) 2,337 (4,342) NM
Net Operating Earnings $6,537 $3,943 $10,480 $74,380 $(20,833) $53,547 (80.4%)
Average Common Shares Outstanding: (2)
Basic 29,419 29,058
Diluted 30,006 29,997
Net Operating Earnings per Common Share: (2)
Basic $0.36 $1.84
Diluted $0.35 $1.79

(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
September 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: $2,752,102; 2016: $2,628,225) $2,798,185 $2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $334,739; 2016: $327,911) 375,876 349,142
Other Invested Assets 1,751 1,960
Short-Term Investments, at fair value (amortized cost: 2017: $247,602; 2016: $143,451) 247,607 143,539
Total Investments $3,423,419 $3,130,523
Cash 56,471 64,643
Premiums Receivable 361,272 306,686
Prepaid Reinsurance Premiums 231,174 213,377
Reinsurance Recoverable on Paid Losses 61,054 82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses 847,505 779,276
Deferred Policy Acquisition Costs 134,625 119,660
Accrued Investment Income 20,420 17,315
Goodwill and Other Intangible Assets 6,591 6,451
Current Income Tax Receivable, Net 48,186 20,556
Deferred Income Tax, Net 13,080 20,938
Other Assets 71,751 52,030
Total Assets $5,275,548 $4,814,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses $2,558,134 $2,289,727
Unearned Premiums 990,518 887,344
Reinsurance Balances Payable 129,306 108,980
Senior Notes 263,845 263,728
Payable for Investments Purchased 21,862
Accounts Payable and Other Liabilities 87,692 86,070
Total Liabilities $4,051,357 $3,635,849
Stockholders' Equity: (1)
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued) $ $
Common Stock ($.10 par value per share, authorized 50,000 shares, issued 36,526 shares for 2017 and 36,147 shares for 2016) 3,650 3,612
Additional Paid-In Capital 371,512 373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016) (155,801) (155,801)
Retained Earnings 956,290 947,519
Accumulated Other Comprehensive Income 48,540 8,875
Total Stockholders' Equity $1,224,191 $1,178,188
Total Liabilities and Stockholders' Equity $5,275,548 $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 September 30, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $235,052 $113,601 $53,385 $ $402,038
Ceded Written Premiums (64,328) (38,966) (2,728) (106,022)
Net Written Premiums 170,724 74,635 50,657 296,016
Net Earned Premiums $169,150 $84,407 $47,798 $ $301,355
Net Losses and LAE (135,340) (81,713) (59,118) (276,171)
Commission Expenses (18,286) (16,201) (11,233) 211 (45,509)
Other Operating Expenses (25,375) (16,388) (4,010) (45,773)
Other Underwriting Income (Expense) 125 94 (211) 8
Underwriting Loss $(9,726) $(29,895) $(26,469) $ $(66,090)
Net Investment Income 22,598 22,598
Net Realized Gains 4,218 4,218
Interest Expense (3,862) (3,862)
Other Loss (1,707) (1,707)
Loss Before Income Taxes $(9,726) $(29,895) $(26,469) $21,247 $(44,843)
Income Tax Benefit 16,864 16,864
Net Loss $(27,979)
Losses and LAE Ratio 80.0% 96.8% 123.7% 91.6%
Commission Expense Ratio 10.8% 19.2% 23.5% 15.1%
Other Operating Expense Ratio (2) 14.9% 19.4% 8.2% 15.2%
Combined Ratio 105.7% 135.4% 155.4% 121.9%

(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)
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 1,586 1,586
Interest Expense (3,859) (3,859)
Other Loss (227) (227)
Income (Loss) Before Income Taxes $5,495 $(813) $7,831 $17,375 $29,888
Income Tax Expense (7,875) (7,875)
Net Income $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
(Unaudited)
Nine Months Ended September 30, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $729,843 $386,654 $188,025 $ $1,304,522
Ceded Written Premiums (199,672) (129,368) (9,021) (338,061)
Net Written Premiums 530,171 257,286 179,004 966,461
Net Earned Premiums $500,241 $250,593 $130,487 $ $881,321
Net Losses and LAE (339,436) (176,513) (106,932) (622,881)
Commission Expenses (59,130) (54,435) (28,695) 734 (141,526)
Other Operating Expenses (91,987) (58,687) (14,403) (165,077)
Other Underwriting Income (Expense) 335 439 (734) 40
Underwriting Profit (Loss) $10,023 $(39,042) $(19,104) $ $(48,123)
Net Investment Income 66,311 66,311
Net Realized Gains 5,868 5,868
Interest Expense (11,584) (11,584)
Other Loss (1,082) (1,082)
Income (Loss) Before Income Taxes $10,023 $(39,042) $(19,104) $59,513 $11,390
Income Tax Benefit 2,243 2,243
Net Income $13,633
Losses and LAE Ratio 67.9% 70.4% 81.9% 70.7%
Commission Expense Ratio 11.8% 21.7% 22.0% 16.1%
Other Operating Expense Ratio (2) 18.3% 23.5% 10.7% 18.7%
Combined Ratio 98.0% 115.6% 114.6% 105.5%

(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)
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 4,993 4,993
Interest Expense (11,575) (11,575)
Other Income 6,679 6,679
Income (Loss) Before Income Taxes $24,902 $(10,438) $12,147 $59,441 $86,052
Income Tax Expense (24,917) (24,917)
Net Income $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
Reportable Segment Results
(Unaudited)
U.S. Insurance
Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $36,403 $166,097 $32,552 $235,052 $40,271 $161,600 $32,776 $234,647 0.2%
Ceded Written Premiums (18,859) (39,952) (5,517) (64,328) (17,636) (36,011) (7,712) (61,359) 4.8%
Net Written Premiums 17,544 126,145 27,035 170,724 22,635 125,589 25,064 173,288 (1.5%)
Net Earned Premiums $20,129 $125,931 $23,090 $169,150 $25,465 $115,971 $20,286 $161,722 4.6%
Net Losses and LAE (18,325) (89,568) (27,447) (135,340) (14,974) (74,129) (17,217) (106,320) 27.3%
Commission Expenses (967) (13,515) (3,804) (18,286) (2,117) (13,664) (2,849) (18,630) (1.8%)
Other Operating Expenses (4,661) (16,897) (3,817) (25,375) (6,767) (19,997) (4,753) (31,517) (19.5%)
Other Underwriting Income 105 18 2 125 126 104 10 240 (47.9%)
Underwriting Profit (Loss) $(3,719) $5,969 $(11,976) $(9,726) $1,733 $8,285 $(4,523) $5,495 NM
Losses and LAE Ratio 91.0% 71.1% 118.9% 80.0% 58.8% 63.9% 84.9% 65.7%
Commission Expense Ratio 4.8% 10.7% 16.5% 10.8% 8.3% 11.8% 14.0% 11.5%
Other Operating Expense Ratio (1) 22.7% 13.5% 16.5% 14.9% 26.1% 17.2% 23.4% 19.4%
Combined Ratio 118.5% 95.3% 151.9% 105.7% 93.2% 92.9% 122.3% 96.6%

(1) - Includes Other Operating Expenses and Other Underwriting Income.
NM – Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
Int'l Insurance
Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $41,689 $37,415 $34,497 $113,601 $38,453 $38,077 $27,954 $104,484 8.7%
Ceded Written Premiums (9,948) (19,772) (9,246) (38,966) (12,631) (15,331) (7,232) (35,194) 10.7%
Net Written Premiums 31,741 17,643 25,251 74,635 25,822 22,746 20,722 69,290 7.7%
Net Earned Premiums $39,038 $21,775 $23,594 $84,407 $34,794 $25,584 $19,383 $79,761 5.8%
Net Losses and LAE (39,457) (29,918) (12,338) (81,713) (17,289) (16,080) (11,674) (45,043) 81.4%
Commission Expenses (8,532) (2,666) (5,003) (16,201) (8,358) (3,502) (3,488) (15,348) 5.6%
Other Operating Expenses (6,788) (5,614) (3,986) (16,388) (7,654) (7,913) (4,616) (20,183) (18.8%)
Underwriting Profit (Loss) $(15,739) $(16,423) $2,267 $(29,895) $1,493 $(1,911) $(395) $(813) NM
Losses and LAE Ratio 101.1% 137.4% 52.3% 96.8% 49.7% 62.8% 60.2% 56.5%
Commission Expense Ratio 21.9% 12.2% 21.2% 19.2% 24.0% 13.7% 18.0% 19.2%
Other Operating Expense Ratio 17.3% 25.8% 16.9% 19.4% 22.0% 31.0% 23.8% 25.3%
Combined Ratio 140.3% 175.4% 90.4% 135.4% 95.7% 107.5% 102.0% 101.0%

NM- Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
U.S. Insurance
Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $119,040 $524,223 $86,580 $729,843 $129,621 $471,532 $88,065 $689,218 5.9%
Ceded Written Premiums (55,830) (129,297) (14,545) (199,672) (53,823) (103,286) (21,365) (178,474) 11.9%
Net Written Premiums 63,210 394,926 72,035 530,171 75,798 368,246 66,700 510,744 3.8%
Net Earned Premiums $64,635 $366,280 $69,326 $500,241 $73,636 $335,342 $53,468 $462,446 8.2%
Net Losses and LAE (44,867) (239,175) (55,394) (339,436) (35,448) (217,898) (37,914) (291,260) 16.5%
Commission Expenses (4,014) (44,113) (11,003) (59,130) (5,775) (38,337) (6,267) (50,379) 17.4%
Other Operating Expenses (18,280) (60,356) (13,351) (91,987) (20,956) (61,568) (14,324) (96,848) (5.0%)
Other Underwriting Income 270 45 20 335 357 550 36 943 (64.5%)
Underwriting Profit (Loss) $(2,256) $22,681 $(10,402) $10,023 $11,814 $18,089 $(5,001) $24,902 (59.8%)
Losses and LAE Ratio 69.4% 65.3% 79.9% 67.9% 48.1% 65.0% 70.9% 63.0%
Commission Expense Ratio 6.2% 12.0% 15.9% 11.8% 7.8% 11.4% 11.7% 10.9%
Other Operating Expense Ratio (1) 27.9% 16.5% 19.2% 18.3% 28.1% 18.2% 26.8% 20.7%
Combined Ratio 103.5% 93.8% 115.0% 98.0% 84.0% 94.6% 109.4% 94.6%

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
Int'l Insurance
Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
amounts in thousands Marine P&C Professional
Liability
Total Marine P&C Professional
Liability
Total %
Change
Total
Gross Written Premiums $160,119 $124,446 $102,089 $386,654 $151,548 $145,125 $87,694 $384,367 0.6%
Ceded Written Premiums (33,410) (69,780) (26,178) (129,368) (33,274) (57,025) (21,776) (112,075) 15.4%
Net Written Premiums 126,709 54,666 75,911 257,286 118,274 88,100 65,918 272,292 (5.5%)
Net Earned Premiums $116,058 $67,292 $67,243 $250,593 $109,746 $70,608 $55,248 $235,602 6.4%
Net Losses and LAE (83,906) (54,654) (37,953) (176,513) (54,398) (49,174) (29,947) (133,519) 32.2%
Commission Expenses (27,590) (10,985) (15,860) (54,435) (26,124) (11,427) (9,973) (47,524) 14.5%
Other Operating Expenses (24,454) (19,983) (14,250) (58,687) (24,794) (25,686) (14,517) (64,997) (9.7%)
Underwriting Profit (Loss) $(19,892) $(18,330) $(820) $(39,042) $4,430 $(15,679) $811 $(10,438) NM
Losses and LAE Ratio 72.3% 81.2% 56.4% 70.4% 49.6% 69.6% 54.2% 56.7%
Commission Expense Ratio 23.8% 16.3% 23.6% 21.7% 23.8% 16.2% 18.1% 20.2%
Other Operating Expense Ratio 21.0% 29.7% 21.2% 23.5% 22.6% 36.4% 26.2% 27.5%
Combined Ratio 117.1% 127.2% 101.2% 115.6% 96.0% 122.2% 98.5% 104.4%

NM- Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Three Months Ended September 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $68,454 $81,461 40.5% 50.4%
Change in Reserves 66,886 24,859 39.5% 15.3%
Net Incurred Loss and LAE $135,340 $106,320 80.0% 65.7%
Int'l Insurance:
Loss and LAE Payments $55,148 $43,848 65.3% 55.0%
Change in Reserves 26,565 1,195 31.5% 1.5%
Net Incurred Loss and LAE $81,713 $45,043 96.8% 56.5%
GlobalRe:
Loss and LAE Payments $13,659 $20,770 28.6% 48.8%
Change in Reserves 45,459 660 95.1% 1.6%
Net Incurred Loss and LAE $59,118 $21,430 123.7% 50.4%
Total
Loss and LAE Payments $137,261 $146,079 45.5% 51.4%
Change in Reserves 138,910 26,714 46.1% 9.4%
Net Incurred Loss and LAE $276,171 $172,793 91.6% 60.8%
For the Three Months Ended September 30,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $(18,383) $(4,903) (6.0%) (1.7%)
Int'l Insurance (10,714) 2,860 (3.6%) 1.0%
GlobalRe (397) 3,074 (0.1%) 1.1%
Total $(29,494) $1,031 (9.7%) 0.4%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Nine Months Ended September 30,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $225,017 $226,742 45.0% 49.0%
Change in Reserves 114,419 64,518 22.9% 14.0%
Net Incurred Loss and LAE $339,436 $291,260 67.9% 63.0%
Int'l Insurance:
Loss and LAE Payments $146,106 $106,087 58.3% 45.0%
Change in Reserves 30,407 27,432 12.1% 11.7%
Net Incurred Loss and LAE $176,513 $133,519 70.4% 56.7%
GlobalRe:
Loss and LAE Payments $63,268 $63,829 48.5% 53.9%
Change in Reserves 43,664 4,347 33.4% 3.7%
Net Incurred Loss and LAE $106,932 $68,176 81.9% 57.6%
Total
Loss and LAE Payments $434,391 $396,658 49.3% 48.6%
Change in Reserves 188,490 96,297 21.4% 11.8%
Net Incurred Loss and LAE $622,881 $492,955 70.7% 60.4%
For the Nine Months Ended September 30,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $(18,206) $1,768 (2.1%) 0.2%
Int'l Insurance (22,073) 5,359 (2.5%) 0.7%
GlobalRe (4,330) 4,517 (0.5%) 0.6%
Total $(44,609) $11,644 (5.1%) 1.5%


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
As of September 30, 2017
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $62,475 $47,364 $109,839
P&C 197,009 680,855 877,864
Professional Liability 32,385 84,753 117,138
Total U.S. Insurance $291,869 $812,972 $1,104,841
Int'l Insurance:
Marine $170,658 $51,094 $221,752
P&C 64,255 42,680 106,935
Professional Liability 40,178 76,618 116,796
Total Int'l Insurance $275,091 $170,392 $445,483
GlobalRe $50,351 $109,954 $160,305
Total Net Loss Reserves $617,311 $1,093,318 $1,710,629
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 September 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 3.6 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

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

As of September 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 $269,851 $8,169 $(607) $262,289
States, Municipalities and Political Subdivisions 684,792 20,643 (1,481) 665,630
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities 426,441 3,365 (4,298) 427,374
Residential Mortgage Obligations 34,748 570 (27) 34,205
Asset-Backed Securities 331,646 2,503 (426) 329,569
Commercial Mortgage-Backed Securities 140,601 2,742 (1,308) 139,167
Subtotal $933,436 $9,180 $(6,059) $930,315
Corporate Exposures 910,106 18,221 (1,983) 893,868
Total Fixed Maturities $2,798,185 $56,213 $(10,130) $2,752,102
Equity Securities:
Common Stocks $180,771 $35,179 $(815) $146,407
Preferred Stocks 195,105 7,418 (645) 188,332
Total Equity Securities $375,876 $42,597 $(1,460) $334,739
Short-Term Investments 247,607 5 247,602
Total Investments $3,421,668 $98,815 $(11,590) $3,334,443


Source:The Navigators Group, Inc.