Navigators Reports Second Quarter Earnings

NEW YORK, Aug. 7, 2013 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $13.9 million, or $0.97 per diluted share, for the three months ended June 30, 2013 compared to $14.9 million, or $1.05 per diluted share, for the comparable period in 2012. Operating earnings were $11.8 million, or $0.82 per diluted share, for the second quarter of 2013 compared to operating earnings of $12.5 million, or $0.88 per diluted share, for the comparable period in 2012.

For the six months ended June 30, 2013, the Company reported net income of $27.8 million, or $1.93 per diluted share, compared to $22.8 million, or $1.60 per diluted share, for the comparable period in 2012. Operating earnings were $22.6 million, or $1.56 per diluted share, for the six months ended June 30, 2013 compared to $19.3 million, or $1.35 per diluted share, for the comparable period in 2012.

Gross written premiums and net written premiums for the three months ended June 30, 2013 were $332.1 million and $198.5 million, respectively, an increase of 2.8% and 4.3% from the comparable period in 2012. Gross written premiums and net written premiums for the six months ended June 30, 2013 were $725.4 million and $467.9 million, respectively, an increase of 8.9% and 8.0% from the comparable period in 2012.

The combined loss and expense ratio for the three and six months ended June 30, 2013 were 97.7% and 97.8%, respectively, compared to 98.1% and 99.0% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased with our second quarter results, reflecting solid underwriting profit in marine, specialty casualty and international D&O. We achieved renewal rate increases in most of our specialty product lines and we experienced particularly strong premium growth in our U.S. Excess and Surplus Lines businesses. Our underwriters continued to avoid business that failed to meet our required terms or price. Cash flow for the quarter was strong. Despite a decline in unrealized gains in our bond portfolio as a result of rising interest rates, our investment portfolio performed reasonably well and we remain confident in the quality of our invested assets."

Stockholders' equity was $874.0 million, or $61.83 per share, as of June 30, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and six months ended June 30, 2013 was $14.2 million and $27.9 million, respectively, a decrease of 9.7% and an increase of 3.2% from the comparable periods in 2012. Net investment income for the six months ended June 30, 2012 was reduced by $4.5 million as a result of the settlement of our dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses, net other-than-temporary impairment losses recognized in earnings, and for 2012 the $4.5 million in interest expense for the settlement of our dispute with Equitas, was 2.4% for both the three and six months ended June 30, 2013, compared to 2.8% for each of the comparable periods in 2012. The effective tax rate on net investment income was 27.6% and 28.0% for the three and six months ended June 30, 2013, respectively, compared to 28.2% and 26.9% for the comparable periods in 2012.

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 4.0 years as of June 30, 2013. As of June 30, 2013, net unrealized gains within our investment portfolio were $42.6 million, a decrease of $60.7 million compared to December 31, 2012.

There were $3.3 million of net realized gains for the three months ended June 30, 2013 compared to $3.7 million for the same period in 2012. There were no other-than-temporary impairment losses for the three months ended June 30, 2013. For the six months ended June 30, 2013, there were $8.1 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $5.4 million for the same period in 2012.

Consolidated net cash flow from operations for the three and six months ended June 30, 2013 was $44.2 million and $48.5 million, respectively, compared to $(1.3) million and $15.0 million for the comparable periods in 2012.

The Company will hold a conference call on Thursday, August 8, 2013 starting at 8:30 a.m. ET to discuss the 2013 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 connect to the webcast at:

http://investor.shareholder.com/navg/eventdetail.cfm?eventid=131762

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 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.

The Navigators Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7778

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   Six Months Ended  
  June 30,   June 30,  
Results of Operations 2013 2012 Change 2013 2012 Change
             
Gross written premiums  $ 332,128  $ 322,987 2.8%  $ 725,350  $ 666,136 8.9%
Net written premiums  198,469  190,252 4.3%  467,921  433,297 8.0%
             
Revenues:            
Net earned premiums  205,814  196,017 5.0%  408,142  379,136 7.7%
Net investment income  14,246  15,777 -9.7%  27,903  27,035 3.2%
 Total other-than-temporary impairment losses  --   (496) NM  (42)  (693) -93.9%
Portion of loss recognized in other comprehensive income (before tax)  --   --  NM  --   43 NM
Net other-than-temporary impairment losses             
 recognized in earnings  --   (496) NM  (42)  (650) -93.5%
Net realized gains (losses)  3,345  4,217 -20.7%  8,159  6,059 34.7%
Other income   (915)  387 NM  (297)  1,298 NM
Total revenues  222,490  215,902 3.1%  443,865  412,878 7.5%
             
Expenses:            
Net losses and loss adjustment expenses  131,148  123,407 6.3%  262,490  241,392 8.7%
Commission expenses  28,391  29,503 -3.8%  54,946  58,953 -6.8%
Other operating expenses  40,678  39,819 2.2%  81,552  76,126 7.1%
Interest expense  2,052  2,049 0.1%  4,103  4,098 0.1%
Total expenses  202,269  194,778 3.8%  403,091  380,569 5.9%
             
Income before income taxes  20,221  21,124 -4.3%  40,774  32,309 26.2%
             
Income tax expense (benefit)  6,284  6,225 0.9%  12,927  9,506 36.0%
             
Net income (loss)  $ 13,937  $ 14,899 -6.5%  $ 27,847  $ 22,803 22.1%
             
             
Per Share Data            
             
Net income per common share:            
Basic  $ 0.99  $ 1.06 -7.3%  $ 1.97  $ 1.63 21.1%
Diluted  $ 0.97  $ 1.05 -7.9%  $ 1.93  $ 1.60 20.5%
             
Average common shares outstanding:            
Basic  14,131,422  14,006,361    14,108,747  13,992,901  
Diluted  14,428,117  14,208,759    14,434,232  14,245,947  
             
Underwriting Ratios            
Loss Ratio 63.7% 63.0%   64.3% 63.7%  
Expense Ratio 34.0% 35.1%   33.5% 35.3%  
Combined Ratio 97.7% 98.1%   97.8% 99.0%  
             
             
Balance Sheet Data June 30, March 31,   June 30, Dec. 31,  
  2013 2013   2013 2012  
Stockholders' equity  $ 873,952  $ 896,758 -2.5%  $ 873,952  $ 879,485 -0.6%
Book value per share  $ 61.83  $ 63.46 -2.6%  $ 61.83  $ 62.61 -1.2%
             
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
     
  June 30, December 31,
  2013 2012
  (unaudited)  
ASSETS    
Investments and cash:    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $1,988,507; 2012, $2,034,765)  $ 2,007,806  $ 2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $115,221; 2012, $85,004)  138,549  101,297
Short-term investments, at cost which approximates fair value  124,726  153,788
Cash  101,960  45,336
Total investments and cash  2,373,041  2,422,254
     
Premiums receivable  394,395  320,182
Prepaid reinsurance premiums  251,046  221,015
Reinsurance recoverable on paid losses  52,569  49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses  881,962  880,139
Deferred policy acquisition costs  65,109  61,005
Accrued investment income  13,691  12,587
Goodwill and other intangible assets  6,785  7,093
Deferred income tax, net  25,882  3,216
Receivable for investments sold  25  4,310
Other assets  32,005  26,587
Total assets  $ 4,096,510  $ 4,007,670
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Liabilities:    
Reserves for losses and loss adjustment expenses  $ 2,116,384  $ 2,097,048
Unearned premiums  729,568  642,407
Reinsurance balances payable  183,683  165,813
Senior notes  114,502  114,424
Current income tax payable, net  6,324  2,133
Payable for investments purchased  21,428  58,345
Accounts payable and other liabilities  50,669  48,015
Total liabilities  3,222,558  3,128,185
     
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 17,645,043 shares for 2013 and 17,558,046 shares for 2012  1,764  1,755
Additional paid-in capital  333,954  329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012)  (155,801)  (155,801)
Retained earnings  656,718  628,871
Accumulated other comprehensive income  37,317  75,208
Total stockholders' equity  873,952  879,485
     
Total liabilities and stockholders' equity  $ 4,096,510  $ 4,007,670
     
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
             
Gross Written Premiums: Three Months   Six Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 43,077  $ 49,896 -13.7%  $ 93,924  $ 111,761 -16.0%
Property Casualty  152,095  130,627 16.4%  371,059  286,546 29.5%
Professional Liability  33,393  33,541 -0.4%  65,210  64,095 1.7%
   228,565  214,064 6.8%  530,193  462,402 14.7%
Lloyd's Operations:            
Marine  45,893  47,037 -2.4%  99,537  108,812 -8.5%
Property Casualty  41,217  48,978 -15.8%  66,275  73,274 -9.6%
Professional Liability  16,453  12,908 27.5%  29,345  21,648 35.6%
   103,563  108,923 -4.9%  195,157  203,734 -4.2%
Total  $ 332,128  $ 322,987 2.8%  $ 725,350  $ 666,136 8.9%
             
Net Written Premiums: Three Months   Six Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 27,366  $ 31,786 -13.9%  $ 68,507  $ 74,651 -8.2%
Property Casualty  90,711  76,842 18.0%  240,662  191,374 25.8%
Professional Liability  25,303  25,437 -0.5%  50,530  49,290 2.5%
   143,380  134,065 6.9%  359,699  315,315 14.1%
Lloyd's Operations:            
Marine  34,060  33,492 1.7%  73,618  81,550 -9.7%
Property Casualty  12,181  15,705 -22.4%  19,493  25,060 -22.2%
Professional Liability  8,848  6,990 26.6%  15,111  11,372 32.9%
   55,089  56,187 -2.0%  108,222  117,982 -8.3%
Total  $ 198,469  $ 190,252 4.3%  $ 467,921  $ 433,297 8.0%
             
Net Earned Premiums: Three Months   Six Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 31,798  $ 35,535 -10.5%  $ 68,523  $ 70,810 -3.2%
Property Casualty  99,477  82,175 21.1%  192,195  156,543 22.8%
Professional Liability  25,272  23,867 5.9%  50,160  45,772 9.6%
   156,547  141,577 10.6%  310,878  273,125 13.8%
Lloyd's Operations:            
Marine  34,623  34,272 1.0%  68,668  67,536 1.7%
Property Casualty  8,562  15,272 -43.9%  16,441  29,774 -44.8%
Professional Liability  6,082  4,896 24.2%  12,155  8,701 39.7%
   49,267  54,440 -9.5%  97,264  106,011 -8.3%
Total  $ 205,814  $ 196,017 5.0%  $ 408,142  $ 379,136 7.7%
             
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2013
         
($ in thousands)
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total
Gross written premiums   $ 228,565  $ 103,563  $ --  $ 332,128
Net written premiums  143,380 55,089  -- 198,469
         
Net earned premiums 156,547 49,267  -- 205,814
Net losses and loss adjustment expenses (106,668) (24,480)  -- (131,148)
Commission expenses (20,573) (8,335) 517 (28,391)
Other operating expenses (29,829) (10,849)  -- (40,678)
Other income (expense) 689 (1,087) (517) (915)
         
Underwriting profit (loss) 166 4,516  -- 4,682
         
Net investment income 12,515 1,728 3 14,246
Net realized gains (losses) 3,099 242 4 3,345
Interest expense  --  --  (2,052)  (2,052)
         
Income (loss) before income taxes 15,780 6,486 (2,045) 20,221
         
Income tax expense (benefit) 4,785 2,206 (707) 6,284
Net income (loss)  $ 10,995  $ 4,280  $ (1,338)  $ 13,937
         
Losses and loss adjustment expenses ratio 68.1% 49.7%   63.7%
Commission expense ratio 13.1% 16.9%   13.8%
Other operating expense ratio (2) 18.7% 24.2%   20.2%
Combined ratio 99.9% 90.8%   97.7%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
Three Months Ended
June 30, 2012
         
($ in thousands)
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total 
Gross written premiums  $ 214,064  $ 108,923  $ --  $ 322,987
Net written premiums 134,065 56,187  -- 190,252
         
Net earned premiums 141,577 54,440  -- 196,017
Net losses and loss adjustment expenses (100,003) (23,404)  -- (123,407)
Commission expenses (21,117) (8,938)  552 (29,503)
Other operating expenses (28,914) (10,905)  -- (39,819)
Other income (expense) 879 60  (552) 387
         
Underwriting profit (loss) (7,578) 11,253  -- 3,675
         
Net investment income 13,286 2,454 37 15,777
Net realized gains (losses) 2,325 1,396  -- 3,721
Interest expense  --  --  (2,049) (2,049)
         
Income (loss) before income taxes 8,033 15,103 (2,012) 21,124
         
Income tax expense (benefit) 2,101 5,207 (1,083) 6,225
Net income (loss)  $ 5,932  $ 9,896  $ (929)  $ 14,899
         
Losses and loss adjustment expenses ratio 70.6% 43.0%   63.0%
Commission expense ratio 14.9% 16.4%   15.1%
Other operating expense ratio (2) 19.9% 19.9%   20.0%
Combined ratio 105.4% 79.3%   98.1%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended
June 30, 2013
         
($ in thousands)
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total
Gross written premiums   $ 530,193  $ 195,157  $ --  $ 725,350
Net written premiums  359,699 108,222  -- 467,921
         
Net earned premiums 310,878 97,264  -- 408,142
Net losses and loss adjustment expenses (213,653) (48,837)  -- (262,490)
Commission expenses (39,090) (16,956)  1,100 (54,946)
Other operating expenses (59,172) (22,380)  -- (81,552)
Other income (expense) 1,348 (545)  (1,100) (297)
         
Underwriting profit (loss) 311 8,546  -- 8,857
         
Net investment income 24,466 3,430 7 27,903
Net realized gains (losses) 7,891 222 4 8,117
Interest expense  --                   --  (4,103) (4,103)
         
Income (loss) before income taxes 32,668 12,198 (4,092) 40,774
         
Income tax expense (benefit) 10,199 4,242 (1,514) 12,927
Net income (loss)  $ 22,469  $ 7,956  $ (2,578)  $ 27,847
         
Losses and loss adjustment expenses ratio 68.7% 50.2%   64.3%
Commission expense ratio 12.6% 17.4%   13.5%
Other operating expense ratio (2) 18.6% 23.6%   20.0%
Combined ratio 99.9% 91.2%   97.8%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
Six Months Ended
June 30, 2012
         
($ in thousands)
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total 
Gross written premiums  $ 462,402  $ 203,734  $ --  $ 666,136
Net written premiums 315,315 117,982  -- 433,297
         
Net earned premiums 273,125 106,011  -- 379,136
Net losses and loss adjustment expenses (191,180) (50,212)  -- (241,392)
Commission expenses (40,418) (19,824)  1,289 (58,953)
Other operating expenses (54,259) (21,867)  -- (76,126)
Other income (expense) 2,521 66  (1,289) 1,298
         
Underwriting profit (loss) (10,211) 14,174  -- 3,963
         
Net investment income 22,221 4,737 77 27,035
Net realized gains (losses) 4,200 1,209  -- 5,409
Interest expense  --  --  (4,098) (4,098)
         
Income (loss) before income taxes 16,210 20,120 (4,021) 32,309
         
Income tax expense (benefit) 3,980 6,933 (1,407) 9,506
Net income (loss)  $ 12,230  $ 13,187  $ (2,614)  $ 22,803
         
Losses and loss adjustment expenses ratio 70.0% 47.4%   63.7%
Commission expense ratio 14.8% 18.7%   15.5%
Other operating expense ratio (2) 18.9% 20.5%   19.8%
Combined ratio 103.7% 86.6%   99.0%
         
(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
               
  Three Months Ended June 30, 2013
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 31,798  $ 17,295  $ 13,124  $ 1,379 54.4% 41.3% 95.7%
Property Casualty  99,477  70,757  27,999  721 71.1% 28.2% 99.3%
Professional Liability  25,272  18,616  8,590  (1,934) 73.7% 34.0% 107.7%
 Total Insurance Companies  156,547  106,668  49,713  166 68.1% 31.8% 99.9%
Lloyd's Operations:              
Marine  34,623  18,218  14,914  1,491 52.6% 43.1% 95.7%
Property Casualty  8,562  6,795  3,272  (1,505) 79.4% 38.2% 117.6%
Professional Liability  6,082  (533)  2,085  4,530 -8.8% 34.3% 25.5%
 Total Lloyd's  49,267  24,480  20,271  4,516 49.7% 41.1% 90.8%
 Total All  $ 205,814  $ 131,148  $ 69,984  $ 4,682 63.7% 34.0% 97.7%
               
  Three Months Ended June 30, 2012
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 35,535  $ 30,283  $ 13,516  $ (8,264) 85.2% 38.1% 123.3%
Property Casualty  82,175  49,724  26,628  5,823 60.5% 32.4% 92.9%
Professional Liability  23,867  19,996  9,008  (5,137) 83.8% 37.7% 121.5%
 Total Insurance Companies  141,577  100,003  49,152  (7,578) 70.6% 34.8% 105.4%
Lloyd's Operations:              
Marine  34,272  12,730  13,362  8,180 37.1% 39.0% 76.1%
Property Casualty  15,272  7,724  4,612  2,936 50.6% 30.2% 80.8%
Professional Liability  4,896  2,950  1,809  137 60.3% 36.9% 97.2%
 Total Lloyd's  54,440  23,404  19,783  11,253 43.0% 36.3% 79.3%
 Total All  $ 196,017  $ 123,407  $ 68,935  $ 3,675 63.0% 35.1% 98.1%
               
               
    Amounts   Loss Ratio  
Net Incurred Loss Activity   June 30, June 30,   June 30, June 30,  
For the Three Months Ended:   2013 2012   2013 2012  
Insurance Companies:              
 Loss and LAE payments    $ 100,920  $ 90,311   64.4% 63.8%  
 Change in reserves    5,748  9,692   3.7% 6.8%  
 Net incurred loss and LAE    106,668  100,003   68.1% 70.6%  
               
Lloyd's Operations:              
 Loss and LAE payments    27,428  30,641   55.7% 56.3%  
 Change in reserves    (2,948)  (7,237)   -6.0% -13.3%  
 Net incurred loss and LAE    24,480  23,404   49.7% 43.0%  
               
Total              
 Loss and LAE payments    128,348  120,952   62.3% 61.7%  
 Change in reserves    2,800  2,455   1.4% 1.3%  
 Net incurred loss and LAE    $ 131,148  $ 123,407   63.7% 63.0%  
               
               
Impact of Prior Years Reserves   Amounts   Loss Ratio Impact  
Favorable / (Unfavorable) Development   June 30, June 30,   June 30, June 30,  
For the Three Months Ended:   2013 2012   2013 2012  
Insurance Companies    $ (7,747)  $ (626)   -3.8% -0.3%  
Lloyd's Operations    5,834  5,998   2.8% 3.0%  
 Total    $ (1,913)  $ 5,372   -1.0% 2.7%  
               
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
               
  Six Months Ended June 30, 2013
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 68,523  $ 40,680  $ 25,952  $ 1,891 59.4% 37.8% 97.2%
Property Casualty  192,195  131,995  54,641  5,559 68.7% 28.4% 97.1%
Professional Liability  50,160  40,978  16,321  (7,139) 81.7% 32.5% 114.2%
 Total Insurance Companies  310,878  213,653  96,914  311 68.7% 31.2% 99.9%
Lloyd's Operations:              
Marine  68,668  37,055  28,026  3,587 54.0% 40.8% 94.8%
Property Casualty  16,441  7,546  7,681  1,214 45.9% 46.7% 92.6%
Professional Liability  12,155  4,236  4,174  3,745 34.9% 34.3% 69.2%
 Total Lloyd's  97,264  48,837  39,881  8,546 50.2% 41.0% 91.2%
 Total All  $ 408,142  $ 262,490  $ 136,795  $ 8,857 64.3% 33.5% 97.8%
               
  Six Months Ended June 30, 2012
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 70,810  $ 58,053  $ 26,171  $ (13,414) 82.0% 36.9% 118.9%
Property Casualty  156,543  97,872  49,482  9,189 62.5% 31.6% 94.1%
Professional Liability  45,772  35,255  16,503  (5,986) 77.0% 36.1% 113.1%
 Total Insurance Companies  273,125  191,180  92,156  (10,211) 70.0% 33.7% 103.7%
Lloyd's Operations:              
Marine  67,536  34,288  28,044  5,204 50.8% 41.5% 92.3%
Property Casualty  29,774  11,772  9,671  8,331 39.5% 32.5% 72.0%
Professional Liability  8,701  4,152  3,910  639 47.7% 45.0% 92.7%
 Total Lloyd's  106,011  50,212  41,625  14,174 47.4% 39.2% 86.6%
 Total All  $ 379,136  $ 241,392  $ 133,781  $ 3,963 63.7% 35.3% 99.0%
               
               
    Amounts   Loss Ratio  
Net Incurred Loss Activity   June 30, June 30,   June 30, June 30,  
For the Six Months Ended:   2013 2012   2013 2012  
Insurance Companies:              
 Loss and LAE payments    $ 180,824  $ 183,963   58.1% 67.4%  
 Change in reserves    32,829  7,217   10.6% 2.6%  
 Net incurred loss and LAE    213,653  191,180   68.7% 70.0%  
               
Lloyd's Operations:              
 Loss and LAE payments    57,890  55,285   59.5% 52.2%  
 Change in reserves    (9,053)  (5,073)   -9.3% -4.8%  
 Net incurred loss and LAE    48,837  50,212   50.2% 47.4%  
               
Total              
 Loss and LAE payments    238,714  239,248   58.5% 63.1%  
 Change in reserves    23,776  2,144   5.8% 0.6%  
 Net incurred loss and LAE    $ 262,490  $ 241,392   64.3% 63.7%  
               
               
Impact of Prior Years Reserves Amounts   Loss Ratio Impact  
Favorable / (Unfavorable) Development June 30, June 30,   June 30, June 30,  
For the Six Months Ended:   2013 2012   2013 2012  
Insurance Companies    $ (15,477)  $ 2,090   -3.8% 0.5%  
Lloyd's Operations    9,481  10,148   2.3% 2.7%  
 Total    $ (5,996)  $ 12,238   -1.5% 3.2%  
               
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
       
  Case IBNR  
Net Loss Reserves, June 30, 2013: Reserves Reserves Total
Insurance Companies:      
 Marine  $ 141,418  $ 107,916  $ 249,334
 Property Casualty  210,556  305,808  516,364
 Professional Liability  73,057  80,272  153,329
 Total Insurance Companies  425,031  493,996  919,027
Lloyd's Operations:      
 Marine  128,066  87,754  215,820
 Property Casualty  28,737  20,837  49,574
 Professional Liability  12,512  37,489  50,001
 Total Lloyd's Operations  169,315  146,080  315,395
       
 Total Net Loss Reserves  $ 594,346  $ 640,076  $ 1,234,422
       
       
  Case IBNR  
Net Loss Reserves, December 31, 2012 Reserves Reserves Total
Insurance Companies:      
 Marine  $ 137,934  $ 114,236  $ 252,170
 Property Casualty  204,988  290,455  495,443
 Professional Liability  54,092  84,493  138,585
 Total Insurance Companies  397,014  489,184  886,198
Lloyd's Operations:      
 Marine  125,884  95,122  221,006
 Property Casualty  27,903  28,463  56,366
 Professional Liability  14,694  38,645  53,339
 Total Lloyd's Operations  168,481  162,230  330,711
       
 Total Net Loss Reserves  $ 565,495  $ 651,414  $ 1,216,909
       
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2013

As of June 30, 2013, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 4.0 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.

As of June 30, 2013, the Company owned two asset-backed securities approximating $0.6 million with subprime mortgage exposures. The securities have an effective maturity of 4.3 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.1 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.1 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 as of June 30, 2013:
    Gross Gross Cost or
  Fair Unrealized Unrealized Amortized
June 30, 2013 Value Gains (Losses) Cost
  ($ in thousands)
Fixed maturities:        
U.S.Treasury bonds, agency bonds and foreign government bonds  $ 464,167  $ 3,538  $ (7,492)  $ 468,121
States, municipalities and political subdivisions  452,084  10,281  (13,114)  454,917
Mortgage- and asset-backed securities:        
 Agency mortgage-backed securities  320,150  7,782  (4,645)  317,013
 Residential mortgage obligations  37,335  1,196  (221)  36,360
 Asset-backed securities  75,311  747  (113)  74,677
 Commercial mortgage-backed securities  173,388  8,731  (514)  165,171
 Subtotal  606,184  18,456  (5,493)  593,221
Corporate bonds  485,371  16,285  (3,162)  472,248
         
Total fixed maturities  2,007,806  48,560  (29,261)  1,988,507
         
Equity securities - common stocks  138,549  25,238  (1,910)  115,221
         
Short-term investments  124,726  --   --   124,726
         
Cash  101,960  --   --   101,960
         
Total  $ 2,373,041  $ 73,798  $ (31,171)  $ 2,330,414
         
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2013
($ in thousands)

The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at June 30, 2013:
     Gross   Gross   Cost or 
   Fair   Unrealized   Unrealized   Amortized 
Agency mortgage-backed securities:  Value   Gains   (Losses)   Cost 
GNMA  $ 120,673  $ 2,892  $ (2,759)  $ 120,540
FNMA  154,398  4,115  (1,634)  151,917
FHLMC  45,079  775  (252)  44,556
Total  $ 320,150  $ 7,782  $ (4,645)  $ 317,013
         
         
     Gross   Gross   Cost or 
   Fair   Unrealized   Unrealized   Amortized 
Residential mortgage obligations:  Value   Gains   (Losses)   Cost 
Prime   $ 11,872  $ 423  $ (183)  $ 11,632
Alt-A  2,111  110  (38)  2,039
Subprime  630  27  --  603
Non-US RMBS  22,722  636  --  22,086
Total  $ 37,335  $ 1,196  $ (221)  $ 36,360
         
CONTACT: Ciro M. DeFalco         Senior Vice President and Chief Financial Officer         (914) 933-6043         cdefalco@navg.com         www.navg.com

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