updated 5/9/2011 4:16:25 PM ET 2011-05-09T20:16:25

NEW YORK, May 9, 2011 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported a net loss of $7.9 million, or $0.50 per share, for the three months ended March 31, 2011 compared to net income of $17.0 million, or $1.00 per diluted share, for the comparable period in 2010. Operating earnings (1) were a deficit of $6.7 million, or $0.43 per share for the first quarter of 2011 compared to earnings of $13.1 million, or $0.77 per diluted share, for the comparable period in 2010.

Gross written premiums and net written premiums for the three months ended March 31, 2011 were $296.3 million and $193.1 million, respectively, an increase of 10% and 2%, respectively, from the comparable period in 2010.

The combined loss and expense ratio for the three months ended March 31, 2011 was 117.1%, compared to 99.1% for the comparable period in 2010. The decline in the pre-tax underwriting profit to a loss of $26.1 million was primarily due to:

  • Large current accident year losses from a North Sea drilling operation and an onshore industrial site. The North Sea drilling operation losses resulted in an $8.9 million first quarter charge including $5 million of net loss and $3.9 million of reinstatement premiums. The onshore drilling site generated gross and net losses of $12.0 million and $2.4 million, respectively. 
  • Sliding scale commission adjustments of $2.6 million related to large loss activity that has reduced our ceding commission benefit on a large quota share treaty.
  • An increase in our reinsurance reinstatement premium accrual by $7.5 million. This accrual was driven by the recognition of the effect of a shift in our marine reinsurance protections to an excess of loss program from a quota share program. As a result of this shift and the increased frequency of severity losses in recent periods, a greater portion of our IBNR was attributable to marine and energy losses that are or will be ceded to Marine Excess of Loss Reinsurance program and such cession will trigger additional reinstatement premiums.
  • Adverse loss development in our Lloyd's Professional Liability business of $4.2 million related mostly to Errors and Omissions ("E&O") lines for underwriting years 2006 and 2007.

Navigators' Chief Executive Officer Stan Galanski commented: "During the first quarter of 2011 the industry experienced an extraordinary level of natural catastrophe and large energy losses. While our losses reported to date from the Japanese earthquake have not been significant, we participated on two major industry losses in the energy sector that pushed our combined ratio above 100%. The increased frequency of large loss activity in both the onshore and offshore energy business, coupled with the industry's property cat loss levels, highlights the need for underwriters to achieve rate increases in these areas. Our ocean marine business had a solid quarter and we are encouraged by the initial market reception of Navigators Re, which was the principal contributor to our premium growth in the quarter. We continue to take a cautious view of the U.S. D&O market, as rate levels continue to be suppressed to levels not reflective of the current litigation environment."

During the three months ended March 31, 2011, the Company repurchased 256,094 of its common stock for an aggregate purchase price of $13.1 million pursuant to its share repurchase program. The Company repurchased an additional 131,469 of its common stock for an aggregate purchase price of $6.8 million between April 1, 2011 and May 9, 2011 pursuant to its share repurchase program. Approximately $21.1 million remains available under the Company's current share repurchase program which expires on December 31, 2011.

Net investment income for the three months ended March 31, 2011 was $17.4 million, which was a decrease of 3% from the comparable period in 2010. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 3.3% for the three months ended March 31, 2011, compared to 3.6% for the comparable period in 2010. The effective tax rate on net investment income was 28.5% for the three months ended March 31, 2011, compared to 24.5% for the comparable period in 2010.

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 4.1 years at March 31, 2011. At March 31, 2011, net unrealized gains within our investment portfolio were $49.3 million, an increase of $0.2 million compared to December 31, 2010. There were $1.6 million of net realized losses and other-than-temporary impairment losses recognized in earnings for the three months ended March 31, 2011.

Consolidated cash flow from operations for the three months ended March 31, 2011 was $13.3 million, compared to $4.1 million for the comparable period in 2010.

Stockholders' equity was $815.2 million, or $52.29 per share, at March 31, 2011 compared to $829.4 million, or $52.68 per share, at December 31, 2010. The statutory surplus of Navigators Insurance Company was $684.0 million at March 31, 2011 compared to $686.9 million at December 31, 2010.

(1)   Operating earnings, or net income excluding after-tax net realized gains (losses) and net other-than-temporary impairment losses recognized in earnings, 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.

The Company will hold a conference call on Tuesday, May 10, 2011 starting at 8:30 a.m. ET to discuss the 2011 first 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://investor.shareholder.com/navg/eventdetail.cfm?eventid=95483

The Navigators Group, Inc. is an international specialty insurance holding company with insurance company operations, underwriting management companies, and operations at Lloyd's of London. Headquartered in New York, Navigators has offices in major insurance centers in the United States, the United Kingdom and Continental Europe.

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.

 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Financial Highlights
($ in thousands, except per share data)
(unaudited)
       
  Three Months Ended  
   March 31,  
Results of Operations 2011 2010 Change
       
Gross written premiums  $ 296,283  $ 270,145 10%
Net written premiums  193,076  189,317 2%
       
Revenues:      
Net earned premiums  152,478  164,069 -7%
Net investment income  17,384  17,972 -3%
 Total other-than-temporary impairment losses  (263)  (251) 5%
 Portion of loss recognized in other comprehensive

 income (before tax)
 22  170 -87%
Net other-than-temporary impairment losses       
 recognized in earnings  (241)  (81)  NM
Net realized gains (losses)  (1,389)  6,113 -123%
Other income   991  1,070 -7%
Total revenues  169,223  189,143 -11%
       
Expenses:      
Net losses and loss adjustment expenses  116,788  103,807 13%
Commission expenses  26,200  25,316 3%
Other operating expenses  36,575  34,586 6%
Interest expense  2,046  2,044 0%
Total expenses  181,609  165,753 10%
       
Income before income taxes  (12,386)  23,390 -153%
       
Income tax expense (benefit)  (4,493)  6,345 -171%
       
Net income (loss)  $ (7,893)  $ 17,045 -146%
       
       
Per Share Data      
       
Net income per common share:      
Basic  $ (0.50)  $ 1.02 -149%
Diluted  $ (0.50)  $ 1.00 -150%
       
Average common shares outstanding:      
Basic  15,739  16,641  
Diluted  15,739  16,979  
       
Underwriting Ratios      
Loss Ratio 76.6% 63.3%  
Expense Ratio 40.5% 35.8%  
Combined Ratio 117.1% 99.1%  
       
       
Balance Sheet Data March 31, Dec. 31,  
  2011 2010  
Stockholders' equity  $ 815,172  $ 829,354 -2%
Book value per share  $ 52.29  $ 52.68 -1%
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
     
  March 31, December 31,
  2011 2010
  (unaudited)  
ASSETS    
Investments and cash:    
Fixed maturities, available-for-sale, at fair value  
 (amortized cost: 2011, $1,821,971; 2010, $1,855,598)  $ 1,844,978  $ 1,882,245
Equity securities, available-for-sale, at fair value (cost: 2011, $64,586; 2010, $64,793)  90,912  87,258
Short-term investments, at cost which approximates fair value  169,510  153,057
Cash  39,284  31,768
Total investments and cash  2,144,684  2,154,328
     
Premiums receivable  251,577  188,368
Prepaid reinsurance premiums  163,564  156,869
Reinsurance recoverable on paid losses  57,920  56,658
Reinsurance recoverable on unpaid losses and loss adjustment expenses  865,212  843,296
Deferred policy acquisition costs  63,992  55,201
Accrued investment income  16,055  15,590
Goodwill and other intangible assets  7,009  6,925
Current income tax receivable, net  6,205  1,054
Deferred income tax, net  15,852  15,141
Other assets  45,040  38,029
     
Total assets  $ 3,637,110  $ 3,531,459
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY  
Liabilities:    
Reserves for losses and loss adjustment expenses  $ 2,034,263  $ 1,985,838
Unearned premiums  511,294  463,515
Reinsurance balances payable  131,803  105,904
Senior notes  114,171  114,138
Accounts payable and other liabilities  30,407  32,710
Total liabilities  2,821,938  2,702,105
     
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 17,377,022 shares

 for 2011 and 17,274,440 shares for 2010
 1,829  1,728
Additional paid-in capital  318,281  312,588
Treasury stock, at cost (1,788,367 shares for 2011 and 1,532,273 shares for 2010)  (77,987)  (64,935)
Retained earnings  531,619  539,512
Accumulated other comprehensive income  41,430  40,461
Total stockholders' equity  815,172  829,354
     
Total liabilities and stockholders' equity  $ 3,637,110  $ 3,531,459
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
       
       
Gross Written Premiums: Three Months  
Insurance Companies: 2011 2010 Change
Marine  $ 70,348  $ 67,526 4%
Property Casualty  112,888  79,346 42%
Professional Liability  23,540  30,966 -24%
   206,776  177,838 16%
Lloyd's Operations:      
Marine  61,155  59,141 3%
Property Casualty  19,302  19,959 -3%
Professional Liability  9,050  13,207 -31%
   89,507  92,307 -3%
Total  $ 296,283  $ 270,145 10%
       
Net Written Premiums: Three Months  
Insurance Companies: 2011 2010 Change
Marine  $ 54,218  $ 51,003 6%
Property Casualty  62,907  49,697 27%
Professional Liability  13,615  20,640 -34%
   130,740  121,340 8%
Lloyd's Operations:      
Marine  49,671  49,642 0%
Property Casualty  8,386  11,711 -28%
Professional Liability  4,279  6,624 -35%
   62,336  67,977 -8%
Total  $ 193,076  $ 189,317 2%
       
Net Earned Premiums: Three Months  
Insurance Companies: 2011 2010 Change
Marine  $ 40,559  $ 41,094 -1%
Property Casualty  42,935  51,081 -16%
Professional Liability  15,326  19,036 -19%
   98,820  111,211 -11%
Lloyd's Operations:      
Marine  36,978  35,560 4%
Property Casualty  11,894  11,915 0%
Professional Liability  4,786  5,383 -11%
   53,658  52,858 2%
Total  $ 152,478  $ 164,069 -7%
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
March 31, 2011
         
($ in thousands)        
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total
Gross written premiums  $ 206,776  $ 89,507  $ --  $ 296,283
Net written premiums  130,740 62,336  -- 193,076
         
Net earned premiums 98,820 53,658  -- 152,478
Net losses and loss adjustment expenses (74,797) (41,991)  -- (116,788)
Commission expenses (12,340) (14,407)  547 (26,200)
Other operating expenses (26,799) (9,776)  -- (36,575)
Other income (expense) 1,691 (153)  (547) 991
         
Underwriting profit (loss) (13,425) (12,669)  0 (26,094)
         
Net investment income 14,983 2,255 146 17,384
Net realized gains (losses) (245) (1,385) 0 (1,630)
Interest expense  --  --  (2,046) (2,046)
         
Income (loss) before income taxes 1,313 (11,799) (1,900) (12,386)
         
Income tax expense (benefit) 228 (4,056) (665) (4,493)
Net income (loss)  $ 1,085  $ (7,743)  $ (1,235)  $ (7,893)
         
Losses and loss adjustment expenses ratio 75.7% 78.3%   76.6%
Commission expense ratio 12.5% 26.8%   17.2%
Other operating expense ratio (2) 25.4% 18.5%   23.3%
Combined ratio 113.6% 123.6%   117.1%
         
(1) The Corporate segment includes intercompany eliminations.    
(2) The Other operating expense ratio includes Other income (expense).    
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information 
Three Months Ended
March 31, 2010
         
($ in thousands)        
         
  Insurance  Lloyd's    
  Companies Operations Corporate (1) Total 
Gross written premiums  $ 177,838  $ 92,307  $ --  $ 270,145
Net written premiums 121,340 67,977  -- 189,317
         
Net earned premiums 111,211 52,858  -- 164,069
Net losses and loss adjustment expenses (68,403) (35,404)  -- (103,807)
Commission expenses (14,362) (10,966)  12 (25,316)
Other operating expenses (27,353) (7,243)  -- (34,596)
Other income (expense) (977) 2,069  (12) 1,080
         
Underwriting profit 116 1,314  -- 1,430
         
Net investment income 15,748 2,069 155 17,972
Net realized gains (losses) 5,205 713  114 6,032
Interest expense  --  --  (2,044) (2,044)
         
Income (loss) before income taxes 21,069 4,096 (1,775) 23,390
         
Income tax expense (benefit) 5,463 1,503 (621) 6,345
Net income (loss)  $ 15,606  $ 2,593  $ (1,154)  $ 17,045
         
Losses and loss adjustment expenses ratio 61.5% 67.0%   63.3%
Commission expense ratio 12.9% 20.7%   15.4%
Other operating expense ratio (2) 25.5% 9.8%   20.4%
Combined ratio 99.9% 97.5%   99.1%
         
(1) The Corporate segment includes intercompany eliminations.    
(2) The Other operating expense ratio includes Other income (expense).    
 
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
               
  Three Months Ended March 31, 2011
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 40,559  $ 27,998  $ 13,798  $ (1,237) 69.0% 34.0% 103.0%
Property Casualty  42,935  35,934  17,598  (10,597) 83.7% 41.0% 124.7%
Professional Liability  15,326  10,865  6,052  (1,591) 70.9% 39.5% 110.4%
   98,820  74,797  37,448  (13,425) 75.7% 37.9% 113.6%
Lloyd's Operations  53,658  41,991  24,336  (12,669) 78.3% 45.3% 123.6%
Total  $ 152,478  $ 116,788  $ 61,784  $ (26,094) 76.6% 40.5% 117.1%
               
               
  Three Months Ended March 31, 2010
  Net  Losses           
  Earned and LAE Underwriting Underwriting Loss Expense Combined
Insurance Companies: Premiums Incurred Expenses Profit (Loss) Ratio Ratio Ratio
Marine  $ 41,094  $ 26,133  $ 14,928  $ 33 63.6% 36.3% 99.9%
Property Casualty  51,081  32,126  20,316  (1,361) 62.9% 39.8% 102.7%
Professional Liability  19,036  10,144  7,448  1,444 53.3% 39.1% 92.4%
   111,211  68,403  42,692  116 61.5% 38.4% 99.9%
Lloyd's Operations  52,858  35,404  16,140  1,314 67.0% 30.5% 97.5%
Total  $ 164,069  $ 103,807  $ 58,832  $ 1,430 63.3% 35.8% 99.1%
               
               
               
    Amounts   Loss Ratio  
Net Incurred Loss Activity   Mar. 31, Mar. 31,   Mar. 31, Mar. 31,  
For the Three Months Ended:   2011 2010   2011 2010  
Insurance Companies:              
 Loss and LAE payments    $ 66,693  $ 72,673   67.5% 65.3%  
 Change in reserves    8,104  (4,270)   8.2% -3.8%  
 Net incurred loss and LAE    74,797  68,403   75.7% 61.5%  
               
Lloyd's Operations:              
 Loss and LAE payments    23,587  26,222   44.0% 49.6%  
 Change in reserves    18,404  9,182   34.3% 17.4%  
 Net incurred loss and LAE    41,991  35,404   78.3% 67.0%  
               
Total              
 Loss and LAE payments    90,280  98,895   59.2% 60.3%  
 Change in reserves    26,508  4,912   17.4% 3.0%  
 Net incurred loss and LAE    $ 116,788  $ 103,807   76.6% 63.3%  
               
               
Impact of Prior Years Reserves   Amounts   Loss Ratio Impact  
Favorable / (Unfavorable) Development   Mar. 31, Mar. 31,   Mar. 31, Mar. 31,  
For the Three Months Ended:   2011 2010   2011 2010  
Insurance Companies    $ (1,222)  $ 653   -1.2% 0.6%  
Lloyd's Operations    (2,211)  593   -4.1% 1.1%  
 Total    $ (3,433)  $ 1,246   -2.3% 0.8%  
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
       
  Case IBNR  
Net Loss Reserves, March 31, 2011: Reserves Reserves Total
Insurance Companies:      
 Marine  $ 106,894  $ 115,173  $ 222,067
 Property Casualty  159,135  311,470  470,605
 Professional Liability  56,372  67,487  123,859
 Total Insurance Companies  322,401  494,130  816,531
Lloyd's Operations:      
 Marine  110,905  120,781  231,686
 Property Casualty  33,613  31,707  65,320
 Professional Liability  10,985  44,529  55,514
 Total Lloyd's Operations  155,503  197,017  352,520
       
 Total Net Loss Reserves  $ 477,904  $ 691,147  $ 1,169,051
       
       
  Case IBNR  
Net Loss Reserves, December 31, 2010: Reserves Reserves Total
Insurance Companies:      
 Marine  $ 107,147  $ 109,361  $ 216,508
 Property Casualty  158,740  308,613  467,353
 Professional Liability  46,096  78,469  124,565
 Total Insurance Companies  311,983  496,443  808,426
Lloyd's Operations:      
 Marine  111,914  112,708  224,622
 Property Casualty  30,327  29,792  60,119
 Professional Liability  9,904  39,471  49,375
 Total Lloyd's Operations  152,145  181,971  334,116
       
 Total Net Loss Reserves  $ 464,128  $ 678,414  $ 1,142,542
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
March 31, 2011
($ in thousands)
           
           
At March 31, 2011, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 4.1 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.
           
At March 31, 2011, the Company owned two asset-backed securities approximating $0.9 million with subprime mortgage exposures. The securities have an effective maturity of 5.4 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.4 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 6.0 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 at March 31, 2011:
           
    Gross Gross Cost or OTTI
  Fair Unrealized Unrealized Amortized Recognized
 March 31, 2011 Value Gains (Losses) Cost in OCI
  ($ in thousands)
Fixed maturities:          
U.S. Government Treasury bonds,          
agency bonds and foreign government bonds  $ 288,734  $ 4,475  $ (2,839)  $ 287,098  $ --
States, municipalities and political          
 subdivisions  373,352  10,312  (2,915)  365,955  --
Mortgage- and asset-backed securities:          
 Agency mortgage-backed securities  359,610  9,254  (3,430)  353,786  --
 Residential mortgage obligations  21,235  77  (2,051)  23,209  (1,260)
 Asset-backed securities  42,914  230  (226)  42,910  --
 Commercial mortgage-backed securities  207,018  4,896  (1,991)  204,113  --
 Subtotal  630,777  14,457  (7,698)  624,018  (1,260)
Corporate bonds  552,115  13,718  (6,503)  544,900  --
           
Total fixed maturities  1,844,978  42,962  (19,955)  1,821,971  (1,260)
           
Equity securities - common stocks  90,912  26,366  (40)  64,586  --
           
Cash  39,284  --  --  39,284  --
           
Short-term investments  169,510  --  --  169,510  --
           
Total  $ 2,144,684  $ 69,328  $ (19,995)  $ 2,095,351  $ (1,260)
 
THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
March 31, 2011
($ 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 March 31, 2011:
         
         
         
         
     Gross   Gross   Cost or 
   Fair   Unrealized   Unrealized   Amortized 
Agency mortgage-backed securities:  Value   Gains   (Losses)   Cost 
GNMA  $ 125,351  $ 3,155  $ (1,202)  $ 123,398
FNMA  189,807  4,978  (1,663)  186,492
FHLMC  44,452  1,121  (565)  43,896
Total  $ 359,610  $ 9,254  $ (3,430)  $ 353,786
         
         
     Gross   Gross   Cost or 
   Fair   Unrealized   Unrealized   Amortized 
Residential mortgage obligations:  Value   Gains   (Losses)   Cost 
Prime   $ 16,214  $ 77  $ (1,661)  $ 17,798
Alt-A  2,390  --  (373)  2,763
Subprime  --  --  --  --
Non-US RMBS  2,631  --  (17)  2,648
Total  $ 21,235  $ 77  $ (2,051)  $ 23,209
CONTACT:  Francis W. McDonnell
          Senior Vice President and Chief Financial Officer
          (914) 933-6270
          fmcdonnell@navg.com
          www.navg.com

© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.71%
$30K home equity loan FICO 5.26%
$75K home equity loan FICO 4.70%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.42%
Cash Back Cards 17.94%
17.94%
Rewards Cards 17.14%
17.14%
Source: Bankrate.com