NAVIGATORS GROUP INC - FORM 8-K - EX-99.1

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8-K - 8-K - NAVIGATORS GROUP INC	navg-8k_20170803.htm

Exhibit 99.1

The Navigators Group, Inc.

CORPORATE NEWS

Navigators Reports Second Quarter 2017 Earnings

Net Income up 26.6%; Book Value up 3.2%

Stamford, CT – August 3, 2017 -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $20.5 million, or $0.69 per diluted share, for the three months ended June 30, 2017 compared to $16.2 million, or $0.54 per diluted share, for the same period in 2016. Net Operating Earnings¹ were $19.7 million, or $0.66 per diluted share, for the three months ended June 30, 2017 compared to $12.2 million, or $0.41 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the three months ended June 30, 2017 were $452.2 million and $333.3 million, respectively, increasing 9.6% and 8.7%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended June 30, 2017 was 97.3%, compared to 99.6% for the same period in 2016.

Net Investment Income for the three months ended June 30, 2017 was $22.3 million, an increase of 12.0% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.8% for the three months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the three months ended June 30, 2017 was $(0.4) million, compared to $4.4 million for the same period in 2016. Other Income (Loss) primarily consists of realized and unrealized foreign exchange gains and losses.

For the six months ended June 30, 2017, our Company reported Net Income of $41.6 million, or $1.39 per diluted share, compared to $39.1 million, or $1.31 per diluted share, for the same period in 2016. Net Operating Earnings were $40.1 million, or $1.34 per diluted share, for the six months ended June 30, 2017 compared to $32.4 million, or $1.08 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the six months ended June 30, 2017 were $902.5 million and $670.4 million, respectively, increasing 9.2% and 7.0%, respectively, from the comparable period in 2016. Our Combined Ratio for the six months ended June 30, 2017 was 96.9%, compared to 97.4% for the same period in 2016.

Net Investment Income for the six months ended June 30, 2017 was $43.7 million, an increase of 10.8% as compared to the same period in 2016. Our annualized pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the six months ended June 30, 2017, compared to 2.6% for the same period in 2016.

Other Income for the six months ended June 30, 2017 was $0.7 million, compared to $7.0 million for the same period in 2016.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report continued profitable underwriting results and good premium growth in the second quarter, led by strong performance from our US Insurance and Global Reinsurance segments and improvement in our International Insurance results. Second quarter Net Income was up 26.6% over the prior year as a result of improved Underwriting Profit and Investment Income, contributing to an increase in Book Value per Share of 3.1% during the quarter. We continue to invest in expanding our business, with a commitment to cost control as reflected in our year to date 2.1 point decrease in our Other Operating Expense Ratio.”

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

News Release

August 3, 2017

Page 2

Our 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 average effective duration of 3.8 years as of June 30, 2017. As of June 30, 2017, Net Unrealized Gains within our investment portfolio were $74.3 million, an increase of $22.2 million compared to March 31, 2017 and an increase of $45.4 million compared to December 31, 2016. We recognized $1.7 million of Net Realized Gains for the three months ended June 30, 2017, compared to $1.8 million of Net Realized Gains for the same period in 2016 (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings). For the six months ended June 30, 2017 we recognized $1.7 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $3.4 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016.

Stockholders’ Equity was $1.2 billion, or $42.21 per share, as of June 30, 2017 compared to $40.94 per share, as of March 31, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended June 30, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On August 3, 2017 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.06 per share, payable on September 14, 2017 to stockholders of record on August 24, 2017.

Our Company will hold a conference call on Friday, August 4, 2017 starting at 8:30 a.m. (ET) to discuss the 2017 second 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 also connect to the webcast at: http://edge.media-server.com/m/p/gvxmqq2j

On December 6, 2016, our Board of Directors declared a two-for-one stock split of The Navigators Group, Inc. Common Stock, to be effected in the form of a stock dividend. Stockholders of record at the close of business on December 30, 2016 received one additional share of Common Stock for every share of Common Stock held. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the stock split for all periods presented. The additional shares of Common Stock were issued on January 20, 2017.

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. 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
		Executive Vice President and Chief Financial Officer
		(203) 905-6343
		cdefalco@navg.com
		www.navg.com

News Release

August 3, 2017

Page 3

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

	Three Months Ended									Six Months Ended
amounts in thousands, except per share amounts	June 30,									June 30,
Results of Operations	2017			2016			Change			2017			2016			Change

Gross Written Premiums	$	452,179		$	412,565			9.6	%	$	902,484		$	826,442			9.2	%
Net Written Premiums		333,282			306,535			8.7	%		670,445			626,355			7.0	%

Revenues:
Net Earned Premiums	$	293,835		$	267,992			9.6	%	$	579,966		$	532,350			8.9	%
Net Investment Income		22,265			19,875			12.0	%		43,713			39,469			10.8	%
Net Realized Gains (Losses):
Total Other-Than-Temporary Impairment Losses		29			(162	)	NM				(1,048	)		(271	)	NM
Portion of Loss Recognized in Other Comprehensive Income (Before Tax)		(29	)		12		NM				(45	)		121		NM
Net Other-Than-Temporary Impairment Losses Recognized In Earnings		—			(150	)	NM				(1,093	)		(150	)	NM
Other Realized Gains		1,694			1,960			(13.6	%)		2,743			3,557			(22.9	%)
Net Realized Gains		1,694			1,810			(6.4	%)		1,650			3,407			(51.6	%)
Other Income (Loss)		(411	)		4,430		NM				657			6,979			(90.6	%)
Total Revenues	$	317,383		$	294,107			7.9	%	$	625,986		$	582,205			7.5	%

Expenses:
Net Losses and Loss Adjustment Expenses	$	177,110		$	167,206			5.9	%	$	346,710		$	320,162			8.3	%
Commission Expenses		48,173			40,726			18.3	%		96,017			78,280			22.7	%
Other Operating Expenses		60,766			59,074			2.9	%		119,304			119,883			(0.5	%)
Interest Expense		3,861			3,858			0.1	%		7,722			7,716			0.1	%
Total Expenses	$	289,910		$	270,864			7.0	%	$	569,753		$	526,041			8.3	%

Income Before Income Taxes	$	27,473		$	23,243			18.2	%	$	56,233		$	56,164			0.1	%

Income Tax Expense		6,971			7,053			(1.2	%)		14,621			17,042			(14.2	%)

Net Income	$	20,502		$	16,190			26.6	%	$	41,612		$	39,122			6.4	%


Per Share Data ⁽¹⁾

Net Income Per Common Share:
Basic	$	0.70		$	0.56			24.9	%	$	1.42		$	1.35			5.1	%
Diluted	$	0.69		$	0.54			26.8	%	$	1.39		$	1.31			6.3	%

Average Common Shares Outstanding:
Basic		29,470			29,074						29,377			29,029
Diluted		29,918			29,953						29,897			29,884

Underwriting Ratios
Loss Ratio		60.3	%		62.4	%					59.8	%		60.1	%
Expense Ratio		37.0	%		37.2	%					37.1	%		37.3	%
Combined Ratio		97.3	%		99.6	%					96.9	%		97.4	%

Balance Sheet Data	June 30,			March 31,						June 30,			December 31,
	2017			2017						2017			2016
Stockholders' Equity	$	1,244,168		$	1,206,136			3.2	%	$	1,244,168		$	1,178,188			5.6	%
Book Value per Share ⁽¹⁾	$	42.21		$	40.94			3.1	%	$	42.21		$	40.45			4.3	%

(1) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

NM - Percentage change not meaningful.

News Release

August 3, 2017

Page 4

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS

(Unaudited)

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

Net Operating Earnings is comprised of Net Income excluding After-Tax Net Realized Gains (Losses), After-Tax Net Other-Than-Temporary Impairment Losses Recognized in Earnings, and After-Tax Foreign Exchange Gains and Losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency). We believe that showing Net Income exclusive of Realized Gains and Losses, Net Other-Than-Temporary Impairment Losses Recognized in Earnings, and Foreign Exchange Gains and Losses reflects the underlying fundamentals of our business.

We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our business and enables investors and other users of our 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 (the nearest GAAP financial measure) to Net Operating Earnings:

	Three Months Ended June 30, 2017									Three Months Ended June 30, 2016									% Change
amounts in thousands, except per share amounts	Pre-Tax			Tax ⁽¹⁾			After-Tax			Pre-Tax			Tax ⁽¹⁾			After-Tax			QTD
Net Income	$	27,473		$	(6,971	)	$	20,502		$	23,243		$	(7,053	)	$	16,190			26.6	%
Adjustments to Net Income:
Realized Losses (Gains)		(1,694	)		593			(1,101	)		(1,810	)		634			(1,176	)		(6.4	%)
FX Losses (Gains)		463			(162	)		301			(4,367	)		1,529			(2,838	)	NM
Net Operating Earnings	$	26,242		$	(6,540	)	$	19,702		$	17,066		$	(4,890	)	$	12,176			61.8	%

Average Common Shares Outstanding: ⁽²⁾
Basic								29,470									29,074
Diluted								29,918									29,953

Net Operating Earnings per Common Share: ⁽²⁾
Basic							$	0.67								$	0.42
Diluted							$	0.66								$	0.41

	Six Months Ended June 30, 2017									Six Months Ended June 30, 2016									% Change
amounts in thousands, except per share amounts	Pre-Tax			Tax ⁽¹⁾			After-Tax			Pre-Tax			Tax ⁽¹⁾			After-Tax			YTD
Net Income	$	56,233		$	(14,621	)	$	41,612		$	56,164		$	(17,042	)	$	39,122			6.4	%
Adjustments to Net Income:
Realized Losses (Gains)		(1,650	)		578			(1,072	)		(3,407	)		1,193			(2,214	)		(51.6	%)
FX Losses (Gains)		(660	)		231			(429	)		(6,907	)		2,417			(4,490	)		(90.4	%)
Net Operating Earnings	$	53,923		$	(13,812	)	$	40,111		$	45,850		$	(13,432	)	$	32,418			23.7	%

Average Common Shares Outstanding: ⁽²⁾
Basic								29,377									29,029
Diluted								29,897									29,884

Net Operating Earnings per Common Share: ⁽²⁾
Basic							$	1.37								$	1.12
Diluted							$	1.34								$	1.08

(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.

(2) - We completed a two-for-one stock split on January 20, 2017. All share and per share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

NM - Percentage change not meaningful.

News Release

August 3, 2017

Page 5

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2017			2016
amounts in thousands, except per share amounts	(Unaudited)
ASSETS
Investments:
Fixed Maturities, available-for-sale, at fair value (amortized cost: 2017: $2,715,910; 2016: $2,628,225)	$	2,750,404		$	2,635,882
Equity Securities, available-for-sale, at fair value (cost: 2017: $312,511; 2016: $327,911)		352,062			349,142
Other Invested Assets		1,781			1,960
Short-Term Investments, at fair value (amortized cost: 2017: $130,598; 2016: $143,451)		130,881			143,539
Total Investments	$	3,235,128		$	3,130,523
Cash		69,222			64,643
Premiums Receivable		423,767			306,686
Prepaid Reinsurance Premiums		238,359			213,377
Reinsurance Recoverable on Paid Losses		67,567			82,582
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses		782,864			779,276
Deferred Policy Acquisition Costs		132,796			119,660
Accrued Investment Income		18,196			17,315
Goodwill and Other Intangible Assets		6,499			6,451
Current Income Tax Receivable, Net		16,113			20,556
Deferred Income Tax, Net		15,430			20,938
Other Assets		57,953			52,030
Total Assets	$	5,063,894		$	4,814,037

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserves for Losses and Loss Adjustment Expenses	$	2,346,327		$	2,289,727
Unearned Premiums		1,002,855			887,344
Reinsurance Balances Payable		125,357			108,980
Senior Notes		263,806			263,728
Payable for Investments Purchased		12,000			—
Accounts Payable and Other Liabilities		69,381			86,070
Total Liabilities	$	3,819,726		$	3,635,849

Stockholders' Equity: ⁽¹⁾
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 36,498 shares for 2017 and 36,147 shares for 2016)		3,647			3,612
Additional Paid-In Capital		371,410			373,983
Treasury Stock, at cost (7,023 shares for 2017 and 2016)		(155,801	)		(155,801	)
Retained Earnings		986,039			947,519
Accumulated Other Comprehensive Income		38,873			8,875
Total Stockholders' Equity	$	1,244,168		$	1,178,188
Total Liabilities and Stockholders' Equity	$	5,063,894		$	4,814,037

(1) - We completed a two-for-one stock split on January 20, 2017. All share data prior to January 20, 2017 has been retroactively restated on a post-split basis.

News Release

August 3, 2017

Page 6

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Three Months Ended June 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	257,186		$	131,193		$	63,800		$	—		$	452,179
Ceded Written Premiums		(73,857	)		(43,809	)		(1,231	)		—			(118,897	)
Net Written Premiums		183,329			87,384			62,569			—			333,282

Net Earned Premiums	$	167,087		$	82,100		$	44,648		$	—		$	293,835
Net Losses and LAE		(105,270	)		(44,095	)		(27,745	)		—			(177,110	)
Commission Expenses		(20,460	)		(19,001	)		(8,970	)		258			(48,173	)
Other Operating Expenses		(33,140	)		(22,506	)		(5,120	)		—			(60,766	)
Other Underwriting Income (Expense)		100			—			169			(258	)		11

Underwriting Profit (Loss)	$	8,317		$	(3,502	)	$	2,982		$	—		$	7,797

Net Investment Income											22,265			22,265
Net Realized Gains											1,694			1,694
Interest Expense											(3,861	)		(3,861	)
Other Loss											(422	)		(422	)
Income (Loss) Before Income Taxes	$	8,317		$	(3,502	)	$	2,982		$	19,676		$	27,473
Income Tax Expense											(6,971	)		(6,971	)
Net Income													$	20,502

Losses and LAE Ratio		63.0	%		53.7	%		62.1	%					60.3	%
Commission Expense Ratio		12.2	%		23.1	%		20.1	%					16.4	%
Other Operating Expense Ratio ⁽²⁾		19.8	%		27.5	%		11.1	%					20.6	%
Combined Ratio		95.0	%		104.3	%		93.3	%					97.3	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

August 3, 2017

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Three Months Ended June 30, 2016
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	243,924		$	135,740		$	32,901		$	—		$	412,565
Ceded Written Premiums		(62,618	)		(41,910	)		(1,502	)		—			(106,030	)
Net Written Premiums		181,306			93,830			31,399			—			306,535

Net Earned Premiums	$	152,384		$	77,833		$	37,775		$	—		$	267,992
Net Losses and LAE		(93,428	)		(48,066	)		(25,712	)		—			(167,206	)
Commission Expenses		(16,894	)		(16,821	)		(7,492	)		481			(40,726	)
Other Operating Expenses		(31,570	)		(23,043	)		(4,461	)		—			(59,074	)
Other Underwriting Income (Expense)		342			—			203			(481	)		64

Underwriting Profit (Loss)	$	10,834		$	(10,097	)	$	313		$	—		$	1,050

Net Investment Income											19,875			19,875
Net Realized Gains											1,810			1,810
Interest Expense											(3,858	)		(3,858	)
Other Income											4,366			4,366
Income (Loss) Before Income Taxes	$	10,834		$	(10,097	)	$	313		$	22,193		$	23,243
Income Tax Expense											(7,053	)		(7,053	)
Net Income													$	16,190

Losses and LAE Ratio		61.3	%		61.8	%		68.1	%					62.4	%
Commission Expense Ratio		11.1	%		21.6	%		19.8	%					15.2	%
Other Operating Expense Ratio ⁽²⁾		20.5	%		29.6	%		11.3	%					22.0	%
Combined Ratio		92.9	%		113.0	%		99.2	%					99.6	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

August 3, 2017

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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Six Months Ended June 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	494,791		$	273,053		$	134,640		$	—		$	902,484
Ceded Written Premiums		(135,344	)		(90,402	)		(6,293	)		—			(232,039	)
Net Written Premiums		359,447			182,651			128,347			—			670,445

Net Earned Premiums	$	331,091		$	166,186		$	82,689		$	—		$	579,966
Net Losses and LAE		(204,096	)		(94,800	)		(47,814	)		—			(346,710	)
Commission Expenses		(40,844	)		(38,234	)		(17,462	)		523			(96,017	)
Other Operating Expenses		(66,612	)		(42,299	)		(10,393	)		—			(119,304	)
Other Underwriting Income (Expense)		210			—			345			(523	)		32

Underwriting Profit (Loss)	$	19,749		$	(9,147	)	$	7,365		$	—		$	17,967

Net Investment Income											43,713			43,713
Net Realized Gains											1,650			1,650
Interest Expense											(7,722	)		(7,722	)
Other Income											625			625
Income (Loss) Before Income Taxes	$	19,749		$	(9,147	)	$	7,365		$	38,266		$	56,233
Income Tax Expense											(14,621	)		(14,621	)
Net Income													$	41,612

Losses and LAE Ratio		61.6	%		57.0	%		57.8	%					59.8	%
Commission Expense Ratio		12.3	%		23.0	%		21.1	%					16.6	%
Other Operating Expense Ratio ⁽²⁾		20.1	%		25.5	%		12.2	%					20.5	%
Combined Ratio		94.0	%		105.5	%		91.1	%					96.9	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

August 3, 2017

Page 9

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Segment Information

(Unaudited)

	Six Months Ended June 30, 2016
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross Written Premiums	$	454,571		$	279,883		$	91,988		$	—		$	826,442
Ceded Written Premiums		(117,115	)		(76,881	)		(6,091	)		—			(200,087	)
Net Written Premiums		337,456			203,002			85,897			—			626,355

Net Earned Premiums	$	300,724		$	155,841		$	75,785		$	—		$	532,350
Net Losses and LAE		(184,940	)		(88,476	)		(46,746	)		—			(320,162	)
Commission Expenses		(31,749	)		(32,176	)		(15,237	)		882			(78,280	)
Other Operating Expenses		(65,331	)		(44,814	)		(9,738	)		—			(119,883	)
Other Underwriting Income (Expense)		703			—			252			(882	)		73

Underwriting Profit (Loss)	$	19,407		$	(9,625	)	$	4,316		$	—		$	14,098

Net Investment Income											39,469			39,469
Net Realized Gains											3,407			3,407
Interest Expense											(7,716	)		(7,716	)
Other Income											6,906			6,906
Income (Loss) Before Income Taxes	$	19,407		$	(9,625	)	$	4,316		$	42,066		$	56,164
Income Tax Expense											(17,042	)		(17,042	)
Net Income													$	39,122

Losses and LAE Ratio		61.5	%		56.8	%		61.7	%					60.1	%
Commission Expense Ratio		10.6	%		20.6	%		20.1	%					14.7	%
Other Operating Expense Ratio ⁽²⁾		21.4	%		28.8	%		12.5	%					22.6	%
Combined Ratio		93.5	%		106.2	%		94.3	%					97.4	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income (Expense).

News Release

August 3, 2017

Page 10

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	U.S. Insurance
	Three Months Ended June 30, 2017												Three Months Ended June 30, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	41,687		$	187,492		$	28,007		$	257,186		$	46,187		$	168,654		$	29,083		$	243,924			5.4	%
Ceded Written Premiums		(19,451	)		(51,147	)		(3,259	)		(73,857	)		(18,540	)		(36,768	)		(7,310	)		(62,618	)		17.9	%
Net Written Premiums		22,236			136,345			24,748			183,329			27,647			131,886			21,773			181,306			1.1	%

Net Earned Premiums	$	21,812		$	121,226		$	24,049		$	167,087		$	24,921		$	110,212		$	17,251		$	152,384			9.6	%
Net Losses and LAE		(12,767	)		(77,858	)		(14,645	)		(105,270	)		(10,699	)		(72,172	)		(10,557	)		(93,428	)		12.7	%
Commission Expenses		(1,575	)		(15,232	)		(3,653	)		(20,460	)		(2,176	)		(12,821	)		(1,897	)		(16,894	)		21.1	%
Other Operating Expenses		(6,798	)		(21,645	)		(4,697	)		(33,140	)		(6,817	)		(20,049	)		(4,704	)		(31,570	)		5.0	%
Other Underwriting Income		82			9			9			100			152			178			12			342			(70.6	%)

Underwriting Profit	$	754		$	6,500		$	1,063		$	8,317		$	5,381		$	5,348		$	105		$	10,834			(23.2	%)

Losses and LAE Ratio		58.5	%		64.2	%		60.9	%		63.0	%		42.9	%		65.5	%		61.2	%		61.3	%
Commission Expense Ratio		7.2	%		12.6	%		15.2	%		12.2	%		8.7	%		11.6	%		11.0	%		11.1	%
Other Operating Expense Ratio ⁽¹⁾		30.8	%		17.8	%		19.5	%		19.8	%		26.8	%		18.0	%		27.2	%		20.5	%
Combined Ratio		96.5	%		94.6	%		95.6	%		95.0	%		78.4	%		95.1	%		99.4	%		92.9	%

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

News Release

August 3, 2017

Page 11

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	Int'l Insurance
	Three Months Ended June 30, 2017												Three Months Ended June 30, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	49,597		$	46,663		$	34,933		$	131,193		$	41,147		$	63,002		$	31,591		$	135,740			(3.3	%)
Ceded Written Premiums		(12,536	)		(20,362	)		(10,911	)		(43,809	)		(9,554	)		(24,465	)		(7,891	)		(41,910	)		4.5	%
Net Written Premiums		37,061			26,301			24,022			87,384			31,593			38,537			23,700			93,830			(6.9	%)

Net Earned Premiums	$	39,525		$	23,337		$	19,238		$	82,100		$	36,096		$	23,815		$	17,922		$	77,833			5.5	%
Net Losses and LAE		(23,848	)		(8,867	)		(11,380	)		(44,095	)		(17,021	)		(21,878	)		(9,167	)		(48,066	)		(8.3	%)
Commission Expenses		(9,517	)		(4,577	)		(4,907	)		(19,001	)		(8,361	)		(5,150	)		(3,310	)		(16,821	)		13.0	%
Other Operating Expenses		(9,226	)		(7,946	)		(5,334	)		(22,506	)		(8,698	)		(9,065	)		(5,280	)		(23,043	)		(2.3	%)

Underwriting Profit (Loss)	$	(3,066	)	$	1,947		$	(2,383	)	$	(3,502	)	$	2,016		$	(12,278	)	$	165		$	(10,097	)		(65.3	%)

Losses and LAE Ratio		60.3	%		38.0	%		59.2	%		53.7	%		47.2	%		91.9	%		51.2	%		61.8	%
Commission Expense Ratio		24.1	%		19.6	%		25.5	%		23.1	%		23.2	%		21.6	%		18.5	%		21.6	%
Other Operating Expense Ratio ⁽¹⁾		23.4	%		34.1	%		27.7	%		27.5	%		24.0	%		38.1	%		29.4	%		29.6	%
Combined Ratio		107.8	%		91.7	%		112.4	%		104.3	%		94.4	%		151.6	%		99.1	%		113.0	%

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

News Release

August 3, 2017

Page 12

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	U.S. Insurance
	Six Months Ended June 30, 2017												Six Months Ended June 30, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	82,637		$	358,126		$	54,028		$	494,791		$	89,350		$	309,932		$	55,289		$	454,571			8.8	%
Ceded Written Premiums		(36,971	)		(89,345	)		(9,028	)		(135,344	)		(36,187	)		(67,275	)		(13,653	)		(117,115	)		15.6	%
Net Written Premiums		45,666			268,781			45,000			359,447			53,163			242,657			41,636			337,456			6.5	%

Net Earned Premiums	$	44,506		$	240,349		$	46,236		$	331,091		$	48,171		$	219,371		$	33,182		$	300,724			10.1	%
Net Losses and LAE		(26,542	)		(149,607	)		(27,947	)		(204,096	)		(20,474	)		(143,769	)		(20,697	)		(184,940	)		10.4	%
Commission Expenses		(3,047	)		(30,598	)		(7,199	)		(40,844	)		(3,658	)		(24,673	)		(3,418	)		(31,749	)		28.6	%
Other Operating Expenses		(13,619	)		(43,459	)		(9,534	)		(66,612	)		(14,189	)		(41,571	)		(9,571	)		(65,331	)		2.0	%
Other Underwriting Income		165			27			18			210			231			446			26			703			(70.1	%)

Underwriting Profit (Loss)	$	1,463		$	16,712		$	1,574		$	19,749		$	10,081		$	9,804		$	(478	)	$	19,407			1.8	%

Losses and LAE Ratio		59.6	%		62.2	%		60.4	%		61.6	%		42.5	%		65.5	%		62.4	%		61.5	%
Commission Expense Ratio		6.8	%		12.7	%		15.6	%		12.3	%		7.6	%		11.2	%		10.3	%		10.6	%
Other Operating Expense Ratio ⁽¹⁾		30.3	%		18.1	%		20.6	%		20.1	%		29.0	%		18.8	%		28.7	%		21.4	%
Combined Ratio		96.7	%		93.0	%		96.6	%		94.0	%		79.1	%		95.5	%		101.4	%		93.5	%

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

News Release

August 3, 2017

Page 13

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Reportable Segment Results

(Unaudited)

	Int'l Insurance
	Six Months Ended June 30, 2017												Six Months Ended June 30, 2016
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross Written Premiums	$	118,430		$	87,031		$	67,592		$	273,053		$	113,095		$	107,048		$	59,740		$	279,883			(2.4	%)
Ceded Written Premiums		(23,462	)		(50,008	)		(16,932	)		(90,402	)		(20,643	)		(41,694	)		(14,544	)		(76,881	)		17.6	%
Net Written Premiums		94,968			37,023			50,660			182,651			92,452			65,354			45,196			203,002			(10.0	%)

Net Earned Premiums	$	77,020		$	45,517		$	43,649		$	166,186		$	74,952		$	45,024		$	35,865		$	155,841			6.6	%
Net Losses and LAE		(44,449	)		(24,736	)		(25,615	)		(94,800	)		(37,109	)		(33,094	)		(18,273	)		(88,476	)		7.1	%
Commission Expenses		(19,058	)		(8,319	)		(10,857	)		(38,234	)		(17,766	)		(7,925	)		(6,485	)		(32,176	)		18.8	%
Other Operating Expenses		(17,666	)		(14,369	)		(10,264	)		(42,299	)		(17,140	)		(17,773	)		(9,901	)		(44,814	)		(5.6	%)

Underwriting Profit (Loss)	$	(4,153	)	$	(1,907	)	$	(3,087	)	$	(9,147	)	$	2,937		$	(13,768	)	$	1,206		$	(9,625	)		(5.0	%)

Losses and LAE Ratio		57.7	%		54.3	%		58.7	%		57.0	%		49.5	%		73.5	%		50.9	%		56.8	%
Commission Expense Ratio		24.7	%		18.3	%		24.9	%		23.0	%		23.7	%		17.6	%		18.1	%		20.6	%
Other Operating Expense Ratio ⁽¹⁾		23.0	%		31.6	%		23.5	%		25.5	%		22.9	%		39.5	%		27.6	%		28.8	%
Combined Ratio		105.4	%		104.2	%		107.1	%		105.5	%		96.1	%		130.6	%		96.6	%		106.2	%

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

News Release

August 3, 2017

Page 14

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Incurred Loss Activity

(Unaudited)

	For the Three Months Ended June 30,
amounts in thousands	Amounts					Loss Ratio
Net Incurred Loss Activity	2017			2016		2017			2016
U.S. Insurance:
Loss and LAE Payments	$	86,792		$	72,246		51.9	%		47.4	%
Change in Reserves		18,478			21,182		11.1	%		13.9	%
Net Incurred Loss and LAE	$	105,270		$	93,428		63.0	%		61.3	%

Int'l Insurance:
Loss and LAE Payments	$	46,050		$	32,996		56.1	%		42.4	%
Change in Reserves		(1,955	)		15,070		(2.4	%)		19.4	%
Net Incurred Loss and LAE	$	44,095		$	48,066		53.7	%		61.8	%

GlobalRe:
Loss and LAE Payments	$	21,279		$	17,928		47.6	%		47.5	%
Change in Reserves		6,466			7,784		14.5	%		20.6	%
Net Incurred Loss and LAE	$	27,745		$	25,712		62.1	%		68.1	%

Total
Loss and LAE Payments	$	154,121		$	123,170		52.5	%		46.0	%
Change in Reserves		22,989			44,036		7.8	%		16.4	%
Net Incurred Loss and LAE	$	177,110		$	167,206		60.3	%		62.4	%


	For the Three Months Ended June 30,
Impact of Prior Years Reserves	Amounts					Loss Ratio Impact
Favorable / (Unfavorable) Development	2017			2016		2017			2016
U.S. Insurance	$	(295	)	$	4,002		(0.1	%)		1.5	%
Int'l Insurance		(4,743	)		3,354		(1.6	%)		1.3	%
GlobalRe		(2,992	)		1,423		(1.0	%)		0.5	%
Total	$	(8,030	)	$	8,779		(2.7	%)		3.3	%

News Release

August 3, 2017

Page 15

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Incurred Loss Activity

(Unaudited)

	For the Six Months Ended June 30,
amounts in thousands	Amounts					Loss Ratio
Net Incurred Loss Activity	2017			2016		2017			2016
U.S. Insurance:
Loss and LAE Payments	$	156,563		$	145,281		47.2	%		48.3	%
Change in Reserves		47,533			39,659		14.4	%		13.2	%
Net Incurred Loss and LAE	$	204,096		$	184,940		61.6	%		61.5	%

Int'l Insurance:
Loss and LAE Payments	$	90,958		$	62,239		54.7	%		39.9	%
Change in Reserves		3,842			26,237		2.3	%		16.9	%
Net Incurred Loss and LAE	$	94,800		$	88,476		57.0	%		56.8	%

GlobalRe:
Loss and LAE Payments	$	49,609		$	43,059		60.0	%		56.8	%
Change in Reserves		(1,795	)		3,687		(2.2	%)		4.9	%
Net Incurred Loss and LAE	$	47,814		$	46,746		57.8	%		61.7	%

Total
Loss and LAE Payments	$	297,130		$	250,579		51.3	%		47.1	%
Change in Reserves		49,580			69,583		8.5	%		13.0	%
Net Incurred Loss and LAE	$	346,710		$	320,162		59.8	%		60.1	%


	For the Six Months Ended June 30,
Impact of Prior Years Reserves	Amounts					Loss Ratio Impact
Favorable / (Unfavorable) Development	2017			2016		2017			2016
U.S. Insurance	$	177		$	6,671		0.0	%		1.3	%
Int'l Insurance		(11,359	)		2,499		(2.0	%)		0.5	%
GlobalRe		(3,933	)		1,443		(0.7	%)		0.3	%
Total	$	(15,115	)	$	10,613		(2.7	%)		2.1	%

News Release

August 3, 2017

Page 16

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Net Loss Data

(Unaudited)

	As of June 30, 2017
amounts in thousands	Case		IBNR
Net Loss Reserves:	Reserves		Reserves		Total
U.S. Insurance:
Marine	$	56,618	$	48,212	$	104,830
P&C		185,454		644,771		830,225
Professional Liability		28,417		74,481		102,898
Total U.S. Insurance	$	270,489	$	767,464	$	1,037,953
Int'l Insurance:
Marine	$	168,472	$	33,258	$	201,730
P&C		74,719		23,213		97,932
Professional Liability		40,838		71,095		111,933
Total Int'l Insurance	$	284,029	$	127,566	$	411,595

GlobalRe	$	42,542	$	71,373	$	113,915

Total Net Loss Reserves	$	597,060	$	966,403	$	1,563,463


	As of December 31, 2016
	Case		IBNR
Net Loss Reserves:	Reserves		Reserves		Total
U.S. Insurance:
Marine	$	56,701	$	54,259	$	110,960
P&C		201,368		603,509		804,877
Professional Liability		24,555		70,559		95,114
Total U.S. Insurance	$	282,624	$	728,327	$	1,010,951
Int'l Insurance:
Marine	$	163,124	$	36,118	$	199,242
P&C		66,496		18,192		84,688
Professional Liability		30,106		70,103		100,209
Total Int'l Insurance	$	259,726	$	124,413	$	384,139

GlobalRe	$	47,505	$	67,856	$	115,361

Total Net Loss Reserves	$	589,855	$	920,596	$	1,510,451

News Release

August 3, 2017

Page 17

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES

Investment Data

(Unaudited)

As of June 30, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an average duration of 3.8 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of June 30, 2017:

	As of June 30, 2017
			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	$	264,511	$	2,888	$	(2,660	)	$	264,283
States, Municipalities and Political Subdivisions		655,064		19,306		(2,004	)		637,762
Mortgage-Backed and Asset-Backed Securities:
Agency Mortgage-Backed Securities		455,133		3,849		(5,389	)		456,673
Residential Mortgage Obligations		18,037		506		(25	)		17,556
Asset-Backed Securities		315,945		1,915		(478	)		314,508
Commercial Mortgage-Backed Securities		145,573		2,883		(1,432	)		144,122
Subtotal	$	934,688	$	9,153	$	(7,324	)	$	932,859
Corporate Exposures		896,141		17,490		(2,355	)		881,006
Total Fixed Maturities	$	2,750,404	$	48,837	$	(14,343	)	$	2,715,910
Equity Securities:
Common Stocks	$	172,456	$	30,985	$	(1,023	)	$	142,494
Preferred Stocks		179,606		10,088		(499	)		170,017
Total Equity Securities	$	352,062	$	41,073	$	(1,522	)	$	312,511
Short-Term Investments		130,881		283		—			130,598
Total Investments	$	3,233,347	$	90,193	$	(15,865	)	$	3,159,019

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