-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TcDai/JocbrYrxttUgs0KadkqF6gZtgesQ5CU28Hzuidj2L4/a9YgJ7KKZATXJmL Ip1sdxIJRjRPP+9pmybYRQ== 0000950123-95-003356.txt : 19951119 0000950123-95-003356.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950123-95-003356 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAVIGATORS GROUP INC CENTRAL INDEX KEY: 0000793547 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 133138397 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15886 FILM NUMBER: 95592171 BUSINESS ADDRESS: STREET 1: 123 WILLIAM ST CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2124062900 MAIL ADDRESS: STREET 2: 123 WILLIAM ST CITY: NEW YORK STATE: NY ZIP: 10038 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1995 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 30, 1995 -------------------------------------------------------------- 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 (IRS Employer incorporation or organization) Identification No.) 123 William Street, New York, New York 10038 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 406-2900 - -------------------------------------------------------------------------------- (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 --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. On November 10, 1995 there were 8,152,151 shares of common stock, $0.10 par value issued and outstanding. 2 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES INDEX
Page No. -------- Part I. FINANCIAL INFORMATION: Balance Sheets September 30, 1995 and December 31, 1994 . . . . . . . . . . 1 Statements of Income Three Months Ended September 30, 1995 and Three Months Ended September 30, 1994 . . . . . . . . . . . 2 Nine Months Ended September 30, 1995 and Nine Months Ended September 30, 1994 . . . . . . . . . . . . 3 Statements of Cash Flows Nine Months Ended September 30, 1995 and Nine Months Ended September 30, 1994 . . . . . . . . . . . . 4 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 5 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . 7 Part II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 1995 Dec. 31, 1994 ------------------ ------------- (Unaudited) ASSETS Investments: Fixed maturities, available for sale, at fair value (amortized cost: 1995, $195,739,434; 1994, $179,313,149) $199,907,677 $174,579,590 Equity securities, available for sale, at fair value (cost: 1995, $5,220,923; 1994, $4,595,463) 7,323,656 5,763,444 Short-term investments, at cost which approximates market 20,670,699 19,643,813 ------------ ------------ Sub-total investments 227,902,032 199,986,847 Investment in affiliated company 2,366,622 2,386,258 ------------ ------------ Total investments 230,268,654 202,373,105 Cash 2,657,265 730,047 Premiums in course of collection 17,897,939 24,608,943 Commissions receivable 5,501,690 5,126,953 Accrued investment income 3,106,406 2,949,340 Prepaid reinsurance premiums 6,315,705 12,224,772 Reinsurance receivable on paid and unpaid losses and loss adjustment expenses 168,233,475 199,888,216 Federal income tax recoverable -- 6,406,340 Deferred federal income tax benefit 10,220,355 13,413,513 Deferred policy acquisition costs 2,629,150 2,910,422 Other assets 3,623,490 3,399,430 ------------ ------------ Total assets $450,454,129 $474,031,081 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for loss and loss adjustment expenses $299,905,298 $314,898,083 Unearned premiums 24,718,899 35,721,013 Reinsurance balances payable 7,146,785 11,002,226 Loans payable to banks 19,750,000 25,500,000 Federal income tax payable 564,222 -- Deferred state & local income taxes 1,071,360 1,221,459 Notes payable to shareholders 991,356 2,608,072 Accounts payable and other liabilities 4,121,392 5,556,994 ------------ ------------ Total liabilities 358,269,312 396,507,847 ------------ ------------ Commitments and contingencies -- -- Stockholders' equity: Preferred Stock, $.10 par value, authorized 1,000,000 shares, no shares issued -- -- Common Stock, $.10 par value Authorized 10,000,000 shares Issued and outstanding 8,152,151 in 1995 and 8,151,401 in 1994 815,215 815,140 Additional paid-in capital 34,992,802 34,983,877 Net unrealized gains (losses) on securities available for sale (net of income taxes (benefits) of $2,132,132 in 1995 and $(1,212,296) in 1994) 4,138,844 (2,353,281) Foreign currency translation adjustment 154,391 105,033 Retained earnings 52,083,565 43,972,465 ------------ ------------ Total stockholders' equity 92,184,817 77,523,234 ------------ ------------ Total liabilities and stockholders' equity $450,454,129 $474,031,081 ============ ============
See accompanying notes to interim consolidated financial statements. 4 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30 1995 1994 (Unaudited) Revenues: Net premiums earned $24,908,174 $17,795,064 Commission income 2,588,599 2,582,822 Net investment income 3,508,621 3,261,044 Net realized capital losses (283,795) (82,785) Other income 248,907 365,649 ----------- ----------- Total revenues 30,970,506 23,921,794 ----------- ----------- Operating expenses: Losses and loss adjustment expenses incurred 18,765,558 16,518,188 Commissions 2,958,837 3,592,417 Other operating expenses 4,842,932 5,484,873 Interest expense 458,607 572,394 ----------- ----------- Total operating expenses 27,025,934 26,167,872 ----------- ----------- Operating income (loss) before income taxes 3,944,572 (2,246,078) Income tax expense (benefit): Current 1,065,958 (533,948) Deferred (201,134) 2,546,469 ----------- ----------- Total income tax expense (benefit): 864,824 2,012,521 Net income (loss) $ 3,079,748 $(4,258,599) =========== =========== Per share data: Average common and common equivalent shares outstanding 8,202,123 8,196,919 Net income (loss) $ 0.38 $ (0.52) =========== ===========
See accompanying notes to interim consolidated financial statements. -2- 5 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30 1995 1994 (Unaudited) Revenues: Net premiums earned $63,560,122 $ 64,260,006 Commission income 8,062,545 8,085,112 Net investment income 10,362,723 9,633,706 Net realized capital gains 30,575 173,471 Other income 738,671 417,597 ----------- ------------ Total revenues 82,754,636 82,569,892 ----------- ------------ Operating expenses: Losses and loss adjustment expenses incurred 46,362,724 78,614,300 Commissions 8,824,953 11,920,309 Other operating expenses 15,975,585 16,509,389 Interest expense 1,532,192 1,174,454 Merger expenses -- 5,679,697 ----------- ------------ Total operating expenses 72,695,454 113,898,149 ----------- ------------ Operating income (loss) before income taxes 10,059,182 (31,328,257) Income tax expense (benefit): Current 2,270,033 (5,352,688) Deferred (321,951) (5,069,006) ----------- ------------ Total income tax expense (benefit): 1,948,082 (10,421,694) Net income (loss) $ 8,111,100 $(20,906,563) =========== ============ Per share data: Average common and common equivalent shares outstanding 8,194,792 8,213,054 Net income (loss) $ 0.99 $ (2.55) =========== ============
See accompanying notes to interim consolidated financial statements. -3- 6 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30 1995 1994 (Unaudited) Operating activities: Net income $ 8,111,100 $(20,906,563) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization 531,602 448,725 Reinsurance receivable on paid and unpaid losses and loss adjustment expenses 31,654,741 (71,043,164) Reserve for losses and loss adjustment expenses (14,992,785) 96,458,536 Prepaid reinsurance premiums 5,909,067 12,473,452 Unearned premiums (11,002,114) (9,593,649) Premiums in course of collection 6,711,004 9,629,020 Commissions receivable (374,737) 242,886 Advance to insurance companies -- (1,295,366) Deferred policy acquisition costs 281,272 (38,654) Accrued investment income (157,066) 56,302 Reinsurance balances payable (3,855,441) 2,168,945 Deposits with reinsurers -- 907,500 Funds due reinsurers -- (447,070) Federal income taxes recoverable 6,406,340 (6,278,984) Federal income tax payable 564,222 -- Deferred federal income taxes (151,270) (5,211,748) Net realized losses (gains) on investments (30,491) (173,471) Other (2,358,375) 2,033,771 ------------ ------------ Net cash provided by operating activities $ 27,247,069 $ 9,430,468 ------------ ------------ Investing activities: Fixed maturities available for sale at fair value: Redemptions and maturities $ 15,325,810 $ 10,057,007 Sales 52,825,521 13,273,927 Purchases (85,146,699) (33,541,404) Equity securities: Sales 1,105,043 3,144,375 Purchases (1,546,301) (838,558) Payable for securities purchased 649,728 44,806 Net sale (purchases) of short-term investments (1,026,886) (9,381,506) Purchase of property and equipment (148,351) (614,730) ------------ ------------ Net cash used in investing activities $(17,962,135) $(17,856,083) ------------ ------------ Financing activities: Proceeds from bank loans $ 1,000,000 $ 51,000,000 Repayment of bank loans (6,750,000) (31,520,000) Proceeds from exercise of stock options 9,000 9,485 Notes payable to shareholders (1,616,716) 5,280,263 Distribution to shareholders -- (16,323,003) ------------ ------------ Net cash provided by financing activities $ (7,357,716) $ 8,446,745 ------------ ------------ Increase (decrease) in cash $ 1,927,218 $ 21,130 Cash at beginning of period 730,047 2,107,687 ------------ ------------ Cash at end of period $ 2,657,265 $ 2,128,817 ============ ============
See accompanying notes to interim consolidated financial statements. -4- 7 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements (1) Accounting Policies The interim financial statements are unaudited but reflect all adjustments which, in the opinion of management, are necessary to provide a fair statement of the results of The Navigators Group, Inc. and its subsidiaries (the "Company") for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1994. (2) Acquisition of the Somerset Companies On June 30, 1994, the stockholders of the Company approved eight substantially identical agreements of merger providing for the acquisition by the Company of eight affiliated underwriting agencies, Somerset Marine, Inc., Somerset of Georgia, Inc., Somerset Insurance Services of Texas, Inc., Somerset Insurance Services of California, Inc., Somerset Insurance Services of Washington, Inc., Somerset Property, Inc., Somerset Re Management, Inc. and Navigators Management Corporation, collectively known as the Somerset Companies. The Company issued 2,875,000 shares of its common stock for all the outstanding common stock of the Somerset Companies. The mergers were accounted for under a method of accounting similar to "pooling of interests." (3) Reinsurance Ceded The Company's ceded earned premiums were $13,533,107 and $28,640,251 for the three months ended September 30, 1995 and 1994, respectively, and were $53,376,346 and $87,373,595 for the nine months ended September 30, 1995 and 1994, respectively. The Company's ceded losses were $11,690,991 and $28,744,331 for the three months ended September 30, 1995 and 1994, respectively, and were $48,395,887 and $146,605,884 for the nine months ended September 30, 1995 and 1994, respectively. (4) Commitments and Contingencies In February 1995, the Insurance Commissioner of the State of California, in accordance with voter referendum "Proposition 103," provided the Company with an initial notification of a rollback of premium rates. In the action, the Commissioner -5- 8 has alleged that the Company's refund obligation is approximately $3,700,000, plus interest to date of approximately $2,500,000. The Company has responded to the Commissioner with the assertion that the Company does not have a rollback obligation. The Company is continuing negotiations with the Commissioner in an attempt to settle this action. If a refund is ultimately made, the Company expects to be able to recover some portion from reinsurers. In addition, the Company is a defendant in various legal actions arising from the normal course of its business. Management does not believe that the outcome of these actions will result in a material adverse effect to the Company. -6- 9 THE NAVIGATORS GROUP, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL The Company is a holding company with 12 wholly owned subsidiaries. Two of the Company's subsidiaries, Navigators Insurance Company and NIC Insurance Company ("NIC"), specialize principally in underwriting marine, aviation and property (including inland marine) insurance and certain lines of specialty reinsurance and non-marine insurance. Navigators Insurance Company has been active since 1983. NIC is a wholly owned subsidiary of Navigators, was licensed in 1989 and began operations during 1990. Navigators Insurance Company and NIC are collectively referred to herein as "Navigators." Eight of the Company's subsidiaries, Somerset Marine, Inc., Somerset of Georgia, Inc., Somerset Insurance Services of Texas, Inc., Somerset Insurance Services of California, Inc., Somerset Insurance Services of Washington, Inc., Somerset Property, Inc., Somerset Re Management, Inc. and Navigators Management Corporation (collectively, the "Somerset Companies"), are a group of underwriting management companies which produce, manage and underwrite insurance and reinsurance for Navigators and nine other unrelated insurance companies. The other subsidiaries of the Company are Somerset Casualty Agency, Inc. and Somerset Marine Aviation Property Managers Inc., which are both inactive. The Somerset Companies were acquired by the Company pursuant to mergers that were approved by the stockholders of the Company at a special meeting held June 30, 1994. The Company accounted for the transfer of the Somerset Companies' assets and liabilities at historical cost under a method of accounting similar to "pooling of interests" and, accordingly, has reported results of operations as if the Company and the Somerset Companies had been combined as of January 1, 1994. The Company's revenue is primarily comprised of premiums, commissions and investment income. Navigators derives substantially all of its business from direct participation in, or by reinsuring certain members of, insurance pools managed by the Somerset Companies. The insurance business and operations of Navigators are managed by one of the Somerset Companies, Navigators Management Corporation. The Somerset Companies specialize principally in four lines of business: marine, aviation and property (including inland marine) insurance and certain lines of specialty reinsurance and non-marine insurance. They underwrite this business through four syndicates of insurance companies, Navigators having the largest participation in each of the four syndicates. The Somerset -7- 10 Companies derive their revenue from commissions, investment income and service fees from Navigators and other insurers. Commissions are earned both on a fixed percentage of premiums and on underwriting profits on business placed with the participating insurance companies within the four syndicates. Property and casualty insurance premiums are cyclical in nature and, accordingly, during a "hard market" demand for property and casualty insurance exceeds supply, or capacity, and as a result, premiums and commissions increase. On the downturn of the property and casualty cycle, supply exceeds demand, and as a result, premiums and commissions decrease. Navigators and the Somerset Companies earn investment income on cash balances and invested assets. The Somerset Companies also earn investment income on fiduciary funds. Such fiduciary funds are invested, subject to applicable insurance regulations, primarily in short-term instruments. RESULTS OF OPERATIONS General. The 1994 results of operations of the Company were dominated by the Northridge, California earthquake, which occurred on January 17, 1994. The Company's pre-tax loss (including direct property losses of $35,388,000, reinsurance reinstatement premiums of $1,925,000 and reinsurance account losses of $1,952,000, but net of reinsurance) in 1994 from the Northridge Earthquake totalled $39,265,000. As a result of this loss, management has restructured the Company by withdrawing from the large commercial and industrial property business which produced most of the earthquake loss, emphasizing its core ocean marine business, and developing its inland marine business as well as a new non-marine program book of business. The results of the third quarter of 1995 reflect this restructuring in that written premiums have been reduced while the continuing book of business has produced profits. However, the results also reflect the impact of losses from the Northridge Earthquake. During the nine months ended September 30, 1995, the total gross losses on direct property claims arising from the Northridge Earthquake increased approximately $16,439,000 from $125,361,000 to $141,800,000. During the three months ended September 30, 1995, the total gross losses on direct property claims arising from the Northridge Earthquake remained virtually unchanged. The Company added gross and net bulk reserves of $11,000,000 and $4,500,000, respectively, which are expected to cover any further deterioration of losses from the Northridge Earthquake. The net losses incurred from the Northridge Earthquake were approximately $10,721,000 in the nine months ended September 30, 1995. During the nine months ended September 30, 1995, the net direct property losses from the Northridge Earthquake were approximately $6,221,000, excluding the net bulk reserves. There -8- 11 can be no assurance given that additional losses will not be reported or adjustments made to existing reserves. Revenues. Gross written premium for the first nine months of 1995 decreased by 25% to approximately $105,934,000 from approximately $142,040,000 for the first nine months of 1994. The following table sets forth Navigators' gross written premium by line of business and net written premium in the aggregate:
Nine Months Ended September 30, ------------------------------- 1995 1994 ---- ---- (Dollars in thousands) -------------------- Marine $ 44,018 41% $47,344 33% Aviation 33,534 32% 37,915 27% Property and Inland Marine 9,322 9% 35,863 25% Specialty Reinsurance and Non-Marine Insurance 19,060 18% 20,918 15% -------- --- -------- --- Total Gross Premium Written $105,934 100% $142,040 100% ======== === ======== === Ceded Premium Written (47,551) (74,733) -------- -------- Total Net Premium Written 58,383 67,307 ======== ========
Marine Premium. Gross marine premium written decreased 7% when comparing the first nine months of 1995 to the first nine months of 1994. Management believes this decrease is due to the timing of certain policies and does not reflect the actual condition of its marine business. It anticipates that the total amount of marine business written in 1995 will be similar to the amount written in 1994. Aviation Premium. Gross aviation premium written decreased 12% from the first nine months of 1994 to the first nine months of 1995. Following an evaluation of its aviation business, management has decided to reduce its participation in airline and aircraft product business, two segments of its aviation business. In addition, effective December 31, 1995, the Company will cease its participation in the Airplane Owners and Pilots Association program, which is expected to contribute approximately $2,000,000 in premium in 1995. The Company expects aviation premium to be less for the 1995 year than it was in 1994. Property Premium. Gross property and inland marine premium written decreased 74% from the first nine months of 1994 to -9- 12 the first nine months of 1995. In 1994, this business consisted primarily of large commercial and industrial property risks, which was essentially a property catastrophe book of business, with a relatively small amount of inland marine risks. In late 1994, Navigators decided to cease writing large commercial and industrial property risks and to concentrate on the inland marine risks and, therefore, 1995 gross written premium is primarily inland marine. Specialty Reinsurance and Non-Marine Insurance Premium. Gross specialty reinsurance and non-marine insurance premium written decreased 9% from the first nine months of 1994 to the first nine months of 1995. The decrease was due primarily to management's decision to cease writing proportional reinsurance. Management is now developing non-marine program business to augment its reinsurance book. Ceded Premium. The decrease in ceded premium corresponds with the decrease in gross writings along with reinstatement premiums incurred during the first nine months of 1994 due primarily to the Northridge Earthquake. Total Premium. Net earned premium for the first nine months of 1995 was approximately $63,560,000 as compared to approximately $64,260,000 for the first nine months of 1994. Net earned premium generally follows the pattern of written premium; however, during 1995, the run-off of the property business, including the amortization of the existing property unearned premium reserve, has resulted in a decrease in writings but a fairly level earned premium for the nine months ended September 30, 1995 and an increase in earned premium for the three months ended September 30, 1995. Commission income, based on gross premiums earned and net underwriting profits, remained substantially level during the first nine months of 1995 at approximately $8,063,000 compared to approximately $8,085,000 during the corresponding period in 1994. Investment income increased 8% to approximately $10,363,000 during the first nine months of 1995 from approximately $9,634,000 during the corresponding period in 1994. This increase is due primarily to the increased amount of invested assets. Included in pre-tax net income were approximately $31,000 in realized capital gains for the first nine months of 1995 and approximately $173,000 in realized capital gains for the same period last year. On an after tax basis these represent realized gains of $0.00 and $0.01 per share for the respective periods. Expenses. The ratio of loss and loss adjustment expenses incurred to net premiums earned was 72.9% and 122.3% during the first nine months of 1995 and 1994, respectively. The 1994 loss ratio includes direct property losses from the Northridge Earthquake which at that time totalled $35,388,000. The decrease is due primarily to a return to more normal experience in -10- 13 comparison to the losses from the Northridge Earthquake, various airline losses and reinsurance costs in 1994, offset by additional Northridge Earthquake development in 1995. Commission expense as a percentage of net premiums earned were 13.9% and 18.6% during the first nine months of 1995 and 1994, respectively. This decrease is reflective of increased reinstatement premium payments to reinsurers in 1994 as a result of the Northridge Earthquake. Other operating expenses decreased 3% to approximately $15,976,000 during the first nine months of 1995 from approximately $16,509,000 during the corresponding period in 1994. Severance charges as a result of a reduction in staff accounted for approximately $820,000 of the operating expenses for the first nine months of 1995. These severance charges were offset by a commensurate decrease in salary expenses and a decrease in guaranty fund assessments. Interest expense reflected during the first nine months of 1995 is attributable to revolving credit loans and a term loan provided for by a credit agreement entered into on August 5, 1994. The term loan's principal was reduced from $22,500,000 at December 31, 1994 to $18,750,000 at September 30, 1995. The revolving credit loans were reduced by $2,000,000 from $3,000,000 at December 31, 1994 to $1,000,000 at September 30, 1995. The effective tax rate was a 19.4% expense and a 33.3% benefit for the nine months ended September 30, 1995 and 1994, respectively. For 1995, the effective rate is less than the statutory federal, state and local rates due primarily to tax-free investment income earned. For the first nine months of 1995, the Company had after tax income of approximately $8,111,000 compared to an after tax loss of approximately $20,907,000 for the same period last year, primarily due to a return to normal experience in comparison to the losses from the Northridge Earthquake. On a per share basis, this represents net income of $0.99 and a net loss of $2.55 for the first nine months of 1995 and 1994, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations was approximately $27,247,000 and approximately $18,789,000 for the first nine months of 1995 and 1994, respectively. Investment assets grew 14% during the first nine months of 1995 to $230,269,000 at September 30, 1995. Investment income during the nine months was $10,363,000, an increase of 8%, reflecting increased assets. The Company has entered into a credit agreement dated as of August 5, 1994. Pursuant to the credit agreement, the Company may borrow, subject to certain conditions, up to an aggregate of -11- 14 $5,000,000 in revolving credit loans. As of September 30, 1995, the Company had outstanding $1,000,000 in revolving credit loans. As of September 30, 1995, the Company's consolidated stockholders' equity was approximately $92,185,000, an increase from approximately $77,523,000 as of December 31, 1994. As of October 31, 1995, the Company has paid approximately $93,769,000 of claims related to the Northridge Earthquake, of which approximately $71,663,000 is subject to indemnification by reinsurers. To date the Company has experienced no significant difficulties collecting reinsured losses. -12- 15 THE NAVIGATORS GROUP, INC. & SUBSIDIARIES Part II - Other Information Item 1. Legal Proceedings: Neither the Company nor any of its subsidiaries is a party to, nor is the property thereof the subject of, any pending legal proceedings which depart from the ordinary routine litigation incident to the kinds of business conducted by the Company and its subsidiaries or, if such proceedings constitute other than routine litigation, in which there is a reasonable possibility of an adverse decision which could have any material adverse effect upon the financial condition of the Company. In February 1995, the Insurance Commissioner of the State of California (the "Commissioner"), in accordance with voter referendum "Proposition 103," provided the Company with an initial notification of a rollback of premium rates. In the action, the Commissioner has alleged that the Company's refund obligation is approximately $3,700,000, plus interest to date of approximately $2,500,000. The Company has responded to the Commissioner with the assertion that the Company does not have a rollback obligation. The Company is continuing negotiations with the Commissioner in an attempt to settle this action. If a refund is ultimately made, the Company expects to be able to recover some portion from reinsurers. Management does not believe that the outcome of this action will result in a material adverse effect to the Company. Item 2. Changes in Securities: None. Item 3. Defaults Upon Senior Securities: None. Item 4. Submissions of Matters to a Vote of Securities Holders: None. Item 5. Other Information: None. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits:
Exhibit No. Description of Exhibit ----------- ---------------------- 27.1 Financial Data Schedule
-13- 16 (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the nine months ended September 30, 1995. -14- 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The Navigators Group, Inc. ---------------------------------- (Registrant) November 13, 1995 /s/ W. ALLEN BARNETT - ----------------- ---------------------------------- (Date) W. Allen Barnett, Senior Vice President, Chief Financial Officer -15- 18 INDEX TO EXHIBITS
Sequentially Numbered Exhibit No. Description of Exhibit Page - ----------- ---------------------- ------------ 27.1 Financial Data Schedule
-16- EX-27.1 2 FINANCIAL DATA SCHEDULE
7 1 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 199,907,677 0 0 7,323,656 0 0 230,268,654 2,657,265 6,732,545 2,629,150 450,454,129 299,905,298 24,718,899 0 0 20,741,356 815,215 0 0 91,369,602 450,454,129 63,560,122 10,362,723 30,575 8,801,216 46,362,724 8,824,953 15,975,585 10,059,182 1,948,082 8,111,100 0 0 0 8,111,100 0.99 0.99 135,377,082 34,818,724 11,544,000 6,628,127 36,707,311 138,404,368 11,544,000
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