EX-99.1 2 a4695782ex991.txt NEWS RELEASE Exhibit 99.1 Navigators' Net Income Up 47% NEW YORK--(BUSINESS WIRE)--Aug. 4, 2004--The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $9,037,000 for the 2004 second quarter compared to $6,157,000 for the 2003 second quarter, an increase of 47%. Net income per share was $0.71 for both the 2004 and 2003 second quarters based on diluted average shares outstanding of 12,647,000 and 8,650,000, respectively. The 2004 second quarter net income includes a net realized capital loss of $0.01 per share compared to net realized capital gains of $0.06 per share in the 2003 second quarter. Gross written premium and net written premium for the 2004 second quarter were $161,626,000 and $73,689,000 respectively, increases of 14% and 20% from the comparable 2003 periods. The 2003 second quarter net written premium reflects an increase in ceded reinsurance premium for specialty business due to a reinsurance treaty change effective from April 1, 2003 to September 30, 2003 which had no impact on net income. Net income for the six month period ended June 30, 2004 was $17,950,000 or $1.42 per share, compared to $10,867,000 or $1.26 per share for the six month period ended June 30, 2003. Included in these results were net realized capital gains of $0.02 per share and $0.08 per share for the six months ended June 30, 2004 and 2003, respectively. Gross written premium and net written premium for the six month period ended June 30, 2004 were $357,577,000 and $169,624,000 respectively, increases of 13% and 11% from the comparable 2003 periods. The combined loss and expense ratios for the 2004 second quarter and six month period were 88.8% for both periods compared to 95.7% and 96.2% for the comparable 2003 periods. The combined loss and expense ratios for the 2004 second quarter and six month periods were favorably impacted by 1.9 and 2.7 loss ratio points, respectively for a redundancy of prior year loss reserves in our Lloyd's operations. Navigators' Chief Executive Officer, Stan Galanski, commented, "We are very pleased with the profitable underwriting results and premium growth levels achieved during the second quarter. Pricing remains at an acceptable level overall, despite softening that is most evident in the energy and directors and officers liability product lines. Incurred loss activity for the first half of 2004 has generally been favorable, particularly for our Lloyd's operations and our cash flow continues to be strong." Consolidated cash flow from operations for the 2004 second quarter and six month period ended June 30, 2004 was $66,427,000 and $93,160,000, respectively, compared to $39,515,000 and $65,550,000 for the comparable 2003 periods. Net investment income for the 2004 second quarter and six month period was $6,625,000 and $12,527,000 respectively, increases of 46% and 36% from the 2003 comparable periods. The pre-tax investment yields for the 2004 second quarter and six month period were 3.6% and 3.5%, respectively compared to 3.9% and 4.1% for the comparable 2003 periods. 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 second quarter and six month period reflect after-tax charges of $181,000 or $0.01 per share and $311,000 or $0.02 per share, respectively, compared to $127,000 or $0.01 per share and $261,000 or $0.03 per share for the comparable 2003 periods. The Company's effective tax rate for foreign operations was 35% for the 2004 second quarter. Included in the 2003 second quarter and six month period were tax benefits of $854,000 or $0.10 per share and $1,484,000 or $0.17 per share, respectively, 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 was $302,356,000 or $24.00 per share at June 30, 2004 compared to $290,028,000 or $23.14 per share at December 31, 2003. Statutory surplus of Navigators Insurance Company was $226,802,000 at June 30, 2004. The Company will hold a conference call on Thursday, August 5, 2004 starting at 8:30 a.m. EST to discuss the second quarter's results. To access the call, please dial 1-800-901-5241, using confirmation code 45398135. Internationally, the call may be accessed by dialing 617-786-2963 using the same confirmation code. To listen via live audio webcast, please visit the Company's website (www.navg.com) at least ten minutes prior to the start of the call and click on the August 5th Live Audio Webcast link. The webcast will also be available as a replay at the same location starting one hour after the call is finished. The Navigators Group, Inc. is an international insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York City, Navigators has offices in major insurance centers in the United States and the United Kingdom. This press release may contain "forward-looking statements" as defined in the Private Securities Litigation Act of 1995. We cannot assure that results which we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties which we face. Please refer to Navigators' most recent Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors which may affect that business. Navigators undertakes no obligation to publicly update or revise any forward- looking statement. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Financial Highlights ($'s in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- Financial Highlights 2004 2003 Change 2004 2003 Change ----------- --------- --------- ----- --------- --------- ------ Gross written premium $161,626 $141,192 14% $357,577 $315,894 13% Net written premium 73,689 61,631 20% 169,624 152,664 11% Revenues: Net earned premium 75,314 65,264 15% 149,489 131,578 14% Commission income 1,361 1,486 -8% 2,488 2,725 -9% Net investment income 6,625 4,552 46% 12,527 9,213 36% Net realized capital gains (losses) (105) 669 NM 317 887 -64% Other income 266 415 -36% 394 588 -33% ------------------- ------------------- Total revenues 83,461 72,386 15% 165,215 144,991 14% ------------------- ------------------- Operating expenses: Net losses and loss adjustment expenses incurred 45,392 43,291 5% 89,144 87,331 2% Commission expense 10,040 8,876 13% 21,068 19,503 8% Other operating expenses 14,620 12,417 18% 28,052 24,195 16% Interest expense - 87 NM - 184 NM ------------------- ------------------- Total operating expenses 70,052 64,671 8% 138,264 131,213 5% ------------------- ------------------- Income before income taxes 13,409 7,715 74% 26,951 13,778 96% ------------------- ------------------- Income tax expense (benefit): Current 4,951 3,437 44% 9,958 4,571 118% Deferred (579) (1,879) -69% (957) (1,660) -42% ------------------- ------------------- Income tax expense 4,372 1,558 181% 9,001 2,911 209% ------------------- ------------------- Net income $9,037 $6,157 47% $17,950 $10,867 65% =================== =================== Per Share Data -------------- Net income per common share: Basic $0.72 $0.72 0% $1.43 $1.28 12% Diluted $0.71 $0.71 0% $1.42 $1.26 13% Average shares outstanding: Basic 12,587 8,516 12,570 8,505 Diluted 12,647 8,650 12,671 8,633 Underwriting Ratios ------------ Loss Ratio 60.2% 66.3% 59.6% 66.4% Expense Ratio 28.6% 29.4% 29.2% 29.8% ------------------- ------------------- Combined Ratio 88.8% 95.7% 88.8% 96.2% Balance Sheet Data ------------- June 30, Dec. 31, 2004 2003 ------------------- Stockholders' equity $302,356 $290,028 4% Book value per share $24.00 $23.14 4% Certain amounts for the prior period have been reclassified to conform to the presentation in the current period. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($'s in thousands) June 30, Dec. 31, 2004 2003 ----------- ----------- ASSETS Investments and cash: Fixed maturities, available-for-sale, at fair value (amortized cost: 2004, $647,648; 2003, $577,904) $646,979 $588,545 Equity securities, available-for-sale, at fair value (cost: 2004, $18,271; 2003, $11,977) 19,626 13,446 Short-term investments, at cost which approximates fair value 91,223 83,202 Cash 13,526 8,399 ----------- ----------- Total investments and cash 771,354 693,592 ----------- ----------- Premiums in course of collection 156,463 128,676 Commissions receivable 2,396 3,970 Prepaid reinsurance premiums 138,727 102,141 Reinsurance receivable on paid losses 23,215 26,270 Reinsurance receivable on unpaid losses and loss adjustment expense 424,787 350,441 Federal income tax recoverable 373 8,747 Net deferred income tax benefit 20,020 15,195 Deferred policy acquisition costs 32,253 24,720 Accrued investment income 6,590 5,546 Goodwill 5,133 5,093 Other assets 11,809 15,067 ----------- ----------- Total assets $1,593,120 $1,379,458 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses $844,443 $724,612 Unearned premium 296,403 238,803 Reinsurance balances payable 130,655 97,583 Payable for securities purchased 3,108 12,857 Accounts payable and other liabilities 16,155 15,575 ----------- ----------- Total liabilities 1,290,764 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: 12,595,624 for 2004 and 12,535,360 for 2003 1,260 1,254 Additional paid-in capital 153,320 151,765 Accumulated other comprehensive income 1,354 8,537 Retained earnings 146,422 128,472 ----------- ----------- Total stockholders' equity 302,356 290,028 ----------- ----------- Total liabilities and stockholders' equity $1,593,120 $1,379,458 =========== =========== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Comparative Premium Data ($'s in thousands) Gross Written Premium: Second Quarter Six Months ------------------- ------------------- Insurance Companies: 2004 2003 Change 2004 2003 Change ------------------------- -------------------------- Marine $51,573 $49,644 4% $110,999 $103,364 7% Specialty 37,484 31,721 18% 71,714 63,614 13% Professional Liability 18,227 12,994 40% 33,260 25,559 30% Assumed from Lloyd's 288 6,820 -96% 3,342 18,418 -82% Other (includes run-off) 36 166 NM 122 272 NM ------------------- ------------------- 107,608 101,345 6% 219,437 211,227 4% Lloyd's Operations: Marine 47,793 39,897 20% 128,757 106,465 21% Other 6,515 6,494 0% 12,709 16,010 -21% ------------------- ------------------- 54,308 46,391 17% 141,466 122,475 16% Intercompany elimination (290) (6,544) NM (3,326) (17,808) NM ------------------- ------------------- Total $161,626 $141,192 14% $357,577 $315,894 13% =================== =================== Net Written Premium: Second Quarter Six Months ------------------- ------------------- Insurance Companies: 2004 2003 Change 2004 2003 Change ------------------------- -------------------------- Marine $20,384 $21,475 -5% $45,642 $44,536 2% Specialty 19,041 12,726 50% 39,552 36,625 8% Professional Liability 6,903 3,323 108% 12,376 6,272 97% Assumed from Lloyd's 229 6,820 -97% 3,135 18,418 -83% Other (includes run-off) 8 (540) NM 5 (393) NM ------------------- ------------------- 46,565 43,804 6% 100,710 105,458 -5% Lloyd's Operations: Marine 23,978 15,438 55% 63,038 41,315 53% Other 3,146 2,389 32% 5,876 5,891 0% ------------------- ------------------- 27,124 17,827 52% 68,914 47,206 46% ------------------- ------------------- Total $73,689 $61,631 20% $169,624 $152,664 11% =================== =================== Net Earned Premium: Second Quarter Six Months ------------------- ------------------- Insurance Companies: 2004 2003 Change 2004 2003 Change -------------------------- ------------------------- Marine $20,834 $20,974 -1% $41,262 $43,250 -5% Specialty 21,365 19,461 10% 42,904 42,411 1% Professional Liability 4,697 2,079 126% 8,507 3,505 143% Assumed from Lloyd's Operations 4,878 4,606 6% 12,283 8,180 50% Other (includes run-off business) 8 (512) NM 8 (338) NM ------------------- ------------------- 51,782 46,608 11% 104,964 97,008 8% Lloyd's Operations: Marine 22,325 17,791 25% 42,843 33,106 29% Other 1,207 865 40% 1,682 1,464 15% ------------------- ------------------- 23,532 18,656 26% 44,525 34,570 29% ------------------- ------------------- Total $75,314 $65,264 15% $149,489 $131,578 14% =================== =================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Quarter Ended June 30, 2004 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total ------------------------------------------------- Gross written premium $107,608 $54,308 $- $(290) $161,626 Net written premium 46,565 27,124 73,689 Revenues: Net earned premium 51,782 23,532 75,314 Commission income 501 8,155 (7,295) 1,361 Net investment income 5,829 791 5 6,625 Net realized capital gains (losses) 176 (281) (105) Other income 74 5 187 266 ------------------------------------------------- Total revenues 57,861 24,548 8,342 (7,290) 83,461 ------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 32,558 12,834 45,392 Commission expense 13,242 4,093 (7,295) 10,040 Other operating expenses 989 3,193 9,093 1,345 14,620 Interest expense ------------------------------------------------- Total operating expenses 46,789 20,120 9,093 (5,950) 70,052 ------------------------------------------------- Income (loss) before income tax expense (benefit) 11,072 4,428 (751) (1,340) 13,409 Income tax expense (benefit) 3,543 1,550 (252) (469) 4,372 ------------------------------------------------- Net income (loss) $7,529 $2,878 $(499) $(871) $9,037 ================================================= Loss and loss expense ratio 62.9% 54.5% 60.2% Commission expense ratio 25.6% 17.4% 23.0% Other operating expense ratio 1.9% 13.6% 5.6% -------------------- --------- Combined ratio 90.4% 85.5% 88.8% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Quarter Ended June 30, 2003 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total -------------------------------------------------- Gross written premium $101,345 $46,391 $- $(6,544) $141,192 Net written premium 43,804 17,827 61,631 Revenues: Net earned premium 46,608 18,656 65,264 Commission income 216 8,287 (7,017) 1,486 Net investment income 4,094 444 14 4,552 Net realized capital gains 307 362 669 Other income (expense) 65 199 276 (125) 415 -------------------------------------------------- Total revenues 51,074 19,877 8,577 (7,142) 72,386 -------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 30,870 12,421 43,291 Commission expense 12,592 3,301 (7,017) 8,876 Other operating expenses 1,357 1,892 7,562 1,606 12,417 Interest expense 87 87 -------------------------------------------------- Total operating expenses 44,819 17,614 7,562 (5,324) 64,671 -------------------------------------------------- Income (loss) before income tax expense (benefit) 6,255 2,263 1,015 (1,818) 7,715 Income tax expense (benefit) 1,969 226 (637) 1,558 -------------------------------------------------- Net income (loss) $4,286 $2,263 $789 $(1,181) $6,157 ================================================== Loss and loss expense ratio 66.2% 66.6% 66.3% Commission expense ratio 27.1% 17.7% 24.4% Other operating expense ratio 2.9% 10.1% 5.0% -------------------- --------- Combined ratio 96.2% 94.4% 95.7% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Six Months Ended June 30, 2004 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total -------------------------------------------------- Gross written premium $219,437 $141,466 $- $(3,326) $357,577 Net written premium 100,710 68,914 169,624 Revenues: Net earned premium 104,964 44,525 149,489 Commission income 563 16,087 (14,162) 2,488 Net investment income 11,313 1,195 3 16 12,527 Net realized capital gains (losses) 381 (64) 317 Other income 13 9 372 394 -------------------------------------------------- Total revenues 116,671 46,228 16,462 (14,146) 165,215 -------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 65,268 23,876 89,144 Commission expense 27,387 7,843 (14,162) 21,068 Other operating expenses 2,187 6,229 17,698 1,938 28,052 Interest expense - -------------------------------------------------- Total operating expenses 94,842 37,948 17,698 (12,224) 138,264 -------------------------------------------------- Income (loss) before income tax expense (benefit) 21,829 8,280 (1,236) (1,922) 26,951 Income tax expense (benefit) 7,021 2,898 (392) (526) 9,001 -------------------------------------------------- Net income (loss) $14,808 $5,382 $(844) $(1,396) $17,950 ================================================== Loss and loss expense ratio 62.2% 53.6% 59.6% Commission expense ratio 26.1% 17.6% 23.6% Other operating expense ratio 2.1% 14.0% 5.6% -------------------- --------- Combined ratio 90.4% 85.2% 88.8% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Six Months Ended June 30, 2003 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total --------------------------------------------------- Gross written premium $211,227 $122,475 $- $(17,808) $315,894 Net written premium 105,458 47,206 152,664 Revenues: Net earned premium 97,008 34,570 131,578 Commission income 344 15,723 (13,342) 2,725 Net investment income 8,199 991 22 1 9,213 Net realized capital gains 426 461 887 Other income (expense) 86 214 538 (250) 588 --------------------------------------------------- Total revenues 105,719 36,580 16,283 (13,591) 144,991 --------------------------------------------------- Operating expenses: Net losses and loss adjustment expenses 64,870 22,461 87,331 Commission expense 26,741 6,104 (13,342) 19,503 Other operating expenses 2,503 3,846 15,203 2,643 24,195 Interest expense 184 184 --------------------------------------------------- Total operating expenses 94,114 32,411 15,203 (10,515) 131,213 --------------------------------------------------- Income (loss) before income tax expense (benefit) 11,605 4,169 1,080 (3,076) 13,778 Income tax expense (benefit) 3,635 353 (1,077) 2,911 --------------------------------------------------- Net income (loss) $7,970 $4,169 $727 $(1,999) $10,867 =================================================== Loss and loss expense ratio 66.9% 65.0% 66.4% Commission expense ratio 27.6% 17.7% 25.0% Other operating expense ratio 2.5% 11.1% 4.8% -------------------- --------- Combined ratio 97.0% 93.8% 96.2% ==================== ========= Notes: (1) Includes inter-segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Underwriting Results ($'s in thousands) Three Months Ended June 30, 2004 ----------------------------------------------------- Net Losses Insurance Earned and LAE Underwriting Loss Expense Combined Companies: Premium Incurred Expenses Ratio Ratio Ratio ----------------------------------------------------- Marine $20,834 $12,423 $5,660 59.6% 27.2% 86.8% Specialty 21,365 14,485 5,877 67.8% 27.5% 95.3% Professional Liability 4,697 2,832 969 60.3% 20.6% 80.9% Assumed from Lloyd's 4,878 2,728 1,723 55.9% 35.3% 91.2% Other (includes run-off) 8 90 2 NM NM NM ----------------------------------------------------- 51,782 32,558 14,231 62.9% 27.5% 90.4% Lloyd's Operations 23,532 12,834 7,286 54.5% 31.0% 85.5% ----------------------------------------------------- Total $75,314 $45,392 $21,517 60.2% 28.6% 88.8% ===================================================== Three Months Ended June 30, 2003 ----------------------------------------------------- Net Losses Insurance Earned and LAE Underwriting Loss Expense Combined Companies: Premium Incurred Expenses Ratio Ratio Ratio ----------------------------------------------------- Marine $20,974 $11,115 $6,973 53.0% 33.2% 86.2% Specialty 19,461 14,246 5,174 73.2% 26.6% 99.8% Professional Liability 2,079 1,352 393 65.0% 18.9% 83.9% Assumed from Lloyd's 4,606 2,757 1,391 59.9% 30.2% 90.1% Other (includes run-off) (512) 1,400 18 NM NM NM ----------------------------------------------------- 46,608 30,870 13,949 66.2% 30.0% 96.2% Lloyd's Operations 18,656 12,421 5,193 66.6% 27.8% 94.4% ----------------------------------------------------- Total $65,264 $43,291 $19,142 66.3% 29.4% 95.7% ===================================================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Underwriting Results ($'s in thousands) Six Months Ended June 30, 2004 ------------------------------------------------------ Net Losses Insurance Earned and LAE Underwriting Loss Expense Combined Companies: Premium Incurred Expenses Ratio Ratio Ratio ------------------------------------------------------ Marine $41,262 $24,469 $11,258 59.3% 27.3% 86.6% Specialty 42,904 28,802 12,845 67.1% 30.0% 97.1% Professional Liability 8,507 5,131 1,744 60.3% 20.5% 80.8% Assumed from Lloyd's 12,283 6,945 3,722 56.5% 30.3% 86.8% Other (includes run-off) 8 (79) 5 NM NM NM ------------------------------------------------------ 104,964 65,268 29,574 62.2% 28.2% 90.4% Lloyd's Operations 44,525 23,876 14,072 53.6% 31.6% 85.2% ------------------------------------------------------ Total $149,489 $89,144 $43,646 59.6% 29.2% 88.8% ====================================================== Six Months Ended June 30, 2003 ------------------------------------------------------ Net Losses Insurance Earned and LAE Underwriting Loss Expense Combined Companies: Premium Incurred Expenses Ratio Ratio Ratio ------------------------------------------------------ Marine $43,250 $25,252 $12,781 58.4% 29.5% 87.9% Specialty 42,411 29,305 12,927 69.1% 30.5% 99.6% Professional Liability 3,505 2,279 1,074 65.1% 30.6% 95.7% Assumed from Lloyd's 8,180 4,860 2,448 59.4% 29.9% 89.3% Other (includes run-off) (338) 3,174 14 NM NM NM ------------------------------------------------------ 97,008 64,870 29,244 66.9% 30.1% 97.0% Lloyd's Operations 34,570 22,461 9,950 65.0% 28.8% 93.8% ------------------------------------------------------ Total $131,578 $87,331 $39,194 66.4% 29.8% 96.2% ====================================================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Net Loss Reserves ($'s in thousands) 6/30/2004 12/31/2003 ---------- ----------- Insurance Companies: Marine $122,816 $110,698 Specialty 133,399 114,167 Professional Liability 12,053 7,059 Assumed from Lloyd's Operations 18,047 14,323 Other (primarily run-off business) 23,223 24,390 ---------- ----------- Total Insurance Companies 309,538 270,637 ---------- ----------- Lloyd's Operations: Marine $104,507 $100,936 Other 5,611 2,598 ---------- ----------- Total Lloyd's Operations 110,118 103,534 ---------- ----------- Total net loss reserves $419,656 $374,171 ========== =========== Total net case loss reserves $170,775 $154,531 Total net IBNR loss reserves 248,881 219,640 ---------- ----------- Total net loss reserves $419,656 $374,171 ========== =========== Asbestos & Environmental Claim Data ($'s in thousands) Six Months Ended June 30, 2004 Asbestos Environmental Total -------- ------------- ------- Gross of Reinsurance Beginning reserve $78,472 $6,800 $85,272 Incurred loss & LAE 66 2,244 2,310 Calendar year payments 41 364 405 -------- ------------ -------- Ending reserves $78,497 $8,680 $87,177 ======== ============ ======== Net of Reinsurance Beginning reserve $32,083 $1,153 $33,236 Incurred loss & LAE 25 1,223 1,248 Calendar year payments 16 144 160 -------- ------------ -------- Ending reserves $32,092 $2,232 $34,324 ======== ============ ======== Outstanding Claim Count 111 93 204 ======== ============ ======== CONTACT: The Navigators Group, Inc. Paul J. Malvasio, 914-933-6088 pmalvasio@navg.com www.navg.com