Exhibit 99.1

 

		The Navigators Group, Inc.
		CORPORATE NEWS
		Navigators Reports Second Quarter Earnings, Net Income up 21%

Stamford, CT – August 7, 2014 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $16.9 million, or $1.17 per diluted share, for the three months ended June 30, 2014 compared to $13.9 million, or $0.97 per diluted share, for the comparable period in 2013. Operating earnings were $15.0 million, or $1.04 per diluted share, for the second quarter of 2014 compared to $11.8 million, or $0.82 per diluted share, for the comparable period in 2013.

For the six months ended June 30, 2014, the Company reported net income of $44.8 million, or $3.11 per diluted share compared to $27.8 million, or $1.93 per diluted share, for the comparable period in 2013. Operating earnings were $35.9 million, or $2.49 per diluted share, for the six months ended June 30, 2014 compared to $22.6 million, or $1.56 per diluted share, for the comparable period in 2013.

Gross written premiums and net written premiums for the three months ended June 30, 2014 were $348.8 million and $231.9 million, respectively, an increase of 5.0% and 16.8% from the comparable period in 2013.

Gross written premiums and net written premiums for the six months ended June 30, 2014 were $771.6 million and $543.7 million, respectively, an increase of 6.4% and 16.2% from the comparable period in 2013.

The combined loss and expense ratio for the three and six months ended June 30, 2014 was 95.3% and 93.8%, respectively, compared to 97.7% and 97.8% for the comparable periods in 2013.

“We are pleased with our financial performance for the first six months of 2014, with net income up 61% and book value per share growth of 7.3%” stated Stan Galanski, President and Chief Executive Officer. “Despite large loss activity in our marine liability business at Lloyd’s, we reported solid underwriting profit, with a combined ratio of 95.3% for the quarter, a more than two point improvement from second quarter 2013. Our U.S. marine business and global management and professional liability units made meaningful earnings contributions to the quarter. We achieved double-digit growth in net written premium, resulting both from ongoing new business success, most notably in our U.S. casualty units and international D&O, and from the restructuring of several ceded reinsurance treaties earlier in the year. We continue to focus on identifying good opportunities for profitable growth.”

Stockholders’ equity was $972.1 million, or $68.16 per share, as of June 30, 2014 compared to $902.2 million, or $63.54 per share, as of December 31, 2013.

 

		400 Atlantic Street		Stamford, CT 06901
		TEL (203) 905-6090		FAX (203) 658-1821

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Net investment income for the three and six months ended June 30, 2014 was $15.6 million and $32.3 million, respectively, an increase of 9.8% and 15.6% from the comparable periods in 2013. The annualized pre-tax investment yield, excluding net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.6% for the three and six months ended June 30, 2014, compared to 2.4% for each of the comparable periods in 2013. The effective tax rate on net investment income was 27.0% and 27.5% for the three and six months ended June 30, 2014, respectively, compared to 27.6% and 28.0% for the comparable periods in 2013.

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 June 30, 2014. As of June 30, 2014, net unrealized gains within our investment portfolio were $75.8 million, an increase of $39.8 million compared to December 31, 2013.

There were $4.5 million of net realized gains recognized in earnings for the three months ended June 30, 2014, compared to $3.3 million for the same period in 2013. For the six months ended June 30, 2014, there were $5.3 million of net realized gains, compared to $8.1 million for the same period in 2013.

Other income for the six months ended June 30, 2014 includes a one-time foreign exchange gain of $10.0 million ($6.6 million after-tax) due to a change in the functional currency of our Lloyd’s Operations, which is equally offset by a reversal within the Accumulated Other Comprehensive Income component of stockholders’ equity.

Consolidated net cash flow from operations for the three and six months ended June 30, 2014 was $69.3 million and $78.1 million, respectively, compared to $44.2 million and $48.5 million for the comparable periods in 2013.

The Company will hold a conference call on Friday, August 8, 2014 starting at 8:30 a.m. ET to discuss the 2014 second quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is (888)-364-3109 and the international dial-in is (719) 325-2491. Participants may connect to the webcast at:

http://www.media-server.com/m/p/trvmhk48

Operating earnings, or net income excluding after-tax net realized gains (losses), net other-than-temporary impairment losses recognized in earnings, and after-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency), 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. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as representative offices in China and Brazil.

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

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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
		(203) 905-6343
		cdefalco@navg.com
		www.navg.com

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Financial Highlights

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

(unaudited)

 

		Three Months Ended												Six Months Ended
		June 30,												June 30,
Results of Operations		2014				2013				Change				2014				2013				Change
Gross written premiums		$	348,795			$	332,128				5.0	%		$	771,585			$	725,350				6.4	%
Net written premiums			231,864				198,469				16.8	%			543,714				467,921				16.2	%
Revenues:
Net earned premiums			231,084				205,814				12.3	%			456,356				408,142				11.8	%
Net investment income			15,648				14,246				9.8	%			32,258				27,903				15.6	%
Total other-than-temporary impairment losses			—				—				NM				—				(42	)			NM
Portion of loss recognized in other comprehensive income (before tax)			—				—				NM				—				—				NM
Net other-than-temporary impairment losses recognized in earnings			—				—				NM				—				(42	)			NM
Net realized gains (losses)			4,473				3,345				33.7	%			5,306				8,159				–35.0	%
Other income			(1,665	)			(915	)			82.0	%			8,734				(297	)			NM
Total revenues			249,540				222,490				12.2	%			502,654				443,865				13.2	%
Expenses:
Net losses and loss adjustment expenses			140,220				131,148				6.9	%			275,287				262,490				4.9	%
Commission expenses			32,150				28,391				13.2	%			57,877				54,946				5.3	%
Other operating expenses			47,992				40,678				18.0	%			95,138				81,552				16.7	%
Interest expense			4,319				2,052				110.5	%			8,171				4,103				99.1	%
Total expenses			224,681				202,269				11.1	%			436,473				403,091				8.3	%
Income before income taxes			24,859				20,221				22.9	%			66,181				40,774				62.3	%
Income tax expense (benefit)			7,998				6,284				27.3	%			21,352				12,927				65.2	%
Net income (loss)		$	16,861			$	13,937				21.0	%		$	44,829			$	27,847				61.0	%
Per Share Data
Net income per common share:
Basic		$	1.18			$	0.99				19.9	%		$	3.15			$	1.97				59.4	%
Diluted		$	1.17			$	0.97				21.4	%		$	3.11			$	1.93				61.3	%
Average common shares outstanding:
Basic			14,259,753				14,131,422								14,246,701				14,108,747
Diluted			14,377,476				14,428,117								14,401,740				14,434,232
Underwriting Ratios
Loss Ratio			60.7	%			63.7	%							60.3	%			64.3	%
Expense Ratio			34.6	%			34.0	%							33.5	%			33.5	%
Combined Ratio			95.3	%			97.7	%							93.8	%			97.8	%
Balance Sheet Data		June 30,				March 31,								June 30,				Dec. 31,
		2014				2014								2014				2013
Stockholders’ equity		$	972,080			$	936,834				3.8	%		$	972,080			$	902,212				7.7	%
Book value per share		$	68.16			$	65.72				3.7	%		$	68.16			$	63.54				7.3	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share data)

 

		June 30,				December 31,
		2014				2013
		(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2014, $2,177,094; 2013, $2,036,999)		$	2,220,855			$	2,047,873
Equity securities, available-for-sale, at fair value (cost: 2014, $148,412; 2013, $118,804)			180,486				143,954
Short-term investments, at cost which approximates fair value			226,237				296,250
Cash			72,604				86,509
Total investments and cash			2,700,182				2,574,586
Premiums receivable			417,122				325,025
Prepaid reinsurance premiums			246,699				247,822
Reinsurance recoverable on paid losses			42,074				38,384
Reinsurance recoverable on unpaid losses and loss adjustment expenses			841,981				822,438
Deferred policy acquisition costs			76,975				67,007
Accrued investment income			14,579				13,866
Goodwill and other intangible assets			7,218				7,177
Current income tax receivable, net			7,149				9,918
Deferred income tax, net			17,307				28,187
Other assets			44,445				35,042
Total assets		$	4,415,731			$	4,169,452
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses		$	2,137,802			$	2,045,071
Unearned premiums			801,302				714,606
Reinsurance balances payable			159,261				167,252
Senior notes			263,373				263,308
Payable for investments purchased			18,615				7,624
Accounts payable and other liabilities			63,298				69,379
Total liabilities			3,443,651				3,267,240
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 17,772,359 shares for 2014 and 17,709,876 shares for 2013			1,776				1,770
Additional paid-in capital			339,523				335,546
Treasury stock, at cost (3,511,380 shares for 2014 and 2013)			(155,801	)			(155,801	)
Retained earnings			737,166				692,337
Accumulated other comprehensive income			49,416				28,360
Total stockholders’ equity			972,080				902,212
Total liabilities and stockholders’ equity		$	4,415,731			$	4,169,452

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Comparative Premium Data

($ in thousands)

 

		Three Months												Six Months
		2014				2013				Change				2014				2013				Change
Gross Written Premiums:
Insurance Companies:
Marine		$	48,119			$	43,077				11.7	%		$	100,352			$	93,924				6.8	%
Property Casualty			168,597				152,095				10.8	%			397,953				371,059				7.2	%
Professional Liability			27,013				33,393				–19.1	%			57,222				65,210				–12.2	%
			243,729				228,565				6.6	%			555,527				530,193				4.8	%
Lloyd’s Operations:
Marine			46,005				45,893				0.2	%			108,962				99,537				9.5	%
Property Casualty			37,162				41,217				–9.8	%			70,241				66,275				6.0	%
Professional Liability			21,899				16,453				33.1	%			36,855				29,345				25.6	%
			105,066				103,563				1.5	%			216,058				195,157				10.7	%
Total		$	348,795			$	332,128				5.0	%		$	771,585			$	725,350				6.4	%
		Three Months												Six Months
		2014				2013				Change				2014				2013				Change
Net Written Premiums:
Insurance Companies:
Marine		$	35,357			$	27,366				29.2	%		$	76,481			$	68,507				11.6	%
Property Casualty			119,633				90,711				31.9	%			291,994				240,662				21.3	%
Professional Liability			19,051				25,303				–24.7	%			39,517				50,530				–21.8	%
			174,041				143,380				21.4	%			407,992				359,699				13.4	%
Lloyd’s Operations:
Marine			29,562				34,060				–13.2	%			81,693				73,618				11.0	%
Property Casualty			14,392				12,181				18.2	%			30,926				19,493				58.7	%
Professional Liability			13,869				8,848				56.7	%			23,103				15,111				52.9	%
			57,823				55,089				5.0	%			135,722				108,222				25.4	%
Total		$	231,864			$	198,469				16.8	%		$	543,714			$	467,921				16.2	%
		Three Months												Six Months
		2014				2013				Change				2014				2013				Change
Net Earned Premiums:
Insurance Companies:
Marine		$	31,752			$	31,798				–0.1	%		$	64,512			$	68,523				–5.9	%
Property Casualty			124,695				99,477				25.4	%			235,521				192,195				22.5	%
Professional Liability			21,965				25,272				–13.1	%			44,263				50,160				–11.8	%
			178,412				156,547				14.0	%			344,296				310,878				10.7	%
Lloyd’s Operations:
Marine			32,213				34,623				–7.0	%			71,100				68,668				3.5	%
Property Casualty			11,463				8,562				33.9	%			24,421				16,441				48.5	%
Professional Liability			8,996				6,082				47.9	%			16,539				12,155				36.1	%
			52,672				49,267				6.9	%			112,060				97,264				15.2	%
Total		$	231,084			$	205,814				12.3	%		$	456,356			$	408,142				11.8	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

June 30, 2014

($ in thousands)

 

		Insurance Companies				Lloyd’s Operations				Corporate (1)				Total
Gross written premiums		$	243,729			$	105,066			$	—			$	348,795
Net written premiums			174,041			$	57,823				—				231,864
Net earned premiums			178,412			$	52,672				—				231,084
Net losses and loss adjustment expenses			(108,502	)			(31,718	)			—				(140,220	)
Commission expenses			(23,021	)			(9,675	)			546				(32,150	)
Other operating expenses			(34,415	)			(13,577	)			—				(47,992	)
Other underwriting income (expense)			768				13				(546	)			235
Underwriting profit (loss)			13,242				(2,285	)			—				10,957
Net investment income			13,805				1,824				19				15,648
Net realized gains (losses)			4,458				15				—				4,473
Interest expense			—				—				(4,319	)			(4,319	)
Other income (expense)			(68	)			(1,832	)			—				(1,900	)
Income (loss) before income taxes			31,437				(2,278	)			(4,300	)			24,859
Income tax expense (benefit)			10,049				(672	)			(1,379	)			7,998
Net income (loss)		$	21,388			$	(1,606	)		$	(2,921	)		$	16,861
Losses and loss adjustment expenses ratio			60.8	%			60.2	%							60.7	%
Commission expense ratio			12.9	%			18.4	%							13.9	%
Other operating expense ratio (2)			18.9	%			25.7	%							20.7	%
Combined ratio			92.6	%			104.3	%							95.3	%

 

(1)	The Corporate segment includes intercompany eliminations.

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

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

June 30, 2013

($ in thousands)

 

		Insurance Companies				Lloyd’s Operations				Corporate (1)				Total
Gross written premiums		$	228,565			$	103,563			$	—			$	332,128
Net written premiums			143,380				55,089				—				198,469
Net earned premiums			156,547				49,267				—				205,814
Net losses and loss adjustment expenses			(106,668	)			(24,480	)			—				(131,148	)
Commission expenses			(20,573	)			(8,335	)			517				(28,391	)
Other operating expenses			(29,829	)			(10,849	)			—				(40,678	)
Other income (expense)			689				(1,087	)			(517	)			(915	)
Underwriting profit (loss)			166				4,516				—				4,682
Net investment income			12,515				1,728				3				14,246
Net realized gains (losses)			3,099				242				4				3,345
Interest expense			—				—				(2,052	)			(2,052	)
Income (loss) before income taxes			15,780				6,486				(2,045	)			20,221
Income tax expense (benefit)			4,785				2,206				(707	)			6,284
Net income (loss)		$	10,995			$	4,280			$	(1,338	)		$	13,937
Losses and loss adjustment expenses ratio			68.1	%			49.7	%							63.7	%
Commission expense ratio			13.1	%			16.9	%							13.8	%
Other operating expense ratio (2)			18.7	%			24.2	%							20.2	%
Combined ratio			99.9	%			90.8	%							97.7	%

 

(1)	The Corporate segment includes intercompany eliminations.

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

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Six Months Ended

June 30, 2014

($ in thousands)

 

		Insurance Companies				Lloyd’s Operations				Corporate (1)				Total
Gross written premiums		$	555,527			$	216,058			$	—			$	771,585
Net written premiums			407,992			$	135,722				—				543,714
Net earned premiums			344,296			$	112,060				—				456,356
Net losses and loss adjustment expenses			(214,929	)			(60,358	)			—				(275,287	)
Commission expenses			(39,731	)			(19,201	)			1,055				(57,877	)
Other operating expenses			(67,802	)			(27,336	)			—				(95,138	)
Other underwriting income (expense)			1,426				19				(1,055	)			390
Underwriting profit (loss)			23,260				5,184				—				28,444
Net investment income			28,582				3,639				37				32,258
Net realized gains (losses)			5,695				(389	)			—				5,306
Interest expense			—				—				(8,171	)			(8,171	)
Other income (expense)			(19	)			8,363				—				8,344
Income (loss) before income taxes			57,518				16,797				(8,134	)			66,181
Income tax expense (benefit)			18,161				5,966				(2,775	)			21,352
Net income (loss)		$	39,357			$	10,831			$	(5,359	)		$	44,829
Losses and loss adjustment expenses ratio			62.4	%			53.9	%							60.3	%
Commission expense ratio			11.5	%			17.1	%							12.7	%
Other operating expense ratio (2)			19.3	%			24.4	%							20.8	%
Combined ratio			93.2	%			95.4	%							93.8	%

 

(1)	The Corporate segment includes intercompany eliminations.

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

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Six Months Ended

June 30, 2013

($ in thousands)

 

		Insurance Companies				Lloyd’s Operations				Corporate (1)				Total
Gross written premiums		$	530,193			$	195,157			$	—			$	725,350
Net written premiums			359,699				108,222				—				467,921
Net earned premiums			310,878				97,264				—				408,142
Net losses and loss adjustment expenses			(213,653	)			(48,837	)			—				(262,490	)
Commission expenses			(39,090	)			(16,956	)			1,100				(54,946	)
Other operating expenses			(59,172	)			(22,380	)			—				(81,552	)
Other income (expense)			1,348				(545	)			(1,100	)			(297	)
Underwriting profit (loss)			311				8,546				—				8,857
Net investment income			24,466				3,430				7				27,903
Net realized gains (losses)			7,891				222				4				8,117
Interest expense			—								(4,103	)			(4,103	)
Income (loss) before income taxes			32,668				12,198				(4,092	)			40,774
Income tax expense (benefit)			10,199				4,242				(1,514	)			12,927
Net income (loss)		$	22,469			$	7,956			$	(2,578	)		$	27,847
Losses and loss adjustment expenses ratio			68.7	%			50.2	%							64.3	%
Commission expense ratio			12.6	%			17.4	%							13.5	%
Other operating expense ratio (2)			18.6	%			23.6	%							20.0	%
Combined ratio			99.9	%			91.2	%							97.8	%

 

(1)	The Corporate segment includes intercompany eliminations.

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

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

		Three Months Ended June 30, 2014
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	31,752			$	11,166			$	12,487			$	8,099				35.2	%			39.3	%			74.5	%
Property Casualty			124,695				87,415				35,895				1,385				70.1	%			28.8	%			98.9	%
Professional Liability			21,965				9,921				8,286				3,758				45.2	%			37.7	%			82.9	%
Total Insurance Companies			178,412				108,502				56,668				13,242				60.8	%			31.8	%			92.6	%
Lloyd’s Operations:
Marine			32,213				24,213				14,738				(6,738	)			75.2	%			45.7	%			120.9	%
Property Casualty			11,463				5,129				5,196				1,138				44.7	%			45.4	%			90.1	%
Professional Liability			8,996				2,376				3,305				3,315				26.4	%			36.7	%			63.1	%
Total Lloyd’s			52,672				31,718				23,239				(2,285	)			60.2	%			44.1	%			104.3	%
Total All		$	231,084			$	140,220			$	79,907			$	10,957				60.7	%			34.6	%			95.3	%
		Three Months Ended June 30, 2013
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	31,798			$	17,295			$	13,124			$	1,379				54.4	%			41.3	%			95.7	%
Property Casualty			99,477				70,757				27,999				721				71.1	%			28.2	%			99.3	%
Professional Liability			25,272				18,616				8,590				(1,934	)			73.7	%			34.0	%			107.7	%
Total Insurance Companies			156,547				106,668				49,713				166				68.1	%			31.8	%			99.9	%
Lloyd’s Operations:
Marine			34,623				18,218				14,914				1,491				52.6	%			43.1	%			95.7	%
Property Casualty			8,562				6,795				3,272				(1,505	)			79.4	%			38.2	%			117.6	%
Professional Liability			6,082				(533	)			2,085				4,530				–8.8	%			34.3	%			25.5	%
Total Lloyd’s			49,267				24,480				20,271				4,516				49.7	%			41.1	%			90.8	%
Total All		$	205,814			$	131,148			$	69,984			$	4,682				63.7	%			34.0	%			97.7	%

 

		Amounts								Loss Ratio
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Net Incurred Loss Activity For the Three Months Ended:
Insurance Companies:
Loss and LAE payments		$	77,300			$	100,920				43.3	%			64.4	%
Change in reserves			31,202				5,748				17.5	%			3.7	%
Net incurred loss and LAE			108,502				106,668				60.8	%			68.1	%
Lloyd’s Operations:
Loss and LAE payments			26,322				27,428				50.0	%			55.7	%
Change in reserves			5,396				(2,948	)			10.2	%			–6.0	%
Net incurred loss and LAE			31,718				24,480				60.2	%			49.7	%
Total
Loss and LAE payments			103,622				128,348				44.9	%			62.3	%
Change in reserves			36,598				2,800				15.8	%			1.4	%
Net incurred loss and LAE		$	140,220			$	131,148				60.7	%			63.7	%
		Amounts								Loss Ratio Impact
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Three Months Ended:
Insurance Companies		$	13,852			$	(7,747	)			6.0	%			–3.8	%
Lloyd’s Operations			6,663				5,834				2.9	%			2.8	%
Total		$	20,515			$	(1,913	)			8.9	%			–1.0	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

		Six Months Ended June 30, 2014
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	64,512			$	28,574			$	22,929			$	13,009				44.3	%			35.5	%			79.8	%
Property Casualty			235,521				162,520				66,853				6,148				69.0	%			28.4	%			97.4	%
Professional Liability			44,263				23,835				16,325				4,103				53.8	%			36.9	%			90.7	%
Total Insurance Companies			344,296				214,929				106,107				23,260				62.4	%			30.8	%			93.2	%
Lloyd’s Operations:
Marine			71,100				43,643				29,863				(2,406	)			61.4	%			42.0	%			103.4	%
Property Casualty			24,421				9,755				10,005				4,661				39.9	%			41.0	%			80.9	%
Professional Liability			16,539				6,960				6,650				2,929				42.1	%			40.2	%			82.3	%
Total Lloyd’s			112,060				60,358				46,518				5,184				53.9	%			41.5	%			95.4	%
Total All		$	456,356			$	275,287			$	152,625			$	28,444				60.3	%			33.5	%			93.8	%

 

		Six Months Ended June 30, 2013
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	68,523			$	40,680			$	25,952			$	1,891				59.4	%			37.8	%			97.2	%
Property Casualty			192,195				131,995				54,641				5,559				68.7	%			28.4	%			97.1	%
Professional Liability			50,160				40,978				16,321				(7,139	)			81.7	%			32.5	%			114.2	%
Total Insurance Companies			310,878				213,653				96,914				311				68.7	%			31.2	%			99.9	%
Lloyd’s Operations:
Marine			68,668				37,055				28,026				3,587				54.0	%			40.8	%			94.8	%
Property Casualty			16,441				7,546				7,681				1,214				45.9	%			46.7	%			92.6	%
Professional Liability			12,155				4,236				4,174				3,745				34.9	%			34.3	%			69.2	%
Total Lloyd’s			97,264				48,837				39,881				8,546				50.2	%			41.0	%			91.2	%
Total All		$	408,142			$	262,490			$	136,795			$	8,857				64.3	%			33.5	%			97.8	%

 

		Amounts								Loss Ratio
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Net Incurred Loss Activity For the Six Months Ended:
Insurance Companies:
Loss and LAE payments		$	152,210			$	180,824				44.2	%			58.1	%
Change in reserves			62,719				32,829				18.2	%			10.6	%
Net incurred loss and LAE			214,929				213,653				62.4	%			68.7	%
Lloyd’s Operations:
Loss and LAE payments			52,075				57,890				46.5	%			59.5	%
Change in reserves			8,283				(9,053	)			7.4	%			–9.3	%
Net incurred loss and LAE			60,358				48,837				53.9	%			50.2	%
Total
Loss and LAE payments			204,285				238,714				44.7	%			58.5	%
Change in reserves			71,002				23,776				15.6	%			5.8	%
Net incurred loss and LAE		$	275,287			$	262,490				60.3	%			64.3	%
		Amounts								Loss Ratio Impact
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Six Months Ended:
Insurance Companies		$	13,304			$	(15,477	)			2.9	%			–3.8	%
Lloyd’s Operations			7,249				9,481				1.6	%			2.3	%
Total		$	20,553			$	(5,996	)			4.5	%			–1.5	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

($ in thousands)

 

		Case Reserves				IBNR Reserves				Total
Net Loss Reserves, June 30, 2014:
Insurance Companies:
Marine		$	124,743			$	92,972			$	217,715
Property Casualty			174,784				427,244				602,028
Professional Liability			57,892				87,702				145,594
Total Insurance Companies			357,419				607,918				965,337
Lloyd’s Operations:
Marine			140,580				85,807			$	226,387
Property Casualty			29,038				15,567				44,605
Professional Liability			13,227				46,265				59,492
Total Lloyd’s Operations			182,845				147,639				330,484
Total Net Loss Reserves		$	540,264			$	755,557			$	1,295,821

 

		Case Reserves				IBNR Reserves				Total
Net Loss Reserves, December 31, 2013
Insurance Companies:
Marine		$	122,909			$	101,077			$	223,986
Property Casualty			150,477				377,173				527,650
Professional Liability			61,117				89,865				150,982
Total Insurance Companies			334,503				568,115				902,618
Lloyd’s Operations:
Marine			133,060				85,685				218,745
Property Casualty			25,870				18,271				44,141
Professional Liability			14,013				43,116				57,129
Total Lloyd’s Operations			172,943				147,072				320,015
Total Net Loss Reserves		$	507,446			$	715,187			$	1,222,633

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Page 14

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

June 30, 2014

As of June 30, 2014, 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 June 30, 2014, the Company owned two asset-backed securities approximating $0.5 million with subprime mortgage exposures. The securities have an effective maturity of 3.4 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $1.8 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.4 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.

The following table sets forth our cash and investments as of June 30, 2014:

 

June 30, 2014		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		$	421,891			$	4,313			$	(4,339	)		$	421,917
States, municipalities and political subdivisions			564,782				15,833				(2,883	)			551,832
Mortgage- and asset-backed securities:
Agency mortgage-backed securities			256,407				8,289				(1,753	)			249,871
Residential mortgage obligations			60,867				1,832				(101	)			59,136
Asset-backed securities			162,529				598				(381	)			162,312
Commercial mortgage-backed securities			184,946				8,071				(131	)			177,006
Subtotal			664,749				18,790				(2,366	)			648,325
Corporate bonds			569,433				15,572				(1,159	)			555,020
Total fixed maturities			2,220,855				54,508				(10,747	)			2,177,094
Equity securities - common stocks			144,977				31,262				(964	)			114,679
Equity securities - preferred stocks			35,509				1,799				(23	)			33,733
Short-term investments			226,237				—				—				226,237
Cash			72,604				—				—				72,604
Total		$	2,700,182			$	87,569			$	(11,734	)		$	2,624,347

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

June 30, 2014

($ in thousands)

The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at June 30, 2013:

 

		Fair Value				Gross Unrealized Gains				Gross Unrealized (Losses)				Cost or Amortized Cost
Agency mortgage-backed securities:
GNMA		$	93,447			$	3,219			$	(1,233	)		$	91,461
FNMA			118,923				3,731				(486	)			115,678
FHLMC			44,037				1,339				(34	)			42,732
Total		$	256,407			$	8,289			$	(1,753	)		$	249,871

 

		Fair Value				Gross Unrealized Gains				Gross Unrealized (Losses)				Cost or Amortized Cost
Residential mortgage obligations:
Prime		$	38,041			$	1,106			$	(78	)		$	37,013
Alt-A			1,845				117				(23	)			1,751
Subprime			465				16				—				449
Non-US RMBS			20,516				593				—				19,923
Total		$	60,867			$	1,832			$	(101	)		$	59,136