-----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, CwFiLkPi7/wcux2GLvE1FXxbUyvW2W+qG1dwaei0n4+UveRv/Q2v5r24EdqPaER2 2gP7EDj7r8tJUmz+amgCEA== 0001157523-06-007648.txt : 20060801 0001157523-06-007648.hdr.sgml : 20060801 20060731181945 ACCESSION NUMBER: 0001157523-06-007648 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060731 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20060801 DATE AS OF CHANGE: 20060731 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: 06992245 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 a5199478.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): July 31, 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 July 31, 2006, The Navigators Group, Inc. issued a press release announcing its earnings for the second 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, General Counsel and Secretary Date: July 31, 2006 INDEX TO EXHIBITS Number Description - ------ ----------- 99.1 Second Quarter Earnings Release dated July 31, 2006. EX-99.1 2 a5199478ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Navigators Reports Record Earnings NEW YORK--(BUSINESS WIRE)--July 31, 2006--The Navigators Group, Inc. (NASDAQ:NAVG) reported record quarterly net income of $18,098,000 for the 2006 second quarter compared to $11,280,000 for the 2005 second quarter, an increase of 60%. Net income per share was $1.08 for the 2006 second quarter compared to $0.88 for the 2005 second quarter based on diluted average shares outstanding of 16,791,000 and 12,853,000, respectively. The 2006 second quarter net income included a net realized capital loss of $0.01 per share compared to a net realized capital gain of $0.02 per share in the 2005 second quarter. Net income for the six month period ended June 30, 2006 was $33,623,000 or $2.00 per share, compared to $20,979,000 or $1.64 per share for the six month period ended June 30, 2005. The results for the six months ended June 30, 2006 included a net realized capital loss of $0.02 per share and the results for the six months ended June 30, 2005 included a net realized capital gain of $0.03 per share. Gross written premium and net written premium for the 2006 second quarter were $252,365,000 and $129,248,000, respectively, increases of 33% and 39% from the comparable 2005 period. Gross written premium and net written premium for the six month period ended June 30, 2006 were $516,149,000 and $272,674,000, respectively, increases of 27% and 30% from the comparable 2005 period. The combined loss and expense ratios for the 2006 second quarter and six month period were 87.0% and 88.1%, respectively, compared to 91.6% for the comparable 2005 periods. The combined loss and expense ratios for the 2006 second quarter and six month period were favorably impacted by 2.5 and 3.1 loss ratio points, respectively, by redundancies of prior year loss reserves. Net paid loss ratios for the 2006 second quarter and six month period were 30.5% and 33.8%, respectively, compared to 39.4% for the comparable 2005 periods. Stan Galanski, Navigators' Chief Executive Officer, commented, "We are pleased with the solid underwriting results produced by each of our business units and remain optimistic about the competitive climate. Our Marine & Energy business, both in the Insurance Companies and at Lloyd's, had a stellar quarter, achieving meaningful growth and avoiding exposure to several of the large claims recently impacting the marine insurance market. While there has been some softening in the casualty market, we believe that rate levels remain consistent with profitable underwriting results. Our Specialty premium growth reflects the increased contribution of several new products launched over the past 18 months. Navigators Pro continues to profitably expand its portfolio of D&O and professional liability business. Loss emergence across all of our business units continues to be well within our expectations." Net investment income for the 2006 second quarter and six month period was $14,003,000 and $26,553,000, respectively, increases of 56% and 60% from the comparable 2005 periods. The pre-tax investment yields for the 2006 second quarter and six month period were 4.5% and 4.3%, respectively, compared to 3.9% and 3.7% for the comparable 2005 periods. Consolidated cash flow from operations was $16,672,000 and $115,906,000 for the 2006 and 2005 six month periods, respectively. The 2006 cash flow from operations was reduced by gross loss payments of approximately $52,400,000 for 2005 hurricane losses and $14,000,000 for settled asbestos claims of which $46,600,000 and $8,400,000, respectively, are due to be collected from reinsurers in subsequent accounting periods. Stockholders' equity was $490,475,000 or $29.42 per share at June 30, 2006 compared to $470,238,000 or $28.30 per share at December 31, 2005. Statutory surplus of Navigators Insurance Company was $483,994,000 at June 30, 2006. The Company will hold a conference call on Tuesday, August 1, 2006 starting at 8:30 a.m. ET to discuss the second quarter's results. To access the call domestically, please dial 1-800-510-0178 using confirmation code 24117908. Internationally, the call may be accessed by dialing 617-614-3450 using the same confirmation code. To listen via live audio webcast, please visit the Company's website (www.navg.com) at least ten minutes prior to the start of the call and click on the August 1st Live Audio Webcast link. The webcast will also be available as a replay at the same location starting one hour after the call is finished. The Navigators Group, Inc. is an international insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York City, Navigators has offices in major insurance centers in the United States, the United Kingdom and Belgium. This press release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Whenever used in this release, the words "estimate", "expect", "believe" or similar expressions are intended to identify such forward-looking statements. We cannot assure that results which we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties which we face. Please refer to Navigators' most recent Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission for a description of Navigators' business and the important factors which may affect that business. Navigators undertakes no obligation to publicly update or revise any forward-looking statement. THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Financial Highlights ($'s in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, Financial ------------------- ------------------- Highlights 2006 2005 Change 2006 2005 Change - ----------- --------- -------- ------ --------- -------- ------ Gross written premium $252,365 $190,133 33% $516,149 $407,129 27% Net written premium 129,248 93,257 39% 272,674 210,347 30% Revenues: Net earned premium 114,541 85,832 33% 218,263 163,370 34% Commission income 540 1,514 -64% 1,826 2,784 -34% Investment Income 14,003 8,961 56% 26,553 16,583 60% Net realized capital gains (losses) (192) 416 NM (616) 583 NM Other income 44 470 NM 230 1,367 NM -------- -------- -------- -------- Total revenues 128,936 97,193 33% 246,256 184,687 33% -------- -------- -------- -------- Operating expenses: Net losses and loss adjustment expenses incurred 66,627 53,611 24% 128,744 99,832 29% Commission expense 13,624 9,242 47% 27,329 18,846 45% Other operating expenses 19,927 17,628 13% 38,335 35,072 9% Interest expense 1,820 - NM 1,820 - NM -------- -------- -------- -------- Total operating expenses 101,998 80,481 27% 196,228 153,750 28% -------- -------- -------- -------- Income before income taxes 26,938 16,712 61% 50,028 30,937 62% -------- -------- -------- -------- Income tax expense (benefit): Current 10,034 8,069 24% 19,366 13,241 46% Deferred (1,194) (2,637) NM (2,961) (3,283) NM -------- -------- -------- -------- Income tax expense 8,840 5,432 63% 16,405 9,958 65% -------- -------- -------- -------- Net income $ 18,098 $ 11,280 60% $ 33,623 $ 20,979 60% ======== ======== ======== ======== Per Share Data - -------------- Net income per common share: Basic $ 1.09 $ 0.88 23% $ 2.02 $ 1.65 22% Diluted $ 1.08 $ 0.88 23% $ 2.00 $ 1.64 22% Average shares outstanding: Basic 16,668 12,763 16,654 12,720 Diluted 16,791 12,853 16,839 12,815 Underwriting Ratios - ------------ Loss Ratio 58.2% 62.5% 59.0% 61.1% Expense Ratio 28.8% 29.1% 29.1% 30.5% -------- -------- -------- -------- Combined Ratio 87.0% 91.6% 88.1% 91.6% Balance Sheet Data - ------------- June 30, Dec. 31, 2006 2005 ------------------ Stockholders' equity $490,475 $470,238 4% Book value per share $ 29.42 $ 28.30 4% THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($'s in thousands) June 30, December 31, 2006 2005 ------------ ------------ ASSETS Investments and cash: Fixed maturities, available-for-sale, at fair value (amortized cost: 2006, $1,187,261; 2005, $986,726) $1,158,996 $984,113 Equity securities, available-for-sale, at fair value (cost: 2006, $26,212; 2005, $19,667) 27,668 20,911 Short-term investments, at cost which approximates fair value 107,542 164,047 Cash 14,345 13,165 ------------ ------------ Total investments and cash 1,308,551 1,182,236 ------------ ------------ Premiums in course of collection 227,121 155,977 Commissions receivable 2,524 3,467 Prepaid reinsurance premiums 186,854 136,341 Reinsurance receivable on paid losses 86,358 37,055 Reinsurance receivable on unpaid losses and loss adjustment expenses 984,887 979,015 Net deferred income tax benefit 39,523 28,317 Deferred policy acquisition costs 43,358 29,697 Accrued investment income 12,762 10,297 Goodwill and other intangible assets 7,706 7,341 Other assets 16,368 13,506 ------------ ------------ Total assets $2,916,012 $2,583,249 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses $1,618,783 $1,557,991 Unearned premium 423,020 316,516 Reinsurance balances payable 205,184 180,059 Senior notes 123,506 - Federal income tax payable 1,558 1,274 Payable for securities purchased 3,681 823 Accounts payable and other liabilities 49,805 56,348 ------------ ------------ Total liabilities 2,425,537 2,113,011 ------------ ------------ Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued - - Common stock, $.10 par value, 50,000,000 shares authorized for 2006 and 20,000,000 for 2005; issued and outstanding: 16,670,566 for 2006 and 16,616,781 for 2005 1,667 1,662 Additional paid-in capital 284,413 282,463 Retained earnings 220,524 186,901 Accumulated other comprehensive (loss) (16,129) (788) ------------ ------------ Total stockholders' equity 490,475 470,238 ------------ ------------ Total liabilities and stockholders' equity $2,916,012 $2,583,249 ============ ============ THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Comparative Premium Data ($'s in thousands) Gross Written Premium: Second Quarter Six Months Insurance ------------------- ------------------- Companies: 2006 2005 Change 2006 2005 Change --------- --------- ------ --------- --------- ------ Marine $ 74,018 $ 60,132 23% $155,812 $128,416 21% Specialty 72,037 50,198 44% 134,168 93,147 44% Professional Liability 24,182 21,250 14% 42,316 39,180 8% Assumed from Lloyd's 4 (930) NM 220 (805) NM Other (includes run-off) 55 30 NM 27 30 NM -------- -------- -------- -------- 170,296 130,680 30% 332,543 259,968 28% Lloyd's Operations: Marine 66,257 47,189 40% 157,112 121,120 30% Professional Liability 5,069 1,587 219% 7,089 1,587 347% Other 10,746 9,771 10% 19,619 23,670 -17% -------- -------- -------- -------- 82,072 58,547 40% 183,820 146,377 26% Intercompany elimination (3) 906 NM (214) 784 NM -------- -------- -------- -------- Total $252,365 $190,133 33% $516,149 $407,129 27% ======== ======== ======== ======== Net Written Premium: Second Quarter Six Months Insurance ------------------- ------------------- Companies: 2006 2005 Change 2006 2005 Change --------- --------- ------ --------- --------- ------ Marine $ 35,810 $ 26,464 35% $ 77,325 $ 56,811 36% Specialty 42,804 33,280 29% 83,323 69,678 20% Professional Liability 13,818 7,831 76% 21,444 14,510 48% Assumed from Lloyd's 4 (922) NM 17 (796) NM Other (includes run-off) 9 22 NM (20) 53 NM -------- -------- -------- -------- 92,445 66,675 39% 182,089 140,256 30% Lloyd's Operations: Marine 31,880 22,730 40% 83,283 62,790 33% Professional Liability 2,116 624 239% 2,945 624 372% Other 2,807 3,228 -13% 4,357 6,677 -35% -------- -------- -------- -------- 36,803 26,582 38% 90,585 70,091 29% -------- -------- -------- -------- Total $129,248 $ 93,257 39% $272,674 $210,347 30% ======== ======== ======== ======== Net Earned Premium: Second Quarter Six Months Insurance ------------------- ------------------- Companies: 2006 2005 Change 2006 2005 Change --------- --------- ------ --------- --------- ------ Marine $ 28,887 $ 23,330 24% $ 51,388 $ 43,209 19% Specialty 39,765 29,442 35% 75,899 49,464 53% Professional Liability 9,824 6,990 41% 18,556 13,707 35% Assumed from Lloyd's 4 (675) NM 17 36 NM Other (includes run-off) 8 20 NM (20) 54 NM -------- -------- -------- -------- 78,488 59,107 33% 145,840 106,470 37% Lloyd's Operations: Marine 34,187 25,563 34% 69,903 55,190 27% Professional Liability 364 166 119% 605 166 264% Other 1,502 996 51% 1,915 1,544 24% -------- -------- -------- -------- 36,053 26,725 35% 72,423 56,900 27% -------- -------- -------- -------- Total $114,541 $ 85,832 33% $218,263 $163,370 34% ======== ======== ======== ======== THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Segment Information (1) Three Months Ended June 30, 2006 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- --------- Gross premium written $170,296 $ 82,072 $252,365 Net premium written 92,445 36,803 129,248 Net earned premium 78,488 36,053 114,541 Net losses and loss adjustment expenses (47,676) (18,951) (66,627) Commission expense (7,912) (5,712) (13,624) Other operating expenses (13,966) (5,961) (19,927) Commission and other income / (expense) 794 (210) 584 -------- -------- -------- Underwriting profit 9,728 5,219 14,947 Investment income 12,023 1,667 $ 313 14,003 Net realized capital gains / (losses) (225) 33 - (192) Interest expense - - (1,820) (1,820) -------- -------- ------- -------- Income (loss) before income tax expense (benefit) 21,526 6,919 (1,507) 26,938 Income tax expense (benefit) 6,868 2,422 (450) 8,840 -------- -------- ------- -------- Net Income (loss) $ 14,658 $ 4,497 $(1,057) $ 18,098 ======== ======== ======= ======== Loss and loss expenses ratio 60.7% 52.6% 58.2% Commission expense ratio 10.1% 15.8% 11.9% Other operating expense ratio (3) 16.8% 17.1% 16.9% -------- -------- -------- Combined ratio 87.6% 85.5% 87.0% ======== ======== ======== (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 Holding 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 June 30, 2005 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- --------- Gross premium written $130,680 $ 58,547 $190,133 Net premium written 66,675 26,582 93,257 Net earned premium 59,107 26,725 85,832 Net losses and loss adjustment expenses (38,682) (14,929) (53,611) Commission expense (4,409) (4,833) (9,242) Other operating expenses (12,316) (5,312) (17,628) Commission and other income 1,624 360 1,984 -------- --------- -------- Underwriting profit 5,324 2,011 7,335 Investment income 7,486 1,454 $ 21 8,961 Net realized capital gains / (losses) 681 (265) - 416 -------- --------- -------- -------- Income (loss) before income tax expense (benefit) 13,491 3,200 21 16,712 Income tax expense 4,304 1,120 8 5,432 -------- --------- -------- -------- Net Income $ 9,187 $ 2,080 $ 13 $ 11,280 ======== ========= ======== ======== Loss and loss expenses ratio 65.4% 55.9% 62.5% Commission expense ratio 7.5% 18.1% 10.9% Other operating expense ratio (3) 18.1% 18.5% 18.2% -------- --------- -------- Combined ratio 91.0% 92.5% 91.6% ======== ========= ======== (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 Holding 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) Six Months Ended June 30, 2006 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- ---------- Gross premium written $332,543 $ 183,820 $ 516,149 Net premium written 182,089 90,585 272,674 Net earned premium 145,840 72,423 218,263 Net losses and loss adjustment expenses (87,630) (41,114) (128,744) Commission expense (15,036) (12,293) (27,329) Other operating expenses (27,399) (10,936) (38,335) Commission and other income 2,000 56 2,056 -------- --------- --------- Underwriting profit 17,775 8,136 25,911 Investment income 22,433 3,674 $ 446 26,553 Net realized capital (losses) (300) (316) - (616) Interest expense - - (1,820) (1,820) -------- --------- -------- --------- Income (loss) before income tax expense (benefit) 39,908 11,494 (1,374) 50,028 Income tax expense (benefit) 12,784 4,023 (402) 16,405 -------- --------- -------- --------- Net Income (loss) $ 27,124 $ 7,471 $ (972) $ 33,623 ======== ========= ======== ========= Loss and loss expenses ratio 60.1% 56.8% 59.0% Commission expense ratio 10.3% 17.0% 12.5% Other operating expense ratio (3) 17.4% 15.0% 16.6% -------- --------- --------- Combined ratio 87.8% 88.8% 88.1% ======== ========= ========= (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 Holding 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) Six Months Ended June 30, 2005 ($'s in thousands) Insurance Lloyd's Companies Operations Corporate Total (2) --------- ---------- --------- --------- Gross premium written $259,968 $ 146,377 $407,129 Net premium written 140,256 70,091 210,347 Net earned premium 106,470 56,900 163,370 Net losses and loss adjustment expenses (67,524) (32,308) (99,832) Commission expense (9,132) (9,714) (18,846) Other operating expenses (24,255) (10,817) (35,072) Commission and other income 2,895 1,256 4,151 -------- --------- -------- Underwriting profit 8,454 5,317 13,771 Investment income 14,343 2,203 $ 37 16,583 Net realized capital gains / (losses) 947 (364) - 583 -------- --------- -------- -------- Income (loss) before income tax expense (benefit) 23,744 7,156 37 30,937 Income tax expense 7,440 2,505 13 9,958 -------- --------- -------- -------- Net Income $ 16,304 $ 4,651 $ 24 $ 20,979 ======== ========= ======== ======== Loss and loss expenses ratio 63.4% 56.8% 61.1% Commission expense ratio 8.6% 17.1% 11.5% Other operating expense ratio (3) 20.1% 16.8% 19.0% -------- --------- -------- Combined ratio 92.1% 90.7% 91.6% ======== ========= ======== (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 Holding 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 June 30, 2006 ---------------------------------------------------- Net Losses Combined Ratio Insurance Earned and LAE Underwriting --------------------- Companies: Premium Incurred Expenses Loss Expense Total ---------------------------------------------------- Marine $ 28,887 $17,045 $ 7,296 59.0% 25.3% 84.3% Specialty 39,765 23,804 11,075 59.9% 27.9% 87.8% Professional Liability 9,824 6,989 2,750 71.1% 28.0% 99.1% Assumed from Lloyd's 4 (221) (2) NM NM NM Other (includes run-off) 8 59 (35) NM NM NM ---------------------------------------------------- 78,488 47,676 21,084 60.7% 26.9% 87.6% Lloyd's Operations 36,053 18,951 11,883 52.6% 32.9% 85.5% ---------------------------------------------------- Total $114,541 $66,627 $ 32,967 58.2% 28.8% 87.0% ==================================================== Three Months Ended June 30, 2005 ---------------------------------------------------- Net Losses Combined Ratio Insurance Earned and LAE Underwriting -------------------- Companies: Premium Incurred Expenses Loss Expense Total ----------------------------------------------------- Marine $ 23,330 $15,868 $ 4,462 68.0% 19.1% 87.1% Specialty 29,442 18,922 9,172 64.3% 31.2% 95.5% Professional Liability 6,990 5,031 2,180 72.0% 31.2% 103.2% Assumed from Lloyd's (675) (888) (18) NM NM NM Other (includes run-off) 20 (251) (695) NM NM NM ---------------------------------------------------- 59,107 38,682 15,101 65.4% 25.6% 91.0% Lloyd's Operations 26,725 14,929 9,785 55.9% 36.6% 92.5% ---------------------------------------------------- Total $ 85,832 $53,611 $ 24,886 62.5% 29.1% 91.6% ==================================================== Amounts Loss Ratio --------------------------------------- Net Incurred Loss Activity June 30, June 30, June 30, June 30, For the Three Months Ended: 2006 2005 2006 2005 --------------------------------------- Insurance Companies: Loss and LAE payments $ 23,984 $ 23,321 30.6% 39.4% Change in reserves 23,692 15,361 30.1% 26.0% --------------------------------------- Net incurred loss and LAE 47,676 38,682 60.7% 65.4% --------------------------------------- Lloyd's Operations: Loss and LAE payments 10,978 10,499 30.5% 39.3% Change in reserves 7,973 4,430 22.1% 16.6% --------------------------------------- Net incurred loss and LAE 18,951 14,929 52.6% 55.9% --------------------------------------- Total Loss and LAE payments 34,962 33,820 30.5% 39.4% Change in reserves 31,665 19,791 27.7% 23.1% --------------------------------------- Net incurred loss and LAE $ 66,627 $ 53,611 58.2% 62.5% ======================================= THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Underwriting Results ($'s in thousands) Six Months Ended June 30, 2006 ---------------------------------------------------- Net Losses Combined Ratio Insurance Earned and LAE Underwriting -------------------- Companies: Premium Incurred Expenses Loss Expense Total ----------------------------------------------------- Marine $ 51,388 $ 30,545 $ 13,342 59.4% 26.0% 85.4% Specialty 75,899 44,961 21,599 59.2% 28.5% 87.7% Professional Liability 18,556 12,298 5,461 66.3% 29.4% 95.7% Assumed from Lloyd's 17 (206) (9) NM NM NM Other (includes run-off) (20) 32 42 NM NM NM ---------------------------------------------------- 145,840 87,630 40,435 60.1% 27.7% 87.8% Lloyd's Operations 72,423 41,114 23,173 56.8% 32.0% 88.8% ---------------------------------------------------- Total $218,263 $128,744 $ 63,608 59.0% 29.1% 88.1% ==================================================== Six Months Ended June 30, 2005 ---------------------------------------------------- Net Losses Combined Ratio Insurance Earned and LAE Underwriting -------------------- Companies: Premium Incurred Expenses Loss Expense Total ----------------------------------------------------- Marine $ 43,209 $ 28,611 $ 10,591 66.2% 24.5% 90.7% Specialty 49,464 30,455 16,144 61.6% 32.6% 94.2% Professional Liability 13,707 9,471 4,093 69.1% 29.9% 99.0% Assumed from Lloyd's 36 (315) 303 NM NM NM Other (includes run-off) 54 (698) (639) NM NM NM ---------------------------------------------------- 106,470 67,524 30,492 63.4% 28.7% 92.1% Lloyd's Operations 56,900 32,308 19,275 56.8% 33.9% 90.7% ---------------------------------------------------- Total $163,370 $ 99,832 $ 49,767 61.1% 30.5% 91.6% ==================================================== Amounts Loss Ratio --------------------------------------- Net Incurred Loss Activity June 30, June 30, June 30, June 30, For the Six Months Ended: 2006 2005 2006 2005 --------------------------------------- Insurance Companies: Loss and LAE payments $ 44,154 $ 41,720 30.3% 39.2% Change in reserves 43,476 25,804 29.8% 24.2% --------------------------------------- Net incurred loss and LAE 87,630 67,524 60.1% 63.4% --------------------------------------- Lloyd's Operations: Loss and LAE payments 29,671 22,604 41.0% 39.7% Change in reserves 11,443 9,704 15.8% 17.1% --------------------------------------- Net incurred loss and LAE 41,114 32,308 56.8% 56.8% --------------------------------------- Total Loss and LAE payments 73,825 64,324 33.8% 39.4% Change in reserves 54,919 35,508 25.2% 21.7% --------------------------------------- Net incurred loss and LAE $128,744 $ 99,832 59.0% 61.1% ======================================= THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES Net Loss Data ($'s in thousands) Net Loss Reserves: 6/30/2006 12/31/2005 ---------- ----------- Insurance Companies: Marine $ 170,476 $ 162,644 Specialty 221,466 193,755 Professional Liability 42,482 33,133 Assumed from Lloyd's Operations 926 1,218 Other (primarily run-off business) 18,490 19,613 ---------- ----------- Total Insurance Companies 453,840 410,363 ---------- ----------- Lloyd's Operations: Marine 164,745 161,262 Other 15,311 7,351 ---------- ----------- Total Lloyd's Operations 180,056 168,613 ---------- ----------- Total net loss reserves $ 633,896 $ 578,976 ========== =========== Total net case loss reserves $ 232,281 $ 228,423 Total net IBNR loss reserves 401,615 350,553 ---------- ----------- Total net loss reserves $ 633,896 $ 578,976 ========== =========== 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-----