-----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, EoyfmZ6x+vRHGO62jaUHrTnCYw3US1VR3I5JxiAGKknIkvEkjpzj7weHslKGt0lZ nS1flZgUa4X1xfVGY2GmIQ== 0001157523-06-004397.txt : 20060502 0001157523-06-004397.hdr.sgml : 20060502 20060501192653 ACCESSION NUMBER: 0001157523-06-004397 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060501 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20060502 DATE AS OF CHANGE: 20060501 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: 06796833 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 a5137261.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 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest reported event): May 1, 2006 The Navigators Group, Inc. (Exact name of registrant as specified in its charter) 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) 933-6027 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 1, 2006, The Navigators Group, Inc. issued a press release announcing its earnings for the first quarter of 2006. 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/ Elliot S. Orol ----------------------------------- Name: Elliot S. Orol Title: Senior Vice President and General Counsel Date: May 1, 2006 INDEX TO EXHIBITS Number Description - ------ ----------- 99.1 First Quarter Earnings Release dated May 1, 2006. EX-99.1 2 a5137261ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Navigators Reports First Quarter Earnings; Navigators' Earnings Up 22% NEW YORK--(BUSINESS WIRE)--May 1, 2006--The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $15,525,000 or $0.93 per share for the 2006 first quarter based on 16,757,000 diluted shares compared to net income of $9,699,000 or $0.76 per share for the 2005 first quarter based on 12,760,000 diluted shares. The 2006 first quarter results include a net realized capital loss of $0.02 per share and the 2005 first quarter results include a net realized capital gain of $0.01 per share. Gross written premium increased 22% over the 2005 first quarter, up 25% for the Insurance Companies and 16% for the Lloyd's Operations. Net written premium increased 22% compared to the first quarter of 2005. The growth rate would have approximated 30% excluding the net impact on the 2005 first quarter of the cancellation of a specialty quota share reinsurance treaty. The combined loss and expense ratio for the 2006 first quarter was 89.4% compared to 91.7% for the comparable 2005 period. These combined ratios reflect the change in accounting for segment reporting adopted in the 2006 first quarter commencing with the elimination of the marine pool. The 2006 first quarter combined ratio was reduced by 3.7 loss ratio points for a net loss reserve redundancy of $3.8 million relating to prior years. The 2006 first quarter net paid loss ratio was 37.5% compared to 39.3% for the comparable 2005 period. Navigators' Chief Executive Officer Stan Galanski commented, "Our first quarter results were characterized by favorable loss experience and strong premium growth, particularly in Marine & Energy and Specialty. Market conditions continue to support profitable underwriting, with an especially strong pricing environment for offshore energy. We are retaining more of the business that we write, reflecting the increased levels of policyholder surplus resulting from capital raising in 2005 and 2006. We continue to respond to opportunities to expand our intellectual capital base, with targeted hirings domestically and in the United Kingdom to support ongoing geographical and product line expansion." Net investment income for the 2006 first quarter was $12,550,000, an increase of 65% compared to $7,622,000 for the 2005 comparable period. Consolidated cash flow from operations for the 2006 first quarter was $29,478,000 compared to $65,190,000 for the 2005 comparable period. The pre-tax investment yield for the 2006 first quarter was 4.3% compared to 3.5% for the comparable 2005 period. The 2006 cash flow from operations was reduced by gross loss payments of approximately $10,200,000 for 2005 hurricane losses and $1,900,000 for a settled asbestos claim of which $4,000,000 and $1,100,000, respectively, are expected to be collected from reinsurers in subsequent accounting periods. The 2005 cash flow from operations included $24,000,000 attributable to the settlement of the 2002 underwriting year reinsurance to close premium recorded by our Lloyd's Operations in the 2004 fourth quarter. Effective in 2006, the Company classifies its business into two underwriting segments, consisting of the Insurance Companies and Lloyd's Operations, and a Corporate segment. Segment data for each of the two underwriting operations include allocations of revenues and expenses of Navigators Agencies and Parent Company expenses and related income tax amounts previously reported separately. Segment data for 2005 and prior periods reflect this change in segment reporting. Stockholders' equity was $478,316,000 or $28.70 per share at March 31, 2006 compared to $470,238,000 or $28.30 per share at December 31, 2005. Statutory surplus of Navigators Insurance Company was $374,411,000 at March 31, 2006. The Company will hold a conference call on Tuesday, May 2, 2006 starting at 8:30 a.m. ET to discuss the first quarter's results. To access the call, please dial 1-866-800-8652, using confirmation code 17440771. Internationally, the call may be accessed by dialing 617-614-2705 using the same confirmation code. To listen via live audio webcast, please visit the Company's website (www.navg.com) at least ten minutes prior to the start of the call and click on the May 2nd Live Audio Webcast link. The webcast will also be available as a replay at the same location starting one hour after the call is finished. The Navigators Group, Inc. is an international insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York City, Navigators has offices in major insurance centers in the United States, the United Kingdom and Belgium. This press release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words "estimate", "expect", "believe" or similar expressions are intended to identify such forward-looking statements. We cannot assure that results which we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties which we face. Please refer to Navigators' most recent Form 10-K and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors which may affect that business. Navigators undertakes no obligation to publicly update or revise any forward-looking statement. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Financial Highlights ($'s in thousands, except per share data) Three Months Ended March 31, ------------------ Financial Highlights 2006 2005 Change - -------------------- ------- ------ ------ Gross written premium $263,784 $216,996 22% Net written premium 143,426 117,090 22% Revenues: Net earned premium 103,722 77,538 34% Commission income 1,286 1,270 1% Investment Income 12,550 7,622 65% Net realized capital gains (losses) (424) 167 NM Other income 186 897 -79% --------- -------- Total revenues 117,320 87,494 34% --------- -------- Operating expenses: Net losses and loss adjustment expenses incurred 62,117 46,221 34% Commission expense 13,705 9,604 43% Other operating expenses 18,408 17,444 6% --------- -------- Total operating expenses 94,230 73,269 29% --------- -------- Income before income taxes 23,090 14,225 62% --------- -------- Income tax expense (benefit): Current 9,332 5,172 80% Deferred (1,767) (646) NM --------- -------- Income tax expense 7,565 4,526 67% --------- -------- Net income $15,525 $9,699 60% ========= ======== Per Share Data - -------------- Net income per common share: Basic $0.93 $0.77 22% Diluted $0.93 $0.76 22% Average shares outstanding: Basic 16,639 12,677 Diluted 16,757 12,760 Underwriting Ratios - ------------------- Loss Ratio 59.9% 59.6% Expense Ratio 29.5% 32.1% ---------- ------- Combined Ratio 89.4% 91.7% Balance Sheet Data - ------------------ Mar. 31, 2006 Dec. 31, 2005 -------- --------- Stockholders' equity $478,316 $470,238 2% Book value per share $28.70 $28.30 1% THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($'s in thousands) March 31, December 31, 2006 2005 ----------- ----------- ASSETS Investments and cash: Fixed maturities, available-for-sale, at fair value (amortized cost: 2006, $1,039,859; 2005, $986,726) $1,022,603 $984,113 Equity securities, available-for-sale, at fair value (cost: 2006, $23,637; 2005, $19,667) 25,181 20,911 Short-term investments, at cost which approximates fair value 132,817 164,047 Cash 14,069 13,165 ----------- ----------- Total investments and cash 1,194,670 1,182,236 ----------- ----------- Premiums in course of collection 210,039 155,977 Commissions receivable 3,489 3,467 Prepaid reinsurance premiums 168,114 136,341 Reinsurance receivable on paid losses 40,091 37,055 Reinsurance receivable on unpaid losses and loss adjustment expenses 1,006,505 979,015 Net deferred income tax benefit 34,961 28,317 Deferred policy acquisition costs 44,251 29,697 Accrued investment income 10,548 10,297 Goodwill and other intangible assets 7,399 7,341 Other assets 20,246 13,506 ----------- ----------- Total assets $2,740,313 $2,583,249 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses $1,608,735 $1,557,991 Unearned premium 388,113 316,516 Reinsurance balances payable 193,113 180,059 Federal income tax payable 6,777 1,274 Payable for securities purchased - 823 Accounts payable and other liabilities 65,259 56,348 ----------- ----------- Total liabilities 2,261,997 2,113,011 ----------- ----------- 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 2006 and 2005; issued and outstanding: 16,667,681 for 2006 and 16,616,781 for 2005 1,667 1,662 Additional paid-in capital 284,099 282,463 Retained earnings 202,426 186,901 Accumulated other comprehensive income (loss) (9,876) (788) ----------- ----------- Total stockholders' equity 478,316 470,238 ----------- ----------- Total liabilities and stockholders' equity $2,740,313 $2,583,249 =========== =========== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Comparative Premium Data ($'s in thousands) Gross Written Premium: First Quarter ------------------------ Insurance Companies: 2006 2005 Change --------------------------------- Marine $81,794 $68,284 20% Specialty 62,131 42,949 45% Professional Liability 18,134 17,930 1% Assumed from Lloyd's 216 125 NM Other (includes run-off) (28) - NM ------------------------ 162,247 129,288 25% Lloyd's Operations: Marine 90,855 73,931 23% Professional Liability 2,020 - NM Other 8,873 13,899 -36% ------------------------ 101,748 87,830 16% Intercompany elimination (211) (122) NM ------------------------ Total $263,784 $216,996 22% ======================== Net Written Premium: First Quarter ------------------------ Insurance Companies: 2006 2005 Change --------------------------------- Marine $41,515 $30,347 37% Specialty 40,519 36,398 11% Professional Liability 7,626 6,679 14% Assumed from Lloyd's 13 126 NM Other (includes run-off) (29) 31 NM ------------------------ 89,644 73,581 22% Lloyd's Operations: Marine 51,403 40,060 28% Professional Liability 829 - NM Other 1,550 3,449 -55% ------------------------ 53,782 43,509 24% ------------------------ Total $143,426 $117,090 22% ======================== Net Earned Premium: First Quarter ------------------------ Insurance Companies: 2006 2005 Change --------------------------------- Marine $22,501 $19,879 13% Specialty 36,134 20,022 80% Professional Liability 8,732 6,717 30% Assumed from Lloyd's 13 711 NM Other (includes run-off) (28) 34 NM ------------------------ 67,352 47,363 42% Lloyd's Operations: Marine 35,716 29,627 21% Professional Liability 241 - NM Other 413 548 -25% ------------------------ 36,370 30,175 21% ------------------------ Total $103,722 $77,538 34% ======================== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information (1) Three Months Ended March 31, 2006 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- --------- Gross premium written $162,247 $101,748 $263,784 Net premium written 89,644 53,782 143,426 Net earned premium 67,352 36,370 103,722 Net losses and loss adjustment expenses (39,954) (22,163) (62,117) Commission expense (7,124) (6,581) (13,705) Other operating expenses (13,433) (4,975) (18,408) Commission and other income / (expense) 1,206 266 1,472 --------- ---------- --------- Underwriting profit 8,047 2,917 10,964 Investment income 10,410 2,007 $133 12,550 Net realized capital gains / (losses) (75) (349) - (424) --------- ---------- --------- --------- Income before income tax expense 18,382 4,575 133 23,090 Income tax expense 5,916 1,601 48 7,565 --------- ---------- --------- --------- Net Income $12,466 $2,974 $85 $15,525 ========= ========== ========= ========= Loss and loss expenses ratio 59.3% 60.9% 59.9% Commission expense ratio 10.6% 18.1% 13.2% Other operating expense ratio (3) 18.2% 13.0% 16.3% --------- ---------- --------- Combined ratio 88.1% 92.0% 89.4% ========= ========== ========= (1) Effective in 2006, the Company classifies its business into two underwriting segments, Insurance Companies and Lloyd's Operations, and a Corporate segment. Segment data for each of the two underwriting operations include allocations of revenues and expenses of Navigators Agencies and Parent Company expenses and related income tax amounts previously reported separately. Segment data for 2005 and prior periods have been restated to reflect this change in segment reporting. (2) Certain amounts included in gross written premium, commission expense and other income relate to inter-segment transactions, accordingly the sum for each segment does not agree to the totals shown in the table above. (3) The other operating expense ratio is adjusted to include commission and other income/(expense). THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information (1) Three Months Ended March 31, 2005 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- --------- Gross premium written $129,288 $87,830 $216,996 Net premium written 73,581 43,509 117,090 Net earned premium 47,363 30,175 77,538 Net losses and loss adjustment expenses (28,842) (17,379) (46,221) Commission expense (4,723) (4,881) (9,604) Other operating expenses (11,939) (5,505) (17,444) Commission and other income / (expense) 1,271 896 2,167 --------- ---------- --------- Underwriting profit 3,130 3,306 6,436 Investment income 6,857 749 $16 7,622 Net realized capital gains / (losses) 266 (99) - 167 --------- ---------- --------- --------- Income before income tax expense 10,253 3,956 16 14,225 Income tax expense (benefit) 3,136 1,385 5 4,526 --------- ---------- --------- --------- Net income $7,117 $2,571 $11 $9,699 ========= ========== ========= ========= Loss and loss expenses ratio 60.9% 57.6% 59.6% Commission expense ratio 10.0% 16.2% 12.4% Other operating expense ratio (3) 22.5% 15.2% 19.7% --------- ---------- --------- Combined ratio 93.4% 89.0% 91.7% ========= ========== ========= (1) Effective in 2006, the Company classifies its business into two underwriting segments, Insurance Companies and Lloyd's Operations, and a Corporate segment. Segment data for each of the two underwriting operations include allocations of revenues and expenses of Navigators Agencies and Parent Company expenses and related income tax amounts previously reported separately. Segment data for 2005 and prior periods have been restated to reflect this change in segment reporting. (2) Certain amounts included in gross written premium, commission expense and other income relate to inter-segment transactions, accordingly the sum for each segment does not agree to the totals shown in the table above. (3) The other operating expense ratio is adjusted to include commission and other income/(expense). THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Underwriting Results ($'s in thousands) Three Months Ended March 31, 2006 -------------------------------------------------- Net Losses Combined Ratio Earned and LAE Underwriting -------------- Insurance Companies: Premium Incurred Expenses Loss Expense Total --------- -------------------- ----- ------- ----- Marine $22,501 $13,500 $6,046 60.0% 26.9% 86.9% Specialty 36,134 21,157 10,524 58.6% 29.1% 87.7% Professional Liability 8,732 5,309 2,711 60.8% 31.0% 91.8% Assumed from Lloyd's 13 15 (7) NM NM NM Other (includes run- off) (28) (27) 77 NM NM NM --------- -------------------- ----- ------- ----- 67,352 39,954 19,351 59.3% 28.8% 88.1% Lloyd's Operations 36,370 22,163 11,290 61.0% 31.1% 92.1% --------- -------------------- ----- ------- ----- Total $103,722 $62,117 $30,641 59.9% 29.5% 89.4% ========= ==================== ===== ======= ===== 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 $6,129 64.1% 30.8% 94.9% Specialty 20,022 11,533 6,972 57.6% 34.8% 92.4% Professional Liability 6,717 4,440 1,913 66.1% 28.5% 94.6% Assumed from Lloyd's 711 573 321 NM NM NM Other (includes run- off) 34 (447) 56 NM NM NM --------- -------------------- ----- ------- ----- 47,363 28,842 15,391 60.9% 32.5% 93.4% Lloyd's Operations 30,175 17,379 9,490 57.6% 31.4% 89.0% --------- -------------------- ----- ------- ----- Total $77,538 $46,221 $24,881 59.6% 32.1% 91.7% ========= ==================== ===== ======= ===== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Net Loss Data ($'s in thousands) Net Loss Reserves: 3/31/2006 12/31/2005 ---------------- --------------- Insurance Companies: Marine $166,351 $162,644 Specialty 206,730 193,755 Professional Liability 36,785 33,133 Assumed from Lloyd's Operations 1,206 1,218 Other (primarily run-off business) 19,076 19,613 ---------------- --------------- Total Insurance Companies 430,148 410,363 ---------------- --------------- Lloyd's Operations: Marine 162,817 161,262 Other 9,265 7,351 ---------------- --------------- Total Lloyd's Operations 172,082 168,613 ---------------- --------------- Total net loss reserves $602,230 $578,976 ================ =============== Total net case loss reserves $228,999 $228,423 Total net IBNR loss reserves 373,231 350,553 ---------------- --------------- Total net loss reserves $602,230 $578,976 ================ =============== Quarter ended Net Incurred Loss Activity: 3/31/2006 3/31/2005 ---------------- --------------- Insurance Companies: Loss and LAE payments $20,170 $18,399 Change in reserves 19,784 10,443 ---------------- --------------- Net incurred loss and LAE 39,954 28,842 ---------------- --------------- Lloyd's Operations: Loss and LAE payments 18,693 12,105 Change in reserves 3,470 5,274 ---------------- --------------- Net incurred loss and LAE 22,163 17,379 ---------------- --------------- Total Loss and LAE payments 38,863 30,504 Change in reserves 23,254 15,717 ---------------- --------------- Net incurred loss and LAE $62,117 $46,221 ================ =============== CONTACT: The Navigators Group, Inc. Paul J. Malvasio, 914-933-6088 Executive Vice President and Chief Financial Officer pmalvasio@navg.com www.navg.com -----END PRIVACY-ENHANCED MESSAGE-----