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Navigators Reports Third Quarter Earnings

NEW YORK, Nov. 1, 2012 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $12.9 million, or $0.90 per diluted share, for the three months ended September 30, 2012 compared to $13.9 million, or $0.92 per diluted share, for the comparable period in 2011. Operating earnings were $9.8 million, or $0.69 per diluted share, for the third quarter of 2012 compared to operating earnings of $12.0 million, or $0.80 per diluted share, for the comparable period in 2011.

For the nine months ended September 30, 2012, the Company reported net income of $35.7 million, or $2.51 per diluted share, compared to $15.5 million, or $1.00 per diluted share, for the comparable period in 2011. Operating earnings were $29.1 million, or $2.04 per diluted share, for the nine months ended September 30, 2012 compared to $13.3 million, or $0.85 per diluted share, for the comparable period in 2011.

Gross written premiums and net written premiums for the three months ended September 30, 2012 were $298.7 million and $188.0 million, respectively, an increase of 17.0% and 7.2% from the comparable period in 2011. Gross written premiums and net written premiums for the nine months ended September 30, 2012 were $964.9 million and $621.3 million, respectively, an increase of 16.2% and 12.6% from the comparable period in 2011.

The combined loss and expense ratio for the three and nine months ended September 30, 2012 were 99.1% and 99.0%, respectively, compared to 99.1% and 105.6% for the comparable periods in 2011.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to have met our primary objectives during the quarter: underwriting profit and growth in book value per share. Our Lloyd's operation had an exceptionally strong quarter, achieving double digit premium growth and benefitting from favorable loss emergence. Navigators Specialty had another strong quarter, as we continue to benefit from the expansion of our E&S underwriting teams. We continue to achieve positive renewal rate change across most product lines and our underwriters remain focused and disciplined in their risk selections."

Stockholders' equity was $874.8 million, or $62.32 per share, as of September 30, 2012 compared to $803.4 million, or $57.57 per share, as of December 31, 2011.

Net investment income for the three and nine months ended September 30, 2012 was $13.6 million and $40.6 million, respectively, a decrease of 16.4% and 20.4% from the comparable periods in 2011. Investment income for the nine months ended September 30, 2012 was reduced by $4.5 million as a result of the settlement of a dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 2.4% for both the three and nine months ended September 30, 2012, compared to 3.1% and 3.2% for the comparable periods in 2011. The effective tax rate on net investment income was 26.6% and 26.8% for the three and nine months ended September 30, 2012, compared to 28.6% for both comparable periods in 2011.

The Company's investment portfolio mainly consists of fixed income securities with an average quality rating of "AA/Aa" as defined by Standard & Poor's and Moody's, respectively, and an average effective duration of 3.8 years as of September 30, 2012. As of September 30, 2012, net unrealized gains within our investment portfolio were $140.6 million, an increase of $47.0 million compared to December 31, 2011. There were $4.8 million net realized gains for the three months ended September 30, 2012 compared to $2.6 million for the same period in 2011. There were no other-than-temporary impairment losses for the three months ended September 30, 2012. For the nine months ended September 30, 2012, there were $10.2 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $3.5 million for the same period in 2011.

Consolidated net cash flow from operations for the three and nine months ended September 30, 2012 were $54.1 million and $69.1 million, respectively, compared to $71.9 million and $86.3 million for the comparable periods in 2011.

The Company will hold a conference call on Friday, November 2, 2012 starting at 8:30 a.m. ET to discuss the 2012 third quarter results. The call will be available via live webcast on Navigators' website (www.navg.com).

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

http://investor.shareholder.com/navg/eventdetail.cfm?eventid=119546

Operating earnings, or net income excluding after-tax net realized gains (losses) and net other-than-temporary impairment losses recognized in earnings, is a non-GAAP financial measure that is a common performance measurement for insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe.

The Navigators Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7778

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Results of Operations 2012 2011 Change 2012 2011 Change
Gross written premiums $ 298,742 $ 255,318 17.0% $ 964,878 $ 830,315 16.2%
Net written premiums 188,046 175,357 7.2% 621,343 551,796 12.6%
Revenues:
Net earned premiums 201,262 173,633 15.9% 580,398 499,888 16.1%
Net investment income 13,597 16,259 -16.4% 40,632 51,072 -20.4%
Total other-than-temporary impairment losses -- (1,241) NM (693) (2,338) -70.4%
Portion of loss recognized in other comprehensive income (before tax) -- 618 NM 43 941 -95.4%
Net other-than-temporary impairment losses recognized in earnings -- (623) NM (650) (1,397) -53.5%
Net realized gains (losses) 4,761 3,238 47.0% 10,820 4,856 122.8%
Other income 789 (921) NM 2,087 643 NM
Total revenues 220,409 191,586 15.0% 633,287 555,062 14.1%
Expenses:
Net losses and loss adjustment expenses 128,850 110,242 16.9% 370,242 340,893 8.6%
Commission expenses 31,258 25,934 20.5% 90,211 80,164 12.5%
Other operating expenses 40,112 34,989 14.6% 116,238 107,341 8.3%
Interest expense 2,049 2,047 0.1% 6,147 6,140 0.1%
Total expenses 202,269 173,212 16.8% 582,838 534,538 9.0%
Income before income taxes 18,140 18,374 -1.3% 50,449 20,524 145.8%
Income tax expense (benefit) 5,225 4,476 16.7% 14,731 5,015 NM
Net income (loss) $ 12,915 $ 13,898 -7.1% $ 35,718 $ 15,509 130.3%
Per Share Data
Net income per common share:
Basic $ 0.92 $ 0.94 -2.0% $ 2.55 $ 1.02 NM
Diluted $ 0.90 $ 0.92 -1.7% $ 2.51 $ 1.00 NM
Average common shares outstanding:
Basic 14,026,855 14,796,309 14,004,302 15,243,603
Diluted 14,272,477 15,104,424 14,255,301 15,569,370
Underwriting Ratios
Loss Ratio 64.0% 63.5% 63.8% 68.2%
Expense Ratio 35.1% 35.6% 35.2% 37.4%
Combined Ratio 99.1% 99.1% 99.0% 105.6%
Balance Sheet Data September 30, June 30, September 30, Dec. 31,
2012 2012 2012 2011
Stockholders' equity $ 874,811 $ 841,808 3.9% $ 874,811 $ 803,435 8.9%
Book value per share $ 62.32 $ 60.08 3.7% $ 62.32 $ 57.57 8.3%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
September 30, December 31,
2012 2011
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2012, $1,975,534; 2011, $1,816,710) $ 2,085,058 $ 1,888,069
Equity securities, available-for-sale, at fair value (cost: 2012, $74,831; 2011, $73,567) 105,930 95,849
Short-term investments, at cost which approximates fair value 187,445 122,220
Cash 36,252 127,360
Total investments and cash 2,414,685 2,233,498
Premiums receivable 351,060 255,725
Prepaid reinsurance premiums 224,851 164,162
Reinsurance recoverable on paid losses 41,819 43,791
Reinsurance recoverable on unpaid losses and loss adjustment expenses 834,604 845,445
Deferred policy acquisition costs 61,281 63,984
Accrued investment income 14,175 14,492
Goodwill and other intangible assets 7,037 6,869
Current income tax receivable, net 10,325 15,391
Other Assets 34,860 26,650
Total assets $ 3,994,697 $ 3,670,007
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,079,956 $ 2,082,679
Unearned premiums 635,241 532,628
Reinsurance balances payable 169,540 108,699
Senior notes 114,386 114,276
Deferred income tax, net 11,199 6,291
Accounts payable and other liabilities 109,564 21,999
Total liabilities 3,119,886 2,866,572
Stockholders' equity:
Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued -- --
Common stock, $.10 par value, authorized 50,000,000 shares, issued 17,548,112 shares for 2012 and 17,467,615 shares for 2011 1,754 1,746
Additional paid-in capital 327,197 322,133
Treasury stock, at cost (3,511,380 shares for 2012 and 2011) (155,801) (155,801)
Retained earnings 600,827 565,109
Accumulated other comprehensive income 100,834 70,248
Total stockholders' equity 874,811 803,435
Total liabilities and stockholders' equity $ 3,994,697 $ 3,670,007
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Nine Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 44,879 $ 47,141 -4.8% $ 156,640 $ 175,812 -10.9%
Property Casualty 139,948 110,975 26.1% 426,494 323,994 31.6%
Professional Liability 33,534 33,059 1.4% 97,629 84,912 15.0%
218,361 191,175 14.2% 680,763 584,718 16.4%
Lloyd's Operations:
Marine 37,716 26,979 39.8% 146,528 127,585 14.8%
Property Casualty 32,789 29,682 10.5% 106,063 91,106 16.4%
Professional Liability 9,876 7,482 32.0% 31,524 26,906 17.2%
80,381 64,143 25.3% 284,115 245,597 15.7%
Total $ 298,742 $ 255,318 17.0% $ 964,878 $ 830,315 16.2%
Net Written Premiums: Three Months Nine Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 32,615 $ 34,180 -4.6% $ 107,266 $ 130,200 -17.6%
Property Casualty 83,449 77,056 8.3% 274,823 201,978 36.1%
Professional Liability 26,084 24,056 8.4% 75,374 57,058 32.1%
142,148 135,292 5.1% 457,463 389,236 17.5%
Lloyd's Operations:
Marine 27,939 20,649 35.3% 109,489 102,362 7.0%
Property Casualty 11,633 16,296 -28.6% 36,693 47,364 -22.5%
Professional Liability 6,326 3,120 102.8% 17,698 12,834 37.9%
45,898 40,065 14.6% 163,880 162,560 0.8%
Total $ 188,046 $ 175,357 7.2% $ 621,343 $ 551,796 12.6%
Net Earned Premiums: Three Months Nine Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 40,592 $ 41,951 -3.2% $ 111,402 $ 124,387 -10.4%
Property Casualty 83,993 58,585 43.4% 240,536 156,871 53.3%
Professional Liability 24,505 18,796 30.4% 70,277 51,881 35.5%
149,090 119,332 24.9% 422,215 333,139 26.7%
Lloyd's Operations:
Marine 34,002 34,510 -1.5% 101,538 109,222 -7.0%
Property Casualty 11,870 15,952 -25.6% 41,644 44,105 -5.6%
Professional Liability 6,300 3,839 64.1% 15,001 13,422 11.8%
52,172 54,301 -3.9% 158,183 166,749 -5.1%
Total $ 201,262 $ 173,633 15.9% $ 580,398 $ 499,888 16.1%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 218,361 $ 80,381 $ -- $ 298,742
Net written premiums 142,148 45,898 -- 188,046
Net earned premiums 149,090 52,172 -- 201,262
Net losses and loss adjustment expenses (113,303) (15,547) -- (128,850)
Commission expenses (20,827) (10,911) 480 (31,258)
Other operating expenses (29,387) (10,725) -- (40,112)
Other income (expense) 1,229 40 (480) 789
Underwriting profit (loss) (13,198) 15,029 -- 1,831
Net investment income 12,004 1,552 41 13,597
Net realized gains (losses) 2,609 2,152 -- 4,761
Interest expense -- -- (2,049) (2,049)
Income (loss) before income taxes 1,415 18,733 (2,008) 18,140
Income tax expense (benefit) (377) 6,525 (923) 5,225
Net income (loss) $ 1,792 $ 12,208 $ (1,085) $ 12,915
Losses and loss adjustment expenses ratio 76.0% 29.8% 64.0%
Commission expense ratio 14.0% 20.9% 15.5%
Other operating expense ratio (2) 18.9% 20.5% 19.6%
Combined ratio 108.9% 71.2% 99.1%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2011
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 191,175 $ 64,143 $ -- $ 255,318
Net written premiums 135,292 40,065 -- 175,357
Net earned premiums 119,332 54,301 -- 173,633
Net losses and loss adjustment expenses (76,755) (33,487) -- (110,242)
Commission expenses (16,514) (9,953) 533 (25,934)
Other operating expenses (25,735) (9,254) -- (34,989)
Other income (expense) 554 (942) (533) (921)
Underwriting profit (loss) 882 665 -- 1,547
Net investment income 14,037 2,158 64 16,259
Net realized gains (losses) 2,809 (226) 32 2,615
Interest expense -- -- (2,047) (2,047)
Income (loss) before income taxes 17,728 2,597 (1,951) 18,374
Income tax expense (benefit) 4,379 780 (683) 4,476
Net income (loss) $ 13,349 $ 1,817 $ (1,268) $ 13,898
Losses and loss adjustment expenses ratio 64.3% 61.7% 63.5%
Commission expense ratio 13.8% 18.3% 14.9%
Other operating expense ratio (2) 21.2% 18.8% 20.7%
Combined ratio 99.3% 98.8% 99.1%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 680,763 $ 284,115 $ -- $ 964,878
Net written premiums 457,463 163,880 -- 621,343
Net earned premiums 422,215 158,183 -- 580,398
Net losses and loss adjustment expenses (304,483) (65,759) -- (370,242)
Commission expenses (61,245) (30,735) 1,769 (90,211)
Other operating expenses (83,646) (32,592) -- (116,238)
Other income (expense) 3,750 106 (1,769) 2,087
Underwriting profit (loss) (23,409) 29,203 -- 5,794
Net investment income 34,225 6,289 118 40,632
Net realized gains (losses) 6,809 3,361 -- 10,170
Interest expense -- -- (6,147) (6,147)
Income (loss) before income taxes 17,625 38,853 (6,029) 50,449
Income tax expense (benefit) 3,603 13,458 (2,330) 14,731
Net income (loss) $ 14,022 $ 25,395 $ (3,699) $ 35,718
Losses and loss adjustment expenses ratio 72.1% 41.6% 63.8%
Commission expense ratio 14.5% 19.4% 15.5%
Other operating expense ratio (2) 18.9% 20.5% 19.7%
Combined ratio 105.5% 81.5% 99.0%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2011
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 584,718 $ 245,597 $ -- $ 830,315
Net written premiums 389,236 162,560 -- 551,796
Net earned premiums 333,139 166,749 -- 499,888
Net losses and loss adjustment expenses (228,882) (112,011) -- (340,893)
Commission expenses (45,256) (36,402) 1,494 (80,164)
Other operating expenses (79,050) (28,291) -- (107,341)
Other income (expense) 2,871 (734) (1,494) 643
Underwriting profit (loss) (17,178) (10,689) -- (27,867)
Net investment income 44,009 6,733 330 51,072
Net realized gains (losses) 5,664 (2,409) 204 3,459
Interest expense -- -- (6,140) (6,140)
Income (loss) before income taxes 32,495 (6,365) (5,606) 20,524
Income tax expense (benefit) 9,224 (2,247) (1,962) 5,015
Net income (loss) $ 23,271 $ (4,118) $ (3,644) $ 15,509
Losses and loss adjustment expenses ratio 68.7% 67.2% 68.2%
Commission expense ratio 13.6% 21.8% 16.0%
Other operating expense ratio (2) 22.9% 17.4% 21.4%
Combined ratio 105.2% 106.4% 105.6%
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Three Months Ended September 30, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 40,592 $ 29,187 $ 14,200 $ (2,795) 71.9% 35.0% 106.9%
Property Casualty 83,993 67,474 25,753 (9,234) 80.3% 30.7% 111.0%
Professional Liability 24,505 16,642 9,032 (1,169) 67.9% 36.9% 104.8%
Total Insurance Companies 149,090 113,303 48,985 (13,198) 76.0% 32.9% 108.9%
Lloyd's Operations:
Marine $ 34,002 $ 10,936 $ 14,543 $ 8,523 32.2% 42.7% 74.9%
Property Casualty 11,870 5,441 4,750 1,679 45.8% 40.1% 85.9%
Professional Liability 6,300 (830) 2,303 4,827 -13.2% 36.6% 23.4%
Total Lloyd's 52,172 15,547 21,596 15,029 29.8% 41.4% 71.2%
Total All $ 201,262 $ 128,850 $ 70,581 $ 1,831 64.0% 35.1% 99.1%
Three Months Ended September 30, 2011
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 41,951 $ 28,082 $ 15,054 $ (1,185) 66.9% 35.9% 102.8%
Property Casualty 58,585 36,272 19,605 2,708 61.9% 33.5% 95.4%
Professional Liability 18,796 12,401 7,036 (641) 66.0% 37.4% 103.4%
Total Insurance Companies 119,332 76,755 41,695 882 64.3% 35.0% 99.3%
Lloyd's Operations:
Marine 34,510 22,817 14,429 (2,736) 66.1% 41.8% 107.9%
Property Casualty 15,952 7,597 4,002 4,353 47.6% 25.1% 72.7%
Professional Liability 3,839 3,073 1,718 (952) 80.0% 44.8% 124.8%
Total Lloyd's 54,301 33,487 20,149 665 61.7% 37.1% 98.8%
Total All $ 173,633 $ 110,242 $ 61,844 $ 1,547 63.5% 35.6% 99.1%
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2012 2011 2012 2011
Insurance Companies:
Loss and LAE payments $ 98,857 $ 63,475 66.3% 53.2%
Change in reserves 14,446 13,280 9.7% 11.1%
Net incurred loss and LAE 113,303 76,755 76.0% 64.3%
Lloyd's Operations:
Loss and LAE payments $ 24,019 26,168 46.0% 48.2%
Change in reserves (8,472) 7,319 -16.2% 13.5%
Net incurred loss and LAE 15,547 33,487 29.8% 61.7%
Total
Loss and LAE payments 122,876 89,643 61.0% 51.6%
Change in reserves 5,974 20,599 3.0% 11.9%
Net incurred loss and LAE $ 128,850 $ 110,242 64.0% 63.5%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2012 2011 2012 2011
Insurance Companies $ (3,607) $ 2,144 -2.4% 1.8%
Lloyd's Operations 9,084 (531) 17.4% -1.0%
Total $ 5,477 $ 1,613 2.7% 0.9%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Nine Months Ended September 30, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 111,402 $ 87,240 $ 40,371 $ (16,209) 78.3% 36.3% 114.6%
Property Casualty 240,536 165,346 75,235 (45) 68.7% 31.3% 100.0%
Professional Liability 70,277 51,897 25,535 (7,155) 73.8% 36.4% 110.2%
Total Insurance Companies 422,215 304,483 141,141 (23,409) 72.1% 33.4% 105.5%
Lloyd's Operations:
Marine 101,538 45,224 42,587 13,727 44.5% 42.0% 86.5%
Property Casualty 41,644 17,213 14,421 10,010 41.3% 34.7% 76.0%
Professional Liability 15,001 3,322 6,213 5,466 22.1% 41.5% 63.6%
Total Lloyd's 158,183 65,759 63,221 29,203 41.6% 39.9% 81.5%
Total All $ 580,398 $ 370,242 $ 204,362 $ 5,794 63.8% 35.2% 99.0%
Nine Months Ended September 30, 2011
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 124,387 $ 82,888 $ 43,934 $ (2,435) 66.6% 35.4% 102.0%
Property Casualty 156,871 110,637 57,662 (11,428) 70.5% 36.8% 107.3%
Professional Liability 51,881 35,357 19,839 (3,315) 68.2% 38.2% 106.4%
Total Insurance Companies 333,139 228,882 121,435 (17,178) 68.7% 36.5% 105.2%
Lloyd's Operations:
Marine 109,222 73,239 43,781 (7,798) 67.1% 40.0% 107.1%
Property Casualty 44,105 22,976 15,720 5,409 52.1% 35.6% 87.7%
Professional Liability 13,422 15,796 5,926 (8,300) 117.7% 44.1% 161.8%
Total Lloyd's 166,749 112,011 65,427 (10,689) 67.2% 39.2% 106.4%
Total All $ 499,888 $ 340,893 $ 186,862 $ (27,867) 68.2% 37.4% 105.6%
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2012 2011 2012 2011
Insurance Companies:
Loss and LAE payments $ 282,820 $ 207,446 67.0% 62.3%
Change in reserves 21,663 21,436 5.1% 6.4%
Net incurred loss and LAE 304,483 228,882 72.1% 68.7%
Lloyd's Operations:
Loss and LAE payments 79,304 74,826 50.2% 44.9%
Change in reserves (13,545) 37,185 -8.6% 22.3%
Net incurred loss and LAE 65,759 112,011 41.6% 67.2%
Total
Loss and LAE payments 362,124 282,272 62.4% 56.5%
Change in reserves 8,118 58,621 1.4% 11.7%
Net incurred loss and LAE $ 370,242 $ 340,893 63.8% 68.2%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2012 2011 2012 2011
Insurance Companies $ (1,517) $ 1,059 -0.4% 0.3%
Lloyd's Operations 19,232 (3,694) 12.2% -2.2%
Total $ 17,715 $ (2,635) 3.1% -0.5%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Case IBNR
Net Loss Reserves, September 30, 2012: Reserves Reserves Total
Insurance Companies:
Marine $ 143,907 $ 112,624 $ 256,531
Property Casualty 173,686 329,070 502,756
Professional Liability 57,004 77,601 134,605
Total Insurance Companies 374,597 519,295 893,892
Lloyd's Operations:
Marine 128,551 106,470 235,021
Property Casualty 28,053 30,200 58,253
Professional Liability 15,823 42,363 58,186
Total Lloyd's Operations 172,427 179,033 351,460
Total Net Loss Reserves $ 547,024 $ 698,328 $ 1,245,352
Case IBNR
Net Loss Reserves, December 31, 2011: Reserves Reserves Total
Insurance Companies:
Marine $ 127,912 $ 121,875 $ 249,787
Property Casualty 185,822 296,177 481,999
Professional Liability 56,953 83,490 140,443
Total Insurance Companies 370,687 501,542 872,229
Lloyd's Operations:
Marine 117,448 123,136 240,584
Property Casualty 37,877 25,846 63,723
Professional Liability 13,580 47,118 60,698
Total Lloyd's Operations 168,905 196,100 365,005
Total Net Loss Reserves $ 539,592 $ 697,642 $ 1,237,234
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2012
As of September 30, 2012, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.8 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.
As of September 30, 2012, the Company owned two asset-backed securities approximating $0.7 million with subprime mortgage exposures. The securities have an effective maturity of 3.2 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.1 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 6.3 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of September 30, 2012:
Gross Gross Cost or OTTI
Fair Unrealized Unrealized Amortized Recognized
September 30, 2012 Value Gains (Losses) Cost in OCI
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 465,215 $ 11,881 $ (55) $ 453,389 $ --
States, municipalities and political subdivisions 443,994 34,451 (66) 409,609 --
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 405,229 17,582 (56) 387,703 --
Residential mortgage obligations 39,095 711 (837) 39,221 (278)
Asset-backed securities 50,897 1,069 (72) 49,900 --
Commercial mortgage-backed securities 208,742 18,126 (50) 190,666 --
Subtotal 703,963 37,488 (1,015) 667,490 (278)
Corporate bonds 471,886 26,941 (101) 445,046 --
Total fixed maturities 2,085,058 110,761 (1,237) 1,975,534 (278)
Equity securities - common stocks 105,930 31,377 (278) 74,831 --
Short-term investments 187,445 -- -- 187,445 --
Cash 36,252 -- -- 36,252 --
Total $ 2,414,685 $ 142,138 $ (1,515) $ 2,274,062 $ (278)
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2012
($ in thousands)
The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at September 30, 2012:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 126,642 $ 6,416 $ (45) $ 120,271
FNMA 210,396 8,705 (11) 201,702
FHLMC 68,191 2,461 -- 65,730
Total $ 405,229 $ 17,582 $ (56) $ 387,703
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 12,709 $ 126 $ (658) $ 13,241
Alt-A 2,102 24 (179) 2,257
Subprime 721 21 -- 700
Non-US RMBS 23,563 540 -- 23,023
Total $ 39,095 $ 711 $ (837) $ 39,221
CONTACT: Ciro M. DeFalco Senior Vice President and Chief Financial Officer (914) 933-6043 cdefalco@navg.com www.navg.com

Source:The Navigators Group, Inc.