Best Affirms Navigators Group Ratings; Outlook Stable

July 7, 2011

A.M. Best Co. announced at the end of June that it has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a+” of Navigators Insurance Group, which is comprised of Navigators Insurance Company and its wholly owned and 100 percent reinsured subsidiary, Navigators Specialty Insurance Company.

At the same time Best affirmed the “bbb+” ICR of Navigators’ publicly traded ultimate parent, The Navigators Group, Inc. All of the companies are domiciled in New York, NY.

In addition Best has affirmed the debt ratings of “bbb+” on $114 million of senior unsecured notes and the shelf ratings of “bbb-” on preferred securities, “bbb” on subordinated notes and “bbb+” on senior unsecured notes.

The outlook for all ratings is stable.

The ratings reflect Navigators Group’s “leading position as a global provider of insurance to the marine sector, the group’s well-diversified book of business, its modest net windstorm exposure, management’s conservative approach to risk management, underwriting and claims handling in addition to the group’s solid level of capitalization and historical profitability,” Best explained.

As partial offsetting factors Best cited Navigators Group’s “declining underwriting results over a three-year period, elevated ceded reinsurance leverage and growth in relatively new lines of business in recent years, some of which have proved unprofitable.

“Despite the group’s historically strong overall underwriting performance, underwriting results have declined in the past two years and into 2011 due to a combination of recent large industry-wide losses in the energy segment, reinstatement premiums, adverse loss development on certain lines and run-off operations.”

However, Best also pointed out that “management is proactive in either re-underwriting unprofitable business or exiting such lines. Furthermore, the financial flexibility and explicit support of Navigators, Inc. is sufficient to offset these concerns. Navigators, Inc.’s financial leverage is a conservative 12.5 percent of debt-to-total tangible capital, with coverage ratios far exceeding Best’s requirements for the current rating level.”

Best added that the stable outlook acknowledges its “expectation that the group will continue to maintain its solid level of capitalization and operating performance, generating overall profitable results throughout market cycles.”

Best’s report differs with an earlier rating analysis released by Standard & Poor’s in May, which changed its outlook on Navigators’ ratings from stable to negative.

Source: A.M. Best

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