The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $16.2 million, or $1.00 per diluted share, for the three months ended September 30, 2010 compared to net income of $21.4 million, or $1.24 per diluted share, for the comparable period in 2009. Operating earnings (1) were $13.7 million, or $0.85 per diluted share for the third quarter of 2010 compared to $17.4 million, or $1.01 per diluted share, for the comparable period in 2009.

For the nine months ended September 30, 2010, the Company reported net income of $52.2 million, or $3.17 per diluted share, compared to $57.1 million, or $3.30 per diluted share, for the comparable period in 2009. Operating earnings were $38.8 million, or $2.35 per diluted share for the nine months ended September 30, 2010 compared to $59.9 million, or $3.46 per diluted share, for the comparable period of 2009.

Gross written premiums and net written premiums for the three months ended September 30, 2010 were $233.6 million and $157.8 million, respectively, a decrease of 4.7% and increase of 1.2% from the comparable 2009 periods. Gross written premiums and net written premiums for the nine months ended September 30, 2010 were $757.4 million and $512.1 million, respectively, a decrease of 4.5% and 5.1% from the comparable 2009 periods.

The combined loss and expense ratios for the three and nine months ended September 30, 2010 were 97.8% and 98.9%, respectively, compared to 95.9% and 93.9% for the comparable 2009 periods. The combined loss and expense ratio for the three months ended September 30, 2010 was favorably impacted by 2.5 loss ratio points due to favorable development in prior period loss reserves. The combined loss and expense ratio for the nine months ended September 30, 2010 was favorably impacted by 2.2 loss ratio points due to favorable development in prior period loss reserves.

Navigators' Chief Executive Officer Stan Galanski commented, “Despite the weak economy and challenging insurance market conditions, Navigators achieved an underwriting profit and grew book value per share 5.2% during the third quarter. Our Nav Tech unit had a superb quarter, with premium growth of 38%. We are well positioned to take advantage of opportunities in the energy and power generation markets.

The underwriting teams hired over the last two years are gaining traction. As part of our longer-term growth plans, we continue to look for opportunities to enhance our existing capabilities as evidenced by the recent launches of iTrade and Navigators Re.”

During the three and nine months ended September 30, 2010, the Company repurchased 97,115 and 1,228,718 shares of its common stock for an aggregate purchase price of $4.1 million and $50.3 million, respectively, pursuant to its share repurchase program. The Company repurchased an additional 1,500 shares of its common stock for an aggregate purchase price of approximately sixty four thousand dollars from October 1, 2010 through November 3, 2010 pursuant to its share repurchase program. Approximately $42.9 million remains available under the Company's current share repurchase program that expires on December 31, 2010.

Net investment income for the three and nine months ended September 30, 2010 was $17.8 million and $53.7 million, respectively, which were decreases of 6.7% and 5.0% from the comparable 2009 periods. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 3.4% and 3.5% for the three and nine months ended September 30, 2010, respectively, compared to 3.8% for both 2009 comparable periods. The effective tax rate on net investment income was 28.4% and 26.7% for the three and nine months ended September 30, 2010, respectively, compared to 25.2% and 25.1% for the comparable 2009 periods.

The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA/Aa” as defined by Standard & Poor’s and Moody’s, respectively, and an average effective duration of 4.1 years at September 30, 2010. At September 30, 2010, net unrealized gains within our investment portfolio were $112.4 million, an increase of $58.5 million compared to December 31, 2009. There were $3.9 million and $20.8 million of net realized gains for the three and nine months ended September 30, 2010.

In April 2009, the Company repurchased $10.0 million aggregate principal amount of its issued and outstanding 7% Senior notes from an unaffiliated noteholder on the open market for $7.0 million, which generated a $2.9 million pre-tax gain that is reflected in Other income (loss) and added $0.11 to the second quarter 2009 earnings per share.

Consolidated cash flow from operations for the three and nine months ended September 30, 2010 was $49.8 million and $114.1 million, respectively, compared to $35.7 million and $105.2 million for the comparable 2009 periods.

Stockholders’ equity was $854.0 million, or $54.17 per share, at September 30, 2010 compared to $801.5 million, or $47.58 per share, at December 31, 2009. The statutory surplus of Navigators Insurance Company was $663.1 million at September 30, 2010 compared to $645.8 million at December 31, 2009.

(1) Operating earnings, or net income excluding after-tax net realized gains (losses) and net other-than-temporary impairment losses recognized in earnings, 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 Company will hold a conference call on Friday, November 5, 2010 starting at 8:30 a.m. ET to discuss the 2010 third quarter results. The call will be available via live webcast on Navigators’ website ( www.navg.com) by clicking on the Earnings Webcast link under "News & Events".

To participate by telephone, the domestic dial-in number is (866) 543-6411 and the international dial-in is (617) 213-8900. The access code is 47887560. Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=PMLTM8EQD. Pre-registrants will be issued a pin number to use when dialing into the live call that will provide quick access by bypassing the operator upon connection.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd’s of London. Headquartered in New York, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe.

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 per share data)
(unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,

Results of Operations

2010

2009

Change

2010

2009

Change
 
Gross written premiums $ 233,638 $ 245,191 -5 % $ 757,351 $ 793,179 -5 %
Net written premiums 157,807 156,001 1 % 512,129 539,660 -5 %
 
Revenues:
Net earned premiums 168,233 171,271 -2 % 493,773 506,085 -2 %
Investment income 17,839 19,110 -7 % 53,664 56,509 -5 %
Total other-than-temporary impairment losses (1,034 ) (22 )

N

M
(1,774 ) (28,769 ) -94 %

Portion of loss recognized in other comprehensive income (before tax)
  365       (525 )

N

M
  870       17,053   -95 %

Net other-than-temporary impairment losses recognized in earnings

 
(669 ) (547 ) 22 % (904 ) (11,716 ) -92 %
Net realized gains 4,521 6,682 -32 % 21,653 7,741 180 %
Other income (expense)   2,767       1,241   123 %   2,938       6,686   -56 %
Total revenues   192,691       197,757   -3 %   571,124       565,305   1 %
 
Expenses:
Net losses and loss adjustment expenses 107,463 107,591 0 % 311,133 308,566 1 %
Commission expenses 25,185 22,852 10 % 76,178 71,578 6 %
Other operating expenses 34,682 35,018 -1 % 103,781 98,572 5 %
Interest expense   2,045       2,042   0 %   6,133       6,411   -4 %
Total expenses   169,375       167,503   1 %   497,225       485,127   2 %
 
Income before income taxes 23,316 30,254 -23 % 73,899 80,178 -8 %
 
Income tax expense   7,091       8,822   -20 %   21,659       23,096   -6 %
 
Net income $ 16,225     $ 21,432   -24 % $ 52,240     $ 57,082   -8 %
 
 

Per Share Data
 
Net income per common share:
Basic $ 1.03 $ 1.26 -19 % $ 3.23 $ 3.37 -4 %
Diluted $ 1.00 $ 1.24 -19 % $ 3.17 $ 3.30 -4 %
 
Average shares outstanding:
Basic 15,780 16,966 16,170 16,929
Diluted 16,149 17,334 16,503 17,277
 

Underwriting Ratios
Loss Ratio 63.9 % 62.8 % 63.0 % 61.0 %
Expense Ratio   33.9 %     33.1 %   35.9 %     32.9 %
Combined Ratio 97.8 % 95.9 % 98.9 % 93.9 %
 
 

Balance Sheet Data
Sept. 30, June 30, Sept. 30, Dec. 31,
2010   2010

2010
  2009
Stockholders' equity $ 854,013 $ 814,743 5 % $ 854,013 $ 801,519 7 %
Book value per share $ 54.17 $ 51.48 5 % $ 54.17 $ 47.58 14 %
 
   
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
 
September 30, December 31,

2010

2009
(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value
(amortized cost: 2010, $1,727,551; 2009, $1,777,983) $ 1,820,493 $ 1,816,669
Equity securities, available-for-sale, at fair value (cost: 2010, $66,986; 2009, $47,376) 86,447 62,610
Short-term investments, at cost which approximates fair value 260,564 176,799
Cash   31,073     509  
Total investments and cash   2,198,577     2,056,587  
 
Premiums receivable 204,180 193,460
Prepaid reinsurance premiums 156,047 162,344
Reinsurance recoverable on paid losses 60,889 76,505
Reinsurance recoverable on unpaid losses and loss adjustment expenses 787,795 807,352
Deferred policy acquisition costs 60,304 56,575
Accrued investment income 15,533 17,438
Goodwill and other intangible assets 6,935 7,057
Current income tax receivable, net 4,773 4,854
Deferred income tax, net - 31,222
Other assets   25,960     40,600  
 
Total assets $ 3,520,993   $ 3,453,994  

 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses $ 1,924,317 $ 1,920,286
Unearned premiums 486,955 475,171
Reinsurance balances payable 97,239 98,555
Senior notes 114,105 114,010
Deferred income tax, net 4,833 -
Accounts payable and other liabilities   39,531     44,453  
Total liabilities   2,666,980     2,652,475  
 
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 17,262,710 shares for 2010 and 17,212,814 shares for 2009
1,726 1,721
Additional paid-in capital 311,233 304,505
Retained earnings 522,174 469,934
Treasury stock, at cost (1,496,707 for 2010 and 366,330 shares for 2009) (63,227 ) (18,296 )
Accumulated other comprehensive income   82,107     43,655  
Total stockholders' equity   854,013     801,519  
 
Total liabilities and stockholders' equity $ 3,520,993   $ 3,453,994  
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
           
 
Gross Written Premiums: Three Months Nine Months
Insurance Companies:   2010     2009   Change   2010     2009   Change
Marine $ 49,406 $ 53,129 -7 % $ 172,136 $ 187,452 -8 %
Property Casualty 81,351 93,302 -13 % 242,494 272,127 -11 %
Professional Liability   32,586     33,569 -3 %   97,192     101,789 -5 %
163,343 180,000 -9 % 511,822 561,368 -9 %
Lloyd's Operations:
Marine 32,788 33,960 -3 % 133,758 140,256 -5 %
Property Casualty 27,687 20,024 38 % 76,768 59,058 30 %
Professional Liability   9,820     11,207 -12 %   35,003     32,497 8 %
  70,295     65,191 8 %   245,529     231,811 6 %
Total $ 233,638   $

245,191
-5 % $ 757,351   $ 793,179 -5 %
 
Net Written Premiums: Three Months Nine Months
Insurance Companies:   2010     2009   Change   2010     2009   Change
Marine $ 35,546 $ 39,632 -10 % $ 123,702 $ 133,047 -7 %
Property Casualty 52,677 57,567 -8 % 156,674 183,247 -15 %
Professional Liability   19,693     18,834 5 %   60,281     59,180 2 %
107,916 116,033 -7 % 340,657 375,474 -9 %
Lloyd's Operations:
Marine 27,142 23,816 14 % 111,205 113,867 -2 %
Property Casualty 17,414 11,116 57 % 43,049 33,781 27 %
Professional Liability   5,335     5,036 6 %   17,218     16,538 4 %
  49,891     39,968 25 %   171,472     164,186 4 %
Total $ 157,807   $ 156,001 1 % $ 512,129   $ 539,660 -5 %
 
Net Earned Premiums: Three Months Nine Months
Insurance Companies:   2010     2009   Change   2010     2009   Change
Marine $ 41,091 $ 42,620 -4 % $ 122,739 $ 114,459 7 %
Property Casualty 50,976 60,380 -16 % 152,228 188,860 -19 %
Professional Liability   20,131     19,804 2 %   58,867     55,998 5 %
112,198 122,804 -9 % 333,834 359,317 -7 %
Lloyd's Operations:
Marine 38,254 33,945 13 % 108,541 102,158 6 %
Property Casualty 12,202 9,126 34 % 34,880 28,250 23 %
Professional Liability   5,579     5,396 3 %   16,518     16,360 1 %
  56,035     48,467 16 %   159,939     146,768 9 %
Total $ 168,233   $ 171,271 -2 % $ 493,773   $ 506,085 -2 %
 
     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2010
 
($ in thousands)
 
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 163,343 $ 70,295 $ - $ 233,638
Net written premiums 107,916 49,891 - 157,807
 
Net earned premiums 112,198 56,035 - 168,233
Net losses and loss adjustment expenses (72,306 ) (35,157 ) - (107,463 )
Commission expenses (14,374 ) (10,459 ) (352 ) (25,185 )
Other operating expenses (26,398 ) (8,301 ) - (34,699 )
Other income (expense)   1,380     1,052     352     2,784  
 
Underwriting profit 500 3,170 - 3,670
 
Investment income 15,736 1,982 121 17,839
Net realized gains (losses) 4,206 (354 ) - 3,852
Other operating expenses - - 17 17
Other income (expense) - - (17 ) (17 )
Interest expense   -     -     (2,045 )   (2,045 )
Income (loss) before income tax expense (benefit)
20,442 4,798 (1,924 ) 23,316
 
Income tax expense (benefit)   6,049     1,715     (673 )   7,091  
Net income (loss) $ 14,393   $ 3,083   $ (1,251 ) $ 16,225  
 
Loss and loss expenses ratio 64.4 % 62.7 % 63.9 %
Commission expense ratio 12.8 % 18.7 % 15.0 %
Other operating expenses ratio (2)   22.4 %   12.9 %   18.9 %
Combined ratio   99.6 %   94.3 %   97.8 %
 
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expenses ratio includes Other income (expense).
 
     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2009
 
($ in thousands)
 
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 180,000 $ 65,191 $ - $ 245,191
Net written premiums 116,033 39,968 - 156,001
 
Net earned premiums 122,804 48,467 - 171,271
Net losses and loss adjustment expenses (75,838 ) (31,753 ) - (107,591 )
Commission expenses (15,346 ) (7,835 ) 329 (22,852 )
Other operating expenses (27,194 ) (7,835 ) - (35,029 )
Other income (expense)   1,301     280     (329 )   1,252  
 
Underwriting profit 5,727 1,324 - 7,051
 
Investment income 16,597 2,361 152 19,110
Net realized gains (losses) 5,710 425 - 6,135
Other operating expenses - - 11 11
Other income (expense) - - (11 ) (11 )
Interest expense   -     -     (2,042 )   (2,042 )
Income (loss) before income tax expense (benefit)
28,034 4,110 (1,890 ) 30,254
 
Income tax expense (benefit)   7,973     1,510     (661 )   8,822  
Net income (loss) $ 20,061   $ 2,600   $ (1,229 ) $ 21,432  
 
Loss and loss expenses ratio 61.8 % 65.5 % 62.8 %
Commission expense ratio 12.5 % 16.2 % 13.3 %
Other operating expenses ratio (2)   21.1 %   15.6 %   19.8 %
Combined ratio   95.4 %   97.3 %   95.9 %
 
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expenses ratio includes Other income (expense).
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2010
       
($ in thousands)
 
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 511,822 $ 245,529 $ - $ 757,351
Net written premiums 340,657 171,472 - 512,129
 
Net earned premiums 333,834 159,939 - 493,773
Net losses and loss adjustment expenses (205,571 ) (105,562 ) - (311,133 )
Commission expenses (43,351 ) (32,827 ) - (76,178 )
Other operating expenses (79,658 ) (24,161 ) - (103,819 )
Other income (expense)   289     2,687     -     2,976  
 
Underwriting profit 5,543 76 - 5,619
 
Investment income 47,040 6,179 445 53,664
Net realized gains (losses) 20,140 378 231 20,749
Other operating expenses - - 38 38
Other income (expense) - - (38 ) (38 )
Interest expense   -     -     (6,133 )   (6,133 )
Income (loss) before income tax expense (benefit)
72,723 6,633 (5,457 ) 73,899
 
Income tax expense (benefit)   21,166     2,403     (1,910 )   21,659  
Net income (loss) $ 51,557   $ 4,230   $ (3,547 ) $ 52,240  
 
Loss and loss expenses ratio 61.6 % 66.0 % 63.0 %
Commission expense ratio 13.0 % 20.5 % 15.4 %
Other operating expenses ratio (2)   23.7 %   13.5 %   20.5 %
Combined ratio   98.3 %   100.0 %   98.9 %
 
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expenses ratio includes Other income (expense).
 
     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2009
 
($ in thousands)
 
Insurance Lloyd's
Companies Operations Corporate (1) Total
Gross written premiums $ 561,368 $ 231,811 $ - $ 793,179
Net written premiums 375,474 164,186 - 539,660
 
Net earned premiums 359,317 146,768 - 506,085
Net losses and loss adjustment expenses (214,834 ) (93,732 ) - (308,566 )
Commission expenses (45,374 ) (26,533 ) 329 (71,578 )
Other operating expenses (78,660 ) (19,933 ) - (98,593 )
Other income (expense)   3,157     879     (329 )   3,707  
 
Underwriting profit 23,606 7,449 - 31,055
 
Investment income 49,043 7,060 406 56,509
Net realized gains (losses) (987 ) (2,988 ) - (3,975 )
Other operating expenses - - 21 21
Other income (expense) - - 2,979 2,979
Interest expense   -     -     (6,411 )   (6,411 )
Income (loss) before income tax
expense (benefit) 71,662 11,521 (3,005 ) 80,178
 
Income tax expense (benefit)   19,677     4,470     (1,051 )   23,096  
Net income (loss) $ 51,985   $ 7,051   $ (1,954 ) $ 57,082  
 
Loss and loss expenses ratio 59.8 % 63.9 % 61.0 %
Commission expense ratio 12.6 % 18.1 % 14.1 %
Other operating expenses ratio (2)   21.0 %   13.0 %   18.8 %
Combined ratio   93.4 %   95.0 %   93.9 %
 
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expenses ratio includes Other income (expense).
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
             
Three Months Ended September 30, 2010
Net Losses
Earned and LAE Underwriting Underwriting

Combined Ratio
Insurance Companies: Premiums   Incurred   Expenses   Gain(Loss)   Loss   Expense   Total
Marine $ 41,091 $ 26,257 $ 13,467 $ 1,367 63.9 % 32.8 % 96.7 %
Property Casualty 50,976 32,575 18,350 51 63.9 % 36.0 % 99.9 %
Professional Liability   20,131     13,474     7,575     (918 )   66.9 %   37.7 %   104.6 %
112,198 72,306 39,392 500 64.4 % 35.2 % 99.6 %
Lloyd's Operations   56,035     35,157     17,708     3,170     62.7 %   31.6 %   94.3 %
Total $ 168,233   $ 107,463   $ 57,100   $ 3,670     63.9 %   33.9 %   97.8 %
 
 
Three Months Ended September 30, 2009
Net Losses
Earned and LAE Underwriting Underwriting

Combined Ratio
Insurance Companies: Premiums   Incurred   Expenses   Gain(Loss)   Loss   Expense   Total
Marine $ 42,620 $ 31,611 $ 13,259 $ (2,250 ) 74.2 % 31.1 % 105.3 %
Property Casualty 60,380 23,881 21,330 15,169 39.6 % 35.3 % 74.9 %
Professional Liability   19,804     20,346     6,650     (7,192 )   102.7 %   33.6 %   136.3 %
122,804 75,838 41,239 5,727 61.8 % 33.6 % 95.4 %
Lloyd's Operations   48,467     31,753     15,390     1,324     65.5 %   31.8 %   97.3 %
Total $ 171,271   $ 107,591   $ 56,629   $ 7,051     62.8 %   33.1 %   95.9 %
 
 
 
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2010 2009 2010 2009
Insurance Companies:
Loss and LAE payments $ 67,343 $ 69,215 60.1 % 56.4 %
Change in reserves   4,963     6,623 4.3 %   5.4 %
Net incurred loss and LAE   72,306     75,838 64.4 %   61.8 %
 
Lloyd's Operations:
Loss and LAE payments 22,572 20,736 40.2 % 42.8 %
Change in reserves   12,585     11,017 22.5 %   22.7 %
Net incurred loss and LAE   35,157     31,753 62.7 %   65.5 %
 
Total
Loss and LAE payments 89,915 89,951 53.5 % 52.5 %
Change in reserves   17,548     17,640 10.4 %   10.3 %
Net incurred loss and LAE $ 107,463   $ 107,591 63.9 %   62.8 %
 
 
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Three Months Ended: 2010   2009 2010   2009
Insurance Companies $ 157 $ 3,220 0.1 % 2.6 %
Lloyd's Operations   4,002     630 7.1 %   1.3 %
Total $ 4,159   $ 3,850 2.5 %   2.2 %
 
         
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
   
Nine Months Ended September 30, 2010
Net Losses
Earned and LAE Underwriting Underwriting

Combined Ratio
Insurance Companies: Premiums   Incurred   Expenses   Gain(Loss)   Loss   Expense   Total
Marine $ 122,739 $ 77,911 $ 42,566 $ 2,262 63.5 % 34.7 % 98.2 %
Property Casualty 152,228 89,637 57,858 4,733 58.9 % 38.0 % 96.9 %
Professional Liability   58,867     38,023       22,296

 
  (1,452 )   64.6 %   37.9 %   102.5 %
333,834 205,571 122,720 5,543 61.6 % 36.7 % 98.3 %
Lloyd's Operations   159,939     105,562       54,301     76     66.0 %   34.0 %   100.0 %
Total $ 493,773   $ 311,133     $ 177,021   $ 5,619     63.0 %   35.9 %   98.9 %
 
 
Nine Months Ended September 30, 2009
Net Losses
Earned and LAE Underwriting Underwriting

Combined Ratio
Insurance Companies: Premiums   Incurred   Expenses   Gain(Loss)   Loss   Expense   Total
Marine $ 114,459 $ 83,239 $ 35,453 $ (4,233 ) 72.7 % 31.0 % 103.7 %
Property Casualty 188,860 80,331 65,642 42,887 42.5 % 34.8 % 77.3 %
Professional Liability   55,998     51,264       19,782     (15,048 )   91.5 %   35.3 %   126.8 %
359,317 214,834 120,877 23,606 59.8 % 33.6 % 93.4 %
Lloyd's Operations   146,768     93,732       45,587     7,449     63.9 %   31.1 %   95.0 %
Total $ 506,085   $ 308,566     $ 166,464   $ 31,055     61.0 %   32.9 %   93.9 %
 
 
 
Amounts Loss Ratio
Net Incurred Loss Activity Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2010   2009 2010   2009
Insurance Companies:
Loss and LAE payments $ 208,114 $ 171,282 62.4 % 47.7 %
Change in reserves   (2,543 )     43,552 -0.8 %   12.1 %
Net incurred loss and LAE   205,571       214,834 61.6 %   59.8 %
 
Lloyd's Operations:
Loss and LAE payments 79,431 52,348 49.7 % 35.7 %
Change in reserves   26,131       41,384 16.3 %   28.2 %
Net incurred loss and LAE   105,562       93,732 66.0 %   63.9 %
 
Total
Loss and LAE payments 287,545 223,630 58.2 % 44.2 %
Change in reserves   23,588       84,936 4.8 %   16.8 %
Net incurred loss and LAE $ 311,133     $ 308,566 63.0 %   61.0 %
 
 
Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development Sept. 30, Sept. 30, Sept. 30, Sept. 30,
For the Nine Months Ended: 2010   2009 2010   2009
Insurance Companies $ 5,654 $ 13,242 1.7 % 3.7 %
Lloyd's Operations   5,001       5,853 3.1 %   4.0 %
Total $ 10,655     $ 19,095 2.2 %   3.8 %
 
     
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
   
Case IBNR
Net Loss Reserves, September 30, 2010:

Reserves

Reserves

Total
Insurance Companies:
Marine $ 111,945 $ 103,307 $ 215,252
Property Casualty 138,089 342,170 480,259
Professional Liability   46,645   62,576   109,221
Total Insurance Companies   296,679   508,053   804,732
Lloyd's Operations:
Marine 114,002 108,477 222,479
Property Casualty 29,860 29,768 59,628
Professional Liability   12,321   37,362   49,683
Total Lloyd's Operations   156,183   175,607   331,790
 
Total Net Loss Reserves $ 452,862 $ 683,660 $ 1,136,522
 
 
Case IBNR
Net Loss Reserves, December 31, 2009:

Reserves

Reserves

Total
Insurance Companies:
Marine $ 113,604 $ 100,042 $ 213,646
Property Casualty 134,427 351,985 486,412
Professional Liability   38,410   68,807   107,217
Total Insurance Companies   286,441   520,834   807,275
Lloyd's Operations:
Marine 107,800 101,851 209,651
Property Casualty 27,148 25,175 52,323
Professional Liability   7,442   36,243   43,685
Total Lloyd's Operations   142,390   163,269   305,659
 
Total Net Loss Reserves $ 428,831 $ 684,103 $ 1,112,934
 
       
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2010
($ in thousands)
 
 

At September 30, 2010, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 4.1 years.  The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset backed commercial paper.

 

At September 30, 2010, the Company owned two asset-backed securities approximating $0.1 million with subprime mortgage exposures.  The securities have an effective maturity of 2.9 years.  In addition, the Company owned a total of five collateralized mortgage obligations and asset-backed securities approximating $1.4 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.5 years.  Such subprime and Alt-A categories are as defined by S&P.  The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.

 

The following table sets forth our cash and investments at September 30, 2010:

 
 
Gross Gross Cost or OTTI
Fair Unrealized Unrealized Amortized Recognized

September 30, 2010
Value Gains (Losses) Cost in OCI
($ in thousands)
Fixed maturities:
U.S. Government Treasury bonds, agency bonds and foreign government bonds
$ 421,540 $ 17,971 $ (2 ) $ 403,571 $ -
States, municipalities and political subdivisions
405,584 25,255 (51 ) 380,380 -
Mortgage- and asset-backed securities
Agency mortgage-backed securities 414,335 19,325 - 395,010 -
Residential mortgage obligations 20,785 - (2,941 ) 23,726 (2,064 )
Asset-backed securities 33,411 513 (9 ) 32,907 (8 )
Commercial mortgage-backed securities   143,278   8,108   (67 )   135,237   -  
Subtotal 611,809 27,946 (3,017 ) 586,880 (2,072 )
Corporate bonds   381,560   24,853   (13 )   356,720  
 
Total fixed maturities 1,820,493 96,025 (3,083 ) 1,727,551 (2,072 )
 
Equity securities - common stocks 86,447 19,546 (85 ) 66,986 -
 
Cash 31,073 - - 31,073 -
 
Short-term investments 260,564 - - 260,564 -
         
Total $ 2,198,577 $ 115,571 $ (3,168 ) $ 2,086,174 $ (2,072 )
 
 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2010
($ in thousands)
       
 

The following three tables set forth our agency mortgage-backed securities, residential mortgage obligations, and asset-backed securities by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at September 30, 2010:
 
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Agency mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 208,594 $ 6,320 $ - $ 202,274
FNMA 146,771 9,890 - 136,881
FHLMC   58,970   3,115   -     55,855
Total $ 414,335 $ 19,325 $ -   $ 395,010
 
 
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Residential mortgage obligations: Value Gains (Losses) Cost
Prime $ 19,408 $ - $ (2,667 ) $ 22,075
Alt-A 1,377 - (274 ) 1,651
Subprime   -   -   -     -
Total $ 20,785 $ - $ (2,941 ) $ 23,726
 
 
Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Asset-backed securities: Value Gains (Losses) Cost
Prime $ 33,272 $ 513 $ - $ 32,759
Alt-A - - - -
Subprime   139   -   (9 )   148
Total $ 33,411 $ 513 $ (9 ) $ 32,907
 

Copyright Business Wire 2010