Navigators Reports Second Quarter 2017 Earnings

Net Income up 26.6%; Book Value up 3.2%

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

STAMFORD, Conn., Aug. 03, 2017 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $20.5 million, or $0.69 per diluted share, for the three months ended June 30, 2017 compared to $16.2 million, or $0.54 per diluted share, for the same period in 2016. Net Operating Earnings1 were $19.7 million, or $0.66 per diluted share, for the three months ended June 30, 2017 compared to $12.2 million, or $0.41 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended June 30, 2017 were $452.2 million and $333.3 million, respectively, increasing 9.6% and 8.7%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended June 30, 2017 was 97.3%, compared to 99.6% for the same period in 2016.

Net Investment Income for the three months ended June 30, 2017 was $22.3 million, an increase of 12.0% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.8% for the three months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the three months ended June 30, 2017 was $(0.4) million, compared to $4.4 million for the same period in 2016. Other Income (Loss) primarily consists of realized and unrealized foreign exchange gains and losses.

For the six months ended June 30, 2017, our Company reported Net Income of $41.6 million, or $1.39 per diluted share, compared to $39.1 million, or $1.31 per diluted share, for the same period in 2016. Net Operating Earnings were $40.1 million, or $1.34 per diluted share, for the six months ended June 30, 2017 compared to $32.4 million, or $1.08 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the six months ended June 30, 2017 were $902.5 million and $670.4 million, respectively, increasing 9.2% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the six months ended June 30, 2017 was 96.9%, compared to 97.4% for the same period in 2016.

Net Investment Income for the six months ended June 30, 2017 was $43.7 million, an increase of 10.8% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the six months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income for the six months ended June 30, 2017 was $0.7 million, compared to $7.0 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report continued profitable underwriting results and good premium growth in the second quarter, led by strong performance from our US Insurance and Global Reinsurance segments and improvement in our International Insurance results. Second quarter Net Income was up 26.6% over the prior year as a result of improved Underwriting Profit and Investment Income, contributing to an increase in Book Value per Share of 3.1% during the quarter. We continue to invest in expanding our business, with a commitment to cost control as reflected in our year to date 2.1 point decrease in our Other Operating Expense Ratio.”

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 3.8 years as of June 30, 2017. As of June 30, 2017, Net Unrealized Gains within our investment portfolio were $74.3 million, an increase of $22.2 million compared to March 31, 2017 and an increase of $45.4 million compared to December 31, 2016. We recognized $1.7 million of Net Realized Gains for the three months ended June 30, 2017, compared to $1.8 million of Net Realized Gains for the same period in 2016 (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings). For the six months ended June 30, 2017 we recognized $1.7 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $3.4 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016.

Stockholders’ Equity was $1.2 billion, or $42.21 per share, as of June 30, 2017 compared to $40.94 per share, as of March 31, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended June 30, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On August 3, 2017 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.06 per share, payable on September 14, 2017 to stockholders of record on August 24, 2017.

Our Company will hold a conference call on Friday, August 4, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: http://edge.media-server.com/m/p/gvxmqq2j

On December 6, 2016, our Board of Directors declared a two-for-one stock split of The Navigators Group, Inc. Common Stock, to be effected in the form of a stock dividend. Stockholders of record at the close of business on December 30, 2016 received one additional share of Common Stock for every share of Common Stock held. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the stock split for all periods presented. The additional shares of Common Stock were issued on January 20, 2017. 

The Navigators Group, Inc. is an international specialty insurance holding company with operations in the United States, the United Kingdom, Continental Europe and Asia.

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

1 Net Operating Earnings is a “non-GAAP financial measure” as defined in Regulation G. A reconciliation of Net income (the nearest GAAP financial measure) to Net Operating Earnings is provided on page 4 of this release, as is a discussion of the rationale for the presentation of this item.

               
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
               
  Three Months Ended      Six Months Ended     
amounts in thousands, except per share amounts June 30,      June 30,     
Results of Operations 2017  2016  Change  2017  2016  Change 
                         
Gross Written Premiums $452,179  $412,565   9.6% $902,484  $826,442   9.2%
Net Written Premiums  333,282   306,535   8.7%  670,445   626,355   7.0%
                         
Revenues:                        
Net Earned Premiums $293,835  $267,992   9.6% $579,966  $532,350   8.9%
Net Investment Income  22,265   19,875   12.0%  43,713   39,469   10.8%
Net Realized Gains (Losses):                        
Total Other-Than-Temporary Impairment
  Losses		  29   (162) NM   (1,048)  (271) NM 
Portion of Loss Recognized in Other
  Comprehensive Income (Before Tax)		  (29)  12  NM   (45)  121  NM 
Net Other-Than-Temporary Impairment Losses
  Recognized In Earnings		  —   (150) NM   (1,093)  (150) NM 
Other Realized Gains  1,694   1,960   (13.6%)  2,743   3,557   (22.9%)
Net Realized Gains  1,694   1,810   (6.4%)  1,650   3,407   (51.6%)
Other Income (Loss)  (411)  4,430  NM   657   6,979   (90.6%)
Total Revenues $317,383  $294,107   7.9% $625,986  $582,205   7.5%
                         
Expenses:                        
Net Losses and Loss Adjustment Expenses $177,110  $167,206   5.9% $346,710  $320,162   8.3%
Commission Expenses  48,173   40,726   18.3%  96,017   78,280   22.7%
Other Operating Expenses  60,766   59,074   2.9%  119,304   119,883   (0.5%)
Interest Expense  3,861   3,858   0.1%  7,722   7,716   0.1%
Total Expenses $289,910  $270,864   7.0% $569,753  $526,041   8.3%
                         
Income Before Income Taxes $27,473  $23,243   18.2% $56,233  $56,164   0.1%
                         
Income Tax Expense  6,971   7,053   (1.2%)  14,621   17,042   (14.2%)
                         
Net Income $20,502  $16,190   26.6% $41,612  $39,122   6.4%
                         
                         
Per Share Data (1)                        
                         
Net Income Per Common Share:                        
Basic $0.70  $0.56   24.9% $1.42  $1.35   5.1%
Diluted $0.69  $0.54   26.8% $1.39  $1.31   6.3%
                         
Average Common Shares Outstanding:                        
Basic  29,470   29,074       29,377   29,029     
Diluted  29,918   29,953       29,897   29,884     
                         
Underwriting Ratios                        
Loss Ratio  60.3%  62.4%      59.8%  60.1%    
Expense Ratio  37.0%  37.2%      37.1%  37.3%    
Combined Ratio  97.3%  99.6%      96.9%  97.4%    
                         
Balance Sheet Data June 30,  March 31,      June 30,  December 31,     
  2017  2017      2017  2016     
Stockholders' Equity $1,244,168  $1,206,136   3.2% $1,244,168  $1,178,188   5.6%
Book Value per Share (1) $42.21  $40.94   3.1% $42.21  $40.45   4.3%

(1) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.
NM - Percentage change not meaningful.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
(Unaudited)

In this release, we present Net Operating Earnings, which is a “non-GAAP financial measure” as defined in Regulation G.

Net Operating Earnings is comprised of Net Income excluding After-Tax Net Realized Gains (Losses), After-Tax Net Other-Than-Temporary Impairment Losses Recognized in Earnings, 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). We believe that showing Net Income exclusive of Realized Gains and Losses, Net Other-Than-Temporary Impairment Losses Recognized in Earnings, and Foreign Exchange Gains and Losses reflects the underlying fundamentals of our business.

We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our business and enables investors and other users of our financial information to analyze underlying business performance in a manner similar to management. We also believe this measure follows industry practice and, therefore facilitates comparison of our performance with our peer group.

The following tables provide a reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings:

  Three Months Ended June 30, 2017  Three Months Ended June 30, 2016  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  QTD 
Net Income $27,473  $(6,971) $20,502  $23,243  $(7,053) $16,190   26.6%
Adjustments to Net Income:                            
Realized Losses (Gains)  (1,694)  593   (1,101)  (1,810)  634   (1,176)  (6.4%)
FX Losses (Gains)  463   (162)  301   (4,367)  1,529   (2,838) NM 
Net Operating Earnings $26,242  $(6,540) $19,702  $17,066  $(4,890) $12,176   61.8%
                             
Average Common Shares Outstanding: (2)                            
Basic          29,470           29,074     
Diluted          29,918           29,953     
                             
Net Operating Earnings per Common Share: (2)                            
Basic         $0.67          $0.42     
Diluted         $0.66          $0.41     


  Six Months Ended June 30, 2017  Six Months Ended June 30, 2016  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  YTD 
Net Income $56,233  $(14,621) $41,612  $56,164  $(17,042) $39,122   6.4%
Adjustments to Net Income:                            
Realized Losses (Gains)  (1,650)  578   (1,072)  (3,407)  1,193   (2,214)  (51.6%)
FX Losses (Gains)  (660)  231   (429)  (6,907)  2,417   (4,490)  (90.4%)
Net Operating Earnings $53,923  $(13,812) $40,111  $45,850  $(13,432) $32,418   23.7%
                             
Average Common Shares Outstanding: (2)                            
Basic          29,377           29,029     
Diluted          29,897           29,884     
                             
Net Operating Earnings per Common Share: (2)                            
Basic         $1.37          $1.12     
Diluted         $1.34          $1.08     

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.
NM - Percentage change not meaningful.

         
         
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
         
  June 30,  December 31, 
  2017  2016 
amounts in thousands, except per share amounts (Unaudited)     
ASSETS        
Investments:        
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2017:  $2,715,910;
  2016: $2,628,225)		 $2,750,404  $2,635,882 
Equity Securities, available-for-sale, at fair value (cost: 2017: $312,511; 2016: $327,911)  352,062   349,142 
Other Invested Assets  1,781   1,960 
Short-Term Investments, at fair value (amortized cost: 2017: $130,598; 2016: $143,451)  130,881   143,539 
Total Investments $3,235,128  $3,130,523 
Cash  69,222   64,643 
Premiums Receivable  423,767   306,686 
Prepaid Reinsurance Premiums  238,359   213,377 
Reinsurance Recoverable on Paid Losses  67,567   82,582 
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses  782,864   779,276 
Deferred Policy Acquisition Costs  132,796   119,660 
Accrued Investment Income  18,196   17,315 
Goodwill and Other Intangible Assets  6,499   6,451 
Current Income Tax Receivable, Net  16,113   20,556 
Deferred Income Tax, Net  15,430   20,938 
Other Assets  57,953   52,030 
Total Assets $5,063,894  $4,814,037 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:        
Reserves for Losses and Loss Adjustment Expenses $2,346,327  $2,289,727 
Unearned Premiums  1,002,855   887,344 
Reinsurance Balances Payable  125,357   108,980 
Senior Notes  263,806   263,728 
Payable for Investments Purchased  12,000   — 
Accounts Payable and Other Liabilities  69,381   86,070 
Total Liabilities $3,819,726  $3,635,849 
         
Stockholders' Equity: (1)        
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued) $—  $— 
         
Common Stock ($.10 par value per share, authorized 50,000 shares, issued
  36,498 shares for 2017 and 36,147 shares for 2016)		  3,647   3,612 
Additional Paid-In Capital  371,410   373,983 
Treasury Stock, at cost (7,023 shares for 2017 and 2016)  (155,801)  (155,801)
Retained Earnings  986,039   947,519 
Accumulated Other Comprehensive Income  38,873   8,875 
Total Stockholders' Equity $1,244,168  $1,178,188 
Total Liabilities and Stockholders' Equity $5,063,894  $4,814,037 

(1) - We completed a two-for-one stock split on January 20, 2017. All share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
    
  Three Months Ended June 30, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $257,186  $131,193  $63,800  $—  $452,179 
Ceded Written Premiums  (73,857)  (43,809)  (1,231)  —   (118,897)
Net Written Premiums  183,329   87,384   62,569   —   333,282 
                     
Net Earned Premiums $167,087  $82,100  $44,648  $—  $293,835 
Net Losses and LAE  (105,270)  (44,095)  (27,745)  —   (177,110)
Commission Expenses  (20,460)  (19,001)  (8,970)  258   (48,173)
Other Operating Expenses  (33,140)  (22,506)  (5,120)  —   (60,766)
Other Underwriting Income (Expense)  100   —   169   (258)  11 
                     
Underwriting Profit (Loss) $8,317  $(3,502) $2,982  $—  $7,797 
                     
Net Investment Income              22,265   22,265 
Net Realized Gains              1,694   1,694 
Interest Expense              (3,861)  (3,861)
Other Loss              (422)  (422)
Income (Loss) Before Income Taxes $8,317  $(3,502) $2,982  $19,676  $27,473 
Income Tax Expense              (6,971)  (6,971)
Net Income                 $20,502 
                     
Losses and LAE Ratio  63.0%  53.7%  62.1%      60.3%
Commission Expense Ratio  12.2%  23.1%  20.1%      16.4%
Other Operating Expense Ratio (2)  19.8%  27.5%  11.1%      20.6%
Combined Ratio  95.0%  104.3%  93.3%      97.3%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
    
  Three Months Ended June 30, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $243,924  $135,740  $32,901  $—  $412,565 
Ceded Written Premiums  (62,618)  (41,910)  (1,502)  —   (106,030)
Net Written Premiums  181,306   93,830   31,399   —   306,535 
                     
Net Earned Premiums $152,384  $77,833  $37,775  $—  $267,992 
Net Losses and LAE  (93,428)  (48,066)  (25,712)  —   (167,206)
Commission Expenses  (16,894)  (16,821)  (7,492)  481   (40,726)
Other Operating Expenses  (31,570)  (23,043)  (4,461)  —   (59,074)
Other Underwriting Income (Expense)  342   —   203   (481)  64 
                     
Underwriting Profit (Loss) $10,834  $(10,097) $313  $—  $1,050 
                     
Net Investment Income              19,875   19,875 
Net Realized Gains              1,810   1,810 
Interest Expense              (3,858)  (3,858)
Other Income              4,366   4,366 
Income (Loss) Before Income Taxes $10,834  $(10,097) $313  $22,193  $23,243 
Income Tax Expense              (7,053)  (7,053)
Net Income                 $16,190 
                     
Losses and LAE Ratio  61.3%  61.8%  68.1%      62.4%
Commission Expense Ratio  11.1%  21.6%  19.8%      15.2%
Other Operating Expense Ratio (2)  20.5%  29.6%  11.3%      22.0%
Combined Ratio  92.9%  113.0%  99.2%      99.6%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
    
    
  Six Months Ended June 30, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $494,791  $273,053  $134,640  $—  $902,484 
Ceded Written Premiums  (135,344)  (90,402)  (6,293)  —   (232,039)
Net Written Premiums  359,447   182,651   128,347   —   670,445 
                     
Net Earned Premiums $331,091  $166,186  $82,689  $—  $579,966 
Net Losses and LAE  (204,096)  (94,800)  (47,814)  —   (346,710)
Commission Expenses  (40,844)  (38,234)  (17,462)  523   (96,017)
Other Operating Expenses  (66,612)  (42,299)  (10,393)  —   (119,304)
Other Underwriting Income (Expense)  210   —   345   (523)  32 
                     
Underwriting Profit (Loss) $19,749  $(9,147) $7,365  $—  $17,967 
                     
Net Investment Income              43,713   43,713 
Net Realized Gains              1,650   1,650 
Interest Expense              (7,722)  (7,722)
Other Income              625   625 
Income (Loss) Before Income Taxes $19,749  $(9,147) $7,365  $38,266  $56,233 
Income Tax Expense              (14,621)  (14,621)
Net Income                 $41,612 
                     
Losses and LAE Ratio  61.6%  57.0%  57.8%      59.8%
Commission Expense Ratio  12.3%  23.0%  21.1%      16.6%
Other Operating Expense Ratio (2)  20.1%  25.5%  12.2%      20.5%
Combined Ratio  94.0%  105.5%  91.1%      96.9%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
    
  Six Months Ended June 30, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $454,571  $279,883  $91,988  $—  $826,442 
Ceded Written Premiums  (117,115)  (76,881)  (6,091)  —   (200,087)
Net Written Premiums  337,456   203,002   85,897   —   626,355 
                     
Net Earned Premiums $300,724  $155,841  $75,785  $—  $532,350 
Net Losses and LAE  (184,940)  (88,476)  (46,746)  —   (320,162)
Commission Expenses  (31,749)  (32,176)  (15,237)  882   (78,280)
Other Operating Expenses  (65,331)  (44,814)  (9,738)  —   (119,883)
Other Underwriting Income (Expense)  703   —   252   (882)  73 
                     
Underwriting Profit (Loss) $19,407  $(9,625) $4,316  $—  $14,098 
                     
Net Investment Income              39,469   39,469 
Net Realized Gains              3,407   3,407 
Interest Expense              (7,716)  (7,716)
Other Income              6,906   6,906 
Income (Loss) Before Income Taxes $19,407  $(9,625) $4,316  $42,066  $56,164 
Income Tax Expense              (17,042)  (17,042)
Net Income                 $39,122 
                     
Losses and LAE Ratio  61.5%  56.8%  61.7%      60.1%
Commission Expense Ratio  10.6%  20.6%  20.1%      14.7%
Other Operating Expense Ratio (2)  21.4%  28.8%  12.5%      22.6%
Combined Ratio  93.5%  106.2%  94.3%      97.4%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
    
  U.S. Insurance 
  Three Months Ended June 30, 2017  Three Months Ended June 30, 2016     
amounts in thousands Marine  P&C  Professional
Liability		  Total  Marine  P&C  Professional
Liability		  Total  %
Change
Total		 
Gross Written Premiums $41,687  $187,492  $28,007  $257,186  $46,187  $168,654  $29,083  $243,924   5.4%
Ceded Written Premiums  (19,451)  (51,147)  (3,259)  (73,857)  (18,540)  (36,768)  (7,310)  (62,618)  17.9%
Net Written Premiums  22,236   136,345   24,748   183,329   27,647   131,886   21,773   181,306   1.1%
                                     
Net Earned Premiums $21,812  $121,226  $24,049  $167,087  $24,921  $110,212  $17,251  $152,384   9.6%
Net Losses and LAE  (12,767)  (77,858)  (14,645)  (105,270)  (10,699)  (72,172)  (10,557)  (93,428)  12.7%
Commission Expenses  (1,575)  (15,232)  (3,653)  (20,460)  (2,176)  (12,821)  (1,897)  (16,894)  21.1%
Other Operating Expenses  (6,798)  (21,645)  (4,697)  (33,140)  (6,817)  (20,049)  (4,704)  (31,570)  5.0%
Other Underwriting Income  82   9   9   100   152   178   12   342   (70.6%)
                                     
Underwriting Profit $754  $6,500  $1,063  $8,317  $5,381  $5,348  $105  $10,834   (23.2%)
                                     
Losses and LAE Ratio  58.5%  64.2%  60.9%  63.0%  42.9%  65.5%  61.2%  61.3%    
Commission Expense Ratio  7.2%  12.6%  15.2%  12.2%  8.7%  11.6%  11.0%  11.1%    
Other Operating Expense Ratio (1)  30.8%  17.8%  19.5%  19.8%  26.8%  18.0%  27.2%  20.5%    
Combined Ratio  96.5%  94.6%  95.6%  95.0%  78.4%  95.1%  99.4%  92.9%    

(1) - Includes Other Operating Expenses and Other Underwriting Income.

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
    
  Int'l Insurance 
  Three Months Ended June 30, 2017  Three Months Ended June 30, 2016     
amounts in thousands Marine  P&C  Professional
Liability		  Total  Marine  P&C  Professional
Liability		  Total  %
Change
Total		 
Gross Written Premiums $49,597  $46,663  $34,933  $131,193  $41,147  $63,002  $31,591  $135,740   (3.3%)
Ceded Written Premiums  (12,536)  (20,362)  (10,911)  (43,809)  (9,554)  (24,465)  (7,891)  (41,910)  4.5%
Net Written Premiums  37,061   26,301   24,022   87,384   31,593   38,537   23,700   93,830   (6.9%)
                                     
Net Earned Premiums $39,525  $23,337  $19,238  $82,100  $36,096  $23,815  $17,922  $77,833   5.5%
Net Losses and LAE  (23,848)  (8,867)  (11,380)  (44,095)  (17,021)  (21,878)  (9,167)  (48,066)  (8.3%)
Commission Expenses  (9,517)  (4,577)  (4,907)  (19,001)  (8,361)  (5,150)  (3,310)  (16,821)  13.0%
Other Operating Expenses  (9,226)  (7,946)  (5,334)  (22,506)  (8,698)  (9,065)  (5,280)  (23,043)  (2.3%)
                                     
Underwriting Profit (Loss) $(3,066) $1,947  $(2,383) $(3,502) $2,016  $(12,278) $165  $(10,097)  (65.3%)
                                     
Losses and LAE Ratio  60.3%  38.0%  59.2%  53.7%  47.2%  91.9%  51.2%  61.8%    
Commission Expense Ratio  24.1%  19.6%  25.5%  23.1%  23.2%  21.6%  18.5%  21.6%    
Other Operating Expense Ratio (1)  23.4%  34.1%  27.7%  27.5%  24.0%  38.1%  29.4%  29.6%    
Combined Ratio  107.8%  91.7%  112.4%  104.3%  94.4%  151.6%  99.1%  113.0%    

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
    
  U.S. Insurance 
  Six Months Ended June 30, 2017  Six Months Ended June 30, 2016     
amounts in thousands Marine  P&C  Professional
Liability		  Total  Marine  P&C  Professional
Liability		  Total  %
Change
Total		 
Gross Written Premiums $82,637  $358,126  $54,028  $494,791  $89,350  $309,932  $55,289  $454,571   8.8%
Ceded Written Premiums  (36,971)  (89,345)  (9,028)  (135,344)  (36,187)  (67,275)  (13,653)  (117,115)  15.6%
Net Written Premiums  45,666   268,781   45,000   359,447   53,163   242,657   41,636   337,456   6.5%
                                     
Net Earned Premiums $44,506  $240,349  $46,236  $331,091  $48,171  $219,371  $33,182  $300,724   10.1%
Net Losses and LAE  (26,542)  (149,607)  (27,947)  (204,096)  (20,474)  (143,769)  (20,697)  (184,940)  10.4%
Commission Expenses  (3,047)  (30,598)  (7,199)  (40,844)  (3,658)  (24,673)  (3,418)  (31,749)  28.6%
Other Operating Expenses  (13,619)  (43,459)  (9,534)  (66,612)  (14,189)  (41,571)  (9,571)  (65,331)  2.0%
Other Underwriting Income  165   27   18   210   231   446   26   703   (70.1%)
                                     
Underwriting Profit (Loss) $1,463  $16,712  $1,574  $19,749  $10,081  $9,804  $(478) $19,407   1.8%
                                     
Losses and LAE Ratio  59.6%  62.2%  60.4%  61.6%  42.5%  65.5%  62.4%  61.5%    
Commission Expense Ratio  6.8%  12.7%  15.6%  12.3%  7.6%  11.2%  10.3%  10.6%    
Other Operating Expense Ratio (1)  30.3%  18.1%  20.6%  20.1%  29.0%  18.8%  28.7%  21.4%    
Combined Ratio  96.7%  93.0%  96.6%  94.0%  79.1%  95.5%  101.4%  93.5%    

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)		 
    
  Int'l Insurance 
  Six Months Ended June 30, 2017  Six Months Ended June 30, 2016     
amounts in thousands Marine  P&C  Professional
Liability		  Total  Marine  P&C  Professional
Liability		  Total  %
Change
Total		 
Gross Written Premiums $118,430  $87,031  $67,592  $273,053  $113,095  $107,048  $59,740  $279,883   (2.4%)
Ceded Written Premiums  (23,462)  (50,008)  (16,932)  (90,402)  (20,643)  (41,694)  (14,544)  (76,881)  17.6%
Net Written Premiums  94,968   37,023   50,660   182,651   92,452   65,354   45,196   203,002   (10.0%)
                                     
Net Earned Premiums $77,020  $45,517  $43,649  $166,186  $74,952  $45,024  $35,865  $155,841   6.6%
Net Losses and LAE  (44,449)  (24,736)  (25,615)  (94,800)  (37,109)  (33,094)  (18,273)  (88,476)  7.1%
Commission Expenses  (19,058)  (8,319)  (10,857)  (38,234)  (17,766)  (7,925)  (6,485)  (32,176)  18.8%
Other Operating Expenses  (17,666)  (14,369)  (10,264)  (42,299)  (17,140)  (17,773)  (9,901)  (44,814)  (5.6%)
                                     
Underwriting Profit (Loss) $(4,153) $(1,907) $(3,087) $(9,147) $2,937  $(13,768) $1,206  $(9,625)  (5.0%)
                                     
Losses and LAE Ratio  57.7%  54.3%  58.7%  57.0%  49.5%  73.5%  50.9%  56.8%    
Commission Expense Ratio  24.7%  18.3%  24.9%  23.0%  23.7%  17.6%  18.1%  20.6%    
Other Operating Expense Ratio (1)  23.0%  31.6%  23.5%  25.5%  22.9%  39.5%  27.6%  28.8%    
Combined Ratio  105.4%  104.2%  107.1%  105.5%  96.1%  130.6%  96.6%  106.2%    

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

    
    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)		 
    
  For the Three Months Ended June 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2017  2016  2017  2016 
U.S. Insurance:                
Loss and LAE Payments $86,792  $72,246   51.9%  47.4%
Change in Reserves  18,478   21,182   11.1%  13.9%
Net Incurred Loss and LAE $105,270  $93,428   63.0%  61.3%
                 
Int'l Insurance:                
Loss and LAE Payments $46,050  $32,996   56.1%  42.4%
Change in Reserves  (1,955)  15,070   (2.4%)  19.4%
Net Incurred Loss and LAE $44,095  $48,066   53.7%  61.8%
                 
GlobalRe:                
Loss and LAE Payments $21,279  $17,928   47.6%  47.5%
Change in Reserves  6,466   7,784   14.5%  20.6%
Net Incurred Loss and LAE $27,745  $25,712   62.1%  68.1%
                 
Total                
Loss and LAE Payments $154,121  $123,170   52.5%  46.0%
Change in Reserves  22,989   44,036   7.8%  16.4%
Net Incurred Loss and LAE $177,110  $167,206   60.3%  62.4%
                 
                 
  For the Three Months Ended June 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2017  2016  2017  2016 
U.S. Insurance $(295) $4,002   (0.1%)  1.5%
Int'l Insurance  (4,743)  3,354   (1.6%)  1.3%
GlobalRe  (2,992)  1,423   (1.0%)  0.5%
Total $(8,030) $8,779   (2.7%)  3.3%


    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
    
  For the Six Months Ended June 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2017  2016  2017  2016 
U.S. Insurance:                
Loss and LAE Payments $156,563  $145,281   47.2%  48.3%
Change in Reserves  47,533   39,659   14.4%  13.2%
Net Incurred Loss and LAE $204,096  $184,940   61.6%  61.5%
                 
Int'l Insurance:                
Loss and LAE Payments $90,958  $62,239   54.7%  39.9%
Change in Reserves  3,842   26,237   2.3%  16.9%
Net Incurred Loss and LAE $94,800  $88,476   57.0%  56.8%
                 
GlobalRe:                
Loss and LAE Payments $49,609  $43,059   60.0%  56.8%
Change in Reserves  (1,795)  3,687   (2.2%)  4.9%
Net Incurred Loss and LAE $47,814  $46,746   57.8%  61.7%
                 
Total                
Loss and LAE Payments $297,130  $250,579   51.3%  47.1%
Change in Reserves  49,580   69,583   8.5%  13.0%
Net Incurred Loss and LAE $346,710  $320,162   59.8%  60.1%
                 
                 
  For the Six Months Ended June 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2017  2016  2017  2016 
U.S. Insurance $177  $6,671   0.0%  1.3%
Int'l Insurance  (11,359)  2,499   (2.0%)  0.5%
GlobalRe  (3,933)  1,443   (0.7%)  0.3%
Total $(15,115) $10,613   (2.7%)  2.1%


    
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
    
  As of June 30, 2017 
amounts in thousands Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $56,618  $48,212  $104,830 
P&C  185,454   644,771   830,225 
Professional Liability  28,417   74,481   102,898 
Total U.S. Insurance $270,489  $767,464  $1,037,953 
Int'l Insurance:            
Marine $168,472  $33,258  $201,730 
P&C  74,719   23,213   97,932 
Professional Liability  40,838   71,095   111,933 
Total Int'l Insurance $284,029  $127,566  $411,595 
             
GlobalRe $42,542  $71,373  $113,915 
             
Total Net Loss Reserves $597,060  $966,403  $1,563,463 
             
             
  As of December 31, 2016 
  Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $56,701  $54,259  $110,960 
P&C  201,368   603,509   804,877 
Professional Liability  24,555   70,559   95,114 
Total U.S. Insurance $282,624  $728,327  $1,010,951 
Int'l Insurance:            
Marine $163,124  $36,118  $199,242 
P&C  66,496   18,192   84,688 
Professional Liability  30,106   70,103   100,209 
Total Int'l Insurance $259,726  $124,413  $384,139 
             
GlobalRe $47,505  $67,856  $115,361 
             
Total Net Loss Reserves $589,855  $920,596  $1,510,451 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
(Unaudited)

As of June 30, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an average duration of 3.8 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2017:

  As of June 30, 2017 
      Gross  Gross  Cost or 
  Fair  Unrealized  Unrealized  Amortized 
amounts in thousands Value  Gains  (Losses)  Cost 
Fixed Maturities:                
U.S. Treasury Bonds, Agency Bonds and Foreign
  Government Bonds		 $264,511  $2,888  $(2,660) $264,283 
States, Municipalities and Political Subdivisions  655,064   19,306   (2,004)  637,762 
Mortgage-Backed and Asset-Backed Securities:                
Agency Mortgage-Backed Securities  455,133   3,849   (5,389)  456,673 
Residential Mortgage Obligations  18,037   506   (25)  17,556 
Asset-Backed Securities  315,945   1,915   (478)  314,508 
Commercial Mortgage-Backed Securities  145,573   2,883   (1,432)  144,122 
Subtotal $934,688  $9,153  $(7,324) $932,859 
Corporate Exposures  896,141   17,490   (2,355)  881,006 
Total Fixed Maturities $2,750,404  $48,837  $(14,343) $2,715,910 
Equity Securities:                
Common Stocks $172,456  $30,985  $(1,023) $142,494 
Preferred Stocks  179,606   10,088   (499)  170,017 
Total Equity Securities $352,062  $41,073  $(1,522) $312,511 
Short-Term Investments  130,881   283   —   130,598 
Total Investments $3,233,347  $90,193  $(15,865) $3,159,019 


 

 


            











    

        

        
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