Navigators Reports Third Quarter Earnings

STAMFORD, Conn., Nov. 7, 2013 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $21.3 million, or $1.48 per diluted share, for the three months ended September 30, 2013 compared to $12.9 million, or $0.90 per diluted share, for the comparable period in 2012. Operating earnings were $23.1 million, or $1.60 per diluted share, for the third quarter of 2013 compared to operating earnings of $9.8 million, or $0.69 per diluted share, for the comparable period in 2012.

For the nine months ended September 30, 2013, the Company reported net income of $49.1 million, or $3.42 per diluted share, compared to $35.7 million, or $2.51 per diluted share, for the comparable period in 2012. Operating earnings were $45.7 million, or $3.18 per diluted share, for the nine months ended September 30, 2013 compared to $29.1 million, or $2.04 per diluted share, for the comparable period in 2012.

Gross written premiums and net written premiums for the three months ended September 30, 2013 were $312.1 million and $196.6 million, respectively, an increase of 4.5% and 4.5% from the comparable period in 2012. Gross written premiums and net written premiums for the nine months ended September 30, 2013 were $1,037.4 million and $664.5 million, respectively, an increase of 7.5% and 6.9% from the comparable period in 2012.

The combined loss and expense ratio for the three and nine months ended September 30, 2013 were 89.8% and 95.1%, respectively, compared to 99.1% and 99.0% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to report a combined ratio of 89.8% for the quarter, which has resulted in record quarterly operating earnings per share of $1.60. Our quarterly results were led by strong underwriting performance in our global marine, global energy and U.S. excess and surplus lines units. We experienced solid premium growth, led by double digit growth in our Navigators Specialty division. We continue to focus on controlling operating expenses in the aggregate while investing in expanding our intellectual capital and technology initiatives."

Stockholders' equity was $899.9 million, or $63.61 per share, as of September 30, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and nine months ended September 30, 2013 was $14.1 million and $42.0 million, respectively, an increase of 3.7% and 3.4% from the comparable periods in 2012. Net investment income for the nine months ended September 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 nine months ended September 30, 2013, compared to 2.4% and 2.7% for each of the comparable periods in 2012. The effective tax rate on net investment income was 27.5% and 27.9% for the three and nine months ended September 30, 2013, respectively, compared to 26.6% and 26.8% 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 3.9 years as of September 30, 2013. As of September 30, 2013, net unrealized gains within our investment portfolio were $51.1 million, a decrease of $52.2 million compared to December 31, 2012.

There were $2.8 million of net realized losses including other-than-temporary impairment losses recognized in earnings for the three months ended September 30, 2013 compared to $4.8 million of net realized gains for the same period in 2012. For the nine months ended September 30, 2013, there were $5.3 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $10.2 million for the same period in 2012.

Consolidated net cash flow from operations for the three and nine months ended September 30, 2013 was $81.5 million and $130.0 million, respectively, compared to $54.1 million and $69.1 million for the comparable periods in 2012.

The Company will hold a conference call on Friday, November 8, 2013 starting at 8:30 a.m. ET to discuss the 2013 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://www.media-server.com/m/p/6q4eew4g

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. With its corporate headquarters in Connecticut and insurance operations based in New York and London, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe, as well as representatives in China and Brazil.

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 September 30,   Nine Months Ended September 30,  
Results of Operations 2013 2012 Change 2013 2012 Change
             
Gross written premiums  $ 312,076  $ 298,742 4.5%  $ 1,037,426  $ 964,878 7.5%
Net written premiums  196,556  188,046 4.5%  664,477  621,343 6.9%
             
Revenues:            
Net earned premiums  213,895  201,262 6.3%  622,037  580,398 7.2%
Net investment income  14,094  13,597 3.7%  41,997  40,632 3.4%
Total other-than-temporary impairment losses  (1,821)  --  NM  (1,863)  (693) NM
Portion of loss recognized in other comprehensive income (before tax)  --   --  NM  --   43 NM
Net other-than-temporary impairment losses recognized in earnings  (1,821)  --  NM  (1,863)  (650) NM
Net realized gains (losses)  (988)  4,761 NM  7,171  10,820 -33.7%
Other income  (210)  789 NM  (507)  2,087 NM
Total revenues  224,970  220,409 2.1%  668,835  633,287 5.6%
             
Expenses:            
Net losses and loss adjustment expenses  125,086  128,850 -2.9%  387,576  370,242 4.7%
Commission expenses  27,685  31,258 -11.4%  82,631  90,211 -8.4%
Other operating expenses  39,056  40,112 -2.6%  120,608  116,238 3.8%
Interest expense  2,053  2,049 0.2%  6,156  6,147 0.1%
Total expenses  193,880  202,269 -4.1%  596,971  582,838 2.4%
             
Income before income taxes  31,090  18,140 71.4%  71,864  50,449 42.4%
             
Income tax expense (benefit)  9,804  5,225 87.6%  22,731  14,731 54.3%
             
Net income (loss)  $ 21,286  $ 12,915 64.8%  $ 49,133  $ 35,718 37.6%
             
Per Share Data            
             
Net income per common share:            
Basic  $ 1.50  $ 0.92 63.4%  $ 3.48  $ 2.55 36.4%
Diluted  $ 1.48  $ 0.90 63.3%  $ 3.42  $ 2.51 36.4%
             
Average common shares outstanding:            
Basic  14,144,478  14,026,855    14,120,788  14,004,302  
Diluted  14,408,413  14,272,477    14,379,943  14,255,301  
             
Underwriting Ratios            
Loss Ratio 58.5% 64.0%   62.3% 63.8%  
Expense Ratio 31.3% 35.1%   32.8% 35.2%  
Combined Ratio 89.8% 99.1%   95.1% 99.0%  
             
             
Balance Sheet Data Sept. 30, 2013 June 30, 2013   Sept. 30, 2013 Dec. 31, 2012  
Stockholders' equity  $ 899,882  $ 873,952 3.0%  $ 899,882  $ 879,485 2.3%
Book value per share  $ 63.61  $ 61.83 2.9%  $ 63.61  $ 62.61 1.6%
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
     
  September 30, 2013 December 31, 2012
  (unaudited)  
ASSETS
Investments and cash:    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $1,958,434; 2012, $2,034,765)  $ 1,981,731  $ 2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $131,046; 2012, $85,004)  158,890  101,297
Short-term investments, at cost which approximates fair value  152,987  153,788
Cash  130,513  45,336
Total investments and cash  2,424,121  2,422,254
     
Premiums receivable  355,578  320,182
Prepaid reinsurance premiums  253,435  221,015
Reinsurance recoverable on paid losses  44,955  49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses  796,289  880,139
Deferred policy acquisition costs  63,171  61,005
Accrued investment income  13,746  12,587
Goodwill and other intangible assets  7,065  7,093
Deferred income tax, net  22,639  3,216
Receivable for investments sold  59,453  4,310
Other assets  34,124  26,587
Total assets  $ 4,074,576  $ 4,007,670
     
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:    
Reserves for losses and loss adjustment expenses  $ 2,050,720  $ 2,097,048
Unearned premiums  716,236  642,407
Reinsurance balances payable  180,563  165,813
Senior notes  114,542  114,424
Current income tax payable, net  5,449  2,133
Payable for investments purchased  48,855  58,345
Accounts payable and other liabilities  58,329  48,015
Total liabilities  3,174,694  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 17,658,292 shares for 2013 and 17,558,046 shares for 2012  1,765  1,755
Additional paid-in capital  334,421  329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012)  (155,801)  (155,801)
Retained earnings  678,004  628,871
Accumulated other comprehensive income  41,493  75,208
Total stockholders' equity  899,882  879,485
     
Total liabilities and stockholders' equity  $ 4,074,576  $ 4,007,670
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
             
Gross Written Premiums: Three Months   Nine Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 38,912  $ 44,879 -13.3%  $ 132,836  $ 156,640 -15.2%
Property Casualty  156,228  139,948 11.6%  527,287  426,494 23.6%
Professional Liability  32,469  33,534 -3.2%  97,679  97,629 0.1%
   227,609  218,361 4.2%  757,802  680,763 11.3%
Lloyd's Operations:            
Marine  36,009  37,716 -4.5%  135,546  146,528 -7.5%
Property Casualty  35,869  32,789 9.4%  102,144  106,063 -3.7%
Professional Liability  12,589  9,876 27.5%  41,934  31,524 33.0%
   84,467  80,381 5.1%  279,624  284,115 -1.6%
Total  $ 312,076  $ 298,742 4.5%  $1,037,426  $ 964,878 7.5%
             
Net Written Premiums: Three Months   Nine Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 26,437  $ 32,615 -18.9%  $ 94,944  $ 107,266 -11.5%
Property Casualty  97,553  83,449 16.9%  338,215  274,823 23.1%
Professional Liability  25,300  26,084 -3.0%  75,830  75,374 0.6%
   149,290  142,148 5.0%  508,989  457,463 11.3%
Lloyd's Operations:            
Marine  26,795  27,939 -4.1%  100,413  109,489 -8.3%
Property Casualty  13,761  11,633 18.3%  33,254  36,693 -9.4%
Professional Liability  6,710  6,326 6.1%  21,821  17,698 23.3%
   47,266  45,898 3.0%  155,488  163,880 -5.1%
Total  $ 196,556  $ 188,046 4.5%  $ 664,477  $ 621,343 6.9%
             
Net Earned Premiums: Three Months   Nine Months  
Insurance Companies: 2013 2012 Change 2013 2012 Change
Marine  $ 31,490  $ 40,592 -22.4%  $ 100,013  $ 111,402 -10.2%
Property Casualty  105,759  83,993 25.9%  297,954  240,536 23.9%
Professional Liability  25,713  24,505 4.9%  75,873  70,277 8.0%
   162,962  149,090 9.3%  473,840  422,215 12.2%
Lloyd's Operations:            
Marine  34,264  34,002 0.8%  102,932  101,538 1.4%
Property Casualty  10,472  11,870 -11.8%  26,913  41,644 -35.4%
Professional Liability  6,197  6,300 -1.6%  18,352  15,001 22.3%
   50,933  52,172 -2.4%  148,197  158,183 -6.3%
Total  $ 213,895  $ 201,262 6.3%  $ 622,037  $ 580,398 7.2%
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2013
 
($ in thousands)
         
  Insurance Companies Lloyd's Operations Corporate (1) Total
Gross written premiums   $ 227,609  $ 84,467  $ --  $ 312,076
Net written premiums   149,290  47,266  --  196,556
         
Net earned premiums  162,962  50,933  --  213,895
Net losses and loss adjustment expenses  (95,315)  (29,771)  --  (125,086)
Commission expenses  (20,039)  (8,289)  643  (27,685)
Other operating expenses  (28,510)  (10,546)  --  (39,056)
Other income (expense)  955  (522)  (643)  (210)
         
Underwriting profit (loss)  20,053  1,805  --  21,858
         
Net investment income  12,285  1,807  2  14,094
Net realized gains (losses)  (1,890)  (919)  --  (2,809)
Interest expense  --   --   (2,053)  (2,053)
         
Income (loss) before income taxes  30,448  2,693  (2,051)  31,090
         
Income tax expense (benefit)  9,355  878  (429)  9,804
Net income (loss)  $ 21,093  $ 1,815  $ (1,622)  $ 21,286
         
Losses and loss adjustment expenses ratio 58.5% 58.5%   58.5%
Commission expense ratio 12.3% 16.3%   12.9%
Other operating expense ratio (2) 16.9% 21.7%   18.4%
Combined ratio 87.7% 96.5%   89.8%
         
(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 
Three Months Ended
September 30, 2012
 
($ in thousands)
         
  Insurance Companies Lloyd's Operations Corporate (1) Total 
Gross written premiums  $ 218,361  $ 80,381  $ --  $ 298,742
Net written premiums 142,148 45,898  -- 188,046
         
Net earned premiums 149,090 52,172  -- 201,262
Net losses and loss adjustment expenses (113,303) (15,547)  -- (128,850)
Commission expenses (20,827) (10,911)  480 (31,258)
Other operating expenses (29,387) (10,725)  -- (40,112)
Other income (expense) 1,229 40  (480) 789
         
Underwriting profit (loss) (13,198) 15,029  -- 1,831
         
Net investment income 12,004 1,552 41 13,597
Net realized gains (losses) 2,609 2,152  -- 4,761
Interest expense  --  --  (2,049) (2,049)
         
Income (loss) before income taxes 1,415 18,733 (2,008) 18,140
         
Income tax expense (benefit) (377) 6,525 (923) 5,225
Net income (loss)  $ 1,792  $ 12,208  $ (1,085)  $ 12,915
         
Losses and loss adjustment expenses ratio 76.0% 29.8%   64.0%
Commission expense ratio 14.0% 20.9%   15.5%
Other operating expense ratio (2) 18.9% 20.5%   19.6%
Combined ratio 108.9% 71.2%   99.1%
         
(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
Nine Months Ended
September 30, 2013
 
($ in thousands)
         
  Insurance Companies Lloyd's Operations Corporate (1) Total
Gross written premiums   $ 757,802  $ 279,624  $ --  $ 1,037,426
Net written premiums   508,989 155,488  -- 664,477
         
Net earned premiums 473,840 148,197  -- 622,037
Net losses and loss adjustment expenses (308,968) (78,608)  -- (387,576)
Commission expenses (59,129) (25,245)  1,743 (82,631)
Other operating expenses (87,682) (32,926)  -- (120,608)
Other income (expense) 2,303 (1,067)  (1,743) (507)
         
Underwriting profit (loss) 20,364 10,351  -- 30,715
         
Net investment income 36,751 5,237 9 41,997
Net realized gains (losses) 6,001 (697) 4 5,308
Interest expense  --  --  (6,156) (6,156)
         
Income (loss) before income taxes 63,116 14,891 (6,143) 71,864
         
Income tax expense (benefit) 19,554 5,120 (1,943) 22,731
Net income (loss)  $ 43,562  $ 9,771  $ (4,200)  $ 49,133
         
Losses and loss adjustment expenses ratio 65.2% 53.0%   62.3%
Commission expense ratio 12.5% 17.0%   13.3%
Other operating expense ratio (2) 18.0% 23.0%   19.5%
Combined ratio 95.7% 93.0%   95.1%
         
(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 
Nine Months Ended
September 30, 2012
 
($ in thousands)
         
  Insurance Companies Lloyd's Operations Corporate (1) Total 
Gross written premiums  $ 680,763  $ 284,115  $ --  $ 964,878
Net written premiums 457,463 163,880  -- 621,343
         
Net earned premiums 422,215 158,183  -- 580,398
Net losses and loss adjustment expenses (304,483) (65,759)  -- (370,242)
Commission expenses (61,245) (30,735)  1,769 (90,211)
Other operating expenses (83,646) (32,592)  -- (116,238)
Other income (expense) 3,750 106  (1,769) 2,087
         
Underwriting profit (loss) (23,409) 29,203  -- 5,794
         
Net investment income 34,225 6,289 118 40,632
Net realized gains (losses) 6,809 3,361  -- 10,170
Interest expense  --  --  (6,147) (6,147)
         
Income (loss) before income taxes 17,625 38,853 (6,029) 50,449
         
Income tax expense (benefit) 3,603 13,458 (2,330) 14,731
Net income (loss)  $ 14,022  $ 25,395  $ (3,699)  $ 35,718
         
Losses and loss adjustment expenses ratio 72.1% 41.6%   63.8%
Commission expense ratio 14.5% 19.4%   15.5%
Other operating expense ratio (2) 18.9% 20.5%   19.7%
Combined ratio 105.5% 81.5%   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 September 30, 2013
Insurance Companies: Net Earned Premiums Losses and LAE Incurred Underwriting Expenses Underwriting Profit (Loss) Loss Ratio Expense Ratio Combined Ratio
Marine  $ 31,490  $ 14,745  $ 10,997  $ 5,748 46.8% 34.9% 81.7%
Property Casualty  105,759  64,156  28,203  13,400 60.7% 26.6% 87.3%
Professional Liability  25,713  16,414  8,394  905 63.8% 32.7% 96.5%
Total Insurance Companies  162,962  95,315  47,594  20,053 58.5% 29.2% 87.7%
Lloyd's Operations:              
Marine  34,264  22,129  13,240  (1,105) 64.6% 38.6% 103.2%
Property Casualty  10,472  3,661  4,428  2,383 35.0% 42.2% 77.2%
Professional Liability  6,197  3,981  1,689  527 64.3% 27.2% 91.5%
Total Lloyd's  50,933  29,771  19,357  1,805 58.5% 38.0% 96.5%
Total All  $ 213,895  $ 125,086  $ 66,951  $ 21,858 58.5% 31.3% 89.8%
               
  Three Months Ended September 30, 2012
Insurance Companies: Net Earned Premiums Losses and LAE Incurred Underwriting Expenses Underwriting Profit (Loss) Loss Ratio Expense Ratio Combined Ratio
Marine  $ 40,592  $ 29,187  $ 14,200  $ (2,795) 71.9% 35.0% 106.9%
Property Casualty  83,993  67,474  25,753  (9,234) 80.3% 30.7% 111.0%
Professional Liability  24,505  16,642  9,032  (1,169) 67.9% 36.9% 104.8%
Total Insurance Companies  149,090  113,303  48,985  (13,198) 76.0% 32.9% 108.9%
Lloyd's Operations:              
Marine  34,002  10,936  14,543  8,523 32.2% 42.7% 74.9%
Property Casualty  11,870  5,441  4,750  1,679 45.8% 40.1% 85.9%
Professional Liability  6,300  (830)  2,303  4,827 -13.2% 36.6% 23.4%
Total Lloyd's Operations  52,172  15,547  21,596  15,029 29.8% 41.4% 71.2%
Total All  $ 201,262  $ 128,850  $ 70,581  $ 1,831 64.0% 35.1% 99.1%
               
    Amounts   Loss Ratio  
Net Incurred Loss Activity For the Three Months Ended:   Sept. 30, 2013 Sept. 30, 2012   Sept. 30, 2013 Sept. 30, 2012  
Insurance Companies:              
Loss and LAE payments    $ 83,008  $ 98,857   50.9% 66.3%  
Change in reserves    12,307  14,446   7.6% 9.7%  
Net incurred loss and LAE    95,315  113,303   58.5% 76.0%  
               
Lloyd's Operations:              
Loss and LAE payments    27,038  24,019   53.1% 46.0%  
Change in reserves    2,733  (8,472)   5.4% -16.2%  
Net incurred loss and LAE    29,771  15,547   58.5% 29.8%  
               
Total              
Loss and LAE payments    110,046  122,876   51.5% 61.0%  
Change in reserves    15,040  5,974   7.0% 3.0%  
Net incurred loss and LAE    $ 125,086  $ 128,850   58.5% 64.0%  
               
Impact of Prior Years Reserves   Amounts   Loss Ratio Impact  
Favorable / (Unfavorable) Development For the Three Months Ended:   Sept. 30, 2013 Sept. 30, 2012   Sept. 30, 2013 Sept. 30, 2012  
Insurance Companies    $ 3,094  $ (3,607)   1.4% -1.8%  
Lloyd's Operations    4,591  9,084   2.1% 4.5%  
Total    $ 7,685  $ 5,477   3.5% 2.7%  
               
               
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
 
  Nine Months Ended September 30, 2013
Insurance Companies: Net Earned Premiums Losses and LAE Incurred Underwriting Expenses Underwriting Profit (Loss) Loss Ratio Expense Ratio Combined Ratio
Marine  $ 100,013  $ 55,425  $ 36,949  $ 7,639 55.4% 37.0% 92.4%
Property Casualty  297,954  196,151  82,844  18,959 65.8% 27.8% 93.6%
Professional Liability  75,873  57,392  24,715  (6,234) 75.6% 32.6% 108.2%
Total Insurance Companies  473,840  308,968  144,508  20,364 65.2% 30.5% 95.7%
Lloyd's Operations:              
Marine  102,932  59,184  41,266  2,482 57.5% 40.1% 97.6%
Property Casualty  26,913  11,207  12,109  3,597 41.6% 45.0% 86.6%
Professional Liability  18,352  8,217  5,863  4,272 44.8% 31.9% 76.7%
Total Lloyd's  148,197  78,608  59,238  10,351 53.0% 40.0% 93.0%
Total All  $ 622,037  $ 387,576  $ 203,746  $ 30,715 62.3% 32.8% 95.1%
               
  Nine Months Ended September 30, 2012
Insurance Companies: Net Earned Premiums Losses and LAE Incurred Underwriting Expenses Underwriting Profit (Loss) Loss Ratio Expense Ratio Combined Ratio
Marine  $ 111,402  $ 87,240  $ 40,371  $ (16,209) 78.3% 36.3% 114.6%
Property Casualty  240,536  165,346  75,235  (45) 68.7% 31.3% 100.0%
Professional Liability  70,277  51,897  25,535  (7,155) 73.8% 36.4% 110.2%
Total Insurance Companies  422,215  304,483  141,141  (23,409) 72.1% 33.4% 105.5%
Lloyd's Operations:              
Marine  101,538  45,224  42,587  13,727 44.5% 42.0% 86.5%
Property Casualty  41,644  17,213  14,421  10,010 41.3% 34.7% 76.0%
Professional Liability  15,001  3,322  6,213  5,466 22.1% 41.5% 63.6%
Total Lloyd's Operations  158,183  65,759  63,221  29,203 41.6% 39.9% 81.5%
Total All  $ 580,398  $ 370,242  $ 204,362  $ 5,794 63.8% 35.2% 99.0%
               
    Amounts   Loss Ratio  
Net Incurred Loss Activity For the Nine Months Ended:   Sept. 30, 2013 Sept. 30, 2012   Sept. 30, 2013 Sept. 30, 2012  
Insurance Companies:              
Loss and LAE payments    $ 263,832  $ 282,820   55.7% 67.0%  
Change in reserves    45,136  21,663   9.5% 5.1%  
Net incurred loss and LAE    308,968  304,483   65.2% 72.1%  
               
Lloyd's Operations:              
Loss and LAE payments    84,928  79,304   57.3% 50.2%  
Change in reserves    (6,320)  (13,545)   -4.3% -8.6%  
Net incurred loss and LAE    78,608  65,759   53.0% 41.6%  
               
Total              
Loss and LAE payments    348,760  362,124   56.1% 62.4%  
Change in reserves    38,816  8,118   6.2% 1.4%  
Net incurred loss and LAE    $ 387,576  $ 370,242   62.3% 63.8%  
               
Impact of Prior Years Reserves   Amounts   Loss Ratio Impact  
Favorable / (Unfavorable) Development For the Nine Months Ended:   Sept. 30, 2013 Sept. 30, 2012   Sept. 30, 2013 Sept. 30, 2012  
Insurance Companies    $ (12,383)  $ (1,517)   -2.0% -0.3%  
Lloyd's Operations    14,072  19,232   2.3% 3.4%  
Total    $ 1,689  $ 17,715   0.3% 3.1%  
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
     
Net Loss Reserves, September 30, 2013: Case Reserves IBNR Reserves Total
Insurance Companies:      
Marine  $ 136,292  $ 105,123  $ 241,415
Property Casualty  198,658  335,065  533,723
Professional Liability  74,600  81,596  156,196
Total Insurance Companies  409,550  521,784  931,334
Lloyd's Operations:      
Marine  131,982  89,023  221,005
Property Casualty  25,979  21,816  47,795
Professional Liability  12,620  41,677  54,297
Total Lloyd's Operations  170,581  152,516  323,097
       
Total Net Loss Reserves  $ 580,131  $ 674,300  $ 1,254,431
       
Net Loss Reserves, December 31, 2012 Case Reserves IBNR 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
September 30, 2013
 
As of September 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 3.9 years. The Company does not own any collateralized debt obligations (CDO's) or asset backed commercial paper.
 
As of September 30, 2013, the Company owned two asset-backed securities approximating $0.6 million with subprime mortgage exposures. The securities have an effective maturity of 4.0 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.0 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.0 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 September 30, 2013:
 
September 30, 2013 Fair Value Gross Unrealized Gains Gross Unrealized (Losses) Cost or Amortized Cost
  ($ in thousands)
Fixed maturities:        
U.S.Treasury bonds, agency bonds and foreign government bonds  $ 445,969  $ 3,683  $ (5,694)  $ 447,980
States, municipalities and political subdivisions  445,281  9,752  (12,240)  447,769
Mortgage- and asset-backed securities:        
Agency mortgage-backed securities  300,347  7,966  (3,925)  296,306
Residential mortgage obligations  35,277  1,107  (224)  34,394
Asset-backed securities  88,714  795  (190)  88,109
Commercial mortgage-backed securities  173,069  8,386  (365)  165,048
Subtotal  597,407  18,254  (4,704)  583,857
Corporate bonds  493,074  17,104  (2,858)  478,828
         
Total fixed maturities  1,981,731  48,793  (25,496)  1,958,434
         
Equity securities - common stocks  158,890  29,548  (1,704)  131,046
         
Short-term investments  152,987  --   --   152,987
         
Cash  130,513  --   --   130,513
         
Total  $ 2,424,121  $ 78,341  $ (27,200)  $ 2,372,980
         
         
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 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 September 30, 2013:
         
Agency mortgage-backed securities:   Fair Value   Gross Unrealized Gains   Gross Unrealized (Losses)   Cost or Amortized Cost 
GNMA  $ 128,321  $ 3,086  $ (2,653)  $ 127,888
FNMA  139,022  3,979  (1,207)  136,250
FHLMC  33,004  901  (65)  32,168
Total  $ 300,347  $ 7,966  $ (3,925)  $ 296,306
         
Residential mortgage obligations:   Fair Value   Gross Unrealized Gains   Gross Unrealized (Losses)   Cost or Amortized Cost 
Prime  $ 11,174  $ 371  $ (181)  $ 10,984
Alt-A  1,968  70  (43)  1,941
Subprime  583  18  --  565
Non-US RMBS  21,552  648  --  20,904
Total  $ 35,277  $ 1,107  $ (224)  $ 34,394
CONTACT: Ciro M. DeFalco         Senior Vice President and Chief Financial Officer         (203) 905-6343         cdefalco@navg.com         www.navg.com

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