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Press release from GlobeNewswire (a Nasdaq OMX company)

Navigators Reports Third Quarter Earnings

Thursday, November 01, 2012

Navigators Reports Third Quarter Earnings13:01 EDT Thursday, November 01, 2012NEW YORK, Nov. 1, 2012 (GLOBE NEWSWIRE) -- The Navigators Group, Inc. (Nasdaq:NAVG) reported net income of $12.9 million, or $0.90 per diluted share, for the three months ended September 30, 2012 compared to $13.9 million, or $0.92 per diluted share, for the comparable period in 2011. Operating earnings were $9.8 million, or $0.69 per diluted share, for the third quarter of 2012 compared to operating earnings of $12.0 million, or $0.80 per diluted share, for the comparable period in 2011. For the nine months ended September 30, 2012, the Company reported net income of $35.7 million, or $2.51 per diluted share, compared to $15.5 million, or $1.00 per diluted share, for the comparable period in 2011. Operating earnings were $29.1 million, or $2.04 per diluted share, for the nine months ended September 30, 2012 compared to $13.3 million, or $0.85 per diluted share, for the comparable period in 2011. Gross written premiums and net written premiums for the three months ended September 30, 2012 were $298.7 million and $188.0 million, respectively, an increase of 17.0% and 7.2% from the comparable period in 2011. Gross written premiums and net written premiums for the nine months ended September 30, 2012 were $964.9 million and $621.3 million, respectively, an increase of 16.2% and 12.6% from the comparable period in 2011. The combined loss and expense ratio for the three and nine months ended September 30, 2012 were 99.1% and 99.0%, respectively, compared to 99.1% and 105.6% for the comparable periods in 2011. Stan Galanski, President and Chief Executive Officer, commented, "We are pleased to have met our primary objectives during the quarter: underwriting profit and growth in book value per share. Our Lloyd's operation had an exceptionally strong quarter, achieving double digit premium growth and benefitting from favorable loss emergence. Navigators Specialty had another strong quarter, as we continue to benefit from the expansion of our E&S underwriting teams. We continue to achieve positive renewal rate change across most product lines and our underwriters remain focused and disciplined in their risk selections." Stockholders' equity was $874.8 million, or $62.32 per share, as of September 30, 2012 compared to $803.4 million, or $57.57 per share, as of December 31, 2011. Net investment income for the three and nine months ended September 30, 2012 was $13.6 million and $40.6 million, respectively, a decrease of 16.4% and 20.4% from the comparable periods in 2011. Investment income for the nine months ended September 30, 2012 was reduced by $4.5 million as a result of the settlement of a dispute with Equitas over foregone interest on amounts that were due on certain reinsurance contracts. The annualized pre-tax investment yield, excluding net realized gains and losses and net other-than-temporary impairment losses recognized in earnings, was 2.4% for both the three and nine months ended September 30, 2012, compared to 3.1% and 3.2% for the comparable periods in 2011. The effective tax rate on net investment income was 26.6% and 26.8% for the three and nine months ended September 30, 2012, compared to 28.6% for both comparable periods in 2011. 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 3.8 years as of September 30, 2012. As of September 30, 2012, net unrealized gains within our investment portfolio were $140.6 million, an increase of $47.0 million compared to December 31, 2011. There were $4.8 million net realized gains for the three months ended September 30, 2012 compared to $2.6 million for the same period in 2011. There were no other-than-temporary impairment losses for the three months ended September 30, 2012. For the nine months ended September 30, 2012, there were $10.2 million of net realized gains including other-than-temporary impairment losses recognized in earnings, compared to $3.5 million for the same period in 2011. Consolidated net cash flow from operations for the three and nine months ended September 30, 2012 were $54.1 million and $69.1 million, respectively, compared to $71.9 million and $86.3 million for the comparable periods in 2011. The Company will hold a conference call on Friday, November 2, 2012 starting at 8:30 a.m. ET to discuss the 2012 third 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=119546 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 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 SUBSIDIARIESFinancial Highlights($ in thousands, except share and per share data)(unaudited)                Three Months Ended  Nine Months Ended    September 30, September 30,  Results of Operations20122011Change20122011Change              Gross written premiums $ 298,742  $ 255,318 17.0% $ 964,878  $ 830,315 16.2%Net written premiums 188,046  175,357 7.2% 621,343  551,796 12.6%              Revenues:       Net earned premiums  201,262  173,633 15.9%  580,398  499,888 16.1% Net investment income  13,597  16,259 -16.4%  40,632  51,072 -20.4% Total other-than-temporary impairment losses  --   (1,241) NM  (693)  (2,338) -70.4% Portion of loss recognized in other comprehensive income (before tax)  --   618 NM  43  941 -95.4% Net other-than-temporary impairment losses recognized in earnings  --   (623) NM  (650)  (1,397) -53.5% Net realized gains (losses)  4,761  3,238 47.0%  10,820  4,856 122.8% Other income  789  (921) NM  2,087  643 NMTotal revenues 220,409  191,586 15.0% 633,287  555,062 14.1%              Expenses:         Net losses and loss adjustment expenses  128,850  110,242 16.9%  370,242  340,893 8.6% Commission expenses  31,258  25,934 20.5%  90,211  80,164 12.5% Other operating expenses  40,112  34,989 14.6%  116,238  107,341 8.3% Interest expense  2,049  2,047 0.1%  6,147  6,140 0.1%Total expenses 202,269  173,212 16.8% 582,838  534,538 9.0%            Income before income taxes 18,140  18,374 -1.3% 50,449  20,524 145.8%        Income tax expense (benefit) 5,225  4,476 16.7% 14,731  5,015 NM            Net income (loss) $ 12,915  $ 13,898 -7.1% $ 35,718  $ 15,509 130.3%                        Per Share Data      Net income per common share:      Basic $ 0.92  $ 0.94 -2.0% $ 2.55  $ 1.02 NMDiluted $ 0.90  $ 0.92 -1.7% $ 2.51  $ 1.00 NM        Average common shares outstanding:      Basic 14,026,855  14,796,309   14,004,302  15,243,603  Diluted 14,272,477  15,104,424   14,255,301  15,569,370          Underwriting Ratios         Loss Ratio 64.0% 63.5%   63.8% 68.2%   Expense Ratio 35.1% 35.6%   35.2% 37.4%  Combined Ratio99.1%99.1% 99.0%105.6%                 Balance Sheet DataSeptember 30,June 30, September 30,Dec. 31,   20122012 20122011 Stockholders' equity $ 874,811  $ 841,808 3.9% $ 874,811  $ 803,435 8.9%Book value per share $ 62.32  $ 60.08 3.7% $ 62.32  $ 57.57 8.3%            THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS($ in thousands, except share data)        September 30,December 31,  20122011  (unaudited)  ASSETS    Investments and cash:     Fixed maturities, available-for-sale, at fair value (amortized cost: 2012, $1,975,534; 2011, $1,816,710)  $ 2,085,058  $ 1,888,069 Equity securities, available-for-sale, at fair value (cost: 2012, $74,831; 2011, $73,567)  105,930  95,849 Short-term investments, at cost which approximates fair value  187,445  122,220 Cash  36,252  127,360Total investments and cash 2,414,685  2,233,498       Premiums receivable  351,060  255,725 Prepaid reinsurance premiums  224,851  164,162 Reinsurance recoverable on paid losses  41,819  43,791 Reinsurance recoverable on unpaid losses and loss adjustment expenses  834,604  845,445 Deferred policy acquisition costs  61,281  63,984 Accrued investment income  14,175  14,492 Goodwill and other intangible assets  7,037  6,869 Current income tax receivable, net  10,325  15,391 Other Assets  34,860  26,650      Total assets $ 3,994,697  $ 3,670,007            LIABILITIES AND STOCKHOLDERS' EQUITY  Liabilities:   Reserves for losses and loss adjustment expenses  $ 2,079,956  $ 2,082,679 Unearned premiums  635,241  532,628 Reinsurance balances payable  169,540  108,699 Senior notes  114,386  114,276 Deferred income tax, net  11,199  6,291 Accounts payable and other liabilities  109,564  21,999Total liabilities 3,119,886  2,866,572      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 17,548,112 shares for 2012 and 17,467,615 shares for 2011  1,754  1,746 Additional paid-in capital  327,197  322,133 Treasury stock, at cost (3,511,380 shares for 2012 and 2011)  (155,801)  (155,801) Retained earnings  600,827  565,109 Accumulated other comprehensive income  100,834  70,248Total stockholders' equity 874,811  803,435    Total liabilities and stockholders' equity $ 3,994,697  $ 3,670,007                            THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESComparative Premium Data($ in thousands)                            Gross Written Premiums:Three Months  Nine Months   Insurance Companies:20122011Change20122011Change Marine  $ 44,879  $ 47,141 -4.8%  $ 156,640  $ 175,812 -10.9% Property Casualty  139,948  110,975 26.1%  426,494  323,994 31.6% Professional Liability  33,534  33,059 1.4%  97,629  84,912 15.0%    218,361  191,175 14.2%  680,763  584,718 16.4% Lloyd's Operations:             Marine  37,716  26,979 39.8%  146,528  127,585 14.8% Property Casualty  32,789  29,682 10.5%  106,063  91,106 16.4% Professional Liability  9,876  7,482 32.0%  31,524  26,906 17.2%    80,381  64,143 25.3%  284,115  245,597 15.7%Total $ 298,742  $ 255,318 17.0% $ 964,878  $ 830,315 16.2%              Net Written Premiums:Three Months  Nine Months   Insurance Companies:20122011Change20122011Change Marine  $ 32,615  $ 34,180 -4.6%  $ 107,266  $ 130,200 -17.6% Property Casualty  83,449  77,056 8.3%  274,823  201,978 36.1% Professional Liability  26,084  24,056 8.4%  75,374  57,058 32.1%    142,148  135,292 5.1%  457,463  389,236 17.5% Lloyd's Operations:             Marine  27,939  20,649 35.3%  109,489  102,362 7.0% Property Casualty  11,633  16,296 -28.6%  36,693  47,364 -22.5% Professional Liability  6,326  3,120 102.8%  17,698  12,834 37.9%    45,898  40,065 14.6%  163,880  162,560 0.8%Total $ 188,046  $ 175,357 7.2% $ 621,343  $ 551,796 12.6%              Net Earned Premiums:Three Months  Nine Months   Insurance Companies:20122011Change20122011Change Marine  $ 40,592  $ 41,951 -3.2%  $ 111,402  $ 124,387 -10.4% Property Casualty  83,993  58,585 43.4%  240,536  156,871 53.3% Professional Liability  24,505  18,796 30.4%  70,277  51,881 35.5%    149,090  119,332 24.9%  422,215  333,139 26.7% Lloyd's Operations:             Marine  34,002  34,510 -1.5%  101,538  109,222 -7.0% Property Casualty  11,870  15,952 -25.6%  41,644  44,105 -5.6% Professional Liability  6,300  3,839 64.1%  15,001  13,422 11.8%    52,172  54,301 -3.9%  158,183  166,749 -5.1%Total $ 201,262  $ 173,633 15.9% $ 580,398  $ 499,888 16.1%                    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESSegment InformationThree Months EndedSeptember 30, 2012     ($ in thousands)      InsuranceLloyd's   CompaniesOperationsCorporate (1)TotalGross written premiums $ 218,361  $ 80,381  $ --  $ 298,742 Net written premiums142,148 45,898  -- 188,046       Net earned premiums 149,090 52,172 -- 201,262 Net losses and loss adjustment expenses (113,303) (15,547) -- (128,850) Commission expenses (20,827) (10,911) 480 (31,258) Other operating expenses (29,387) (10,725) -- (40,112) Other income (expense) 1,229 40 (480) 789          Underwriting profit (loss)(13,198)15,029  --1,831           Net investment income 12,004 1,552 41 13,597 Net realized gains (losses) 2,609 2,152 -- 4,761 Interest expense  --  --  (2,049)  (2,049)           Income (loss) before income taxes 1,415 18,733 (2,008) 18,140           Income tax expense (benefit) (377) 6,525 (923) 5,225Net income (loss) $ 1,792  $ 12,208  $ (1,085) $ 12,915           Losses and loss adjustment expenses ratio 76.0% 29.8%   64.0% Commission expense ratio 14.0% 20.9%   15.5% Other operating expense ratio (2) 18.9% 20.5%   19.6%Combined ratio108.9%71.2% 99.1%           (1) The Corporate segment includes intercompany eliminations. (2) The Other operating expense ratio includes Other income (expense).                    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESSegment InformationThree Months EndedSeptember 30, 2011          ($ in thousands)            InsuranceLloyd's      CompaniesOperationsCorporate (1)TotalGross written premiums $ 191,175  $ 64,143  $ --  $ 255,318 Net written premiums135,292 40,065  -- 175,357           Net earned premiums 119,332 54,301  -- 173,633 Net losses and loss adjustment expenses (76,755) (33,487)  -- (110,242) Commission expenses (16,514) (9,953)  533 (25,934) Other operating expenses (25,735) (9,254)  -- (34,989) Other income (expense) 554 (942)  (533) (921)          Underwriting profit (loss)882 665  --1,547           Net investment income 14,037 2,158 64 16,259 Net realized gains (losses) 2,809 (226)  32 2,615 Interest expense  --  --  (2,047) (2,047)           Income (loss) before income taxes 17,728 2,597 (1,951) 18,374           Income tax expense (benefit) 4,379 780 (683) 4,476Net income (loss) $ 13,349  $ 1,817  $ (1,268) $ 13,898           Losses and loss adjustment expenses ratio 64.3% 61.7%   63.5% Commission expense ratio 13.8% 18.3%   14.9% Other operating expense ratio (2) 21.2% 18.8%   20.7%Combined ratio99.3%98.8%  99.1%           (1) The Corporate segment includes intercompany eliminations. (2) The Other operating expense ratio includes Other income (expense).                    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESSegment InformationNine Months EndedSeptember 30, 2012          ($ in thousands)            InsuranceLloyd's      CompaniesOperationsCorporate (1)TotalGross written premiums $ 680,763  $ 284,115  $ --  $ 964,878 Net written premiums457,463 163,880  -- 621,343          Net earned premiums 422,215 158,183  -- 580,398 Net losses and loss adjustment expenses (304,483) (65,759)  -- (370,242) Commission expenses (61,245) (30,735)  1,769 (90,211) Other operating expenses (83,646) (32,592)  -- (116,238) Other income (expense) 3,750 106  (1,769) 2,087          Underwriting profit (loss)(23,409)29,203  --5,794           Net investment income 34,225 6,289 118 40,632 Net realized gains (losses) 6,809 3,361 -- 10,170 Interest expense  --  --  (6,147) (6,147)           Income (loss) before income taxes 17,625 38,853 (6,029) 50,449           Income tax expense (benefit) 3,603 13,458 (2,330) 14,731Net income (loss) $ 14,022  $ 25,395  $ (3,699) $ 35,718           Losses and loss adjustment expenses ratio 72.1% 41.6%   63.8% Commission expense ratio 14.5% 19.4%   15.5% Other operating expense ratio (2) 18.9% 20.5%   19.7%Combined ratio105.5%81.5% 99.0%           (1) The Corporate segment includes intercompany eliminations. (2) The Other operating expense ratio includes Other income (expense).                    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESSegment InformationNine Months EndedSeptember 30, 2011          ($ in thousands)            InsuranceLloyd's      CompaniesOperationsCorporate (1)TotalGross written premiums $ 584,718  $ 245,597  $ --  $ 830,315 Net written premiums389,236 162,560  -- 551,796           Net earned premiums 333,139 166,749  -- 499,888 Net losses and loss adjustment expenses (228,882) (112,011)  -- (340,893) Commission expenses (45,256) (36,402)  1,494 (80,164) Other operating expenses (79,050) (28,291)  -- (107,341) Other income (expense) 2,871 (734)  (1,494) 643          Underwriting profit (loss)(17,178)(10,689)  --(27,867)           Net investment income 44,009 6,733 330 51,072 Net realized gains (losses) 5,664 (2,409)  204 3,459 Interest expense  --  --  (6,140) (6,140)           Income (loss) before income taxes 32,495 (6,365) (5,606) 20,524           Income tax expense (benefit) 9,224 (2,247) (1,962) 5,015Net income (loss) $ 23,271  $ (4,118) $ (3,644) $ 15,509           Losses and loss adjustment expenses ratio 68.7% 67.2%   68.2% Commission expense ratio 13.6% 21.8%   16.0% Other operating expense ratio (2) 22.9% 17.4%   21.4%Combined ratio105.2%106.4%  105.6%           (1) The Corporate segment includes intercompany eliminations. (2) The Other operating expense ratio includes Other income (expense).                                THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESUnderwriting Results($ in thousands)                  Three Months Ended September 30, 2012  NetLosses            Earnedand LAEUnderwritingUnderwritingLossExpenseCombined Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio Marine  $ 40,592  $ 29,187  $ 14,200  $ (2,795) 71.9% 35.0% 106.9% Property Casualty  83,993  67,474  25,753  (9,234) 80.3% 30.7% 111.0% Professional Liability  24,505  16,642  9,032  (1,169) 67.9% 36.9% 104.8%Total Insurance Companies  149,090  113,303  48,985  (13,198) 76.0% 32.9% 108.9% Lloyd's Operations:               Marine  $ 34,002  $ 10,936  $ 14,543  $ 8,523 32.2% 42.7% 74.9% Property Casualty  11,870  5,441  4,750  1,679 45.8% 40.1% 85.9% Professional Liability  6,300  (830)  2,303  4,827 -13.2% 36.6% 23.4%Total Lloyd's  52,172  15,547  21,596  15,029 29.8% 41.4% 71.2%Total All $ 201,262  $ 128,850  $ 70,581  $ 1,831 64.0%35.1%99.1%                  Three Months Ended September 30, 2011  NetLosses            Earnedand LAEUnderwritingUnderwritingLossExpenseCombined Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio Marine  $ 41,951  $ 28,082  $ 15,054  $ (1,185) 66.9% 35.9% 102.8% Property Casualty  58,585  36,272  19,605  2,708 61.9% 33.5% 95.4% Professional Liability  18,796  12,401  7,036  (641) 66.0% 37.4% 103.4%Total Insurance Companies  119,332  76,755  41,695  882 64.3% 35.0% 99.3% Lloyd's Operations:               Marine  34,510  22,817  14,429  (2,736) 66.1% 41.8% 107.9% Property Casualty  15,952  7,597  4,002  4,353 47.6% 25.1% 72.7% Professional Liability  3,839  3,073  1,718  (952) 80.0% 44.8% 124.8%Total Lloyd's  54,301  33,487  20,149  665 61.7% 37.1% 98.8%Total All $ 173,633  $ 110,242  $ 61,844  $ 1,547 63.5%35.6%99.1%                                    Amounts  Loss Ratio  Net Incurred Loss Activity  Sept. 30,Sept. 30,  Sept. 30,Sept. 30,  For the Three Months Ended:  20122011  20122011   Insurance Companies:               Loss and LAE payments    $ 98,857  $ 63,475   66.3% 53.2%   Change in reserves    14,446  13,280   9.7% 11.1%   Net incurred loss and LAE    113,303  76,755   76.0% 64.3%                   Lloyd's Operations:               Loss and LAE payments    $ 24,019  26,168   46.0% 48.2%   Change in reserves    (8,472)  7,319   -16.2% 13.5%   Net incurred loss and LAE    15,547  33,487   29.8% 61.7%                   Total              Loss and LAE payments    122,876  89,643   61.0% 51.6%   Change in reserves    5,974  20,599   3.0% 11.9%  Net incurred loss and LAE  $ 128,850  $ 110,242  64.0%63.5%                                  Impact of Prior Years Reserves  Amounts  Loss Ratio Impact  Favorable / (Unfavorable) Development  Sept. 30,Sept. 30,  Sept. 30,Sept. 30,  For the Three Months Ended: 20122011  20122011   Insurance Companies    $ (3,607)  $ 2,144   -2.4% 1.8%   Lloyd's Operations    9,084  (531)   17.4% -1.0%   Total   $ 5,477  $ 1,613  2.7%0.9%                                  THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESUnderwriting Results($ in thousands)         Nine Months Ended September 30, 2012 NetLosses       Earnedand LAEUnderwritingUnderwritingLossExpenseCombined Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio Marine  $ 111,402  $ 87,240  $ 40,371  $ (16,209) 78.3% 36.3% 114.6% Property Casualty  240,536  165,346  75,235  (45) 68.7% 31.3% 100.0% Professional Liability  70,277  51,897  25,535  (7,155) 73.8% 36.4% 110.2%Total Insurance Companies  422,215  304,483  141,141  (23,409) 72.1% 33.4% 105.5% Lloyd's Operations:               Marine  101,538  45,224  42,587  13,727 44.5% 42.0% 86.5% Property Casualty  41,644  17,213  14,421  10,010 41.3% 34.7% 76.0% Professional Liability  15,001  3,322  6,213  5,466 22.1% 41.5% 63.6%Total Lloyd's  158,183  65,759  63,221  29,203 41.6% 39.9% 81.5%Total All $ 580,398  $ 370,242  $ 204,362  $ 5,794 63.8%35.2%99.0%                  Nine Months Ended September 30, 2011  NetLosses       Earnedand LAEUnderwritingUnderwritingLossExpenseCombined Insurance Companies:PremiumsIncurredExpensesProfit (Loss)RatioRatioRatio Marine  $ 124,387  $ 82,888  $ 43,934  $ (2,435) 66.6% 35.4% 102.0% Property Casualty  156,871  110,637  57,662  (11,428) 70.5% 36.8% 107.3% Professional Liability  51,881  35,357  19,839  (3,315) 68.2% 38.2% 106.4%Total Insurance Companies  333,139  228,882  121,435  (17,178) 68.7% 36.5% 105.2% Lloyd's Operations:               Marine  109,222  73,239  43,781  (7,798) 67.1% 40.0% 107.1% Property Casualty  44,105  22,976  15,720  5,409 52.1% 35.6% 87.7% Professional Liability  13,422  15,796  5,926  (8,300) 117.7% 44.1% 161.8%Total Lloyd's  166,749  112,011  65,427  (10,689) 67.2% 39.2% 106.4%Total All $ 499,888  $ 340,893  $ 186,862  $ (27,867)68.2%37.4%105.6%                     Amounts  Loss Ratio Net Incurred Loss Activity  Sept. 30,Sept. 30,  Sept. 30,Sept. 30, For the Nine Months Ended: 20122011  20122011   Insurance Companies:               Loss and LAE payments    $ 282,820  $ 207,446   67.0% 62.3%   Change in reserves    21,663  21,436   5.1% 6.4%   Net incurred loss and LAE    304,483  228,882   72.1% 68.7%                   Lloyd's Operations:               Loss and LAE payments    79,304  74,826   50.2% 44.9%   Change in reserves    (13,545)  37,185   -8.6% 22.3%   Net incurred loss and LAE    65,759  112,011   41.6% 67.2%                   Total              Loss and LAE payments    362,124  282,272   62.4% 56.5%   Change in reserves    8,118  58,621   1.4% 11.7%  Net incurred loss and LAE  $ 370,242  $ 340,893  63.8%68.2%                                  Impact of Prior Years Reserves  Amounts  Loss Ratio Impact  Favorable / (Unfavorable) Development  Sept. 30,Sept. 30,  Sept. 30,Sept. 30,  For the Nine Months Ended: 20122011  20122011   Insurance Companies    $ (1,517)  $ 1,059   -0.4% 0.3%   Lloyd's Operations    19,232  (3,694)   12.2% -2.2%   Total   $ 17,715  $ (2,635)  3.1%-0.5%                  THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESNet Loss Data($ in thousands)          CaseIBNR  Net Loss Reserves, September 30, 2012:ReservesReservesTotal Insurance Companies:       Marine  $ 143,907  $ 112,624  $ 256,531 Property Casualty  173,686  329,070  502,756 Professional Liability  57,004  77,601  134,605 Total Insurance Companies  374,597  519,295  893,892 Lloyd's Operations:       Marine  128,551  106,470  235,021 Property Casualty  28,053  30,200  58,253 Professional Liability  15,823  42,363  58,186 Total Lloyd's Operations  172,427  179,033  351,460        Total Net Loss Reserves $ 547,024  $ 698,328  $ 1,245,352                  CaseIBNR  Net Loss Reserves, December 31, 2011:ReservesReservesTotal Insurance Companies:       Marine  $ 127,912  $ 121,875  $ 249,787 Property Casualty  185,822  296,177  481,999 Professional Liability  56,953  83,490  140,443 Total Insurance Companies  370,687  501,542  872,229 Lloyd's Operations:       Marine  117,448  123,136  240,584 Property Casualty  37,877  25,846  63,723 Professional Liability  13,580  47,118  60,698 Total Lloyd's Operations  168,905  196,100  365,005        Total Net Loss Reserves $ 539,592  $ 697,642  $ 1,237,234                        THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESInvestment DataSeptember 30, 2012              As of September 30, 2012, the average quality of the investment portfolio as rated by S&P and Moody's was AA/Aa with an average duration of 3.8 years. The Company does not own any collateralized debt obligations (CDO's), collateralized loan obligations (CLO's) or asset backed commercial paper. As of September 30, 2012, the Company owned two asset-backed securities approximating $0.7 million with subprime mortgage exposures. The securities have an effective maturity of 3.2 years. In addition, the Company owned a total of seven collateralized mortgage obligations and asset-backed securities approximating $2.1 million classified as Alt-A which is a credit category between prime and subprime. They have an effective maturity of 6.3 years. Such subprime and Alt-A categories are as defined by S&P. The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible. The following table sets forth our cash and investments as of September 30, 2012:                  GrossGrossCost orOTTI  FairUnrealizedUnrealizedAmortizedRecognizedSeptember 30, 2012ValueGains(Losses)Costin OCI   ($ in thousands) Fixed maturities:           U.S.Treasury bonds, agency bonds and foreign government bonds  $ 465,215  $ 11,881  $ (55)  $ 453,389  $ -- States, municipalities and political subdivisions  443,994  34,451  (66)  409,609  -- Mortgage- and asset-backed securities:           Agency mortgage-backed securities  405,229  17,582  (56)  387,703  -- Residential mortgage obligations  39,095  711  (837)  39,221  (278) Asset-backed securities  50,897  1,069  (72)  49,900  -- Commercial mortgage-backed securities  208,742  18,126  (50)  190,666  -- Subtotal  703,963  37,488  (1,015)  667,490  (278) Corporate bonds  471,886  26,941  (101)  445,046  --             Total fixed maturities   2,085,058  110,761  (1,237)  1,975,534  (278)             Equity securities - common stocks  105,930  31,377  (278)  74,831  --             Short-term investments  187,445  --  --  187,445  --             Cash  36,252  --  --  36,252  --             Total  $ 2,414,685  $ 142,138  $ (1,515)  $ 2,274,062  $ (278)                    THE NAVIGATORS GROUP, INC. AND SUBSIDIARIESInvestment DataSeptember 30, 2012($ 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 September 30, 2012:               Gross  Gross  Cost or    Fair  Unrealized  Unrealized  Amortized Agency mortgage-backed securities: Value  Gains  (Losses)  Cost  GNMA  $ 126,642  $ 6,416  $ (45)  $ 120,271 FNMA  210,396  8,705  (11)  201,702 FHLMC  68,191  2,461  --  65,730 Total  $ 405,229  $ 17,582  $ (56)  $ 387,703                        Gross  Gross  Cost or    Fair  Unrealized  Unrealized  Amortized Residential mortgage obligations: Value  Gains  (Losses)  Cost  Prime  $ 12,709  $ 126  $ (658)  $ 13,241 Alt-A  2,102  24  (179)  2,257 Subprime  721  21  --  700 Non-US RMBS  23,563  540  --  23,023 Total  $ 39,095  $ 711  $ (837)  $ 39,221CONTACT: Ciro M. DeFalco Senior Vice President and Chief Financial Officer (914) 933-6043 cdefalco@navg.com www.navg.com