Navigators Reports First Quarter Earnings

NEW YORK--(Business Wire)--
The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $12.0 million or
$0.71 per share for the 2009 first quarter compared to net income of $23.3
million or $1.36 per share for the 2008 first quarter.

The first quarter summary of results was as follows:

(Diluted earnings
($ in millions) per share)
2009 2008 2009 2008

Net income $ 12.0 $ 23.3 $ 0.71 $ 1.36
Less net realized capital gains / (losses) (8.2 ) (0.0 ) (0.48 ) (0.00 )
Operating earnings (1) $ 20.2 $ 23.3 $ 1.19 $ 1.36

* The 2009 first quarter net realized capital losses include provisions for
declines in market value which were considered to be other-than-temporary of
$8.3 million for equity securities, of $1.8 million for asset-backed securities
and of $0.6 million for corporate debt securities. The after-tax loss from such
provisions was $7.0 million or $0.41 per share. The decision to record realized
capital losses on such securities had no impact on the Company`s stockholders`
equity or book value per share, which increased by 3% during the first quarter
to $42.07.

(1) Operating earnings, or income excluding net realized gains (losses) net of
tax, 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.

Gross written premium for the 2009 first quarter was $275.3 million, a decrease
of 4.1% from the comparable 2008 period. Net written premium for the 2009 first
quarter was $200.7 million, an increase of 6.9% from the comparable 2008 period.

The combined loss and expense ratio for the 2009 first quarter was 92.8%
compared to 89.2% for the comparable 2008 period. The combined loss and expense
ratio for the 2009 first quarter was favorably impacted by 3.5 loss ratio points
for redundancies in prior period loss reserves compared to 8.8 loss points for
the comparable 2008 period.

Navigators` Chief Executive Officer Stan Galanski commented, "I am very pleased
to report that our book value per share increased more than three percent during
the first quarter despite the declining economic environment and turbulence in
the financial markets. Net written premiums increased 6.9% and our combined
ratio was 92.8%. We remain very well positioned to capitalize on the
opportunities created by the current market conditions."

Net investment income for the 2009 first quarter was $18.7 million, a decrease
of 0.5% from the comparable 2008 period. The pre-tax investment yield for the
2009 first quarter was 3.9%, compared to 4.2% for 2008 first quarter. The
effective tax rates on net investment income were 24.9% for the 2009 first
quarter compared to 26.4% for the comparable 2008 period.

The Company`s investment portfolio mainly consists of fixed income securities
with an average quality rating of "AA/Aa" by Standard & Poor`s and Moody`s,
respectively, and an average effective duration of 4.3 years at March 31, 2009.
At March 31, 2009, net unrealized losses within our investment portfolio were
$12.9 million, a decrease of $8.8 million for the quarter due to the recognition
of $12.2 million of realized losses, and $3.4 million of net unrealized losses
during the period.

Consolidated cash flow from operations for the 2009 first quarter was $42.9
million compared to $59.7 million for the comparable 2008 period.

During the 2009 first quarter, the Company did not purchase any shares of its
common stock.

Stockholders` equity was $712.5 million or $42.07 per share at March 31, 2009
compared to $689.3 million or $40.89 per share at December 31, 2008. Statutory
surplus of Navigators Insurance Company was $568.0 million at March 31, 2009.

Effective in 2009, the Company has reclassified certain of its business lines,
which has no effect on the segment classifications of the Insurance Company and
Lloyd's.

* The offshore energy business, formerly included in the "Marine and Energy"
businesses of the Insurance Companies and Lloyd`s, is now included in the
Insurance Companies` and Lloyd`s "Property Casualty" businesses.
* The marine lines within both the Insurance Company and Lloyd`s are now
presented as "Marine" instead of "Marine and Energy," since the energy business
has now been reclassified to "Property Casualty."
* Engineering and construction, European Property and other run-off business,
formerly included in the "Other" category of business within the Insurance
Companies and Lloyd`s, are now included under "Property Casualty."
* The "Middle Markets" business, formerly broken out separately in the Insurance
Companies, is now included in the Insurance Companies` "Property Casualty"
business.

Underwriting data for prior periods has been reclassified to reflect these
changes.

The Company will hold a conference call on Friday, May 1, 2009 starting at 8:30
a.m. ET to discuss the 2009 first quarter results. The call will be available
via live webcast on Navigators` website (www.navg.com) by clicking on the
Earnings Webcast link under "News & Events".

To participate by telephone, the domestic dial-in number is 888-680-0878and the
international dial-in is 617-213-4855. The access code is 78508745. Participants
may pre-register for the call at
www.theconferencingservice.com/prereg/key.process?key=P8LXA9EVA. Pre-registrants
will be issued a pin number to use when dialing into the live call that will
provide quick access by bypassing the operator upon connection.

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", "may", "will", "intend", "continue"
or similar expressions are intended to identify such forward-looking statements.
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 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)

Three Months Ended
March 31,
Financial Highlights 2009 2008 Change

Gross written premium $ 275,259 $ 287,146 -4 %
Net written premium 200,652 187,722 7 %

Revenues:
Net earned premium 164,946 155,740 6 %
Commission income (20 ) 261 NM
Investment income 18,743 18,838 -1 %
Total other-than-temporary impairments (26,871 ) - NM
Portion of loss recognized in OCI (before tax) (16,171 ) - NM
Net impairment loss recognized in earnings (10,700 ) - NM
Net realized capital gains (losses) on securities sold (1,537 ) (76 ) NM
Other income (expense) 163 11 NM
Total revenues 171,595 174,774 -2 %

Operating expenses:
Net losses and loss adjustment expenses incurred 100,247 88,420 13 %
Commission expense 22,448 20,948 7 %
Other operating expenses 30,535 29,756 3 %
Interest expense 2,219 2,217 0 %
Total operating expenses 155,449 141,341 10 %

Income before income taxes 16,146 33,433 -52 %

Income tax expense (benefit):
Current 6,750 10,306 -35 %
Deferred (2,604 ) (123 ) NM
Income tax expense (benefit) 4,146 10,183 -59 %

Net income $ 12,000 $ 23,250 -48 %

Per Share Data

Net income per common share:
Basic $ 0.71 $ 1.38 -48 %
Diluted $ 0.71 $ 1.36 -48 %

Average shares outstanding:
Basic 16,882 16,862
Diluted 17,002 17,052

Underwriting Ratios
Loss Ratio 60.8 % 56.8 %
Expense Ratio 32.0 % 32.4 %
Combined Ratio 92.8 % 89.2 %

Balance Sheet Data Mar. 31, Dec. 31,
2009 2008
Stockholders' equity $ 712,454 $ 689,317 3 %
Book value per share $ 42.07 $ 40.89 3 %

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)

March 31, December 31,
2009 2008
ASSETS
Investments
and cash:
Fixed $ 1,676,826 $ 1,643,772
maturities,
available-for
-sale, at
fair value
(amortized
cost: 2009,
$1,689,179;
2008,
$1,664,755)
Equity 51,735 51,802
securities,
available-for
-sale, at
fair value
(cost: 2009,
$52,309;
2008,
$52,523)
Short-term 206,223 220,684
investments,
at cost which
approximates
fair value
Cash 16,644 1,457
Total 1,951,428 1,917,715
investments
and cash

Premiums in 201,891 170,522
course of
collection
Commissions 313 319
receivable
Prepaid 167,272 188,874
reinsurance
premiums
Reinsurance 70,725 67,227
receivable on
paid losses
Reinsurance 851,703 853,793
receivable on
unpaid losses
and loss
adjustment
expenses
Net deferred 53,908 54,736
income tax
benefit
Deferred 57,675 47,618
policy
acquisition
costs
Accrued 16,114 17,411
investment
income
Goodwill and 6,532 6,622
other
intangible
assets
Other assets 26,072 24,743

Total assets $ 3,403,633 $ 3,349,580

LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Liabilities:
Reserves for $ 1,879,895 $ 1,853,664
losses and
loss
adjustment
expenses
Unearned 494,455 480,665
premium
Reinsurance 129,296 140,319
balances
payable
Senior notes 123,825 123,794
Federal 12,139 5,874
income tax
payable
Accounts 51,569 55,947
payable and
other
liabilities
Total 2,691,179 2,660,263
liabilities

Stockholders'
equity:
Preferred - -
stock, $.10
par value,
authorized
1,000,000
shares, none
issued
Common stock, 1,716 1,708
$.10 par
value,
50,000,000
shares
authorized;
issued and
outstanding
(Net of
treasury
shares) :
16,934,225
for 2009 and
16,856,073
for 2008
Additional 302,498 298,872
paid-in
capital
Retained 418,776 406,776
earnings
Treasury (11,540 ) (11,540 )
stock, at
cost (224,754
shares for
both 2009 and
2008)
Accumulated 1,004 (6,499 )
other
comprehensive
income (loss)
Total 712,454 689,317
stockholders'
equity

Total $ 3,403,633 $ 3,349,580
liabilities
and
stockholders'
equity

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)

Gross Written Premium: First Quarter
Insurance Companies: 2009 2008 Change
Marine $ 77,237 $ 71,485 8 %
Property Casualty 84,258 100,824 -16 %
Professional Liability 30,488 19,287 58 %
191,983 191,596 0 %
Lloyd's Operations:
Marine 59,023 67,154 -12 %
Property Casualty 13,528 17,726 -24 %
Professional Liability 10,725 10,670 1 %
83,276 95,550 -13 %
Total $ 275,259 $ 287,146 -4 %

Net Written Premium: First Quarter
Insurance Companies: 2009 2008 Change
Marine $ 58,459 43,463 35 %
Property Casualty 59,976 69,114 -13 %
Professional Liability 18,647 11,733 59 %
137,082 124,310 10 %
Lloyd's Operations:
Marine 49,974 48,910 2 %
Property Casualty 7,595 7,710 -1 %
Professional Liability 6,001 6,792 -12 %
63,570 63,412 0 %
Total $ 200,652 $ 187,722 7 %

Net Earned Premium: First Quarter
Insurance Companies: 2009 2008 Change
Marine $ 37,161 26,455 40 %
Property Casualty 65,412 71,718 -9 %
Professional Liability 17,717 14,073 26 %
120,290 112,246 7 %
Lloyd's Operations:
Marine 31,175 28,793 8 %
Property Casualty 7,923 8,742 -9 %
Professional Liability 5,558 5,959 -7 %
44,656 43,494 3 %
Total $ 164,946 $ 155,740 6 %

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
March 31, 2009

($ in thousands)

Insurance Lloyd's
Companies Operations Corporate Total
Gross written premium $ 191,983 $ 83,276 $ 275,259
Net written premium 137,082 63,570 200,652

Net earned premium 120,290 44,656 164,946
Net losses and loss adjustment expenses (70,153 ) (30,094 ) (100,247 )
Commission expense (14,968 ) (7,480 ) (22,448 )
Other operating expenses (24,560 ) (5,981 ) $ 6 (30,535 )
Other income (expense) 201 (52 ) (6 ) 143

Underwriting profit 10,810 1,049 - 11,859

Investment income 16,207 2,383 153 18,743
Net realized capital gains (8,907 ) (3,330 ) (12,237 )
Interest expense (2,219 ) (2,219 )
Income (loss) before income tax expense (benefit) 18,110 102 (2,066 ) 16,146

Income tax expense (benefit) 4,533 336 (723 ) 4,146
Net income (loss) $ 13,577 $ (234 ) $ (1,343 ) $ 12,000

Loss and loss expenses ratio 58.3 % 67.4 % 60.8 %
Commission expense ratio 12.4 % 16.8 % 13.6 %
Other operating expenses ratio (1) 20.3 % 13.5 % 18.4 %
Combined ratio 91.0 % 97.7 % 92.8 %

(1) The other operating expenses ratio includes other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
March 31, 2008

($ in thousands)

Insurance Lloyd's
Companies Operations Corporate Total
Gross written premium $ 191,596 $ 95,550 $ 287,146
Net written premium 124,310 63,412 187,722

Net earned premium 112,246 43,494 155,740
Net losses and loss adjustment expenses (67,356 ) (21,064 ) (88,420 )
Commission expense (12,948 ) (8,000 ) (20,948 )
Other operating expenses (22,148 ) (7,608 ) (29,756 )
Other income (expense) 258 14 272

Underwriting profit 10,052 6,836 16,888

Investment income 15,465 2,982 $ 391 18,838
Net realized capital gains (losses) (102 ) 26 - (76 )
Interest expense - - (2,217 ) (2,217 )
Income (loss) before income tax
expense (benefit) 25,415 9,844 (1,826 ) 33,433

Income tax expense (benefit) 7,370 3,452 (639 ) 10,183
Net income (loss) $ 18,045 $ 6,392 $ (1,187 ) $ 23,250

Loss and loss expenses ratio 60.0 % 48.4 % 56.8 %
Commission expense ratio 11.5 % 18.4 % 13.5 %
Other operating expenses ratio (1) 19.5 % 17.5 % 18.9 %
Combined ratio 91.0 % 84.3 % 89.2 %

(1) The other operating expenses ratio includes other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)

Three Months Ended March 31, 2009
Net Losses
Earned and LAE Underwriting Combined Ratio
Insurance Companies: Premium Incurred Expenses Loss Expense Total
Marine $ 37,161 $ 26,390 $ 11,622 71.0 % 31.3 % 102.3 %
Property Casualty 65,412 28,004 20,753 42.8 % 31.7 % 74.5 %
Professional Liability 17,717 15,759 6,952 89.0 % 39.2 % 128.2 %
120,290 70,153 39,327 58.3 % 32.7 % 91.0 %
Lloyd's Operations 44,656 30,094 13,513 67.4 % 30.3 % 97.7 %
Total $ 164,946 $ 100,247 $ 52,840 60.8 % 32.0 % 92.8 %

Three Months Ended March 31, 2008
Net Losses
Earned and LAE Underwriting Combined Ratio
Insurance Companies: Premium Incurred Expenses Loss Expense Total
Marine $ 26,455 $ 22,313 $ 9,169 84.3 % 34.7 % 119.0 %
Property Casualty 71,718 36,138 20,571 50.4 % 28.7 % 79.1 %
Professional Liability 14,073 8,905 5,098 63.3 % 36.2 % 99.5 %
112,246 67,356 34,838 60.0 % 31.0 % 91.0 %
Lloyd's Operations 43,494 21,064 15,594 48.4 % 35.9 % 84.3 %
Total $ 155,740 $ 88,420 $ 50,432 56.8 % 32.4 % 89.2 %

Amounts Loss Ratio
Net Incurred Loss Activity March 31, March 31, March 31, March 31,
For the Three Months Ended: 2009 2008 2009 2008
Insurance Companies:
Loss and LAE payments $ 48,804 $ 34,164 40.6 % 30.4 %
Change in reserves 21,349 33,192 17.7 % 29.6 %
Net incurred loss and LAE 70,153 67,356 58.3 % 60.0 %

Lloyd's Operations:
Loss and LAE payments 23,122 16,771 51.8 % 38.6 %
Change in reserves 6,972 4,293 15.6 % 9.8 %
Net incurred loss and LAE 30,094 21,064 67.4 % 48.4 %

Total
Loss and LAE payments 71,926 50,935 43.6 % 32.7 %
Change in reserves 28,321 37,485 17.2 % 24.1 %
Net incurred loss and LAE $ 100,247 $ 88,420 60.8 % 56.8 %

Impact of Prior Years Reserves Amounts Loss Ratio Impact
Favorable / (Unfavorable) Development March 31, March 31, March 31, March 31,
For the Three Months Ended: 2009 2008 2009 2008
Insurance Companies $ 5,132 $ 8,500 4.3 % 7.6 %
Lloyd's Operations 635 5,180 1.4 % 11.9 %
Total $ 5,767 $ 13,680 3.5 % 8.8 %

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)

Case IBNR
Net Loss Reserves, March 31, 2009: Reserves Reserves Total
Insurance Companies:
Marine $ 106,949 $ 96,636 $ 203,585
Property Casualty 116,354 359,035 475,389
Professional Liability 32,443 58,992 91,435
Total Insurance Companies 255,746 514,663 770,409
Lloyd's Operations:
Marine 97,211 83,218 180,429
Property Casualty 21,788 23,438 45,226
Professional Liability 6,416 25,712 32,128
Total Lloyd's Operations 125,415 132,368 257,783

Total Net Loss Reserves $ 381,161 $ 647,031 $ 1,028,192

Case IBNR
Net Loss Reserves, December 31, 2008: Reserves Reserves Total
Insurance Companies:
Marine $ 96,244 $ 96,995 $ 193,239
Property Casualty 115,810 358,305 474,115
Professional Liability 22,913 58,793 81,706
Total Insurance Companies 234,967 514,093 749,060
Lloyd's Operations:
Marine 99,233 78,293 177,526
Property Casualty 26,218 16,386 42,604
Professional Liability 5,822 24,859 30,681
Total Lloyd's Operations 131,273 119,538 250,811

Total Net Loss Reserves $ 366,240 $ 633,631 $ 999,871

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
March 31, 2009
($ in thousands)

At March 31, 2009, the average quality of the investment portfolio as rated by
S&P and Moody`s was AA/Aa with an average duration of 4.3 years. All of the
Company`s mortgage-backed and asset-backed securities are rated AAA/Aaa by S&P
and Moody`s except for 40 securities approximating $30.8 million. The Company
does not own any collateralized debt obligations (CDO`s), collateralized loan
obligations (CLO`s) or asset backed commercial paper.

At March 31, 2009, the Company owned two asset-backed securities approximating
$0.2 million with subprime mortgage exposures. The securities have an effective
maturity of 1.7 years. In addition, the Company owned a total of five
collateralized mortgage obligations and asset-backed securities approximating
$1.5 million classified as Alt-A which is a credit category between prime and
subprime. They have an effective maturity of 5.2 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, 2009:

Gross Gross OTTI Cost or
Fair Unrealized Unrealized Recognized Amortized
March 31, 2009 Value Gains (Losses) in OCI Cost
($ in thousands)
Fixed maturities:
U.S. Government Treasury Bonds, agency bonds and foreign government bonds $ 398,268 $ 19,757 $ (25 ) $ - $ 378,536
States, municipalities and political subdivisions 610,021 19,116 (4,230 ) - 595,135
Mortgage- and asset-backed securities:
Mortgage-backed securities 314,432 14,055 (1 ) - 300,378
Collateralized mortgage obligations 43,167 - (7,188 ) (16,103 ) 66,458
Asset-backed securities 29,826 273 (785 ) (68 ) 30,406
Commercial mortgage-backed securities 89,648 15 (23,511 ) - 113,144
Subtotal 477,073 14,343 (31,485 ) (16,171 ) 510,386
Corporate bonds 191,464 2,259 (15,917 ) - 205,122

Total fixed maturities 1,676,826 55,475 (51,657 ) (16,171 ) 1,689,179

Equity securities - common stocks 51,735 609 (1,183 ) - 52,309

Cash 16,644 - - - 16,644

Short-term investments 206,223 - - - 206,223

Total $ 1,951,428 $ 56,084 $ (52,840 ) $ (16,171 ) $ 1,964,355

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data

March 31, 2009
($ in thousands)

The following three tables set forth our mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities by those issued by FNMA and FHLMC and the quality category (prime, Alt-A and subprime)
for all other such investments at March 31, 2009:

Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Mortgage-backed securities: Value Gains (Losses) Cost
GNMA $ 41,227 $ 1,424 $ - $ 39,803
FNMA 202,042 9,235 (1 ) 192,808
FHLMC 71,163 3,396 - 67,767
Prime - - - -
Alt-A - - - -
Subprime - - - -
Total $ 314,432 $ 14,055 $ (1 ) $ 300,378

Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Collateralized mortgage obligations: Value Gains (Losses) Cost
GNMA $ - $ - $ - $ -
FNMA - - - -
FHLMC - - - -
Prime 42,250 - (22,772 ) 65,022
Alt-A 917 - (519 ) 1,436
Subprime - - - -
Total $ 43,167 $ - $ (23,291 ) $ 66,458

Gross Gross Cost or
Fair Unrealized Unrealized Amortized
Asset-backed securities: Value Gains (Losses) Cost
GNMA $ - $ - $ - $ -
FNMA - - - -
FHLMC - - - -
Prime 29,117 273 (648 ) 29,492
Alt-A 545 - (136 ) 681
Subprime 164 - (69 ) 233
Total $ 29,826 $ 273 $ (853 ) $ 30,406

The Navigators Group, Inc.
Francis W. McDonnell, 914-933-6270
Senior Vice President and Chief Financial Officer
fmcdonnell@navg.com
www.navg.com

Copyright Business Wire 2009