NAVIGATORS GROUP INC - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - 8-K - 4Q17 - NAVIGATORS GROUP INC	navg-8k_20171231.htm

Exhibit 99.1

The Navigators Group, Inc.

CORPORATE NEWS

Navigators Reports Fourth Quarter 2017 Earnings

Net Income up 24.4%; Board Approves Dividend Increase

Stamford, CT – February 15, 2018 -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $26.9 million, or $0.89 per diluted share, for the three months ended December 31, 2017 compared to $21.6 million, or $0.71 per diluted share, for the same period in 2016. Net Operating Earnings¹ were $24.5 million, or $0.81 per diluted share, for the three months ended December 31, 2017 compared to $17.7 million, or $0.58 per diluted share, for the same period in 2016.

The fourth quarter of 2017 was impacted by the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As a result of the Tax Act, The Navigators Group, Inc. (“Navigators” or the “Company”) recognized additional income tax expense of $19.7 million which reduced Net Income in the fourth quarter.

Gross Written Premiums and Net Written Premiums for the three months ended December 31, 2017 were $408.7 million and $304.9 million, respectively, increasing 11.2% and 7.8%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended December 31, 2017 was 96.6%, compared to 96.7% for the same period in 2016.

Net Investment Income for the three months ended December 31, 2017 was $23.0 million, an increase of 14.3% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the three months ended December 31, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended December 31, 2017 was $(3.2) million, compared to $1.9 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the full year ended December 31, 2017, our Company reported Net Income of $40.5 million, or $1.35 per diluted share, compared to $82.7 million, or $2.75 per diluted share, for the same period in 2016. Net Operating Earnings were $35.0 million, or $1.16 per diluted share, for the full year ended December 31, 2017 compared to $71.2 million, or $2.37 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the full year ended December 31, 2017 were $1.7 billion and $1.3 billion, respectively, increasing 9.2% and 7.2%, respectively, from the comparable period in 2016. Our Combined Ratio for the full year ended December 31, 2017 was 103.2%, compared to 96.7% for the same period in 2016.

In addition to the impact of the enactment of the Tax Act in the fourth quarter of 2017, the full year results also include Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums totaling $71.3 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $34.3 million.

Net Investment Income for the full year ended December 31, 2017 was $89.3 million, an increase of 12.4% as compared to the same period in 2016. Our pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the full year ended December 31, 2017, compared to 2.6% for the same period in 2016.

¹ Net Operating Earnings is a “non-GAAP financial measure” as defined in Regulation G. A reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings is provided on page 4 of this release, as is a discussion of the rationale for the presentation of this item.

News Release

February 15, 2018

Page 2

Other Income (Loss) for the full year ended December 31, 2017 was $(4.2) million, compared to $8.7 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report solidly profitable results for the fourth quarter. Both the U.S. Insurance and Global Reinsurance segments produced excellent underwriting results, with combined ratios of 91.3% and 90.9% respectively. We grew Gross Written Premium by 11.2% and are well positioned to capitalize on anticipated growth opportunities emanating from the ongoing strength of the U.S. economy as well as targeted specialty niches globally. Net Investment Income was up 14.3% over fourth quarter 2017. In December, we opted to liquidate our actively managed common equity holdings, realizing pre-tax gains of $37.1 million. While the recently enacted Tax Act adversely impacted our fourth quarter results, we anticipate positive benefits of a lower corporate tax rate beginning in 2018. During the quarter, we announced the proposed acquisition of a Belgium-based specialty underwriting manager and insurance company, which we expect to close in the second quarter, subject to regulatory approval. This is an important part of our post-Brexit strategy.”

Our Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by S&P and Moody’s, respectively, with an effective duration of 3.5 years as of December 31, 2017. As of December 31, 2017, Net Unrealized Gains within our investment portfolio were $41.5 million, a decrease of $(45.8) million compared to September 30, 2017. We recognized $37.1 million of Net Realized Gains for the three months ended December 31, 2017, compared to $4.0 million of Net Realized Gains for the same period in 2016. For the full year ended December 31, 2017 we recognized $43.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $9.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016. The increase in Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the fourth quarter and full year 2017 compared to the same periods in 2016 was primarily related to the liquidation of our common equity portfolio in December 2017 as we reassess our actively managed common equity strategy.

Stockholders’ Equity was $1.2 billion, or $41.55 per share, as of December 31, 2017 compared to $41.49 per share, as of September 30, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended December 31, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On February 15, 2018 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.07 per share, payable on March 23, 2018 to stockholders of record on March 2, 2018. This represents an increase of 16.7% over the prior quarter dividend.

Our Company will hold a conference call on Friday, February 16, 2018 starting at 8:30 a.m. (ET) to discuss the 2017 fourth quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is 800-850-2903 and the international dial-in is 224-357-2399. Participants may also connect to the webcast at: https://edge.media-server.com/m6/p/o8reaviq.

The Navigators Group, Inc. is an international specialty insurance holding company with operations in the United States, the United Kingdom, Continental Europe and Asia.

This press release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words “estimate,” “expect,” “believe” or similar expressions are intended to identify such forward-looking statements. Forward-looking statements are derived from information that we currently have and assumptions that we make. These forward-looking statements include statements on the financial impact of tax reform. We continue to assess the tax accounting effects of tax reform. We cannot assure that results that we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties that we face. Please refer to Navigators’ most recent reports on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators’ business and the important factors that may affect that business. Navigators’ undertakes no obligation to publicly update or revise any forward-looking statement.

Contact:		Ciro M. DeFalco
		Executive Vice President and Chief Financial Officer
		(203) 905-6343
		cdefalco@navg.com
		www.navg.com

News Release

February 15, 2018

Page 3

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

	Three Months Ended									Years Ended
amounts in thousands, except per share amounts	December 31,									December 31,
Results of Operations	2017			2016			Change			2017			2016			Change

Gross Written Premiums	$	408,743		$	367,539			11.2	%	$	1,713,265		$	1,568,911			9.2	%
Net Written Premiums		304,869			282,868			7.8	%		1,271,330			1,186,224			7.2	%

Revenues:
Net Earned Premiums	$	305,099		$	283,985			7.4	%	$	1,186,420		$	1,100,345			7.8	%
Net Investment Income		22,982			20,107			14.3	%		89,293			79,451			12.4	%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment Losses		3			21			(87.9	%)		(2,002	)		(227	)	NM
Portion of Loss Recognized in Other Comprehensive Income (Before Tax)		(3	)		(21	)		(85.7	%)		(62	)		77		NM
Net Other-Than-Temporary Impairment Losses Recognized In Earnings		—			—		NM				(2,064	)		(150	)	NM
Other Realized Gains		37,141			4,043		NM				45,073			9,186		NM
Net Realized Gains		37,141			4,043		NM				43,009			9,036		NM
Other Income (Loss)		(3,201	)		1,905		NM				(4,243	)		8,701		NM
Total Revenues	$	362,021		$	310,040			16.8	%	$	1,314,479		$	1,197,533			9.8	%

Expenses:
Net Losses and Loss Adjustment Expenses		183,384			172,493			6.3	%		806,265			665,448			21.2	%
Commission Expenses		43,205			44,154			(2.2	%)		184,731			165,045			11.9	%
Other Operating Expenses		68,153			58,076			17.4	%		233,230			234,096			(0.4	%)
Interest Expense		3,863			3,860			0.1	%		15,447			15,435			0.1	%
Total Expenses	$	298,605		$	278,583			7.2	%	$	1,239,673		$	1,080,024			14.8	%

Income Before Income Taxes		63,416			31,457			101.6	%		74,806			117,509			(36.3	%)

Income Tax Expense		36,555			9,866		NM				34,312			34,783			(1.4	%)

Net Income	$	26,861		$	21,591			24.4	%	$	40,494		$	82,726			(51.1	%)


Per Share Data

Net Income Per Common Share:
Basic	$	0.91		$	0.74			22.8	%	$	1.38		$	2.85			(51.7	%)
Diluted	$	0.89		$	0.71			25.2	%	$	1.35		$	2.75			(51.1	%)

Average Common Shares Outstanding:
Basic		29,505			29,121						29,441			29,074
Diluted		30,099			30,282						30,071			30,032

Underwriting Ratios
Loss Ratio		60.1	%		60.7	%					68.0	%		60.5	%
Expense Ratio		36.5	%		36.0	%					35.2	%		36.2	%
Combined Ratio		96.6	%		96.7	%					103.2	%		96.7	%

Balance Sheet Data	December 31,			September 30,						December 31,			December 31,
	2017			2017						2017			2016
Stockholders' Equity	$	1,225,965		$	1,224,191			0.1	%	$	1,225,965		$	1,178,188			4.1	%
Book Value per Share	$	41.55		$	41.49			0.1	%	$	41.55		$	40.45			2.7	%

NM - Percentage change not meaningful.

News Release

February 15, 2018

Page 4

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS

(Unaudited)

In this release, we present Net Operating Earnings, which is a “non-GAAP financial measure” as defined in Regulation G.

Net Operating Earnings is comprised of Net Income excluding After-Tax Net Realized Gains (Losses), After-Tax Net Other-Than-Temporary Impairment Losses Recognized in Earnings, After-Tax Foreign Exchange Gains (Losses), and the impact of the passage of the Tax Act at enactment recognized in our Consolidated Statements of Income.

We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our business and enables investors and other users of our financial information to analyze underlying business performance in a manner similar to management. We also believe this measure follows industry practice and, therefore facilitates comparison of our performance with our peer group.

The following tables provide a reconciliation of Net Income (the nearest GAAP financial measure) to Net Operating Earnings:

	Three Months Ended December 31, 2017									Three Months Ended December 31, 2016									% Change
amounts in thousands, except per share amounts	Pre-Tax			Tax ⁽¹⁾			After-Tax			Pre-Tax			Tax ⁽¹⁾			After-Tax			QTD
Net Income	$	63,416		$	(36,555	)	$	26,861		$	31,457		$	(9,866	)	$	21,591			24.4	%
Adjustments to Net Income:
Realized Losses (Gains)		(37,141	)		12,999			(24,142	)		(4,043	)		1,416			(2,627	)	NM
FX Losses (Gains)		3,198			(1,119	)		2,079			(1,947	)		682			(1,265	)	NM
Impact of the Tax Act at Enactment ⁽²⁾		—			19,694			19,694			—			—			—		NM
Net Operating Earnings	$	29,473		$	(4,981	)	$	24,492		$	25,467		$	(7,768	)	$	17,699			38.4	%

Average Common Shares Outstanding:
Basic								29,505									29,121
Diluted								30,099									30,282

Net Operating Earnings per Common Share:
Basic							$	0.83								$	0.61
Diluted							$	0.81								$	0.58

	Year Ended December 31, 2017									Year Ended December 31, 2016									% Change
amounts in thousands, except per share amounts	Pre-Tax			Tax ⁽¹⁾			After-Tax			Pre-Tax			Tax ⁽¹⁾			After-Tax			YTD
Net Income	$	74,806		$	(34,312	)	$	40,494		$	117,509		$	(34,783	)	$	82,726			(51.1	%)
Adjustments to Net Income:
Realized Losses (Gains)		(43,009	)		15,054			(27,955	)		(9,036	)		3,163			(5,873	)	NM
FX Losses (Gains)		4,213			(1,474	)		2,739			(8,626	)		3,019			(5,607	)	NM
Impact of the Tax Act at Enactment ⁽²⁾		—			19,694			19,694			—			—			—		NM
Net Operating Earnings	$	36,010		$	(1,038	)	$	34,972		$	99,847		$	(28,601	)	$	71,246			(50.9	%)

Average Common Shares Outstanding:
Basic								29,441									29,074
Diluted								30,071									30,032

Net Operating Earnings per Common Share:
Basic							$	1.19								$	2.45
Diluted							$	1.16								$	2.37

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.

(2) - As a result of the enactment of the Tax Act, we revalued our deferred tax assets as of December 31, 2017 resulting in a reduction in our deferred tax assets of $17.1 million and we also anticipate incurring a one-time payment of approximately $2.6 million due to tax on previously untaxed accumulated and current earnings and profits on certain foreign subsidiaries.

NM - Percentage change not meaningful.

News Release

February 15, 2018

Page 5

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,			December 31,
	2017			2016
amounts in thousands, except per share amounts	(Unaudited)
ASSETS
Investments:
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2017: $3,027,408; 2016: $2,628,225)	$	3,057,054		$	2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $224,159; 2016: $327,911)		235,981			349,142
Other Invested Assets (Equity Method)		1,720			1,960
Short-Term Investments, at fair value (amortized cost: 2017: $127,125; 2016: $143,451)		127,128			143,539
Total Investments	$	3,421,883		$	3,130,523
Cash		67,084			64,643
Premiums Receivable		351,393			306,686
Prepaid Reinsurance Premiums		228,569			213,377
Reinsurance Recoverable on Paid Losses		72,494			82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses		809,765			779,276
Deferred Policy Acquisition Costs		135,249			119,660
Accrued Investment Income		19,480			17,315
Goodwill and Other Intangible Assets		6,596			6,451
Current Income Tax Receivable, Net		16,667			20,556
Deferred Income Tax, Net		22,271			20,938
Other Assets		73,171			52,030
Total Assets	$	5,224,622		$	4,814,037

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses	$	2,515,145		$	2,289,727
Unearned Premiums		987,681			887,344
Reinsurance Balances Payable		136,192			108,980
Senior Notes		263,885			263,728
Accounts Payable and Other Liabilities		95,754			86,070
Total Liabilities	$	3,998,657		$	3,635,849

Stockholders' Equity:
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued)	$	—		$	—

Common Stock ($.10 par value per share, authorized 50,000 shares, issued 36,530 shares for 2017 and 36,147 shares for 2016)		3,650			3,612
Additional Paid-In Capital		376,868			373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016)		(155,801	)		(155,801	)
Retained Earnings		981,380			947,519
Accumulated Other Comprehensive Income		19,868			8,875
Total Stockholders' Equity	$	1,225,965		$	1,178,188
Total Liabilities and Stockholders' Equity	$	5,224,622		$	4,814,037

News Release

February 15, 2018

Page 6

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Three Months Ended December 31, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	258,450		$	114,476		$	35,817		$	—		$	408,743
Ceded Written Premiums		(67,321	)		(35,910	)		(643	)		—			(103,874	)
Net Written Premiums		191,129			78,566			35,174			—			304,869

Net Earned Premiums	$	174,424		$	83,199		$	47,476		$	—		$	305,099
Net Losses and LAE		(103,917	)		(53,088	)		(26,379	)		—			(183,384	)
Commission Expenses		(18,599	)		(14,389	)		(10,441	)		224			(43,205	)
Other Operating Expenses		(36,918	)		(24,777	)		(6,458	)		—			(68,153	)
Other Underwriting Income (Expense)		126			—			126			(224	)		28

Underwriting Profit (Loss)	$	15,116		$	(9,055	)	$	4,324		$	—		$	10,385

Net Investment Income											22,982			22,982
Net Realized Gains											37,141			37,141
Interest Expense											(3,863	)		(3,863	)
Other Loss											(3,229	)		(3,229	)
Income (Loss) Before Income Taxes	$	15,116		$	(9,055	)	$	4,324		$	53,031		$	63,416
Income Tax Expense											(36,555	)		(36,555	)
Net Income													$	26,861

Losses and LAE Ratio		59.6	%		63.8	%		55.6	%					60.1	%
Commission Expense Ratio		10.7	%		17.3	%		22.0	%					14.2	%
Other Operating Expense Ratio ⁽²⁾		21.0	%		29.8	%		13.3	%					22.3	%
Combined Ratio		91.3	%		110.9	%		90.9	%					96.6	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

February 15, 2018

Page 7

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Three Months Ended December 31, 2016
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	230,177		$	100,104		$	37,258		$	—		$	367,539
Ceded Written Premiums		(57,353	)		(26,429	)		(889	)		—			(84,671	)
Net Written Premiums		172,824			73,675			36,369			—			282,868

Net Earned Premiums	$	166,862		$	71,814		$	45,309		$	—		$	283,985
Net Losses and LAE		(106,600	)		(44,765	)		(21,128	)		—			(172,493	)
Commission Expenses		(20,433	)		(14,179	)		(9,820	)		278			(44,154	)
Other Operating Expenses		(31,260	)		(21,398	)		(5,418	)		—			(58,076	)
Other Underwriting Income (Expense)		149			—			148			(278	)		19

Underwriting Profit (Loss)	$	8,718		$	(8,528	)	$	9,091		$	—		$	9,281

Net Investment Income											20,107			20,107
Net Realized Gains											4,043			4,043
Interest Expense											(3,860	)		(3,860	)
Other Income											1,886			1,886
Income (Loss) Before Income Taxes	$	8,718		$	(8,528	)	$	9,091		$	22,176		$	31,457
Income Tax Expense											(9,866	)		(9,866	)
Net Income													$	21,591

Losses and LAE Ratio		63.9	%		62.3	%		46.6	%					60.7	%
Commission Expense Ratio		12.2	%		19.7	%		21.7	%					15.5	%
Other Operating Expense Ratio ⁽²⁾		18.7	%		29.9	%		11.6	%					20.5	%
Combined Ratio		94.8	%		111.9	%		79.9	%					96.7	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

February 15, 2018

Page 8

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Year Ended December 31, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	988,293		$	501,130		$	223,842		$	—		$	1,713,265
Ceded Written Premiums		(266,993	)		(165,278	)		(9,664	)		—			(441,935	)
Net Written Premiums		721,300			335,852			214,178			—			1,271,330

Net Earned Premiums	$	674,665		$	333,792		$	177,963		$	—		$	1,186,420
Net Losses and LAE		(443,353	)		(229,601	)		(133,311	)		—			(806,265	)
Commission Expenses		(77,729	)		(68,824	)		(39,136	)		958			(184,731	)
Other Operating Expenses		(128,905	)		(83,464	)		(20,861	)		—			(233,230	)
Other Underwriting Income (Expense)		461			—			565			(958	)		68

Underwriting Profit (Loss)	$	25,139		$	(48,097	)	$	(14,780	)	$	—		$	(37,738	)

Net Investment Income											89,293			89,293
Net Realized Gains											43,009			43,009
Interest Expense											(15,447	)		(15,447	)
Other Loss											(4,311	)		(4,311	)
Income (Loss) Before Income Taxes	$	25,139		$	(48,097	)	$	(14,780	)	$	112,544		$	74,806
Income Tax Expense											(34,312	)		(34,312	)
Net Income													$	40,494

Losses and LAE Ratio		65.7	%		68.8	%		74.9	%					68.0	%
Commission Expense Ratio		11.5	%		20.6	%		22.0	%					15.6	%
Other Operating Expense Ratio ⁽²⁾		19.1	%		25.0	%		11.4	%					19.6	%
Combined Ratio		96.3	%		114.4	%		108.3	%					103.2	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

February 15, 2018

Page 9

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Year Ended December 31, 2016
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	919,395		$	484,471		$	165,045		$	—		$	1,568,911
Ceded Written Premiums		(235,827	)		(138,504	)		(8,356	)		—			(382,687	)
Net Written Premiums		683,568			345,967			156,689			—			1,186,224

Net Earned Premiums	$	629,308		$	307,416		$	163,621		$	—		$	1,100,345
Net Losses and LAE		(397,860	)		(178,284	)		(89,304	)		—			(665,448	)
Commission Expenses		(70,812	)		(61,703	)		(34,008	)		1,478			(165,045	)
Other Operating Expenses		(128,108	)		(86,395	)		(19,593	)		—			(234,096	)
Other Underwriting Income (Expense)		1,092			—			522			(1,478	)		136

Underwriting Profit (Loss)	$	33,620		$	(18,966	)	$	21,238		$	—		$	35,892

Net Investment Income											79,451			79,451
Net Realized Gains											9,036			9,036
Interest Expense											(15,435	)		(15,435	)
Other Income											8,565			8,565
Income (Loss) Before Income Taxes	$	33,620		$	(18,966	)	$	21,238		$	81,617		$	117,509
Income Tax Expense											(34,783	)		(34,783	)
Net Income													$	82,726

Losses and LAE Ratio		63.2	%		58.0	%		54.6	%					60.5	%
Commission Expense Ratio		11.3	%		20.1	%		20.8	%					15.0	%
Other Operating Expense Ratio ⁽²⁾		20.2	%		28.1	%		11.6	%					21.2	%
Combined Ratio		94.7	%		106.2	%		87.0	%					96.7	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

February 15, 2018

Page 10

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	U.S. Insurance
	Three Months Ended December 31, 2017												Three Months Ended December 31, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	37,131		$	189,316		$	32,003		$	258,450		$	39,784		$	160,030		$	30,363		$	230,177			12.3	%
Ceded Written Premiums		(16,601	)		(44,204	)		(6,516	)		(67,321	)		(17,035	)		(32,602	)		(7,716	)		(57,353	)		17.4	%
Net Written Premiums		20,530			145,112			25,487			191,129			22,749			127,428			22,647			172,824			10.6	%

Net Earned Premiums	$	21,970		$	128,980		$	23,474		$	174,424		$	26,496		$	118,331		$	22,035		$	166,862			4.5	%
Net Losses and LAE		(13,232	)		(76,937	)		(13,748	)		(103,917	)		(14,639	)		(77,979	)		(13,982	)		(106,600	)		(2.5	%)
Commission Expenses		(918	)		(13,643	)		(4,038	)		(18,599	)		(2,694	)		(14,146	)		(3,593	)		(20,433	)		(9.0	%)
Other Operating Expenses		(7,221	)		(24,077	)		(5,620	)		(36,918	)		(6,603	)		(19,901	)		(4,756	)		(31,260	)		18.1	%
Other Underwriting Income		104			16			6			126			108			32			9			149			(15.5	%)

Underwriting Profit (Loss)	$	703		$	14,339		$	74		$	15,116		$	2,668		$	6,337		$	(287	)	$	8,718			73.4	%

Losses and LAE Ratio		60.2	%		59.7	%		58.6	%		59.6	%		55.3	%		65.9	%		63.5	%		63.9	%
Commission Expense Ratio		4.2	%		10.6	%		17.2	%		10.7	%		10.2	%		12.0	%		16.3	%		12.2	%
Other Operating Expense Ratio ⁽¹⁾		32.4	%		18.6	%		23.9	%		21.0	%		24.4	%		16.7	%		21.5	%		18.7	%
Combined Ratio		96.8	%		88.9	%		99.7	%		91.3	%		89.9	%		94.6	%		101.3	%		94.8	%

(1) - Includes Other Operating Expenses and Other Underwriting Income.

News Release

February 15, 2018

Page 11

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	Int'l Insurance
	Three Months Ended December 31, 2017												Three Months Ended December 31, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	38,122		$	34,677		$	41,677		$	114,476		$	31,680		$	35,969		$	32,455		$	100,104			14.4	%
Ceded Written Premiums		(8,608	)		(15,518	)		(11,784	)		(35,910	)		(6,818	)		(12,581	)		(7,030	)		(26,429	)		35.9	%
Net Written Premiums		29,514			19,159			29,893			78,566			24,862			23,388			25,425			73,675			6.6	%

Net Earned Premiums	$	36,338		$	21,225		$	25,636		$	83,199		$	31,847		$	18,847		$	21,120		$	71,814			15.9	%
Net Losses and LAE		(30,554	)		(7,137	)		(15,397	)		(53,088	)		(12,653	)		(19,821	)		(12,291	)		(44,765	)		18.6	%
Commission Expenses		(4,951	)		(2,933	)		(6,505	)		(14,389	)		(7,894	)		(3,102	)		(3,183	)		(14,179	)		1.5	%
Other Operating Expenses		(10,424	)		(8,554	)		(5,799	)		(24,777	)		(8,376	)		(8,389	)		(4,633	)		(21,398	)		15.8	%

Underwriting Profit (Loss)		(9,591	)		2,601			(2,065	)		(9,055	)		2,924			(12,465	)		1,013			(8,528	)		6.2	%

Losses and LAE Ratio		84.1	%		33.6	%		60.1	%		63.8	%		39.7	%		105.2	%		58.2	%		62.3	%
Commission Expense Ratio		13.6	%		13.8	%		25.4	%		17.3	%		24.8	%		16.5	%		15.1	%		19.7	%
Other Operating Expense Ratio		28.7	%		40.3	%		22.6	%		29.8	%		26.3	%		44.4	%		21.9	%		29.9	%
Combined Ratio		126.4	%		87.7	%		108.1	%		110.9	%		90.8	%		166.1	%		95.2	%		111.9	%

News Release

February 15, 2018

Page 12

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	U.S. Insurance
	Year Ended December 31, 2017												Year Ended December 31, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	156,171		$	713,539		$	118,583		$	988,293		$	169,405		$	631,562		$	118,428		$	919,395			7.5	%
Ceded Written Premiums		(72,431	)		(173,501	)		(21,061	)		(266,993	)		(70,858	)		(135,888	)		(29,081	)		(235,827	)		13.2	%
Net Written Premiums		83,740			540,038			97,522			721,300			98,547			495,674			89,347			683,568			5.5	%

Net Earned Premiums	$	86,605		$	495,260		$	92,800		$	674,665		$	100,132		$	453,673		$	75,503		$	629,308			7.2	%
Net Losses and LAE		(58,099	)		(316,112	)		(69,142	)		(443,353	)		(50,087	)		(295,877	)		(51,896	)		(397,860	)		11.4	%
Commission Expenses		(4,932	)		(57,756	)		(15,041	)		(77,729	)		(8,469	)		(52,483	)		(9,860	)		(70,812	)		9.8	%
Other Operating Expenses		(25,501	)		(84,433	)		(18,971	)		(128,905	)		(27,559	)		(81,469	)		(19,080	)		(128,108	)		0.6	%
Other Underwriting Income		374			61			26			461			465			582			45			1,092			(57.8	%)

Underwriting Profit (Loss)	$	(1,553	)	$	37,020		$	(10,328	)	$	25,139		$	14,482		$	24,426		$	(5,288	)	$	33,620			(25.2	%)

Losses and LAE Ratio		67.1	%		63.8	%		74.5	%		65.7	%		50.0	%		65.2	%		68.7	%		63.2	%
Commission Expense Ratio		5.7	%		11.7	%		16.2	%		11.5	%		8.5	%		11.6	%		13.1	%		11.3	%
Other Operating Expense Ratio ⁽¹⁾		29.0	%		17.0	%		20.4	%		19.1	%		27.0	%		17.8	%		25.2	%		20.2	%
Combined Ratio		101.8	%		92.5	%		111.1	%		96.3	%		85.5	%		94.6	%		107.0	%		94.7	%

(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

February 15, 2018

Page 13

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	Int'l Insurance
	Year Ended December 31, 2017												Year Ended December 31, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	198,241		$	159,123		$	143,766		$	501,130		$	183,228		$	181,094		$	120,149		$	484,471			3.4	%
Ceded Written Premiums		(42,018	)		(85,298	)		(37,962	)		(165,278	)		(40,092	)		(69,606	)		(28,806	)		(138,504	)		19.3	%
Net Written Premiums		156,223			73,825			105,804			335,852			143,136			111,488			91,343			345,967			(2.9	%)

Net Earned Premiums	$	152,396		$	88,517		$	92,879		$	333,792		$	141,593		$	89,455		$	76,368		$	307,416			8.6	%
Net Losses and LAE		(114,460	)		(61,791	)		(53,350	)		(229,601	)		(67,051	)		(68,995	)		(42,238	)		(178,284	)		28.8	%
Commission Expenses		(32,541	)		(13,918	)		(22,365	)		(68,824	)		(34,018	)		(14,529	)		(13,156	)		(61,703	)		11.5	%
Other Operating Expenses		(34,878	)		(28,537	)		(20,049	)		(83,464	)		(33,170	)		(34,075	)		(19,150	)		(86,395	)		(3.4	%)

Underwriting Profit (Loss)	$	(29,483	)	$	(15,729	)	$	(2,885	)	$	(48,097	)	$	7,354		$	(28,144	)	$	1,824		$	(18,966	)	NM

Losses and LAE Ratio		75.1	%		69.8	%		57.4	%		68.8	%		47.4	%		77.1	%		55.3	%		58.0	%
Commission Expense Ratio		21.4	%		15.7	%		24.1	%		20.6	%		24.0	%		16.2	%		17.2	%		20.1	%
Other Operating Expense Ratio		22.8	%		32.3	%		21.6	%		25.0	%		23.4	%		38.2	%		25.1	%		28.1	%
Combined Ratio		119.3	%		117.8	%		103.1	%		114.4	%		94.8	%		131.5	%		97.6	%		106.2	%

NM- Percentage change not meaningful.

News Release

February 15, 2018

Page 14

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Incurred Loss Activity

(Unaudited)

	For the Three Months Ended December 31,
amounts in thousands	Amounts						Loss Ratio
Net Incurred Loss Activity	2017			2016			2017			2016
U.S. Insurance:
Loss and LAE Payments	$	99,085		$	73,100			56.8	%		43.8	%
Change in Reserves		4,832			33,500			2.8	%		20.1	%
Net Incurred Loss and LAE	$	103,917		$	106,600			59.6	%		63.9	%

Int'l Insurance:
Loss and LAE Payments	$	55,296		$	45,011			66.5	%		62.6	%
Change in Reserves		(2,208	)		(246	)		(2.7	%)		(0.3	%)
Net Incurred Loss and LAE	$	53,088		$	44,765			63.8	%		62.3	%

GlobalRe:
Loss and LAE Payments	$	34,302		$	17,260			72.3	%		38.1	%
Change in Reserves		(7,923	)		3,868			(16.7	%)		8.5	%
Net Incurred Loss and LAE	$	26,379		$	21,128			55.6	%		46.6	%

Total
Loss and LAE Payments	$	188,683		$	135,371			61.8	%		47.6	%
Change in Reserves		(5,299	)		37,122			(1.7	%)		13.1	%
Net Incurred Loss and LAE	$	183,384		$	172,493			60.1	%		60.7	%

	For the Three Months Ended December 31,
Impact of Prior Years Reserves	Amounts						Loss Ratio Impact
Favorable / (Unfavorable) Development	2017			2016			2017			2016
U.S. Insurance	$	1,492		$	(420	)		0.5	%		(0.1	%)
Int'l Insurance		7,239			19,660			2.5	%		6.9	%
GlobalRe		1,568			(2,356	)		0.5	%		(0.8	%)
Total	$	10,299		$	16,884			3.5	%		6.0	%

News Release

February 15, 2018

Page 15

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Incurred Loss Activity

(Unaudited)

	For the Years Ended December 31,
amounts in thousands	Amounts					Loss Ratio
Net Incurred Loss Activity	2017			2016		2017			2016
U.S. Insurance:
Loss and LAE Payments	$	324,102		$	299,842		48.0	%		47.6	%
Change in Reserves		119,251			98,018		17.7	%		15.6	%
Net Incurred Loss and LAE	$	443,353		$	397,860		65.7	%		63.2	%

Int'l Insurance:
Loss and LAE Payments	$	201,402		$	151,098		60.4	%		49.2	%
Change in Reserves		28,199			27,186		8.4	%		8.8	%
Net Incurred Loss and LAE	$	229,601		$	178,284		68.8	%		58.0	%

GlobalRe:
Loss and LAE Payments	$	97,570		$	81,089		54.8	%		49.6	%
Change in Reserves		35,741			8,215		20.1	%		5.0	%
Net Incurred Loss and LAE	$	133,311		$	89,304		74.9	%		54.6	%

Total
Loss and LAE Payments	$	623,074		$	532,029		52.6	%		48.4	%
Change in Reserves		183,191			133,419		15.4	%		12.1	%
Net Incurred Loss and LAE	$	806,265		$	665,448		68.0	%		60.5	%

	For the Years Ended December 31,
Impact of Prior Years Reserves	Amounts					Loss Ratio Impact
Favorable / (Unfavorable) Development	2017			2016		2017			2016
U.S. Insurance	$	(16,714	)	$	1,348		(1.4	%)		0.1	%
Int'l Insurance		(14,834	)		25,019		(1.3	%)		2.3	%
GlobalRe		(2,762	)		2,161		(0.2	%)		0.2	%
Total	$	(34,310	)	$	28,528		(2.9	%)		2.6	%

News Release

February 15, 2018

Page 16

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

(Unaudited)

	As of December 31, 2017
amounts in thousands	Case		IBNR
Net Loss Reserves:	Reserves		Reserves		Total
U.S. Insurance:
Marine	$	58,301	$	45,393	$	103,694
P&C		192,291		700,264		892,555
Professional Liability		26,774		86,649		113,423
Total U.S. Insurance	$	277,366	$	832,306	$	1,109,672
Int'l Insurance:
Marine	$	181,369	$	39,949	$	221,318
P&C		66,412		37,067		103,479
Professional Liability		31,463		87,211		118,674
Total Int'l Insurance	$	279,244	$	164,227	$	443,471

GlobalRe	$	58,962	$	93,275	$	152,237

Total Net Loss Reserves	$	615,572	$	1,089,808	$	1,705,380


	As of December 31, 2016
	Case		IBNR
Net Loss Reserves:	Reserves		Reserves		Total
U.S. Insurance:
Marine	$	56,701	$	54,259	$	110,960
P&C		201,368		603,509		804,877
Professional Liability		24,555		70,559		95,114
Total U.S. Insurance	$	282,624	$	728,327	$	1,010,951
Int'l Insurance:
Marine	$	163,124	$	36,118	$	199,242
P&C		66,496		18,192		84,688
Professional Liability		30,106		70,103		100,209
Total Int'l Insurance	$	259,726	$	124,413	$	384,139

GlobalRe	$	47,505	$	67,856	$	115,361

Total Net Loss Reserves	$	589,855	$	920,596	$	1,510,451

News Release

February 15, 2018

Page 17

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

(Unaudited)

As of December 31, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.5 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of December 31, 2017:

	As of December 31, 2017
			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	$	393,563	$	2,081	$	(2,014	)	$	393,496
States, Municipalities and Political Subdivisions		814,632		20,136		(1,423	)		795,919
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities		407,619		2,352		(5,414	)		410,681
Residential Mortgage Obligations		54,104		606		(79	)		53,577
Asset-Backed Securities		328,753		2,138		(663	)		327,278
Commercial Mortgage-Backed Securities		160,904		2,354		(1,182	)		159,732
Subtotal	$	951,380	$	7,450	$	(7,338	)	$	951,268
Corporate Exposures ⁽¹⁾		897,479		14,491		(3,737	)		886,725
Total Fixed Maturities	$	3,057,054	$	44,158	$	(14,512	)	$	3,027,408
Equity Securities:
Common Stocks	$	52,439	$	7,423	$	(112	)	$	45,128
Preferred Stocks		183,542		6,071		(1,560	)		179,031
Total Equity Securities	$	235,981	$	13,494	$	(1,672	)	$	224,159
Short-Term Investments		127,128		3		—			127,125
Total Investments	$	3,420,163	$	57,655	$	(16,184	)	$	3,378,692

(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.

Attached files

Stock widget

Investing forum

NAVIGATORS GROUP INC Reports