A.M. Best Affirms Ratings of Navigators Insurance Company, its Subsidiary and The Navigators Group, Inc.

A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating (ICR) of “a+” of Navigators Insurance Company and its wholly owned and 100% reinsured subsidiary, Navigators Specialty Insurance Company, collectively referred to as Navigators. Concurrently, A.M. Best has affirmed the ICR of “bbb+” and the debt ratings of “bbb+” on $265 million 5.75% senior unsecured notes due 2023, as well as the shelf ratings of “bbb+” on senior unsecured notes, “bbb” on subordinated notes and “bbb-” on preferred securities of Navigators’ publicly traded ultimate parent, The Navigators Group, Inc. (NAVG) [NASDAQ: NAVG]. The outlook for all ratings is stable. All companies are domiciled in New York, NY.

The ratings reflect Navigators’ leading position as a global provider of marine insurance, its well-diversified book of business and management’s conservative approach to risk management, underwriting and claims handling. Further, the ratings recognize Navigators’ favorable operating performance and solid level of risk-adjusted capitalization.

Offsetting these positive rating factors is Navigators’ modest decline in underwriting results earlier in the past five-year period, driven by a combination of recent large industry-wide losses, reinstatement premiums, adverse loss development on certain lines and run-off operations. Increased loss ratios among specific products have led to discontinuing and re-underwriting certain lines, which has led to some variability in product mix. When needed, management will take corrective actions to address any problematic segments of its business.

In addition, Navigators benefits from the financial and explicit support available from its parent company, NAVG. NAVG’s debt-to-total capital as of Dec. 31, 2014 is approximately 21% and interest coverage ratios fall within the guidelines for the current rating level.

The stable outlook takes into account A.M. Best’s expectation that Navigators will maintain its solid level of risk-adjusted capitalization and generate operating profits throughout market cycles.

A.M. Best believes Navigators is well-positioned at its current rating level for the near-to-midterm, although positive rating action may result if Navigators’ sustains operating results that outperform the composite average over the long term. However, negative rating action could occur if there is a decline in its level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, or a significant deterioration in financial performance.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Analyzing Insurance Holding Company Liquidity
• Catastrophe Analysis in A.M. Best Ratings
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• Understanding BCAR for Property/Casualty Insurers

• Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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