STAMFORD, Conn., Aug. 08, 2018 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $32.1 million, or $1.07 per diluted share, for the three months ended June 30, 2018 compared to $20.5 million, or $0.69 per diluted share, for the same period in 2017. Net Operating Earnings1 were $27.6 million, or $0.92 per diluted share, for the three months ended June 30, 2018 compared to $19.7 million, or $0.66 per diluted share, for the same period in 2017.

Gross Written Premiums and Net Written Premiums for the three months ended June 30, 2018 were $497.2 million and $379.3 million, respectively, increasing 10.0% and 13.8%, respectively, from the comparable period in 2017. The Combined Ratio for the three months ended June 30, 2018 was 96.0%, compared to 97.3% for the same period in 2017.

Net Investment Income for the three months ended June 30, 2018 was $24.6 million, an increase of 10.5% as compared to the same period in 2017. The annualized pre-tax investment yield, excluding Total Net Realized and Unrealized Gains and Losses recognized in the Results of Operations, was 2.8% for the three months ended June 30, 2018 and 2017.

Other Income (Loss) for the three months ended June 30, 2018 was $2.6 million, compared to $(0.4) million for the same period in 2017. Other Income (Loss) primarily consists of realized and unrealized foreign exchange gains and losses.

Stan Galanski, President and Chief Executive Officer, commented, “We are very pleased with our financial results and operating performance for the second quarter. We continued to achieve profitable underwriting results and double digit premium growth, led by our U.S. Insurance and GlobalRe segments. While the market remains competitive, we are encouraged by both positive renewal price movement for most of our specialty product lines during the quarter as well as by the number of insurers exiting unprofitable product lines, especially in the London market. Our investments continued to perform well, with Net Investment Income up 10.5% for the quarter and six months. During the quarter we completed the acquisition of Belgium based ASCO and BDM, a key to our future growth in the European Union.”

On June 7, 2018, the Company acquired 100% ownership interest in Bracht, Deckers & Mackelbert NV (“BDM”), a specialty underwriting agency, and its affiliated insurance company, Assurances Continentales – Continentale Verzekeringen NV (“ASCO”). The acquisition of BDM/ASCO was undertaken as part of the Company’s strategy of expanding to more brokers and insureds across Europe and reinforces the Company’s presence in the European Union’s single market. We anticipate that this will enable the Company to better serve its European clients after Brexit and will also provide an opportunity for BDM and ASCO to reach a wider European audience.

For the six months ended June 30, 2018 the Company reported Net Income of $63.0 million, or $2.09 per diluted share compared to $41.6 million, or $1.39 per diluted share, for the same period in 2017. Net Operating Earnings1 were $60.5 million, or $2.01 per diluted share, for the six months ended June 30, 2018 compared to $40.1 million, or $1.34 per diluted share, for the same period in 2017.

Gross Written Premiums and Net Written Premiums for the six months ended June 30, 2018 were $992.5 million and $772.6 million, respectively, increasing 10.0% and 15.2%, respectively, from the comparable period in 2017. The Combined Ratio for the six months ended June 30, 2018 was 95.0%, compared to 96.9% for the same period in 2017.

Net Investment Income for the six months ended June 30, 2018 was $48.3 million, an increase of 10.5% as compared to the same period in 2017. The annualized pre-tax investment yield, excluding Total Net Realized and Unrealized Gains and Losses recognized in the Results of Operations, was 2.8% for the six months ended June 30, 2018 compared to 2.7% for the same period in 2017.

Other Income for the six months ended June 30, 2018 was $2.5 million, compared to $0.7 million for the same period in 2017. Other Income for the six months ended June 30, 2018 included revenue from the sale of renewal rights for the Company’s fixed-premium protection and indemnity (“P&I”) business as well as net realized and unrealized foreign exchange gains. Other Income for the same period in 2017 primarily consisted of net realized and unrealized foreign exchange gains.

The 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 effective duration of 3.5 years as of June 30, 2018. As of June 30, 2018, Net Unrealized Losses within the Available-For-Sale investment portfolio recognized in Accumulated Other Comprehensive Income were $30.1 million, a change of $71.6 million, compared to Net Unrealized Gains of $41.5 million as of December 31, 2017. Included in this change was the reclassification of $11.8 million of net unrealized gains, before tax, from Accumulated Other Comprehensive Income to Retained Earnings as a result of adopting ASU 2016-01.

The Company recognized $3.1 million of Total Net Realized and Unrealized Gains within the Results of Operations for the three months ended June 30, 2018, compared to $1.7 million for the same period in 2017. The Net Realized and Unrealized Gains within the Results of Operations for the three months ended June 30, 2018 included $1.3 million of Net Unrealized Gains on Equity Securities. For the six months ended June 30, 2018 the Company recognized $1.1 million of Total Net Realized and Unrealized Gains within the Results of Operations, compared to $1.7 million for the same period in 2017. The Net Realized and Unrealized Gains within the Results of Operations for the six months ended June 30, 2018 included $1.9 million of Net Unrealized Losses on Equity Securities.

The effective tax rate was 19.3% and 18.1% for the three and six months ended June 30, 2018, respectively, which compares to 25.4% and 26.0% for the same periods in 2017, with the decrease being primarily a result of changes related to 2017 tax reform.

Stockholders’ Equity was $1.2 billion, or $41.49 per share, as of June 30, 2018 compared to $40.96 per share, as of March 31, 2018, and $41.55 per share, as of December 31, 2017.

During the three months ended June 30, 2018, the Company declared and paid a quarterly cash dividend of $0.07 per share of Common Stock.

The Company will hold a conference call on Thursday, August 9, 2018 starting at 8:30 a.m. (ET) to discuss the 2018 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: https://edge.media-server.com/m6/p/spw5hg2q

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. These forward-looking statements include statements on the financial impact of tax reform. We continue to assess the tax accounting effects of tax reform. 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.

Contact:Ciro M. DeFalco
 Executive Vice President and Chief Financial Officer
 (203) 905-6343
 cdefalco@navg.com
 www.navg.com
  

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 2018  2017  Change  2018  2017  Change 
                         
Gross Written Premiums $497,236  $452,179   10.0%  $992,460  $902,484   10.0% 
Net Written Premiums  379,292   333,282   13.8%   772,554   670,445   15.2% 
                         
Revenues:                        
Net Earned Premiums $331,015  $293,835   12.7%  $653,642  $579,966   12.7% 
Net Investment Income  24,601   22,265   10.5%   48,303   43,713   10.5% 
Net Realized and Unrealized Gains (Losses):                        
Total Other-Than-Temporary Impairment
  Losses
  (18)   29  NM   (55)   (1,048)   (94.7%) 
Portion of Loss Recognized in Other
  Comprehensive Income (Before Tax)
  18   (29)  NM   55   (45)  NM 
Net Other-Than-Temporary Impairment Losses
  Recognized In Earnings
       NM      (1,093)  NM 
Net Realized Gains on Investments Sold  1,787   1,694   5.5%   2,956   2,743   7.7% 
Net Unrealized Gains (Losses) on Equity
  Securities at Fair Value
  1,329     NM   (1,852)     NM 
Total Net Realized and Unrealized Gains  3,116   1,694   83.9%   1,104   1,650   (33.1%) 
Other Income (Loss)  2,628   (411)  NM   2,511   657  NM 
Total Revenues $361,360  $317,383   13.9%  $705,560  $625,986   12.7% 
                         
Expenses:                        
Net Losses and Loss Adjustment Expenses $196,333  $177,110   10.9%  $382,478  $346,710   10.3% 
Commission Expenses  53,193   48,173   10.4%   107,345   96,017   11.8% 
Other Operating Expenses  68,182   60,766   12.2%   131,108   119,304   9.9% 
Interest Expense  3,864   3,861   0.1%   7,728   7,722   0.1% 
Total Expenses $321,572  $289,910   10.9%  $628,659  $569,753   10.3% 
                         
Income Before Income Taxes $39,788  $27,473   44.8%  $76,901  $56,233   36.8% 
                         
Income Tax Expense  7,684   6,971   10.2%   13,919   14,621   (4.8%) 
                         
Net Income $32,104  $20,502   56.6%  $62,982  $41,612   51.4% 
                         
                         
Per Share Data                        
                         
Net Income Per Common Share:                        
Basic $1.08  $0.70   55.2%  $2.12  $1.42   49.9% 
Diluted $1.07  $0.69   55.6%  $2.09  $1.39   50.1% 
                         
Average Common Shares Outstanding:                        
Basic  29,733   29,470       29,664   29,377     
Diluted  30,103   29,918       30,143   29,897     
                         
Underwriting Ratios                        
Loss Ratio  59.3%   60.3%       58.5%   59.8%     
Expense Ratio  36.7%   37.0%       36.5%   37.1%     
Combined Ratio  96.0%   97.3%       95.0%   96.9%     
                         
Balance Sheet Data June 30,  March 31,      June 30,  December 31,     
  2018  2018      2018  2017     
Stockholders' Equity $1,234,084  $1,216,952   1.4%  $1,234,084  $1,225,965   0.7% 
Book Value per Share $41.49  $40.96   1.3%  $41.49  $41.55   (0.1%) 

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 Total Net Realized and Unrealized Gains (Losses), After-Tax Foreign Exchange Gains (Losses), and the Net Gain on Disposition of Product Line recognized in the Results of Operations.

We believe this presentation enhances the understanding of the results of operations by highlighting the underlying profitability of the business and enables investors and other users of the 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, 2018  Three Months Ended June 30, 2017  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  QTD 
Net Income $39,788  $(7,684)  $32,104  $27,473  $(6,971)  $20,502   56.6% 
Adjustments to Net Income:                            
Total Net Realized and Unrealized Losses  (3,116)   654   (2,462)   (1,694)   593   (1,101)   123.7% 
FX Losses (Gains)  (2,586)   543   (2,043)   463   (162)   301  NM 
Net Operating Earnings $34,086  $(6,487)  $27,599  $26,242  $(6,540)  $19,702   40.1% 
                             
Average Common Shares Outstanding:                            
Basic          29,733           29,470     
Diluted          30,103           29,918     
                             
Net Operating Earnings per Common Share:                            
Basic         $0.93          $0.67     
Diluted         $0.92          $0.66     

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
NM - Percentage change not meaningful.

          
  Six Months Ended June 30, 2018  Six Months Ended June 30, 2017  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  YTD 
Net Income $76,901  $(13,919)  $62,982  $56,233  $(14,621)  $41,612   51.4% 
Adjustments to Net Income:                            
Total Net Realized and Unrealized Losses  (1,104)   232   (872)   (1,650)   578   (1,072)   (18.6%) 
FX Losses (Gains)  (1,064)   223   (841)   (660)   231   (429)   96.1% 
Net Gain on Disposition of Product Line  (948)   199   (749)           NM 
Net Operating Earnings $73,785  $(13,265)  $60,520  $53,923  $(13,812)  $40,111   50.9% 
                             
Average Common Shares Outstanding:                            
Basic          29,664           29,377     
Diluted          30,143           29,897     
                             
Net Operating Earnings per Common Share:                            
Basic         $2.04          $1.37     
Diluted         $2.01          $1.34     

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
NM - Percentage change not meaningful.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

         
  June 30,  December 31, 
  2018  2017 
amounts in thousands, except per share amounts (Unaudited)     
ASSETS        
Investments:        
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2018:  $2,991,629;
  2017: $3,027,408)
 $2,961,541  $3,057,054 
Equity Securities, at fair value  (cost: 2018: $317,497; 2017: $224,159)  327,466   235,981 
Other Invested Assets  38,372   30,488 
Short-Term Investments, available-for-sale, at fair value (amortized cost: 2018: $6,368;
  2017: $6,477)
  6,368   6,480 
Total Investments $3,333,747  $3,330,003 
Cash and Cash Equivalents  175,834   102,735 
Restricted Cash and Cash Equivalents  47,522   56,229 
Premiums Receivable  455,742   351,393 
Prepaid Reinsurance Premiums  239,660   228,569 
Reinsurance Recoverable on Paid Losses  94,503   72,494 
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses  799,084   809,765 
Deferred Policy Acquisition Costs  157,153   135,249 
Accrued Investment Income  20,276   19,480 
Goodwill and Other Intangible Assets  28,272   6,596 
Current Income Tax Receivable, Net  21,395   16,667 
Deferred Income Tax, Net  24,552   22,271 
Other Assets  91,205   73,171 
Total Assets $5,488,945  $5,224,622 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:        
Reserves for Losses and Loss Adjustment Expenses $2,574,116  $2,515,145 
Unearned Premiums  1,125,731   987,681 
Reinsurance Balances Payable  132,285   136,192 
Senior Notes  263,967   263,885 
Payable for Investments Purchased  45,800    
Accounts Payable and Other Liabilities  112,962   95,754 
Total Liabilities $4,254,861  $3,998,657 
         
Stockholders' Equity:        
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
  36,764 shares for 2018 and 36,530 shares for 2017)
  3,673   3,650 
Additional Paid-In Capital  376,705   376,868 
Treasury Stock, at cost (7,023 shares for 2018 and 2017)  (155,801)   (155,801) 
Retained Earnings  1,045,131   981,380 
Accumulated Other Comprehensive Income  (35,624)   19,868 
Total Stockholders' Equity $1,234,084  $1,225,965 
Total Liabilities and Stockholders' Equity $5,488,945  $5,224,622 
         

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)

  Three Months Ended June 30, 2018 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $288,478  $132,523  $76,235  $  $497,236 
Ceded Written Premiums  (76,144)   (39,882)   (1,918)      (117,944) 
Net Written Premiums  212,334   92,641   74,317      379,292 
                     
Net Earned Premiums $179,746  $92,071  $59,198  $  $331,015 
Net Losses and LAE  (111,885)   (52,304)   (32,144)      (196,333) 
Commission Expenses  (20,382)   (19,863)   (13,148)   200   (53,193) 
Other Operating Expenses  (38,447)   (23,299)   (6,436)      (68,182) 
Other Underwriting Income (Expense)  71      136   (200)   7 
                     
Underwriting Profit (Loss) $9,103  $(3,395)  $7,606  $  $13,314 
                     
Net Investment Income              24,601   24,601 
Total Net Realized and Unrealized Gains              3,116   3,116 
Interest Expense              (3,864)   (3,864) 
Other Income              2,621   2,621 
Income (Loss) Before Income Taxes $9,103  $(3,395)  $7,606  $26,474  $39,788 
Income Tax Expense              (7,684)   (7,684) 
Net Income                 $32,104 
                     
Losses and LAE Ratio  62.2%   56.8%   54.3%       59.3% 
Commission Expense Ratio  11.3%   21.6%   22.2%       16.1% 
Other Operating Expense Ratio (2)  21.4%   25.3%   10.7%       20.6% 
Combined Ratio  94.9%   103.7%   87.2%       96.0% 

(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, 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 
Total Net Realized and Unrealized 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)

  Six Months Ended June 30, 2018 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $528,406  $260,395  $203,659  $  $992,460 
Ceded Written Premiums  (142,725)   (68,770)   (8,411)      (219,906) 
Net Written Premiums  385,681   191,625   195,248      772,554 
                     
Net Earned Premiums $352,659  $185,281  $115,702  $  $653,642 
Net Losses and LAE  (222,307)   (98,147)   (62,024)      (382,478) 
Commission Expenses  (41,243)   (39,619)   (26,916)   433   (107,345) 
Other Operating Expenses  (75,438)   (43,829)   (11,841)      (131,108) 
Other Underwriting Income (Expense)  169      274   (433)   10 
                     
Underwriting Profit $13,840  $3,686  $15,195  $  $32,721 
                     
Net Investment Income              48,303   48,303 
Total Net Realized and Unrealized Gains              1,104   1,104 
Interest Expense              (7,728)   (7,728) 
Other Income              2,501   2,501 
Income Before Income Taxes $13,840  $3,686  $15,195  $44,179  $76,901 
Income Tax Expense              (13,919)   (13,919) 
Net Income                 $62,982 
                     
Losses and LAE Ratio  63.0%   53.0%   53.6%       58.5% 
Commission Expense Ratio  11.7%   21.4%   23.3%       16.4% 
Other Operating Expense Ratio (2)  21.4%   23.6%   10.0%       20.1% 
Combined Ratio  96.1%   98.0%   86.9%       95.0% 

(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 
Total Net Realized and Unrealized 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
Reportable Segment Results
(Unaudited)

  U.S. Insurance 
  Three Months Ended June 30, 2018  Three Months Ended June 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $38,830  $217,984  $31,664  $288,478  $41,687  $187,492  $28,007  $257,186   12.2% 
Ceded Written Premiums  (16,918)   (54,835)   (4,391)   (76,144)   (19,451)   (51,147)   (3,259)   (73,857)   3.1% 
Net Written Premiums  21,912   163,149   27,273   212,334   22,236   136,345   24,748   183,329   15.8% 
                                     
Net Earned Premiums $21,177  $132,630  $25,939  $179,746  $21,812  $121,226  $24,049  $167,087   7.6% 
Net Losses and LAE  (9,517)   (86,192)   (16,176)   (111,885)   (12,767)   (77,858)   (14,645)   (105,270)   6.3% 
Commission Expenses  (780)   (15,089)   (4,513)   (20,382)   (1,575)   (15,232)   (3,653)   (20,460)   (0.4%) 
Other Operating Expenses  (6,934)   (26,231)   (5,282)   (38,447)   (6,798)   (21,645)   (4,697)   (33,140)   16.0% 
Other Underwriting Income  53   13   5   71   82   9   9   100   (29.0%) 
                                     
Underwriting Profit (Loss) $3,999  $5,131  $(27)  $9,103  $754  $6,500  $1,063  $8,317   9.5% 
                                     
Losses and LAE Ratio  44.9%   65.0%   62.4%   62.2%   58.5%   64.2%   60.9%   63.0%     
Commission Expense Ratio  3.7%   11.4%   17.4%   11.3%   7.2%   12.6%   15.2%   12.2%     
Other Operating Expense Ratio (1)  32.5%   19.7%   20.3%   21.4%   30.8%   17.8%   19.5%   19.8%     
Combined Ratio  81.1%   96.1%   100.1%   94.9%   96.5%   94.6%   95.6%   95.0%     

(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, 2018  Three Months Ended June 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $40,714  $46,579  $45,230  $132,523  $49,597  $46,663  $34,933  $131,193   1.0% 
Ceded Written Premiums  (11,523)   (17,705)   (10,654)   (39,882)   (12,536)   (20,362)   (10,911)   (43,809)   (9.0%) 
Net Written Premiums  29,191   28,874   34,576   92,641   37,061   26,301   24,022   87,384   6.0% 
                                     
Net Earned Premiums $37,197  $23,715  $31,159  $92,071  $39,525  $23,337  $19,238  $82,100   12.1% 
Net Losses and LAE  (29,287)   (6,294)   (16,723)   (52,304)   (23,848)   (8,867)   (11,380)   (44,095)   18.6% 
Commission Expenses  (8,945)   (2,984)   (7,935)   (19,863)   (9,517)   (4,577)   (4,907)   (19,001)   4.5% 
Other Operating Expenses  (7,931)   (8,703)   (6,664)   (23,299)   (9,226)   (7,946)   (5,334)   (22,506)   3.5% 
                                     
Underwriting Profit (Loss) $(8,966)  $5,734  $(163)  $(3,395)  $(3,066)  $1,947  $(2,383)  $(3,502)   (3.0%) 
                                     
Losses and LAE Ratio  78.7%   26.5%   53.7%   56.8%   60.3%   38.0%   59.2%   53.7%     
Commission Expense Ratio  24.0%   12.6%   25.5%   21.6%   24.1%   19.6%   25.5%   23.1%     
Other Operating Expense Ratio  21.4%   36.7%   21.3%   25.3%   23.4%   34.1%   27.7%   27.5%     
Combined Ratio  124.1%   75.8%   100.5%   103.7%   107.8%   91.7%   112.4%   104.3%     
                                     

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  U.S. Insurance 
  Six Months Ended June 30, 2018  Six Months Ended June 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $80,554  $386,177  $61,675  $528,406  $82,637  $358,126  $54,028  $494,791   6.8% 
Ceded Written Premiums  (34,398)   (99,747)   (8,580)   (142,725)   (36,971)   (89,345)   (9,028)   (135,344)   5.5% 
Net Written Premiums  46,156   286,430   53,095   385,681   45,666   268,781   45,000   359,447   7.3% 
                                     
Net Earned Premiums $42,269  $260,220  $50,170  $352,659  $44,506  $240,349  $46,236  $331,091   6.5% 
Net Losses and LAE  (25,269)   (167,110)   (29,928)   (222,307)   (26,542)   (149,607)   (27,947)   (204,096)   8.9% 
Commission Expenses  (2,188)   (30,256)   (8,799)   (41,243)   (3,047)   (30,598)   (7,199)   (40,844)   1.0% 
Other Operating Expenses  (13,209)   (51,855)   (10,374)   (75,438)   (13,619)   (43,459)   (9,534)   (66,612)   13.3% 
Other Underwriting Income  130   28   11   169   165   27   18   210   (19.5%) 
                                     
Underwriting Profit $1,733  $11,027  $1,080  $13,840  $1,463  $16,712  $1,574  $19,749   (29.9%) 
                                     
Losses and LAE Ratio  59.8%   64.2%   59.7%   63.0%   59.6%   62.2%   60.4%   61.6%     
Commission Expense Ratio  5.2%   11.6%   17.5%   11.7%   6.8%   12.7%   15.6%   12.3%     
Other Operating Expense Ratio (1)  30.9%   20.0%   20.6%   21.4%   30.3%   18.1%   20.6%   20.1%     
Combined Ratio  95.9%   95.8%   97.8%   96.1%   96.7%   93.0%   96.6%   94.0%     

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  Int'l Insurance 
  Six Months Ended June 30, 2018  Six Months Ended June 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $97,192  $80,539  $82,664  $260,395  $118,430  $87,031  $67,592  $273,053   (4.6%) 
Ceded Written Premiums  (19,577)   (31,372)   (17,821)   (68,770)   (23,462)   (50,008)   (16,932)   (90,402)   (23.9%) 
Net Written Premiums  77,615   49,167   64,843   191,625   94,968   37,023   50,660   182,651   4.9% 
                                     
Net Earned Premiums $76,476  $45,484  $63,321  $185,281  $77,020  $45,517  $43,649  $166,186   11.5% 
Net Losses and LAE  (49,733)   (15,517)   (32,897)   (98,147)   (44,449)   (24,736)   (25,615)   (94,800)   3.5% 
Commission Expenses  (18,675)   (5,549)   (15,396)   (39,619)   (19,058)   (8,319)   (10,857)   (38,234)   3.6% 
Other Operating Expenses  (14,741)   (16,382)   (12,705)   (43,829)   (17,666)   (14,369)   (10,264)   (42,299)   3.6% 
                                     
Underwriting Profit (Loss) $(6,673)  $8,036  $2,323  $3,686  $(4,153)  $(1,907)  $(3,087)  $(9,147)  NM 
                                     
Losses and LAE Ratio  65.0%   34.1%   52.0%   53.0%   57.7%   54.3%   58.7%   57.0%     
Commission Expense Ratio  24.4%   12.2%   24.3%   21.4%   24.7%   18.3%   24.9%   23.0%     
Other Operating Expense Ratio  19.3%   36.0%   20.0%   23.6%   23.0%   31.6%   23.5%   25.5%     
Combined Ratio  108.7%   82.3%   96.3%   98.0%   105.4%   104.2%   107.1%   105.5%     

NM – Percentage change not meaningful

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 2018  2017  2018  2017 
U.S. Insurance:                
Loss and LAE Payments $81,269  $86,792   45.2%   51.9% 
Change in Reserves  30,616   18,478   17.0%   11.1% 
Net Incurred Loss and LAE $111,885  $105,270   62.2%   63.0% 
                 
Int'l Insurance:                
Loss and LAE Payments $56,926  $46,050   61.8%   56.1% 
Change in Reserves  (4,622)   (1,955)   (5.0%)   (2.4%) 
Net Incurred Loss and LAE $52,304  $44,095   56.8%   53.7% 
                 
GlobalRe:                
Loss and LAE Payments $22,413  $21,279   37.9%   47.6% 
Change in Reserves  9,731   6,466   16.4%   14.5% 
Net Incurred Loss and LAE $32,144  $27,745   54.3%   62.1% 
                 
Total                
Loss and LAE Payments $160,608  $154,121   48.5%   52.5% 
Change in Reserves  35,725   22,989   10.8%   7.8% 
Net Incurred Loss and LAE $196,333  $177,110   59.3%   60.3% 
                 
                 
  For the Three Months Ended June 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2018  2017  2018  2017 
U.S. Insurance $2,220  $(295)   0.7%   (0.1%) 
Int'l Insurance  (3,330)   (4,743)   (1.0%)   (1.6%) 
GlobalRe  (244)   (2,992)   (0.1%)   (1.0%) 
Total $(1,354)  $(8,030)   (0.4%)   (2.7%) 
                 

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 2018  2017  2018  2017 
U.S. Insurance:                
Loss and LAE Payments $168,820  $156,563   47.8%   47.2% 
Change in Reserves  53,487   47,533   15.2%   14.4% 
Net Incurred Loss and LAE $222,307  $204,096   63.0%   61.6% 
                 
Int'l Insurance:                
Loss and LAE Payments $105,169  $90,958   56.8%   54.7% 
Change in Reserves  (7,022)   3,842   (3.8%)   2.3% 
Net Incurred Loss and LAE $98,147  $94,800   53.0%   57.0% 
                 
GlobalRe:                
Loss and LAE Payments $51,686  $49,609   44.8%   60.0% 
Change in Reserves  10,338   (1,795)   8.8%   (2.2%) 
Net Incurred Loss and LAE $62,024  $47,814   53.6%   57.8% 
                 
Total                
Loss and LAE Payments $325,675  $297,130   49.8%   51.3% 
Change in Reserves  56,803   49,580   8.7%   8.5% 
Net Incurred Loss and LAE $382,478  $346,710   58.5%   59.8% 
                 
                 
  For the Six Months Ended June 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2018  2017  2018  2017 
U.S. Insurance $(2,593)  $177   (0.4%)   0.0% 
Int'l Insurance  (847)   (11,359)   (0.1%)   (2.0%) 
GlobalRe  120   (3,933)   0.0%   (0.7%) 
Total $(3,320)  $(15,115)   (0.5%)   (2.7%) 
                 

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

  As of June 30, 2018 
amounts in thousands Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $51,576  $50,637  $102,213 
P&C  197,765   740,654   938,419 
Professional Liability  34,839   87,603   122,442 
Total U.S. Insurance $284,180  $878,894  $1,163,074 
Int'l Insurance:            
Marine $172,149  $36,540  $208,689 
P&C  75,011   24,928   99,939 
Professional Liability  39,551   101,453   141,004 
Total Int'l Insurance $286,711  $162,921  $449,632 
             
GlobalRe $58,300  $104,026  $162,326 
             
Total Net Loss Reserves $629,191  $1,145,841  $1,775,032 
             
             
  As of December 31, 2017 
  Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $58,301  $45,393  $103,694 
P&C  192,291   700,264   892,555 
Professional Liability  26,774   86,649   113,423 
Total U.S. Insurance $277,366  $832,306  $1,109,672 
Int'l Insurance:            
Marine $181,369  $39,949  $221,318 
P&C  66,412   37,067   103,479 
Professional Liability  31,463   87,211   118,674 
Total Int'l Insurance $279,244  $164,227  $443,471 
             
GlobalRe $58,962  $93,275  $152,237 
             
Total Net Loss Reserves $615,572  $1,089,808  $1,705,380 
             

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

As of June 30, 2018, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.5 years. The Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth the Available-For-Sale Investments as of June 30, 2018:

    
  As of June 30, 2018 
      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
 $289,612  $955  $(4,189)  $292,846 
States, Municipalities and Political Subdivisions  658,129   10,410   (4,870)   652,589 
Mortgage-Backed and Asset-Backed Securities:                
Agency Mortgage-Backed Securities  362,870   1,091   (14,497)   376,276 
Residential Mortgage Obligations  96,134   464   (431)   96,101 
Asset-Backed Securities  476,838   737   (2,749)   478,850 
Commercial Mortgage-Backed Securities  168,609   807   (2,817)   170,619 
Subtotal $1,104,451  $3,099  $(20,494)  $1,121,846 
Corporate Exposures (1)  909,349   4,303   (19,302)   924,348 
Total Fixed Maturities $2,961,541  $18,767  $(48,855)  $2,991,629 
Short-Term Investments  6,368         6,368 
Total Available-For-Sale Investments $2,967,909  $18,767  $(48,855)  $2,997,997 

(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.