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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 13-3138397 (I.R.S. Employer Identification No.) | |
6 International Drive, Rye Brook, New York (Address of principal executive offices) | 10573 (Zip Code) |
Title of each class: | Name of each exchange on which registered: | |
Common Stock, $.10 Par Value | The NASDAQ Global Select Market |
None
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo |
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Exhibit 32-2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
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Marine — Insurance Companies | • | Marine and energy liability | ||
• | Bluewater hull | |||
• | Brownwater hull | |||
• | Cargo | |||
• | Specie | |||
• | Protection & indemnity | |||
• | Transport | |||
• | War | |||
• | Customs bonds | |||
Inland Marine — Insurance Companies | • | Transportation | ||
• | Construction | |||
• | Specialty | |||
• | Commercial output policy | |||
Marine — Lloyd’s Operations | • | Cargo and specie | ||
• | Marine liability | |||
• | Bluewater hull | |||
• | Marine excess-of-loss reinsurance | |||
• | War |
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Property and Casualty | • | Life sciences | ||
— Insurance Companies | • | Exporters package liability | ||
Primary Casualty — Insurance Companies | • | General liability | ||
• | Environmental liability | |||
Excess Casualty — Insurance Companies | • | Umbrella & excess (wholesale brokerage) | ||
• | Umbrella & excess (retail agency) | |||
Navigators Technical Risk (NavTech) | • | Offshore energy | ||
— Insurance Companies | • | Onshore energy | ||
• | Operational engineering | |||
• | Construction | |||
Navigators Re (NavRe) | • | Accident and health reinsurance | ||
• | Latin America property reinsurance | |||
• | Agriculture | |||
Casualty — Lloyd’s Operations | • | Bloodstock | ||
• | U.S. Casualty written through Lloyd’s | |||
Navigators Technical Risk (NavTech) | • | Offshore energy | ||
— Lloyd’s Operations | • | Onshore energy | ||
• | Engineering and construction |
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Navigators Professional Liability (Navigators Pro) | • | Directors & officers liability | ||
— Insurance Companies | • | Employment practices liability | ||
• | Fiduciary liability | |||
• | Crime liability | |||
• | Accountants professional liability | |||
• | Lawyers professional liability | |||
• | Insurance agent errors & omissions | |||
• | Miscellaneous professional liability | |||
• | Technology & media liability | |||
• | Design professionals liability | |||
Navigators Professional Liability (Navigators Pro) | • | Directors & officers liability | ||
— Lloyd’s Operations | • | Lawyers professional liability |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Net reserves for losses and LAE at beginning of year | $ | 1,112,934 | $ | 999,871 | $ | 847,303 | ||||||
Provision for losses and LAE for claims occurring in the current year | 434,957 | 444,939 | 443,877 | |||||||||
Decrease in estimated losses and LAE for claims occurring in prior years | (13,802 | ) | (8,941 | ) | (50,746 | ) | ||||||
Incurred losses and LAE | 421,155 | 435,998 | 393,131 | |||||||||
Losses and LAE paid for claims occurring during: | ||||||||||||
Current year | (76,982 | ) | (59,412 | ) | (60,104 | ) | ||||||
Prior years | (314,565 | ) | (263,523 | ) | (180,459 | ) | ||||||
Losses and LAE payments | (391,547 | ) | (322,935 | ) | (240,563 | ) | ||||||
Net reserves for losses and LAE at end of year | 1,142,542 | 1,112,934 | 999,871 | |||||||||
Reinsurance recoverables on unpaid losses and LAE | 843,296 | 807,352 | 853,793 | |||||||||
Gross reserves for losses and LAE at end of year | $ | 1,985,838 | $ | 1,920,286 | $ | 1,853,664 | ||||||
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Net reserves for losses and LAE | $ | 174,883 | $ | 202,759 | $ | 264,647 | $ | 374,171 | $ | 463,788 | $ | 578,976 | $ | 696,116 | $ | 847,303 | $ | 999,871 | $ | 1,112,934 | $ | 1,142,542 | ||||||||||||||||||||||
Reserves for losses and LAE re-estimated as of: | ||||||||||||||||||||||||||||||||||||||||||||
One year later | 180,268 | 209,797 | 323,282 | 370,335 | 460,007 | 561,762 | 649,107 | 796,557 | 990,930 | 1,099,132 | ||||||||||||||||||||||||||||||||||
Two years later | 183,344 | 266,459 | 328,683 | 360,964 | 457,769 | 523,541 | 589,044 | 776,845 | 971,048 | |||||||||||||||||||||||||||||||||||
Three years later | 232,530 | 266,097 | 321,213 | 377,229 | 432,988 | 481,532 | 555,448 | 767,600 | ||||||||||||||||||||||||||||||||||||
Four years later | 227,554 | 256,236 | 334,991 | 362,227 | 401,380 | 461,563 | 559,368 | |||||||||||||||||||||||||||||||||||||
Five years later | 218,982 | 264,431 | 325,249 | 343,182 | 391,766 | 469,195 | ||||||||||||||||||||||||||||||||||||||
Six years later | 225,031 | 260,264 | 314,332 | 333,857 | 401,071 | |||||||||||||||||||||||||||||||||||||||
Seven years later | 221,541 | 257,852 | 305,051 | 336,790 | ||||||||||||||||||||||||||||||||||||||||
Eight years later | 220,045 | 250,021 | 308,593 | |||||||||||||||||||||||||||||||||||||||||
Nine years later | 213,198 | 256,615 | ||||||||||||||||||||||||||||||||||||||||||
Ten years later | 220,766 | |||||||||||||||||||||||||||||||||||||||||||
Net cumulative redundancy (deficiency) | (45,883 | ) | (53,856 | ) | (43,946 | ) | 37,381 | 62,717 | 109,781 | 136,748 | 79,703 | 28,823 | 13,802 | |||||||||||||||||||||||||||||||
Net cumulative paid as of: | ||||||||||||||||||||||||||||||||||||||||||||
One year later | 53,646 | 64,785 | 84,385 | 80,034 | 96,981 | 133,337 | 142,938 | 180,459 | 263,523 | 314,565 | ||||||||||||||||||||||||||||||||||
Two years later | 91,352 | 112,746 | 133,911 | 140,644 | 180,121 | 219,125 | 233,211 | 322,892 | 460,058 | |||||||||||||||||||||||||||||||||||
Three years later | 114,449 | 138,086 | 170,236 | 195,961 | 238,673 | 264,663 | 300,328 | 441,267 | ||||||||||||||||||||||||||||||||||||
Four years later | 127,961 | 159,042 | 208,266 | 223,847 | 262,425 | 302,273 | 359,592 | |||||||||||||||||||||||||||||||||||||
Five years later | 141,384 | 185,037 | 226,798 | 239,355 | 283,538 | 337,559 | ||||||||||||||||||||||||||||||||||||||
Six years later | 159,389 | 196,098 | 234,284 | 251,006 | 305,214 | |||||||||||||||||||||||||||||||||||||||
Seven years later | 171,768 | 198,760 | 241,083 | 263,072 | ||||||||||||||||||||||||||||||||||||||||
Eight years later | 171,744 | 203,370 | 248,850 | |||||||||||||||||||||||||||||||||||||||||
Nine years later | 176,876 | 208,150 | ||||||||||||||||||||||||||||||||||||||||||
Ten years later | 180,327 | |||||||||||||||||||||||||||||||||||||||||||
Gross liability-end of year | 357,674 | 401,177 | 489,642 | 724,612 | 966,117 | 1,557,991 | 1,607,555 | 1,648,764 | 1,853,664 | 1,920,286 | 1,985,838 | |||||||||||||||||||||||||||||||||
Reinsurance recoverable | 182,791 | 198,418 | 224,995 | 350,441 | 502,329 | 979,015 | 911,439 | 801,461 | 853,793 | 807,352 | 843,296 | |||||||||||||||||||||||||||||||||
Net liability-end of year | 174,883 | 202,759 | 264,647 | 374,171 | 463,788 | 578,976 | 696,116 | 847,303 | 999,871 | 1,112,934 | 1,142,542 | |||||||||||||||||||||||||||||||||
Gross re-estimated latest | 467,131 | 529,894 | 639,350 | 695,923 | 869,081 | 1,373,048 | 1,394,109 | 1,549,651 | 1,836,848 | 1,919,169 | ||||||||||||||||||||||||||||||||||
Re-estimated recoverable latest | 246,365 | 273,280 | 330,757 | 359,133 | 468,010 | 903,853 | 834,741 | 782,051 | 865,799 | 820,038 | ||||||||||||||||||||||||||||||||||
Net re-estimated latest | 220,765 | 256,614 | 308,594 | 336,790 | 401,071 | 469,196 | 559,368 | 767,600 | 971,048 | 1,099,132 | ||||||||||||||||||||||||||||||||||
Gross cumulative redundancy (deficiency) | (109,457 | ) | (128,717 | ) | (149,708 | ) | 28,689 | 97,036 | 184,943 | 213,446 | 99,113 | 16,817 | 1,115 |
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Consolidated | Insurance Companies | |||||||||||||||||||||||
Year | Grand | Excluding | All | Lloyd’s | ||||||||||||||||||||
Ended | Total | Asbestos | Total | Asbestos | Other(1) | Operations | ||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
2009 | $ | 1,115 | $ | 1,753 | $ | (13,904 | ) | $ | (638 | ) | $ | (13,266 | ) | $ | 15,019 | |||||||||
2008 | 16,817 | 18,384 | (17,428 | ) | (1,567 | ) | (15,861 | ) | 34,245 | |||||||||||||||
2007 | 99,113 | 101,476 | 46,442 | (2,363 | ) | 48,805 | 52,671 | |||||||||||||||||
2006 | 213,446 | 215,029 | 107,267 | (1,583 | ) | 108,850 | 106,179 | |||||||||||||||||
2005 | 184,943 | 186,772 | 94,498 | (1,829 | ) | 96,327 | 90,445 | |||||||||||||||||
2004 | 97,036 | 81,456 | 79,646 | 15,580 | 64,066 | 17,390 | ||||||||||||||||||
2003 | 28,689 | 14,292 | 16,874 | 14,397 | 2,477 | 11,815 | ||||||||||||||||||
2002 | (149,708 | ) | (86,268 | ) | (148,119 | ) | (63,440 | ) | (84,679 | ) | (1,589 | ) | ||||||||||||
2001 | (128,717 | ) | (64,920 | ) | (118,715 | ) | (63,797 | ) | (54,918 | ) | (10,002 | ) | ||||||||||||
2000 | (109,457 | ) | (45,412 | ) | (79,579 | ) | (64,045 | ) | (15,534 | ) | (29,878 | ) |
Consolidated | Insurance Companies | |||||||||||||||||||||||
Year | Grand | Excluding | All | Lloyd’s | ||||||||||||||||||||
Ended | Total | Asbestos | Total | Asbestos | Other(1) | Operations | ||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
2009 | $ | 13,802 | $ | 14,080 | $ | 5,455 | $ | (278 | ) | $ | 5,733 | $ | 8,347 | |||||||||||
2008 | 28,823 | 29,076 | 14,533 | (253 | ) | 14,786 | 14,290 | |||||||||||||||||
2007 | 79,703 | 80,219 | 54,945 | (516 | ) | 55,461 | 24,758 | |||||||||||||||||
2006 | 136,748 | 139,043 | 93,642 | (2,295 | ) | 95,937 | 43,106 | |||||||||||||||||
2005 | 109,781 | 112,305 | 84,788 | (2,524 | ) | 87,312 | 24,993 | |||||||||||||||||
2004 | 62,717 | 65,770 | 48,828 | (3,053 | ) | 51,881 | 13,889 | |||||||||||||||||
2003 | 37,381 | 40,839 | 17,125 | (3,458 | ) | 20,583 | 20,256 | |||||||||||||||||
2002 | (43,946 | ) | (8,808 | ) | (53,507 | ) | (35,138 | ) | (18,369 | ) | 9,561 | |||||||||||||
2001 | (53,856 | ) | (18,570 | ) | (49,144 | ) | (35,286 | ) | (13,858 | ) | (4,712 | ) | ||||||||||||
2000 | (45,883 | ) | (10,503 | ) | (29,696 | ) | (35,380 | ) | 5,684 | (16,187 | ) |
1) | Contains cumulative loss development for all active and run-off lines of business exclusive of asbestos losses. |
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A.M. Best | Rating | Recoverable | Percent | |||||||
Rating(1) | Description | Amounts | of Total | |||||||
($ in millions) | ||||||||||
A++, A+ | Superior | $ | 447.8 | 42 | % | |||||
A, A- | Excellent | 585.0 | 56 | % | ||||||
B++, B+ | Very good | 4.4 | 0 | %(2) | ||||||
NR | Not rated | 19.7 | 2 | %(2) | ||||||
Total | $ | 1,056.9 | 100 | % | ||||||
(1) | Equivalent S&P rating used for certain companies when an A.M. Best rating was unavailable. | |
(2) | The Company holds offsetting collateral of approximately 80.2% for B++ and B+ companies and 75.6% for not rated companies which includes letters of credit, ceded balances payable and other balances held by our Insurance Companies and our Lloyd’s Operations. |
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Reinsurance Recoverables | ||||||||||||||||||||
Unearned | Unpaid/Paid | Collateral | Rating & | |||||||||||||||||
Reinsurer | Premium | Losses | Total | Held(1) | Rating Agency(2) | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Swiss Reinsurance America Corporation | $ | 8.2 | $ | 98.4 | $ | 106.6 | $ | 9.0 | A | AMB | ||||||||||
Munich Reinsurance America Inc. | 16.5 | 80.7 | 97.2 | 4.5 | A+ | AMB | ||||||||||||||
Everest Reinsurance Company | 19.4 | 67.1 | 86.5 | 9.0 | A+ | AMB | ||||||||||||||
Transatlantic Reinsurance Company | 21.4 | 62.6 | 84.0 | 8.7 | A | AMB | ||||||||||||||
National Indemnity Company | 10.1 | 29.3 | 39.4 | 3.5 | A++ | AMB | ||||||||||||||
Scor Holding (Switzerland) AG | 9.1 | 29.4 | 38.5 | 11.5 | A | AMB | ||||||||||||||
General Reinsurance Corporation | 1.5 | 34.9 | 36.4 | 1.3 | A++ | AMB | ||||||||||||||
White Mountains Reinsurance of America | 0.3 | 36.0 | 36.3 | 0.2 | A- | AMB | ||||||||||||||
Partner Reinsurance Europe | 8.3 | 26.8 | 35.1 | 16.7 | AA- | S&P | ||||||||||||||
Munchener Ruckversicherungs-Gesellschaft | 1.1 | 32.7 | 33.8 | 7.7 | A+ | AMB | ||||||||||||||
Berkley Insurance Company | 3.4 | 29.2 | 32.6 | 0.2 | A+ | AMB | ||||||||||||||
Platinum Underwriters Re | 2.1 | 26.7 | 28.8 | 2.5 | A | AMB | ||||||||||||||
Lloyd’s Syndicate #2003 | 2.9 | 23.8 | 26.7 | 4.2 | A | AMB | ||||||||||||||
Ace Property and Casualty Insurance Company | 5.5 | 19.1 | 24.6 | 2.5 | A+ | AMB | ||||||||||||||
Allied World Reinsurance | 7.1 | 13.1 | 20.2 | 2.8 | A | AMB | ||||||||||||||
Swiss Re International SE | 0.7 | 15.6 | 16.3 | 5.7 | A | AMB | ||||||||||||||
AXIS Re Europe | 3.6 | 11.5 | 15.1 | 4.0 | A | AMB | ||||||||||||||
Axa Corporate Solutions | 0.4 | 14.0 | 14.4 | 0.7 | AA- | S&P | ||||||||||||||
Hannover Ruckversicherung | 0.5 | 13.6 | 14.1 | 2.8 | A | AMB | ||||||||||||||
Validus Reinsurance Ltd. | 1.8 | 11.9 | 13.7 | 5.6 | A- | AMB | ||||||||||||||
Top 20 Total | $ | 123.9 | $ | 676.4 | $ | 800.3 | $ | 103.1 | ||||||||||||
All Other | 33.0 | 223.6 | 256.6 | 76.1 | ||||||||||||||||
Total | $ | 156.9 | $ | 900.0 | $ | 1,056.9 | $ | 179.2 | ||||||||||||
(1) | Collateral includes letters of credit, ceded balances payable and other balances held by our Insurance Companies and our Lloyd’s Operations. | |
(2) | A.M. Best |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Invested Assets and Cash | ||||||||||||
Insurance Companies | $ | 1,675,725 | $ | 1,604,354 | $ | 1,509,382 | ||||||
Lloyd’s Operations | 425,386 | 388,556 | 356,184 | |||||||||
Parent Company | 53,217 | 63,677 | 52,149 | |||||||||
Consolidated | $ | 2,154,328 | $ | 2,056,587 | $ | 1,917,715 | ||||||
Net Investment Income | ||||||||||||
Insurance Companies | $ | 62,792 | $ | 65,717 | $ | 63,544 | ||||||
Lloyd’s Operations | 8,286 | 9,229 | 11,655 | |||||||||
Parent Company | 584 | 566 | 1,355 | |||||||||
Consolidated | $ | 71,662 | $ | 75,512 | $ | 76,554 | ||||||
Average Yield (amortized cost basis) | ||||||||||||
Insurance Companies | 3.8 | % | 4.1 | % | 4.3 | % | ||||||
Lloyd’s Operations | 2.2 | % | 2.7 | % | 3.4 | % | ||||||
Parent Company | 1.2 | % | 1.0 | % | 3.1 | % | ||||||
Consolidated | 3.5 | % | 3.8 | % | 4.1 | % |
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• | actual or anticipated variations in our quarterly results of operations, including the result of catastrophes, |
• | changes in market valuations of companies in the insurance and reinsurance industry, |
• | changes in expectations of future financial performance or changes in estimates of securities analysts, |
• | issuances of common shares or other securities in the future, |
• | the addition or departure of key personnel, and |
• | announcements by us or our competitors of acquisitions, investments or strategic alliances. |
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2010 | 2009 | |||||||||||||||||||||||
High | Low | Close | High | Low | Close | |||||||||||||||||||
First Quarter | $ | 47.99 | $ | 36.93 | $ | 39.33 | $ | 57.58 | $ | 45.30 | $ | 47.18 | ||||||||||||
Second Quarter | $ | 43.85 | $ | 36.86 | $ | 41.13 | $ | 49.75 | $ | 42.80 | $ | 44.43 | ||||||||||||
Third Quarter | $ | 45.00 | $ | 40.92 | $ | 44.63 | $ | 56.29 | $ | 43.59 | $ | 55.00 | ||||||||||||
Fourth Quarter | $ | 52.35 | $ | 42.82 | $ | 50.35 | $ | 57.64 | $ | 45.83 | $ | 47.11 |
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Base | Cumulative Indexed Returns | |||||||||||||||||||||||
Period | Years Ending December 31, | |||||||||||||||||||||||
Company / Index | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||
The Navigators Group, Inc. | 100.00 | 110.48 | 149.05 | 125.91 | 108.02 | 115.45 | ||||||||||||||||||
S&P 500 Index | 100.00 | 115.79 | 122.16 | 76.96 | 97.32 | 111.98 | ||||||||||||||||||
S&P 500 Property & Casualty Insurance | 100.00 | 112.87 | 97.11 | 68.55 | 76.92 | 84.02 |
Annual Return Percentage | ||||||||||||||||||||
Years Ending December 31, | ||||||||||||||||||||
Company / Index | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
The Navigators Group, Inc. | 10.48 | 34.91 | -15.52 | -14.21 | 6.88 | |||||||||||||||
S&P 500 Index | 15.79 | 5.49 | -37.00 | 26.46 | 15.06 | |||||||||||||||
S&P 500 Property & Casualty Insurance | 12.87 | -13.96 | -29.41 | 12.21 | 9.23 |
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Dollar Value | ||||||||||||
of Shares that | ||||||||||||
Total Number | Average | May Yet Be | ||||||||||
of Shares | Cost Paid | Purchased Under | ||||||||||
Purchased | Per Share | the Program(1) | ||||||||||
($ in thousands, except per share) | ||||||||||||
October 2009 | — | $ | — | $ | 35,000 | |||||||
November 2009 | 29,021 | $ | 47.30 | $ | 33,627 | |||||||
December 2009 | 112,555 | $ | 47.83 | $ | 28,243 | |||||||
Subtotal fourth quarter | 141,576 | $ | 47.72 | |||||||||
Total 2009 activity | 141,576 | $ | 47.72 | |||||||||
January 2010 | 171,500 | $ | 44.32 | $ | 20,642 | |||||||
February 2010 | 128,500 | $ | 41.79 | $ | 15,272 | |||||||
March 2010 | 273,600 | $ | 39.10 | $ | 69,573 | |||||||
Subtotal first quarter | 573,600 | $ | 41.27 | |||||||||
April 2010 | 149,912 | $ | 40.92 | $ | 63,439 | |||||||
May 2010 | 248,430 | $ | 39.92 | $ | 53,522 | |||||||
June 2010 | 159,661 | $ | 40.38 | $ | 47,075 | |||||||
Subtotal second quarter | 558,003 | $ | 40.32 | |||||||||
July 2010 | 57,177 | $ | 42.10 | $ | 44,668 | |||||||
August 2010 | 32,556 | $ | 42.49 | $ | 43,284 | |||||||
September 2010 | 7,382 | $ | 42.29 | $ | 42,972 | |||||||
Subtotal third quarter | 97,115 | $ | 42.25 | |||||||||
October 2010 | 1,500 | $ | 42.85 | $ | 42,841 | |||||||
November 2010 | 34,066 | $ | 48.27 | $ | 41,265 | |||||||
December 2010 | — | $ | — | $ | 41,265 | |||||||
Subtotal fourth quarter | 35,566 | $ | 48.04 | |||||||||
Total 2010 activity | 1,264,284 | $ | 41.11 | |||||||||
Total share repurchase activity | 1,405,860 | $ | 41.78 | |||||||||
(1) | Balance as of the end of the month indicated. |
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Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||
Operating Information: | ||||||||||||||||||||
Gross written premiums | $ | 987,201 | $ | 1,044,918 | $ | 1,084,922 | $ | 1,070,707 | $ | 970,790 | ||||||||||
Net written premiums | 653,938 | 701,255 | 661,615 | 645,796 | 520,807 | |||||||||||||||
Net earned premiums | 659,931 | 683,363 | 643,976 | 601,977 | 468,323 | |||||||||||||||
Net investment income | 71,662 | 75,512 | 76,554 | 70,662 | 56,895 | |||||||||||||||
Net realized gains (losses)(1) | 40,239 | (2,660 | ) | (38,299 | ) | 2,006 | (1,026 | ) | ||||||||||||
Total revenues | 776,975 | 762,880 | 683,666 | 676,659 | 526,594 | |||||||||||||||
Income before income taxes | 98,829 | 86,848 | 68,731 | 139,182 | 106,617 | |||||||||||||||
Net income | 69,578 | 63,158 | 51,692 | 95,620 | 72,563 | |||||||||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 4.33 | $ | 3.73 | $ | 3.08 | $ | 5.69 | $ | 4.34 | ||||||||||
Diluted | $ | 4.24 | $ | 3.65 | $ | 3.04 | $ | 5.62 | $ | 4.30 | ||||||||||
Average common shares outstanding (000s): | ||||||||||||||||||||
Basic | 16,065 | 16,935 | 16,802 | 16,812 | 16,722 | |||||||||||||||
Diluted | 16,415 | 17,322 | 16,992 | 17,005 | 16,856 | |||||||||||||||
Combined loss & expense ratio(2): | ||||||||||||||||||||
Loss ratio | 63.8 | % | 63.8 | % | 61.0 | % | 56.6 | % | 57.7 | % | ||||||||||
Expense ratio | 36.9 | % | 33.4 | % | 32.8 | % | 30.9 | % | 30.1 | % | ||||||||||
Total | 100.7 | % | 97.2 | % | 93.8 | % | 87.5 | % | 87.8 | % | ||||||||||
Balance sheet information (at end of year): | ||||||||||||||||||||
Total investments and cash | $ | 2,154,328 | $ | 2,056,587 | $ | 1,917,715 | $ | 1,767,301 | $ | 1,475,910 | ||||||||||
Total assets | 3,531,459 | 3,453,994 | 3,349,580 | 3,143,771 | 2,956,686 | |||||||||||||||
Gross losses and LAE reserves | 1,985,838 | 1,920,286 | 1,853,664 | 1,648,764 | 1,607,555 | |||||||||||||||
Net losses and LAE reserves | 1,142,542 | 1,112,934 | 999,871 | 847,303 | 696,116 | |||||||||||||||
Senior notes | 114,138 | 114,010 | 123,794 | 123,673 | 123,560 | |||||||||||||||
Stockholders’ equity | 829,354 | 801,519 | 689,317 | 662,106 | 551,343 | |||||||||||||||
Common shares outstanding (000s) | 15,744 | 16,846 | 16,856 | 16,873 | 16,736 | |||||||||||||||
Book value per share(3) | $ | 52.68 | $ | 47.58 | $ | 40.89 | $ | 39.24 | $ | 32.94 | ||||||||||
Statutory surplus of Navigators Insurance Company | $ | 686,919 | $ | 645,820 | $ | 581,166 | $ | 578,668 | $ | 524,188 |
(1) | Includes Net other-than-temporary impairment losses recognized in earnings. | |
(2) | Calculated based on earned premiums. | |
(3) | Calculated as stockholders’ equity divided by actual shares outstanding as of the date indicated. |
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• | Inflationary pressures (medical and economic) that affect the size of losses; | ||
• | Judicial, regulatory, legislative, and legal decisions that affect insurers’ liabilities; | ||
• | Changes in the frequency and severity of losses; | ||
• | Changes in the underlying loss exposures of our policies; | ||
• | Changes in our claims handling procedures. |
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Decrease | Increase | |||||||
Insurance Companies: | ||||||||
Marine | 6 | % | 8 | % | ||||
Property Casualty | 6 | % | 9 | % | ||||
Professional Liability | 14 | % | 17 | % | ||||
Lloyd’s Operations | 7 | % | 12 | % |
Decrease | Increase | |||||||
Insurance Companies: | ||||||||
Marine | 9 | % | 13 | % | ||||
Property Casualty | 10 | % | 13 | % | ||||
Professional Liability | 24 | % | 32 | % | ||||
Lloyd’s Operations | 12 | % | 16 | % |
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Total | Reasonably Likely Range of Deviation | |||||||||||||||||||
Net Loss | Redundancy | Deficiency | ||||||||||||||||||
Reserve | Amount | % | Amount | % | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Insurance Companies: | ||||||||||||||||||||
Marine | $ | 216,508 | $ | 19,486 | 9 | % | $ | 28,146 | 13 | % | ||||||||||
Property Casualty | 467,353 | 46,735 | 10 | % | 60,756 | 13 | % | |||||||||||||
Professional Liability | 124,565 | 29,896 | 24 | % | 39,861 | 32 | % | |||||||||||||
Total Insurance Companies | 808,426 | 96,117 | 128,763 | |||||||||||||||||
Total Lloyd’s Operations | 334,116 | 40,094 | 12 | % | 53,459 | 16 | % | |||||||||||||
Subtotal | 1,142,542 | 136,211 | 182,222 | |||||||||||||||||
Portfolio effect | — | (67,658 | ) | (79,393 | ) | |||||||||||||||
Total Company | $ | 1,142,542 | $ | 68,553 | 6 | % | $ | 102,829 | 9 | % | ||||||||||
Increase (decrease) to net income | ||||||||||||||||||||
Amount | $ | 44,559 | $ | (66,839 | ) | |||||||||||||||
Per Share(1) | $ | 2.71 | $ | (4.07 | ) |
(1) | Used 16.4 million average diluted shares outstanding for the year ended December 31, 2010. |
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• | Intense competition, excess capacity and a continued weak economy have driven down premiums across the majority of our Marine lines as well as our construction liability line |
• | The run-off of our personal umbrella line |
• | A shift in underwriting strategy in our D&O lines toward excess layers |
Partially offsetting these factors were: |
• | An increase in our errors and omissions (“E&O”) lines primarily due to growth in our Brown & Brown Small Lawyers business |
• | Improvements in our offshore energy line due to greater demand as well as improved pricing following the Deepwater Horizon incident |
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||
Gross | Net | Net | Gross | Net | Net | Gross | Net | Net | ||||||||||||||||||||||||||||||||||||||||
Written | Written | Earned | Written | Written | Earned | Written | Written | Earned | ||||||||||||||||||||||||||||||||||||||||
Premiums | % | Premiums | Premiums | Premiums | % | Premiums | Premiums | Premiums | % | Premiums | Premiums | |||||||||||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Insurance Companies: | ||||||||||||||||||||||||||||||||||||||||||||||||
Marine | $ | 223,061 | 23 | % | $ | 151,059 | $ | 155,846 | $ | 241,438 | 23 | % | $ | 171,289 | $ | 157,534 | $ | 248,080 | 23 | % | $ | 147,569 | $ | 132,005 | ||||||||||||||||||||||||
Property Casualty | 312,651 | 31 | % | 197,845 | 200,741 | 352,285 | 34 | % | 227,234 | 246,143 | 405,062 | 37 | % | 261,322 | 273,977 | |||||||||||||||||||||||||||||||||
Professional Liability | 129,793 | 13 | % | 80,451 | 82,264 | 137,053 | 13 | % | 79,150 | 75,444 | 109,048 | 10 | % | 63,797 | 57,316 | |||||||||||||||||||||||||||||||||
Insurance Companies Total | 665,505 | 67 | % | 429,355 | 438,851 | 730,776 | 70 | % | 477,673 | 479,121 | 762,190 | 70 | % | 472,688 | 463,298 | |||||||||||||||||||||||||||||||||
Lloyd’s Operations: | ||||||||||||||||||||||||||||||||||||||||||||||||
Marine | 182,723 | 19 | % | 149,340 | 149,225 | 191,959 | 19 | % | 156,153 | 142,958 | 192,568 | 18 | % | 132,788 | 126,126 | |||||||||||||||||||||||||||||||||
Property Casualty | 94,799 | 10 | % | 54,049 | 49,852 | 78,151 | 7 | % | 45,097 | 39,330 | 91,292 | 8 | % | 32,735 | 32,644 | |||||||||||||||||||||||||||||||||
Professional Liability | 44,174 | 4 | % | 21,194 | 22,003 | 44,032 | 4 | % | 22,332 | 21,954 | 38,872 | 4 | % | 23,404 | 21,908 | |||||||||||||||||||||||||||||||||
Lloyd’s Operations Total | 321,696 | 33 | % | 224,583 | 221,080 | 314,142 | 30 | % | 223,582 | 204,242 | 322,732 | 30 | % | 188,927 | 180,678 | |||||||||||||||||||||||||||||||||
Total | $ | 987,201 | 100 | % | $ | 653,938 | $ | 659,931 | $ | 1,044,918 | 100 | % | $ | 701,255 | $ | 683,363 | $ | 1,084,922 | 100 | % | $ | 661,615 | $ | 643,976 | ||||||||||||||||||||||||
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Twelve Months Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Marine liability | $ | 77,066 | 36 | % | $ | 83,915 | 34 | % | $ | 82,991 | 32 | % | ||||||||||||
Inland marine | 29,986 | 13 | % | 28,573 | 12 | % | 23,914 | 10 | % | |||||||||||||||
Cargo | 23,179 | 10 | % | 26,636 | 11 | % | 34,202 | 14 | % | |||||||||||||||
Craft/Fishing vessel | 19,948 | 9 | % | 19,758 | 8 | % | 16,545 | 7 | % | |||||||||||||||
Other | 18,917 | 8 | % | 15,977 | 7 | % | 21,246 | 9 | % | |||||||||||||||
Bluewater hull | 18,610 | 8 | % | 19,691 | 8 | % | 17,234 | 7 | % | |||||||||||||||
Transport | 17,876 | 8 | % | 21,527 | 9 | % | 23,013 | 9 | % | |||||||||||||||
P&I | 17,479 | 8 | % | 25,361 | 11 | % | 28,935 | 12 | % | |||||||||||||||
Total | $ | 223,061 | 100 | % | $ | 241,438 | 100 | % | $ | 248,080 | 100 | % | ||||||||||||
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Twelve Months Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Commercial umbrella | $ | 96,015 | 30 | % | $ | 81,405 | 23 | % | $ | 63,977 | 16 | % | ||||||||||||
Construction liability | 88,296 | 28 | % | 108,744 | 32 | % | 147,880 | 37 | % | |||||||||||||||
Offshore energy | 52,148 | 17 | % | 47,368 | 13 | % | 56,989 | 14 | % | |||||||||||||||
Nav Pac | 39,293 | 13 | % | 40,428 | 11 | % | 30,095 | 7 | % | |||||||||||||||
Primary Casualty | 18,954 | 6 | % | 8,598 | 2 | % | 45,708 | 11 | % | |||||||||||||||
Other | 17,945 | 6 | % | 65,742 | 19 | % | 60,413 | 15 | % | |||||||||||||||
Total | $ | 312,651 | 100 | % | $ | 352,285 | 100 | % | $ | 405,062 | 100 | % | ||||||||||||
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Twelve Months Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
D&O (public and private) | $ | 73,515 | 57 | % | $ | 99,601 | 73 | % | $ | 75,010 | 69 | % | ||||||||||||
Errors and omissions | 34,135 | 26 | % | 32,129 | 23 | % | 28,097 | 26 | % | |||||||||||||||
Small Lawyers | 17,725 | 14 | % | — | 0 | % | — | 0 | % | |||||||||||||||
Architects & Engineers | 4,418 | 3 | % | 5,323 | 4 | % | 5,941 | 5 | % | |||||||||||||||
Total | $ | 129,793 | 100 | % | $ | 137,053 | 100 | % | $ | 109,048 | 100 | % | ||||||||||||
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Twelve Months Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Cargo and specie | $ | 78,515 | 43 | % | $ | 92,139 | 48 | % | $ | 92,789 | 47 | % | ||||||||||||
Marine liability | 61,230 | 34 | % | 51,204 | 27 | % | 58,886 | 31 | % | |||||||||||||||
Hull | 18,633 | 10 | % | 18,697 | 10 | % | 16,416 | 9 | % | |||||||||||||||
Assumed reinsurance | 14,380 | 8 | % | 19,756 | 10 | % | 17,078 | 9 | % | |||||||||||||||
War | 9,965 | 5 | % | 10,163 | 5 | % | 7,399 | 4 | % | |||||||||||||||
Total | $ | 182,723 | 100 | % | $ | 191,959 | 100 | % | $ | 192,568 | 100 | % | ||||||||||||
Twelve Months Ended December 31, | ||||||||||||||||||||||||
�� | 2010 | 2009 | 2008 | |||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Offshore Energy | $ | 43,479 | 46 | % | $ | 34,469 | 43 | % | $ | 51,073 | 56 | % | ||||||||||||
Engineering and Construction | 23,411 | 25 | % | 18,383 | 24 | % | 21,036 | 23 | % | |||||||||||||||
Onshore Energy | 17,349 | 18 | % | 14,055 | 18 | % | 12,726 | 14 | % | |||||||||||||||
Bloodstock | 7,487 | 8 | % | 7,726 | 10 | % | — | 0 | % | |||||||||||||||
US Property Casualty | 3,034 | 3 | % | 3,594 | 5 | % | 826 | 1 | % | |||||||||||||||
Property | 39 | 0 | % | (76 | ) | 0 | % | 5,631 | 6 | % | ||||||||||||||
Total | $ | 94,799 | 100 | % | $ | 78,151 | 100 | % | $ | 91,292 | 100 | % | ||||||||||||
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Twelve Months Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
D&O (public and private) | $ | 30,777 | 70 | % | $ | 26,776 | 61 | % | $ | 15,845 | 41 | % | ||||||||||||
E&O | 13,397 | 30 | % | 17,256 | 39 | % | 23,027 | 59 | % | |||||||||||||||
Total | $ | 44,174 | 100 | % | $ | 44,032 | 100 | % | $ | 38,872 | 100 | % | ||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Ceded | Gross | Ceded | Gross | Ceded | Gross | |||||||||||||||||||
Written | Written | Written | Written | Written | Written | |||||||||||||||||||
Premiums | Premiums | Premiums | Premiums | Premiums | Premiums | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Insurance Companies: | ||||||||||||||||||||||||
Marine | $ | 72,002 | 32.3 | % | $ | 70,149 | 29.1 | % | $ | 100,511 | 40.5 | % | ||||||||||||
Property Casualty | 114,806 | 36.7 | % | 125,051 | 35.5 | % | 143,740 | 35.5 | % | |||||||||||||||
Professional Liability | 49,342 | 38.0 | % | 57,903 | 42.2 | % | 45,251 | 41.5 | % | |||||||||||||||
Subtotal | 236,150 | 35.5 | % | 253,103 | 34.6 | % | 289,502 | 38.0 | % | |||||||||||||||
Lloyd’s Operations: | ||||||||||||||||||||||||
Marine | 33,383 | 18.3 | % | 35,806 | 18.7 | % | 59,780 | 31.0 | % | |||||||||||||||
Property Casualty | 40,750 | 43.0 | % | 33,054 | 42.3 | % | 58,557 | 64.1 | % | |||||||||||||||
Professional Liability | 22,980 | 52.0 | % | 21,700 | 49.3 | % | 15,468 | 39.8 | % | |||||||||||||||
Subtotal | 97,113 | 30.2 | % | 90,560 | 28.8 | % | 133,805 | 41.5 | % | |||||||||||||||
Total | $ | 333,263 | 33.8 | % | $ | 343,663 | 32.9 | % | $ | 423,307 | 39.0 | % | ||||||||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Fixed maturities | $ | (693 | ) | $ | (3,101 | ) | $ | (8,604 | ) | |||
Equity securities | (387 | ) | (8,776 | ) | (28,441 | ) | ||||||
Net other-than-temporary impairment losses recognized in earnings | $ | (1,080 | ) | $ | (11,877 | ) | $ | (37,045 | ) | |||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Fixed maturities: | ||||||||||||
Gains | $ | 42,932 | $ | 18,312 | $ | 3,650 | ||||||
(Losses) | (3,239 | ) | (9,676 | ) | (1,670 | ) | ||||||
39,693 | 8,636 | 1,980 | ||||||||||
Equity securities: | ||||||||||||
Gains | 1,867 | 2,110 | 720 | |||||||||
(Losses) | (241 | ) | (1,529 | ) | (3,954 | ) | ||||||
1,626 | 581 | (3,234 | ) | |||||||||
Net realized gains (losses) | $ | 41,319 | $ | 9,217 | $ | (1,254 | ) | |||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Insurance Companies: | ||||||||||||
Marine | $ | (4,155 | ) | $ | 11,893 | $ | (5,298 | ) | ||||
Property Casualty | (14,923 | ) | (35,658 | ) | (33,065 | ) | ||||||
Professional Liability | 13,623 | 20,686 | (3,559 | ) | ||||||||
Insurance Companies | $ | (5,455 | ) | $ | (3,079 | ) | $ | (41,922 | ) | |||
Lloyd’s Operations | (8,347 | ) | (5,862 | ) | (8,824 | ) | ||||||
Total | $ | (13,802 | ) | $ | (8,941 | ) | $ | (50,746 | ) | |||
• | $29.2 million for West Coast contractors’ liability due to an internal actuarial review conducted in 2010 which indicated that loss development on underwriting years 2006 to 2008 has been more favorable than our prior expectations with a partial offset for underwriting years 2004 and prior. This internal review includes a more detailed analysis than is included in our regular quarterly reserving process. |
• | $2.9 million of favorable development on our offshore energy (NavTech) book due to favorable claims trends across a number of prior underwriting years. |
• | $1.8 million of favorable development on the Somerset Re run-off book of business where we concluded the IBNR was no longer required and $1.5 million on our Agriculture reinsurance book where the reported activity was lower than our initial estimate for the 2009 treaty year. |
• | $16.5 million in our Specialty run-off books of business, including $13.3 million in our personal umbrella lines across multiple underwriting years where loss activity has exceeded our expectations and $2.0 million of adverse development in our Liquor business due to reported claim activity. |
• | $1.7 million for New York construction liability due to unfavorable loss emergence. |
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• | The directors and officers’ liability book of business had $15.7 million of adverse development, which was primarily attributable to a severity study of our open claims completed during the fourth quarter. This study showed our IBNR to be significantly deficient if current trends continued and we raised our loss estimates for underwriting years 2002 to 2009. This was partially offset by $1.4 million of favorable development on a run-off lawyers book of business written from London where we saw favorable settlements of outstanding claims and $0.7 million of favorable development on other lawyers business mostly due to a favorable claim reserve settlement. |
• | $36.5 million for contractors’ liability due to an actuarial review conducted in 2009 which indicated that loss development on the 2006 and prior underwriting years has been more favorable than our prior expectations for those underwriting years |
• | $9.3 million from our primary E&S lines and $6.2 million in excess casualty business due to favorable loss trends in underwriting years 2007 and prior |
• | $8.0 million of favorable development on our offshore energy (NavTech) book due to favorable claims trends across a number of prior underwriting years |
• | $12.0 million in our Nav Pac business due to reported loss activity in excess of our prior expectations from most underwriting years resulting from reviews of open claims in the auto and liability lines of business |
• | $6.4 million from our liquor business, which is now in run-off |
• | $5.9 million in our personal umbrella books of business across most underwriting years where large loss activity has exceeded our expectations |
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• | The directors and officers’ liability book of business had $12.4 million of adverse development, which was primarily attributable to the unexpected development of previously reported claims in the 2006 and prior underwriting years. This loss activity was inconsistent with the loss emergence trends that we observed in calendar years 2007 and 2008 and it caused us to increase our ultimate loss projections in the 2006 and prior underwriting years, as well as those in the more current underwriting years. |
• | The lawyers’ liability book of business had adverse development of $8.3 million due to reported loss activity in underwriting years 2005 to 2008 in excess of our prior expectations. |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Gross of Reinsurance | ||||||||||||
Beginning gross reserves | $ | 59,509 | $ | 107,399 | $ | — | ||||||
Incurred loss & LAE | (1,997 | ) | 1,039 | 114,000 | ||||||||
Calendar year payments | 17,417 | 48,929 | 6,601 | |||||||||
Ending gross reserves | $ | 40,095 | $ | 59,509 | $ | 107,399 | ||||||
Gross case loss reserves | $ | 17,987 | $ | 34,015 | $ | 70,299 | ||||||
Gross IBNR loss reserves | 22,108 | 25,494 | 37,100 | |||||||||
Ending gross reserves | $ | 40,095 | $ | 59,509 | $ | 107,399 | ||||||
Net of Reinsurance | ||||||||||||
Beginning net reserves | $ | 2,683 | $ | 12,923 | $ | — | ||||||
Incurred loss & LAE | 1,257 | 978 | 17,169 | |||||||||
Calendar year payments | 3,371 | 11,218 | 4,246 | |||||||||
Ending net reserves | $ | 569 | $ | 2,683 | $ | 12,923 | ||||||
Net case loss reserves | $ | 569 | $ | 1,793 | $ | 11,696 | ||||||
Net IBNR loss reserves | — | 890 | 1,227 | |||||||||
Ending net reserves | $ | 569 | $ | 2,683 | $ | 12,923 | ||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Gross of Reinsurance | ||||||||||||
Beginning gross reserves | $ | 67,038 | $ | 97,732 | $ | 141,831 | ||||||
Incurred loss & LAE | (2,300 | ) | 671 | (12,250 | ) | |||||||
Calendar year payments | 42,139 | 31,365 | 31,849 | |||||||||
Ending gross reserves | $ | 22,599 | $ | 67,038 | $ | 97,732 | ||||||
Gross case loss reserves | $ | 19,164 | $ | 49,291 | $ | 62,732 | ||||||
Gross IBNR loss reserves | 3,435 | 17,747 | 35,000 | |||||||||
Ending gross reserves | $ | 22,599 | $ | 67,038 | $ | 97,732 | ||||||
Net of Reinsurance | ||||||||||||
Beginning net reserves | $ | 3,536 | $ | 3,667 | $ | 4,519 | ||||||
Incurred loss & LAE | (3,559 | ) | 114 | (990 | ) | |||||||
Calendar year payments | (113 | ) | 245 | (138 | ) | |||||||
Ending net reserves | $ | 90 | $ | 3,536 | $ | 3,667 | ||||||
Net case loss reserves | $ | 44 | $ | 183 | $ | 279 | ||||||
Net IBNR loss reserves | 46 | 3,353 | 3,388 | |||||||||
Ending net reserves | $ | 90 | $ | 3,536 | $ | 3,667 | ||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Gross of Reinsurance | ||||||||||||
Beginning gross reserves | $ | 22,147 | $ | 21,774 | $ | 23,194 | ||||||
Incurred loss & LAE | 638 | 928 | 796 | |||||||||
Calendar year payments | 681 | 555 | 2,216 | |||||||||
Ending gross reserves | $ | 22,104 | $ | 22,147 | $ | 21,774 | ||||||
Gross case loss reserves | $ | 14,248 | $ | 14,291 | $ | 13,918 | ||||||
Gross IBNR loss reserves | 7,856 | 7,856 | 7,856 | |||||||||
Ending gross reserves | $ | 22,104 | $ | 22,147 | $ | 21,774 | ||||||
Net of Reinsurance | ||||||||||||
Beginning net reserves | $ | 16,763 | $ | 16,683 | $ | 16,717 | ||||||
Incurred loss & LAE | 278 | (25 | ) | 263 | ||||||||
Calendar year payments | 289 | (105 | ) | 297 | ||||||||
Ending net reserves | $ | 16,752 | $ | 16,763 | $ | 16,683 | ||||||
Net case loss reserves | $ | 9,101 | $ | 9,112 | $ | 9,032 | ||||||
Net IBNR loss reserves | 7,651 | 7,651 | 7,651 | |||||||||
Ending net reserves | $ | 16,752 | $ | 16,763 | $ | 16,683 | ||||||
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December 31, | December 31, | |||||||||||
2010 | 2009 | Change | ||||||||||
($ in thousands) | ||||||||||||
Reinsurance recoverables: | ||||||||||||
Paid losses | $ | 56,658 | $ | 76,505 | $ | (19,847 | ) | |||||
Unpaid losses and LAE reserves | 843,296 | 807,352 | 35,944 | |||||||||
Total | $ | 899,954 | $ | 883,857 | $ | 16,097 | ||||||
December 31, | December 31, | |||||||||||
2010 | 2009 | Change | ||||||||||
($ in thousands) | ||||||||||||
Gross reserves for losses and LAE | $ | 1,985,838 | $ | 1,920,286 | $ | 65,552 | ||||||
Less: Reinsurance recoverable on unpaid losses and LAE reserves | 843,296 | 807,352 | 35,944 | |||||||||
Net loss and LAE reserves | $ | 1,142,542 | $ | 1,112,934 | $ | 29,608 | ||||||
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December 31, 2010 | ||||||||||||||||
Net | Net | Total | % of IBNR | |||||||||||||
Reported | IBNR | Net Loss | to Total Net | |||||||||||||
Reserves | Reserves | Reserves | Loss Reserves | |||||||||||||
($ in thousands) | ||||||||||||||||
Insurance Companies: | ||||||||||||||||
Marine | $ | 107,147 | $ | 109,361 | $ | 216,508 | 51 | % | ||||||||
Property Casualty | 158,740 | 308,613 | 467,353 | 66 | % | |||||||||||
Professional Liability | 46,096 | 78,469 | 124,565 | 63 | % | |||||||||||
Total Insurance Companies | 311,983 | 496,443 | 808,426 | 61 | % | |||||||||||
Lloyd’s Operations: | ||||||||||||||||
Marine | 111,914 | 112,708 | 224,622 | 50 | % | |||||||||||
Property Casualty | 30,327 | 29,792 | 60,119 | 50 | % | |||||||||||
Professional Liability | 9,904 | 39,471 | 49,375 | 80 | % | |||||||||||
Total Lloyd’s Operations | 152,145 | 181,971 | 334,116 | 54 | % | |||||||||||
Total | $ | 464,128 | $ | 678,414 | $ | 1,142,542 | 59 | % | ||||||||
December 31, 2009 | ||||||||||||||||
Net | Net | Total | % of IBNR | |||||||||||||
Reported | IBNR | Net Loss | to Total Net | |||||||||||||
Reserves | Reserves | Reserves | Loss Reserves | |||||||||||||
($ in thousands) | ||||||||||||||||
Insurance Companies: | ||||||||||||||||
Marine | $ | 113,604 | $ | 100,042 | $ | 213,646 | 47 | % | ||||||||
Property Casualty | 134,427 | 351,985 | 486,412 | 72 | % | |||||||||||
Professional Liability | 38,410 | 68,807 | 107,217 | 64 | % | |||||||||||
Total Insurance Companies | 286,441 | 520,834 | 807,275 | 65 | % | |||||||||||
Lloyd’s Operations: | ||||||||||||||||
Marine | 107,800 | 101,851 | 209,651 | 49 | % | |||||||||||
Property Casualty | 27,148 | 25,175 | 52,323 | 48 | % | |||||||||||
Professional Liability | 7,442 | 36,243 | 43,685 | 83 | % | |||||||||||
Total Lloyd’s Operations | 142,390 | 163,269 | 305,659 | 53 | % | |||||||||||
Total | $ | 428,831 | $ | 684,103 | $ | 1,112,934 | 61 | % | ||||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Gross written premiums | $ | 665,505 | $ | 730,776 | $ | 762,190 | ||||||
Net written premiums | 429,355 | 477,673 | 472,688 | |||||||||
Net earned premiums | 438,851 | 479,121 | 463,298 | |||||||||
Net losses and loss adjustment expenses | (280,120 | ) | (304,672 | ) | (275,767 | ) | ||||||
Commission expenses | (59,122 | ) | (61,949 | ) | (55,752 | ) | ||||||
Other operating expenses | (106,631 | ) | (104,801 | ) | �� | (92,297 | ) | |||||
Other income (expense) | 1,698 | 3,498 | 2,145 | |||||||||
Underwriting profit (loss) | (5,324 | ) | 11,197 | 41,627 | ||||||||
Net investment income | 62,792 | 65,717 | 63,544 | |||||||||
Net realized gains (losses) | 36,057 | 533 | (37,822 | ) | ||||||||
Income before income tax expense | 93,525 | 77,447 | 67,349 | |||||||||
Income tax expense | 27,219 | 19,819 | 16,401 | |||||||||
Net income | $ | 66,306 | $ | 57,628 | $ | 50,948 | ||||||
Identifiable assets | $ | 2,592,679 | $ | 2,554,037 | $ | 2,477,139 | ||||||
Loss and loss expenses ratio | 63.8 | % | 63.6 | % | 59.5 | % | ||||||
Commission expense ratio | 13.5 | % | 12.9 | % | 12.0 | % | ||||||
Other operating expenses ratio(1) | 23.9 | % | 21.1 | % | 19.5 | % | ||||||
Combined ratio | 101.2 | % | 97.6 | % | 91.0 | % | ||||||
(1) | IncludesOther operating expensesandOther income (expense). |
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Year Ended December 31, 2010 | ||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Net | Losses | |||||||||||||||||||||||||||
Earned | and LAE | Underwriting | Underwriting | Loss | Expense | Combined | ||||||||||||||||||||||
Premiums | Incurred | Expenses | Profit (Loss) | Ratio | Ratio | Ratio | ||||||||||||||||||||||
Marine | $ | 155,846 | $ | 100,579 | $ | 56,092 | $ | (825 | ) | 64.5 | % | 36.0 | % | 100.5 | % | |||||||||||||
Property Casualty | 200,741 | 110,902 | 77,040 | 12,799 | 55.2 | % | 38.4 | % | 93.6 | % | ||||||||||||||||||
Professional Liability | 82,264 | 68,639 | 30,923 | (17,298 | ) | 83.4 | % | 37.6 | % | 121.0 | % | |||||||||||||||||
Total | $ | 438,851 | $ | 280,120 | $ | 164,055 | $ | (5,324 | ) | 63.8 | % | 37.4 | % | 101.2 | % | |||||||||||||
Year Ended December 31, 2009 | ||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Net | Losses | |||||||||||||||||||||||||||
Earned | and LAE | Underwriting | Underwriting | Loss | Expense | Combined | ||||||||||||||||||||||
Premiums | Incurred | Expenses | Profit (Loss) | Ratio | Ratio | Ratio | ||||||||||||||||||||||
Marine | $ | 157,534 | $ | 109,916 | $ | 50,451 | $ | (2,833 | ) | 69.8 | % | 32.0 | % | 101.8 | % | |||||||||||||
Property Casualty | 246,143 | 123,775 | 86,116 | 36,252 | 50.3 | % | 35.0 | % | 85.3 | % | ||||||||||||||||||
Professional Liability | 75,444 | 70,981 | 26,685 | (22,222 | ) | 94.1 | % | 35.4 | % | 129.5 | % | |||||||||||||||||
Total | $ | 479,121 | $ | 304,672 | $ | 163,252 | $ | 11,197 | 63.6 | % | 34.0 | % | 97.6 | % | ||||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Net | Losses | |||||||||||||||||||||||||||
Earned | and LAE | Underwriting | Underwriting | Loss | Expense | Combined | ||||||||||||||||||||||
Premiums | Incurred | Expenses | Profit (Loss) | Ratio | Ratio | Ratio | ||||||||||||||||||||||
Marine | $ | 132,005 | $ | 84,099 | $ | 38,184 | $ | 9,722 | 63.7 | % | 28.9 | % | 92.6 | % | ||||||||||||||
Property Casualty | 273,977 | 158,457 | 87,310 | 28,210 | 57.8 | % | 31.9 | % | 89.7 | % | ||||||||||||||||||
Professional Liability | 57,316 | 33,211 | 20,410 | 3,695 | 57.9 | % | 35.6 | % | 93.5 | % | ||||||||||||||||||
Total | $ | 463,298 | $ | 275,767 | $ | 145,904 | $ | 41,627 | 59.5 | % | 31.5 | % | 91.0 | % | ||||||||||||||
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Hurricane | Hurricane | |||||||||||
Gustav | Ike | Total | ||||||||||
($ in thousands) | ||||||||||||
Reduction in net earned premiums for reinstatement costs | $ | (871 | ) | $ | (6,343 | ) | $ | (7,214 | ) | |||
Gross losses incurred | 7,200 | 53,800 | 61,000 | |||||||||
Reinsurance recoverable | 4,377 | 47,546 | 51,923 | |||||||||
Net losses incurred | 2,823 | 6,254 | 9,077 | |||||||||
Underwriting loss | $ | (3,694 | ) | $ | (12,597 | ) | $ | (16,291 | ) | |||
After-tax net loss | $ | (2,401 | ) | $ | (8,188 | ) | $ | (10,589 | ) | |||
Reduction in earnings per share | $ | (0.14 | ) | $ | (0.48 | ) | $ | (0.62 | ) | |||
Effect on combined ratio: | ||||||||||||
Loss and LAE ratio | 0.7 | % | 2.1 | % | 2.8 | % | ||||||
Expense ratio | 0.1 | % | 0.4 | % | 0.5 | % | ||||||
Combined ratio | 0.8 | % | 2.5 | % | 3.3 | % | ||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Gross written premiums | $ | 321,696 | $ | 314,142 | $ | 322,732 | ||||||
Net written premiums | 224,583 | 223,582 | 188,927 | |||||||||
Net earned premiums | 221,080 | 204,242 | 180,678 | |||||||||
Net losses and loss adjustment expenses | (141,035 | ) | (131,326 | ) | (117,364 | ) | ||||||
Commission expenses | (49,991 | ) | (37,727 | ) | (34,033 | ) | ||||||
Other operating expenses | (33,112 | ) | (27,896 | ) | (30,961 | ) | ||||||
Other income (expense) | 3,488 | 961 | (600 | ) | ||||||||
Underwriting profit (loss) | 430 | 8,254 | (2,280 | ) | ||||||||
Net investment income | 8,286 | 9,229 | 11,655 | |||||||||
Net realized gains (losses) | 3,323 | (3,193 | ) | (477 | ) | |||||||
Income before income tax expense | 12,039 | 14,290 | 8,898 | |||||||||
Income tax expense | 4,389 | 5,582 | 3,269 | |||||||||
Net income | $ | 7,650 | $ | 8,708 | $ | 5,629 | ||||||
Identifiable assets | $ | 842,121 | $ | 799,577 | $ | 779,800 | ||||||
Loss and loss expenses ratio | 63.8 | % | 64.3 | % | 65.0 | % | ||||||
Commission expense ratio | 22.6 | % | 18.5 | % | 18.8 | % | ||||||
Other operating expenses ratio(1) | 13.4 | % | 13.2 | % | 17.5 | % | ||||||
Combined ratio | 99.8 | % | 96.0 | % | 101.3 | % | ||||||
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Hurricane | Hurricane | |||||||||||
Gustav | Ike | Total | ||||||||||
($ in thousands) | ||||||||||||
Reduction in net earned premiums for reinstatement costs | $ | (672 | ) | $ | (4,292 | ) | $ | (4,964 | ) | |||
Gross losses incurred | 6,800 | 46,200 | 53,000 | |||||||||
Reinsurance recoverable | 4,623 | 40,285 | 44,908 | |||||||||
Net losses incurred | 2,177 | 5,915 | 8,092 | |||||||||
Underwriting loss | $ | (2,849 | ) | $ | (10,207 | ) | $ | (13,056 | ) | |||
After-tax net loss | $ | (1,852 | ) | $ | (6,635 | ) | $ | (8,487 | ) | |||
Reduction in earnings per share | $ | (0.11 | ) | $ | (0.39 | ) | $ | (0.50 | ) | |||
Effect on combined ratio: | ||||||||||||
Loss and LAE ratio | 1.4 | % | 4.7 | % | 6.1 | % | ||||||
Expense ratio | 0.2 | % | 0.8 | % | 1.0 | % | ||||||
Combined ratio | 1.6 | % | 5.5 | % | 7.1 | % | ||||||
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
Reserves for losses and LAE(1) | $ | 1,985,838 | $ | 626,385 | $ | 762,637 | $ | 347,321 | $ | 249,495 | ||||||||||
7% Senior Notes(2) | 159,275 | 8,050 | 16,100 | 16,100 | 119,025 | |||||||||||||||
Operating Leases | 57,017 | 9,748 | 18,020 | 14,649 | 14,600 | |||||||||||||||
Total | $ | 2,202,130 | $ | 644,183 | $ | 796,757 | $ | 378,070 | $ | 383,120 | ||||||||||
(1) | The amounts determined are estimates which are subject to a high degree of variation and uncertainty, and are not subject to any specific payment schedule since the timing of these obligations are not set contractually. The amounts in the above table exclude reinsurance recoveries of $843 million. See “Business — Loss Reserves” included herein. | |
(2) | Includes interest payments. |
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Gross | Gross | OTTI | ||||||||||||||||||
Unrealized | Unrealized | Cost or | Recognized | |||||||||||||||||
December 31, 2010 | Fair Value | Gains | (Losses) | Amortized Cost | in OCI | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 324,145 | $ | 5,229 | $ | (4,499 | ) | $ | 323,415 | $ | — | |||||||||
States, municipalities and political subdivisions | 392,250 | 11,903 | (3,805 | ) | 384,152 | — | ||||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||||||
Agency mortgage-backed securities | 382,628 | 10,127 | (2,434 | ) | 374,935 | — | ||||||||||||||
Residential mortgage obligations | 20,463 | 24 | (2,393 | ) | 22,832 | (1,646 | ) | |||||||||||||
Asset-backed securities | 46,093 | 247 | (292 | ) | 46,138 | — | ||||||||||||||
Commercial mortgage-backed securities | 190,015 | 4,804 | (1,794 | ) | 187,005 | — | ||||||||||||||
Subtotal | 639,199 | 15,202 | (6,913 | ) | 630,910 | (1,646 | ) | |||||||||||||
Corporate bonds | 526,651 | 15,075 | (5,545 | ) | 517,121 | — | ||||||||||||||
Total fixed maturities | 1,882,245 | 47,409 | (20,762 | ) | 1,855,598 | (1,646 | ) | |||||||||||||
Equity securities — common stocks | 87,258 | 22,475 | (10 | ) | 64,793 | — | ||||||||||||||
Cash | 31,768 | — | — | 31,768 | — | |||||||||||||||
Short-term investments | 153,057 | — | — | 153,057 | — | |||||||||||||||
Total | $ | 2,154,328 | $ | 69,884 | $ | (20,772 | ) | $ | 2,105,216 | $ | (1,646 | ) | ||||||||
Gross | Gross | OTTI | ||||||||||||||||||
Unrealized | Unrealized | Cost or | Recognized | |||||||||||||||||
December 31, 2009 | Fair Value | Gains | (Losses) | Amortized Cost | in OCI | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 471,598 | $ | 7,397 | $ | (597 | ) | $ | 464,798 | $ | — | |||||||||
States, municipalities and political subdivisions | 676,699 | 25,044 | (2,917 | ) | 654,572 | — | ||||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||||||
Agency mortgage-backed securities | 283,578 | 12,607 | (98 | ) | 271,069 | — | ||||||||||||||
Residential mortgage obligations | 31,071 | — | (7,246 | ) | 38,317 | (5,723 | ) | |||||||||||||
Asset-backed securities | 16,469 | 612 | (34 | ) | 15,891 | (23 | ) | |||||||||||||
Commercial mortgage-backed securities | 100,393 | 594 | (5,028 | ) | 104,827 | — | ||||||||||||||
Subtotal | 431,511 | 13,813 | (12,406 | ) | 430,104 | (5,746 | ) | |||||||||||||
Corporate bonds | 236,861 | 9,111 | (759 | ) | 228,509 | — | ||||||||||||||
Total fixed maturities | 1,816,669 | 55,365 | (16,679 | ) | 1,777,983 | (5,746 | ) | |||||||||||||
Equity securities — common stocks | 62,610 | 15,244 | (10 | ) | 47,376 | — | ||||||||||||||
Cash | 509 | — | — | 509 | — | |||||||||||||||
Short-term investments | 176,799 | — | — | 176,799 | — | |||||||||||||||
Total | $ | 2,056,587 | $ | 70,609 | $ | (16,689 | ) | $ | 2,002,667 | $ | (5,746 | ) | ||||||||
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Quoted Prices | Significant | |||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
December 31, 2010 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
($ in thousands) | ||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 212,933 | $ | 111,212 | $ | — | $ | 324,145 | ||||||||
States, municipalities and political subdivisions | — | 392,250 | — | 392,250 | ||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||
Agency mortgage-backed securities | — | 382,628 | — | 382,628 | ||||||||||||
Residential mortgage obligations | — | 20,463 | — | 20,463 | ||||||||||||
Asset-backed securities | — | 46,093 | — | 46,093 | ||||||||||||
Commercial mortgage-backed securities | — | 188,178 | 1,837 | 190,015 | ||||||||||||
Subtotal | — | 637,362 | 1,837 | 639,199 | ||||||||||||
Corporate bonds | — | 526,651 | — | 526,651 | ||||||||||||
Total fixed maturities | 212,933 | 1,667,475 | 1,837 | 1,882,245 | ||||||||||||
Equity securities — common stocks | 87,258 | — | — | 87,258 | ||||||||||||
Total | $ | 300,191 | $ | 1,667,475 | $ | 1,837 | $ | 1,969,503 | ||||||||
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Gross | Gross | Cost or | ||||||||||||||
Fair | Unrealized | Unrealized | Amortized | |||||||||||||
December 31, 2010 | Value | Gains | (Losses) | Cost | ||||||||||||
($ in thousands) | ||||||||||||||||
U.S. Treasury bonds | $ | 213,544 | $ | 3,552 | $ | (3,554 | ) | $ | 213,546 | |||||||
Agency bonds | 77,229 | 1,311 | (604 | ) | 76,522 | |||||||||||
Foreign government bonds | 33,372 | 366 | (341 | ) | 33,347 | |||||||||||
Total | $ | 324,145 | $ | 5,229 | $ | (4,499 | ) | $ | 323,415 | |||||||
Gross | Gross | Cost or | ||||||||||||||
Fair | Unrealized | Unrealized | Amortized | |||||||||||||
December 31, 2009 | Value | Gains | (Losses) | Cost | ||||||||||||
($ in thousands) | ||||||||||||||||
U.S. Treasury bonds | $ | 362,614 | $ | 5,549 | $ | (560 | ) | $ | 357,625 | |||||||
Agency bonds | 82,739 | 1,489 | — | 81,250 | ||||||||||||
Foreign government bonds | 26,245 | 359 | (37 | ) | 25,923 | |||||||||||
Total | $ | 471,598 | $ | 7,397 | $ | (597 | ) | $ | 464,798 | |||||||
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Net | Cost or | |||||||||||||
Fair | Unrealized | Amortized | S&P | |||||||||||
Value | Gains/(Losses) | Cost | Rating | |||||||||||
($ in thousands) | ||||||||||||||
Issuers: | ||||||||||||||
University of Pittsburgh | $ | 13,594 | $ | 194 | $ | 13,400 | AA | |||||||
Virginia Resources Authority | 11,140 | 651 | 10,489 | AAA | ||||||||||
New York City Transitional Finance Authority | 7,966 | 165 | 7,801 | A+ | ||||||||||
Illinois Finance Authority | 7,859 | (56 | ) | 7,915 | BBB | |||||||||
County of Hamilton | 7,791 | 7 | 7,784 | A+ | ||||||||||
New York Local Government Assistance | 6,922 | 428 | 6,494 | AA | ||||||||||
Missouri Highway and Transportation Comm | 6,899 | 236 | 6,663 | AA+ | ||||||||||
Delaware Transportation Authority | 6,872 | 601 | 6,271 | AA | ||||||||||
Texas State Transportation Comm | 6,616 | (293 | ) | 6,909 | AAA | |||||||||
Ohio State University | 6,564 | (686 | ) | 7,250 | AA | |||||||||
Virginia College Building Authority | 6,521 | 214 | 6,307 | AA+ | ||||||||||
Purdue University | 6,039 | (239 | ) | 6,278 | AA+ | |||||||||
Pennsylvania Turnpike Commission | 6,012 | (22 | ) | 6,034 | A+ | |||||||||
Energy Northwest | 5,958 | (32 | ) | 5,990 | AA | |||||||||
New York State Thruway Authority | 5,913 | 358 | 5,555 | AA- | ||||||||||
Subtotal | 112,666 | 1,526 | 111,140 | |||||||||||
All Other | 279,584 | 6,572 | 273,012 | |||||||||||
Total | $ | 392,250 | $ | 8,098 | $ | 384,152 | ||||||||
Equivalent | Equivalent | Net | ||||||||||||
S&P | Moody’s | Unrealized | ||||||||||||
Rating | Rating | Fair Value | Book Value | Gain/(Loss) | ||||||||||
($ in thousands) | ||||||||||||||
AAA/AA/A | Aaa/Aa/A | $ | 370,250 | $ | 362,105 | $ | 8,145 | |||||||
BBB | Baa | 16,915 | 16,966 | (51 | ) | |||||||||
BB | Ba | — | — | — | ||||||||||
B | B | — | — | — | ||||||||||
CCC or lower | Caa or lower | — | — | — | ||||||||||
NR | NR | 5,085 | 5,081 | 4 | ||||||||||
Total | $ | 392,250 | $ | 384,152 | $ | 8,098 | ||||||||
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December 31, 2010 | December 31, 2009 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Municipal Sector | Fair Value | Total | Fair Value | Total | ||||||||||||
($ in thousands) | ||||||||||||||||
General Obligation | $ | 13,249 | 3 | % | $ | 282,738 | 42 | % | ||||||||
Prerefunded | 14,122 | 4 | % | 8,771 | 1 | % | ||||||||||
Revenue | 313,166 | 80 | % | 342,830 | 51 | % | ||||||||||
Taxable | 51,713 | 13 | % | 42,360 | 6 | % | ||||||||||
$ | 392,250 | 100 | % | $ | 676,699 | 100 | % | |||||||||
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Gross | Gross | Cost or | ||||||||||||||
Fair | Unrealized | Unrealized | Amortized | |||||||||||||
Value | Gains | (Losses) | Cost | |||||||||||||
($ in thousands) | ||||||||||||||||
Agency mortgage-backed securities: | ||||||||||||||||
GNMA | $ | 142,677 | $ | 3,478 | $ | (1,006 | ) | $ | 140,205 | |||||||
FNMA | 191,682 | 5,386 | (937 | ) | 187,233 | |||||||||||
FHLMC | 48,269 | 1,263 | (491 | ) | 47,497 | |||||||||||
Total | $ | 382,628 | $ | 10,127 | $ | (2,434 | ) | $ | 374,935 | |||||||
Gross | Gross | Cost or | ||||||||||||||
Fair | Unrealized | Unrealized | Amortized | |||||||||||||
Value | Gains | (Losses) | Cost | |||||||||||||
($ in thousands) | ||||||||||||||||
Residential mortgage obligations: | ||||||||||||||||
Prime | $ | 15,369 | $ | 24 | $ | (1,999 | ) | $ | 17,344 | |||||||
Alt-A | 2,453 | — | (379 | ) | 2,832 | |||||||||||
Subprime | — | — | — | — | ||||||||||||
Non-US RMBS | 2,641 | (15 | ) | 2,656 | ||||||||||||
Total | $ | 20,463 | $ | 24 | $ | (2,393 | ) | $ | 22,832 | |||||||
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Issue | Fair | Book | Unrealized | S&P | Moody’s | |||||||||||||
Security Description | Date | Value | Value | (Loss) | Rating | Rating | ||||||||||||
($ in thousands) | ||||||||||||||||||
Arkle Master Issuer Plc 10-2A 1A1 | 2010 | $ | 2,497 | $ | 2,500 | $ | (3 | ) | AAA | Aaa | ||||||||
Wells Fargo Mtg Bkd Secs Tr 05 Ar4 2A2 | 2005 | 877 | 881 | (4 | ) | NR | Ba2 | |||||||||||
Bear Stearns Adjustable Rate 06 1 A1 | 2006 | 606 | 675 | (69 | ) | NR | B2 | |||||||||||
JP Morgan Mortgage Trust 07-A3 1A1 | 2007 | 595 | 745 | (150 | ) | CCC | NR | |||||||||||
JP Morgan Mortgage Trust 06 A4 1A1 | 2006 | 574 | 711 | (137 | ) | NR | Caa2 | |||||||||||
Wells Fargo Mtg Bkd Secs Tr 06 Ar6 3A | 2006 | 571 | 654 | (83 | ) | NR | B3 | |||||||||||
GSR Mortgage Loan Trust 06 Ar1 2A1 | 2006 | 570 | 703 | (133 | ) | B+ | NR | |||||||||||
Banc Of America Fdg Corp 05 F 4A1 | 2005 | 565 | 614 | (49 | ) | CCC | Caa2 | |||||||||||
Citigroup Mtg Ln Tr Inc 04 Hyb3 1A | 2004 | 549 | 590 | (41 | ) | AA- | A1 | |||||||||||
Wells Fargo Mortgage Backed Se 06-Ar14 2 | 2006 | 530 | 582 | (52 | ) | NR | Caa2 | |||||||||||
Mortgageit Trust 05 1 2A | 2005 | 521 | 581 | (60 | ) | AAA | Ba3 | |||||||||||
Banc Of America Fdg Corp 06 D 3A1 | 2006 | 518 | 607 | (89 | ) | CCC | NR | |||||||||||
First Horizon Mtg Pass-Th 05 Ar4 2A | 2005 | 478 | 493 | (15 | ) | CCC | NR | |||||||||||
Citigroup Mtg Ln Tr Inc 06 Ar1 3A1 | 2006 | 475 | 533 | (58 | ) | NR | Caa3 | |||||||||||
JP Morgan Mortgage Trust 05 A6 7A1 | 2005 | 459 | 558 | (99 | ) | CCC | NR | |||||||||||
Subtotal | 10,385 | 11,427 | (1,042 | ) | ||||||||||||||
All Other | 10,078 | 11,405 | (1,327 | ) | ||||||||||||||
Total | $ | 20,463 | $ | 22,832 | $ | (2,369 | ) | |||||||||||
Total | ||||||||||||||||||||||||||||
Total | Amortized | Unrealized | ||||||||||||||||||||||||||
AAA | AA | A | BBB | Fair Value | Cost | Gain/(Loss) | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Auto Loans | $ | 545 | $ | 6,413 | $ | 35 | $ | 3,609 | $ | 10,602 | $ | 10,570 | $ | 32 | ||||||||||||||
Credit Cards | 5,401 | — | — | — | 5,401 | 5,498 | (97 | ) | ||||||||||||||||||||
Miscellaneous | 6,247 | 20,432 | 3,411 | 30,090 | 30,070 | 20 | ||||||||||||||||||||||
Total | $ | 12,193 | $ | 6,413 | $ | 20,467 | $ | 7,020 | $ | 46,093 | $ | 46,138 | $ | (45 | ) | |||||||||||||
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Average | ||||||||||||||||||||||||||
Issue | Fair | Book | Underlying | Delinq. | Subord. | S&P | Moody’s | |||||||||||||||||||
Security Description | Date | Value | Value | LTV % | Rate | Level | Rating | Rating | ||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||
Morgan Stanley Cap I 06 IQ12 A4 | 2006 | $ | 22,039 | $ | 22,671 | 72.54 | % | 13.29 | % | 29.24 | % | AAA | NR | |||||||||||||
Wachovia Bk Comm Mtg Tr 06 C23 A4 | 2006 | 15,227 | 15,569 | 75.33 | % | 6.44 | % | 32.95 | % | AA- | Aaa | |||||||||||||||
Banc Of America Comm Mtg 06 2 A4 | 2006 | 12,042 | 12,040 | 76.82 | % | 12.02 | % | 30.89 | % | AAA | NR | |||||||||||||||
GSMS 2010-C1 A2 | 2010 | 8,077 | 8,276 | 53.32 | % | 0.00 | % | 18.60 | % | NR | Aaa | |||||||||||||||
Wachovia Bk Comm Mtg Tr 05 C18 A4 | 2005 | 7,440 | 6,881 | 79.92 | % | 14.94 | % | 34.02 | % | AAA | Aaa | |||||||||||||||
Four Times Square Tr 06-4Ts A | 2006 | 7,267 | 7,027 | 39.40 | % | 0.00 | % | 8.04 | % | AAA | Aa1 | |||||||||||||||
Citigroup Comm Mtg Tr 06 C5 A4 | 2006 | 7,209 | 6,977 | 72.11 | % | 3.74 | % | 29.50 | % | NR | Aaa | |||||||||||||||
Credit Suisse Mortgage Capital 06-OMA B2 | 2006 | 6,928 | 7,170 | 65.71 | % | 0.00 | % | 52.76 | % | NR | Aa1 | |||||||||||||||
LB-UBS Comm Mtg Tr 06 C7 A3 | 2006 | 6,661 | 6,324 | 71.34 | % | 8.07 | % | 30.03 | % | AAA | NR | |||||||||||||||
GS Mortgage Securities Corpora 10-C1 B | 2010 | 6,097 | 6,174 | 53.32 | % | 0.00 | % | 15.08 | % | NR | Aa2 | |||||||||||||||
LB-UBS Comm Mtg Tr 06 C6 A4 | 2006 | 5,670 | 5,795 | 65.89 | % | 5.78 | % | 28.01 | % | AAA | Aaa | |||||||||||||||
Bear Stearns Comm Mtg Secs 06 T22 A4 | 2006 | 5,325 | 4,886 | 58.37 | % | 1.07 | % | 30.62 | % | NR | Aaa | |||||||||||||||
Morgan Stanley Capital I 06 Hq10 A4 | 2006 | 4,765 | 4,749 | 73.60 | % | 11.66 | % | 32.37 | % | NR | Aaa | |||||||||||||||
Citigroup/Deutsche Bk Comm Mtg 05 CD1 A4 | 2005 | 4,520 | 4,207 | 73.35 | % | 10.74 | % | 31.57 | % | AAA | Aaa | |||||||||||||||
Commercial Mtg Pt Cert 05 C6 A5A | 2005 | 4,334 | 4,051 | 76.59 | % | 9.29 | % | 31.49 | % | AAA | Aaa | |||||||||||||||
Subtotal | 123,601 | 122,797 | ||||||||||||||||||||||||
All Other | 66,414 | 64,208 | ||||||||||||||||||||||||
Total | $ | 190,015 | $ | 187,005 | ||||||||||||||||||||||
Percent | ||||||||||
Rating | Fair | of | ||||||||
Description | Rating | Value | Total | |||||||
($ in thousands) | ||||||||||
Extremely Strong | AAA | $ | 1,122,760 | 55 | % | |||||
Very Strong | AA | 355,094 | 17 | % | ||||||
Strong | A | 441,008 | 22 | % | ||||||
Adequate | BBB | 96,894 | 5 | % | ||||||
Speculative | BB & below | 14,461 | 1 | % | ||||||
Not Rated | NR | 5,085 | 0 | % | ||||||
Total | $ | 2,035,302 | 100 | % | ||||||
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Net | Cost or | |||||||||||||
Fair | Unrealized | Amortized | S&P | |||||||||||
Value | Gains/(Losses) | Cost | Rating | |||||||||||
($ in thousands) | ||||||||||||||
Issuers: | ||||||||||||||
General Electric | $ | 25,750 | $ | 1,755 | $ | 23,995 | AA | |||||||
Barclays PLC | 17,529 | 423 | 17,106 | AA- | ||||||||||
Morgan Stanley | 17,004 | 110 | 16,894 | A- | ||||||||||
Goldman Sachs Group Inc | 16,182 | 344 | 15,838 | A- | ||||||||||
J.P. Morgan Chase & Co | 16,086 | 157 | 15,929 | A | ||||||||||
Wells Fargo & Co | 15,982 | 184 | 15,798 | A+ | ||||||||||
Credit Suisse Group AG | 14,205 | (184 | ) | 14,389 | A+ | |||||||||
Southern Co | 12,349 | 539 | 11,810 | A- | ||||||||||
Citigroup Inc | 11,398 | 515 | 10,883 | A- | ||||||||||
Consolidated Edison Inc | 11,071 | 356 | 10,715 | A- | ||||||||||
Wal-Mart Stores Inc | 11,052 | (515 | ) | 11,567 | AA | |||||||||
Baker Hughes Inc | 10,972 | 537 | 10,435 | A | ||||||||||
Bank of America Corp | 10,950 | 178 | 10,772 | A- | ||||||||||
Deutsche Bank AG | 10,245 | 307 | 9,938 | A+ | ||||||||||
Transcanada Corp | 10,197 | 741 | 9,456 | A- | ||||||||||
Subtotal | 210,972 | 5,447 | 205,525 | |||||||||||
All Other | 315,679 | 4,083 | 311,596 | |||||||||||
Total | $ | 526,651 | $ | 9,530 | $ | 517,121 | ||||||||
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Net | Cost or | |||||||||||
Fair | Unrealized | Amortized | ||||||||||
Value | Gains/(Losses) | Cost | ||||||||||
($ in thousands) | ||||||||||||
Issuers: | ||||||||||||
Vanguard Total Stock Market Index | $ | 5,457 | $ | 2,066 | $ | 3,391 | ||||||
Vanguard Emerging Market Stock Index | 5,007 | 2,485 | 2,522 | |||||||||
Vanguard Pacific Stock Index | 4,602 | 1,503 | 3,099 | |||||||||
Vanguard European Stock Index | 4,080 | 1,305 | 2,775 | |||||||||
Conocophillips | 2,887 | 1,037 | 1,850 | |||||||||
Philip Morris International Inc | 2,543 | 839 | 1,704 | |||||||||
Chevron Corp | 2,532 | 788 | 1,744 | |||||||||
Altria Group Inc | 2,415 | 795 | 1,620 | |||||||||
General Electric | 2,373 | 558 | 1,815 | |||||||||
AT&T Inc | 2,324 | 370 | 1,954 | |||||||||
HJ Heinz Co | 2,273 | 404 | 1,869 | |||||||||
Vodafone Group Plc | 2,230 | 675 | 1,555 | |||||||||
Johnson & Johnson | 2,193 | 130 | 2,063 | |||||||||
Bristol-Myers Squibb Co | 2,176 | 396 | 1,780 | |||||||||
Diageo Plc | 2,156 | 672 | 1,484 | |||||||||
Subtotal | 45,248 | 14,023 | 31,225 | |||||||||
All Other | 42,010 | 8,442 | 33,568 | |||||||||
Total | $ | 87,258 | $ | 22,465 | $ | 64,793 | ||||||
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December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Number of | Fair | Gross | Number of | Fair | Gross | |||||||||||||||||||
Securities | Value | Unrealized Loss | Securities | Value | Unrealized Loss | |||||||||||||||||||
($ in thousands except # of securities) | ||||||||||||||||||||||||
Fixed Maturities: | ||||||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | ||||||||||||||||||||||||
0-6 Months | 36 | $ | 163,253 | $ | 4,499 | 24 | $ | 116,566 | $ | 597 | ||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 36 | 163,253 | 4,499 | 24 | 116,566 | 597 | ||||||||||||||||||
States, municipalities and political subdivisions | ||||||||||||||||||||||||
0-6 Months | 57 | 112,291 | 3,749 | 47 | 108,290 | 2,291 | ||||||||||||||||||
7-12 Months | 1 | 1,004 | 20 | 4 | 3,534 | 112 | ||||||||||||||||||
> 12 Months | 4 | 1,317 | 36 | 23 | 17,777 | 514 | ||||||||||||||||||
Subtotal | 62 | 114,612 | 3,805 | 74 | 129,601 | 2,917 | ||||||||||||||||||
Agency mortgage-backed securities | ||||||||||||||||||||||||
0-6 Months | 36 | 139,226 | 2,434 | 5 | 18,385 | 98 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 36 | 139,226 | 2,434 | 5 | 18,385 | 98 | ||||||||||||||||||
Residential mortgage obligations | ||||||||||||||||||||||||
0-6 Months | 3 | 3,215 | 20 | — | — | — | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 52 | 15,939 | 2,373 | 73 | 31,071 | 7,246 | ||||||||||||||||||
Subtotal | 55 | 19,154 | 2,393 | 73 | 31,071 | 7,246 | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||||||||
0-6 Months | 7 | 28,175 | 292 | — | — | — | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 1 | 2 | — | 4 | 637 | 34 | ||||||||||||||||||
Subtotal | 8 | 28,177 | 292 | 4 | 637 | 34 | ||||||||||||||||||
Commercial mortgage-backed securities | ||||||||||||||||||||||||
0-6 Months | 16 | 78,212 | 1,755 | 11 | 28,103 | 324 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 2 | 491 | 39 | 21 | 45,135 | 4,704 | ||||||||||||||||||
Subtotal | 18 | 78,703 | 1,794 | 32 | 73,238 | 5,028 | ||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||||
0-6 Months | 98 | 214,180 | 5,545 | 13 | 33,275 | 337 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | 8 | 6,325 | 422 | ||||||||||||||||||||
Subtotal | 98 | 214,180 | 5,545 | 21 | 39,600 | 759 | ||||||||||||||||||
Total fixed maturities | 313 | $ | 757,305 | $ | 20,762 | 233 | $ | 409,098 | $ | 16,679 | ||||||||||||||
Equity securities — common stocks | ||||||||||||||||||||||||
0-6 Months | 1 | $ | 322 | $ | 10 | — | $ | — | $ | — | ||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | 1 | 872 | 10 | ||||||||||||||||||
Total equity securities | 1 | $ | 322 | $ | 10 | 1 | $ | 872 | $ | 10 | ||||||||||||||
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6 months | ||||||||||||||||||||
Longer than 3 | or longer, less | |||||||||||||||||||
Less than 3 | months, less | than 12 | 12 months | |||||||||||||||||
months | than 6 months | months | or longer | Total | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Fixed maturities | $ | — | $ | — | $ | — | $ | (607 | ) | $ | (607 | ) | ||||||||
Equity securities | — | — | — | — | — | |||||||||||||||
Total | $ | — | $ | — | $ | — | $ | (607 | ) | $ | (607 | ) | ||||||||
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Gross | ||||||||||||||||||||
Equivalent | Equivalent | Unrealized Loss | Fair Value | |||||||||||||||||
NAIC | S&P | Moody’s | Percent | Percent | ||||||||||||||||
Rating | Rating | Rating | Amount | of Total | Amount | of Total | ||||||||||||||
($ in thousands) | ||||||||||||||||||||
1 | AAA/AA/A | Aaa/Aa/A | $ | 17,552 | 85 | % | $ | 693,279 | 92 | % | ||||||||||
2 | BBB | Baa | 1,092 | 5 | % | 48,831 | 6 | % | ||||||||||||
3 | BB | Ba | 161 | 1 | % | 1,908 | 0 | % | ||||||||||||
4 | B | B | 531 | 3 | % | 4,044 | 1 | % | ||||||||||||
5 | CCC or lower | Caa or lower | 1,347 | 6 | % | 7,945 | 1 | % | ||||||||||||
6 | NR | NR | 79 | 0 | % | 1,298 | 0 | % | ||||||||||||
Total | $ | 20,762 | 100 | % | $ | 757,305 | 100 | % | ||||||||||||
Gross | ||||||||||||||||
Unrealized Loss | Fair Value | |||||||||||||||
Percent | Percent | |||||||||||||||
Amount | of Total | Amount | of Total | |||||||||||||
($ in thousands) | ||||||||||||||||
Due in one year or less | $ | 2 | 0 | % | $ | 1,430 | 0 | % | ||||||||
Due after one year through five years | 2,087 | 10 | % | 153,866 | 20 | % | ||||||||||
Due after five years through ten years | 7,284 | 35 | % | 218,215 | 29 | % | ||||||||||
Due after ten years | 4,476 | 22 | % | 118,534 | 16 | % | ||||||||||
Mortgage- and asset-backed securities | 6,913 | 33 | % | 265,260 | 35 | % | ||||||||||
Total fixed maturity securities | $ | 20,762 | 100 | % | $ | 757,305 | 100 | % | ||||||||
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December 31, | December 31, | |||||||
2010 | 2009 | |||||||
($ in thousands) | ||||||||
Senior debt | $ | 114,138 | $ | 114,010 | ||||
Stockholders’ equity | 829,354 | 801,519 | ||||||
Total capitalization | $ | 943,492 | $ | 915,529 | ||||
Ratio of debt to total capitalization | 12.1 | % | 12.5 | % | ||||
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December 31, | ||||||||
2010 | 2009 | |||||||
($ in thousands, except share data) | ||||||||
ASSETS | ||||||||
Cash and investments | $ | 53,217 | $ | 63,676 | ||||
Investments in subsidiaries | 877,999 | 846,295 | ||||||
Goodwill and other intangible assets | 2,534 | 2,534 | ||||||
Other assets | 12,028 | 5,213 | ||||||
Total assets | $ | 945,778 | $ | 917,718 | ||||
LIABILITIES | ||||||||
7% Senior Notes | $ | 114,138 | $ | 114,010 | ||||
Accounts payable and other liabilities | 946 | 847 | ||||||
Accrued interest payable | 1,340 | 1,342 | ||||||
Total liabilities | 116,424 | 116,199 | ||||||
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 17,274,440 shares for 2010 and 17,212,814 shares for 2009 | 1,728 | 1,721 | ||||||
Additional paid-in capital | 312,588 | 304,505 | ||||||
Treasury stock, at cost (1,532,273 shares for 2010 and 366,330 shares for 2009) | (64,935 | ) | (18,296 | ) | ||||
Retained earnings | 539,512 | 469,934 | ||||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains (losses) on securities available-for-sale, net of tax | 31,474 | 34,958 | ||||||
Foreign currency translation adjustment, net of tax | 8,987 | 8,697 | ||||||
Total stockholders’ equity | 829,354 | 801,519 | ||||||
Total liabilities and stockholders’ equity | $ | 945,778 | $ | 917,718 | ||||
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Interest Rate Shift in Basis Points | ||||||||||||||||||||
-100 | -50 | 0 | +50 | +100 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
December 31, 2010: | ||||||||||||||||||||
Total market value | $ | 2,132,182 | $ | 2,084,353 | $ | 2,035,302 | $ | 1,986,455 | $ | 1,938,625 | ||||||||||
Market value change from base | 4.76 | % | 2.41 | % | -2.40 | % | -4.75 | % | ||||||||||||
Change in unrealized value | $ | 96,880 | $ | 49,051 | $ | — | $ | (48,847 | ) | $ | (96,677 | ) |
USD equivalent | ||||||||||||||||
as of | Negative currency movement of | |||||||||||||||
(amounts in millions) | December 31, 2010 | 5% | 10% | 15% | ||||||||||||
Cash, cash equivalents and marketable securities at fair value | $ | 100.5 | $ | (5.0 | ) | $ | (10.1 | ) | $ | (15.1 | ) | |||||
Premiums receivable | $ | 23.9 | $ | (1.2 | ) | $ | (2.4 | ) | $ | (3.6 | ) | |||||
Reinsurance recoverables on paid, unpaid losses and loss adjustment expenses | $ | 72.8 | $ | (3.6 | ) | $ | (7.3 | ) | $ | (10.9 | ) | |||||
Reserves for losses and loss adjustment expenses | $ | (181.4 | ) | $ | 9.1 | $ | 18.1 | $ | 27.2 |
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The Navigators Group, Inc.
February 18, 2011
102
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a. | Financial Statements and Schedules:The financial statements and schedules that are listed in the accompanying Index to Consolidated Financial Statements and Schedules on page F-1. |
b. | Exhibits:The exhibits that are listed in the accompanying Index to Exhibits on the page which immediately follows page S-8. The exhibits include the management contracts and compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by Item 601(a)(10)(iii) of Regulation S-K. |
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The Navigators Group, Inc. (Company) | ||||
Dated: February 18, 2011 | By: | /s/ FRANCIS W. MCDONNELL | ||
Francis W. McDonnell | ||||
Senior Vice President and Chief Financial Officer |
Name | Title | Date | ||
/s/ TERENCE N. DEEKS | Chairman | February 18, 2011 | ||
/s/ STANLEY A. GALANSKI | President and Chief Executive Officer (Principal Executive Officer) | February 18, 2011 | ||
/s/ FRANCIS W. MCDONNELL | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | February 18, 2011 | ||
/s/ THOMAS C. CONNOLLY | Vice President and Treasurer Navigators Management Company (Principal Accounting Officer) | February 18, 2011 | ||
/s/ H.J. MERVYN BLAKENEY | Director | February 18, 2011 | ||
/s/ PETER A. CHENEY | Director | February 18, 2011 | ||
/s/ WILLIAM T. FORRESTER | Director | February 18, 2011 | ||
/s/ JOHN F. KIRBY | Director | February 18, 2011 | ||
/s/ MARC M. TRACT | Director | February 18, 2011 | ||
/s/ ROBERT V. MENDELSOHN | Director | February 18, 2011 | ||
Robert V. Mendelsohn | ||||
/s/ MARJORIE D. RAINES | Director | February 18, 2011 | ||
Marjorie D. Raines |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
SCHEDULES: | ||||
Schedule I Summary of Consolidated Investments—Other Than Investment in Related Parties | S-1 | |||
Schedule II Condensed Financial Information of Registrant | S-2 | |||
Schedule III Supplementary Insurance Information | S-5 | |||
Schedule IV Reinsurance | S-6 | |||
Schedule V Valuation and Qualifying Accounts | S-7 | |||
Schedule VI Supplementary Information Concerning Property-Casualty Insurance Operations | S-8 | |||
F-1
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The Navigators Group, Inc.
February 18, 2011
F-2
Table of Contents
($ in thousands, except share data)
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Investments and cash: | ||||||||
Fixed maturities, available-for-sale, at fair value (amortized cost: 2010, $1,855,598; 2009, $1,777,983) | $ | 1,882,245 | $ | 1,816,669 | ||||
Equity securities, available-for-sale, at fair value (cost: 2010, $64,793; 2009, $47,376) | 87,258 | 62,610 | ||||||
Short-term investments, at cost which approximates fair value | 153,057 | 176,799 | ||||||
Cash | 31,768 | 509 | ||||||
Total investments and cash | 2,154,328 | 2,056,587 | ||||||
Premiums receivable | 188,368 | 193,460 | ||||||
Prepaid reinsurance premiums | 156,869 | 162,344 | ||||||
Reinsurance recoverable on paid losses | 56,658 | 76,505 | ||||||
Reinsurance recoverable on unpaid losses and loss adjustment expenses | 843,296 | 807,352 | ||||||
Deferred policy acquisition costs | 55,201 | 56,575 | ||||||
Accrued investment income | 15,590 | 17,438 | ||||||
Goodwill and other intangible assets | 6,925 | 7,057 | ||||||
Current income tax receivable, net | 1,054 | 4,854 | ||||||
Deferred income tax, net | 15,141 | 31,222 | ||||||
Other assets | 38,029 | 40,600 | ||||||
Total assets | $ | 3,531,459 | $ | 3,453,994 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Reserves for losses and loss adjustment expenses | $ | 1,985,838 | $ | 1,920,286 | ||||
Unearned premiums | 463,515 | 475,171 | ||||||
Reinsurance balances payable | 105,904 | 98,555 | ||||||
Senior notes | 114,138 | 114,010 | ||||||
Accounts payable and other liabilities | 32,710 | 44,453 | ||||||
Total liabilities | 2,702,105 | 2,652,475 | ||||||
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 17,274,440 shares for 2010 and 17,212,814 shares for 2009 | 1,728 | 1,721 | ||||||
Additional paid-in capital | 312,588 | 304,505 | ||||||
Treasury stock, at cost (1,532,273 shares for 2010 and 366,330 shares for 2009) | (64,935 | ) | (18,296 | ) | ||||
Retained earnings | 539,512 | 469,934 | ||||||
Accumulated other comprehensive income | 40,461 | 43,655 | ||||||
Total stockholders’ equity | 829,354 | 801,519 | ||||||
Total liabilities and stockholders’ equity | $ | 3,531,459 | $ | 3,453,994 | ||||
F-3
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Gross written premiums | $ | 987,201 | $ | 1,044,918 | $ | 1,084,922 | ||||||
Revenues: | ||||||||||||
Net written premiums | $ | 653,938 | $ | 701,255 | $ | 661,615 | ||||||
Change in unearned premiums | 5,993 | (17,892 | ) | (17,639 | ) | |||||||
Net earned premiums | 659,931 | 683,363 | 643,976 | |||||||||
Net investment income | 71,662 | 75,512 | 76,554 | |||||||||
Total other-than-temporary impairment losses | (2,222 | ) | (29,265 | ) | (37,045 | ) | ||||||
Portion of loss recognized in other comprehensive income (before tax) | 1,142 | 17,388 | — | |||||||||
Net other-than-temporary impairment losses recognized in earnings | (1,080 | ) | (11,877 | ) | (37,045 | ) | ||||||
Net realized gains (losses) | 41,319 | 9,217 | (1,254 | ) | ||||||||
Other income (expense) | 5,143 | 6,665 | 1,435 | |||||||||
Total revenues | 776,975 | 762,880 | 683,666 | |||||||||
Expenses: | ||||||||||||
Net losses and loss adjustment expenses | 421,155 | 435,998 | 393,131 | |||||||||
Commission expenses | 109,113 | 98,908 | 89,785 | |||||||||
Other operating expenses | 139,700 | 132,671 | 123,148 | |||||||||
Interest expense | 8,178 | 8,455 | 8,871 | |||||||||
Total expenses | 678,146 | 676,032 | 614,935 | |||||||||
Income before income taxes | 98,829 | 86,848 | 68,731 | |||||||||
Income tax expense | 29,251 | 23,690 | 17,039 | |||||||||
Net income | $ | 69,578 | $ | 63,158 | $ | 51,692 | ||||||
Net income per common share: | ||||||||||||
Basic | $ | 4.33 | $ | 3.73 | $ | 3.08 | ||||||
Diluted | $ | 4.24 | $ | 3.65 | $ | 3.04 | ||||||
Average common shares outstanding: | ||||||||||||
Basic | 16,065 | 16,935 | 16,802 | |||||||||
Diluted | 16,415 | 17,322 | 16,992 |
F-4
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Preferred Stock | ||||||||||||
Balance at beginning and end of year | $ | — | $ | — | $ | — | ||||||
Common stock | ||||||||||||
Balance at beginning of year | $ | 1,721 | $ | 1,708 | $ | 1,687 | ||||||
Shares issued under stock plans | 7 | 13 | 21 | |||||||||
Balance at end of year | $ | 1,728 | $ | 1,721 | $ | 1,708 | ||||||
Additional paid-in capital | ||||||||||||
Balance at beginning of year | $ | 304,505 | $ | 298,872 | $ | 291,616 | ||||||
Share-based compensation | 8,083 | 5,633 | 7,256 | |||||||||
Balance at end of year | $ | 312,588 | $ | 304,505 | $ | 298,872 | ||||||
Treasury stock, at cost | ||||||||||||
Balance at beginning of year | $ | (18,296 | ) | $ | (11,540 | ) | $ | — | ||||
Treasury stock acquired | (51,980 | ) | (6,756 | ) | (11,540 | ) | ||||||
Issuance related to share-based compensation | 5,341 | — | — | |||||||||
Balance at end of year | $ | (64,935 | ) | $ | (18,296 | ) | $ | (11,540 | ) | |||
Retained earnings | ||||||||||||
Balance at beginning of year | $ | 469,934 | $ | 406,776 | $ | 355,084 | ||||||
Net income | 69,578 | 63,158 | 51,692 | |||||||||
Balance at end of year | $ | 539,512 | $ | 469,934 | $ | 406,776 | ||||||
Accumulated other comprehensive income (loss) | ||||||||||||
Net unrealized gains (losses) on securities, net of tax | ||||||||||||
Balance at beginning of year | $ | 30,958 | $ | (15,062 | ) | $ | 10,186 | |||||
Change in year | (660 | ) | 46,020 | (25,248 | ) | |||||||
Balance at end of year | 30,298 | 30,958 | (15,062 | ) | ||||||||
Non-credit other-than-temporary impairment gains (losses), net of tax | ||||||||||||
Balance at beginning of year | 4,000 | — | — | |||||||||
Change in year | (2,824 | ) | 4,000 | — | ||||||||
Balance at end of year | 1,176 | 4,000 | — | |||||||||
Cumulative translation adjustments, net of tax | ||||||||||||
Balance at beginning of year | 8,697 | 8,563 | 3,533 | |||||||||
Net adjustment | 290 | 134 | 5,030 | |||||||||
Balance at end of year | 8,987 | 8,697 | 8,563 | |||||||||
Balance at end of year | $ | 40,461 | $ | 43,655 | $ | (6,499 | ) | |||||
Total stockholders’ equity at end of year | $ | 829,354 | $ | 801,519 | $ | 689,317 | ||||||
F-5
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net income | $ | 69,578 | $ | 63,158 | $ | 51,692 | ||||||
Other comprehensive income (loss): | ||||||||||||
Change in net unrealized gains (losses) on investments, net of tax expense (benefit) of $(1,324), $25,602 and $(12,034) in 2010, 2009 and 2008, respectively(1) | (3,484 | ) | 50,020 | (25,248 | ) | |||||||
Change in foreign currency translation gains, net of tax expense of $157, $72 and $2,709 in 2010, 2009 and 2008, respectively | 290 | 134 | 5,030 | |||||||||
Other comprehensive income (loss) | (3,194 | ) | 50,154 | (20,218 | ) | |||||||
Comprehensive income | $ | 66,384 | $ | 113,312 | $ | 31,474 | ||||||
(1) | Disclosure of reclassification amount, net of tax: |
Unrealized gains (losses) on investments arising during period | $ | 22,634 | $ | 48,068 | $ | (50,142 | ) | |||||
Less: reclassification adjustment for net realized gains (losses) included in net income | 26,858 | 5,882 | (768 | ) | ||||||||
reclassification adjustment for other-than-temporary impairment losses recognized in net income | (740 | ) | (7,834 | ) | (24,126 | ) | ||||||
Change in net unrealized gains (losses) on securities, net of tax | $ | (3,484 | ) | $ | 50,020 | $ | (25,248 | ) | ||||
F-6
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities: | ||||||||||||
Net income | $ | 69,578 | $ | 63,158 | $ | 51,692 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation & amortization | 4,362 | 4,551 | 4,761 | |||||||||
Deferred income taxes | 17,189 | (2,285 | ) | (16,522 | ) | |||||||
Net realized (gains) losses | (40,239 | ) | 2,660 | 38,299 | ||||||||
Changes in assets and liabilities: | ||||||||||||
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses | (17,359 | ) | 42,781 | (48,314 | ) | |||||||
Reserves for losses and loss adjustment expenses | 67,701 | 54,050 | 237,817 | |||||||||
Prepaid reinsurance premiums | 5,298 | 27,788 | (3,701 | ) | ||||||||
Unearned premiums | (10,990 | ) | (8,872 | ) | 20,183 | |||||||
Premiums receivable | 4,415 | (20,447 | ) | (14,369 | ) | |||||||
Deferred policy acquisition costs | 1,212 | (8,394 | ) | 2,627 | ||||||||
Accrued investment income | 1,856 | (11 | ) | (1,822 | ) | |||||||
Reinsurance balances payable | 7,450 | (42,808 | ) | (10,048 | ) | |||||||
Current income taxes | 3,092 | (12,094 | ) | (798 | ) | |||||||
Other | 4,656 | 3,833 | (14,530 | ) | ||||||||
Net cash provided by operating activities | 118,221 | 103,910 | 245,275 | |||||||||
Investing activities: | ||||||||||||
Fixed maturities | ||||||||||||
Redemptions and maturities | 206,461 | 135,374 | 131,674 | |||||||||
Sales | 1,191,796 | 473,913 | 186,106 | |||||||||
Purchases | (1,439,725 | ) | (728,216 | ) | (473,295 | ) | ||||||
Equity securities | ||||||||||||
Sales | 6,942 | 18,899 | 22,041 | |||||||||
Purchases | (23,123 | ) | (21,947 | ) | (40,746 | ) | ||||||
Change in payable for securities | 1,043 | (15,836 | ) | (112 | ) | |||||||
Net change in short-term investments | 22,713 | 47,821 | (61,431 | ) | ||||||||
Purchase of property and equipment | (2,568 | ) | (2,781 | ) | (7,548 | ) | ||||||
Net cash used in investing activities | (36,461 | ) | (92,773 | ) | (243,311 | ) | ||||||
Financing activities: | ||||||||||||
Purchase of treasury stock | (51,980 | ) | (6,756 | ) | (11,540 | ) | ||||||
Purchase of Senior notes | — | (7,000 | ) | — | ||||||||
Proceeds of stock issued from employee stock purchase plan | 868 | 727 | 963 | |||||||||
Proceeds of stock issued from exercise of stock options | 611 | 944 | 3,014 | |||||||||
Net cash used in financing activities | (50,501 | ) | (12,085 | ) | (7,563 | ) | ||||||
Increase (decrease) in cash | 31,259 | (948 | ) | (5,599 | ) | |||||||
Cash at beginning of year | 509 | 1,457 | 7,056 | |||||||||
Cash at end of year | $ | 31,768 | $ | 509 | $ | 1,457 | ||||||
Supplemental cash information: | ||||||||||||
Income taxes paid, net | $ | 6,398 | $ | 37,089 | $ | 34,990 | ||||||
Interest paid | $ | 8,050 | $ | 8,355 | $ | 8,750 | ||||||
Issuance of stock to directors | $ | 190 | $ | 210 | $ | 200 |
F-7
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F-8
Table of Contents
F-9
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F-10
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F-11
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F-12
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F-13
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F-14
Table of Contents
Year Ended December 31, 2010 | ||||||||||||
Average | Net | |||||||||||
Net | Shares | Income | ||||||||||
Income | Outstanding | Per Share | ||||||||||
($ and shares in thousands, except net income per share) | ||||||||||||
Basic EPS: | ||||||||||||
Income available to common stockholders | $ | 69,578 | 16,065 | $ | 4.33 | |||||||
Effect of dilutive securities: | ||||||||||||
Stock options and grants | 350 | |||||||||||
Diluted EPS: | ||||||||||||
Income available to common stockholders | $ | 69,578 | 16,415 | $ | 4.24 |
Year Ended December 31, 2009 | ||||||||||||
Average | Net | |||||||||||
Net | Shares | Income | ||||||||||
Income | Outstanding | Per Share | ||||||||||
($ and shares in thousands, except net income per share) | ||||||||||||
Basic EPS: | ||||||||||||
Income available to common stockholders | $ | 63,158 | 16,935 | $ | 3.73 | |||||||
Effect of dilutive securities: | ||||||||||||
Stock options and grants | 387 | |||||||||||
Diluted EPS: | ||||||||||||
Income available to common stockholders | $ | 63,158 | 17,322 | $ | 3.65 |
Year Ended December 31, 2008 | ||||||||||||
Average | Net | |||||||||||
Net | Shares | Income | ||||||||||
Income | Outstanding | Per Share | ||||||||||
($ and shares in thousands, except net income per share) | ||||||||||||
Basic EPS: | ||||||||||||
Income available to common stockholders | $ | 51,692 | 16,802 | $ | 3.08 | |||||||
Effect of dilutive securities: | ||||||||||||
Stock options and grants | 190 | |||||||||||
Diluted EPS: | ||||||||||||
Income available to common stockholders | $ | 51,692 | 16,992 | $ | 3.04 |
F-15
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F-16
Table of Contents
Year Ended December 31, 2010 | ||||||||||||||||
Insurance | Lloyd’s | |||||||||||||||
Companies | Operations | Corporate(1) | Total | |||||||||||||
($ in thousands) | ||||||||||||||||
Gross written premiums | $ | 665,505 | $ | 321,696 | $ | — | $ | 987,201 | ||||||||
Net written premiums | 429,355 | 224,583 | — | 653,938 | ||||||||||||
Net earned premiums | 438,851 | 221,080 | — | 659,931 | ||||||||||||
Net losses and LAE | (280,120 | ) | (141,035 | ) | — | (421,155 | ) | |||||||||
Commission expenses | (59,122 | ) | (49,991 | ) | — | (109,113 | ) | |||||||||
Other operating expenses | (106,631 | ) | (33,112 | ) | — | (139,743 | ) | |||||||||
Other income (expense) | 1,698 | 3,488 | — | 5,186 | ||||||||||||
Underwriting profit (loss) | (5,324 | ) | 430 | — | (4,894 | ) | ||||||||||
Net investment income | 62,792 | 8,286 | 584 | 71,662 | ||||||||||||
Net realized gains (losses) | 36,057 | 3,323 | 859 | 40,239 | ||||||||||||
Interest expense | — | — | (8,178 | ) | (8,178 | ) | ||||||||||
Income (loss) before income taxes | 93,525 | 12,039 | (6,735 | ) | 98,829 | |||||||||||
Income tax expense (benefit) | 27,219 | 4,389 | (2,357 | ) | 29,251 | |||||||||||
Net income (loss) | $ | 66,306 | $ | 7,650 | $ | (4,378 | ) | $ | 69,578 | |||||||
Identifiable assets(1) | $ | 2,592,679 | $ | 842,121 | $ | 81,657 | $ | 3,531,455 | ||||||||
Loss and LAE ratio | 63.8 | % | 63.8 | % | 63.8 | % | ||||||||||
Commission expense ratio | 13.5 | % | 22.6 | % | 16.5 | % | ||||||||||
Other operating expense ratio(2) | 23.9 | % | 13.4 | % | 20.4 | % | ||||||||||
Combined ratio | 101.2 | % | 99.8 | % | 100.7 | % | ||||||||||
(1) | Includes inter-segment transactions causing the row not to cross foot. | |
(2) | IncludesOther operating expensesandOther income (expense). |
F-17
Table of Contents
Year Ended December 31, 2010 | ||||||||||||
Insurance | Lloyd’s | |||||||||||
Companies | Operations | Total | ||||||||||
($ in thousands) | ||||||||||||
Gross written premiums: | ||||||||||||
Marine | $ | 223,061 | $ | 182,723 | $ | 405,784 | ||||||
Property Casualty | 312,651 | 94,799 | 407,450 | |||||||||
Professional Liability | 129,793 | 44,174 | 173,967 | |||||||||
Total | $ | 665,505 | $ | 321,696 | $ | 987,201 | ||||||
Net written premiums: | ||||||||||||
Marine | $ | 151,059 | $ | 149,340 | $ | 300,399 | ||||||
Property Casualty | 197,845 | 54,049 | 251,894 | |||||||||
Professional Liability | 80,451 | 21,194 | 101,645 | |||||||||
Total | $ | 429,355 | $ | 224,583 | $ | 653,938 | ||||||
Net earned premiums: | ||||||||||||
Marine | $ | 155,846 | $ | 149,225 | $ | 305,071 | ||||||
Property Casualty | 200,741 | 49,852 | 250,593 | |||||||||
Professional Liability | 82,264 | 22,003 | 104,267 | |||||||||
Total | $ | 438,851 | $ | 221,080 | $ | 659,931 | ||||||
F-18
Table of Contents
Year Ended December 31, 2009 | ||||||||||||||||
Insurance | Lloyd’s | |||||||||||||||
Companies | Operations | Corporate(1) | Total | |||||||||||||
($ in thousands) | ||||||||||||||||
Gross written premiums | $ | 730,776 | $ | 314,142 | $ | — | $ | 1,044,918 | ||||||||
Net written premiums | 477,673 | 223,582 | — | 701,255 | ||||||||||||
Net earned premiums | 479,121 | 204,242 | — | 683,363 | ||||||||||||
Net losses and LAE | (304,672 | ) | (131,326 | ) | — | (435,998 | ) | |||||||||
Commission expenses | (61,949 | ) | (37,727 | ) | 768 | (98,908 | ) | |||||||||
Other operating expenses | (104,801 | ) | (27,896 | ) | — | (132,697 | ) | |||||||||
Other income (expense) | 3,498 | 961 | (768 | ) | 3,691 | |||||||||||
Underwriting profit | 11,197 | 8,254 | — | 19,451 | ||||||||||||
Net investment income | 65,717 | 9,229 | 566 | 75,512 | ||||||||||||
Net realized gains (losses) | 533 | (3,193 | ) | — | (2,660 | ) | ||||||||||
Gain on debt repurchase | — | — | 3,000 | 3,000 | ||||||||||||
Interest expense | — | — | (8,455 | ) | (8,455 | ) | ||||||||||
Income (loss) before income taxes | 77,447 | 14,290 | (4,889 | ) | 86,848 | |||||||||||
Income tax expense (benefit) | 19,819 | 5,582 | (1,711 | ) | 23,690 | |||||||||||
Net income (loss) | $ | 57,628 | $ | 8,708 | $ | (3,178 | ) | $ | 63,158 | |||||||
Identifiable assets(1) | $ | 2,554,037 | $ | 799,577 | $ | 71,422 | $ | 3,453,994 | ||||||||
Loss and LAE ratio | 63.6 | % | 64.3 | % | 63.8 | % | ||||||||||
Commission expense ratio | 12.9 | % | 18.5 | % | 14.5 | % | ||||||||||
Other operating expense ratio(2) | 21.1 | % | 13.2 | % | 18.9 | % | ||||||||||
Combined ratio | 97.6 | % | 96.0 | % | 97.2 | % | ||||||||||
(1) | Includes inter-segment transactions causing the row not to cross foot. | |
(2) | IncludesOther operating expensesandOther income (expense). |
F-19
Table of Contents
Year Ended December 31, 2009 | ||||||||||||
Insurance | Lloyd’s | |||||||||||
Companies | Operations | Total | ||||||||||
($ in thousands) | ||||||||||||
Gross written premiums: | ||||||||||||
Marine | $ | 241,438 | $ | 191,959 | $ | 433,397 | ||||||
Property Casualty | 352,285 | 78,151 | 430,436 | |||||||||
Professional Liability | 137,053 | 44,032 | 181,085 | |||||||||
Total | $ | 730,776 | $ | 314,142 | $ | 1,044,918 | ||||||
Net written premiums: | ||||||||||||
Marine | $ | 171,289 | $ | 156,153 | $ | 327,442 | ||||||
Property Casualty | 227,234 | 45,097 | 272,331 | |||||||||
Professional Liability | 79,150 | 22,332 | 101,482 | |||||||||
Total | $ | 477,673 | $ | 223,582 | $ | 701,255 | ||||||
Net earned premiums: | ||||||||||||
Marine | $ | 157,534 | $ | 142,958 | $ | 300,492 | ||||||
Property Casualty | 246,143 | 39,330 | 285,473 | |||||||||
Professional Liability | 75,444 | 21,954 | 97,398 | |||||||||
Total | $ | 479,121 | $ | 204,242 | $ | 683,363 | ||||||
F-20
Table of Contents
Year Ended December 31, 2008 | ||||||||||||||||
Insurance | Lloyd’s | |||||||||||||||
Companies | Operations | Corporate(1) | Total | |||||||||||||
($ in thousands) | ||||||||||||||||
Gross written premiums | $ | 762,190 | $ | 322,732 | $ | — | $ | 1,084,922 | ||||||||
Net written premiums | 472,688 | 188,927 | — | 661,615 | ||||||||||||
Net earned premiums | 463,298 | 180,678 | — | 643,976 | ||||||||||||
Net losses and LAE | (275,767 | ) | (117,364 | ) | — | (393,131 | ) | |||||||||
Commission expenses | (55,752 | ) | (34,033 | ) | — | (89,785 | ) | |||||||||
Other operating expenses | (92,297 | ) | (30,961 | ) | 110 | (123,148 | ) | |||||||||
Other income (expense) | 2,145 | (600 | ) | (110 | ) | 1,435 | ||||||||||
Underwriting profit (loss) | 41,627 | (2,280 | ) | — | 39,347 | |||||||||||
Net investment income | 63,544 | 11,655 | 1,355 | 76,554 | ||||||||||||
Net realized gains (losses) | (37,822 | ) | (477 | ) | — | (38,299 | ) | |||||||||
Interest expense | — | — | (8,871 | ) | (8,871 | ) | ||||||||||
Income (loss) before income taxes | 67,349 | 8,898 | (7,516 | ) | 68,731 | |||||||||||
Income tax expense (benefit) | 16,401 | 3,269 | (2,631 | ) | 17,039 | |||||||||||
Net income (loss) | $ | 50,948 | $ | 5,629 | $ | (4,885 | ) | $ | 51,692 | |||||||
Identifiable assets(1) | $ | 2,477,139 | $ | 779,800 | $ | 63,452 | $ | 3,349,580 | ||||||||
Loss and LAE ratio | 59.5 | % | 65.0 | % | 61.0 | % | ||||||||||
Commission expense ratio | 12.0 | % | 18.8 | % | 13.9 | % | ||||||||||
Other operating expense ratio(2) | 19.5 | % | 17.5 | % | 18.9 | % | ||||||||||
Combined ratio | 91.0 | % | 101.3 | % | 93.8 | % | ||||||||||
(1) | Includes inter-segment transactions causing the row not to cross foot. | |
(2) | IncludesOther operating expensesandOther income (expense). |
F-21
Table of Contents
Year Ended December 31, 2008 | ||||||||||||
Insurance | Lloyd’s | |||||||||||
Companies | Operations | Total | ||||||||||
($ in thousands) | ||||||||||||
Gross written premiums: | ||||||||||||
Marine | $ | 248,080 | $ | 192,568 | $ | 440,648 | ||||||
Property Casualty | 405,062 | 91,292 | 496,354 | |||||||||
Professional Liability | 109,048 | 38,872 | 147,920 | |||||||||
Total | $ | 762,190 | $ | 322,732 | $ | 1,084,922 | ||||||
Net written premiums: | ||||||||||||
Marine | $ | 147,569 | $ | 132,788 | $ | 280,357 | ||||||
Property Casualty | 261,322 | 32,735 | 294,057 | |||||||||
Professional Liability | 63,797 | 23,404 | 87,201 | |||||||||
Total | $ | 472,688 | $ | 188,927 | $ | 661,615 | ||||||
Net earned premiums: | ||||||||||||
Marine | $ | 132,005 | $ | 126,126 | $ | 258,131 | ||||||
Property Casualty | 273,977 | 32,644 | 306,621 | |||||||||
Professional Liability | 57,316 | 21,908 | 79,224 | |||||||||
Total | $ | 463,298 | $ | 180,678 | $ | 643,976 | ||||||
F-22
Table of Contents
Gross | Gross | OTTI | ||||||||||||||||||
Unrealized | Unrealized | Cost or | Recognized | |||||||||||||||||
December 31, 2010 | Fair Value | Gains | (Losses) | Amortized Cost | in OCI | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 324,145 | $ | 5,229 | $ | (4,499 | ) | $ | 323,415 | $ | — | |||||||||
States, municipalities and political subdivisions | 392,250 | 11,903 | (3,805 | ) | 384,152 | — | ||||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||||||
Agency mortgage-backed securities | 382,628 | 10,127 | (2,434 | ) | 374,935 | — | ||||||||||||||
Residential mortgage obligations | 20,463 | 24 | (2,393 | ) | 22,832 | (1,646 | ) | |||||||||||||
Asset-backed securities | 46,093 | 247 | (292 | ) | 46,138 | — | ||||||||||||||
Commercial mortgage-backed securities | 190,015 | 4,804 | (1,794 | ) | 187,005 | — | ||||||||||||||
Subtotal | 639,199 | 15,202 | (6,913 | ) | 630,910 | (1,646 | ) | |||||||||||||
Corporate bonds | 526,651 | 15,075 | (5,545 | ) | 517,121 | — | ||||||||||||||
Total fixed maturities | 1,882,245 | 47,409 | (20,762 | ) | 1,855,598 | (1,646 | ) | |||||||||||||
Equity securities — common stocks | 87,258 | 22,475 | (10 | ) | 64,793 | — | ||||||||||||||
Cash | 31,768 | — | — | 31,768 | — | |||||||||||||||
Short-term investments | 153,057 | — | — | 153,057 | — | |||||||||||||||
Total | $ | 2,154,328 | $ | 69,884 | $ | (20,772 | ) | $ | 2,105,216 | $ | (1,646 | ) | ||||||||
Gross | Gross | OTTI | ||||||||||||||||||
Unrealized | Unrealized | Cost or | Recognized | |||||||||||||||||
December 31, 2009 | Fair Value | Gains | (Losses) | Amortized Cost | in OCI | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 471,598 | $ | 7,397 | $ | (597 | ) | $ | 464,798 | $ | — | |||||||||
States, municipalities and political subdivisions | 676,699 | 25,044 | (2,917 | ) | 654,572 | — | ||||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||||||
Agency mortgage-backed securities | 283,578 | 12,607 | (98 | ) | 271,069 | — | ||||||||||||||
Residential mortgage obligations | 31,071 | — | (7,246 | ) | 38,317 | (5,723 | ) | |||||||||||||
Asset-backed securities | 16,469 | 612 | (34 | ) | 15,891 | (23 | ) | |||||||||||||
Commercial mortgage-backed securities | 100,393 | 594 | (5,028 | ) | 104,827 | — | ||||||||||||||
Subtotal | 431,511 | 13,813 | (12,406 | ) | 430,104 | (5,746 | ) | |||||||||||||
Corporate bonds | 236,861 | 9,111 | (759 | ) | 228,509 | — | ||||||||||||||
Total fixed maturities | 1,816,669 | 55,365 | (16,679 | ) | 1,777,983 | (5,746 | ) | |||||||||||||
Equity securities — common stocks | 62,610 | 15,244 | (10 | ) | 47,376 | — | ||||||||||||||
Cash | 509 | — | — | 509 | — | |||||||||||||||
Short-term investments | 176,799 | — | — | 176,799 | — | |||||||||||||||
Total | $ | 2,056,587 | $ | 70,609 | $ | (16,689 | ) | $ | 2,002,667 | $ | (5,746 | ) | ||||||||
F-23
Table of Contents
• | Level 1 — Quoted prices for identical instruments in active markets. Examples are listed equity and fixed income securities traded on an exchange. Treasury securities would generally be considered level 1. |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Examples are asset-backed and mortgage-backed securities which are similar to other asset-backed or mortgage-backed securities observed in the market. |
• | Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. An example would be a private placement with minimal liquidity. |
Quoted Prices | Significant | |||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
December 31, 2010 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
($ in thousands) | ||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 212,933 | $ | 111,212 | $ | — | $ | 324,145 | ||||||||
States, municipalities and political subdivisions | — | 392,250 | — | 392,250 | ||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||
Agency mortgage-backed securities | — | 382,628 | — | 382,628 | ||||||||||||
Residential mortgage obligations | — | 20,463 | — | 20,463 | ||||||||||||
Asset-backed securities | — | 46,093 | — | 46,093 | ||||||||||||
Commercial mortgage-backed securities | — | 188,178 | 1,837 | 190,015 | ||||||||||||
Subtotal | — | 637,362 | 1,837 | 639,199 | ||||||||||||
Corporate bonds | — | 526,651 | — | 526,651 | ||||||||||||
Total fixed maturities | 212,933 | 1,667,475 | 1,837 | 1,882,245 | ||||||||||||
Equity securities — common stocks | 87,258 | — | — | 87,258 | ||||||||||||
Total | $ | 300,191 | $ | 1,667,475 | $ | 1,837 | $ | 1,969,503 | ||||||||
F-24
Table of Contents
Quoted Prices | Significant | |||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
December 31, 2009 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
($ in thousands) | ||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 331,921 | $ | 139,677 | $ | — | $ | 471,598 | ||||||||
States, municipalities and political subdivisions | — | 676,699 | — | 676,699 | ||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||
Agency mortgage-backed securities | — | 283,578 | — | 283,578 | ||||||||||||
Residential mortgage obligations | — | 31,071 | — | 31,071 | ||||||||||||
Asset-backed securities | — | 16,469 | — | 16,469 | ||||||||||||
Commercial mortgage-backed securities | — | 100,393 | — | 100,393 | ||||||||||||
Subtotal | — | 431,511 | — | 431,511 | ||||||||||||
Corporate bonds | — | 236,861 | — | 236,861 | ||||||||||||
Total fixed maturities | 331,921 | 1,484,748 | — | 1,816,669 | ||||||||||||
Equity securities — common stocks | 62,610 | — | — | 62,610 | ||||||||||||
Total | $ | 394,531 | $ | 1,484,748 | $ | — | $ | 1,879,279 | ||||||||
F-25
Table of Contents
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
($ in thousands) | ||||||||
Level 3 investments as of December 31 | $ | — | $ | 156 | ||||
Unrealized net gains included in other comprehensive income (loss) | (19 | ) | 23 | |||||
Purchases, sales, paydowns and amortization | 1,856 | (23 | ) | |||||
Transfer from Level 3 | — | (156 | ) | |||||
Transfer to Level 3 | — | — | ||||||
Level 3 investments as of December 31 | $ | 1,837 | $ | — | ||||
Percent | ||||||||||
Rating | Fair | of | ||||||||
Description | Rating | Value | Total | |||||||
($ in thousands) | ||||||||||
Extremely Strong | AAA | $ | 1,122,760 | 55 | % | |||||
Very Strong | AA | 355,094 | 17 | % | ||||||
Strong | A | 441,008 | 22 | % | ||||||
Adequate | BBB | 96,894 | 5 | % | ||||||
Speculative | BB & below | 14,461 | 1 | % | ||||||
Not Rated | NR | 5,085 | 0 | % | ||||||
Total | $ | 2,035,302 | 100 | % | ||||||
F-26
Table of Contents
Period from | ||||||||
December 31, 2010 | Fair | Amortized | ||||||
to Maturity | Value | Cost | ||||||
($ in thousands) | ||||||||
Due in one year or less | $ | 31,073 | $ | 30,871 | ||||
Due after one year through five years | 472,812 | 462,407 | ||||||
Due after five years through ten years | 490,251 | 482,401 | ||||||
Due after ten years | 248,910 | 249,009 | ||||||
Mortgage- and asset-backed (including GNMAs) | 639,199 | 630,910 | ||||||
Total | $ | 1,882,245 | $ | 1,855,598 | ||||
F-27
Table of Contents
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Number of | Fair | Gross | Number of | Fair | Gross | |||||||||||||||||||
Securities | Value | Unrealized Loss | Securities | Value | Unrealized Loss | |||||||||||||||||||
($ in thousands except # of securities) | ||||||||||||||||||||||||
Fixed Maturities: | ||||||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | ||||||||||||||||||||||||
0-6 Months | 36 | $ | 163,253 | $ | 4,499 | 24 | $ | 116,566 | $ | 597 | ||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 36 | 163,253 | 4,499 | 24 | 116,566 | 597 | ||||||||||||||||||
States, municipalities and political subdivisions | ||||||||||||||||||||||||
0-6 Months | 57 | 112,291 | 3,749 | 47 | 108,290 | 2,291 | ||||||||||||||||||
7-12 Months | 1 | 1,004 | 20 | 4 | 3,534 | 112 | ||||||||||||||||||
> 12 Months | 4 | 1,317 | 36 | 23 | 17,777 | 514 | ||||||||||||||||||
Subtotal | 62 | 114,612 | 3,805 | 74 | 129,601 | 2,917 | ||||||||||||||||||
Agency mortgage-backed securities | ||||||||||||||||||||||||
0-6 Months | 36 | 139,226 | 2,434 | 5 | 18,385 | 98 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 36 | 139,226 | 2,434 | 5 | 18,385 | 98 | ||||||||||||||||||
Residential mortgage obligations | ||||||||||||||||||||||||
0-6 Months | 3 | 3,215 | 20 | — | — | — | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 52 | 15,939 | 2,373 | 73 | 31,071 | 7,246 | ||||||||||||||||||
Subtotal | 55 | 19,154 | 2,393 | 73 | 31,071 | 7,246 | ||||||||||||||||||
Asset-backed securities | ||||||||||||||||||||||||
0-6 Months | 7 | 28,175 | 292 | — | — | — | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 1 | 2 | — | 4 | 637 | 34 | ||||||||||||||||||
Subtotal | 8 | 28,177 | 292 | 4 | 637 | 34 | ||||||||||||||||||
Commercial mortgage-backed securities | ||||||||||||||||||||||||
0-6 Months | 16 | 78,212 | 1,755 | 11 | 28,103 | 324 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | 2 | 491 | 39 | 21 | 45,135 | 4,704 | ||||||||||||||||||
Subtotal | 18 | 78,703 | 1,794 | 32 | 73,238 | 5,028 | ||||||||||||||||||
Corporate bonds | ||||||||||||||||||||||||
0-6 Months | 98 | 214,180 | 5,545 | 13 | 33,275 | 337 | ||||||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | 8 | 6,325 | 422 | ||||||||||||||||||||
Subtotal | 98 | 214,180 | 5,545 | 21 | 39,600 | 759 | ||||||||||||||||||
Total fixed maturities | 313 | $ | 757,305 | $ | 20,762 | 233 | $ | 409,098 | $ | 16,679 | ||||||||||||||
Equity securities — common stocks | ||||||||||||||||||||||||
0-6 Months | 1 | $ | 322 | $ | 10 | — | $ | — | $ | — | ||||||||||||||
7-12 Months | — | — | — | — | — | — | ||||||||||||||||||
> 12 Months | — | — | — | 1 | 872 | 10 | ||||||||||||||||||
Total equity securities | 1 | $ | 322 | $ | 10 | 1 | $ | 872 | $ | 10 | ||||||||||||||
F-28
Table of Contents
Beginning balance at January 1, 2010 | $ | 2,523 | ||
Credit losses on securities not previously impaired as of January 1, 2010 | 123 | |||
Reductions for securities sold during the period | (988 | ) | ||
Ending balance at December 31, 2010 | $ | 1,658 | ||
F-29
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6 months | ||||||||||||||||||||
Longer than 3 | or longer, less | |||||||||||||||||||
Less than 3 | months, less | than 12 | 12 months | |||||||||||||||||
months | than 6 months | months | or longer | Total | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Fixed maturities | $ | — | $ | — | $ | — | $ | (607 | ) | $ | (607 | ) | ||||||||
Equity securities | — | — | — | — | — | |||||||||||||||
Total | $ | — | $ | — | $ | — | $ | (607 | ) | $ | (607 | ) | ||||||||
F-30
Table of Contents
Year ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Number of | Number of | Number of | ||||||||||||||||||||||
Securities | Amount | Securities | Amount | Securities | Amount | |||||||||||||||||||
($ in thousands, except # of securities) | ||||||||||||||||||||||||
Total other-than-temporary impairment losses | ||||||||||||||||||||||||
Corporate and other bonds | — | $ | — | 2 | $ | 564 | 1 | $ | 748 | |||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | ||||||||||||||||||
Residential mortgage-backed securities | 18 | 1,835 | 39 | 19,783 | 4 | 7,856 | ||||||||||||||||||
Asset-backed securities | — | — | 1 | 143 | — | — | ||||||||||||||||||
Equities | 2 | 387 | 56 | 8,775 | 59 | 28,441 | ||||||||||||||||||
Total | 20 | $ | 2,222 | 98 | $ | 29,265 | 64 | $ | 37,045 | |||||||||||||||
Portion of loss in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||
Corporate and other bonds | $ | — | $ | — | $ | — | ||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | |||||||||||||||||||||
Residential mortgage-backed securities | 1,142 | 17,324 | — | |||||||||||||||||||||
Asset-backed securities | — | 64 | — | |||||||||||||||||||||
Equities | — | — | — | |||||||||||||||||||||
Total | $ | 1,142 | $ | 17,388 | $ | — | ||||||||||||||||||
Impairment losses recognized in earnings | ||||||||||||||||||||||||
Corporate and other bonds | $ | — | $ | 564 | $ | 748 | ||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | |||||||||||||||||||||
Residential mortgage-backed securities | 693 | 2,458 | 7,856 | |||||||||||||||||||||
Asset-backed securities | — | 79 | — | |||||||||||||||||||||
Equities | 387 | 8,776 | 28,441 | |||||||||||||||||||||
Total | $ | 1,080 | $ | 11,877 | $ | 37,045 | ||||||||||||||||||
F-31
Table of Contents
Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Number of | Pre-Tax | After-Tax | Number of | Pre-Tax | After-Tax | |||||||||||||||||||
Securities | Amount | Amount | Securities | Amount | Amount | |||||||||||||||||||
($ in thousands, except # of securities) | ||||||||||||||||||||||||
Beginning balance at January 1 | ||||||||||||||||||||||||
Residential mortgage-backed securities | 39 | $ | 5,723 | $ | 3,984 | — | $ | — | $ | — | ||||||||||||||
Asset-backed securities | 1 | 23 | 16 | — | — | — | ||||||||||||||||||
Total | $ | 5,746 | $ | 4,000 | $ | — | $ | — | ||||||||||||||||
Portion of loss in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||
Residential mortgage-backed securities | 18 | $ | 1,142 | $ | 742 | 39 | $ | 17,324 | $ | 11,261 | ||||||||||||||
Asset-backed securities | — | — | — | 1 | 64 | 42 | ||||||||||||||||||
Total | $ | 1,142 | $ | 742 | $ | 17,388 | $ | 11,303 | ||||||||||||||||
Subsequent net unrealized losses (gains) related to securities in which an OTTI loss was recorded in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||
Residential mortgage-backed securities | 31 | $ | (3,668 | ) | $ | (2,542 | ) | 39 | $ | (11,601 | ) | $ | (7,277 | ) | ||||||||||
Asset-backed securities | — | (15 | ) | (11 | ) | 1 | (41 | ) | (26 | ) | ||||||||||||||
Total | $ | (3,683 | ) | $ | (2,553 | ) | $ | (11,642 | ) | $ | (7,303 | ) | ||||||||||||
Subsequent sale of securities in which an OTTI loss was recorded in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||
Residential mortgage-backed securities | 9 | $ | (1,551 | ) | $ | (1,008 | ) | $ | — | $ | — | |||||||||||||
Asset-backed securities | 1 | (8 | ) | (5 | ) | — | — | — | ||||||||||||||||
Total | $ | (1,559 | ) | $ | (1,013 | ) | — | $ | — | $ | — | |||||||||||||
Ending balance at December 31 | ||||||||||||||||||||||||
Residential mortgage-backed securities | 31 | $ | 1,646 | $ | 1,176 | 39 | $ | 5,723 | $ | 3,984 | ||||||||||||||
Asset-backed securities | — | — | — | 1 | 23 | 16 | ||||||||||||||||||
Total | $ | 1,646 | $ | 1,176 | $ | 5,746 | $ | 4,000 | ||||||||||||||||
F-32
Table of Contents
Gross | ||||||||||||||||
Unrealized Loss | Fair Value | |||||||||||||||
Percent | Percent | |||||||||||||||
Amount | of Total | Amount | of Total | |||||||||||||
($ in thousands) | ||||||||||||||||
Due in one year or less | $ | 2 | 0 | % | $ | 1,430 | 0 | % | ||||||||
Due after one year through five years | 2,087 | 10 | % | 153,866 | 20 | % | ||||||||||
Due after five years through ten years | 7,284 | 36 | % | 218,215 | 28 | % | ||||||||||
Due after ten years | 4,476 | 22 | % | 118,534 | 16 | % | ||||||||||
Mortgage- and asset-backed securities | 6,913 | 32 | % | 265,260 | 36 | % | ||||||||||
Total fixed maturity securities | $ | 20,762 | 100 | % | $ | 757,305 | 100 | % | ||||||||
Year Ended December 31, | ||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
($ in thousands) | ||||||||||||||||
Fixed maturities | $ | 69,996 | $ | 74,779 | $ | 73,493 | ||||||||||
Equity securities | 3,028 | 2,464 | 2,359 | |||||||||||||
Short-term investments | 965 | 811 | 3,925 | |||||||||||||
73,989 | 78,054 | 79,777 | ||||||||||||||
Investment expenses | (2,327 | ) | (2,542 | ) | (3,223 | ) | ||||||||||
Net investment income | $ | 71,662 | $ | 75,512 | $ | 76,554 | ||||||||||
F-33
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Fixed maturities: | ||||||||||||
Gains | $ | 42,932 | $ | 18,312 | $ | 3,650 | ||||||
(Losses) | (3,239 | ) | (9,676 | ) | (1,670 | ) | ||||||
39,693 | 8,636 | 1,980 | ||||||||||
Equity securities: | ||||||||||||
Gains | 1,867 | 2,110 | 720 | |||||||||
(Losses) | (241 | ) | (1,529 | ) | (3,954 | ) | ||||||
1,626 | 581 | (3,234 | ) | |||||||||
Net realized gains (losses) | $ | 41,319 | $ | 9,217 | $ | (1,254 | ) | |||||
Year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Fixed maturities | $ | (12,039 | ) | $ | 59,667 | $ | (34,813 | ) | ||||
Equity securities | 7,231 | 15,955 | (2,469 | ) | ||||||||
(4,808 | ) | 75,622 | (37,282 | ) | ||||||||
Deferred income tax (charged) credited | 1,324 | (25,602 | ) | 12,034 | ||||||||
Change in unrealized gains (losses), net | $ | (3,484 | ) | $ | 50,020 | $ | (25,248 | ) | ||||
F-34
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F-35
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Net reserves for losses and LAE at beginning of year | $ | 1,112,934 | $ | 999,871 | $ | 847,303 | ||||||
Provision for losses and LAE for claims occurring in the current year | 434,957 | 444,939 | 443,877 | |||||||||
Decrease in estimated losses and LAE for claims occurring in prior years | (13,802 | ) | (8,941 | ) | (50,746 | ) | ||||||
Incurred losses and LAE | 421,155 | 435,998 | 393,131 | |||||||||
Losses and LAE paid for claims occurring during: | ||||||||||||
Current year | (76,982 | ) | (59,412 | ) | (60,104 | ) | ||||||
Prior years | (314,565 | ) | (263,523 | ) | (180,459 | ) | ||||||
Losses and LAE payments | (391,547 | ) | (322,935 | ) | (240,563 | ) | ||||||
Net reserves for losses and LAE at end of year | 1,142,542 | 1,112,934 | 999,871 | |||||||||
Reinsurance recoverables on unpaid losses and LAE | 843,296 | 807,352 | 853,793 | |||||||||
Gross reserves for losses and LAE at end of year | $ | 1,985,838 | $ | 1,920,286 | $ | 1,853,664 | ||||||
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Insurance Companies: | ||||||||||||
Marine | $ | (4,155 | ) | $ | 11,893 | $ | (5,298 | ) | ||||
Property Casualty | (14,923 | ) | (35,658 | ) | (33,065 | ) | ||||||
Professional Liability | 13,623 | 20,686 | (3,559 | ) | ||||||||
Insurance Companies | $ | (5,455 | ) | $ | (3,079 | ) | $ | (41,922 | ) | |||
Lloyd’s Operations | (8,347 | ) | (5,862 | ) | (8,824 | ) | ||||||
Total | $ | (13,802 | ) | $ | (8,941 | ) | $ | (50,746 | ) | |||
F-36
Table of Contents
• | $29.2 million for West Coast contractors’ liability due to an internal actuarial review conducted in 2010 which indicated that loss development on underwriting years 2006 to 2008 has been more favorable than our prior expectations with a partial offset for underwriting years 2004 and prior. This internal review includes a more detailed analysis than is included in our regular quarterly reserving process. |
• | $2.9 million of favorable development on our offshore energy (NavTech) book due to favorable claims trends across a number of prior underwriting years. |
• | $1.8 million of favorable development on the Somerset Re run-off book of business where we concluded the IBNR was no longer required and $1.5 million on our Agriculture reinsurance book where the reported activity was lower than our initial estimate for the 2009 treaty year. |
• | $16.5 million in our Specialty run-off books of business, including $13.3 million in our personal umbrella lines across multiple underwriting years where loss activity has exceeded our expectations and $2.0 million of adverse development in our Liquor business due to reported claim activity. | ||
• | $1.7 million for New York construction liability due to unfavorable loss emergence. |
• | The directors and officers’ liability book of business had $15.7 million of adverse development, which was primarily attributable to a severity study of our open claims completed during the fourth quarter. This study showed our IBNR to be significantly deficient if current trends continued and we raised our loss estimates for underwriting years 2002 to 2009. This was partially offset by $1.4 million of favorable development on a run-off lawyers book of business written from London where we saw favorable settlements of outstanding claims and $0.7 million of favorable development on other lawyers business mostly due to a favorable claim reserve settlement. |
F-37
Table of Contents
A.M. Best | Rating | Recoverable | Percent | |||||||||
Rating(1) | Description | Amounts | of Total | |||||||||
($ in millions) | ||||||||||||
A++, A+ | Superior | $ | 447.8 | 42 | % | |||||||
A, A- | Excellent | 585.0 | 56 | % | ||||||||
B++, B+ | Very good | 4.4 | 0 | %(2) | ||||||||
NR | Not rated | 19.7 | 2 | %(2) | ||||||||
Total | $ | 1,056.9 | 100 | % | ||||||||
(1) | Equivalent S&P rating used for certain companies when an A.M. Best rating was unavailable. | |
(2) | The Company holds offsetting collateral of approximately 80.2% for B++ and B+ companies and 75.6% for not rated companies which includes letters of credit, ceded balances payable and other balances held by our Insurance Companies and our Lloyd’s Operations. |
F-38
Table of Contents
Reinsurance Recoverables | ||||||||||||||||||||||||
Unearned | Unpaid/Paid | Collateral | Rating & | |||||||||||||||||||||
Reinsurer | Premium | Losses | Total | Held(1) | Rating Agency(2) | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Swiss Reinsurance America Corporation | $ | 8.2 | $ | 98.4 | $ | 106.6 | $ | 9.0 | A | AMB | ||||||||||||||
Munich Reinsurance America Inc. | 16.5 | 80.7 | 97.2 | 4.5 | A+ | AMB | ||||||||||||||||||
Everest Reinsurance Company | 19.4 | 67.1 | 86.5 | 9.0 | A+ | AMB | ||||||||||||||||||
Transatlantic Reinsurance Company | 21.4 | 62.6 | 84.0 | 8.7 | A | AMB | ||||||||||||||||||
National Indemnity Company | 10.1 | 29.3 | 39.4 | 3.5 | A++ | AMB | ||||||||||||||||||
Scor Holding (Switzerland) AG | 9.1 | 29.4 | 38.5 | 11.5 | A | AMB | ||||||||||||||||||
General Reinsurance Corporation | 1.5 | 34.9 | 36.4 | 1.3 | A++ | AMB | ||||||||||||||||||
White Mountains Reinsurance of America | 0.3 | 36.0 | 36.3 | 0.2 | A- | AMB | ||||||||||||||||||
Partner Reinsurance Europe | 8.3 | 26.8 | 35.1 | 16.7 | AA- | S&P | ||||||||||||||||||
Munchener Ruckversicherungs-Gesellschaft | 1.1 | 32.7 | 33.8 | 7.7 | A+ | AMB | ||||||||||||||||||
Berkley Insurance Company | 3.4 | 29.2 | 32.6 | 0.2 | A+ | AMB | ||||||||||||||||||
Platinum Underwriters Re | 2.1 | 26.7 | 28.8 | 2.5 | A | AMB | ||||||||||||||||||
Lloyd’s Syndicate #2003 | 2.9 | 23.8 | 26.7 | 4.2 | A | AMB | ||||||||||||||||||
Ace Property and Casualty Insurance Company | 5.5 | 19.1 | 24.6 | 2.5 | A+ | AMB | ||||||||||||||||||
Allied World Reinsurance | 7.1 | 13.1 | 20.2 | 2.8 | A | AMB | ||||||||||||||||||
Swiss Re International SE | 0.7 | 15.6 | 16.3 | 5.7 | A | AMB | ||||||||||||||||||
AXIS Re Europe | 3.6 | 11.5 | 15.1 | 4.0 | A | AMB | ||||||||||||||||||
Axa Corporate Solutions | 0.4 | 14.0 | 14.4 | 0.7 | AA- | S&P | ||||||||||||||||||
Hannover Ruckversicherung | 0.5 | 13.6 | 14.1 | 2.8 | A | AMB | ||||||||||||||||||
Validus Reinsurance Ltd. | 1.8 | 11.9 | 13.7 | 5.6 | A- | AMB | ||||||||||||||||||
Top 20 Total | $ | 123.9 | $ | 676.4 | $ | 800.3 | $ | 103.1 | ||||||||||||||||
All Other | 33.0 | 223.6 | 256.6 | 76.1 | ||||||||||||||||||||
Total | $ | 156.9 | $ | 900.0 | $ | 1,056.9 | $ | 179.2 | ||||||||||||||||
(1) | Collateral includes letters of credit, ceded balances payable and other balances held by our Insurance Companies and our Lloyd’s Operations. | |
(2) | A.M. Best |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Direct | $ | 916,817 | $ | 966,251 | $ | 1,016,521 | ||||||
Assumed | 70,384 | 78,667 | 68,401 | |||||||||
Ceded | (333,263 | ) | (343,663 | ) | (423,307 | ) | ||||||
Net | $ | 653,938 | $ | 701,255 | $ | 661,615 | ||||||
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Direct | $ | 925,935 | $ | 977,170 | $ | 993,123 | ||||||
Assumed | 72,643 | 78,932 | 69,989 | |||||||||
Ceded | (338,647 | ) | (372,739 | ) | (419,136 | ) | ||||||
Net | $ | 659,931 | $ | 683,363 | $ | 643,976 | ||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Direct | $ | 669,949 | $ | 625,558 | $ | 646,095 | ||||||
Assumed | 32,505 | 44,318 | 38,013 | |||||||||
Ceded | (281,299 | ) | (233,878 | ) | (290,977 | ) | ||||||
Net | $ | 421,155 | $ | 435,998 | $ | 393,131 | ||||||
F-41
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
($ in thousands) | ||||||||||||
Current income tax expense: | ||||||||||||
Federal and foreign | $ | 11,965 | $ | 25,833 | $ | 33,126 | ||||||
State and local | 97 | 142 | 435 | |||||||||
Subtotal | 12,062 | 25,975 | 33,561 | |||||||||
Deferred income tax expense (benefit): | ||||||||||||
Federal and foreign | 17,189 | (2,285 | ) | (16,522 | ) | |||||||
State and local | — | — | — | |||||||||
Subtotal | 17,189 | (2,285 | ) | (16,522 | ) | |||||||
Total income tax expense | $ | 29,251 | $ | 23,690 | $ | 17,039 | ||||||
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Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Computed expected tax expense | $ | 34,590 | 35.0 | % | $ | 30,397 | 35.0 | % | $ | 24,056 | 35.0 | % | ||||||||||||
Tax-exempt interest | (5,093 | ) | -5.2 | % | (7,051 | ) | -8.1 | % | (6,650 | ) | -9.7 | % | ||||||||||||
Dividends received deduction | (611 | ) | -0.6 | % | (508 | ) | -0.6 | % | (493 | ) | -0.7 | % | ||||||||||||
Current state and local income taxes, net of federal income tax | 63 | 0.1 | % | 93 | 0.1 | % | 284 | 0.4 | % | |||||||||||||||
Change in the deferred state and local income tax, net of deferred tax assets | 463 | 0.5 | % | 3,546 | 4.1 | % | (154 | ) | -0.2 | % | ||||||||||||||
Change in the valuation allowance | (463 | ) | -0.5 | % | (3,546 | ) | -4.1 | % | 154 | 0.2 | % | |||||||||||||
Other | 302 | 0.3 | % | 759 | 0.9 | % | (158 | ) | -0.2 | % | ||||||||||||||
Actual tax expense and rate | $ | 29,251 | 29.6 | % | $ | 23,690 | 27.3 | % | $ | 17,039 | 24.8 | % | ||||||||||||
F-43
Table of Contents
Year ended December 31, | ||||||||
2010 | 2009 | |||||||
($ in thousands) | ||||||||
Deferred tax assets: | ||||||||
Loss reserve discount | $ | 30,190 | $ | 31,798 | ||||
Unearned premiums | 14,358 | 15,023 | ||||||
Investment impairments | 2,585 | 19,327 | ||||||
Compensation related | 5,149 | 6,052 | ||||||
State and local net deferred tax assets | 2,185 | 2,648 | ||||||
Other | 1,287 | 721 | ||||||
Total gross deferred tax assets | 55,754 | 75,569 | ||||||
Less: Valuation allowance | (2,185 | ) | (2,648 | ) | ||||
Total deferred tax assets | 53,569 | 72,921 | ||||||
Deferred tax liabilities: | ||||||||
Deferred acquisition costs | (11,645 | ) | (12,205 | ) | ||||
Net unrealized gains on securities | (17,638 | ) | (18,962 | ) | ||||
Other | (9,145 | ) | (10,532 | ) | ||||
Total deferred tax liabilities | (38,428 | ) | (41,699 | ) | ||||
Net deferred income tax asset | $ | 15,141 | $ | 31,222 | ||||
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F-45
Table of Contents
Year Ended December 31, | ($ in thousands) | |||
2011 | $ | 9,748 | ||
2012 | 9,082 | |||
2013 | 8,938 | |||
2014 | 7,737 | |||
2015 | 6,912 | |||
Subsequent to 2015 | 14,600 | |||
Total | $ | 57,017 | ||
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F-47
Table of Contents
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Balance, beginning of year | 16,846 | 16,856 | 16,873 | |||||||||
Vested stock grants | 109 | 74 | 36 | |||||||||
Employee stock purchase plan | 22 | 17 | 17 | |||||||||
Stock options exercised | 29 | 41 | 155 | |||||||||
Treasury shares purchased | (1,264 | ) | (142 | ) | (225 | ) | ||||||
Balance, end of year | 15,742 | 16,846 | 16,856 | |||||||||
F-48
Table of Contents
Dollar Value | ||||||||||||
of Shares that | ||||||||||||
Total Number | Average | May Yet Be | ||||||||||
of Shares | Cost Paid | Purchased Under | ||||||||||
Purchased | Per Share | the Program(1) | ||||||||||
($ in thousands, except per share) | ||||||||||||
October 2009 | — | $ | — | $ | 35,000 | |||||||
November 2009 | 29,021 | $ | 47.30 | $ | 33,627 | |||||||
December 2009 | 112,555 | $ | 47.83 | $ | 28,243 | |||||||
Subtotal fourth quarter | 141,576 | $ | 47.72 | |||||||||
Total 2009 activity | 141,576 | $ | 47.72 | |||||||||
January 2010 | 171,500 | $ | 44.32 | $ | 20,642 | |||||||
February 2010 | 128,500 | $ | 41.79 | $ | 15,272 | |||||||
March 2010 | 273,600 | $ | 39.10 | $ | 69,573 | |||||||
Subtotal first quarter | 573,600 | $ | 41.27 | |||||||||
April 2010 | 149,912 | $ | 40.92 | $ | 63,439 | |||||||
May 2010 | 248,430 | $ | 39.92 | $ | 53,522 | |||||||
June 2010 | 159,661 | $ | 40.38 | $ | 47,075 | |||||||
Subtotal second quarter | 558,003 | $ | 40.32 | |||||||||
July 2010 | 57,177 | $ | 42.10 | $ | 44,668 | |||||||
August 2010 | 32,556 | $ | 42.49 | $ | 43,284 | |||||||
September 2010 | 7,382 | $ | 42.29 | $ | 42,972 | |||||||
Subtotal third quarter | 97,115 | $ | 42.25 | |||||||||
October 2010 | 1,500 | $ | 42.85 | $ | 42,841 | |||||||
November 2010 | 34,066 | $ | 48.27 | $ | 41,265 | |||||||
December 2010 | — | $ | — | $ | 41,265 | |||||||
Subtotal fourth quarter | 35,566 | $ | 48.04 | |||||||||
Total 2010 activity | 1,264,284 | $ | 41.11 | |||||||||
Total share repurchase activity | 1,405,860 | $ | 41.78 | |||||||||
(1) | Balance as of the end of the month indicated. |
F-49
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F-50
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Stock grants outstanding at beginning of year | 619,739 | 558,049 | 391,866 | |||||||||
Granted | 169,134 | 202,731 | 243,587 | |||||||||
Vested | (156,723 | ) | (104,677 | ) | (63,768 | ) | ||||||
Forfeited | (41,489 | ) | (36,364 | ) | (13,636 | ) | ||||||
Balance at end of year | 590,661 | 619,739 | 558,049 | |||||||||
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Year ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
No. of | Exercise | No. of | Exercise | No. of | Exercise | |||||||||||||||||||
Shares | Prices | Shares | Prices | Shares | Prices | |||||||||||||||||||
Options outstanding at beginning of year | 191,000 | $ | 26.21 | 231,750 | $ | 25.62 | 384,350 | $ | 23.34 | |||||||||||||||
Granted | — | — | — | |||||||||||||||||||||
Exercised | (29,000 | ) | $ | 21.12 | (40,750 | ) | $ | 23.16 | (152,350 | ) | $ | 19.78 | ||||||||||||
Expired or forfeited | (4,500 | ) | $ | 26.69 | — | $ | — | (250 | ) | $ | 29.11 | |||||||||||||
Options outstanding at end of year | 157,500 | $ | 27.13 | 191,000 | $ | 26.21 | 231,750 | $ | 25.67 | |||||||||||||||
Number of options exercisable | 157,500 | $ | 27.13 | 191,000 | $ | 26.21 | 230,250 | $ | 25.62 | |||||||||||||||
Average | ||||||||||||||||||||
Outstanding | Remaining | Average | Exercisable | Average | ||||||||||||||||
Price Range | Options | Contract Life | Exercise Price | Options | Exercise Price | |||||||||||||||
$16 to $20 | 27,000 | 1.1 | $ | 17.62 | 27,000 | $ | 17.62 | |||||||||||||
$21 to $30 | 109,000 | 3.0 | $ | 28.25 | 109,000 | $ | 28.25 | |||||||||||||
$31 to $37 | 21,500 | 4.2 | $ | 33.39 | 21,500 | $ | 33.39 |
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Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
SARs | Prices | SARs | Prices | SARs | Prices | |||||||||||||||||||
SARs outstanding at beginning of year | 52,000 | $ | 14.05 | 59,250 | $ | 13.89 | 64,250 | $ | 13.63 | |||||||||||||||
Granted | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Exercised | (35,500 | ) | $ | 11.86 | (7,250 | ) | $ | 12.76 | (5,000 | ) | $ | 10.50 | ||||||||||||
Expired or forfeited | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
SARs outstanding at end of year | 16,500 | $ | 18.74 | 52,000 | $ | 14.05 | 59,250 | $ | 13.89 | |||||||||||||||
Number of SARs exercisable | 16,500 | $ | 18.74 | 52,000 | $ | 14.05 | 59,250 | $ | 13.89 | |||||||||||||||
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March 31, | June 30, | Sept. 30, | Dec. 31, | |||||||||||||
2010 | 2010 | 2010 | 2010 | |||||||||||||
($ in thousands, except net income per share) | ||||||||||||||||
Gross written premiums | $ | 270,145 | $ | 253,568 | $ | 233,638 | $ | 229,850 | ||||||||
Net written premiums | 189,317 | 165,005 | 157,807 | 141,809 | ||||||||||||
Revenues: | ||||||||||||||||
Net earned premiums | 164,069 | 161,471 | 168,233 | 166,158 | ||||||||||||
Net investment income | 17,972 | 17,853 | 17,839 | 17,998 | ||||||||||||
Total other-than-temporary impairment losses | (251 | ) | (489 | ) | (1,034 | ) | (448 | ) | ||||||||
Portion of loss recognized in Other comprehensive income (before tax) | 170 | 334 | 365 | 273 | ||||||||||||
Net other-than-temporary impairment losses recognized in earnings | (81 | ) | (155 | ) | (669 | ) | (175 | ) | ||||||||
Net realized gains (losses) | 6,113 | 11,020 | 4,521 | 19,665 | ||||||||||||
Other income (expense) | 1,070 | (899 | ) | 2,767 | 2,205 | |||||||||||
Total revenues | 189,143 | 189,290 | 192,691 | 205,851 | ||||||||||||
Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 103,807 | 99,863 | 107,463 | 110,022 | ||||||||||||
Commission expenses | 25,316 | 25,677 | 25,185 | 32,935 | ||||||||||||
Other operating expenses | 34,586 | 34,513 | 34,682 | 35,919 | ||||||||||||
Interest expense | 2,044 | 2,044 | 2,045 | 2,045 | ||||||||||||
Total expenses | 165,753 | 162,097 | 169,375 | 180,921 | ||||||||||||
Income before income taxes | 23,390 | 27,193 | 23,316 | 24,930 | ||||||||||||
Income tax expense | 6,345 | 8,223 | 7,091 | 7,592 | ||||||||||||
Net income | $ | 17,045 | $ | 18,970 | $ | 16,225 | $ | 17,338 | ||||||||
Comprehensive income (loss) | $ | 24,505 | $ | 26,164 | $ | 40,023 | $ | (24,308 | ) | |||||||
Combined ratio | 99.1 | % | 99.7 | % | 97.8 | % | 106.3 | % | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 1.02 | $ | 1.18 | $ | 1.03 | $ | 1.10 | ||||||||
Diluted | $ | 1.00 | $ | 1.16 | $ | 1.00 | $ | 1.07 |
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March 31, | June 30, | Sept. 30, | Dec. 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
($ in thousands, except net income per share) | ||||||||||||||||
Gross written premiums | $ | 275,259 | $ | 272,729 | $ | 245,191 | $ | 251,739 | ||||||||
Net written premiums | 200,652 | 183,007 | 156,001 | 161,595 | ||||||||||||
Revenues: | ||||||||||||||||
Net earned premiums | 164,946 | 169,868 | 171,271 | 177,278 | ||||||||||||
Net investment income | 18,743 | 18,656 | 19,110 | 19,003 | ||||||||||||
Total other-than-temporary impairment losses | (26,871 | ) | (1,876 | ) | (22 | ) | (496 | ) | ||||||||
Portion of loss recognized in Other comprehensive income (before tax) | 16,171 | 1,407 | (525 | ) | 335 | |||||||||||
Net other-than-temporary impairment losses recognized in earnings | (10,700 | ) | (469 | ) | (547 | ) | (161 | ) | ||||||||
Net realized gains (losses) | (1,537 | ) | 2,596 | 6,682 | 1,476 | |||||||||||
Other income (expense) | 143 | 5,302 | 1,241 | (21 | ) | |||||||||||
Total revenues | 171,595 | 195,953 | 197,757 | 197,575 | ||||||||||||
Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 100,247 | 100,728 | 107,591 | 127,432 | ||||||||||||
Commission expenses | 22,448 | 26,278 | 22,852 | 27,330 | ||||||||||||
Other operating expenses | 30,535 | 33,019 | 35,018 | 34,099 | ||||||||||||
Interest expense | 2,219 | 2,150 | 2,042 | 2,044 | ||||||||||||
Total expenses | 155,449 | 162,175 | 167,503 | 190,905 | ||||||||||||
Income before income taxes | 16,146 | 33,778 | 30,254 | 6,670 | ||||||||||||
Income tax expense | 4,146 | 10,128 | 8,822 | 594 | ||||||||||||
Net income | $ | 12,000 | $ | 23,650 | $ | 21,432 | $ | 6,076 | ||||||||
Comprehensive income (loss) | $ | 19,503 | $ | 34,876 | $ | 62,119 | $ | (3,186 | ) | |||||||
Combined ratio | 92.8 | % | 92.9 | % | 95.9 | % | 106.5 | % | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.71 | $ | 1.40 | $ | 1.26 | $ | 0.36 | ||||||||
Diluted | $ | 0.71 | $ | 1.39 | $ | 1.24 | $ | 0.35 |
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SUMMARY OF CONSOLIDATED INVESTMENTS—OTHER THAN INVESTMENTS
IN RELATED PARTIES
December 31, 2010
Gross | Gross | OTTI | ||||||||||||||||||
Unrealized | Unrealized | Cost or | Recognized | |||||||||||||||||
December 31, 2010 | Fair Value | Gains | (Losses) | Amortized Cost | in OCI | |||||||||||||||
($ in thousands) | ||||||||||||||||||||
U.S. Government Treasury bonds, agency bonds and foreign government bonds | $ | 324,145 | $ | 5,229 | $ | (4,499 | ) | $ | 323,415 | $ | — | |||||||||
States, municipalities and political subdivisions | 392,250 | 11,903 | (3,805 | ) | 384,152 | — | ||||||||||||||
Mortgage- and asset-backed securities: | ||||||||||||||||||||
Agency mortgage-backed securities | 382,628 | 10,127 | (2,434 | ) | 374,935 | — | ||||||||||||||
Residential mortgage obligations | 20,463 | 24 | (2,393 | ) | 22,832 | (1,646 | ) | |||||||||||||
Asset-backed securities | 46,093 | 247 | (292 | ) | 46,138 | — | ||||||||||||||
Commercial mortgage-backed securities | 190,015 | 4,804 | (1,794 | ) | 187,005 | — | ||||||||||||||
Subtotal | 639,199 | 15,202 | (6,913 | ) | 630,910 | (1,646 | ) | |||||||||||||
Corporate bonds | 526,651 | 15,075 | (5,545 | ) | 517,121 | — | ||||||||||||||
Total fixed maturities | 1,882,245 | 47,409 | (20,762 | ) | 1,855,598 | (1,646 | ) | |||||||||||||
Equity securities — common stocks | 87,258 | 22,475 | (10 | ) | 64,793 | — | ||||||||||||||
Cash | 31,768 | — | — | 31,768 | — | |||||||||||||||
Short-term investments | 153,057 | — | — | 153,057 | — | |||||||||||||||
Total | $ | 2,154,328 | $ | 69,884 | $ | (20,772 | ) | $ | 2,105,216 | $ | (1,646 | ) | ||||||||
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THE NAVIGATORS GROUP, INC.
(Parent Company)
($ in thousands, except share data)
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Cash and investments | $ | 53,217 | $ | 63,676 | ||||
Investments in subsidiaries | 877,999 | 846,295 | ||||||
Goodwill and other intangible assets | 2,534 | 2,534 | ||||||
Other assets | 12,028 | 5,213 | ||||||
Total assets | $ | 945,778 | $ | 917,718 | ||||
LIABILITIES | ||||||||
7% Senior Notes | $ | 114,138 | $ | 114,010 | ||||
Accounts payable and other liabilities | 946 | 847 | ||||||
Accrued interest payable | 1,340 | 1,342 | ||||||
Total liabilities | �� | 116,424 | 116,199 | |||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, $.10 par value, 1,000,000 shares authorized, none issued | — | — | ||||||
Common stock, $.10 par value, 50,000,000 shares authorized: authorized; issued 17,274,440 shares for 2010 and 17,212,814 shares for 2009 | 1,728 | 1,721 | ||||||
Additional paid-in capital | 312,588 | 304,505 | ||||||
Treasury stock, at cost (1,532,273 shares for 2010 and 366,330 shares for 2009) | (64,935 | ) | (18,296 | ) | ||||
Retained earnings | 539,512 | 469,934 | ||||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains (losses) on securities available-for-sale, net of tax | 31,474 | 34,958 | ||||||
Foreign currency translation adjustment, net of tax | 8,987 | 8,697 | ||||||
Total stockholders’ equity | 829,354 | 801,519 | ||||||
Total liabilities and stockholders’ equity | $ | 945,778 | $ | 917,718 | ||||
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Table of Contents
THE NAVIGATORS GROUP, INC.
(Parent Company)
($ in thousands)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues: | ||||||||||||
Net investment income | $ | 630 | $ | 583 | $ | 1,354 | ||||||
Dividends received from wholly-owned subsidiaries | 40,000 | 25,000 | 20,000 | |||||||||
Total revenues | 40,630 | 25,583 | 21,354 | |||||||||
Expenses: | ||||||||||||
Interest expense | 8,178 | 8,455 | 8,871 | |||||||||
Other (income) expense | 634 | (1,482 | ) | 1,016 | ||||||||
Total expenses | 8,812 | 6,973 | 9,887 | |||||||||
Income before income tax benefit | 31,818 | 18,610 | 11,467 | |||||||||
Income tax benefit | (2,846 | ) | (2,174 | ) | (3,495 | ) | ||||||
Income before equity in undistributed net income of wholly owned subsidiaries | 34,664 | 20,784 | 14,962 | |||||||||
Equity in undistributed net income of wholly-owned subsidiaries | 34,914 | 42,374 | 36,730 | |||||||||
Net income | $ | 69,578 | $ | 63,158 | $ | 51,692 | ||||||
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Table of Contents
THE NAVIGATORS GROUP, INC.
(Parent Company)
($ in thousands)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities: | ||||||||||||
Net income | $ | 69,578 | $ | 63,158 | $ | 51,692 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operations: | ||||||||||||
Equity in undistributed net income of wholly-owned subsidiaries | (74,914 | ) | (67,374 | ) | (56,730 | ) | ||||||
Dividends received from subsidiaries | 40,000 | 25,000 | 20,000 | |||||||||
Other | 4,543 | 4,682 | 604 | |||||||||
Net cash provided by operating activities | 39,207 | 25,466 | 15,566 | |||||||||
Investing activities: | ||||||||||||
Fixed maturities, available-for-sale | ||||||||||||
Sales | 26,313 | 9,103 | 9,637 | |||||||||
Purchases | (28,213 | ) | (34,932 | ) | (13,500 | ) | ||||||
Equity securities | ||||||||||||
Sales | 2,995 | — | — | |||||||||
Purchases | (2,367 | ) | — | — | ||||||||
Net increase in short-term investments | 5,122 | 13,863 | 2,432 | |||||||||
Net cash provided by (used in) investing activities | 3,850 | (11,966 | ) | (1,431 | ) | |||||||
Financing activities: | ||||||||||||
Capital contribution | — | (2,000 | ) | — | ||||||||
Purchase of treasury stock | (51,980 | ) | (6,756 | ) | (11,540 | ) | ||||||
Purchase of Senior notes | — | (7,000 | ) | — | ||||||||
Proceeds of stock issued from employee stock purchase plan | 868 | 727 | 963 | |||||||||
Proceeds of stock issued from exercise of stock options | 611 | 944 | 3,014 | |||||||||
Net cash used in financing activities | (50,501 | ) | (14,085 | ) | (7,563 | ) | ||||||
Increase (decrease) in cash | (7,444 | ) | (585 | ) | 6,572 | |||||||
Cash at beginning of year | 9,090 | 9,675 | 3,103 | |||||||||
Cash at end of year | $ | 1,646 | $ | 9,090 | $ | 9,675 | ||||||
S-4
Table of Contents
SUPPLEMENTARY INSURANCE INFORMATION
($ in thousands)
Reserve | Losses | Amortization | ||||||||||||||||||||||||||||||||||||||
Deferred | for losses | Other policy | and loss | of deferred | ||||||||||||||||||||||||||||||||||||
policy | and loss | claims and | Net | Net | adjustment | policy | Other | Net | ||||||||||||||||||||||||||||||||
acquisition | adjustment | Unearned | benefits | earned | investment | expenses | acquisition | operating | written | |||||||||||||||||||||||||||||||
costs | expenses | premiums | payable | premiums | income(1) | incurred | costs(2) | expenses(1) | premiums | |||||||||||||||||||||||||||||||
Year ended December 31, 2010 | ||||||||||||||||||||||||||||||||||||||||
Insurance Companies | $ | 33,273 | $ | 1,433,556 | $ | 318,119 | $ | — | $ | 438,851 | $ | 62,792 | $ | 280,120 | $ | 59,122 | $ | 106,631 | $ | 429,355 | ||||||||||||||||||||
Lloyd’s Operations | 21,928 | 552,282 | 145,396 | — | 221,080 | $ | 8,286 | $ | 141,035 | $ | 49,991 | $ | 33,112 | $ | 224,583 | |||||||||||||||||||||||||
$ | 55,201 | $ | 1,985,838 | $ | 463,515 | $ | — | $ | 659,931 | $ | 71,078 | $ | 421,155 | $ | 109,113 | $ | 139,743 | $ | 653,938 | |||||||||||||||||||||
Year ended December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Insurance Companies | $ | 34,872 | $ | 1,395,876 | $ | 334,798 | $ | — | $ | 479,121 | $ | 65,717 | $ | 304,672 | $ | 61,949 | $ | 104,801 | $ | 477,673 | ||||||||||||||||||||
Lloyd’s Operations | 21,703 | 524,410 | 140,373 | — | 204,242 | 9,229 | 131,326 | 37,727 | 27,896 | 223,582 | ||||||||||||||||||||||||||||||
$ | 56,575 | $ | 1,920,286 | $ | 475,171 | $ | — | $ | 683,363 | $ | 74,946 | $ | 435,998 | $ | 99,676 | $ | 132,697 | $ | 701,255 | |||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||
Insurance Companies | $ | 33,308 | $ | 1,359,231 | $ | 348,824 | $ | — | $ | 463,298 | $ | 63,544 | $ | 275,767 | $ | 55,752 | $ | 92,297 | $ | 472,688 | ||||||||||||||||||||
Lloyd’s Operations | 14,310 | 494,433 | 131,841 | — | 180,678 | 11,655 | 117,364 | 34,033 | 30,961 | 188,927 | ||||||||||||||||||||||||||||||
$ | 47,618 | $ | 1,853,664 | $ | 480,665 | $ | — | $ | 643,976 | $ | 75,199 | $ | 393,131 | $ | 89,785 | $ | 123,258 | $ | 661,615 | |||||||||||||||||||||
(1) | Net investment income and Other operating expenses reflect only such amounts attributable to the Company’s insurance operations. | |
(2) | Amortization of deferred policy acquisition costs reflects only such amounts attributable to the Company’s insurance operations. A portion of these costs is eliminated in consolidation. |
S-5
Table of Contents
REINSURANCE
($ in thousands)
Ceded to | Assumed | Percentage | ||||||||||||||||||
Direct | other | from other | Net | of amount | ||||||||||||||||
Amount | companies | companies | amount | assumed to net | ||||||||||||||||
Year ended December 31, 2010 Property-Casualty | $ | 916,817 | $ | 333,263 | $ | 70,384 | $ | 653,938 | 11 | % | ||||||||||
Year ended December 31, 2009 Property-Casualty | $ | 966,251 | $ | 343,663 | $ | 78,667 | $ | 701,255 | 11 | % | ||||||||||
Year ended December 31, 2008 Property-Casualty | $ | 1,016,521 | $ | 423,307 | $ | 68,401 | $ | 661,615 | 10 | % | ||||||||||
S-6
Table of Contents
VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
Balance at | Balance at | |||||||||||||||||||
January 1, | Charged (Credited) to | Charged to | Deductions | December 31, | ||||||||||||||||
Description | 2010 | Costs and Expenses | Other Accounts | (Describe) | 2010 | |||||||||||||||
Allowance for uncollectible reinsurance | $ | 13,799 | $ | (829 | ) | $ | — | $ | — | $ | 12,970 | |||||||||
Valuation allowance in deferred taxes | $ | 2,648 | $ | (463 | ) | $ | — | $ | — | $ | 2,185 | |||||||||
S-7
Table of Contents
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
($ in thousands)
Reserve | Amortization | |||||||||||||||||||||||||||||||||||||||||||
Deferred | for losses | Losses and loss adjustment | of deferred | |||||||||||||||||||||||||||||||||||||||||
Affiliation | policy | and loss | Discount, | Net | Net | expenses incurred related to | policy | Other | Net | |||||||||||||||||||||||||||||||||||
with | acquisition | adjustment | if any, | Unearned | earned | investment | Current | Prior | acquisition | operating | written | |||||||||||||||||||||||||||||||||
Registrant | costs | expenses | deducted | premiums | premiums | income(1) | year | years | costs(2) | expenses(1) | premiums | |||||||||||||||||||||||||||||||||
Consolidated Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2010 | $ | 55,201 | $ | 1,985,838 | $ | — | $ | 463,515 | $ | 659,931 | $ | 71,078 | $ | 434,957 | $ | (13,802 | ) | $ | 109,113 | $ | 139,743 | $ | 653,938 | |||||||||||||||||||||
Year ended December 31, 2009 | $ | 56,575 | $ | 1,920,286 | $ | — | $ | 475,171 | $ | 683,363 | $ | 74,946 | $ | 444,939 | $ | (8,941 | ) | $ | 99,676 | $ | 132,697 | $ | 701,255 | |||||||||||||||||||||
Year ended December 31, 2008 | $ | 47,618 | $ | 1,853,664 | $ | — | $ | 480,665 | $ | 643,976 | $ | 75,199 | $ | 443,877 | $ | (50,746 | ) | $ | 89,785 | $ | 123,258 | $ | 661,615 | |||||||||||||||||||||
(1) | Net investment income and Other operating expenses reflect only such amounts attributable to the Company’s insurance operations. | |
(2) | Amortization of Deferred policy acquisition costs reflects only such amounts attributable to the Company’s insurance operations. A portion of these costs is eliminated in consolidation. |
S-8
Table of Contents
Previously Filed and | |||||
Incorporated Herein | |||||
Exhibit No. | Description of Exhibit | by Reference to: | |||
3-1 | Restated Certificate of Incorporation | Form S-8 filed July 26, 2002 (File No. 333-97183) | |||
3-2 | Certificate of Amendment to the Restated Certificate of Incorporation | Form S-8 filed July 26, 2002 (File No. 333-97183) | |||
3-3 | By-laws, as amended | Form S-1 (File No. 33-5667) | |||
3-4 | Certificate of Amendment to the Restated Certificate of Incorporation | Form 10-Q for June 30, 2006 | |||
4-1 | Specimen of Common Stock certificate, par value $0.10 per share | Form S-8 filed June 20, 2003 (File No. 333-106317) | |||
10-1 | Management Agreement between Navigators Insurance Company and Navigators Management Company, Inc. (formerly Somerset Marine, Inc.) | Form S-1 (File No. 33-5667) | |||
10-2 | Agreement between the Company and Navigators Management Company, Inc. (formerly Somerset Marine, Inc.) | Form S-1 (File No. 33-5667) | |||
10-3 | * | Stock Option Plan | Form S-1 (File No. 33-5667) | ||
10-4 | * | Non-Qualified Stock Option Plan | Form S-4 (File No. 33-75918) | ||
10-5 | Agreement with Bradley D. Wiley dated June 3, 1997 | Form 10-K for December 31, 1997 | |||
10-6 | Employment Agreement with Salvatore A. Margarella dated March 1, 1999 | Form 10-K for December 31, 1998 | |||
10-7 | Employment Agreement with Stanley A. Galanski effective March 26, 2001 | Form 10-Q for March 31, 2001 | |||
10-8 | Employment Agreement with R. Scott Eisdorfer dated September 1, 1999 | Form 10-K for December 31, 2002 | |||
10-9 | * | 2002 Stock Incentive Plan | Proxy Statement for May 30, 2002 | ||
10-10 | * | Employee Stock Purchase Plan | Proxy Statement for May 29, 2003 | ||
10-11 | * | Executive Performance Incentive Plan | Proxy Statement for May 29, 2003 | ||
10-12 | Form of Indemnity Agreement by the Company and the Selling Stockholders (as defined therein) | Amendment No. 2 to Form S-3 dated October 1, 2003 (File No. 333-108424) | |||
10-14 | Form of Stock Grant Award Certificate and Restricted Stock Agreement for the 2002 Stock Incentive Plan (approved at Annual Meeting of Shareholders held May 30, 2002) | Form 10-Q for September 30, 2004 | |||
10-15 | Form of Option Award Certificate for the 2002 Stock Incentive Plan (approved at Annual Meeting of Shareholders held May 30, 2002) | Form 10-Q for September 30, 2004 | |||
10-16 | Agreement with Jane E. Keller | Form 10-Q for September 30, 2004 | |||
10-17 | Common Stock Grant Award to Stanley A. Galanski under the 2002 Stock Incentive Plan | Form 8-K filed December 14, 2004 | |||
10-18 | Commutation Agreement between Navigators Insurance Company and Somerset Insurance Limited | Form 8-K filed January 18, 2005 | |||
10-19 | Second Amended and Restated Credit Agreement among the Company and the Lenders dated January 31, 2005 | Form 8-K filed February 4, 2005 | |||
10-20 | * | 2005 Stock Incentive Plan | Proxy Statement for May 20, 2005 | ||
10-23 | Third Amended and Restated Credit Agreement among the Company and the Lenders dated February 2, 2007 | Form 8-K filed February 7, 2007 | |||
10-24 | Paul J. Malvasio Letter Agreement and Retirement Agreement | Form 10-Q for March 31, 2008 | |||
10-25 | Agreement with Francis W. McDonnell | Form 8-K filed July 29, 2008 |
Table of Contents
Previously Filed and | |||||
Incorporated Herein | |||||
Exhibit No. | Description of Exhibit | by Reference to: | |||
10-26 | Fourth Amended and Restated Credit Agreement among the Company and the Lender dated April 3, 2009 | Form 8-K filed April 7, 2009 | |||
10-27 | * | Amended 2005 Stock Incentive Plan | Proxy Statement for April 29, 2009 | ||
10-28 | Agreement with Bruce J. Byrnes | Form 8-K filed June 16, 2009 | |||
11-1 | Statement re Computation of Per Share Earnings | ** | |||
21-1 | Subsidiaries of Registrant | ** | |||
23-1 | Consent of Independent Registered Public Accounting Firm | ** | |||
31-1 | Certification of CEO per Section 302 of the Sarbanes-Oxley Act | ** | |||
31-2 | Certification of CFO per Section 302 of the Sarbanes-Oxley Act | ** | |||
32-1 | Certification of CEO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference). | ** | |||
32-2 | Certification of CFO per Section 906 of the Sarbanes-Oxley Act (This exhibit is intended to be furnished in accordance with regulation S-K item 601(b)(32)(ii) and shall not be deemed to be filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference). | ** |
* | Compensatory plan. | |
** | Included herein. |