In a conference call marking the Q3 results of Specialty insurer Navigators, CEO and President Stan Galanski noted that “the challenges faced by the shipping industry are evident to us”. An increase in the number of vessel sales, the scrapping of older ships and an rise in the percentage of vessels put into layup were all factors contributing to premium volume declining for most marine classes, he said.
Galanski observed that there were notable exceptions, one of which was international Cargo business, for which gross written premium (GWP) was up 19% compared with Q3 2015. Another was Hull, which benefited from dramatic growth in Navigators’ continental European offices.
Galanski said that Navigators had no direct exposure to the Hull or Liability coverage for Hanjin, but that the bankruptcy of the company had a significant impact on the shipping industry.
“Hundreds of tonnes of goods remained on cargo vessels that are still not dock to port, but at the same time it has created opportunities for other shipping companies who might be able to acquire some of the assets at a deep discount. It is reported that freight prices are increasing potentially offering some relief for the rest of the global shipping industry” Galanski said.
In its US insurance marine section for Q3 Navigators Group reported GWP of $40.3m, up from $35.5m in the same period last year. Net earned premiums (NEP) rose to $25.5m, from $24.3m. The combined ratio rose sharply year on year – to 93.2%, from 67.1% — reflecting a fall in underwriting profit to $1.73m, from $7.99m in the corresponding quarter last year.
US Marine operating segment GWP increased $4.7m, due to higher renewal retention within Navigators’ Marine Liability product and new business production within its Inland Marine product.
A 1.5% decrease in rates within US Marine was offset by new business production and higher renewal retention.
In International insurance marine, GWP for Q3 2016 was $38.5m, down from $41.0m in Q3 2015. NEP fell to $34.8m, from $36.8m in Q3 last year.
The combined ratio for Q3 in international insurance marine was 95.7%, down from 107.3% in the corresponding quarter last year. Underwriting profit swung to a gain of $1.49m, compared with an underwriting loss of $2.67m in Q3 2015.
International Marine operating segment GWP declined by $2.5m, due to decreases in Marine Liability and Transport products, partially offset by growth in Navigators’ Hull and Cargo products.
Year To Date
For the year to date, GWP in US insurance marine rose to $129.6m from $118.2m. NEP in US insurance marine fell to $73.6m, from $74.2m in the first nine months of 2015. The combined ratio rose to 84.0% from 77.6%, reflecting a decline in underwriting profit from $16.6m in 9mo 2015, to $11.8m in 9mo 2016.
US Marine operating segment GWP increased by $11.5m, due to new business production within Navigators’ Cargo and Craft products.
Navigators’ saidd that renewal rates began strongly in 2016, but have since declined steadily, resulting in a 0.2% increase for the year to date. There was $7.7m in favourable loss development.
In International Insurance marine, GWP for the first nine months was $151.5m, up from $149.8m. NEP for the period declined to $109.7m, from $114.7m. The combined ratio for year to date in this sector was 96.0%, down from 98.1% in 9mo 2015. Underwriting profit rose to $4.43m, from $2.18m in 9mo 2015.
International Marine operating segment GWP increased by $1.7m year on year, mainly driven by growth in Cargo and Hull products and growth from new broker facilities business. This was offset by a decrease in Marine Liability and P&I products. There was $11.5m of favourable loss development in the segment.
For the company as a whole, for 9mo 2016, Navigators reported net income of $61.1m, compared to $63.3m for the same nine months last year. GWP of $374.9m was 5.9% higher than for 9mo 2015. The combined ratio for the first nine months was 96.7%, up from 93.0%.
Mr Galanski said: “We are very pleased with our third quarter results. It is our 15th consecutive quarter of profitable underwriting results with net income up 20.9% from third quarter 2015 and a healthy combined ratio of 95.6%. Our investment portfolio performed well, with net investment income up 14.4% over third quarter 2015. Premium growth remained strong, with net written premium up nearly 10% for the quarter. Encouragingly, non-commission operating expenses were about flat with the third quarter of 2015, reflecting our efforts to control operating costs. “