Navigators Reports Third Quarter Earnings

NEW YORK — The Navigators Group, Inc. (NASDAQ:NAVG) reported net income of $21.4 million, or $1.24 per diluted share, for the three months ended September 30, 2009 compared to net income of $1.0 million, or $0.06 per diluted share, for the comparable period in 2008.

The summary of results for the three months ended September 30, 2009 and 2008 were as follows:

($ in millions, except per share amounts)												Diluted earnings per share
		2009					2008					2009			2008
Net income			$	21.4				$	1.0			$	1.24		$	0.06
Less: Net realized gains / (losses) after-tax				4.0					(3.6	)			0.23			(0.21	)
Operating earnings (1)		$		17.4			$		4.6			$	1.01		$	0.27

• The results for the three months ended September 30, 2009 included after-tax net realized gains of $4.0 million, or $0.23 per diluted share, which included other-than-temporary impairment losses on investments of $0.4 million after-tax, or $0.02 per diluted share.
• The results for the three months ended September 30, 2008 included $18.3 million, or $1.08 per diluted share, for after-tax net losses from Hurricanes Gustav and Ike. In addition, the results included net realized losses of $3.6 million, or $0.21 per diluted share, which included other-than-temporary impairment losses on investments of $3.1 million after-tax, or $0.18 per diluted share.

The summary of results for the nine months ended September 30, 2009 and 2008 were as follows:

($ in millions, except per share amounts)														Diluted earnings per share
		2009						2008						2009				2008
Net income			$	57.1					$	41.7				$	3.30			$	2.45
Less: Net realized gains / (losses) after-tax				(2.8	)					(8.8	)				(0.16	)			(0.52	)
Operating earnings (1)		$		59.9				$		50.5				$	3.46			$	2.97

• The results for the nine months ended September 30, 2009 included after-tax net realized losses of $2.8 million, or $0.16 per diluted share, which included other-than-temporary impairment losses on investments of $7.7 million after-tax, or $0.45 per diluted share.
• The results for the nine months ended September 30, 2008 included $18.3 million, or $1.08 per diluted share, for after-tax net losses from Hurricanes Gustav and Ike. In addition, the results included net realized losses of $8.8 million, or $0.52 per diluted share, which included other-than-temporary impairment losses on investments of $8.6 million after-tax, or $0.50 per diluted share.
• For the three and nine months ended September 30, 2009, book value per share increased by 8% and 17%, respectively, to $47.78.

Gross written premiums and net written premiums for the three months ended September 30, 2009 were $245.2 million and $156.0 million, respectively, a decrease of 3.1% and an increase of 11.2% from the comparable 2008 periods. Gross written premiums and net written premiums for the nine months ended September 30, 2009 were $793.2 million and $539.7 million, respectively, a decrease of 3.2% and an increase of 7.4% from the comparable 2008 periods.

The combined loss and expense ratios for the three and nine months ended September 30, 2009 were 95.9% and 93.9%, respectively, compared to 107.9% and 95.7% for the comparable 2008 periods. The combined loss and expense ratios for the three and nine months ended September 30, 2009 were favorably impacted by 2.2 and 3.8 loss ratio points, respectively, due to redundancies in prior period loss reserves. The combined loss and expense ratios for the three and nine months ended September 30, 2008 included 17.4 and 5.7 loss and expense ratio points, respectively, due to the net losses from Hurricanes Gustav and Ike. Such net losses are inclusive of reinsurance recoveries and related costs for reinsurance reinstatement premiums.

Navigators' Chief Executive Officer Stan Galanski commented, “Navigators emphasizes disciplined risk selection and pricing in what continues to be a challenging environment and we are pleased to have, once again, generated underwriting profit in our insurance companies and at Lloyd’s. As a specialty insurer, we focus on complex risks for which the quality of our underwriting and claims professionals make a meaningful difference. We experienced strong growth in our excess casualty, environmental and professional liability business as a result of the investments made in additional intellectual capital over the last twelve months. For other product lines, we have opted to reduce premium volume when market conditions appeared to be inconsistent with profitable underwriting results. We remain cautious as to the ultimate loss development for longer-tail lines and emphasize this in our reserving philosophy. Our book value per share increased 17% in 2009, including 8% in the third quarter, to reach an all-time high.”

Net investment income for the three and nine months ended September 30, 2009 was $19.1 million and $56.5 million, respectively, which were decreases of 1.1% and 0.7% from the comparable 2008 periods. The annualized pre-tax investment yield, excluding net realized gains and losses, was 3.8% for both the three and nine months ended September 30, 2009, respectively, compared to 4.1% for both of the comparable 2008 periods. The effective tax rates on net investment income were 25.2% and 25.1% for the three and nine months ended September 30, 2009, respectively, compared to 25.7% and 25.8% for the comparable 2008 periods.

The Company’s investment portfolio mainly consists of fixed income securities with an average quality rating of “AA/Aa” as defined by Standard & Poor’s and Moody’s, respectively, and an average effective duration of 4.3 years at September 30, 2009. At September 30, 2009, net unrealized gains within our investment portfolio were $67.5 million, an increase of $59.7 million compared to June 30, 2009. There were $6.1 million of net realized gains for the three months ended September 30, 2009.

Consolidated cash flow from operations for the three and nine months ended September 30, 2009 was $35.7 million and $105.2 million, respectively, compared to $83.0 million and $216.4 million for the comparable 2008 periods.

During the three and nine months ended September 30, 2009, the Company did not repurchase any shares of its common stock.

Stockholders’ equity was $811.0 million, or $47.78 per share, at September 30, 2009 compared to $689.3 million, or $40.89 per share, at December 31, 2008. The statutory surplus of Navigators Insurance Company was $630.0 million at September 30, 2009 compared to $581.2 million at December 31, 2008.

Effective in 2009, the Company has reclassified certain of its business lines which had no effect on the segment classifications of the Insurance Companies and Lloyd's Operations. Underwriting data for prior periods has been reclassified to reflect these changes.

• The offshore energy business, formerly included in the "Marine and Energy" businesses of the Insurance Companies and Lloyd’s Operations, 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.

(1) Operating earnings, or net income excluding net realized gains (losses) after-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.

The Company will hold a conference call on Friday, November 6, 2009 starting at 8:30 a.m. ET to discuss the 2009 third 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 888-680-0892 and the international dial-in is 617-213-4858. The access code is 77625623. Participants may pre-register for the call at www.theconferencingservice.com/prereg/key.process?key=P79MRBUQV. 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” 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 per share data)
(unaudited)
			Three Months Ended										Nine Months Ended
			September 30,										September 30,
Results of Operations			2009				2008				Change		2009				2008				Change
Gross written premiums			$	245,191			$	252,943			-3%		$	793,179			$	819,302			-3%
Net written premiums				156,001				140,318			11%			539,660				502,327			7%
Revenues:
	Net earned premiums			171,271				154,040			11%			506,085				472,483			7%
	Commission income			144				8			NM			179				736			-76%
	Net investment income			19,110				19,322			-1%			56,509				56,891			-1%
	Total other-than-temporary impairment losses			(22	)			(4,748	)		NM			(28,769	)			(13,160	)		NM
	Portion of loss recognized in other comprehensive income (before tax)			(525	)			-			NM			17,053				-			NM
	Net other-than-temporary impairment losses
	recognized in earnings			(547	)			(4,748	)		NM			(11,716	)			(13,160	)		NM
	Net realized gains (losses)			6,682				(768	)		NM			7,741				(408	)		NM
	Other income (expense)			1,097				(119	)		NM			6,507				902			NM
	Total revenues			197,757				167,735			18%			565,305				517,444			9%
Expenses:
	Net losses and loss adjustment expenses			107,591				113,269			-5%			308,566				293,578			5%
	Commission expenses			22,852				22,357			2%			71,578				66,795			7%
	Other operating expenses			35,018				30,601			14%			98,572				93,594			5%
	Interest expense			2,042				2,218			-8%			6,411				6,652			-4%
	Total expenses			167,503				168,445			-1%			485,127				460,619			5%
Income (loss) before income taxes				30,254				(710	)		NM			80,178				56,825			41%
Income tax expense (benefit)				8,822				(1,711	)		NM			23,096				15,153			52%
Net income			$	21,432			$	1,001			NM		$	57,082			$	41,672			37%
Per Share Data
Net income per common share:
	Basic		$	1.26			$	0.06			NM		$	3.37			$	2.48			36%
	Diluted		$	1.24			$	0.06			NM		$	3.30			$	2.45			35%
Average shares outstanding:
	Basic			16,966				16,772						16,929				16,802
	Diluted			17,334				16,927						17,277				16,980
Underwriting Ratios
Loss Ratio				62.8	%			73.5	%					61.0	%			62.1	%
Expense Ratio				33.1	%			34.4	%					32.9	%			33.6	%
Combined Ratio				95.9	%			107.9	%					93.9	%			95.7	%
Balance Sheet Data			Sept. 30,				June 30,						Sept. 30,				Dec. 31,
			2009				2009						2009				2008
Stockholders' equity			$	810,955			$	747,797			8%		$	810,955			$	689,317			18%
Book value per share			$	47.78			$	44.12			8%		$	47.78			$	40.89			17%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
				September 30,				December 31,
				2009				2008
				(unaudited)
ASSETS
Investments and cash:
	Fixed maturities, available-for-sale, at fair value
	(amortized cost: 2009, $1,823,107; 2008, $1,664,755)			$	1,877,786			$	1,643,772
	Equity securities, available-for-sale, at fair value (cost: 2009, $45,178; 2008, $52,523)				57,949				51,802
	Short-term investments, at cost which approximates fair value				136,935				220,684
	Cash				21,692				1,457
	Total investments and cash				2,094,362				1,917,715
	Premiums receivable				189,378				170,522
	Prepaid reinsurance premiums				163,248				188,874
	Reinsurance recoverable on paid losses				93,287				67,227
	Reinsurance recoverable on unpaid losses and loss adjustment expenses				818,397				853,793
	Deferred income tax, net				25,233				54,736
	Deferred policy acquisition costs				59,480				47,618
	Accrued investment income				16,596				17,411
	Goodwill and other intangible assets				7,010				6,622
	Other assets				26,306				25,062
	Total assets			$	3,493,297			$	3,349,580
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
	Reserves for losses and loss adjustment expenses			$	1,903,204			$	1,853,664
	Unearned premiums				491,410				480,665
	Reinsurance balances payable				111,494				140,319
	Senior notes				113,979				123,794
	Federal income taxes payable				6,563				5,874
	Accounts payable and other liabilities				55,692				55,947
	Total liabilities				2,682,342				2,660,263
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 17,197,419 shares as of September 2009 and 17,080,826 shares as of September 2008				1,720				1,708
	Additional paid-in capital				304,000				298,872
	Retained earnings				463,858				406,776
	Treasury stock, at cost (224,754 shares for both 2009 and 2008)				(11,540	)			(11,540	)
	Accumulated other comprehensive income (loss)				52,917				(6,499	)
	Total stockholders' equity				810,955				689,317
	Total liabilities and stockholders' equity			$	3,493,297			$	3,349,580

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Comparative Premium Data
($ in thousands)
Gross Written Premiums:		Three Months									Nine Months
Insurance Companies:		2009			2008			Change			2009			2008			Change
Marine		$	53,129		$	53,247		0	%		$	187,452		$	189,202		-1	%
Property Casualty			93,302			103,180		-10	%			272,127			311,053		-13	%
Professional Liability			33,569			25,706		31	%			101,789			71,430		43	%
			180,000			182,133		-1	%			561,368			571,685		-2	%
Lloyd's Operations:
Marine			33,960			34,917		-3	%			140,256			143,570		-2	%
Property Casualty			20,024			25,586		-22	%			59,058			74,671		-21	%
Professional Liability			11,207			10,307		9	%			32,497			29,376		11	%
			65,191			70,810		-8	%			231,811			247,617		-6	%
Total		$	245,191		$	252,943		-3	%		$	793,179		$	819,302		-3	%
Net Written Premiums:		Three Months									Nine Months
Insurance Companies:		2009			2008			Change			2009			2008			Change
Marine		$	39,632		$	29,983		32	%		$	133,047		$	112,439		18	%
Property Casualty			57,567			61,131		-6	%			183,247			203,528		-10	%
Professional Liability			18,834			15,019		25	%			59,180			42,658		39	%
			116,033			106,133		9	%			375,474			358,625		5	%
Lloyd's Operations:
Marine			23,816			22,448		6	%			113,867			99,627		14	%
Property Casualty			11,116			5,682		96	%			33,781			26,147		29	%
Professional Liability			5,036			6,055		-17	%			16,538			17,928		-8	%
			39,968			34,185		17	%			164,186			143,702		14	%
Total		$	156,001		$	140,318		11	%		$	539,660		$	502,327		7	%
Net Earned Premiums:		Three Months									Nine Months
Insurance Companies:		2009			2008			Change			2009			2008			Change
Marine		$	42,620		$	34,091		25	%		$	114,459		$	93,655		22	%
Property Casualty			60,380			63,740		-5	%			188,860			205,395		-8	%
Professional Liability			19,804			14,616		35	%			55,998			43,077		30	%
			122,804			112,447		9	%			359,317			342,127		5	%
Lloyd's Operations:
Marine			33,945			31,132		9	%			102,158			91,253		12	%
Property Casualty			9,126			5,350		71	%			28,250			22,892		23	%
Professional Liability			5,396			5,111		6	%			16,360			16,211		1	%
			48,467			41,593		17	%			146,768			130,356		13	%
Total		$	171,271		$	154,040		11	%		$	506,085		$	472,483		7	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2009
($ in thousands)
		Insurance				Lloyd's
		Companies				Operations				Corporate				Total
Gross written premiums		$	180,000			$	65,191			$	-			$	245,191
Net written premiums			116,033				39,968				-				156,001
Net earned premiums			122,804				48,467				-				171,271
Net losses and loss adjustment expenses			(75,838	)			(31,753	)			-				(107,591	)
Commission expenses			(15,346	)			(7,835	)			329				(22,852	)
Other operating expenses			(27,194	)			(7,835	)			-				(35,029	)
Other income (expense)			1,301				280				(329	)			1,252
Underwriting profit (loss)			5,727				1,324				-				7,051
Investment income			16,597				2,361				152				19,110
Net realized gains (losses)			5,710				425				-				6,135
Other operating expenses			-				-				11				11
Other income (expense)			-				-				(11	)			(11	)
Interest expense			-				-				(2,042	)			(2,042	)
Income (loss) before income taxes			28,034				4,110				(1,890	)			30,254
Income tax expense (benefit)			7,973				1,510				(661	)			8,822
Net income (loss)		$	20,061			$	2,600			$	(1,229	)		$	21,432
Loss and loss expenses ratio			61.8	%			65.5	%							62.8	%
Commission expense ratio			12.5	%			16.2	%							13.3	%
Other operating expenses ratio (1)			21.1	%			15.6	%							19.8	%
Combined ratio			95.4	%			97.3	%							95.9	%
(1) The Other operating expenses ratio includes Other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Three Months Ended
September 30, 2008
($ in thousands)
		Insurance				Lloyd's
		Companies				Operations				Corporate				Total
Gross written premiums		$	182,133			$	70,810			$	-			$	252,943
Net written premiums			106,133				34,185				-				140,318
Net earned premiums			112,447				41,593				-				154,040
Net losses and loss adjustment expenses			(78,346	)			(34,923	)			-				(113,269	)
Commission expenses			(13,823	)			(8,534	)			-				(22,357	)
Other operating expenses			(22,802	)			(7,799	)			-				(30,601	)
Other income (expense)			279				(390	)			-				(111	)
Underwriting profit (loss)			(2,245	)			(10,053	)			-				(12,298	)
Investment income			15,973				3,074				275				19,322
Net realized gains (losses)			(5,207	)			(309	)			-				(5,516	)
Interest expense			-				-				(2,218	)			(2,218	)
Income (loss) before income taxes			8,521				(7,288	)			(1,943	)			(710	)
Income tax expense (benefit)			1,458				(2,489	)			(680	)			(1,711	)
Net income (loss)		$	7,063			$	(4,799	)		$	(1,263	)		$	1,001
Loss and loss expenses ratio			69.7	%			84.0	%							73.5	%
Commission expense ratio			12.3	%			20.5	%							14.5	%
Other operating expenses ratio (1)			20.0	%			19.7	%							19.9	%
Combined ratio			102.0	%			124.2	%							107.9	%
(1) The Other operating expenses ratio includes Other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2009
($ in thousands)
		Insurance				Lloyd's
		Companies				Operations				Corporate				Total
Gross written premiums		$	561,368			$	231,811			$	-			$	793,179
Net written premiums			375,474				164,186				-				539,660
Net earned premiums			359,317				146,768				-				506,085
Net losses and loss adjustment expenses			(214,834	)			(93,732	)			-				(308,566	)
Commission expenses			(45,374	)			(26,533	)			329				(71,578	)
Other operating expenses			(78,660	)			(19,933	)			-				(98,593	)
Other income (expense)			3,157				879				(329	)			3,707
Underwriting profit			23,606				7,449				-				31,055
Investment income			49,043				7,060				406				56,509
Net realized losses			(987	)			(2,988	)			-				(3,975	)
Other operating expenses			-				-				21				21
Other income (expense)			-				-				2,979				2,979
Interest expense			-				-				(6,411	)			(6,411	)
Income (loss) before income taxes			71,662				11,521				(3,005	)			80,178
Income tax expense (benefit)			19,677				4,470				(1,051	)			23,096
Net income (loss)		$	51,985			$	7,051			$	(1,954	)		$	57,082
Loss and loss expenses ratio			59.8	%			63.9	%							61.0	%
Commission expense ratio			12.6	%			18.1	%							14.1	%
Other operating expenses ratio (1)			21.0	%			13.0	%							18.8	%
Combined ratio			93.4	%			95.0	%							93.9	%
(1) The Other operating expenses ratio includes Other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Segment Information
Nine Months Ended
September 30, 2008
($ in thousands)
		Insurance				Lloyd's
		Companies				Operations				Corporate				Total
Gross written premiums		$	571,685			$	247,617			$	-			$	819,302
Net written premiums			358,625				143,702				-				502,327
Net earned premiums			342,127				130,356				-				472,483
Net losses and loss adjustment expenses			(207,927	)			(85,651	)			-				(293,578	)
Commission expenses			(41,494	)			(25,301	)			-				(66,795	)
Other operating expenses			(69,502	)			(24,092	)			-				(93,594	)
Other income (expense)			2,053				(415	)			-				1,638
Underwriting profit (loss)			25,257				(5,103	)			-				20,154
Investment income			47,031				8,927				933				56,891
Net realized gains (losses)			(13,362	)			(206	)			-				(13,568	)
Interest expense			-				-				(6,652	)			(6,652	)
Income (loss) before income taxes			58,926				3,618				(5,719	)			56,825
Income tax expense (benefit)			15,767				1,388				(2,002	)			15,153
Net income (loss)		$	43,159			$	2,230			$	(3,717	)		$	41,672
Loss and loss expenses ratio			60.8	%			65.7	%							62.1	%
Commission expense ratio			12.1	%			19.4	%							14.1	%
Other operating expenses ratio (1)			19.7	%			18.8	%							19.5	%
Combined ratio			92.6	%			103.9	%							95.7	%
(1) The Other operating expenses ratio includes Other income (expense).

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
		Three Months Ended September 30, 2009
		Net				Losses
		Earned				and LAE			Underwriting			Combined Ratio
Insurance Companies:		Premiums				Incurred			Expenses			Loss			Expense			Total
Marine		$	42,620			$	31,611		$	13,259		74.2	%		31.1	%		105.3	%
Property Casualty			60,380				23,881			21,330		39.6	%		35.3	%		74.9	%
Professional Liability			19,804				20,346			6,650		102.7	%		33.6	%		136.3	%
			122,804				75,838			41,239		61.8	%		33.6	%		95.4	%
Lloyd's Operations			48,467				31,753			15,390		65.5	%		31.8	%		97.3	%
Total		$	171,271			$	107,591		$	56,629		62.8	%		33.1	%		95.9	%
		Three Months Ended September 30, 2008
		Net				Losses
		Earned				and LAE			Underwriting			Combined Ratio
Insurance Companies:		Premiums				Incurred			Expenses			Loss			Expense			Total
Marine		$	34,091			$	21,910		$	8,588		64.3	%		25.2	%		89.5	%
Property Casualty			63,740				48,426			22,574		76.0	%		35.4	%		111.4	%
Professional Liability			14,616				8,010			5,184		54.8	%		35.5	%		90.3	%
			112,447				78,346			36,346		69.7	%		32.3	%		102.0	%
Lloyd's Operations			41,593				34,923			16,723		84.0	%		40.2	%		124.2	%
Total		$	154,040			$	113,269		$	53,069		73.5	%		34.4	%		107.9	%
		Effect of Hurricanes Gustav and Ike on the Three Months Ended Sept. 30, 2008
Property Casualty		$	(5,778	)		$	9,103		$	-		34.9	%		4.5	%		39.4	%
Lloyd's Operations			(6,806	)			6,397			-		25.0	%		5.7	%		30.7	%
Total		$	(12,584	)		$	15,500		$	-		14.9	%		2.5	%		17.4	%
						Amounts						Loss Ratio
Net Incurred Loss Activity						Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
For the Three Months Ended:						2009			2008			2009			2008
Insurance Companies:
Loss and LAE payments						$	69,215		$	36,929		56.4	%		32.8	%
Change in reserves							6,623			41,417		5.4	%		36.9	%
Net incurred loss and LAE							75,838			78,346		61.8	%		69.7	%
Lloyd's Operations:
Loss and LAE payments							20,736			22,320		42.8	%		53.7	%
Change in reserves							11,017			12,603		22.7	%		30.3	%
Net incurred loss and LAE							31,753			34,923		65.5	%		84.0	%
Total
Loss and LAE payments							89,951			59,249		52.5	%		38.4	%
Change in reserves							17,640			54,020		10.3	%		35.1	%
Net incurred loss and LAE						$	107,591		$	113,269		62.8	%		73.5	%
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:						2009			2008			2009			2008
Insurance Companies						$	3,220		$	5,600		2.6	%		5.0	%
Lloyd's Operations							630			2,420		1.3	%		5.8	%
Total						$	3,850		$	8,020		2.2	%		5.2	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Underwriting Results
($ in thousands)
		Nine Months Ended September 30, 2009
		Net				Losses
		Earned				and LAE			Underwriting			Combined Ratio
Insurance Companies:		Premiums				Incurred			Expenses			Loss			Expense			Total
Marine		$	114,459			$	83,239		$	35,453		72.7	%		31.0	%		103.7	%
Property Casualty			188,860				80,331			65,642		42.5	%		34.8	%		77.3	%
Professional Liability			55,998				51,264			19,782		91.5	%		35.3	%		126.8	%
			359,317				214,834			120,877		59.8	%		33.6	%		93.4	%
Lloyd's Operations			146,768				93,732			45,587		63.9	%		31.1	%		95.0	%
Total		$	506,085			$	308,566		$	166,464		61.0	%		32.9	%		93.9	%
		Nine Months Ended September 30, 2008
		Net				Losses
		Earned				and LAE			Underwriting			Combined Ratio
Insurance Companies:		Premiums				Incurred			Expenses			Loss			Expense			Total
Marine		$	93,655			$	58,208		$	27,890		62.2	%		29.8	%		92.0	%
Property Casualty			205,395				125,430			65,751		61.1	%		32.0	%		93.1	%
Professional Liability			43,077				24,289			15,302		56.4	%		35.5	%		91.9	%
			342,127				207,927			108,943		60.8	%		31.8	%		92.6	%
Lloyd's Operations			130,356				85,651			49,808		65.7	%		38.2	%		103.9	%
Total		$	472,483			$	293,578		$	158,751		62.1	%		33.6	%		95.7	%
		Effect of Hurricanes Gustav and Ike on the Nine Months Ended Sept. 30, 2008
Property Casualty		$	(5,778	)		$	9,103		$	-		11.9	%		1.7	%		13.6	%
Lloyd's Operations			(6,806	)			6,397			-		7.9	%		1.9	%		9.8	%
Total		$	(12,584	)		$	15,500		$	-		4.8	%		0.9	%		5.7	%
						Amounts						Loss Ratio
Net Incurred Loss Activity						Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
For the Nine Months Ended:						2009			2008			2009			2008
Insurance Companies:
Loss and LAE payments						$	171,282		$	106,015		47.7	%		31.0	%
Change in reserves							43,552			101,912		12.1	%		29.8	%
Net incurred loss and LAE							214,834			207,927		59.8	%		60.8	%
Lloyd's Operations:
Loss and LAE payments							52,348			52,461		35.7	%		40.2	%
Change in reserves							41,384			33,190		28.2	%		25.5	%
Net incurred loss and LAE							93,732			85,651		63.9	%		65.7	%
Total
Loss and LAE payments							223,630			158,476		44.2	%		33.5	%
Change in reserves							84,936			135,102		16.8	%		28.6	%
Net incurred loss and LAE						$	308,566		$	293,578		61.0	%		62.1	%
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:						2009			2008			2009			2008
Insurance Companies						$	13,242		$	25,752		3.7	%		7.5	%
Lloyd's Operations							5,853			6,528		4.0	%		5.0	%
Total						$	19,095		$	32,280		3.8	%		6.8	%

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Net Loss Data
($ in thousands)
		Case			IBNR
Net Loss Reserves, September 30, 2009:		Reserves			Reserves			Total
Insurance Companies:
Marine		$	106,888		$	104,007		$	210,895
Property Casualty			127,427			348,055			475,482
Professional Liability			41,326			64,909			106,235
Total Insurance Companies			275,641			516,971			792,612
Lloyd's Operations:
Marine			105,102			94,621			199,723
Property Casualty			26,065			26,525			52,590
Professional Liability			8,419			31,463			39,882
Total Lloyd's Operations			139,586			152,609			292,195
Total Net Loss Reserves		$	415,227		$	669,580		$	1,084,807
		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
September 30, 2009
($ in thousands)
At September 30, 2009, the average quality of the company’s investment portfolio as rated by S&P and Moody’s was AA and Aa, respectively, with an average duration of 4.3 years.  The Company does not own any collateralized debt obligations (CDO’s), collateralized loan obligations (CLO’s) or asset-backed commercial paper.
At September 30, 2009, the Company owned two asset-backed securities approximating $0.1 million with subprime mortgage exposures.  These securities have an effective maturity of 1.3 years.  In addition, the Company owned a total of four collateralized mortgage obligations and asset-backed securities approximating $0.9 million classified as Alt-A which is a credit category between prime and subprime. These securities have an effective maturity of 7.6 years.  Such subprime and Alt-A categories are as defined by S&P.  The Company is receiving principal and/or interest payments on all these securities and believes such amounts are fully collectible.
The following table sets forth our cash and investments at September 30, 2009:
					Gross			Gross				Cost or			OTTI
		Fair			Unrealized			Unrealized				Amortized			Recognized
September 30, 2009		Value			Gains			(Losses)				Cost			in OCI
		($ in thousands)
Fixed maturities:
U.S. Government Treasury bonds,
agency bonds and foreign government bonds		$	514,158		$	10,855		$	(54	)		$	503,357		$	-
States, municipalities and political
subdivisions			679,417			37,072			(570	)			642,915			-
Mortgage- and asset-backed securities
Mortgage-backed securities			308,515			15,142			(10	)			293,383			-
Collateralized mortgage obligations			46,126			-			(12,120	)			58,246			(9,818	)
Asset-backed securities			20,088			793			(119	)			19,414			(48	)
Commercial mortgage-backed securities			106,459			584			(6,458	)			112,333			-
Subtotal			481,188			16,519			(18,707	)			483,376			(9,866	)
Corporate bonds			203,023			10,166			(602	)			193,459			-
Total fixed maturities			1,877,786			74,612			(19,933	)			1,823,107			(9,866	)
Equity securities - common stocks			57,949			12,843			(72	)			45,178			-
Cash			21,692			-			-				21,692			-
Short-term investments			136,935			-			-				136,935			-
Total		$	2,094,362		$	87,455		$	(20,005	)		$	2,026,912		$	(9,866	)

THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
Investment Data
September 30, 2009
($ in thousands)
The following four tables set forth our mortgage-backed securities, collateralized mortgage obligations, asset-backed securities and commercial mortgage-backed securities 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, 2009:
					Gross			Gross				Cost or
		Fair			Unrealized			Unrealized				Amortized
Mortgage-backed securities:		Value			Gains			(Losses)				Cost
GNMA		$	46,725		$	1,485		$	(9	)		$	45,249
FNMA			191,824			10,332			(1	)			181,493
FHLMC			69,966			3,325			-				66,641
Total		$	308,515		$	15,142		$	(10	)		$	293,383
					Gross			Gross				Cost or
		Fair			Unrealized			Unrealized				Amortized
Collateralized mortgage obligations:		Value			Gains			(Losses)				Cost
Prime		$	45,192		$	-		$	(11,736	)		$	56,928
Alt-A			934			-			(384	)			1,318
Subprime			-			-			-				-
Total		$	46,126		$	-		$	(12,120	)		$	58,246
					Gross			Gross				Cost or
		Fair			Unrealized			Unrealized				Amortized
Asset-backed securities:		Value			Gains			(Losses)				Cost
Prime		$	19,956		$	793		$	(70	)		$	19,233
Alt-A			-			-			-				-
Subprime			132			-			(49	)			181
Total		$	20,088		$	793		$	(119	)		$	19,414
					Gross			Gross				Cost or
		Fair			Unrealized			Unrealized				Amortized
Commercial mortgage-backed securities:		Value			Gains			(Losses)				Cost
Prime		$	106,459		$	584		$	(6,458	)		$	112,333
Alt-A			-			-			-				-
Subprime			-			-			-				-
Total		$	106,459		$	584		$	(6,458	)		$	112,333