The Navigators Group Inc. is a holding company with twelve active wholly owned subsidiaries. They primarily write marine onshore energy engineering and construction insurance and a contractors' general liability program. As underwritten by Navigators marine insurance includes hull energy liability and cargo; onshore energy primarily covers property damage with an emphasis on the oil and petrochemical sectors; and engineering and construction primarily covers construction projects including machinery equipment and loss of use due to delays. Navigators Group Inc. has a market cap of $765.1 million; its shares were traded at around $45.38 with a P/E ratio of 10.1 and P/S ratio of 1.1. Navigators Group Inc. had an annual average earning growth of 115.7% over the past 5 years.
Highlight of Business Operations:The Company has significant catastrophe exposures throughout the world with the largest catastrophe exposure coming from offshore energy risks exposed to hurricanes in the Gulf of Mexico. Following the 2008 hurricane season, many offshore energy policies that were in-force during Hurricanes Gustav and Ike now have either reduced limits or have used up the entire windstorm limit of the policy. To take account of this in assessing our overall Gulf of Mexico exposure, we have remodeled the offshore energy exposure with these reduced windstorm limits. Based on this assessment, the Company estimates that our probable maximum pre-tax gross and net loss exposure in a theoretical one in two hundred and fifty year hurricane event in the Gulf of Mexico would approximate $147 million and $26 million, respectively, including the cost of reinsurance reinstatement premiums, which emanates from 2008 underwriting year risks that have yet to expire.
Net income for the three months ended March 31, 2009 was $12.0 million or $0.71 per share compared to $23.3 million or $1.36 per share for the three months ended March 31, 2008. Included in these results were net realized capital losses of $0.48 per share and net realized capital gains of $0.00 per share for the three months ended March 31, 2009 and 2008, respectively. The 2009 first quarters net realized capital losses include impairments of $10.7 million for declines in the market value of securities which were considered to be other-than-temporary, as further discussed under the caption Investments, included herein. The after-tax loss of such impairments was $7.0 million or $0.41 per share. Recording realized capital losses on such securities has no impact on the Companys stockholders equity or book value per share since unrealized gains and losses on the investment portfolio are a component of accumulated other comprehensive income (loss).
The combined ratios, which consist of the sum of the loss and LAE ratio and the expense ratio for each period, for the 2009 first quarter period was 92.8 % compared to 89.2% for the comparable period in 2008. The combined ratio for the 2009 first quarter was reduced by 3.5 loss ratio points for net loss reserve redundancies of $5.8 million relating to prior years. The combined ratio for the 2008 first quarter was reduced by 8.8 loss ratio points for net loss reserve redundancies of $13.7 million relating to prior years. The net paid loss and LAE ratio for the 2009 first quarter was 43.6 % compared to 32.7% for the comparable period in 2008.
Cash flow from operations was $42.9 million for the 2009 three month period compared to $59.7 million for the comparable period in 2008.
Consolidated stockholders equity increased 3.4% to $ 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. The increase was due to net income.
Revenues. Gross written premium was $275.3 million in the 2009 first quarter, compared to $287.1 million in the 2008 comparable period. The decrease in the 2009 first quarter gross written premium compared to 2008 generally reflects a combination of selective business expansion in new and existing lines of business, offset by the effect of premium rate changes on renewal policies on certain lines of business and lost or cancelled business.
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