NAVIGATORS GROUP INC - FORM 10-Q

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EX-11.1 - EX-11.1 - NAVIGATORS GROUP INC	navg-ex111_11.htm
EX-32.2 - EX-32.2 - NAVIGATORS GROUP INC	navg-ex322_15.htm
EX-31.2 - EX-31.2 - NAVIGATORS GROUP INC	navg-ex312_13.htm
EX-32.1 - EX-32.1 - NAVIGATORS GROUP INC	navg-ex321_14.htm
EX-31.1 - EX-31.1 - NAVIGATORS GROUP INC	navg-ex311_12.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2015

o	Transitional Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 0-15886

The Navigators Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3138397
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

400 Atlantic Street, Stamford, Connecticut		06901
(Address of principal executive offices)		(Zip Code)

(203) 905-6090

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso No x

The number of common shares outstanding as of October 28, 2015 was 14,416,060.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

INDEX

Contents


PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Balance Sheets (Unaudited) – September 30, 2015 and December 31, 2014	3
Consolidated Statements of Income (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014	4
Consolidated Statements of Comprehensive Income (Unaudited) – Three and Nine Months Ended September 30, 2015 and 2014	5
Consolidated Statement of Stockholders’ Equity (Unaudited) – Nine Months Ended September 30, 2015	6
Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2015 and 2014	7
Notes to Interim Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures about Market Risk	42
Item 4. Controls and Procedures	42
PART II - OTHER INFORMATION	43
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3. Defaults Upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
Index to Exhibits	46

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

amounts in thousands, except share and per share amounts	September 30,			December 31,
	2015			2014
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2015: $2,367,172; 2014: $2,323,959)	$	2,396,987		$	2,365,934
Equity securities, available-for-sale, at fair value (cost: 2015: $265,760; 2014: $154,843)		274,928			184,295
Short-term investments, at fair value (amortized cost: 2015: $233,109; 2014: $179,527)		233,142			179,506
Cash		69,483			90,751
Total investments and cash	$	2,974,540		$	2,820,486

Premiums receivable	$	343,214		$	342,479
Prepaid reinsurance premiums		252,488			237,851
Reinsurance recoverable on paid losses		53,174			51,347
Reinsurance recoverable on unpaid losses and loss adjustment expenses		794,235			851,498
Deferred policy acquisition costs		88,959			79,452
Accrued investment income		16,130			14,791
Goodwill and other intangible assets		6,906			7,013
Current income tax receivable, net		14,011			14,549
Deferred income tax, net		9,955			—
Receivable for investments sold		2,727			326
Other assets		40,188			44,384
Total assets	$	4,596,527		$	4,464,176

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses	$	2,175,317		$	2,159,634
Unearned premiums		847,403			766,167
Reinsurance balances payable		133,542			152,774
Senior notes		263,544			263,440
Deferred income tax, net		—			1,467
Payable for investments purchased		31,000			134
Accounts payable and other liabilities		68,866			93,336
Total liabilities	$	3,519,672		$	3,436,952

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 17,926,323 shares for 2015 and 17,792,846 shares for 2014		1,792			1,778
Additional paid-in capital		354,527			347,022
Treasury stock, at cost (3,511,380 shares for 2015 and 2014)		(155,801	)		(155,801	)
Retained earnings		850,980			787,666
Accumulated other comprehensive income		25,357			46,559
Total stockholders' equity	$	1,076,855		$	1,027,224
Total liabilities and stockholders' equity	$	4,596,527		$	4,464,176

See accompanying Notes to Interim Consolidated Financial Statements.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

amounts in thousands, except share and per share amounts	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Gross written premiums	$	354,062		$	327,469		$	1,129,993		$	1,099,054
Revenues:
Net written premiums		251,939			228,417			799,141			772,131
Change in unearned premiums		2,143			16,950			(66,599	)		(70,408	)
Net earned premiums		254,082			245,367			732,542			701,723
Net investment income		17,371			15,839			50,219			48,097
Net realized gains (losses):
Total other-than-temporary impairment losses		(1,298	)		(41	)		(1,747	)		158
Portion of loss recognized in other comprehensive income (before tax)		23			41			49			(158	)
Net other-than-temporary impairment losses recognized in earnings		(1,275	)		—			(1,698	)		—
Other realized gains (losses)		518			6,718			10,453			12,024
Net realized gains (losses)		(757	)		6,718			8,755			12,024
Other income (loss)		(2,518	)		1,336			(4,638	)		10,070
Total revenues	$	268,178		$	269,260		$	786,878		$	771,914

Expenses:
Net losses and loss adjustment expenses	$	146,546		$	135,284		$	418,717		$	410,571
Commission expenses		34,253			33,943			98,638			91,820
Other operating expenses		56,599			50,388			164,297			145,526
Interest expense		3,856			3,388			11,567			11,559
Total expenses		241,254			223,003			693,219			659,476

Income before income taxes		26,924			46,257			93,659			112,438
Income tax expense		8,723			15,032			30,345			36,384

Net income	$	18,201		$	31,225		$	63,314		$	76,054

Net income per common share:
Basic	$	1.26		$	2.19		$	4.40		$	5.34
Diluted	$	1.23		$	2.14		$	4.29		$	5.22

Average common shares outstanding:
Basic		14,411,927			14,265,260			14,384,291			14,252,910
Diluted		14,811,095			14,613,744			14,767,949			14,577,297

See accompanying Notes to Interim Consolidated Financial Statements.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

amounts in thousands	Three Months Ended September 30,
	2015			2014
Net income	$	18,201		$	31,225
Other comprehensive income:
Change in net unrealized gains (losses) on investments:
Unrealized gains (losses) on investments arising during the period, net of deferred tax of $(549) and $8,231 in 2015 and 2014, respectively		1,018			(15,405	)
Reclassification adjustment for net realized (gains) losses included in net income net of deferred tax of $293 and $2,581 in 2015 and 2014, respectively		(544	)		4,794
Change in net unrealized gains (losses) on investments	$	474		$	(10,611	)

Change in other-than-temporary impairments:
Non credit other-than-temporary impairments arising during the period, net of deferred tax of $8 and $14 in 2015 and 2014, respectively		(15	)		(27	)
Reclassification adjustment for other-than-temporary impairment credit losses recognized in net income net of deferred tax of $(101) in 2015 and $0 in 2014		188			—
Change in other-than-temporary impairments	$	173		$	(27	)

Change in foreign currency translation gains (losses), net of deferred tax of $(1) and $0 in 2015 and 2014, respectively		1			41
Other comprehensive income (loss)	$	648		$	(10,597	)
Comprehensive income (loss)	$	18,849		$	20,628

	Nine Months Ended September 30,
	2015			2014
Net income	$	63,314		$	76,054
Other comprehensive income:
Change in net unrealized gains (losses) on investments:
Unrealized gains (losses) on investments arising during the period, net of deferred tax of $9,858 and $4,951 in 2015 and 2014, respectively	$	(18,765	)	$	9,576
Reclassification adjustment for net realized (gains) losses included in net income net of deferred tax of $1,472 and $3,088 in 2015 and 2014, respectively		(2,733	)		5,736
Change in net unrealized gains (losses) on investments	$	(21,498	)	$	15,312

Change in other-than-temporary impairments:
Non credit other-than-temporary impairments arising during the period, net of deferred tax of $17 and $55 in 2015 and 2014, respectively	$	(32	)	$	103
Reclassification adjustment for other-than-temporary impairment credit losses recognized in net income net of deferred tax of $(170) in 2015 and $0 in 2014		316			—
Change in other-than-temporary impairments	$	284		$	103

Change in foreign currency translation gains (losses), net of deferred tax of $6 and $2,800 in 2015 and 2014, respectively		12			(4,956	)
Other comprehensive income (loss)	$	(21,202	)	$	10,459
Comprehensive income (loss)	$	42,112		$	86,513

See accompanying Notes to Interim Consolidated Financial Statements.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)

amounts in thousands, except share amounts					Additional										Accumulated Other			Total
	Common Stock				Paid-in			Treasury Stock					Retained		Comprehensive			Stockholders'
	Shares		Amount		Capital			Shares		Amount			Earnings		Income (Loss)			Equity
Balance, December 31, 2014		17,792,846	$	1,778	$	347,022			3,511,380	$	(155,801	)	$	787,666	$	46,559		$	1,027,224
Net income														63,314		—			63,314
Changes in other comprehensive income:

Change in net unrealized gain (loss) on investments		—		—		—			—		—			—		(21,182	)		(21,182	)

Change in net non-credit other-than-temporary impairment losses		—		—		—			—		—			—		(32	)		(32	)

Change in foreign currency translation gain (loss)		—		—		—			—		—			—		12			12
Total other comprehensive income (loss)		—		—		—			—		—			—		(21,202	)		(21,202	)
Shares issued under stock plan		133,477		14		(3,004	)		—		—			—					(2,990	)
Share-based compensation		—		—		10,509			—		—			—					10,509
Balance, September 30, 2015		17,926,323	$	1,792	$	354,527			3,511,380	$	(155,801	)	$	850,980	$	25,357		$	1,076,855

See accompanying Notes to Interim Consolidated Financial Statements.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

amounts in thousands	Nine Months Ended September 30,
	2015			2014
Operating activities:
Net income	$	63,314		$	76,054
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation & amortization		3,892			3,544
Deferred income taxes		(185	)		8,500
Net realized (gains) losses		(10,453	)		(12,024	)
Net other-than-temporary impairments recognized in earnings		1,698			—
Changes in assets and liabilities:
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses		55,436			(39,087	)
Reserves for losses and loss adjustment expenses		15,683			123,903
Prepaid reinsurance premiums		(14,637	)		11,089
Unearned premiums		81,237			58,920
Premiums receivable		(735	)		(38,028	)
Deferred policy acquisition costs		(9,507	)		(9,261	)
Accrued investment income		(1,338	)		(1,209	)
Reinsurance balances payable		(18,993	)		(9,941	)
Current income tax payable, net		411			7,080
Other		(6,679	)		1,841
Net cash provided by (used in) operating activities	$	159,144		$	181,381

Investing activities:
Fixed maturities
Redemptions and maturities	$	126,930		$	162,931
Sales		266,707			313,218
Purchases		(446,516	)		(718,693	)
Equity securities
Sales		76,388			54,828
Purchases		(178,517	)		(65,691	)
Change in payable for securities		28,465			24,231
Net change in short-term investments		(53,747	)		40,610
Purchase of property and equipment		(1,503	)		(5,522	)
Net cash provided by (used in) investing activities	$	(181,793	)	$	(194,088	)

Financing activities:
Proceeds of stock issued from employee stock purchase plan	$	1,352		$	453
Proceeds of stock issued from exercise of stock options		29			153
Net cash provided by (used in) financing activities	$	1,381		$	606

Change in cash	$	(21,268	)	$	(12,101	)
Cash at beginning of year		90,751			86,509
Cash at end of period	$	69,483		$	74,408

Supplemental cash information:
Income taxes paid, net	$	28,634		$	19,864
Interest paid	$	7,619		$	8,084
Issuance of stock to directors	$	563		$	438

See accompanying Notes to Interim Consolidated Financial Statements.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements (Unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Unless the context requires otherwise, the terms “we,” “us,” “our,” or “our Company” are used to mean The Navigators Group, Inc., a Delaware holding company established in 1982, and its subsidiaries. The terms “Parent” or “Parent Company” are used to mean The Navigators Group, Inc. without its subsidiaries.

Organization

We are an international insurance company with a long-standing area of specialization in Marine insurance. Our Property and Casualty (“P&C”) insurance business primarily offers General Liability coverage and Umbrella & Excess Liability coverage to commercial enterprises through our Primary and Excess Casualty divisions. We have also developed niches in Professional Liability insurance, through our Management Liability and Errors & Omissions (“E&O”) divisions. Beginning in 2010, we added reinsurance products through our Assumed Reinsurance division.

We operate through various wholly-owned subsidiaries, including Navigators Insurance Company, inclusive of its United Kingdom Branch (“U.K. Branch”), and Navigators Specialty Insurance Company, both of which are U.S. insurance companies, and Navigators Underwriting Agency Ltd., a Lloyd’s of London (“Lloyd’s”) underwriting agency that manages Lloyd’s Syndicate 1221 (“the Syndicate”) in the U.K. Our Company controls 100% of the Syndicate’s stamp capacity.

Basis of Presentation

The accompanying Interim Consolidated Financial Statements are unaudited and reflect all adjustments, which, in the opinion of management, are necessary to fairly present the results of The Navigators Group, Inc. and its subsidiaries for the interim periods presented on the basis of United States generally accepted accounting principles (“GAAP” or “U.S. GAAP”). All significant intercompany transactions and balances have been eliminated in consolidation. The preparation of these Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Financial Statements and the reported revenues and expenses during the reporting periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The Interim Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014. Certain amounts for the prior year have been reclassified to conform with the current period presentation.

Foreign Exchange Remeasurement and Translation

During the first quarter of 2014, the Syndicate revised its foreign exchange accounting methodology from reporting its financial position and results using three functional currencies (GBP, USD and CAD) to one functional currency (USD). The USD was chosen as the single functional currency as the majority of the Syndicate’s insurance business has been and continues to be transacted in USD. This cumulative change in remeasurement has resulted in an immaterial correction of $10.0 million ($6.6 million after-tax) in Accumulated other comprehensive income (“AOCI”), on the Consolidated Balance Sheets, offset by a gain in Other income (loss) in the Consolidated Statements of Income.

Income Taxes

The income tax provision has been computed based on our estimated annual effective tax rate. Our effective tax rate for the quarter differs from the federal tax rate of 35% principally because of tax-exempt investment income and dividends received deduction.

Current and Pending Accounting Pronouncements

As of January 1, 2015, we did not adopt any new accounting pronouncements. In 2015, the Financial Accounting Standards Board issued the following new pronouncements that may have an impact on our Company and we are assessing the future impact of these updates to our Consolidated Financial Statements:

Accounting Standards Update 2015-03 – Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs, which will be effective for fiscal years beginning after December 15, 2015. The new pronouncement was issued to simplify presentation of debt issuance costs.

Accounting Standards Update 2015-05 – Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40) Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which will be effective for fiscal years beginning after December 15, 2015. The new pronouncement was issued to provide guidance to customers about whether a cloud computing arrangement includes a software license.

Accounting Standards Update 2015-07 – Fair Value Measurement – (Topic 820) Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its equivalent) (a consensus of the Emerging Issues Task Force), which will be effective for fiscal years beginning after December 15, 2015. The new pronouncement was issued to ensure that all investments categorized in the fair value hierarchy are classified using a consistent approach.

Accounting Standards Update 2015-09 – Financial Services Insurance – (Topic 944) Disclosures about Short-Duration Contracts, effective for annual periods beginning after December 15, 2015. The new pronouncement was issued to (1) increase the usefulness of the information about a reporting entity’s insurance liabilities, including the nature, amount, timing, and uncertainty of cash flows related to those liabilities and the effect of those cash flows on the Statements of Comprehensive Income and (2) improve comparability between reporting entities, regardless of the type of entity issuing the contract.

Accounting Standards Update 2015-12 – Plan Accounting: Defined Benefit Pension Plans, Defined Contribution Pension Plans, Health and Welfare Plans, effective for annual periods beginning after December 15, 2015. This update was issued to reduce complexity in employee benefit plan accounting. This update designates contract value as the only required measure for fully benefit-responsive investment contracts, which maintains the relevant information while reducing the cost and complexity of reporting for fully benefit-responsive investment contracts.

Accounting Standards Update 2015-14 – Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, effective for annual periods beginning after December 15, 2017. In response to stakeholders’ request to defer the effective date of the guidance in Update 2014-09 and in consideration of feedback received through extensive outreach with preparers, practitioners, and users of financial statements, the Board issued this proposed update. The amendments in this update defer the effective date of Update 2014-09 for all entities by one year.

Accounting Standards Update 2015-15 – Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, effective for annual periods beginning after December 15, 2015. This update changed the wording in Subtopic 835-30 for the imputation of interest. Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangements.

There were no additional pending accounting pronouncements that are expected to have a significant impact on the Consolidated Financial Statements upon adoption.

Note 2. Segment Information

During the first quarter of 2015, we realigned our reporting segments from Insurance Companies, Lloyd’s Operations and Corporate to U.S. Insurance, International Insurance (“Int’l Insurance”), Global Reinsurance (“GlobalRe”) and Corporate. The new segment presentation reflects an increase in the level of importance that the Chief Operating Decision Maker now places on the results of the underlying operating segments when aggregated and reported in alignment with the products and services offered to the marketplace versus when aggregated and reported in alignment with our legal entity structure. Over the past few years, we have been monitoring the growth and stability of our reinsurance business and in 2015 determined that reinsurance has become a stable and significant component of our Company. We are also increasing our focus on additional international insurance markets by establishing underwriting offices in Continental Europe. The offices were fully operational during our January 2015 renewal season. We considered these changes in conjunction with operating and reportable segments.

Our previously reported segments were consistent with our legal entity structure; however, our new reporting segments are now primarily reflective of where our business is written. We reclassified our international business from our previously reported Lloyd’s Operations segment to the Int’l Insurance segment. We also reclassified our non-Lloyd’s business written internationally (primarily business written by the U.K. Branch) into this segment and have excluded Assumed Reinsurance. Our new GlobalRe segment was previously reported within our U.S. Insurance and Lloyd’s Operations segments as Assumed Reinsurance. Our U.S. Insurance segment now excludes the U.K. Branch and Assumed Reinsurance. Our Corporate segment now includes Net investment income, Net realized gains (losses), Interest expense, Other income (loss) primarily consisting of foreign exchange gain (loss) and Income tax (expense) benefit, which are not allocated to the U.S. Insurance, Int’l Insurance and GlobalRe segments (together, “underwriting segments”). We do not allocate assets under the new reporting segments, as it is impracticable to do so.

As noted above, we classify our business into three underwriting segments (U.S. Insurance, Int’l Insurance and GlobalRe) and a Corporate Segment. Both the U.S. Insurance and Int’l Insurance reporting segments are each comprised of three operating segments: Marine, P&C and Professional Liability.

We evaluate the performance of each of the underwriting segments based on underwriting results. Underwriting results are measured based on underwriting profit or loss and the related Combined ratio, which are both non-GAAP measures of underwriting profitability. Underwriting profit or loss is calculated from Net earned premiums less the sum of Net losses and loss adjustment expenses (“LAE”), Commission expenses, Other operating expenses and Other underwriting income (expense). The Combined ratio is derived by dividing the sum of Net losses and LAE, Commission expenses, Other operating expenses and Other underwriting income (expense) by Net earned premiums. A Combined ratio of less than 100% indicates an underwriting profit and greater than 100% indicates an underwriting loss. Our underwriting performance is evaluated separately from the rest of our operations. The performance of our investment portfolios, our liquidity and capital resource needs, our foreign currency exposure and our tax planning strategies are evaluated on a consolidated basis within our Corporate segment.

The accounting policies used to prepare the segment reporting data for our reportable segments are the same as those described in Note 1 and Note 3 of our Annual Report on Form 10-K for the year ended December 31, 2014. In addition, 2014 data presented in this Quarterly Report has been recast to align with the new segment reporting described above.

Financial data by segment for the three and nine months ended September 30, 2015 and 2014 was as follows:

	Three Months Ended September 30, 2015
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	142,409		$	68,533		$	43,140		$	—		$	254,082
Net losses and LAE		(85,140	)		(39,182	)		(22,224	)		—			(146,546	)
Commission expenses		(15,157	)		(12,780	)		(7,705	)		1,389			(34,253	)
Other operating expenses		(32,948	)		(19,937	)		(3,714	)		—			(56,599	)
Other underwriting income (expense)		1,013			—			395			(1,389	)		19
Underwriting profit (loss)	$	10,177		$	(3,366	)	$	9,892		$	—		$	16,703
Net investment income											17,371			17,371
Net realized gains (losses)											(757	)		(757	)
Interest expense											(3,856	)		(3,856	)
Other income (loss)											(2,537	)		(2,537	)
Income before income taxes	$	10,177		$	(3,366	)	$	9,892		$	10,221		$	26,924
Income tax (expense) benefit											(8,723	)		(8,723	)
Net income (loss)													$	18,201
Losses and LAE ratio		59.8	%		57.2	%		51.5	%					57.7	%
Commission expense ratio		10.6	%		18.6	%		17.9	%					13.5	%
Other operating expense ratio ⁽²⁾		22.5	%		29.1	%		7.7	%					22.2	%
Combined ratio		92.9	%		104.9	%		77.1	%					93.4	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Three Months Ended September 30, 2014
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	130,420		$	66,278		$	48,669		$	—		$	245,367
Net losses and LAE		(80,722	)		(24,910	)		(29,652	)		—			(135,284	)
Commission expenses		(12,870	)		(12,792	)		(8,831	)		550			(33,943	)
Other operating expenses		(29,160	)		(17,288	)		(3,940	)		—			(50,388	)
Other underwriting income (expense)		534			1			122			(550	)		107
Underwriting profit (loss)	$	8,202		$	11,289		$	6,368		$	—		$	25,859
Net investment income											15,839			15,839
Net realized gains (losses)											6,718			6,718
Interest expense											(3,388	)		(3,388	)
Other income (loss)											1,229			1,229
Income before income taxes	$	8,202		$	11,289		$	6,368		$	20,398		$	46,257
Income tax (expense) benefit											(15,032	)		(15,032	)
Net income (loss)													$	31,225
Losses and LAE ratio		61.9	%		37.6	%		60.9	%					55.1	%
Commission expense ratio		9.9	%		19.3	%		18.1	%					13.8	%
Other operating expense ratio ⁽²⁾		21.9	%		26.1	%		7.9	%					20.6	%
Combined ratio		93.7	%		83.0	%		86.9	%					89.5	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Nine Months Ended September 30, 2015
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	410,804		$	197,244		$	124,494		$	—		$	732,542
Net losses and LAE		(247,094	)		(101,236	)		(70,387	)		—			(418,717	)
Commission expenses		(41,777	)		(35,491	)		(23,042	)		1,672			(98,638	)
Other operating expenses		(98,010	)		(54,312	)		(11,975	)		—			(164,297	)
Other underwriting income (expense)		1,330			—			441			(1,672	)		99
Underwriting profit (loss)	$	25,253		$	6,205		$	19,531		$	—		$	50,989
Net investment income											50,219			50,219
Net realized gains (losses)											8,755			8,755
Interest expense											(11,567	)		(11,567	)
Other income (loss)											(4,737	)		(4,737	)
Income (loss) before income taxes	$	25,253		$	6,205		$	19,531		$	42,670		$	93,659
Income tax (expense) benefit											(30,345	)		(30,345	)
Net income (loss)													$	63,314
Losses and LAE ratio		60.1	%		51.3	%		56.5	%					57.2	%
Commission expense ratio		10.2	%		18.0	%		18.5	%					13.5	%
Other operating expense ratio ⁽²⁾		23.6	%		27.6	%		9.3	%					22.3	%
Combined ratio		93.9	%		96.9	%		84.3	%					93.0	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Nine Months Ended September 30, 2014
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	370,864		$	187,993		$	142,866		$	—		$	701,723
Net losses and LAE		(226,817	)		(91,423	)		(92,331	)		—			(410,571	)
Commission expenses		(35,598	)		(32,656	)		(25,171	)		1,605			(91,820	)
Other operating expenses		(85,993	)		(47,783	)		(11,750	)		—			(145,526	)
Other underwriting income (expense)		1,783			18			301			(1,605	)		497
Underwriting profit (loss)	$	24,239		$	16,149		$	13,915		$	—		$	54,303
Net investment income											48,097			48,097
Net realized gains (losses)											12,024			12,024
Interest expense											(11,559	)		(11,559	)
Other income (loss)											9,573			9,573
Income (loss) before income taxes	$	24,239		$	16,149		$	13,915		$	58,135		$	112,438
Income tax (expense) benefit											(36,384	)		(36,384	)
Net income (loss)													$	76,054
Losses and LAE ratio		61.2	%		48.6	%		64.6	%					58.5	%
Commission expense ratio		9.6	%		17.4	%		17.6	%					13.1	%
Other operating expense ratio ⁽²⁾		22.7	%		25.4	%		8.1	%					20.7	%
Combined ratio		93.5	%		91.4	%		90.3	%					92.3	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

Revenue by operating segment for the three and nine months ended September 30, 2015 and 2014 was as follows:

	Three months ended September 30, 2015									Three months ended September 30, 2014									% Change
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums			Ceded written premiums			Net written premiums			Net earned premiums
U.S. Insurance
Marine	$	35,529	$	(13,865	)	$	21,664	$	24,292	$	34,576	$	(13,338	)	$	21,238	$	27,207		2.8	%		4.0	%		2.0	%		(10.7	%)
P&C		154,009		(34,902	)		119,107		104,473		138,181		(41,180	)		97,001		82,635		11.5	%		(15.2	%)		22.8	%		26.4	%
Professional Liability		29,245		(14,986	)		14,259		13,644		26,966		(7,136	)		19,830		20,578		8.5	%		110.0	%		(28.1	%)		(33.7	%)
Total	$	218,783	$	(63,753	)	$	155,030	$	142,409	$	199,723	$	(61,654	)	$	138,069	$	130,420		9.5	%		3.4	%		12.3	%		9.2	%

Int'l Insurance
Marine	$	41,002	$	(10,985	)	$	30,017	$	36,792	$	41,593	$	(6,924	)	$	34,669	$	40,207		(1.4	%)		58.7	%		(13.4	%)		(8.5	%)
P&C		37,449		(20,034	)		17,415		16,879		35,399		(24,267	)		11,132		14,300		5.8	%		(17.4	%)		56.4	%		18.0	%
Professional Liability		20,337		(6,785	)		13,552		14,862		17,169		(5,416	)		11,753		11,771		18.5	%		25.3	%		15.3	%		26.3	%
Total	$	98,788	$	(37,804	)	$	60,984	$	68,533	$	94,161	$	(36,607	)	$	57,554	$	66,278		4.9	%		3.3	%		6.0	%		3.4	%

GlobalRe	$	36,491	$	(566	)	$	35,925	$	43,140	$	33,585	$	(791	)	$	32,794	$	48,669		8.7	%		(28.4	%)		9.5	%		(11.4	%)

Total	$	354,062	$	(102,123	)	$	251,939	$	254,082	$	327,469	$	(99,052	)	$	228,417	$	245,367		8.1	%		3.1	%		10.3	%		3.6	%

	Nine months ended September 30, 2015									Nine months ended September 30, 2014									% Change
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums			Ceded written premiums			Net written premiums			Net earned premiums
U.S. Insurance
Marine	$	118,167	$	(45,177	)	$	72,990	$	74,193	$	120,149	$	(34,095	)	$	86,054	$	81,920		(1.6	%)		32.5	%		(15.2	%)		(9.4	%)
P&C		458,371		(123,765	)		334,606		291,648		400,437		(127,788	)		272,649		224,151		14.5	%		(3.1	%)		22.7	%		30.1	%
Professional Liability		81,559		(42,423	)		39,136		44,963		84,188		(24,841	)		59,347		64,793		(3.1	%)		70.8	%		(34.1	%)		(30.6	%)
Total	$	658,097	$	(211,365	)	$	446,732	$	410,804	$	604,774	$	(186,724	)	$	418,050	$	370,864		8.8	%		13.2	%		6.9	%		10.8	%

Int'l Insurance
Marine	$	149,844	$	(30,933	)	$	118,911	$	114,716	$	151,107	$	(36,351	)	$	114,756	$	112,428		(0.8	%)		(14.9	%)		3.6	%		2.0	%
P&C		112,014		(60,676	)		51,338		43,112		128,954		(80,015	)		48,939		47,207		(13.1	%)		(24.2	%)		4.9	%		(8.7	%)
Professional Liability		68,147		(22,072	)		46,075		39,416		54,024		(19,168	)		34,856		28,358		26.1	%		15.2	%		32.2	%		39.0	%
Total	$	330,005	$	(113,681	)	$	216,324	$	197,244	$	334,085	$	(135,534	)	$	198,551	$	187,993		(1.2	%)		(16.1	%)		9.0	%		4.9	%

GlobalRe	$	141,891	$	(5,806	)	$	136,085	$	124,494	$	160,195	$	(4,665	)	$	155,530	$	142,866		(11.4	%)		24.5	%		(12.5	%)		(12.9	%)

Total	$	1,129,993	$	(330,852	)	$	799,141	$	732,542	$	1,099,054	$	(326,923	)	$	772,131	$	701,723		2.8	%		1.2	%		3.5	%		4.4	%

Note 3. Investments

The following tables set forth our Company’s investments as of September 30, 2015 and December 31, 2014 and include Other-than-temporary-impairment (“OTTI”) securities recognized within AOCI:

	As of September 30, 2015
			Gross		Gross			Cost or
	Fair		Unrealized		Unrealized			Amortized
amounts in thousands	Value		Gains		(Losses)			Cost
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	301,915	$	4,327	$	(8,812	)	$	306,400
States, municipalities and political subdivisions		571,104		17,402		(927	)		554,629
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		360,198		7,200		(912	)		353,910
Residential mortgage obligations		31,568		854		(104	)		30,818
Asset-backed securities		197,934		591		(846	)		198,189
Commercial mortgage-backed securities		204,876		5,335		(958	)		200,499
Subtotal	$	794,576	$	13,980	$	(2,820	)	$	783,416
Corporate bonds		729,392		10,776		(4,111	)		722,727
Total fixed maturities	$	2,396,987	$	46,485	$	(16,670	)	$	2,367,172
Equity securities		274,928		16,486		(7,318	)		265,760
Short-term investments		233,142		33		—			233,109
Total investments	$	2,905,057	$	63,004	$	(23,988	)	$	2,866,041

	As of December 31, 2014
			Gross		Gross			Cost or
	Fair		Unrealized		Unrealized			Amortized
amounts in thousands	Value		Gains		(Losses)			Cost
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-backed 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		184,295		30,756		(1,304	)		154,843
Short-term investments		179,506		—		(21	)		179,527
Total investments	$	2,729,735	$	83,078	$	(11,672	)	$	2,658,329

As of September 30, 2015 and December 31, 2014, our Company did not have a concentration of greater than 5% of invested assets in a single non-U.S. government-backed issuer.

As of September 30, 2015 and December 31, 2014, Fixed maturities for which non-credit OTTI was previously recognized and included in AOCI are now in an unrealized gains position of $0.6 million and $0.7 million, respectively.

The fair value of our Company’s investment portfolio may fluctuate significantly in response to various factors such as changes in interest rates, investment quality ratings, equity prices, foreign exchange rates and credit spreads. Our Company does not have the intent to sell nor is it more likely than not that it will have to sell Fixed maturities in unrealized loss positions that are not other-than-temporarily impaired before recovery. For structured securities, default probability and severity assumptions differ based on property type, vintage and the stress of the collateral. Our Company does not intend to sell, and it is more likely than not that our Company will not be required to sell, these securities before the recovery of the amortized cost basis. For Equity securities, our Company also considers our intent to hold securities as part of the process of evaluating whether a decline in fair value represents an other-than-temporary decline in value. Our Company may realize investment losses to the extent our liquidity needs require the disposition of Fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments. Significant changes in the factors our Company considers when evaluating investments for impairment losses could result in a significant change in impairment losses reported in the Consolidated Financial Statements.

The contractual maturity dates for Fixed maturities categorized by the number of years until maturity as of September 30, 2015 are shown in the following table:

	As of September 30, 2015
	Fair		Amortized
amounts in thousands	Value		Cost
Due in one year or less	$	82,515	$	86,268
Due after one year through five years		802,221		794,442
Due after five years through ten years		307,813		302,656
Due after ten years		409,862		400,390
Mortgage-backed and asset-backed securities		794,576		783,416
Total	$	2,396,987	$	2,367,172

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Prepayment assumptions associated with the mortgage-backed and asset-backed securities are reviewed on a periodic basis. When changes in prepayment assumptions are deemed necessary as the result of actual prepayments differing from anticipated prepayments, securities are revalued based upon the new prepayment assumptions utilizing the retrospective accounting method. Due to the periodic repayment of principal, the mortgage-backed and asset-backed securities are estimated to have an effective maturity of approximately 4.6 years.

The following tables summarize all securities in a gross unrealized loss position as of September 30, 2015 and December 31, 2014, showing the aggregate fair value and gross unrealized loss by the length of time those securities have continuously been in a gross unrealized loss position:

	As of September 30, 2015
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
amounts in thousands	Value		(Losses)			Value		(Losses)			Value		(Losses)
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	37,766	$	(1,866	)	$	28,143	$	(6,946	)	$	65,909	$	(8,812	)
States, municipalities and political subdivisions		54,653		(540	)		4,669		(387	)		59,322		(927	)
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		52,009		(259	)		23,259		(653	)		75,268		(912	)
Residential mortgage obligations		5,196		(22	)		1,947		(82	)		7,143		(104	)
Asset-backed securities		28,823		(146	)		78,725		(700	)		107,548		(846	)
Commercial mortgage-backed securities		47,297		(939	)		3,440		(19	)		50,737		(958	)
Subtotal	$	133,325	$	(1,366	)	$	107,371	$	(1,454	)	$	240,696	$	(2,820	)
Corporate bonds		224,426		(3,454	)		17,784		(657	)		242,210		(4,111	)
Total fixed maturities	$	450,170	$	(7,226	)	$	157,967	$	(9,444	)	$	608,137	$	(16,670	)
Equity securities		128,247		(7,318	)		—		—			128,247		(7,318	)
Total fixed maturities and equity securities	$	578,417	$	(14,544	)	$	157,967	$	(9,444	)	$	736,384	$	(23,988	)

	As of December 31, 2014
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
amounts in thousands	Value		(Losses)			Value		(Losses)			Value		(Losses)
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	87,915	$	(1,061	)	$	117,683	$	(4,904	)	$	205,598	$	(5,965	)
States, municipalities and political subdivisions		16,349		(60	)		37,340		(498	)		53,689		(558	)
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		18,881		(80	)		58,301		(918	)		77,182		(998	)
Residential mortgage obligations		5,625		(50	)		1,728		(88	)		7,353		(138	)
Asset-backed securities		110,275		(539	)		34,530		(425	)		144,805		(964	)
Commercial mortgage-backed securities		19,741		(71	)		1,391		(27	)		21,132		(98	)
Subtotal	$	154,522	$	(740	)	$	95,950	$	(1,458	)	$	250,472	$	(2,198	)
Corporate bonds		190,461		(871	)		31,126		(755	)		221,587		(1,626	)
Total fixed maturities	$	449,247	$	(2,732	)	$	282,099	$	(7,615	)	$	731,346	$	(10,347	)
Equity securities		19,690		(1,297	)		238		(7	)		19,928		(1,304	)
Total fixed maturities and equity securities	$	468,937	$	(4,029	)	$	282,337	$	(7,622	)	$	751,274	$	(11,651	)

As of September 30, 2015, there were 252 Fixed maturities and 58 Equity securities in an unrealized loss position. In the above table, the gross unrealized loss for the greater than 12 months category consists primarily of agency and foreign government bonds principally due to an unfavorable foreign exchange movement. As of December 31, 2014, there were 259 Fixed maturities and 15 Equity securities in an unrealized loss position. The gross unrealized loss for the greater than 12 months category consists primarily of Treasury and agency bonds, due to an increase in interest rates and unfavorable foreign exchange movement.

As of September 30, 2015 and December 31, 2014, the largest unrealized loss by a non-government backed issuer in the investment portfolio was $0.7 million and $0.5 million, respectively.

Our Company analyzes impaired securities quarterly to determine if any are other-than-temporary. The above securities with unrealized losses have been determined to be temporarily impaired based on our evaluation. For Fixed maturities, when assessing whether the amortized cost basis of the security will be recovered, our Company compares the present value of cash flows expected to be collected in relation to the current book value. Any shortfalls of the present value of the cash flows expected to be collected to the amortized cost basis is considered the credit loss portion of OTTI losses and is recognized in earnings. All non-credit losses are recognized as changes in OTTI losses within AOCI.

To determine whether the unrealized loss on structured securities is other-than-temporary, our Company analyzes the projections provided by our investment managers with respect to an expected principal loss under a range of scenarios and utilizes the most likely outcomes. The analysis relies on actual collateral performance measures such as default rate, prepayment rate and loss severity. These assumptions are applied throughout the remaining term of the deal, incorporating the transaction structure and priority of payments, to generate loss adjusted cash flows. Results of the analysis will indicate whether the security is expected ultimately to incur a loss or whether there is a material impact on yield due to either a projected loss or a change in cash flow timing. A break-even default rate is also calculated. A comparison of the break-even default rate to the actual default rate provides an indication of the level of cushion or coverage to the first dollar principal loss. For securities in which a tranche loss is present and the net present value of loss adjusted cash flows is less than book value, impairment is recognized. The output data also includes a number of additional metrics such as average life remaining, original and current credit support, over 60 day delinquency and security rating.

The significant inputs used to measure the amount of credit loss recognized in earnings were actual delinquency rates, default probability, severity and prepayment assumptions. Projected losses are a function of both loss severity and probability of default, which differ based on property type, vintage and the stress of the collateral. Our Company does not intend to sell, and it is more likely than not that it will not be required to sell, these securities before the recovery of the amortized cost basis.

For Equity securities, in general, our Company reviews securities with a fair value less than 80% of their cost for six or more consecutive months. If warranted as the result of conditions relating to a particular security, our Company will review significant declines in fair value regardless of the time period involved. Factors considered in evaluating potential impairment include, but are not limited to, the current fair value as compared to cost of the security, the length of time the investment has been below cost and by how much the investment is below cost. If an Equity security is deemed to be other-than-temporarily impaired, the cost is written down to fair value with the loss recognized in earnings.

Our Company’s ability to hold securities is supported by sufficient cash flow from our operations and from maturities within our investment portfolio in order to meet our claims payments and other disbursement obligations arising from our underwriting operations without selling such investments. With respect to securities where the decline in value is determined to be temporary and the security's value is not written down, a subsequent decision may be made to sell that security and realize a loss. Subsequent decisions on security sales are made within the context of overall risk monitoring, changing information and market conditions.

Our Company had three credit related OTTI losses of $1.3 million and $1.7 million in the equity portfolio during the three and nine months ended September 30, 2015, respectively. Our Company did not have any credit related OTTI losses during the three and nine months ended September 30, 2014.

As of September 30, 2015 and 2014, the cumulative amounts related to our Company’s credit loss portion of the OTTI losses on Fixed maturities were $2.4 million and $2.7 million, respectively. There was no activity for the three and nine months ended September 30, 2015 related to these amounts. We sold one bond with a credit loss of $1.5 million during the three and nine months ended September 30, 2014 related to these amounts. Our Company does not intend to sell, and it is more likely than not that it will not be required to sell, the securities prior to recovery of the amortized cost basis and for which the non-credit loss portion is included in AOCI.

Our Company’s Net investment income was derived from the following sources:

	Three Months Ended September 30,						Nine Months Ended September 30,
amounts in thousands	2015			2014			2015			2014
Fixed maturities	$	15,353		$	14,401		$	45,660		$	42,540
Equity securities		2,543			1,956			6,383			7,160
Short-term investments		272			225			604			686
Total investment income	$	18,168		$	16,582		$	52,647		$	50,386
Investment expenses		(797	)		(743	)		(2,428	)		(2,289	)
Net investment income	$	17,371		$	15,839		$	50,219		$	48,097

Realized gains and losses, excluding net OTTI losses recognized in earnings, for the periods indicated, were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
amounts in thousands	2015			2014			2015			2014
Fixed maturities:
Gains	$	484		$	3,702		$	2,889		$	8,682
Losses		(667	)		(1,645	)		(2,757	)		(3,752	)
Fixed maturities, net	$	(183	)	$	2,057		$	132		$	4,930
Short-term:
Gains	$	9		$	—		$	109		$	—
Losses		(120	)		—			(273	)		—
Short-term, net	$	(111	)	$	—		$	(164	)	$	—
Equity securities:
Gains	$	1,107		$	6,109		$	12,185		$	9,445
Losses		(295	)		(1,448	)		(1,700	)		(2,351	)
Equity securities, net	$	812		$	4,661		$	10,485		$	7,094
Net realized gains (losses)	$	518		$	6,718		$	10,453		$	12,024

Note 4. Fair Value Measurement

The fair value of our financial instruments is determined based on the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets. Examples are listed equity and fixed income securities traded on an exchange. U.S. Treasury securities are reported as Level 1 and are valued based on unadjusted quoted prices for identical assets in active markets that our Company can access.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Examples are asset-backed and mortgage-backed securities that are similar to other asset-backed or mortgage-backed securities observed in the market. U.S. government agency securities are reported as Level 2 and are valued using yields and spreads that are observable in active markets.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. An example would be a private placement with minimal liquidity.

The following tables present, for each of the fair value hierarchy levels as defined by the accounting guidance for fair value measurements and described below, our Company’s Fixed maturities and Equity securities by asset class that are measured at fair value on a recurring basis, as well as the fair value of the 5.75% Senior notes due October 15, 2023 (the “Senior notes”) carried at amortized cost as of September 30, 2015 and December 31, 2014:

	As of September 30, 2015
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	89,238	$	212,677	$	—	$	301,915
States, municipalities and political subdivisions		—		571,104		—		571,104
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		360,198		—		360,198
Residential mortgage obligations		—		31,568		—		31,568
Asset-backed securities		—		197,934		—		197,934
Commercial mortgage-backed securities		—		204,876		—		204,876
Subtotal	$	—	$	794,576	$	—	$	794,576
Corporate bonds		—		729,392		—		729,392
Total fixed maturities	$	89,238	$	2,307,749	$	—	$	2,396,987
Equity securities		116,625		158,303		—		274,928
Short-term investments		233,142		—		—		233,142
Total assets measured at fair value	$	439,005	$	2,466,052	$	—	$	2,905,057
Senior notes		—		286,930		—		286,930
Total liabilities measured at fair value	$	—	$	286,930	$	—	$	286,930

	As of December 31, 2014
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	146,904	$	251,019	$	—	$	397,923
States, municipalities and political subdivisions		—		541,007		—		541,007
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		364,622		—		364,622
Residential mortgage obligations		—		34,087		—		34,087
Asset-backed securities		—		206,413		—		206,413
Commercial mortgage-backed securities		—		206,318		—		206,318
Subtotal	$	—	$	811,440	$	—	$	811,440
Corporate bonds		—		615,564		—		615,564
Total fixed maturities	$	146,904	$	2,219,030	$	—	$	2,365,934
Equity securities		127,183		57,112		—		184,295
Short-term investments		179,506		—		—		179,506
Total assets measured at fair value	$	453,593	$	2,276,142	$	—	$	2,729,735
Senior notes		—		285,710		—		285,710
Total liabilities measured at fair value	$	—	$	285,710	$	—	$	285,710

All other financial assets and liabilities including Cash, Premium receivable, Reinsurance recoverable and Reinsurance balances payable are carried at cost, which approximates fair value.

Our Company did not have any significant transfers between Level 1 and Level 2 classifications for the three and nine months ended September 30, 2015 and 2014.

As of September 30, 2015, our Company did not have any Level 3 assets. During 2014, one security was transferred from Level 3 to Level 2 as our Company was able to obtain a valuation in which all significant inputs to the model are observable in active markets.

Note 5. Ceded Reinsurance

As of September 30, 2015, the credit quality distribution of our Company’s Reinsurance recoverable of $1.1 billion for ceded paid losses, ceded unpaid losses and LAE, and ceded unearned premiums based on insurer financial strength ratings from A.M. Best or S&P was not significantly different from the credit quality distribution as of December 31, 2014.

Our allowance for uncollectible reinsurance was $8.2 million and $11.3 million as of September 30, 2015 and December 31, 2014, respectively. The reduction in our allowance for uncollectible reinsurance was the result of payments of outstanding balances from one of our large reinsurers.

As of September 30, 2015, our 20 largest reinsurers measured by the amount of Reinsurance recoverable for ceded losses and LAE and ceded unearned premium, together with the reinsurance recoverable and collateral, were not significantly different from December 31, 2014.

Note 6. Commitments and Contingencies

In 2013, the State of Connecticut (“the State”) awarded our Company up to $11.5 million ($8.0 million in loans and $3.5 million in grants) to move our corporate headquarters to Stamford, Connecticut. The loan is non-interest bearing, has a term of 10 years and is subject to forgiveness based on our compliance with certain conditions set forth in the agreement with the State. The amount of the loan to be received is dependent on our Company reaching certain milestones for creation of new jobs over a five-year period, and the funds are to be used to offset certain equipment purchases, facility costs, training of employees and other eligible project-related costs. Our Company completed the move to Stamford in September 2013 and received $7.5 million of the award, which is comprised of $6.0 million of the loan and $1.5 million of the grant for reaching the first job milestone. Under the terms of the agreement with the State, if our Company maintains an average of 100 full-time employees in Connecticut over a 12-month period, the State will forgive the initial $6.0 million of the loan. In addition, as soon as our Company hires its 150^th full-time employee in Connecticut, it is eligible to receive an additional $1.0 million of the loan and $0.5 million of the grant. On October 20, 2015, our Company received a letter from the State determining that our Company had achieved both of those milestones for the period from September 30, 2013 through July 31, 2015. As a result, our Company earned a loan forgiveness credit of $6.0 million with the State and a notification of earning

the additional $1.0 million of the loan and $0.5 million of the grant. Earning of the remaining portions of the grant and forgiveness of any outstanding amounts of the loan is subject to certain conditions, including maintaining the required jobs for an extended period of time. The length of time commitment for forgiveness of the additional $1.0 million of the October 20, 2015 loan has not been met. However, our Company expects to meet all the conditions for the State to forgive the additional $1.0 million of the loan, and accordingly, is recognizing the amount of loan and grants received over the period in which our Company recognizes the expenses for which the assistance is intended to compensate as a reduction of such expenses. Our Company recognized $0.4 million and $0.9 million of the incentive for the three and nine months ended September 30, 2015, respectively. As of September 30, 2015 and December 31, 2014, our Company has deferred revenue of $5.3 million and $6.1 million, respectively, which is included in Other liabilities on the Consolidated Balance Sheets.

In the ordinary course of conducting business, our Company’s subsidiaries are involved in various legal proceedings, either indirectly as insurers for parties or directly as defendants. Most of these proceedings consist of claims litigation involving our Company’s subsidiaries as either: (a) liability insurers defending or providing indemnity for third party claims brought against insureds or (b) insurers defending first party coverage claims brought against them. Our Company accounts for such activity through the establishment of unpaid losses and LAE reserves. Our Company’s management believes that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and cost of defense, will not be material to our Company’s Consolidated Balance Sheets, Consolidated Statements of Income or Consolidated Statements of Cash Flows.

Our Company’s subsidiaries are also from time to time involved with other legal actions, some of which assert claims for substantial amounts. These actions include claims asserting extra contractual obligations, such as claims involving allegations of bad faith in the handling of claims or the underwriting of policies. In general, our Company believes it has valid defenses to these cases. Our Company’s management expects that the ultimate liability, if any, with respect to future extra-contractual matters will not be material to our Consolidated Balance Sheets, Consolidated Statements of Income or Consolidated Statements of Cash Flows. Nonetheless, given the large or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of litigation, an adverse outcome in such matters could, from time to time, have a material adverse outcome on our Company’s Consolidated Statements of Income or Consolidated Statements of Cash Flows in a particular fiscal quarter or year.

Note 7. Stock Options, Stock Grants, SARs and ESPP

Stock-based compensation granted under our Company’s stock plans is expensed in tranches over the vesting period. Options and non-performance based grants generally vest equally over a three or four-year period and the options have a maximum term of ten years. For the nine months ended September 30, 2015, we granted 200,208 stock incentive units at a grant price between $73.62 and $78.86. Each performance unit and restricted stock unit represents a contingent right to receive one share of common stock as of the vesting date. Such common stock may be subject to forfeiture for the payment of any required tax withholding.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in or incorporated by reference in this Quarterly Report are forward-looking statements. Whenever used in this report, the words “estimate,” “expect,” “believe,” “may,” “will,” “intend,” “continue” or similar expressions or their negative are intended to identify such forward-looking statements. Forward-looking statements are derived from information that we currently have and assumptions that we make, and are subject to a number of risks and uncertainties, including those described in the “Risk Factors” section of our 2014 Annual Report on Form 10-K. We operate in a very competitive environment, with new risks emerging from time to time. We cannot assure you that anticipated results will be achieved, since actual results may differ materially because of both known and unknown risks and uncertainties which we face.

In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this Form 10-Q may not occur, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of their respective dates.

U.S. GAAP and Non-GAAP Financial Performance Metrics

Throughout this Quarterly Report, we present our operations in the way we believe will be most meaningful, useful and transparent to anyone using this financial information to evaluate our performance. In addition to the GAAP presentation of Net income, we show certain non-GAAP financial measures that we believe are valuable in managing our business and drawing comparisons to our peers. These measures are Underwriting profit (loss), Combined ratio, Net operating earnings, Net losses and LAE reserves and Book value and Book value per share.

The following is a list of GAAP and non-GAAP measures found throughout this report with their definitions, relationships to GAAP measures and explanations of their importance to our operations:

Underwriting Profit (Loss)

Underwriting profit (loss) represents one measure of the pretax profitability of our insurance operations and is derived by subtracting Net losses and LAE incurred, Commission expenses and Other operating expenses from Net earned premiums. This information is available in total and by segment in Note 2 – Segment Information in the Interim Consolidated Financial Statements as of September 30, 2015. The nearest comparable GAAP measure is Income before income taxes which, in addition to Net underwriting profit (loss), includes Net investment income, OTTI, Net realized gains (losses) on investments, Interest expense and Other income (loss).

Combined Ratio

The Combined ratio is a common insurance industry measure of profitability for any underwriting operation and is calculated in two components. First, the loss ratio is Net losses and LAE divided by Net earned premiums. The second component, the expense ratio, reflects the sum of Commission expenses and insurance operating expenses, divided by Net earned premiums. All items included in these components of the Combined ratio are presented in our GAAP Consolidated Financial Statements. The sum of the loss and expense ratios is the Combined ratio. The difference between the Combined ratio and $100 reflects the per-dollar rate of Underwriting profit (loss). For example, a Combined ratio of 85 percent implies that for every $100 of premium we earn, we record $15 of Underwriting profit.

Net Operating Earnings

Net operating earnings is calculated as Net income before after-tax Net realized gains (losses), after-tax OTTI losses recognized in earnings, and net after-tax realized and unrealized 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 USD).

Net Losses and LAE Reserves

Net losses and LAE reserves, as shown in the liabilities section of our Consolidated Balance Sheets, represents the total obligations to claimants for both estimates of known claims and estimates for incurred but not reported (“IBNR”) claims. The related asset item, Reinsurance balances recoverable on unpaid losses and LAE, is the estimate of both known claims and IBNR that we expect to recover from reinsurers. The net of these two items is generally referred to as Net losses and LAE reserves and is commonly used in our disclosures regarding the process of establishing these various estimated amounts.

Book Value and Book Value Per Share

Book value is equivalent to Stockholders’ equity and book value per share is calculated by dividing Stockholders’ equity by the number of outstanding shares at the end of the interim period.

Overview

The discussion and analysis of our financial condition and results of operations contained herein should be read in conjunction with our 2014 Annual Report on Form 10-K in its entirety as well as the statements under “Forward-Looking Statements” and the Interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a complete description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

We are an international insurance company with a long-standing area of specialization in Marine insurance. Our P&C insurance business primarily offers General Liability coverage and Umbrella & Excess Liability coverage to commercial enterprises through our Primary and Excess Casualty divisions. We have also developed niches in Professional Liability insurance, through our Management Liability and E&O divisions. Beginning in 2010, we added reinsurance products through our Assumed Reinsurance division.

Financial Highlights

Net income was $18.2 million and $63.3 million for the three and nine months ended September 30, 2015, a decrease of 41.7% and 16.8% compared to the same periods in the prior year, respectively.

Earnings per diluted share were $1.23 and $4.29 for the three and nine months ended September 30, 2015, a decrease of 42.5% and 17.8% compared to the same periods in the prior year, respectively.

Underwriting profit was $16.7 million and $51.0 million for the three and nine months ended September 30, 2015, a decrease of 35.4% and 6.1% compared to the same periods in the prior year, respectively.

Net investment income was $17.4 million and $50.2 million for the three and nine months ended September 30, 2015, an increase of 9.7% and 4.4% compared to the same periods in the prior year, respectively.

Net cash provided by operations was $159.1 million and $181.4 million for the nine months ended September 30, 2015 and September 30, 2014, respectively.

Annualized return on equity was 8.2% as of September 30, 2015, a decrease of 3.0% compared to the same period in the prior year.

Book value was $1.1 billion as of September 30, 2015, an increase of 4.8% compared to December 31, 2014.

Our revenue is primarily comprised of premiums and investment income. Cash flow is generated from premiums collected and investment income received less paid losses and loss expenses, Commission expenses and administrative expenses. Our products are distributed through multiple channels, utilizing global, national and regional retail and wholesale insurance brokers.

During the first quarter of 2015, we realigned our reporting segments from Insurance Companies, Lloyd’s Operations and Corporate to U.S. Insurance, Int’l Insurance, GlobalRe and Corporate. The new segment presentation reflects an increase in the level of importance that the Chief Operating Decision Maker now places on the results of the underlying operating segments when aggregated and reported in alignment with the products and services offered to the marketplace versus when aggregated and reported in alignment with our legal entity structure. Over the past few years, we have been monitoring the growth and stability of our reinsurance business and in 2015 determined that reinsurance has become a stable and significant component of our Company. We are also increasing our focus on additional international insurance markets by establishing underwriting offices in Continental Europe. The offices were fully operational during our January renewal season. We considered these changes in conjunction with operating and reportable segments.

Results of Operations

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2015 and 2014.

Summary of Consolidated Results

The following table presents a summary of our consolidated financial results for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,						Nine Months Ended September 30,						% Change
amounts in thousands	2015			2014			2015			2014			QTD			YTD
Gross written premiums	$	354,062		$	327,469		$	1,129,993		$	1,099,054			8.1	%		2.8	%
Ceded written premiums		(102,123	)		(99,052	)		(330,852	)		(326,923	)		3.1	%		1.2	%
Net written premiums		251,939			228,417			799,141			772,131			10.3	%		3.5	%
Net earned premiums		254,082			245,367			732,542			701,723			3.6	%		4.4	%
Net losses and LAE		(146,546	)		(135,284	)		(418,717	)		(410,571	)		8.3	%		2.0	%
Commission expenses		(34,253	)		(33,943	)		(98,638	)		(91,820	)		0.9	%		7.4	%
Other operating expenses		(56,599	)		(50,388	)		(164,297	)		(145,526	)		12.3	%		12.9	%
Other underwriting income (expense)		19			107			99			497			(82.2	%)		(80.1	%)
Underwriting profit (loss)	$	16,703		$	25,859		$	50,989		$	54,303			(35.4	%)		(6.1	%)
Net investment income		17,371			15,839			50,219			48,097			9.7	%		4.4	%
Net realized gains (losses)		(757	)		6,718			8,755			12,024		NM				(27.2	%)
Interest expense		(3,856	)		(3,388	)		(11,567	)		(11,559	)		13.8	%		0.1	%
Other income (loss)		(2,537	)		1,229			(4,737	)		9,573		NM			NM
Income (loss) before income taxes	$	26,924		$	46,257		$	93,659		$	112,438			(41.8	%)		(16.7	%)
Income tax (expense) benefit		(8,723	)		(15,032	)		(30,345	)		(36,384	)		(42.0	%)		(16.6	%)
Net income (loss)	$	18,201		$	31,225		$	63,314		$	76,054			(41.7	%)		(16.8	%)

Net income per diluted share	$	1.23		$	2.14		$	4.29		$	5.22

Effective tax rate		32.4	%		32.5	%		32.4	%		32.4	%
Losses and LAE ratio		57.7	%		55.1	%		57.2	%		58.5	%
Commission expense ratio		13.5	%		13.8	%		13.5	%		13.1	%
Other operating expense ratio ⁽¹⁾		22.2	%		20.6	%		22.3	%		20.7	%
Combined ratio		93.4	%		89.5	%		93.0	%		92.3	%

NM - Percentage change not meaningful

(1) - Includes Other operating expenses and Other underwriting income (expense).

The following table calculates our operating earnings for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended Sept. 30,					Nine Months Ended Sept. 30,						% Change
amounts in thousands	2015		2014			2015			2014			QTD			YTD
Net income	$	18,201	$	31,225		$	63,314		$	76,054			(41.7	%)		(16.8	%)
After-tax realized losses (gains)		492		(4,367	)		(5,691	)		(7,816	)	NM				(27.2	%)
After-tax FX losses (gains)		1,593		(760	)		3,090			(6,222	)	NM			NM
Net operating earnings	$	20,286	$	26,098		$	60,713		$	62,016			(22.3	%)		(2.1	%)
Net operating earnings per common share:
Basic	$	1.41	$	1.83		$	4.22		$	4.35
Diluted	$	1.37	$	1.79		$	4.11		$	4.25

NM - Percentage change not meaningful

Gross Written Premiums

Gross written premiums increased $26.6 million for the three months ended September 30, 2015 compared to the same period in 2014 primarily due to growth in our U.S. P&C operating segment specifically in our Excess Casualty, Primary Casualty and Environmental Casualty divisions, due to growth in the construction market. In addition, we had growth in our Int’l Professional Liability operating segment and GlobalRe segment, specifically in our Accident & Health (“A&H”) division, related to increased underwriting opportunities. Gross written premiums increased $30.9 million for the nine months ended September 30, 2015 compared to the same period in 2014 primarily due to strong new business production in our U.S. P&C operating segment, offset by the non-renewal of a large GlobalRe treaty in the first quarter of 2015 and lower renewal premiums and rate reductions in our Int’l Energy & Engineering division.

Average renewal premium rates for the three and nine months ended September 30, 2015 decreased by 2.6% and 3.1%, respectively, compared to the same periods in 2014.

Ceded Written Premiums

Ceded written premiums increased $3.1 million and $3.9 million, for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014 primarily due to reinsurance reinstatement premium (“RRP”), changes in our mix of business written and certain changes in our reinsurance programs.

For the three months ended September 30, 2015, we recorded an additional $1.3 million of RRP accruals, compared to RRP accrual reversals of $1.0 million in the three months ended September 30, 2014. For the nine months ended September 30, 2015, we recorded $0.2 million of net RRP accruals, compared to $3.9 million of additional accruals reported in the comparable prior year. The prior year amount of $3.9 million included an Int’l Marine Liability loss, mostly driven by the sinking of a vessel in South Korean waters, of $3.9 million, as well as additional unfavorable RRP accruals of $3.6 million, including $1.3 million related to Costa Concordia, partially offset by $3.9 million of favorable RRPs within our GlobalRe reporting segment.

Net Earned Premiums

Net earned premiums increased $8.7 million for the three months ended September 30, 2015 compared to the same period in 2014. The increase is primarily driven by strong new business production and a decrease in cessions in our U.S. P&C operating segment. This increase is offset by decreases in our U.S. Professional Liability operating segment and GlobalRe reporting segment. Net earned premiums increased $30.8 million for the nine months ended September 30, 2015 compared to the same period in 2014. The increase is primarily driven by increased retention resulting from changes in our reinsurance programs in 2014, prior year growth in our U.S. Insurance reporting segment and the prior year RRPs described above.

Net Losses and LAE

The following table presents the impact of RRPs and reserve development on our Net losses and LAE ratio for the three and nine months ended September 30, 2015 and 2014 (note: accident year is abbreviated “AY”):

	Three months ended Sept. 30,						Point
	2015			2014			Change
Net losses and LAE ratio, reported		57.7	%		55.1	%		2.6
RRPs		(0.3	%)		0.2	%		(0.5	)
Net current AY release/(development)		(2.9	%)		(0.8	%)		(2.1	)
Net prior AY release/(strengthening)		5.5	%		6.3	%		(0.8	)
Net losses and LAE ratio, adjusted		60.0	%		60.8	%		(0.8	)

	Nine months ended Sept. 30,						Point
	2015			2014			Change
Net losses and LAE ratio, reported		57.2	%		58.5	%		(1.3	)
RRPs		0.0	%		(0.3	%)		0.3
Net current AY release/(development)		(2.0	%)		(2.4	%)		0.4
Net prior AY release/(strengthening)		4.6	%		5.1	%		(0.5	)
Net losses and LAE ratio, adjusted		59.8	%		60.9	%		(1.1	)

For the three and nine months ended September 30, 2015, we recorded $14.1 million and $34.0 million of prior AY reserve releases, respectively, as compared to $15.5 million and $36.0 million of releases for the comparable periods in 2014. In addition, we recorded $7.5 million and $15.0 million of current AY reserve development, for the three and nine months ended September 30, 2015, respectively, as compared to $2.0 million and $16.8 million development for the comparable periods in 2014. Please refer to our reporting segment sections for individual drivers of these changes.

Commission Expenses

Commissions paid to brokers and agents are generally based on a percentage of Gross written premiums and are partially offset by ceding commissions we may receive on Ceded written premiums. Commission expenses are generally deferred and recorded as deferred policy acquisition costs to the extent that they relate to unearned premium. The percentage of earned Commission expenses to Net earned premiums (“Commission expense ratio”) for both the three and nine months ended September 30, 2015 was 13.5%, as compared to 13.8% and 13.1%, respectively, for the comparable periods during 2014. The change in the Commission expense ratios for the three and nine months ended September 30, 2015 compared to the same periods in 2014 is attributable to the changes in the mix of business, changes in our reinsurance programs and to a lesser extent higher profit commission accruals for certain products.

Other Operating Expenses

Other operating expenses were $56.6 million and $164.3 million for the three and nine months ended September 30, 2015, respectively, compared to $50.4 million and $145.5 million for the same periods in 2014. The increase for the three and nine months ended September 30, 2015 is primarily due to continued investment in our employee base, resulting in increased salary and related costs, designed to closely align with business growth and expanding our presence in Europe.

Net Investment Income

Our Net investment income was derived from the following sources:

	Three Months Ended September 30,						Nine Months Ended September 30,
amounts in thousands	2015			2014			2015			2014
Fixed maturities	$	15,353		$	14,401		$	45,660		$	42,540
Equity securities		2,543			1,956			6,383			7,160
Short-term investments		272			225			604			686
Total investment income	$	18,168		$	16,582		$	52,647		$	50,386
Investment expenses		(797	)		(743	)		(2,428	)		(2,289	)
Net investment income	$	17,371		$	15,839		$	50,219		$	48,097

The increase in total investment income for the three months ended September 30, 2015 as compared to the same period in the prior year was primarily due to growth of invested assets, coupled with an increase in the overall portfolio yield. The annualized pre-tax yield, excluding Net realized gains and losses and OTTI losses recognized in earnings, for the three months ended September 30, 2015 and 2014, was 2.5% and 2.2%, respectively.

The increase in total investment income for the nine months ended September 30, 2015 as compared to the prior year was primarily due to growth of invested assets, coupled with an increase in the overall portfolio yield. This was partially offset by a one-time special dividend of $1.6 million in the prior year from our equity portfolio. The annualized pre-tax yield, excluding Net realized gains and losses and OTTI losses recognized in earnings, was 2.4% for the nine months ended September 30, 2015. For the same period in 2014, the equivalent yield excluding the impact of the special dividend was 2.3%.

OTTI Losses Recognized in Earnings

Our Company had three credit related OTTI losses of $1.3 million and $1.7 million during the three and nine months ended September 30, 2015, respectively, which were for certain common stocks in the energy sector and aerospace industry that were impacted by global economic events. Our Company did not have any credit related OTTI losses during the three and nine months ended September 30, 2014.

Net Realized Gains and Losses

Net realized gains and losses, excluding OTTI losses recognized in earnings, for the periods indicated were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
amounts in thousands	2015			2014			2015			2014
Fixed maturities:
Gains	$	484		$	3,702		$	2,889		$	8,682
Losses		(667	)		(1,645	)		(2,757	)		(3,752	)
Fixed maturities, net	$	(183	)	$	2,057		$	132		$	4,930
Short-term:
Gains	$	9		$	—		$	109		$	—
Losses		(120	)		—			(273	)		—
Short-term, net	$	(111	)	$	—		$	(164	)	$	—
Equity securities:
Gains	$	1,107		$	6,109		$	12,185		$	9,445
Losses		(295	)		(1,448	)		(1,700	)		(2,351	)
Equity securities, net	$	812		$	4,661		$	10,485		$	7,094
Net realized gains (losses)	$	518		$	6,718		$	10,453		$	12,024

Net realized gains and losses are generated as part of the normal ongoing management of our investment portfolio. Net realized gains of $0.5 million and $10.5 million for the three and nine months ended September 30, 2015, respectively, are primarily due to the sale of Equity securities. Realized losses for the three and nine months ended September 30, 2015 in the Fixed maturities portfolio are primarily driven by foreign currency losses on our Canadian portfolio. Net realized gains of $6.7 million and $12.0 million for the three and nine months ended September 30, 2014, respectively, are primarily due to the sale of corporate bonds and Equity securities.

Interest Expense

Interest expense was $3.9 million and $11.6 million for the three and nine months ended September 30, 2015, respectively, and $3.4 million and $11.6 million for the three and nine months ended September 30, 2014, respectively, relating to our $265.0 million principal amount of the Senior notes. The effective interest rate related to the Senior notes, based on the proceeds net of discount and all issuance costs, is approximately 5.86%.

Other Income (Loss)

Other income (loss) for the three and nine months ended September 30, 2015 was a $2.5 million loss and a $4.7 million loss, respectively, as compared to Other income (loss) of $1.2 million income and $9.6 million income for the same periods in the prior year. Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses. The current quarter and nine month foreign exchange losses are mostly driven by the strengthening of the USD against the GBP. The prior year was impacted by a $10.0 million foreign currency transaction gain in connection with a change in the functional currency of the Syndicate. See Note 1 – Organization & Summary of Significant Accounting Policies, in the Notes to Interim Consolidated Financial Statements, included herein for additional information regarding the foreign currency adjustment.

Income Taxes

We recorded an Effective tax rate of 32.4% for the three and nine months ended September 30, 2015, compared to 32.5% and 32.4%, respectively, for the same periods in 2014. The income tax provision has been computed based on our estimated annual effective tax rate. Our Effective tax rate for the quarter differs from the federal tax rate of 35% principally due to tax-exempt investment income and dividends received deduction.

Book Value and Book Value Per Share

As of September 30, 2015, our book value was $1.1 billion and our book value per share was $74.70, increasing 3.9% from $71.93 per share as of December 31, 2014, mostly driven by $63.3 million of Net income, partially offset by Total other comprehensive loss of $21.2 million for the nine months ended September 30, 2015.

Segment Information

The following tables summarize our consolidated financial results by segment for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30, 2015
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	142,409		$	68,533		$	43,140		$	—		$	254,082
Net losses and LAE		(85,140	)		(39,182	)		(22,224	)		—			(146,546	)
Commission expenses		(15,157	)		(12,780	)		(7,705	)		1,389			(34,253	)
Other operating expenses		(32,948	)		(19,937	)		(3,714	)		—			(56,599	)
Other underwriting income (expense)		1,013			—			395			(1,389	)		19
Underwriting profit (loss)	$	10,177		$	(3,366	)	$	9,892		$	—		$	16,703
Net investment income											17,371			17,371
Net realized gains (losses)											(757	)		(757	)
Interest expense											(3,856	)		(3,856	)
Other income (loss)											(2,537	)		(2,537	)
Income before income taxes	$	10,177		$	(3,366	)	$	9,892		$	10,221		$	26,924
Income tax (expense) benefit											(8,723	)		(8,723	)
Net income (loss)													$	18,201
Losses and LAE ratio		59.8	%		57.2	%		51.5	%					57.7	%
Commission expense ratio		10.6	%		18.6	%		17.9	%					13.5	%
Other operating expense ratio ⁽²⁾		22.5	%		29.1	%		7.7	%					22.2	%
Combined ratio		92.9	%		104.9	%		77.1	%					93.4	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Three Months Ended September 30, 2014
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	130,420		$	66,278		$	48,669		$	—		$	245,367
Net losses and LAE		(80,722	)		(24,910	)		(29,652	)		—			(135,284	)
Commission expenses		(12,870	)		(12,792	)		(8,831	)		550			(33,943	)
Other operating expenses		(29,160	)		(17,288	)		(3,940	)		—			(50,388	)
Other underwriting income (expense)		534			1			122			(550	)		107
Underwriting profit (loss)	$	8,202		$	11,289		$	6,368		$	—		$	25,859
Net investment income											15,839			15,839
Net realized gains (losses)											6,718			6,718
Interest expense											(3,388	)		(3,388	)
Other income (loss)											1,229			1,229
Income before income taxes	$	8,202		$	11,289		$	6,368		$	20,398		$	46,257
Income tax (expense) benefit											(15,032	)		(15,032	)
Net income (loss)													$	31,225
Losses and LAE ratio		61.9	%		37.6	%		60.9	%					55.1	%
Commission expense ratio		9.9	%		19.3	%		18.1	%					13.8	%
Other operating expense ratio ⁽²⁾		21.9	%		26.1	%		7.9	%					20.6	%
Combined ratio		93.7	%		83.0	%		86.9	%					89.5	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Nine Months Ended September 30, 2015
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	410,804		$	197,244		$	124,494		$	—		$	732,542
Net losses and LAE		(247,094	)		(101,236	)		(70,387	)		—			(418,717	)
Commission expenses		(41,777	)		(35,491	)		(23,042	)		1,672			(98,638	)
Other operating expenses		(98,010	)		(54,312	)		(11,975	)		—			(164,297	)
Other underwriting income (expense)		1,330			—			441			(1,672	)		99
Underwriting profit (loss)	$	25,253		$	6,205		$	19,531		$	—		$	50,989
Net investment income											50,219			50,219
Net realized gains (losses)											8,755			8,755
Interest expense											(11,567	)		(11,567	)
Other income (loss)											(4,737	)		(4,737	)
Income (loss) before income taxes	$	25,253		$	6,205		$	19,531		$	42,670		$	93,659
Income tax (expense) benefit											(30,345	)		(30,345	)
Net income (loss)													$	63,314
Losses and LAE ratio		60.1	%		51.3	%		56.5	%					57.2	%
Commission expense ratio		10.2	%		18.0	%		18.5	%					13.5	%
Other operating expense ratio ⁽²⁾		23.6	%		27.6	%		9.3	%					22.3	%
Combined ratio		93.9	%		96.9	%		84.3	%					93.0	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

	Nine Months Ended September 30, 2014
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net earned premiums	$	370,864		$	187,993		$	142,866		$	—		$	701,723
Net losses and LAE		(226,817	)		(91,423	)		(92,331	)		—			(410,571	)
Commission expenses		(35,598	)		(32,656	)		(25,171	)		1,605			(91,820	)
Other operating expenses		(85,993	)		(47,783	)		(11,750	)		—			(145,526	)
Other underwriting income (expense)		1,783			18			301			(1,605	)		497
Underwriting profit (loss)	$	24,239		$	16,149		$	13,915		$	—		$	54,303
Net investment income											48,097			48,097
Net realized gains (losses)											12,024			12,024
Interest expense											(11,559	)		(11,559	)
Other income (loss)											9,573			9,573
Income (loss) before income taxes	$	24,239		$	16,149		$	13,915		$	58,135		$	112,438
Income tax (expense) benefit											(36,384	)		(36,384	)
Net income (loss)													$	76,054
Losses and LAE ratio		61.2	%		48.6	%		64.6	%					58.5	%
Commission expense ratio		9.6	%		17.4	%		17.6	%					13.1	%
Other operating expense ratio ⁽²⁾		22.7	%		25.4	%		8.1	%					20.7	%
Combined ratio		93.5	%		91.4	%		90.3	%					92.3	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income (expense).

U.S. Insurance

The following tables summarize our Underwriting profit (loss) by operating segment for our U.S. Insurance reporting segment for the three and nine months ended September 30, 2015 and 2014:

	U.S. Insurance
	Three months ended September 30, 2015												Three months ended September 30, 2014
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	35,529		$	154,009		$	29,245		$	218,783		$	34,576		$	138,181		$	26,966		$	199,723			9.5	%
Ceded written premiums		(13,865	)		(34,902	)		(14,986	)		(63,753	)		(13,338	)		(41,180	)		(7,136	)		(61,654	)		3.4	%
Net written premiums		21,664			119,107			14,259			155,030			21,238			97,001			19,830			138,069			12.3	%

Net earned premiums	$	24,292		$	104,473		$	13,644		$	142,409		$	27,207		$	82,635		$	20,578		$	130,420			9.2	%
Net losses and LAE		(7,349	)		(69,054	)		(8,737	)		(85,140	)		(13,581	)		(53,955	)		(13,186	)		(80,722	)		5.5	%
Commission expenses		(2,412	)		(11,711	)		(1,034	)		(15,157	)		(3,486	)		(6,697	)		(2,687	)		(12,870	)		17.8	%
Other operating expenses		(6,754	)		(20,581	)		(5,613	)		(32,948	)		(6,086	)		(17,935	)		(5,139	)		(29,160	)		13.0	%
Other underwriting income (expense)		214			735			64			1,013			168			331			35			534			89.7	%
Underwriting profit (loss)	$	7,991		$	3,862		$	(1,676	)	$	10,177		$	4,222		$	4,379		$	(399	)	$	8,202			24.1	%

Losses and LAE ratio		30.3	%		66.1	%		64.0	%		59.8	%		49.9	%		65.3	%		64.1	%		61.9	%
Commission expense ratio		9.9	%		11.2	%		7.6	%		10.6	%		12.8	%		8.1	%		13.1	%		9.9	%
Other operating expense ratio ⁽¹⁾		26.9	%		19.0	%		40.7	%		22.5	%		21.8	%		21.3	%		24.7	%		21.9	%
Combined ratio		67.1	%		96.3	%		112.3	%		92.9	%		84.5	%		94.7	%		101.9	%		93.7	%

(1) - Includes Other operating expenses and Other underwriting income (expense).

	U.S. Insurance
	Nine months ended September 30, 2015												Nine months ended September 30, 2014
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	118,167		$	458,371		$	81,559		$	658,097		$	120,149		$	400,437		$	84,188		$	604,774			8.8	%
Ceded written premiums		(45,177	)		(123,765	)		(42,423	)		(211,365	)		(34,095	)		(127,788	)		(24,841	)		(186,724	)		13.2	%
Net written premiums		72,990			334,606			39,136			446,732			86,054			272,649			59,347			418,050			6.9	%

Net earned premiums	$	74,193		$	291,648		$	44,963		$	410,804		$	81,920		$	224,151		$	64,793		$	370,864			10.8	%
Net losses and LAE		(28,952	)		(194,910	)		(23,232	)		(247,094	)		(38,873	)		(150,924	)		(37,020	)		(226,817	)		8.9	%
Commission expenses		(8,873	)		(29,018	)		(3,886	)		(41,777	)		(10,134	)		(16,737	)		(8,727	)		(35,598	)		17.4	%
Other operating expenses		(20,129	)		(60,976	)		(16,905	)		(98,010	)		(17,720	)		(52,923	)		(15,350	)		(85,993	)		14.0	%
Other underwriting income (expense)		389			876			65			1,330			691			971			121			1,783			(25.4	%)
Underwriting profit (loss)	$	16,628		$	7,620		$	1,005		$	25,253		$	15,884		$	4,538		$	3,817		$	24,239			4.2	%

Losses and LAE ratio		39.0	%		66.8	%		51.7	%		60.1	%		47.5	%		67.3	%		57.1	%		61.2	%
Commission expense ratio		12.0	%		9.9	%		8.6	%		10.2	%		12.4	%		7.5	%		13.5	%		9.6	%
Other operating expense ratio ⁽¹⁾		26.6	%		20.7	%		37.5	%		23.6	%		20.7	%		23.2	%		23.5	%		22.7	%
Combined ratio		77.6	%		97.4	%		97.8	%		93.9	%		80.6	%		98.0	%		94.1	%		93.5	%

(1) - Includes Other operating expenses and Other underwriting income (expense).

Gross Written Premiums

Gross written premiums increased $19.1 million for the three months ended September 30, 2015 compared to the same period in 2014 due to strong new business production and improving market conditions in our U.S. P&C operating segment, which increased 11.5%. This increase was specifically driven by our Environmental, Excess Casualty and Primary Casualty divisions, which increased 31.7%, 11.6% and 6.7%, respectively.

Gross written premiums increased $53.3 million for the nine months ended September 30, 2015 compared to the same period in 2014 due to the impacts discussed above for the quarter, offset by a decrease in our U.S. Marine and U.S. Professional Liability operating segments driven by difficult market conditions and our decision to exit the small lawyers professional liability business as well as a decrease in our real estate agents liability business as a result of a program termination.

Average renewal premium rates for our U.S. Insurance reporting segment for the three and nine months ended September 30, 2015 decreased 1.8% and 1.3%, respectively. For the three months ended September 30, 2015, the decrease was primarily driven by a decline of 2.1%, 1.3% and 1.1% in our U.S. P&C, U.S. Marine and U.S. Professional Liability operating segments, respectively. For the nine months ended September 30, 2015, the decrease was primarily driven by a decline of 2.1% and 1.3% in our U.S. Professional Liability and U.S. P&C operating segments, respectively.

Ceded Written Premiums

Ceded written premiums increased $2.1 million and $24.6 million for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014. The increase for both the three and nine months ended September 30, 2015 was primarily due to two new proportional reinsurance programs implemented in the first quarter of 2015, covering products within our

U.S Marine operating segment, offset by a decrease in cessions in our U.S. P&C operating segment driven by change in our proportional reinsurance coverage on Excess Casualty, Environmental and Life Science divisions. Additionally, contributing to the increase was a new reinsurance program implemented in the fourth quarter of 2014, which includes proportional and excess-of-loss coverage on various products within our E&O division in our U.S. Professional Liability operating segment.

Net Earned Premiums

Net earned premiums increased $12.0 million and $39.9 million for the three and nine months ended September 30, 2015, respectively, compared to the same periods in 2014. The increase was primarily driven by continued growth in our Excess Casualty and Primary Casualty divisions of our U.S. P&C operating segment as well as reductions to reinsurance programs in our Excess Casualty division. The increase in Net earned premiums was partially offset by the effect of new ceded reinsurance programs in our U.S. Marine and U.S. Professional Liability operating segments, as described above.

Net Losses and LAE

The Net losses and LAE reserves as of September 30, 2015 and December 31, 2014 are as follows:

	U.S. Insurance
	As of September 30, 2015								As of December 31, 2014
amounts in thousands	Marine		P&C		Professional Liability		Total		Marine		P&C		Professional Liability		Total		Total % Change
Case Reserves	$	69,067	$	162,634	$	38,642	$	270,343	$	74,699	$	144,334	$	56,501	$	275,534		(1.9	%)
IBNR Reserves		61,475		478,821		66,637		606,933		64,390		391,643		85,369		541,402		12.1	%
Total	$	130,542	$	641,455	$	105,279	$	877,276	$	139,089	$	535,977	$	141,870	$	816,936		7.4	%

The following tables present the impact of RRPs and reserve development on our Net losses and LAE ratio for the three and nine months ended September 30, 2015 and 2014:

	U.S. Insurance
	Three months ended September 30, 2015												Three months ended September 30, 2014
							Professional												Professional						Point
	Marine			P&C			Liability			Total			Marine			P&C			Liability			Total			Change
Net losses and LAE ratio, reported		30.3	%		66.1	%		64.0	%		59.8	%		49.9	%		65.3	%		64.1	%		61.9	%		(2.1	)
RRPs		(0.1	%)		(0.9	%)		0.0	%		(0.7	%)		(0.5	%)		(0.3	%)		0.0	%		(0.3	%)		(0.4	)
Net current AY release/(development)		0.0	%		0.0	%		0.0	%		0.0	%		(5.8	%)		(0.5	%)		0.0	%		(1.5	%)		1.5
Net prior AY release/(strengthening)		28.9	%		0.0	%		0.0	%		4.9	%		16.6	%		0.3	%		0.0	%		3.7	%		1.2
Net losses and LAE ratio, adjusted		59.1	%		65.2	%		64.0	%		64.0	%		60.2	%		64.8	%		64.1	%		63.8	%		0.2

	U.S. Insurance
	Nine months ended September 30, 2015												Nine months ended September 30, 2014
							Professional												Professional						Point
	Marine			P&C			Liability			Total			Marine			P&C			Liability			Total			Change
Net losses and LAE ratio, reported		39.0	%		66.8	%		51.7	%		60.1	%		47.5	%		67.3	%		57.1	%		61.2	%		(1.1	)
RRPs		(0.8	%)		(0.3	%)		0.0	%		(0.4	%)		(1.2	%)		(0.1	%)		0.0	%		(0.4	%)		(0.0	)
Net current AY release/(development)		0.0	%		(1.7	%)		0.0	%		(1.2	%)		(7.0	%)		(0.2	%)		0.0	%		(1.7	%)		0.5
Net prior AY release/(strengthening)		19.9	%		0.3	%		11.5	%		5.1	%		21.1	%		(2.0	%)		5.7	%		4.5	%		0.6
Net losses and LAE ratio, adjusted		58.1	%		65.1	%		63.2	%		63.6	%		60.4	%		65.0	%		62.8	%		63.6	%		(0.0	)

Our U.S. Insurance reporting segment recorded $5.0 million of current AY strengthening for the nine months ended September 30, 2015, on our U.S. Energy & Engineering division, within our U.S. P&C operating segment, related to a large loss as compared to $6.3 million for the same period in 2014. The amount recorded for the nine months ended September 30, 2014 included $5.9 million of current AY strengthening in our U.S. Marine operating segment, however this was offset with $4.3 million prior AY reserve releases due to a reclass between prior AY and current AY.

Our U.S. Insurance reporting segment recorded $7.1 million of net prior AY reserve releases for the three months ended September 30, 2015, due to favorable loss emergence in the U.S. Marine operating segment.

Our U.S. Insurance reporting segment recorded $21.3 million of net prior AY reserve releases for the nine months ended September 30, 2015, primarily driven by $15.1 million and $5.2 million of reserve releases from our U.S. Marine and U.S. Professional Liability operating segments, respectively, due to a favorable loss emergence and to a lesser extent, a $1.5 million release of provision for uncollectible reinsurance due to payments of outstanding balances from one of our large reinsurers.

The changes in Net losses and LAE ratio, as adjusted, are primarily due to the mix of business earned.

Commission Expenses

The Commission expense ratio for the three months ended September 30, 2015 increased 0.7 points as compared to the same period in 2014, primarily driven by less ceded proportional reinsurance within our Excess Casualty division of our U.S. P&C operating segment, offset partially by changes in the proportional reinsurance programs across various product lines with increased cessions in our U.S. Marine and U.S. Professional Liability operating segments.

The Commission expense ratio for the nine months ended September 30, 2015 increased 0.6 points compared to the same period in 2014. The increase was primarily driven by the favorable effects noted above for the third quarter of 2015 partially offset by a benefit from increased profit commissions in 2015.

Other Operating Expenses

For the three and nine months ended September 30, 2015, Other operating expenses increased $3.8 million and $12.0 million, respectively, compared to the same periods in 2014, primarily driven by continued investment in our underwriting teams and support staff.

Int’l Insurance

The following tables summarize our Underwriting profit (loss) by operating segment for our Int’l Insurance reporting segment for the three and nine months ended September 30, 2015 and 2014:

	Int'l Insurance
	Three months ended September 30, 2015												Three months ended September 30, 2014
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	41,002		$	37,449		$	20,337		$	98,788		$	41,593		$	35,399		$	17,169		$	94,161			4.9	%
Ceded written premiums		(10,985	)		(20,034	)		(6,785	)		(37,804	)		(6,924	)		(24,267	)		(5,416	)		(36,607	)		3.3	%
Net written premiums		30,017			17,415			13,552			60,984			34,669			11,132			11,753			57,554			6.0	%

Net earned premiums	$	36,792		$	16,879		$	14,862		$	68,533		$	40,207		$	14,300		$	11,771		$	66,278			3.4	%
Net losses and LAE		(23,002	)		(8,051	)		(8,129	)		(39,182	)		(14,657	)		(3,565	)		(6,688	)		(24,910	)		57.3	%
Commission expenses		(8,227	)		(2,779	)		(1,774	)		(12,780	)		(9,755	)		(2,565	)		(472	)		(12,792	)		(0.1	%)
Other operating expenses		(8,233	)		(6,604	)		(5,100	)		(19,937	)		(7,573	)		(5,675	)		(4,040	)		(17,288	)		15.3	%
Other underwriting income (expense)		—			—			—			—			1			—			—			1		NM
Underwriting profit (loss)	$	(2,670	)	$	(555	)	$	(141	)	$	(3,366	)	$	8,223		$	2,495		$	571		$	11,289		NM

Losses and LAE ratio		62.5	%		47.7	%		54.7	%		57.2	%		36.5	%		24.9	%		56.8	%		37.6	%
Commission expense ratio		22.4	%		16.5	%		11.9	%		18.6	%		24.3	%		17.9	%		4.0	%		19.3	%
Other operating expense ratio ⁽¹⁾		22.4	%		39.1	%		34.4	%		29.1	%		18.7	%		39.8	%		34.4	%		26.1	%
Combined ratio		107.3	%		103.3	%		101.0	%		104.9	%		79.5	%		82.6	%		95.2	%		83.0	%

NM - Percentage change not meaningful

(1) - Includes Other operating expenses and Other underwriting income (expense).

	Int'l Insurance
	Nine months ended September 30, 2015												Nine months ended September 30, 2014
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	149,844		$	112,014		$	68,147		$	330,005		$	151,107		$	128,954		$	54,024		$	334,085			(1.2	%)
Ceded written premiums		(30,933	)		(60,676	)		(22,072	)		(113,681	)		(36,351	)		(80,015	)		(19,168	)		(135,534	)		(16.1	%)
Net written premiums		118,911			51,338			46,075			216,324			114,756			48,939			34,856			198,551			9.0	%

Net earned premiums	$	114,716		$	43,112		$	39,416		$	197,244		$	112,428		$	47,207		$	28,358		$	187,993			4.9	%
Net losses and LAE		(63,945	)		(17,015	)		(20,276	)		(101,236	)		(57,316	)		(20,460	)		(13,647	)		(91,423	)		10.7	%
Commission expenses		(26,912	)		(3,961	)		(4,618	)		(35,491	)		(29,763	)		(2,370	)		(523	)		(32,656	)		8.7	%
Other operating expenses		(21,677	)		(18,754	)		(13,881	)		(54,312	)		(20,454	)		(16,526	)		(10,803	)		(47,783	)		13.7	%
Other underwriting income (expense)		—			—			—			—			9			5			4			18		NM
Underwriting profit (loss)	$	2,182		$	3,382		$	641		$	6,205		$	4,904		$	7,856		$	3,389		$	16,149			(61.6	%)

Losses and LAE ratio		55.7	%		39.5	%		51.4	%		51.3	%		51.0	%		43.3	%		48.1	%		48.6	%
Commission expense ratio		23.5	%		9.2	%		11.7	%		18.0	%		26.5	%		5.0	%		1.8	%		17.4	%
Other operating expense ratio ⁽¹⁾		18.9	%		43.5	%		35.3	%		27.6	%		18.1	%		35.1	%		38.2	%		25.4	%
Combined ratio		98.1	%		92.2	%		98.4	%		96.9	%		95.6	%		83.4	%		88.1	%		91.4	%

NM - Percentage change not meaningful

(1) - Includes Other operating expenses and Other underwriting income (expense).

Gross Written Premiums

Gross written premiums increased $4.6 million for the three months ended September 30, 2015 compared to the same period in 2014, mostly driven by a growth in our Int’l Professional Liability operating segment, predominately due to operations in our new European offices, new business written and increased renewal premiums driven by increased line sizes across several client accounts. In addition, the increase was due to our Int’l P&C operating segment growth from a new product line, Int’l Property. These increases are partially offset by a decline in our Int’l Marine operating segment of $0.6 million, related primarily to rate reductions in our Protection & Indemnity, Hull, Specie and Marine Liability divisions.

Gross written premiums decreased $4.1 million for the nine months ended September 30, 2015 compared to the same period in 2014. The decrease in Gross written premiums was primarily driven by a decline in our Int’l P&C operating segment of $16.9 million due to a decline in our NavTech division, offset partially by growth in the Int’l Professional Liability operating segment of $14.1 million, of which $9.5 million and $2.8 million relates to our E&O product line and new product line Warranties and Indemnities, respectively.

Average renewal premium rates for our Int’l Insurance segment for the three and nine months ended September 30, 2015 decreased 4.0% and 5.4%, respectively. The decline for the three months was driven by decreases of 11.6% and 2.1% in our Int’l P&C and Int’l Professional Liability operating segments, respectively. The decline for the nine months is driven by decreases of 10.3%, 4.5% and 2.1% in our Int’l P&C, Int’l Professional Liability and Int’l Marine operating segments, respectively.

Ceded Written Premiums

Ceded written premiums increased $1.2 million for the three months ended September 30, 2015, compared to the same period in 2014. The increase is primarily due to our Transport product line within our Int’l Marine operating segment. Ceded written premiums decreased $21.9 million for the nine months ended September 30, 2015, compared to the same period in 2014. The decrease was primarily due to decreases in our proportional reinsurance program within each of our operating segments as well as a lower amount of current period RRP accruals compared with higher RRPs in our Int’l Marine operating segment in the prior year, primarily due to a

loss which involved the sinking of a vessel in South Korean waters of $3.9 million, $0.8 million for Rena and $0.6 million for Costa Concordia, which resulted in a positive year over year effect.

Net Earned Premiums

Net earned premiums increased $2.3 million for the three months ended September 30, 2015 as compared to the same period in 2014. This was driven by increases in our Int’l Professional Liability and Int’l P&C operating segments of $3.1 million and $2.6 million, respectively, offset by a decrease in our Int’l Marine operating segment of $3.4 million. The increase in our Int’l Professional Liability operating segment was driven by continued growth, specifically in the E&O and Warranties & Indemnities product lines.

Net earned premiums increased $9.3 million for the nine months ended September 30, 2015 as compared to the same period in 2014. This increase was due to a lesser amount of RRP accruals in the current year and fully earned RRPs in the prior year of $4.8 million within our Int’l Marine operating segment, which had a favorable year over year effect. In addition, there has been continued growth in our Int’l Professional Liability operating segment partially offset by the decline in our NavTech division within our Int’l P&C operating segment.

Net Losses and LAE

The Net losses and LAE reserves as of September 30, 2015 and December 31, 2014 are as follows:

	Int'l Insurance
	As of September 30, 2015								As of December 31, 2014
amounts in thousands	Marine		P&C		Professional Liability		Total		Marine		P&C		Professional Liability		Total		Total % Change
Case Reserves	$	171,492	$	37,906	$	10,347	$	219,745	$	168,575	$	41,695	$	12,466	$	222,736		(1.3	%)
IBNR Reserves		71,114		17,793		61,648		150,555		75,673		21,391		49,712		146,776		2.6	%
Total	$	242,606	$	55,699	$	71,995	$	370,300	$	244,248	$	63,086	$	62,178	$	369,512		0.2	%

The following tables present the impact of RRPs and reserve development on our Net losses and LAE ratio for the three and nine months ended September 30, 2015 and 2014:

	Int'l Insurance
	Three months ended September 30, 2015												Three months ended September 30, 2014
							Professional												Professional						Point
	Marine			P&C			Liability			Total			Marine			P&C			Liability			Total			Change
Net losses and LAE ratio, reported		62.5	%		47.7	%		54.7	%		57.2	%		36.5	%		24.9	%		56.8	%		37.6	%		19.6
RRPs		0.1	%		0.0	%		0.0	%		0.0	%		0.8	%		(0.8	%)		0.0	%		0.2	%		(0.2	)
Net current AY release/(development)		(19.0	%)		0.0	%		0.0	%		(10.2	%)		0.0	%		0.0	%		0.0	%		0.0	%		(10.2	)
Net prior AY release/(strengthening)		9.6	%		(4.4	%)		0.0	%		4.1	%		17.3	%		22.5	%		0.0	%		15.4	%		(11.3	)
Net losses and LAE ratio, adjusted		53.2	%		43.3	%		54.7	%		51.1	%		54.6	%		46.6	%		56.8	%		53.2	%		(2.1	)

	Int'l Insurance
	Nine months ended September 30, 2015												Nine months ended September 30, 2014
							Professional												Professional						Point
	Marine			P&C			Liability			Total			Marine			P&C			Liability			Total			Change
Net losses and LAE ratio, reported		55.7	%		39.5	%		51.4	%		51.3	%		51.0	%		43.3	%		48.1	%		48.6	%		2.7
RRPs		0.9	%		0.3	%		0.0	%		0.5	%		(2.1	%)		(0.5	%)		0.0	%		(1.3	%)		1.8
Net current AY release/(development)		(8.4	%)		0.0	%		0.0	%		(4.9	%)		(8.9	%)		0.0	%		0.0	%		(5.4	%)		0.5
Net prior AY release/(strengthening)		5.3	%		3.7	%		2.1	%		4.3	%		14.6	%		2.7	%		9.5	%		10.9	%		(6.6	)
Net losses and LAE ratio, adjusted		53.5	%		43.5	%		53.5	%		51.2	%		54.6	%		45.5	%		57.6	%		52.8	%		(1.6	)

For the three months ended September 30, 2015, our Int’l Insurance reporting segment recorded $7.0 million of net current AY reserve development on Property & Indemnity product within our Int’l Marine operating segment.

For the three months ended September 30, 2015, our Int’l Insurance reporting segment recorded $2.8 million of net prior AY reserve releases primarily driven by $3.5 million of reserve releases in our Int’l Marine operating segment, partially offset by net prior AY reserve strengthening of $0.7 million in our Int’l P&C operating segment.

For the nine months ended September 30, 2015, our Int’l Insurance reporting segment recorded $8.4 million of net prior AY reserve releases primarily driven by $6.0 million and $1.6 million of net reserve releases in our Int’l Marine and Int’l P&C operating segments, respectively, in connection with favorable loss emergence.

The changes in Net losses and LAE ratio, as adjusted, are primarily due to the mix of business earned.

Commission Expenses

The commission expense ratio for the three and nine months ended September 30, 2015 decreased 0.7 points and increased 0.6 points, respectively, as compared to the same periods in 2014, primarily driven by changes in our mix of business, changes in our proportional reinsurance programs, and to a lesser extent, higher profit commissions for certain products.

Other Operating Expenses

For the three and nine months ended September 30, 2015, Other operating expenses increased $2.6 million and $6.5 million, respectively, as compared to the same periods in 2014 due to investment in new underwriting initiatives in continental Europe including new underwriting offices in Rotterdam, Milan and Paris, and continued investment in new underwriting teams and support staff, partially offset by favorable foreign exchange rates.

GlobalRe

The following tables summarize our Underwriting profit (loss) for our GlobalRe reporting segment for the three and nine months ended September 30, 2015 and 2014:

	GlobalRe
	Three months ended September 30,
amounts in thousands	2015			2014			% Change
Gross written premiums	$	36,491		$	33,585			8.7	%
Ceded written premiums		(566	)		(791	)		(28.4	%)
Net written premiums		35,925			32,794			9.5	%

Net earned premiums	$	43,140		$	48,669			(11.4	%)
Net losses and LAE		(22,224	)		(29,652	)		(25.1	%)
Commission expenses		(7,705	)		(8,831	)		(12.8	%)
Other operating expenses		(3,714	)		(3,940	)		(5.7	%)
Other underwriting income (expense)		395			122		NM
Underwriting profit (loss)	$	9,892		$	6,368			55.3	%

Losses and LAE ratio		51.5	%		60.9	%
Commission expense ratio		17.9	%		18.1	%
Other operating expense ratio ⁽¹⁾		7.7	%		7.9	%
Combined ratio		77.1	%		86.9	%

NM - Percentage change not meaningful

(1) - Includes Other operating expenses and Other underwriting income (expense).

	GlobalRe
	Nine months ended September 30,
amounts in thousands	2015			2014			% Change
Gross written premiums	$	141,891		$	160,195			(11.4	%)
Ceded written premiums		(5,806	)		(4,665	)		24.5	%
Net written premiums		136,085			155,530			(12.5	%)

Net earned premiums	$	124,494		$	142,866			(12.9	%)
Net losses and LAE		(70,387	)		(92,331	)		(23.8	%)
Commission expenses		(23,042	)		(25,171	)		(8.5	%)
Other operating expenses		(11,975	)		(11,750	)		1.9	%
Other underwriting income (expense)		441			301			46.5	%
Underwriting profit (loss)	$	19,531		$	13,915			40.4	%

Losses and LAE ratio		56.5	%		64.6	%
Commission expense ratio		18.5	%		17.6	%
Other operating expense ratio ⁽¹⁾		9.3	%		8.1	%
Combined ratio		84.3	%		90.3	%

(1) - Includes Other operating expenses and Other underwriting income (expense).

Gross Written Premiums

Gross written premiums increased $2.9 million for the three months ended September 30, 2015 compared to the same period in 2014, primarily due to the new business opportunities within our A&H product line, partially offset by a decrease due to non-renewals in the Latin America (“LatAm”) product line.

Gross written premiums decreased $18.3 million for the nine months ended September 30, 2015 compared to the same period in 2014, primarily due to the non-renewal of a significant multiple peril crop quota share treaty within the Agriculture product line and lower assumed RRPs compared to our prior year LatAm product line, partially offset by year over year increases in our A&H product line due to new business opportunities.

Ceded Written Premiums

Ceded written premiums decreased $0.2 million for the three months ended September 30, 2015, compared to the same period in 2014, primarily due to a premium adjustment on the 2014 Property Catastrophe retrocessional treaty for our LatAm product line. Ceded written premiums increased $1.1 million for the nine months ended September 30, 2015 compared to the same period in 2014, primarily due to two additional retrocessional treaties written in 2015 for our LatAm product line as well as an increase in the retrocessional treaties, which includes our Property Treaty product line.

Net Earned Premiums

Net earned premiums decreased $5.5 million and $18.4 million for the three and nine months ended September 30, 2015 compared to the same periods in 2014. These decreases were primarily due to the non-renewal of the crop quota share treaty noted above and less RRPs assumed than in prior year, partially offset by growth in our A&H, Professional Liability, LatAm and Property Treaty products.

Net Losses and LAE

The Net losses and LAE reserves as of September 30, 2015 and December 31, 2014 are as follows:

	GlobalRe
	As of
amounts in thousands	September 30, 2015		December 31, 2014		% Change
Case Reserves	$	27,907	$	31,108		(10.3	%)
IBNR Reserves		105,601		90,580		16.6	%
Total	$	133,508	$	121,688		9.7	%

The following tables present the impact of RRPs and reserve development on our Net losses and LAE ratio for the three and nine months ended September 30, 2015 and 2014:

	GlobalRe
	Three months ended Sept. 30,						Point
	2015			2014			Change
Net losses and LAE ratio, reported		51.5	%		60.9	%		(9.4	)
RRPs		0.3	%		1.6	%		(1.3	)
Net current AY release/(development)		(1.2	%)		0.0	%		(1.2	)
Net prior AY release/(strengthening)		9.9	%		1.1	%		8.8
Net losses and LAE ratio, adjusted		60.5	%		63.6	%		(3.1	)

	GlobalRe
	Nine months ended Sept. 30,						Point
	2015			2014			Change
Net losses and LAE ratio, reported		56.5	%		64.6	%		(8.1	)
RRPs		0.3	%		1.8	%		(1.5	)
Net current AY release/(development)		(0.4	%)		0.0	%		(0.4	)
Net prior AY release/(strengthening)		3.4	%		(1.5	%)		4.9
Net losses and LAE ratio, adjusted		59.8	%		64.9	%		(5.1	)

The favorable variance in adjusted Net losses and LAE ratio for the three months ended September 30, 2015 compared to the same period in 2014 was primarily driven by mix of business earned in the quarter related to A&H premium adjustment earnings which carried a higher loss ratio.

The favorable variance in adjusted Net losses and LAE ratio for the nine months ended September 30, 2015 compared to the same period in 2014 was primarily driven by the non-renewal of the crop quota share treaty which carried a higher loss ratio, partially offset by the A&H premium adjustment noted above.

Commission Expenses

The Commission expense ratio decreased 0.2 points for the three months ended September 30, 2015 compared to the same period in 2014, due to mix of business changes, particularly a decrease in A&H quota share business which carries a higher commission rate. The Commission expense ratio increased 0.9 points for the nine months ended September 30, 2015 compared to the same period in 2014, resulting from an increase in A&H and LatAm products’ profit commissions payable as well as the non-renewal of a significant multiple peril crop quota share treaty, within our Agriculture product line, which carried a lower commission rate. This was offset by a decrease in the A&H product line’s assumed quota share business, as noted above.

Other Operating Expenses

Other operating expenses remained flat for the three and nine months ended September 30, 2015, compared to the same periods in 2014.

Capital Resources and Liquidity

Capital Resources

Our capital resources consist of funds deployed or available to be deployed to support our business operations. As of September 30, 2015 and December 31, 2014, our capital resources were as follows:

	As of
amounts in thousands	Sept. 30, 2015			December 31, 2014
Senior notes	$	263,544		$	263,440
Stockholders' equity		1,076,855			1,027,224
Total capitalization	$	1,340,399		$	1,290,664

Ratio of debt to total capitalization		19.7	%		20.4	%

We primarily rely upon dividends from our subsidiaries to meet our Parent Company’s obligations. Our Parent Company’s cash obligations primarily consist of semi-annual (April and October) interest payments of $7.6 million on the Senior notes. Going forward, the interest payments may be made from funds held at our Parent Company or dividends from its subsidiaries.

Navigators Insurance Company may pay dividends to our Parent Company out of its statutory earned surplus pursuant to statutory restrictions imposed under the New York insurance law. As of September 30, 2015, the maximum amount available for the payment of dividends by Navigators Insurance Company in 2015 without prior regulatory approval is $91.7 million.

Navigators Corporate Underwriters, Ltd., our wholly-owned corporate member at Lloyd’s, may pay dividends to our Parent Company up to the extent of available profits that have been distributed from the Syndicate. As of September 30, 2015, that amount was $12.6 million (£8.0 million).

Senior Notes and Credit Facility

On October 4, 2013, we completed a public debt offering of $265.0 million of the 5.75% Senior notes and received net proceeds of $263.3 million. The effective interest rate related to the net proceeds received from the 5.75% Senior notes is approximately 5.86%. Interest is payable on the 5.75% Senior notes each April 15 and October 15.

On November 6, 2014, NUAL entered into a credit facility for $8.0 million Australian Dollars with Barclays Bank PLC to fund its participation in the Syndicate. The facility is used to fund Australian underwriting obligations for the 2015 and prior underwriting years (“UWYs”). The facility contains customary covenants for facilities of this type, including a restriction on future encumbrances that are outside the ordinary course of business, and a requirement to maintain at least £75 million of Funds at Lloyd’s. Interest is payable on the facility at a rate of 2% per annum above a floating rate tied to the average mid-rate for Australian bills of exchange administered by the Australian Financial Markets Association. The facility may be cancelled by either party after providing written notice. As of September 30, 2015, our Company was in compliance with all covenants.

On November 24, 2014, our Company entered into a $175.0 million credit facility agreement with ING Bank N.V., London Branch, individually and as Administrative Agent, and a syndicate of lenders. The new credit facility amended and restated a $165.0 million letter of credit facility entered into by the parties on November 22, 2012. The credit facility, which is denominated in USD, is utilized to fund our participation in the Syndicate by posting Funds at Lloyd’s through letters of credit for the 2015 and 2016 UWYs, as well as open prior years. The letters of credit issued under the facility can be denominated in GBP and their aggregate face amount will fluctuate based on exchange rates. If any letters of credit remain outstanding under the facility after December 31, 2016, our Company would be required to post additional collateral to secure the remaining letters of credit. As of September 30, 2015, letters of credit with an aggregate face amount of $148.5 million were outstanding under the credit facility and our Company had $1.0 million of cash collateral posted.

This credit facility contains customary covenants for facilities of this type, including restrictions on indebtedness and liens, limitations on mergers, dividends and the sale of assets, and requirements as to maintaining certain consolidated tangible net worth, statutory surplus and other financial ratios. The credit facility also provides for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by our Company being false in any material respect, default under certain other indebtedness, certain insolvency or receivership events affecting our Company and its subsidiaries, the occurrence of certain material judgments, or a change in control of our Company. The letter of credit facility is secured by a pledge of the stock of certain insurance subsidiaries of our Company. To the extent the aggregate face amount issued under the credit facility exceeds the commitment amount; our Company is required to post collateral with the lead bank of the syndicate of lenders.

The applicable fee rate payable under the credit facility is based on a tiered schedule that is based on our Company’s then-current financial strength ratings issued by S&P and A.M. Best and the amount of our Company’s own collateral utilized to fund its participation in the Syndicate.

Shelf Registration

We generally maintain the ability to issue certain classes of debt and Equity securities via a universal shelf registration statement filed with the SEC, which is renewed every three years. The shelf registration provides us the means to access the debt and equity markets relatively quickly. Our current shelf registration, which was filed on April 14, 2015 with the SEC, expires in 2018. This report is not an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.

Consolidated Cash Flows

We believe that the cash flow generated by the operating activities of our subsidiaries will provide sufficient funds for us to meet our liquidity needs over the next twelve months. Beyond the next twelve months, cash flow available to us may be influenced by a variety of factors, including general economic conditions and conditions in the insurance and reinsurance markets, as well as fluctuations from year to year in claims experience.

We believe that we have adequately managed our cash flow requirements related to reinsurance recoveries from their positive cash flows and the use of available short-term funds when applicable. However, there can be no assurances that we will be able to continue to adequately manage such recoveries in the future or that collection disputes or reinsurer insolvencies will not arise that could materially increase the collection time lags or result in recoverable write-offs causing additional incurred losses and liquidity constraints to our Company. The payment of gross claims and related collections from reinsurers with respect to large losses could significantly impact our liquidity needs. However, in general, we expect to collect our paid reinsurance recoverables under the terms described above.

Net cash provided by operating activities was $159.1 million for the nine months ended September 30, 2015 compared to $181.4 million for the same period in 2014. The net decrease in cash flow from operations during the nine months ended September 30, 2015 was largely attributable to increased estimated federal tax payments associated with profitable underwriting results. Additionally, we experienced increased operating expenses paid resulting from increased headcount associated with the expansion of our business lines in our U.S. Insurance segment and into new European regions in our Int’l Insurance segment, offset by increased premium collections.

Net cash used in investing activities was $181.8 million for the nine months ended September 30, 2015 compared to $194.1 million for the comparable period in 2014. Fluctuations in cash provided by, or used in, investing activities is primarily due to changes in operating cash flows and the associated ongoing management of our investment portfolio.

Net cash provided by financing activities was $1.4 million for the nine months ended September 30, 2015 compared to $0.6 million for the comparable period in 2014. The fluctuation in cash provided by financing activities is primarily the result of transactions in our employee stock purchase plan.

Investments

Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of AA-/Aa3 as rated by S&P or Moody’s Investors Service (“Moody’s”). As of September 30, 2015, our portfolio had a duration of 3.8 years. Management periodically projects cash flow of the investment portfolio and other sources in order to maintain the appropriate levels of liquidity in an effort to ensure our ability to satisfy claims. As of September 30, 2015 and December 31, 2014, all Fixed maturities and Equity securities held by us were classified as available-for-sale.

The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. The primary objectives are to maximize total investment return in the context of preserving the statutory surplus of the insurance companies and enhancing shareholder value. As part of our overall investment strategy, we seek to build a tax efficient investment portfolio. As of September 30, 2015, the tax-exempt portion of our Fixed maturities portfolio was 20.9%. The investments are subject to the oversight of the respective insurance companies’ Boards of Directors and the Finance Committee of the Parent Company’s Board of Directors.

We are a specialty insurance company and periods of moderate economic recession or inflation tend not to have a significant direct effect on underwriting operations. They do, however, impact our investment portfolio. A decrease in interest rates will tend to decrease our yield and have a positive effect on the fair value of our invested assets. An increase in interest rates will tend to increase our yield and have a negative effect on the fair value of our invested assets.

The following table summarizes the composition of our investments at fair value:

	Fair Value as of
amounts in thousands	Sept. 30, 2015		Dec. 31, 2014		% Change
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	301,915	$	397,923		(24.1	%)
States, municipalities and political subdivisions		571,104		541,007		5.6	%
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		360,198		364,622		(1.2	%)
Residential mortgage obligations		31,568		34,087		(7.4	%)
Asset-backed securities		197,934		206,413		(4.1	%)
Commercial mortgage-backed securities		204,876		206,318		(0.7	%)
Subtotal	$	794,576	$	811,440		(2.1	%)
Corporate bonds		729,392		615,564		18.5	%
Total fixed maturities	$	2,396,987	$	2,365,934		1.3	%
Equity securities		274,928		184,295		49.2	%
Short-term investments		233,142		179,506		29.9	%
Total investments	$	2,905,057	$	2,729,735		6.4	%

Invested assets increased from December 31, 2014 primarily due to strong operating cash flows and to a lesser extent a decrease in Treasury rates. This was partially offset by spreads widening. The decrease in U.S. Treasury, agency and foreign government bonds is due to a strategic reallocation to municipal and corporate bonds in an effort to enhance portfolio yield. During 2015, operating cash flows were primarily invested in Equity securities to compensate for lower yields in fixed income.

The following table sets forth the amount of our Fixed maturities as of September 30, 2015 by S&P credit rating or, if an S&P rating is not available, the equivalent Moody’s rating. The total rating is the weighted average quality rating for the Fixed maturities portfolio as a whole.

		As of September 30, 2015
amounts in thousands	Rating	Fair Value		Amortized Cost
Rating description:
Extremely strong	AAA	$	435,330	$	435,805
Very strong	AA		1,019,705		998,357
Strong	A		683,626		675,586
Adequate	BBB		234,948		234,370
Speculative	BB & Below		23,348		23,024
Not rated	NR		30		30
Total	AA	$	2,396,987	$	2,367,172

The following table sets forth the composition of the non-government guaranteed Fixed maturities categorized by asset class and generally equivalent S&P and Moody’s ratings (not all securities in our portfolio are rated by both S&P and Moody’s) as of September 30, 2015:

	As of September 30, 2015
amounts in thousands	AAA		AA		A		BBB		BB and below		NR		Fair Value		Amortized Cost
Municipal bonds	$	43,456	$	361,273	$	165,318	$	1,027	$	—	$	30	$	571,104	$	554,629
Agency residential mortgage-backed		—		360,198		—		—		—		—		360,198		353,910
Residential mortgage-backed		18,269		3,883		107		1,504		7,805		—		31,568		30,818
Asset-backed		125,808		17,609		48,496		6,021		—		—		197,934		198,189
Commercial mortgage-backed		151,782		25,071		28,023		—		—		—		204,876		200,499
Corporate bonds		12,304		51,224		423,925		226,396		15,543		—		729,392		722,727
Total	$	351,619	$	819,258	$	665,869	$	234,948	$	23,348	$	30	$	2,095,072	$	2,060,772

The following table sets forth our U.S. Treasury bonds, agency bonds and foreign government bonds, as well as our state, municipality and political subdivision bond holdings by sector:

	As of September 30, 2015
amounts in thousands	Fair Value		Amortized Cost
U.S. Treasury bonds, agency bonds and foreign government bonds:
U.S. Treasury bonds	$	89,239	$	86,972
Agency bonds		111,601		109,884
Foreign government bonds		101,075		109,544
Total U.S. Treasury bonds, agency bonds and foreign government bonds	$	301,915	$	306,400

States, municipalities and political subdivisions:
General obligation	$	164,581	$	161,146
Prerefunded		25,813		24,675
Revenue		311,220		300,588
Taxable		69,490		68,220
Total States, municipalities and politcal subdivsions	$	571,104	$	554,629

We own $60.3 million of municipal securities, which are credit enhanced by various financial guarantors. As of September 30, 2015, the average underlying credit rating for these securities is AA-. There has been no material adverse impact to our investment portfolio or results of operations as a result of downgrades of the credit ratings for several of the financial guarantors.

The following table sets forth our agency mortgage-backed securities (“AMBS”) and residential mortgage-backed securities (“RMBS”) issued by the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) and the quality category (prime, Alternative A-paper (“Alt-A”) and subprime) for all other such investments as of September 30, 2015:

	As of September 30, 2015
amounts in thousands	Fair Value		Amortized Cost
AMBS:
GNMA	$	71,452	$	69,928
FNMA		193,450		189,945
FHLMC		95,296		94,037
Total agency mortgage-backed securities	$	360,198	$	353,910

RMBS:
Prime	$	11,825	$	11,411
Alt-A and subprime		1,474		1,383
Non-U.S. RMBS		18,269		18,024
Total residential mortgage-backed securities	$	31,568	$	30,818

We analyze our mortgage-backed securities by credit quality of the underlying collateral distinguishing between the securities issued by FNMA, FHLMC and GNMA, which are federal government sponsored entities, and non-FNMA and non-FHLMC securities broken out by prime, Alt-A and subprime collateral. The securities issued by FNMA and FHLMC are the obligations of each respective entity. The U.S. Department of the Treasury has agreed to provide support to FNMA and FHLMC under a Preferred Stock Purchase Agreement by committing to make quarterly payments to these enterprises, if needed, to maintain a zero net worth.

Prime collateral consists of mortgages or other collateral from the most creditworthy borrowers. Alt-A collateral consists of mortgages or other collateral from borrowers, which have a risk potential greater than prime but less than subprime. The subprime collateral consists of mortgages or other collateral from borrowers with low credit ratings. Such subprime and Alt-A categories are as defined by S&P.

Details of the collateral of our asset-backed securities portfolio as of September 30, 2015 are presented below:

	As of September 30, 2015
amounts in thousands	Fair Value		Amortized Cost
Auto loans	$	29,711	$	29,451
Credit cards		41,277		41,273
Collateralized loan obligations		75,933		76,688
Time share		23,151		23,059
Miscellaneous		27,862		27,718
Total	$	197,934	$	198,189

We hold non-sovereign securities where the issuer is located in the Euro Area, an economic and monetary union of certain member states within the European Union that have adopted the Euro as their common currency. As of September 30, 2015, the fair value of such securities was $87.2 million, with an amortized cost of $86.7 million, representing 3.3% of our total Fixed maturities and equity portfolio. Our largest exposure is in the Netherlands with a total of $39.8 million followed by France with a total of $25.8 million. We have no direct exposure to Greece, Portugal, Italy or Spain within the Euro Area, or Ukraine or Russia as of September 30, 2015.

The following table summarizes the gross unrealized investment losses as of September 30, 2015 by length of time where the fair value was less than 80% of amortized cost:

	As of September 30, 2015
	Fixed		Equity
amounts in thousands	Maturities		Securities		Total
Less than twelve months	$	—	$	1,702	$	1,702
Longer than twelve months		5,147		—		5,147
Total	$	5,147	$	1,702	$	6,849

The longer than twelve months unrealized loss of $5.1 million is due to unfavorable foreign exchange movement in our Canadian portfolio.

Our Company had credit related OTTI losses of $1.3 million and $1.7 million from our equity portfolio during the three and nine months ended September 30, 2015. Our Company did not have any credit related OTTI losses during the three and nine months ended September 30, 2014. The fair value of our investment portfolio may fluctuate significantly in response to various factors such as changes in interest rates, investment quality ratings, equity prices, foreign exchange rates and credit spreads. We do not have the intent to sell nor is it more likely than not that we will have to sell Fixed maturities in unrealized loss positions that are not other-than-temporarily impaired before recovery. For structured securities, default probability and severity assumptions differ based on property type, vintage and the stress of the collateral. We do not intend to sell any of these securities and it is more likely than not that, we will not be required to sell these securities before the recovery of the amortized cost basis. For Equity securities, we also consider our intent to hold securities as part of the process of evaluating whether a decline in fair value represents an other-than-temporary decline in value. We may realize investment losses to the extent our liquidity needs require the disposition of Fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments. Significant changes in the factors we consider when evaluating investments for impairment losses could result in a significant change in impairment losses reported in the Consolidated Financial Statements.

Critical Accounting Estimates

Our Company’s Annual Report on Form 10-K for the year ended December 31, 2014 discloses our critical accounting estimates (refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates).

We believe the items that require the most subjective and complex estimates involve the reporting of:

The Reserves for losses and LAE (including losses that have occurred but were not reported to us by the financial reporting date)

Reinsurance recoverables, including a provision for uncollectible reinsurance

Written and unearned premiums

The recoverability of deferred tax assets

The impairment of investment securities

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The following updates our disclosure regarding foreign currency exchange rate risk as previously stated in our Company’s 2014 Annual Report on Form 10-K.

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate risk primarily related to foreign-denominated cash, cash equivalents and marketable securities, premiums receivable, reinsurance recoverables on paid and unpaid losses and LAE as well as Reserves for losses and LAE. The principal currencies creating foreign currency exchange risk for our operations are the British pound, the Euro and the Canadian dollar. We manage our foreign currency exchange rate risk primarily through asset-liability matching.

There have been no material changes in foreign exchange rate risk from year-end.

Item 4. Controls and Procedures

(a)

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of such period our Company’s disclosure controls and procedures are effective in identifying, on a timely basis, material information required to be disclosed in our reports filed or submitted under the Exchange Act.

(b)

There have been no changes during our third fiscal quarter in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our Company’s internal control over financial reporting.

(c)

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Company’s 2014 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.	Description of Exhibit

11-1	Computation of Per Share Earnings	*

31-1	Certification of CEO per Section 302 of the Sarbanes-Oxley Act	*

31-2	Certification of CFO per Section 302 of the Sarbanes-Oxley Act	*

32-1	Certification of CEO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with Regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference).	*

32-2	Certification of CFO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with Regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference).	*

101.INS	XBRL Instance Document	*

101.SCH	XBRL Taxonomy Extension Scheme	*

101.CAL	XBRL Taxonomy Extension Calculation Database	*

101.LAB	XBRL Taxonomy Extension Label Linkbase	*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	*

101.DEF	XBRL Taxonomy Extension Definition Linkbase	*

*	Included herein

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	The Navigators Group, Inc.
	(Company)

Dated: November 6, 2015	By:	/s/ Ciro M. DeFalco
		Ciro M. DeFalco
		Senior Vice President and Chief Financial Officer

Index to Exhibits

Exhibit No.	Description of Exhibit

11-1	Computation of Per Share Earnings	*

31-1	Certification of CEO per Section 302 of the Sarbanes-Oxley Act	*

31-2	Certification of CFO per Section 302 of the Sarbanes-Oxley Act	*

32-1	Certification of CEO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with Regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference).	*

32-2	Certification of CFO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with Regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference).	*

101.INS	XBRL Instance Document	*

101.SCH	XBRL Taxonomy Extension Scheme	*

101.CAL	XBRL Taxonomy Extension Calculation Database	*

101.LAB	XBRL Taxonomy Extension Label Linkbase	*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	*

101.DEF	XBRL Taxonomy Extension Definition Linkbase	*

*	Included herein

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