Navigators Affirmed

S&P affirmed its “A” counterparty credit and financial strength ratings on Navigators Insurance Co. and NIC Insurance Co. (collectively referred to as Navigators), with a negative outlook.

According to S&P, Navigators’ ratings reflect a strong competitive position in the marine insurance market, very strong capitalization, strong and improving operating performance, and good financial flexibility. Offsetting these positive factors are the company’s implementation risk of its diversification strategy, extensive use of reinsurance, and asbestos adverse loss-reserve developments.

The rating agency explained it was maintaining the negative outlook, even though Navigators is expected to grow its gross premiums written at a less aggressive rate of 10 percent to 15 percent in 2004 compared with prior years, as it reflects the short track record of Navigators in the new lines of business such as general liability, surety, directors and officers, and errors and omissions.

S&P also noted that the diversification strategy initiated in 2001 outside the marine insurance, which is Navigators’ longstanding area of specialization, has not been tested yet in a difficult cycle.

The report indicated that despite the softening of the overall pricing environment for P/C insurance, S&P expects Navigators will continue to benefit from moderate rate increases and generate a strong operating performance in 2004 with a 10 percent to 15 percent ROR and a 90 percent to 95 percent combined ratio.

In 2004, Navigators’ capitalization is expected to remain very strong above the rating level and should further strengthen.