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Navigators Group (NAVG) Q2 Earnings Miss, Revenues Beat

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Navigators Group, Inc. reported second-quarter 2016 net operating earnings per share of 81 cents, which missed the Zacks Consensus Estimate of 97 cents by 16.5%. Also, earnings plunged 39.5% year over year.

Despite incurring property catastrophe loss of $18.3 million in the second quarter, the company delivered its fourteenth consecutive quarter of profitable underwriting results. Shares gained 0.5% in the last two trading sessions reflecting investor optimism over the company’s performance amid catastrophe loss.

The U.S. Insurance business displayed another quarter of solid performance, whereas the International Insurance segment underperformed as it was negatively impacted by property catastrophe activity associated with the Fort McMurray wildfires.
 
Net income for the reported quarter was $16.2 million or $1.08 per share compared with $19.2 million or $1.30 per share in the year-ago quarter.

Navigators Group’s total revenue rose 14.8% year over year to $292.3 million in the reported quarter. Moreover, the top line beat the Zacks Consensus Estimate of $288 million by 1.4%. Net earned premiums climbed 10.6% to $267.9 million buoyed by growth in both the U.S. insurance and International insurance. The net investment income decreased 19.8% to $19.9 million.

Gross premiums written were $412.6 million, up 8.7% year over year.

Insurance loss and loss adjusted expenses (LAE) increased 17.8% year over year to $167.2 million. Subsequently, total expenses jumped 17.7% to $270.9 million primarily due to high net losses and loss adjustment expenses as well as commissions and operating expenses.

Underwriting profit plummeted 93.5% to $1.1 million from $16.1 million in the year-ago quarter. The underwriting loss reported by the International Insurance segment led to the downside. However, the combined ratio deteriorated 620 basis points (bps) to 99.6% from year-ago quarter.

Segment Update

U.S. Insurance: Net earned premiums grew about 11% year over to $152.4 million. The segment reported underwriting profit of $10.4 million, up 7.9% from the year-ago quarter. Combined ratio improved 10 basis points (bps) to 92.9% in the reported quarter.

International Insurance: Net earned premiums surged 23.2% year over year to $77.8 million. Underwriting loss of $10.1 million compared unfavorably with the underwriting profit of $2.2 million in the prior-year quarter. Combined ratio deteriorated 1640 bps to 113.0% in the second quarter.

Global Re: The segment’s net earned premiums declined 9.8% year over year to $37.8 million. Underwriting profit plunged 92.8% year over year to $0.3 million in the reported quarter. Combined ratio deteriorated 960 bps to 99.2% in the second quarter.

Financial Update

Navigators Group exited the second quarter with book value per share of $81.24, up 3.2% from $78.72 as of Mar 31, 2016. The company reported operating cash flow of $114.5 million for the first half of 2016 compared with operating cash flow of $2.7 million in the first half of 2015.

As of Jun 30, 2016, Navigators Group’s total investment and cash amounted to $3.2 billion, up 7.4% from $3 billion at year-end 2015. Total shareholders’ equity was $1.2 billion as of Jun 30, 2016, up 7.8% from $1.1 billion at the end of 2015.

NAVIGATORS GRP Price, Consensus and EPS Surprise

NAVIGATORS GRP Price, Consensus and EPS Surprise | NAVIGATORS GRP Quote

Zacks Rank and Performance of Other P&C Insurers

Currently, Navigators Group carries a Zacks Rank #5 (Strong Sell). Among other property and casualty insurers that have reported their second-quarter results so far, the bottom line at RLI Corp. (RLI - Free Report) and Progressive Corp. (PGR - Free Report) missed their respective Zacks Consensus Estimates, while First American Financial Corporation’s (FAF - Free Report) earnings beat the same.

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