Navigators Reports Fourth Quarter 2017 Earnings

Net Income up 24.4%; Board Approves Dividend Increase

 | Source: The Navigators Group, Inc. The Navigators Group, Inc.

STAMFORD, Conn., Feb. 15, 2018 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (NASDAQ:NAVG) reported Net Income of $26.9 million, or $0.89 per diluted share, for the three months ended December 31, 2017 compared to $21.6 million, or $0.71 per diluted share, for the same period in 2016. Net Operating Earnings1 were $24.5 million, or $0.81 per diluted share, for the three months ended December 31, 2017 compared to $17.7 million, or $0.58 per diluted share, for the same period in 2016.

The fourth quarter of 2017 was impacted by the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As a result of the Tax Act, The Navigators Group, Inc. (“Navigators” or the “Company”) recognized additional income tax expense of $19.7 million which reduced Net Income in the fourth quarter.

Gross Written Premiums and Net Written Premiums for the three months ended December 31, 2017 were $408.7 million and $304.9 million, respectively, increasing 11.2% and 7.8%, respectively, from the comparable period in 2016. Our Combined Ratio for the three months ended December 31, 2017 was 96.6%, compared to 96.7% for the same period in 2016.

Net Investment Income for the three months ended December 31, 2017 was $23.0 million, an increase of 14.3% 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 three months ended December 31, 2017, compared to 2.5% for the same period in 2016.

Other Income (Loss) for the three months ended December 31, 2017 was $(3.2) million, compared to $1.9 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

For the full year ended December 31, 2017, our Company reported Net Income of $40.5 million, or $1.35 per diluted share, compared to $82.7 million, or $2.75 per diluted share, for the same period in 2016. Net Operating Earnings were $35.0 million, or $1.16 per diluted share, for the full year ended December 31, 2017 compared to $71.2 million, or $2.37 per diluted share, for the same period in 2016.

Gross Written Premiums and Net Written Premiums for the full year ended December 31, 2017 were $1.7 billion and $1.3 billion, respectively, increasing 9.2% and 7.2%, respectively, from the comparable period in 2016. Our Combined Ratio for the full year ended December 31, 2017 was 103.2%, compared to 96.7% for the same period in 2016.

In addition to the impact of the enactment of the Tax Act in the fourth quarter of 2017, the full year results also include Net Losses and Loss Adjustment Expenses and related net reinsurance reinstatement premiums totaling $71.3 million from Hurricanes Maria, Irma and Harvey and the Puebla, Mexico Earthquake, as well as prior accident year reserve strengthening of $34.3 million.

Net Investment Income for the full year ended December 31, 2017 was $89.3 million, an increase of 12.4% as compared to the same period in 2016. Our pre-tax investment yield, excluding Net Realized Gains and Losses and Other-Than-Temporary Impairment Losses Recognized in Earnings, was 2.7% for the full year ended December 31, 2017, compared to 2.6% for the same period in 2016.

Other Income (Loss) for the full year ended December 31, 2017 was $(4.2) million, compared to $8.7 million for the same period in 2016, and primarily consists of realized and unrealized foreign exchange gains and losses.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report solidly profitable results for the fourth quarter.  Both the U.S. Insurance and Global Reinsurance segments produced excellent underwriting results, with combined ratios of 91.3% and 90.9% respectively. We grew Gross Written Premium by 11.2% and are well positioned to capitalize on anticipated growth opportunities emanating from the ongoing strength of the U.S. economy as well as targeted specialty niches globally. Net Investment Income was up 14.3% over fourth quarter 2017. In December, we opted to liquidate our actively managed common equity holdings, realizing pre-tax gains of $37.1 million. While the recently enacted Tax Act adversely impacted our fourth quarter results, we anticipate positive benefits of a lower corporate tax rate beginning in 2018. During the quarter, we announced the proposed acquisition of a Belgium-based specialty underwriting manager and insurance company, which we expect to close in the second quarter, subject to regulatory approval. This is an important part of our post-Brexit strategy.”

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 effective duration of 3.5 years as of December 31, 2017. As of December 31, 2017, Net Unrealized Gains within our investment portfolio were $41.5 million, a decrease of $(45.8) million compared to September 30, 2017. We recognized $37.1 million of Net Realized Gains for the three months ended December 31, 2017, compared to $4.0 million of Net Realized Gains for the same period in 2016. For the full year ended December 31, 2017  we recognized $43.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings), compared to $9.0 million of Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the same period in 2016. The increase in Net Realized Gains (inclusive of Net Other-Than-Temporary Impairment Losses Recognized in Earnings) for the fourth quarter and full year 2017 compared to the same periods in 2016 was primarily related to the liquidation of our common equity portfolio in December 2017 as we reassess our actively managed common equity strategy.

Stockholders’ Equity was $1.2 billion, or $41.55 per share, as of December 31, 2017 compared to $41.49 per share, as of September 30, 2017 and $40.45 per share, as of December 31, 2016.

During the three months ended December 31, 2017, our Company declared and paid a quarterly cash dividend of $0.06 per share of Common Stock.

On February 15, 2018 our Board of Directors declared a cash dividend on our Company’s Common Stock of $0.07 per share, payable on March 23, 2018 to stockholders of record on March 2, 2018. This represents an increase of 16.7% over the prior quarter dividend.

Our Company will hold a conference call on Friday, February 16, 2018 starting at 8:30 a.m. (ET) to discuss the 2017 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 also connect to the webcast at: https://edge.media-server.com/m6/p/o8reaviq.

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 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.

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      Years Ended     
amounts in thousands, except per share amounts December 31,      December 31,     
Results of Operations 2017  2016  Change  2017  2016  Change 
                         
Gross Written Premiums $408,743  $367,539   11.2% $1,713,265  $1,568,911   9.2%
Net Written Premiums  304,869   282,868   7.8%  1,271,330   1,186,224   7.2%
                         
Revenues:                        
Net Earned Premiums $305,099  $283,985   7.4% $1,186,420  $1,100,345   7.8%
Net Investment Income  22,982   20,107   14.3%  89,293   79,451   12.4%
Net Realized Gains (Losses):                        
Total Other-Than-Temporary Impairment
  Losses		  3   21   (87.9%)  (2,002)  (227) NM 
Portion of Loss Recognized in Other
  Comprehensive Income (Before Tax)		  (3)  (21)  (85.7%)  (62)  77  NM 
Net Other-Than-Temporary Impairment Losses
  Recognized In Earnings		  —   —  NM   (2,064)  (150) NM 
Other Realized Gains  37,141   4,043  NM   45,073   9,186  NM 
Net Realized Gains  37,141   4,043  NM   43,009   9,036  NM 
Other Income (Loss)  (3,201)  1,905  NM   (4,243)  8,701  NM 
Total Revenues $362,021  $310,040   16.8% $1,314,479  $1,197,533   9.8%
                         
Expenses:                        
Net Losses and Loss Adjustment Expenses  183,384   172,493   6.3%  806,265   665,448   21.2%
Commission Expenses  43,205   44,154   (2.2%)  184,731   165,045   11.9%
Other Operating Expenses  68,153   58,076   17.4%  233,230   234,096   (0.4%)
Interest Expense  3,863   3,860   0.1%  15,447   15,435   0.1%
Total Expenses $298,605  $278,583   7.2% $1,239,673  $1,080,024   14.8%
                         
Income Before Income Taxes  63,416   31,457   101.6%  74,806   117,509   (36.3%)
                         
Income Tax Expense  36,555   9,866  NM   34,312   34,783   (1.4%)
                         
Net Income $26,861  $21,591   24.4% $40,494  $82,726   (51.1%)
                         
Per Share Data                        
                         
Net Income Per Common Share:                        
Basic $0.91  $0.74   22.8% $1.38  $2.85   (51.7%)
Diluted $0.89  $0.71   25.2% $1.35  $2.75   (51.1%)
                         
Average Common Shares Outstanding:                        
Basic  29,505   29,121       29,441   29,074     
Diluted  30,099   30,282       30,071   30,032     
                         
Underwriting Ratios                        
Loss Ratio  60.1%  60.7%      68.0%  60.5%    
Expense Ratio  36.5%  36.0%      35.2%  36.2%    
Combined Ratio  96.6%  96.7%      103.2%  96.7%    
                         
Balance Sheet Data December 31,  September 30,      December 31,  December 31,     
  2017  2017      2017  2016     
Stockholders' Equity $1,225,965  $1,224,191   0.1% $1,225,965  $1,178,188   4.1%
Book Value per Share $41.55  $41.49   0.1% $41.55  $40.45   2.7%
                         
NM - Percentage change not meaningful.                    
                         


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, After-Tax Foreign Exchange Gains (Losses), and the impact of the passage of the Tax Act at enactment recognized in our Consolidated Statements of Income.

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 December 31, 2017  Three Months Ended December 31, 2016  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  QTD 
Net Income $63,416  $(36,555) $26,861  $31,457  $(9,866) $21,591   24.4%
Adjustments to Net Income:                            
Realized Losses (Gains)  (37,141)  12,999   (24,142)  (4,043)  1,416   (2,627) NM 
FX Losses (Gains)  3,198   (1,119)  2,079   (1,947)  682   (1,265) NM 
Impact of the Tax Act at Enactment (2)  —   19,694   19,694   —   —   —  NM 
Net Operating Earnings $29,473  $(4,981) $24,492  $25,467  $(7,768) $17,699   38.4%
                             
Average Common Shares Outstanding:                            
Basic          29,505           29,121     
Diluted          30,099           30,282     
                             
Net Operating Earnings per Common Share:                            
Basic         $0.83          $0.61     
Diluted         $0.81          $0.58     


  Year Ended December 31, 2017  Year Ended December 31, 2016  % Change 
amounts in thousands, except per share amounts Pre-Tax  Tax (1)  After-Tax  Pre-Tax  Tax (1)  After-Tax  YTD 
Net Income $74,806  $(34,312) $40,494  $117,509  $(34,783) $82,726   (51.1%)
Adjustments to Net Income:                            
Realized Losses (Gains)  (43,009)  15,054   (27,955)  (9,036)  3,163   (5,873) NM 
FX Losses (Gains)  4,213   (1,474)  2,739   (8,626)  3,019   (5,607) NM 
Impact of the Tax Act at Enactment (2)  —   19,694   19,694   —   —   —  NM 
Net Operating Earnings $36,010  $(1,038) $34,972  $99,847  $(28,601) $71,246   (50.9%)
                             
Average Common Shares Outstanding:                            
Basic          29,441           29,074     
Diluted          30,071           30,032     
                             
Net Operating Earnings per Common Share:                            
Basic         $1.19          $2.45     
Diluted         $1.16          $2.37     
                             
(1) - Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of any other relevant factors.
(2) - As a result of the enactment of the Tax Act, we revalued our deferred tax assets as of December 31, 2017 resulting in a reduction in our deferred tax assets of $17.1 million and we also anticipate incurring a one-time payment of approximately $2.6 million due to tax on previously untaxed accumulated and current earnings and profits on certain foreign subsidiaries.
NM - Percentage change not meaningful.
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
         
  December 31,  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:  $3,027,408; 2016: $2,628,225) $3,057,054  $2,635,882 
Equity Securities, available-for-sale, at fair value (cost: 2017: $224,159; 2016: $327,911)  235,981   349,142 
Other Invested Assets (Equity Method)  1,720   1,960 
Short-Term Investments, at fair value (amortized cost: 2017: $127,125; 2016: $143,451)  127,128   143,539 
Total Investments $3,421,883  $3,130,523 
Cash  67,084   64,643 
Premiums Receivable  351,393   306,686 
Prepaid Reinsurance Premiums  228,569   213,377 
Reinsurance Recoverable on Paid Losses  72,494   82,582 
Reinsurance Recoverable on Unpaid Losses and Loss Adjustment Expenses  809,765   779,276 
Deferred Policy Acquisition Costs  135,249   119,660 
Accrued Investment Income  19,480   17,315 
Goodwill and Other Intangible Assets  6,596   6,451 
Current Income Tax Receivable, Net  16,667   20,556 
Deferred Income Tax, Net  22,271   20,938 
Other Assets  73,171   52,030 
Total Assets $5,224,622  $4,814,037 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities:        
Reserves for Losses and Loss Adjustment Expenses $2,515,145  $2,289,727 
Unearned Premiums  987,681   887,344 
Reinsurance Balances Payable  136,192   108,980 
Senior Notes  263,885   263,728 
Accounts Payable and Other Liabilities  95,754   86,070 
Total Liabilities $3,998,657  $3,635,849 
         
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
  36,530 shares for 2017 and 36,147 shares for 2016)		  3,650   3,612 
Additional Paid-In Capital  376,868   373,983 
Treasury Stock, at cost (7,023 shares for 2017 and 2016)  (155,801)  (155,801)
Retained Earnings  981,380   947,519 
Accumulated Other Comprehensive Income  19,868   8,875 
Total Stockholders' Equity $1,225,965  $1,178,188 
Total Liabilities and Stockholders' Equity $5,224,622  $4,814,037 
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
(Unaudited)
 
   Three Months Ended December 31, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $258,450  $114,476  $35,817  $—  $408,743 
Ceded Written Premiums  (67,321)  (35,910)  (643)  —   (103,874)
Net Written Premiums  191,129   78,566   35,174   —   304,869 
                     
Net Earned Premiums $174,424  $83,199  $47,476  $—  $305,099 
Net Losses and LAE  (103,917)  (53,088)  (26,379)  —   (183,384)
Commission Expenses  (18,599)  (14,389)  (10,441)  224   (43,205)
Other Operating Expenses  (36,918)  (24,777)  (6,458)  —   (68,153)
Other Underwriting Income (Expense)  126   —   126   (224)  28 
                     
Underwriting Profit (Loss) $15,116  $(9,055) $4,324  $—  $10,385 
                     
Net Investment Income              22,982   22,982 
Net Realized Gains              37,141   37,141 
Interest Expense              (3,863)  (3,863)
Other Loss              (3,229)  (3,229)
Income (Loss) Before Income Taxes $15,116  $(9,055) $4,324  $53,031  $63,416 
Income Tax Expense              (36,555)  (36,555)
Net Income                 $26,861 
                     
Losses and LAE Ratio  59.6%  63.8%  55.6%      60.1%
Commission Expense Ratio  10.7%  17.3%  22.0%      14.2%
Other Operating Expense Ratio (2)  21.0%  29.8%  13.3%      22.3%
Combined Ratio  91.3%  110.9%  90.9%      96.6%
 
(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)
 
   Three Months Ended December 31, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $230,177  $100,104  $37,258  $—  $367,539 
Ceded Written Premiums  (57,353)  (26,429)  (889)  —   (84,671)
Net Written Premiums  172,824   73,675   36,369   —   282,868 
Net Earned Premiums $166,862  $71,814  $45,309  $—  $283,985 
Net Losses and LAE  (106,600)  (44,765)  (21,128)  —   (172,493)
Commission Expenses  (20,433)  (14,179)  (9,820)  278   (44,154)
Other Operating Expenses  (31,260)  (21,398)  (5,418)  —   (58,076)
Other Underwriting Income (Expense)  149   —   148   (278)  19 
                     
Underwriting Profit (Loss) $8,718  $(8,528) $9,091  $—  $9,281 
                     
Net Investment Income              20,107   20,107 
Net Realized Gains              4,043   4,043 
Interest Expense              (3,860)  (3,860)
Other Income              1,886   1,886 
Income (Loss) Before Income Taxes $8,718  $(8,528) $9,091  $22,176  $31,457 
Income Tax Expense              (9,866)  (9,866)
Net Income                 $21,591 
                     
Losses and LAE Ratio  63.9%  62.3%  46.6%      60.7%
Commission Expense Ratio  12.2%  19.7%  21.7%      15.5%
Other Operating Expense Ratio (2)  18.7%  29.9%  11.6%      20.5%
Combined Ratio  94.8%  111.9%  79.9%      96.7%
 
(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)
 
   Year Ended December 31, 2017 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $988,293  $501,130  $223,842  $—  $1,713,265 
Ceded Written Premiums  (266,993)  (165,278)  (9,664)  —   (441,935)
Net Written Premiums  721,300   335,852   214,178   —   1,271,330 
                     
Net Earned Premiums $674,665  $333,792  $177,963  $—  $1,186,420 
Net Losses and LAE  (443,353)  (229,601)  (133,311)  —   (806,265)
Commission Expenses  (77,729)  (68,824)  (39,136)  958   (184,731)
Other Operating Expenses  (128,905)  (83,464)  (20,861)  —   (233,230)
Other Underwriting Income (Expense)  461   —   565   (958)  68 
                     
Underwriting Profit (Loss) $25,139  $(48,097) $(14,780) $—  $(37,738)
                     
Net Investment Income              89,293   89,293 
Net Realized Gains              43,009   43,009 
Interest Expense              (15,447)  (15,447)
Other Loss              (4,311)  (4,311)
Income (Loss) Before Income Taxes $25,139  $(48,097) $(14,780) $112,544  $74,806 
Income Tax Expense              (34,312)  (34,312)
Net Income                 $40,494 
                     
Losses and LAE Ratio  65.7%  68.8%  74.9%      68.0%
Commission Expense Ratio  11.5%  20.6%  22.0%      15.6%
Other Operating Expense Ratio (2)  19.1%  25.0%  11.4%      19.6%
Combined Ratio  96.3%  114.4%  108.3%      103.2%
 
 (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)
 
  Year Ended December 31, 2016 
  U.S.  Int'l             
amounts in thousands Insurance  Insurance  GlobalRe  Corporate (1)  Total 
Gross Written Premiums $919,395  $484,471  $165,045  $—  $1,568,911 
Ceded Written Premiums  (235,827)  (138,504)  (8,356)  —   (382,687)
Net Written Premiums  683,568   345,967   156,689   —   1,186,224 
Net Earned Premiums $629,308  $307,416  $163,621  $—  $1,100,345 
Net Losses and LAE  (397,860)  (178,284)  (89,304)  —   (665,448)
Commission Expenses  (70,812)  (61,703)  (34,008)  1,478   (165,045)
Other Operating Expenses  (128,108)  (86,395)  (19,593)  —   (234,096)
Other Underwriting Income (Expense)  1,092   —   522   (1,478)  136 
                     
Underwriting Profit (Loss) $33,620  $(18,966) $21,238  $—  $35,892 
                     
Net Investment Income              79,451   79,451 
Net Realized Gains              9,036   9,036 
Interest Expense              (15,435)  (15,435)
Other Income              8,565   8,565 
Income (Loss) Before Income Taxes $33,620  $(18,966) $21,238  $81,617  $117,509 
Income Tax Expense              (34,783)  (34,783)
Net Income                 $82,726 
                     
Losses and LAE Ratio  63.2%  58.0%  54.6%      60.5%
Commission Expense Ratio  11.3%  20.1%  20.8%      15.0%
Other Operating Expense Ratio (2)  20.2%  28.1%  11.6%      21.2%
Combined Ratio  94.7%  106.2%  87.0%      96.7%
 
(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 December 31, 2017  Three Months Ended December 31, 2016     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total		 
Gross Written Premiums $37,131  $189,316  $32,003  $258,450  $39,784  $160,030  $30,363  $230,177   12.3%
Ceded Written Premiums  (16,601)  (44,204)  (6,516)  (67,321)  (17,035)  (32,602)  (7,716)  (57,353)  17.4%
Net Written Premiums  20,530   145,112   25,487   191,129   22,749   127,428   22,647   172,824   10.6%
                                     
Net Earned Premiums $21,970  $128,980  $23,474  $174,424  $26,496  $118,331  $22,035  $166,862   4.5%
Net Losses and LAE  (13,232)  (76,937)  (13,748)  (103,917)  (14,639)  (77,979)  (13,982)  (106,600)  (2.5%)
Commission Expenses  (918)  (13,643)  (4,038)  (18,599)  (2,694)  (14,146)  (3,593)  (20,433)  (9.0%)
Other Operating Expenses  (7,221)  (24,077)  (5,620)  (36,918)  (6,603)  (19,901)  (4,756)  (31,260)  18.1%
Other Underwriting Income  104   16   6   126   108   32   9   149   (15.5%)
                                     
Underwriting Profit (Loss) $703  $14,339  $74  $15,116  $2,668  $6,337  $(287) $8,718   73.4%
                                     
Losses and LAE Ratio  60.2%  59.7%  58.6%  59.6%  55.3%  65.9%  63.5%  63.9%    
Commission Expense Ratio  4.2%  10.6%  17.2%  10.7%  10.2%  12.0%  16.3%  12.2%    
Other Operating Expense Ratio (1)  32.4%  18.6%  23.9%  21.0%  24.4%  16.7%  21.5%  18.7%    
Combined Ratio  96.8%  88.9%  99.7%  91.3%  89.9%  94.6%  101.3%  94.8%    
 
(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 December 31, 2017  Three Months Ended December 31, 2016     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total		 
Gross Written Premiums $38,122  $34,677  $41,677  $114,476  $31,680  $35,969  $32,455  $100,104   14.4%
Ceded Written Premiums  (8,608)  (15,518)  (11,784)  (35,910)  (6,818)  (12,581)  (7,030)  (26,429)  35.9%
Net Written Premiums  29,514   19,159   29,893   78,566   24,862   23,388   25,425   73,675   6.6%
                                     
Net Earned Premiums $36,338  $21,225  $25,636  $83,199  $31,847  $18,847  $21,120  $71,814   15.9%
Net Losses and LAE  (30,554)  (7,137)  (15,397)  (53,088)  (12,653)  (19,821)  (12,291)  (44,765)  18.6%
Commission Expenses  (4,951)  (2,933)  (6,505)  (14,389)  (7,894)  (3,102)  (3,183)  (14,179)  1.5%
Other Operating Expenses  (10,424)  (8,554)  (5,799)  (24,777)  (8,376)  (8,389)  (4,633)  (21,398)  15.8%
                                     
Underwriting Profit (Loss)  (9,591)  2,601   (2,065)  (9,055)  2,924   (12,465)  1,013   (8,528)  6.2%
                                     
Losses and LAE Ratio  84.1%  33.6%  60.1%  63.8%  39.7%  105.2%  58.2%  62.3%    
Commission Expense Ratio  13.6%  13.8%  25.4%  17.3%  24.8%  16.5%  15.1%  19.7%    
Other Operating Expense Ratio  28.7%  40.3%  22.6%  29.8%  26.3%  44.4%  21.9%  29.9%    
Combined Ratio  126.4%  87.7%  108.1%  110.9%  90.8%  166.1%  95.2%  111.9%    
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
    
  U.S. Insurance 
  Year Ended December 31, 2017  Year Ended December 31, 2016     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total		 
Gross Written Premiums $156,171  $713,539  $118,583  $988,293  $169,405  $631,562  $118,428  $919,395   7.5%
Ceded Written Premiums  (72,431)  (173,501)  (21,061)  (266,993)  (70,858)  (135,888)  (29,081)  (235,827)  13.2%
Net Written Premiums  83,740   540,038   97,522   721,300   98,547   495,674   89,347   683,568   5.5%
                                     
Net Earned Premiums $86,605  $495,260  $92,800  $674,665  $100,132  $453,673  $75,503  $629,308   7.2%
Net Losses and LAE  (58,099)  (316,112)  (69,142)  (443,353)  (50,087)  (295,877)  (51,896)  (397,860)  11.4%
Commission Expenses  (4,932)  (57,756)  (15,041)  (77,729)  (8,469)  (52,483)  (9,860)  (70,812)  9.8%
Other Operating Expenses  (25,501)  (84,433)  (18,971)  (128,905)  (27,559)  (81,469)  (19,080)  (128,108)  0.6%
Other Underwriting Income  374   61   26   461   465   582   45   1,092   (57.8%)
                                     
Underwriting Profit (Loss) $(1,553) $37,020  $(10,328) $25,139  $14,482  $24,426  $(5,288) $33,620   (25.2%)
                                     
Losses and LAE Ratio  67.1%  63.8%  74.5%  65.7%  50.0%  65.2%  68.7%  63.2%    
Commission Expense Ratio  5.7%  11.7%  16.2%  11.5%  8.5%  11.6%  13.1%  11.3%    
Other Operating Expense Ratio (1)  29.0%  17.0%  20.4%  19.1%  27.0%  17.8%  25.2%  20.2%    
Combined Ratio  101.8%  92.5%  111.1%  96.3%  85.5%  94.6%  107.0%  94.7%    
 
(1) - Includes Other Operating Expenses and Other Underwriting Income (Expense).
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results
(Unaudited)
    
  Int'l Insurance 
  Year Ended December 31, 2017  Year Ended December 31, 2016     
amounts in thousands Marine  P&C  Professional Liability  Total  Marine  P&C  Professional Liability  Total  %
Change
Total		 
Gross Written Premiums $198,241  $159,123  $143,766  $501,130  $183,228  $181,094  $120,149  $484,471   3.4%
Ceded Written Premiums  (42,018)  (85,298)  (37,962)  (165,278)  (40,092)  (69,606)  (28,806)  (138,504)  19.3%
Net Written Premiums  156,223   73,825   105,804   335,852   143,136   111,488   91,343   345,967   (2.9%)
                                     
Net Earned Premiums $152,396  $88,517  $92,879  $333,792  $141,593  $89,455  $76,368  $307,416   8.6%
Net Losses and LAE  (114,460)  (61,791)  (53,350)  (229,601)  (67,051)  (68,995)  (42,238)  (178,284)  28.8%
Commission Expenses  (32,541)  (13,918)  (22,365)  (68,824)  (34,018)  (14,529)  (13,156)  (61,703)  11.5%
Other Operating Expenses  (34,878)  (28,537)  (20,049)  (83,464)  (33,170)  (34,075)  (19,150)  (86,395)  (3.4%)
                                     
Underwriting Profit (Loss) $(29,483) $(15,729) $(2,885) $(48,097) $7,354  $(28,144) $1,824  $(18,966) NM 
                                     
Losses and LAE Ratio  75.1%  69.8%  57.4%  68.8%  47.4%  77.1%  55.3%  58.0%    
Commission Expense Ratio  21.4%  15.7%  24.1%  20.6%  24.0%  16.2%  17.2%  20.1%    
Other Operating Expense Ratio  22.8%  32.3%  21.6%  25.0%  23.4%  38.2%  25.1%  28.1%    
Combined Ratio  119.3%  117.8%  103.1%  114.4%  94.8%  131.5%  97.6%  106.2%    
 
NM- Percentage change not meaningful.
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
 
  For the Three Months Ended December 31, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2017  2016  2017  2016 
U.S. Insurance:                
Loss and LAE Payments $99,085  $73,100   56.8%  43.8%
Change in Reserves  4,832   33,500   2.8%  20.1%
Net Incurred Loss and LAE $103,917  $106,600   59.6%  63.9%
                 
Int'l Insurance:                
Loss and LAE Payments $55,296  $45,011   66.5%  62.6%
Change in Reserves  (2,208)  (246)  (2.7%)  (0.3%)
Net Incurred Loss and LAE $53,088  $44,765   63.8%  62.3%
                 
GlobalRe:                
Loss and LAE Payments $34,302  $17,260   72.3%  38.1%
Change in Reserves  (7,923)  3,868   (16.7%)  8.5%
Net Incurred Loss and LAE $26,379  $21,128   55.6%  46.6%
                 
Total                
Loss and LAE Payments $188,683  $135,371   61.8%  47.6%
Change in Reserves  (5,299)  37,122   (1.7%)  13.1%
Net Incurred Loss and LAE $183,384  $172,493   60.1%  60.7%
                 
  For the Three Months Ended December 31, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2017  2016  2017  2016 
U.S. Insurance $1,492  $(420)  0.5%  (0.1%)
Int'l Insurance  7,239   19,660   2.5%  6.9%
GlobalRe  1,568   (2,356)  0.5%  (0.8%)
Total $10,299  $16,884   3.5%  6.0%
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity
(Unaudited)
 
  For the Years Ended December 31, 
amounts in thousands Amounts  Loss Ratio 
Net Incurred Loss Activity 2017  2016  2017  2016 
U.S. Insurance:                
Loss and LAE Payments $324,102  $299,842   48.0%  47.6%
Change in Reserves  119,251   98,018   17.7%  15.6%
Net Incurred Loss and LAE $443,353  $397,860   65.7%  63.2%
                 
Int'l Insurance:                
Loss and LAE Payments $201,402  $151,098   60.4%  49.2%
Change in Reserves  28,199   27,186   8.4%  8.8%
Net Incurred Loss and LAE $229,601  $178,284   68.8%  58.0%
                 
GlobalRe:                
Loss and LAE Payments $97,570  $81,089   54.8%  49.6%
Change in Reserves  35,741   8,215   20.1%  5.0%
Net Incurred Loss and LAE $133,311  $89,304   74.9%  54.6%
                 
Total                
Loss and LAE Payments $623,074  $532,029   52.6%  48.4%
Change in Reserves  183,191   133,419   15.4%  12.1%
Net Incurred Loss and LAE $806,265  $665,448   68.0%  60.5%
                 
  For the Years Ended December 31, 
Impact of Prior Years Reserves Amounts  Loss Ratio Impact 
Favorable / (Unfavorable) Development 2017  2016  2017  2016 
U.S. Insurance $(16,714) $1,348   (1.4%)  0.1%
Int'l Insurance  (14,834)  25,019   (1.3%)  2.3%
GlobalRe  (2,762)  2,161   (0.2%)  0.2%
Total $(34,310) $28,528   (2.9%)  2.6%
 

 

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
(Unaudited)
 
  As of December 31, 2017 
amounts in thousands 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 
             
  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 
 
 

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

As of December 31, 2017, the average quality of the investment portfolio as rated by S&P and Moody’s was “AA-/Aa3”, respectively, with an effective duration of 3.5 years. Our Company does not own any collateralized debt obligations or asset backed commercial paper.

The following table sets forth our investments as of December 31, 2017:

 
   As of December 31, 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		 $393,563  $2,081  $(2,014) $393,496 
States, Municipalities and Political Subdivisions  814,632   20,136   (1,423)  795,919 
Mortgage-Backed and Asset-Backed Securities:                
Agency Mortgage-Backed Securities  407,619   2,352   (5,414)  410,681 
Residential Mortgage Obligations  54,104   606   (79)  53,577 
Asset-Backed Securities  328,753   2,138   (663)  327,278 
Commercial Mortgage-Backed Securities  160,904   2,354   (1,182)  159,732 
   Subtotal $951,380  $7,450  $(7,338) $951,268 
Corporate Exposures (1)  897,479   14,491   (3,737)  886,725 
Total Fixed Maturities $3,057,054  $44,158  $(14,512) $3,027,408 
Equity Securities:                
Common Stocks $52,439  $7,423  $(112) $45,128 
Preferred Stocks  183,542   6,071   (1,560)  179,031 
Total Equity Securities $235,981  $13,494  $(1,672) $224,159 
Short-Term Investments  127,128   3   —   127,125 
Total Investments $3,420,163  $57,655  $(16,184) $3,378,692 
 
(1) - Corporate Exposures consist of investments in corporate bonds, hybrid bonds and redeemable preferred stocks.