##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2008
 Commission file number 0-15886
 The Navigators Group, Inc.
  Delaware
    
    13-3138397(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)One Penn Plaza, New York, New York
    
    10119(Address of principal executive offices)
    
    (Zip Code)
  
  
  þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer  
o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
o
 o þ




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##### 



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 INDEX
 Page No.Part I. FINANCIAL INFORMATION:Item 1. Financial StatementsConsolidated Balance Sheets March 31, 2008 (Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Stockholders Equity (Unaudited) March 31, 2008 and 2007
    
    
    5Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, 2008 and 2007
    
    
    6Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2008 and 2007
    
    
    7Notes to Interim Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    61Item 4. Controls and Procedures
    
    
    61Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    61Item 1A. Risk Factors
    
    
    61Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    62Item 3. Defaults Upon Senior Securities
    
    
    62Item 4. Submissions of Matters to a Vote of Security Holders
    
    
    62Item 5. Other Information
    
    
    62Item 6. Exhibits
    
    
    62Signature
    
    
    63Index of Exhibits
    
    
    64Exhibit 10-1Exhibit 11-1Exhibit 31-1Exhibit 31-2Exhibit 32-1Exhibit 32-2
   2




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##### Table of Contents



Part 1. Financial Information
 
 Item 1. Financial Statements
 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 ($ in thousands, except share data)
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSInvestments and cash:Fixed maturities, available-for-sale, at fair value 
(amortized cost: 2008, $1,554,999; 2007, $1,508,489)
    
    $
    1,570,971
    
    
    $
    1,522,320Equity securities, available-for-sale, at fair value 
(cost: 2008, $65,309; 2007, $65,492)
    
    
    59,688
    
    
    
    67,240Short-term investments, at fair value
    
    
    171,447
    
    
    
    170,685Cash
    
    
    12,810
    
    
    
    7,056Total investments and cash
    
    
    1,814,916
    
    
    
    1,767,301Premiums in course of collection
    
    
    198,494
    
    
    
    163,081Commissions receivable
    
    
    272
    
    
    
    2,381Prepaid reinsurance premiums
    
    
    188,223
    
    
    
    188,961Reinsurance receivable on paid losses
    
    
    74,183
    
    
    
    94,818Reinsurance receivable on unpaid losses and loss adjustment expenses
    
    
    776,767
    
    
    
    801,461Net deferred income tax benefit
    
    
    31,260
    
    
    
    29,249Deferred policy acquisition costs
    
    
    53,450
    
    
    
    51,895Accrued investment income
    
    
    15,867
    
    
    
    15,605Goodwill and other intangible assets
    
    
    8,087
    
    
    
    8,084Other assets
    
    
    20,756
    
    
    
    20,935Total assets
    
    $
    3,182,275
    
    
    $
    3,143,771LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Reserves for losses and loss adjustment expenses
    
    $
    1,661,556
    
    
    $
    1,648,764Unearned premium
    
    
    500,663
    
    
    
    469,481Reinsurance balances payable
    
    
    139,331
    
    
    
    161,829Senior notes
    
    
    123,702
    
    
    
    123,673Federal income tax payable
    
    
    18,965
    
    
    
    10,868Payable for securities purchased
    
    
    1,939
    
    
    
    Accounts payable and other liabilities
    
    
    59,242
    
    
    
    67,050Total liabilities
    
    
    2,505,398
    
    
    
    2,481,665Stockholders equity:Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued
    
    
    
    
    
    
    Common stock, $.10 par value, shares authorized: 50,000,000 at 3/31/08 and 
12/31/07;
issued and outstanding: 16,798,542 (net of Treasury stock) at 3/31/08 and 16,873,094 at
12/31/07
    
    
    1,693
    
    
    
    1,687Additional paid-in capital
    
    
    294,146
    
    
    
    291,616Retained earnings
    
    
    378,334
    
    
    
    355,084Treasury stock, at cost (136,026 shares at 3/31/08)
    
    
    (7,321
    )
    
    
    Accumulated other comprehensive income
    
    
    10,025
    
    
    
    13,719Total stockholders equity
    
    
    676,877
    
    
    
    662,106Total liabilities and stockholders equity
    
    $
    3,182,275
    
    
    $
    3,143,771
   3




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##### Table of Contents



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 ($ and shares in thousands, except net income per share)
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Gross written premium
    
    $
    287,146
    
    
    $
    300,861Revenues:Net written premium
    
    $
    187,722
    
    
    $
    173,019(Increase) in unearned premium
    
    
    (31,982
    )
    
    
    (33,973
    )Net earned premium
    
    
    155,740
    
    
    
    139,046Commission income
    
    
    261
    
    
    
    408Net investment income
    
    
    18,838
    
    
    
    16,216Net realized capital gains (losses)
    
    
    (76
    )
    
    
    201Other income (expense)
    
    
    11
    
    
    
    (71
    )Total revenues
    
    
    174,774
    
    
    
    155,800Operating expenses:Net losses and loss adjustment expenses incurred
    
    
    88,420
    
    
    
    81,192Commission expense
    
    
    20,948
    
    
    
    17,099Other operating expenses
    
    
    29,756
    
    
    
    26,289Interest expense
    
    
    2,217
    
    
    
    2,215Total operating expenses
    
    
    141,341
    
    
    
    126,795Income before income tax expense
    
    
    33,433
    
    
    
    29,005Income tax expense (benefit):Current
    
    
    10,306
    
    
    
    9,276Deferred
    
    
    (123
    )
    
    
    57Total income tax expense
    
    
    10,183
    
    
    
    9,333Net income
    
    $
    23,250
    
    
    $
    19,672Net income per common share:Basic
    
    $
    1.38
    
    
    $
    1.17Diluted
    
    $
    1.36
    
    
    $
    1.17Average common shares outstanding:Basic
    
    
    16,862
    
    
    
    16,756Diluted
    
    
    17,052
    
    
    
    16,884
   4




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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 ($ in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Preferred StockBalance at beginning and end of period
    
    $
    
    
    
    $
    Common stockBalance at beginning of year
    
    $
    1,687
    
    
    $
    1,674Shares issued under stock plans
    
    
    6
    
    
    
    4Balance at end of period
    
    $
    1,693
    
    
    $
    1,678Additional paid-in capitalBalance at beginning of year
    
    $
    291,616
    
    
    $
    286,732Shares issued under stock plans
    
    
    2,530
    
    
    
    1,747Balance at end of period
    
    $
    294,146
    
    
    $
    288,479Retained earningsBalance at beginning of year
    
    $
    355,084
    
    
    $
    259,464Net income
    
    
    23,250
    
    
    
    19,672Balance at end of period
    
    $
    378,334
    
    
    $
    279,136Treasury stock, at costBalance at beginning of year
    
    $
    
    
    
    $
    Treasury stock acquired
    
    
    (7,321
    )
    
    
    Balance at end of period
    
    $
    (7,321
    )
    
    $
    Accumulated other comprehensive income (loss)Net unrealized gains (losses) on securities,
net of taxBalance at beginning of year
    
    $
    10,186
    
    
    $
    849Change in period
    
    
    (3,412
    )
    
    
    1,496Balance at end of period
    
    
    6,774
    
    
    
    2,345Cumulative translation adjustments, net of taxBalance at beginning of year
    
    
    3,533
    
    
    
    2,624Net adjustment for period
    
    
    (282
    )
    
    
    105Balance at end of period
    
    
    3,251
    
    
    
    2,729Balance at end of period
    
    $
    10,025
    
    
    $
    5,074Total stockholders equity at end of period
    
    $
    676,877
    
    
    $
    574,367
   5




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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 ($ in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Net income
    
    $
    23,250
    
    
    $
    19,672Other comprehensive income:Change in net unrealized gains (losses) on securities,
net of tax expense (benefit) of ($1,813) and $771
in 2008 and 2007, respectively(1)
    
    
    (3,412
    )
    
    
    1,496Change in foreign currency translation gains,
net of tax expense (benefit) of ($151) and $56 in 2008 and 2007, respectively
    
    
    (282
    )
    
    
    105Other comprehensive income
    
    
    (3,694
    )
    
    
    1,601Comprehensive income
    
    $
    19,556
    
    
    $
    21,273(1) Disclosure of reclassification amount, net of tax:
 Unrealized holding gains (losses) arising
during period
    
    $
    (3,461
    )
    
    $
    1,625Less: reclassification adjustment for net realized
capital gains (losses) included in net income
    
    
    (49
    )
    
    
    129Change in net unrealized gains (losses) on securities
    
    $
    (3,412
    )
    
    $
    1,496
   6




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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 ($ in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Operating activities:Net income
    
    $
    23,250
    
    
    $
    19,672Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Depreciation & amortization
    
    
    1,222
    
    
    
    703Net deferred income tax expense (benefit)
    
    
    (123
    )
    
    
    57Net realized capital (gains) losses
    
    
    76
    
    
    
    (201
    )Changes in assets and liabilities:Reinsurance receivable on paid and unpaid losses and LAE
    
    
    45,418
    
    
    
    18,344Reserve for losses and LAE
    
    
    12,577
    
    
    
    (3,699
    )Prepaid reinsurance premiums
    
    
    776
    
    
    
    (19,719
    )Unearned premium
    
    
    31,035
    
    
    
    53,426Premiums in course of collection
    
    
    (35,297
    )
    
    
    (61,862
    )Commissions receivable
    
    
    2,109
    
    
    
    298Deferred policy acquisition costs
    
    
    (1,546
    )
    
    
    (11,884
    )Accrued investment income
    
    
    (262
    )
    
    
    (290
    )Reinsurance balances payable
    
    
    (22,525
    )
    
    
    8,347Federal income tax
    
    
    8,076
    
    
    
    7,400Other
    
    
    (5,134
    )
    
    
    9,486Net cash provided by operating activities
    
    
    59,652
    
    
    
    20,078Investing activities:Fixed maturities, available-for-saleRedemptions and maturities
    
    
    35,146
    
    
    
    50,738Sales
    
    
    20,644
    
    
    
    55,680Purchases
    
    
    (103,436
    )
    
    
    (174,445
    )Equity securities, available-for-saleSales
    
    
    5,514
    
    
    
    4,464Purchases
    
    
    (5,595
    )
    
    
    (11,877
    )Change in payable for securities
    
    
    1,974
    
    
    
    8,863Net change in short-term investments
    
    
    (647
    )
    
    
    47,079Purchase of property and equipment
    
    
    (1,072
    )
    
    
    (1,898
    )Net cash (used in) investing activities
    
    
    (47,472
    )
    
    
    (21,396
    )Financing activities:Purchase of treasury stock
    
    
    (7,321
    )
    
    
    Proceeds of stock issued from employee stock purchase plan
    
    
    356
    
    
    
    301Proceeds of stock issued from exercise of stock options
    
    
    540
    
    
    
    241Net cash provided by (used in) financing activities
    
    
    (6,425
    )
    
    
    542Effect of exchange rate changes on foreign currency cash
    
    
    (1
    )
    
    
    Increase (decrease) in cash
    
    
    5,754
    
    
    
    (776
    )Cash at beginning of year
    
    
    7,056
    
    
    
    2,404Cash at end of period
    
    $
    12,810
    
    
    $
    1,628Supplemental disclosures of cash flow information:Federal, state and local income tax paid
    
    $
    2,728
    
    
    $
    1,712Interest paid
    
    
    
    
    
    
    Issuance of stock to directors
    
    
    200
    
    
    
    181
   7




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##### Table of Contents



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 Notes to Interim Consolidated Financial Statements  (Unaudited)
 Note 1. Accounting Policies
  Note 2. Reinsurance Ceded
  Note 3. Segment Information
      8




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9




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##### Table of Contents



Three Months Ended March 31, 2008Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Corporate
    
    
    Total($ in thousands)Gross written premium
    
    $
    191,596
    
    
    $
    95,550
    
    
    
    
    
    
    $
    287,146Net written premium
    
    
    124,310
    
    
    
    63,412
    
    
    
    
    
    
    
    187,722Net earned premium
    
    
    112,246
    
    
    
    43,494
    
    
    
    
    
    
    
    155,740Net losses and LAE
    
    
    (67,356
    )
    
    
    (21,064
    )
    
    
    
    
    
    
    (88,420
    )Commission expense
    
    
    (12,948
    )
    
    
    (8,000
    )
    
    
    
    
    
    
    (20,948
    )Other operating expenses
    
    
    (22,148
    )
    
    
    (7,608
    )
    
    
    
    
    
    
    (29,756
    )Commission income and other income (expense)
    
    
    258
    
    
    
    14
    
    
    
    
    
    
    
    272Underwriting profit
    
    
    10,052
    
    
    
    6,836
    
    
    
    
    
    
    
    16,888Net investment income
    
    
    15,465
    
    
    
    2,982
    
    
    $
    391
    
    
    
    18,838Net realized capital gains (losses)
    
    
    (102
    )
    
    
    26
    
    
    
    
    
    
    
    (76
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,217
    )
    
    
    (2,217
    )Income (loss) before income taxes
    
    
    25,415
    
    
    
    9,844
    
    
    
    (1,826
    )
    
    
    33,433Income tax expense (benefit)
    
    
    7,370
    
    
    
    3,452
    
    
    
    (639
    )
    
    
    10,183Net income (loss)
    
    $
    18,045
    
    
    $
    6,392
    
    
    $
    (1,187
    )
    
    $
    23,250Identifiable assets (1)
    
    $
    2,356,343
    
    
    $
    756,100
    
    
    $
    69,520
    
    
    $
    3,182,275Loss and LAE ratio
    
    
    60.0
    %
    
    
    48.4
    %
    
    
    
    
    
    
    56.8
    %Commission expense ratio
    
    
    11.5
    %
    
    
    18.4
    %
    
    
    
    
    
    
    13.5
    %Other operating expense ratio (2)
    
    
    19.5
    %
    
    
    17.5
    %
    
    
    
    
    
    
    18.9
    %Combined ratio
    
    
    91.0
    %
    
    
    84.3
    %
    
    
    
    
    
    
    89.2
    %
 (1)
    
    Includes inter-segment transactions causing the row not to crossfoot.(2)
    
    Includes other operating expensesand commission income and other income (expense).  10




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##### Table of Contents



Three Months Ended March 31, 2008Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Total($ in thousands)Gross written premium:Marine & Energy
    
    $
    82,535
    
    
    $
    74,953
    
    
    $
    157,488Specialty
    
    
    78,882
    
    
    
    
    
    
    
    78,882Professional Liability
    
    
    19,287
    
    
    
    10,670
    
    
    
    29,957Middle Markets
    
    
    8,014
    
    
    
    
    
    
    
    8,014Property/Other
    
    
    2,878
    
    
    
    9,927
    
    
    
    12,805Total
    
    $
    191,596
    
    
    $
    95,550
    
    
    $
    287,146Net written premium:Marine & Energy
    
    $
    49,671
    
    
    $
    52,502
    
    
    $
    102,173Specialty
    
    
    53,944
    
    
    
    
    
    
    
    53,944Professional Liability
    
    
    11,733
    
    
    
    6,792
    
    
    
    18,525Middle Markets
    
    
    6,526
    
    
    
    
    
    
    
    6,526Property/Other
    
    
    2,436
    
    
    
    4,118
    
    
    
    6,554Total
    
    $
    124,310
    
    
    $
    63,412
    
    
    $
    187,722Net earned premium:Marine & Energy
    
    $
    33,226
    
    
    $
    33,992
    
    
    $
    67,218Specialty
    
    
    56,669
    
    
    
    
    
    
    
    56,669Professional Liability
    
    
    14,073
    
    
    
    5,959
    
    
    
    20,032Middle Markets
    
    
    5,697
    
    
    
    
    
    
    
    5,697Property/Other
    
    
    2,581
    
    
    
    3,543
    
    
    
    6,124Total
    
    $
    112,246
    
    
    $
    43,494
    
    
    $
    155,740
  11




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##### Table of Contents



Three Months Ended March 31, 2007Insurance
    
    
    LloydsCompanies
    
    
    Operations
        
    Corporate
        
    Total($ in thousands)Gross written premium
    
    $
    208,874
    
    
    $
    91,987
    
    
    
    
    
    
    $
    300,861Net written premium
    
    
    122,048
    
    
    
    50,971
    
    
    
    
    
    
    
    173,019Net earned premium
    
    
    101,812
    
    
    
    37,234
    
    
    
    
    
    
    
    139,046Net losses and LAE
    
    
    (61,340
    )
    
    
    (19,852
    )
    
    
    
    
    
    
    (81,192
    )Commission expense
    
    
    (11,083
    )
    
    
    (6,016
    )
    
    
    
    
    
    
    (17,099
    )Other operating expenses
    
    
    (18,769
    )
    
    
    (7,520
    )
    
    
    
    
    
    
    (26,289
    )Commission income and other income (expense)
    
    
    489
    
    
    
    (152
    )
    
    
    
    
    
    
    337Underwriting profit
    
    
    11,109
    
    
    
    3,694
    
    
    
    
    
    
    
    14,803Net investment income
    
    
    13,654
    
    
    
    2,151
    
    
    $
    411
    
    
    
    16,216Net realized capital gains (losses)
    
    
    243
    
    
    
    (42
    )
    
    
    
    
    
    
    201Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,215
    )
    
    
    (2,215
    )Income (loss) before income taxes
    
    
    25,006
    
    
    
    5,803
    
    
    
    (1,804
    )
    
    
    29,005Income tax expense (benefit)
    
    
    7,911
    
    
    
    2,054
    
    
    
    (632
    )
    
    
    9,333Net income (loss)
    
    $
    17,095
    
    
    $
    3,749
    
    
    $
    (1,172
    )
    
    $
    19,672Identifiable assets (1)
    
    $
    2,166,439
    
    
    $
    822,689
    
    
    $
    65,240
    
    
    $
    3,065,861Loss and LAE ratio
    
    
    60.2
    %
    
    
    53.3
    %
    
    
    
    
    
    
    58.4
    %Commission expense ratio
    
    
    10.9
    %
    
    
    16.2
    %
    
    
    
    
    
    
    12.3
    %Other operating expense ratio (2)
    
    
    18.0
    %
    
    
    20.6
    %
    
    
    
    
    
    
    18.7
    %Combined ratio
    
    
    89.1
    %
    
    
    90.1
    %
    
    
    
    
    
    
    89.4
    %
 (1)
    
    Includes inter-segment transactions causing the row not to crossfoot.(2)
    
    Includes other operating expensesand commission income and other income (expense).  12




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##### Table of Contents



Three Months Ended March 31, 2007Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Total($ in thousands)Gross written premium:Marine & Energy
    
    $
    86,856
    
    
    $
    77,679
    
    
    $
    164,535Specialty
    
    
    89,416
    
    
    
    
    
    
    
    89,416Professional Liability
    
    
    20,482
    
    
    
    5,478
    
    
    
    25,960Middle Markets
    
    
    6,304
    
    
    
    
    
    
    
    6,304Property/Other
    
    
    5,816
    
    
    
    8,830
    
    
    
    14,646Total
    
    $
    208,874
    
    
    $
    91,987
    
    
    $
    300,861Net written premium:Marine & Energy
    
    $
    45,736
    
    
    $
    45,488
    
    
    $
    91,224Specialty
    
    
    54,585
    
    
    
    
    
    
    
    54,585Professional Liability
    
    
    12,192
    
    
    
    3,383
    
    
    
    15,575Middle Markets
    
    
    3,969
    
    
    
    
    
    
    
    3,969Property/Other
    
    
    5,566
    
    
    
    2,100
    
    
    
    7,666Total
    
    $
    122,048
    
    
    $
    50,971
    
    
    $
    173,019Net earned premium:Marine & Energy
    
    $
    33,490
    
    
    $
    32,341
    
    
    $
    65,831Specialty
    
    
    49,042
    
    
    
    
    
    
    
    49,042Professional Liability
    
    
    13,037
    
    
    
    2,957
    
    
    
    15,994Middle Markets
    
    
    4,570
    
    
    
    
    
    
    
    4,570Property/Other
    
    
    1,673
    
    
    
    1,936
    
    
    
    3,609Total
    
    $
    101,812
    
    
    $
    37,234
    
    
    $
    139,046
  Note 4. Comprehensive Income
 Consolidated Statements of Stockholders Equity Consolidated
Statements of Comprehensive Income accumulated other
comprehensive income (loss) comprehensive income (loss)
 Note 5. Stock-Based Compensation
 other operating expenses
   13




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Note 6. Application of New Accounting Standards
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements
 Note 7. Syndicate 1221
      14




---



##### Table of Contents



Note 8. Income Taxes
    Note 9. Commitments and Contingencies
    15




---



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Note 10. Senior Notes due May 1, 2016
   Note 11. Fair Value Measurements SFAS 157 and SFAS 159
 Fair Value Measurements
 
    
    Level 1  Quoted prices for identical instruments in active markets.
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations in which all significant inputs and significant value
drivers are observable in active markets.
    
    Level 3  Valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
   16




---



##### Table of Contents



Quoted Prices
    
    
    SignificantIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total($ in thousands)Fixed maturities
    
    $
    188,291
    
    
    $
    1,380,607
    
    
    $
    2,073
    
    
    $
    1,570,971Equities securities
    
    
    54,030
    
    
    
    5,658
    
    
    
    
    
    
    
    59,688Short-term investments
    
    
    28,664
    
    
    
    142,783
    
    
    
    
    
    
    
    171,447Total
    
    $
    270,985
    
    
    $
    1,529,048
    
    
    $
    2,073
    
    
    $
    1,802,106
  Three Months EndedMarch 31, 2008($ in thousands)Level 3 investments as of January 1, 2008
    
    $
    2,603Unrealized net gains included in
other comprehensive income (loss)
    
    
    17Purchases, sales, paydowns and amortization
    
    
    (153
    )Transfer to Level 2
    
    
    (394
    )Level 3 investments as of March 31, 2008
    
    $
    2,073
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Note 12. Share Repurchases
   17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Note on Forward-Looking Statements
  
    
    the effects of domestic and foreign economic conditions, and conditions which
affect the market for property and casualty insurance;
    
    changes in the laws, rules and regulations which apply to our insurance
companies;
    
    the effects of emerging claim and coverage issues on our business, including
adverse judicial or regulatory decisions and rulings;
    
    the effects of competition from banks and other insurers and the trend toward
self-insurance;
    
    risks that we face in entering new markets and diversifying the products and
services we offer;
    
    unexpected turnover of our professional staff;
    
    changing legal and social trends and inherent uncertainties in the loss
estimation process that can adversely impact the adequacy of loss reserves and the
allowance for reinsurance recoverables, including our estimates relating to ultimate
asbestos liabilities and related reinsurance recoverables;
    
    risks inherent in the collection of reinsurance recoverable amounts from our
reinsurers over many years into the future based on the reinsurers financial ability
and intent to meet such obligations to the Company;
    
    risks associated with our continuing ability to obtain reinsurance covering our
exposures at appropriate prices and/or in sufficient amounts and the related
recoverability of our reinsured losses;
    
    weather-related events and other catastrophes (including acts of terrorism)
impacting our insureds and/or reinsurers, including, without limitation, the impact of
Hurricanes Katrina, Rita, and Wilma and the possibility that our estimates of losses
from Hurricanes Katrina, Rita and Wilma will prove to be materially inaccurate;
    
    our ability to attain adequate prices, obtain new business and retain existing
business consistent with our expectations and to successfully implement our business
strategy during soft as well as hard markets;
    
    our ability to maintain or improve our ratings to avoid the possibility of
downgrades in our claims-paying and financial strength ratings significantly adversely
affecting us, including reducing the number of insurance policies we write generally, or causing
clients who require an insurer with a
certain rating level to use higher-rated insurers;
  18




---



##### Table of Contents




    
    the inability of our internal control framework to provide absolute assurance
that all incidents of fraud or unintended material errors will be detected and
prevented;
    
    changes in accounting principles or policies or in our application of such
accounting principles or policies;
    
    the risk that our investment portfolio suffers reduced returns or investment
losses which could reduce our profitability; and
    
    other risks that we identify in future filings with the Securities and Exchange
Commission (the SEC), including without limitation the risks described under the
caption Risk Factors in our Annual Report on Form 10-K for the year ended December
31, 2007.
  The discussion and analysis of our financial condition and results of operations contained
herein should be read in conjunction with our consolidated financial statements and accompanying
notes which appear elsewhere in this Form 10-Q . It contains forward-looking statements that
involve risks and uncertainties. Please see Note on Forward-Looking Statements for more
information. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those discussed below and
elsewhere in this Form 10-Q .
 Overview
    19




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20




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##### Table of Contents



Catastrophe Risk Management
     21




---



##### Table of Contents



Critical Accounting Policies
   Reserves for Losses and LAE.
 Reinsurance Recoverables.
 Written and Unearned Premium.
  22




---



##### Table of Contents



Deferred Tax Assets.
 Impairment of Invested Assets.
    23




---



##### Table of Contents



Accounting for Lloyds Results.
 Translation
of Foreign Currencies. Foreign Currency
Translation, accumulated other comprehensive income
 other
income (expense)
 Results of Operations
       24




---



##### Table of Contents



Revenues .
   25




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Gross
    
    
    
    
    
    
    Net
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    NetWritten
    
    
    
    
    
    
    Written
    
    
    Earned
    
    
    Written
    
    
    
    
    
    
    Written
    
    
    EarnedPremium
    
    
    %
    
    
    Premium
    
    
    Premium
    
    
    Premium
    
    
    %
    
    
    Premium
    
    
    Premium($ in thousands)Insurance Companies:Marine
    
    $
    82,535
    
    
    
    28.7
    %
    
    $
    49,671
    
    
    $
    33,226
    
    
    $
    86,856
    
    
    
    28.9
    %
    
    $
    45,736
    
    
    $
    33,490Specialty
    
    
    78,882
    
    
    
    27.5
    %
    
    
    53,944
    
    
    
    56,669
    
    
    
    89,416
    
    
    
    29.7
    %
    
    
    54,585
    
    
    
    49,042Professional Liability
    
    
    19,287
    
    
    
    6.7
    %
    
    
    11,733
    
    
    
    14,073
    
    
    
    20,482
    
    
    
    6.8
    %
    
    
    12,192
    
    
    
    13,037Middle Markets
    
    
    8,014
    
    
    
    2.8
    %
    
    
    6,526
    
    
    
    5,697
    
    
    
    6,304
    
    
    
    2.1
    %
    
    
    3,969
    
    
    
    4,570Property/Other
    
    
    2,878
    
    
    
    1.0
    %
    
    
    2,436
    
    
    
    2,581
    
    
    
    5,816
    
    
    
    1.9
    %
    
    
    5,566
    
    
    
    1,673Insurance Companies Total
    
    
    191,596
    
    
    
    66.7
    %
    
    
    124,310
    
    
    
    112,246
    
    
    
    208,874
    
    
    
    69.4
    %
    
    
    122,048
    
    
    
    101,812Lloyds Operations:Marine
    
    
    74,953
    
    
    
    26.1
    %
    
    
    52,502
    
    
    
    33,992
    
    
    
    77,679
    
    
    
    25.8
    %
    
    
    45,488
    
    
    
    32,341Professional Liability
    
    
    10,670
    
    
    
    3.7
    %
    
    
    6,792
    
    
    
    5,959
    
    
    
    5,478
    
    
    
    1.8
    %
    
    
    3,383
    
    
    
    2,957Other
    
    
    9,927
    
    
    
    3.5
    %
    
    
    4,118
    
    
    
    3,543
    
    
    
    8,830
    
    
    
    3.0
    %
    
    
    2,100
    
    
    
    1,936Lloyds Operations Total
    
    
    95,550
    
    
    
    33.3
    %
    
    
    63,412
    
    
    
    43,494
    
    
    
    91,987
    
    
    
    30.6
    %
    
    
    50,971
    
    
    
    37,234Intercompany elimination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    287,146
    
    
    
    100.0
    %
    
    $
    187,722
    
    
    $
    155,740
    
    
    $
    300,861
    
    
    
    100.0
    %
    
    $
    173,019
    
    
    $
    139,046
  26




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##### Table of Contents



Gross Written Premium
 Insurance Companies Gross Written Premium
 Marine Premium.
 2008
    
    
    2007Marine liability
    
    
    31
    %
    
    
    30
    %P&I
    
    
    14
    %
    
    
    13
    %Offshore energy
    
    
    13
    %
    
    
    17
    %Cargo
    
    
    10
    %
    
    
    9
    %Transport
    
    
    8
    %
    
    
    8
    %Inland marine
    
    
    7
    %
    
    
    3
    %Other
    
    
    6
    %
    
    
    7
    %Bluewater hull
    
    
    6
    %
    
    
    7
    %Craft/Fishing vessel
    
    
    5
    %
    
    
    6
    %Total
    
    
    100
    %
    
    
    100
    %
  Specialty Premium.
 2008
    
    
    2007Construction liability
    
    
    50
    %
    
    
    50
    %Commercial umbrella
    
    
    21
    %
    
    
    18
    %Programs
    
    
    13
    %
    
    
    10
    %Primary E&S
    
    
    11
    %
    
    
    14
    %Personal umbrella
    
    
    3
    %
    
    
    3
    %Liquor liability
    
    
    2
    %
    
    
    1
    %Other
    
    
    0
    %
    
    
    4
    %Total
    
    
    100
    %
    
    
    100
    %
   27




---



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Professional Liability Premium.
 2008
    
    
    2007D&O (public and private)
    
    
    57
    %
    
    
    60
    %Lawyers and other professionals
    
    
    38
    %
    
    
    33
    %Architects and engineers
    
    
    5
    %
    
    
    7
    %Total
    
    
    100
    %
    
    
    100
    %
  Middle Markets Premium.
  2008
    
    
    2007General liability
    
    
    49
    %
    
    
    55
    %Commercial automobile liability
    
    
    38
    %
    
    
    32
    %Property
    
    
    13
    %
    
    
    13
    %Total
    
    
    100
    %
    
    
    100
    %
 Property/Other Premium.
 Lloyds Operations Gross Written Premium
    28




---



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Marine Premium.
 2008
    
    
    2007Marine liability
    
    
    37
    %
    
    
    27
    %Cargo and specie
    
    
    31
    %
    
    
    38
    %Assumed reinsurance
    
    
    12
    %
    
    
    12
    %Offshore energy
    
    
    10
    %
    
    
    18
    %Hull
    
    
    6
    %
    
    
    4
    %Other
    
    
    4
    %
    
    
    1
    %Total
    
    
    100
    %
    
    
    100
    %
  Professional Liability Premium.
 2008
    
    
    2007E&O
    
    
    78
    %
    
    
    68
    %D&O (public and private)
    
    
    22
    %
    
    
    32
    %Total
    
    
    100
    %
    
    
    100
    %
  Property/Other Premium.
 Ceded Written Premium .
  29




---



##### Table of Contents



Three Months Ended March 312008
    
    
    2007% of
    
    
    
    
    
    
    % ofCeded
    
    
    Gross
    
    
    Ceded
    
    
    GrossWritten
    
    
    Written
    
    
    Written
    
    
    WrittenPremium
    
    
    Premium
    
    
    Premium
    
    
    Premium($ in thousands)Insurance Companies:Marine
    
    $
    32,864
    
    
    
    39.8
    %
    
    $
    41,120
    
    
    
    47.3
    %Specialty
    
    
    24,938
    
    
    
    31.6
    %
    
    
    34,831
    
    
    
    39.0
    %Professional Liability
    
    
    7,554
    
    
    
    39.2
    %
    
    
    8,290
    
    
    
    40.5
    %Middle Markets
    
    
    1,488
    
    
    
    18.6
    %
    
    
    2,335
    
    
    
    37.0
    %Property/Other
    
    
    442
    
    
    
    15.4
    %
    
    
    250
    
    
    
    4.3
    %Subtotal
    
    
    67,286
    
    
    
    35.1
    %
    
    
    86,826
    
    
    
    41.6
    %Lloyds Operations:Marine
    
    
    22,451
    
    
    
    30.0
    %
    
    
    32,191
    
    
    
    41.4
    %Professional Liability
    
    
    3,878
    
    
    
    36.3
    %
    
    
    2,095
    
    
    
    38.2
    %Property/Other
    
    
    5,809
    
    
    
    58.5
    %
    
    
    6,730
    
    
    
    76.2
    %Subtotal
    
    
    32,138
    
    
    
    33.6
    %
    
    
    41,016
    
    
    
    44.6
    %Total
    
    $
    99,424
    
    
    
    34.6
    %
    
    $
    127,842
    
    
    
    42.5
    %
  
    
    Restructuring of the marine quota share treaties for the Insurance Companies and the
Lloyds Operations resulting in a large reduction in ceded premium.
    
    An increased retention from $0.5 million to $1.0 million effective April 1, 2007 for the
contractors liability business which reduced the amount of premium ceded.
    
    The elimination of a 5% reinsurer participation in our Syndicate 1221 2008 stamp capacity.
 Net Written Premium .
 Net Earned Premium .
  30




---



##### Table of Contents



Commission Income .
 Net Investment Income .
 Net Realized Capital Gains and Losses .
 Other Income/(Expense) .
 Operating Expenses
 Net Losses and Loss Adjustment Expenses Incurred
    31




---



##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    Change($ in thousands)Reinsurance recoverables:Paid losses
    
    $
    74,183
    
    
    $
    94,818
    
    
    $
    (20,635
    )Unpaid losses and LAE reserves
    
    
    776,767
    
    
    
    801,461
    
    
    
    (24,694
    )Total
    
    $
    850,950
    
    
    $
    896,279
    
    
    $
    (45,329
    )
  March 31,
    
    
    December 31,2008
    
    
    2007
    
    
    Change($ in thousands)Gross reserves for losses and LAE
    
    $
    1,661,556
    
    
    $
    1,648,764
    
    
    
    0.8
    %Less: Reinsurance recoverable on unpaid
losses and LAE reserves
    
    
    776,767
    
    
    
    801,461
    
    
    
    -3.1
    %Net loss and LAE reserves
    
    $
    884,789
    
    
    $
    847,303
    
    
    
    4.4
    %
  32




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##### Table of Contents



March 31, 2008Net
    
    
    Net
    
    
    Total
    
    
    % of IBNRReported
    
    
    IBNR
    
    
    Net Loss
    
    
    to Total NetReserves
    
    
    Reserves
    
    
    Reserves
    
    
    Loss Reserves($ in thousands)Insurance Companies:Marine
    
    $
    103,002
    
    
    $
    103,627
    
    
    $
    206,629
    
    
    
    50.2
    %SpecialtyConstruction Liability
    
    
    41,362
    
    
    
    214,979
    
    
    
    256,341
    
    
    
    83.9
    %All other liability
    
    
    22,231
    
    
    
    60,716
    
    
    
    82,947
    
    
    
    73.2
    %Total Specialty
    
    
    63,593
    
    
    
    275,695
    
    
    
    339,288
    
    
    
    81.3
    %Professional Liability
    
    
    23,195
    
    
    
    53,278
    
    
    
    76,473
    
    
    
    69.7
    %Middle Markets
    
    
    10,936
    
    
    
    12,339
    
    
    
    23,275
    
    
    
    53.0
    %Property/Other
    
    
    12,422
    
    
    
    10,787
    
    
    
    23,209
    
    
    
    46.5
    %Total Insurance Companies
    
    
    213,148
    
    
    
    455,726
    
    
    
    668,874
    
    
    
    68.1
    %Lloyds Operations:Marine
    
    
    95,940
    
    
    
    87,360
    
    
    
    183,300
    
    
    
    47.7
    %Other
    
    
    10,222
    
    
    
    22,393
    
    
    
    32,615
    
    
    
    68.7
    %Total Lloyds Operations
    
    
    106,162
    
    
    
    109,753
    
    
    
    215,915
    
    
    
    50.8
    %Total Company
    
    $
    319,310
    
    
    $
    565,479
    
    
    $
    884,789
    
    
    
    63.9
    %
  33




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December 31, 2007Net
    
    
    Net
    
    
    Total
    
    
    % of IBNRReported
    
    
    IBNR
    
    
    Net Loss
    
    
    to Total NetReserves
    
    
    Reserves
    
    
    Reserves
    
    
    Loss Reserves($ in thousands)Insurance Companies:Marine
    
    $
    93,467
    
    
    $
    103,500
    
    
    $
    196,967
    
    
    
    52.5
    %SpecialtyConstruction Liability
    
    
    36,137
    
    
    
    213,453
    
    
    
    249,590
    
    
    
    85.5
    %All other liability
    
    
    17,139
    
    
    
    55,032
    
    
    
    72,171
    
    
    
    76.3
    %Total Specialty
    
    
    53,276
    
    
    
    268,485
    
    
    
    321,761
    
    
    
    83.4
    %Professional Liability
    
    
    20,335
    
    
    
    50,584
    
    
    
    70,919
    
    
    
    71.3
    %Middle Markets
    
    
    11,469
    
    
    
    10,329
    
    
    
    21,798
    
    
    
    47.4
    %Property/Other
    
    
    12,790
    
    
    
    11,446
    
    
    
    24,236
    
    
    
    47.2
    %Total Insurance Companies
    
    
    191,337
    
    
    
    444,344
    
    
    
    635,681
    
    
    
    69.9
    %Lloyds Operations:Marine
    
    
    89,957
    
    
    
    93,069
    
    
    
    183,026
    
    
    
    50.9
    %Other
    
    
    7,485
    
    
    
    21,111
    
    
    
    28,596
    
    
    
    73.8
    %Total Lloyds Operations
    
    
    97,442
    
    
    
    114,180
    
    
    
    211,622
    
    
    
    54.0
    %Total Company
    
    $
    288,779
    
    
    $
    558,524
    
    
    $
    847,303
    
    
    
    65.9
    %
      34




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##### Table of Contents



Asbestos Liability.
    35




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##### Table of Contents



Three Months Ended
    
    
    Year EndedMarch 31, 2008
    
    
    December 31, 2007($ in thousands)Gross of ReinsuranceBeginning gross reserves
    
    $
    23,194
    
    
    $
    37,171Incurred losses & LAE
    
    
    121
    
    
    
    (780
    )Calendar year payments
    
    
    35
    
    
    
    13,197Ending gross reserves
    
    $
    23,280
    
    
    $
    23,194Gross case loss reserves
    
    $
    16,101
    
    
    $
    16,014Gross IBNR loss reserves
    
    
    7,179
    
    
    
    7,180Ending gross reserves
    
    $
    23,280
    
    
    $
    23,194Net of ReinsuranceBeginning net reserves
    
    $
    16,717
    
    
    $
    21,381Incurred losses & LAE
    
    
    106
    
    
    
    1,779Calendar year payments
    
    
    27
    
    
    
    6,443Ending net reserves
    
    $
    16,796
    
    
    $
    16,717Net case loss reserves
    
    $
    9,794
    
    
    $
    9,715Net IBNR loss reserves
    
    
    7,002
    
    
    
    7,002Ending net reserves
    
    $
    16,796
    
    
    $
    16,717
    Hurricanes Katrina and Rita.
  36




---



##### Table of Contents



Three Months Ended
    
    
    Year EndedMarch 31, 2008
    
    
    December 31, 2007($ in thousands)Gross of ReinsuranceBeginning gross reserves
    
    $
    141,831
    
    
    $
    319,230Incurred loss & LAE
    
    
    0
    
    
    
    (29,349
    )Calendar year payments
    
    
    5,837
    
    
    
    148,050Ending gross reserves
    
    $
    135,994
    
    
    $
    141,831Gross case loss reserves
    
    $
    89,032
    
    
    $
    94,959Gross IBNR loss reserves
    
    
    46,962
    
    
    
    46,872Ending gross reserves
    
    $
    135,994
    
    
    $
    141,831Net of ReinsuranceBeginning net reserves
    
    $
    4,519
    
    
    $
    10,003Incurred loss & LAE
    
    
    (5
    )
    
    
    (1,909
    )Calendar year payments
    
    
    (35
    )
    
    
    3,575Ending net reserves
    
    $
    4,549
    
    
    $
    4,519Net case loss reserves
    
    $
    592
    
    
    $
    646Net IBNR loss reserves
    
    
    3,957
    
    
    
    3,873Ending net reserves
    
    $
    4,549
    
    
    $
    4,519
   37




---



##### Table of Contents



Professional Liability Subprime Exposure.
 Number
    
    
    Average
    
    
    Average
    
    
    Averageof
    
    
    Gross
    
    
    Net
    
    
    ExcessClaims (1)
    
    
    Limit
    
    
    Limit (2)
    
    
    Attachment($ in thousands)Primary:D&O Securities/Other Claims
    
    
    
    
    
    $
    
    
    
    $
    Excess:D&O Securities Claims
    
    
    4
    
    
    
    7,500
    
    
    
    4,500
    
    
    $
    37,500D&O Side A Securities Claims
    
    
    2
    
    
    
    5,000
    
    
    
    3,500
    
    
    
    137,500Other Claims
    
    
    2
    
    
    
    10,000
    
    
    
    5,500
    
    
    
    35,000Subtotal/Average
    
    
    8
    
    
    
    7,500
    
    
    
    4,500Total
    
    
    8
    
    
    $
    7,500
    
    
    $
    4,500
 (1)
    
    Claims include all professional liability policies written by the Insurance Companies.
There are no reported claims or notices of potential claims reported for the Lloyds
Operations. All policies are claims made. Defense costs are included within the limits of
liability. There were no new claims or notices of potential claims reported for the three
months ended March 31, 2008.(2)
    
    Amounts are net of reinsurance. Prior Year Reserve Redundancies/Deficiencies
    38




---



##### Table of Contents



Three Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007($ in thousands)Insurance Companies:Marine
    
    $
    (300
    )
    
    $
    (1,500
    )Specialty
    
    
    (7,300
    )
    
    
    (2,200
    )Professional Liability
    
    
    (300
    )
    
    
    (2,000
    )Middle Markets
    
    
    1,200
    
    
    
    Property/Other
    
    
    (1,800
    )
    
    
    Subtotal Insurance Companies
    
    
    (8,500
    )
    
    
    (5,700
    )Lloyds Operations
    
    
    (5,180
    )
    
    
    (1,100
    )Total
    
    $
    (13,680
    )
    
    $
    (6,800
    )
        39




---



##### Table of Contents



Commission Expense.
 Other Operating Expenses.
 Income Taxes
    40




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes
 Segment Information
     Insurance Companies
   41




---



##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Gross written premium
    
    $
    191,596
    
    
    $
    208,874Net written premium
    
    
    124,310
    
    
    
    122,048Net earned premium
    
    
    112,246
    
    
    
    101,812Net losses and LAE
    
    
    (67,356
    )
    
    
    (61,340
    )Commission expense
    
    
    (12,948
    )
    
    
    (11,083
    )Other operating expenses
    
    
    (22,148
    )
    
    
    (18,769
    )Commission income and other income (expense)
    
    
    258
    
    
    
    489Underwriting profit
    
    
    10,052
    
    
    
    11,109Net investment income
    
    
    15,465
    
    
    
    13,654Net realized capital gains (losses)
    
    
    (102
    )
    
    
    243Income before income taxes
    
    
    25,415
    
    
    
    25,006Income tax expense
    
    
    7,370
    
    
    
    7,911Net income
    
    $
    18,045
    
    
    $
    17,095Loss and LAE ratio
    
    
    60.0
    %
    
    
    60.2
    %Commission expense ratio
    
    
    11.5
    %
    
    
    10.9
    %Other operating expense ratio (1)
    
    
    19.5
    %
    
    
    18.0
    %Combined ratio
    
    
    91.0
    %
    
    
    89.1
    %
 (1)
    
    Includes other operating expensesand commission income and other income (expense).  42




---



##### Table of Contents



Three Months Ended March 31, 2008($ in thousands)Net
    
    
    LossesEarned
    
    
    and LAE
    
    
    Underwriting
    
    
    Underwriting
    
    
    Loss
    
    
    Expense
    
    
    CombinedPremium
    
    
    Incurred
    
    
    Expenses
    
    
    Profit/(Loss)
    
    
    Ratio
    
    
    Ratio
    
    
    RatioMarine & Energy
    
    $
    33,226
    
    
    $
    24,371
    
    
    $
    11,062
    
    
    $
    (2,207
    )
    
    
    73.4
    %
    
    
    33.3
    %
    
    
    106.7
    %Specialty
    
    
    56,669
    
    
    
    29,480
    
    
    
    15,498
    
    
    
    11,691
    
    
    
    52.0
    %
    
    
    27.3
    %
    
    
    79.3
    %Professional
Liability
    
    
    14,073
    
    
    
    8,905
    
    
    
    5,098
    
    
    
    70
    
    
    
    63.3
    %
    
    
    36.2
    %
    
    
    99.5
    %Middle Markets
    
    
    5,697
    
    
    
    4,284
    
    
    
    1,989
    
    
    
    (576
    )
    
    
    75.2
    %
    
    
    34.8
    %
    
    
    110.0
    %Property/Other
    
    
    2,581
    
    
    
    316
    
    
    
    1,191
    
    
    
    1,074
    
    
    
    12.2
    %
    
    
    46.1
    %
    
    
    58.3
    %Total
    
    $
    112,246
    
    
    $
    67,356
    
    
    $
    34,838
    
    
    $
    10,052
    
    
    
    60.0
    %
    
    
    31.0
    %
    
    
    91.0
    %
 Three Months Ended March 31, 2007($ in thousands)Net
    
    
    LossesEarned
    
    
    and LAE
    
    
    Underwriting
    
    
    Underwriting
    
    
    Loss
    
    
    Expense
    
    
    CombinedPremium
    
    
    Incurred
    
    
    Expenses
    
    
    Profit/(Loss)
    
    
    Ratio
    
    
    Ratio
    
    
    RatioMarine & Energy
    
    $
    33,490
    
    
    $
    20,323
    
    
    $
    7,773
    
    
    $
    5,394
    
    
    
    60.7
    %
    
    
    23.2
    %
    
    
    83.9
    %Specialty
    
    
    49,042
    
    
    
    29,026
    
    
    
    14,879
    
    
    
    5,137
    
    
    
    59.2
    %
    
    
    30.3
    %
    
    
    89.5
    %Professional
Liability
    
    
    13,037
    
    
    
    8,484
    
    
    
    4,323
    
    
    
    230
    
    
    
    65.1
    %
    
    
    33.1
    %
    
    
    98.2
    %Middle Markets
    
    
    4,570
    
    
    
    2,740
    
    
    
    1,613
    
    
    
    217
    
    
    
    60.0
    %
    
    
    35.3
    %
    
    
    95.3
    %Property/Other
    
    
    1,673
    
    
    
    767
    
    
    
    775
    
    
    
    131
    
    
    NM
    
    
    NM
    
    
    NMTotal
    
    $
    101,812
    
    
    $
    61,340
    
    
    $
    29,363
    
    
    $
    11,109
    
    
    
    60.2
    %
    
    
    28.9
    %
    
    
    89.1
    %
     43




---



##### Table of Contents



Lloyds Operations
    Liquidity and Capital
Resources
   44




---



##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Gross written premium
    
    $
    95,550
    
    
    $
    91,987Net written premium
    
    
    63,412
    
    
    
    50,971Net earned premium
    
    
    43,494
    
    
    
    37,234Net losses and LAE
    
    
    (21,064
    )
    
    
    (19,852
    )Commission expense
    
    
    (8,000
    )
    
    
    (6,016
    )Other operating expenses
    
    
    (7,608
    )
    
    
    (7,520
    )Commission income and other income (expense)
    
    
    14
    
    
    
    (152
    )Underwriting profit
    
    
    6,836
    
    
    
    3,694Net investment income
    
    
    2,982
    
    
    
    2,151Net realized capital gains (losses)
    
    
    26
    
    
    
    (42
    )Income before income taxes
    
    
    9,844
    
    
    
    5,803Income tax expense
    
    
    3,452
    
    
    
    2,054Net income
    
    $
    6,392
    
    
    $
    3,749Loss and LAE ratio
    
    
    48.4
    %
    
    
    53.3
    %Commission expense ratio
    
    
    18.4
    %
    
    
    16.2
    %Other operating expense ratio (1)
    
    
    17.5
    %
    
    
    20.6
    %Combined ratio
    
    
    84.3
    %
    
    
    90.1
    %
 (1)
    
    Includes other operating expensesand commission income and other income (expense).     45




---



##### Table of Contents



Off-Balance Sheet Transactions
  Tabular Disclosure of Contractual Obligations
   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years($ in thousands)7% Senior Notes
    
    $
    199,375
    
    
    $
    8,750
    
    
    $
    17,500
    
    
    $
    17,500
    
    
    $
    155,625
 Investments
     46




---



##### Table of Contents




    
    Level 1  Quoted prices for identical instruments in active markets. Examples
are listed equity and fixed income securities traded on an exchange. Treasury
securities would generally be considered level 1.
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations in which all significant inputs and significant value
drivers are observable in active markets. Examples are ABS and MBS securities which
are similar to other ABS or MBS securities observed in the market.
    
    Level 3  Valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable. An example would
be a private placement with minimal liquidity.
   47




---



##### Table of Contents



Quoted Prices
    
    
    SignificantIn Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total($ in thousands)Fixed maturities
    
    $
    188,291
    
    
    $
    1,380,607
    
    
    $
    2,073
    
    
    $
    1,570,971Equities securities
    
    
    54,030
    
    
    
    5,658
    
    
    
    
    
    
    
    59,688Short-term investments
    
    
    28,664
    
    
    
    142,783
    
    
    
    
    
    
    
    171,447Total
    
    $
    270,985
    
    
    $
    1,529,048
    
    
    $
    2,073
    
    
    $
    1,802,106
  Three Months EndedMarch 31, 2008($ in thousands)Level 3 investments as of January 1, 2008
    
    $
    2,603Unrealized net gains included in
other comprehensive income (loss)
    
    
    17Purchases, sales, paydowns and amortization
    
    
    (153
    )Transfer to Level 2
    
    
    (394
    )Level 3 investments as of March 31, 2008
    
    $
    2,073
  48




---



##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedMarch 31, 2008
    
    Value
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Fixed maturities:U.S. Government Treasury Bonds,
GNMAs and foreign government bonds
    
    $
    247,946
    
    
    $
    11,885
    
    
    $
    (101
    )
    
    $
    236,162States, municipalities and political
subdivisions
    
    
    572,056
    
    
    
    9,224
    
    
    
    (2,708
    )
    
    
    565,540Mortgage- and asset-backed securities:Non-guaranteed government agency bonds
    
    
    34,802
    
    
    
    872
    
    
    
    
    
    
    
    33,930Mortgage-backed securities
    
    
    228,621
    
    
    
    3,940
    
    
    
    (114
    )
    
    
    224,795Collateralized mortgage obligations
    
    
    124,946
    
    
    
    698
    
    
    
    (6,107
    )
    
    
    130,355Asset-backed securities
    
    
    58,786
    
    
    
    817
    
    
    
    (266
    )
    
    
    58,235Commercial mortgage-backed securities
    
    
    111,458
    
    
    
    132
    
    
    
    (2,348
    )
    
    
    113,674Subtotal
    
    
    558,613
    
    
    
    6,459
    
    
    
    (8,835
    )
    
    
    560,989Corporate bonds
    
    
    192,356
    
    
    
    3,555
    
    
    
    (3,507
    )
    
    
    192,308Total fixed maturities
    
    
    1,570,971
    
    
    
    31,123
    
    
    
    (15,151
    )
    
    
    1,554,999Equity securities  common stocks
    
    
    59,688
    
    
    
    3,699
    
    
    
    (9,320
    )
    
    
    65,309Cash
    
    
    12,810
    
    
    
    
    
    
    
    
    
    
    
    12,810Short-term investments
    
    
    171,447
    
    
    
    
    
    
    
    
    
    
    
    171,447Total
    
    $
    1,814,916
    
    
    $
    34,822
    
    
    $
    (24,471
    )
    
    $
    1,804,565
 Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedDecember 31, 2007
    
    Value
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Fixed maturities:U.S. Government Treasury Bonds,
GNMAs and foreign government bonds
    
    $
    234,375
    
    
    $
    5,724
    
    
    $
    (337
    )
    
    $
    228,988States, municipalities and political
subdivisions
    
    
    515,883
    
    
    
    7,050
    
    
    
    (657
    )
    
    
    509,490Mortgage- and asset-backed securities:Non-guaranteed government agency bonds
    
    
    29,818
    
    
    
    342
    
    
    
    (4
    )
    
    
    29,480Mortgage-backed securities
    
    
    232,869
    
    
    
    1,824
    
    
    
    (479
    )
    
    
    231,524Collateralized mortgage obligations
    
    
    134,899
    
    
    
    524
    
    
    
    (823
    )
    
    
    135,198Asset-backed securities
    
    
    64,352
    
    
    
    533
    
    
    
    (79
    )
    
    
    63,898Commercial mortgage-backed securities
    
    
    113,488
    
    
    
    544
    
    
    
    (1,031
    )
    
    
    113,975Subtotal
    
    
    575,426
    
    
    
    3,767
    
    
    
    (2,416
    )
    
    
    574,075Corporate bonds
    
    
    196,636
    
    
    
    2,504
    
    
    
    (1,804
    )
    
    
    195,936Total fixed maturities
    
    
    1,522,320
    
    
    
    19,045
    
    
    
    (5,214
    )
    
    
    1,508,489Equity securities  common stocks
    
    
    67,240
    
    
    
    6,452
    
    
    
    (4,704
    )
    
    
    65,492Cash
    
    
    7,056
    
    
    
    
    
    
    
    
    
    
    
    7,056Short-term investments
    
    
    170,685
    
    
    
    
    
    
    
    
    
    
    
    170,685Total
    
    $
    1,767,301
    
    
    $
    25,497
    
    
    $
    (9,918
    )
    
    $
    1,751,722
  49




---



##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    CostMortgage-backed securities:FNMA
    
    $
    170,909
    
    
    $
    3,028
    
    
    $
    (96
    )
    
    $
    167,977FHLMC
    
    
    57,712
    
    
    
    912
    
    
    
    (18
    )
    
    
    56,818Prime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alt-A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subprime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    228,621
    
    
    $
    3,940
    
    
    $
    (114
    )
    
    $
    224,795
 Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    CostCollateralized mortgage obligations:GNMA
    
    $
    517
    
    
    $
    9
    
    
    $
    
    
    
    $
    508FNMA
    
    
    10,836
    
    
    
    261
    
    
    
    
    
    
    
    10,575FHLMC
    
    
    13,062
    
    
    
    373
    
    
    
    
    
    
    
    12,689Prime
    
    
    82,013
    
    
    
    55
    
    
    
    (4,451
    )
    
    
    86,409Alt-A
    
    
    18,518
    
    
    
    
    
    
    
    (1,656
    )
    
    
    20,174Subprime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    124,946
    
    
    $
    698
    
    
    $
    (6,107
    )
    
    $
    130,355
  50




---



##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    CostAsset-backed securities:GNMA
    
    $
    2,880
    
    
    $
    182
    
    
    $
    
    
    
    $
    2,698FNMA
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FHLMC
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prime
    
    
    55,528
    
    
    
    635
    
    
    
    (235
    )
    
    
    55,128Alt-A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subprime
    
    
    378
    
    
    
    
    
    
    
    (31
    )
    
    
    409Total
    
    $
    58,786
    
    
    $
    817
    
    
    $
    (266
    )
    
    $
    58,235
   PercentRating
    
    
    
    
    
    
    
    toDescription

    
    Rating
    
    Amount
    
    
    Total($ in thousands)Extremely Strong
    
    AAA
    
    $
    1,236,946
    
    
    
    71
    %Very Strong
    
    AA
    
    
    243,905
    
    
    
    14
    %Strong
    
    A
    
    
    191,639
    
    
    
    11
    %Adequate
    
    BBB
    
    
    69,688
    
    
    
    4
    %Speculative
    
    BB & below
    
    
    240
    
    
    
    0
    %Not Rated
    
    NR
    
    
    
    
    
    
    0
    %Total
    
    AA(1)
    
    $
    1,742,418
    
    
    
    100
    %
 (1)
    
    Weighted average quality rating.  51




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##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Credit enhanced securities:States, municipalities and political
subdivisions
    
    $
    318,022
    
    
    $
    4,885
    
    
    $
    (1,529
    )
    
    $
    314,666Mortgage- and asset-backed securities
    
    
    10,879
    
    
    
    2
    
    
    
    (250
    )
    
    
    11,127Corporate bonds
    
    
    2,174
    
    
    
    12
    
    
    
    (29
    )
    
    
    2,191Total
    
    $
    331,075
    
    
    $
    4,899
    
    
    $
    (1,808
    )
    
    $
    327,984
 AverageGross
    
    
    Gross
    
    
    Cost or
    
    
    UnderlyingFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    Amortized
    
    
    CreditValue
    
    
    Gains
    
    
    (Losses)
    
    
    Cost
    
    
    Rating($ in thousands)Financial guarantors:AMBAC
    
    $
    65,878
    
    
    $
    809
    
    
    $
    (561
    )
    
    $
    65,630
    
    
    
    A+Assured Guaranty LTD
    
    
    3,952
    
    
    
    20
    
    
    
    
    
    
    
    3,932
    
    
    
    AFGIC
    
    
    64,190
    
    
    
    788
    
    
    
    (232
    )
    
    
    63,634
    
    
    AA-Financial Security
Assurance
    
    
    79,470
    
    
    
    1,791
    
    
    
    (270
    )
    
    
    77,949
    
    
    
    A+MBIA
    
    
    98,456
    
    
    
    1,379
    
    
    
    (578
    )
    
    
    97,655
    
    
    AA-Radian Group, Inc
    
    
    7,702
    
    
    
    98
    
    
    
    (41
    )
    
    
    7,645
    
    
    AA-XL Capital
    
    
    11,427
    
    
    
    14
    
    
    
    (126
    )
    
    
    11,539
    
    
    
    ATotal
    
    $
    331,075
    
    
    $
    4,899
    
    
    $
    (1,808
    )
    
    $
    327,984
    
    
    AA-
    52




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53




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March 31, 2008
    
    
    December 31, 2007Fair
    
    
    GrossUnrealized
    
    
    Fair
    
    
    GrossUnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss($ in thousands)Fixed Maturities:U.S. Government Treasury
Bonds, GNMAs and
foreign
government bonds0-6 Months
    
    $
    2,179
    
    
    $
    4
    
    
    $
    4,119
    
    
    $
    327-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    6,470
    
    
    
    97
    
    
    
    19,587
    
    
    
    305Subtotal
    
    
    8,649
    
    
    
    101
    
    
    
    23,706
    
    
    
    337States, municipalities and
political subdivisions0-6 Months
    
    
    116,402
    
    
    
    1,990
    
    
    
    21,853
    
    
    
    677-12 Months
    
    
    9,175
    
    
    
    327
    
    
    
    6,045
    
    
    
    115> 12 Months
    
    
    13,256
    
    
    
    391
    
    
    
    69,671
    
    
    
    475Subtotal
    
    
    138,833
    
    
    
    2,708
    
    
    
    97,569
    
    
    
    657Mortgage- and
asset-backed securities
(excluding GNMAs)0-6 Months
    
    
    121,619
    
    
    
    4,657
    
    
    
    61,388
    
    
    
    5157-12 Months
    
    
    18,110
    
    
    
    1,730
    
    
    
    48,496
    
    
    
    423> 12 Months
    
    
    80,960
    
    
    
    2,448
    
    
    
    121,798
    
    
    
    1,478Subtotal
    
    
    220,689
    
    
    
    8,835
    
    
    
    231,682
    
    
    
    2,416Corporate bonds0-6 Months
    
    
    34,229
    
    
    
    1,089
    
    
    
    20,722
    
    
    
    2557-12 Months
    
    
    15,169
    
    
    
    1,452
    
    
    
    25,520
    
    
    
    974> 12 Months
    
    
    18,291
    
    
    
    966
    
    
    
    38,865
    
    
    
    575Subtotal
    
    
    67,689
    
    
    
    3,507
    
    
    
    85,107
    
    
    
    1,804Total Fixed Maturities
    
    $
    435,860
    
    
    $
    15,151
    
    
    $
    438,064
    
    
    $
    5,214Equity securities -
common stocks0-6 Months
    
    $
    28,106
    
    
    $
    5,413
    
    
    $
    26,257
    
    
    $
    3,4947-12 Months
    
    
    7,314
    
    
    
    3,664
    
    
    
    4,153
    
    
    
    1,209> 12 Months
    
    
    523
    
    
    
    243
    
    
    
    53
    
    
    
    1Total Equity Securities
    
    $
    35,943
    
    
    $
    9,320
    
    
    $
    30,463
    
    
    $
    4,704
  54




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##### Table of Contents



GrossEquivalent
    
    Equivalent
    
    Unrealized Loss
    
    
    Fair ValueNAIC

    
    S&P
    
    Moodys
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentRating

    
    Rating
    
    Rating
    
    Amount
    
    
    to Total
    
    
    Amount
    
    
    to Total($ in thousands)1
    
    AAA/AA/A
    
    Aaa/Aa/A
    
    $
    13,648
    
    
    
    90
    %
    
    $
    405,776
    
    
    
    93
    %2
    
    BBB
    
    Baa
    
    
    1,492
    
    
    
    10
    %
    
    
    29,844
    
    
    
    7
    %3
    
    BB
    
    Ba
    
    
    11
    
    
    
    0
    %
    
    
    240
    
    
    
    0
    %4
    
    B
    
    B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    CCC or lower
    
    Caa or lower
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    N/A
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    $
    15,151
    
    
    
    100
    %
    
    $
    435,860
    
    
    
    100
    %
   55




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##### Table of Contents



GrossUnrealized Loss
    
    
    Fair ValuePercent
    
    
    
    
    
    
    PercentAmount
    
    
    to Total
    
    
    Amount
    
    
    to Total($ in thousands)Due in one year or less
    
    $
    33
    
    
    
    0
    %
    
    $
    7,594
    
    
    
    2
    %Due after one year through five years
    
    
    797
    
    
    
    5
    %
    
    
    23,372
    
    
    
    5
    %Due after five years through ten years
    
    
    2,027
    
    
    
    13
    %
    
    
    65,823
    
    
    
    15
    %Due after ten years
    
    
    3,459
    
    
    
    23
    %
    
    
    118,382
    
    
    
    27
    %Mortgage- and asset-backed securities
    
    
    8,835
    
    
    
    59
    %
    
    
    220,689
    
    
    
    51
    %Total fixed income securities
    
    $
    15,151
    
    
    
    100
    %
    
    $
    435,860
    
    
    
    100
    %
   Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Fixed maturities:Gains
    
    $
    197
    
    
    $
    450(Losses)
    
    
    (9
    )
    
    
    (438
    )188
    
    
    
    12Equity securities:Gains
    
    
    263
    
    
    
    250(Losses)
    
    
    (527
    )
    
    
    (61
    )(264
    )
    
    
    189Net realized capital gains (losses)
    
    $
    (76
    )
    
    $
    201
  56




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##### Table of Contents



# of MonthsUnrealized LossNet
    
    
    Exceeded 20%Date of
    
    
    Proceeds
    
    
    Loss on
    
    
    
    
    
    
    Holdings at
    
    
    Unrealized
    
    
    of Cost orDescription
    
    Sale
    
    
    from Sale
    
    
    Sale
    
    
    Impairment
    
    
    March 31, 2008
    
    
    Loss
    
    
    Amortized Cost($ in thousands)Three months ended:March 31, 2008:NoneMarch 31, 2007:TIPS (1)
    
    
    3/31/2007
    
    
    $
    5,823
    
    
    $
    (335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Treasury inflation protection securities (TIPS) were sold during the 2007 first
quarters due to the widening breakeven yield spread between TIPS and Treasuries. Reinsurance Recoverables
     Liquidity and Capital Resources
   57




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58




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##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007($ in thousands)Senior debt
    
    $
    123,702
    
    
    $
    123,673Stockholders equity
    
    
    676,877
    
    
    
    662,106Total capitalization
    
    $
    800,579
    
    
    $
    785,779Ratio of debt to total capitalization
    
    
    15.5
    %
    
    
    15.7
    %
   59




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##### Table of Contents



60




---



##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007($ in thousands)Cash and investments
    
    $
    43,102
    
    
    $
    44,146Investments in subsidiaries
    
    
    751,212
    
    
    
    735,351Goodwill and other intangible assets
    
    
    2,534
    
    
    
    2,534Other assets
    
    
    8,238
    
    
    
    6,821Total assets
    
    $
    805,086
    
    
    $
    788,852Accounts payable and other liabilities
    
    $
    861
    
    
    
    1,615Accrued interest payable
    
    
    3,646
    
    
    
    1,4587% Senior Notes due May 1, 2016
    
    
    123,702
    
    
    
    123,673Total liabilities
    
    
    128,209
    
    
    
    126,746Stockholders equity
    
    
    676,877
    
    
    
    662,106Total liabilities and stockholders equity
    
    $
    805,086
    
    
    $
    788,852
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    The Chief Executive Officer and Chief Financial Officer of the Company
have evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act)), as of the end of the period covered by this
quarterly report. Based on such evaluation, such officers have concluded that as of
the end of such period the Companys disclosure controls and procedures are
effective in identifying, on a timely basis, material information required to be
disclosed in our reports filed or submitted under the Exchange Act.(b)
    
    There have been no changes during our first fiscal quarter in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.
 
 Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A.Risk Factors
   61




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   ($
in thousands, except per share)
 Number ofShares
    
    
    Dollar ValueTotal
    
    
    
    
    
    
    Purchased
    
    
    of Shares thatNumber
    
    
    Average
    
    
    Under Publicly
    
    
    May Yet Beof Shares
    
    
    Cost Paid
    
    
    Announced
    
    
    Purchased UnderPurchased
    
    
    Per Share
    
    
    Program
    
    
    the Program (1)January 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    30,000February 2008
    
    
    30,202
    
    
    $
    54.66
    
    
    
    30,202
    
    
    $
    28,349March 2008
    
    
    105,824
    
    
    $
    53.58
    
    
    
    105,824
    
    
    $
    22,679Total
    
    
    136,026
    
    
    $
    53.82
    
    
    
    136,026
 (1)
    
    Balance as of the end of the month indicated. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit No.
    
    Description of Exhibit10-1
    
    Paul J. Malvasio Letter Agreement and Retirement Agreement
    
    *11-1
    
    Statement re Computation of Per Share Earnings
    
    *31-1
    
    Certification of CEO per Section 302 of the Sarbanes-Oxley Act
    
    *31-2
    
    Certification of CFO per Section 302 of the Sarbanes-Oxley Act
    
    *32-1
    
    Certification of CEO per Section 906 of the Sarbanes-Oxley Act
(This exhibit is intended to be furnished in accordance
with Regulation S-K item 601(b)(32)(ii) and shall not be
deemed to be filed for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, or
incorporated by reference into any filing under the
Securities Act of 1933, except as shall be expressly set
forth by specific reference).
    
    *32-2
    
    Certification of CFO per Section 906 of the Sarbanes-Oxley Act
(This exhibit is intended to be furnished in accordance
with Regulation S-K item 601(b)(32)(ii) and shall not be
deemed to be filed for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, or
incorporated by reference into any filing under the
Securities Act of 1933, except as shall be expressly set
forth by specific reference).
    
    *
 *
    
    Included herein.  62




---



##### Table of Contents



The Navigators Group, Inc.
            (Registrant)Date:  April 30, 2008
    /s/ Paul J. MalvasioPaul J. MalvasioExecutive Vice President
and Chief Financial Officer  63




---



##### Table of Contents



INDEX OF EXHIBITS
 Exhibit No.
    
    Description of Exhibit10-1
    
    Paul J. Malvasio Letter Agreement and Retirement Agreement
    
    *11-1
    
    Statement re Computation of Per Share Earnings
    
    *31-1
    
    Certification of CEO per Section 302 of the Sarbanes-Oxley Act
    
    *31-2
    
    Certification of CFO per Section 302 of the Sarbanes-Oxley Act
    
    *32-1
    
    Certification of CEO per Section 906 of the Sarbanes-Oxley Act
(This exhibit is intended to be furnished in accordance
with Regulation S-K item 601(b)(32)(ii) and shall not be
deemed to be filed for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, or
incorporated by reference into any filing under the
Securities Act of 1933, except as shall be expressly set
forth by specific reference).
    
    *32-2
    
    Certification of CFO per Section 906 of the Sarbanes-Oxley Act
(This exhibit is intended to be furnished in accordance
with Regulation S-K item 601(b)(32)(ii) and shall not be
deemed to be filed for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, or
incorporated by reference into any filing under the
Securities Act of 1933, except as shall be expressly set
forth by specific reference).
    
    *
 
 *
    
    Included herein.  64