The Navigators Group, Inc. Insuring a World in Motion

Transcription

1 The Navigators Group, Inc. Insuring a World in Motion KBW 2011 Insurance Conference September 8, 2011 New York, NY Stan Galanski President and CEO Frank McDonnell Senior Vice President & CFO

2 Forward Looking Statements This presentation contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this presentation are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan, "intend," "believe" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are based on assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you consider this presentation, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. Because of these factors, we caution that you should not place undue reliance on any of our forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we have no duty to, and do not intend to, update or revise the forward-looking statements in this presentation after the date of this presentation. 2

3 The Navigators Group, Inc. Specialty insurer operating in targeted property/casualty niches Top 5 U.S. Marine insurer Top 25 U.S. Excess & Surplus Lines casualty insurer Emerging leader in D&O / Professional Liability A global specialty insurance platform Two U.S. domiciled insurance companies with licenses in the U.K. and South America Navigators Syndicate 1221 at Lloyd s provides global access to desired markets 40% of Navigators premiums are produced outside the U.S. A growing brand and market reputation #66 New York s fastest-growing companies, 2010 Crain s New York Business #137 New York s largest publicly held companies, 2010, Crain s New York Business Recognized as one of 100 Most Trustworthy Companies by Forbes.com Financial Strength rated A by Standard & Poor s and A.M. Best 3

4 Core Values Underwriting Profit, not premium volume. Specialization in complex risks where the know-how of our Intellectual Capital is a competitive advantage. Commitment to Customer Service backed by a Strong Balance Sheet. Discipline to walk away from business that doesn t meet our terms and standards. Expense Control by spending money like it is our own. Teamwork gets the job done. We conduct our business with Integrity, Professionalism and Pride. 4

5 Combined Ratio Track Record of Underwriting Excellence % % 80.00% 60.00% U.S. P&C Industry (Source: A.M. Best Co.) Navigators 40.00% 20.00% 0.00% Calendar Year 5

6 A Decade of Successful Growth and Diversification $1,200 $1,000 $800 $600 $400 $200 $0 3% 4% 2% 4% 9% 10% 4% 13% 10% 8% 8% 13% 1% 9% 7% 10% 11% 10% 4% 37% 43% 35% 10% 3% 9% 37% 27% 31% 9% 9% 5% 27% 11% 5% 29% 27% 18% 1% 36% 20% 16% 18% 19% 38% 28% 21% 27% 38% 23% 17% 30% 22% 21% 23% 23% 23% 40% 31% 26% 25% 22% YTD 6/11 Insurance Companies Marine Lloyd's Marine Insurance Companies Property Casualty Lloyd's Property Casualty Insurance Companies Professional Liability Lloyd's Professional liability D&O Chicago Marine Excess Casualty Antwerp Office Acquired 100% Control of Lloyd s Syndicate 1221 Primary Casualty Inland Marine Orange County Office Miami Office (Latin America) New Jersey Office Stockholm Office Brazilian License Environmental Underwriting Team Professional Liability Expansion Lloyd s China UK D&O Expansion Architect & Engineering Team Philadelphia Office Pittsburgh Office Charlotte Office Copenhagen Office Los Angeles Office Lloyd s Brazil Navigators Re 6

7 Specialty Focus Management & Professional Liability $174 Million 17% Marine $406 Million 42% Specialty Property & Casualty $407 Million 41% $987 Million Gross Written Premiums Full Year

8 A Market Leader In Marine Market Leaders In Marine Liability Bluewater Hull Specie/ Cash in Transit Transport Specie - 5% Gross Written Premiums $406 Million 42% of 2010 Group Total All Other - 13% Policy Holders Include Terminal Operators Port Authorities Cruise Ships Ship Owners Logistics Providers Importers/Exporters Armored Car Services Museums Transport - 4% Bluewater Hull - 9% Inland Marine - 7% Cargo - 20% Marine Liability - 42% Marine Liability Cargo Transport Inland Marine Bluewater Hull Specie All Other Green = Higher Growth Potential 8

9 Focus on Select Specialty Property & Casualty Niches Nav Tech Property Insurance for Energy and Power Generation Risks Gross Written Premiums $407 Million 41% of 2010 Group Total Excess Casualty Monoline Commercial Umbrella & Commercial Excess Liability All Others - 15% Western States Construction A Market Leader in California Construction Liability since 1995 Western States Construction - 17% Excess Casualty - 24% Excess Casualty Nav Tech E&S Primary Casualty Construction East of the Rockies, Product Liability, Real Estate and Environmental Casualty E&S Primary Casualty - 10% Nav Tech - 34% E&S Primary Casualty Western States Construction All Others All Others Life Sciences, Product Liability and Clinical Trials Coverage 9

10 Management & Professional Liability Niche Focus Specializing In: US D&O Primary and Excess on Small to Mid Cap Public Companies Private Companies Not for Profit Organization Gross Written Premiums $174 Million 17% of 2010 Group Total International D&O E&O High Excess D&O on Large Cap Primary D&O on Small to Mid Cap Underwriters in London, Stockholm, Copenhagen and Shanghai Lawyers Architects & Engineers Insurance Agents Miscellaneous Professional U.S. D&O - 42% International E&O (Lloyd's) - 8% U.S. E&O - 32% International D&O (Lloyd's) - 18% U.S. E&O International D&O (Lloyd's) International E&O (Lloyd's) U.S. D&O Green = Higher Growth Potential 10

11 Taking Our Products to New Geographic Markets in The U.S. Navigators US Footprint Gross Written Premiums by City (in millions) San Francisco $68 New York $37 Houston $22 Seattle $13 Schaumburg $0.4 Number of Products One Black Two Blue Multiple - Red 2001 $278 Million Gross Written Premiums UK $138 11

12 Taking Our Products to New Geographic Markets in The U.S. Navigators US Footprint Gross Written Premiums by City (in millions) New York $240 San Francisco $ 97 Chicago $ 70 Houston $ 31 Parsippany $ 22 Philadelphia $ 19 Seattle $ 18 Los Angeles $ 15 Irvine $ 14 Charlotte $ 11 Miami $ 7 Pittsburgh $ 5 Columbia $ 5 Schaumburg $ 3 Atlanta $ 2 Number of Products One Black Two Blue Multiple - Red 2010 $987 Million Gross Written Premiums UK $428 12

13 Enhancing our Product Portfolio Gross Written Premiums 18% 7% 10% 15% 75% 75% YTD June 2011 YTD June 2010 Mature 1% Net Written Premiums New Since % 77% 9% 13% 78% Restructuring/Run-Off YTD June 2011 YTD June

14 Strategies For A Softening Market Emphasize Profit Not Premium Reduce premium when profit margins are not apparent Reward underwriters for profit, not premiums Diligent commission negotiations and expense management Targeted Growth Opportunities in High Margin/Low Market Share Products NavTech Excess Casualty International D&O Professional Liability Navigators Re Expansion of Distribution System/Regional Office Network Improve Productivity / Service Efficiency Navigate Proprietary Policy Administration Systems Expansion of remote service centers Preserve & Grow our Intellectual Capital Responsible Capital Management Share re-purchase Conservative investment strategy Enterprise risk management 14

15 Global Leadership Team The Navigators Group, Inc. Age Years in P&C Industry Years at NAVG Stan Galanski President & Chief Executive Officer Frank McDonnell SVP & Chief Financial Officer Clay Bassett SVP, CUO, Chief Risk Officer & President of Navigators Re Bruce Byrnes SVP, General Counsel & Chief Compliance Officer Scott Eisdorfer SVP & Chief Administrative Officer Denise Lowsley SVP, Human Resources Navigators Management Company, Inc. Chris Duca President & Chief Executive Officer Mike Civisca EVP & Chief Operating Officer LoriAnn Lowery - Biggers SVP & President of Field Operations Navigators Holdings (UK) Paul Hennessy President Stephen Coward President, Navigators Technical Risk Richard Bardwell Active Underwriter, Navigators Underwriting Agency Ltd Average

16 The Navigators Group, Inc. Financial Overview 16

17 The Navigators Group, Inc. EXCHANGE/TICKER MARKET CAP (8/31/11) SHARE PRICE (8/31/11) BOOK VALUE/SHARE (6/30/11) FINANCIAL STRENGTH WEBSITE NASDAQ/NAVG $669 million $44.77 $54.44 A (S&P/A.M. BEST) 17

18 Strong Book Value Growth Stockholders Equity ($ in millions) 120.0% 100.0% 80.0% 60.0% 106.5% 98.6% 106.6% 11.7% - A&E Charge 94.9% 92.2% 90.8% 101.3% 93.8% 10.5% - Hurricanes Hurricanes - 4.3% $ % 87.5% 89.5% $551 $662 $689 Deep Water Horizon 97.2% 97.8% $ % 109.0% 2.9% 5.5% $ % $818 - Large Losses 40.0% $291 $ % $147 $ % 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 6/30/11 Combined Ratio Stockholders Equity 18

19 High Quality Investment Portfolio Invested assets: $2.2 billion At June 30, 2011 Fixed Maturities, Cash and Shortterm Investments: CMO's 96% of portfolio Corporate Bonds Average AA/Aa rating (S&P/Moody s) Duration of approximately 3.6 years 2% 17% 1% 26% Equities Cash & Short Term Securities Average 2011investment yield of 3.3% Equity securities: 4% of portfolio 10% 17% 13% 10% 4% U.S. Treasury Bonds & Foreign Government Bonds Municipal Bonds Substantially all mortgage and asset- backed securities are investment grade Commercial Mortgages Asset-Backed No CDO s, CLO s or asset-backed commercial paper Mortgage-Backed Underlying credit rating of A+ for credit enhanced securities 19

20 Strong Growth in Invested Assets Invested Assets ($ in millions) $2,154 $2,167 $2,057 $1,918 $1,767 US Treasury Bonds & Foreign Government Bonds Municipal Bonds $1,182 $1,476 Mortgage & Asset- Backed $855 Corporate Bonds $453 $694 Equity Securities $278 Cash & Short-Term Investments 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 6/30/11 20

21 Prudent & Consistent Loss Reserving Historical Consolidated Net Loss Reserves ($ in millions) $1,113 $1,143 $1,181 $847 $1,000 39% 40% 41% $203 54% $265 51% $374 41% 59% $464 41% 59% $579 39% 61% $696 35% 65% 34% 66% 37% 63% 61% 60% 59% 46% 49% 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 6/30/11 Net IBNR Reserves Net Case Loss Reserves 21

22 Reinsurance - Integral Part of Our Business Utilize reinsurance to reduce exposure to individual risks & catastrophic losses Philosophy Stabilize underwriting results Ratio of net written premiums to gross written premium for first 6 months of 2011 was 65.5% Mitigate Risks Diversification of reinsurers High credit quality Strong collateral position Reserve for Uncollectible Reinsurance Integration of reinsurance risk into ERM practices 22

23 Reinsurer Financial Strength Ratings (A.M. Best or equivalent ratings June 30, 2011) ($ in millions) Collateral Reinsurer Total Held Ratings Swiss Reinsurance America Corporation $ $ 8.2 A Munich Reinsurance America Inc A+ Everest Reinsurance Company A+ Transatlantic Reinsurance Company A National Indemnity Company A++ Scor Holding (Switzerland) AG A General Reinsurance Corporation A++ White Mountains Reinsurance of America A- Partner Reinsurance Europe AA- Munchener Ruckversicherungs-Gesellschaft A+ Berkley Insurance Company A+ Platinum Underwriters Re A Lloyd's Syndicate # A Ace Property and Casualty Insurance Company A+ Allied World Reinsurance A Tower Insurance Company A- AXIS Re Europe A Lloyd's Syndicate # A Lloyd's Syndicate # A Validus Reinsurance Ltd A- Top 20 Total $ $ All Other Total $ 1,095.9 $ % Total Recoverables $1,096 Total Offsets/Funds Held (198) Net Recoverables $898 2% 39% Superior A++, A+ Excellent A, A- Other 23

24 Managing the Cycle Underwriting Discipline Ultimate Premium West Coast Construction Liability ($ in millions) Ultimate Loss Ratio 120,000 70% 100,000 60% 80,000 60,000 40,000 50% 40% 30% 20% 20,000 10% - 0%

25 Managing the Cycle Aggregate Management Offshore Energy Gulf of Mexico Wind Aggregate Exposure $300,000,000 $250,000,000 $200,000,000 $150,000, $100,000,000 $50,000,000 $0 25

26 Managing the Cycle Capital Management Maintain financial strength ratings Grow book value per share Conservative & proactive investment management Accretive debt repurchase - $3 million gain Accretive share repurchases o $ 11.5 million o $ 6.8 million o $ 52.0 million o $ 45.4 million through 8/4/11 o Average cost per share through 8/4/11 - $

27 The Navigators Group, Inc Financial Highlights 27

28 The Navigators Group, Inc. and Subsidiaries 2011 Financial Highlights ($ in thousands, except per share data, unaudited) Three Months Ended Six Months Ended June 30, June 30, Results of Operations Change Change Gross written premiums $ 278,714 $ 253,568 10% $ 574,997 $ 523,713 10% Net written premiums 183, ,005 11% 376, ,322 6% Operating revenues 191, ,425 7% 362, ,536 1% Expenses 179, ,097 11% 361, ,850 10% Pre-tax operating income 12,062 16,328-26% 1,306 33,686-96% Realized investment gain (loss) 2,474 10,865-77% ,897-95% Income tax expense 5,032 8,223-39% ,568-96% Net income $ 9,504 $ 18,970-50% $ 1,611 $ 36,015-96% Net income per common share: Basic $ 0.62 $ % $ 0.10 $ % Diluted $ 0.60 $ % $ 0.10 $ % Underwriting Ratios Loss Ratio 65.5% 61.8% 70.7% 62.6% Expense Ratio 36.4% 37.9% 38.3% 36.8% Combined Ratio 101.9% 99.7% 109.0% 99.4% Balance Sheet Data 30-Jun 31-Mar 30-Jun 31-Dec Stockholders' equity $ 817,919 $ 815,172 1% $ 817,919 $ 829,354-1% Book value per share $ $ % $ $ % 28

29 Summary Navigators is: A specialty underwriter with a proven track record of profitable growth Able to attract and retain specialty underwriting expertise Experienced at insurance cycle management Experienced at prudent capital management Focused on growing book value per share 29