Type: Public Company
Address: 1 Penn Plaza, New York, New York, 10119, U.S.A.
Telephone: (212) 244-2333
Fax: (212) 244-4077
Web: http://www.navg.com
Employees: 275
Sales: $526.59 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: NAVG
Incorporated: 1974 as New York Marine Managers Inc.
NAIC: 524126 Direct Property and Casualty Insurance Carriers
SIC: 6331 Fire, Marine & Casualty Insurance; 6351 Surety Insurance
Based in New York City, The Navigators Group, Inc., is an international insurance holding company primarily involved in the writing of marine insurance. The company's main insurance subsidiary, Navigators Insurance Company, offers a full slate of ocean and inland marine insurance, providing hull and cargo coverage, war insurance, as well as energy insurance to cover offshore and onshore oil and gas operations. NIC Insurance Company, Navigators' specialty insurance unit, offers a wide variety of niche insurance products for such industries as contracting, manufacturing, real estate, and hospitality. Navigators' underwriting operations include Marine, Specialty Property-Casualty, and Professional Liability (covering corporate directors and officers, lawyers, and others).
In addition, Navigators Underwriting Agency, Ltd., is a member of Lloyd's of London, the world's premiere marine insurance market. Navigators maintains domestic offices in Chicago, Houston, Seattle, San Francisco, and Corona, California; conducts business in the United Kingdom through offices in London, Manchester, and Bassingstoke; and operates internationally through an office in Antwerp, Belgium. Navigators is a public company listed on NASDAQ, 20 percent of its shares held by chairman and founder Terence N. Deeks and his family.
Company Founded: 1974
Born in London, Terence Deeks joined Lloyd's of London in 1957 and over the next decade rose through the ranks as a major insurance writer to become deputy marine underwriter. In the meantime he pursued an associate's degree from London's Chartered Insurance Institute, graduating in 1966. He then immigrated to the United States, employed by New York City-based General Reinsurance Corporation to start a marine department.
Deeks relocated to Houston in 1968 to establish and manage a marine department for Highlands Insurance Company. In 1974 he struck out on his own, returning to New York City to launch the Somerset Agencies to provide underwriting management services for marine, aviation, property insurance, and reinsurance companies. He also formed New York Marine Managers Inc., Navigators predecessor. New York Marine operated a marine insurance pool, serving as a marine underwriting department for a group of property and casualty insurance companies.
New York Marine was an immediate success, and just one year after its launch, the firm opened an office in Houston to become involved in the Gulf of Mexico. Another regional office was opened in San Francisco in 1982. In that same year the business was reorganized as a Delaware corporation under the name Navigators Group, Inc. This set the stage for the creation of Navigators Insurance Company in 1983, permitting the firm to write insurance and become a risk-taking member of the pool it managed.
Company Taken Public: 1986
Navigators went public in 1986. In an initial public offering of stock managed by Donaldson, Lufkin & Jenrette, the company raised $25 million, the money earmarked to increase the firm's insurance underwriting capacity. Some of that new business would be generated from a new office in Seattle, opened in 1987. A year later Navigators formed International Aviation Insurance Group, which began doing business at the start of 1989. This bid to launch a general aviation underwriting firm, primarily to cover U.S. jet fleets, evolved into NIC Insurance Company, which in addition to aviation and inland marine insurance added property insurance lines of specialty reinsurance. As a result, revenues of the parent company increased to $70.8 million in 1991 and two years later approached the $120 million mark. Net income during this period grew from $16 million to $21.6 million. Also in 1993 Navigators arranged to acquire the 50 percent stake it did not already own in the eight affiliated Somerset companies that provided underwriting management services for Navigators Insurance and other insurance companies. The transaction closed in June 1994.
Navigators' success was even more impressive in light of difficult market conditions that had been in place since the company was launched in the mid-1970s. Moreover, at the start of the 1990s marine and aviation direct insurers had to deal with escalating rates from reinsurers, which had taken considerable losses in recent years and had increased their rates significantly. Direct insurers were forced to raise their rates but lacked leverage with shipowners and airlines because of excess supply of insurance that depressed rates. As a result, there was a shakeout in the industry. Navigators emerged as one of the survivors, and for the first time since its founding benefited from favorable market conditions that allowed it to raise rates and grow from a $50 million to a $100 million company in just five years.
Although Navigators was able to withstand losses caused by Hurricanes Andrew and Iniki in 1992 to maintain profits, the same could not be said for 1994. In January of that year a 6.7 magnitude earthquake, the Northridge Earthquake, struck northwest of Los Angeles, California, killing 72 people, injuring 11,000, and causing an estimated $12.5 billion in damage. Navigators was one of many insurance companies that suffered significant losses due to the earthquake. For the year, the firm posted a net loss of $20.5 million on revenues that dipped to $113.9 million.
It was a major setback for Navigators, which took steps to reduce its exposure to such domestic catastrophes and focus on becoming a true international specialty marine underwriter. In 1995 the firm withdrew completely from the property business and returned to profitability in 1996, recording earnings of $12.6 million on revenues of $113.7 million. The loss of property insurance premiums led to a decline in revenues to $102.8 million in 1996, but net income continued to rise, approaching $16.8 million. That number fell to $12.5 million on sales of $108.2 million in 1997. Due to increased competition in the aviation insurance field, Navigators withdrew from this segment as well in 1997, and Somerset Marine Aviation Property Managers, Inc., became an inactive subsidiary.
In the late 1990s Navigators took further steps to focus on its core marine insurance business. The Non Marine division was consolidated as four subsidiaries (Somerset Re Management, Inc.; Navigators Management Corporation; Somerset Casualty Agency, Inc.; and Somerset Property, Inc.) and merged into Somerset Marine, Inc. Moreover, Navigators decided to cease writing inland marine insurance, with the exception of onshore energy insurance. This move allowed Navigators to trim operating costs by closing inland marine offices in Atlanta, Chicago, and Dallas in 1997, and in Cranbury, New Jersey, in 1998. To increase its international business, in 1996 Navigators formed Somerset Asia in Sydney, Australia, and a Singapore subsidiary called Somerset Services Pte. Ltd. In early 1997 Somerset Asia began writing coverage on marine, onshore energy, engineering, and construction in China, Indonesia, Malaysia, Taiwan, Thailand, and Vietnam, while Somerset Services did loss prevention consulting work.
Also in late 1996 Navigators formed Somerset UK to offer marine, aviation, onshore energy, engineering, and construction coverage. Once authorization was received the unit began conducting business in October 1997. Three months later, in January 1998, Navigators acquired the Lloyd's of London underwriting agency, Mander, Thomas & Cooper (Underwriting Agencies) Ltd. (MTC), manager of Lloyd's Syndicate 1221, which possessed one of Lloyd's largest specialist marine portfolios. Navigators was well familiar with the syndicate because it was the largest participant, and as such had developed a long-term relationship with the MTC staff.
In addition to gaining entry into Lloyd's important market, the MTC acquisition provided Lloyd's worldwide licenses, creating a platform on which Navigators could build its international program. It also allowed Navigators to cut costs by relocating Somerset UK's accounting and support staff to the MTC offices, while the underwriters were assigned to Lloyd's underwriting floors.
Conditions in the marine insurance field were difficult in the mid- to late 1990s. Premium levels declined each year and because of increased competition, rates fell. By the end of the decade they were about 40 percent of their 1993 level. Having elected to focus on its marine line, which accounted for almost 90 percent of its business, Navigators saw net income fall to $11.5 million on revenues of $115.2 million in 1998. The company then posted a loss of $5.4 million in 1999 on revenues of $105.6 million, due in large measure to a $6.6 million write-off of uncollectible reinsurance.
Despite these disappointing results at the end of the decade, Navigators was able to position itself for the future, especially in its U.K. business. In 1999 it began writing engineering and construction, and onshore energy policies through its newly launched Robertson Consortium at Lloyd's, and later in the year Navigators established Pennine Underwriting Ltd., based in Manchester to provide cargo and engineering business for its Lloyd's Syndicate 1221. An office in Leeds would follow later. In order to become less dependent on marine insurance, in 1999 Navigators also acquired San Francisco-based Anfield Insurance Services, which specialized in construction liability insurance and provided a foundation for Navigators specialty lines.
Navigators returned to profitability in 2000 at a time when rival firms experienced continued losses. Despite difficult market conditions during much of the year, Navigators was able to grow revenues to more than $120 million and post earnings of $7 million. The company also moved its headquarters in 2000 from lower Manhattan to One Penn Plaza in Midtown.
New CEO: 2003
To help in growing the business, Navigators in 2001 implemented a new global branding strategy that called for all subsidiaries to operate under the Navigators name. At the same time, the company announced that Stanley A. Galanski joined the firm as executive vice-president and chief operating officer of the Group, as well as president and COO of the insurance companies. He was also Deeks' heir apparent. Galanski was a seasoned insurance executive. From 1980 to 1995 he held a variety positions with the Chubb Group of Insurance Companies. He then became president of New Hampshire Insurance company, and in 1997 was named president of XL Specialty Insurance Company. In May 2002 he would become Navigators' president, and succeeded Deeks as CEO in January 2003, while Deeks remained the firm's chairman.
Another development in 2001 was Navigators Management Company's opening of a midwestern regional office in suburban Chicago. In September 2001, the subsidiary also expanded into management and professional liability lines with the launch of the Navigators Pro division. The terrorist attacks that took place in that same month had worldwide repercussions, and the destruction of the World Trade Center had a direct impact on Navigators' balance sheet. The company incurred a $18 million gross loss, and a $4.5 million net loss after reinsurance and tax considerations. As a result the company lost $3.7 million to the bottom line. In the end, Navigators netted $3.7 million on revenues that improved to $171.2 million.
Navigators was able to take greater advantage of an improving underwriting environment in 2002 that resulted in escalating rate increases. Revenues soared to $252.7 million and net income improved to $16.4 million. Moreover, the amount of premiums the Group wrote increased from $278.2 million in 2001 to nearly $450 million in 2002. As rates continued to climb, Navigators continued to post record revenues, which topped $300 million in 2003. The company took advantage of this growth to make a secondary securities offering in October 2003, which netted $11 million. Earnings fell to $7.7 million in 2003 due to a write-off connected to asbestos liabilities incurred from policies written in the late 1970s and early 1980s, but soared to nearly $35 million on revenues of $343 million a year later. As a result, Navigators Insurance Company was the fourth largest U.S.-based ocean marine insurer and 14th largest in the world.
To help sustain growth, Navigators added a marine and energy product line to its London operation in 2004 and made plans to expand its international business by opening an office in Antwerp, Belgium, the Group's first continental European office, which began operations in 2005 by focusing on ocean marine coverage not available to the London market. Navigators also launched its Excess Casualty Division in 2005 to offer businesses with commercial umbrella and low level excess liability policies. To gain greater flexibility in its Lloyd's business, Navigators bought out the minority interest in Syndicate 1221.
Hurricanes Katrina and Rita hurt profits in 2005, when Navigators' net income fell to $23.6 million on revenues of $385.2 million. However, business from the new product lines and an increased contribution from Syndicate 1221 helped to fuel solid gains in 2006 that more than made up for the losses of the previous year. Revenues reached $526.6 million and net income totaled $72.6 million for the year. Moreover, the amount of gross written premiums approached the $1 billion mark.
Principal Subsidiaries
Navigators Insurance Company; NIC Insurance; Navigators Management Company, Inc.; Navigators Management (UK) Ltd.; Navigators NV.
Principal Competitors
Highlands Insurance Group, Inc.; CIGNA Property & Casualty Insurance Company; Insurance Co. of North America.
Further Reading
Bray, Julian, "Navigators Stages a Strong Recovery," Lloyd's List International, April 6, 1994.
"CEO Interview: The Navigators Group, Inc.," Wall Street Transcript, December 13, 1993.
"Navigators Group Says Asbestos Charge Will Impact Earnings," A.M. Best Newswire, February 13, 2004.
"Navigators Opens Marine Unit in Belgium," A.M. Best Newswire, January 18, 2005.
"New Aviation Subsidiary Formed by Navigator's Group," Lloyd's List International, December 14, 1988.
— Ed Dinger
