Navigators Reports Third Quarter 2016 Earnings

Date03 Nov 2016

CategoriesEarnings Releases And Operating Results

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

Contact: Ciro M. DeFalco Senior Vice President and Chief Financial Officer (203) 905-6343 [email protected]  www.navg.com

Navigators Reports Third Quarter 2016 Earnings

Stock Updates

Categories