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Navigators Reports Fourth Quarter Earnings

NEW YORK, Feb. 13, 2013 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $28.0 million, or $1.96 per diluted share, for the three months ended December 31, 2012 compared to $10.1 million, or $0.70 per diluted share, for the comparable period in 2011. Operating earnings were $8.5 million, or $0.59 per diluted share, for the fourth quarter of 2012 compared to operating earnings of $5.8 million, or $0.41 per diluted share, for the comparable period in 2011.

For the twelve months ended December 31, 2012, the Company reported net income of $63.8 million, or $4.45 per diluted share, compared to $25.6 million, or $1.69 per diluted share, for the comparable period in 2011. Operating earnings were $37.6 million, or $2.63 per diluted share, for the twelve months ended December 31, 2012 compared to $19.1 million, or $1.26 per diluted share, for the comparable period in 2011.

Gross written premiums and net written premiums for the three months ended December 31, 2012 were $321.6 million and $212.3 million, respectively, an increase of 15.7% and 5.1% from the comparable period in 2011. Gross written premiums and net written premiums for the twelve months ended December 31, 2012 were $1,286.5 million and $833.7 million, respectively, an increase of 16.1% and 10.6% from the comparable period in 2011.

The combined loss and expense ratios for the three and twelve months ended December 31, 2012 were 100.2% and 99.3%, respectively, compared to 102.5% and 104.7% for the comparable periods in 2011. The current quarter includes net reserve releases of $28.0 million from our Lloyd's Operations, most notably from our Lloyd's Marine business in connection with favorable settlement of several large losses and the continued favorable loss emergence for underwriting years 2010 and prior. The current quarter also includes a net loss from Superstorm Sandy of $20.4 million, inclusive of $8.3 million in reinsurance reinstatement premiums.

Stan Galanski, President and Chief Executive Officer, commented, "In a year that began with the grounding of the Costa Concordia and concluded with Superstorm Sandy, we are pleased to have achieved profitable underwriting results. Our results were driven by an exceptionally strong performance at Lloyd's, where favorable loss emergence contributed to their best combined ratio since acquiring the Lloyd's operation in 1998."

Stockholders' equity was $879.5 million, or $62.61 per share, as of December 31, 2012 compared to $803.4 million, or $57.57 per share, as of December 31, 2011.

Net investment income for the three and twelve months ended December 31, 2012 was $13.6 million and $54.2 million, respectively, an increase of 9.6% for the three months ended December 31, 2012 and a decrease of 14.6% for the twelve months ended December 31, 2012. Investment income for the twelve months ended December 31, 2012 and 2011 was reduced by $4.5 million and $4.7 million, respectively, for a total of $9.2 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, for the three and twelve months ended December 31, 2012 was 2.3% and 2.4%, respectively, compared to 2.3% and 3.0% for the comparable periods in 2011. The effective tax rate on net investment income was 26.7% and 26.8% for the three and twelve months ended December 31, 2012, compared to 23.6% and 27.6% for the 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 3.6 years as of December 31, 2012. As of December 31, 2012, net unrealized gains within our investment portfolio were $103.3 million, an increase of $9.7 million compared to December 31, 2011. There were $30.0 million and $40.2 million of net realized gains including other-than-temporary impairment losses recognized in earnings for the three and twelve months ended December 31, 2012, respectively, compared to $6.6 million and $10.0 million for the same periods in 2011.

Consolidated net cash flow from operations for the three and twelve months ended December 31, 2012 were $27.6 million and $96.7 million, respectively, compared to $32.0 million and $118.3 million for the comparable periods in 2011.

The Company will hold a conference call on Thursday, February 14, 2013 starting at 8:30 a.m. ET to discuss the 2012 fourth quarter results. The call will be available via live webcast on Navigators' website (www.navg.com).

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

http://investor.shareholder.com/navg/eventdetail.cfm?eventid=123733

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
December 31,
Twelve Months Ended
December 31,
Results of Operations 2012 2011 Change 2012 2011 Change
Gross written premiums $ 321,587 $ 277,901 15.7% $ 1,286,465 $ 1,108,216 16.1%
Net written premiums 212,312 202,002 5.1% 833,655 753,798 10.6%
Revenues:
Net earned premiums 201,566 191,757 5.1% 781,964 691,645 13.1%
Net investment income 13,616 12,428 9.6% 54,248 63,500 -14.6%
Total other-than-temporary impairment losses (208) (1,280) -83.8% (902) (3,617) -75.1%
Portion of loss recognized in other comprehensive income (before tax) -- 691 NM 44 1,632 -97.3%
Net other-than-temporary impairment losses recognized in earnings (208) (589) -64.7% (858) (1,985) -56.8%
Net realized gains (losses) 30,254 7,141 NM 41,074 11,996 NM
Other income (599) 586 NM 1,488 1,229 21.1%
Total revenues 244,629 211,323 15.8% 877,916 766,385 14.6%
Expenses:
Net losses and loss adjustment expenses 127,191 136,104 -6.5% 497,433 476,997 4.3%
Commission expenses 31,259 30,273 3.3% 121,470 110,437 10.0%
Other operating expenses 42,841 30,688 39.6% 159,079 138,029 15.3%
Interest expense 2,051 2,048 0.1% 8,198 8,188 0.1%
Total expenses 203,342 199,113 2.1% 786,180 733,651 7.2%
Income before income taxes 41,287 12,210 NM 91,736 32,734 NM
Income tax expense (benefit) 13,243 2,122 NM 27,974 7,137 NM
Net income (loss) $ 28,044 $ 10,088 NM $ 63,762 $ 25,597 149.1%
Per Share Data
Net income per common share:
Basic $ 2.00 $ 0.71 NM $ 4.54 $ 1.71 NM
Diluted $ 1.96 $ 0.70 NM $ 4.45 $ 1.69 NM
Average common shares outstanding:
Basic 14,042,553 14,199,491 14,052,311 14,980,429
Diluted 14,340,057 14,380,161 14,327,820 15,183,285
Underwriting Ratios
Loss Ratio 63.1% 71.0% 63.6% 69.0%
Expense Ratio 37.1% 31.5% 35.7% 35.7%
Combined Ratio 100.2% 102.5% 99.3% 104.7%
Balance Sheet Data Dec. 31, Sept. 30, Dec. 31, Dec. 31,
2012 2012 2012 2011
Stockholders' equity $ 879,485 $ 874,811 0.5% $ 879,485 $ 803,435 9.5%
Book value per share $ 62.61 $ 62.32 0.5% $ 62.61 $ 57.57 8.8%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
December 31, December 31,
2012 2011
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2012, $2,034,765; 2011, $1,816,710) $ 2,121,833 $ 1,888,069
Equity securities, available-for-sale, at fair value (cost: 2012, $85,004; 2011, $73,567) 101,297 95,849
Short-term investments, at cost which approximates fair value 153,788 122,220
Cash 45,336 127,360
Total investments and cash 2,422,254 2,233,498
Premiums receivable 320,182 255,725
Prepaid reinsurance premiums 221,015 164,162
Reinsurance recoverable on paid losses 49,282 43,791
Reinsurance recoverable on unpaid losses and loss adjustment expenses 880,139 845,445
Deferred policy acquisition costs 61,005 63,984
Accrued investment income 12,587 14,492
Goodwill and other intangible assets 7,093 6,869
Current income tax receivable, net -- 15,391
Deferred income tax, net 3,216 --
Receivable for investments sold 4,310 2,583
Other assets 26,587 26,650
Total assets $ 4,007,670 $ 3,672,590
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,097,048 $ 2,082,679
Unearned premiums 642,407 532,628
Reinsurance balances payable 165,813 108,699
Senior notes 114,424 114,276
Current income tax payable, net 2,133 --
Deferred income tax, net -- 6,291
Payable for investments purchased 58,345 74
Accounts payable and other liabilities 48,015 24,508
Total liabilities 3,128,185 2,869,155
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 17,558,046 shares for 2012 and 17,467,615 shares for 2011 1,755 1,746
Additional paid-in capital 329,452 322,133
Treasury stock, at cost (3,511,380 shares for 2012 and 2011) (155,801) (155,801)
Retained earnings 628,871 565,109
Accumulated other comprehensive income 75,208 70,248
Total stockholders' equity 879,485 803,435
Total liabilities and stockholders' equity $ 4,007,670 $ 3,672,590
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Twelve Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 43,455 $ 52,688 -17.5% $ 200,095 $ 228,500 -12.4%
Property Casualty 164,247 121,293 35.4% 590,741 445,287 32.7%
Professional Liability 32,860 29,720 10.6% 130,489 114,632 13.8%
240,562 203,701 18.1% 921,325 788,419 16.9%
Lloyd's Operations:
Marine 47,895 39,977 19.8% 194,423 167,562 16.0%
Property Casualty 20,965 24,032 -12.8% 127,028 115,138 10.3%
Professional Liability 12,165 10,191 19.4% 43,689 37,097 17.8%
81,025 74,200 9.2% 365,140 319,797 14.2%
Total $ 321,587 $ 277,901 15.7% $ 1,286,465 $ 1,108,216 16.1%
Net Written Premiums: Three Months Twelve Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 25,944 $ 40,442 -35.8% $ 133,210 $ 170,642 -21.9%
Property Casualty 115,345 91,780 25.7% 390,168 293,758 32.8%
Professional Liability 24,204 20,933 15.6% 99,578 77,991 27.7%
165,493 153,155 8.1% 622,956 542,391 14.9%
Lloyd's Operations:
Marine 34,111 34,844 -2.1% 143,600 137,206 4.7%
Property Casualty 7,131 8,885 -19.7% 43,824 56,249 -22.1%
Professional Liability 5,577 5,118 9.0% 23,275 17,952 29.7%
46,819 48,847 -4.2% 210,699 211,407 -0.3%
Total $ 212,312 $ 202,002 5.1% $ 833,655 $ 753,798 10.6%
Net Earned Premiums: Three Months Twelve Months
Insurance Companies: 2012 2011 Change 2012 2011 Change
Marine $ 30,779 $ 44,631 -31.0% $ 142,181 $ 169,018 -15.9%
Property Casualty 92,246 74,426 23.9% 332,782 231,297 43.9%
Professional Liability 26,199 20,267 29.3% 96,476 72,148 33.7%
149,224 139,324 7.1% 571,439 472,463 20.9%
Lloyd's Operations:
Marine 35,360 36,437 -3.0% 136,898 145,659 -6.0%
Property Casualty 11,307 11,798 -4.2% 52,951 55,903 -5.3%
Professional Liability 5,675 4,198 35.2% 20,676 17,620 17.3%
52,342 52,433 -0.2% 210,525 219,182 -3.9%
Total $ 201,566 $ 191,757 5.1% $ 781,964 $ 691,645 13.1%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
December 31, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 240,562 $ 81,025 $ -- $ 321,587
Net written premiums 165,493 46,819 -- 212,312
Net earned premiums 149,224 52,342 -- 201,566
Net losses and loss adjustment expenses (112,599) (14,592) -- (127,191)
Commission expenses (20,125) (11,714) 580 (31,259)
Other operating expenses (29,979) (12,862) -- (42,841)
Other income (expense) 40 (59) (580) (599)
Underwriting profit (loss) (13,439) 13,115 -- (324)
Net investment income 12,324 1,262 30 13,616
Net realized gains (losses) 29,659 194 193 30,046
Interest expense -- -- (2,051) (2,051)
Income (loss) before income taxes 28,544 14,571 (1,828) 41,287
Income tax expense (benefit) 9,083 5,162 (1,002) 13,243
Net income (loss) $ 19,461 $ 9,409 $ (826) $ 28,044
Losses and loss adjustment expenses ratio 75.5% 27.9% 63.1%
Commission expense ratio 13.5% 22.4% 15.5%
Other operating expense ratio (2) 20.0% 24.6% 21.6%
Combined ratio 109.0% 74.9% 100.2%
(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
December 31, 2011
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 203,701 $ 74,200 $ -- $ 277,901
Net written premiums 153,155 48,847 -- 202,002
Net earned premiums 139,324 52,433 -- 191,757
Net losses and loss adjustment expenses (112,743) (23,361) -- (136,104)
Commission expenses (18,909) (11,939) 575 (30,273)
Other operating expenses (22,467) (8,221) -- (30,688)
Other income (expense) 1,084 77 (575) 586
Underwriting profit (loss) (13,711) 8,989 -- (4,722)
Net investment income 10,155 2,222 51 12,428
Net realized gains (losses) 6,487 55 10 6,552
Interest expense -- -- (2,048) (2,048)
Income (loss) before income taxes 2,931 11,266 (1,987) 12,210
Income tax expense (benefit) (953) 3,770 (695) 2,122
Net income (loss) $ 3,884 $ 7,496 $ (1,292) $ 10,088
Losses and loss adjustment expenses ratio 80.9% 44.6% 71.0%
Commission expense ratio 13.6% 22.8% 15.8%
Other operating expense ratio (2) 15.3% 15.5% 15.7%
Combined ratio 109.8% 82.9% 102.5%
(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
Twelve Months Ended
December 31, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 921,325 $ 365,140 $ -- $1,286,465
Net written premiums 622,956 210,699 -- 833,655
Net earned premiums 571,439 210,525 -- 781,964
Net losses and loss adjustment expenses (417,082) (80,351) -- (497,433)
Commission expenses (81,370) (42,449) 2,349 (121,470)
Other operating expenses (113,625) (45,454) -- (159,079)
Other income (expense) 3,790 47 (2,349) 1,488
Underwriting profit (loss) (36,848) 42,318 -- 5,470
Net investment income 46,549 7,551 148 54,248
Net realized gains (losses) 36,468 3,555 193 40,216
Interest expense -- -- (8,198) (8,198)
Income (loss) before income taxes 46,169 53,424 (7,857) 91,736
Income tax expense (benefit) 12,686 18,620 (3,332) 27,974
Net income (loss) $ 33,483 $ 34,804 $ (4,525) $ 63,762
Losses and loss adjustment expenses ratio 73.0% 38.2% 63.6%
Commission expense ratio 14.2% 20.2% 15.5%
Other operating expense ratio (2) 19.2% 21.5% 20.2%
Combined ratio 106.4% 79.9% 99.3%
(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
Twelve Months Ended
December 31, 2011
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 788,419 $ 319,797 $ -- $1,108,216
Net written premiums 542,391 211,407 -- 753,798
Net earned premiums 472,463 219,182 -- 691,645
Net losses and loss adjustment expenses (341,625) (135,372) -- (476,997)
Commission expenses (64,165) (48,341) 2,069 (110,437)
Other operating expenses (101,517) (36,512) -- (138,029)
Other income (expense) 3,955 (657) (2,069) 1,229
Underwriting profit (loss) (30,889) (1,700) -- (32,589)
Net investment income 54,164 8,955 381 63,500
Net realized gains (losses) 12,151 (2,354) 214 10,011
Interest expense -- -- (8,188) (8,188)
Income (loss) before income taxes 35,426 4,901 (7,593) 32,734
Income tax expense (benefit) 8,271 1,523 (2,657) 7,137
Net income (loss) $ 27,155 $ 3,378 $ (4,936) $ 25,597
Losses and loss adjustment expenses ratio 72.3% 61.8% 69.0%
Commission expense ratio 13.6% 22.1% 16.0%
Other operating expense ratio (2) 20.6% 16.9% 19.7%
Combined ratio 106.5% 100.8% 104.7%
(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 December 31, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 30,779 $ 22,879 $ 15,048 $ (7,148) 74.3% 48.9% 123.2%
Property Casualty 92,246 70,394 25,535 (3,683) 76.3% 27.7% 104.0%
Professional Liability 26,199 19,326 9,481 (2,608) 73.8% 36.2% 110.0%
Total Insurance Companies 149,224 112,599 50,064 (13,439) 75.5% 33.5% 109.0%
Lloyd's Operations:
Marine 35,360 5,892 16,523 12,945 16.7% 46.7% 63.4%
Property Casualty 11,307 6,476 5,609 (778) 57.3% 49.6% 106.9%
Professional Liability 5,675 2,224 2,503 948 39.2% 44.1% 83.3%
Total Lloyd's 52,342 14,592 24,635 13,115 27.9% 47.0% 74.9%
Total All $ 201,566 $ 127,191 $ 74,699 $ (324) 63.1% 37.1% 100.2%
Three Months Ended December 31, 2011
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 44,631 $ 28,321 $ 13,537 $ 2,773 63.5% 30.3% 93.8%
Property Casualty 74,426 41,297 20,227 12,902 55.5% 27.2% 82.7%
Professional Liability 20,267 43,125 6,528 (29,386) 212.8% 32.2% 245.0%
Total Insurance Companies 139,324 112,743 40,292 (13,711) 80.9% 28.9% 109.8%
Lloyd's Operations:
Marine 36,437 14,089 14,024 8,324 38.7% 38.5% 77.2%
Property Casualty 11,798 4,232 4,466 3,100 35.9% 37.8% 73.7%
Professional Liability 4,198 5,040 1,593 (2,435) 120.1% 37.9% 158.0%
Total Lloyd's 52,433 23,361 20,083 8,989 44.6% 38.3% 82.9%
Total All $ 191,757 $ 136,104 $ 60,375 $ (4,722) 71.0% 31.5% 102.5%
Amounts Loss Ratio
Net Incurred Loss Activity Dec. 31, Dec. 31, Dec. 31, Dec. 31,
For the Three Months Ended: 2012 2011 2012 2011
Insurance Companies:
Loss and LAE payments $ 120,293 $ 70,377 80.7% 50.5%
Change in reserves (7,694) 42,366 -5.2% 30.4%
Net incurred loss and LAE 112,599 112,743 75.5% 80.9%
Lloyd's Operations:
Loss and LAE payments 35,341 29,656 67.5% 56.6%
Change in reserves (20,749) (6,295) -39.6% -12.0%
Net incurred loss and LAE 14,592 23,361 27.9% 44.6%
Total
Loss and LAE payments 155,634 100,033 77.2% 52.2%
Change in reserves (28,443) 36,071 -14.1% 18.8%
Net incurred loss and LAE $ 127,191 $ 136,104 63.1% 71.0%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Dec. 31, Dec. 31, Dec. 31, Dec. 31,
For the Three Months Ended: 2012 2011 2012 2011
Insurance Companies $ (379) $ (13,161) -0.2% -6.9%
Lloyd's Operations 27,955 13,651 13.9% 7.2%
Total $ 27,576 $ 490 13.7% 0.3%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Twelve Months Ended December 31, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 142,181 $ 110,119 $ 55,419 $ (23,357) 77.4% 39.0% 116.4%
Property Casualty 332,782 235,740 100,770 (3,728) 70.8% 30.3% 101.1%
Professional Liability 96,476 71,223 35,016 (9,763) 73.8% 36.3% 110.1%
Total Insurance Companies 571,439 417,082 191,205 (36,848) 73.0% 33.4% 106.4%
Lloyd's Operations:
Marine 136,898 51,116 59,110 26,672 37.3% 43.2% 80.5%
Property Casualty 52,951 23,689 20,030 9,232 44.7% 37.9% 82.6%
Professional Liability 20,676 5,546 8,716 6,414 26.8% 42.2% 69.0%
Total Lloyd's 210,525 80,351 87,856 42,318 38.2% 41.7% 79.9%
Total All $ 781,964 $ 497,433 $ 279,061 $ 5,470 63.6% 35.7% 99.3%
Twelve Months Ended December 31, 2011
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 169,018 $ 111,209 $ 57,471 $ 338 65.8% 34.0% 99.8%
Property Casualty 231,297 151,934 77,889 1,474 65.7% 33.7% 99.4%
Professional Liability 72,148 78,482 26,367 (32,701) 108.8% 36.5% 145.3%
Total Insurance Companies 472,463 341,625 161,727 (30,889) 72.3% 34.2% 106.5%
Lloyd's Operations:
Marine 145,659 87,328 57,805 526 60.0% 39.6% 99.6%
Property Casualty 55,903 27,208 20,186 8,509 48.7% 36.1% 84.8%
Professional Liability 17,620 20,836 7,519 (10,735) 118.3% 42.6% 160.9%
Total Lloyd's 219,182 135,372 85,510 (1,700) 61.8% 39.0% 100.8%
Total All $ 691,645 $ 476,997 $ 247,237 $ (32,589) 69.0% 35.7% 104.7%
Amounts Loss Ratio ��
Net Incurred Loss Activity Dec. 31, Dec. 31, Dec. 31, Dec. 31,
For the Twelve Months Ended: 2012 2011 2012 2011
Insurance Companies:
Loss and LAE payments $ 403,113 $ 277,823 70.6% 58.8%
Change in reserves 13,969 63,802 2.4% 13.5%
Net incurred loss and LAE 417,082 341,625 73.0% 72.3%
Lloyd's Operations:
Loss and LAE payments 114,645 104,482 54.5% 47.7%
Change in reserves (34,294) 30,890 -16.3% 14.1%
Net incurred loss and LAE 80,351 135,372 38.2% 61.8%
Total
Loss and LAE payments 517,758 382,305 66.2% 55.3%
Change in reserves (20,325) 94,692 -2.6% 13.7%
Net incurred loss and LAE $ 497,433 $ 476,997 63.6% 69.0%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Dec. 31, Dec. 31, Dec. 31, Dec. 31,
For the Twelve Months Ended: 2012 2011 2012 2011
Insurance Companies $ (1,896) $ (12,102) -0.2% -1.7%
Lloyd's Operations 47,187 9,957 6.0% 1.4%
Total $ 45,291 $ (2,145) 5.8% -0.3%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Case IBNR
Net Loss Reserves, December 31, 2012: Reserves Reserves Total
Insurance Companies:
Marine $ 137,934 $ 114,236 $ 252,170
Property Casualty 204,988 290,455 495,443
Professional Liability 54,092 84,493 138,585
Total Insurance Companies 397,014 489,184 886,198
Lloyd's Operations:
Marine 125,884 95,122 221,006
Property Casualty 27,903 28,463 56,366
Professional Liability 14,694 38,645 53,339
Total Lloyd's Operations 168,481 162,230 330,711
Total Net Loss Reserves $ 565,495 $ 651,414 $ 1,216,909
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
December 31, 2012
As of December 31, 2012, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.6 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.
As of December 31, 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 $2.1 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 6.2 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments as of December 31, 2012:
Gross Gross Cost or OTTI
Fair Unrealized Unrealized Amortized Recognized
December 31, 2012 Value Gains (Losses) Cost in OCI
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 649,692 $ 8,654 $ (36) $ 641,074 $ --
States, municipalities and political subdivisions 322,947 18,712 (380) 304,615 --
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 384,445 13,652 (204) 370,997 --
Residential mortgage obligations 38,692 1,053 (549) 38,188 20
Asset-backed securities 50,382 1,133 (49) 49,298 --
Commercial mortgage-backed securities 204,821 17,996 (18) 186,843 --
Subtotal 678,340 33,834 (820) 645,326 20
Corporate bonds 470,854 27,129 (25) 443,750 --
Total fixed maturities 2,121,833 88,329 (1,261) 2,034,765 20
Equity securities - common stocks 101,297 16,919 (626) 85,004 --
Short-term investments 153,788 -- -- 153,788 --
Cash 45,336 -- -- 45,336 --
Total $ 2,422,254 $ 105,248 $ (1,887) $ 2,318,893 $ 20
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 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 December 31, 2012:
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 132,595 $ 4,657 $ (198) $ 128,136
FNMA 193,901 7,230 (6) 186,677
FHLMC 57,949 1,765 -- 56,184
Total $ 384,445 $ 13,652 $ (204) $ 370,997
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 12,492 $ 217 $ (440) $ 12,715
Alt-A 2,119 40 (109) 2,188
Subprime 699 26 -- 673
Non-US RMBS 23,382 770 -- 22,612
Total $ 38,692 $ 1,053 $ (549) $ 38,188

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.