Exhibit 99.1

 

The Navigators Group, Inc.

CORPORATE NEWS

Navigators Reports Fourth Quarter Earnings,

Operating Earnings up 89%

Stamford, CT – February 13, 2014 — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $14.3 million, or $1.00 per diluted share, for the three months ended December 31, 2013 compared to $28.0 million, or $1.96 per diluted share, for the comparable period in 2012. Operating earnings were $16.1 million, or $1.13 per diluted share, for the fourth quarter of 2013 compared to $8.5 million, or $0.59 per diluted share, for the comparable period in 2012.

For the twelve months ended December 31, 2013, the Company reported net income of $63.5 million, or $4.42 per diluted share, compared to $63.8 million, or $4.45 per diluted share, for the comparable period in 2012. Operating earnings were $61.7 million, or $4.30 per diluted share, for the twelve months ended December 31, 2013 compared to $37.6 million, or $2.63 per diluted share, for the comparable period in 2012.

The results for the fourth quarter and year include an after-tax charge of $11.6 million for the payment of call premium in connection with the redemption of outstanding 7.0% Senior Notes due 2016. Excluding the call premium, net income for the fourth quarter would be $25.9 million, or $1.80 per diluted share, and for the year, would be $75.1 million, or $5.23 per diluted share.

Gross written premiums and net written premiums for the three months ended December 31, 2013 were $333.1 million and $223.4 million, respectively, an increase of 3.6% and 5.2% from the comparable period in 2012. Gross written premiums and net written premiums for the twelve months ended December 31, 2013 were $1.371 billion and $887.9 million, respectively, an increase of 6.5% for both from the comparable period in 2012.

The combined loss and expense ratio for the three and twelve months ended December 31, 2013 were 94.0% and 94.8%, respectively, compared to 100.2% and 99.3% for the comparable periods in 2012.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report strong operating performance with significantly improved underwriting profitability for the fourth quarter and for the full year of 2013, by both our Insurance Companies and Lloyd’s Operations. Operating earnings were up 89% for the fourth quarter of 2013 compared to 2012 and 64% for the twelve months. We produced profitable and improved combined ratios of 94% for the fourth quarter and 94.8% for the full year, with a meaningful contribution from our Insurance Company Marine business. We continue to experience strong premium growth in targeted specialty classes, most notably in Navigators Specialty, our U.S. excess & surplus lines unit, and in international D&O. We have continued to emphasize cost control, limiting the growth in non-commission operating expenses. During the quarter, we raised $265 million of capital through the issuance of 10 year, 5.75% senior notes, which allowed us to retire existing 7.00% senior notes due 2016. This debt issuance provided $131 million of incremental capital after redeeming the outstanding notes to enhance our capital efficiency. We believe this action effectively enhances Navigators’ position to continue to pursue targeted growth strategies in specialty classes, both in the U.S. and internationally.”

 

 

 

400 Atlantic Street TEL (203) 905-6090		Stamford, CT 06901 FAX (203) 658-1821

---

News Release

February 13, 2014

Page 2

 

Stockholders’ equity was $902.2 million, or $63.54 per share, as of December 31, 2013 compared to $879.5 million, or $62.61 per share, as of December 31, 2012.

Net investment income for the three and twelve months ended December 31, 2013 was $14.3 million and $56.3 million, respectively, an increase of 4.7% and 3.7% from the comparable periods in 2012. Net investment income for the twelve months ended December 31, 2012 was reduced by $4.5 million as a result of the settlement of our dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses, net other-than-temporary impairment losses recognized in earnings, and for 2012 the $4.5 million in interest expense for the settlement of our dispute with Equitas, was 2.3% and 2.4% for the three and twelve months ended December 31, 2013, respectively, compared to 2.3% and 2.6% for the comparable periods in 2012. The effective tax rate on net investment income was 27.8% for both the three and twelve months ended December 31, 2013, respectively, compared to 26.7% and 26.8% for the comparable periods in 2012.

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 3.7 years as of December 31, 2013. As of December 31, 2013, net unrealized gains within our investment portfolio were $36.0 million, a decrease of $67.3 million compared to December 31, 2012.

There were $15.2 million and $20.5 million of net realized gains including other-than-temporary impairment losses recognized in earnings for the three and twelve months ended December 31, 2013, respectively, compared to $30.0 million and $40.2 million for the same periods in 2012.

Consolidated net cash flow from operations for the three and twelve months ended December 31, 2013 was $6.9 million and $136.9 million, respectively, compared to $27.6 million and $96.7 million for the comparable periods in 2012.

The Company will hold a conference call on Friday, February 14, 2014 starting at 8:30 a.m. ET to discuss the 2013 fourth quarter results. The call will be available via live webcast on Navigators’ website (www.navg.com).

To participate by telephone, the domestic dial-in number is (800) 850-2903 and the international dial-in is (224) 357-2399. Participants may connect to the webcast at:

http://www.media-server.com/m/p/n8ezzwb2

Operating earnings, or net income excluding after-tax net realized gains (losses), net other-than-temporary impairment losses recognized in earnings, and the after-tax call premium charge in connection with the redemption of our 7.0% Senior Notes due May 1, 2016, 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.

---

News Release

February 13, 2014

Page 3

 

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies and operations at Lloyd’s. With its corporate headquarters in Connecticut and insurance operations based in New York and London, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe, as well as representatives in China and Brazil.

The Navigators Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7778

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

---

News Release

Page 4

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Financial Highlights

($ in thousands, except share and per share data)

(unaudited)

 

		Three Months Ended												Twelve Months Ended
		December 31,												December 31,
		2013				2012				Change				2013				2012				Change
Results of Operations
Gross written premiums		$	333,091			$	321,587				3.6	%		$	1,370,517			$	1,286,465				6.5	%
Net written premiums			223,445				212,312				5.2	%			887,922				833,655				6.5	%
Revenues:
Net earned premiums			219,902				201,566				9.1	%			841,939				781,964				7.7	%
Net investment income			14,254				13,616				4.7	%			56,251				54,248				3.7	%
Total other-than-temporary impairment losses			(530	)			(208	)			NM				(2,393	)			(902	)			NM
Portion of loss recognized in other comprehensive income (before tax)			—				—				NM				—				44				NM
Net other-than-temporary impairment losses recognized in earnings			(530	)			(208	)			NM				(2,393	)			(858	)			NM
Net realized gains (losses)			15,768				30,254				-47.9	%			22,939				41,074				-44.2	%
Other income			(665	)			(599	)			11.0	%			(1,172	)			1,488				NM
Total revenues			248,729				244,629				1.7	%			917,564				877,916				4.5	%
Expenses:
Net losses and loss adjustment expenses			131,385				127,191				3.3	%			518,961				497,433				4.3	%
Commission expenses			30,863				31,259				-1.3	%			113,494				121,470				-6.6	%
Other operating expenses			43,826				42,841				2.3	%			164,434				159,079				3.4	%
Call premium on Senior Notes			17,895				—				NM				17,895				—				NM
Interest expense			4,351				2,051				112.1	%			10,507				8,198				28.2	%
Total expenses			228,320				203,342				12.3	%			825,291				786,180				5.0	%
Income before income taxes			20,409				41,287				-50.6	%			92,273				91,736				0.6	%
Income tax expense (benefit)			6,076				13,243				-54.1	%			28,807				27,974				3.0	%
Net income (loss)		$	14,333			$	28,044				-48.9	%		$	63,466			$	63,762				-0.5	%
Per Share Data
Net income per common share:
Basic		$	1.01			$	2.00				-49.4	%		$	4.49			$	4.54				-1.0	%
Diluted		$	1.00			$	1.96				-48.7	%		$	4.42			$	4.45				-0.6	%
Average common shares outstanding:
Basic			14,172,908				14,042,553								14,133,925				14,052,311
Diluted			14,434,137				14,340,057								14,345,553				14,327,820
Underwriting Ratios
Loss Ratio			59.7	%			63.1	%							61.6	%			63.6	%
Expense Ratio			34.3	%			37.1	%							33.2	%			35.7	%
Combined Ratio			94.0	%			100.2	%							94.8	%			99.3	%
		Dec. 31,				Sept. 30,								Dec. 31,				Dec. 31,
		2013				2013								2013				2012
Balance Sheet Data
Stockholders’ equity		$	902,212			$	899,882				0.3	%		$	902,212			$	879,485				2.6	%
Book value per share		$	63.54			$	63.61				-0.1	%		$	63.54			$	62.61				1.5	%

---

News Release

Page 5

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share data)

 

		December 31,				December 31,
		2013				2012
		(unaudited)
ASSETS
Investments and cash:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013, $2,036,999; 2012, $2,034,765)		$	2,047,873			$	2,121,833
Equity securities, available-for-sale, at fair value (cost: 2013, $118,804; 2012, $85,004)			143,954				101,297
Short-term investments, at cost which approximates fair value			296,250				153,788
Cash			86,509				45,336
Total investments and cash			2,574,586				2,422,254
Premiums receivable			325,025				320,182
Prepaid reinsurance premiums			247,822				221,015
Reinsurance recoverable on paid losses			38,384				49,282
Reinsurance recoverable on unpaid losses and loss adjustment expenses			822,438				880,139
Deferred policy acquisition costs			67,007				61,005
Accrued investment income			13,866				12,587
Goodwill and other intangible assets			7,177				7,093
Current income tax receivable, net			9,918				—
Deferred income tax, net			28,187				3,216
Receivable for investments sold			3				4,310
Other assets			35,039				26,587
Total assets		$	4,169,452			$	4,007,670
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses		$	2,045,071			$	2,097,048
Unearned premiums			714,606				642,407
Reinsurance balances payable			167,252				165,813
Senior notes			263,308				114,424
Payable for investments purchased			7,624				58,345
Accounts payable and other liabilities			69,379				48,015
Total liabilities			3,267,240				3,128,185
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 17,709,876 shares for 2013 and 17,558,046 shares for 2012			1,770				1,755
Additional paid-in capital			335,546				329,452
Treasury stock, at cost (3,511,380 shares for 2013 and 2012)			(155,801	)			(155,801	)
Retained earnings			692,337				628,871
Accumulated other comprehensive income			28,360				75,208
Total stockholders’ equity			902,212				879,485
Total liabilities and stockholders’ equity		$	4,169,452			$	4,007,670

---

News Release

Page 6

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Comparative Premium Data

($ in thousands)

 

		Three Months												Twelve Months
		2013				2012				Change				2013				2012				Change
Gross Written Premiums:
Insurance Companies:
Marine		$	38,986			$	43,455				-10.3	%		$	171,822			$	200,095				-14.1	%
Property Casualty			172,800				164,247				5.2	%			700,087				590,741				18.5	%
Professional Liability			32,687				32,860				-0.5	%			130,366				130,489				-0.1	%
Total Insurance Companies			244,473				240,562				1.6	%			1,002,275				921,325				8.8	%
Lloyd’s Operations:
Marine			45,500				47,895				-5.0	%			181,046				194,423				-6.9	%
Property Casualty			27,378				20,965				30.6	%			129,522				127,028				2.0	%
Professional Liability			15,740				12,165				29.4	%			57,674				43,689				32.0	%
Total Lloyd’s Operations			88,618				81,025				9.4	%			368,242				365,140				0.8	%
Total		$	333,091			$	321,587				3.6	%		$	1,370,517			$	1,286,465				6.5	%
		Three Months												Twelve Months
		2013				2012				Change				2013				2012				Change
Net Written Premiums:
Insurance Companies:
Marine		$	24,893			$	25,944				-4.1	%		$	119,837			$	133,210				-10.0	%
Property Casualty			124,727				115,345				8.1	%			462,942				390,168				18.7	%
Professional Liability			21,399				24,204				-11.6	%			97,229				99,578				-2.4	%
Total Insurance Companies			171,019				165,493				3.3	%			680,008				622,956				9.2	%
Lloyd’s Operations:
Marine			34,214				34,111				0.3	%			134,627				143,600				-6.2	%
Property Casualty			9,080				7,131				27.3	%			42,334				43,824				-3.4	%
Professional Liability			9,132				5,577				63.8	%			30,953				23,275				33.0	%
Total Lloyd’s Operations			52,426				46,819				12.0	%			207,914				210,699				-1.3	%
Total		$	223,445			$	212,312				5.2	%		$	887,922			$	833,655				6.5	%
		Three Months												Twelve Months
		2013				2012				Change				2013				2012				Change
Net Earned Premiums:
Insurance Companies:
Marine		$	29,263			$	30,779				-4.9	%		$	129,276			$	142,181				-9.1	%
Property Casualty			111,526				92,246				20.9	%			409,480				332,782				23.0	%
Professional Liability			24,709				26,199				-5.7	%			100,582				96,476				4.3	%
Total Insurance Companies			165,498				149,224				10.9	%			639,338				571,439				11.9	%
Lloyd’s Operations:
Marine			35,758				35,360				1.1	%			138,690				136,898				1.3	%
Property Casualty			10,809				11,307				-4.4	%			37,722				52,951				-28.8	%
Professional Liability			7,837				5,675				38.1	%			26,189				20,676				26.7	%
Total Lloyd’s Operations			54,404				52,342				3.9	%			202,601				210,525				-3.8	%
Total		$	219,902			$	201,566				9.1	%		$	841,939			$	781,964				7.7	%

---

News Release

Page 7

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

December 31, 2013

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	244,473			$	88,618			$	—			$	333,091
Net written premiums			171,019				52,426				—				223,445
Net earned premiums			165,498				54,404				—				219,902
Net losses and loss adjustment expenses			(106,445	)			(24,940	)			—				(131,385	)
Commission expenses			(22,003	)			(9,465	)			605				(30,863	)
Other operating expenses			(32,238	)			(11,588	)			—				(43,826	)
Other income (expense)			461				(521	)			(605	)			(665	)
Underwriting profit (loss)			5,273				7,890				—				13,163
Net investment income			12,332				1,923				(1	)			14,254
Net realized gains (losses)			14,599				639				—				15,238
Call premium on Senior Notes			—				—				(17,895	)			(17,895	)
Interest expense			—				—				(4,351	)			(4,351	)
Income (loss) before income taxes			32,204				10,452				(22,247	)			20,409
Income tax expense (benefit)			10,411				3,608				(7,943	)			6,076
Net income (loss)		$	21,793			$	6,844			$	(14,304	)		$	14,333
Losses and loss adjustment expenses ratio			64.3	%			45.8	%							59.7	%
Commission expense ratio			13.3	%			17.4	%							14.0	%
Other operating expense ratio (2)			19.2	%			22.3	%							20.3	%
Combined ratio			96.8	%			85.5	%							94.0	%

 

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

---

News Release

Page 8

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Three Months Ended

December 31, 2012

($ in thousands)

 

		Insurance Companies				Lloyd’s Operations				Corporate (1)				Total
Gross written premiums		$	240,562			$	81,025			$	—			$	321,587
Net written premiums			165,493				46,819				—				212,312
Net earned premiums			149,224				52,342				—				201,566
Net losses and loss adjustment expenses			(112,599	)			(14,592	)			—				(127,191	)
Commission expenses			(20,125	)			(11,714	)			580				(31,259	)
Other operating expenses			(29,979	)			(12,862	)			—				(42,841	)
Other income (expense)			40				(59	)			(580	)			(599	)
Underwriting profit (loss)			(13,439	)			13,115				—				(324	)
Net investment income			12,324				1,262				30				13,616
Net realized gains (losses)			29,659				194				193				30,046
Interest expense			—				—				(2,051	)			(2,051	)
Income (loss) before income taxes			28,544				14,571				(1,828	)			41,287
Income tax expense (benefit)			9,083				5,162				(1,002	)			13,243
Net income (loss)		$	19,461			$	9,409			$	(826	)		$	28,044
Losses and loss adjustment expenses ratio			75.5	%			27.9	%							63.1	%
Commission expense ratio			13.5	%			22.4	%							15.5	%
Other operating expense ratio (2)			20.0	%			24.6	%							21.6	%
Combined ratio			109.0	%			74.9	%							100.2	%

 

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

---

News Release

Page 9

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Twelve Months Ended

December 31, 2013

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	1,002,275			$	368,242			$	—			$	1,370,517
Net written premiums			680,008				207,914				—				887,922
Net earned premiums			639,338				202,601				—				841,939
Net losses and loss adjustment expenses			(415,413	)			(103,548	)			—				(518,961	)
Commission expenses			(81,132	)			(34,710	)			2,348				(113,494	)
Other operating expenses			(119,920	)			(44,514	)			—				(164,434	)
Other income (expense)			2,764				(1,588	)			(2,348	)			(1,172	)
Underwriting profit (loss)			25,637				18,241				—				43,878
Net investment income			49,083				7,160				8				56,251
Net realized gains (losses)			20,600				(58	)			4				20,546
Call premium on Senior Notes			—				—				(17,895	)			(17,895	)
Interest expense			—				—				(10,507	)			(10,507	)
Income (loss) before income taxes			95,320				25,343				(28,390	)			92,273
Income tax expense (benefit)			29,965				8,728				(9,886	)			28,807
Net income (loss)		$	65,355			$	16,615			$	(18,504	)		$	63,466
Losses and loss adjustment expenses ratio			65.0	%			51.1	%							61.6	%
Commission expense ratio			12.7	%			17.1	%							13.5	%
Other operating expense ratio (2)			18.3	%			22.8	%							19.7	%
Combined ratio			96.0	%			91.0	%							94.8	%

 

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

---

News Release

Page 10

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

Twelve Months Ended

December 31, 2012

($ in thousands)

 

		Insurance				Lloyd’s
		Companies				Operations				Corporate (1)				Total
Gross written premiums		$	921,325			$	365,140			$	—			$	1,286,465
Net written premiums			622,956				210,699				—				833,655
Net earned premiums			571,439				210,525				—				781,964
Net losses and loss adjustment expenses			(417,082	)			(80,351	)			—				(497,433	)
Commission expenses			(81,370	)			(42,449	)			2,349				(121,470	)
Other operating expenses			(113,625	)			(45,454	)			—				(159,079	)
Other income (expense)			3,790				47				(2,349	)			1,488
Underwriting profit (loss)			(36,848	)			42,318				—				5,470
Net investment income			46,549				7,551				148				54,248
Net realized gains (losses)			36,468				3,555				193				40,216
Interest expense			—				—				(8,198	)			(8,198	)
Income (loss) before income taxes			46,169				53,424				(7,857	)			91,736
Income tax expense (benefit)			12,686				18,620				(3,332	)			27,974
Net income (loss)		$	33,483			$	34,804			$	(4,525	)		$	63,762
Losses and loss adjustment expenses ratio			73.0	%			38.2	%							63.6	%
Commission expense ratio			14.2	%			20.2	%							15.5	%
Other operating expense ratio (2)			19.2	%			21.5	%							20.2	%
Combined ratio			106.4	%			79.9	%							99.3	%

 

(1)	The Corporate segment includes intercompany eliminations.

(2)	The Other operating expense ratio includes Other income (expense).

---

News Release

Page 11

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

		Three Months Ended December 31, 2013
		Net				Losses
		Earned				and LAE				Underwriting				Underwriting				Loss				Expense				Combined
		Premiums				Incurred				Expenses				Profit (Loss)				Ratio				Ratio				Ratio
Insurance Companies:
Marine		$	29,263			$	7,192			$	13,257			$	8,814				24.6	%			45.3	%			69.9	%
Property Casualty			111,526				84,379				31,816				(4,669	)			75.7	%			28.5	%			104.2	%
Professional Liability			24,709				14,874				8,707				1,128				60.2	%			35.2	%			95.4	%
Total Insurance Companies			165,498				106,445				53,780				5,273				64.3	%			32.5	%			96.8	%
Lloyd’s Operations:
Marine			35,758				17,270				15,111				3,377				48.3	%			42.3	%			90.6	%
Property Casualty			10,809				2,645				3,957				4,207				24.5	%			36.6	%			61.1	%
Professional Liability			7,837				5,025				2,506				306				64.1	%			32.0	%			96.1	%
Total Lloyd’s Operations			54,404				24,940				21,574				7,890				45.8	%			39.7	%			85.5	%
Total All		$	219,902			$	131,385			$	75,354			$	13,163				59.7	%			34.3	%			94.0	%
		Three Months Ended December 31, 2012
		Net				Losses
		Earned				and LAE				Underwriting				Underwriting				Loss				Expense				Combined
		Premiums				Incurred				Expenses				Profit (Loss)				Ratio				Ratio				Ratio
Insurance Companies:
Marine		$	30,779			$	22,879			$	15,048			$	(7,148	)			74.3	%			48.9	%			123.2	%
Property Casualty			92,246				70,394				25,535				(3,683	)			76.3	%			27.7	%			104.0	%
Professional Liability			26,199				19,326				9,481				(2,608	)			73.8	%			36.2	%			110.0	%
Total Insurance Companies			149,224				112,599				50,064				(13,439	)			75.5	%			33.5	%			109.0	%
Lloyd’s Operations:
Marine			35,360				5,892				16,523				12,945				16.7	%			46.7	%			63.4	%
Property Casualty			11,307				6,476				5,609				(778	)			57.3	%			49.6	%			106.9	%
Professional Liability			5,675				2,224				2,503				948				39.2	%			44.1	%			83.3	%
Total Lloyd’s Operations			52,342				14,592				24,635				13,115				27.9	%			47.0	%			74.9	%
Total All		$	201,566			$	127,191			$	74,699			$	(324	)			63.1	%			37.1	%			100.2	%

 

		Amounts								Loss Ratio
		Dec. 31, 2013				Dec. 31, 2012				Dec. 31, 2013				Dec. 31, 2012
Net Incurred Loss Activity For the Three Months Ended:
Insurance Companies:
Loss and LAE payments		$	135,161			$	120,293				81.7	%			80.7	%
Change in reserves			(28,716	)			(7,694	)			-17.4	%			-5.2	%
Net incurred loss and LAE			106,445				112,599				64.3	%			75.5	%
Lloyd’s Operations:
Loss and LAE payments			29,424				35,341				54.1	%			67.5	%
Change in reserves			(4,484	)			(20,749	)			-8.3	%			-39.6	%
Net incurred loss and LAE			24,940				14,592				45.8	%			27.9	%
Total
Loss and LAE payments			164,585				155,634				74.8	%			77.2	%
Change in reserves			(33,200	)			(28,443	)			-15.1	%			-14.1	%
Net incurred loss and LAE		$	131,385			$	127,191				59.7	%			63.1	%
		Amounts								Loss Ratio Impact
		Dec. 31, 2013				Dec. 31, 2012				Dec. 31, 2013				Dec. 31, 2012
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Three Months Ended:
Insurance Companies		$	(1,047	)		$	(379	)			-0.5	%			-0.2	%
Lloyd’s Operations			624				27,955				0.3	%			13.9	%
Total		$	(423	)		$	27,576				-0.2	%			13.7	%

---

News Release

Page 12

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Underwriting Results

($ in thousands)

 

		Twelve Months Ended December 31, 2013
		Net				Losses
		Earned				and LAE				Underwriting				Underwriting				Loss				Expense				Combined
		Premiums				Incurred				Expenses				Profit (Loss)				Ratio				Ratio				Ratio
Insurance Companies:
Marine		$	129,276			$	62,617			$	50,206			$	16,453				48.4	%			38.9	%			87.3	%
Property Casualty			409,480				280,530				114,660				14,290				68.5	%			28.0	%			96.5	%
Professional Liability			100,582				72,266				33,422				(5,106	)			71.8	%			33.3	%			105.1	%
Total Insurance Companies			639,338				415,413				198,288				25,637				65.0	%			31.0	%			96.0	%
Lloyd’s Operations:
Marine			138,690				76,454				56,377				5,859				55.1	%			40.7	%			95.8	%
Property Casualty			37,722				13,852				16,066				7,804				36.7	%			42.6	%			79.3	%
Professional Liability			26,189				13,242				8,369				4,578				50.6	%			31.9	%			82.5	%
Total Lloyd’s Operations			202,601				103,548				80,812				18,241				51.1	%			39.9	%			91.0	%
Total All		$	841,939			$	518,961			$	279,100			$	43,878				61.6	%			33.2	%			94.8	%
		Twelve Months Ended December 31, 2012
		Net				Losses
		Earned				and LAE				Underwriting				Underwriting				Loss				Expense				Combined
		Premiums				Incurred				Expenses				Profit (Loss)				Ratio				Ratio				Ratio
Insurance Companies:
Marine		$	142,181			$	110,119			$	55,419			$	(23,357	)			77.4	%			39.0	%			116.4	%
Property Casualty			332,782				235,740				100,770				(3,728	)			70.8	%			30.3	%			101.1	%
Professional Liability			96,476				71,223				35,016				(9,763	)			73.8	%			36.3	%			110.1	%
Total Insurance Companies			571,439				417,082				191,205				(36,848	)			73.0	%			33.4	%			106.4	%
Lloyd’s Operations:
Marine			136,898				51,116				59,110				26,672				37.3	%			43.2	%			80.5	%
Property Casualty			52,951				23,689				20,030				9,232				44.7	%			37.9	%			82.6	%
Professional Liability			20,676				5,546				8,716				6,414				26.8	%			42.2	%			69.0	%
Total Lloyd’s Operations			210,525				80,351				87,856				42,318				38.2	%			41.7	%			79.9	%
Total All		$	781,964			$	497,433			$	279,061			$	5,470				63.6	%			35.7	%			99.3	%

 

		Amounts								Loss Ratio
		Dec. 31,				Dec. 31,				Dec. 31,				Dec. 31,
		2013				2012				2013				2012
Net Incurred Loss Activity For the Twelve Months Ended:
Insurance Companies:
Loss and LAE payments		$	398,993			$	403,113				62.4	%			70.6	%
Change in reserves			16,420				13,969				2.6	%			2.4	%
Net incurred loss and LAE			415,413				417,082				65.0	%			73.0	%
Lloyd’s Operations:
Loss and LAE payments			114,350				114,645				56.4	%			54.5	%
Change in reserves			(10,802	)			(34,294	)			-5.3	%			-16.3	%
Net incurred loss and LAE			103,548				80,351				51.1	%			38.2	%
Total
Loss and LAE payments			513,343				517,758				61.0	%			66.2	%
Change in reserves			5,618				(20,325	)			0.6	%			-2.6	%
Net incurred loss and LAE		$	518,961			$	497,433				61.6	%			63.6	%
		Amounts								Loss Ratio Impact
		Dec. 31,				Dec. 31,				Dec. 31,				Dec. 31,
		2013				2012				2013				2012
Impact of Prior Years Reserves Favorable / (Unfavorable) Development For the Twelve Months Ended:
Insurance Companies		$	(13,430	)		$	(1,896	)			-1.6	%			-0.2	%
Lloyd’s Operations			14,696				47,187				1.7	%			6.0	%
Total		$	1,266			$	45,291				0.1	%			5.8	%

---

News Release

Page 13

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

($ in thousands)

 

		Case				IBNR
		Reserves				Reserves				Total
Net Loss Reserves, December 31, 2013:
Insurance Companies:
Marine		$	122,909			$	101,077			$	223,986
Property Casualty			150,477				377,173				527,650
Professional Liability			61,117				89,865				150,982
Total Insurance Companies			334,503				568,115				902,618
Lloyd’s Operations:
Marine			133,060				85,685				218,745
Property Casualty			25,870				18,271				44,141
Professional Liability			14,013				43,116				57,129
Total Lloyd’s Operations			172,943				147,072				320,015
Total Net Loss Reserves		$	507,446			$	715,187			$	1,222,633
		Case Reserves				IBNR Reserves				Total
Net Loss Reserves, December 31, 2012
Insurance Companies:
Marine		$	137,934			$	114,236			$	252,170
Property Casualty			204,988				290,455				495,443
Professional Liability			54,092				84,493				138,585
Total Insurance Companies			397,014				489,184				886,198
Lloyd’s Operations:
Marine			125,884				95,122				221,006
Property Casualty			27,903				28,463				56,366
Professional Liability			14,694				38,645				53,339
Total Lloyd’s Operations			168,481				162,230				330,711
Total Net Loss Reserves		$	565,495			$	651,414			$	1,216,909

---

News Release

Page 14

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

December 31, 2013

As of December 31, 2013, the average quality of the investment portfolio as rated by S&P and Moody’s was AA/Aa with an average duration of 3.7 years. The Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

As of December 31, 2013, the Company owned two asset-backed securities approximating $0.5 million with subprime mortgage exposures. The securities have an effective maturity of 2.3 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $1.9 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 7.7 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 as of December 31, 2013:

 

						Gross				Gross
		Fair				Unrealized				Unrealized				Amortized
December 31, 2013		Value				Gains				(Losses)				Cost
		($ in thousands)
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds		$	441,685			$	2,854			$	(8,855	)		$	447,686
States, municipalities and political subdivisions			460,422				9,298				(13,651	)			464,775
Mortgage- and asset-backed securities:
Agency mortgage-backed securities			301,274				6,779				(6,016	)			300,511
Residential mortgage obligations			41,755				1,212				(161	)			40,704
Asset-backed securities			125,133				653				(480	)			124,960
Commercial mortgage-backed securities			172,750				7,656				(374	)			165,468
Subtotal			640,912				16,300				(7,031	)			631,643
Corporate bonds			504,854				15,402				(3,443	)			492,895
Total fixed maturities			2,047,873				43,854				(32,980	)			2,036,999
Equity securities—common stocks			143,954				25,700				(550	)			118,804
Short-term investments			296,250				—				—				296,250
Cash			86,509				—				—				86,509
Total		$	2,574,586			$	69,554			$	(33,530	)		$	2,538,562

---

News Release

Page 15

 

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

December 31, 2013

($ in thousands)

The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, categorized by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at December 31, 2013:

 

						Gross				Gross
		Fair				Unrealized				Unrealized				Amortized
		Value				Gains				(Losses)				Cost
Agency mortgage-backed securities:
GNMA		$	122,079			$	2,707			$	(3,645	)		$	123,017
FNMA			132,731				3,232				(2,058	)			131,557
FHLMC			46,464				840				(313	)			45,937
Total		$	301,274			$	6,779			$	(6,016	)		$	300,511
						Gross				Gross
		Fair				Unrealized				Unrealized				Amortized
		Value				Gains				(Losses)				Cost
Residential mortgage obligations:
Prime		$	17,932			$	500			$	(137	)		$	17,569
Alt-A			1,885				77				(24	)			1,832
Subprime			543				14				—				529
Non-US RMBS			21,395				621				—				20,774
Total		$	41,755			$	1,212			$	(161	)		$	40,704