Net Income up 20.9%

STAMFORD, Conn., Nov. 03, 2016 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $22.0 million, or $1.46 per diluted share, for the three months ended September 30, 2016 compared to $18.2 million, or $1.23 per diluted share, for the comparable period in 2015. Operating earnings were $21.1 million, or $1.40 per diluted share, for the three months ended September 30, 2016 compared to $20.3 million, or $1.37 per diluted share, for the comparable period in 2015. 

For the nine months ended September 30, 2016, our Company reported Net income of $61.1 million, or $4.08 per diluted share, compared to $63.3 million, or $4.29 per diluted share, for the comparable period in 2015. Operating earnings were $53.5 million, or $3.57 per diluted share, for the nine months ended September 30, 2016 compared to $60.7 million, or $4.11 per diluted share, for the comparable period in 2015.

Gross written premiums and Net written premiums for the three months ended September 30, 2016 were $374.9 million and $277.0 million, respectively, increasing 5.9% and 9.9% from the comparable period in 2015.

Gross written premiums and Net written premiums for the nine months ended September 30, 2016 were $1.2 billion and $0.9 billion, respectively, increasing 6.3% and 13.0% from the comparable period in 2015.

The combined ratio for the three and nine months ended September 30, 2016 was 95.6% and 96.7%, respectively, compared to 93.4% and 93.0% for the comparable periods in 2015.

Stan Galanski, President and Chief Executive Officer, commented, “We are very pleased with our third quarter results. It is our 15th consecutive quarter of profitable underwriting results with net income up 20.9% from third quarter 2015 and a healthy combined ratio of 95.6%.  Our investment portfolio performed well, with net investment income up 14.4% over third quarter 2015. Premium growth remained strong, with net written premium up nearly 10% for the quarter. Encouragingly, non-commission operating expenses were about flat with the third quarter of 2015, reflecting our efforts to control operating costs. Book value per share increased to $82.71 and was up nearly 9% from year end.”

Stockholders’ equity was $1.2 billion, or $82.71 per share, as of September 30, 2016 compared to $1.1 billion, or $75.96 per share, as of  December 31, 2015.

On November 3, 2016, the Board of Directors declared a quarterly cash dividend of $0.09 per share of Common stock to be paid on December 29, 2016 to stockholders of record at the close of business on November 18, 2016.

Net investment income for the three and nine months ended September 30, 2016 was $19.9 million and $59.3 million, respectively, increases of 14.4% and 18.2% as compared to the same periods in 2015. The annualized pre-tax investment yield, excluding Net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.6% for the three and nine months ended September 30, 2016, compared to 2.5% and 2.4%, respectively, for the comparable periods in 2015.

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 average effective duration of 3.9 years as of September 30, 2016.  As of September 30, 2016, Net unrealized gains within our investment portfolio were $106.1 million, an increase of $68.8 million compared to December 31, 2015.

We recognized $1.6 million of Net realized gains (losses) for the three months ended September 30, 2016, compared to ($0.8) million of Net realized losses for the same period in 2015.  For the nine months ended September 30, 2016, we recognized $5.0 million of Net realized gains, compared to $8.8 million for the same period in 2015.

Other income (loss) for the three months ended September 30, 2016 was ($0.2) million of loss, compared to ($2.5) million of loss for the same period in 2015.  For the nine months ended September 30, 2016 Other income (loss) was $6.8 million of income, compared to ($4.6) million of loss for the same period in 2015.  Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses.

Our Company will hold a conference call on Friday, November 4, 2016 starting at 8:30 a.m. (EDT) to discuss the 2016 third quarter results.  The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is 800-850-2903 and the international dial-in is 224-357-2399. Participants may connect to the webcast at: 

http://edge.media-server.com/m/p/ok7hgnmv

Net operating earnings, comprised of  Net income excluding After-tax net realized gains (losses), After-tax net other-than-temporary impairment losses recognized in earnings, and After-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency), is a non-GAAP financial measure that is a common performance measurement for insurance companies.  We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies and operations at Lloyd's. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as representative offices in China and Brazil.

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

THE NAVIGATORS GROUP, INC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
($ in thousands, except share and per share data)
(unaudited)
		Three Months Ended												Nine Months Ended
		September 30,												September 30,
Results of Operations		2016				2015				Change				2016				2015				Change
Gross written premiums		$	374,930			$	354,062				5.9	%		$	1,201,372			$	1,129,993				6.3	%
Net written premiums			277,001				251,939				9.9	%			903,356				799,141				13.0	%
Revenues:
Net earned premiums		$	284,010			$	254,082				11.8	%		$	816,360			$	732,542				11.4	%
Net investment income			19,875				17,371				14.4	%			59,344				50,219				18.2	%
Net realized gains (losses):
Total other-than-temporary impairment losses			23				(1,298	)		NM					(248	)			(1,747	)			(85.8	%)
Portion of loss recognized in other comprehensive income (before tax)			(23	)			23			NM					98				49				100.2	%
Net other-than-temporary impairment losses recognized in earnings			-				(1,275	)		NM					(150	)			(1,698	)			(91.2	%)
Other realized gains (losses)			1,586				518			NM					5,143				10,453				(50.8	%)
Net realized gains (losses)			1,586				(757	)		NM					4,993				8,755				(43.0	%)
Other income (loss)			(183	)			(2,518	)			(92.7	%)			6,796				(4,638	)		NM
Total revenues		$	305,288			$	268,178				13.8	%		$	887,493			$	786,878				12.8	%
Expenses:
Net losses and loss adjustment expenses			172,793				146,546				17.9	%			492,955				418,717				17.7	%
Commission expenses			42,611				34,253				24.4	%			120,891				98,638				22.6	%
Other operating expenses			56,137				56,599				(0.8	%)			176,020				164,297				7.1	%
Interest expense			3,859				3,856				0.1	%			11,575				11,567				0.1	%
Total expenses		$	275,400			$	241,254				14.2	%		$	801,441			$	693,219				15.6	%
Income before income taxes			29,888				26,924				11.0	%			86,052				93,659				(8.1	%)
Income tax expense (benefit)			7,875				8,723				(9.7	%)			24,917				30,345				(17.9	%)
Net income (loss)		$	22,013			$	18,201				20.9	%		$	61,135			$	63,314				(3.4	%)
Per Share Data
Net income per common share:
Basic		$	1.51			$	1.26				19.7	%		$	4.21			$	4.40				-4.4	%
Diluted		$	1.46			$	1.23				18.9	%		$	4.08			$	4.29				-4.9	%
Average common shares outstanding:
Basic			14,557,376				14,411,927								14,528,917				14,384,291
Diluted			15,070,422				14,811,095								14,998,385				14,767,949
Underwriting Ratios
Loss Ratio			60.8	%			57.7	%							60.4	%			57.2	%
Expense Ratio			34.8	%			35.7	%							36.3	%			35.8	%
Combined Ratio			95.6	%			93.4	%							96.7	%			93.0	%
Balance Sheet Data		September 30,				June 30,								September 30,				December 31,
		2016				2016								2016				2015
Stockholders' equity		$	1,204,281			$	1,181,558				1.9	%		$	1,204,281			$	1,096,148				9.9	%
Book value per share		$	82.71			$	81.24				1.8	%		$	82.71			$	75.96				8.9	%
NM- Percentage change not meaningful

THE NAVIGATORS GROUP, INC AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
($ in thousands, except per share data)
		Three Months Ended September 30, 2016												Three Months Ended September 30, 2015												% Change
		Pre-Tax				Tax				After Tax				Pre-Tax				Tax				After Tax				QTD
Net income		$	29,888			$	(7,875	)		$	22,013			$	26,924			$	(8,723	)		$	18,201				20.9	%
Adjustments to Net income:
Realized losses (gains)			(1,586	)			555				(1,031	)			757				(265	)			492			NM
FX losses (gains)			227				(80	)			147				2,451				(858	)			1,593				(90.8	%)
Net operating earnings		$	28,529			$	(7,400	)		$	21,129			$	30,132			$	(9,846	)		$	20,286				4.2	%
Net operating earnings per common share:
Basic										$	1.45											$	1.41
Diluted										$	1.40											$	1.37
		Nine Months Ended September 30, 2016												Nine Months Ended September 30, 2015												% Change
		Pre-Tax				Tax				After Tax				Pre-Tax				Tax				After Tax				YTD
Net income		$	86,052			$	(24,917	)		$	61,135			$	93,659			$	(30,345	)		$	63,314				(3.4	%)
Adjustments to Net income:
Realized losses (gains)			(4,993	)			1,747				(3,246	)			(8,755	)			3,064				(5,691	)			(43.0	%)
FX losses (gains)			(6,679	)			2,337				(4,342	)			4,754				(1,664	)			3,090			NM
Net operating earnings		$	74,380			$	(20,833	)		$	53,547			$	89,658			$	(28,945	)		$	60,713				(11.8	%)
Net operating earnings per common share:
Basic										$	3.69											$	4.22
Diluted										$	3.57											$	4.11
NM - Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
amounts in thousands, except share and per share amounts.
		September 30,				December 31,
		2016				2015
ASSETS
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016:  $2,591,050; 2015: $2,400,245)		$	2,660,417			$	2,414,210
Equity securities, available-for-sale, at fair value (cost: 2016: $305,906; 2015: $281,943)			342,677				305,271
Other invested assets			2,021				—
Short-term investments, at fair value (amortized cost: 2016: $134,273; 2015: $217,743)			134,273				217,745
Total investments		$	3,139,388			$	2,937,226
Cash			147,515				69,901
Premiums receivable			320,429				276,616
Prepaid reinsurance premiums			222,891				232,588
Reinsurance recoverable on paid losses			73,331				49,506
Reinsurance recoverable on unpaid losses and loss adjustment expenses			787,917				809,518
Deferred policy acquisition costs			116,295				91,983
Accrued investment income			16,840				16,001
Goodwill and other intangible assets			6,568				6,807
Current income tax receivable, net			15,879				22,323
Deferred income tax, net			—				3,900
Other assets			50,343				67,643
Total assets		$	4,897,396			$	4,584,012
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses		$	2,268,127			$	2,202,644
Unearned premiums			897,975				820,676
Reinsurance balances payable			123,702				107,411
Senior notes			263,690				263,580
Deferred income tax, net			8,703				—
Payable for investments purchased			42,783				1,495
Accounts payable and other liabilities			88,135				92,058
Total liabilities		$	3,693,115			$	3,487,864
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    18,070,815 shares for 2016 and 17,942,269 shares for 2015			1,806				1,793
Additional paid-in capital			368,860				357,829
Treasury stock, at cost (3,511,380 shares for 2016 and 2015)			(155,801	)			(155,801	)
Retained earnings			927,239				868,723
Accumulated other comprehensive income			62,177				23,604
Total stockholders' equity		$	1,204,281			$	1,096,148
Total liabilities and stockholders' equity		$	4,897,396			$	4,584,012

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
		Three Months Ended September 30, 2016
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross written premiums		$	234,647			$	104,484			$	35,799			$	—			$	374,930
Ceded written premiums			(61,359	)			(35,194	)			(1,376	)			—				(97,929	)
Net written premiums			173,288				69,290				34,423				—				277,001
Net earned premiums		$	161,722			$	79,761			$	42,527			$	—			$	284,010
Net losses and LAE			(106,320	)			(45,043	)			(21,430	)			—				(172,793	)
Commission expenses			(18,630	)			(15,348	)			(8,951	)			318				(42,611	)
Other operating expenses			(31,517	)			(20,183	)			(4,437	)			—				(56,137	)
Other underwriting income (expense)			240				—				122				(318	)			44
Underwriting profit (loss)		$	5,495			$	(813	)		$	7,831			$	—			$	12,513
Net investment income															19,875				19,875
Net realized gains (losses)															1,586				1,586
Interest expense															(3,859	)			(3,859	)
Other income (loss)															(227	)			(227	)
Income before income taxes		$	5,495			$	(813	)		$	7,831			$	17,375			$	29,888
Income tax (expense) benefit															(7,875	)			(7,875	)
Net income (loss)																		$	22,013
Losses and LAE ratio			65.7	%			56.5	%			50.4	%							60.8	%
Commission expense ratio			11.5	%			19.2	%			21.0	%							15.0	%
Other operating expense ratio (2)			19.4	%			25.3	%			10.2	%							19.8	%
Combined ratio			96.6	%			101.0	%			81.6	%							95.6	%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
		Three Months Ended September 30, 2015
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross written premiums		$	218,783			$	98,788			$	36,491			$	—			$	354,062
Ceded written premiums			(63,753	)			(37,804	)			(566	)			—				(102,123	)
Net written premiums			155,030				60,984				35,925				—				251,939
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).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
		Nine Months Ended September 30, 2016
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross written premiums		$	689,218			$	384,367			$	127,787			$	—			$	1,201,372
Ceded written premiums			(178,474	)			(112,075	)			(7,467	)			—				(298,016	)
Net written premiums			510,744				272,292				120,320				—				903,356
Net earned premiums		$	462,446			$	235,602			$	118,312			$	—			$	816,360
Net losses and LAE			(291,260	)			(133,519	)			(68,176	)			—				(492,955	)
Commission expenses			(50,379	)			(47,524	)			(24,188	)			1,200				(120,891	)
Other operating expenses			(96,848	)			(64,997	)			(14,175	)			—				(176,020	)
Other underwriting income (expense)			943				—				374				(1,200	)			117
Underwriting profit (loss)		$	24,902			$	(10,438	)		$	12,147			$	—			$	26,611
Net investment income															59,344				59,344
Net realized gains (losses)															4,993				4,993
Interest expense															(11,575	)			(11,575	)
Other income (loss)															6,679				6,679
Income (loss) before income taxes		$	24,902			$	(10,438	)		$	12,147			$	59,441			$	86,052
Income tax (expense) benefit															(24,917	)			(24,917	)
Net income (loss)																		$	61,135
Losses and LAE ratio			63.0	%			56.7	%			57.6	%							60.4	%
Commission expense ratio			10.9	%			20.2	%			20.4	%							14.8	%
Other operating expense ratio (2)			20.7	%			27.5	%			11.7	%							21.5	%
Combined ratio			94.6	%			104.4	%			89.7	%							96.7	%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
		Nine Months Ended September 30, 2015
		U.S.				Int'l
amounts in thousands		Insurance				Insurance				GlobalRe				Corporate (1)				Total
Gross written premiums		$	658,097			$	330,005			$	141,891			$	—			$	1,129,993
Ceded written premiums			(211,365	)			(113,681	)			(5,806	)			—				(330,852	)
Net written premiums			446,732				216,324				136,085				—				799,141
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).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
		U.S. Insurance
		Three Months Ended September 30, 2016																Three Months Ended September 30, 2015
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross written premiums		$	40,271			$	161,600			$	32,776			$	234,647			$	35,529			$	154,009			$	29,245			$	218,783				7.3	%
Ceded written premiums			(17,636	)			(36,011	)			(7,712	)			(61,359	)			(13,865	)			(34,902	)			(14,986	)			(63,753	)			(3.8	%)
Net written  premiums			22,635				125,589				25,064				173,288				21,664				119,107				14,259				155,030				11.8	%
Net earned premiums		$	25,465			$	115,971			$	20,286			$	161,722			$	24,292			$	104,473			$	13,644			$	142,409				13.6	%
Net losses and LAE			(14,974	)			(74,129	)			(17,217	)			(106,320	)			(7,349	)			(69,054	)			(8,737	)			(85,140	)			24.9	%
Commission expenses			(2,117	)			(13,664	)			(2,849	)			(18,630	)			(2,412	)			(11,711	)			(1,034	)			(15,157	)			22.9	%
Other operating expenses			(6,767	)			(19,997	)			(4,753	)			(31,517	)			(6,754	)			(20,581	)			(5,613	)			(32,948	)			(4.3	%)
Other underwriting income (expense)			126				104				10				240				214				735				64				1,013				(76.3	%)
Underwriting profit (loss)		$	1,733			$	8,285			$	(4,523	)		$	5,495			$	7,991			$	3,862			$	(1,676	)		$	10,177				(46.0	%)
Losses and LAE ratio			58.8	%			63.9	%			84.9	%			65.7	%			30.3	%			66.1	%			64.0	%			59.8	%
Commission expense ratio			8.3	%			11.8	%			14.0	%			11.5	%			9.9	%			11.2	%			7.6	%			10.6	%
Other operating expense ratio (1)			26.1	%			17.2	%			23.4	%			19.4	%			26.9	%			19.0	%			40.7	%			22.5	%
Combined ratio			93.2	%			92.9	%			122.3	%			96.6	%			67.1	%			96.3	%			112.3	%			92.9	%

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
		Int'l Insurance
		Three Months Ended September 30, 2016																Three Months Ended September 30, 2015
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross written premiums		$	38,453			$	38,077			$	27,954			$	104,484			$	41,002			$	37,449			$	20,337			$	98,788				5.8	%
Ceded written premiums			(12,631	)			(15,331	)			(7,232	)			(35,194	)			(10,985	)			(20,034	)			(6,785	)			(37,804	)			(6.9	%)
Net written  premiums			25,822				22,746				20,722				69,290				30,017				17,415				13,552				60,984				13.6	%
Net earned premiums		$	34,794			$	25,584			$	19,383			$	79,761			$	36,792			$	16,879			$	14,862			$	68,533				16.4	%
Net losses and LAE			(17,289	)			(16,080	)			(11,674	)			(45,043	)			(23,002	)			(8,051	)			(8,129	)			(39,182	)			15.0	%
Commission expenses			(8,358	)			(3,502	)			(3,488	)			(15,348	)			(8,227	)			(2,779	)			(1,774	)			(12,780	)			20.1	%
Other operating expenses			(7,654	)			(7,913	)			(4,616	)			(20,183	)			(8,233	)			(6,604	)			(5,100	)			(19,937	)			1.2	%
Other underwriting income (expense)			—				—				—				—				—				—				—				—			NM
Underwriting profit (loss)		$	1,493			$	(1,911	)		$	(395	)		$	(813	)		$	(2,670	)		$	(555	)		$	(141	)		$	(3,366	)			(75.8	%)
Losses and LAE ratio			49.7	%			62.8	%			60.2	%			56.5	%			62.5	%			47.7	%			54.7	%			57.2	%
Commission expense ratio			24.0	%			13.7	%			18.0	%			19.2	%			22.4	%			16.5	%			11.9	%			18.6	%
Other operating expense ratio (1)			22.0	%			31.0	%			23.8	%			25.3	%			22.4	%			39.1	%			34.4	%			29.1	%
Combined ratio			95.7	%			107.5	%			102.0	%			101.0	%			107.3	%			103.3	%			101.0	%			104.9	%

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
		U.S. Insurance
		Nine Months Ended September 30, 2016																Nine Months Ended September 30, 2015
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross written premiums		$	129,621			$	471,532			$	88,065			$	689,218			$	118,167			$	458,371			$	81,559			$	658,097				4.7	%
Ceded written premiums			(53,823	)			(103,286	)			(21,365	)			(178,474	)			(45,177	)			(123,765	)			(42,423	)			(211,365	)			(15.6	%)
Net written  premiums			75,798				368,246				66,700				510,744				72,990				334,606				39,136				446,732				14.3	%
Net earned premiums		$	73,636			$	335,342			$	53,468			$	462,446			$	74,193			$	291,648			$	44,963			$	410,804				12.6	%
Net losses and LAE			(35,448	)			(217,898	)			(37,914	)			(291,260	)			(28,952	)			(194,910	)			(23,232	)			(247,094	)			17.9	%
Commission expenses			(5,775	)			(38,337	)			(6,267	)			(50,379	)			(8,873	)			(29,018	)			(3,886	)			(41,777	)			20.6	%
Other operating expenses			(20,956	)			(61,568	)			(14,324	)			(96,848	)			(20,129	)			(60,976	)			(16,905	)			(98,010	)			(1.2	%)
Other underwriting income (expense)			357				550				36				943				389				876				65				1,330				(29.1	%)
Underwriting profit (loss)		$	11,814			$	18,089			$	(5,001	)		$	24,902			$	16,628			$	7,620			$	1,005			$	25,253				(1.4	%)
Losses and LAE ratio			48.1	%			65.0	%			70.9	%			63.0	%			39.0	%			66.8	%			51.7	%			60.1	%
Commission expense ratio			7.8	%			11.4	%			11.7	%			10.9	%			12.0	%			9.9	%			8.6	%			10.2	%
Other operating expense ratio (1)			28.1	%			18.2	%			26.8	%			20.7	%			26.6	%			20.7	%			37.5	%			23.6	%
Combined ratio			84.0	%			94.6	%			109.4	%			94.6	%			77.6	%			97.4	%			97.8	%			93.9	%

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

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
		Int'l Insurance
		Nine Months Ended September 30, 2016																Nine Months Ended September 30, 2015
amounts in thousands		Marine				P&C				Professional Liability				Total				Marine				P&C				Professional Liability				Total				% Change Total
Gross written premiums		$	151,548			$	145,125			$	87,694			$	384,367			$	149,844			$	112,014			$	68,147			$	330,005				16.5	%
Ceded written premiums			(33,274	)			(57,025	)			(21,776	)			(112,075	)			(30,933	)			(60,676	)			(22,072	)			(113,681	)			(1.4	%)
Net written  premiums			118,274				88,100				65,918				272,292				118,911				51,338				46,075				216,324				25.9	%
Net earned premiums		$	109,746			$	70,608			$	55,248			$	235,602			$	114,716			$	43,112			$	39,416			$	197,244				19.4	%
Net losses and LAE			(54,398	)			(49,174	)			(29,947	)			(133,519	)			(63,945	)			(17,015	)			(20,276	)			(101,236	)			31.9	%
Commission expenses			(26,124	)			(11,427	)			(9,973	)			(47,524	)			(26,912	)			(3,961	)			(4,618	)			(35,491	)			33.9	%
Other operating expenses			(24,794	)			(25,686	)			(14,517	)			(64,997	)			(21,677	)			(18,754	)			(13,881	)			(54,312	)			19.7	%
Other underwriting income (expense)			—				—				—				—				—				—				—				—			NM
Underwriting profit (loss)		$	4,430			$	(15,679	)		$	811			$	(10,438	)		$	2,182			$	3,382			$	641			$	6,205			NM
Losses and LAE ratio			49.6	%			69.6	%			54.2	%			56.7	%			55.7	%			39.5	%			51.4	%			51.3	%
Commission expense ratio			23.8	%			16.2	%			18.1	%			20.2	%			23.5	%			9.2	%			11.7	%			18.0	%
Other operating expense ratio (1)			22.6	%			36.4	%			26.2	%			27.5	%			18.9	%			43.5	%			35.3	%			27.6	%
Combined ratio			96.0	%			122.2	%			98.5	%			104.4	%			98.1	%			92.2	%			98.4	%			96.9	%

NM - Percentage change not meaningful
(1) - Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
		For the Three Months Ended September 30,
amounts in thousands		Amounts								Loss Ratio
Net Incurred Loss Activity		2016				2015				2016				2015
US Insurance:
Loss and LAE payments		$	81,461			$	67,327				50.4	%			47.3	%
Change in reserves			24,859				17,813				15.3	%			12.5	%
Net incurred loss and LAE		$	106,320			$	85,140				65.7	%			59.8	%
Int'l Insurance:
Loss and LAE payments		$	43,848			$	29,306				55.0	%			42.8	%
Change in reserves			1,195				9,876				1.5	%			14.4	%
Net incurred loss and LAE		$	45,043			$	39,182				56.5	%			57.2	%
GlobalRe:
Loss and LAE payments		$	20,770			$	16,899				48.8	%			39.2	%
Change in reserves			660				5,325				1.6	%			12.3	%
Net incurred loss and LAE		$	21,430			$	22,224				50.4	%			51.5	%
Total
Loss and LAE payments		$	146,079			$	113,532				51.4	%			44.7	%
Change in reserves			26,714				33,014				9.4	%			13.0	%
Net incurred loss and LAE		$	172,793			$	146,546				60.8	%			57.7	%
		Amounts								Loss Ratio Impact
Impact of Prior Years Reserves		September 30,				September 30,				September 30,				September 30,
Favorable / (Unfavorable) Development		2016				2015				2016				2015
US Insurance		$	(4,903	)		$	7,057				-1.7	%			2.8	%
Int'l Insurance			2,860				2,794				1.0	%			1.1	%
GlobalRe			3,074				4,264				1.1	%			1.7	%
Total		$	1,031			$	14,115				0.4	%			5.6	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
		For the Nine Months Ended September 30,
amounts in thousands		Amounts								Loss Ratio
Net Incurred Loss Activity		2016				2015				2016				2015
US Insurance:
Loss and LAE payments		$	226,742			$	186,780				49.0	%			45.4	%
Change in reserves			64,518				60,314				14.0	%			14.7	%
Net incurred loss and LAE		$	291,260			$	247,094				63.0	%			60.1	%
Int'l Insurance:
Loss and LAE payments		$	106,087			$	98,734				45.0	%			50.0	%
Change in reserves			27,432				2,502				11.7	%			1.3	%
Net incurred loss and LAE		$	133,519			$	101,236				56.7	%			51.3	%
GlobalRe:
Loss and LAE payments		$	63,829			$	58,148				53.9	%			46.7	%
Change in reserves			4,347				12,239				3.7	%			9.8	%
Net incurred loss and LAE		$	68,176			$	70,387				57.6	%			56.5	%
Total
Loss and LAE payments		$	396,658			$	343,662				48.6	%			47.0	%
Change in reserves			96,297				75,055				11.8	%			10.2	%
Net incurred loss and LAE		$	492,955			$	418,717				60.4	%			57.2	%
		Amounts								Loss Ratio Impact
Impact of Prior Years Reserves		September 30,				September 30,				September 30,				September 30,
Favorable / (Unfavorable) Development		2016				2015				2016				2015
US Insurance		$	1,768			$	21,295				0.2	%			2.9	%
Int'l Insurance			5,359				8,404				0.7	%			1.1	%
GlobalRe			4,517				4,270				0.6	%			0.6	%
Total		$	11,644			$	33,969				1.5	%			4.6	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
		As of September 30, 2016
amounts in thousands		Case				IBNR
Net Loss Reserves:		Reserves				Reserves				Total
US Insurance:
Marine		$	58,332			$	53,462			$	111,794
Property Casualty			188,495				584,581				773,076
Professional Liability			29,482				63,105				92,587
Total US Insurance		$	276,309			$	701,148			$	977,457
Int'l Insurance:
Marine		$	175,133			$	42,824			$	217,957
Property Casualty			58,360				20,414				78,774
Professional Liability			27,635				65,947				93,582
Total Int'l Insurance		$	261,128			$	129,185			$	390,313
GlobalRe		$	47,448			$	64,992			$	112,440
Total Net Loss Reserves		$	584,885			$	895,325			$	1,480,210
		As of December 31, 2015
		Case				IBNR
Net Loss Reserves:		Reserves				Reserves				Total
US Insurance:
Marine		$	68,677			$	55,408			$	124,085
Property Casualty			170,988				514,777				685,765
Professional Liability			42,546				60,528				103,074
Total US Insurance		$	282,211			$	630,713			$	912,924
Int'l Insurance:
Marine		$	167,157			$	61,409			$	228,566
Property Casualty			40,313				19,735				60,048
Professional Liability			19,583				63,229				82,812
Total Int'l Insurance		$	227,053			$	144,373			$	371,426
GlobalRe		$	32,160			$	76,616			$	108,776
Total Net Loss Reserves		$	541,424			$	851,702			$	1,393,126

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data

As of September 30, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was AA-/Aa3 with an average duration of 3.9 years. Our Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of September 30, 2016:

		As of September 30, 2016
						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		$	262,030			$	3,691			$	(3,981	)		$	262,320
States, municipalities and political subdivisions			580,324				29,288				(769	)			551,805
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities			526,069				11,778				(105	)			514,396
Residential mortgage obligations			27,055				455				(97	)			26,697
Asset-backed securities			288,636				1,503				(458	)			287,591
Commercial mortgage-backed securities			165,405				6,392				(423	)			159,436
Subtotal		$	1,007,165			$	20,128			$	(1,083	)		$	988,120
Corporate bonds			810,898				23,447				(1,354	)			788,805
Total fixed maturities		$	2,660,417			$	76,554			$	(7,187	)		$	2,591,050
Equity securities			342,677				38,538				(1,767	)			305,906
Other invested assets			2,021				—				—				2,021
Short-term investments			134,273				—				—				134,273
Total investments		$	3,139,388			$	115,092			$	(8,954	)		$	3,033,250

 

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

www.navg.com

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