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 ().
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.
CONTACT: Francis W. McDonnell Senior Vice President and Chief Financial Officer (914) 933-6270 fmcdonnell@navg.com www.navg.com
