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Navigators Reports Fourth Quarter Earnings

NEW YORK, Feb. 17, 2011 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $17.3 million, or $1.07 per diluted share, for the three months ended December 31, 2010 compared to net income of $6.1 million, or $0.35 per diluted share, for the comparable period in 2009. Operating earnings (1) were $4.7 million, or $0.29 per diluted share for the fourth quarter of 2010 compared to $5.3 million, or $0.30 per diluted share, for the comparable period in 2009. As previously announced on January 21, 2011, during the fourth quarter of 2010 Navigators recognized $9.2 million of after-tax reinsurance reinstatement costs related to the April 2010 Deepwater Horizon loss event in the Gulf of Mexico, which reduced net written and net earned premiums by $14.2 million.
/ Source: GlobeNewswire

NEW YORK, Feb. 17, 2011 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $17.3 million, or $1.07 per diluted share, for the three months ended December 31, 2010 compared to net income of $6.1 million, or $0.35 per diluted share, for the comparable period in 2009. Operating earnings (1) were $4.7 million, or $0.29 per diluted share for the fourth quarter of 2010 compared to $5.3 million, or $0.30 per diluted share, for the comparable period in 2009. As previously announced on January 21, 2011, during the fourth quarter of 2010 Navigators recognized $9.2 million of after-tax reinsurance reinstatement costs related to the April 2010 Deepwater Horizon loss event in the Gulf of Mexico, which reduced net written and net earned premiums by $14.2 million.

For the twelve months ended December 31, 2010, the Company reported net income of $69.6 million, or $4.24 per diluted share, compared to $63.2 million, or $3.65 per diluted share, for the comparable period in 2009. Operating earnings were $43.4 million, or $2.65 per diluted share for the twelve months ended December 31, 2010 compared to $65.2 million, or $3.76 per diluted share, for the comparable period of 2009. For the twelve months ended December 31, 2010, Navigators recognized $12.4 million of after-tax reinstatement costs related to the Deepwater Horizon loss event, which reduced net written and net earned premiums by $19.0 million.

Gross written premiums and net written premiums for the three months ended December 31, 2010 were $229.9 million and $141.8 million, respectively, a decrease of 8.7% and 12.2% from the comparable 2009 periods.  Gross written premiums and net written premiums for the twelve months ended December 31, 2010 were $987.2 million and $653.9 million, respectively, a decrease of 5.5% and 6.7% from the comparable 2009 periods.

The combined loss and expense ratios for the three and twelve months ended December 31, 2010 were 106.3% and 100.7%, respectively, compared to 106.5% and 97.2% for the comparable 2009 periods. The combined loss and expense ratio for the three months ended December 31, 2010 was favorably impacted by 1.9 loss ratio points due to favorable development in prior period loss reserves. The combined loss and expense ratio for the twelve months ended December 31, 2010 was favorably impacted by 2.1 loss ratio points due to favorable development in prior period loss reserves.

Navigators' Chief Executive Officer Stan Galanski commented: "Although we see pockets of opportunity, such as the energy sector, most of the insurance markets in which we operate continued to be challenging during the fourth quarter due to intense industry competition and the continued fragile nature of the economic recovery.  Despite those factors, along with historically low investment yields and the Deepwater Horizon industry loss, Navigators maintained its strong capital position and grew book value per share 11% during 2010. The Navigators franchise has never been stronger as we improved our distribution capabilities, added new products and walked away from underperforming business.  We enter 2011 cautious, but poised to capitalize as opportunities arise to extend Navigators superior record of book value per share growth."

During the three and twelve months ended December 31, 2010, the Company repurchased 35,566 and 1,264,284 shares of its common stock for an aggregate purchase price of $1.7 million and $52.0 million, respectively, pursuant to its share repurchase program. The Company did not repurchase any additional shares of its common stock between January 1, 2011 and February 16, 2011 pursuant to its share repurchase program.  Approximately $41.3 million remains available under the Company's current share repurchase program that expires on December 31, 2011.

Net investment income for the three and twelve months ended December 31, 2010 was $18.0 million and $71.7 million, respectively, which were decreases of 5.3% and 5.1% from the comparable 2009 periods. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 3.4% and 3.5% for the three and twelve months ended December 31, 2010, respectively, compared to 3.7% and 3.8% for the 2009 comparable periods. The effective tax rate on net investment income was 28.1% and 27.0% for the three and twelve months ended December 31, 2010, respectively, compared to 24.7% and 25.0% for the comparable 2009 periods.

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 4.4 years at December 31, 2010. At December 31, 2010, net unrealized gains within our investment portfolio were $49.1 million, a decrease of $4.8 million compared to December 31, 2009. There were $19.5 million and $40.2 million of net realized gains and other-than temporary impairment losses recognized in earnings for the three and twelve months ended December 31, 2010.

Consolidated cash flow from operations for the three and twelve months ended December 31, 2010 was $4.1 million and $118.2 million, respectively, compared to $(1.3) million and $103.9 million for the comparable 2009 periods.

Stockholders' equity was $829.4 million, or $52.68 per share, at December 31, 2010 compared to $801.5 million, or $47.58 per share, at December 31, 2009. The statutory surplus of Navigators Insurance Company was $686.9 million at December 31, 2010 compared to $645.8 million at December 31, 2009.

(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 Friday, February 18, 2011 starting at 8:30 a.m. ET to discuss the 2010 fourth 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:  

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.

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
Investment Data
December 31, 2010
($ in thousands)

At December 31, 2010, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 4.4 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper.

At December 31, 2010, 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 $2.5 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 December 31, 2010:

    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
December 31, 2010
($ in thousands)

The following tables set forth our agency mortgage-backed securities and residential mortgage obligations, by those issued by GNMA, FNMA and FHLMC and the quality category (prime, Alt-A and subprime) for all other such investments at December 31, 2010:

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