Navigators Reports Fourth Quarter 2016 Earnings - 1 Reason Insurance (715)598-9924

STAMFORD, Conn., Feb. 16, 2017 (GLOBE NEWSWIRE) — The Navigators Group, Inc. (NASDAQ:NAVG) reported Net income of $21.6 million, or $0.71 per diluted share, for the three months ended December 31, 2016 compared to $17.7 million, or $0.59 per diluted share, for the comparable period in 2015. Net operating earnings were $17.7 million, or $0.58 per diluted share, for the three months ended December 31, 2016 compared to $16.4 million, or $0.55 per diluted share, for the comparable period in 2015.

For the twelve months ended December 31, 2016, our Company reported Net income of $82.7 million, or $2.75 per diluted share, compared to $81.1 million, or $2.73, for the comparable period in 2015. Net operating earnings were $71.2 million, or $2.37 per diluted share, for the twelve months ended December 31, 2016 compared to $77.1 million, or $2.60 per diluted share, for the comparable period in 2015.

Stan Galanski, President and Chief Executive Officer, commented, “We are pleased to report profitable results for the fourth quarter and full year, led by strong performances in our U.S. Insurance and Global Reinsurance segments. While our International Insurance segment was adversely impacted by property loss activity during the fourth quarter and full year, largely emanating from North American exposures underwritten at Lloyd’s, our Marine and Professional Liability businesses within the segment were profitable. Premium growth remained strong, with Net written premium up 15.6% for the quarter and 13.6% for the full year, reflecting the ongoing development of more recent product initiatives. Net investment income was up 8.7% for the quarter and 15.6% for the full year while maintaining the portfolio’s credit quality.” Mr. Galanski continued, “While we are a growing company, we continue to emphasize cost control. Our Other operating expenses for the quarter were down 1.9% and up only 4.7% for the full year, which is well below our rate of revenue growth. Despite challenging market conditions, we continue to execute on a strategy built around our culture of underwriting excellence, local decision-making and superb customer experiences.”

Gross written premiums and Net written premiums for the three months ended December 31, 2016 were $367.5 million and $282.9 million, respectively, increasing 13.6% and 15.6% from the comparable period in 2015.

Gross written premiums and Net written premiums for the twelve months ended December 31, 2016 were $1.6 billion and $1.2 billion, respectively, increasing 7.9% and 13.6% from the comparable period in 2015.

The combined ratio for the three and twelve months ended December 31, 2016 was 96.7% and 96.7%, respectively, compared to 97.2% and 94.1% for the comparable periods in 2015.

Net investment income for the three and twelve months ended December 31, 2016 was $20.1 million and $79.5 million, respectively, increases of 8.7% and 15.6% as compared to the same periods in 2015. The annualized pre-tax investment yield, excluding Net realized gains and losses and other-than-temporary impairment losses recognized in earnings, was 2.5% and 2.6% for the three and twelve months ended December 31, 2016, compared to 2.5% and 2.4%, respectively, for the comparable periods in 2015.

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 average effective duration of 3.7 years as of December 31, 2016. As of December 31, 2016, Net unrealized gains within our investment portfolio were $29.0 million, a decrease of $8.3 million compared to December 31, 2015.

We recognized $4.0 million of Net realized gains (losses) for the three months ended December 31, 2016, compared to ($2.1) million of Net realized losses for the same period in 2015. For the twelve months ended December 31, 2016, we recognized $9.0 million of Net realized gains, compared to $6.7 million for the same period in 2015.

Other income (loss) for the three months ended December 31, 2016 was $1.9 million of income, compared to $4.1 million of income for the same period in 2015. For the twelve months ended December 31, 2016, Other income (loss) was $8.7 million of income, compared to ($0.5) million of loss for the same period in 2015. Other income (loss) primarily consists of realized and unrealized foreign exchange gains and losses. Stockholders’ equity was $1.2 billion, or $40.45 per share, as of December 31, 2016 compared to $1.1 billion, or $37.98 per share, as of December 31, 2015.

On February 16, 2017, the Board of Directors declared a quarterly cash dividend of $0.045 per share of Common stock to be paid on March 24, 2017 to stockholders of record at the close of business on March 3, 2017.

Our Company will hold a conference call on Friday, February 17, 2017 starting at 8:30 a.m. (EST) to discuss the 2016 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 connect to the webcast at:

http://edge.media-server.com/m/p/5a9fo82i

On December 6, 2016, our Board of Directors declared a two-for-one stock split of The Navigators Group, Inc. Common stock, to be effected in the form of a stock dividend. Stockholders of record at the close of business on December 30, 2016 received one additional share of Common stock for every share of Common stock held. All disclosures of shares and per share data in this earnings release have been retroactively adjusted to reflect the stock split for all periods presented. The additional shares of Common stock were issued on January 20, 2017.

Net operating earnings, comprised of Net income excluding After-tax net realized gains (losses), After-tax net other-than-temporary impairment losses recognized in earnings, and After-tax foreign exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) and translation adjustments (translation of foreign currency denominated assets and liabilities into the entity’s functional currency), 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. Navigators has offices in the United States, the United Kingdom and Continental Europe, as well as a representative office in China.

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 share and per share data)
(unaudited)

	Three Months Ended									Twelve Months Ended
	December 31,									December 31,
Results of Operations	2016			2015			Change			2016			2015			Change

Gross written premiums	$	367,539		$	323,509			13.6	%	$	1,568,911		$	1,453,502			7.9	%
Net written premiums		282,868			244,719			15.6	%		1,186,224			1,043,860			13.6	%

Revenues:
Net earned premiums	$	283,985		$	251,545			12.9	%	$	1,100,345		$	984,087			11.8	%
Net investment income		20,107			18,499			8.7	%		79,451			68,718			15.6	%
Net realized gains (losses):
Total other-than-temporary impairment losses		21			(123	)	NM				(227	)		(1,870	)		(87.9	%)
Portion of loss recognized in other comprehensive income (before tax)		(21	)		123		NM				77			172			(55.3	%)
Net other-than-temporary impairment losses recognized in earnings		—			—		NM				(150	)		(1,698	)		(91.2	%)
Other realized gains (losses)		4,043			(2,080	)	NM				9,186			8,373			9.7	%
Net realized gains (losses)		4,043			(2,080	)	NM				9,036			6,675			35.4	%
Other income (loss)		1,905			4,147			(54.1	%)		8,701			(491	)	NM
Total revenues	$	310,040		$	272,111			13.9	%	$	1,197,533		$	1,058,989			13.1	%

Expenses:
Net losses and loss adjustment expenses		172,493			153,881			12.1	%		665,448			572,598			16.2	%
Commission expenses		44,154			31,339			40.9	%		165,045			129,977			27.0	%
Other operating expenses		58,076			59,219			(1.9	%)		234,096			223,516			4.7	%
Interest expense		3,860			3,857			0.1	%		15,435			15,424			0.1	%
Total expenses	$	278,583		$	248,296			12.2	%	$	1,080,024		$	941,515			14.7	%

Income before income taxes		31,457			23,815			32.1	%		117,509			117,474			0.0	%

Income tax expense (benefit)		9,866			6,072			62.5	%		34,783			36,417			(4.5	%)

Net income (loss)	$	21,591		$	17,743			21.7	%	$	82,726		$	81,057			2.1	%

Per Share Data⁽¹⁾

Net income per common share:
Basic	$	0.74		$	0.62			20.5	%	$	2.85		$	2.82			1.0	%
Diluted	$	0.71		$	0.59			19.9	%	$	2.75		$	2.73			0.8	%

Average common shares outstanding:
Basic		29,121,376			28,833,895						29,073,803			28,785,044
Diluted		30,282,248			29,835,293						30,031,609			29,651,490

Underwriting Ratios
Loss Rati o		60.7	%		61.2	%					60.5	%		58.2	%
Expense Ratio		36.0	%		36.0	%					36.2	%		35.9	%
Combined Ratio		96.7	%		97.2	%					96.7	%		94.1	%

Balance Sheet Data	December 31,			September 30,						December 31,			December 31,
	2016			2016						2016			2015
Stockholders’ equity	$	1,178,188		$	1,204,281			-2.2	%	$	1,178,188		$	1,096,148			7.5	%
Book value per share	$	40.45		$	41.36			-2.2	%	$	40.45		$	37.98			6.5	%

(1) We completed a two-for-one stock split on January 20, 2017. All share and per share data has been retroactively restated on a post-split basis.
NM- Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME TO NET OPERATING EARNINGS
($ in thousands, except per share data)

	Three Months Ended December 31, 2016									Three Months Ended December 31, 2015									% Change
	Pre-Tax			Tax			After-Tax			Pre-Tax			Tax			After-Tax			QTD
Net income	$	31,457		$	(9,866	)	$	21,591		$	23,815		$	(6,072	)	$	17,743			21.7	%
Adjustments to Net income:
Realized losses (gains)		(4,043	)		1,416			(2,627	)		2,080			(728	)		1,352		NM
FX losses (gains)		(1,947	)		682			(1,265	)		(4,132	)		1,446			(2,686	)		(52.9	%)
Net operating earnings	$	25,467		$	(7,768	)	$	17,699		$	21,763		$	(5,354	)	$	16,409			7.9	%

Net operating earnings per common share:⁽¹⁾
Basic							$	0.61								$	0.57
Diluted							$	0.58								$	0.55


	Twelve Months Ended December 31, 2016									Twelve Months Ended December 31, 2015									% Change
	Pre-Tax			Tax			After-Tax			Pre-Tax			Tax			After-Tax			YTD
Net income	$	117,509		$	(34,783	)	$	82,726		$	117,474		$	(36,417	)	$	81,057			2.1	%
Adjustments to Net income:
Realized losses (gains)		(9,036	)		3,163			(5,873	)		(6,675	)		2,336			(4,339	)		35.4	%
FX losses (gains)		(8,626	)		3,019			(5,607	)		622			(218	)		404		NM
Net operating earnings	$	99,847		$	(28,601	)	$	71,246		$	111,421		$	(34,299	)	$	77,122			(7.6	%)

Net operating earnings per common share:⁽¹⁾
Basic							$	2.45								$	2.68
Diluted							$	2.37								$	2.60

(1) We completed a two-for-one stock split on January 20, 2017. All share and per share data has been retroactively restated on a post-split basis.
NM- Percentage change not meaningful

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)

amounts in thousands, except share and per share amounts.
	December 31,			December 31,
	2016			2015
ASSETS
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $2,628,225; 2015: $2,400,245)	$	2,635,882		$	2,414,210
Equity securities, available-for-sale, at fair value (cost: 2016: $327,911; 2015: $281,943)		349,142			305,271
Other invested assets (equity method)		1,960			—
Short-term investments, at fair value (amortized cost: 2016: $143,451; 2015: $217,743)		143,539			217,745
Total investments	$	3,130,523		$	2,937,226

Cash		64,643			69,901
Premiums receivable		306,686			276,616
Prepaid reinsurance premiums		213,377			232,588
Reinsurance recoverable on paid losses		82,582			49,506
Reinsurance recoverable on unpaid losses and loss adjustment expenses		779,276			809,518
Deferred policy acquisition costs		119,660			91,983
Accrued investment income		17,315			16,001
Goodwill and other intangible assets		6,451			6,807
Current income tax receivable, net		23,659			22,323
Deferred income tax, net		17,835			3,900
Other assets		52,030			67,643
Total assets	$	4,814,037		$	4,584,012

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserves for losses and loss adjustment expenses	$	2,289,727		$	2,202,644
Unearned premiums		887,344			820,676
Reinsurance balances payable		108,980			107,411
Senior notes		263,728			263,580
Accounts payable and other liabilities		86,070			93,553
Total liabilities	$	3,635,849		$	3,487,864

Stockholders’ equity:⁽¹⁾
Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued	$	—		$	—
Common stock, $.10 par value, authorized 50,000,000 shares, issued 36,146,899 shares for 2016 and 35,884,538 shares for 2015		3,612			3,586
Additional paid-in capital		373,983			356,036
Treasury stock, at cost (7,022,760 shares for 2016 and 2015)		(155,801	)		(155,801	)
Retained earnings		947,519			868,723
Accumulated other comprehensive income		8,875			23,604
Total stockholders’ equity	$	1,178,188		$	1,096,148
Total liabilities and stockholders’ equity	$	4,814,037		$	4,584,012

(1) We completed a two-for-one stock split on January 20, 2017. All share data has been retroactively restated on a post-split basis.

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information

	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 (losses)											4,043			4,043
Interest expense											(3,860	)		(3,860	)
Other income (loss)											1,886			1,886
Income before income taxes	$	8,718		$	(8,528	)	$	9,091		$	22,176		$	31,457
Income tax (expense) benefit											(9,866	)		(9,866	)
Net income (loss)													$	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 intercompan y eliminations.
(2) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information

	Three Months Ended December 31, 2015
	U.S.			Int’l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	207,684		$	81,942		$	33,883		$	—		$	323,509
Ceded written premiums		(57,410	)		(20,324	)		(1,056	)		—			(78,790	)
Net written premiums		150,274			61,618			32,827			—			244,719

Net earned premiums	$	145,032		$	62,716		$	43,797		$	—		$	251,545
Net losses and LAE		(96,403	)		(33,466	)		(24,012	)		—			(153,881	)
Commission expenses		(14,542	)		(8,185	)		(9,198	)		586			(31,339	)
Other operating expenses		(33,397	)		(21,555	)		(4,267	)		—			(59,219	)
Other underwriting income (expense)		360			—			249			(586	)		23

Underwriting profit (loss)	$	1,050		$	(490	)	$	6,569		$	—		$	7,129

Net investment income											18,499			18,499
Net realized gains (losses)											(2,080	)		(2,080	)
Interest expense											(3,857	)		(3,857	)
Other income (loss)											4,124			4,124
Income before income taxes	$	1,050		$	(490	)	$	6,569		$	16,686		$	23,815
Income tax (expense) benefit											(6,072	)		(6,072	)
Net income (loss)													$	17,743

Losses and LAE ratio		66.5	%		53.4	%		54.8	%					61.2	%
Commission expense ratio		10.0	%		13.1	%		21.0	%					12.5	%
Other operating expense ratio ⁽²⁾		22.8	%		34.3	%		9.2	%					23.5	%
Combined ratio		99.3	%		100.8	%		85.0	%					97.2	%

(1) – Includes Corporate segment intercompany eliminations.
(2) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information

	Twelve Months 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 (losses)											9,036			9,036
Interest expense											(15,435	)		(15,435	)
Other income (loss)											8,565			8,565
Income (loss) before income taxes	$	33,620		$	(18,966	)	$	21,238		$	81,617		$	117,509
Income tax (expense) benefit											(34,783	)		(34,783	)
Net income (loss)													$	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
Segment Information

	Twelve Months Ended December 31, 2015
	U.S.			Int’l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	865,781		$	411,947		$	175,774		$	—		$	1,453,502
Ceded written premiums		(268,775	)		(134,005	)		(6,862	)		—			(409,642	)
Net written premiums		597,006			277,942			168,912			—			1,043,860

Net earned premiums	$	555,836		$	259,960		$	168,291		$	—		$	984,087
Net losses and LAE		(343,497	)		(134,702	)		(94,399	)		—			(572,598	)
Commission expenses		(56,319	)		(43,676	)		(32,240	)		2,258			(129,977	)
Other operating expenses		(131,407	)		(75,867	)		(16,242	)		—			(223,516	)
Other underwriting income (expense)		1,690			—			690			(2,258	)		122

Underwriting profit (loss)	$	26,303		$	5,715		$	26,100		$	—		$	58,118

Net investment income											68,718			68,718
Net realized gains (losses)											6,675			6,675
Interest expense											(15,424	)		(15,424	)
Other income (loss)											(613	)		(613	)
Income (loss) before income taxes	$	26,303		$	5,715		$	26,100		$	59,356		$	117,474
Income tax (expense) benefit											(36,417	)		(36,417	)
Net income (loss)													$	81,057

Losses and LAE ratio		61.8	%		51.8	%		56.1	%					58.2	%
Commission expense ratio		10.1	%		16.8	%		19.2	%					13.2	%
Other operating expense ratio ⁽²⁾		23.4	%		29.2	%		9.2	%					22.7	%
Combined ratio		95.3	%		97.8	%		84.5	%					94.1	%

(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

	U.S. Insurance
	Three Months Ended December 31, 2016												Three Months Ended December 31, 2015
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	39,784		$	160,030		$	30,363		$	230,177		$	40,045		$	138,214		$	29,425		$	207,684			10.8	%
Ceded written premiums		(17,035	)		(32,602	)		(7,716	)		(57,353	)		(16,747	)		(28,395	)		(12,268	)		(57,410	)		(0.1	%)
Net written premiums		22,749			127,428			22,647			172,824			23,298			109,819			17,157			150,274			15.0	%

Net earned premiums	$	26,496		$	118,331		$	22,035		$	166,862		$	21,976		$	109,673		$	13,383		$	145,032			15.1	%
Net losses and LAE		(14,639	)		(77,979	)		(13,982	)		(106,600	)		(14,619	)		(71,878	)		(9,906	)		(96,403	)		10.6	%
Commission expenses		(2,694	)		(14,146	)		(3,593	)		(20,433	)		(2,254	)		(11,392	)		(896	)		(14,542	)		40.5	%
Other operating expenses		(6,603	)		(19,901	)		(4,756	)		(31,260	)		(6,953	)		(20,890	)		(5,554	)		(33,397	)		(6.4	%)
Other underwriting income (expense)		108			32			9			149			100			246			14			360			(58.5	%)

Underwriting profit (loss)	$	2,668		$	6,337		$	(287	)	$	8,718		$	(1,750	)	$	5,759		$	(2,959	)	$	1,050		NM

Losses and LAE ratio		55.3	%		65.9	%		63.5	%		63.9	%		66.5	%		65.5	%		74.0	%		66.5	%
Commission expense ratio		10.2	%		12.0	%		16.3	%		12.2	%		10.3	%		10.4	%		6.7	%		10.0	%
Other operating expense ratio ⁽¹⁾		24.4	%		16.7	%		21.5	%		18.7	%		31.2	%		18.8	%		41.4	%		22.8	%
Combined ratio		89.9	%		94.6	%		101.3	%		94.8	%		108.0	%		94.7	%		122.1	%		99.3	%

NM – Percentage change not meaningful
(1) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results

	Int’l Insurance
	Three Months Ended December 31, 2016												Three Months Ended December 31, 2015
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	31,680		$	35,969		$	32,455		$	100,104		$	33,863		$	18,715		$	29,364		$	81,942			22.2	%
Ceded written premiums		(6,818	)		(12,581	)		(7,030	)		(26,429	)		(5,582	)		(7,046	)		(7,696	)		(20,324	)		30.0	%
Net written premiums		24,862			23,388			25,425			73,675			28,281			11,669			21,668			61,618			19.6	%

Net earned premiums	$	31,847		$	18,847		$	21,120		$	71,814		$	34,540		$	12,208		$	15,968		$	62,716			14.5	%
Net losses and LAE		(12,653	)		(19,821	)		(12,291	)		(44,765	)		(15,792	)		(3,463	)		(14,211	)		(33,466	)		33.8	%
Commission expenses		(7,894	)		(3,102	)		(3,183	)		(14,179	)		(5,275	)		(1,038	)		(1,872	)		(8,185	)		73.2	%
Other operating expenses		(8,376	)		(8,389	)		(4,633	)		(21,398	)		(8,742	)		(7,540	)		(5,273	)		(21,555	)		(0.7	%)
Other underwriting income (expense)		—			—			—			—			—			—			—			—		NM

Underwriting profit (loss)	$	2,924		$	(12,465	)	$	1,013		$	(8,528	)	$	4,731		$	167		$	(5,388	)	$	(490	)	NM

Losses and LAE ratio		39.7	%		105.2	%		58.2	%		62.3	%		45.7	%		28.4	%		89.0	%		53.4	%
Commission expense ratio		24.8	%		16.5	%		15.1	%		19.7	%		15.3	%		8.5	%		11.7	%		13.1	%
Other operating expense ratio ⁽¹⁾		26.3	%		44.4	%		21.9	%		29.9	%		25.3	%		61.7	%		33.0	%		34.3	%
Combined ratio		90.8	%		166.1	%		95.2	%		111.9	%		86.3	%		98.6	%		133.7	%		100.8	%

NM – Percentage change not meaningful
(1) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results

	U.S. Insurance
	Twelve Months Ended December 31, 2016												Twelve Months Ended December 31, 2015
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	169,405		$	631,562		$	118,428		$	919,395		$	158,124		$	596,673		$	110,984		$	865,781			6.2	%
Ceded written premiums		(70,858	)		(135,888	)		(29,081	)		(235,827	)		(61,916	)		(152,168	)		(54,691	)		(268,775	)		(12.3	%)
Net written premiums		98,547			495,674			89,347			683,568			96,208			444,505			56,293			597,006			14.5	%

Net earned premiums	$	100,132		$	453,673		$	75,503		$	629,308		$	96,082		$	401,408		$	58,346		$	555,836			13.2	%
Net losses and LAE		(50,087	)		(295,877	)		(51,896	)		(397,860	)		(43,553	)		(266,806	)		(33,138	)		(343,497	)		15.8	%
Commission expenses		(8,469	)		(52,483	)		(9,860	)		(70,812	)		(11,606	)		(39,931	)		(4,782	)		(56,319	)		25.7	%
Other operating expenses		(27,559	)		(81,469	)		(19,080	)		(128,108	)		(27,082	)		(81,866	)		(22,459	)		(131,407	)		(2.5	%)
Other underwriting income (expense)		465			582			45			1,092			489			1,122			79			1,690			(35.4	%)

Underwriting profit (loss)	$	14,482		$	24,426		$	(5,288	)	$	33,620		$	14,330		$	13,927		$	(1,954	)	$	26,303			27.8	%

Losses and LAE ratio		50.0	%		65.2	%		68.7	%		63.2	%		45.3	%		66.5	%		56.8	%		61.8	%
Commission expense ratio		8.5	%		11.6	%		13.1	%		11.3	%		12.1	%		9.9	%		8.2	%		10.1	%
Other operating expense ratio ⁽¹⁾		27.0	%		17.8	%		25.2	%		20.2	%		27.7	%		20.1	%		38.3	%		23.4	%
Combined ratio		85.5	%		94.6	%		107.0	%		94.7	%		85.1	%		96.5	%		103.3	%		95.3	%

(1) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Reportable Segment Results

	Int’l Insurance
	Twelve Months Ended December 31, 2016												Twelve Months Ended December 31, 2015
amounts in thousands	Marine			P&C			Professional Liability			Total			Marine			P&C			Professional Liability			Total			% Change Total
Gross written premiums	$	183,228		$	181,094		$	120,149		$	484,471		$	183,707		$	130,729		$	97,511		$	411,947			17.6	%
Ceded written premiums		(40,092	)		(69,606	)		(28,806	)		(138,504	)		(36,515	)		(67,722	)		(29,768	)		(134,005	)		3.4	%
Net written premiums		143,136			111,488			91,343			345,967			147,192			63,007			67,743			277,942			24.5	%

Net earned premiums	$	141,593		$	89,455		$	76,368		$	307,416		$	149,256		$	55,320		$	55,384		$	259,960			18.3	%
Net losses and LAE		(67,051	)		(68,995	)		(42,238	)		(178,284	)		(79,737	)		(20,478	)		(34,487	)		(134,702	)		32.4	%
Commission expenses		(34,018	)		(14,529	)		(13,156	)		(61,703	)		(32,187	)		(4,999	)		(6,490	)		(43,676	)		41.3	%
Other operating expenses		(33,170	)		(34,075	)		(19,150	)		(86,395	)		(30,419	)		(26,294	)		(19,154	)		(75,867	)		13.9	%
Other underwriting income (expense)		—			—			—			—			—			—			—			—		NM

Underwriting profit (loss)	$	7,354		$	(28,144	)	$	1,824		$	(18,966	)	$	6,913		$	3,549		$	(4,747	)	$	5,715		NM

Losses and LAE ratio		47.4	%		77.1	%		55.3	%		58.0	%		53.4	%		37.0	%		62.3	%		51.8	%
Commission expense ratio		24.0	%		16.2	%		17.2	%		20.1	%		21.6	%		9.0	%		11.7	%		16.8	%
Other operating expense ratio ⁽¹⁾		23.4	%		38.2	%		25.1	%		28.1	%		20.4	%		47.6	%		34.6	%		29.2	%
Combined ratio		94.8	%		131.5	%		97.6	%		106.2	%		95.4	%		93.6	%		108.6	%		97.8	%

NM – Percentage change not meaningful
(1) – Includes Other operating expenses and Other underwriting income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity

	For the Three Months Ended December 31,
amounts in thousands	Amounts						Loss Ratio
Net Incurred Loss Activity	2016			2015			2016			2015
U.S. Insurance:
Loss and LAE payments	$	73,100		$	60,750			43.8	%		41.9	%
Change in reserves		33,500			35,653			20.1	%		24.6	%
Net incurred loss and LAE	$	106,600		$	96,403			63.9	%		66.5	%

Int’l Insurance:
Loss and LAE payments	$	45,011		$	27,933			62.6	%		44.6	%
Change in reserves		(246	)		5,533			(0.3	%)		8.8	%
Net incurred loss and LAE	$	44,765		$	33,466			62.3	%		53.4	%

GlobalRe:
Loss and LAE payments	$	17,260		$	48,320			38.1	%		110.3	%
Change in reserves		3,868			(24,308	)		8.5	%		(55.5	%)
Net incurred loss and LAE	$	21,128		$	24,012			46.6	%		54.8	%

Total
Loss and LAE payments	$	135,371		$	137,003			47.6	%		54.5	%
Change in reserves		37,122			16,878			13.1	%		6.7	%
Net incurred loss and LAE	$	172,493		$	153,881			60.7	%		61.2	%

	Amounts						Loss Ratio Impact
Impact of Prior Years Reserves	December 31,			December 31,			December 31,			December 31,
Favorable / (Unfavorable) Development	2016			2015			2016			2015
U.S. Insurance	$	(420	)	$	8,023			(0.1	%)		3.2	%
Int’l Insurance		19,660			17,812			6.9	%		7.1	%
GlobalRe		(2,356	)		4,865			(0.8	%)		1.9	%
Total	$	16,884		$	30,700			6.0	%		12.2	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Incurred Loss Activity

	For the Twelve Months Ended December 31,
amounts in thousands	Amounts					Loss Ratio
Net Incurred Loss Activity	2016		2015			2016			2015
U.S. Insurance:
Loss and LAE payments	$	299,842	$	247,530			47.6	%		44.5	%
Change in reserves		98,018		95,967			15.6	%		17.3	%
Net incurred loss and LAE	$	397,860	$	343,497			63.2	%		61.8	%

Int’l Insurance:
Loss and LAE payments	$	151,098	$	126,667			49.2	%		48.7	%
Change in reserves		27,186		8,035			8.8	%		3.1	%
Net incurred loss and LAE	$	178,284	$	134,702			58.0	%		51.8	%

GlobalRe:
Loss and LAE payments	$	81,089	$	106,468			49.6	%		63.3	%
Change in reserves		8,215		(12,069	)		5.0	%		(7.2	%)
Net incurred loss and LAE	$	89,304	$	94,399			54.6	%		56.1	%

Total
Loss and LAE payments	$	532,029	$	480,665			48.4	%		48.9	%
Change in reserves		133,419		91,933			12.1	%		9.3	%
Net incurred loss and LAE	$	665,448	$	572,598			60.5	%		58.2	%

	Amounts					Loss Ratio Impact
Impact of Prior Years Reserves	December 31,		December 31,			December 31,			December 31,
Favorable / (Unfavorable) Development	2016		2015			2016			2015
U.S. Insurance	$	1,348	$	29,319			0.1	%		3.0	%
Int’l Insurance		25,019		26,216			2.3	%		2.7	%
GlobalRe		2,161		9,134			0.2	%		0.9	%
Total	$	28,528	$	64,669			2.6	%		6.6	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data

	As of December 31, 2016
amounts in thousands	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


	As of December 31, 2015
	Case		IBNR
Net Loss Reserves:	Reserves		Reserves		Total
U.S. Insurance:
Marine	$	68,677	$	55,408	$	124,085
P&C		170,988		514,777		685,765
Professional Liability		42,546		60,528		103,074
Total U.S. Insurance	$	282,211	$	630,713	$	912,924
Int’l Insurance:
Marine	$	167,157	$	61,409	$	228,566
P&C		40,313		19,735		60,048
Professional Liability		19,583		63,229		82,812
Total Int’l Insurance	$	227,053	$	144,373	$	371,426

GlobalRe	$	32,160	$	76,616	$	108,776

Total Net Loss Reserves	$	541,424	$	851,702	$	1,393,126

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data

As of December 31, 2016, the average quality of the investment portfolio as rated by S&P and Moody’s was AA-/Aa3 with an average duration of 3.7 years. Our Company does not own any collateralized debt obligations (CDO’s) or asset backed commercial paper.

The following table sets forth our investments as of December 31, 2016:

	As of December 31, 2016
			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	$	273,776	$	2,192	$	(5,128	)	$	276,712
States, municipalities and political subdivisions		547,415		11,542		(4,036	)		539,909
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		487,364		4,016		(6,585	)		489,933
Residential mortgage obligations		20,530		453		(55	)		20,132
Asset-backed securities		314,601		824		(1,178	)		314,955
Commercial mortgage-backed securities		154,139		2,859		(1,904	)		153,184
Subtotal	$	976,634	$	8,152	$	(9,722	)	$	978,204
Corporate bonds		838,057		10,185		(5,528	)		833,400
Total fixed maturities	$	2,635,882	$	32,071	$	(24,414	)	$	2,628,225
Equity securities		349,142		27,016		(5,785	)		327,911
Short-term investments		143,539		88		—			143,451
Total investments	$	3,128,563	$	59,175	$	(30,199	)	$	3,099,587

Contact:Ciro M. DeFalcoSenior Vice President and Chief Financial Officer(203) 905-6343cdefalco@navg.comwww.navg.com

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