A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a+” of Navigators Insurance Company (Navigators) and its wholly owned and 100% reinsured subsidiary, Navigators Specialty Insurance Company (Specialty). Concurrently, A.M. Best has affirmed the ICR of “bbb+” of Navigators’ publicly traded ultimate parent, The Navigators Group, Inc. (Navigators, Inc.) (NASDAQ: NAVG). A.M. Best also has affirmed the debt ratings of “bbb+” on $114 million senior unsecured notes and the shelf ratings of “bbb-“on preferred securities, “bbb” on subordinated notes and “bbb+” on senior unsecured notes of Navigators, Inc. The outlook for all ratings is stable. All companies are domiciled in New York, NY.
The ratings reflect Navigators’ strong level of risk-adjusted capitalization and historical operating profitability coupled with its leading position within the global marine sector. Furthermore, the ratings recognize management’s conservative approach to risk selection and its ongoing efforts to further diversify Navigators’ book of business by targeting specific niches of business.
These positive rating factors are somewhat offset by Navigators’ declining underwriting results in most recent years, elevated (though declining in recent years) ceded reinsurance leverage and growth in relatively new lines of business, some of which have been unprofitable. Despite Navigators’ historically strong overall underwriting performance, underwriting results declined in 2010 and 2011 due to adverse development of loss reserves for several lines of business, the continuation of the run-off of several programs and large industry-wide losses in the energy and marine segments.
Management continues to implement corrective actions that include re-underwriting and exiting unprofitable business. In addition, the companies continue to benefit from the financial flexibility and explicit support provided by Navigators, Inc. Furthermore, Navigators, Inc.’s financial leverage is conservative at 13.5% of debt-to-total tangible capital, with coverage and operating ratios that exceed A.M. Best’s requirements for its current rating level.