Navigators Group (NAVG) Q3 Earnings Miss, Revenues Meet

The Navigators Group, Inc. (NASDAQ:NAVG) reported third-quarter 2016 net operating earnings per share of $1.40, which missed the Zacks Consensus Estimate of $1.59 by 11.9%. Shares of the company dipped 1.1% in the last trading session, reflecting the underperformance. However, earnings improved 2.2% year over year.

The company delivered its fifteenth consecutive quarter of profitable underwriting results, with solid performance by its investment portfolio. The company also witnessed strong premium growth in the reported quarter.

Net income was $1.46 per share, up 18.7% from $1.23 per share in the year-ago quarter.

Navigators Group’s total revenue rose 12.9% year over year to $303.7 million in the reported quarter. Revenues were in line with the Zacks Consensus Estimate. Net earned premiums climbed 11.8% to $284 million buoyed by growth in both the U.S. insurance and International insurance. The net investment income increased 14.4% to $19.9 million.

Gross premiums written were $374.9 million, up 5.9% year over year.

Net losses and loss adjustment expenses (LAE) increased 17.9% year over year to $172.8 million. Total expense rose 14.2% to $275.4 million, primarily due to high net losses and loss adjustment expenses as well as commissions and interest expenses.

Underwriting profit plunged 25.1% to $12.5 million from $16.7 million in the year-ago quarter. Lower underwriting profit at both the U.S. Insurance and Global Re segments as well as underwriting loss by the International insurance segment contributed to the downside. Combined ratio deteriorated 220 basis points (bps) to 95.6% from year-ago quarter.

Segment Update

U.S. Insurance: Net earned premiums grew about 13.6% year over year to $161.7 million. The segment reported underwriting profit of $5.5 million, down 46% from the year-ago quarter. Combined ratio deteriorated 370 bps to 96.6% in the reported quarter.

International Insurance: Net earned premiums climbed 16.4% year over year to $79.8 million. The segment reported underwriting loss of $0.8 million, significantly narrower than the year-ago loss of $3.4 million. However, combined ratio improved 390 bps to 101.0% in the third quarter.

Global Re: The segment’s net earned premiums declined 1.4% year over year to $42.5 million. Underwriting profit decreased 20.8% year over year to $7.8 million in the reported quarter. Combined ratio deteriorated 450 bps to 81.6% in the third quarter.

Financial Update

Navigators Group exited the third quarter with book value per share of $82.71, up 8.9% from $75.96 as of Dec 31, 2015.

As of Sep 30, 2016, Navigators Group’s total investment and cash amounted to $3.3 billion, up 9.3% from $3 billion at year-end 2015. Total shareholders’ equity was $1.2 billion as of Sep 30, 2016, up 9.9% from $1.1 billion at the end of 2015.

Dividend Update

On Nov 3, 2016, the board of directors declared a quarterly cash dividend of 9 cents per share. The dividend will be paid on Dec 29, to shareholders on record at the close of business on Nov 18, 2016.

Zacks Rank

Currently, Navigators Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other P&C Insurers

Among other property and casualty insurers that have reported their third-quarter earnings so far, the bottom line at Progressive Corp. (NYSE:PGR) and The Travelers Companies Inc. (NYSE:TRV) beat their respective Zacks Consensus Estimate, while earnings of RLI Corp. (NYSE:RLI) missed the same.

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