Exhibit 99.1
Navigators Reports First Quarter Earnings; Navigators' Earnings Up 22%
NEW YORK--(BUSINESS WIRE)--May 1, 2006--The Navigators Group, Inc.
(NASDAQ:NAVG) reported net income of $15,525,000 or $0.93 per share
for the 2006 first quarter based on 16,757,000 diluted shares compared
to net income of $9,699,000 or $0.76 per share for the 2005 first
quarter based on 12,760,000 diluted shares. The 2006 first quarter
results include a net realized capital loss of $0.02 per share and the
2005 first quarter results include a net realized capital gain of
$0.01 per share.
Gross written premium increased 22% over the 2005 first quarter,
up 25% for the Insurance Companies and 16% for the Lloyd's Operations.
Net written premium increased 22% compared to the first quarter of
2005. The growth rate would have approximated 30% excluding the net
impact on the 2005 first quarter of the cancellation of a specialty
quota share reinsurance treaty.
The combined loss and expense ratio for the 2006 first quarter was
89.4% compared to 91.7% for the comparable 2005 period. These combined
ratios reflect the change in accounting for segment reporting adopted
in the 2006 first quarter commencing with the elimination of the
marine pool. The 2006 first quarter combined ratio was reduced by 3.7
loss ratio points for a net loss reserve redundancy of $3.8 million
relating to prior years. The 2006 first quarter net paid loss ratio
was 37.5% compared to 39.3% for the comparable 2005 period.
Navigators' Chief Executive Officer Stan Galanski commented, "Our
first quarter results were characterized by favorable loss experience
and strong premium growth, particularly in Marine & Energy and
Specialty. Market conditions continue to support profitable
underwriting, with an especially strong pricing environment for
offshore energy. We are retaining more of the business that we write,
reflecting the increased levels of policyholder surplus resulting from
capital raising in 2005 and 2006. We continue to respond to
opportunities to expand our intellectual capital base, with targeted
hirings domestically and in the United Kingdom to support ongoing
geographical and product line expansion."
Net investment income for the 2006 first quarter was $12,550,000,
an increase of 65% compared to $7,622,000 for the 2005 comparable
period. Consolidated cash flow from operations for the 2006 first
quarter was $29,478,000 compared to $65,190,000 for the 2005
comparable period. The pre-tax investment yield for the 2006 first
quarter was 4.3% compared to 3.5% for the comparable 2005 period.
The 2006 cash flow from operations was reduced by gross loss
payments of approximately $10,200,000 for 2005 hurricane losses and
$1,900,000 for a settled asbestos claim of which $4,000,000 and
$1,100,000, respectively, are expected to be collected from reinsurers
in subsequent accounting periods. The 2005 cash flow from operations
included $24,000,000 attributable to the settlement of the 2002
underwriting year reinsurance to close premium recorded by our Lloyd's
Operations in the 2004 fourth quarter.
Effective in 2006, the Company classifies its business into two
underwriting segments, consisting of the Insurance Companies and
Lloyd's Operations, and a Corporate segment. Segment data for each of
the two underwriting operations include allocations of revenues and
expenses of Navigators Agencies and Parent Company expenses and
related income tax amounts previously reported separately. Segment
data for 2005 and prior periods reflect this change in segment
reporting.
Stockholders' equity was $478,316,000 or $28.70 per share at March
31, 2006 compared to $470,238,000 or $28.30 per share at December 31,
2005. Statutory surplus of Navigators Insurance Company was
$374,411,000 at March 31, 2006.
The Company will hold a conference call on Tuesday, May 2, 2006
starting at 8:30 a.m. ET to discuss the first quarter's results. To
access the call, please dial 1-866-800-8652, using confirmation code
17440771. Internationally, the call may be accessed by dialing
617-614-2705 using the same confirmation code. To listen via live
audio webcast, please visit the Company's website (www.navg.com) at
least ten minutes prior to the start of the call and click on the May
2nd Live Audio Webcast link. The webcast will also be available as a
replay at the same location starting one hour after the call is
finished.
The Navigators Group, Inc. is an international insurance holding
company with insurance company operations, underwriting management
companies, and operations at Lloyd's of London. Headquartered in New
York City, Navigators has offices in major insurance centers in the
United States, the United Kingdom and Belgium.
This press release may contain "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995.
Whenever used in this release, the words "estimate", "expect",
"believe" or similar expressions are intended to identify such
forward-looking statements. We cannot assure that results which we
anticipate will be achieved, since results may differ materially
because of known and unknown risks and uncertainties which we face.
Please refer to Navigators' most recent Form 10-K and its other
filings with the Securities and Exchange Commission for a description
of Navigators' business and the important factors which may affect
that business. Navigators undertakes no obligation to publicly update
or revise any forward-looking statement.
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($'s in thousands, except per share data)
Three Months Ended
March 31,
------------------
Financial Highlights 2006 2005 Change
- -------------------- ------- ------ ------
Gross written premium $263,784 $216,996 22%
Net written premium 143,426 117,090 22%
Revenues:
Net earned premium 103,722 77,538 34%
Commission income 1,286 1,270 1%
Investment Income 12,550 7,622 65%
Net realized capital gains (losses) (424) 167 NM
Other income 186 897 -79%
--------- --------
Total revenues 117,320 87,494 34%
--------- --------
Operating expenses:
Net losses and loss adjustment
expenses incurred 62,117 46,221 34%
Commission expense 13,705 9,604 43%
Other operating expenses 18,408 17,444 6%
--------- --------
Total operating expenses 94,230 73,269 29%
--------- --------
Income before income taxes 23,090 14,225 62%
--------- --------
Income tax expense (benefit):
Current 9,332 5,172 80%
Deferred (1,767) (646) NM
--------- --------
Income tax expense 7,565 4,526 67%
--------- --------
Net income $15,525 $9,699 60%
========= ========
Per Share Data
- --------------
Net income per common share:
Basic $0.93 $0.77 22%
Diluted $0.93 $0.76 22%
Average shares outstanding:
Basic 16,639 12,677
Diluted 16,757 12,760
Underwriting Ratios
- -------------------
Loss Ratio 59.9% 59.6%
Expense Ratio 29.5% 32.1%
---------- -------
Combined Ratio 89.4% 91.7%
Balance Sheet Data
- ------------------ Mar. 31, 2006 Dec. 31, 2005
-------- ---------
Stockholders' equity $478,316 $470,238 2%
Book value per share $28.70 $28.30 1%
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($'s in thousands)
March 31, December 31,
2006 2005
----------- -----------
ASSETS
Investments and cash:
Fixed maturities, available-for-sale,
at fair value
(amortized cost: 2006, $1,039,859; 2005,
$986,726) $1,022,603 $984,113
Equity securities, available-for-sale,
at fair value (cost: 2006, $23,637;
2005, $19,667) 25,181 20,911
Short-term investments, at cost which
approximates fair value 132,817 164,047
Cash 14,069 13,165
----------- -----------
Total investments and cash 1,194,670 1,182,236
----------- -----------
Premiums in course of collection 210,039 155,977
Commissions receivable 3,489 3,467
Prepaid reinsurance premiums 168,114 136,341
Reinsurance receivable on paid losses 40,091 37,055
Reinsurance receivable on unpaid losses and
loss adjustment expenses 1,006,505 979,015
Net deferred income tax benefit 34,961 28,317
Deferred policy acquisition costs 44,251 29,697
Accrued investment income 10,548 10,297
Goodwill and other intangible assets 7,399 7,341
Other assets 20,246 13,506
----------- -----------
Total assets $2,740,313 $2,583,249
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for losses and loss adjustment
expenses $1,608,735 $1,557,991
Unearned premium 388,113 316,516
Reinsurance balances payable 193,113 180,059
Federal income tax payable 6,777 1,274
Payable for securities purchased - 823
Accounts payable and other liabilities 65,259 56,348
----------- -----------
Total liabilities 2,261,997 2,113,011
----------- -----------
Stockholders' equity:
Preferred stock, $.10 par value, authorized
1,000,000 shares, none issued - -
Common stock, $.10 par value, 20,000,000
shares authorized for 2006
and 2005; issued and
outstanding: 16,667,681 for 2006 and
16,616,781 for 2005 1,667 1,662
Additional paid-in capital 284,099 282,463
Retained earnings 202,426 186,901
Accumulated other comprehensive income (loss) (9,876) (788)
----------- -----------
Total stockholders' equity 478,316 470,238
----------- -----------
Total liabilities and stockholders' equity $2,740,313 $2,583,249
=========== ===========
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($'s in thousands)
Gross Written Premium: First Quarter
------------------------
Insurance Companies: 2006 2005 Change
---------------------------------
Marine $81,794 $68,284 20%
Specialty 62,131 42,949 45%
Professional Liability 18,134 17,930 1%
Assumed from Lloyd's 216 125 NM
Other (includes run-off) (28) - NM
------------------------
162,247 129,288 25%
Lloyd's Operations:
Marine 90,855 73,931 23%
Professional Liability 2,020 - NM
Other 8,873 13,899 -36%
------------------------
101,748 87,830 16%
Intercompany elimination (211) (122) NM
------------------------
Total $263,784 $216,996 22%
========================
Net Written Premium: First Quarter
------------------------
Insurance Companies: 2006 2005 Change
---------------------------------
Marine $41,515 $30,347 37%
Specialty 40,519 36,398 11%
Professional Liability 7,626 6,679 14%
Assumed from Lloyd's 13 126 NM
Other (includes run-off) (29) 31 NM
------------------------
89,644 73,581 22%
Lloyd's Operations:
Marine 51,403 40,060 28%
Professional Liability 829 - NM
Other 1,550 3,449 -55%
------------------------
53,782 43,509 24%
------------------------
Total $143,426 $117,090 22%
========================
Net Earned Premium: First Quarter
------------------------
Insurance Companies: 2006 2005 Change
---------------------------------
Marine $22,501 $19,879 13%
Specialty 36,134 20,022 80%
Professional Liability 8,732 6,717 30%
Assumed from Lloyd's 13 711 NM
Other (includes run-off) (28) 34 NM
------------------------
67,352 47,363 42%
Lloyd's Operations:
Marine 35,716 29,627 21%
Professional Liability 241 - NM
Other 413 548 -25%
------------------------
36,370 30,175 21%
------------------------
Total $103,722 $77,538 34%
========================
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information (1)
Three Months Ended
March 31, 2006
($'s in thousands)
Insurance Lloyd's
Companies Operations Corporate Total (2)
--------- ---------- --------- ---------
Gross premium written $162,247 $101,748 $263,784
Net premium written 89,644 53,782 143,426
Net earned premium 67,352 36,370 103,722
Net losses and loss
adjustment expenses (39,954) (22,163) (62,117)
Commission expense (7,124) (6,581) (13,705)
Other operating expenses (13,433) (4,975) (18,408)
Commission and other income /
(expense) 1,206 266 1,472
--------- ---------- ---------
Underwriting profit 8,047 2,917 10,964
Investment income 10,410 2,007 $133 12,550
Net realized capital gains /
(losses) (75) (349) - (424)
--------- ---------- --------- ---------
Income before income tax
expense 18,382 4,575 133 23,090
Income tax expense 5,916 1,601 48 7,565
--------- ---------- --------- ---------
Net Income $12,466 $2,974 $85 $15,525
========= ========== ========= =========
Loss and loss expenses ratio 59.3% 60.9% 59.9%
Commission expense ratio 10.6% 18.1% 13.2%
Other operating expense ratio
(3) 18.2% 13.0% 16.3%
--------- ---------- ---------
Combined ratio 88.1% 92.0% 89.4%
========= ========== =========
(1) Effective in 2006, the Company classifies its business into
two underwriting segments, Insurance Companies and Lloyd's Operations,
and a Corporate segment. Segment data for each of the two underwriting
operations include allocations of revenues and expenses of Navigators
Agencies and Parent Company expenses and related income tax amounts
previously reported separately. Segment data for 2005 and prior
periods have been restated to reflect this change in segment
reporting.
(2) Certain amounts included in gross written premium, commission
expense and other income relate to inter-segment transactions,
accordingly the sum for each segment does not agree to the totals
shown in the table above.
(3) The other operating expense ratio is adjusted to include
commission and other income/(expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information (1)
Three Months Ended
March 31, 2005
($'s in thousands)
Insurance Lloyd's
Companies Operations Corporate Total (2)
--------- ---------- --------- ---------
Gross premium written $129,288 $87,830 $216,996
Net premium written 73,581 43,509 117,090
Net earned premium 47,363 30,175 77,538
Net losses and loss
adjustment expenses (28,842) (17,379) (46,221)
Commission expense (4,723) (4,881) (9,604)
Other operating expenses (11,939) (5,505) (17,444)
Commission and other income
/ (expense) 1,271 896 2,167
--------- ---------- ---------
Underwriting profit 3,130 3,306 6,436
Investment income 6,857 749 $16 7,622
Net realized capital gains /
(losses) 266 (99) - 167
--------- ---------- --------- ---------
Income before income tax
expense 10,253 3,956 16 14,225
Income tax expense (benefit) 3,136 1,385 5 4,526
--------- ---------- --------- ---------
Net income $7,117 $2,571 $11 $9,699
========= ========== ========= =========
Loss and loss expenses ratio 60.9% 57.6% 59.6%
Commission expense ratio 10.0% 16.2% 12.4%
Other operating expense
ratio (3) 22.5% 15.2% 19.7%
--------- ---------- ---------
Combined ratio 93.4% 89.0% 91.7%
========= ========== =========
(1) Effective in 2006, the Company classifies its business into
two underwriting segments, Insurance Companies and Lloyd's Operations,
and a Corporate segment. Segment data for each of the two underwriting
operations include allocations of revenues and expenses of Navigators
Agencies and Parent Company expenses and related income tax amounts
previously reported separately. Segment data for 2005 and prior
periods have been restated to reflect this change in segment
reporting.
(2) Certain amounts included in gross written premium, commission
expense and other income relate to inter-segment transactions,
accordingly the sum for each segment does not agree to the totals
shown in the table above.
(3) The other operating expense ratio is adjusted to include
commission and other income/(expense).
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($'s in thousands)
Three Months Ended March 31, 2006
--------------------------------------------------
Net Losses Combined Ratio
Earned and LAE Underwriting --------------
Insurance Companies: Premium Incurred Expenses Loss Expense Total
--------- -------------------- ----- ------- -----
Marine $22,501 $13,500 $6,046 60.0% 26.9% 86.9%
Specialty 36,134 21,157 10,524 58.6% 29.1% 87.7%
Professional
Liability 8,732 5,309 2,711 60.8% 31.0% 91.8%
Assumed from Lloyd's 13 15 (7) NM NM NM
Other (includes run-
off) (28) (27) 77 NM NM NM
--------- -------------------- ----- ------- -----
67,352 39,954 19,351 59.3% 28.8% 88.1%
Lloyd's Operations 36,370 22,163 11,290 61.0% 31.1% 92.1%
--------- -------------------- ----- ------- -----
Total $103,722 $62,117 $30,641 59.9% 29.5% 89.4%
========= ==================== ===== ======= =====
Three Months Ended March 31, 2005
--------------------------------------------------
Net Losses Combined Ratio
Earned and LAE Underwriting --------------
Insurance Companies: Premium Incurred Expenses Loss Expense Total
--------- -------------------- ----- ------- -----
Marine $19,879 $12,743 $6,129 64.1% 30.8% 94.9%
Specialty 20,022 11,533 6,972 57.6% 34.8% 92.4%
Professional
Liability 6,717 4,440 1,913 66.1% 28.5% 94.6%
Assumed from Lloyd's 711 573 321 NM NM NM
Other (includes run-
off) 34 (447) 56 NM NM NM
--------- -------------------- ----- ------- -----
47,363 28,842 15,391 60.9% 32.5% 93.4%
Lloyd's Operations 30,175 17,379 9,490 57.6% 31.4% 89.0%
--------- -------------------- ----- ------- -----
Total $77,538 $46,221 $24,881 59.6% 32.1% 91.7%
========= ==================== ===== ======= =====
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($'s in thousands)
Net Loss Reserves: 3/31/2006 12/31/2005
---------------- ---------------
Insurance Companies:
Marine $166,351 $162,644
Specialty 206,730 193,755
Professional Liability 36,785 33,133
Assumed from Lloyd's
Operations 1,206 1,218
Other (primarily run-off
business) 19,076 19,613
---------------- ---------------
Total Insurance Companies 430,148 410,363
---------------- ---------------
Lloyd's Operations:
Marine 162,817 161,262
Other 9,265 7,351
---------------- ---------------
Total Lloyd's Operations 172,082 168,613
---------------- ---------------
Total net loss reserves $602,230 $578,976
================ ===============
Total net case loss reserves $228,999 $228,423
Total net IBNR loss reserves 373,231 350,553
---------------- ---------------
Total net loss reserves $602,230 $578,976
================ ===============
Quarter ended
Net Incurred Loss Activity: 3/31/2006 3/31/2005
---------------- ---------------
Insurance Companies:
Loss and LAE payments $20,170 $18,399
Change in reserves 19,784 10,443
---------------- ---------------
Net incurred loss and
LAE 39,954 28,842
---------------- ---------------
Lloyd's Operations:
Loss and LAE payments 18,693 12,105
Change in reserves 3,470 5,274
---------------- ---------------
Net incurred loss and LAE 22,163 17,379
---------------- ---------------
Total
Loss and LAE payments 38,863 30,504
Change in reserves 23,254 15,717
---------------- ---------------
Net incurred loss and
LAE $62,117 $46,221
================ ===============
CONTACT: The Navigators Group, Inc.
Paul J. Malvasio, 914-933-6088
Executive Vice President and
Chief Financial Officer
pmalvasio@navg.com
www.navg.com