NAVIGATORS GROUP INC - FORM 8-K - EX-99.1 - THIRD QUARTER EARNINGS PRESS RELEASE

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8-K - FORM 8-K - NAVIGATORS GROUP INC	d432588d8k.htm

Exhibit 99.1

LOGO

The Navigators Group, Inc.

CORPORATE NEWS

Navigators Reports Third Quarter Earnings

New York – November 1, 2012 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $12.9 million, or $0.90 per diluted share, for the three months ended September 30, 2012 compared to $13.9 million, or $0.92 per diluted share, for the comparable period in 2011. Operating earnings were $9.8 million, or $0.69 per diluted share, for the third quarter of 2012 compared to operating earnings of $12.0 million, or $0.80 per diluted share, for the comparable period in 2011.

For the nine months ended September 30, 2012, the Company reported net income of $35.7 million, or $2.51 per diluted share, compared to $15.5 million, or $1.00 per diluted share, for the comparable period in 2011. Operating earnings were $29.1 million, or $2.04 per diluted share, for the nine months ended September 30, 2012 compared to $13.3 million, or $0.85 per diluted share, for the comparable period in 2011.

Gross written premiums and net written premiums for the three months ended September 30, 2012 were $298.7 million and $188.0 million, respectively, an increase of 17.0% and 7.2% from the comparable period in 2011. Gross written premiums and net written premiums for the nine months ended September 30, 2012 were $964.9 million and $621.3 million, respectively, an increase of 16.2% and 12.6% from the comparable period in 2011.

The combined loss and expense ratio for the three and nine months ended September 30, 2012 were 99.1% and 99.0%, respectively, compared to 99.1% and 105.6% for the comparable periods in 2011.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to have met our primary objectives during the quarter: underwriting profit and growth in book value per share. Our Lloyd’s operation had an exceptionally strong quarter, achieving double digit premium growth and benefitting from favorable loss emergence. Navigators Specialty had another strong quarter, as we continue to benefit from the expansion of our E&S underwriting teams. We continue to achieve positive renewal rate change across most product lines and our underwriters remain focused and disciplined in their risk selections.”

Stockholders’ equity was $874.8 million, or $62.32 per share, as of September 30, 2012 compared to $803.4 million, or $57.57 per share, as of December 31, 2011.

Net investment income for the three and nine months ended September 30, 2012 was $13.6 million and $40.6 million, respectively, a decrease of 16.4% and 20.4% from the comparable periods in 2011. Investment income for the nine months ended September 30, 2012 was reduced by $4.5 million as a result of the settlement of a 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 and net other-than-temporary impairment losses recognized in earnings, was 2.4% for both the three and nine months ended September 30, 2012, compared to 3.1% and 3.2% for the comparable periods in 2011. The effective tax rate on net investment income was 26.6% and 26.8% for the three and nine months ended September 30, 2012, compared to 28.6% for both comparable periods in 2011.


6 International Drive		Rye Brook, NY 10573
TEL (914) 933-6000		FAX (914) 934-2355

News Release

November 1, 2012

Page 2

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 3.8 years as of September 30, 2012. As of September 30, 2012, net unrealized gains within our investment portfolio were $140.6 million, an increase of $47.0 million compared to December 31, 2011. There were $4.8 million net realized gains for the three months ended September 30, 2012 compared to $2.6 million for the same period in 2011. There were no other-than-temporary impairment losses for the three months ended September 30, 2012. For the nine months ended September 30, 2012, there were $10.2 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $3.5 million for the same period in 2011.

Consolidated net cash flow from operations for the three and nine months ended September 30, 2012 were $54.1 million and $69.1 million, respectively, compared to $71.9 million and $86.3 million for the comparable periods in 2011.

The Company will hold a conference call on Friday, November 2, 2012 starting at 8:30 a.m. ET to discuss the 2012 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://investor.shareholder.com/navg/eventdetail.cfm?eventid=119546

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.

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:		Ciro M. DeFalco
		Senior Vice President and Chief Financial Officer
		(914) 933-6043
		cdefalco@navg.com
		www.navg.com

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Financial Highlights

($ in thousands, except share and per share data)

(unaudited)


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Results of Operations	2012			2011			Change			2012			2011			Change

Gross written premiums	$	298,742		$	255,318			17.0	%	$	964,878		$	830,315			16.2	%
Net written premiums		188,046			175,357			7.2	%		621,343			551,796			12.6	%
Revenues:
Net earned premiums		201,262			173,633			15.9	%		580,398			499,888			16.1	%
Net investment income		13,597			16,259			-16.4	%		40,632			51,072			-20.4	%
Total other-than-temporary impairment losses		—			(1,241	)		NM			(693	)		(2,338	)		-70.4	%
Portion of loss recognized in other comprehensive income (before tax)		—			618			NM			43			941			-95.4	%

Net other-than-temporary impairment losses recognized in earnings		—			(623	)		NM			(650	)		(1,397	)		-53.5	%
Net realized gains (losses)		4,761			3,238			47.0	%		10,820			4,856			122.8	%
Other income		789			(921	)		NM			2,087			643			NM

Total revenues		220,409			191,586			15.0	%		633,287			555,062			14.1	%

Expenses:
Net losses and loss adjustment expenses		128,850			110,242			16.9	%		370,242			340,893			8.6	%
Commission expenses		31,258			25,934			20.5	%		90,211			80,164			12.5	%
Other operating expenses		40,112			34,989			14.6	%		116,238			107,341			8.3	%
Interest expense		2,049			2,047			0.1	%		6,147			6,140			0.1	%

Total expenses		202,269			173,212			16.8	%		582,838			534,538			9.0	%

Income before income taxes		18,140			18,374			-1.3	%		50,449			20,524			145.8	%
Income tax expense (benefit)		5,225			4,476			16.7	%		14,731			5,015			NM

Net income (loss)	$	12,915		$	13,898			-7.1	%	$	35,718		$	15,509			130.3	%

Per Share Data
Net income per common share:
Basic	$	0.92		$	0.94			-2.0	%	$	2.55		$	1.02			NM
Diluted	$	0.90		$	0.92			-1.7	%	$	2.51		$	1.00			NM
Average common shares outstanding:
Basic		14,026,855			14,796,309						14,004,302			15,243,603
Diluted		14,272,477			15,104,424						14,255,301			15,569,370
Underwriting Ratios
Loss Ratio		64.0	%		63.5	%					63.8	%		68.2	%
Expense Ratio		35.1	%		35.6	%					35.2	%		37.4	%

Combined Ratio		99.1	%		99.1	%					99.0	%		105.6	%

Balance Sheet Data	September 30,			June 30,						September 30,			Dec. 31,
	2012			2012						2012			2011
Stockholders’ equity	$	874,811		$	841,808			3.9	%	$	874,811		$	803,435			8.9	%
Book value per share	$	62.32		$	60.08			3.7	%	$	62.32		$	57.57			8.3	%

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)

	September 30, 2012			December 31, 2011
	(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2012, $1,975,534; 2011, $1,816,710)	$	2,085,058		$	1,888,069
Equity securities, available-for-sale, at fair value (cost: 2012, $74,831; 2011, $73,567)		105,930			95,849
Short-term investments, at cost which approximates fair value		187,445			122,220
Cash		36,252			127,360

Total investments and cash		2,414,685			2,233,498

Premiums receivable		351,060			255,725
Prepaid reinsurance premiums		224,851			164,162
Reinsurance recoverable on paid losses		41,819			43,791
Reinsurance recoverable on unpaid losses and loss adjustment expenses		834,604			845,445
Deferred policy acquisition costs		61,281			63,984
Accrued investment income		14,175			14,492
Goodwill and other intangible assets		7,037			6,869
Current income tax receivable, net		10,325			15,391
Other Assets		34,860			26,650

Total assets	$	3,994,697		$	3,670,007

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses	$	2,079,956		$	2,082,679
Unearned premiums		635,241			532,628
Reinsurance balances payable		169,540			108,699
Senior notes		114,386			114,276
Deferred income tax, net		11,199			6,291
Accounts payable and other liabilities		109,564			21,999

Total liabilities		3,119,886			2,866,572

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 17,548,112 shares for 2012 and 17,467,615 shares for 2011		1,754			1,746
Additional paid-in capital		327,197			322,133
Treasury stock, at cost (3,511,380 shares for 2012 and 2011)		(155,801	)		(155,801	)
Retained earnings		600,827			565,109
Accumulated other comprehensive income		100,834			70,248

Total stockholders’ equity		874,811			803,435

Total liabilities and stockholders’ equity	$	3,994,697		$	3,670,007

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Comparative Premium Data

($ in thousands)


	Three Months							Nine Months
	2012		2011		Change			2012		2011		Change
Gross Written Premiums:
Insurance Companies:
Marine	$	44,879	$	47,141		-4.8	%	$	156,640	$	175,812		-10.9	%
Property Casualty		139,948		110,975		26.1	%		426,494		323,994		31.6	%
Professional Liability		33,534		33,059		1.4	%		97,629		84,912		15.0	%

		218,361		191,175		14.2	%		680,763		584,718		16.4	%
Lloyd’s Operations:
Marine		37,716		26,979		39.8	%		146,528		127,585		14.8	%
Property Casualty		32,789		29,682		10.5	%		106,063		91,106		16.4	%
Professional Liability		9,876		7,482		32.0	%		31,524		26,906		17.2	%

		80,381		64,143		25.3	%		284,115		245,597		15.7	%

Total	$	298,742	$	255,318		17.0	%	$	964,878	$	830,315		16.2	%


	Three Months							Nine Months
	2012		2011		Change			2012		2011		Change
Net Written Premiums:
Insurance Companies:
Marine	$	32,615	$	34,180		-4.6	%	$	107,266	$	130,200		-17.6	%
Property Casualty		83,449		77,056		8.3	%		274,823		201,978		36.1	%
Professional Liability		26,084		24,056		8.4	%		75,374		57,058		32.1	%

		142,148		135,292		5.1	%		457,463		389,236		17.5	%
Lloyd’s Operations:
Marine		27,939		20,649		35.3	%		109,489		102,362		7.0	%
Property Casualty		11,633		16,296		-28.6	%		36,693		47,364		-22.5	%
Professional Liability		6,326		3,120		102.8	%		17,698		12,834		37.9	%

		45,898		40,065		14.6	%		163,880		162,560		0.8	%

Total	$	188,046	$	175,357		7.2	%	$	621,343	$	551,796		12.6	%


	Three Months							Nine Months
	2012		2011		Change			2012		2011		Change
Net Earned Premiums:
Insurance Companies:
Marine	$	40,592	$	41,951		-3.2	%	$	111,402	$	124,387		-10.4	%
Property Casualty		83,993		58,585		43.4	%		240,536		156,871		53.3	%
Professional Liability		24,505		18,796		30.4	%		70,277		51,881		35.5	%

		149,090		119,332		24.9	%		422,215		333,139		26.7	%
Lloyd’s Operations:
Marine		34,002		34,510		-1.5	%		101,538		109,222		-7.0	%
Property Casualty		11,870		15,952		-25.6	%		41,644		44,105		-5.6	%
Professional Liability		6,300		3,839		64.1	%		15,001		13,422		11.8	%

		52,172		54,301		-3.9	%		158,183		166,749		-5.1	%

Total	$	201,262	$	173,633		15.9	%	$	580,398	$	499,888		16.1	%

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November 1, 2012

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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).

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

September 30, 2011

($ in thousands)


	Insurance Companies			Lloyd’s Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	191,175		$	64,143		$	—		$	255,318
Net written premiums		135,292			40,065			—			175,357
Net earned premiums		119,332			54,301			—			173,633
Net losses and loss adjustment expenses		(76,755	)		(33,487	)		—			(110,242	)
Commission expenses		(16,514	)		(9,953	)		533			(25,934	)
Other operating expenses		(25,735	)		(9,254	)		—			(34,989	)
Other income (expense)		554			(942	)		(533	)		(921	)

Underwriting profit (loss)		882			665			—			1,547
Net investment income		14,037			2,158			64			16,259
Net realized gains (losses)		2,809			(226	)		32			2,615
Interest expense		—			—			(2,047	)		(2,047	)

Income (loss) before income taxes		17,728			2,597			(1,951	)		18,374
Income tax expense (benefit)		4,379			780			(683	)		4,476

Net income (loss)	$	13,349		$	1,817		$	(1,268	)	$	13,898

Losses and loss adjustment expenses ratio		64.3	%		61.7	%					63.5	%
Commission expense ratio		13.8	%		18.3	%					14.9	%
Other operating expense ratio ⁽²⁾		21.2	%		18.8	%					20.7	%

Combined ratio		99.3	%		98.8	%					99.1	%

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

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November 1, 2012

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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).

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Nine Months Ended

September 30, 2011

($ in thousands)



	Insurance Companies			Lloyd’s Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	584,718		$	245,597		$	—		$	830,315
Net written premiums		389,236			162,560			—			551,796
Net earned premiums		333,139			166,749			—			499,888
Net losses and loss adjustment expenses		(228,882	)		(112,011	)		—			(340,893	)
Commission expenses		(45,256	)		(36,402	)		1,494			(80,164	)
Other operating expenses		(79,050	)		(28,291	)		—			(107,341	)
Other income (expense)		2,871			(734	)		(1,494	)		643

Underwriting profit (loss)		(17,178	)		(10,689	)		—			(27,867	)
Net investment income		44,009			6,733			330			51,072
Net realized gains (losses)		5,664			(2,409	)		204			3,459
Interest expense		—			—			(6,140	)		(6,140	)

Income (loss) before income taxes		32,495			(6,365	)		(5,606	)		20,524
Income tax expense (benefit)		9,224			(2,247	)		(1,962	)		5,015

Net income (loss)	$	23,271		$	(4,118	)	$	(3,644	)	$	15,509

Losses and loss adjustment expenses ratio		68.7	%		67.2	%					68.2	%
Commission expense ratio		13.6	%		21.8	%					16.0	%
Other operating expense ratio ⁽²⁾		22.9	%		17.4	%					21.4	%

Combined ratio		105.2	%		106.4	%					105.6	%

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

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November 1, 2012

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)


	Three Months Ended September 30, 2012
	Net Earned Premiums		Losses and LAE Incurred			Underwriting Expenses		Underwriting Profit (Loss)			Loss Ratio			Expense Ratio			Combined Ratio
Insurance Companies:
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		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	%


	Three Months Ended September 30, 2011
	Net Earned Premiums		Losses and LAE Incurred			Underwriting Expenses		Underwriting Profit (Loss)			Loss Ratio			Expense Ratio			Combined Ratio
Insurance Companies:
Marine	$	41,951	$	28,082		$	15,054	$	(1,185	)		66.9	%		35.9	%		102.8	%
Property Casualty		58,585		36,272			19,605		2,708			61.9	%		33.5	%		95.4	%
Professional Liability		18,796		12,401			7,036		(641	)		66.0	%		37.4	%		103.4	%

Total Insurance Companies		119,332		76,755			41,695		882			64.3	%		35.0	%		99.3	%

Lloyd’s Operations:
Marine		34,510		22,817			14,429		(2,736	)		66.1	%		41.8	%		107.9	%
Property Casualty		15,952		7,597			4,002		4,353			47.6	%		25.1	%		72.7	%
Professional Liability		3,839		3,073			1,718		(952	)		80.0	%		44.8	%		124.8	%

Total Lloyd’s		54,301		33,487			20,149		665			61.7	%		37.1	%		98.8	%

Total All	$	173,633	$	110,242		$	61,844	$	1,547			63.5	%		35.6	%		99.1	%


	Amounts						Loss Ratio
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
Net Incurred Loss Activity For the Three Months Ended:
Insurance Companies:
Loss and LAE payments	$	98,857		$	63,475			66.3	%		53.2	%
Change in reserves		14,446			13,280			9.7	%		11.1	%

Net incurred loss and LAE		113,303			76,755			76.0	%		64.3	%

Lloyd’s Operations:
Loss and LAE payments	$	24,019			26,168			46.0	%		48.2	%
Change in reserves		(8,472	)		7,319			-16.2	%		13.5	%

Net incurred loss and LAE		15,547			33,487			29.8	%		61.7	%

Total
Loss and LAE payments		122,876			89,643			61.0	%		51.6	%
Change in reserves		5,974			20,599			3.0	%		11.9	%

Net incurred loss and LAE	$	128,850		$	110,242			64.0	%		63.5	%


	Amounts						Loss Ratio Impact
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Three Months Ended:
Insurance Companies	$	(3,607	)	$	2,144			-2.4	%		1.8	%
Lloyd’s Operations		9,084			(531	)		17.4	%		-1.0	%

Total	$	5,477		$	1,613			2.7	%		0.9	%

News Release

November 1, 2012

Page 11

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)


	Nine Months Ended September 30, 2012
	Net Earned Premiums		Losses and LAE Incurred		Underwriting Expenses		Underwriting Profit (Loss)			Loss Ratio			Expense Ratio			Combined Ratio


Insurance Companies:
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		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	%


	Nine Months Ended September 30, 2011
	Net Earned Premiums		Losses and LAE Incurred		Underwriting Expenses		Underwriting Profit (Loss)			Loss Ratio			Expense Ratio			Combined Ratio
Insurance Companies:
Marine	$	124,387	$	82,888	$	43,934	$	(2,435	)		66.6	%		35.4	%		102.0	%
Property Casualty		156,871		110,637		57,662		(11,428	)		70.5	%		36.8	%		107.3	%
Professional Liability		51,881		35,357		19,839		(3,315	)		68.2	%		38.2	%		106.4	%

Total Insurance Companies		333,139		228,882		121,435		(17,178	)		68.7	%		36.5	%		105.2	%

Lloyd’s Operations:
Marine		109,222		73,239		43,781		(7,798	)		67.1	%		40.0	%		107.1	%
Property Casualty		44,105		22,976		15,720		5,409			52.1	%		35.6	%		87.7	%
Professional Liability		13,422		15,796		5,926		(8,300	)		117.7	%		44.1	%		161.8	%

Total Lloyd’s		166,749		112,011		65,427		(10,689	)		67.2	%		39.2	%		106.4	%

Total All	$	499,888	$	340,893	$	186,862	$	(27,867	)		68.2	%		37.4	%		105.6	%


	Amounts						Loss Ratio
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
Net Incurred Loss Activity
For the Nine Months Ended:
Insurance Companies:
Loss and LAE payments	$	282,820		$	207,446			67.0	%		62.3	%
Change in reserves		21,663			21,436			5.1	%		6.4	%

Net incurred loss and LAE		304,483			228,882			72.1	%		68.7	%

Lloyd’s Operations:
Loss and LAE payments		79,304			74,826			50.2	%		44.9	%
Change in reserves		(13,545	)		37,185			-8.6	%		22.3	%

Net incurred loss and LAE		65,759			112,011			41.6	%		67.2	%

Total
Loss and LAE payments		362,124			282,272			62.4	%		56.5	%
Change in reserves		8,118			58,621			1.4	%		11.7	%

Net incurred loss and LAE	$	370,242		$	340,893			63.8	%		68.2	%


	Amounts						Loss Ratio Impact
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
	Sept. 30, 2012			Sept. 30, 2011			Sept. 30, 2012			Sept. 30, 2011
Impact of Prior Years Reserves
Favorable / (Unfavorable) Development
For the Nine Months Ended:
Insurance Companies	$	(1,517	)	$	1,059			-0.4	%		0.3	%
Lloyd’s Operations		19,232			(3,694	)		12.2	%		-2.2	%

Total	$	17,715		$	(2,635	)		3.1	%		-0.5	%

News Release

November 1, 2012

Page 12

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

($ in thousands)


	Case Reserves		IBNR Reserves		Total
Net Loss Reserves, September 30, 2012:
Insurance Companies:
Marine	$	143,907	$	112,624	$	256,531
Property Casualty		173,686		329,070		502,756
Professional Liability		57,004		77,601		134,605

Total Insurance Companies		374,597		519,295		893,892

Lloyd’s Operations:
Marine		128,551		106,470		235,021
Property Casualty		28,053		30,200		58,253
Professional Liability		15,823		42,363		58,186

Total Lloyd’s Operations		172,427		179,033		351,460

Total Net Loss Reserves	$	547,024	$	698,328	$	1,245,352


	Case Reserves		IBNR Reserves		Total
Net Loss Reserves, December 31, 2011:
Insurance Companies:
Marine	$	127,912	$	121,875	$	249,787
Property Casualty		185,822		296,177		481,999
Professional Liability		56,953		83,490		140,443

Total Insurance Companies		370,687		501,542		872,229

Lloyd’s Operations:
Marine		117,448		123,136		240,584
Property Casualty		37,877		25,846		63,723
Professional Liability		13,580		47,118		60,698

Total Lloyd’s Operations		168,905		196,100		365,005

Total Net Loss Reserves	$	539,592	$	697,642	$	1,237,234

News Release

November 1, 2012

Page 13

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

September 30, 2012

As of September 30, 2012, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 3.8 years. The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset backed commercial paper.

As of September 30, 2012, the Company owned two asset-backed securities approximating $0.7 million with subprime mortgage exposures. The securities have an effective maturity of 3.2 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 6.3 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, 2012:


			Gross		Gross			Cost or		OTTI
	Fair		Unrealized		Unrealized			Amortized		Recognized
September 30, 2012	Value		Gains		(Losses)			Cost		in OCI
	($ in thousands)
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	465,215	$	11,881	$	(55	)	$	453,389	$	—
States, municipalities and political subdivisions		443,994		34,451		(66	)		409,609		—
Mortgage- and asset-backed securities:
Agency mortgage-backed securities		405,229		17,582		(56	)		387,703		—
Residential mortgage obligations		39,095		711		(837	)		39,221		(278	)
Asset-backed securities		50,897		1,069		(72	)		49,900		—
Commercial mortgage-backed securities		208,742		18,126		(50	)		190,666		—

Subtotal		703,963		37,488		(1,015	)		667,490		(278	)
Corporate bonds		471,886		26,941		(101	)		445,046		—

Total fixed maturities		2,085,058		110,761		(1,237	)		1,975,534		(278	)

Equity securities—common stocks		105,930		31,377		(278	)		74,831		—
Short-term investments		187,445		—		—			187,445		—
Cash		36,252		—		—			36,252		—

Total	$	2,414,685	$	142,138	$	(1,515	)	$	2,274,062	$	(278	)

News Release

November 1, 2012

Page 14

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

September 30, 2012

($ 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, 2012:


			Gross		Gross			Cost or
	Fair		Unrealized		Unrealized			Amortized
Agency mortgage-backed securities:	Value		Gains		(Losses)			Cost
GNMA	$	126,642	$	6,416	$	(45	)	$	120,271
FNMA		210,396		8,705		(11	)		201,702
FHLMC		68,191		2,461		—			65,730

Total	$	405,229	$	17,582	$	(56	)	$	387,703


			Gross		Gross			Cost or
	Fair		Unrealized		Unrealized			Amortized
Residential mortgage obligations:	Value		Gains		(Losses)			Cost
Prime	$	12,709	$	126	$	(658	)	$	13,241
Alt-A		2,102		24		(179	)		2,257
Subprime		721		21		—			700
Non-US RMBS		23,563		540		—			23,023

Total	$	39,095	$	711	$	(837	)	$	39,221

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