Navigators Group Inc. Reports Operating Results (10-Q)
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 $910.9 million; its shares were traded at around $53.75 with a P/E ratio of 12.4 and P/S ratio of 1.3. Navigators Group Inc. had an annual average earning growth of 115.7% over the past 5 years. Highlight of Business Operations:Net income for the three months ended September 30, 2009 was $21.4 million or $1.24 per share compared to $1.0 million or $0.06 per share for the three months ended September 30, 2008. Included in these results were net realized gains of $0.23 per share after-tax and net realized losses of $0.21 per share after-tax for the three months ended September 30, 2009 and 2008, respectively. The 2009 third quarters net realized gains included impairments of $0.5 million pre-tax for declines in the fair 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 $0.4 million or $0.02 per share.
Net income for the nine months ended September 30, 2009 was $57.1 million or $3.30 per share compared to $41.7 million or $2.45 per share for the nine months ended September 30, 2008. Included in these results were net realized losses of $0.16 per share and $0.52 per share after-tax for the nine months ended September 30, 2009 and 2008, respectively. The 2009 nine month net realized gains included impairments of $11.7 million pre-tax for declines in the fair value of securities which were considered to be other-than-temporary. The after-tax loss of such impairments was $7.7 million or $0.45 per share.
Net income for the nine month period ended September 30, 2009 included a gain related to the repurchase of $10 million aggregate principal amount of its issued and outstanding 7.00% senior notes (Senior Notes) from an unaffiliated note-holder on the open market for $7 million, which, net of amortized costs, resulted in a pre-tax gain of $2.9 million and added $0.11 to earnings per share.
Net cash provided by operating activities was $105.2 million for the nine months ended September 30, 2009 compared to net cash provided by operating activities of $216.4 million for the nine months ended September 30, 2008, a decrease of $111.2 million. Our loss and LAE payments for the nine months ended September 30, 2009 and 2008 were $223.6 million and $158.5 million, respectively, resulting in a decrease in cash provided by operating activities of $65.2 million. In addition, there was a $47.5 million negative variance in our cash flows related to collections for storm loss recoverables from our reinsurers when comparing the first nine months of 2009 to the same period in 2008. During the first nine months of 2008 we collected $20.2 million of net balances from reinsurers mostly related to gross losses paid during 2007 for Hurricanes Katrina and Rita, while during the first nine months of 2009 our recoverable balances grew by $27.3 million related to gross storm loss payments that we have not yet collected from reinsurers primarily on Hurricanes Gustav and Ike.
Consolidated stockholders equity increased 17.6% to $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 increase was due to unrealized investment portfolio gains and net income.
Gross written premiums decreased to $245.2 million and $793.2 million in the three and nine months ended September 30, 2009, respectively, compared to $252.9 million and $819.3 million in the 2008 comparable periods. The decrease in the 2009 third quarter gross written premiums 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 business lost or cancelled due to rate decreases.
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