NAVG
$69.77
Navigators Grp
($.03)
(.04%)
Earnings Details
3rd Quarter September 2018
Wednesday, November 7, 2018 4:01:00 PM
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Summary

Navigators Grp (NAVG) Recent Earnings

Navigators Grp (NAVG) reported 3rd Quarter September 2018 earnings of $0.14 per share on revenue of $377.0 million. The consensus earnings estimate was $0.61 per share on revenue of $374.0 million. Revenue grew 15.5% on a year-over-year basis.

Navigators Group is an international insurance holding company focused on specialty products within the overall property/casualty insurance market.

Results
Reported Earnings
$0.14
Earnings Whisper
-
Consensus Estimate
$0.61
Reported Revenue
$377.0 Mil
Revenue Estimate
$374.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Navigators Reports Third Quarter 2018 Earnings

STAMFORD, Conn., Nov. 07, 2018 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $4.6 million, or $0.15 per diluted share, for the three months ended September 30, 2018 compared to a Net Loss of $(28.0) million, or $(0.95) per diluted share, for the same period in 2017. Net Operating Earnings (Loss)1 were $4.2 million, or $0.14 per diluted share, for the three months ended September 30, 2018 compared to $(29.6) million, or $(1.00) per diluted share, for the same period in 2017.

Gross Written Premiums and Net Written Premiums for the three months ended September 30, 2018 were $455.9 million and $352.4 million, respectively, increasing 13.4% and 19.1%, respectively, from the comparable period in 2017. The Combined Ratio for the three months ended September 30, 2018 was 105.3%, compared to 121.9% for the same period in 2017.

The current quarter included Net Losses and Loss Adjustment Expenses of $11.8 million, net of reinsurance reinstatement premiums, from Typhoon Jebi and Hurricane Florence, as well as prior accident year reserve strengthening of $16.5 million primarily within our Primary Casualty division of our U.S. Insurance reporting segment. This compares with the same quarter in 2017 which included Net Losses and Loss Adjustment Expenses of $75.1 million, net of reinsurance reinstatement premiums, from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $29.5 million primarily within our U.S. and International Insurance reporting segments.

Net Investment Income for the three months ended September 30, 2018 was $25.7 million, an increase of 13.5% as compared to the same period in 2017. The annualized pre-tax investment yield, excluding Total Net Realized and Unrealized Gains and Losses recognized in the Results of Operations, was 2.8% for the three months ended September 30, 2018 compared to 2.7% for the same period in 2017.

The Company recognized $2.6 million of Total Net Realized and Unrealized Gains within the Results of Operations for the three months ended September 30, 2018, compared to $4.2 million for the same period in 2017. The Net Realized and Unrealized Gains within the Results of Operations for the three months ended September 30, 2018 included $2.3 million of Net Unrealized Gains on Equity Securities.

Other Income (Loss) for the three months ended September 30, 2018 was $1.7 million, compared to $(1.7) million for the same period in 2017. Other Income (Loss) primarily consists of managing agent fee income and realized and unrealized foreign exchange gains and losses.

The effective tax rate was (11.1%) for the three months ended September 30, 2018, which compares to 37.6% for the same period in 2017, with the decrease being primarily driven by low pretax earnings resulting from an underwriting loss during the third quarter of 2018 and a consistent level of permanent tax adjustments, which generated a tax benefit for the quarter. This compares to the third quarter of 2017 which incurred large catastrophe losses driving a pretax loss resulting in a tax benefit.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report continued strong revenue growth in the third quarter, with each of our three reporting segments producing positive premium growth. We benefited from modest rate increases across the majority of our specialty product lines. The ongoing strength of the U.S. economy, and particularly the construction segment, also benefited us, providing a strong growth of new business. In a quarter in which the insurance industry experienced significant natural catastrophe activity, our natural catastrophe loss estimates were well within our expectations. GlobalRe had another excellent quarter, with 9.4% growth in gross written premium and a 93.2% combined ratio. Within the U.S. Insurance segment, gross written premium grew 19.2%. Underwriting results for the U.S. Insurance segment were adversely impacted by a strengthening of reserves for a portfolio of primary casualty policies on habitational risks that is largely now in runoff. Absent that action, the U.S. Insurance business would have been profitable, with continued solid performance in our primary construction liability, excess casualty, environmental, life sciences, marine and management and professional liability products. The International Insurance segment showed improved results over third quarter 2017 and for the first nine months and our team is focused on actions required to improve both the loss ratio and cost structure. Our investment portfolio continued to perform well, with net investment income up 13.5% for the quarter and 11.5% for the first nine months of 2018.”

On August 22, 2018, the Company announced that it had entered into a definitive agreement to be acquired by The Hartford Financial Services Group, Inc. (NYSE: HIG) in an all-cash transaction that values Navigators at approximately $2.1 billion. Holders of the Company’s common shares will be entitled to receive consideration of $70.00 in cash per common share. The Merger is expected to close in the first half of 2019, subject to the receipt of regulatory approvals and other customary closing conditions.

For the nine months ended September 30, 2018 the Company reported Net Income of $67.6 million, or $2.24 per diluted share compared to $13.6 million, or $0.45 per diluted share, for the same period in 2017. Net Operating Earnings1 were $64.7 million, or $2.15 per diluted share, for the nine months ended September 30, 2018 compared to $10.5 million, or $0.35 per diluted share, for the same period in 2017.

Gross Written Premiums and Net Written Premiums for the nine months ended September 30, 2018 were $1.4 billion and $1.1 billion, respectively, increasing 11.0% and 16.4%, respectively, from the comparable period in 2017. The Combined Ratio for the nine months ended September 30, 2018 was 98.6%, compared to 105.5% for the same period in 2017.

Net Investment Income for the nine months ended September 30, 2018 was $74.0 million, an increase of 11.5% as compared to the same period in 2017. The annualized pre-tax investment yield, excluding Total Net Realized and Unrealized Gains and Losses recognized in the Results of Operations, was 2.8% for the nine months ended September 30, 2018 compared to 2.7% for the same period in 2017.

The Company recognized $3.7 million of Total Net Realized and Unrealized Gains within the Results of Operations for the nine months ended September 30, 2018, compared to $5.9 million for the same period in 2017. The Net Realized and Unrealized Gains within the Results of Operations for the nine months ended September 30, 2018 included $0.5 million of Net Unrealized Gains on Equity Securities.

Other Income (Loss) for the nine months ended September 30, 2018 was $4.2 million, compared to $(1.0) million for the same period in 2017. Other Income for the nine months ended September 30, 2018 included revenue from the sale of renewal rights for the Company’s fixed-premium protection and indemnity (“P&I”) business as well as net realized and unrealized foreign exchange gains and managing agent fee income. Other Income for the same period in 2017 primarily consisted of net realized and unrealized foreign exchange losses.

The effective tax rate was 16.6% for the nine months ended September 30, 2018, which compares to (19.7%) for the same period in 2017. The tax benefit for the nine months ended September 30, 2017 was the result of a lower level of pretax earnings driven by catastrophe losses incurred during 2017 and a consistent level of permanent tax adjustments.

The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA-/Aa3” as defined by S&P and Moody’s, respectively, with an effective duration of 3.4 years as of September 30, 2018. As of September 30, 2018, Net Unrealized Losses within the Available-For-Sale investment portfolio recognized in Accumulated Other Comprehensive Income were $38.4 million, a change of $79.8 million, compared to Net Unrealized Gains of $41.5 million as of December 31, 2017. Included in this change was the reclassification of $11.8 million of net unrealized gains, before tax, from Accumulated Other Comprehensive Income to Retained Earnings as a result of adopting ASU 2016-01.

Stockholders’ Equity was $1.2 billion, or $41.38 per share, as of September 30, 2018 compared to $41.49 per share, as of June 30, 2018, and $41.55 per share, as of December 31, 2017.

During the three months ended September 30, 2018, the Company declared and paid a quarterly cash dividend of $0.07 per share of Common Stock.

On November 7, 2018 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.07 per share, payable on December 21, 2018 to stockholders of record on November 30, 2018.

The Navigators Group, Inc. is an international specialty insurance holding company with operations in the United States, the United Kingdom, Continental Europe and Asia.

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. These forward-looking statements include statements on the financial impact of tax reform. We continue to assess the tax accounting effects of tax reform. 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.

___________________________

1  Net Operating Earnings (Loss) is a “non-GAAP financial measure” as defined in Regulation G. A reconciliation of Net Income (Loss) (the nearest GAAP financial measure) to Net Operating Earnings (Loss) is provided on page 4 of this release, as is a discussion of the rationale for the presentation of this item.

Contact: Ciro M. DeFalco
  Executive Vice President and Chief Financial Officer
  (203) 905-6343
  cdefalco@navg.com
  www.navg.com


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)

   Three Months Ended      Nine Months Ended     
amounts in thousands, except per share amounts September 30,      September 30,     
Results of Operations 2018  2017  Change  2018  2017  Change 
                         
Gross Written Premiums $455,943  $402,038   13.4% $1,448,403  $1,304,522   11.0%
Net Written Premiums  352,412   296,016   19.1%  1,124,966   966,461   16.4%
                         
Revenues:                        
Net Earned Premiums $347,038  $301,355   15.2% $1,000,680  $881,321   13.5%
Net Investment Income  25,651   22,598   13.5%  73,954   66,311   11.5%
Net Realized and Unrealized Gains (Losses):                        
Total Other-Than-Temporary Impairment Losses  (15)  (957)  (98.4%)  (71)  (2,005)  (96.5%)
Portion of Loss Recognized in Other Comprehensive Income  15   (15) NM   71   (60) NM 
Net Other-Than-Temporary Impairment Losses Recognized In Earnings     (972) NM      (2,065) NM 
Net Realized Gains on Investments Sold  253   5,190   (95.1%)  3,210   7,933   (59.5%)
Net Unrealized Gains on Equity Securities  2,310     NM   457     NM 
Total Net Realized and Unrealized Gains  2,563   4,218   (39.2%)  3,667   5,868   (37.5%)
Other Income (Loss)  1,724   (1,699) NM   4,235   (1,042) NM 
Total Revenues $376,976  $326,472   15.5% $1,082,536  $952,458   13.7%
                         
Expenses:                        
Net Losses and Loss Adjustment Expenses $240,900  $276,171   (12.8%) $623,378  $622,881   0.1%
Commission Expenses  57,999   45,509   27.4%  165,344   141,526   16.8%
Other Operating Expenses  67,584   45,773   47.6%  198,692   165,077   20.4%
Merger Transaction Costs  2,439     NM   2,439     NM 
Interest Expense  3,891   3,862   0.8%  11,619   11,584   0.3%
Total Expenses $372,813  $371,315   0.4% $1,001,472  $941,068   6.4%
                         
Income (Loss) Before Income Taxes $4,163  $(44,843) NM  $81,064  $11,390  NM 
                         
Income Tax Expense (Benefit)  (462)  (16,864)  (97.3%)  13,457   (2,243) NM 
                         
Net Income (Loss) $4,625  $(27,979) NM  $67,607  $13,633  NM 
                         
                         
Per Share Data                        
                         
Net Income (Loss) Per Common Share:                        
Basic $0.16  $(0.95) NM  $2.28  $0.46  NM 
Diluted $0.15  $(0.95) NM  $2.24  $0.45  NM 
                         
Average Common Shares Outstanding:                        
Basic  29,768   29,500       29,699   29,419     
Diluted  30,184   29,500       30,160   30,006     
                         
Underwriting Ratios                        
Loss Ratio  69.4%  91.6%      62.3%  70.7%    
Expense Ratio  35.9%  30.3%      36.3%  34.8%    
Combined Ratio  105.3%  121.9%      98.6%  105.5%    
                         
Balance Sheet Data September 30,  June 30,      September 30,  December 31,     
  2018  2018      2018  2017     
Stockholders' Equity $1,231,828  $1,234,084   (0.2%) $1,231,828  $1,225,965   0.5%
Book Value per Share $41.38  $41.49   (0.3%) $41.38  $41.55   (0.4%)

NM - Percentage change not meaningful.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME (LOSS) TO NET OPERATING EARNINGS (LOSS)
(Unaudited)

In this release, we present Net Operating Earnings (Loss), which is a “non-GAAP financial measure” as defined in Regulation G.

Net Operating Earnings (Loss) is comprised of Net Income (Loss) excluding After-Tax adjustments, including: Total Net Realized and Unrealized Gains (Losses), Foreign Exchange Gains (Losses), the Net Gain on Disposition of Product Line, and Merger Transaction Costs recognized in the Results of Operations.

We believe this presentation enhances the understanding of the results of operations by highlighting the underlying profitability of the business and enables investors and other users of the financial information to analyze underlying business performance in a manner similar to management. We also believe this measure follows industry practice and, therefore facilitates comparison of our performance with our peer group.

The following tables provide a reconciliation of Net Income (Loss) (the nearest GAAP financial measure) to Net Operating Earnings (Loss):

 
  Three Months Ended September 30, 2018  Three Months Ended September 30, 2017  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  QTD 
Net Income (Loss) $4,163  $462  $4,625  $(44,843) $16,864  $(27,979) NM 
Adjustments to Net Income (Loss):                            
Total Net Realized and Unrealized Gains  (2,563)  538   (2,025)  (4,218)  1,477   (2,741)  (26.1%)
FX Losses (Gains)  (706)  148   (558)  1,675   (586)  1,089  NM 
Merger Transaction Costs  2,439   (302)  2,137           NM 
Net Operating Earnings (Loss) $3,333  $846  $4,179  $(47,386) $17,755  $(29,631) NM 
                             
Average Common Shares Outstanding:                            
Basic          29,768           29,500     
Diluted          30,184           29,500     
                             
Net Operating Earnings (Loss) per Common Share:                            
Basic         $0.14          $(1.00)    
Diluted         $0.14          $(1.00)    

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
NM - Percentage change not meaningful.

 
  Nine Months Ended September 30, 2018  Nine Months Ended September 30, 2017  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  YTD 
Net Income $81,064  $(13,457) $67,607  $11,390  $2,243  $13,633  NM 
Adjustments to Net Income:                            
Total Net Realized and Unrealized Gains  (3,667)  770   (2,897)  (5,868)  2,055   (3,813)  (24.0%)
FX Losses (Gains)  (1,770)  371   (1,399)  1,015   (355)  660  NM 
Net Gain on Disposition of Product Line  (948)  199   (749)          NM 
Merger Transaction Costs  2,439   (302)  2,137           NM 
Net Operating Earnings $77,118  $(12,419) $64,699  $6,537  $3,943  $10,480  NM 
                             
Average Common Shares Outstanding:                            
Basic          29,699           29,419     
Diluted          30,160           30,006     
                             
Net Operating Earnings per Common Share:                            
Basic         $2.18          $0.36     
Diluted         $2.15          $0.35     

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
NM - Percentage change not meaningful.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

         
  September 30,  December 31, 
  2018  2017 
amounts in thousands, except per share amounts (Unaudited)     
ASSETS        
Investments:        
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2018:  $3,027,835; 2017: $3,027,408) $2,989,473  $3,057,054 
Equity Securities, at fair value  (cost: 2018: $359,400; 2017: $224,159)  371,680   235,981 
Other Invested Assets  42,489   30,488 
Short-Term Investments, available-for-sale, at fair value (amortized cost: 2018: $7,268; 2017: $6,477)  7,264   6,480 
Total Investments $3,410,906  $3,330,003 
Cash and Cash Equivalents  219,980   102,735 
Restricted Cash and Cash Equivalents  61,644   56,229 
Premiums Receivable  392,392   351,393 
Prepaid Reinsurance Premiums  235,642   228,569 
Reinsurance Recoverable on Paid Losses  102,829   72,494 
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses  780,215   809,765 
Deferred Policy Acquisition Costs  161,419   135,249 
Accrued Investment Income  21,981   19,480 
Goodwill and Other Intangible Assets  28,140   6,596 
Current Income Tax Receivable, Net  25,429   16,667 
Deferred Income Tax, Net  26,377   22,271 
Other Assets  81,373   73,171 
Total Assets $5,548,327  $5,224,622 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:        
Reserves for Losses and Loss Adjustment Expenses $2,633,835  $2,515,145 
Unearned Premiums  1,128,762   987,681 
Reinsurance Balances Payable  147,129   136,192 
Senior Notes  264,009   263,885 
Payable for Investments Purchased  16,968    
Accounts Payable and Other Liabilities  125,796   95,754 
Total Liabilities $4,316,499  $3,998,657 
         
Stockholders' Equity:        
Preferred Stock ($.10 par value per share, authorized 1,000 shares, none issued) $  $ 
         
Common Stock ($.10 par value per share, authorized 50,000 shares, issued 36,795 shares for 2018 and 36,530 shares for 2017)  3,677   3,650 
Additional Paid-In Capital  379,212   376,868 
Treasury Stock, at cost (7,023 shares for 2018 and 2017)  (155,801)  (155,801)
Retained Earnings  1,047,673   981,380 
Accumulated Other Comprehensive Income (Loss)  (42,933)  19,868 
Total Stockholders' Equity $1,231,828  $1,225,965 
Total Liabilities and Stockholders' Equity $5,548,327  $5,224,622 


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)

  Three Months Ended September 30, 2018 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $280,183  $117,376  $58,384  $  $455,943 
Ceded Written Premiums  (72,615)  (29,020)  (1,896)     (103,531)
Net Written Premiums $207,568  $88,356  $56,488  $  $352,412 
Retention Ratio  74.1%  75.3%  96.8%     77.3%
                     
Net Earned Premiums $188,504  $95,226  $63,308  $  $347,038 
Net Losses and LAE  (141,182)  (60,275)  (39,443)     (240,900)
Commission Expenses  (22,247)  (22,547)  (13,282)  77   (57,999)
Other Operating Expenses  (36,826)  (24,441)  (6,317)     (67,584)
Other Underwriting Income (Expense)  65   945   20   (77)  953 
                     
Underwriting Profit (Loss) $(11,686) $(11,092) $4,286  $  $(18,492)
                     
Net Investment Income              25,651   25,651 
Total Net Realized and Unrealized Gains              2,563   2,563 
Interest Expense              (3,891)  (3,891)
Other Income              771   771 
Merger Transaction Costs              (2,439)  (2,439)
Income (Loss) Before Income Taxes $(11,686) $(11,092) $4,286  $22,655  $4,163 
Income Tax Benefit              462   462 
Net Income                 $4,625 
                     
Losses and LAE Ratio  74.9%  63.3%  62.3%      69.4%
Commission Expense Ratio  11.8%  23.7%  21.0%      16.7%
Other Operating Expense Ratio (2)  19.5%  24.6%  9.9%      19.2%
Combined Ratio  106.2%  111.6%  93.2%      105.3%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)

  Three Months Ended September 30, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $235,052  $113,601  $53,385  $  $402,038 
Ceded Written Premiums  (64,328)  (38,966)  (2,728)     (106,022)
Net Written Premiums $170,724  $74,635  $50,657  $  $296,016 
Retention Ratio  72.6%  65.7%  94.9%     73.6%
                     
Net Earned Premiums $169,150  $84,407  $47,798  $  $301,355 
Net Losses and LAE  (135,340)  (81,713)  (59,118)     (276,171)
Commission Expenses  (18,286)  (16,201)  (11,233)  211   (45,509)
Other Operating Expenses  (25,375)  (16,388)  (4,010)     (45,773)
Other Underwriting Income (Expense)  125      94   (211)  8 
                     
Underwriting Loss $(9,726) $(29,895) $(26,469) $  $(66,090)
                     
Net Investment Income              22,598   22,598 
Total Net Realized and Unrealized Gains              4,218   4,218 
Interest Expense              (3,862)  (3,862)
Other Loss              (1,707)  (1,707)
Income (Loss) Before Income Taxes $(9,726) $(29,895) $(26,469) $21,247  $(44,843)
Income Tax Benefit              16,864   16,864 
Net Loss                 $(27,979)
                     
Losses and LAE Ratio  80.0%  96.8%  123.7%      91.6%
Commission Expense Ratio  10.8%  19.2%  23.5%      15.1%
Other Operating Expense Ratio (2)  14.9%  19.4%  8.2%      15.2%
Combined Ratio  105.7%  135.4%  155.4%      121.9%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)

  Nine Months Ended September 30, 2018 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $808,589  $377,771  $262,043  $  $1,448,403 
Ceded Written Premiums  (215,340)  (97,790)  (10,307)     (323,437)
Net Written Premiums $593,249  $279,981  $251,736  $  $1,124,966 
Retention Ratio  73.4%  74.1%  96.1%     77.7%
                     
Net Earned Premiums $541,163  $280,507  $179,010  $  $1,000,680 
Net Losses and LAE  (363,489)  (158,422)  (101,467)     (623,378)
Commission Expenses  (63,490)  (62,166)  (40,198)  510   (165,344)
Other Operating Expenses  (112,264)  (68,270)  (18,158)     (198,692)
Other Underwriting Income (Expense)  234   945   294   (510)  963 
                     
Underwriting Profit (Loss) $2,154  $(7,406) $19,481  $  $14,229 
                     
Net Investment Income              73,954   73,954 
Total Net Realized and Unrealized Gains              3,667   3,667 
Interest Expense              (11,619)  (11,619)
Other Income              3,272   3,272 
Merger Transaction Costs              (2,439)  (2,439)
Income (Loss) Before Income Taxes $2,154  $(7,406) $19,481  $66,835  $81,064 
Income Tax Expense              (13,457)  (13,457)
Net Income                 $67,607 
                     
Losses and LAE Ratio  67.2%  56.5%  56.7%      62.3%
Commission Expense Ratio  11.7%  22.2%  22.5%      16.5%
Other Operating Expense Ratio (2)  20.7%  23.9%  9.9%      19.8%
Combined Ratio  99.6%  102.6%  89.1%      98.6%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)

  Nine Months Ended September 30, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $729,843  $386,654  $188,025  $  $1,304,522 
Ceded Written Premiums  (199,672)  (129,368)  (9,021)     (338,061)
Net Written Premiums $530,171  $257,286  $179,004  $  $966,461 
Retention Ratio  72.6%  66.5%  95.2%     74.1%
                     
Net Earned Premiums $500,241  $250,593  $130,487  $  $881,321 
Net Losses and LAE  (339,436)  (176,513)  (106,932)     (622,881)
Commission Expenses  (59,130)  (54,435)  (28,695)  734   (141,526)
Other Operating Expenses  (91,987)  (58,687)  (14,403)     (165,077)
Other Underwriting Income (Expense)  335      439   (734)  40 
                     
Underwriting Profit (Loss) $10,023  $(39,042) $(19,104) $  $(48,123)
                     
Net Investment Income              66,311   66,311 
Total Net Realized and Unrealized Gains              5,868   5,868 
Interest Expense              (11,584)  (11,584)
Other Loss              (1,082)  (1,082)
Income (Loss) Before Income Taxes $10,023  $(39,042) $(19,104) $59,513  $11,390 
Income Tax Benefit              2,243   2,243 
Net Income                 $13,633 
                     
Losses and LAE Ratio  67.9%  70.4%  81.9%      70.7%
Commission Expense Ratio  11.8%  21.7%  22.0%      16.1%
Other Operating Expense Ratio (2)  18.3%  23.5%  10.7%      18.7%
Combined Ratio  98.0%  115.6%  114.6%      105.5%

(1) - Includes Corporate segment intercompany eliminations.
(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  U.S. Insurance 
  Three Months Ended September 30, 2018  Three Months Ended September 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $31,681  $212,911  $35,591  $280,183  $36,403  $166,097  $32,552  $235,052   19.2%
Ceded Written Premiums  (14,442)  (52,993)  (5,180)  (72,615)  (18,859)  (39,952)  (5,517)  (64,328)  12.9%
Net Written Premiums $17,239  $159,918  $30,411  $207,568  $17,544  $126,145  $27,035  $170,724   21.6%
                                     
Net Earned Premiums $20,401  $141,650  $26,453  $188,504  $20,129  $125,931  $23,090  $169,150   11.4%
Net Losses and LAE  (11,939)  (112,993)  (16,250)  (141,182)  (18,325)  (89,568)  (27,447)  (135,340)  4.3%
Commission Expenses  (915)  (16,597)  (4,735)  (22,247)  (967)  (13,515)  (3,804)  (18,286)  21.7%
Other Operating Expenses  (6,394)  (25,202)  (5,230)  (36,826)  (4,661)  (16,897)  (3,817)  (25,375)  45.1%
Other Underwriting Income  49   12   4   65   105   18   2   125   (48.0%)
                                     
Underwriting Profit (Loss) $1,202  $(13,130) $242  $(11,686) $(3,719) $5,969  $(11,976) $(9,726)  20.2%
                                     
Losses and LAE Ratio  58.5%  79.8%  61.4%  74.9%  91.0%  71.1%  118.9%  80.0%    
Commission Expense Ratio  4.5%  11.7%  17.9%  11.8%  4.8%  10.7%  16.5%  10.8%    
Other Operating Expense Ratio (1)  31.1%  17.8%  19.8%  19.5%  22.7%  13.5%  16.5%  14.9%    
Combined Ratio  94.1%  109.3%  99.1%  106.2%  118.5%  95.3%  151.9%  105.7%    

(1) - Includes Other Operating Expenses and Other Underwriting Income.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  Int'l Insurance 
  Three Months Ended September 30, 2018  Three Months Ended September 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $32,486  $41,898  $42,992  $117,376  $41,689  $37,415  $34,497  $113,601   3.3%
Ceded Written Premiums  (4,965)  (13,727)  (10,328)  (29,020)  (9,948)  (19,772)  (9,246)  (38,966)  (25.5%)
Net Written Premiums $27,521  $28,171  $32,664  $88,356  $31,741  $17,643  $25,251  $74,635   18.4%
                                     
Net Earned Premiums $38,866  $29,616  $26,744  $95,226  $39,038  $21,775  $23,594  $84,407   12.8%
Net Losses and LAE  (27,873)  (12,728)  (19,674)  (60,275)  (39,457)  (29,918)  (12,338)  (81,713)  (26.2%)
Commission Expenses  (8,889)  (6,465)  (7,193)  (22,547)  (8,532)  (2,666)  (5,003)  (16,201)  39.2%
Other Operating Expenses  (8,200)  (9,705)  (6,536)  (24,441)  (6,788)  (5,614)  (3,986)  (16,388)  49.1%
Other Underwriting Income  640   305      945              NM 
                                     
Underwriting Profit (Loss) $(5,456) $1,023  $(6,659) $(11,092) $(15,739) $(16,423) $2,267  $(29,895)  (62.9%)
                                     
Losses and LAE Ratio  71.7%  43.0%  73.6%  63.3%  101.1%  137.4%  52.3%  96.8%    
Commission Expense Ratio  22.9%  21.8%  26.9%  23.7%  21.9%  12.2%  21.2%  19.2%    
Other Operating Expense Ratio (1)  19.4%  31.7%  24.4%  24.6%  17.3%  25.8%  16.9%  19.4%    
Combined Ratio  114.0%  96.5%  124.9%  111.6%  140.3%  175.4%  90.4%  135.4%    

(1) - Includes Other Operating Expenses and Other Underwriting Income.
NM – Percentage change not meaningful


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  U.S. Insurance 
  Nine Months Ended September 30, 2018  Nine Months Ended September 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $112,235  $599,088  $97,266  $808,589  $119,040  $524,223  $86,580  $729,843   10.8%
Ceded Written Premiums  (48,840)  (152,740)  (13,760)  (215,340)  (55,830)  (129,297)  (14,545)  (199,672)  7.8%
Net Written Premiums $63,395  $446,348  $83,506  $593,249  $63,210  $394,926  $72,035  $530,171   11.9%
                                     
Net Earned Premiums $62,670  $401,870  $76,623  $541,163  $64,635  $366,280  $69,326  $500,241   8.2%
Net Losses and LAE  (37,208)  (280,103)  (46,178)  (363,489)  (44,867)  (239,175)  (55,394)  (339,436)  7.1%
Commission Expenses  (3,103)  (46,853)  (13,534)  (63,490)  (4,014)  (44,113)  (11,003)  (59,130)  7.4%
Other Operating Expenses  (19,603)  (77,057)  (15,604)  (112,264)  (18,280)  (60,356)  (13,351)  (91,987)  22.0%
Other Underwriting Income  179   40   15   234   270   45   20   335   (30.2%)
                                     
Underwriting Profit (Loss) $2,935  $(2,103) $1,322  $2,154  $(2,256) $22,681  $(10,402) $10,023   (78.5%)
                                     
Losses and LAE Ratio  59.4%  69.7%  60.3%  67.2%  69.4%  65.3%  79.9%  67.9%    
Commission Expense Ratio  5.0%  11.7%  17.7%  11.7%  6.2%  12.0%  15.9%  11.8%    
Other Operating Expense Ratio (1)  30.9%  19.1%  20.3%  20.7%  27.9%  16.5%  19.2%  18.3%    
Combined Ratio  95.3%  100.5%  98.3%  99.6%  103.5%  93.8%  115.0%  98.0%    

(1) - Includes Other Operating Expenses and Other Underwriting Income.


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)

  Int'l Insurance 
  Nine Months Ended September 30, 2018  Nine Months Ended September 30, 2017     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total
 
Gross Written Premiums $129,678  $122,437  $125,656  $377,771  $160,119  $124,446  $102,089  $386,654   (2.3%)
Ceded Written Premiums  (24,542)  (45,099)  (28,149)  (97,790)  (33,410)  (69,780)  (26,178)  (129,368)  (24.4%)
Net Written Premiums $105,136  $77,338  $97,507  $279,981  $126,709  $54,666  $75,911  $257,286   8.8%
                                     
Net Earned Premiums $115,342  $75,100  $90,065  $280,507  $116,058  $67,292  $67,243  $250,593   11.9%
Net Losses and LAE  (77,606)  (28,245)  (52,571)  (158,422)  (83,906)  (54,654)  (37,953)  (176,513)  (10.2%)
Commission Expenses  (27,563)  (12,014)  (22,589)  (62,166)  (27,590)  (10,985)  (15,860)  (54,435)  14.2%
Other Operating Expenses  (22,942)  (26,087)  (19,241)  (68,270)  (24,454)  (19,983)  (14,250)  (58,687)  16.3%
Other Underwriting Income  640   305      945              NM 
                                     
Underwriting Profit (Loss) $(12,129) $9,059  $(4,336) $(7,406) $(19,892) $(18,330) $(820) $(39,042)  (81.0%)
                                     
Losses and LAE Ratio  67.3%  37.6%  58.4%  56.5%  72.3%  81.2%  56.4%  70.4%    
Commission Expense Ratio  23.9%  16.0%  25.1%  22.2%  23.8%  16.3%  23.6%  21.7%    
Other Operating Expense Ratio (1)  19.3%  34.3%  21.3%  23.9%  21.0%  29.7%  21.2%  23.5%    
Combined Ratio  110.5%  87.9%  104.8%  102.6%  117.1%  127.2%  101.2%  115.6%    

(1) - Includes Other Operating Expenses and Other Underwriting Income.
NM – Percentage change not meaningful


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)

  For the Three Months Ended September 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2018  2017  2018  2017 
U.S. Insurance:                
Loss and LAE Payments $74,090  $68,454   39.3%  40.5%
Change in Reserves  67,092   66,886   35.6%  39.5%
Net Incurred Loss and LAE $141,182  $135,340   74.9%  80.0%
                 
Int'l Insurance:                
Loss and LAE Payments $55,647  $55,148   58.4%  65.3%
Change in Reserves  4,628   26,565   4.9%  31.5%
Net Incurred Loss and LAE $60,275  $81,713   63.3%  96.8%
                 
GlobalRe:                
Loss and LAE Payments $30,903  $13,659   48.8%  28.6%
Change in Reserves  8,540   45,459   13.5%  95.1%
Net Incurred Loss and LAE $39,443  $59,118   62.3%  123.7%
                 
Total                
Loss and LAE Payments $160,640  $137,261   46.3%  45.5%
Change in Reserves  80,260   138,910   23.1%  46.1%
Net Incurred Loss and LAE $240,900  $276,171   69.4%  91.6%
                 
                 
  For the Three Months Ended September 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2018  2017  2018  2017 
U.S. Insurance $(16,640) $(18,383)  (4.8%)  (6.0%)
Int'l Insurance  (1,813)  (10,714)  (0.5%)  (3.7%)
GlobalRe  1,959   (397)  0.6%  (0.1%)
Total $(16,494) $(29,494)  (4.7%)  (9.8%)


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)

  For the Nine Months Ended September 30, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2018  2017  2018  2017 
U.S. Insurance:                
Loss and LAE Payments $242,910  $225,017   44.9%  45.0%
Change in Reserves  120,579   114,419   22.3%  22.9%
Net Incurred Loss and LAE $363,489  $339,436   67.2%  67.9%
                 
Int'l Insurance:                
Loss and LAE Payments $160,816  $146,106   57.3%  58.3%
Change in Reserves  (2,394)  30,407   (0.9%)  12.1%
Net Incurred Loss and LAE $158,422  $176,513   56.4%  70.4%
                 
GlobalRe:                
Loss and LAE Payments $82,589  $63,268   46.2%  48.5%
Change in Reserves  18,878   43,664   10.5%  33.4%
Net Incurred Loss and LAE $101,467  $106,932   56.7%  81.9%
                 
Total                
Loss and LAE Payments $486,315  $434,391   48.6%  49.3%
Change in Reserves  137,063   188,490   13.7%  21.4%
Net Incurred Loss and LAE $623,378  $622,881   62.3%  70.7%
                 
                 
  For the Nine Months Ended September 30, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2018  2017  2018  2017 
U.S. Insurance $(19,233) $(18,206)  (1.9%)  (2.1%)
Int'l Insurance  (2,660)  (22,073)  (0.3%)  (2.5%)
GlobalRe  2,079   (4,330)  0.2%  (0.5%)
Total $(19,814) $(44,609)  (2.0%)  (5.1%)


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)

  As of September 30, 2018 
amounts in thousands Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $55,476  $48,904  $104,380 
P&C  217,004   783,350   1,000,354 
Professional Liability  36,075   89,358   125,433 
Total U.S. Insurance $308,555  $921,612  $1,230,167 
Int'l Insurance:            
Marine $174,517  $38,034  $212,551 
P&C  59,152   31,539   90,691 
Professional Liability  42,193   107,591   149,784 
Total Int'l Insurance $275,862  $177,164  $453,026 
             
GlobalRe $55,752  $114,675  $170,427 
             
Total Net Loss Reserves $640,169  $1,213,451  $1,853,620 
             
             
  As of December 31, 2017 
  Case  IBNR     
Net Loss Reserves: Reserves  Reserves  Total 
U.S. Insurance:            
Marine $58,301  $45,393  $103,694 
P&C  192,291   700,264   892,555 
Professional Liability  26,774   86,649   113,423 
Total U.S. Insurance $277,366  $832,306  $1,109,672 
Int'l Insurance:            
Marine $181,369  $39,949  $221,318 
P&C  66,412   37,067   103,479 
Professional Liability  31,463   87,211   118,674 
Total Int'l Insurance $279,244  $164,227  $443,471 
             
GlobalRe $58,962  $93,275  $152,237 
             
Total Net Loss Reserves $615,572  $1,089,808  $1,705,380 


THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
(Unaudited)

As of September 30, 2018, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.4 years. The Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth the Available-For-Sale Investments as of September 30, 2018:

  As of September 30, 2018 
      Gross  Gross  Cost or 
  Fair  Unrealized  Unrealized  Amortized 
amounts in thousands Value  Gains  (Losses)  Cost 
Fixed Maturities:                
U.S. Treasury Bonds, Agency Bonds and Foreign Government Bonds $245,285  $1,031  $(3,879) $248,133 
States, Municipalities and Political Subdivisions  631,514   7,569   (7,534)  631,479 
Mortgage-Backed and Asset-Backed Securities:                
Agency Mortgage-Backed Securities  344,016   874   (17,219)  360,361 
Residential Mortgage Obligations  124,191   521   (493)  124,163 
Asset-Backed Securities  540,566   554   (4,033)  544,045 
Commercial Mortgage-Backed Securities  186,251   696   (3,126)  188,681 
Subtotal $1,195,024  $2,645  $(24,871) $1,217,250 
Corporate Exposures (1)  917,650   4,191   (17,514)  930,973 
Total Fixed Maturities $2,989,473  $15,436  $(53,798) $3,027,835 
Short-Term Investments  7,264      (4)  7,268 
Total Available-For-Sale Investments $2,996,737  $15,436  $(53,802) $3,035,103 

(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.

 

Nav_logo_tag_288_oct2016.jpg

Source: The Navigators Group, Inc.