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8-K - FORM 8-K - NAVIGATORS GROUP INCc12874e8vk.htm
Exhibit 99.1
(NAVIGATORS GROUP, INC LOGO)
The Navigators Group, Inc.
CORPORATE NEWS
Navigators Reports Fourth Quarter Earnings
New York — February 17, 2011 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $17.3 million, or $1.07 per diluted share, for the three months ended December 31, 2010 compared to net income of $6.1 million, or $0.35 per diluted share, for the comparable period in 2009. Operating earnings (1) were $4.7 million, or $0.29 per diluted share for the fourth quarter of 2010 compared to $5.3 million, or $0.30 per diluted share, for the comparable period in 2009. As previously announced on January 21, 2011, during the fourth quarter of 2010 Navigators recognized $9.2 million of after-tax reinsurance reinstatement costs related to the April 2010 Deepwater Horizon loss event in the Gulf of Mexico, which reduced net written and net earned premiums by $14.2 million.
For the twelve months ended December 31, 2010, the Company reported net income of $69.6 million, or $4.24 per diluted share, compared to $63.2 million, or $3.65 per diluted share, for the comparable period in 2009. Operating earnings were $43.4 million, or $2.65 per diluted share for the twelve months ended December 31, 2010 compared to $65.2 million, or $3.76 per diluted share, for the comparable period of 2009. For the twelve months ended December 31, 2010, Navigators recognized $12.4 million of after-tax reinstatement costs related to the Deepwater Horizon loss event, which reduced net written and net earned premiums by $19.0 million.
Gross written premiums and net written premiums for the three months ended December 31, 2010 were $229.9 million and $141.8 million, respectively, a decrease of 8.7% and 12.2% from the comparable 2009 periods. Gross written premiums and net written premiums for the twelve months ended December 31, 2010 were $987.2 million and $653.9 million, respectively, a decrease of 5.5% and 6.7% from the comparable 2009 periods.
The combined loss and expense ratios for the three and twelve months ended December 31, 2010 were 106.3% and 100.7%, respectively, compared to 106.5% and 97.2% for the comparable 2009 periods. The combined loss and expense ratio for the three months ended December 31, 2010 was favorably impacted by 1.9 loss ratio points due to favorable development in prior period loss reserves. The combined loss and expense ratio for the twelve months ended December 31, 2010 was favorably impacted by 2.1 loss ratio points due to favorable development in prior period loss reserves.
Navigators’ Chief Executive Officer Stan Galanski commented: “Although we see pockets of opportunity, such as the energy sector, most of the insurance markets in which we operate continued to be challenging during the fourth quarter due to intense industry competition and the continued fragile nature of the economic recovery. Despite those factors, along with historically low investment yields and the Deepwater Horizon industry loss, Navigators maintained its strong capital position and grew book value per share 11% during 2010. The Navigators franchise has never been stronger as we improved our distribution capabilities, added new products and walked away from underperforming business. We enter 2011 cautious, but poised to capitalize as opportunities arise to extend Navigators superior record of book value per share growth.”
         
 
  6 International Drive   Rye Brook, NY 10573
  TEL (914) 933-6000   FAX(914) 934-2355

 


 

News Release
February 17, 2011
Page 2
During the three and twelve months ended December 31, 2010, the Company repurchased 35,566 and 1,264,284 shares of its common stock for an aggregate purchase price of $1.7 million and $52.0 million, respectively, pursuant to its share repurchase program. The Company did not repurchase any additional shares of its common stock between January 1, 2011 and February 16, 2011 pursuant to its share repurchase program. Approximately $41.3 million remains available under the Company’s current share repurchase program that expires on December 31, 2011.
Net investment income for the three and twelve months ended December 31, 2010 was $18.0 million and $71.7 million, respectively, which were decreases of 5.3% and 5.1% 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 twelve months ended December 31, 2010, respectively, compared to 3.7% and 3.8% for the 2009 comparable periods. The effective tax rate on net investment income was 28.1% and 27.0% for the three and twelve months ended December 31, 2010, respectively, compared to 24.7% and 25.0% 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 4.4 years at December 31, 2010. At December 31, 2010, net unrealized gains within our investment portfolio were $49.1 million, a decrease of $4.8 million compared to December 31, 2009. There were $19.5 million and $40.2 million of net realized gains and other-than temporary impairment losses recognized in earnings for the three and twelve months ended December 31, 2010.
Consolidated cash flow from operations for the three and twelve months ended December 31, 2010 was $4.1 million and $118.2 million, respectively, compared to $(1.3) million and $103.9 million for the comparable 2009 periods.
Stockholders’ equity was $829.4 million, or $52.68 per share, at December 31, 2010 compared to $801.5 million, or $47.58 per share, at December 31, 2009. The statutory surplus of Navigators Insurance Company was $686.9 million at December 31, 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, February 18, 2011 starting at 8:30 a.m. ET to discuss the 2010 fourth 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=91365
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.

 


 

News Release
February 17, 2011
Page 3
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.
     
Contact:
  Francis W. McDonnell
 
  Senior Vice President and Chief Financial Officer
 
  (914) 933-6270
 
  fmcdonnell@navg.com
 
  www.navg.com

 


 

News Release
Page 4
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except per share data)
(unaudited)
                                                 
    Three Months Ended             Twelve Months Ended        
    December 31,             December 31,        
Results of Operations   2010     2009     Change     2010     2009     Change  
 
                                               
Gross written premiums
  $ 229,850     $ 251,739       -9 %   $ 987,201     $ 1,044,918       -6 %
Net written premiums
    141,809       161,595       -12 %     653,938       701,255       -7 %
 
                                               
Revenues:
                                               
Net earned premiums
    166,158       177,278       -6 %     659,931       683,363       -3 %
Investment income
    17,998       19,003       -5 %     71,662       75,512       -5 %
Total other-than-temporary impairment losses
    (448 )     (496 )     -10 %     (2,222 )     (29,265 )     -92 %
Portion of loss recognized in other comprehensive income (before tax)
    273       335       -19 %     1,142       17,388       -93 %
 
                                       
Net other-than-temporary impairment losses recognized in earnings
    (175 )     (161 )     9 %     (1,080 )     (11,877 )     -91 %
Net realized gains
    19,665       1,476       1232 %     41,319       9,217       348 %
Other income (expense)
    2,205       (21 )   NM       5,143       6,665       -23 %
 
                                       
Total revenues
    205,851       197,575       4 %     776,975       762,880       2 %
 
                                       
 
                                               
Expenses:
                                               
Net losses and loss adjustment expenses
    110,022       127,432       -14 %     421,155       435,998       -3 %
Commission expenses
    32,935       27,330       21 %     109,113       98,908       10 %
Other operating expenses
    35,919       34,099       5 %     139,700       132,671       5 %
Interest expense
    2,045       2,044       0 %     8,178       8,455       -3 %
 
                                       
Total expenses
    180,921       190,905       -5 %     678,146       676,032       0 %
 
                                       
 
                                               
Income before income taxes
    24,930       6,670       274 %     98,829       86,848       14 %
 
                                               
Income tax expense
    7,592       594       1178 %     29,251       23,690       23 %
 
                                       
 
                                               
Net income
  $ 17,338     $ 6,076       185 %   $ 69,578     $ 63,158       10 %
 
                                       
 
                                               
Per Share Data
                                               
 
                                               
Net income per common share:
                                               
Basic
  $ 1.10     $ 0.36       206 %   $ 4.33     $ 3.73       16 %
Diluted
  $ 1.07     $ 0.35       207 %   $ 4.24     $ 3.65       16 %
 
                                               
Average shares outstanding:
                                               
Basic
    15,751       16,955               16,065       16,935          
Diluted
    16,159       17,355               16,415       17,322          
 
                                               
Underwriting Ratios
                                               
Loss Ratio
    66.2 %     71.9 %             63.8 %     63.8 %        
Expense Ratio
    40.1 %     34.6 %             36.9 %     33.4 %        
 
                                       
Combined Ratio
    106.3 %     106.5 %             100.7 %     97.2 %        
                                                 
    Dec. 31,     Sept. 30,             Dec. 31,     Dec. 31,          
Balance Sheet Data   2010     2010             2010     2009          
Stockholders’ equity
  $ 829,354     $ 854,013       -3 %   $ 829,354     $ 801,519       3 %
Book value per share
  $ 52.68     $ 54.17       -3 %   $ 52.68     $ 47.58       11 %

 


 

News Release
Page 5
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
                 
    December 31,     December 31,  
    2010     2009  
    (unaudited)        
ASSETS
Investments and cash:
               
Fixed maturities, available-for-sale, at fair value (amortized cost: 2010, $1,855,598; 2009, $1,777,983)
  $ 1,882,245     $ 1,816,669  
Equity securities, available-for-sale, at fair value (cost: 2010, $64,793; 2009, $47,376)
    87,258       62,610  
Short-term investments, at cost which approximates fair value
    153,057       176,799  
Cash
    31,768       509  
 
           
Total investments and cash
    2,154,328       2,056,587  
 
           
 
               
Premiums receivable
    188,368       193,460  
Prepaid reinsurance premiums
    156,869       162,344  
Reinsurance recoverable on paid losses
    56,658       76,505  
Reinsurance recoverable on unpaid losses and loss adjustment expenses
    843,296       807,352  
Deferred policy acquisition costs
    55,201       56,575  
Accrued investment income
    15,590       17,438  
Goodwill and other intangible assets
    6,925       7,057  
Current income tax receivable, net
    1,054       4,854  
Deferred income tax, net
    15,141       31,222  
Other assets
    38,029       40,600  
 
           
 
               
Total assets
  $ 3,531,459     $ 3,453,994  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
               
Reserves for losses and loss adjustment expenses
  $ 1,985,838     $ 1,920,286  
Unearned premiums
    463,515       475,171  
Reinsurance balances payable
    105,904       98,555  
Senior notes
    114,138       114,010  
Accounts payable and other liabilities
    32,710       44,453  
 
           
Total liabilities
    2,702,105       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 17,274,440 shares for 2010 and 17,212,814 shares for 2009
    1,728       1,721  
Additional paid-in capital
    312,588       304,505  
Retained earnings
    539,512       469,934  
Treasury stock, at cost (1,532,273 shares for 2010 and 366,330 shares for 2009)
    (64,935 )     (18,296 )
Accumulated other comprehensive income
    40,461       43,655  
 
           
Total stockholders’ equity
    829,354       801,519  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 3,531,459     $ 3,453,994  
 
           

 


 

News Release
Page 6
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
                                                 
    Three Months             Twelve Months        
Gross Written Premiums:   2010     2009     Change     2010     2009     Change  
Insurance Companies:
                                               
Marine
  $ 50,925     $ 53,986       -6 %   $ 223,061     $ 241,438       -8 %
Property Casualty
    70,157       80,158       -12 %     312,651       352,285       -11 %
Professional Liability
    32,601       35,264       -8 %     129,793       137,053       -5 %
 
                                       
 
    153,683       169,408       -9 %     665,505       730,776       -9 %
Lloyd’s Operations:
                                               
Marine
    48,965       51,703       -5 %     182,723       191,959       -5 %
Property Casualty
    18,031       19,093       -6 %     94,799       78,151       21 %
Professional Liability
    9,171       11,535       -20 %     44,174       44,032       0 %
 
                                       
 
    76,167       82,331       -7 %     321,696       314,142       2 %
 
                                       
Total
  $ 229,850     $ 251,739       -9 %   $ 987,201     $ 1,044,918       -6 %
 
                                       
                                                 
    Three Months             Twelve Months        
Net Written Premiums:   2010     2009     Change     2010     2009     Change  
Insurance Companies:
                                               
Marine
  $ 27,357     $ 38,242       -28 %   $ 151,059     $ 171,289       -12 %
Property Casualty
    41,171       43,987       -6 %     197,845       227,234       -13 %
Professional Liability
    20,170       19,970       1 %     80,451       79,150       2 %
 
                                       
 
    88,698       102,199       -13 %     429,355       477,673       -10 %
Lloyd’s Operations:
                                               
Marine
    38,135       42,286       -10 %     149,340       156,153       -4 %
Property Casualty
    11,000       11,316       -3 %     54,049       45,097       20 %
Professional Liability
    3,976       5,794       -31 %     21,194       22,332       -5 %
 
                                       
 
    53,111       59,396       -11 %     224,583       223,582       0 %
 
                                       
Total
  $ 141,809     $ 161,595       -12 %   $ 653,938     $ 701,255       -7 %
 
                                       
                                                 
    Three Months             Twelve Months        
Net Earned Premiums:   2010     2009     Change     2010     2009     Change  
Insurance Companies:
                                               
Marine
  $ 33,107     $ 43,075       -23 %   $ 155,846     $ 157,534       -1 %
Property Casualty
    48,513       57,283       -15 %     200,741       246,143       -18 %
Professional Liability
    23,397       19,446       20 %     82,264       75,444       9 %
 
                                       
 
    105,017       119,804       -12 %     438,851       479,121       -8 %
Lloyd’s Operations:
                                               
Marine
    40,684       40,800       0 %     149,225       142,958       4 %
Property Casualty
    14,972       11,080       35 %     49,852       39,330       27 %
Professional Liability
    5,485       5,594       -2 %     22,003       21,954       0 %
 
                                       
 
    61,141       57,474       6 %     221,080       204,242       8 %
 
                                       
Total
  $ 166,158     $ 177,278       -6 %   $ 659,931     $ 683,363       -3 %
 
                                       

 


 

News Release
Page 7
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
December 31, 2010
($ in thousands)
                                 
    Insurance     Lloyd’s              
    Companies     Operations     Corporate(1)     Total  
Gross written premiums
  $ 153,683     $ 76,167     $     $ 229,850  
Net written premiums
    88,698       53,111             141,809  
 
                               
Net earned premiums
    105,017       61,141             166,158  
Net losses and loss adjustment expenses
    (74,549 )     (35,473 )           (110,022 )
Commission expenses
    (15,771 )     (17,164 )           (32,935 )
Other operating expenses
    (26,973 )     (8,951 )           (35,924 )
Other income (expense)
    1,409       801             2,210  
 
                       
 
                               
Underwriting profit (loss)
    (10,867 )     354             (10,513 )
 
                               
Investment income
    15,752       2,107       139       17,998  
Net realized gains (losses)
    15,917       2,945       628       19,490  
Interest expense
                (2,045 )     (2,045 )
 
                       
Income (loss) before income tax expense (benefit)
    20,802       5,406       (1,278 )     24,930  
 
                               
Income tax expense (benefit)
    6,053       1,986       (447 )     7,592  
 
                       
Net income (loss)
  $ 14,749     $ 3,420     $ (831 )   $ 17,338  
 
                       
 
                               
Loss and loss expenses ratio
    71.0 %     58.0 %             66.2 %
Commission expense ratio
    15.0 %     28.1 %             19.8 %
Other operating expenses ratio (2)
    24.3 %     13.3 %             20.3 %
 
                         
Combined ratio
    110.3 %     99.4 %             106.3 %
 
                         
     
(1)  
The Corporate segment includes intercompany eliminations.
 
(2)  
The Other operating expenses ratio includes Other income (expense).

 


 

News Release
Page 8
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
December 31, 2009
($ in thousands)
                                 
    Insurance     Lloyd’s              
    Companies     Operations     Corporate(1)     Total  
Gross written premiums
  $ 169,408     $ 82,331     $     $ 251,739  
Net written premiums
    102,199       59,396             161,595  
 
                               
Net earned premiums
    119,804       57,474             177,278  
Net losses and loss adjustment expenses
    (89,838 )     (37,594 )           (127,432 )
Commission expenses
    (16,575 )     (11,194 )     439       (27,330 )
Other operating expenses
    (26,141 )     (7,963 )           (34,104 )
Other income (expense)
    341       82       (439 )     (16 )
 
                       
 
                               
Underwriting profit (loss)
    (12,409 )     805             (11,604 )
 
                               
Investment income
    16,674       2,169       160       19,003  
Net realized gains (losses)
    1,520       (205 )           1,315  
Interest expense
                (2,044 )     (2,044 )
 
                       
Income (loss) before income tax expense (benefit)
    5,785       2,769       (1,884 )     6,670  
 
                               
Income tax expense (benefit)
    142       1,112       (660 )     594  
 
                       
Net income (loss)
  $ 5,643     $ 1,657     $ (1,224 )   $ 6,076  
 
                       
 
                               
Loss and loss expenses ratio
    75.0 %     65.4 %             71.9 %
Commission expense ratio
    13.8 %     19.5 %             15.4 %
Other operating expenses ratio (2)
    21.6 %     13.7 %             19.2 %
 
                         
Combined ratio
    110.4 %     98.6 %             106.5 %
 
                         
     
(1)  
The Corporate segment includes intercompany eliminations.
 
(2)  
The Other operating expenses ratio includes Other income (expense).

 


 

News Release
Page 9
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Twelve Months Ended
December 31, 2010
($ in thousands)
                                 
    Insurance     Lloyd’s              
    Companies     Operations     Corporate(1)     Total  
Gross written premiums
  $ 665,505     $ 321,696     $     $ 987,201  
Net written premiums
    429,355       224,583             653,938  
 
                               
Net earned premiums
    438,851       221,080             659,931  
Net losses and loss adjustment expenses
    (280,120 )     (141,035 )           (421,155 )
Commission expenses
    (59,122 )     (49,991 )           (109,113 )
Other operating expenses
    (106,631 )     (33,112 )           (139,743 )
Other income (expense)
    1,698       3,488             5,186  
 
                       
 
                               
Underwriting profit (loss)
    (5,324 )     430             (4,894 )
 
                               
Investment income
    62,792       8,286       584       71,662  
Net realized gains (losses)
    36,057       3,323       859       40,239  
Interest expense
                (8,178 )     (8,178 )
 
                       
Income (loss) before income tax expense (benefit)
    93,525       12,039       (6,735 )     98,829  
 
                               
Income tax expense (benefit)
    27,219       4,389       (2,357 )     29,251  
 
                       
Net income (loss)
  $ 66,306     $ 7,650     $ (4,378 )   $ 69,578  
 
                       
 
                               
Loss and loss expenses ratio
    63.8 %     63.8 %             63.8 %
Commission expense ratio
    13.5 %     22.6 %             16.5 %
Other operating expenses ratio (2)
    23.9 %     13.4 %             20.4 %
 
                         
Combined ratio
    101.2 %     99.8 %             100.7 %
 
                         
     
(1)  
The Corporate segment includes intercompany eliminations.
 
(2)  
The Other operating expenses ratio includes Other income (expense).

 


 

News Release
Page 10
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Twelve Months Ended
December 31, 2009
($ in thousands)
                                 
    Insurance     Lloyd’s              
    Companies     Operations     Corporate(1)     Total  
Gross written premiums
  $ 730,776     $ 314,142     $     $ 1,044,918  
Net written premiums
    477,673       223,582             701,255  
 
                               
Net earned premiums
    479,121       204,242             683,363  
Net losses and loss adjustment expenses
    (304,672 )     (131,326 )           (435,998 )
Commission expenses
    (61,949 )     (37,727 )     768       (98,908 )
Other operating expenses
    (104,801 )     (27,896 )           (132,697 )
Other income (expense)
    3,498       961       (768 )     3,691  
 
                       
 
                               
Underwriting profit
    11,197       8,254             19,451  
 
                               
Investment income
    65,717       9,229       566       75,512  
Net realized gains (losses)
    533       (3,193 )           (2,660 )
Gain on debt repurchase
                3,000       3,000  
Interest expense
                (8,455 )     (8,455 )
 
                       
Income (loss) before income tax expense (benefit)
    77,447       14,290       (4,889 )     86,848  
 
                               
Income tax expense (benefit)
    19,819       5,582       (1,711 )     23,690  
 
                       
Net income (loss)
  $ 57,628     $ 8,708     $ (3,178 )   $ 63,158  
 
                       
 
                               
Loss and loss expenses ratio
    63.6 %     64.3 %             63.8 %
Commission expense ratio
    12.9 %     18.5 %             14.5 %
Other operating expenses ratio (2)
    21.1 %     13.2 %             18.9 %
 
                         
Combined ratio
    97.6 %     96.0 %             97.2 %
 
                         
     
(1)  
The Corporate segment includes intercompany eliminations.
 
(2)  
The Other operating expenses ratio includes Other income (expense).

 

 


 

News Release
Page 11
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
                                                         
    Three Months Ended December 31, 2010  
    Net     Losses                    
    Earned     and LAE     Underwriting     Underwriting     Combined Ratio  
Insurance Companies:   Premiums     Incurred     Expenses     Gain(Loss)     Loss     Expense     Total  
Marine
  $ 33,107     $ 22,668     $ 13,526     $ (3,087 )     68.5 %     40.8 %     109.3 %
Property Casualty
    48,513       21,265       19,182       8,066       43.8 %     39.6 %     83.4 %
Professional Liability
    23,397       30,616       8,627       (15,846 )     130.9 %     36.8 %     167.7 %
 
                                         
 
    105,017       74,549       41,335       (10,867 )     71.0 %     39.3 %     110.3 %
Lloyd’s Operations
    61,141       35,473       25,314       354       58.0 %     41.4 %     99.4 %
 
                                         
Total
  $ 166,158     $ 110,022     $ 66,649     $ (10,513 )     66.2 %     40.1 %     106.3 %
 
                                         
                                                         
    Three Months Ended December 31, 2009  
    Net     Losses                    
    Earned     and LAE     Underwriting     Underwriting     Combined Ratio  
Insurance Companies:   Premiums     Incurred     Expenses     Gain(Loss)     Loss     Expense     Total  
Marine
  $ 43,075     $ 26,677     $ 14,998     $ 1,400       61.9 %     34.8 %     96.7 %
Property Casualty
    57,283       43,444       20,474       (6,635 )     75.8 %     35.7 %     111.5 %
Professional Liability
    19,446       19,717       6,903       (7,174 )     101.4 %     35.5 %     136.9 %
 
                                         
 
    119,804       89,838       42,375       (12,409 )     75.0 %     35.4 %     110.4 %
Lloyd’s Operations
    57,474       37,594       19,075       805       65.4 %     33.2 %     98.6 %
 
                                         
Total
  $ 177,278     $ 127,432     $ 61,450     $ (11,604 )     71.9 %     34.6 %     106.5 %
 
                                         
                                 
    Amounts     Loss Ratio  
Net Incurred Loss Activity   Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
For the Three Months Ended:   2010     2009     2010     2009  
Insurance Companies:
                               
Loss and LAE payments
  $ 70,855     $ 75,175       67.5 %     62.8 %
Change in reserves
    3,694       14,663       3.5 %     12.2 %
 
                       
Net incurred loss and LAE
    74,549       89,838       71.0 %     75.0 %
 
                       
 
                               
Lloyd’s Operations:
                               
Loss and LAE payments
    33,147       24,130       54.2 %     42.0 %
Change in reserves
    2,326       13,464       3.8 %     23.4 %
 
                       
Net incurred loss and LAE
    35,473       37,594       58.0 %     65.4 %
 
                       
 
                               
Total
                               
Loss and LAE payments
    104,002       99,305       62.6 %     56.0 %
Change in reserves
    6,020       28,127       3.6 %     15.9 %
 
                       
Net incurred loss and LAE
  $ 110,022     $ 127,432       66.2 %     71.9 %
 
                       
                                 
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
For the Three Months Ended:   2010     2009     2010     2009  
Insurance Companies
  $ (199 )   $ (10,164 )     -0.2 %     -8.5 %
Lloyd’s Operations
    3,346       9       5.5 %     0.0 %
 
                       
Total
  $ 3,147     $ (10,155 )     1.9 %     -5.7 %
 
                       

 

 


 

News Release
Page 12
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
                                                         
    Twelve Months Ended December 31, 2010  
    Net     Losses                    
    Earned     and LAE     Underwriting     Underwriting     Combined Ratio  
Insurance Companies:   Premiums     Incurred     Expenses     Gain(Loss)     Loss     Expense     Total  
Marine
  $ 155,846     $ 100,579     $ 56,092     $ (825 )     64.5 %     36.0 %     100.5 %
Property Casualty
    200,741       110,902       77,040       12,799       55.2 %     38.4 %     93.6 %
Professional Liability
    82,264       68,639       30,923       (17,298 )     83.4 %     37.6 %     121.0 %
 
                                         
 
    438,851       280,120       164,055       (5,324 )     63.8 %     37.4 %     101.2 %
Lloyd’s Operations
    221,080       141,035       79,615       430       63.8 %     36.0 %     99.8 %
 
                                         
Total
  $ 659,931     $ 421,155     $ 243,670     $ (4,894 )     63.8 %     36.9 %     100.7 %
 
                                         
                                                         
    Twelve Months Ended December 31, 2009  
    Net     Losses                    
    Earned     and LAE     Underwriting     Underwriting     Combined Ratio  
Insurance Companies:   Premiums     Incurred     Expenses     Gain(Loss)     Loss     Expense     Total  
Marine
  $ 157,534     $ 109,916     $ 50,451     $ (2,833 )     69.8 %     32.0 %     101.8 %
Property Casualty
    246,143       123,775       86,116       36,252       50.3 %     35.0 %     85.3 %
Professional Liability
    75,444       70,981       26,685       (22,222 )     94.1 %     35.4 %     129.5 %
 
                                         
 
    479,121       304,672       163,252       11,197       63.6 %     34.0 %     97.6 %
Lloyd’s Operations
    204,242       131,326       64,662       8,254       64.3 %     31.7 %     96.0 %
 
                                         
Total
  $ 683,363     $ 435,998     $ 227,914     $ 19,451       63.8 %     33.4 %     97.2 %
 
                                         
                                 
    Amounts     Loss Ratio  
Net Incurred Loss Activity   Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
For the Twelve Months Ended:   2010     2009     2010     2009  
Insurance Companies:
                               
Loss and LAE payments
  $ 278,969     $ 246,457       63.5 %     51.4 %
Change in reserves
    1,151       58,215       0.3 %     12.2 %
 
                       
Net incurred loss and LAE
    280,120       304,672       63.8 %     63.6 %
 
                       
 
                               
Lloyd’s Operations:
                               
Loss and LAE payments
    112,578       76,478       50.9 %     37.4 %
Change in reserves
    28,457       54,848       12.9 %     26.9 %
 
                       
Net incurred loss and LAE
    141,035       131,326       63.8 %     64.3 %
 
                       
 
                               
Total
                               
Loss and LAE payments
    391,547       322,935       59.3 %     47.3 %
Change in reserves
    29,608       113,063       4.5 %     16.5 %
 
                       
Net incurred loss and LAE
  $ 421,155     $ 435,998       63.8 %     63.8 %
 
                       
                                 
Impact of Prior Years Reserves   Amounts     Loss Ratio Impact  
Favorable / (Unfavorable) Development   Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
For the Twelve Months Ended:   2010     2009     2010     2009  
Insurance Companies
  $ 5,455     $ 3,079       1.2 %     0.6 %
Lloyd’s Operations
    8,347       5,862       3.8 %     2.9 %
 
                       
Total
  $ 13,802     $ 8,941       2.1 %     1.3 %
 
                       

 

 


 

News Release
Page 13
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
                         
    Case     IBNR        
Net Loss Reserves, December 31, 2010:   Reserves     Reserves     Total  
Insurance Companies:
                       
Marine
  $ 107,147     $ 109,361     $ 216,508  
Property Casualty
    158,740       308,613       467,353  
Professional Liability
    46,096       78,469       124,565  
 
                 
Total Insurance Companies
    311,983       496,443       808,426  
 
                 
Lloyd’s Operations:
                       
Marine
    111,914       112,708       224,622  
Property Casualty
    30,327       29,792       60,119  
Professional Liability
    9,904       39,471       49,375  
 
                 
Total Lloyd’s Operations
    152,145       181,971       334,116  
 
                 
 
                       
Total Net Loss Reserves
  $ 464,128     $ 678,414     $ 1,142,542  
 
                 
                         
    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  
 
                 

 

 


 

News Release
Page 14
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 2010
($ in thousands)
At December 31, 2010, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 4.4 years. The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset backed commercial paper.
At December 31, 2010, the Company owned two asset-backed securities approximating $0.9 million with subprime mortgage exposures. The securities have an effective maturity of 5.4 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.5 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 6.0 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 at December 31, 2010:
                                         
            Gross     Gross     Cost or     OTTI  
    Fair     Unrealized     Unrealized     Amortized     Recognized  
December 31, 2010   Value     Gains     (Losses)     Cost     in OCI  
    ($ in thousands)  
Fixed maturities:
                                       
U.S. Government Treasury bonds, agency bonds and foreign government bonds
  $ 324,145     $ 5,229     $ (4,499 )   $ 323,415     $  
States, municipalities and political subdivisions
    392,250       11,903       (3,805 )     384,152        
Mortgage- and asset-backed securities
                                       
Agency mortgage-backed securities
    382,628       10,127       (2,434 )     374,935        
Residential mortgage obligations
    20,463       24       (2,393 )     22,832       (1,646 )
Asset-backed securities
    46,093       247       (292 )     46,138        
Commercial mortgage-backed securities
    190,015       4,804       (1,794 )     187,005        
 
                             
Subtotal
    639,199       15,202       (6,913 )     630,910       (1,646 )
 
                                       
Corporate bonds
    526,651       15,075       (5,545 )     517,121        
 
                             
 
                                       
Total fixed maturities
    1,882,245       47,409       (20,762 )     1,855,598       (1,646 )
 
                             
 
                                       
Equity securities — common stocks
    87,258       22,475       (10 )     64,793        
 
                                       
Cash
    31,768                   31,768        
 
                                       
Short-term investments
    153,057                   153,057        
 
                                       
 
                             
Total
  $ 2,154,328     $ 69,884     $ (20,772 )   $ 2,105,216     $ (1,646 )
 
                             

 

 


 

News Release
Page 15
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 2010
($ in thousands)
The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at December 31, 2010:
                                 
            Gross     Gross     Cost or  
    Fair     Unrealized     Unrealized     Amortized  
Agency mortgage-backed securities:   Value     Gains     (Losses)     Cost  
GNMA
  $ 142,677     $ 3,478     $ (1,006 )   $ 140,205  
FNMA
    191,682       5,386       (937 )     187,233  
FHLMC
    48,269       1,263       (491 )     47,497  
 
                       
Total
  $ 382,628     $ 10,127     $ (2,434 )   $ 374,935  
 
                       
                                 
            Gross     Gross     Cost or  
    Fair     Unrealized     Unrealized     Amortized  
Residential mortgage obligations:   Value     Gains     (Losses)     Cost  
Prime
  $ 15,369     $ 24     $ (1,999 )   $ 17,344  
Alt-A
    2,453             (379 )     2,832  
Subprime
                       
Non-US RMBS
    2,641             (15 )     2,656  
 
                       
Total
  $ 20,463     $ 24     $ (2,393 )   $ 22,832