-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hDSnBkcjDu02vbImU/Rps3zCdCKP/TzJG35VT3b5nA8qjyvZP1pLMqP0ZH/u7oQm Z0c9mm+sECkEGY+szHKI8w== 0000950123-95-001436.txt : 19950516 0000950123-95-001436.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950123-95-001436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 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: 95539289 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 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 March 31, 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 May 12, 1995 there were 8,151,401 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 March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . 1 Statements of Income Three Months Ended March 31, 1995 and Three Months Ended March 31, 1994 . . . . . . . . . . . . . . . . . . . . 2 Statements of Cash Flows Three Months Ended March 31, 1995 and Three Months Ended March 31, 1994 . . . . . . . . . . . . . . . . . . . . 3 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 7 Part II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1995 Dec. 31, 1994 -------------- ------------- (Unaudited) ASSETS Investments: Fixed maturities, available for sale, at fair value (amortized cost: 1995, $180,008,956; 1994, $174,579,590) $180,526,530 $174,579,590 Equity securities, available for sale, at fair value (cost: 1995, $4,926,380; 1994, $4,574,115) 6,255,888 5,763,444 Short-term investments, at cost which approximates market 22,156,902 19,643,813 ----------- ----------- Sub-total investments 208,939,320 199,986,847 Investment in affiliated company 2,451,911 2,386,258 ----------- ----------- Total investments 211,391,231 202,373,105 Cash 2,245,039 730,047 Premiums in course of collection 16,414,349 24,608,943 Commissions receivable 5,576,191 5,126,953 Accrued investment income 2,877,922 2,949,340 Prepaid reinsurance premiums 7,345,598 12,224,772 Reinsurance receivable on paid and unpaid losses and loss adjustment expenses 187,501,397 199,888,216 Federal income tax recoverable 6,247,519 6,406,340 Deferred federal income tax benefit 11,659,047 13,413,513 Deferred policy acquisition costs 2,547,139 2,910,422 Other assets 2,981,573 3,399,430 ----------- ----------- Total assets $456,787,005 $474,031,081 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for loss and loss adjustment expenses $311,160,073 $314,898,083 Unearned premiums 28,250,354 35,721,013 Reinsurance balances payable 7,008,217 11,002,226 Loans payable to banks 22,250,000 25,500,000 Deferred state & local income taxes 1,238,890 1,221,459 Notes payable to shareholders 2,594,868 2,608,072 Accounts payable and other liabilities 1,075,240 5,556,994 ----------- ----------- Total liabilities 373,577,642 396,507,847 ----------- ----------- 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 8,151,401 in 1995 and 8,151,401 in 1994 815,140 815,140 Additional paid-in capital 34,983,877 34,983,877 Net unrealized gains (losses) on securities available for sale (net of income taxes (benefits) of $628,008 in 1995 and $(1,212,296) in 1994) 1,219,074 (2,353,281) Foreign currency translation adjustment 193,081 105,033 Retained earnings 45,998,191 43,972,465 ----------- ----------- Total stockholders' equity 83,209,363 77,523,234 ----------- ----------- Total liabilities and stockholders' equity $456,787,005 $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 March 31 1995 1994 (Unaudited) Revenues: Net premiums earned $17,718,090 $ 24,024,484 Commission income 2,594,170 2,640,717 Net investment income 3,412,370 3,045,425 Net realized capital gains (62,147) 241,829 Other income 217,123 32,975 ---------- ----------- Total revenues 23,879,606 29,985,430 ---------- ----------- Operating expenses: Losses and loss adjustment expenses incurred 13,112,306 46,603,272 Commissions 2,460,155 3,842,029 Other operating expenses 5,514,635 5,067,459 Interest expense 539,923 85,898 ---------- ----------- Total operating expenses 21,627,019 55,598,658 ---------- ----------- Operating income (loss) before income taxes 2,252,587 (25,613,228) Income tax expense: Current 308,329 (6,045,202) Deferred (81,470) (7,631,974) ----------- ----------- Total income tax expense 226,859 (13,677,176) Net income (loss) $ 2,025,728 $(11,936,052) ========== =========== Per share data: Average common and common equivalent shares outstanding 8,205,946 8,233,140 Net income (loss) $ 0.25 $ (1.45) ========== ===========
See accompanying notes to interim consolidated financial statements. -2- 5 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 1995 1994 (Unaudited) Operating activities: Net income $ 2,025,728 $(11,936,052) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization 181,901 94,527 Reinsurance receivable on paid and unpaid losses and loss adjustment expenses 12,386,819 (71,712,228) Reserve for losses and loss adjustment expenses (3,738,010) 109,698,077 Prepaid reinsurance premiums 4,879,174 1,955,648 Unearned premiums (7,470,659) (2,946,690) Premiums in course of collection 8,194,594 4,062,117 Commissions receivable (449,238) 371,800 Advance to insurance companies -- (1,334,676) Deferred policy acquisition costs 363,283 398,304 Accrued investment income 71,418 160,426 Reinsurance balances payable (3,994,009) 1,708,554 Deposits with reinsurers -- 907,500 Funds due reinsurers -- 152,760 Federal income taxes recoverable 158,821 (6,296,424) Deferred federal income taxes (85,838) (7,545,710) Net realized losses (gains) on investments 62,147 (241,829) Other (1,980,870) (2,135,780) ----------- ----------- Net cash provided by operating activities $ 10,605,261 $ 15,360,324 ----------- ----------- Investing activities: Fixed maturities available for sale at fair value: Redemption and maturities $ 411,010 $ 3,675,186 Sales 21,171,214 7,437,592 Purchases (22,479,777) (15,966,580) Equity securities: Sales 152,857 2,900,126 Purchases (476,217) (444,142) Payable for securities purchased (2,028,556) (33,180) Net sale (purchases) of short-term investments (2,513,089) (2,769,793) Purchase of property and equipment (64,507) (341,118) ------------ ----------- Net cash used in investing activities $ (5,827,065) $ (5,541,909) ------------ ----------- Financing activities: Proceeds from bank loans $ 1,000,000 $ 23,000,000 Repayment of bank loans (4,250,000) (4,270,000) Notes payable to shareholders (13,204) -- Distribution to shareholders -- (6,700,266) ----------- ----------- Net cash provided by financing activities (3,263,204) 12,029,734 ----------- ----------- Increase (decrease) in cash 1,514,992 21,848,149 Cash at beginning of period 730,047 2,107,687 ----------- ----------- Cash at end of period $ 2,245,039 $ 23,955,836 =========== ===========
See accompanying notes to interim consolidated financial statements. -3- 6 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." The prior period's financial statements have been restated to include the historical accounts, results of operations and cash flows of the Somerset Companies. Included in the restated financial statements are adjustments to account for the elimination of intercompany transactions. -4- 7 Reconciliations of amounts of total revenues and net income previously reported by the Company with the combined amounts currently presented in the accompanying consolidated financial statements are as follows:
Three Months Ended The Navigators Intercompany March 31, 1994 Group, Inc. Somerset Companies Transactions Consolidated ------------------ -------------- ------------------ ------------ ------------ Total revenues 27,021,740 7,701,888 (4,738,198) 29,985,430 Net income* (16,139,777) 3,511,468 692,257 (11,936,052)
_______________ * Somerset Companies' income from operations does not include a provision for federal income taxes as the companies were S Corporations under federal laws through June 30, 1994. (3) Reinsurance Ceded The Company's ceded earned premiums were $21,039,928 and $29,028,210 for the three months ended March 31, 1995 and 1994, respectively. The Company's ceded losses were $19,354,793 and $91,161,910 for the three months ended March 31, 1995 and 1994, respectively. (4) Northridge Earthquake On January 17, 1994, an earthquake (the "Northridge Earthquake") occurred in the vicinity of the Northridge area of Los Angeles, California. The Company's pre-tax loss in 1994 (including direct property losses, net of reinsurance, of $35,388,000, reinsurance reinstatement premiums of $1,925,000 and reinsurance account losses of $1,952,000) from the Northridge Earthquake totalled $39,265,000. During the first quarter of 1995, the total gross losses on direct property claims arising from the Northridge Earthquake increased $6,070,000 from $125,361,000 million to $131,431,000. The net loss to the Company from this increase was $2,580,000 in the first quarter of 1995. There can be no assurance given that additional losses will not be reported or adjustments made to existing reserves. (5) Notes Payable and Loans In conjunction with the mergers, the Somerset Companies distributed $5,280,263 in the form of notes payable to the then existing shareholders of the Somerset Companies. These notes represent certain pre-merger income to such shareholders and were interest free through December 30, 1994. The Company paid $2,672,193 of these notes on December 30, 1994, and an additional $13,204 on March 15, 1995. As of March 31, 1995, $2,594,868, remained outstanding. -5- 8 On August 5, 1994, the Company entered into a Credit Agreement (the "Credit Agreement") with three banks. The Credit Agreement provides for (i) revolving credit loans of up to $5,000,000 through August 5, 1997 (the "Revolving Credit Loans"), (ii) a term loan of $25,000,000, the principal of which is payable in quarterly installments of $1,250,000 for the first eight quarters and $3,750,000 for the last four quarters, with the last installment due on June 30, 1997 (the "Term Loan"), and (iii) an irrevocable stand-by letter of credit issued by one of the banks for the benefit of the Society of Lloyd's in the amount of L.2,585,000 (approximately U.S. $4,185,115 at the exchange rate as of March 31, 1995) for the account of the Company (the "Letter of Credit"). The Revolving Credit Loans bear interest at the prime rate of one of the banks plus .25%. The Term Loan bears interest, at the election of the Company, at either the prime rate of one of the banks plus .25% or at LIBOR plus 2.25%. Any amounts drawn under the Letter of Credit and not repaid initially bear interest at the prime rate of one of the banks plus .25%. The Revolving Credit Loans, the Term Loan and the Letter of Credit are currently collateralized by shares of common stock of the active subsidiaries of the Company other than NIC Insurance Company. The Credit Agreement contains covenants common to transactions of this type, including restrictions on indebtedness and liens, limitations on mergers and the sale of assets, and maintenance of consolidated total stockholders' equity, statutory surplus, minimum liquidity and loss reserves. In addition, the covenants prevent the Company from declaring or paying dividends during the term of the loans. On September 30, 1994, December 30, 1994 and March 31, 1995 the Company paid to the Lenders its first, second and third quarterly installments of $1,250,000 with respect to the Term Loan. During the first quarter of 1995 the amounts outstanding under the Revolving Credit Loans were reduced by the net amount of $2,000,000. As of March 31, 1995, there was $21,250,000 outstanding under the Term Loan and there was $1,000,000 outstanding under the Revolving Credit Loans. (6) 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 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. 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 (the "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. In addition, financial statements presented from the prior year have been restated to include the historical accounts of the Somerset Companies. 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 -7- 10 marine) insurance and certain lines of specialty reinsurance. They underwrite this business through four syndicates of insurance companies, Navigators having the largest participation in each of the four syndicates. The Somerset 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 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 first quarter of 1995 reflect this restructuring in that premiums have been reduced while the continuing book of business has produced profits. However, the results also reflect the continued deterioration of losses from the Northridge Earthquake. During the first quarter of 1995, the total gross losses on direct property claims arising from the Northridge Earthquake increased $6,070,000 from $125,361,000 to $131,431,000. The net loss to the Company from this increase was $2,580,000 in the first quarter of 1995. There 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 three months of 1995 decreased by 38% to $31,287,000 from $50,118,000 for the first three months of 1994. -8- 11 The following table sets forth Navigators' gross written premium by line of business and net written premium in the aggregate:
Three Months Ended March 31, ---------------------------- 1995 1994 ---- ---- (Dollars in thousands) -------------------- Marine $12,957 42% $17,485 35% Aviation 11,357 36% 9,888 20% Property and Inland 2,544 8% 15,741 31% Marine Reinsurance 4,429 14% 7,004 14% ------ --- ------ -- Total Gross Premium Written $31,287 100% $50,118 100% ====== ==== ====== ==== Ceded Premium Written (16,160) (26,750) ------ ------ Total Net Premium Written 15,127 23,368 ====== ======
Marine Premium. Marine premium decreased 26% when comparing the first three months of 1995 to the first three 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. Aviation premium increased 15% from the first three months of 1994 to the first three months of 1995 reflecting continuing increases in airline premium rates. However, the aviation business has produced underwriting losses and management is currently assessing the future of Navigators' participation in this line. Among the alternatives being considered are a sale of the aviation line of business or a substantial reduction of Navigators' participation in the aviation insurance pool. Property Premium. Property and Inland Marine premium decreased 84% from the first three months of 1994 to the first three months of 1995. In 1994, this business consisted primarily of large commercial and industrial risks with a relatively small amount of inland marine risks. In late 1994, Navigators decided to cease writing large commercial and industrial property risks, which is essentially a property catastrophe book of business, and to concentrate on the inland marine risks and, therefore, 1995 gross written premium is primarily inland marine. Reinsurance Premium. Reinsurance premium decreased 37% from the first three months of 1994 to the first three months -9- 12 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 and anticipates the premium from this new book of business will begin to appear in the last half of 1995. Ceded Premium. The decrease in ceded premium corresponds with the decrease in gross writings along with reinstatement premiums incurred during the first quarter of 1994 due primarily to the Northridge Earthquake. Total Premium. Net earned premium for the first three months of 1995 was $17,718,000 as compared to $24,024,000 for the first three months of 1994. Net earned premium generally follows the pattern of written premium. Commission income, based on gross premiums earned and net underwriting profits, remained substantially level during the first three months of 1995 at approximately $2,594,000 compared to approximately $2,641,000 during the corresponding period in 1994. Investment income increased 12% to approximately $3,412,000 during the first three months of 1995 from approximately $3,045,000 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 $62,000 in realized capital losses for the first three months of 1995 and $242,000 in realized capital gains for the same period last year. On an after tax basis these represent realized gains of $0 and $0.02 per share for the respective periods. Expenses. The ratio of loss and loss adjustment expenses incurred to net premiums earned was 74% and 194% during the first three months of 1995 and 1994, respectively. The 1994 loss ratio includes the losses, at that time, from the Northridge Earthquake of $28,625,000. The decrease is due primarily to a return to more normal experience in comparison to the losses from the Northridge Earthquake, various airline losses and reinsurance costs in 1994. Commission expense as a percentage of net premiums earned were 13.9% and 16.0% during the first three 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 increased 8.8% to approximately $5,515,000 during the first three months of 1995 from approximately $5,067,000 during the corresponding period in 1994. This increase is primarily due to $420,000 of severance -10- 13 charges as a result of a reduction in staff in the property division. Interest expense reflected during the first three 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 $21,250,000 at March 31, 1995. The revolving credit loans were reduced by $2,000,000 from $3,000,000 at December 31, 1994 to $1,000,000 at March 31, 1994. The effective tax rate was a 10.1% expense and a 53.4% benefit for the three months ended March 31, 1995 and 1994, respectively. For the first three months of 1995, the Company had after tax income of $2,026,000 compared to an after tax loss of $11,936,000 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 $0.25 and a net loss of $1.45 for the first three months of 1995 and 1994, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations was $10,605,000 and $15,360,000 for the first three months of 1995 and 1994, respectively. Investment assets grew at the rate of 4% during the first three months of 1995 to $211,391,000 at March 31, 1995. Investment income during the three months was $3,412,000, an increase of 12%, 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 $5,000,000 in revolving credit loans. As of March 31, 1995, the Company had outstanding $1,000,000 in revolving credit loans. As of March 31, 1995, the Company's consolidated stockholders' equity was $83,209,000, an increase from $77,523,000 as of December 31, 1994. As of April 30, 1995, the Company has paid approximately $77,413,000 of claims related to the Northridge Earthquake, of which approximately $56,553,000 is subject to indemnification by reinsurers. To date the Company has experienced no significant difficulties collecting reinsured losses. -11- 14 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, in accordance with voter referendum "Proposition 103," provided the Company with an initial notification of a rollback of premium rates. 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
(b) Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended March 31, 1995. -12- 15 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) May 12, 1995 /s/ W. ALLEN BARNETT - ------------------ ---------------------------------------- (Date) W. Allen Barnett, Senior Vice President, Chief Financial Officer -13- 16 INDEX TO EXHIBITS
Sequentially Numbered Exhibit No. Description of Exhibit Page - ----------- ---------------------- ------------ 27.1 Financial Data Schedule
-14- EX-27.1 2 FINANCIAL DATA SCHEDULE
7 1 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 180,526,530 0 0 6,255,888 0 0 211,391,231 2,245,039 13,225,338 2,547,139 456,787,005 311,160,073 28,250,354 0 0 24,844,868 815,140 0 0 82,394,223 456,787,005 17,718,090 3,412,370 (62,147) 2,811,293 13,112,306 2,460,155 5,514,635 2,252,587 226,859 2,025,728 0 0 0 2,025,728 0.25 0.25 135,377,082 10,765,678 2,346,627 268,965 11,336,410 136,884,012 2,346,627
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