-----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, Gj/RqZKw/eBWZavkObYorqH3LcgjXZGwkzLk3q7GRsHSYMnWQ0zawiRSTuN385XH AK3KoYU9dZpEVJ9i9CHGEg== 0001157523-05-004196.txt : 20050503 0001157523-05-004196.hdr.sgml : 20050503 20050503171350 ACCESSION NUMBER: 0001157523-05-004196 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20050503 DATE AS OF CHANGE: 20050503 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: 05796049 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 a4879619.txt THE NAVIGATORS GROUP, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest reported event): May 3, 2005 The Navigators Group, Inc. (Exact name of registrant as specified in its chapter) DELAWARE 0-15886 13-3138397 - -------------------------------------------------------------------------------- (State of (Commission (I.R.S. Employer organization) File Number) Identification No.) One Penn Plaza, New York, NY 10119 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (914) 933-6025 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition Item 7.01 Regulation FD Disclosure The following information is furnished pursuant to Item 2.02 "Results of Operations and Financial Condition" and Item 7.01 "Regulation FD Disclosure". This information, including the Exhibit attached hereto, 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 3, 2005, The Navigators Group, Inc. issued a press release announcing its earnings for the first quarter of 2005. 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 3, 2005 INDEX TO EXHIBITS Number Description - ------ ----------- 99.1 First Quarter Earnings Release dated May 3, 2005. EX-99.1 2 a4879619ex991.txt THE NAVIGATORS GROUP, INC. EXHIBIT 99.1 Exhibit 99.1 Navigators Reports First Quarter 2005 Earnings NEW YORK--(BUSINESS WIRE)--May 3, 2005--The Navigators Group, Inc. (NAVG/NASDAQ) reported net income for the 2005 first quarter of $9,699,000 or $0.76 per share compared to $8,913,000 or $0.70 per share for the 2004 first quarter. The 2005 and 2004 first quarter results include net realized capital gains of $0.01 and $0.02 per share, respectively. Gross written premium and net written premium for the 2005 first quarter were $216,996,000 and $117,090,000 respectively, increases of 11% and 22% from the comparable 2004 period. The 2005 first quarter net written premium reflects a reduction of approximately $14,500,000 in ceded reinsurance premium resulting from the cancellation of a quota share reinsurance agreement for specialty business effective March 31, 2005. Such amount represents the unearned portion of the premium ceded to the reinsurance agreement that has been retained and will be earned over the next twelve months by the Company. The combined loss and expense ratio for the 2005 first quarter was 91.0% compared to 88.8% for the 2004 comparable period. Navigators' Chief Executive Officer, Stan Galanski commented, "We are pleased with the continued profitable underwriting results generated across our business units. Net written premium growth benefited from increased net retentions in select product lines, reflecting our continuing confidence in the risk selection and pricing decisions of our underwriters. Cash flow was strong, contributing to increased investment income. As a niche underwriter, we remain focused on attractive specialty opportunities in markets where rates and terms are consistent with our objective of underwriting profitability." Consolidated cash flow from operations for the 2005 first quarter was $65,190,000, compared to $26,733,000 for the comparable 2004 period. Included in the 2005 first quarter cash flow is approximately $24 million attributable to the settlement of the reinsurance to close ("RITC") premium recorded by Lloyd's Syndicate 1221 in the 2004 fourth quarter representing the transfer of assets and liabilities from the participants of the 2002 underwriting year to the 2003 underwriting year in which Navigators had increased its participation to 97.4% from 68.1%. Approximately 70% of the RITC settlement has been recorded as interest-earning funds withheld for reinsurers of the syndicate or will be distributed to third party participants of the 2002 year of account. Net investment income for the 2005 first quarter was $7,622,000, an increase of 29% compared to $5,902,000 for the comparable 2004 period. The pre-tax investment yield for the 2005 and 2004 first quarters was 3.5% and 3.4%, respectively. Stockholders' equity was $333,756,000 or $26.16 per share at March 31, 2005 compared to $328,578,000 or $25.96 per share at December 31, 2004. Statutory surplus of Navigators Insurance Company was $240,153,000 at March 31, 2005. The Company will hold a conference call on Wednesday, May 4, 2005 starting at 8:30 a.m. EST to discuss the first quarter's results. To access the call domestically, please dial 1-800-510-0146 using confirmation code 38627959. Internationally, the call may be accessed by dialing 617-614-3449 using the same confirmation code. To listen via live audio webcast, please visit the Company's website (www.navg.com) at least ten minutes prior to the start of the call and click on the May 4th Live Audio Webcast link. The webcast will also be available as a replay at the same location starting one hour after the call is finished. The Navigators Group, Inc. is an international insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York City, Navigators has offices in major insurance centers in the United States, the United Kingdom and Belgium. This press release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words "estimate", "expect", "believe" or similar expressions are intended to identify such forward-looking statements. We cannot assure that results which we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties which we face. Please refer to Navigators' most recent Form 10-K and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors which may affect that business. Navigators undertakes no obligation to publicly update or revise any forward-looking statement. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Financial Highlights ($'s in thousands, except per share data) Three Months Ended March 31, ------------------ Financial Highlights 2005 2004 Change - -------------------- ---- ---- ------ Gross written premium $216,996 $195,951 11% Net written premium 117,090 95,935 22% Revenues: Net earned premium 77,538 74,175 5% Commission income 1,270 1,127 13% Investment Income 7,622 5,902 29% Net realized capital gains 167 422 -60% Other income 897 128 NM ----------------- Total revenues 87,494 81,754 7% ----------------- Operating expenses: Net losses and loss adjustment expenses incurred 46,221 43,752 6% Commission expense 9,604 11,028 -13% Other operating expenses 17,444 13,432 30% ----------------- Total operating expenses 73,269 68,212 7% ----------------- Income before income taxes 14,225 13,542 5% ----------------- Income Tax Expense / (Benefit): Current 5,172 5,007 3% Deferred (646) (378) NM ----------------- Income tax expense 4,526 4,629 -2% ----------------- Net income $ 9,699 $ 8,913 9% ================= Per Share Data - -------------- Net income per common share: Basic $ 0.77 $ 0.71 8% Diluted $ 0.76 $ 0.70 8% Average shares outstanding: Basic 12,677 12,554 Diluted 12,760 12,654 Underwriting Ratios - ------------------- Loss Ratio 59.6% 59.0% Expense Ratio 31.4% 29.8% ----------------- Combined Ratio 91.0% 88.8% Balance Sheet Data March 31, Dec. 31, - ------------------ 2005 2004 ------------------ Stockholders' equity $333,756 $328,578 2% Book value per share $ 26.16 $ 25.96 1% THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($'s in thousands) March 31, December 31, 2005 2004 -------- ----------- ASSETS Investments and cash: Fixed maturities, available-for-sale, at fair value (amortized cost: 2005, $771,506: 2004, $713,049) $ 771,307 $ 722,434 Equity securities, available-for-sale, at fair value (cost: 2005, $19,254: 2004, $19,101) 20,884 21,170 Short-term investments, at cost which approximates fair value 107,574 96,653 Cash 7,652 14,676 ---------- ---------- Total investments and cash 907,417 854,933 ---------- ---------- Premiums in course of collection 179,181 176,720 Commissions receivable 3,138 3,062 Prepaid reinsurance premiums 147,012 130,761 Reinsurance receivable on paid losses 18,861 20,955 Reinsurance receivable on unpaid losses and loss adjustment expenses 520,262 502,329 Net deferred income tax benefit 21,427 17,348 Deferred policy acquisition costs 35,935 23,882 Accrued investment income 7,341 7,303 Goodwill 5,241 5,282 Other assets 19,218 14,103 ---------- ---------- Total assets $1,865,033 $1,756,678 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses $ 999,766 $ 966,117 Unearned premium 326,571 270,970 Reinsurance balances payable 140,451 143,427 Federal income tax payable 9,270 5,614 Payable for securities purchased 2,695 3,027 Accounts payable and other liabilities 52,524 38,945 ---------- ---------- Total liabilities 1,531,277 1,428,100 ---------- ---------- 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 2005 and 2004; issued and outstanding: 12,759,958 for 2005 and 12,657,160 for 2004 1,276 1,266 Additional paid-in capital 156,514 154,670 Retained earnings 173,036 163,337 Accumulated other comprehensive income 2,930 9,305 ---------- ---------- Total stockholders' equity 333,756 328,578 ---------- ---------- Total liabilities and stockholders' equity $1,865,033 $1,756,678 ========== ========== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Comparative Premium Data ($'s in thousands) Gross Written Premium: First Quarter ----------------- Insurance Companies: 2005 2004 Change ------------------------- Marine $ 68,284 $ 59,426 15% Specialty 42,949 34,230 25% Professional Liability 17,930 15,033 19% Assumed from Lloyd's 125 3,054 -96% Other (includes run-off) - 86 NM ----------------- 129,288 111,829 16% Lloyd's Operations: Marine 73,931 79,316 -7% Other 13,899 7,842 77% ----------------- 87,830 87,158 1% Intercompany elimination (122) (3,036) NM ----------------- Total $216,996 $195,951 11% ================= Net Written Premium: First Quarter ----------------- Insurance Companies: 2005 2004 Change ------------------------- Marine $ 30,347 $ 25,258 20% Specialty 36,398 20,511 77% Professional Liability 6,679 5,473 22% Assumed from Lloyd's 126 2,906 -96% Other (includes run-off) 31 (3) NM ----------------- 73,581 54,145 36% Lloyd's Operations: Marine 40,060 39,059 3% Other 3,449 2,731 26% ----------------- 43,509 41,790 4% ----------------- Total $117,090 $ 95,935 22% ================= Net Earned Premium: First Quarter ----------------- Insurance Companies: 2005 2004 Change ------------------------- Marine $ 19,879 $ 20,428 -3% Specialty 20,022 21,539 -7% Professional Liability 6,717 3,811 76% Assumed from Lloyd's 711 7,405 -90% Other (includes run-off) 34 (1) NM ----------------- 47,363 53,182 -11% Lloyd's Operations: Marine 29,627 20,518 44% Other 548 475 15% ----------------- 30,175 20,993 44% ----------------- Total $ 77,538 $ 74,175 5% ================= THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Three Months Ended March 31, 2005 ($'s in thousands) Insurance Lloyd's Navigators Parent & Companies Operations Agencies Other (1) Total ------------------------------------------------- Gross premium written $129,288 $87,830 $ (122)$216,996 Net premium written 73,581 43,509 - 117,090 Revenues: Net earned premium 47,363 30,175 - 77,538 Commission income - 268 $ 9,750 (8,748) 1,270 Investment Income 6,855 749 2 16 7,622 Net realized capital gains / (losses) 266 (99) - - 167 Other income (expense) (2) 628 271 - 897 -------- ------- ------- ------- -------- Total revenues 54,482 31,721 10,023 (8,732) 87,494 -------- ------- ------- ------- -------- Operating expenses: Net losses and loss adjustment expenses 28,842 17,379 - - 46,221 Commission expense 12,586 4,881 - (7,863) 9,604 Other operating expenses 2,112 4,761 10,996 (425) 17,444 -------- ------- ------- ------- -------- Total operating expenses 43,540 27,021 10,996 (8,288) 73,269 -------- ------- ------- ------- -------- Income before income taxes 10,942 4,700 (973) (444) 14,225 Income tax expense (benefit) 3,399 1,645 (362) (156) 4,526 -------- ------- ------- ------- -------- Net Income (loss) $ 7,543 $ 3,055 $ (611) $ (288)$ 9,699 ======== ======= ======= ======= ======== Loss and loss expenses ratio 60.9% 57.6% 59.6% Commission expense ratio 26.6% 16.2% 22.5% Other operating expense ratio 4.5% 15.8% 8.9% -------- ------- -------- Combined ratio 92.0% 89.6% 91.0% ======== ======= ======== Notes: (1) Includes inter- segment eliminations. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information Three Months 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 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 -------- ------- ------- ------- -------- Total operating expenses 48,053 17,828 8,605 (6,274) 68,212 -------- ------- ------- ------- -------- Income before income taxes 10,757 3,852 (485) (582) 13,542 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 Underwriting Results ($'s in thousands) Three Months Ended March 31, 2005 ---------------------------------------------- Net Losses Combined Ratio Earned and LAE Underwriting -------------- Insurance Companies: Premium Incurred Expenses Loss Expense Total ---------------------------------------------- Marine $19,879 $12,743 $ 5,520 64.1% 27.8% 91.9% Specialty 20,022 11,533 6,850 57.6% 34.2% 91.8% Professional Liability 6,717 4,440 2,001 66.1% 29.8% 95.9% Assumed from Lloyd's 711 573 322 80.6% 45.4% 126.0% Other (includes run-off) 34 (447) 5 NM NM NM ---------------------------------------------- 47,363 28,842 14,698 60.9% 31.1% 92.0% Lloyd's Operations 30,175 17,379 9,642 57.6% 32.0% 89.6% ---------------------------------------------- Total $77,538 $46,221 $24,340 59.6% 31.4% 91.0% ============================================== Three Months Ended March 31, 2004 ---------------------------------------------- Net Losses Combined Ratio Earned and LAE Underwriting -------------- Insurance 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 $22,129 59.0% 29.8% 88.8% ============================================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Net Loss Reserves ($'s in thousands) 3/31/2005 12/31/2004 --------- ---------- Insurance Companies: Marine $ 134,936 $ 130,439 Specialty 155,313 150,347 Professional Liability 22,871 19,001 Assumed from Lloyd's Operations 36,078 37,790 Other (primarily run-off business) 21,334 22,512 ---------- ----------- Total Insurance Companies 370,532 360,089 ---------- ----------- Lloyd's Operations: Marine 104,214 99,565 Other 4,758 4,134 ---------- ----------- Total Lloyd's Operations 108,972 103,699 ---------- ----------- Total net loss reserves $ 479,504 $ 463,788 ========== =========== Total net case loss reserves $ 198,632 $ 189,746 Total net IBNR loss reserves 280,872 274,042 ---------- ----------- Total net loss reserves $ 479,504 $ 463,788 ========== =========== Asbestos & Environmental Claim Data ($'s in thousands) Three Months Ended March 31, 2005 Asbestos Environmental Total ---------- ------------- ------------ Gross of Reinsurance Beginning reserve $ 78,421 $ 7,513 $ 85,934 Incurred loss & LAE 251 1,498 1,749 Calendar year payments 109 662 771 --------- ---------- ----------- Ending reserves $ 78,563 $ 8,349 $ 86,912 ========= ========== =========== Net of Reinsurance Beginning reserve $ 31,394 $ 1,494 $ 32,888 Incurred loss & LAE 199 900 1,099 Calendar year payments 3 569 572 --------- ---------- ----------- Ending reserves $ 31,590 $ 1,825 $ 33,415 ========= ========== =========== Outstanding Claim Count 135 98 233 ========= ========== =========== 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-----