-----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, RkrGtyefAOmKQVtJ9O1lOGQHTYHjzPNUrSV02rh1hiWf/ThYyoFqGZ/2C6SE/ngy xU+2bxEhDH0W+cef2uqPxw== 0001157523-04-004482.txt : 20040506 0001157523-04-004482.hdr.sgml : 20040506 20040505191123 ACCESSION NUMBER: 0001157523-04-004482 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040505 ITEM INFORMATION: ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040506 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15886 FILM NUMBER: 04782978 BUSINESS ADDRESS: STREET 1: ONE PENN PLAZA STREET 2: 55TH FL CITY: NEW YORK STATE: NY ZIP: 10119 BUSINESS PHONE: 2122442333 MAIL ADDRESS: STREET 1: ONE PENN PLAZA 55TH FL CITY: NEW YORK STATE: NY ZIP: 10119 8-K 1 a4633835.txt THE NAVIGATORS GROUP, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: May 5, 2004 Commission File No. 0-15886 (Date of Earliest Event Reported: May 5, 2004) THE NAVIGATORS GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3138397 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Penn Plaza New York, New York 10119 (212) 244-2333 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Item 9. Regulation FD Disclosure Item 12. Results of Operations and Financial Condition The following information is furnished pursuant to Item 9 "Regulation FD Disclosure" and Item 12 "Results of Operations and Financial Condition." This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. On May 5, 2004, The Navigators Group, Inc. (the "Company") issued a press release announcing its earnings for the first quarter of 2004. This press release is attached hereto as Exhibit 99.1. SIGNATURE 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 hereunto duly authorized. THE NAVIGATORS GROUP, INC. -------------------------- (Registrant) /s/ Bradley D. Wiley -------------------------------------------------- Name: Bradley D. Wiley Title: Senior Vice President, Financial Compliance Officer and Secretary Date: May 5, 2004 INDEX TO EXHIBITS Number Description - ------ ----------- 99.1 Press Release dated May 5, 2004. EX-99.1 2 a4633835ex99.txt PRESS RELEASE Exhibit 99.1 Navigators Reports Record First Quarter 2004 Earnings NEW YORK--(BUSINESS WIRE)--May 5, 2004--The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $8,913,000 for the 2004 first quarter compared to $4,710,000 for the 2003 first quarter, an increase of 89%. Net income per share increased 30% to $0.70 from $0.54 based on 12,654,000 diluted average shares outstanding in the 2004 first quarter compared to 8,724,000 diluted average shares outstanding in the 2003 first quarter. The 2004 and 2003 first quarter results include net realized capital gains of $0.02 per share in each period. Gross written premium and net written premium for the 2004 first quarter were $195,951,000 and $95,935,000 respectively, increases of 12% and 5% from the comparable 2003 period. The 2004 first quarter net written premium reflects an increase in ceded reinsurance premium principally as a result of restructuring the Company's reinsurance program for specialty business effective January 1, 2004. The combined loss and expense ratio for the 2004 first quarter was 88.8% compared to 96.6% for the 2003 comparable period. Navigators' Chief Executive Officer, Stan Galanski commented, "We are pleased that each of our business units produced profitable underwriting results and improved combined ratios in the first quarter of 2004 compared to the first quarter of 2003. We achieved a record level of gross written premium for the 2004 first quarter while maintaining our underwriting discipline. We believe our specialty underwriting teams are well positioned to continue to capitalize on profitable growth opportunities in the current market environment." Consolidated cash flow from operations for the 2004 first quarter was $26,733,000, compared to $26,035,000 for the comparable 2003 period. Net investment income for the 2004 first quarter was $5,902,000, an increase of 27% compared to $4,661,000 for the comparable 2003 period. The pre-tax investment yield for the 2004 first quarter was 3.4% compared to 4.3% for the 2003 comparable period. The Company adopted the fair value method of accounting for stock-based employee compensation in the 2003 fourth quarter retroactive to January 1, 2003. As a result of the 2003 accounting change, net income for the 2004 and 2003 first quarters reflect after-tax charges of $130,000, or $0.01 per share and $124,000, or $0.01 per share, respectively, for the expensing of stock options. The Company's effective tax rate for foreign operations was 35% for the 2004 first quarter. Included in the 2003 first quarter was a tax benefit of $630,000 or $0.07 per share resulting from the reduction of a tax valuation allowance related to the Company's foreign operations. The balance of the tax valuation allowance was eliminated in the 2003 fourth quarter. Stockholders' equity increased 5% for the 2004 first quarter to $305,204,000 or $24.26 per share at March 31, 2004 compared to $290,028,000 or $23.14 per share at December 31, 2003. Statutory surplus of Navigators Insurance Company was $217,725,000 at March 31, 2004. The Company will hold a conference call on Thursday, May 6, 2004 starting at 8:30 a.m. EST to discuss the first quarter's results. To access the call, please dial 1-800-299-8538, using confirmation code 43852052. Internationally, the call may be accessed by dialing 617-786-2902 using the same confirmation code. To listen via live audio webcast, please visit the Company's website (www.navg.com) at least ten minutes prior to the start of the call and click on the May 6th Live Audio Webcast link. The webcast will also be available as a replay starting one hour after the call is finished at the same location. The Navigators Group, Inc. is an international insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York City, Navigators has offices in major insurance centers in the United States and the United Kingdom. This press release may contain "forward looking statements" as defined in the Private Securities Litigation Act of 1995. We cannot assure that results which we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties which we face. Please refer to Navigators' most recent Form 10-K and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors which may affect that business. Navigators undertakes no obligation to publicly update or revise any forward looking statement. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Financial Highlights ($'s in thousands, except per share data) Three Months Ended March 31, ------------------- Financial Highlights 2004 2003 Change - -------------------- --------- --------- ------ Gross written premium $195,951 $174,702 12% Net written premium 95,935 91,033 5% Revenues: Net earned premium 74,175 66,314 12% Commission income 1,127 1,239 -9% Net investment income 5,902 4,661 27% Net realized capital gains 422 218 93% Other income 128 173 -26% --------- --------- Total revenues 81,754 72,605 13% --------- --------- Operating expenses: Net losses and loss adjustment expenses incurred 43,752 44,040 -1% Commission expense 11,028 10,627 4% Other operating expenses 13,432 11,778 14% Interest expense 97 -100% --------- --------- Total operating expenses 68,212 66,542 3% --------- --------- Income before income taxes 13,542 6,063 123% --------- --------- Income tax expense: Current 5,007 1,134 342% Deferred (378) 219 -272% --------- --------- Income tax expense 4,629 1,353 242% --------- --------- Net income $8,913 $4,710 89% ========= ========= Per Share Data - -------------- Net income per common share: Basic $0.71 $0.55 28% Diluted $0.70 $0.54 30% Average shares outstanding: Basic 12,554 8,494 Diluted 12,654 8,724 Underwriting Ratios - ------------------- Loss Ratio 59.0% 66.4% Expense Ratio 29.8% 30.2% --------- --------- Combined Ratio 88.8% 96.6% Balance Sheet Data March 31, December 31, - ------------------ 2004 2003 --------- --------- Stockholders' equity $305,204 $290,028 5% Book value per share $24.26 $23.14 5% Certain amounts for the prior period have been reclassified to conform to the presentation in the current period. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($'s in thousands) March 31, Dec. 31, 2004 2003 ----------- ----------- ASSETS Investments and cash: Fixed maturities, available-for-sale, at fair value (amortized cost: 2004, $614,328: 2003, $577,904) $632,098 $588,545 Equity securities, available-for-sale, at fair value (cost: 2004, $18,806: 2003, $11,977) 20,484 13,446 Short-term investments, at cost which approximates fair value 67,384 83,202 Cash 6,105 8,399 ----------- ----------- Total investments and cash 726,071 693,592 ----------- ----------- Premiums in course of collection 185,801 128,676 Commissions receivable 3,881 3,970 Prepaid reinsurance premiums 130,345 102,141 Reinsurance receivable on paid losses 21,495 26,270 Reinsurance receivable on unpaid losses and loss adjustment expense 387,735 350,441 Federal income tax recoverable 3,817 8,747 Net deferred income tax benefit 12,886 15,195 Deferred policy acquisition costs 34,454 24,720 Accrued investment income 6,028 5,546 Goodwill 5,173 5,093 Other assets 17,662 15,067 ----------- ----------- Total assets $1,535,348 $1,379,458 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses $786,088 $724,612 Unearned premium 290,009 238,803 Reinsurance balances payable 126,985 97,583 Payable for securities purchased 8,844 12,857 Accounts payable and other liabilities 18,218 15,575 ----------- ----------- Total liabilities 1,230,144 1,089,430 ----------- ----------- Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued - - Common stock, $.10 par value, 20,000,000 shares authorized for 2004 and 2003; issued and outstanding: 12,582,249 for 2004 and 12,535,360 for 2003 1,259 1,254 Additional paid-in capital 153,034 151,765 Accumulated other comprehensive income 13,526 8,537 Retained earnings 137,385 128,472 ----------- ----------- Total stockholders' equity 305,204 290,028 ----------- ----------- Total liabilities and stockholders' equity $1,535,348 $1,379,458 =========== =========== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Comparative Premium Data ($'s in thousands) Gross Written Premiums -------------------------- 1st 1st Quarter Quarter Insurance Companies: 2004 2003 Change -------------------------- Marine $59,426 $53,720 11% Specialty 34,230 31,893 7% Professional Liability 15,033 12,565 20% Assumed from Lloyd's Operations 3,054 11,598 -74% Other (includes run-off business) 86 106 -19% ------------------- 111,829 109,882 2% Lloyd's Operations 87,158 76,084 15% Intercompany elimination (3,036) (11,264) NM ------------------- Total $195,951 $174,702 12% =================== Net Written Premiums -------------------------- 1st 1st Quarter Quarter Insurance Companies: 2004 2003 Change -------------------------- Marine $25,258 $23,061 10% Specialty 20,511 23,899 -14% Professional Liability 5,473 2,949 86% Assumed from Lloyd's Operations 2,906 11,598 -75% Other (includes run-off business) (3) 147 NM ------------------- 54,145 61,654 -12% Lloyd's Operations 41,790 29,379 42% ------------------- Total $95,935 $91,033 5% =================== Net Earned Premium -------------------------- 1st 1st Quarter Quarter Insurance Companies: 2004 2003 Change -------------------------- Marine $20,428 $22,275 -8% Specialty 21,539 22,950 -6% Professional Liability 3,811 1,427 167% Assumed from Lloyd's Operations 7,405 3,574 107% Other (includes run-off business) (1) 174 NM ------------------- 53,182 50,400 6% Lloyd's Operations 20,993 15,914 32% ------------------- Total $74,175 $66,314 12% =================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Quarter Ended March 31, 2004 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total -------------------------------------------------- Gross premium written $111,829 $87,158 $(3,036) $195,951 Net premium written 54,145 41,790 95,935 Revenues: Net earned premium 53,182 20,993 74,175 Commission income 62 $7,932 (6,867) 1,127 Net investment income 5,484 404 3 11 5,902 Net realized capital gains 205 217 422 Other income (expense) (61) 4 185 128 -------------------------------------------------- Total revenues 58,810 21,680 8,120 (6,856) 81,754 -------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 32,710 11,042 43,752 Commission expense 14,145 3,750 (6,867) 11,028 Other operating expenses 1,198 3,036 8,605 593 13,432 Interest expense -------------------------------------------------- Total operating expenses 48,053 17,828 8,605 (6,274) 68,212 -------------------------------------------------- Income (loss) before income tax 10,757 3,852 (485) (582) 13,542 expense (benefit) Income tax expense (benefit) 3,478 1,348 (140) (57) 4,629 -------------------------------------------------- Net income (loss) $7,279 $2,504 $(345) $(525) $8,913 ================================================== Loss and loss expenses ratio 61.5% 52.6% 59.0% Commission expense ratio 26.6% 17.9% 24.1% Other operating expense ratio 2.3% 14.4% 5.7% -------------------- --------- Combined ratio 90.4% 84.9% 88.8% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Quarter Ended March 31, 2003 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total --------------------------------------------------- Gross premium written $109,882 $76,084 $(11,264) $174,702 Net premium written 61,654 29,379 91,033 Revenues: Net earned premium 50,400 15,914 66,314 Commission income 964 $6,600 (6,325) 1,239 Net investment income 4,106 547 8 4,661 Net realized capital gains 119 99 218 Other income (expense) 21 15 262 (125) 173 --------------------------------------------------- Total revenues 54,646 17,539 6,870 (6,450) 72,605 --------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 34,000 10,040 44,040 Commission expense 14,149 2,803 (6,325) 10,627 Other operating expenses 1,146 1,954 7,641 1,037 11,778 Interest expense 97 97 --------------------------------------------------- Total operating expenses 49,295 14,797 7,641 (5,191) 66,542 --------------------------------------------------- Income (loss) before income tax expense (benefit) 5,351 2,742 (771) (1,259) 6,063 Income tax expense (benefit) 1,666 127 (440) 1,353 --------------------------------------------------- Net income (loss) $3,685 $2,742 $(898) $(819) $4,710 =================================================== Loss and loss expenses ratio 67.5% 63.1% 66.4% Commission expense ratio 28.1% 17.6% 25.6% Other operating expense ratio 2.3% 12.3% 4.6% -------------------- --------- Combined ratio 97.9% 93.0% 96.6% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Underwriting Results ($'s in thousands) Three Months Ended March 31, 2004 --------------------------------------------------- Combined Ratio Net Losses -------------------- Insurance Earned and LAE Underwriting Companies: Premium Incurred Expenses Loss Expense Total --------------------------------------------------- Marine $20,428 $12,046 $5,599 59.0% 27.4% 86.4% Specialty 21,539 14,317 6,968 66.5% 32.3% 98.8% Professional Liability 3,811 2,299 776 60.3% 20.4% 80.7% Assumed from Lloyd's 7,405 4,217 1,999 57.0% 27.0% 84.0% Other (includes run-off) (1) (169) 1 NM NM NM --------------------------------------------------- 53,182 32,710 15,343 61.5% 28.9% 90.4% Lloyd's Operations 20,993 11,042 6,786 52.6% 32.3% 84.9% --------------------------------------------------- Total $74,175 $43,752 $22,129 59.0% 29.8% 88.8% =================================================== Three Months Ended March 31, 2003 --------------------------------------------------- Combined Ratio Net Losses -------------------- Insurance Earned and LAE Underwriting Companies: Premium Incurred Expenses Loss Expense Total --------------------------------------------------- Marine $22,275 $14,137 $5,808 63.5% 26.1% 89.6% Specialty 22,950 15,059 7,753 65.6% 33.8% 99.4% Professional Liability 1,427 927 681 65.0% 47.7% 112.7% Assumed from Lloyd's 3,574 2,103 1,057 58.8% 29.6% 88.4% Other (includes run-off) 174 1,774 (4) NM NM NM --------------------------------------------------- 50,400 34,000 15,295 67.5% 30.4% 97.9% Lloyd's Operations 15,914 10,040 4,757 63.1% 29.9% 93.0% --------------------------------------------------- Total $66,314 $44,040 $20,052 66.4% 30.2% 96.6% =================================================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Net Loss Reserves ($'s in thousands) 3/31/2004 12/31/2003 ------------ ----------- Insurance Companies: Marine $117,538 $110,698 Specialty 123,893 114,167 Professional Liability 9,314 7,059 Assumed from Lloyd's Operations 17,036 14,323 Other (primarily run-off business) 24,744 24,390 ------------ ----------- Total Insurance Companies 292,525 270,637 ------------ ----------- Lloyd's Operations: 105,828 103,534 ------------ ----------- Total net loss reserves $398,353 $374,171 ============ =========== Total net case loss reserves $159,749 $154,531 Total net IBNR loss reserves 238,604 219,640 ------------ ----------- Total net loss reserves $398,353 $374,171 ============ =========== Asbestos & Environmental Claim Data ($'s in thousands) Three Months Ended March 31, 2004 Asbestos Environmental Total --------- ------------- ---------- Gross of Reinsurance Beginning reserve $78,472 $6,800 $85,272 Incurred loss & LAE 11 664 675 Calendar year payments 4 87 91 --------- ------------- ---------- Ending reserves $78,479 $7,377 $85,856 ========= ============= ========== Net of Reinsurance Beginning reserve $32,083 $1,153 $33,236 Incurred loss & LAE 10 648 658 Calendar year payments 2 68 70 --------- ------------- ---------- Ending reserves $32,091 $1,733 $33,824 ========= ============= ========== Outstanding Claim Count 111 94 205 ========= ============= ========== CONTACT: The Navigators Group, Inc. Paul J. Malvasio, Executive Vice President and Chief Financial Officer 914-933-6088 pmalvasio@navg.com www.navg.com -----END PRIVACY-ENHANCED MESSAGE-----