Exhibit 99.1
 | The Navigators Group, Inc. CORPORATE NEWS |
Navigators Reports Second Quarter Earnings
New York –August 6, 2009 -- The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $23.7 million or $1.39 per share for the 2009 second quarter compared to net income of $17.4 million or $1.03 per share for the 2008 second quarter.
The second quarter summary of results was as follows:
| ($ in millions) | (Diluted earnings per share) | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net income | $ | 23.7 | $ | 17.4 | $ | 1.39 | $ | 1.03 | ||||||||
| Less net realized capital gains / (losses) | 1.4 | (5.2 | ) | 0.08 | (0.31 | ) | ||||||||||
| Operating earnings (1) | $ | 22.3 | $ | 22.6 | $ | 1.31 | $ | 1.34 | ||||||||
| o | The 2009 second quarter net realized capital gains include provisions for declines in market value which were considered to be other-than-temporary of $0.4 million for equity securities, and $0.1 million for asset-backed securities. The after-tax loss from such provisions was $0.3 million or $0.02 per share. The decision to record realized capital losses on such securities had no impact on the Company’s stockholders’ equity or book value per share, which increased by 5% during the second quarter to $44.12. |
| o | In April 2009, the Company repurchased $10.0 million aggregate principal amount of its issued and outstanding 7% senior notes from an unaffiliated noteholder on the open market for $7.0 million, which generated a $2.9 million pretax gain that is reflected in other income and added $0.11 to the second quarter earnings per share. As a result of this transaction $115.0 million aggregate principal amount of notes remains issued and outstanding. This reduction in the notes outstanding also reduced our interest expense by 3% compared to the second quarter of 2008. This gain is excluded from the combined loss and expense ratio. |
The six month summary of results was as follows:
| ($ in millions) | (Diluted earnings per share) | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net income | $ | 35.7 | $ | 40.7 | $ | 2.10 | $ | 2.39 | ||||||||
| Less net realized capital gains / (losses) | (6.8 | ) | (5.2 | ) | (0.40 | ) | (0.31 | ) | ||||||||
| Operating earnings (1) | $ | 42.5 | $ | 45.9 | $ | 2.50 | $ | 2.70 | ||||||||
| o | The six month period ended June 30, 2009 net realized capital losses include provisions for declines in market value which were considered to be other-than-temporary of $8.7 million for equity |
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August 6, 2009
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securities, of $1.9 million for asset-backed securities and of $0.6 million for corporate debt securities. The after-tax loss from such provisions was $7.3 million or $0.43 per share. The decision to record realized capital losses on such securities had no impact on the Company’s stockholders’ equity or book value per share, which increased by 8% during the six month period ended June 30, 2009 to $44.12.
Gross written premium and net written premium for the 2009 second quarter were $272.7 million and $183.0 million, respectively, a decrease of 2.3% and an increase of 5.0%, respectively, from the comparable 2008 period. Gross written premium and net written premium for the six month period ended June 30, 2009 were $548.0 million and $383.7 million, respectively, a decrease of 3.2% and an increase of 6.0%, respectively, from the comparable 2008 period.
The combined loss and expense ratios for the 2009 second quarter and six month period were 92.9% and 92.8%, respectively, compared to 90.4% and 89.8% for the comparable 2008 periods. The combined loss and expense ratios for the 2009 second quarter and six month period were favorably impacted by 5.6 and 4.6 loss ratio points, respectively, for redundancies in prior period loss reserves.
Navigators’ Chief Executive Officer Stan Galanski commented, “We are very pleased with the second quarter results. Strong operating performance and improved investment valuations enabled us to increase book value 5% during the quarter. Our Directors and Officers Liability business grew significantly as we continue to benefit from market dislocation and a flight to quality. Competitive market conditions, especially in E&S lines, constrained premium growth as we continue to refuse to chase growth at the expense of profitability. The diversity of our portfolio of specialty lines businesses and our underwriting and financial discipline have served us well in this challenging economic environment. We are well positioned to grow our businesses as the underwriting fundamentals improve.”
Net investment income for the 2009 second quarter and six month period was $18.7 million and $37.4 million, respectively, decreases of 0.4% and 0.5% from the comparable 2008 periods, respectively. The pre-tax investment yields for the 2009 second quarter and six month period were 3.8% and 3.9%, respectively, compared to 4.1% and 4.2% for comparable 2008 periods. The effective tax rates on net investment income were 25.2% and 25.1% for the 2009 second quarter and six month period, respectively, compared to 25.4% and 25.9% for the comparable 2008 periods.
The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA/Aa” by Standard & Poor’s and Moody’s, respectively, and an average effective duration of 4.2 years at June 30, 2009. At June 30, 2009, net unrealized gains within our investment portfolio were $7.8 million, an increase of $20.7 million, which was net of $2.1 million of realized gains.
Consolidated cash flow from operations for the 2009 second quarter and six month period was $26.6 million and $69.5 million, respectively, compared to $73.7 million and $133.4 million for the comparable 2008 periods.
During the 2009 second quarter, the Company did not purchase any shares of its common stock.
Stockholders’ equity was $747.8 million or $44.12 per share at June 30, 2009 compared to $689.3 million or $40.89 per share at December 31, 2008. Statutory surplus of Navigators Insurance Company was $596.3 million at June 30, 2009.
Effective in 2009, the Company has reclassified certain of its business lines, which has no effect on the segment classifications of the Insurance Company and Lloyd's.
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August 6, 2009
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| o | The offshore energy business, formerly included in the "Marine and Energy" businesses of the Insurance Companies and Lloyd’s, is now included in the Insurance Companies’ and Lloyd’s "Property Casualty" businesses. |
| o | The marine lines within both the Insurance Company and Lloyd’s are now presented as "Marine" instead of "Marine and Energy," since the energy business has now been reclassified to "Property Casualty." |
| o | Engineering and construction, European Property and other run-off business, formerly included in the "Other" category of business within the Insurance Companies and Lloyd’s, are now included under "Property Casualty." |
| o | The "Middle Markets" business, formerly broken out separately in the Insurance Companies, is now included in the Insurance Companies’ "Property Casualty" business. |
Underwriting data for prior periods has been reclassified to reflect these changes.
| (1) | Operating earnings, or income excluding net realized gains (losses) net of tax, 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 Company will hold a conference call on Friday, August 7, 2009 starting at 8:30 a.m. ET to discuss the 2009 second quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com) by clicking on the Earnings Webcast link under "News & Events".
To participate by telephone, the domestic dial-in number is 888-679-8018 and the international dial-in is 617-213-4845. The access code is 13465283. Participants may pre-register for the call at www.theconferencingservice.com/prereg/key.process?key=PAWWEG6W6. Pre-registrants will be issued a pin number to use when dialing into the live call that will provide quick access by bypassing the operator upon connection.
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.
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 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 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: | Francis W. McDonnell Senior Vice President and Chief Financial Officer (914) 933-6270 fmcdonnell@navg.com www.navg.com |
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| Financial Highlights | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Gross written premium | $ | 272,729 | $ | 279,213 | -2% | $ | 547,988 | $ | 566,359 | -3% | ||||||||||||||
| Net written premium | 183,007 | 174,287 | 5% | 383,659 | 362,009 | 6% | ||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Net earned premium | 169,868 | 162,703 | 4% | 334,814 | 318,443 | 5% | ||||||||||||||||||
| Commission income | 55 | 467 | NM | 35 | 728 | -95% | ||||||||||||||||||
| Investment income | 18,656 | 18,731 | 0% | 37,399 | 37,569 | 0% | ||||||||||||||||||
| Total other than temporary impairments | (1,876 | ) | (8,412 | ) | NM | (28,747 | ) | (8,412 | ) | NM | ||||||||||||||
| Portion of loss recognized in OCI (before tax) | (1,407 | ) | - | NM | (17,578 | ) | - | NM | ||||||||||||||||
| Net impairment loss recognized in earnings | (469 | ) | (8,412 | ) | NM | (11,169 | ) | (8,412 | ) | NM | ||||||||||||||
| Net realized capital gains (losses) on securites sold | 2,596 | 436 | NM | 1,059 | 360 | NM | ||||||||||||||||||
| Other income (expense) | 5,247 | 1,010 | 419% | 5,410 | 1,021 | 430% | ||||||||||||||||||
| Total revenues | 195,953 | 174,935 | 12% | 367,548 | 349,709 | 5% | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Net losses and loss adjustment | ||||||||||||||||||||||||
| expenses incurred | 100,728 | 91,889 | 10% | 200,975 | 180,309 | 11% | ||||||||||||||||||
| Commission expense | 26,278 | 23,490 | 12% | 48,726 | 44,438 | 10% | ||||||||||||||||||
| Other operating expenses | 33,019 | 33,237 | -1% | 63,554 | 62,993 | 1% | ||||||||||||||||||
| Interest expense | 2,150 | 2,217 | -3% | 4,369 | 4,434 | -1% | ||||||||||||||||||
| Total operating expenses | 162,175 | 150,833 | 8% | 317,624 | 292,174 | 9% | ||||||||||||||||||
| Income before income taxes | 33,778 | 24,102 | 40% | 49,924 | 57,535 | -13% | ||||||||||||||||||
| Income tax expense (benefit): | ||||||||||||||||||||||||
| Current | 10,440 | 12,156 | -14% | 17,190 | 22,462 | -23% | ||||||||||||||||||
| Deferred | (312 | ) | (5,475 | ) | NM | (2,916 | ) | (5,598 | ) | NM | ||||||||||||||
| Income tax expense (benefit) | 10,128 | 6,681 | 52% | 14,274 | 16,864 | -15% | ||||||||||||||||||
| Net income | $ | 23,650 | $ | 17,421 | 36% | $ | 35,650 | $ | 40,671 | -12% | ||||||||||||||
| Per Share Data | ||||||||||||||||||||||||
| Net income per common share: | ||||||||||||||||||||||||
| Basic | $ | 1.40 | $ | 1.04 | 34% | $ | 2.11 | $ | 2.42 | -13% | ||||||||||||||
| Diluted | $ | 1.39 | $ | 1.03 | 35% | $ | 2.10 | $ | 2.39 | -12% | ||||||||||||||
| Average shares outstanding: | ||||||||||||||||||||||||
| Basic | 16,938 | 16,773 | 16,910 | 16,817 | ||||||||||||||||||||
| Diluted | 16,993 | 16,912 | 17,010 | 17,002 | ||||||||||||||||||||
| Underwriting Ratios | ||||||||||||||||||||||||
| Loss Ratio | 59.3% | 56.5% | 60.0% | 56.6% | ||||||||||||||||||||
| Expense Ratio | 33.6% | 33.9% | 32.8% | 33.2% | ||||||||||||||||||||
| Combined Ratio | 92.9% | 90.4% | 92.8% | 89.8% | ||||||||||||||||||||
| Balance Sheet Data | June 30, | Mar. 31, | June 30, | Dec. 31, | ||||||||||||||||||||
| 2009 | 2009 | 2009 | 2008 | |||||||||||||||||||||
| Stockholders' equity | $ | 747,797 | $ | 712,454 | 5% | $ | 747,797 | $ | 689,317 | 8% | ||||||||||||||
| Book value per share | $ | 44.12 | $ | 42.07 | 5% | $ | 44.12 | $ | 40.89 | 8% | ||||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
| June 30, | December 31, | |||||||||||
| 2009 | 2008 | |||||||||||
| ASSETS | ||||||||||||
| Investments and cash: | ||||||||||||
| Fixed maturities, available-for-sale, at fair value | ||||||||||||
| (amortized cost: 2009, $1,752,828; 2008, $1,664,755) | $ | 1,754,770 | $ | 1,643,772 | ||||||||
| Equity securities, available-for-sale, at fair value (cost: 2009, $41,944; 2008, $52,523) | 47,781 | 51,802 | ||||||||||
| Short-term investments, at cost which approximates fair value | 191,616 | 220,684 | ||||||||||
| Cash | 14,401 | 1,457 | ||||||||||
| Total investments and cash | 2,008,568 | 1,917,715 | ||||||||||
| Premiums in course of collection | 210,815 | 170,522 | ||||||||||
| Commissions receivable | 313 | 319 | ||||||||||
| Prepaid reinsurance premiums | 166,539 | 188,874 | ||||||||||
| Reinsurance receivable on paid losses | 79,857 | 67,227 | ||||||||||
| Reinsurance receivable on unpaid losses and loss adjustment expenses | 875,809 | 853,793 | ||||||||||
| Net deferred income tax asset | 48,231 | 54,736 | ||||||||||
| Deferred policy acquisition costs | 60,032 | 47,618 | ||||||||||
| Accrued investment income | 17,397 | 17,411 | ||||||||||
| Goodwill and other intangible assets | 7,135 | 6,622 | ||||||||||
| Other assets | 25,407 | 24,743 | ||||||||||
| Total assets | $ | 3,500,103 | $ | 3,349,580 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Liabilities: | ||||||||||||
| Reserves for losses and loss adjustment expenses | $ | 1,942,976 | $ | 1,853,664 | ||||||||
| Unearned premium | 510,282 | 480,665 | ||||||||||
| Reinsurance balances payable | 125,167 | 140,319 | ||||||||||
| Senior notes | 113,949 | 123,794 | ||||||||||
| Federal income tax payable | 14,033 | 5,874 | ||||||||||
| Payable for securities | 11,075 | - | ||||||||||
| Accounts payable and other liabilities | 34,824 | 55,947 | ||||||||||
| Total liabilities | 2,752,306 | 2,660,263 | ||||||||||
| Stockholders' equity: | ||||||||||||
| Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued | - | - | ||||||||||
| Common stock, $.10 par value, 50,000,000 shares authorized; issued and | ||||||||||||
| outstanding (net of treasury shares) : 16,948,497 for 2009 and 16,856,073 for 2008 | 1,717 | 1,708 | ||||||||||
| Additional paid-in capital | 302,964 | 298,872 | ||||||||||
| Retained earnings | 442,426 | 406,776 | ||||||||||
| Treasury stock, at cost (224,754 shares for both 2009 and 2008) | (11,540 | ) | (11,540 | ) | ||||||||
| Accumulated other comprehensive income (loss) | 12,230 | (6,499 | ) | |||||||||
| Total stockholders' equity | 747,797 | 689,317 | ||||||||||
| Total liabilities and stockholders' equity | $ | 3,500,103 | $ | 3,349,580 | ||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
| Gross Written Premium: | Second Quarter | Six Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 57,086 | $ | 64,339 | -11% | $ | 134,323 | $ | 135,955 | -1% | ||||||||||||||
| Property Casualty | 94,567 | 107,180 | -12% | 178,825 | 207,873 | -14% | ||||||||||||||||||
| Professional Liability | 37,732 | 26,437 | 43% | 68,220 | 45,724 | 49% | ||||||||||||||||||
| 189,385 | 197,956 | -4% | 381,368 | 389,552 | -2% | |||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 47,273 | 41,499 | 14% | 106,296 | 108,653 | -2% | ||||||||||||||||||
| Property Casualty | 25,506 | 31,359 | -19% | 39,034 | 49,085 | -20% | ||||||||||||||||||
| Professional Liability | 10,565 | 8,399 | 26% | 21,290 | 19,069 | 12% | ||||||||||||||||||
| 83,344 | 81,257 | 3% | 166,620 | 176,807 | -6% | |||||||||||||||||||
| Total | $ | 272,729 | $ | 279,213 | -2% | $ | 547,988 | $ | 566,359 | -3% | ||||||||||||||
| Net Written Premium: | Second Quarter | Six Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 34,956 | 38,982 | -10% | $ | 93,415 | 82,456 | 13% | ||||||||||||||||
| Property Casualty | 65,704 | 73,294 | -10% | 125,680 | 142,397 | -12% | ||||||||||||||||||
| Professional Liability | 21,699 | 15,906 | 36% | 40,346 | 27,639 | 46% | ||||||||||||||||||
| 122,359 | 128,182 | -5% | 259,441 | 252,492 | 3% | |||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 40,077 | 28,269 | 42% | 90,051 | 77,179 | 17% | ||||||||||||||||||
| Property Casualty | 15,070 | 12,755 | 18% | 22,665 | 20,465 | 11% | ||||||||||||||||||
| Professional Liability | 5,501 | 5,081 | 8% | 11,502 | 11,873 | -3% | ||||||||||||||||||
| 60,648 | 46,105 | 32% | 124,218 | 109,517 | 13% | |||||||||||||||||||
| Total | $ | 183,007 | $ | 174,287 | 5% | $ | 383,659 | $ | 362,009 | 6% | ||||||||||||||
| Net Earned Premium: | Second Quarter | Six Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 34,678 | 33,095 | 5% | $ | 71,839 | 59,564 | 21% | ||||||||||||||||
| Property Casualty | 63,068 | 69,951 | -10% | 128,480 | 141,655 | -9% | ||||||||||||||||||
| Professional Liability | 18,477 | 14,388 | 28% | 36,194 | 28,461 | 27% | ||||||||||||||||||
| 116,223 | 117,434 | -1% | 236,513 | 229,680 | 3% | |||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 37,038 | 31,328 | 18% | 68,213 | 60,121 | 13% | ||||||||||||||||||
| Property Casualty | 11,201 | 8,800 | 27% | 19,124 | 17,542 | 9% | ||||||||||||||||||
| Professional Liability | 5,406 | 5,141 | 5% | 10,964 | 11,100 | -1% | ||||||||||||||||||
| 53,645 | 45,269 | 19% | 98,301 | 88,763 | 11% | |||||||||||||||||||
| Total | $ | 169,868 | $ | 162,703 | 4% | $ | 334,814 | $ | 318,443 | 5% | ||||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2009
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premium | $ | 189,385 | $ | 83,344 | $ | 272,729 | ||||||||||
| Net written premium | 122,359 | 60,648 | 183,007 | |||||||||||||
| Net earned premium | 116,223 | 53,645 | 169,868 | |||||||||||||
| Net losses and loss adjustment expenses | (68,843 | ) | (31,885 | ) | (100,728 | ) | ||||||||||
| Commission expense | (15,060 | ) | (11,218 | ) | (26,278 | ) | ||||||||||
| Other operating expenses | (26,906 | ) | (6,117 | ) | $ | 4 | (33,019 | ) | ||||||||
| Other income (expense) | 1,655 | 651 | 2,996 | 5,302 | ||||||||||||
| Underwriting profit | 7,069 | 5,076 | 3,000 | 15,145 | ||||||||||||
| Investment income | 16,239 | 2,316 | 101 | 18,656 | ||||||||||||
| Net realized capital gains | 2,210 | (83 | ) | 2,127 | ||||||||||||
| Interest expense | (2,150 | ) | (2,150 | ) | ||||||||||||
| Income (loss) before income tax | ||||||||||||||||
| expense (benefit) | 25,518 | 7,309 | 951 | 33,778 | ||||||||||||
| Income tax expense (benefit) | 7,171 | 2,624 | 333 | 10,128 | ||||||||||||
| Net income (loss) | $ | 18,347 | $ | 4,685 | $ | 618 | $ | 23,650 | ||||||||
| Loss and loss expenses ratio | 59.2% | 59.4% | 59.3% | |||||||||||||
| Commission expense ratio | 13.0% | 20.9% | 15.5% | |||||||||||||
| Other operating expenses ratio (1) | 21.7% | 10.2% | 18.1% | |||||||||||||
| Combined ratio | 93.9% | 90.5% | 92.9% | |||||||||||||
| (1) The other operating expenses ratio includes other income (expense). | ||||||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
June 30, 2008
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premium | $ | 197,956 | $ | 81,257 | $ | 279,213 | ||||||||||
| Net written premium | 128,182 | 46,105 | 174,287 | |||||||||||||
| Net earned premium | 117,434 | 45,269 | 162,703 | |||||||||||||
| Net losses and loss adjustment expenses | (62,225 | ) | (29,664 | ) | (91,889 | ) | ||||||||||
| Commission expense | (14,723 | ) | (8,767 | ) | (23,490 | ) | ||||||||||
| Other operating expenses | (24,552 | ) | (8,685 | ) | (33,237 | ) | ||||||||||
| Other income (expense) | 1,516 | (39 | ) | 1,477 | ||||||||||||
| Underwriting profit | 17,450 | (1,886 | ) | 15,564 | ||||||||||||
| Investment income | 15,593 | 2,871 | $ | 267 | 18,731 | |||||||||||
| Net realized capital gains (losses) | (8,053 | ) | 77 | $ | (7,976 | ) | ||||||||||
| Interest expense | (2,217 | ) | (2,217 | ) | ||||||||||||
| Income (loss) before income tax | ||||||||||||||||
| expense (benefit) | 24,990 | 1,062 | (1,950 | ) | 24,102 | |||||||||||
| Income tax expense (benefit) | 6,939 | 425 | (683 | ) | 6,681 | |||||||||||
| Net income (loss) | $ | 18,051 | $ | 637 | $ | (1,267 | ) | $ | 17,421 | |||||||
| Loss and loss expenses ratio | 53.0% | 65.5% | 56.5% | |||||||||||||
| Commission expense ratio | 12.5% | 19.4% | 14.4% | |||||||||||||
| Other operating expenses ratio (1) | 19.6% | 19.3% | 19.5% | |||||||||||||
| Combined ratio | 85.1% | 104.2% | 90.4% | |||||||||||||
| (1) The other operating expenses ratio includes other income (expense). | ||||||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended
June 30, 2009
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premium | $ | 381,368 | $ | 166,620 | $ | 547,988 | ||||||||||
| Net written premium | 259,441 | 124,218 | 383,659 | |||||||||||||
| Net earned premium | 236,513 | 98,301 | 334,814 | |||||||||||||
| Net losses and loss adjustment expenses | (138,996 | ) | (61,979 | ) | (200,975 | ) | ||||||||||
| Commission expense | (30,028 | ) | (18,698 | ) | (48,726 | ) | ||||||||||
| Other operating expenses | (51,466 | ) | (12,098 | ) | $ | 10 | (63,554 | ) | ||||||||
| Other income (expense) | 1,856 | 599 | 2,990 | 5,445 | ||||||||||||
| Underwriting profit | 17,879 | 6,125 | 3,000 | 27,004 | ||||||||||||
| Investment income | 32,446 | 4,699 | 254 | 37,399 | ||||||||||||
| Net realized capital gains | (6,697 | ) | (3,413 | ) | (10,110 | ) | ||||||||||
| Interest expense | (4,369 | ) | (4,369 | ) | ||||||||||||
| Income (loss) before income tax | ||||||||||||||||
| expense (benefit) | 43,628 | 7,411 | (1,115 | ) | 49,924 | |||||||||||
| Income tax expense (benefit) | 11,704 | 2,960 | (390 | ) | 14,274 | |||||||||||
| Net income (loss) | $ | 31,924 | $ | 4,451 | $ | (725 | ) | $ | 35,650 | |||||||
| Loss and loss expenses ratio | 58.8% | 63.0% | 60.0% | |||||||||||||
| Commission expense ratio | 12.7% | 19.0% | 14.6% | |||||||||||||
| Other operating expenses ratio (1) | 21.0% | 11.7% | 18.2% | |||||||||||||
| Combined ratio | 92.5% | 93.7% | 92.8% | |||||||||||||
| (1) The other operating expenses ratio includes other income (expense). | ||||||||||||||||
News Release
Page 10
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Six Months Ended
June 30, 2008
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premium | $ | 389,552 | $ | 176,807 | $ | 566,359 | ||||||||||
| Net written premium | 252,492 | 109,517 | 362,009 | |||||||||||||
| Net earned premium | 229,680 | 88,763 | 318,443 | |||||||||||||
| Net losses and loss adjustment expenses | (129,581 | ) | (50,728 | ) | (180,309 | ) | ||||||||||
| Commission expense | (27,671 | ) | (16,767 | ) | (44,438 | ) | ||||||||||
| Other operating expenses | (46,700 | ) | (16,293 | ) | (62,993 | ) | ||||||||||
| Other income (expense) | 1,774 | (25 | ) | 1,749 | ||||||||||||
| Underwriting profit | 27,502 | 4,950 | 32,452 | |||||||||||||
| Investment income | 31,058 | 5,853 | $ | 658 | 37,569 | |||||||||||
| Net realized capital gains (losses) | (8,155 | ) | 103 | $ | (8,052 | ) | ||||||||||
| Interest expense | (4,434 | ) | (4,434 | ) | ||||||||||||
| Income (loss) before income tax | ||||||||||||||||
| expense (benefit) | 50,405 | 10,906 | (3,776 | ) | 57,535 | |||||||||||
| Income tax expense (benefit) | 14,309 | 3,877 | (1,322 | ) | 16,864 | |||||||||||
| Net income (loss) | $ | 36,096 | $ | 7,029 | $ | (2,454 | ) | $ | 40,671 | |||||||
| Loss and loss expenses ratio | 56.4% | 57.1% | 56.6% | |||||||||||||
| Commission expense ratio | 12.0% | 18.9% | 14.0% | |||||||||||||
| Other operating expenses ratio (1) | 19.6% | 18.4% | 19.2% | |||||||||||||
| Combined ratio | 88.0% | 94.4% | 89.8% | |||||||||||||
| (1) The other operating expenses ratio includes other income (expense). | ||||||||||||||||
News Release
Page 11
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
| Three Months Ended June 30, 2009 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premium | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 34,678 | $ | 25,238 | $ | 10,904 | 72.8 | % | 31.4 | % | 104.2 | % | ||||||||||||
| Property Casualty | 63,068 | 28,446 | 23,227 | 45.1 | % | 36.8 | % | 81.9 | % | |||||||||||||||
| Professional Liability | 18,477 | 15,159 | 6,180 | 82.0 | % | 33.4 | % | 115.4 | % | |||||||||||||||
| 116,223 | 68,843 | 40,311 | 59.2 | % | 34.7 | % | 93.9 | % | ||||||||||||||||
| Lloyd's Operations | 53,645 | 31,885 | 16,684 | 59.4 | % | 31.1 | % | 90.5 | % | |||||||||||||||
| Total | $ | 169,868 | $ | 100,728 | $ | 56,995 | 59.3 | % | 33.6 | % | 92.9 | % | ||||||||||||
| Three Months Ended June 30, 2008 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premium | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 33,095 | $ | 13,976 | $ | 10,092 | 42.2 | % | 30.5 | % | 72.7 | % | ||||||||||||
| Property Casualty | 69,951 | 40,875 | 22,647 | 58.4 | % | 32.4 | % | 90.8 | % | |||||||||||||||
| Professional Liability | 14,388 | 7,374 | 5,020 | 51.3 | % | 34.9 | % | 86.2 | % | |||||||||||||||
| 117,434 | 62,225 | 37,759 | 53.0 | % | 32.1 | % | 85.1 | % | ||||||||||||||||
| Lloyd's Operations | 45,269 | 29,664 | 17,491 | 65.5 | % | 38.7 | % | 104.2 | % | |||||||||||||||
| Total | $ | 162,703 | $ | 91,889 | $ | 55,250 | 56.5 | % | 33.9 | % | 90.4 | % | ||||||||||||
| Amounts | Loss Ratio | |||||||||||||||||||||||
| Net Incurred Loss Activity | June 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||
| For the Three Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies: | ||||||||||||||||||||||||
| Loss and LAE payments | $ | 53,262 | $ | 34,922 | 45.8 | % | 29.8 | % | ||||||||||||||||
| Change in reserves | 15,581 | 27,303 | 13.4 | % | 23.2 | % | ||||||||||||||||||
| Net incurred loss and LAE | 68,843 | 62,225 | 59.2 | % | 53.0 | % | ||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Loss and LAE payments | 8,491 | 13,369 | 15.8 | % | 29.5 | % | ||||||||||||||||||
| Change in reserves | 23,394 | 16,295 | 43.6 | % | 36.0 | % | ||||||||||||||||||
| Net incurred loss and LAE | 31,885 | 29,664 | 59.4 | % | 65.5 | % | ||||||||||||||||||
| Total | ||||||||||||||||||||||||
| Loss and LAE payments | 61,753 | 48,291 | 36.4 | % | 29.7 | % | ||||||||||||||||||
| Change in reserves | 38,975 | 43,598 | 22.9 | % | 26.8 | % | ||||||||||||||||||
| Net incurred loss and LAE | $ | 100,728 | $ | 91,889 | 59.3 | % | 56.5 | % | ||||||||||||||||
| Impact of Prior Years Reserves | Amounts | Loss Ratio Impact | ||||||||||||||||||||||
| Favorable / (Unfavorable) Development | June 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||
| For the Three Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies | $ | 4,890 | $ | 11,652 | 4.2 | % | 9.9 | % | ||||||||||||||||
| Lloyd's Operations | 4,588 | (1,072 | ) | 8.6 | % | -2.4 | % | |||||||||||||||||
| Total | $ | 9,478 | $ | 10,580 | 5.6 | % | 6.5 | % | ||||||||||||||||
News Release
Page 12
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
| Six Months Ended June 30, 2009 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premium | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 71,839 | $ | 51,628 | $ | 22,194 | 71.9 | % | 30.9 | % | 102.8 | % | ||||||||||||
| Property Casualty | 128,480 | 56,450 | 44,312 | 43.9 | % | 34.5 | % | 78.4 | % | |||||||||||||||
| Professional Liability | 36,194 | 30,918 | 13,132 | 85.4 | % | 36.3 | % | 121.7 | % | |||||||||||||||
| 236,513 | 138,996 | 79,638 | 58.8 | % | 33.7 | % | 92.5 | % | ||||||||||||||||
| Lloyd's Operations | 98,301 | 61,979 | 30,197 | 63.0 | % | 30.7 | % | 93.7 | % | |||||||||||||||
| Total | $ | 334,814 | $ | 200,975 | $ | 109,835 | 60.0 | % | 32.8 | % | 92.8 | % | ||||||||||||
| Six Months Ended June 30, 2008 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premium | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 59,564 | $ | 36,298 | $ | 19,301 | 60.9 | % | 32.4 | % | 93.3 | % | ||||||||||||
| Property Casualty | 141,655 | 77,004 | 43,178 | 54.4 | % | 30.4 | % | 84.8 | % | |||||||||||||||
| Professional Liability | 28,461 | 16,279 | 10,118 | 57.2 | % | 35.6 | % | 92.8 | % | |||||||||||||||
| 229,680 | 129,581 | 72,597 | 56.4 | % | 31.6 | % | 88.0 | % | ||||||||||||||||
| Lloyd's Operations | 88,763 | 50,728 | 33,085 | 57.1 | % | 37.3 | % | 94.4 | % | |||||||||||||||
| Total | $ | 318,443 | $ | 180,309 | $ | 105,682 | 56.6 | % | 33.2 | % | 89.8 | % | ||||||||||||
| Amounts | Loss Ratio | |||||||||||||||||||||||
| Net Incurred Loss Activity | June 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||
| For the Six Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies: | ||||||||||||||||||||||||
| Loss and LAE payments | $ | 102,066 | $ | 69,086 | 43.2 | % | 30.1 | % | ||||||||||||||||
| Change in reserves | 36,930 | 60,495 | 15.6 | % | 26.3 | % | ||||||||||||||||||
| Net incurred loss and LAE | 138,996 | 129,581 | 58.8 | % | 56.4 | % | ||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Loss and LAE payments | 31,613 | 30,141 | 32.1 | % | 34.0 | % | ||||||||||||||||||
| Change in reserves | 30,366 | 20,587 | 30.9 | % | 23.1 | % | ||||||||||||||||||
| Net incurred loss and LAE | 61,979 | 50,728 | 63.0 | % | 57.1 | % | ||||||||||||||||||
| Total | ||||||||||||||||||||||||
| Loss and LAE payments | 133,679 | 99,227 | 39.9 | % | 31.2 | % | ||||||||||||||||||
| Change in reserves | 67,296 | 81,082 | 20.1 | % | 25.4 | % | ||||||||||||||||||
| Net incurred loss and LAE | $ | 200,975 | $ | 180,309 | 60.0 | % | 56.6 | % | ||||||||||||||||
| Impact of Prior Years Reserves | Amounts | Loss Ratio Impact | ||||||||||||||||||||||
| Favorable / (Unfavorable) Development | June 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||
| For the Six Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies | $ | 10,022 | $ | 20,152 | 4.2 | % | 8.8 | % | ||||||||||||||||
| Lloyd's Operations | 5,223 | 4,108 | 5.3 | % | 4.6 | % | ||||||||||||||||||
| Total | $ | 15,245 | $ | 24,260 | 4.6 | % | 7.6 | % | ||||||||||||||||
News Release
Page 13
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
| Case | IBNR | |||||||||||
| Net Loss Reserves, June 30, 2009 | Reserves | Reserves | Total | |||||||||
| Insurance Companies: | ||||||||||||
| Marine | $ | 109,472 | $ | 97,777 | $ | 207,249 | ||||||
| Property Casualty | 120,666 | 360,070 | 480,736 | |||||||||
| Professional Liability | 40,267 | 57,737 | 98,004 | |||||||||
| Total Insurance Companies | 270,405 | 515,584 | 785,989 | |||||||||
| Lloyd's Operations: | ||||||||||||
| Marine | 104,252 | 89,553 | 193,805 | |||||||||
| Property Casualty | 23,354 | 27,627 | 50,981 | |||||||||
| Professional Liability | 7,843 | 28,549 | 36,392 | |||||||||
| Total Lloyd's Operations | 135,449 | 145,729 | 281,178 | |||||||||
| Total Net Loss Reserves | $ | 405,854 | $ | 661,313 | $ | 1,067,167 | ||||||
| Case | IBNR | |||||||||||
| Net Loss Reserves, December 31, 2008: | Reserves | Reserves | Total | |||||||||
| Insurance Companies: | ||||||||||||
| Marine | $ | 96,244 | $ | 96,995 | $ | 193,239 | ||||||
| Property Casualty | 115,810 | 358,305 | 474,115 | |||||||||
| Professional Liability | 22,913 | 58,793 | 81,706 | |||||||||
| Total Insurance Companies | 234,967 | 514,093 | 749,060 | |||||||||
| Lloyd's Operations: | ||||||||||||
| Marine | 99,233 | 78,293 | 177,526 | |||||||||
| Property Casualty | 26,218 | 16,386 | 42,604 | |||||||||
| Professional Liability | 5,822 | 24,859 | 30,681 | |||||||||
| Total Lloyd's Operations | 131,273 | 119,538 | 250,811 | |||||||||
| Total Net Loss Reserves | $ | 366,240 | $ | 633,631 | $ | 999,871 | ||||||
News Release
Page 14
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2009
($ in thousands)
At June 30, 2009, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 4.2 years. All of the Company’s mortgage-backed and asset-backed securities are rated AAA/Aaa by S&P and Moody’s except for 64 securities approximating $50.8 million. The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset backed commercial paper.
At June 30, 2009, the Company owned two asset-backed securities approximating $0.1 million with subprime mortgage exposures. The securities have an effective maturity of 1.5 years. In addition, the Company owned a total of five collateralized mortgage obligations and asset-backed securities approximating $1.3 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 5.3 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments at June 30, 2009:
June 30, 2009 | Fair Value | Gross Unrealized Gains | Gross Unrealized (Losses) | OTTI Recognized in OCI | Cost or Amortized Cost | |||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||
| U.S. Government Treasury Bonds, agency bonds and foreign government bonds | $ | 402,071 | $ | 11,555 | $ | (249 | ) | $ | - | $ | 390,765 | |||||||||
| States, municipalities and political subdivisions | 642,861 | 18,069 | (3,719 | ) | - | 628,511 | ||||||||||||||
| Mortgage- and asset-backed securities | ||||||||||||||||||||
| Mortgage-backed securities | 309,097 | 11,607 | (170 | ) | - | 297,660 | ||||||||||||||
| Collateralized mortgage obligations | 43,230 | - | (1,359 | ) | (17,505 | ) | 62,094 | |||||||||||||
| Asset-backed securities | 24,773 | 721 | (197 | ) | (73 | ) | 24,322 | |||||||||||||
| Commercial mortgage-backed securities | 96,417 | 119 | (16,763 | ) | - | 113,061 | ||||||||||||||
| Subtotal | 473,517 | 12,447 | (18,489 | ) | (17,578 | ) | 497,137 | |||||||||||||
Corporate bonds | 236,321 | 6,184 | (6,278 | ) | - | 236,415 | ||||||||||||||
Total fixed maturities | 1,754,770 | 48,255 | (28,735 | ) | (17,578 | ) | 1,752,828 | |||||||||||||
Equity securities - common stocks | 47,781 | 6,103 | (266 | ) | - | 41,944 | ||||||||||||||
Cash | 14,401 | - | - | - | 14,401 | |||||||||||||||
Short-term investments | 191,616 | - | - | - | 191,616 | |||||||||||||||
Total | $ | 2,008,568 | $ | 54,358 | $ | (29,001 | ) | $ | (17,578 | ) | $ | 2,000,789 | ||||||||
News Release
Page 15
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
June 30, 2009
($ in thousands)
The following three tables set forth our mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities by those issued by FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at June 30, 2009:
| Mortgage-backed securities: | Fair Value | Gross Unrealilzed Gains | Gross Unrealized (Losses) | Cost or Amortized Cost | ||||||||||||
| GNMA | $ | 38,508 | $ | 978 | $ | (1 | ) | $ | 37,531 | |||||||
| FNMA | 197,285 | 7,973 | (1080 | ) | 189,420 | |||||||||||
| FHLMC | 73,304 | 2,656 | (61 | ) | 70,709 | |||||||||||
| Prime | - | - | - | - | ||||||||||||
| Alt-A | - | - | - | - | ||||||||||||
| Subprime | - | - | - | - | ||||||||||||
| Total | $ | 309,097 | $ | 11,607 | $ | (170 | ) | $ | 297,660 | |||||||
| Collateralized mortgage obligations: | Fair Value | Gross Unrealized Gains | Gross Unrealized (Losses) | Cost or Amortized Cost | ||||||||||||
| GNMA | $ | - | $ | - | $ | - | $ | - | ||||||||
| FNMA | - | - | - | - | ||||||||||||
| FHLMC | - | - | - | - | ||||||||||||
| Prime | 42,386 | - | (18,337 | ) | 60,723 | |||||||||||
| Alt-A | 844 | - | (527 | ) | 1,371 | |||||||||||
| Subprime | - | - | - | - | ||||||||||||
| Total | $ | 43,230 | $ | - | $ | (18,864 | ) | $ | 62,094 | |||||||
| Asset-backed securities: | Fair Value | Gross Unrealized Gains | Gross Unrealized (Losses) | Cost or Amortized Cost | ||||||||||||
| GNMA | $ | - | $ | - | $ | - | $ | - | ||||||||
| FNMA | - | - | - | - | ||||||||||||
| FHLMC | - | - | - | - | ||||||||||||
| Prime | 24,184 | 721 | (147 | ) | 23,610 | |||||||||||
| Alt-A | 450 | - | (59 | ) | 509 | |||||||||||
| Subprime | 139 | - | (64 | ) | 203 | |||||||||||
| Total | $ | 24,773 | $ | 721 | $ | (270 | ) | $ | 24,322 | |||||||