Exhibit 99.1

 

		The Navigators Group, Inc.

CORPORATE NEWS

Navigators Reports Fourth Quarter and Full Year 2014

Earnings, Record Earnings Per Share

Stamford, CT – February 11, 2015 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $19.3 million, or $1.31 per diluted share, for the three months ended December 31, 2014 compared to $14.3 million, or $1.00 per diluted share, for the comparable period in 2013. Net operating earnings were $18.4 million, or $1.25 per diluted share, for the fourth quarter of 2014 compared to $16.1 million, or $1.13 per diluted share, for the comparable period in 2013.

For the twelve months ended December 31, 2014, the Company reported net income of $95.3 million, or $6.51 per diluted share compared to $63.5 million, or $4.42 per diluted share, for the comparable period in 2013. Net operating earnings were $80.5 million, or $5.49 per diluted share, for the twelve months ended December 31, 2014 compared to $61.7 million, or $4.30 per diluted share, for the comparable period in 2013.

Gross written premiums and net written premiums for the three months ended December 31, 2014 were $333.3 million and $228.0 million, respectively, an increase of 0.1% and 2.0% from the comparable period in 2013.

Gross written premiums and net written premiums for the twelve months ended December 31, 2014 were $1.4 billion and $1.0 billion, respectively, an increase of 4.5% and 12.6% from the comparable period in 2013.

The combined loss and expense ratio for the three and twelve months ended December 31, 2014 was 93.8% and 92.6%, respectively, compared to 94.0% and 94.8% for the comparable periods in 2013.

“Our profitable fourth quarter results capped an excellent year for Navigators, as we achieved our eighth consecutive quarter of underwriting profit,” said Stan Galanski, President and Chief Executive Officer. “We are pleased with our 2014 financial performance in which book value per share increased by 13.2%, the combined ratio improved to 92.6% and diluted earnings per share increased by 47.1% to a record $6.51.”

Stockholders’ equity was $1.0 billion, or $71.93 per share, as of December 31, 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 twelve months ended December 31, 2014 was $16.1 million and $64.2 million, respectively, an increase of 12.7% and 14.1% from the comparable periods in 2013. The annualized pre-tax investment yield, excluding net realized gains and losses, was 2.3% for both the three and twelve months ended December 31, 2014, compared to 2.3% and 2.4% for each of the comparable periods in 2013. The effective tax rate on net investment income for the three and twelve months ended December 31, 2014 was 27.2% and 27.4%, respectively.

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 December 31, 2014. As of December 31, 2014, net unrealized gains within our investment portfolio were $71.4 million, an increase of $35.4 million compared to December 31, 2013.

There were $0.8 million and $12.8 million of net realized gains, including other-than-temporary impairment losses recognized in earnings, for the three and twelve months ended December 31, 2014, respectively, compared to $15.2 million and $20.5 million for the same periods in 2013.

Other income for the twelve months ended December 31, 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 twelve months ended December 31, 2014 was $41.1 million and $222.5 million, respectively, compared to $6.9 million and $136.9 million for the comparable periods in 2013.

The Company will hold a conference call on Thursday, February 12, 2015 starting at 8:30 a.m. ET to discuss the 2014 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 (888-428-9473) and the international dial-in is (719) 325-2495. Participants may connect to the webcast at:

http://edge.media-server.com/m/p/vprqdsnq

Net operating earnings, or net income excluding after-tax net realized gains (losses), after-tax 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												Twelve Months Ended
		December 31,												December 31,
Results of Operations		2014				2013				Change				2014				2013				Change
Gross written premiums		$	333,299			$	333,091				0.1	%		$	1,432,353			$	1,370,517				4.5	%
Net written premiums			228,007				223,445				2.0	%			1,000,138				887,922				12.6	%
Revenues:
Net earned premiums			234,172				219,902				6.5	%			935,895				841,939				11.2	%
Net investment income			16,071				14,254				12.7	%			64,168				56,251				14.1	%
Total other-than-temporary impairment losses			(21	)			(530	)			-96.0	%			137				(2,393	)			NM
Portion of loss recognized in other comprehensive income (before tax)			21				—				NM				(137	)			—				NM
Net other-than-temporary impairment losses recognized in earnings			—				(530	)			NM				—				(2,393	)			NM
Net realized gains (losses)			788				15,768				-95.0	%			12,812				22,939				-44.1	%
Other income			586				(665	)			NM				10,656				(1,172	)			NM
Total revenues			251,617				248,729				1.2	%			1,023,531				917,564				11.5	%
Expenses:
Net losses and loss adjustment expenses			134,658				131,385				2.5	%			545,229				518,961				5.1	%
Commission expenses			33,708				30,863				9.2	%			125,528				113,494				10.6	%
Other operating expenses			51,299				43,826				17.1	%			196,825				164,434				19.7	%
Call premium on Senior Notes			—				17,895				NM				—				17,895				NM
Interest expense			3,854				4,351				-11.4	%			15,413				10,507				46.7	%
Total expenses			223,519				228,320				-2.1	%			882,995				825,291				7.0	%
Income before income taxes			28,098				20,409				37.7	%			140,536				92,273				52.3	%
Income tax expense (benefit)			8,823				6,076				45.2	%			45,207				28,807				56.9	%
Net income (loss)		$	19,275			$	14,333				34.5	%		$	95,329			$	63,466				50.2	%
Per Share Data
Net income per common share:
Basic		$	1.35			$	1.01				33.5	%		$	6.69			$	4.49				48.9	%
Diluted		$	1.31			$	1.00				30.6	%		$	6.51			$	4.42				47.1	%
Average common shares outstanding:
Basic			14,280,045				14,172,908								14,259,768				14,133,925
Diluted			14,715,265				14,434,137								14,646,369				14,345,553
Underwriting Ratios
Loss Ratio			57.5	%			59.7	%							58.3	%			61.6	%
Expense Ratio			36.3	%			34.3	%							34.3	%			33.2	%
Combined Ratio			93.8	%			94.0	%							92.6	%			94.8	%
Balance Sheet Data		Dec. 31, 2014				Sep. 30, 2014								Dec. 31, 2014				Dec. 31, 2013
Stockholders’ equity		$	1,027,224			$	996,593				3.1	%		$	1,027,224			$	902,212				13.9	%
Book value per share		$	71.93			$	69.85				3.0	%		$	71.93			$	63.54				13.2	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share data)

 

		December 31,				December 31,
		2014				2013
		(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2014, $2,323,959; 2013, $2,036,999)		$	2,365,934			$	2,047,873
Equity securities, available-for-sale, at fair value (cost: 2014, $154,843; 2013, $118,804)			184,295				143,954
Short-term investments, at fair value (amortized cost: 2014: $179,527; 2013: $296,250)			179,506				296,250
Cash			90,751				86,509
Total investments and cash			2,820,486				2,574,586
Premiums receivable			342,479				325,025
Prepaid reinsurance premiums			237,851				247,822
Reinsurance recoverable on paid losses			51,347				38,384
Reinsurance recoverable on unpaid losses and loss adjustment expenses			851,498				822,438
Deferred policy acquisition costs			79,452				67,007
Accrued investment income			14,791				13,866
Goodwill and other intangible assets			7,013				7,177
Current income tax receivable, net			14,549				14,299
Deferred income tax, net			—				23,806
Receivable for investments sold			326				3
Other assets			44,384				35,039
Total assets		$	4,464,176			$	4,169,452
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses		$	2,159,634			$	2,045,071
Unearned premiums			766,167				714,606
Reinsurance balances payable			152,774				167,252
Senior notes			263,440				263,308
Deferred income tax, net			1,467				—
Payable for investments purchased			134				7,624
Accounts payable and other liabilities			93,336				69,379
Total liabilities			3,436,952				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 17,792,846 shares for 2014 and 17,709,876 shares for 2013			1,778				1,770
Additional paid-in capital			347,022				335,546
Treasury stock, at cost (3,511,380 shares for 2014 and 2013)			(155,801	)			(155,801	)
Retained earnings			787,666				692,337
Accumulated other comprehensive income			46,559				28,360
Total stockholders’ equity			1,027,224				902,212
Total liabilities and stockholders’ equity		$	4,464,176			$	4,169,452

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Comparative Premium Data

($ in thousands)

 

		Three Months												Twelve Months
Gross Written Premiums:		2014				2013				Change				2014				2013				Change
Insurance Companies:
Marine		$	38,285			$	38,986				-1.8	%		$	177,363			$	171,822				3.2	%
Property Casualty			182,238				172,800				5.5	%			755,059				700,087				7.9	%
Professional Liability			26,922				32,687				-17.6	%			113,032				130,366				-13.3	%
			247,445				244,473				1.2	%			1,045,454				1,002,275				4.3	%
Lloyd’s Operations:
Marine			40,577				45,500				-10.8	%			188,107				181,046				3.9	%
Property Casualty			24,603				27,378				-10.1	%			126,016				129,522				-2.7	%
Professional Liability			20,674				15,740				31.3	%			72,776				57,674				26.2	%
			85,854				88,618				-3.1	%			386,899				368,242				5.1	%
Total		$	333,299			$	333,091				0.1	%		$	1,432,353			$	1,370,517				4.5	%
Net Written Premiums:		Three Months												Twelve Months
		2014				2013				Change				2014				2013				Change
Insurance Companies:
Marine		$	22,970			$	24,893				-7.7	%		$	123,617			$	119,837				3.2	%
Property Casualty			136,185				124,727				9.2	%			554,844				462,942				19.9	%
Professional Liability			13,142				21,399				-38.6	%			74,312				97,229				-23.6	%
			172,297				171,019				0.7	%			752,773				680,008				10.7	%
Lloyd’s Operations:
Marine			30,389				34,214				-11.2	%			144,327				134,627				7.2	%
Property Casualty			11,233				9,080				23.7	%			55,917				42,334				32.1	%
Professional Liability			14,088				9,132				54.3	%			47,121				30,953				52.2	%
			55,710				52,426				6.3	%			247,365				207,914				19.0	%
Total		$	228,007			$	223,445				2.0	%		$	1,000,138			$	887,922				12.6	%
Net Earned Premiums:		Three Months												Twelve Months
		2014				2013				Change				2014				2013				Change
Insurance Companies:
Marine		$	27,568			$	29,263				-5.8	%		$	123,203			$	129,276				-4.7	%
Property Casualty			131,141				111,526				17.6	%			496,209				409,480				21.2	%
Professional Liability			19,518				24,709				-21.0	%			85,162				100,582				-15.3	%
			178,227				165,498				7.7	%			704,574				639,338				10.2	%
Lloyd’s Operations:
Marine			31,003				35,758				-13.3	%			141,471				138,690				2.0	%
Property Casualty			13,937				10,809				28.9	%			51,338				37,722				36.1	%
Professional Liability			11,005				7,837				40.4	%			38,512				26,189				47.1	%
			55,945				54,404				2.8	%			231,321				202,601				14.2	%
Total		$	234,172			$	219,902				6.5	%		$	935,895			$	841,939				11.2	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

December 31, 2014

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	247,445			$	85,854			$	—			$	333,299
Net written premiums			172,297				55,710				—				228,007
Net earned premiums			178,227				55,945				—				234,172
Net losses and loss adjustment expenses			(111,042	)			(23,616	)			—				(134,658	)
Commission expenses			(22,701	)			(11,569	)			562				(33,708	)
Other operating expenses			(35,712	)			(15,587	)			—				(51,299	)
Other underwriting income (expense)			645				15				(562	)			98
Underwriting profit (loss)			9,417				5,188				—				14,605
Net investment income			14,161				1,890				20				16,071
Net realized gains (losses)			347				441				—				788
Call premium on Senior Notes			—				—				—				—
Interest expense			—				—				(3,854	)			(3,854	)
Other income (expense)			(1,063	)			1,551				—				488
Income (loss) before income taxes			22,862				9,070				(3,834	)			28,098
Income tax expense (benefit)			6,959				3,132				(1,268	)			8,823
Net income (loss)		$	15,903			$	5,938			$	(2,566	)		$	19,275
Losses and loss adjustment expenses ratio			62.3	%			42.2	%							57.5	%
Commission expense ratio			12.7	%			20.7	%							14.4	%
Other operating expense ratio (2)			19.7	%			27.8	%							21.9	%
Combined ratio			94.7	%			90.7	%							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

Three Months Ended

December 31, 2013

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	244,473			$	88,618			$	—			$	333,091
Net written premiums			171,019				52,426				—				223,445
Net earned premiums			165,498				54,404				—				219,902
Net losses and loss adjustment expenses			(106,445	)			(24,940	)			—				(131,385	)
Commission expenses			(22,003	)			(9,465	)			605				(30,863	)
Other operating expenses			(32,238	)			(11,588	)			—				(43,826	)
Other underwriting income (expense)			461				(521	)			(605	)			(665	)
Underwriting profit (loss)			5,273				7,890				—				13,163
Net investment income			12,332				1,923				(1	)			14,254
Net realized gains (losses)			14,599				639				—				15,238
Call premium on Senior Notes			—				—				(17,895	)			(17,895	)
Interest expense			—				—				(4,351	)			(4,351	)
Other income (expense)			—				—				—				—
Income (loss) before income taxes			32,204				10,452				(22,247	)			20,409
Income tax expense (benefit)			10,411				3,608				(7,943	)			6,076
Net income (loss)		$	21,793			$	6,844			$	(14,304	)		$	14,333
Losses and loss adjustment expenses ratio			64.3	%			45.8	%							59.7	%
Commission expense ratio			13.3	%			17.4	%							14.0	%
Other operating expense ratio (2)			19.2	%			22.3	%							20.3	%
Combined ratio			96.8	%			85.5	%							94.0	%

 

(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

Twelve Months Ended

December 31, 2014

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	1,045,454			$	386,899			$	—			$	1,432,353
Net written premiums			752,773				247,365				—				1,000,138
Net earned premiums			704,574				231,321				—				935,895
Net losses and loss adjustment expenses			(434,396	)			(110,833	)			—				(545,229	)
Commission expenses			(85,137	)			(42,558	)			2,167				(125,528	)
Other operating expenses			(138,675	)			(58,150	)			—				(196,825	)
Other underwriting income (expense)			2,727				35				(2,167	)			595
Underwriting profit (loss)			49,093				19,815				—				68,908
Net investment income			56,714				7,378				76				64,168
Net realized gains (losses)			12,715				97				—				12,812
Call premium on Senior Notes			—				—				—				—
Interest expense			—				—				(15,413	)			(15,413	)
Other income (expense)			(2,182	)			12,243				—				10,061
Income (loss) before income taxes			116,340				39,533				(15,337	)			140,536
Income tax expense (benefit)			36,609				13,885				(5,287	)			45,207
Net income (loss)		$	79,731				25,648			$	(10,050	)		$	95,329
Losses and loss adjustment expenses ratio			61.7	%			47.9	%							58.3	%
Commission expense ratio			12.1	%			18.4	%							13.4	%
Other operating expense ratio (2)			19.2	%			25.1	%							20.9	%
Combined ratio			93.0	%			91.4	%							92.6	%

 

(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

Twelve Months Ended

December 31, 2013

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	1,002,275			$	368,242			$	—			$	1,370,517
Net written premiums			680,008				207,914				—				887,922
Net earned premiums			639,338				202,601				—				841,939
Net losses and loss adjustment expenses			(415,413	)			(103,548	)			—				(518,961	)
Commission expenses			(81,132	)			(34,710	)			2,348				(113,494	)
Other operating expenses			(119,920	)			(44,514	)			—				(164,434	)
Other underwriting income (expense)			2,764				(1,588	)			(2,348	)			(1,172	)
Underwriting profit (loss)			25,637				18,241				—				43,878
Net investment income			49,083				7,160				8				56,251
Net realized gains (losses)			20,600				(58	)			4				20,546
Call premium on Senior Notes			—				—				(17,895	)			(17,895	)
Interest expense			—				—				(10,507	)			(10,507	)
Other income (expense)			—				—				—				—
Income (loss) before income taxes			95,320				25,343				(28,390	)			92,273
Income tax expense (benefit)			29,965				8,728				(9,886	)			28,807
Net income (loss)		$	65,355			$	16,615			$	(18,504	)		$	63,466
Losses and loss adjustment expenses ratio			65.0	%			51.1	%							61.6	%
Commission expense ratio			12.7	%			17.1	%							13.5	%
Other operating expense ratio (2)			18.3	%			22.8	%							19.7	%
Combined ratio			96.0	%			91.0	%							94.8	%

 

(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 December 31, 2014
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	27,568			$	4,515			$	11,283			$	11,770				16.4	%			40.9	%			57.3	%
Property Casualty			131,141				93,759				38,107				(725	)			71.5	%			29.1	%			100.6	%
Professional Liability			19,518				12,768				8,378				(1,628	)			65.4	%			42.9	%			108.3	%
Total Insurance Companies			178,227				111,042				57,768				9,417				62.3	%			32.4	%			94.7	%
Lloyd’s Operations:
Marine			31,003				14,537				15,141				1,325				46.9	%			48.8	%			95.7	%
Property Casualty			13,937				3,220				7,407				3,310				23.1	%			53.2	%			76.3	%
Professional Liability			11,005				5,859				4,593				553				53.2	%			41.8	%			95.0	%
Total Lloyd’s			55,945				23,616				27,141				5,188				42.2	%			48.5	%			90.7	%
Total All		$	234,172			$	134,658			$	84,909			$	14,605				57.5	%			36.3	%			93.8	%
		Three Months Ended December 31, 2013
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	29,263			$	7,192			$	13,257			$	8,814				24.6	%			45.3	%			69.9	%
Property Casualty			111,526				84,379				31,816				(4,669	)			75.7	%			28.5	%			104.2	%
Professional Liability			24,709				14,874				8,707				1,128				60.2	%			35.2	%			95.4	%
Total Insurance Companies			165,498				106,445				53,780				5,273				64.3	%			32.5	%			96.8	%
Lloyd’s Operations:
Marine			35,758				17,270				15,111				3,377				48.3	%			42.3	%			90.6	%
Property Casualty			10,809				2,645				3,957				4,207				24.5	%			36.6	%			61.1	%
Professional Liability			7,837				5,025				2,506				306				64.1	%			32.0	%			96.1	%
Total Lloyd’s			54,404				24,940				21,574				7,890				45.8	%			39.7	%			85.5	%
Total All		$	219,902			$	131,385			$	75,354			$	13,163				59.7	%			34.3	%			94.0	%

 

		Amounts								Loss Ratio
Net Incurred Loss Activity For the Three Months Ended:		Dec. 31, 2014				Dec. 31, 2013				Dec. 31, 2014				Dec. 31, 2013
Insurance Companies:
Loss and LAE payments		$	106,984			$	135,161				60.0	%			81.7	%
Change in reserves			4,058				(28,716	)			2.3	%			-17.4	%
Net incurred loss and LAE			111,042				106,445				62.3	%			64.3	%
Lloyd’s Operations:
Loss and LAE payments			34,984				29,424				62.5	%			54.1	%
Change in reserves			(11,368	)			(4,484	)			-20.3	%			-8.3	%
Net incurred loss and LAE			23,616				24,940				42.2	%			45.8	%
Total
Loss and LAE payments			141,968				164,585				60.6	%			74.8	%
Change in reserves			(7,310	)			(33,200	)			-3.1	%			-15.1	%
Net incurred loss and LAE		$	134,658			$	131,385				57.5	%			59.7	%
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Three Months Ended:		Amounts								Loss Ratio Impact
		Dec. 31, 2014				Dec. 31, 2013				Dec. 31, 2014				Dec. 31, 2013
Insurance Companies		$	7,038			$	(1,047	)			3.0	%			-0.5	%
Lloyd’s Operations			12,751				624				5.4	%			0.3	%
Total		$	19,789			$	(423	)			8.4	%			-0.2	%

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

		Twelve Months Ended December 31, 2014
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	123,203			$	46,169			$	46,226			$	30,808				37.5	%			37.5	%			75.0	%
Property Casualty			496,209				337,961				142,131				16,117				68.1	%			28.7	%			96.8	%
Professional Liability			85,162				50,266				32,728				2,168				59.0	%			38.5	%			97.5	%
Total Insurance Companies			704,574				434,396				221,085				49,093				61.7	%			31.3	%			93.0	%
Lloyd’s Operations:
Marine			141,471				74,569				60,633				6,269				52.7	%			42.9	%			95.6	%
Property Casualty			51,338				17,235				24,517				9,586				33.6	%			47.7	%			81.3	%
Professional Liability			38,512				19,029				15,523				3,960				49.4	%			40.3	%			89.7	%
Total Lloyd’s			231,321				110,833				100,673				19,815				47.9	%			43.5	%			91.4	%
Total All		$	935,895			$	545,229			$	321,758			$	68,908				58.3	%			34.3	%			92.6	%
		Twelve Months Ended December 31, 2013
		Net Earned Premiums				Losses and LAE Incurred				Underwriting Expenses				Underwriting Profit (Loss)				Loss Ratio				Expense Ratio				Combined Ratio
Insurance Companies:
Marine		$	129,276			$	62,617			$	50,206			$	16,453				48.4	%			38.9	%			87.3	%
Property Casualty			409,480				280,530				114,660				14,290				68.5	%			28.0	%			96.5	%
Professional Liability			100,582				72,266				33,422				(5,106	)			71.8	%			33.3	%			105.1	%
Total Insurance Companies			639,338				415,413				198,288				25,637				65.0	%			31.0	%			96.0	%
Lloyd’s Operations:
Marine			138,690				76,454				56,377				5,859				55.1	%			40.7	%			95.8	%
Property Casualty			37,722				13,852				16,066				7,804				36.7	%			42.6	%			79.3	%
Professional Liability			26,189				13,242				8,369				4,578				50.6	%			31.9	%			82.5	%
Total Lloyd’s			202,601				103,548				80,812				18,241				51.1	%			39.9	%			91.0	%
Total All		$	841,939			$	518,961			$	279,100			$	43,878				61.6	%			33.2	%			94.8	%

 

		Amounts								Loss Ratio
Net Incurred Loss Activity For the Twelve Months Ended:		Dec. 31, 2014				Dec. 31, 2013				Dec. 31, 2014				Dec. 31, 2013
Insurance Companies:
Loss and LAE payments		$	344,093			$	398,993				48.9	%			62.4	%
Change in reserves			90,303				16,420				12.8	%			2.6	%
Net incurred loss and LAE			434,396				415,413				61.7	%			65.0	%
Lloyd’s Operations:
Loss and LAE payments			110,240				114,350				47.6	%			56.4	%
Change in reserves			593				(10,802	)			0.3	%			-5.3	%
Net incurred loss and LAE			110,833				103,548				47.9	%			51.1	%
Total
Loss and LAE payments			454,333				513,343				48.6	%			61.0	%
Change in reserves			90,896				5,618				9.7	%			0.6	%
Net incurred loss and LAE		$	545,229			$	518,961				58.3	%			61.6	%
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Twelve Months Ended:		Amounts								Loss Ratio Impact
		Dec. 31, 2014				Dec. 31, 2013				Dec. 31, 2014				Dec. 31, 2013
Insurance Companies		$	30,312			$	(13,430	)			3.2	%			-1.6	%
Lloyd’s Operations			25,500				14,696				2.7	%			1.7	%
Total		$	55,812			$	1,266				5.9	%			0.1	%

 

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

($ in thousands)

 

Net Loss Reserves, December 31, 2014:		Case Reserves				IBNR Reserves				Total
Insurance Companies:
Marine		$	116,652			$	78,091			$	194,743
Property Casualty			176,016				479,304				655,320
Professional Liability			56,594				86,264				142,858
Total Insurance Companies			349,262				643,659				992,921
Lloyd’s Operations:
Marine			145,366				69,095			$	214,461
Property Casualty			22,376				17,187				39,563
Professional Liability			12,374				48,817				61,191
Total Lloyd’s Operations			180,116				135,099				315,215
Total Net Loss Reserves		$	529,378			$	778,758			$	1,308,136
Net Loss Reserves, December 31, 2013		Case Reserves				IBNR Reserves				Total
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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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

December 31, 2014

As of December 31, 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) or asset backed commercial paper.

As of December 31, 2014, the Company owned two collateralized mortgage obligations approximating $0.4 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 $1.7 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.5 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 December 31, 2014:

 

December 31, 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		$	397,923			$	3,431			$	(5,965	)		$	400,457
States, municipalities and political subdivisions			541,007				19,204				(558	)			522,361
Mortgage- and asset-backed securities:
Agency mortgage-backed securities			364,622				8,476				(998	)			357,144
Residential mortgage obligations			34,087				1,153				(138	)			33,072
Asset-backed securities			206,413				380				(964	)			206,997
Commercial mortgage-backed securities			206,318				6,630				(98	)			199,786
Subtotal			811,440				16,639				(2,198	)			796,999
Corporate bonds			615,564				13,048				(1,626	)			604,142
Total fixed maturities			2,365,934				52,322				(10,347	)			2,323,959
Equity securities - common stocks			127,183				28,520				(1,254	)			99,917
Equity securities - preferred stocks			57,112				2,236				(50	)			54,926
Short-term investments			179,506				—				(21	)			179,527
Cash			90,751				—				—				90,751
Total		$	2,820,486			$	83,078			$	(11,672	)		$	2,749,080

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

December 31, 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 December 31, 2014:

 

Agency mortgage-backed securities:		Fair Value				Gross Unrealized Gains				Gross Unrealized (Losses)				Cost or Amortized Cost
GNMA		$	83,452			$	2,865			$	(772	)		$	81,359
FNMA			216,133				4,059				(162	)			212,236
FHLMC			65,037				1,552				(64	)			63,549
Total		$	364,622			$	8,476			$	(998	)		$	357,144
Residential mortgage obligations:		Fair Value				Gross Unrealized Gains				Gross Unrealized (Losses)				Cost or Amortized Cost
Prime		$	13,457			$	548			$	(117	)		$	13,026
Alt-A			1,738				116				(21	)			1,643
Subprime			390				14				—				376
Non-US RMBS			18,502				475				—				18,027
Total		$	34,087			$	1,153			$	(138	)		$	33,072