0001193125-13-327230.txt : 20130809 0001193125-13-327230.hdr.sgml : 20130809 20130808173937 ACCESSION NUMBER: 0001193125-13-327230 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20130807 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130809 DATE AS OF CHANGE: 20130808 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: 131023338 BUSINESS ADDRESS: STREET 1: 6 INTERNATIONAL DR STREET 2: SUITE 100 CITY: RYE BROOK STATE: NY ZIP: 10573 BUSINESS PHONE: 9149348999 MAIL ADDRESS: STREET 1: 6 INTERNATIONAL DR STREET 2: SUITE 100 CITY: RYE BROOK STATE: NY ZIP: 10573 8-K 1 d582378d8k.htm FORM 8-K Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported) August 7, 2013

 

 

The Navigators Group, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   0-15886   13-3138397

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

   (IRS Employer
Identification No.)
6 International Drive, Rye Brook, New York   10573
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code (914) 934-8999

 

 

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:

 

  ¨ 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

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 Exhibit 99.1 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 August 7, 2013, The Navigators Group, Inc. issued a press release announcing its earnings for the second quarter of 2013. This press release is attached hereto as Exhibit 99.1.

 

Item 7.01. Regulation FD Disclosure

See Item 2.02, above.

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

99.1    Second Quarter Earnings Press Release dated August 7, 2013.

 

2

SIGNATURES

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.
    By:  

/s/ Emily B. Miner

      Name: Emily B. Miner
      Title:   Senior Vice President and General Counsel

Date: August 7, 2013

EXHIBIT INDEX

 

Exhibit No.

   

Exhibit

99.1    Second Quarter Earnings Press Release dated August 7, 2013.
 EX-99.1 2 d582378dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO   The Navigators Group, Inc.  

CORPORATE NEWS

Navigators Reports Second

Quarter Earnings

New York – August 7, 2013 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $13.9 million, or $0.97 per diluted share, for the three months ended June 30, 2013 compared to $14.9 million, or $1.05 per diluted share, for the comparable period in 2012. Operating earnings were $11.8 million, or $0.82 per diluted share, for the second quarter of 2013 compared to operating earnings of $12.5 million, or $0.88 per diluted share, for the comparable period in 2012.

For the six months ended June 30, 2013, the Company reported net income of $27.8 million, or $1.93 per diluted share, compared to $22.8 million, or $1.60 per diluted share, for the comparable period in 2012. Operating earnings were $22.6 million, or $1.56 per diluted share, for the six months ended June 30, 2013 compared to $19.3 million, or $1.35 per diluted share, for the comparable period in 2012.

Gross written premiums and net written premiums for the three months ended June 30, 2013 were $332.1 million and $198.5 million, respectively, an increase of 2.8% and 4.3% from the comparable period in 2012. Gross written premiums and net written premiums for the six months ended June 30, 2013 were $725.4 million and $467.9 million, respectively, an increase of 8.9% and 8.0% from the comparable period in 2012.

The combined loss and expense ratio for the three and six months ended June 30, 2013 were 97.7% and 97.8%, respectively, compared to 98.1% and 99.0% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased with our second quarter results, reflecting solid underwriting profit in marine, specialty casualty and international D&O. We achieved renewal rate increases in most of our specialty product lines and we experienced particularly strong premium growth in our U.S. Excess and Surplus Lines businesses. Our underwriters continued to avoid business that failed to meet our required terms or price. Cash flow for the quarter was strong. Despite a decline in unrealized gains in our bond portfolio as a result of rising interest rates, our investment portfolio performed reasonably well and we remain confident in the quality of our invested assets.”

Stockholders’ equity was $874.0 million, or $61.83 per share, as of June 30, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

 

 

6 International Drive

  

Rye Brook, NY 10573

  
 

TEL (914) 933-6000

  

FAX (914) 934-2355

  

News Release

August 7, 2013

Page 2

 

Net investment income for the three and six months ended June 30, 2013 was $14.2 million and $27.9 million, respectively, a decrease of 9.7% and an increase of 3.2% from the comparable periods in 2012. Net investment income for the six months ended June 30, 2012 was reduced by $4.5 million as a result of the settlement of our dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses, net other-than-temporary impairment losses recognized in earnings, and for 2012 the $4.5 million in interest expense for the settlement of our dispute with Equitas, was 2.4% for both the three and six months ended June 30, 2013, compared to 2.8% for each of the comparable periods in 2012. The effective tax rate on net investment income was 27.6% and 28.0% for the three and six months ended June 30, 2013, respectively, compared to 28.2% and 26.9% for the comparable periods in 2012.

The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA/Aa” as defined by Standard & Poor’s and Moody’s, respectively, and an average effective duration of 4.0 years as of June 30, 2013. As of June 30, 2013, net unrealized gains within our investment portfolio were $42.6 million, a decrease of $60.7 million compared to December 31, 2012.

There were $3.3 million of net realized gains for the three months ended June 30, 2013 compared to $3.7 million for the same period in 2012. There were no other-than-temporary impairment losses for the three months ended June 30, 2013. For the six months ended June 30, 2013, there were $8.1 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $5.4 million for the same period in 2012.

Consolidated net cash flow from operations for the three and six months ended June 30, 2013 was $44.2 million and $48.5 million, respectively, compared to $(1.3) million and $15.0 million for the comparable periods in 2012.

The Company will hold a conference call on Thursday, August 8, 2013 starting at 8:30 a.m. ET to discuss the 2013 second quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is (800) 850-2903 and the international dial-in is (224) 357-2399. Participants may connect to the webcast at:

http://investor.shareholder.com/navg/eventdetail.cfm?eventid=131762

Operating earnings, or net income excluding after-tax net realized gains (losses) and net other-than-temporary impairment losses recognized in earnings, is a non-GAAP financial measure that is a common performance measurement for insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd’s of London. Headquartered in New York, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe.

News Release

August 7, 2013

Page 3

 

The Navigators Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs /?pkgid=7778

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. Forward-looking statements are derived from information that we currently have and assumptions that we make. We cannot assure that results that we anticipate will be achieved, since results may differ materially because of known and unknown risks and uncertainties that we face. Please refer to Navigators’ most recent reports on 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 that may affect that business. Navigators’ undertakes no obligation to publicly update or revise any forward-looking statement.

 

Contact: Ciro M. DeFalco
   Senior Vice President and Chief Financial Officer
   (914) 933-6043
   cdefalco@navg.com
   www.navg.com

News Release

August 7, 2013

Page 4

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Financial Highlights

($ in thousands, except share and per share data)

(unaudited)

 

     Three Months Ended           Six Months Ended        
     June 30,           June 30,        

Results of Operations

    2013     2012     Change     2013     2012     Change  

Gross written premiums

    $ 332,128      $ 322,987        2.8 %    $ 725,350      $ 666,136        8.9 % 

Net written premiums

      198,469        190,252        4.3 %      467,921        433,297        8.0 % 

Revenues:

             

Net earned premiums

      205,814        196,017        5.0 %      408,142        379,136        7.7 % 

Net investment income

      14,246        15,777        -9.7 %      27,903        27,035        3.2 % 

Total other-than-temporary impairment losses

      —          (496 )      NM        (42 )      (693 )      -93.9 % 

Portion of loss recognized in other comprehensive income (before tax)

      —          —          NM        —          43        NM   
  

 

 

    

 

 

      

 

 

    

 

 

    

Net other-than-temporary impairment losses recognized in earnings

      —          (496 )      NM        (42 )      (650 )      -93.5 % 

Net realized gains (losses)

      3,345        4,217        -20.7 %      8,159        6,059        34.7 % 

Other income

      (915 )      387        NM        (297 )      1,298        NM   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total revenues

      222,490        215,902        3.1 %      443,865        412,878        7.5 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Expenses:

             

Net losses and loss adjustment expenses

      131,148        123,407        6.3 %      262,490        241,392        8.7 % 

Commission expenses

      28,391        29,503        -3.8 %      54,946        58,953        -6.8 % 

Other operating expenses

      40,678        39,819        2.2 %      81,552        76,126        7.1 % 

Interest expense

      2,052        2,049        0.1 %      4,103        4,098        0.1 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total expenses

      202,269        194,778        3.8 %      403,091        380,569        5.9 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Income before income taxes

      20,221        21,124        -4.3 %      40,774        32,309        26.2 % 

Income tax expense (benefit)

     6,284        6,225        0.9 %      12,927        9,506        36.0 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Net income (loss)

    $ 13,937      $ 14,899        -6.5 %    $ 27,847      $ 22,803        22.1 % 
  

 

 

    

 

 

      

 

 

    

 

 

    

Per Share Data

            

Net income per common share:

             

Basic

    $ 0.99      $ 1.06        -7.3 %    $ 1.97      $ 1.63        21.1 % 

Diluted

    $ 0.97      $ 1.05        -7.9 %    $ 1.93      $ 1.60        20.5 % 

Average common shares outstanding:

             

Basic

      14,131,422        14,006,361          14,108,747        13,992,901     

Diluted

      14,428,117        14,208,759          14,434,232        14,245,947     

Underwriting Ratios

            

Loss Ratio

      63.7 %      63.0 %        64.3 %      63.7 %   

Expense Ratio

      34.0 %      35.1 %        33.5 %      35.3 %   
  

 

 

    

 

 

      

 

 

    

 

 

    

Combined Ratio

      97.7 %      98.1 %        97.8 %      99.0 %   
     June 30,
2013		     March 31,
2013		           June 30,
2013		     Dec. 31,
2012		        

Balance Sheet Data

            

Stockholders’ equity

    $ 873,952      $ 896,758        -2.5 %    $ 873,952      $ 879,485        -0.6 % 

Book value per share

    $ 61.83      $ 63.46        -2.6 %    $ 61.83      $ 62.61        -1.2 % 

News Release

August 7, 2013

Page 5

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share data)

 

     June 30,     December 31,  
     2013     2012  
     (unaudited)        
ASSETS   

Investments and cash:

     

Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $1,988,507; 2012, $2,034,765)

    $ 2,007,806      $ 2,121,833   

Equity securities, available-for-sale, at fair value (cost: 2013, $115,221; 2012, $85,004)

      138,549        101,297   

Short-term investments, at cost which approximates fair value

      124,726        153,788   

Cash

      101,960        45,336   
  

 

 

    

 

 

  

Total investments and cash

      2,373,041        2,422,254   
  

 

 

    

 

 

  

Premiums receivable

      394,395        320,182   

Prepaid reinsurance premiums

      251,046        221,015   

Reinsurance recoverable on paid losses

      52,569        49,282   

Reinsurance recoverable on unpaid losses and loss adjustment expenses

      881,962        880,139   

Deferred policy acquisition costs

      65,109        61,005   

Accrued investment income

      13,691        12,587   

Goodwill and other intangible assets

      6,785        7,093   

Deferred income tax, net

      25,882        3,216   

Receivable for investments sold

      25        4,310   

Other assets

      32,005        26,587   
  

 

 

    

 

 

  

Total assets

    $ 4,096,510      $ 4,007,670   
  

 

 

    

 

 

  
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Liabilities:

     

Reserves for losses and loss adjustment expenses

    $ 2,116,384      $ 2,097,048   

Unearned premiums

      729,568        642,407   

Reinsurance balances payable

      183,683        165,813   

Senior notes

      114,502        114,424   

Current income tax payable, net

      6,324        2,133   

Payable for investments purchased

      21,428        58,345   

Accounts payable and other liabilities

      50,669        48,015   
  

 

 

    

 

 

  

Total liabilities

      3,222,558        3,128,185   
  

 

 

    

 

 

  

Stockholders’ equity:

     

Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued

      —          —     

Common stock, $.10 par value, authorized 50,000,000 shares, issued 17,645,043 shares for 2013 and 17,558,046 shares for 2012

      1,764        1,755   

Additional paid-in capital

      333,954        329,452   

Treasury stock, at cost (3,511,380 shares for 2013 and 2012)

      (155,801 )      (155,801 ) 

Retained earnings

      656,718        628,871   

Accumulated other comprehensive income

      37,317        75,208   
  

 

 

    

 

 

  

Total stockholders’ equity

      873,952        879,485   
  

 

 

    

 

 

  

Total liabilities and stockholders’ equity

    $ 4,096,510      $ 4,007,670   
  

 

 

    

 

 

  

News Release

August 7, 2013

Page 6

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Comparative Premium Data

($ in thousands)

 

     Three Months            Six Months         
     2013      2012      Change     2013      2012      Change  

Gross Written Premiums:

                 

Insurance Companies:

                 

Marine

    $ 43,077       $ 49,896         -13.7 %    $ 93,924       $ 111,761         -16.0 % 

Property Casualty

      152,095         130,627         16.4 %      371,059         286,546         29.5 % 

Professional Liability

      33,393         33,541         -0.4 %      65,210         64,095         1.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     228,565         214,064         6.8 %      530,193         462,402         14.7 % 

Lloyd’s Operations:

                 

Marine

      45,893         47,037         -2.4 %      99,537         108,812         -8.5 % 

Property Casualty

      41,217         48,978         -15.8 %      66,275         73,274         -9.6 % 

Professional Liability

      16,453         12,908         27.5 %      29,345         21,648         35.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     103,563         108,923         -4.9 %      195,157         203,734         -4.2 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total

    $ 332,128       $ 322,987         2.8 %    $ 725,350       $ 666,136         8.9 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     Three Months            Six Months         
     2013      2012      Change     2013      2012      Change  

Net Written Premiums:

                 

Insurance Companies:

                 

Marine

    $ 27,366       $ 31,786         -13.9 %    $ 68,507       $ 74,651         -8.2 % 

Property Casualty

      90,711         76,842         18.0 %      240,662         191,374         25.8 % 

Professional Liability

      25,303         25,437         -0.5 %      50,530         49,290         2.5 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     143,380         134,065         6.9 %      359,699         315,315         14.1 % 

Lloyd’s Operations:

                 

Marine

      34,060         33,492         1.7 %      73,618         81,550         -9.7 % 

Property Casualty

      12,181         15,705         -22.4 %      19,493         25,060         -22.2 % 

Professional Liability

      8,848         6,990         26.6 %      15,111         11,372         32.9 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     55,089         56,187         -2.0 %      108,222         117,982         -8.3 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total

    $ 198,469       $ 190,252         4.3 %    $ 467,921       $ 433,297         8.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     Three Months            Six Months         
     2013      2012      Change     2013      2012      Change  

Net Earned Premiums:

                 

Insurance Companies:

                 

Marine

    $ 31,798       $ 35,535         -10.5 %    $ 68,523       $ 70,810         -3.2 % 

Property Casualty

      99,477         82,175         21.1 %      192,195         156,543         22.8 % 

Professional Liability

      25,272         23,867         5.9 %      50,160         45,772         9.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     156,547         141,577         10.6 %      310,878         273,125         13.8 % 

Lloyd’s Operations:

                 

Marine

      34,623         34,272         1.0 %      68,668         67,536         1.7 % 

Property Casualty

      8,562         15,272         -43.9 %      16,441         29,774         -44.8 % 

Professional Liability

      6,082         4,896         24.2 %      12,155         8,701         39.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     
     49,267         54,440         -9.5 %      97,264         106,011         -8.3 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

Total

    $ 205,814       $ 196,017         5.0 %    $ 408,142       $ 379,136         7.7 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

News Release

August 7, 2013

Page 7

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

June 30, 2013

($ in thousands)

 

     Insurance     Lloyd’s              
     Companies     Operations     Corporate  (1)     Total  

Gross written premiums

    $ 228,565      $ 103,563      $ —        $ 332,128   

Net written premiums

      143,380        55,089        —          198,469   

Net earned premiums

      156,547        49,267        —          205,814   

Net losses and loss adjustment expenses

      (106,668 )      (24,480 )      —          (131,148 ) 

Commission expenses

      (20,573 )      (8,335 )      517        (28,391 ) 

Other operating expenses

      (29,829 )      (10,849 )      —          (40,678 ) 

Other income (expense)

      689        (1,087 )      (517 )      (915 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Underwriting profit (loss)

      166        4,516        —          4,682   

Net investment income

      12,515        1,728        3        14,246   

Net realized gains (losses)

      3,099        242        4        3,345   

Interest expense

      —          —          (2,052 )      (2,052 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      15,780        6,486        (2,045 )      20,221   

Income tax expense (benefit)

      4,785        2,206        (707 )      6,284   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 10,995      $ 4,280      $ (1,338 )    $ 13,937   
  

 

 

    

 

 

    

 

 

    

 

 

  

Losses and loss adjustment expenses ratio

      68.1 %      49.7 %        63.7 % 

Commission expense ratio

      13.1 %      16.9 %        13.8 % 

Other operating expense ratio (2)

      18.7 %      24.2 %        20.2 % 
  

 

 

    

 

 

      

 

 

  

Combined ratio

      99.9 %      90.8 %        97.7 % 
  

 

 

    

 

 

      

 

 

  

 

(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).

News Release

August 7, 2013

Page 8

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

June 30, 2012

($ in thousands)

 

     Insurance     Lloyd’s              
     Companies     Operations     Corporate  (1)     Total  

Gross written premiums

    $ 214,064      $ 108,923      $ —        $ 322,987   

Net written premiums

      134,065        56,187        —          190,252   

Net earned premiums

      141,577        54,440        —          196,017   

Net losses and loss adjustment expenses

      (100,003 )      (23,404 )      —          (123,407 ) 

Commission expenses

      (21,117 )      (8,938 )      552        (29,503 ) 

Other operating expenses

      (28,914 )      (10,905 )      —          (39,819 ) 

Other income (expense)

      879        60        (552 )      387   
  

 

 

    

 

 

    

 

 

    

 

 

  

Underwriting profit (loss)

      (7,578 )      11,253        —          3,675   

Net investment income

      13,286        2,454        37        15,777   

Net realized gains (losses)

      2,325        1,396        —          3,721   

Interest expense

      —          —          (2,049 )      (2,049 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      8,033        15,103        (2,012 )      21,124   

Income tax expense (benefit)

      2,101        5,207        (1,083 )      6,225   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 5,932      $ 9,896      $ (929 )    $ 14,899   
  

 

 

    

 

 

    

 

 

    

 

 

  

Losses and loss adjustment expenses ratio

      70.6 %      43.0 %        63.0 % 

Commission expense ratio

      14.9 %      16.4 %        15.1 % 

Other operating expense ratio (2)

      19.9 %      19.9 %        20.0 % 
  

 

 

    

 

 

      

 

 

  

Combined ratio

      105.4 %      79.3 %        98.1 % 
  

 

 

    

 

 

      

 

 

  

 

(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).

News Release

August 7, 2013

Page 9

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Six Months Ended

June 30, 2013

($ in thousands)

 

     Insurance     Lloyd’s              
     Companies     Operations     Corporate  (1)     Total  

Gross written premiums

    $ 530,193      $ 195,157      $ —        $ 725,350   

Net written premiums

      359,699        108,222        —          467,921   

Net earned premiums

      310,878        97,264        —          408,142   

Net losses and loss adjustment expenses

      (213,653 )      (48,837 )      —          (262,490 ) 

Commission expenses

      (39,090 )      (16,956 )      1,100        (54,946 ) 

Other operating expenses

      (59,172 )      (22,380 )      —          (81,552 ) 

Other income (expense)

      1,348        (545 )      (1,100 )      (297 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Underwriting profit (loss)

      311        8,546        —          8,857   

Net investment income

      24,466        3,430        7        27,903   

Net realized gains (losses)

      7,891        222        4        8,117   

Interest expense

      —            (4,103 )      (4,103 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      32,668        12,198        (4,092 )      40,774   

Income tax expense (benefit)

      10,199        4,242        (1,514 )      12,927   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 22,469      $ 7,956      $ (2,578 )    $ 27,847   
  

 

 

    

 

 

    

 

 

    

 

 

  

Losses and loss adjustment expenses ratio

      68.7 %      50.2 %        64.3 % 

Commission expense ratio

      12.6 %      17.4 %        13.5 % 

Other operating expense ratio (2)

      18.6 %      23.6 %        20.0 % 
  

 

 

    

 

 

      

 

 

  

Combined ratio

      99.9 %      91.2 %        97.8 % 
  

 

 

    

 

 

      

 

 

  

 

(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).

News Release

August 7, 2013

Page 10

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Six Months Ended

June 30, 2012

($ in thousands)

 

     Insurance     Lloyd’s              
     Companies     Operations     Corporate  (1)     Total  

Gross written premiums

    $ 462,402      $ 203,734      $ —        $ 666,136   

Net written premiums

      315,315        117,982        —          433,297   

Net earned premiums

      273,125        106,011        —          379,136   

Net losses and loss adjustment expenses

      (191,180 )      (50,212 )      —          (241,392 ) 

Commission expenses

      (40,418 )      (19,824 )      1,289        (58,953 ) 

Other operating expenses

      (54,259 )      (21,867 )      —          (76,126 ) 

Other income (expense)

      2,521        66        (1,289 )      1,298   
  

 

 

    

 

 

    

 

 

    

 

 

  

Underwriting profit (loss)

      (10,211 )      14,174        —          3,963   

Net investment income

      22,221        4,737        77        27,035   

Net realized gains (losses)

      4,200        1,209        —          5,409   

Interest expense

      —          —          (4,098 )      (4,098 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      16,210        20,120        (4,021 )      32,309   

Income tax expense (benefit)

      3,980        6,933        (1,407 )      9,506   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 12,230      $ 13,187      $ (2,614 )    $ 22,803   
  

 

 

    

 

 

    

 

 

    

 

 

  

Losses and loss adjustment expenses ratio

      70.0 %      47.4 %        63.7 % 

Commission expense ratio

      14.8 %      18.7 %        15.5 % 

Other operating expense ratio (2)

      18.9 %      20.5 %        19.8 % 
  

 

 

    

 

 

      

 

 

  

Combined ratio

      103.7 %      86.6 %        99.0 % 
  

 

 

    

 

 

      

 

 

  

 

(1) The Corporate segment includes intercompany eliminations.
(2) The Other operating expense ratio includes Other income (expense).

News Release

August 7, 2013

Page 11

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

     Three Months Ended June 30, 2013  
     Net      Losses                                 
     Earned      and LAE     Underwriting      Underwriting     Loss     Expense     Combined  
     Premiums      Incurred     Expenses      Profit (Loss)     Ratio     Ratio     Ratio  

Insurance Companies:

                 

Marine

    $ 31,798       $ 17,295      $ 13,124       $ 1,379        54.4 %      41.3 %      95.7 % 

Property Casualty

      99,477         70,757        27,999         721        71.1 %      28.2 %      99.3 % 

Professional Liability

      25,272         18,616        8,590         (1,934 )      73.7 %      34.0 %      107.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Insurance Companies

      156,547         106,668        49,713         166        68.1 %      31.8 %      99.9 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

                 

Marine

      34,623         18,218        14,914         1,491        52.6 %      43.1 %      95.7 % 

Property Casualty

      8,562         6,795        3,272         (1,505 )      79.4 %      38.2 %      117.6 % 

Professional Liability

      6,082         (533 )      2,085         4,530        -8.8 %      34.3 %      25.5 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Lloyd’s

      49,267         24,480        20,271         4,516        49.7 %      41.1 %      90.8 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total All

    $ 205,814       $ 131,148      $ 69,984       $ 4,682        63.7 %      34.0 %      97.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
     Three Months Ended June 30, 2012  
     Net      Losses                                 
     Earned      and LAE     Underwriting      Underwriting     Loss     Expense     Combined  
     Premiums      Incurred     Expenses      Profit (Loss)     Ratio     Ratio     Ratio  

Insurance Companies:

                 

Marine

    $ 35,535       $ 30,283      $ 13,516       $ (8,264 )      85.2 %      38.1 %      123.3 % 

Property Casualty

      82,175         49,724        26,628         5,823        60.5 %      32.4 %      92.9 % 

Professional Liability

      23,867         19,996        9,008         (5,137 )      83.8 %      37.7 %      121.5 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Insurance Companies

      141,577         100,003        49,152         (7,578 )      70.6 %      34.8 %      105.4 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

                 

Marine

      34,272         12,730        13,362         8,180        37.1 %      39.0 %      76.1 % 

Property Casualty

      15,272         7,724        4,612         2,936        50.6 %      30.2 %      80.8 % 

Professional Liability

      4,896         2,950        1,809         137        60.3 %      36.9 %      97.2 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Lloyd’s

      54,440         23,404        19,783         11,253        43.0 %      36.3 %      79.3 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total All

    $ 196,017       $ 123,407      $ 68,935       $ 3,675        63.0 %      35.1 %      98.1 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

     Amounts     Loss Ratio  
     June 30,     June 30,     June 30,     June 30,  
     2013     2012     2013     2012  

Net Incurred Loss Activity For the Three Months Ended:

         

Insurance Companies:

         

Loss and LAE payments

    $ 100,920      $ 90,311        64.4 %      63.8 % 

Change in reserves

      5,748        9,692        3.7 %      6.8 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

      106,668        100,003        68.1 %      70.6 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

         

Loss and LAE payments

      27,428        30,641        55.7 %      56.3 % 

Change in reserves

      (2,948 )      (7,237 )      -6.0 %      -13.3 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

      24,480        23,404        49.7 %      43.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

         

Loss and LAE payments

      128,348        120,952        62.3 %      61.7 % 

Change in reserves

      2,800        2,455        1.4 %      1.3 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

    $ 131,148      $ 123,407        63.7 %      63.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Amounts     Loss Ratio Impact  
     June 30,
2013		     June 30,
2012		     June 30,
2013		     June 30,
2012		  

Impact of Prior Years Reserves

         

Favorable / (Unfavorable) Development For the Three Months Ended:

         

Insurance Companies

    $ (7,747 )    $ (626 )      -3.8 %      -0.3 % 

Lloyd’s Operations

      5,834        5,998        2.8 %      3.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ (1,913 )    $ 5,372        -1.0 %      2.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

News Release

August 7, 2013

Page 12

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

     Six Months Ended June 30, 2013  
     Net      Losses                                  
     Earned      and LAE      Underwriting      Underwriting     Loss     Expense     Combined  
     Premiums      Incurred      Expenses      Profit (Loss)     Ratio     Ratio     Ratio  

Insurance Companies:

                  

Marine

    $ 68,523       $ 40,680       $ 25,952       $ 1,891        59.4 %      37.8 %      97.2 % 

Property Casualty

      192,195         131,995         54,641         5,559        68.7 %      28.4 %      97.1 % 

Professional Liability

      50,160         40,978         16,321         (7,139 )      81.7 %      32.5 %      114.2 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Insurance Companies

      310,878         213,653         96,914         311        68.7 %      31.2 %      99.9 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

                  

Marine

      68,668         37,055         28,026         3,587        54.0 %      40.8 %      94.8 % 

Property Casualty

      16,441         7,546         7,681         1,214        45.9 %      46.7 %      92.6 % 

Professional Liability

      12,155         4,236         4,174         3,745        34.9 %      34.3 %      69.2 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Lloyd’s

      97,264         48,837         39,881         8,546        50.2 %      41.0 %      91.2 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total All

    $ 408,142       $ 262,490       $ 136,795       $ 8,857        64.3 %      33.5 %      97.8 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
     Six Months Ended June 30, 2012  
     Net      Losses                                  
     Earned      and LAE      Underwriting      Underwriting     Loss     Expense     Combined  
     Premiums      Incurred      Expenses      Profit (Loss)     Ratio     Ratio     Ratio  

Insurance Companies:

                  

Marine

    $ 70,810       $ 58,053       $ 26,171       $ (13,414 )      82.0 %      36.9 %      118.9 % 

Property Casualty

      156,543         97,872         49,482         9,189        62.5 %      31.6 %      94.1 % 

Professional Liability

      45,772         35,255         16,503         (5,986 )      77.0 %      36.1 %      113.1 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Insurance Companies

      273,125         191,180         92,156         (10,211 )      70.0 %      33.7 %      103.7 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

                  

Marine

      67,536         34,288         28,044         5,204        50.8 %      41.5 %      92.3 % 

Property Casualty

      29,774         11,772         9,671         8,331        39.5 %      32.5 %      72.0 % 

Professional Liability

      8,701         4,152         3,910         639        47.7 %      45.0 %      92.7 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total Lloyd’s

      106,011         50,212         41,625         14,174        47.4 %      39.2 %      86.6 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total All

    $ 379,136       $ 241,392       $ 133,781       $ 3,963        63.7 %      35.3 %      99.0 % 
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

     Amounts     Loss Ratio  
     June 30,     June 30,     June 30,     June 30,  
     2013     2012     2013     2012  

Net Incurred Loss Activity For the Six Months Ended:

         

Insurance Companies:

         

Loss and LAE payments

    $ 180,824      $ 183,963        58.1 %      67.4 % 

Change in reserves

      32,829        7,217        10.6 %      2.6 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

      213,653        191,180        68.7 %      70.0 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Lloyd’s Operations:

         

Loss and LAE payments

      57,890        55,285        59.5 %      52.2 % 

Change in reserves

      (9,053 )      (5,073 )      -9.3 %      -4.8 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

      48,837        50,212        50.2 %      47.4 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

        

Loss and LAE payments

      238,714        239,248        58.5 %      63.1 % 

Change in reserves

      23,776        2,144        5.8 %      0.6 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net incurred loss and LAE

    $ 262,490      $ 241,392        64.3 %      63.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Amounts     Loss Ratio Impact  
     June 30,     June 30,     June 30,     June 30,  
     2013     2012     2013     2012  

Impact of Prior Years Reserves

         

Favorable / (Unfavorable) Development For the Six Months Ended:

         

Insurance Companies

    $ (15,477 )    $ 2,090        -3.8 %      0.5 % 

Lloyd’s Operations

      9,481        10,148        2.3 %      2.7 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ (5,996 )    $ 12,238        -1.5 %      3.2 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

News Release

August 7, 2013

Page 13

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

($ in thousands)

 

     Case
Reserves		      IBNR
Reserves		      Total  

Net Loss Reserves, June 30, 2013:

         

Insurance Companies:

         

Marine

    $ 141,418       $ 107,916       $ 249,334   

Property Casualty

      210,556         305,808         516,364   

Professional Liability

      73,057         80,272         153,329   
  

 

 

     

 

 

     

 

 

  

Total Insurance Companies

      425,031         493,996         919,027   
  

 

 

     

 

 

     

 

 

  

Lloyd’s Operations:

         

Marine

      128,066         87,754         215,820   

Property Casualty

      28,737         20,837         49,574   

Professional Liability

      12,512         37,489         50,001   
  

 

 

     

 

 

     

 

 

  

Total Lloyd’s Operations

      169,315         146,080         315,395   
  

 

 

     

 

 

     

 

 

  

Total Net Loss Reserves

    $ 594,346       $ 640,076       $ 1,234,422   
  

 

 

     

 

 

     

 

 

  
     Case
Reserves		      IBNR
Reserves		      Total  

Net Loss Reserves, December 31, 2012

         

Insurance Companies:

         

Marine

    $ 137,934       $ 114,236       $ 252,170   

Property Casualty

      204,988         290,455         495,443   

Professional Liability

      54,092         84,493         138,585   
  

 

 

     

 

 

     

 

 

  

Total Insurance Companies

      397,014         489,184         886,198   
  

 

 

     

 

 

     

 

 

  

Lloyd’s Operations:

         

Marine

      125,884         95,122         221,006   

Property Casualty

      27,903         28,463         56,366   

Professional Liability

      14,694         38,645         53,339   
  

 

 

     

 

 

     

 

 

  

Total Lloyd’s Operations

      168,481         162,230         330,711   
  

 

 

     

 

 

     

 

 

  

Total Net Loss Reserves

    $ 565,495       $ 651,414       $ 1,216,909   
  

 

 

     

 

 

     

 

 

  

News Release

August 7, 2013

Page 14

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

June 30, 2013

As of June 30, 2013, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 4.0 years. The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset backed commercial paper.

As of June 30, 2013, the Company owned two asset-backed securities approximating $0.6 million with subprime mortgage exposures. The securities have an effective maturity of 4.3 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.1 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.1 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.

The following table sets forth our cash and investments as of June 30, 2013:

 

June 30, 2013

    Fair
Value		      Gross
Unrealized
Gains		      Gross
Unrealized
(Losses)		     Cost or
Amortized
Cost		  
     ($ in thousands)  

Fixed maturities:

           

U.S.Treasury bonds, agency bonds and foreign government bonds

    $ 464,167       $ 3,538      $ (7,492 )    $ 468,121  

States, municipalities and political subdivisions

      452,084         10,281        (13,114 )      454,917  

Mortgage- and asset-backed securities:

           

Agency mortgage-backed securities

      320,150         7,782        (4,645 )      317,013  

Residential mortgage obligations

      37,335         1,196        (221 )      36,360  

Asset-backed securities

      75,311         747        (113 )      74,677  

Commercial mortgage-backed securities

      173,388         8,731        (514 )      165,171  
  

 

 

     

 

 

     

 

 

    

 

 

  

Subtotal

      606,184         18,456        (5,493 )      593,221  

Corporate bonds

      485,371         16,285        (3,162 )      472,248  
  

 

 

     

 

 

     

 

 

    

 

 

  

Total fixed maturities

      2,007,806         48,560        (29,261 )      1,988,507  
  

 

 

     

 

 

     

 

 

    

 

 

  

Equity securities - common stocks

      138,549         25,238        (1,910 )      115,221  

Short-term investments

      124,726         —           —          124,726  

Cash

      101,960         —           —          101,960  
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 2,373,041       $ 73,798      $ (31,171 )    $ 2,330,414  
  

 

 

     

 

 

     

 

 

    

 

 

  

News Release

August 7, 2013

Page 15

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

June 30, 2013

($ in thousands)

The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at June 30, 2013:

 

     Fair
Value		      Gross
Unrealized
Gains		      Gross
Unrealized
(Losses)		     Cost or
Amortized
Cost		  

Agency mortgage-backed securities:

           

GNMA

    $ 120,673       $ 2,892       $ (2,759 )    $ 120,540   

FNMA

      154,398         4,115         (1,634 )      151,917   

FHLMC

      45,079         775         (252 )      44,556   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 320,150       $ 7,782       $ (4,645 )    $ 317,013   
  

 

 

     

 

 

     

 

 

    

 

 

  
     Fair
Value		      Gross
Unrealized
Gains		      Gross
Unrealized
(Losses)		     Cost or
Amortized
Cost		  

Residential mortgage obligations:

           

Prime

    $ 11,872       $ 423       $ (183 )    $ 11,632   

Alt-A

      2,111         110         (38 )      2,039   

Subprime

      630         27         —          603   

Non-US RMBS

      22,722         636         —          22,086   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 37,335       $ 1,196       $ (221 )    $ 36,360   
  

 

 

     

 

 

     

 

 

    

 

 

  
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