THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Condensed Financial Information of Registrant

The Navigators Group, Inc.

Balance Sheets

(Parent Company)

	December 31,
amounts in thousands except share amounts	2015			2014
ASSETS
Investments	$	89,586		$	94,732
Cash		6,417			6,300
Investments in subsidiaries		1,232,012			1,163,822
Goodwill and other intangible assets		2,534			2,534
Other assets		33,647			27,531
Total assets	$	1,364,196		$	1,294,919

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Senior notes	$	263,580		$	263,440
Accounts payable and other liabilities		1,294			1,081
Accrued interest payable		3,174			3,174
Total liabilities	$	268,048		$	267,695

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 17,942,269 shares for 2015 and 17,792,846 shares for 2014		1,793			1,778
Additional paid-in capital		357,829			347,022
Treasury stock, at cost (3,511,380 shares for 2015 and 2014)		(155,801	)		(155,801	)
Retained earnings		868,723			787,666
Accumulated other comprehensive income:
Net unrealized gains (losses) on securities available-for-sale, net of tax		23,611			46,573
Foreign currency translation adjustment, net of tax		(7	)		(14	)
Total stockholders' equity	$	1,096,148		$	1,027,224
Total liabilities and stockholders' equity	$	1,364,196		$	1,294,919

SCHEDULE II

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Condensed Financial Information of Registrant (Continued)

The Navigators Group, Inc.

Statements of Income

(Parent Company)

	Years Ended December 31,
amounts in thousands	2015			2014			2013
Revenues:
Net investment income	$	147		$	76		$	13
Total revenues	$	147		$	76		$	13
Expenses:
Call premium on Senior notes	$	—		$	—		$	17,895
Interest expense		15,424			15,413			10,507
Other (income) expense		—			—			2
Total expenses	$	15,424		$	15,413		$	28,404
Income (loss) before income tax benefit	$	(15,277	)	$	(15,337	)	$	(28,391	)
Income tax benefit		(5,472	)		(5,287	)		(9,886	)
Income (loss) before equity in undistributed net income of wholly owned subsidiaries	$	(9,805	)	$	(10,050	)	$	(18,505	)
Equity in undistributed net income of wholly-owned subsidiaries		90,862			105,379			81,971
Net income	$	81,057		$	95,329		$	63,466

SCHEDULE II

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Condensed Financial Information of Registrant (Continued)

The Navigators Group, Inc.

Statements of Cash Flows

(Parent Company)

	Years Ended December 31,
amounts in thousands	2015			2014			2013
Operating activities:
Net income	$	81,057		$	95,329		$	63,466
Adjustments to reconcile net income to net cash provided by (used in) operations:
Equity in undistributed net income of wholly-owned subsidiaries		(90,862	)		(105,379	)		(81,971	)
Dividends received from subsidiaries		—			—			—
Call premium on redemption of Senior notes		—			—			17,895
Other		3,373			9,211			2,098
Net cash provided by (used in) operating activities	$	(6,432	)	$	(839	)	$	1,488
Investing activities:
Fixed maturities, available-for-sale
Sales	$	1,250		$	3,200		$	8,754
Purchases		—			—			(1,249	)
Equity securities
Sales		—			—			—
Purchases		—			—			—
Net increase in short-term investments		3,918			(3,424	)		(89,988	)
Net cash provided by (used in) investing activities	$	5,168		$	(224	)	$	(82,483	)
Financing activities:
Capital contribution to subsidiary	$	—		$	—		$	(50,000	)
Net proceeds from debt offering		—			—			263,278
Redemption of 7.0% Senior notes		—			—			(132,437	)
Proceeds of stock issued from employee stock purchase plan		1,352			1,067			821
Proceeds of stock issued from exercise of stock options		29			153			2,495
Net cash provided by (used in) financing activities	$	1,381		$	1,220		$	84,157
Increase (decrease) in cash	$	117		$	157		$	3,162
Cash at beginning of year		6,300			6,143			2,981
Cash at end of year	$	6,417		$	6,300		$	6,143