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Executives

Stanley A. Galanski - Chief Executive Officer, Director, Member of Underwriting Advisory Committee and Chairman of Navigators Insurance Company

Ciro M. DeFalco - Chief Financial Officer, Senior Vice President and Member of Enterprise Risk Management Steering Committee

Analysts

Randy Binner - FBR Capital Markets & Co., Research Division

Max Zormelo - Evercore Partners Inc., Research Division

Amit Kumar - Macquarie Research

Robert Paun - Sidoti & Company, LLC

Robert Farnam - Keefe, Bruyette, & Woods, Inc., Research Division

Navigators Group (NAVG) Q3 2013 Earnings Call November 8, 2013 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Navigators Group Inc. Q3 2013 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded.

We remind everyone that today's call includes forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements concern future business conditions, expectations and the outlook for the company based on currently available information that involves risks and uncertainties. The company's actual results could differ materially from those anticipated in the forward-looking statements. We refer you to the company's most recent forms 10-K and 10-Q for description of the important factors that may affect the company's business. The forward-looking statements made on this call and any transcript of this call are only made as of this date, and the company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances, except required by law.

I would now turn the call over to Stan Galanski, President and Chief Executive Officer; and Ciro DeFalco, Chief Financial Officer. Gentlemen, you may begin.

Stanley A. Galanski

Thank you very much, and I'd like to welcome everyone to the third quarter earnings teleconference for the Navigators Group Inc. Yesterday afternoon, we announced quarterly net income of $21.3 million for the third quarter of 2013 or $1.48 per share, that was up from $12.9 million or $0.90 per share from the third quarter of 2012.

For the first 9 months of 2013, we generated net income of $49.1 million, up from $35.7 million for the first 9 months in 2012. We have 2 important measures to assess our financial performance. Our first and foremost, objective is in underwriting profit, and we're pleased to have achieved this solid underwriting profit with the combined ratio of 89.8% for the quarter and 95.1% for the 9 months. Our second measure is growth in book value per share, which increased 2.9% for the quarter to $63.61.

From a top line perspective, gross written premium was $312 million for the quarter, up 4.5% from the third quarter of 2012. Net written premium was up the same amount. We experienced double-digit gross and net premium growth in our U.S. Primary Casualty, Excess Casualty, environmental liability business, as well as in international D&O.

We're also pleased with the meaningful improvement in our operating expenses. The expense ratio for the third quarter was 31.3%, down from 35.1% in the third quarter of 2012. And the 9 months expense ratio was 32.8%, which was down from 35.2% for the comparable period in '12. We strive to balance our commitment, investing in both people and technology to create future growth and profit with the reality of the need to control operating expenses in the short-term. Let's take a look at the performance of some of our key business units.

Navigators Specialty, our U.S. excess and surplus lines underwriting unit, had a terrific quarter with a combined ratio of 94.1%, and that brought the year-to-date combined ratio to 95.4%. Gross written premium was up 20% from third quarter 2012, and net written premium increased 30%.

We experienced strong new business production in both Primary and Excess Casualty. The increase in the U.S. construction activity is evident in our new business production, with construction-related risk amounting to about 60% of the Primary Casualty business that we booked during the quarter. In particular, we are seeing and writing new construction wrap-up risks, which is one of our sweet spots. We continue to achieve low-single-digit rate increases on our Casualty portfolio.

Earlier this year, the U.S. Professional Liability business became part of Navigators Specialty, and we're already experiencing the benefits of aligning this product line with our wholesale distribution business. U.S. Professional Liability had a very good quarter, with a combined ratio of 95%, improving the year-to-date combined ratio to about a breakeven. Premium volume is down 5% for the quarter, as we've begun the efforts to transition the portfolio away from the small law firms toward a broader-base of small- to medium-sized professional service firms, such as architects and engineers, insurance agents, accountants and other professional service providers. We anticipate premium volume is likely to contract further in the Professional Liability space over the next 12 months, as we continued that transition to what we fully expect will be a higher-margin portfolio.

NavTech, our first-party offshore energy, onshore energy, power gen and engineering business, had an exceptionally good quarter, with combined ratio of 49.8%, benefiting from favorable loss emergence. For the 9 months of 2013, NavTech's combined ratio was an impressive 70.3%, gross written premium was up 13.6% for the quarter, renewal pricing for the quarter was relatively flat in the aggregate for NavTech business, with the onshore energy rates up about 9% for the quarter and offshore energy renewal rates down 4% on average.

Our global Marine business produced a combined ratio of 92.9% for the quarter and 95.1% for the first 9 months of 2013. The real story behind the combined ratio was a strong underwriting result produced by the U.S. Marine offices, particularly in marine liability and cargo. While we're very pleased with the underwriting results from Marine, premium volume was down 13% in the quarter for the insurance company Marine business. This was large as a result of the re-underwriting of U.S. in the Marine portfolio and some specie business written in the U.K. branch of the insurance company.

Ocean marine insurance underwritten in the U.S. offices from the Ocean Marine standpoint was actually up 7% for the quarter, led by growth in marine liability and Craft or brownwater hull business. Renewal pricing remained strong in the U.S. with average Marine renewal rates up 5.5% for the quarter.

At Lloyd's, our Marine business was down slightly for the quarter, as we non-renewed a large port authority account based on the unattractive pricing and conditions that were available for that risk in the market. The level of renewal rate change slowed during the quarter to an average increase of 1.3% on our Lloyd's Marine business, compared to 4% for the 9-month period, with cargo rates about flat and low single-digit renewal rate increases on most Marine classes for the quarter.

Our global Directors and Officers Liability business produced a combined ratio of 95% for the third quarter of 2013 and 93% for the 9-month period. Gross written premium was up 10% for the quarter, driven by strong growth in the international D&O portfolio. Our underwriters in London and Stockholm are focused on secure risk selection in writing attractive excess D&O lines on non-U.S.-listed large-cap companies, as well as primary- and lower-level access for small- to mid-cap corporations outside of the U.S.

Our U.S. D&O team has done a terrific job of repositioning the portfolio. Through the first 9 months of 2013, our U.S. public company portfolio now represents 94% excess business with an average excess attachment point of $65 million. We continue to push rates up on our relatively limited portfolio of U.S. public company Primary business with an average rate increase on that book about 20%.

Renewal pricing is relatively flat for excess D&O for U.S. public companies. However, during the quarter, we achieved an average rate increase of 12% on private company business, as our competitors appear to be recognizing the increased levels in employment-practice-related claims in this segment of the D&O market. International D&O renewal pricing was down about 1%, well within our expectation in what remains a relatively benign claims environment.

We're pleased with the profitable underwriting results generated by the navigator Navigators Re, which produced a combined ratio of 96.2% for the third quarter, a significant improvement from the third quarter of 2012, which was adversely impacted by crop reinsurance losses. For the first 9 months of 2013, the combined ratio of our Navigators Re was 98.9%, down from 107.1% in 2013.

Third quarter is typically a lighter premium quarter for Navigators Re. Gross written premium for the quarter was down 37% from the third quarter of 2012, largely resulting from the nonrenewal of 1 quota share Accident and Health treaty.

The Latin American treaty portfolio continue to perform well, with very light catastrophe activities so far in 2013 and attritional losses at or below our expectations. Our surety treaty business in Latin America also is developing nicely. While it's too early to speak definitively about the 2013 crop year, the yields are certainly moved back toward what we project as long-term averages, and we're cautiously optimistic about the performance of that book.

We continue to experience profitable underwriting results and double-digit premium growth from a group of products that we've introduced over the last few years, targeted toward retail agents and brokers in the U.S. that internally, we refer to as our Commercial unit. This unit underwrites several Casualty product lines, including Environmental, Life Sciences, Excess Casualty, Commercial Auto and international liability for U.S.-based companies. The combined ratio for the Commercial unit was 84.5% for the quarter, and as that unit continues to gain scale, we're focused on maintaining the underwriting quality, while achieving quarterly improvement in the expense ratio of this growing segment of our business.

So to conclude the overview, it was a very good quarter for us across the organization. During the quarter, we completed the relocation of our corporate headquarters to 400 Atlantic Street, in Stamford, Connecticut, where we have entered a 10-year lease. We're delighted with the new location, which provides better access to public transportation for employees and our business partners who were visiting our headquarters, as well as the other municipal services, which are conveniently located near the office. As we were nearing the expiration of our lease in Westchester County, New York, our decision to relocate was, in part, based upon the financial incentives negotiated with the Connecticut economic development commissions. One of the result of those incentives is that we expect to expand our presence in our existing Connecticut locations over the next 5 years.

Additionally, as the quarter closed, we raised $265 million of capital through the issuance of new 5.75% 10-year senior notes. We've deployed part of those proceeds for the early retirement of existing debt that would've come due in 2016, and intend to deploy the balance of the proceeds to support the future growth of the company and general corporate development. We believe this transaction provides us with the solid foundation and a more efficient capital structure on which to grow our business in the coming years.

And with that, I'll turn it over to Ciro DeFalco to review our financial performance.

Ciro M. DeFalco

Thanks, Stan. Good morning, everyone. Thanks, again, for joining us today.

Our third quarter net income of $21.3 million or $1.48 per share reported yesterday after the market closed, includes net operating earnings of $23.1 million or $1.60, net realized losses after taxes of $642,000 or minus $0.04 per share, and OTTI losses after-tax of $1.2 million or a minus $0.08 per share. The second (sic) quarter's combined ratio of 89.8% includes a reported loss in LAE ratio of 58.5% and an all-in expense ratio of 31.3%, split between net commission expenses of 12.9% and other operating expenses of 18.4%. The quarter benefited from favorable prior year loss emergence of $7.7 million, with $3.1 million in the U.S. insurance companies and $4.6 million at Lloyd's for a benefit of 3.6 combined ratio percentage points.

The quarterly consolidated results include $21.9 million of underwriting profit with $20.1 million of that profit coming from our U.S. insurance company. Net investment income of $14.1 million was flat in the quarter and up $500,000 compared to the same period last year, while net realized losses, as I just mentioned of $1 million pretax or $642,000 after-tax, were the result of normal active management in our investment portfolio.

OTTI losses in the quarter of $1.8 million pretax or $1.2 million after-tax relates to a single CUSIP holding. Our overall portfolio's unrealized gain position increased $8.6 million pretax or $5.5 million after-tax in the quarter, as interest rates moderated in mid-September. The investment portfolio value as of September 30, 2013, was up just above $2.4 billion, with an annualized book yield of 2.39%, down just 2 basis points from 2.41% in the second quarter of this year, and up from 2.35% for the same period last year.

Market yield on a yield-to-worse basis at the end of the third quarter was 2.2% versus 1.65% for the same period last year and flat when compared to the second quarter of 2013. Our investment portfolio has maintained its AA average credit quality with a duration of 3.9 years, which is the same as it was for the same period last year.

GAAP shareholders' equity at September 30, 2013, was $900 million, up from $874 million at June 30 of this year and $875 million at September 30, 2012. The book value per share increased by $1.78 or 2.9% in the quarter to $63.61, primarily driven by net income of $1.50 per share.

On a year-over-year basis, our book value per share increased by about $0.29 or 2.1%. Finally, our net cash flow from operations was a positive $81.5 million in the quarter.

So with that, we can open up the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Randy Binner of FBR.

Randy Binner - FBR Capital Markets & Co., Research Division

Just wanted to get a little more detail potentially on the favorable reserve development in the quarter. Can you just give us some color on kind of what areas within the insurance companies and the Lloyd's operation saw that favorable development?

Stanley A. Galanski

Well, it started up with our U.S. Marine business, I would say, which we're the leader in that, but Ciro can take you through the different numbers on it, if you like.

Ciro M. DeFalco

Okay. Yes. Most of it in the quarter was exactly as Stan said. The U.S. Marine business benefited from some closing out of some accounts, losses that were previously up and settled, and those are all 2011 underwriting year and prior. That was probably the biggest piece of the overall book. I would say, I would list it as U.S. Marine, Randy.

Stanley A. Galanski

And the Lloyd's operation, I think, the principal benefit was kind of on the energy account as I alluded to in my comments.

Ciro M. DeFalco

Yes, exactly.

Randy Binner - FBR Capital Markets & Co., Research Division

So tracking with your comments, that's great. And then -- so Lloyd's top line is lower, and you mentioned that the market was competitive on a port facility. Could you elaborate a little bit more just kind of what you're seeing at Lloyd's? There's probably more capital and activity there than a lot of us have seen in a while. It seems like a pretty popular place that sometimes that can be a huge challenge in the insurance business. So just kind of would like your perspective on kind of how you see the competitive environment at Lloyd's overall?

Stanley A. Galanski

Yes. That's great. I think the first thing, I guess, I'd comment on was the thing that was the biggest news earlier this year, was the facility which Aon cobbled together with Berkshire Hathaway and now has been press on a similar type of arrangement that Willis has put up. And talking with the executives from Aon, I think they're pretty straightforward about what they see as the impact to that, which is that they are simply placing more business into the Lloyd's market. That facility is an enabler of business for Lloyd's, not something that's taking away. So I'd say we monitor that situation pretty closely, obviously.

Lloyd's is a subscription market. And by that, it's very rare you write 100% of the risk. You're typically participating on a risk and a line size might be 5%, it might be 15%. And due to the nature of how that market works, when an underwriter authorizes a line size, that's what he's authorized. That doesn't mean that's what he's going to get. You have to really monitor your signings. We monitor those signings and have not really seen any adverse impact from it. So I guess philosophically, where I'm heading with this comment on a more broad basis in those 2 facilities, Randy, is that it's very difficult, if you're simply a following market in a subscription market, to really demonstrate that you're something other than a commodity. We prefer to lead business, and we've got the underwriting talent and the claims talent to lead business, and that's really what we seek to do. So when you look at businesses like the specie business, which is high-value cargo, whether that's fine arts or cash in transit or the cargo account, our marine liability, our Energy Liability business our underwriters are market leaders. And there will always be large accounts, or small accounts for that matter, where it's just terms available in the market that we don't want to support. But in general, I'd say, looking at the technical pricing and so on for the business, I think we feel pretty good about the Lloyd's market, there's a lot of capacity there. But I think the place you'd probably feel that most is areas that we don't really have a meaningful presence in , and by that, I'd say the global property cap market.

Randy Binner - FBR Capital Markets & Co., Research Division

Okay. That's fair. And just let me just ask one more. Don (sic) [Stan], if the average reserve development was not in Professional Liability, it doesn't sound like, so the underlying -- your loss ratio there's best it's been in a while, I guess, it's a pretty favorable comment. So does that mean are you -- is that kind of -- are you getting price ahead of loss cost trend kind of consistently the Professional Liability segment overall? Is that turning a corner from a bottom-line perspective now more than it has, maybe, in past quarters?

Stanley A. Galanski

Well, let me just comment on that a bit. In terms of the segment reporting stuff in the earnings release, what's shown as Professional Liability is both D&O and E&O. E&O is what we think of as Professional Liability business.

I think the U.S. D&O business, I think are -- the issues that we try to manage our way through there and we talked about a number of times on prior calls, well, I still think it's early to declare victory on it. What we have is a very different portfolio today of our U.S. public company D&O business. As I mentioned, when you're looking at a book that's 94% excess, it's just a very, very different book. I mean, we have a very limited number of primary U.S. public D&O policies. So that's a book that it took a while to transition. Our guys have done a great job of transitioning it. And we like where the portfolio is. That's no guarantee you're going to print money on your portfolio, but it means you've got a good chance of making money. You're doing the things that you think make sense. So we've kind of steered that mix of our business to what we think is an optimal mix in the U.S.

Internationally, as I say, it's been a very benign loss environment for the international D&O. It's a business we like, while we're cognizant that there are things that can be too cheap for us. Our underwriters focus on risk selection in that market, particularly the international high excess business that we write in Lloyd's, which generally attaches north of $125 million on larger-cap, non-U.S.-listed companies, we see as a very attractive market.

To what we internally think of as the E&O side of Professional Liability, that's a book that the rate change, the growth, is very much in transition, where -- we opted earlier this year to really get out of the small lawyer segment. It's just become too commoditized, and we just don't really see value added in what we bring to that business. On the other hand, there's some areas like the Design Professional business where our rates are up 3% this year. There are others that the rates are flattish, other segments like the insurance agents. So on a technical price, that's a business that will always change, but we always want to kind of move it into the direction of what we think the higher-margin business is. And typically, that's in the smaller segment of the professional service providers in the U.S.

Operator

Our next question comes from Max Zormelo of Evercore.

Max Zormelo - Evercore Partners Inc., Research Division

I was looking at the Lloyd's segment and I'm looking at the loss ratio, excluding the reserve development and catastrophe losses, you're accident-year loss ratio as cats. And over the past couple of quarters, there's deteriorating -- deteriorated quite sharply. I'm wondering what's going on there. I think last quarter it was down 7.5 points. This quarter -- sorry, up 7.5 points. This quarter is up 20 points. I'm just wondering what's going on. If you could give us some detail on that? And I have one follow-up, please.

Ciro M. DeFalco

I think I missed part of the question, Max. Just can you repeat the last piece of what you were looking at? You were looking at the development or the result...

Max Zormelo - Evercore Partners Inc., Research Division

No. I'm looking at the accident year loss ratio excluding catastrophes in the line segment.

Ciro M. DeFalco

Okay. Yes, that's okay, we can speak to that. Really, what you have here is nothing more than third quarter. There were some large losses both in Marines and NavTech in Lloyd's, quarter events. And that is why you see that impact in the financial statements masking the otherwise good performance of the operation overall and on a year-to-date basis. So it's just some quarterly activity, Marine and NavTech losses that have spiked the number a little bit. But if you look at the 9-month number in the press release, you'll see more of what the normative run rate is.

Stanley A. Galanski

I'd also say that our general reserving practices for the current underwriting years at Lloyd's and the insurance company, we try to bring a philosophy to it that emphasize reserve adequacy and not in early declaration of victory. So I don't think it's unusual over time in our numbers to see if we're successful in the way we expect our business to perform. We see emergence come out of that and we try to get it as accurate as possible. But I don't do think it's an unusual phenomena. But put it this way, we're very happy with the quality of the underwriting going in our Lloyd's operation.

Ciro M. DeFalco

Absolutely.

Max Zormelo - Evercore Partners Inc., Research Division

And do you, Ciro, do you have the numbers for those large losses?

Ciro M. DeFalco

I do not have those in front of me. They're not like headline stories. It's just a grouping of them so...

Stanley A. Galanski

Yes, to be clear. I would just consider it more of an attritional quarter. I would not want to portray some sort of bad news on large loss activity at Lloyd's. But in any given quarter, there's only x amount of earned premium and losses will flow through. And so I wouldn't consider it anything more than just a quarterly movement.

Max Zormelo - Evercore Partners Inc., Research Division

That's helpful. Second question, the Marine segment in the insurance companies, you've been taking the top line down quite meaningfully over the past almost 2 years now. I'm just wondering, given what the profitability of that line is now, when you look out over the next 12 months -- next year, are you look to start to grow that line again?

Stanley A. Galanski

Yes. I mean, again, it's very difficult to say exactly where the market's going and so on. And I think you may recall in the first quarter of this year in respect to the largest marine reinsurance program in the world, that, for the international group, we basically halved our line. And that half, which we took out came out of the insurance company. We continued to participate on the program in the syndicate. So when you look at the year-to-date numbers, that's a meaningful number. And on top of that, we really kind of repositioned our Inland Marine portfolio. There was a fair amount of what we consider to be Inland Marine that looked more like property then what more like things like EDP and valuable papers and fine arts and the stuff where we really want that book to go. So that add an impact.

As I said, our Ocean Marine business, particularly liability and brownwater hull, was up for the quarter. And I think I have every confidence that our Marine underwriters around the U.S. will always respond to good opportunities to write business. We're a market leader. We got great capacity. We've got a great team. But sometimes we'll walk away from some accounts as well. In general, I'd say if you expect the Marine business to grow or shrink in Navigators, the answer is grow.

Max Zormelo - Evercore Partners Inc., Research Division

Okay. And one last one, if I may. The -- I think you mentioned this in your prepared remarks, but the expense ratio is definitely down quite a bit. Just wondering, going forward, is this just what we shall expect in future quarters?

Stanley A. Galanski

We just don't give forward-looking guidance. If we throw those numbers out there, it will be really speculative on our part. But suffice to say, when we were producing expense ratios in the mid-30s, those were numbers that were, more often than not, adversely impacted by the impact of reinsurance reinstatement premiums. We have never felt that we were a 35% or 36% expense ratio company, and the culture here is spend money like an owner because you are one.

Operator

[Operator Instructions] Our next question comes from Amit Kumar of Macquarie.

Amit Kumar - Macquarie Research

Just a few quick questions. Just going back to the discussion on crop book. Do you still expect to make an underwriting profit for 2013?

Stanley A. Galanski

As I said, it's a little early to really comment on that in the underwriting year. But we are encouraged by everything we read, everything we see about crop yields and stuff like that. So far, so good, is what I would say.

Amit Kumar - Macquarie Research

Okay. The next question, and I don't if you mentioned this and if I missed this. Did you talk about any potential exposure you might have to the Spanish surety bonds?

Stanley A. Galanski

I don't believe we have any exposure to Spanish surety bonds. Our -- we've got a little bit of surety insurance in America, primarily consisting of U.S. customs bonds and a couple other little commercial surety things, which are generally more just supportive of other things we do at Navigators, and they're very -- they're domestic product.

We write a treaty book of surety reinsurance in Latin America, and we feel pretty good about that book. We don't really have anything outside of those territories.

Amit Kumar - Macquarie Research

Got it. That's very helpful. The final question I have is, there has been a lot of discussion that primaries will be restructuring their reinsurance spend going into 2014. Can you sort of talk about broadly how you might be thinking about your reinsurance purchase going forward versus what you might have seen in the past?

Stanley A. Galanski

Yes, well, there's a lot of changes in the industry, and for the 30 years I've been in it, I guess, there always have been. And we're at a time where, I think, there seems to be a lot of capacity in the business, particularly on the first-party side for property. As you know, we're not a big underwriter of property business. We do write a bit of it in Navigators Re and a very, very modest amount of it in our insurance companies. So we don't really see that as an event.

Now to the extent that in the Casualty sector, particularly large multinational re -- insurers decide to retain more risk and there's less premium for reinsurers to write, you have to figure out what that means about their behavior, how will they behave? Does that mean they'll allocate capacity to other lines of business? Or does that mean they'll simply return money to shareholders? We look at reinsurance as kind of a -- reinsurance buying as kind of a core skill in our company, and that decision is based on a lot of factors, not just the ability to pay, but the culture of the reinsurers and the relationships we have with them. We think that's very, very part of our trading relationships. So we tend to not really be opportunistic, but to really look at trading partners we can trade with over time.

If conditions are such that it makes more sense for us to reinsure a little bit more business, we'll do that. And if it doesn't, we have a continuum dynamic in the way we look at the business.

Now as a seller of reinsurance, I'll just remind you that, that is really a kind of a different approach for us. We're in the reinsurance business as a seller to really access markets where being an insurer is just not economical, and Latin America is a great example of that. So our client base there is really not the large globals. We try to sell reinsurance to people who need to buy it and look for long-term relationships.

Operator

Our next question comes from Robert Paun of Sidoti & Company.

Robert Paun - Sidoti & Company, LLC

On the construction business, it was nice to hear about some new wrap-up products. Can you just talk about the opportunity there and where you're seeing the segments start to pick up?

Stanley A. Galanski

Yes. We're seeing it, obviously, on commercial construction. We don't do a lot in the infrastructure area. But it's an area that were going to continue to look at, see if you could do a little bit more there. By that, I mean, things like bridges and roads and stuff like that as a Casualty product. We certainly do have some commercial construction in our book, and that's been relatively stable over the last few years with the economy. But in the last year, I'd say in particular, we've seen more in the apartment area than in the luxury home area, driving the residential side of that business and, particularly coming out of places like Texas and California where you might have thought it would take forever to recover. But there are new projects going on, as well as in other western states as well. We kind of trying to stay, keep a low profile in some of the tougher areas that we have not been able to figure out, like New York construction, where the labor law is just so set up against you, it's very, very difficult to make money except on a high excess basis. Well, I would say it's been in those areas. Commercial has been very stable. We do see some more residential, particularly in the apartment side, coming back.

Operator

Our next question comes from Bob Farnam of KBW.

Robert Farnam - Keefe, Bruyette, & Woods, Inc., Research Division

Just a quick question for you. Are you looking to add any more new businesses? Or are just kind of content focusing on growing the numerous stuff that you already created?

Stanley A. Galanski

It's a great question. We've got a very good, I think, collection of businesses today. We like the segments we're in, and we think that because, other than Marine, we're not really a mature market in most of those segments. There's still a lot of room to grow. And frankly, even in a place like Lloyd's, where we've -- our managing agencies have been in business since 1980, and we're one of the top 10 marine syndicates at Lloyd's. There's not a marine product line where we have greater than a 4% market share. So continuing to mine the areas that we specialize in are attractive to us.

Having said that, I think Navigators is a very attractive place for specialty underwriting and claims professionals to work, and we are regularly approached by individuals and teams, sometimes in segments that we're in. We're simply expanding what we do with greater intellectual capital and, occasionally, with other products that might fit the broad definition of E&S or might be a little outside it. So we never rule out an expansion, but I would say that we have ample room in the areas that we're in.

Robert Farnam - Keefe, Bruyette, & Woods, Inc., Research Division

Have you been pretty successful retaining your talent and underwriters? Or are people been trying to poach them?

Stanley A. Galanski

Well, it's a great question. There is always a war for talent out there, and somebody can always pay a little bit more if you have employees that are going to jump for dollars. We hope we don't have that because what we try to provide is an environment that is one that enables people to do their jobs, gives talented people the authority to make decisions, allows them to effectively service their business and not tie them up with a lot of what we would view as unnecessary bureaucracy. And don't read that as a lack of controls, but simply an empowered underwriting organization that's run by underwriters. We think that's a competitive advantage because somebody can always throw a few more bucks at your people and we've been very fortunate, we never take that for granted. We compete on the basis of our intellectual capital, and retaining and developing that talent is one of the most important jobs we have.

Operator

At this time, I'm showing no further questions. I'd like to turn the call back over to Stan Galanski for any further remarks.

Stanley A. Galanski

We appreciate your interest in the company. Thanks for your time on the call today. Have a great weekend.

Ciro M. DeFalco

Thank you. Thanks very much.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may, all, disconnect. Everyone, have a great day.

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