Exhibit 99.1
The Navigators Group, Inc.CORPORATE NEWS
Navigators Reports Third Quarter Earnings
New York –November 5, 2009 - -- The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $21.4 million, or $1.24 per diluted share, for the three months ended September 30, 2009 compared to net income of $1.0 million, or $0.06 per diluted share, for the comparable period in 2008.
The summary of results for the three months ended September 30, 2009 and 2008 were as follows:
| ($ in millions, except per share amounts) | Diluted earnings per share | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net income | $ | 21.4 | $ | 1.0 | $ | 1.24 | $ | 0.06 | ||||||||
Less: Net realized gains / (losses) after-tax | 4.0 | (3.6 | ) | 0.23 | (0.21 | ) | ||||||||||
| Operating earnings (1) | $ | 17.4 | $ | 4.6 | $ | 1.01 | $ | 0.27 | ||||||||
| o | The results for the three months ended September 30, 2009 included after-tax net realized gains of $4.0 million, or $0.23 per diluted share, which included other-than-temporary impairment losses on investments of $0.4 million after-tax, or $0.02 per diluted share. |
| o | The results for the three months ended September 30, 2008 included $18.3 million, or $1.08 per diluted share, for after-tax net losses from Hurricanes Gustav and Ike. In addition, the results included net realized losses of $3.6 million, or $0.21 per diluted share, which included other-than-temporary impairment losses on investments of $3.1 million after-tax, or $0.18 per diluted share. |
The summary of results for the nine months ended September 30, 2009 and 2008 were as follows:
| ($ in millions, except per share amounts) | Diluted earnings per share | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net income | $ | 57.1 | $ | 41.7 | $ | 3.30 | $ | 2.45 | ||||||||
Less: Net realized gains / (losses) after-tax | (2.8 | ) | (8.8 | ) | (0.16 | ) | (0.52 | ) | ||||||||
| Operating earnings (1) | $ | 59.9 | $ | 50.5 | $ | 3.46 | $ | 2.97 | ||||||||
| o | The results for the nine months ended September 30, 2009 included after-tax net realized losses of $2.8 million, or $0.16 per diluted share, which included other-than-temporary impairment losses on investments of $7.7 million after-tax, or $0.45 per diluted share. |
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November 5, 2009
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| o | The results for the nine months ended September 30, 2008 included $18.3 million, or $1.08 per diluted share, for after-tax net losses from Hurricanes Gustav and Ike. In addition, the results included net realized losses of $8.8 million, or $0.52 per diluted share, which included other-than-temporary impairment losses on investments of $8.6 million after-tax, or $0.50 per diluted share. |
| o | For the three and nine months ended September 30, 2009, book value per share increased by 8% and 17%, respectively, to $47.78. |
Gross written premiums and net written premiums for the three months ended September 30, 2009 were $245.2 million and $156.0 million, respectively, a decrease of 3.1% and an increase of 11.2% from the comparable 2008 periods. Gross written premiums and net written premiums for the nine months ended September 30, 2009 were $793.2 million and $539.7 million, respectively, a decrease of 3.2% and an increase of 7.4% from the comparable 2008 periods.
The combined loss and expense ratios for the three and nine months ended September 30, 2009 were 95.9% and 93.9%, respectively, compared to 107.9% and 95.7% for the comparable 2008 periods. The combined loss and expense ratios for the three and nine months ended September 30, 2009 were favorably impacted by 2.2 and 3.8 loss ratio points, respectively, due to redundancies in prior period loss reserves. The combined loss and expense ratios for the three and nine months ended September 30, 2008 included 17.4 and 5.7 loss and expense ratio points, respectively, due to the net losses from Hurricanes Gustav and Ike. Such net losses are inclusive of reinsurance recoveries and related costs for reinsurance reinstatement premiums.
Navigators' Chief Executive Officer Stan Galanski commented, “Navigators emphasizes disciplined risk selection and pricing in what continues to be a challenging environment and we are pleased to have, once again, generated underwriting profit in our insurance companies and at Lloyd’s. As a specialty insurer, we focus on complex risks for which the quality of our underwriting and claims professionals make a meaningful difference. We experienced strong growth in our excess casualty, environmental and professional liability business as a result of the investments made in additional intellectual capital over the last twelve months. For other product lines, we have opted to reduce premium volume when market conditions appeared to be inconsistent with profitable underwriting results. We remain cautious as to the ultimate loss development for longer-tail lines and emphasize this in our reserving philosophy. Our book value per share increased 17% in 2009, including 8% in the third quarter, to reach an all-time high.”
Net investment income for the three and nine months ended September 30, 2009 was $19.1 million and $56.5 million, respectively, which were decreases of 1.1% and 0.7% from the comparable 2008 periods. The annualized pre-tax investment yield, excluding net realized gains and losses, was 3.8% for both the three and nine months ended September 30, 2009, respectively, compared to 4.1% for both of the comparable 2008 periods. The effective tax rates on net investment income were 25.2% and 25.1% for the three and nine months ended September 30, 2009, respectively, compared to 25.7% and 25.8% for the comparable 2008 periods.
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 4.3 years at September 30, 2009. At September 30, 2009, net unrealized gains within our investment portfolio were $67.5 million, an increase of $59.7 million compared to June 30, 2009. There were $6.1 million of net realized gains for the three months ended September 30, 2009.
Consolidated cash flow from operations for the three and nine months ended September 30, 2009 was $35.7 million and $105.2 million, respectively, compared to $83.0 million and $216.4 million for the comparable 2008 periods.
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November 5, 2009
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During the three and nine months ended September 30, 2009, the Company did not repurchase any shares of its common stock.
Stockholders’ equity was $811.0 million, or $47.78 per share, at September 30, 2009 compared to $689.3 million, or $40.89 per share, at December 31, 2008. The statutory surplus of Navigators Insurance Company was $630.0 million at September 30, 2009 compared to $581.2 million at December 31, 2008.
Effective in 2009, the Company has reclassified certain of its business lines which had no effect on the segment classifications of the Insurance Companies and Lloyd's Operations. Underwriting data for prior periods has been reclassified to reflect these changes.
| o | The offshore energy business, formerly included in the "Marine and Energy" businesses of the Insurance Companies and Lloyd’s Operations, 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. |
| (1) | Operating earnings, or net income excluding net realized gains (losses) after-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, November 6, 2009 starting at 8:30 a.m. ET to discuss the 2009 third 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 888-680-0892 and the international dial-in is 617-213-4858. The access code is 77625623. Participants may pre-register for the call at www.theconferencingservice.com/prereg/key.process?key=P79MRBUQV. 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.
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November 5, 2009
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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: | 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)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Results of Operations | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Gross written premiums | $ | 245,191 | $ | 252,943 | -3% | $ | 793,179 | $ | 819,302 | -3% | ||||||||||||||
| Net written premiums | 156,001 | 140,318 | 11% | 539,660 | 502,327 | 7% | ||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
| Net earned premiums | 171,271 | 154,040 | 11% | 506,085 | 472,483 | 7% | ||||||||||||||||||
| Commission income | 144 | 8 | NM | 179 | 736 | -76% | ||||||||||||||||||
| Net investment income | 19,110 | 19,322 | -1% | 56,509 | 56,891 | -1% | ||||||||||||||||||
| Total other-than-temporary impairment losses | (22 | ) | (4,748 | ) | NM | (28,769 | ) | (13,160 | ) | NM | ||||||||||||||
| Portion of loss recognized in other comprehensive | ||||||||||||||||||||||||
| income (before tax) | (525 | ) | - | NM | 17,053 | - | NM | |||||||||||||||||
| Net other-than-temporary impairment losses | ||||||||||||||||||||||||
| recognized in earnings | (547 | ) | (4,748 | ) | NM | (11,716 | ) | (13,160 | ) | NM | ||||||||||||||
| Net realized gains (losses) | 6,682 | (768 | ) | NM | 7,741 | (408 | ) | NM | ||||||||||||||||
| Other income (expense) | 1,097 | (119 | ) | NM | 6,507 | 902 | NM | |||||||||||||||||
| Total revenues | 197,757 | 167,735 | 18% | 565,305 | 517,444 | 9% | ||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||
| Net losses and loss adjustment expenses | 107,591 | 113,269 | -5% | 308,566 | 293,578 | 5% | ||||||||||||||||||
| Commission expenses | 22,852 | 22,357 | 2% | 71,578 | 66,795 | 7% | ||||||||||||||||||
| Other operating expenses | 35,018 | 30,601 | 14% | 98,572 | 93,594 | 5% | ||||||||||||||||||
| Interest expense | 2,042 | 2,218 | -8% | 6,411 | 6,652 | -4% | ||||||||||||||||||
| Total expenses | 167,503 | 168,445 | -1% | 485,127 | 460,619 | 5% | ||||||||||||||||||
| Income (loss) before income taxes | 30,254 | (710 | ) | NM | 80,178 | 56,825 | 41% | |||||||||||||||||
| Income tax expense (benefit) | 8,822 | (1,711 | ) | NM | 23,096 | 15,153 | 52% | |||||||||||||||||
| Net income | $ | 21,432 | $ | 1,001 | NM | $ | 57,082 | $ | 41,672 | 37% | ||||||||||||||
| Per Share Data | ||||||||||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||
| Basic | $ | 1.26 | $ | 0.06 | NM | $ | 3.37 | $ | 2.48 | 36% | ||||||||||||||
| Diluted | $ | 1.24 | $ | 0.06 | NM | $ | 3.30 | $ | 2.45 | 35% | ||||||||||||||
| Average shares outstanding: | ||||||||||||||||||||||||
| Basic | 16,966 | 16,772 | 16,929 | 16,802 | ||||||||||||||||||||
| Diluted | 17,334 | 16,927 | 17,277 | 16,980 | ||||||||||||||||||||
| Underwriting Ratios | ||||||||||||||||||||||||
| Loss Ratio | 62.8 | % | 73.5 | % | 61.0 | % | 62.1 | % | ||||||||||||||||
| Expense Ratio | 33.1 | % | 34.4 | % | 32.9 | % | 33.6 | % | ||||||||||||||||
| Combined Ratio | 95.9 | % | 107.9 | % | 93.9 | % | 95.7 | % | ||||||||||||||||
| Balance Sheet Data | Sept. 30, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||||
| 2009 | 2009 | 2009 | 2008 | |||||||||||||||||||||
| Stockholders' equity | $ | 810,955 | $ | 747,797 | 8% | $ | 810,955 | $ | 689,317 | 18% | ||||||||||||||
| Book value per share | $ | 47.78 | $ | 44.12 | 8% | $ | 47.78 | $ | 40.89 | 17% | ||||||||||||||
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| THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| ($ in thousands) | ||||||||
| September 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Investments and cash: | ||||||||
| Fixed maturities, available-for-sale, at fair value | ||||||||
| (amortized cost: 2009, $1,823,107; 2008, $1,664,755) | $ | 1,877,786 | $ | 1,643,772 | ||||
| Equity securities, available-for-sale, at fair value (cost: 2009, $45,178; 2008, $52,523) | 57,949 | 51,802 | ||||||
| Short-term investments, at cost which approximates fair value | 136,935 | 220,684 | ||||||
| Cash | 21,692 | 1,457 | ||||||
| Total investments and cash | 2,094,362 | 1,917,715 | ||||||
| Premiums receivable | 189,378 | 170,522 | ||||||
| Prepaid reinsurance premiums | 163,248 | 188,874 | ||||||
| Reinsurance recoverable on paid losses | 93,287 | 67,227 | ||||||
| Reinsurance recoverable on unpaid losses and loss adjustment expenses | 818,397 | 853,793 | ||||||
| Deferred income tax, net | 25,233 | 54,736 | ||||||
| Deferred policy acquisition costs | 59,480 | 47,618 | ||||||
| Accrued investment income | 16,596 | 17,411 | ||||||
| Goodwill and other intangible assets | 7,010 | 6,622 | ||||||
| Other assets | 26,306 | 25,062 | ||||||
| Total assets | $ | 3,493,297 | $ | 3,349,580 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities: | ||||||||
| Reserves for losses and loss adjustment expenses | $ | 1,903,204 | $ | 1,853,664 | ||||
| Unearned premiums | 491,410 | 480,665 | ||||||
| Reinsurance balances payable | 111,494 | 140,319 | ||||||
| Senior notes | 113,979 | 123,794 | ||||||
| Federal income taxes payable | 6,563 | 5,874 | ||||||
| Accounts payable and other liabilities | 55,692 | 55,947 | ||||||
| Total liabilities | 2,682,342 | 2,660,263 | ||||||
| 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 17,197,419 shares | ||||||||
| as of September 2009 and 17,080,826 shares as of December 2008 | 1,720 | 1,708 | ||||||
| Additional paid-in capital | 304,000 | 298,872 | ||||||
| Retained earnings | 463,858 | 406,776 | ||||||
| Treasury stock, at cost (224,754 shares for both 2009 and 2008) | (11,540 | ) | (11,540 | ) | ||||
| Accumulated other comprehensive income (loss) | 52,917 | (6,499 | ) | |||||
| Total stockholders' equity | 810,955 | 689,317 | ||||||
| Total liabilities and stockholders' equity | $ | 3,493,297 | $ | 3,349,580 | ||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
| Gross Written Premiums: | Three Months | Nine Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 53,129 | $ | 53,247 | 0 | % | $ | 187,452 | $ | 189,202 | -1 | % | ||||||||||||
| Property Casualty | 93,302 | 103,180 | -10 | % | 272,127 | 311,053 | -13 | % | ||||||||||||||||
| Professional Liability | 33,569 | 25,706 | 31 | % | 101,789 | 71,430 | 43 | % | ||||||||||||||||
| 180,000 | 182,133 | -1 | % | 561,368 | 571,685 | -2 | % | |||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 33,960 | 34,917 | -3 | % | 140,256 | 143,570 | -2 | % | ||||||||||||||||
| Property Casualty | 20,024 | 25,586 | -22 | % | 59,058 | 74,671 | -21 | % | ||||||||||||||||
| Professional Liability | 11,207 | 10,307 | 9 | % | 32,497 | 29,376 | 11 | % | ||||||||||||||||
| 65,191 | 70,810 | -8 | % | 231,811 | 247,617 | -6 | % | |||||||||||||||||
| Total | $ | 245,191 | $ | 252,943 | -3 | % | $ | 793,179 | $ | 819,302 | -3 | % | ||||||||||||
| Net Written Premiums: | Three Months | Nine Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 39,632 | $ | 29,983 | 32 | % | $ | 133,047 | $ | 112,439 | 18 | % | ||||||||||||
| Property Casualty | 57,567 | 61,131 | -6 | % | 183,247 | 203,528 | -10 | % | ||||||||||||||||
| Professional Liability | 18,834 | 15,019 | 25 | % | 59,180 | 42,658 | 39 | % | ||||||||||||||||
| 116,033 | 106,133 | 9 | % | 375,474 | 358,625 | 5 | % | |||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 23,816 | 22,448 | 6 | % | 113,867 | 99,627 | 14 | % | ||||||||||||||||
| Property Casualty | 11,116 | 5,682 | 96 | % | 33,781 | 26,147 | 29 | % | ||||||||||||||||
| Professional Liability | 5,036 | 6,055 | -17 | % | 16,538 | 17,928 | -8 | % | ||||||||||||||||
| 39,968 | 34,185 | 17 | % | 164,186 | 143,702 | 14 | % | |||||||||||||||||
| Total | $ | 156,001 | $ | 140,318 | 11 | % | $ | 539,660 | $ | 502,327 | 7 | % | ||||||||||||
| Net Earned Premiums: | Three Months | Nine Months | ||||||||||||||||||||||
| Insurance Companies: | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| Marine | $ | 42,620 | $ | 34,091 | 25 | % | $ | 114,459 | $ | 93,655 | 22 | % | ||||||||||||
| Property Casualty | 60,380 | 63,740 | -5 | % | 188,860 | 205,395 | -8 | % | ||||||||||||||||
| Professional Liability | 19,804 | 14,616 | 35 | % | 55,998 | 43,077 | 30 | % | ||||||||||||||||
| 122,804 | 112,447 | 9 | % | 359,317 | 342,127 | 5 | % | |||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Marine | 33,945 | 31,132 | 9 | % | 102,158 | 91,253 | 12 | % | ||||||||||||||||
| Property Casualty | 9,126 | 5,350 | 71 | % | 28,250 | 22,892 | 23 | % | ||||||||||||||||
| Professional Liability | 5,396 | 5,111 | 6 | % | 16,360 | 16,211 | 1 | % | ||||||||||||||||
| 48,467 | 41,593 | 17 | % | 146,768 | 130,356 | 13 | % | |||||||||||||||||
| Total | $ | 171,271 | $ | 154,040 | 11 | % | $ | 506,085 | $ | 472,483 | 7 | % | ||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2009
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premiums | $ | 180,000 | $ | 65,191 | $ | - | $ | 245,191 | ||||||||
| Net written premiums | 116,033 | 39,968 | - | 156,001 | ||||||||||||
| Net earned premiums | 122,804 | 48,467 | - | 171,271 | ||||||||||||
| Net losses and loss adjustment expenses | (75,838 | ) | (31,753 | ) | - | (107,591 | ) | |||||||||
| Commission expenses | (15,346 | ) | (7,835 | ) | 329 | (22,852 | ) | |||||||||
| Other operating expenses | (27,194 | ) | (7,835 | ) | - | (35,029 | ) | |||||||||
| Other income (expense) | 1,301 | 280 | (329 | ) | 1,252 | |||||||||||
| Underwriting profit (loss) | 5,727 | 1,324 | - | 7,051 | ||||||||||||
| Investment income | 16,597 | 2,361 | 152 | 19,110 | ||||||||||||
| Net realized gains (losses) | 5,710 | 425 | - | 6,135 | ||||||||||||
| Other operating expenses | - | - | 11 | 11 | ||||||||||||
| Other income (expense) | - | - | (11 | ) | (11 | ) | ||||||||||
| Interest expense | - | - | (2,042 | ) | (2,042 | ) | ||||||||||
| Income (loss) before income taxes | 28,034 | 4,110 | (1,890 | ) | 30,254 | |||||||||||
| Income tax expense (benefit) | 7,973 | 1,510 | (661 | ) | 8,822 | |||||||||||
| Net income (loss) | $ | 20,061 | $ | 2,600 | $ | (1,229 | ) | $ | 21,432 | |||||||
| Loss and loss expenses ratio | 61.8 | % | 65.5 | % | 62.8 | % | ||||||||||
| Commission expense ratio | 12.5 | % | 16.2 | % | 13.3 | % | ||||||||||
| Other operating expenses ratio (1) | 21.1 | % | 15.6 | % | 19.8 | % | ||||||||||
| Combined ratio | 95.4 | % | 97.3 | % | 95.9 | % | ||||||||||
| (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
September 30, 2008
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premiums | $ | 182,133 | $ | 70,810 | $ | - | $ | 252,943 | ||||||||
| Net written premiums | 106,133 | 34,185 | - | 140,318 | ||||||||||||
| Net earned premiums | 112,447 | 41,593 | - | 154,040 | ||||||||||||
| Net losses and loss adjustment expenses | (78,346 | ) | (34,923 | ) | - | (113,269 | ) | |||||||||
| Commission expenses | (13,823 | ) | (8,534 | ) | - | (22,357 | ) | |||||||||
| Other operating expenses | (22,802 | ) | (7,799 | ) | - | (30,601 | ) | |||||||||
| Other income (expense) | 279 | (390 | ) | - | (111 | ) | ||||||||||
| Underwriting profit (loss) | (2,245 | ) | (10,053 | ) | - | (12,298 | ) | |||||||||
| Investment income | 15,973 | 3,074 | 275 | 19,322 | ||||||||||||
| Net realized gains (losses) | (5,207 | ) | (309 | ) | - | (5,516 | ) | |||||||||
| Interest expense | - | - | (2,218 | ) | (2,218 | ) | ||||||||||
| Income (loss) before income taxes | 8,521 | (7,288 | ) | (1,943 | ) | (710 | ) | |||||||||
| Income tax expense (benefit) | 1,458 | (2,489 | ) | (680 | ) | (1,711 | ) | |||||||||
| Net income (loss) | $ | 7,063 | $ | (4,799 | ) | $ | (1,263 | ) | $ | 1,001 | ||||||
| Loss and loss expenses ratio | 69.7 | % | 84.0 | % | 73.5 | % | ||||||||||
| Commission expense ratio | 12.3 | % | 20.5 | % | 14.5 | % | ||||||||||
| Other operating expenses ratio (1) | 20.0 | % | 19.7 | % | 19.9 | % | ||||||||||
| Combined ratio | 102.0 | % | 124.2 | % | 107.9 | % | ||||||||||
| (1) The Other operating expenses ratio includes Other income (expense). | ||||||||||||||||
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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2009
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premiums | $ | 561,368 | $ | 231,811 | $ | - | $ | 793,179 | ||||||||
| Net written premiums | 375,474 | 164,186 | - | 539,660 | ||||||||||||
| Net earned premiums | 359,317 | 146,768 | - | 506,085 | ||||||||||||
| Net losses and loss adjustment expenses | (214,834 | ) | (93,732 | ) | - | (308,566 | ) | |||||||||
| Commission expenses | (45,374 | ) | (26,533 | ) | 329 | (71,578 | ) | |||||||||
| Other operating expenses | (78,660 | ) | (19,933 | ) | - | (98,593 | ) | |||||||||
| Other income (expense) | 3,157 | 879 | (329 | ) | 3,707 | |||||||||||
| Underwriting profit | 23,606 | 7,449 | - | 31,055 | ||||||||||||
| Investment income | 49,043 | 7,060 | 406 | 56,509 | ||||||||||||
| Net realized losses | (987 | ) | (2,988 | ) | - | (3,975 | ) | |||||||||
| Other operating expenses | - | - | 21 | 21 | ||||||||||||
| Other income (expense) | - | - | 2,979 | 2,979 | ||||||||||||
| Interest expense | - | - | (6,411 | ) | (6,411 | ) | ||||||||||
| Income (loss) before income taxes | 71,662 | 11,521 | (3,005 | ) | 80,178 | |||||||||||
| Income tax expense (benefit) | 19,677 | 4,470 | (1,051 | ) | 23,096 | |||||||||||
| Net income (loss) | $ | 51,985 | $ | 7,051 | $ | (1,954 | ) | $ | 57,082 | |||||||
| Loss and loss expenses ratio | 59.8 | % | 63.9 | % | 61.0 | % | ||||||||||
| Commission expense ratio | 12.6 | % | 18.1 | % | 14.1 | % | ||||||||||
| Other operating expenses ratio (1) | 21.0 | % | 13.0 | % | 18.8 | % | ||||||||||
| Combined ratio | 93.4 | % | 95.0 | % | 93.9 | % | ||||||||||
| (1) The Other operating expenses ratio includes Other income (expense). | ||||||||||||||||
News Release
Page 11
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2008
($ in thousands)
| Insurance | Lloyd's | |||||||||||||||
| Companies | Operations | Corporate | Total | |||||||||||||
| Gross written premiums | $ | 571,685 | $ | 247,617 | $ | - | $ | 819,302 | ||||||||
| Net written premiums | 358,625 | 143,702 | - | 502,327 | ||||||||||||
| Net earned premiums | 342,127 | 130,356 | - | 472,483 | ||||||||||||
| Net losses and loss adjustment expenses | (207,927 | ) | (85,651 | ) | - | (293,578 | ) | |||||||||
| Commission expenses | (41,494 | ) | (25,301 | ) | - | (66,795 | ) | |||||||||
| Other operating expenses | (69,502 | ) | (24,092 | ) | - | (93,594 | ) | |||||||||
| Other income (expense) | 2,053 | (415 | ) | - | 1,638 | |||||||||||
| Underwriting profit (loss) | 25,257 | (5,103 | ) | - | 20,154 | |||||||||||
| Investment income | 47,031 | 8,927 | 933 | 56,891 | ||||||||||||
| Net realized gains (losses) | (13,362 | ) | (206 | ) | - | (13,568 | ) | |||||||||
| Interest expense | - | - | (6,652 | ) | (6,652 | ) | ||||||||||
| Income (loss) before income taxes | 58,926 | 3,618 | (5,719 | ) | 56,825 | |||||||||||
| Income tax expense (benefit) | 15,767 | 1,388 | (2,002 | ) | 15,153 | |||||||||||
| Net income (loss) | $ | 43,159 | $ | 2,230 | $ | (3,717 | ) | $ | 41,672 | |||||||
| Loss and loss expenses ratio | 60.8 | % | 65.7 | % | 62.1 | % | ||||||||||
| Commission expense ratio | 12.1 | % | 19.4 | % | 14.1 | % | ||||||||||
| Other operating expenses ratio (1) | 19.7 | % | 18.8 | % | 19.5 | % | ||||||||||
| Combined ratio | 92.6 | % | 103.9 | % | 95.7 | % | ||||||||||
| (1) The Other operating expenses ratio includes Other income (expense). | ||||||||||||||||
News Release
Page 12
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
| Three Months Ended September 30, 2009 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premiums | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 42,620 | $ | 31,611 | $ | 13,259 | 74.2 | % | 31.1 | % | 105.3 | % | ||||||||||||
| Property Casualty | 60,380 | 23,881 | 21,330 | 39.6 | % | 35.3 | % | 74.9 | % | |||||||||||||||
| Professional Liability | 19,804 | 20,346 | 6,650 | 102.7 | % | 33.6 | % | 136.3 | % | |||||||||||||||
| 122,804 | 75,838 | 41,239 | 61.8 | % | 33.6 | % | 95.4 | % | ||||||||||||||||
| Lloyd's Operations | 48,467 | 31,753 | 15,390 | 65.5 | % | 31.8 | % | 97.3 | % | |||||||||||||||
| Total | $ | 171,271 | $ | 107,591 | $ | 56,629 | 62.8 | % | 33.1 | % | 95.9 | % | ||||||||||||
| Three Months Ended September 30, 2008 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premiums | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 34,091 | $ | 21,910 | $ | 8,588 | 64.3 | % | 25.2 | % | 89.5 | % | ||||||||||||
| Property Casualty | 63,740 | 48,426 | 22,574 | 76.0 | % | 35.4 | % | 111.4 | % | |||||||||||||||
| Professional Liability | 14,616 | 8,010 | 5,184 | 54.8 | % | 35.5 | % | 90.3 | % | |||||||||||||||
| 112,447 | 78,346 | 36,346 | 69.7 | % | 32.3 | % | 102.0 | % | ||||||||||||||||
| Lloyd's Operations | 41,593 | 34,923 | 16,723 | 84.0 | % | 40.2 | % | 124.2 | % | |||||||||||||||
| Total | $ | 154,040 | $ | 113,269 | $ | 53,069 | 73.5 | % | 34.4 | % | 107.9 | % | ||||||||||||
| Effect of Hurricanes Gustav and Ike on the Three Months Ended Sept. 30, 2008 | ||||||||||||||||||||||||
| Property Casualty | $ | (5,778 | ) | $ | 9,103 | $ | - | 34.9 | % | 4.5 | % | 39.4 | % | |||||||||||
| Lloyd's Operations | (6,806 | ) | 6,397 | - | 25.0 | % | 5.7 | % | 30.7 | % | ||||||||||||||
| Total | $ | (12,584 | ) | $ | 15,500 | $ | - | 14.9 | % | 2.5 | % | 17.4 | % | |||||||||||
| Amounts | Loss Ratio | |||||||||||||||||||||||
| Net Incurred Loss Activity | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||||||
| For the Three Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies: | ||||||||||||||||||||||||
| Loss and LAE payments | $ | 69,215 | $ | 36,929 | 56.4 | % | 32.8 | % | ||||||||||||||||
| Change in reserves | 6,623 | 41,417 | 5.4 | % | 36.9 | % | ||||||||||||||||||
| Net incurred loss and LAE | 75,838 | 78,346 | 61.8 | % | 69.7 | % | ||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Loss and LAE payments | 20,736 | 22,320 | 42.8 | % | 53.7 | % | ||||||||||||||||||
| Change in reserves | 11,017 | 12,603 | 22.7 | % | 30.3 | % | ||||||||||||||||||
| Net incurred loss and LAE | 31,753 | 34,923 | 65.5 | % | 84.0 | % | ||||||||||||||||||
| Total | ||||||||||||||||||||||||
| Loss and LAE payments | 89,951 | 59,249 | 52.5 | % | 38.4 | % | ||||||||||||||||||
| Change in reserves | 17,640 | 54,020 | 10.3 | % | 35.1 | % | ||||||||||||||||||
| Net incurred loss and LAE | $ | 107,591 | $ | 113,269 | 62.8 | % | 73.5 | % | ||||||||||||||||
| Impact of Prior Years Reserves | Amounts | Loss Ratio Impact | ||||||||||||||||||||||
| Favorable / (Unfavorable) Development | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||||||
| For the Three Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies | $ | 3,220 | $ | 5,600 | 2.6 | % | 5.0 | % | ||||||||||||||||
| Lloyd's Operations | 630 | 2,420 | 1.3 | % | 5.8 | % | ||||||||||||||||||
| Total | $ | 3,850 | $ | 8,020 | 2.2 | % | 5.2 | % | ||||||||||||||||
News Release
Page 13
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
| Nine Months Ended September 30, 2009 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premiums | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 114,459 | $ | 83,239 | $ | 35,453 | 72.7 | % | 31.0 | % | 103.7 | % | ||||||||||||
| Property Casualty | 188,860 | 80,331 | 65,642 | 42.5 | % | 34.8 | % | 77.3 | % | |||||||||||||||
| Professional Liability | 55,998 | 51,264 | 19,782 | 91.5 | % | 35.3 | % | 126.8 | % | |||||||||||||||
| 359,317 | 214,834 | 120,877 | 59.8 | % | 33.6 | % | 93.4 | % | ||||||||||||||||
| Lloyd's Operations | 146,768 | 93,732 | 45,587 | 63.9 | % | 31.1 | % | 95.0 | % | |||||||||||||||
| Total | $ | 506,085 | $ | 308,566 | $ | 166,464 | 61.0 | % | 32.9 | % | 93.9 | % | ||||||||||||
| Nine Months Ended September 30, 2008 | ||||||||||||||||||||||||
| Net | Losses | |||||||||||||||||||||||
| Earned | and LAE | Underwriting | Combined Ratio | |||||||||||||||||||||
| Insurance Companies: | Premiums | Incurred | Expenses | Loss | Expense | Total | ||||||||||||||||||
| Marine | $ | 93,655 | $ | 58,208 | $ | 27,890 | 62.2 | % | 29.8 | % | 92.0 | % | ||||||||||||
| Property Casualty | 205,395 | 125,430 | 65,751 | 61.1 | % | 32.0 | % | 93.1 | % | |||||||||||||||
| Professional Liability | 43,077 | 24,289 | 15,302 | 56.4 | % | 35.5 | % | 91.9 | % | |||||||||||||||
| 342,127 | 207,927 | 108,943 | 60.8 | % | 31.8 | % | 92.6 | % | ||||||||||||||||
| Lloyd's Operations | 130,356 | 85,651 | 49,808 | 65.7 | % | 38.2 | % | 103.9 | % | |||||||||||||||
| Total | $ | 472,483 | $ | 293,578 | $ | 158,751 | 62.1 | % | 33.6 | % | 95.7 | % | ||||||||||||
| Effect of Hurricanes Gustav and Ike on the Nine Months Ended Sept. 30, 2008 | ||||||||||||||||||||||||
| Property Casualty | $ | (5,778 | ) | $ | 9,103 | $ | - | 11.9 | % | 1.7 | % | 13.6 | % | |||||||||||
| Lloyd's Operations | (6,806 | ) | 6,397 | - | 7.9 | % | 1.9 | % | 9.8 | % | ||||||||||||||
| Total | $ | (12,584 | ) | $ | 15,500 | $ | - | 4.8 | % | 0.9 | % | 5.7 | % | |||||||||||
| Amounts | Loss Ratio | |||||||||||||||||||||||
| Net Incurred Loss Activity | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||||||
| For the Nine Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies: | ||||||||||||||||||||||||
| Loss and LAE payments | $ | 171,282 | $ | 106,015 | 47.7 | % | 31.0 | % | ||||||||||||||||
| Change in reserves | 43,552 | 101,912 | 12.1 | % | 29.8 | % | ||||||||||||||||||
| Net incurred loss and LAE | 214,834 | 207,927 | 59.8 | % | 60.8 | % | ||||||||||||||||||
| Lloyd's Operations: | ||||||||||||||||||||||||
| Loss and LAE payments | 52,348 | 52,461 | 35.7 | % | 40.2 | % | ||||||||||||||||||
| Change in reserves | 41,384 | 33,190 | 28.2 | % | 25.5 | % | ||||||||||||||||||
| Net incurred loss and LAE | 93,732 | 85,651 | 63.9 | % | 65.7 | % | ||||||||||||||||||
| Total | ||||||||||||||||||||||||
| Loss and LAE payments | 223,630 | 158,476 | 44.2 | % | 33.5 | % | ||||||||||||||||||
| Change in reserves | 84,936 | 135,102 | 16.8 | % | 28.6 | % | ||||||||||||||||||
| Net incurred loss and LAE | $ | 308,566 | $ | 293,578 | 61.0 | % | 62.1 | % | ||||||||||||||||
| Impact of Prior Years Reserves | Amounts | Loss Ratio Impact | ||||||||||||||||||||||
| Favorable / (Unfavorable) Development | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||||||
| For the Nine Months Ended: | 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||
| Insurance Companies | $ | 13,242 | $ | 25,752 | 3.7 | % | 7.5 | % | ||||||||||||||||
| Lloyd's Operations | 5,853 | 6,528 | 4.0 | % | 5.0 | % | ||||||||||||||||||
| Total | $ | 19,095 | $ | 32,280 | 3.8 | % | 6.8 | % | ||||||||||||||||
News Release
Page 14
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
| Case | IBNR | |||||||||||
| Net Loss Reserves, September 30, 2009: | Reserves | Reserves | Total | |||||||||
| Insurance Companies: | ||||||||||||
| Marine | $ | 106,888 | $ | 104,007 | $ | 210,895 | ||||||
| Property Casualty | 127,427 | 348,055 | 475,482 | |||||||||
| Professional Liability | 41,326 | 64,909 | 106,235 | |||||||||
| Total Insurance Companies | 275,641 | 516,971 | 792,612 | |||||||||
| Lloyd's Operations: | ||||||||||||
| Marine | 105,102 | 94,621 | 199,723 | |||||||||
| Property Casualty | 26,065 | 26,525 | 52,590 | |||||||||
| Professional Liability | 8,419 | 31,463 | 39,882 | |||||||||
| Total Lloyd's Operations | 139,586 | 152,609 | 292,195 | |||||||||
| Total Net Loss Reserves | $ | 415,227 | $ | 669,580 | $ | 1,084,807 | ||||||
| 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 15
Page 15
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2009
($ in thousands)
At September 30, 2009, the average quality of the company’s investment portfolio as rated by S&P and Moody’s was AA and Aa, respectively, with an average duration of 4.3 years. The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset-backed commercial paper.
At September 30, 2009, the Company owned two asset-backed securities approximating $0.1 million with subprime mortgage exposures. These securities have an effective maturity of 1.3 years. In addition, the Company owned a total of four collateralized mortgage obligations and asset-backed securities approximating $0.9 million classified as Alt-A which is a credit category between prime and subprime. These securities have an effective maturity of 7.6 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments at September 30, 2009:
| September 30, 2009 | Fair Value | Gross Unrealized Gains | Gross Unrealized (Losses) | Cost or Amortized Cost | OTTI Recognized in OCI | |||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Fixed maturities: | ||||||||||||||||||||
| U.S. Government Treasury bonds, | ||||||||||||||||||||
| agency bonds and foreign government bonds | $ | 514,158 | $ | 10,855 | $ | (54 | ) | $ | 503,357 | $ | - | |||||||||
| States, municipalities and political | ||||||||||||||||||||
| subdivisions | 679,417 | 37,072 | (570 | ) | 642,915 | - | ||||||||||||||
| Mortgage- and asset-backed securities | ||||||||||||||||||||
| Mortgage-backed securities | 308,515 | 15,142 | (10 | ) | 293,383 | - | ||||||||||||||
| Collateralized mortgage obligations | 46,126 | - | (12,120 | ) | 58,246 | (9,818 | ) | |||||||||||||
| Asset-backed securities | 20,088 | 793 | (119 | ) | 19,414 | (48 | ) | |||||||||||||
| Commercial mortgage-backed securities | 106,459 | 584 | (6,458 | ) | 112,333 | - | ||||||||||||||
| Subtotal | 481,188 | 16,519 | (18,707 | ) | 483,376 | (9,866 | ) | |||||||||||||
| Corporate bonds | 203,023 | 10,166 | (602 | ) | 193,459 | - | ||||||||||||||
| Total fixed maturities | 1,877,786 | 74,612 | (19,933 | ) | 1,823,107 | (9,866 | ) | |||||||||||||
| Equity securities - common stocks | 57,949 | 12,843 | (72 | ) | 45,178 | - | ||||||||||||||
| Cash | 21,692 | - | - | 21,692 | - | |||||||||||||||
| Short-term investments | 136,935 | - | - | 136,935 | - | |||||||||||||||
| Total | $ | 2,094,362 | $ | 87,455 | $ | (20,005 | ) | $ | 2,026,912 | $ | (9,866 | ) | ||||||||
News Release
Page 16
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2009
($ in thousands)
The following four tables set forth our mortgage-backed securities, collateralized mortgage obligations, asset-backed securities and commercial mortgage-backed securities by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at September 30, 2009:
| Gross | Gross | Cost or | ||||||||||||||
| Fair | Unrealized | Unrealized | Amortized | |||||||||||||
| Mortgage-backed securities: | Value | Gains | (Losses) | Cost | ||||||||||||
| GNMA | $ | 46,725 | $ | 1,485 | $ | (9 | ) | $ | 45,249 | |||||||
| FNMA | 191,824 | 10,332 | (1 | ) | 181,493 | |||||||||||
| FHLMC | 69,966 | 3,325 | - | 66,641 | ||||||||||||
| Total | $ | 308,515 | $ | 15,142 | $ | (10 | ) | $ | 293,383 | |||||||
| Gross | Gross | Cost or | ||||||||||||||
| Fair | Unrealized | Unrealized | Amortized | |||||||||||||
| Collateralized mortgage obligations: | Value | Gains | (Losses) | Cost | ||||||||||||
| Prime | $ | 45,192 | $ | - | $ | (11,736 | ) | $ | 56,928 | |||||||
| Alt-A | 934 | - | (384 | ) | 1,318 | |||||||||||
| Subprime | - | - | - | - | ||||||||||||
| Total | $ | 46,126 | $ | - | $ | (12,120 | ) | $ | 58,246 | |||||||
| Gross | Gross | Cost or | ||||||||||||||
| Fair | Unrealized | Unrealized | Amortized | |||||||||||||
| Asset-backed securities: | Value | Gains | (Losses) | Cost | ||||||||||||
| Prime | $ | 19,956 | $ | 793 | $ | (70 | ) | $ | 19,233 | |||||||
| Alt-A | - | - | - | - | ||||||||||||
| Subprime | 132 | - | (49 | ) | 181 | |||||||||||
| Total | $ | 20,088 | $ | 793 | $ | (119 | ) | $ | 19,414 | |||||||
| Gross | Gross | Cost or | ||||||||||||||
| Fair | Unrealized | Unrealized | Amortized | |||||||||||||
| Commercial mortgage-backed securities: | Value | Gains | (Losses) | Cost | ||||||||||||
| Prime | $ | 106,459 | $ | 584 | $ | (6,458 | ) | $ | 112,333 | |||||||
| Alt-A | - | - | - | - | ||||||||||||
| Subprime | - | - | - | - | ||||||||||||
| Total | $ | 106,459 | $ | 584 | $ | (6,458 | ) | $ | 112,333 | |||||||