Navigators Reports Third Quarter 2016 Earnings

Net Income up 20.9%

| Source: The Navigators Group, Inc. The Navigators Group, Inc.

STAMFORD, Conn., Nov. 03, 2016 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $22.0 million, or $1.46 per diluted share, for the three months ended September 30, 2016 compared to $18.2 million, or $1.23 per diluted share, for the comparable period in 2015. Operating earnings were $21.1 million, or $1.40 per diluted share, for the three months ended September 30, 2016 compared to $20.3 million, or $1.37 per diluted share, for the comparable period in 2015. 

For the nine months ended September 30, 2016, our Company reported Net income of $61.1 million, or $4.08 per diluted share, compared to $63.3 million, or $4.29 per diluted share, for the comparable period in 2015. Operating earnings were $53.5 million, or $3.57 per diluted share, for the nine months ended September 30, 2016 compared to $60.7 million, or $4.11 per diluted share, for the comparable period in 2015.

Gross written premiums and Net written premiums for the three months ended September 30, 2016 were $374.9 million and $277.0 million, respectively, increasing 5.9% and 9.9% from the comparable period in 2015.

Gross written premiums and Net written premiums for the nine months ended September 30, 2016 were $1.2 billion and $0.9 billion, respectively, increasing 6.3% and 13.0% from the comparable period in 2015.

The combined ratio for the three and nine months ended September 30, 2016 was 95.6% and 96.7%, respectively, compared to 93.4% and 93.0% for the comparable periods in 2015.

Stan Galanski, President and Chief Executive Officer, commented, “We are very pleased with our third quarter results. It is our 15th consecutive quarter of profitable underwriting results with net income up 20.9% from third quarter 2015 and a healthy combined ratio of 95.6%.  Our investment portfolio performed well, with net investment income up 14.4% over third quarter 2015. Premium growth remained strong, with net written premium up nearly 10% for the quarter. Encouragingly, non-commission operating expenses were about flat with the third quarter of 2015, reflecting our efforts to control operating costs. Book value per share increased to $82.71 and was up nearly 9% from year end.”

Stockholders’ equity was $1.2 billion, or $82.71 per share, as of September 30, 2016 compared to $1.1 billion, or $75.96 per share, as of  December 31, 2015.

On November 3, 2016, the Board of Directors declared a quarterly cash dividend of $0.09 per share of Common stock to be paid on December 29, 2016 to stockholders of record at the close of business on November 18, 2016.

Net investment income for the three and nine months ended September 30, 2016 was $19.9 million and $59.3 million, respectively, increases of 14.4% and 18.2% as compared to the same periods in 2015. The annualized pre-tax investment yield, excluding Net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.6% for the three and nine months ended September 30, 2016, compared to 2.5% and 2.4%, respectively, for the comparable periods in 2015.

Our Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by S&P and Moody’s, respectively, with an average effective duration of 3.9 years as of September 30, 2016.  As of September 30, 2016, Net unrealized gains within our investment portfolio were $106.1 million, an increase of $68.8 million compared to December 31, 2015.

We recognized $1.6 million of Net realized gains (losses) for the three months ended September 30, 2016, compared to ($0.8) million of Net realized losses for the same period in 2015.  For the nine months ended September 30, 2016, we recognized $5.0 million of Net realized gains, compared to $8.8 million for the same period in 2015.

Other income (loss) for the three months ended September 30, 2016 was ($0.2) million of loss, compared to ($2.5) million of loss for the same period in 2015.  For the nine months ended September 30, 2016 Other income (loss) was $6.8 million of income, compared to ($4.6) million of loss for the same period in 2015.  Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses.

Our Company will hold a conference call on Friday, November 4, 2016 starting at 8:30 a.m. (EDT) to discuss the 2016 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://edge.media-server.com/m/p/ok7hgnmv

Net operating earnings, comprised of  Net income excluding After-tax net realized gains (losses), After-tax net other-than-temporary impairment losses recognized in earnings, and After-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency), 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. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as representative offices in China and Brazil.

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 2016  2015  Change  2016  2015  Change 
                         
Gross written premiums $374,930  $354,062   5.9% $1,201,372  $1,129,993   6.3%
Net written premiums  277,001   251,939   9.9%  903,356   799,141   13.0%
                         
Revenues:                        
Net earned premiums $284,010  $254,082   11.8% $816,360  $732,542   11.4%
Net investment income  19,875   17,371   14.4%  59,344   50,219   18.2%
Net realized gains (losses):                        
  Total other-than-temporary impairment losses  23   (1,298) NM   (248)  (1,747)  (85.8%)
  Portion of loss recognized in other comprehensive income (before tax)    (23)  23  NM   98   49   100.2%
Net other-than-temporary impairment losses recognized in earnings  -   (1,275) NM   (150)  (1,698)  (91.2%)
Other realized gains (losses)  1,586   518  NM   5,143   10,453   (50.8%)
Net realized gains (losses)  1,586   (757) NM   4,993   8,755   (43.0%)
Other income (loss)  (183)  (2,518)  (92.7%)  6,796   (4,638) NM 
Total revenues $305,288  $268,178   13.8% $887,493  $786,878   12.8%
                         
Expenses:                        
Net losses and loss adjustment expenses  172,793   146,546   17.9%  492,955   418,717   17.7%
Commission expenses  42,611   34,253   24.4%  120,891   98,638   22.6%
Other operating expenses  56,137   56,599   (0.8%)  176,020   164,297   7.1%
Interest expense  3,859   3,856   0.1%  11,575   11,567   0.1%
Total expenses $275,400  $241,254   14.2% $801,441  $693,219   15.6%
                         
Income before income taxes  29,888   26,924   11.0%  86,052   93,659   (8.1%)
                         
Income tax expense (benefit)  7,875   8,723   (9.7%)  24,917   30,345   (17.9%)
                         
Net income (loss) $22,013  $18,201   20.9% $61,135  $63,314   (3.4%)
                         
                         
Per Share Data                        
                         
Net income per common share:                        
Basic $1.51  $1.26   19.7% $4.21  $4.40   -4.4%
Diluted $1.46  $1.23   18.9% $4.08  $4.29   -4.9%
                         
Average common shares outstanding:                        
Basic  14,557,376   14,411,927       14,528,917   14,384,291     
Diluted  15,070,422   14,811,095       14,998,385   14,767,949     
                         
Underwriting Ratios                        
Loss Ratio  60.8%  57.7%      60.4%  57.2%    
Expense Ratio  34.8%  35.7%      36.3%  35.8%    
Combined Ratio  95.6%  93.4%      96.7%  93.0%    
                         
Balance Sheet Data September 30,  June 30,      September 30,  December 31,     
  2016  2016      2016  2015     
Stockholders' equity $1,204,281  $1,181,558   1.9% $1,204,281  $1,096,148   9.9%
Book value per share $82.71  $81.24   1.8% $82.71  $75.96   8.9%
                         
NM- Percentage change not meaningful
                         


 
THE NAVIGATORS GROUP, INC AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
($ in thousands, except per share data)
 
  Three Months Ended September 30, 2016  Three Months Ended September 30, 2015  % Change 
  Pre-Tax  Tax  After Tax  Pre-Tax  Tax  After Tax  QTD 
Net income $29,888  $(7,875) $22,013  $26,924  $(8,723) $18,201   20.9%
Adjustments to Net income:                            
Realized losses (gains)  (1,586)  555   (1,031)  757   (265)  492  NM 
FX losses (gains)  227   (80)  147   2,451   (858)  1,593   (90.8%)
Net operating earnings $28,529  $(7,400) $21,129  $30,132  $(9,846) $20,286   4.2%
                             
Net operating earnings per common share:                              
Basic         $1.45          $1.41     
Diluted         $1.40          $1.37     
                             
                             
                             
  Nine Months Ended September 30, 2016  Nine Months Ended September 30, 2015  % Change 
  Pre-Tax  Tax  After Tax  Pre-Tax  Tax  After Tax  YTD 
Net income $86,052  $(24,917) $61,135  $93,659  $(30,345) $63,314   (3.4%)
Adjustments to Net income:                            
Realized losses (gains)  (4,993)  1,747   (3,246)  (8,755)  3,064   (5,691)  (43.0%)
FX losses (gains)  (6,679)  2,337   (4,342)  4,754   (1,664)  3,090  NM 
Net operating earnings $74,380  $(20,833) $53,547  $89,658  $(28,945) $60,713   (11.8%)
                             
Net operating earnings per common share:                            
Basic         $3.69          $4.22     
Diluted         $3.57          $4.11     
                             
NM - Percentage change not meaningful 
 



  
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS (Unaudited) 
  
amounts in thousands, except share and per share amounts.        
  September 30,  December 31, 
  2016  2015 
ASSETS        
Investments:        
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016:  $2,591,050; 2015: $2,400,245)   $2,660,417  $2,414,210 
Equity securities, available-for-sale, at fair value (cost: 2016: $305,906; 2015: $281,943)  342,677   305,271 
Other invested assets  2,021   — 
Short-term investments, at fair value (amortized cost: 2016: $134,273; 2015: $217,743)  134,273   217,745 
Total investments $3,139,388  $2,937,226 
         
Cash  147,515   69,901 
Premiums receivable  320,429   276,616 
Prepaid reinsurance premiums  222,891   232,588 
Reinsurance recoverable on paid losses  73,331   49,506 
Reinsurance recoverable on unpaid losses and loss adjustment expenses  787,917   809,518 
Deferred policy acquisition costs  116,295   91,983 
Accrued investment income  16,840   16,001 
Goodwill and other intangible assets  6,568   6,807 
Current income tax receivable, net  15,879   22,323 
Deferred income tax, net  —   3,900 
Other assets  50,343   67,643 
Total assets $4,897,396  $4,584,012 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:        
Reserves for losses and loss adjustment expenses $2,268,127  $2,202,644 
Unearned premiums  897,975   820,676 
Reinsurance balances payable  123,702   107,411 
Senior notes  263,690   263,580 
Deferred income tax, net  8,703   — 
Payable for investments purchased  42,783   1,495 
Accounts payable and other liabilities  88,135   92,058 
Total liabilities $3,693,115  $3,487,864 
         
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 
  18,070,815 shares for 2016 and 17,942,269 shares for 2015		  1,806   1,793 
Additional paid-in capital  368,860   357,829 
Treasury stock, at cost (3,511,380 shares for 2016 and 2015)  (155,801)  (155,801)
Retained earnings  927,239   868,723 
Accumulated other comprehensive income  62,177   23,604 
Total stockholders' equity $1,204,281  $1,096,148 
Total liabilities and stockholders' equity $4,897,396  $4,584,012 
         


 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
 
  Three Months Ended September 30, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross written premiums $234,647  $104,484  $35,799  $—  $374,930 
Ceded written premiums  (61,359)  (35,194)  (1,376)  —   (97,929)
Net written premiums  173,288   69,290   34,423   —   277,001 
                     
Net earned premiums $161,722  $79,761  $42,527  $—  $284,010 
Net losses and LAE  (106,320)  (45,043)  (21,430)  —   (172,793)
Commission expenses  (18,630)  (15,348)  (8,951)  318   (42,611)
Other operating expenses  (31,517)  (20,183)  (4,437)  —   (56,137)
Other underwriting income (expense)    240   —   122   (318)  44 
                     
Underwriting profit (loss) $5,495  $(813) $7,831  $—  $12,513 
                     
Net investment income              19,875   19,875 
Net realized gains (losses)              1,586   1,586 
Interest expense              (3,859)  (3,859)
Other income (loss)              (227)  (227)
Income before income taxes $5,495  $(813) $7,831  $17,375  $29,888 
Income tax (expense) benefit              (7,875)  (7,875)
Net income (loss)                 $22,013 
                     
Losses and LAE ratio  65.7%  56.5%  50.4%      60.8%
Commission expense ratio  11.5%  19.2%  21.0%      15.0%
Other operating expense ratio (2)  19.4%  25.3%  10.2%      19.8%
Combined ratio  96.6%  101.0%  81.6%      95.6%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
 
  Three Months Ended September 30, 2015 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross written premiums $218,783  $98,788  $36,491  $—  $354,062 
Ceded written premiums  (63,753)  (37,804)  (566)  —   (102,123)
Net written premiums  155,030   60,984   35,925   —   251,939 
                     
Net earned premiums $142,409  $68,533  $43,140  $—  $254,082 
Net losses and LAE  (85,140)  (39,182)  (22,224)  —   (146,546)
Commission expenses  (15,157)  (12,780)  (7,705)  1,389   (34,253)
Other operating expenses  (32,948)  (19,937)  (3,714)  —   (56,599)
Other underwriting income (expense)    1,013   —   395   (1,389)  19 
                     
Underwriting profit (loss) $10,177  $(3,366) $9,892  $—  $16,703 
                     
Net investment income              17,371   17,371 
Net realized gains (losses)              (757)  (757)
Interest expense              (3,856)  (3,856)
Other income (loss)              (2,537)  (2,537)
Income before income taxes $10,177  $(3,366) $9,892  $10,221  $26,924 
Income tax (expense) benefit              (8,723)  (8,723)
Net income (loss)                 $18,201 
                     
Losses and LAE ratio  59.8%  57.2%  51.5%      57.7%
Commission expense ratio  10.6%  18.6%  17.9%      13.5%
Other operating expense ratio (2)  22.5%  29.1%  7.7%      22.2%
Combined ratio  92.9%  104.9%  77.1%      93.4%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
 
  Nine Months Ended September 30, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross written premiums $689,218  $384,367  $127,787  $—  $1,201,372 
Ceded written premiums  (178,474)  (112,075)  (7,467)  —   (298,016)
Net written premiums  510,744   272,292   120,320   —   903,356 
                     
Net earned premiums $462,446  $235,602  $118,312  $—  $816,360 
Net losses and LAE  (291,260)  (133,519)  (68,176)  —   (492,955)
Commission expenses  (50,379)  (47,524)  (24,188)  1,200   (120,891)
Other operating expenses  (96,848)  (64,997)  (14,175)  —   (176,020)
Other underwriting income (expense)    943   —   374   (1,200)  117 
                     
Underwriting profit (loss) $24,902  $(10,438) $12,147  $—  $26,611 
                     
Net investment income              59,344   59,344 
Net realized gains (losses)              4,993   4,993 
Interest expense              (11,575)  (11,575)
Other income (loss)              6,679   6,679 
Income (loss) before income taxes $24,902  $(10,438) $12,147  $59,441  $86,052 
Income tax (expense) benefit              (24,917)  (24,917)
Net income (loss)                 $61,135 
                     
Losses and LAE ratio  63.0%  56.7%  57.6%      60.4%
Commission expense ratio  10.9%  20.2%  20.4%      14.8%
Other operating expense ratio (2)  20.7%  27.5%  11.7%      21.5%
Combined ratio  94.6%  104.4%  89.7%      96.7%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
 
  Nine Months Ended September 30, 2015 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross written premiums $658,097  $330,005  $141,891  $—  $1,129,993 
Ceded written premiums  (211,365)  (113,681)  (5,806)  —   (330,852)
Net written premiums  446,732   216,324   136,085   —   799,141 
                     
Net earned premiums $410,804  $197,244  $124,494  $—  $732,542 
Net losses and LAE  (247,094)  (101,236)  (70,387)  —   (418,717)
Commission expenses  (41,777)  (35,491)  (23,042)  1,672   (98,638)
Other operating expenses  (98,010)  (54,312)  (11,975)  —   (164,297)
Other underwriting income (expense)    1,330   —   441   (1,672)  99 
                     
Underwriting profit (loss) $25,253  $6,205  $19,531  $—  $50,989 
                     
Net investment income              50,219   50,219 
Net realized gains (losses)              8,755   8,755 
Interest expense              (11,567)  (11,567)
Other income (loss)              (4,737)  (4,737)
Income (loss) before income taxes $25,253  $6,205  $19,531  $42,670  $93,659 
Income tax (expense) benefit              (30,345)  (30,345)
Net income (loss)                 $63,314 
                     
Losses and LAE ratio  60.1%  51.3%  56.5%      57.2%
Commission expense ratio  10.2%  18.0%  18.5%      13.5%
Other operating expense ratio (2)  23.6%  27.6%  9.3%      22.3%
Combined ratio  93.9%  96.9%  84.3%      93.0%

(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
 
  U.S. Insurance 
  Three Months Ended September 30, 2016  Three Months Ended September 30, 2015     
amounts in thousands Marine  P&C   Professional
Liability		  Total  Marine  P&C   Professional
Liability		  Total  %
Change
Total		 
Gross written premiums $40,271  $161,600  $32,776  $234,647  $35,529  $154,009  $29,245  $218,783   7.3%
Ceded written premiums  (17,636)  (36,011)  (7,712)  (61,359)  (13,865)  (34,902)  (14,986)  (63,753)  (3.8%)
Net written  premiums  22,635   125,589   25,064   173,288   21,664   119,107   14,259   155,030   11.8%
                                     
Net earned premiums $25,465  $115,971  $20,286  $161,722  $24,292  $104,473  $13,644  $142,409   13.6%
Net losses and LAE  (14,974)  (74,129)  (17,217)  (106,320)  (7,349)  (69,054)  (8,737)  (85,140)  24.9%
Commission expenses  (2,117)  (13,664)  (2,849)  (18,630)  (2,412)  (11,711)  (1,034)  (15,157)  22.9%
Other operating expenses  (6,767)  (19,997)  (4,753)  (31,517)  (6,754)  (20,581)  (5,613)  (32,948)  (4.3%)
Other underwriting income (expense)    126   104   10   240   214   735   64   1,013   (76.3%)
                                     
Underwriting profit (loss) $1,733  $8,285  $(4,523) $5,495  $7,991  $3,862  $(1,676) $10,177   (46.0%)
                                     
Losses and LAE ratio  58.8%  63.9%  84.9%  65.7%  30.3%  66.1%  64.0%  59.8%    
Commission expense ratio  8.3%  11.8%  14.0%  11.5%  9.9%  11.2%  7.6%  10.6%    
Other operating expense ratio (1)  26.1%  17.2%  23.4%  19.4%  26.9%  19.0%  40.7%  22.5%    
Combined ratio  93.2%  92.9%  122.3%  96.6%  67.1%  96.3%  112.3%  92.9%    

(1) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
  Int'l Insurance 
  Three Months Ended September 30, 2016  Three Months Ended September 30, 2015     
amounts in thousands Marine  P&C   Professional
Liability		  Total  Marine  P&C   Professional
Liability		  Total  %
Change
Total		 
Gross written premiums $38,453  $38,077  $27,954  $104,484  $41,002  $37,449  $20,337  $98,788   5.8%
Ceded written premiums  (12,631)  (15,331)  (7,232)  (35,194)  (10,985)  (20,034)  (6,785)  (37,804)  (6.9%)
Net written  premiums  25,822   22,746   20,722   69,290   30,017   17,415   13,552   60,984   13.6%
                                     
Net earned premiums $34,794  $25,584  $19,383  $79,761  $36,792  $16,879  $14,862  $68,533   16.4%
Net losses and LAE  (17,289)  (16,080)  (11,674)  (45,043)  (23,002)  (8,051)  (8,129)  (39,182)  15.0%
Commission expenses  (8,358)  (3,502)  (3,488)  (15,348)  (8,227)  (2,779)  (1,774)  (12,780)  20.1%
Other operating expenses  (7,654)  (7,913)  (4,616)  (20,183)  (8,233)  (6,604)  (5,100)  (19,937)  1.2%
Other underwriting income (expense)    —   —   —   —   —   —   —   —  NM 
                                     
Underwriting profit (loss) $1,493  $(1,911) $(395) $(813) $(2,670) $(555) $(141) $(3,366)  (75.8%)
                                     
Losses and LAE ratio  49.7%  62.8%  60.2%  56.5%  62.5%  47.7%  54.7%  57.2%    
Commission expense ratio  24.0%  13.7%  18.0%  19.2%  22.4%  16.5%  11.9%  18.6%    
Other operating expense ratio (1)  22.0%  31.0%  23.8%  25.3%  22.4%  39.1%  34.4%  29.1%    
Combined ratio  95.7%  107.5%  102.0%  101.0%  107.3%  103.3%  101.0%  104.9%    

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
  U.S. Insurance 
  Nine Months Ended September 30, 2016  Nine Months Ended September 30, 2015     
amounts in thousands Marine  P&C   Professional
Liability		  Total  Marine  P&C   Professional
Liability		  Total  %
Change
Total		 
Gross written premiums $129,621  $471,532  $88,065  $689,218  $118,167  $458,371  $81,559  $658,097   4.7%
Ceded written premiums  (53,823)  (103,286)  (21,365)  (178,474)  (45,177)  (123,765)  (42,423)  (211,365)  (15.6%)
Net written  premiums  75,798   368,246   66,700   510,744   72,990   334,606   39,136   446,732   14.3%
                                     
Net earned premiums $73,636  $335,342  $53,468  $462,446  $74,193  $291,648  $44,963  $410,804   12.6%
Net losses and LAE  (35,448)  (217,898)  (37,914)  (291,260)  (28,952)  (194,910)  (23,232)  (247,094)  17.9%
Commission expenses  (5,775)  (38,337)  (6,267)  (50,379)  (8,873)  (29,018)  (3,886)  (41,777)  20.6%
Other operating expenses  (20,956)  (61,568)  (14,324)  (96,848)  (20,129)  (60,976)  (16,905)  (98,010)  (1.2%)
Other underwriting income (expense)    357   550   36   943   389   876   65   1,330   (29.1%)
                                     
Underwriting profit (loss) $11,814  $18,089  $(5,001) $24,902  $16,628  $7,620  $1,005  $25,253   (1.4%)
                                     
Losses and LAE ratio  48.1%  65.0%  70.9%  63.0%  39.0%  66.8%  51.7%  60.1%    
Commission expense ratio  7.8%  11.4%  11.7%  10.9%  12.0%  9.9%  8.6%  10.2%    
Other operating expense ratio (1)  28.1%  18.2%  26.8%  20.7%  26.6%  20.7%  37.5%  23.6%    
Combined ratio  84.0%  94.6%  109.4%  94.6%  77.6%  97.4%  97.8%  93.9%    

(1) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
 
  Int'l Insurance 
  Nine Months Ended September 30, 2016  Nine Months Ended September 30, 2015     
amounts in thousands Marine  P&C   Professional
Liability		  Total  Marine  P&C   Professional
Liability		  Total  %
Change
Total		 
Gross written premiums $151,548  $145,125  $87,694  $384,367  $149,844  $112,014  $68,147  $330,005   16.5%
Ceded written premiums  (33,274)  (57,025)  (21,776)  (112,075)  (30,933)  (60,676)  (22,072)  (113,681)  (1.4%)
Net written  premiums  118,274   88,100   65,918   272,292   118,911   51,338   46,075   216,324   25.9%
                                     
Net earned premiums $109,746  $70,608  $55,248  $235,602  $114,716  $43,112  $39,416  $197,244   19.4%
Net losses and LAE  (54,398)  (49,174)  (29,947)  (133,519)  (63,945)  (17,015)  (20,276)  (101,236)  31.9%
Commission expenses  (26,124)  (11,427)  (9,973)  (47,524)  (26,912)  (3,961)  (4,618)  (35,491)  33.9%
Other operating expenses  (24,794)  (25,686)  (14,517)  (64,997)  (21,677)  (18,754)  (13,881)  (54,312)  19.7%
Other underwriting income (expense)    —   —   —   —   —   —   —   —  NM 
                                     
Underwriting profit (loss) $4,430  $(15,679) $811  $(10,438) $2,182  $3,382  $641  $6,205  NM 
                                     
Losses and LAE ratio  49.6%  69.6%  54.2%  56.7%  55.7%  39.5%  51.4%  51.3%    
Commission expense ratio  23.8%  16.2%  18.1%  20.2%  23.5%  9.2%  11.7%  18.0%    
Other operating expense ratio (1)  22.6%  36.4%  26.2%  27.5%  18.9%  43.5%  35.3%  27.6%    
Combined ratio  96.0%  122.2%  98.5%  104.4%  98.1%  92.2%  98.4%  96.9%    

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
 
  For the Three Months Ended September 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2016  2015  2016  2015 
US Insurance:                
Loss and LAE payments $81,461  $67,327   50.4%  47.3%
Change in reserves  24,859   17,813   15.3%  12.5%
Net incurred loss and LAE $106,320  $85,140   65.7%  59.8%
                 
Int'l Insurance:                
Loss and LAE payments $43,848  $29,306   55.0%  42.8%
Change in reserves  1,195   9,876   1.5%  14.4%
Net incurred loss and LAE $45,043  $39,182   56.5%  57.2%
                 
GlobalRe:                
Loss and LAE payments $20,770  $16,899   48.8%  39.2%
Change in reserves  660   5,325   1.6%  12.3%
Net incurred loss and LAE $21,430  $22,224   50.4%  51.5%
                 
Total                
Loss and LAE payments $146,079  $113,532   51.4%  44.7%
Change in reserves  26,714   33,014   9.4%  13.0%
Net incurred loss and LAE $172,793  $146,546   60.8%  57.7%
                 
  Amounts  Loss Ratio Impact 
Impact of Prior Years Reserves September 30,  September 30,  September 30,  September 30, 
Favorable / (Unfavorable) Development   2016  2015  2016  2015 
US Insurance $(4,903) $7,057   -1.7%  2.8%
Int'l Insurance  2,860   2,794   1.0%  1.1%
GlobalRe  3,074   4,264   1.1%  1.7%
Total $1,031  $14,115   0.4%  5.6%
                 


 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
 
  For the Nine Months Ended September 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2016  2015  2016  2015 
US Insurance:                
Loss and LAE payments $226,742  $186,780   49.0%  45.4%
Change in reserves  64,518   60,314   14.0%  14.7%
Net incurred loss and LAE $291,260  $247,094   63.0%  60.1%
                 
Int'l Insurance:                
Loss and LAE payments $106,087  $98,734   45.0%  50.0%
Change in reserves  27,432   2,502   11.7%  1.3%
Net incurred loss and LAE $133,519  $101,236   56.7%  51.3%
                 
GlobalRe:                
Loss and LAE payments $63,829  $58,148   53.9%  46.7%
Change in reserves  4,347   12,239   3.7%  9.8%
Net incurred loss and LAE $68,176  $70,387   57.6%  56.5%
                 
Total                
Loss and LAE payments $396,658  $343,662   48.6%  47.0%
Change in reserves  96,297   75,055   11.8%  10.2%
Net incurred loss and LAE $492,955  $418,717   60.4%  57.2%
                 
  Amounts  Loss Ratio Impact 
Impact of Prior Years Reserves September 30,  September 30,  September 30,  September 30, 
Favorable / (Unfavorable) Development   2016  2015  2016  2015 
US Insurance $1,768  $21,295   0.2%  2.9%
Int'l Insurance  5,359   8,404   0.7%  1.1%
GlobalRe  4,517   4,270   0.6%  0.6%
Total $11,644  $33,969   1.5%  4.6%
                 


  
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES 
Net Loss Data 
  
  As of September 30, 2016 
amounts in thousands Case  IBNR     
Net Loss Reserves:  Reserves    Reserves   Total 
US Insurance:            
Marine $58,332  $53,462  $111,794 
Property Casualty  188,495   584,581   773,076 
Professional Liability  29,482   63,105   92,587 
Total US Insurance $276,309  $701,148  $977,457 
Int'l Insurance:            
Marine $175,133  $42,824  $217,957 
Property Casualty  58,360   20,414   78,774 
Professional Liability  27,635   65,947   93,582 
Total Int'l Insurance $261,128  $129,185  $390,313 
             
GlobalRe $47,448  $64,992  $112,440 
             
Total Net Loss Reserves   $584,885  $895,325  $1,480,210 
             
             
  As of December 31, 2015 
  Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
US Insurance:            
Marine $68,677  $55,408  $124,085 
Property Casualty  170,988   514,777   685,765 
Professional Liability  42,546   60,528   103,074 
Total US Insurance $282,211  $630,713  $912,924 
Int'l Insurance:            
Marine $167,157  $61,409  $228,566 
Property Casualty  40,313   19,735   60,048 
Professional Liability  19,583   63,229   82,812 
Total Int'l Insurance $227,053  $144,373  $371,426 
             
GlobalRe $32,160  $76,616  $108,776 
             
Total Net Loss Reserves $541,424  $851,702  $1,393,126 
             
             

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data

As of September 30, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was AA-/Aa3 with an average duration of 3.9 years. Our Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of September 30, 2016:

  As of September 30, 2016 
      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   $262,030  $3,691  $(3,981) $262,320 
States, municipalities and political subdivisions  580,324   29,288   (769)  551,805 
Mortgage-backed and asset-backed securities:                
Agency mortgage-backed securities  526,069   11,778   (105)  514,396 
Residential mortgage obligations  27,055   455   (97)  26,697 
Asset-backed securities  288,636   1,503   (458)  287,591 
Commercial mortgage-backed securities  165,405   6,392   (423)  159,436 
  Subtotal $1,007,165  $20,128  $(1,083) $988,120 
Corporate bonds  810,898   23,447   (1,354)  788,805 
Total fixed maturities $2,660,417  $76,554  $(7,187) $2,591,050 
Equity securities  342,677   38,538   (1,767)  305,906 
Other invested assets  2,021   —   —   2,021 
Short-term investments  134,273   —   —   134,273 
Total investments $3,139,388  $115,092  $(8,954) $3,033,250 

 


            











    

        

        
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