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Navigators Reports Second Quarter Earnings

NEW YORK, Aug. 7, 2013 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $13.9 million, or $0.97 per diluted share, for the three months ended June 30, 2013 compared to $14.9 million, or $1.05 per diluted share, for the comparable period in 2012. Operating earnings were $11.8 million, or $0.82 per diluted share, for the second quarter of 2013 compared to operating earnings of $12.5 million, or $0.88 per diluted share, for the comparable period in 2012.

For the six months ended June 30, 2013, the Company reported net income of $27.8 million, or $1.93 per diluted share, compared to $22.8 million, or $1.60 per diluted share, for the comparable period in 2012. Operating earnings were $22.6 million, or $1.56 per diluted share, for the six months ended June 30, 2013 compared to $19.3 million, or $1.35 per diluted share, for the comparable period in 2012.

Gross written premiums and net written premiums for the three months ended June 30, 2013 were $332.1 million and $198.5 million, respectively, an increase of 2.8% and 4.3% from the comparable period in 2012. Gross written premiums and net written premiums for the six months ended June 30, 2013 were $725.4 million and $467.9 million, respectively, an increase of 8.9% and 8.0% from the comparable period in 2012.

The combined loss and expense ratio for the three and six months ended June 30, 2013 were 97.7% and 97.8%, respectively, compared to 98.1% and 99.0% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased with our second quarter results, reflecting solid underwriting profit in marine, specialty casualty and international D&O. We achieved renewal rate increases in most of our specialty product lines and we experienced particularly strong premium growth in our U.S. Excess and Surplus Lines businesses. Our underwriters continued to avoid business that failed to meet our required terms or price. Cash flow for the quarter was strong. Despite a decline in unrealized gains in our bond portfolio as a result of rising interest rates, our investment portfolio performed reasonably well and we remain confident in the quality of our invested assets."

Stockholders' equity was $874.0 million, or $61.83 per share, as of June 30, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and six months ended June 30, 2013 was $14.2 million and $27.9 million, respectively, a decrease of 9.7% and an increase of 3.2% from the comparable periods in 2012. Net investment income for the six months ended June 30, 2012 was reduced by $4.5 million as a result of the settlement of our 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, net other-than-temporary impairment losses recognized in earnings, and for 2012 the $4.5 million in interest expense for the settlement of our dispute with Equitas, was 2.4% for both the three and six months ended June 30, 2013, compared to 2.8% for each of the comparable periods in 2012. The effective tax rate on net investment income was 27.6% and 28.0% for the three and six months ended June 30, 2013, respectively, compared to 28.2% and 26.9% for the comparable periods in 2012.

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 4.0 years as of June 30, 2013. As of June 30, 2013, net unrealized gains within our investment portfolio were $42.6 million, a decrease of $60.7 million compared to December 31, 2012.

There were $3.3 million of net realized gains for the three months ended June 30, 2013 compared to $3.7 million for the same period in 2012. There were no other-than-temporary impairment losses for the three months ended June 30, 2013. For the six months ended June 30, 2013, there were $8.1 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $5.4 million for the same period in 2012.

Consolidated net cash flow from operations for the three and six months ended June 30, 2013 was $44.2 million and $48.5 million, respectively, compared to $(1.3) million and $15.0 million for the comparable periods in 2012.

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

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

http://investor.shareholder.com/navg/eventdetail.cfm?eventid=131762

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 Six Months Ended
June 30, June 30,
Results of Operations 2013 2012 Change 2013 2012 Change
Gross written premiums $ 332,128 $ 322,987 2.8% $ 725,350 $ 666,136 8.9%
Net written premiums 198,469 190,252 4.3% 467,921 433,297 8.0%
Revenues:
Net earned premiums 205,814 196,017 5.0% 408,142 379,136 7.7%
Net investment income 14,246 15,777 -9.7% 27,903 27,035 3.2%
Total other-than-temporary impairment losses -- (496) NM (42) (693) -93.9%
Portion of loss recognized in other comprehensive income (before tax) -- -- NM -- 43 NM
Net other-than-temporary impairment losses
recognized in earnings -- (496) NM (42) (650) -93.5%
Net realized gains (losses) 3,345 4,217 -20.7% 8,159 6,059 34.7%
Other income (915) 387 NM (297) 1,298 NM
Total revenues 222,490 215,902 3.1% 443,865 412,878 7.5%
Expenses:
Net losses and loss adjustment expenses 131,148 123,407 6.3% 262,490 241,392 8.7%
Commission expenses 28,391 29,503 -3.8% 54,946 58,953 -6.8%
Other operating expenses 40,678 39,819 2.2% 81,552 76,126 7.1%
Interest expense 2,052 2,049 0.1% 4,103 4,098 0.1%
Total expenses 202,269 194,778 3.8% 403,091 380,569 5.9%
Income before income taxes 20,221 21,124 -4.3% 40,774 32,309 26.2%
Income tax expense (benefit) 6,284 6,225 0.9% 12,927 9,506 36.0%
Net income (loss) $ 13,937 $ 14,899 -6.5% $ 27,847 $ 22,803 22.1%
Per Share Data
Net income per common share:
Basic $ 0.99 $ 1.06 -7.3% $ 1.97 $ 1.63 21.1%
Diluted $ 0.97 $ 1.05 -7.9% $ 1.93 $ 1.60 20.5%
Average common shares outstanding:
Basic 14,131,422 14,006,361 14,108,747 13,992,901
Diluted 14,428,117 14,208,759 14,434,232 14,245,947
Underwriting Ratios
Loss Ratio 63.7% 63.0% 64.3% 63.7%
Expense Ratio 34.0% 35.1% 33.5% 35.3%
Combined Ratio 97.7% 98.1% 97.8% 99.0%
Balance Sheet Data June 30, March 31, June 30, Dec. 31,
2013 2013 2013 2012
Stockholders' equity $ 873,952 $ 896,758 -2.5% $ 873,952 $ 879,485 -0.6%
Book value per share $ 61.83 $ 63.46 -2.6% $ 61.83 $ 62.61 -1.2%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
June 30, December 31,
2013 2012
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $1,988,507; 2012, $2,034,765) $ 2,007,806 $ 2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $115,221; 2012, $85,004) 138,549 101,297
Short-term investments, at cost which approximates fair value 124,726 153,788
Cash 101,960 45,336
Total investments and cash 2,373,041 2,422,254
Premiums receivable 394,395 320,182
Prepaid reinsurance premiums 251,046 221,015
Reinsurance recoverable on paid losses 52,569 49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses 881,962 880,139
Deferred policy acquisition costs 65,109 61,005
Accrued investment income 13,691 12,587
Goodwill and other intangible assets 6,785 7,093
Deferred income tax, net 25,882 3,216
Receivable for investments sold 25 4,310
Other assets 32,005 26,587
Total assets $ 4,096,510 $ 4,007,670
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 2,116,384 $ 2,097,048
Unearned premiums 729,568 642,407
Reinsurance balances payable 183,683 165,813
Senior notes 114,502 114,424
Current income tax payable, net 6,324 2,133
Payable for investments purchased 21,428 58,345
Accounts payable and other liabilities 50,669 48,015
Total liabilities 3,222,558 3,128,185
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 17,645,043 shares for 2013 and 17,558,046 shares for 2012 1,764 1,755
Additional paid-in capital 333,954 329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012) (155,801) (155,801)
Retained earnings 656,718 628,871
Accumulated other comprehensive income 37,317 75,208
Total stockholders' equity 873,952 879,485
Total liabilities and stockholders' equity $ 4,096,510 $ 4,007,670
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums: Three Months Six Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 43,077 $ 49,896 -13.7% $ 93,924 $ 111,761 -16.0%
Property Casualty 152,095 130,627 16.4% 371,059 286,546 29.5%
Professional Liability 33,393 33,541 -0.4% 65,210 64,095 1.7%
228,565 214,064 6.8% 530,193 462,402 14.7%
Lloyd's Operations:
Marine 45,893 47,037 -2.4% 99,537 108,812 -8.5%
Property Casualty 41,217 48,978 -15.8% 66,275 73,274 -9.6%
Professional Liability 16,453 12,908 27.5% 29,345 21,648 35.6%
103,563 108,923 -4.9% 195,157 203,734 -4.2%
Total $ 332,128 $ 322,987 2.8% $ 725,350 $ 666,136 8.9%
Net Written Premiums: Three Months Six Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 27,366 $ 31,786 -13.9% $ 68,507 $ 74,651 -8.2%
Property Casualty 90,711 76,842 18.0% 240,662 191,374 25.8%
Professional Liability 25,303 25,437 -0.5% 50,530 49,290 2.5%
143,380 134,065 6.9% 359,699 315,315 14.1%
Lloyd's Operations:
Marine 34,060 33,492 1.7% 73,618 81,550 -9.7%
Property Casualty 12,181 15,705 -22.4% 19,493 25,060 -22.2%
Professional Liability 8,848 6,990 26.6% 15,111 11,372 32.9%
55,089 56,187 -2.0% 108,222 117,982 -8.3%
Total $ 198,469 $ 190,252 4.3% $ 467,921 $ 433,297 8.0%
Net Earned Premiums: Three Months Six Months
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine $ 31,798 $ 35,535 -10.5% $ 68,523 $ 70,810 -3.2%
Property Casualty 99,477 82,175 21.1% 192,195 156,543 22.8%
Professional Liability 25,272 23,867 5.9% 50,160 45,772 9.6%
156,547 141,577 10.6% 310,878 273,125 13.8%
Lloyd's Operations:
Marine 34,623 34,272 1.0% 68,668 67,536 1.7%
Property Casualty 8,562 15,272 -43.9% 16,441 29,774 -44.8%
Professional Liability 6,082 4,896 24.2% 12,155 8,701 39.7%
49,267 54,440 -9.5% 97,264 106,011 -8.3%
Total $ 205,814 $ 196,017 5.0% $ 408,142 $ 379,136 7.7%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2013
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 228,565 $ 103,563 $ -- $ 332,128
Net written premiums 143,380 55,089 -- 198,469
Net earned premiums 156,547 49,267 -- 205,814
Net losses and loss adjustment expenses (106,668) (24,480) -- (131,148)
Commission expenses (20,573) (8,335) 517 (28,391)
Other operating expenses (29,829) (10,849) -- (40,678)
Other income (expense) 689 (1,087) (517) (915)
Underwriting profit (loss) 166 4,516 -- 4,682
Net investment income 12,515 1,728 3 14,246
Net realized gains (losses) 3,099 242 4 3,345
Interest expense -- -- (2,052) (2,052)
Income (loss) before income taxes 15,780 6,486 (2,045) 20,221
Income tax expense (benefit) 4,785 2,206 (707) 6,284
Net income (loss) $ 10,995 $ 4,280 $ (1,338) $ 13,937
Losses and loss adjustment expenses ratio 68.1% 49.7% 63.7%
Commission expense ratio 13.1% 16.9% 13.8%
Other operating expense ratio (2) 18.7% 24.2% 20.2%
Combined ratio 99.9% 90.8% 97.7%
(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
June 30, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 214,064 $ 108,923 $ -- $ 322,987
Net written premiums 134,065 56,187 -- 190,252
Net earned premiums 141,577 54,440 -- 196,017
Net losses and loss adjustment expenses (100,003) (23,404) -- (123,407)
Commission expenses (21,117) (8,938) 552 (29,503)
Other operating expenses (28,914) (10,905) -- (39,819)
Other income (expense) 879 60 (552) 387
Underwriting profit (loss) (7,578) 11,253 -- 3,675
Net investment income 13,286 2,454 37 15,777
Net realized gains (losses) 2,325 1,396 -- 3,721
Interest expense -- -- (2,049) (2,049)
Income (loss) before income taxes 8,033 15,103 (2,012) 21,124
Income tax expense (benefit) 2,101 5,207 (1,083) 6,225
Net income (loss) $ 5,932 $ 9,896 $ (929) $ 14,899
Losses and loss adjustment expenses ratio 70.6% 43.0% 63.0%
Commission expense ratio 14.9% 16.4% 15.1%
Other operating expense ratio (2) 19.9% 19.9% 20.0%
Combined ratio 105.4% 79.3% 98.1%
(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
Six Months Ended
June 30, 2013
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 530,193 $ 195,157 $ -- $ 725,350
Net written premiums 359,699 108,222 -- 467,921
Net earned premiums 310,878 97,264 -- 408,142
Net losses and loss adjustment expenses (213,653) (48,837) -- (262,490)
Commission expenses (39,090) (16,956) 1,100 (54,946)
Other operating expenses (59,172) (22,380) -- (81,552)
Other income (expense) 1,348 (545) (1,100) (297)
Underwriting profit (loss) 311 8,546 -- 8,857
Net investment income 24,466 3,430 7 27,903
Net realized gains (losses) 7,891 222 4 8,117
Interest expense -- -- (4,103) (4,103)
Income (loss) before income taxes 32,668 12,198 (4,092) 40,774
Income tax expense (benefit) 10,199 4,242 (1,514) 12,927
Net income (loss) $ 22,469 $ 7,956 $ (2,578) $ 27,847
Losses and loss adjustment expenses ratio 68.7% 50.2% 64.3%
Commission expense ratio 12.6% 17.4% 13.5%
Other operating expense ratio (2) 18.6% 23.6% 20.0%
Combined ratio 99.9% 91.2% 97.8%
(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
Six Months Ended
June 30, 2012
($ in thousands)
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 462,402 $ 203,734 $ -- $ 666,136
Net written premiums 315,315 117,982 -- 433,297
Net earned premiums 273,125 106,011 -- 379,136
Net losses and loss adjustment expenses (191,180) (50,212) -- (241,392)
Commission expenses (40,418) (19,824) 1,289 (58,953)
Other operating expenses (54,259) (21,867) -- (76,126)
Other income (expense) 2,521 66 (1,289) 1,298
Underwriting profit (loss) (10,211) 14,174 -- 3,963
Net investment income 22,221 4,737 77 27,035
Net realized gains (losses) 4,200 1,209 -- 5,409
Interest expense -- -- (4,098) (4,098)
Income (loss) before income taxes 16,210 20,120 (4,021) 32,309
Income tax expense (benefit) 3,980 6,933 (1,407) 9,506
Net income (loss) $ 12,230 $ 13,187 $ (2,614) $ 22,803
Losses and loss adjustment expenses ratio 70.0% 47.4% 63.7%
Commission expense ratio 14.8% 18.7% 15.5%
Other operating expense ratio (2) 18.9% 20.5% 19.8%
Combined ratio 103.7% 86.6% 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
Underwriting Results
($ in thousands)
Three Months Ended June 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 31,798 $ 17,295 $ 13,124 $ 1,379 54.4% 41.3% 95.7%
Property Casualty 99,477 70,757 27,999 721 71.1% 28.2% 99.3%
Professional Liability 25,272 18,616 8,590 (1,934) 73.7% 34.0% 107.7%
Total Insurance Companies 156,547 106,668 49,713 166 68.1% 31.8% 99.9%
Lloyd's Operations:
Marine 34,623 18,218 14,914 1,491 52.6% 43.1% 95.7%
Property Casualty 8,562 6,795 3,272 (1,505) 79.4% 38.2% 117.6%
Professional Liability 6,082 (533) 2,085 4,530 -8.8% 34.3% 25.5%
Total Lloyd's 49,267 24,480 20,271 4,516 49.7% 41.1% 90.8%
Total All $ 205,814 $ 131,148 $ 69,984 $ 4,682 63.7% 34.0% 97.7%
Three Months Ended June 30, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 35,535 $ 30,283 $ 13,516 $ (8,264) 85.2% 38.1% 123.3%
Property Casualty 82,175 49,724 26,628 5,823 60.5% 32.4% 92.9%
Professional Liability 23,867 19,996 9,008 (5,137) 83.8% 37.7% 121.5%
Total Insurance Companies 141,577 100,003 49,152 (7,578) 70.6% 34.8% 105.4%
Lloyd's Operations:
Marine 34,272 12,730 13,362 8,180 37.1% 39.0% 76.1%
Property Casualty 15,272 7,724 4,612 2,936 50.6% 30.2% 80.8%
Professional Liability 4,896 2,950 1,809 137 60.3% 36.9% 97.2%
Total Lloyd's 54,440 23,404 19,783 11,253 43.0% 36.3% 79.3%
Total All $ 196,017 $ 123,407 $ 68,935 $ 3,675 63.0% 35.1% 98.1%
Amounts Loss Ratio
Net Incurred Loss Activity June 30, June 30, June 30, June 30,
For the Three Months Ended: 2013 2012 2013 2012
Insurance Companies:
Loss and LAE payments $ 100,920 $ 90,311 64.4% 63.8%
Change in reserves 5,748 9,692 3.7% 6.8%
Net incurred loss and LAE 106,668 100,003 68.1% 70.6%
Lloyd's Operations:
Loss and LAE payments 27,428 30,641 55.7% 56.3%
Change in reserves (2,948) (7,237) -6.0% -13.3%
Net incurred loss and LAE 24,480 23,404 49.7% 43.0%
Total
Loss and LAE payments 128,348 120,952 62.3% 61.7%
Change in reserves 2,800 2,455 1.4% 1.3%
Net incurred loss and LAE $ 131,148 $ 123,407 63.7% 63.0%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development June 30, June 30, June 30, June 30,
For the Three Months Ended: 2013 2012 2013 2012
Insurance Companies $ (7,747) $ (626) -3.8% -0.3%
Lloyd's Operations 5,834 5,998 2.8% 3.0%
Total $ (1,913) $ 5,372 -1.0% 2.7%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
Six Months Ended June 30, 2013
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 68,523 $ 40,680 $ 25,952 $ 1,891 59.4% 37.8% 97.2%
Property Casualty 192,195 131,995 54,641 5,559 68.7% 28.4% 97.1%
Professional Liability 50,160 40,978 16,321 (7,139) 81.7% 32.5% 114.2%
Total Insurance Companies 310,878 213,653 96,914 311 68.7% 31.2% 99.9%
Lloyd's Operations:
Marine 68,668 37,055 28,026 3,587 54.0% 40.8% 94.8%
Property Casualty 16,441 7,546 7,681 1,214 45.9% 46.7% 92.6%
Professional Liability 12,155 4,236 4,174 3,745 34.9% 34.3% 69.2%
Total Lloyd's 97,264 48,837 39,881 8,546 50.2% 41.0% 91.2%
Total All $ 408,142 $ 262,490 $ 136,795 $ 8,857 64.3% 33.5% 97.8%
Six Months Ended June 30, 2012
Net Losses
Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine $ 70,810 $ 58,053 $ 26,171 $ (13,414) 82.0% 36.9% 118.9%
Property Casualty 156,543 97,872 49,482 9,189 62.5% 31.6% 94.1%
Professional Liability 45,772 35,255 16,503 (5,986) 77.0% 36.1% 113.1%
Total Insurance Companies 273,125 191,180 92,156 (10,211) 70.0% 33.7% 103.7%
Lloyd's Operations:
Marine 67,536 34,288 28,044 5,204 50.8% 41.5% 92.3%
Property Casualty 29,774 11,772 9,671 8,331 39.5% 32.5% 72.0%
Professional Liability 8,701 4,152 3,910 639 47.7% 45.0% 92.7%
Total Lloyd's 106,011 50,212 41,625 14,174 47.4% 39.2% 86.6%
Total All $ 379,136 $ 241,392 $ 133,781 $ 3,963 63.7% 35.3% 99.0%
Amounts Loss Ratio
Net Incurred Loss Activity June 30, June 30, June 30, June 30,
For the Six Months Ended: 2013 2012 2013 2012
Insurance Companies:
Loss and LAE payments $ 180,824 $ 183,963 58.1% 67.4%
Change in reserves 32,829 7,217 10.6% 2.6%
Net incurred loss and LAE 213,653 191,180 68.7% 70.0%
Lloyd's Operations:
Loss and LAE payments 57,890 55,285 59.5% 52.2%
Change in reserves (9,053) (5,073) -9.3% -4.8%
Net incurred loss and LAE 48,837 50,212 50.2% 47.4%
Total
Loss and LAE payments 238,714 239,248 58.5% 63.1%
Change in reserves 23,776 2,144 5.8% 0.6%
Net incurred loss and LAE $ 262,490 $ 241,392 64.3% 63.7%
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development June 30, June 30, June 30, June 30,
For the Six Months Ended: 2013 2012 2013 2012
Insurance Companies $ (15,477) $ 2,090 -3.8% 0.5%
Lloyd's Operations 9,481 10,148 2.3% 2.7%
Total $ (5,996) $ 12,238 -1.5% 3.2%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
Case IBNR
Net Loss Reserves, June 30, 2013: Reserves Reserves Total
Insurance Companies:
Marine $ 141,418 $ 107,916 $ 249,334
Property Casualty 210,556 305,808 516,364
Professional Liability 73,057 80,272 153,329
Total Insurance Companies 425,031 493,996 919,027
Lloyd's Operations:
Marine 128,066 87,754 215,820
Property Casualty 28,737 20,837 49,574
Professional Liability 12,512 37,489 50,001
Total Lloyd's Operations 169,315 146,080 315,395
Total Net Loss Reserves $ 594,346 $ 640,076 $ 1,234,422
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
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2013

As of June 30, 2013, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 4.0 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.

As of June 30, 2013, the Company owned two asset-backed securities approximating $0.6 million with subprime mortgage exposures. The securities have an effective maturity of 4.3 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 5.1 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 June 30, 2013:

Gross Gross Cost or
Fair Unrealized Unrealized Amortized
June 30, 2013 Value Gains (Losses) Cost
($ in thousands)
Fixed maturities:
U.S.Treasury bonds, agency bonds and foreign government bonds $ 464,167 $ 3,538 $ (7,492) $ 468,121
States, municipalities and political subdivisions 452,084 10,281 (13,114) 454,917
Mortgage- and asset-backed securities:
Agency mortgage-backed securities 320,150 7,782 (4,645) 317,013
Residential mortgage obligations 37,335 1,196 (221) 36,360
Asset-backed securities 75,311 747 (113) 74,677
Commercial mortgage-backed securities 173,388 8,731 (514) 165,171
Subtotal 606,184 18,456 (5,493) 593,221
Corporate bonds 485,371 16,285 (3,162) 472,248
Total fixed maturities 2,007,806 48,560 (29,261) 1,988,507
Equity securities - common stocks 138,549 25,238 (1,910) 115,221
Short-term investments 124,726 -- -- 124,726
Cash 101,960 -- -- 101,960
Total $ 2,373,041 $ 73,798 $ (31,171) $ 2,330,414
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2013
($ 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 June 30, 2013:

Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 120,673 $ 2,892 $ (2,759) $ 120,540
FNMA 154,398 4,115 (1,634) 151,917
FHLMC 45,079 775 (252) 44,556
Total $ 320,150 $ 7,782 $ (4,645) $ 317,013
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 11,872 $ 423 $ (183) $ 11,632
Alt-A 2,111 110 (38) 2,039
Subprime 630 27 -- 603
Non-US RMBS 22,722 636 -- 22,086
Total $ 37,335 $ 1,196 $ (221) $ 36,360

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.