Navigators Reports Fourth Quarter 2017 Earnings

STAMFORD, Conn., Feb. 15, 2018 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $26.9 million, or $0.89 per diluted share, for the three months ended December 31, 2017 compared to $21.6 million, or $0.71 per diluted share, for the same period in 2016. Net Operating Earnings1 were $24.5 million, or $0.81 per diluted share, for the three months ended December 31, 2017 compared to $17.7 million, or $0.58 per diluted share, for the same period in 2016.

The fourth quarter of 2017 was impacted by the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As a result of the Tax Act, The Navigators Group, Inc. (“Navigators” or the “Company”) recognized additional income tax expense of $19.7 million which reduced Net Income in the fourth quarter.

Gross Written Premiums and Net Written Premiums for the three months ended December 31, 2017 were $408.7 million and $304.9 million, respectively, increasing 11.2% and 7.8%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended December 31, 2017 was 96.6%, compared to 96.7% for the same period in 2016.

Net Investment Income for the three months ended December 31, 2017 was $23.0 million, an increase of 14.3% 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 December 31, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended December 31, 2017 was $(3.2) million, compared to $1.9 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the full year ended December 31, 2017, our Company reported Net Income of $40.5 million, or $1.35 per diluted share, compared to $82.7 million, or $2.75 per diluted share, for the same period in 2016. Net Operating Earnings were $35.0 million, or $1.16 per diluted share, for the full year ended December 31, 2017 compared to $71.2 million, or $2.37 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the full year ended December 31, 2017 were $1.7 billion and $1.3 billion, respectively, increasing 9.2% and 7.2%, respectively, from the comparable period in 2016. Our Combined Ratio for the full year ended December 31, 2017 was 103.2%, compared to 96.7% for the same period in 2016.

In addition to the impact of the enactment of the Tax Act in the fourth quarter of 2017, the full year results also include Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums totaling $71.3 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $34.3 million.

Net Investment Income for the full year ended December 31, 2017 was $89.3 million, an increase of 12.4% as compared to the same period in 2016. Our pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the full year ended December 31, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the full year ended December 31, 2017 was $(4.2) million, compared to $8.7 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report solidly profitable results for the fourth quarter. Both the U.S. Insurance and Global Reinsurance segments produced excellent underwriting results, with combined ratios of 91.3% and 90.9% respectively. We grew Gross Written Premium by 11.2% and are well positioned to capitalize on anticipated growth opportunities emanating from the ongoing strength of the U.S. economy as well as targeted specialty niches globally. Net Investment Income was up 14.3% over fourth quarter 2017. In December, we opted to liquidate our actively managed common equity holdings, realizing pre-tax gains of $37.1 million. While the recently enacted Tax Act adversely impacted our fourth quarter results, we anticipate positive benefits of a lower corporate tax rate beginning in 2018. During the quarter, we announced the proposed acquisition of a Belgium-based specialty underwriting manager and insurance company, which we expect to close in the second quarter, subject to regulatory approval. This is an important part of our post-Brexit strategy.”

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 effective duration of 3.5 years as of December 31, 2017. As of December 31, 2017, Net Unrealized Gains within our investment portfolio were $41.5 million, a decrease of $(45.8) million compared to September 30, 2017. We recognized $37.1 million of Net Realized Gains for the three months ended December 31, 2017, compared to $4.0 million of Net Realized Gains for the same period in 2016. For the full year ended December 31, 2017 we recognized $43.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $9.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016. The increase in Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the fourth quarter and full year 2017 compared to the same periods in 2016 was primarily related to the liquidation of our common equity portfolio in December 2017 as we reassess our actively managed common equity strategy.

Stockholders’ Equity was $1.2 billion, or $41.55 per share, as of December 31, 2017 compared to $41.49 per share, as of September 30, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended December 31, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On February 15, 2018 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.07 per share, payable on March 23, 2018 to stockholders of record on March 2, 2018. This represents an increase of 16.7% over the prior quarter dividend.

Our Company will hold a conference call on Friday, February 16, 2018 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: https://edge.media-server.com/m6/p/o8reaviq.

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. These forward-looking statements include statements on the financial impact of tax reform. We continue to assess the tax accounting effects of tax reform. 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.

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 Years Ended
amounts in thousands, except per share amounts December 31, December 31,
Results of Operations 2017 2016 Change 2017 2016 Change
Gross Written Premiums $408,743 $367,539 11.2% $1,713,265 $1,568,911 9.2%
Net Written Premiums 304,869 282,868 7.8% 1,271,330 1,186,224 7.2%
Revenues:
Net Earned Premiums $305,099 $283,985 7.4% $1,186,420 $1,100,345 7.8%
Net Investment Income 22,982 20,107 14.3% 89,293 79,451 12.4%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment
Losses
3 21 (87.9%) (2,002) (227) NM
Portion of Loss Recognized in Other
Comprehensive Income (Before Tax)
(3) (21) (85.7%) (62) 77 NM
Net Other-Than-Temporary Impairment Losses
Recognized In Earnings
NM (2,064) (150) NM
Other Realized Gains 37,141 4,043 NM 45,073 9,186 NM
Net Realized Gains 37,141 4,043 NM 43,009 9,036 NM
Other Income (Loss) (3,201) 1,905 NM (4,243) 8,701 NM
Total Revenues $362,021 $310,040 16.8% $1,314,479 $1,197,533 9.8%
Expenses:
Net Losses and Loss Adjustment Expenses 183,384 172,493 6.3% 806,265 665,448 21.2%
Commission Expenses 43,205 44,154 (2.2%) 184,731 165,045 11.9%
Other Operating Expenses 68,153 58,076 17.4% 233,230 234,096 (0.4%)
Interest Expense 3,863 3,860 0.1% 15,447 15,435 0.1%
Total Expenses $298,605 $278,583 7.2% $1,239,673 $1,080,024 14.8%
Income Before Income Taxes 63,416 31,457 101.6% 74,806 117,509 (36.3%)
Income Tax Expense 36,555 9,866 NM 34,312 34,783 (1.4%)
Net Income $26,861 $21,591 24.4% $40,494 $82,726 (51.1%)
Per Share Data
Net Income Per Common Share:
Basic $0.91 $0.74 22.8% $1.38 $2.85 (51.7%)
Diluted $0.89 $0.71 25.2% $1.35 $2.75 (51.1%)
Average Common Shares Outstanding:
Basic 29,505 29,121 29,441 29,074
Diluted 30,099 30,282 30,071 30,032
Underwriting Ratios
Loss Ratio 60.1% 60.7% 68.0% 60.5%
Expense Ratio 36.5% 36.0% 35.2% 36.2%
Combined Ratio 96.6% 96.7% 103.2% 96.7%
Balance Sheet Data December 31, September 30, December 31, December 31,
2017 2017 2017 2016
Stockholders' Equity $1,225,965 $1,224,191 0.1% $1,225,965 $1,178,188 4.1%
Book Value per Share $41.55 $41.49 0.1% $41.55 $40.45 2.7%
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, After-Tax Foreign Exchange Gains (Losses), and the impact of the passage of the Tax Act at enactment recognized in our Consolidated Statements of Income.

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 December 31, 2017 Three Months Ended December 31, 2016 % Change
amounts in thousands, except per share amounts Pre-Tax Tax (1) After-Tax Pre-Tax Tax (1) After-Tax QTD
Net Income $63,416 $(36,555) $26,861 $31,457 $(9,866) $21,591 24.4%
Adjustments to Net Income:
Realized Losses (Gains) (37,141) 12,999 (24,142) (4,043) 1,416 (2,627) NM
FX Losses (Gains) 3,198 (1,119) 2,079 (1,947) 682 (1,265) NM
Impact of the Tax Act at Enactment (2) 19,694 19,694 NM
Net Operating Earnings $29,473 $(4,981) $24,492 $25,467 $(7,768) $17,699 38.4%
Average Common Shares Outstanding:
Basic 29,505 29,121
Diluted 30,099 30,282
Net Operating Earnings per Common Share:
Basic $0.83 $0.61
Diluted $0.81 $0.58


Year Ended December 31, 2017 Year Ended December 31, 2016 % Change
amounts in thousands, except per share amounts Pre-Tax Tax (1) After-Tax Pre-Tax Tax (1) After-Tax YTD
Net Income $74,806 $(34,312) $40,494 $117,509 $(34,783) $82,726 (51.1%)
Adjustments to Net Income:
Realized Losses (Gains) (43,009) 15,054 (27,955) (9,036) 3,163 (5,873) NM
FX Losses (Gains) 4,213 (1,474) 2,739 (8,626) 3,019 (5,607) NM
Impact of the Tax Act at Enactment (2) 19,694 19,694 NM
Net Operating Earnings $36,010 $(1,038) $34,972 $99,847 $(28,601) $71,246 (50.9%)
Average Common Shares Outstanding:
Basic 29,441 29,074
Diluted 30,071 30,032
Net Operating Earnings per Common Share:
Basic $1.19 $2.45
Diluted $1.16 $2.37
(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - As a result of the enactment of the Tax Act, we revalued our deferred tax assets as of December 31, 2017 resulting in a reduction in our deferred tax assets of $17.1 million and we also anticipate incurring a one-time payment of approximately $2.6 million due to tax on previously untaxed accumulated and current earnings and profits on certain foreign subsidiaries.
NM - Percentage change not meaningful.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 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: $3,027,408; 2016: $2,628,225) $3,057,054 $2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $224,159; 2016: $327,911) 235,981 349,142
Other Invested Assets (Equity Method) 1,720 1,960
Short-Term Investments, at fair value (amortized cost: 2017: $127,125; 2016: $143,451) 127,128 143,539
Total Investments $3,421,883 $3,130,523
Cash 67,084 64,643
Premiums Receivable 351,393 306,686
Prepaid Reinsurance Premiums 228,569 213,377
Reinsurance Recoverable on Paid Losses 72,494 82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses 809,765 779,276
Deferred Policy Acquisition Costs 135,249 119,660
Accrued Investment Income 19,480 17,315
Goodwill and Other Intangible Assets 6,596 6,451
Current Income Tax Receivable, Net 16,667 20,556
Deferred Income Tax, Net 22,271 20,938
Other Assets 73,171 52,030
Total Assets $5,224,622 $4,814,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses $2,515,145 $2,289,727
Unearned Premiums 987,681 887,344
Reinsurance Balances Payable 136,192 108,980
Senior Notes 263,885 263,728
Accounts Payable and Other Liabilities 95,754 86,070
Total Liabilities $3,998,657 $3,635,849
Stockholders' Equity:
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued) $ $
Common Stock ($.10 par value per share, authorized 50,000 shares, issued
36,530 shares for 2017 and 36,147 shares for 2016)
3,650 3,612
Additional Paid-In Capital 376,868 373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016) (155,801) (155,801)
Retained Earnings 981,380 947,519
Accumulated Other Comprehensive Income 19,868 8,875
Total Stockholders' Equity $1,225,965 $1,178,188
Total Liabilities and Stockholders' Equity $5,224,622 $4,814,037

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
Three Months Ended December 31, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $258,450 $114,476 $35,817 $ $408,743
Ceded Written Premiums (67,321) (35,910) (643) (103,874)
Net Written Premiums 191,129 78,566 35,174 304,869
Net Earned Premiums $174,424 $83,199 $47,476 $ $305,099
Net Losses and LAE (103,917) (53,088) (26,379) (183,384)
Commission Expenses (18,599) (14,389) (10,441) 224 (43,205)
Other Operating Expenses (36,918) (24,777) (6,458) (68,153)
Other Underwriting Income (Expense) 126 126 (224) 28
Underwriting Profit (Loss) $15,116 $(9,055) $4,324 $ $10,385
Net Investment Income 22,982 22,982
Net Realized Gains 37,141 37,141
Interest Expense (3,863) (3,863)
Other Loss (3,229) (3,229)
Income (Loss) Before Income Taxes $15,116 $(9,055) $4,324 $53,031 $63,416
Income Tax Expense (36,555) (36,555)
Net Income $26,861
Losses and LAE Ratio 59.6% 63.8% 55.6% 60.1%
Commission Expense Ratio 10.7% 17.3% 22.0% 14.2%
Other Operating Expense Ratio (2) 21.0% 29.8% 13.3% 22.3%
Combined Ratio 91.3% 110.9% 90.9% 96.6%
(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)
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 4,043 4,043
Interest Expense (3,860) (3,860)
Other Income 1,886 1,886
Income (Loss) Before Income Taxes $8,718 $(8,528) $9,091 $22,176 $31,457
Income Tax Expense (9,866) (9,866)
Net Income $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
(Unaudited)
Year Ended December 31, 2017
U.S. Int'l
amounts in thousands Insurance Insurance GlobalRe Corporate (1) Total
Gross Written Premiums $988,293 $501,130 $223,842 $ $1,713,265
Ceded Written Premiums (266,993) (165,278) (9,664) (441,935)
Net Written Premiums 721,300 335,852 214,178 1,271,330
Net Earned Premiums $674,665 $333,792 $177,963 $ $1,186,420
Net Losses and LAE (443,353) (229,601) (133,311) (806,265)
Commission Expenses (77,729) (68,824) (39,136) 958 (184,731)
Other Operating Expenses (128,905) (83,464) (20,861) (233,230)
Other Underwriting Income (Expense) 461 565 (958) 68
Underwriting Profit (Loss) $25,139 $(48,097) $(14,780) $ $(37,738)
Net Investment Income 89,293 89,293
Net Realized Gains 43,009 43,009
Interest Expense (15,447) (15,447)
Other Loss (4,311) (4,311)
Income (Loss) Before Income Taxes $25,139 $(48,097) $(14,780) $112,544 $74,806
Income Tax Expense (34,312) (34,312)
Net Income $40,494
Losses and LAE Ratio 65.7% 68.8% 74.9% 68.0%
Commission Expense Ratio 11.5% 20.6% 22.0% 15.6%
Other Operating Expense Ratio (2) 19.1% 25.0% 11.4% 19.6%
Combined Ratio 96.3% 114.4% 108.3% 103.2%
(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
Year 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 9,036 9,036
Interest Expense (15,435) (15,435)
Other Income 8,565 8,565
Income (Loss) Before Income Taxes $33,620 $(18,966) $21,238 $81,617 $117,509
Income Tax Expense (34,783) (34,783)
Net Income $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
Reportable Segment Results
(Unaudited)
U.S. Insurance
Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
amounts in thousands Marine P&C Professional Liability Total Marine P&C Professional Liability Total %
Change
Total
Gross Written Premiums $37,131 $189,316 $32,003 $258,450 $39,784 $160,030 $30,363 $230,177 12.3%
Ceded Written Premiums (16,601) (44,204) (6,516) (67,321) (17,035) (32,602) (7,716) (57,353) 17.4%
Net Written Premiums 20,530 145,112 25,487 191,129 22,749 127,428 22,647 172,824 10.6%
Net Earned Premiums $21,970 $128,980 $23,474 $174,424 $26,496 $118,331 $22,035 $166,862 4.5%
Net Losses and LAE (13,232) (76,937) (13,748) (103,917) (14,639) (77,979) (13,982) (106,600) (2.5%)
Commission Expenses (918) (13,643) (4,038) (18,599) (2,694) (14,146) (3,593) (20,433) (9.0%)
Other Operating Expenses (7,221) (24,077) (5,620) (36,918) (6,603) (19,901) (4,756) (31,260) 18.1%
Other Underwriting Income 104 16 6 126 108 32 9 149 (15.5%)
Underwriting Profit (Loss) $703 $14,339 $74 $15,116 $2,668 $6,337 $(287) $8,718 73.4%
Losses and LAE Ratio 60.2% 59.7% 58.6% 59.6% 55.3% 65.9% 63.5% 63.9%
Commission Expense Ratio 4.2% 10.6% 17.2% 10.7% 10.2% 12.0% 16.3% 12.2%
Other Operating Expense Ratio (1) 32.4% 18.6% 23.9% 21.0% 24.4% 16.7% 21.5% 18.7%
Combined Ratio 96.8% 88.9% 99.7% 91.3% 89.9% 94.6% 101.3% 94.8%
(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 December 31, 2017 Three Months Ended December 31, 2016
amounts in thousands Marine P&C Professional Liability Total Marine P&C Professional Liability Total %
Change
Total
Gross Written Premiums $38,122 $34,677 $41,677 $114,476 $31,680 $35,969 $32,455 $100,104 14.4%
Ceded Written Premiums (8,608) (15,518) (11,784) (35,910) (6,818) (12,581) (7,030) (26,429) 35.9%
Net Written Premiums 29,514 19,159 29,893 78,566 24,862 23,388 25,425 73,675 6.6%
Net Earned Premiums $36,338 $21,225 $25,636 $83,199 $31,847 $18,847 $21,120 $71,814 15.9%
Net Losses and LAE (30,554) (7,137) (15,397) (53,088) (12,653) (19,821) (12,291) (44,765) 18.6%
Commission Expenses (4,951) (2,933) (6,505) (14,389) (7,894) (3,102) (3,183) (14,179) 1.5%
Other Operating Expenses (10,424) (8,554) (5,799) (24,777) (8,376) (8,389) (4,633) (21,398) 15.8%
Underwriting Profit (Loss) (9,591) 2,601 (2,065) (9,055) 2,924 (12,465) 1,013 (8,528) 6.2%
Losses and LAE Ratio 84.1% 33.6% 60.1% 63.8% 39.7% 105.2% 58.2% 62.3%
Commission Expense Ratio 13.6% 13.8% 25.4% 17.3% 24.8% 16.5% 15.1% 19.7%
Other Operating Expense Ratio 28.7% 40.3% 22.6% 29.8% 26.3% 44.4% 21.9% 29.9%
Combined Ratio 126.4% 87.7% 108.1% 110.9% 90.8% 166.1% 95.2% 111.9%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
U.S. Insurance
Year Ended December 31, 2017 Year Ended December 31, 2016
amounts in thousands Marine P&C Professional Liability Total Marine P&C Professional Liability Total %
Change
Total
Gross Written Premiums $156,171 $713,539 $118,583 $988,293 $169,405 $631,562 $118,428 $919,395 7.5%
Ceded Written Premiums (72,431) (173,501) (21,061) (266,993) (70,858) (135,888) (29,081) (235,827) 13.2%
Net Written Premiums 83,740 540,038 97,522 721,300 98,547 495,674 89,347 683,568 5.5%
Net Earned Premiums $86,605 $495,260 $92,800 $674,665 $100,132 $453,673 $75,503 $629,308 7.2%
Net Losses and LAE (58,099) (316,112) (69,142) (443,353) (50,087) (295,877) (51,896) (397,860) 11.4%
Commission Expenses (4,932) (57,756) (15,041) (77,729) (8,469) (52,483) (9,860) (70,812) 9.8%
Other Operating Expenses (25,501) (84,433) (18,971) (128,905) (27,559) (81,469) (19,080) (128,108) 0.6%
Other Underwriting Income 374 61 26 461 465 582 45 1,092 (57.8%)
Underwriting Profit (Loss) $(1,553) $37,020 $(10,328) $25,139 $14,482 $24,426 $(5,288) $33,620 (25.2%)
Losses and LAE Ratio 67.1% 63.8% 74.5% 65.7% 50.0% 65.2% 68.7% 63.2%
Commission Expense Ratio 5.7% 11.7% 16.2% 11.5% 8.5% 11.6% 13.1% 11.3%
Other Operating Expense Ratio (1) 29.0% 17.0% 20.4% 19.1% 27.0% 17.8% 25.2% 20.2%
Combined Ratio 101.8% 92.5% 111.1% 96.3% 85.5% 94.6% 107.0% 94.7%
(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
Int'l Insurance
Year Ended December 31, 2017 Year Ended December 31, 2016
amounts in thousands Marine P&C Professional Liability Total Marine P&C Professional Liability Total %
Change
Total
Gross Written Premiums $198,241 $159,123 $143,766 $501,130 $183,228 $181,094 $120,149 $484,471 3.4%
Ceded Written Premiums (42,018) (85,298) (37,962) (165,278) (40,092) (69,606) (28,806) (138,504) 19.3%
Net Written Premiums 156,223 73,825 105,804 335,852 143,136 111,488 91,343 345,967 (2.9%)
Net Earned Premiums $152,396 $88,517 $92,879 $333,792 $141,593 $89,455 $76,368 $307,416 8.6%
Net Losses and LAE (114,460) (61,791) (53,350) (229,601) (67,051) (68,995) (42,238) (178,284) 28.8%
Commission Expenses (32,541) (13,918) (22,365) (68,824) (34,018) (14,529) (13,156) (61,703) 11.5%
Other Operating Expenses (34,878) (28,537) (20,049) (83,464) (33,170) (34,075) (19,150) (86,395) (3.4%)
Underwriting Profit (Loss) $(29,483) $(15,729) $(2,885) $(48,097) $7,354 $(28,144) $1,824 $(18,966) NM
Losses and LAE Ratio 75.1% 69.8% 57.4% 68.8% 47.4% 77.1% 55.3% 58.0%
Commission Expense Ratio 21.4% 15.7% 24.1% 20.6% 24.0% 16.2% 17.2% 20.1%
Other Operating Expense Ratio 22.8% 32.3% 21.6% 25.0% 23.4% 38.2% 25.1% 28.1%
Combined Ratio 119.3% 117.8% 103.1% 114.4% 94.8% 131.5% 97.6% 106.2%
NM- Percentage change not meaningful.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Three Months Ended December 31,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $99,085 $73,100 56.8% 43.8%
Change in Reserves 4,832 33,500 2.8% 20.1%
Net Incurred Loss and LAE $103,917 $106,600 59.6% 63.9%
Int'l Insurance:
Loss and LAE Payments $55,296 $45,011 66.5% 62.6%
Change in Reserves (2,208) (246) (2.7%) (0.3%)
Net Incurred Loss and LAE $53,088 $44,765 63.8% 62.3%
GlobalRe:
Loss and LAE Payments $34,302 $17,260 72.3% 38.1%
Change in Reserves (7,923) 3,868 (16.7%) 8.5%
Net Incurred Loss and LAE $26,379 $21,128 55.6% 46.6%
Total
Loss and LAE Payments $188,683 $135,371 61.8% 47.6%
Change in Reserves (5,299) 37,122 (1.7%) 13.1%
Net Incurred Loss and LAE $183,384 $172,493 60.1% 60.7%
For the Three Months Ended December 31,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $1,492 $(420) 0.5% (0.1%)
Int'l Insurance 7,239 19,660 2.5% 6.9%
GlobalRe 1,568 (2,356) 0.5% (0.8%)
Total $10,299 $16,884 3.5% 6.0%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
For the Years Ended December 31,
amounts in thousands Amounts Loss Ratio
Net Incurred Loss Activity 2017 2016 2017 2016
U.S. Insurance:
Loss and LAE Payments $324,102 $299,842 48.0% 47.6%
Change in Reserves 119,251 98,018 17.7% 15.6%
Net Incurred Loss and LAE $443,353 $397,860 65.7% 63.2%
Int'l Insurance:
Loss and LAE Payments $201,402 $151,098 60.4% 49.2%
Change in Reserves 28,199 27,186 8.4% 8.8%
Net Incurred Loss and LAE $229,601 $178,284 68.8% 58.0%
GlobalRe:
Loss and LAE Payments $97,570 $81,089 54.8% 49.6%
Change in Reserves 35,741 8,215 20.1% 5.0%
Net Incurred Loss and LAE $133,311 $89,304 74.9% 54.6%
Total
Loss and LAE Payments $623,074 $532,029 52.6% 48.4%
Change in Reserves 183,191 133,419 15.4% 12.1%
Net Incurred Loss and LAE $806,265 $665,448 68.0% 60.5%
For the Years Ended December 31,
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development 2017 2016 2017 2016
U.S. Insurance $(16,714) $1,348 (1.4%) 0.1%
Int'l Insurance (14,834) 25,019 (1.3%) 2.3%
GlobalRe (2,762) 2,161 (0.2%) 0.2%
Total $(34,310) $28,528 (2.9%) 2.6%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
As of December 31, 2017
amounts in thousands Case IBNR
Net Loss Reserves: Reserves Reserves Total
U.S. Insurance:
Marine $58,301 $45,393 $103,694
P&C 192,291 700,264 892,555
Professional Liability 26,774 86,649 113,423
Total U.S. Insurance $277,366 $832,306 $1,109,672
Int'l Insurance:
Marine $181,369 $39,949 $221,318
P&C 66,412 37,067 103,479
Professional Liability 31,463 87,211 118,674
Total Int'l Insurance $279,244 $164,227 $443,471
GlobalRe $58,962 $93,275 $152,237
Total Net Loss Reserves $615,572 $1,089,808 $1,705,380
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 December 31, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.5 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of December 31, 2017:

As of December 31, 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
$393,563 $2,081 $(2,014) $393,496
States, Municipalities and Political Subdivisions 814,632 20,136 (1,423) 795,919
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities 407,619 2,352 (5,414) 410,681
Residential Mortgage Obligations 54,104 606 (79) 53,577
Asset-Backed Securities 328,753 2,138 (663) 327,278
Commercial Mortgage-Backed Securities 160,904 2,354 (1,182) 159,732
Subtotal $951,380 $7,450 $(7,338) $951,268
Corporate Exposures (1) 897,479 14,491 (3,737) 886,725
Total Fixed Maturities $3,057,054 $44,158 $(14,512) $3,027,408
Equity Securities:
Common Stocks $52,439 $7,423 $(112) $45,128
Preferred Stocks 183,542 6,071 (1,560) 179,031
Total Equity Securities $235,981 $13,494 $(1,672) $224,159
Short-Term Investments 127,128 3 127,125
Total Investments $3,420,163 $57,655 $(16,184) $3,378,692
(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.

Source:The Navigators Group, Inc.