##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    Transitional Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number 0-15886
 The Navigators Group, Inc.
  Delaware
    
    13-3138397(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)6 International Drive, Rye Brook, New York
    
    10573(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No 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, 2010 (Unaudited) and December 31, 2009
    
    
    3Consolidated Statements of Income (Unaudited) 

Three Months Ended March 31, 2010 and 2009
    
    
    4Consolidated Statements of Stockholders Equity (Unaudited) 

Three Months Ended March 31, 2010 and 2009
    
    
    5Consolidated Statements of Comprehensive Income (Unaudited) 

Three Months Ended March 31, 2010 and 2009
    
    
    6Consolidated Statements of Cash Flows (Unaudited) 

Three Months Ended March 31, 2010 and 2009
    
    
    7Notes to Interim Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    73Item 4. Controls and Procedures
    
    
    73Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    73Item 1A. Risk Factors
    
    
    73Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    73Item 3. Defaults Upon Senior Securities
    
    
    74Item 5. Other Information
    
    
    74Item 6. Exhibits
    
    
    74Signatures
    
    
    75Index of Exhibits
    
    
    76Exhibit 11.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Part I. Financial Information
 
 Item 1.
    
    Financial Statements
 THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 ($ in thousands, except share data)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSInvestments and cash:Fixed maturities, available-for-sale, at fair value
(amortized cost: 2010, $1,762,223; 2009, $1,777,983)
    
    $
    1,807,348
    
    
    $
    1,816,669Equity securities, available-for-sale, at fair value (cost: 2010, $54,624; 2009,
$47,376)
    
    
    72,609
    
    
    
    62,610Short-term investments, at cost which approximates fair value
    
    
    172,342
    
    
    
    176,799Cash
    
    
    2,699
    
    
    
    509Total investments and cash
    
    
    2,054,998
    
    
    
    2,056,587Premiums receivable
    
    
    225,025
    
    
    
    193,460Prepaid reinsurance premiums
    
    
    157,201
    
    
    
    162,344Reinsurance recoverable on paid losses
    
    
    75,355
    
    
    
    76,505Reinsurance recoverable on unpaid losses and loss adjustment expenses
    
    
    795,914
    
    
    
    807,352Deferred policy acquisition costs
    
    
    63,133
    
    
    
    56,575Accrued investment income
    
    
    16,767
    
    
    
    17,438Goodwill and other intangible assets
    
    
    6,779
    
    
    
    7,057Current income tax receivable, net
    
    
    5,021
    
    
    
    4,854Deferred income tax, net
    
    
    25,643
    
    
    
    31,222Other assets
    
    
    34,895
    
    
    
    40,600Total assets
    
    $
    3,460,731
    
    
    $
    3,453,994LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Reserves for losses and loss adjustment expenses
    
    $
    1,913,760
    
    
    $
    1,920,286Unearned premiums
    
    
    494,061
    
    
    
    475,171Reinsurance balances payable
    
    
    86,376
    
    
    
    98,555Senior notes
    
    
    114,041
    
    
    
    114,010Accounts payable and other liabilities
    
    
    42,449
    
    
    
    44,453Total liabilities
    
    
    2,650,687
    
    
    
    2,652,475Stockholders equity:Preferred stock, $.10 par value, authorized 1,000,000 shares, none issued
    
    $
    
    
    
    $
    Common stock, $.10 par value, authorized 50,000,000 shares, issued
17,228,278 shares for 2010 and 17,212,814 shares for 2009
    
    
    1,723
    
    
    
    1,721Additional paid-in capital
    
    
    307,517
    
    
    
    304,505Treasury stock, at cost (853,842 shares for 2010 and 366,330 shares for 2009)
    
    
    (37,290
    )
    
    
    (18,296
    )Retained earnings
    
    
    486,979
    
    
    
    469,934Accumulated other comprehensive income
    
    
    51,115
    
    
    
    43,655Total stockholders equity
    
    
    810,044
    
    
    
    801,519Total liabilities and stockholders equity
    
    $
    3,460,731
    
    
    $
    3,453,994
   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 31,2010
    
    
    2009(Unaudited)Gross written premiums
    
    $
    270,145
    
    
    $
    275,259Revenues:Net written premiums
    
    $
    189,317
    
    
    $
    200,652Increase in unearned premiums
    
    
    (25,248
    )
    
    
    (35,706
    )Net earned premiums
    
    
    164,069
    
    
    
    164,946Net investment income
    
    
    17,972
    
    
    
    18,743Total other-than-temporary impairment losses
    
    
    (251
    )
    
    
    (26,871
    )Portion of loss recognized in other
comprehensive income (before tax)
    
    
    170
    
    
    
    16,171Net other-than-temporary impairment losses
    
    
    (81
    )
    
    
    (10,700
    )Net realized gains (losses)
    
    
    6,113
    
    
    
    (1,537
    )Other income
    
    
    1,070
    
    
    
    143Total revenues
    
    
    189,143
    
    
    
    171,595Expenses:Net losses and loss adjustment expenses
    
    
    103,807
    
    
    
    100,247Commission expenses
    
    
    25,316
    
    
    
    22,448Other operating expenses
    
    
    34,586
    
    
    
    30,535Interest expense
    
    
    2,044
    
    
    
    2,219Total expenses
    
    
    165,753
    
    
    
    155,449Income before income taxes
    
    
    23,390
    
    
    
    16,146Income tax expense
    
    
    6,345
    
    
    
    4,146Net income
    
    $
    17,045
    
    
    $
    12,000Net income per common share:Basic
    
    $
    1.02
    
    
    $
    0.71Diluted
    
    $
    1.00
    
    
    $
    0.71Average common shares outstanding:Basic
    
    
    16,641
    
    
    
    16,882Diluted
    
    
    16,979
    
    
    
    17,002
   4




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THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 ($ in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009(Unaudited)Preferred StockBalance at beginning and end of period
    
    $
    
    
    
    $
    Common stockBalance at beginning of year
    
    $
    1,721
    
    
    $
    1,708Shares issued under stock plans
    
    
    2
    
    
    
    8Balance at end of period
    
    $
    1,723
    
    
    $
    1,716Additional paid-in capitalBalance at beginning of year
    
    $
    304,505
    
    
    $
    298,872Share-based compensation
    
    
    3,012
    
    
    
    3,626Balance at end of period
    
    $
    307,517
    
    
    $
    302,498Treasury stock, at costBalance at beginning of year
    
    $
    (18,296
    )
    
    $
    (11,540
    )Treasury stock acquired
    
    
    (23,671
    )
    
    
    Shares
issued for share-based compensation
    
    
    4,677
    
    
    
    Balance at end of period
    
    $
    (37,290
    )
    
    $
    (11,540
    )Retained earningsBalance at beginning of year
    
    $
    469,934
    
    
    $
    406,776Net income
    
    
    17,045
    
    
    
    12,000Balance at end of period
    
    $
    486,979
    
    
    $
    418,776Accumulated other comprehensive income (loss)Net unrealized gains (losses) on securities, net of taxBalance at beginning of year
    
    $
    30,958
    
    
    $
    (15,062
    )Change in period
    
    
    6,710
    
    
    
    16,494Balance at end of period
    
    
    37,668
    
    
    
    1,432Non-credit other-than-temporary impairment gains (losses), net of taxBalance at beginning of year
    
    
    4,000
    
    
    
    Change in period
    
    
    (712
    )
    
    
    (10,511
    )Balance at end of period
    
    
    3,288
    
    
    
    (10,511
    )Cumulative translation adjustments, net of taxBalance at beginning of year
    
    
    8,697
    
    
    
    8,563Net adjustment
    
    
    1,462
    
    
    
    1,520Balance at end of period
    
    
    10,159
    
    
    
    10,083Balance at end of period
    
    $
    51,115
    
    
    $
    1,004Total stockholders equity at end of period
    
    $
    810,044
    
    
    $
    712,454
   5




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##### Table of Contents



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 ($ in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009(Unaudited)Net income
    
    $
    17,045
    
    
    $
    12,000Other comprehensive income (loss):Change in net unrealized gains (losses) on investments,
net of tax expense (benefit) of $3,192 and $2,794 in 2010 and
2009, respectively (1)
    
    
    5,998
    
    
    
    5,983Change in foreign currency translation gains (losses),
net of tax expense of $788 and $818 in 2010 and 2009, respectively
    
    
    1,462
    
    
    
    1,520Other comprehensive income (loss)
    
    
    7,460
    
    
    
    7,503Comprehensive income
    
    $
    24,505
    
    
    $
    19,503(1) Disclosure of reclassification amount, net of tax:Unrealized gains (losses) on investments arising during period
    
    $
    9,915
    
    
    $
    (2,204
    )Less: reclassification adjustment for net realized
gains (losses) included in net income
    
    
    3,973
    
    
    
    (1,140
    )reclassification adjustment for other-than-temporary
impairment losses recognized in net income
    
    
    (56
    )
    
    
    (7,047
    )Change in net unrealized gains (losses) on investments, net of tax
    
    $
    5,998
    
    
    $
    5,983
   6




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##### Table of Contents



THE NAVIGATORS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 ($ in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009(Unaudited)Operating activities:Net income
    
    $
    17,045
    
    
    $
    12,000Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation & amortization
    
    
    1,246
    
    
    
    957Deferred income taxes
    
    
    1,777
    
    
    
    (2,604
    )Net realized (gains) losses
    
    
    (6,032
    )
    
    
    12,237Changes in assets and liabilities:Reinsurance recoverable on paid and unpaid
losses and loss adjustment expenses
    
    
    8,969
    
    
    
    (2,916
    )Reserves for losses and loss adjustment expenses
    
    
    1,376
    
    
    
    28,539Prepaid reinsurance premiums
    
    
    4,610
    
    
    
    21,318Unearned premium
    
    
    20,788
    
    
    
    14,492Premiums receivable
    
    
    (33,117
    )
    
    
    (31,897
    )Commissions receivable
    
    
    203
    
    
    
    7Deferred policy acquisition costs
    
    
    (6,982
    )
    
    
    (10,169
    )Accrued investment income
    
    
    677
    
    
    
    1,294Reinsurance balances payable
    
    
    (11,763
    )
    
    
    (10,382
    )Current income taxes
    
    
    366
    
    
    
    6,719Other
    
    
    4,961
    
    
    
    3,333Net cash provided by operating activities
    
    
    4,124
    
    
    
    42,928Investing activities:Fixed maturities, available-for-saleRedemptions and maturities
    
    
    34,771
    
    
    
    32,122Sales
    
    
    165,405
    
    
    
    91,969Purchases
    
    
    (180,252
    )
    
    
    (153,211
    )Equity securities, available-for-saleSales
    
    
    
    
    
    
    1,420Purchases
    
    
    (7,274
    )
    
    
    (10,713
    )Change in payable for securities
    
    
    7,451
    
    
    
    (1,106
    )Net change in short-term investments
    
    
    1,514
    
    
    
    13,265Purchase of property and equipment
    
    
    (491
    )
    
    
    (2,164
    )Net cash provided by (used in) investing activities
    
    
    21,124
    
    
    
    (28,418
    )Financing activities:Purchase of treasury stock
    
    
    (23,671
    )
    
    
    Proceeds of stock issued from employee stock purchase plan
    
    
    415
    
    
    
    344Proceeds of stock issued from exercise of stock options
    
    
    198
    
    
    
    333Net cash (used in) provided by financing activities
    
    
    (23,058
    )
    
    
    677Increase in cash
    
    
    2,190
    
    
    
    15,187Cash at beginning of year
    
    
    509
    
    
    
    1,457Cash at end of period
    
    $
    2,699
    
    
    $
    16,644Supplemental cash information:Income taxes paid, net
    
    $
    3,806
    
    
    $
    68Issuance of stock to directors
    
    
    180
    
    
    
    210
   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. Recent Accounting Pronouncements
 Recently Adopted Accounting Pronouncements
    8




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##### Table of Contents



Recent Accounting Developments
  Note 3. Segment Information
        9




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##### Table of Contents



Three Months Ended March 31,      2010Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Corporate
    
    
    Total($ in thousands)Gross written premiums
    
    $
    177,838
    
    
    $
    92,307
    
    
    $
    
    
    
    $
    270,145Net written premiums
    
    
    121,340
    
    
    
    67,977
    
    
    
    
    
    
    
    189,317Net earned premiums
    
    
    111,211
    
    
    
    52,858
    
    
    
    
    
    
    
    164,069Net loss and LAE
    
    
    (68,403
    )
    
    
    (35,404
    )
    
    
    
    
    
    
    (103,807
    )Commission expenses
    
    
    (14,362
    )
    
    
    (10,966
    )
    
    
    12
    
    
    
    (25,316
    )Other operating expenses
    
    
    (27,353
    )
    
    
    (7,243
    )
    
    
    
    
    
    
    (34,596
    )Other income (expense)
    
    
    (977
    )
    
    
    2,069
    
    
    
    (12
    )
    
    
    1,080Underwriting profit (loss)
    
    
    116
    
    
    
    1,314
    
    
    
    
    
    
    
    1,430Net investment income
    
    
    15,748
    
    
    
    2,069
    
    
    
    155
    
    
    
    17,972Net realized gains (losses)
    
    
    5,205
    
    
    
    713
    
    
    
    114
    
    
    
    6,032Other operating expenses
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10Other income (expense)
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,044
    )
    
    
    (2,044
    )Income (loss) before income taxes
    
    
    21,069
    
    
    
    4,096
    
    
    
    (1,775
    )
    
    
    23,390Income tax expense (benefit)
    
    
    5,463
    
    
    
    1,503
    
    
    
    (621
    )
    
    
    6,345Net income (loss)
    
    $
    15,606
    
    
    $
    2,593
    
    
    $
    (1,154
    )
    
    $
    17,045Identifiable assets (1)
    
    $
    2,546,248
    
    
    $
    815,946
    
    
    $
    86,046
    
    
    $
    3,460,731Loss and LAE ratio
    
    
    61.5
    %
    
    
    67.0
    %
    
    
    
    
    
    
    63.3
    %Commission expense ratio
    
    
    12.9
    %
    
    
    20.7
    %
    
    
    
    
    
    
    15.4
    %Other operating expense ratio (2)
    
    
    25.5
    %
    
    
    9.8
    %
    
    
    
    
    
    
    20.4
    %Combined ratio
    
    
    99.9
    %
    
    
    97.5
    %
    
    
    
    
    
    
    99.1
    %
 (1)
    
    Includes inter-segment transactions causing the row not to cross foot.(2)
    
    Includes Other operating expensesand Other income (expense).  10




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##### Table of Contents



Three Months Ended March 31, 2010Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Total($ in thousands)Gross written premiums:Marine
    
    $
    67,526
    
    
    $
    59,141
    
    
    $
    126,667Property Casualty
    
    
    79,346
    
    
    
    19,959
    
    
    
    99,305Professional Liability
    
    
    30,966
    
    
    
    13,207
    
    
    
    44,173Total
    
    $
    177,838
    
    
    $
    92,307
    
    
    $
    270,145Net written premiums:Marine
    
    $
    51,003
    
    
    $
    49,642
    
    
    $
    100,645Property Casualty
    
    
    49,697
    
    
    
    11,711
    
    
    
    61,408Professional Liability
    
    
    20,640
    
    
    
    6,624
    
    
    
    27,264Total
    
    $
    121,340
    
    
    $
    67,977
    
    
    $
    189,317Net earned premiums:Marine
    
    $
    41,094
    
    
    $
    35,560
    
    
    $
    76,654Property Casualty
    
    
    51,081
    
    
    
    11,915
    
    
    
    62,996Professional Liability
    
    
    19,036
    
    
    
    5,383
    
    
    
    24,419Total
    
    $
    111,211
    
    
    $
    52,858
    
    
    $
    164,069
  11




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##### Table of Contents



Three Months Ended March 31, 2009Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Corporate
    
    
    Total($ in thousands)Gross written premiums
    
    $
    191,983
    
    
    $
    83,276
    
    
    $
    
    
    
    $
    275,259Net written premiums
    
    
    137,082
    
    
    
    63,570
    
    
    
    
    
    
    
    200,652Net earned premiums
    
    
    120,290
    
    
    
    44,656
    
    
    
    
    
    
    
    164,946Net losses and LAE
    
    
    (70,153
    )
    
    
    (30,094
    )
    
    
    
    
    
    
    (100,247
    )Commission expenses
    
    
    (14,968
    )
    
    
    (7,480
    )
    
    
    
    
    
    
    (22,448
    )Other operating expenses
    
    
    (24,560
    )
    
    
    (5,981
    )
    
    
    6
    
    
    
    (30,535
    )Other income (expense)
    
    
    201
    
    
    
    (52
    )
    
    
    (6
    )
    
    
    143Underwriting profit
    
    
    10,810
    
    
    
    1,049
    
    
    
    
    
    
    
    11,859Net investment income
    
    
    16,207
    
    
    
    2,383
    
    
    
    153
    
    
    
    18,743Net realized gains (losses)
    
    
    (8,907
    )
    
    
    (3,330
    )
    
    
    
    
    
    
    (12,237
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,219
    )
    
    
    (2,219
    )Income (loss) before income taxes
    
    
    18,110
    
    
    
    102
    
    
    
    (2,066
    )
    
    
    16,146Income tax expense (benefit)
    
    
    4,533
    
    
    
    336
    
    
    
    (723
    )
    
    
    4,146Net income (loss)
    
    $
    13,577
    
    
    $
    (234
    )
    
    $
    (1,343
    )
    
    $
    12,000Identifiable assets (1)
    
    $
    2,497,923
    
    
    $
    799,907
    
    
    $
    90,135
    
    
    $
    3,403,633Loss and LAE ratio
    
    
    58.3
    %
    
    
    67.4
    %
    
    
    
    
    
    
    60.8
    %Commission expense ratio
    
    
    12.4
    %
    
    
    16.8
    %
    
    
    
    
    
    
    13.6
    %Other operating expense ratio (2)
    
    
    20.3
    %
    
    
    13.5
    %
    
    
    
    
    
    
    18.4
    %Combined ratio
    
    
    91.0
    %
    
    
    97.7
    %
    
    
    
    
    
    
    92.8
    %
 (1)
    
    Includes inter-segment transactions causing the row not to cross foot.(2)
    
    Includes Other operating expensesand Other income (expense).  12




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##### Table of Contents



Three Months Ended March 31, 2009Insurance
    
    
    LloydsCompanies
    
    
    Operations
    
    
    Total($ in thousands)Gross written premiums:Marine
    
    $
    77,237
    
    
    $
    59,023
    
    
    $
    136,260Property Casualty
    
    
    84,258
    
    
    
    13,528
    
    
    
    97,786Professional Liability
    
    
    30,488
    
    
    
    10,725
    
    
    
    41,213Total
    
    $
    191,983
    
    
    $
    83,276
    
    
    $
    275,259Net written premiums:Marine
    
    $
    58,459
    
    
    $
    49,974
    
    
    $
    108,433Property Casualty
    
    
    59,976
    
    
    
    7,595
    
    
    
    67,571Professional Liability
    
    
    18,647
    
    
    
    6,001
    
    
    
    24,648Total
    
    $
    137,082
    
    
    $
    63,570
    
    
    $
    200,652Net earned premiums:Marine
    
    $
    37,161
    
    
    $
    31,175
    
    
    $
    68,336Property Casualty
    
    
    65,412
    
    
    
    7,923
    
    
    
    73,335Professional Liability
    
    
    17,717
    
    
    
    5,558
    
    
    
    23,275Total
    
    $
    120,290
    
    
    $
    44,656
    
    
    $
    164,946
  Note 4. Reinsurance Ceded
   13




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##### Table of Contents



Reinsurance RecoverablesUnearned
    
    
    Unpaid/Paid
    
    
    
    
    
    Collateral
    
    
    Rating &Reinsurer
    
    Premium
    
    
    Losses
    
    
    Total
    
    
    Held(1)
    
    
    Rating Agency($ in millions)Swiss Reinsurance America Corporation
    
    $
    8.4
    
    
    $
    95.2
    
    
    $
    103.6
    
    
    $
    6.5
    
    
    A
    AMB
    (2)Munich Reinsurance America Inc.
    
    
    28.0
    
    
    
    65.3
    
    
    
    93.3
    
    
    
    8.9
    
    
    A+
    AMBTransatlantic Reinsurance Company
    
    
    20.9
    
    
    
    49.4
    
    
    
    70.3
    
    
    
    10.4
    
    
    A
    AMBEverest Reinsurance Company
    
    
    19.4
    
    
    
    48.6
    
    
    
    68.0
    
    
    
    9.0
    
    
    A+
    AMBWhite Mountains Reinsurance of America
    
    
    0.7
    
    
    
    63.0
    
    
    
    63.7
    
    
    
    1.9
    
    
    A-
    AMBGeneral Reinsurance Corporation
    
    
    1.5
    
    
    
    56.9
    
    
    
    58.4
    
    
    
    1.1
    
    
    A++
    AMBMunchener Ruckversicherungs-Gesellschaft
    
    
    3.2
    
    
    
    33.6
    
    
    
    36.8
    
    
    
    11.5
    
    
    A+
    AMBNational Indemnity Company
    
    
    6.6
    
    
    
    28.0
    
    
    
    34.6
    
    
    
    1.2
    
    
    A++
    AMBBerkley Insurance Company
    
    
    6.8
    
    
    
    22.8
    
    
    
    29.6
    
    
    
    1.2
    
    
    A+
    AMBPlatinum Underwriters Re
    
    
    3.8
    
    
    
    25.6
    
    
    
    29.4
    
    
    
    1.7
    
    
    A
    AMBScor Holding (Switzerland) AG
    
    
    5.8
    
    
    
    19.4
    
    
    
    25.2
    
    
    
    5.9
    
    
    A-
    AMBPartner Reinsurance Europe
    
    
    5.7
    
    
    
    17.9
    
    
    
    23.6
    
    
    
    9.4
    
    
    AA-
    S&PSwiss Re International SE
    
    
    0.9
    
    
    
    20.6
    
    
    
    21.5
    
    
    
    5.6
    
    
    A
    AMBPartner Reinsurance Company of the U.S.
    
    
    1.0
    
    
    
    19.9
    
    
    
    20.9
    
    
    
    0.1
    
    
    A+
    AMBAce Property and Casualty Insurance Company
    
    
    3.4
    
    
    
    17.0
    
    
    
    20.4
    
    
    
    1.9
    
    
    A+
    AMBLloyds Syndicate #2003
    
    
    3.3
    
    
    
    14.8
    
    
    
    18.1
    
    
    
    2.7
    
    
    A
    AMBHannover Ruckversicherung
    
    
    1.4
    
    
    
    14.6
    
    
    
    16.0
    
    
    
    1.7
    
    
    A
    AMBArch Reinsurance Company
    
    
    0.5
    
    
    
    15.3
    
    
    
    15.8
    
    
    
    0.0
    
    
    A
    AMBAllianz Global Corporate & Specialty AG
    
    
    
    
    
    
    11.0
    
    
    
    11.0
    
    
    
    4.4
    
    
    A+
    AMBXL Reinsurance America Inc.
    
    
    0.0
    
    
    
    10.3
    
    
    
    10.3
    
    
    
    0.3
    
    
    A
    AMBTop 20 Total
    
    
    121.3
    
    
    
    649.2
    
    
    
    770.5
    
    
    
    85.4All Other
    
    
    35.9
    
    
    
    222.1
    
    
    
    258.0
    
    
    
    81.0Total
    
    $
    157.2
    
    
    $
    871.3
    
    
    $
    1,028.5
    
    
    $
    166.4
 (1)
    
    Collateral includes letters of credit, ceded balances payable and
other balances held by our Insurance Companies and our Lloyds Operations.(2)
    
    A.M. Best Company (A.M. Best, AMB) and Standard and Poors Rating
Services (S&P) Note 5. Stock-Based Compensation
    14




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Note 6. Syndicate 1221
  Credit Facility
 Note 7. Income Taxes
   15




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##### Table of Contents



Note 8. Senior Notes due May 1, 2016
     16




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##### Table of Contents



Note 9. Commitments and Contingencies
    17




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##### Table of Contents



Note 10. Investments
  Gross
    
    
    Gross
    
    
    
    
    
    
    OTTIUnrealized
    
    
    Unrealized
    
    
    Cost or
    
    
    RecognizedMarch 31, 2010
    
    Fair Value
    
    
    Gains
    
    
    (Losses)
    
    
    Amortized Cost
    
    
    in OCI($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    408,935
    
    
    $
    7,571
    
    
    $
    (355
    )
    
    $
    401,719
    
    
    $
    States, municipalities and political
subdivisions
    
    
    640,783
    
    
    
    22,064
    
    
    
    (1,996
    )
    
    
    620,715
    
    
    
    Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    348,619
    
    
    
    12,289
    
    
    
    (108
    )
    
    
    336,438
    
    
    
    Residential mortgage obligations
    
    
    30,486
    
    
    
    
    
    
    
    (6,050
    )
    
    
    36,536
    
    
    
    (4,685
    )Asset-backed securities
    
    
    11,283
    
    
    
    485
    
    
    
    (34
    )
    
    
    10,832
    
    
    
    (34
    )Commercial mortgage-backed securities
    
    
    105,728
    
    
    
    2,494
    
    
    
    (685
    )
    
    
    103,919
    
    
    
    Subtotal
    
    
    496,116
    
    
    
    15,268
    
    
    
    (6,877
    )
    
    
    487,725
    
    
    
    (4,719
    )Corporate bonds
    
    
    261,514
    
    
    
    10,132
    
    
    
    (682
    )
    
    
    252,064
    
    
    
    Total fixed maturities
    
    
    1,807,348
    
    
    
    55,035
    
    
    
    (9,910
    )
    
    
    1,762,223
    
    
    
    (4,719
    )Equity securities  common stocks
    
    
    72,609
    
    
    
    17,995
    
    
    
    (10
    )
    
    
    54,624
    
    
    
    Cash
    
    
    2,699
    
    
    
    
    
    
    
    
    
    
    
    2,699
    
    
    
    Short-term investments
    
    
    172,342
    
    
    
    
    
    
    
    
    
    
    
    172,342
    
    
    
    Total
    
    $
    2,054,998
    
    
    $
    73,030
    
    
    $
    (9,920
    )
    
    $
    1,991,888
    
    
    $
    (4,719
    )
  18




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##### Table of Contents



Gross
    
    
    Gross
    
    
    
    
    
    
    OTTIUnrealized
    
    
    Unrealized
    
    
    Cost or
    
    
    RecognizedDecember 31, 2009
    
    Fair Value
    
    
    Gains
    
    
    (Losses)
    
    
    Amortized Cost
    
    
    in OCI($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    471,598
    
    
    $
    7,397
    
    
    $
    (597
    )
    
    $
    464,798
    
    
    $
    States, municipalities and political
subdivisions
    
    
    676,699
    
    
    
    25,044
    
    
    
    (2,917
    )
    
    
    654,572
    
    
    
    Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    283,578
    
    
    
    12,607
    
    
    
    (98
    )
    
    
    271,069
    
    
    
    Residential mortgage obligations
    
    
    31,071
    
    
    
    
    
    
    
    (7,246
    )
    
    
    38,317
    
    
    
    (5,723
    )Asset-backed securities
    
    
    16,469
    
    
    
    612
    
    
    
    (34
    )
    
    
    15,891
    
    
    
    (23
    )Commercial mortgage-backed securities
    
    
    100,393
    
    
    
    594
    
    
    
    (5,028
    )
    
    
    104,827
    
    
    
    Subtotal
    
    
    431,511
    
    
    
    13,813
    
    
    
    (12,406
    )
    
    
    430,104
    
    
    
    (5,746
    )Corporate bonds
    
    
    236,861
    
    
    
    9,111
    
    
    
    (759
    )
    
    
    228,509
    
    
    
    Total fixed maturities
    
    
    1,816,669
    
    
    
    55,365
    
    
    
    (16,679
    )
    
    
    1,777,983
    
    
    
    (5,746
    )Equity securities  common stocks
    
    
    62,610
    
    
    
    15,244
    
    
    
    (10
    )
    
    
    47,376
    
    
    
    Cash
    
    
    509
    
    
    
    
    
    
    
    
    
    
    
    509
    
    
    
    Short-term investments
    
    
    176,799
    
    
    
    
    
    
    
    
    
    
    
    176,799
    
    
    
    Total
    
    $
    2,056,587
    
    
    $
    70,609
    
    
    $
    (16,689
    )
    
    $
    2,002,667
    
    
    $
    (5,746
    )
   19




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Period fromMarch 31, 2010
    
    Fair
    
    
    Amortizedto Maturity
    
    Value
    
    
    Cost($ in thousands)Due in one year or less
    
    $
    202,918
    
    
    $
    200,767Due after one year through five years
    
    
    413,412
    
    
    
    396,940Due after five years through ten years
    
    
    388,296
    
    
    
    376,251Due after ten years
    
    
    306,606
    
    
    
    300,540Mortgage- and asset-backed (including GNMAs)
    
    
    496,116
    
    
    
    487,725Total
    
    $
    1,807,348
    
    
    $
    1,762,223
   20




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##### Table of Contents



March 31, 2010
    
    
    December 31, 2009# of
    
    
    Fair
    
    
    Gross
    
    
    # of
    
    
    Fair
    
    
    GrossSecurities
    
    
    Value
    
    
    Unrealized Loss
    
    
    Securities
    
    
    Value
    
    
    Unrealized Loss($ in thousands except # of securities)Fixed Maturities:U.S. Government Treasury bonds, agency
bonds and foreign government bonds0-6 Months
    
    
    15
    
    
    $
    31,720
    
    
    $
    355
    
    
    
    24
    
    
    $
    116,566
    
    
    $
    5977-12 Months
    
    
    1
    
    
    
    985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    16
    
    
    
    32,705
    
    
    
    355
    
    
    
    24
    
    
    
    116,566
    
    
    
    597States, municipalities and
political subdivisions0-6 Months
    
    
    33
    
    
    
    88,859
    
    
    
    1,408
    
    
    
    47
    
    
    
    108,290
    
    
    
    2,2917-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    3,534
    
    
    
    112> 12 Months
    
    
    22
    
    
    
    19,582
    
    
    
    588
    
    
    
    23
    
    
    
    17,777
    
    
    
    514Subtotal
    
    
    55
    
    
    
    108,441
    
    
    
    1,996
    
    
    
    74
    
    
    
    129,601
    
    
    
    2,917Agency mortgage-backed securities0-6 Months
    
    
    14
    
    
    
    92,247
    
    
    
    108
    
    
    
    5
    
    
    
    18,385
    
    
    
    987-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    14
    
    
    
    92,247
    
    
    
    108
    
    
    
    5
    
    
    
    18,385
    
    
    
    98Residential mortgage obligations0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    64
    
    
    
    30,486
    
    
    
    6,050
    
    
    
    73
    
    
    
    31,071
    
    
    
    7,246Subtotal
    
    
    64
    
    
    
    30,486
    
    
    
    6,050
    
    
    
    73
    
    
    
    31,071
    
    
    
    7,246Asset-backed securities0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    3
    
    
    
    188
    
    
    
    34
    
    
    
    4
    
    
    
    637
    
    
    
    34Subtotal
    
    
    3
    
    
    
    188
    
    
    
    34
    
    
    
    4
    
    
    
    637
    
    
    
    34Commercial mortgage-backed securities0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    28,103
    
    
    
    3247-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    10
    
    
    
    24,775
    
    
    
    685
    
    
    
    21
    
    
    
    45,135
    
    
    
    4,704Subtotal
    
    
    10
    
    
    
    24,775
    
    
    
    685
    
    
    
    32
    
    
    
    73,238
    
    
    
    5,028Corporate bonds0-6 Months
    
    
    16
    
    
    
    59,921
    
    
    
    516
    
    
    
    13
    
    
    
    33,275
    
    
    
    3377-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    3
    
    
    
    2,217
    
    
    
    166
    
    
    
    8
    
    
    
    6,325
    
    
    
    422Subtotal
    
    
    19
    
    
    
    62,138
    
    
    
    682
    
    
    
    21
    
    
    
    39,600
    
    
    
    759Total fixed maturities
    
    
    181
    
    
    $
    350,980
    
    
    $
    9,910
    
    
    
    233
    
    
    $
    409,098
    
    
    $
    16,679Equity securities  common stocks0-6 Months
    
    
    2
    
    
    $
    796
    
    
    $
    10
    
    
    
    
    
    
    $
    
    
    
    $
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    872
    
    
    
    10Total equity securities
    
    
    2
    
    
    $
    796
    
    
    $
    10
    
    
    
    1
    
    
    $
    872
    
    
    $
    10
  21




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22




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Three Months EndedMarch 31,2010
    
    
    2009($ in thousands)
    
    No.
    
    
    Amount
    
    
    No.
    
    
    AmountTotal other-than-temporary impairment lossesCorporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    2
    
    
    $
    564Residential mortgage-backed securities
    
    
    2
    
    
    
    224
    
    
    
    35
    
    
    
    17,849Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    119Equities
    
    
    1
    
    
    
    27
    
    
    
    54
    
    
    
    8,339Total
    
    
    3
    
    
    $
    251
    
    
    
    92
    
    
    $
    26,871Portion of loss in accumulated other
comprehensive income (loss)Corporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Residential mortgage-backed securities
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    16,102Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Equities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    170
    
    
    
    
    
    
    $
    16,171Impairment losses recognized in earningsCorporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    564Residential mortgage-backed securities
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    1,747Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Equities
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    8,339Total
    
    
    
    
    
    $
    81
    
    
    
    
    
    
    $
    10,700
  23




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($ in thousands)Beginning balance of at January 1, 2010
    
    $
    2,523Credit losses on securities not previously impaired as of December 31, 2009
    
    
    54Reductions for securities sold during the period
    
    
    Ending balance at March 31, 2010
    
    $
    2,577
  GrossUnrealized Loss
    
    
    Fair ValuePercent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total($ in thousands)Due in one year or less
    
    $
    16
    
    
    
    0
    %
    
    $
    5,878
    
    
    
    2
    %Due after one year through five years
    
    
    235
    
    
    
    2
    %
    
    
    42,264
    
    
    
    12
    %Due after five years through ten years
    
    
    1,231
    
    
    
    12
    %
    
    
    88,163
    
    
    
    25
    %Due after ten years
    
    
    1,551
    
    
    
    16
    %
    
    
    66,979
    
    
    
    19
    %Mortgage- and asset-backed securities
    
    
    6,877
    
    
    
    70
    %
    
    
    147,696
    
    
    
    42
    %Total fixed maturity securities
    
    $
    9,910
    
    
    
    100
    %
    
    $
    350,980
    
    
    
    100
    %
  24




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##### Table of Contents



Three months ended March 31,2010
    
    
    2009Fixed maturities
    
    $
    6,439
    
    
    $
    8,630Equity securities
    
    
    2,751
    
    
    
    1479,190
    
    
    
    8,777Deferred income tax (charged) credited
    
    
    (3,192
    )
    
    
    (2,794
    )Change in unrealized gains (losses), net
    
    $
    5,998
    
    
    $
    5,983
  Three Months Ended March 31,2010
    
    
    2009($ in thousands)Fixed maturities:Gains
    
    $
    6,370
    
    
    $
    2,932(Losses)
    
    
    (257
    )
    
    
    (3,302
    )6,113
    
    
    
    (370
    )Equity securities:Gains
    
    
    
    
    
    
    13(Losses)
    
    
    
    
    
    
    (1,180
    )
    
    
    
    (1,167
    )Net realized gains (losses)
    
    $
    6,113
    
    
    $
    (1,537
    )
  25




---



##### Table of Contents



Fair Value Measurements
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    285,455
    
    
    $
    123,480
    
    
    $
    
    
    
    $
    408,935States, municipalities and political
subdivisions
    
    
    
    
    
    
    640,783
    
    
    
    
    
    
    
    640,783Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    
    
    
    
    348,619
    
    
    
    
    
    
    
    348,619Residential mortgage obligations
    
    
    
    
    
    
    30,486
    
    
    
    
    
    
    
    30,486Asset-backed securities
    
    
    
    
    
    
    11,283
    
    
    
    
    
    
    
    11,283Commercial mortgage-backed securities
    
    
    
    
    
    
    105,728
    
    
    
    
    
    
    
    105,728Subtotal
    
    
    
    
    
    
    496,116
    
    
    
    
    
    
    
    496,116Corporate bonds
    
    
    
    
    
    
    261,514
    
    
    
    
    
    
    
    261,514Total fixed maturities
    
    
    285,455
    
    
    
    1,521,893
    
    
    
    
    
    
    
    1,807,348Equity securities  common stocks
    
    
    72,609
    
    
    
    
    
    
    
    
    
    
    
    72,609Total
    
    $
    358,064
    
    
    $
    1,521,893
    
    
    $
    
    
    
    $
    1,879,957
  
    
    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 asset-backed and mortgage-backed securities which are similar to other
asset-backed or mortgage-backed 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.
  26




---



##### Table of Contents



Three Months Ended($ in thousands)
    
    March 31, 2009Level 3 investments as of January 1
    
    $
    156Unrealized net gains included in other comprehensive income (loss)
    
    
    23Purchases, sales, paydowns and amortization
    
    
    (23
    )Transfer from Level 3
    
    
    Transfer to Level 3
    
    
    Level 3 investments as of March 31, 2009
    
    $
    156
 Note 11. Credit Facility
      27




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##### Table of Contents



Note 12. Share Repurchases
  Note 13. Subsequent Events
 th
   28




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Note on Forward-Looking Statements
  
    
    continued volatility in the financial markets and the current recession;
 
    
    risks arising from the concentration of our business in marine and energy, general
liability and professional liability insurance, including the risk that market
conditions for these lines could change adversely or that we could experience large
losses in these lines;
 
    
    cyclicality in the property/casualty insurance business generally, and the marine
insurance business specifically;
 
    
    risks that we face in entering new markets and diversifying the products and
services that we offer, including risks arising from the development of our new
specialty lines or our ability to manage effectively the rapid growth in our lines of
business;
 
    
    changing legal, social and economic trends and inherent uncertainties in the loss
estimation process, which could adversely impact the adequacy of loss reserves and the
allowance for reinsurance recoverables;
 
    
    risks inherent in the preparation of our financial statements, which requires us to
make many estimates and judgments;
 
    
    our ability to continue to obtain reinsurance covering our exposures at appropriate
prices and/or in sufficient amounts;
 
    
    the counterparty credit risk of our reinsurers, including the other participants in
the marine pool, and other risks associated with the collection of reinsurance
recoverable amounts from our reinsurers, who may not pay on losses in a timely fashion,
or at all;
 
    
    the effects of competition from other insurers;
 
    
    unexpected turnover of our professional staff and our ability to attract and retain
qualified employees;
 
    
    increases in interest rates during periods in which we must sell fixed-income
securities to satisfy liquidity needs may result in realized investment losses;
 
    
    our investment portfolio is exposed to market-wide risks and fluctuations, as well
as to risks inherent in particular types of securities;
 
    
    exposure to significant capital market risks related to changes in interest rates,
credit spreads, equity prices and foreign exchange rates which may adversely affect our
results of operations, financial condition or cash flows;
 
    
    capital may not be available in the future, or may not be available on favorable
terms;
 
    
    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;
  29




---



##### Table of Contents




    
    risks associated with continued or increased premium levies by Lloyds of London
(Lloyds) for the Lloyds Central Fund and cash calls for trust fund deposits, or a
significant downgrade of Lloyds rating by A.M. Best Company;
 
    
    changes in the laws, rules and regulations that apply to our insurance companies;
 
    
    the inability of our subsidiaries to pay dividends to us in sufficient amounts,
which would harm our ability to meet our obligations;
 
    
    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 in 2005 and Hurricanes Gustav and Ike in 2008 and
the possibility that our estimates of losses from such hurricanes will prove to be
materially inaccurate;
 
    
    volatility in the market price of our common stock; and
 
    
    other risks that we identify in current and future filings with the Securities and
Exchange Commission (SEC).
  Overview
 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.
    30




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Catastrophe Risk Management
      Critical Accounting Policies
   31




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##### Table of Contents



Recent Accounting Pronouncements
  Results of Operations
      REVENUES
   32




---



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33




---



##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009Gross
    
    
    
    
    
    
    Net
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    NetWritten
    
    
    
    
    
    
    Written
    
    
    Earned
    
    
    Written
    
    
    
    
    
    
    Written
    
    
    EarnedPremiums
    
    
    %
    
    
    Premiums
    
    
    Premiums
    
    
    Premiums
    
    
    %
    
    
    Premiums
    
    
    Premiums($ in thousands)Insurance Companies:Marine
    
    $
    67,526
    
    
    
    25
    %
    
    $
    51,003
    
    
    $
    41,094
    
    
    $
    77,237
    
    
    
    28
    %
    
    $
    58,459
    
    
    $
    37,161Property Casualty
    
    
    79,346
    
    
    
    30
    %
    
    
    49,697
    
    
    
    51,081
    
    
    
    84,258
    
    
    
    31
    %
    
    
    59,976
    
    
    
    65,412Professional Liability
    
    
    30,966
    
    
    
    11
    %
    
    
    20,640
    
    
    
    19,036
    
    
    
    30,488
    
    
    
    11
    %
    
    
    18,647
    
    
    
    17,717Insurance Companies
Total
    
    
    177,838
    
    
    
    66
    %
    
    
    121,340
    
    
    
    111,211
    
    
    
    191,983
    
    
    
    70
    %
    
    
    137,082
    
    
    
    120,290Lloyds Operations:Marine
    
    
    59,141
    
    
    
    22
    %
    
    
    49,642
    
    
    
    35,560
    
    
    
    59,023
    
    
    
    21
    %
    
    
    49,974
    
    
    
    31,175Property Casualty
    
    
    19,959
    
    
    
    7
    %
    
    
    11,711
    
    
    
    11,915
    
    
    
    13,528
    
    
    
    5
    %
    
    
    7,595
    
    
    
    7,923Professional Liability
    
    
    13,207
    
    
    
    5
    %
    
    
    6,624
    
    
    
    5,383
    
    
    
    10,725
    
    
    
    4
    %
    
    
    6,001
    
    
    
    5,558Lloyds Operations Total
    
    
    92,307
    
    
    
    34
    %
    
    
    67,977
    
    
    
    52,858
    
    
    
    83,276
    
    
    
    30
    %
    
    
    63,570
    
    
    
    44,656Total
    
    $
    270,145
    
    
    
    100
    %
    
    $
    189,317
    
    
    $
    164,069
    
    
    $
    275,259
    
    
    
    100
    %
    
    $
    200,652
    
    
    $
    164,946
  34




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##### Table of Contents



Gross Written Premiums
 Insurance Companies Gross Written Premiums
 Marine Premiums.
 2010
    
    
    2009Marine liability
    
    $
    24,780
    
    
    
    37
    %
    
    $
    27,083
    
    
    
    35
    %Inland marine
    
    
    8,892
    
    
    
    13
    %
    
    
    8,436
    
    
    
    11
    %P&I
    
    
    7,122
    
    
    
    11
    %
    
    
    12,350
    
    
    
    16
    %Other
    
    
    6,340
    
    
    
    9
    %
    
    
    4,770
    
    
    
    6
    %Cargo
    
    
    6,221
    
    
    
    9
    %
    
    
    8,777
    
    
    
    11
    %Craft/Fishing vessel
    
    
    5,870
    
    
    
    9
    %
    
    
    4,441
    
    
    
    6
    %Bluewater hull
    
    
    4,624
    
    
    
    7
    %
    
    
    6,154
    
    
    
    8
    %Transport
    
    
    3,677
    
    
    
    5
    %
    
    
    5,226
    
    
    
    7
    %Total
    
    $
    67,526
    
    
    
    100
    %
    
    $
    77,237
    
    
    
    100
    %
  Property Casualty Premiums.
 2010
    
    
    2009Construction liability
    
    $
    22,026
    
    
    
    28
    %
    
    $
    27,452
    
    
    
    33
    %Commercial umbrella
    
    
    16,313
    
    
    
    21
    %
    
    
    15,090
    
    
    
    18
    %Offshore energy
    
    
    9,215
    
    
    
    12
    %
    
    
    9,326
    
    
    
    11
    %Primary E&S
    
    
    2,054
    
    
    
    3
    %
    
    
    1,479
    
    
    
    2
    %Other
    
    
    29,738
    
    
    
    36
    %
    
    
    30,911
    
    
    
    36
    %Total
    
    $
    79,346
    
    
    
    100
    %
    
    $
    84,258
    
    
    
    100
    %
   35




---



##### Table of Contents



Professional Liability Premiums.
 2010
    
    
    2009D&O (public and private)
    
    $
    16,143
    
    
    
    52
    %
    
    $
    18,338
    
    
    
    60
    %Errors and omissions
    
    
    13,887
    
    
    
    45
    %
    
    
    11,199
    
    
    
    37
    %Architects and engineers
    
    
    936
    
    
    
    3
    %
    
    
    951
    
    
    
    3
    %Total
    
    $
    30,966
    
    
    
    100
    %
    
    $
    30,488
    
    
    
    100
    %
  Lloyds Operations Gross Written Premiums
   Marine Premiums.
 2010
    
    
    2009Marine liability
    
    $
    25,528
    
    
    
    43
    %
    
    $
    20,845
    
    
    
    35
    %Cargo and specie
    
    
    21,082
    
    
    
    36
    %
    
    
    21,687
    
    
    
    38
    %Assumed reinsurance
    
    
    6,496
    
    
    
    11
    %
    
    
    10,324
    
    
    
    17
    %Hull
    
    
    3,627
    
    
    
    6
    %
    
    
    3,749
    
    
    
    6
    %Other
    
    
    2,408
    
    
    
    4
    %
    
    
    2,418
    
    
    
    4
    %Total
    
    $
    59,141
    
    
    
    100
    %
    
    $
    59,023
    
    
    
    100
    %
   36




---



##### Table of Contents



Property Casualty Premiums.
 2010
    
    
    2009Offshore Energy
    
    $
    10,406
    
    
    
    51
    %
    
    $
    6,299
    
    
    
    47
    %Engineering and Construction
    
    
    4,959
    
    
    
    25
    %
    
    
    3,562
    
    
    
    26
    %Onshore Energy
    
    
    2,312
    
    
    
    12
    %
    
    
    2,435
    
    
    
    18
    %US Property Casualty
    
    
    329
    
    
    
    2
    %
    
    
    1,280
    
    
    
    9
    %Bloodstock
    
    
    1,958
    
    
    
    10
    %
    
    
    
    
    
    
    0
    %Property
    
    
    (5
    )
    
    
    0
    %
    
    
    (48
    )
    
    
    0
    %Total
    
    $
    19,959
    
    
    
    100
    %
    
    $
    13,528
    
    
    
    100
    %
  Professional Liability Premiums.
 2010
    
    
    2009D&O (public and private)
    
    $
    6,582
    
    
    
    50
    %
    
    $
    4,100
    
    
    
    38
    %E&O
    
    
    6,625
    
    
    
    50
    %
    
    
    6,625
    
    
    
    62
    %Total
    
    $
    13,207
    
    
    
    100
    %
    
    $
    10,725
    
    
    
    100
    %
  Ceded Written Premiums
   37




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##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009% of
    
    
    
    
    
    
    % ofCeded
    
    
    Gross
    
    
    Ceded
    
    
    GrossWritten
    
    
    Written
    
    
    Written
    
    
    WrittenPremium
    
    
    Premium
    
    
    Premium
    
    
    Premium($ in thousands)Insurance Companies:Marine
    
    $
    16,523
    
    
    
    24
    %
    
    $
    18,778
    
    
    
    24
    %Property Casualty
    
    
    29,649
    
    
    
    37
    %
    
    
    24,282
    
    
    
    29
    %Professional Liability
    
    
    10,326
    
    
    
    33
    %
    
    
    11,841
    
    
    
    39
    %Subtotal
    
    
    56,498
    
    
    
    32
    %
    
    
    54,901
    
    
    
    29
    %Lloyds Operations:Marine
    
    
    9,499
    
    
    
    16
    %
    
    
    9,049
    
    
    
    15
    %Property Casualty
    
    
    8,248
    
    
    
    41
    %
    
    
    5,933
    
    
    
    44
    %Professional Liability
    
    
    6,583
    
    
    
    50
    %
    
    
    4,724
    
    
    
    44
    %Subtotal
    
    
    24,330
    
    
    
    26
    %
    
    
    19,706
    
    
    
    24
    %Total
    
    $
    80,828
    
    
    
    30
    %
    
    $
    74,607
    
    
    
    27
    %
  Net Written Premiums
  Net Earned Premiums
   38




---



##### Table of Contents



Net Investment Income
  Three Months Ended March 31,2010
    
    
    2009($ in thousands)Fixed maturities
    
    $
    17,740
    
    
    $
    18,368Equity securities
    
    
    556
    
    
    
    745Short-term investments
    
    
    235
    
    
    
    36818,531
    
    
    
    19,481Investment expenses
    
    
    (559
    )
    
    
    (738
    )Net investment income
    
    $
    17,972
    
    
    $
    18,743
  Net Other-Than-Temporary Impairment Losses Recognized In Earnings
  Three months ended March 31,2010
    
    
    2009($ in thousands)Fixed maturities
    
    $
    (54
    )
    
    $
    (2,360
    )Equity securities
    
    
    (27
    )
    
    
    (8,340
    )Net other-than-temporary impairment losses
recognized in earnings
    
    $
    (81
    )
    
    $
    (10,700
    )
   39




---



##### Table of Contents



Net Realized Gains and Losses
  Three Months Ended March 31,2010
    
    
    2009($ in thousands)Fixed maturities:Gains
    
    $
    6,370
    
    
    $
    2,932(Losses)
    
    
    (257
    )
    
    
    (3,302
    )6,113
    
    
    
    (370
    )Equity securities:Gains
    
    
    
    
    
    
    13(Losses)
    
    
    
    
    
    
    (1,180
    )
    
    
    
    (1,167
    )Net realized gains (losses)
    
    $
    6,113
    
    
    $
    (1,537
    )
  Other Income/(Expense)
  EXPENSES
 Net Losses and Loss Adjustment Expenses
    40




---



##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009
    
    
    Change($ in thousands)Reinsurance recoverables:Paid losses
    
    $
    75,355
    
    
    $
    76,505
    
    
    $
    (1,150
    )Unpaid losses and LAE reserves
    
    
    795,914
    
    
    
    807,352
    
    
    
    (11,438
    )Total
    
    $
    871,269
    
    
    $
    883,857
    
    
    $
    (12,588
    )
  March 31,
    
    
    December 31,2010
    
    
    2009
    
    
    Change($ in thousands)Gross reserves for losses and LAE
    
    $
    1,913,760
    
    
    $
    1,920,286
    
    
    $
    (6,526
    )Less: Reinsurance recoverable on unpaid losses and LAE reserves
    
    
    795,914
    
    
    
    807,352
    
    
    
    (11,438
    )Net loss and LAE reserves
    
    $
    1,117,846
    
    
    $
    1,112,934
    
    
    $
    4,912
  41




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##### Table of Contents



March 31, 2010Net
    
    
    Net
    
    
    Total
    
    
    % of IBNRReported
    
    
    IBNR
    
    
    Net Loss
    
    
    to Total NetReserves
    
    
    Reserves
    
    
    Reserves
    
    
    Loss Reserves($ in thousands)Insurance Companies:Marine
    
    $
    113,864
    
    
    $
    98,044
    
    
    $
    211,908
    
    
    
    46.3
    %Property Casualty
    
    
    139,708
    
    
    
    348,242
    
    
    
    487,950
    
    
    
    71.4
    %Professional liability
    
    
    37,765
    
    
    
    65,382
    
    
    
    103,147
    
    
    
    63.4
    %Total Insurance Companies
    
    
    291,337
    
    
    
    511,668
    
    
    
    803,005
    
    
    
    63.7
    %Lloyds Operations:Marine
    
    
    110,889
    
    
    
    101,925
    
    
    
    212,814
    
    
    
    47.9
    %Property Casualty
    
    
    26,671
    
    
    
    28,409
    
    
    
    55,080
    
    
    
    51.6
    %Professional liability
    
    
    9,246
    
    
    
    37,701
    
    
    
    46,947
    
    
    
    80.3
    %Total Lloyds Operations
    
    
    146,806
    
    
    
    168,035
    
    
    
    314,841
    
    
    
    53.4
    %Total
    
    $
    438,143
    
    
    $
    679,703
    
    
    $
    1,117,846
    
    
    
    60.8
    %
 December 31, 2009Net
    
    
    Net
    
    
    Total
    
    
    % of IBNRReported
    
    
    IBNR
    
    
    Net Loss
    
    
    to Total NetReserves
    
    
    Reserves
    
    
    Reserves
    
    
    Loss Reserves($ in thousands)Insurance Companies:Marine
    
    $
    113,604
    
    
    $
    100,042
    
    
    $
    213,646
    
    
    
    46.8
    %Property Casualty
    
    
    134,427
    
    
    
    351,985
    
    
    
    486,412
    
    
    
    72.4
    %Professional liability
    
    
    38,410
    
    
    
    68,807
    
    
    
    107,217
    
    
    
    64.2
    %Total Insurance Companies
    
    
    286,441
    
    
    
    520,834
    
    
    
    807,275
    
    
    
    64.5
    %Lloyds Operations:Marine
    
    
    107,800
    
    
    
    101,851
    
    
    
    209,651
    
    
    
    48.6
    %Property Casualty
    
    
    27,148
    
    
    
    25,175
    
    
    
    52,323
    
    
    
    48.1
    %Professional liability
    
    
    7,442
    
    
    
    36,243
    
    
    
    43,685
    
    
    
    83.0
    %Total Lloyds Operations
    
    
    142,390
    
    
    
    163,269
    
    
    
    305,659
    
    
    
    53.4
    %Total
    
    $
    428,831
    
    
    $
    684,103
    
    
    $
    1,112,934
    
    
    
    61.5
    %
  42




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##### Table of Contents



Hurricanes Gustav and Ike
   43




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##### Table of Contents



Three Months Ended
    
    
    Year EndedMarch 31, 2010
    
    
    December 31, 2009($ in thousands)Gross of ReinsuranceBeginning gross reserves
    
    $
    59,509
    
    
    $
    107,399Incurred loss & LAE
    
    
    (16
    )
    
    
    1,039Calendar year payments
    
    
    3,601
    
    
    
    48,929Ending gross reserves
    
    $
    55,892
    
    
    $
    59,509Gross case loss reserves
    
    $
    29,335
    
    
    $
    34,015Gross IBNR loss reserves
    
    
    26,557
    
    
    
    25,494Ending gross reserves
    
    $
    55,892
    
    
    $
    59,509Net of ReinsuranceBeginning net reserves
    
    $
    2,683
    
    
    $
    12,923Incurred loss & LAE
    
    
    43
    
    
    
    978Calendar year payments
    
    
    350
    
    
    
    11,218Ending net reserves
    
    $
    2,376
    
    
    $
    2,683Net case loss reserves
    
    $
    2,811
    
    
    $
    1,793Net IBNR loss reserves
    
    
    (435
    )
    
    
    890Ending net reserves
    
    $
    2,376
    
    
    $
    2,683
  Hurricanes Katrina and Rita
   44




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##### Table of Contents



Three Months Ended
    
    
    Year EndedMarch 31, 2010
    
    
    December 31, 2009($ in thousands)Gross of ReinsuranceBeginning gross reserves
    
    $
    67,038
    
    
    $
    97,732Incurred loss & LAE
    
    
    229
    
    
    
    671Calendar year payments
    
    
    12,977
    
    
    
    31,365Ending gross reserves
    
    $
    54,290
    
    
    $
    67,038Gross case loss reserves
    
    $
    35,033
    
    
    $
    49,291Gross IBNR loss reserves
    
    
    19,257
    
    
    
    17,747Ending gross reserves
    
    $
    54,290
    
    
    $
    67,038Net of ReinsuranceBeginning net reserves
    
    $
    3,536
    
    
    $
    3,667Incurred loss & LAE
    
    
    258
    
    
    
    114Calendar year payments
    
    
    73
    
    
    
    245Ending net reserves
    
    $
    3,721
    
    
    $
    3,536Net case loss reserves
    
    $
    53
    
    
    $
    183Net IBNR loss reserves
    
    
    3,668
    
    
    
    3,353Ending net reserves
    
    $
    3,721
    
    
    $
    3,536
  Asbestos Liability
     45




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##### Table of Contents



Three Months Ended
    
    
    Year EndedMarch 31, 2010
    
    
    December 31, 2009($ in thousands)Gross of ReinsuranceBeginning gross reserves
    
    $
    22,147
    
    
    $
    21,774Incurred losses & LAE
    
    
    (54
    )
    
    
    928Calendar year payments
    
    
    186
    
    
    
    555Ending gross reserves
    
    $
    21,907
    
    
    $
    22,147Gross case loss reserves
    
    $
    14,051
    
    
    $
    14,291Gross IBNR loss reserves
    
    
    7,856
    
    
    
    7,856Ending gross reserves
    
    $
    21,907
    
    
    $
    22,147Net of ReinsuranceBeginning net reserves
    
    $
    16,763
    
    
    $
    16,683Incurred losses & LAE
    
    
    (11
    )
    
    
    (25
    )Calendar year payments
    
    
    90
    
    
    
    (105
    )Ending net reserves
    
    $
    16,662
    
    
    $
    16,763Net case loss reserves
    
    $
    9,011
    
    
    $
    9,112Net IBNR loss reserves
    
    
    7,651
    
    
    
    7,651Ending net reserves
    
    $
    16,662
    
    
    $
    16,763
  Prior Year Reserve Redundancies/Deficiencies
    46




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##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009($ in thousands)Insurance Companies:Marine
    
    $
    696
    
    
    $
    1,958Property Casualty
    
    
    (1,541
    )
    
    
    (11,713
    )Professional Liability
    
    
    192
    
    
    
    4,623Subtotal Insurance Companies
    
    
    (653
    )
    
    
    (5,132
    )Lloyds Operations
    
    
    (593
    )
    
    
    (635
    )Total
    
    $
    (1,246
    )
    
    $
    (5,767
    )
          47




---



##### Table of Contents



Commission Expenses
  Other Operating Expenses
  INCOME TAXES
    48




---



##### Table of Contents



Segment Information
    Insurance Companies
   49




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    %2010
    
    
    2009
    
    
    Change($ in thousands)Gross written premiums
    
    $
    177,838
    
    
    $
    191,983
    
    
    
    -7
    %Net written premiums
    
    
    121,340
    
    
    
    137,082
    
    
    
    -11
    %Net earned premiums
    
    
    111,211
    
    
    
    120,290
    
    
    
    -8
    %Net losses and LAE
    
    
    (68,403
    )
    
    
    (70,153
    )
    
    
    -2
    %Commission expenses
    
    
    (14,362
    )
    
    
    (14,968
    )
    
    
    -4
    %Other operating expenses
    
    
    (27,353
    )
    
    
    (24,560
    )
    
    
    11
    %Other income (expense)
    
    
    (977
    )
    
    
    201
    
    
    NMUnderwriting profit
    
    
    116
    
    
    
    10,810
    
    
    
    -99
    %Net investment income
    
    
    15,748
    
    
    
    16,207
    
    
    
    -3
    %Net realized gains (losses)
    
    
    5,205
    
    
    
    (8,907
    )
    
    NMIncome before income taxes
    
    
    21,069
    
    
    
    18,110
    
    
    
    16
    %Income tax expense
    
    
    5,463
    
    
    
    4,533
    
    
    
    21
    %Net income
    
    $
    15,606
    
    
    $
    13,577
    
    
    
    15
    %Loss and LAE ratio
    
    
    61.5
    %
    
    
    58.3
    %Commission expense ratio
    
    
    12.9
    %
    
    
    12.4
    %Other operating expense ratio (1)
    
    
    25.5
    %
    
    
    20.3
    %Combined ratio
    
    
    99.9
    %
    
    
    91.0
    %
 (1)
    
    Includes Other operating expensesand Other income (expense).  50




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##### Table of Contents



Three Months Ended March 31, 2010($ in thousands)Net
    
    
    LossesEarned
    
    
    and LAE
    
    
    Underwriting
    
    
    Underwriting
    
    
    Loss
    
    
    Expense
    
    
    CombinedPremium
    
    
    Incurred
    
    
    Expenses
    
    
    Profit/(Loss)
    
    
    Ratio
    
    
    Ratio
    
    
    RatioMarine
    
    $
    41,094
    
    
    $
    26,133
    
    
    $
    14,928
    
    
    $
    33
    
    
    
    63.6
    %
    
    
    36.3
    %
    
    
    99.9
    %Property Casualty
    
    
    51,081
    
    
    
    32,126
    
    
    
    20,316
    
    
    
    (1,361
    )
    
    
    62.9
    %
    
    
    39.8
    %
    
    
    102.7
    %Professional
Liability
    
    
    19,036
    
    
    
    10,144
    
    
    
    7,448
    
    
    
    1,444
    
    
    
    53.3
    %
    
    
    39.1
    %
    
    
    92.4
    %Total
    
    $
    111,211
    
    
    $
    68,403
    
    
    $
    42,692
    
    
    $
    116
    
    
    
    61.5
    %
    
    
    38.4
    %
    
    
    99.9
    %
 Three Months Ended March 31, 2009($ in thousands)Net
    
    
    LossesEarned
    
    
    and LAE
    
    
    Underwriting
    
    
    Underwriting
    
    
    Loss
    
    
    Expense
    
    
    CombinedPremium
    
    
    Incurred
    
    
    Expenses
    
    
    Profit/(Loss)
    
    
    Ratio
    
    
    Ratio
    
    
    RatioMarine
    
    $
    37,161
    
    
    $
    26,390
    
    
    $
    11,622
    
    
    $
    (851
    )
    
    
    71.0
    %
    
    
    31.3
    %
    
    
    102.3
    %Property Casualty
    
    
    65,412
    
    
    
    28,004
    
    
    
    20,753
    
    
    
    16,655
    
    
    
    42.8
    %
    
    
    31.7
    %
    
    
    74.5
    %Professional
Liability
    
    
    17,717
    
    
    
    15,759
    
    
    
    6,952
    
    
    
    (4,994
    )
    
    
    89.0
    %
    
    
    39.2
    %
    
    
    128.2
    %Total
    
    $
    120,290
    
    
    $
    70,153
    
    
    $
    39,327
    
    
    $
    10,810
    
    
    
    58.3
    %
    
    
    32.7
    %
    
    
    91.0
    %
     51




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##### Table of Contents



Lloyds Operations
   Three Months EndedMarch 31,
    
    
    %2010
    
    
    2009
    
    
    Change($ in thousands)Gross written premiums
    
    $
    92,307
    
    
    $
    83,276
    
    
    
    11
    %Net written premiums
    
    
    67,977
    
    
    
    63,570
    
    
    
    7
    %Net earned premiums
    
    
    52,858
    
    
    
    44,656
    
    
    
    18
    %Net losses and LAE
    
    
    (35,404
    )
    
    
    (30,094
    )
    
    
    18
    %Commission expenses
    
    
    (10,966
    )
    
    
    (7,480
    )
    
    
    47
    %Other operating expenses
    
    
    (7,243
    )
    
    
    (5,981
    )
    
    
    21
    %Other income (expense)
    
    
    2,069
    
    
    
    (52
    )
    
    NMUnderwriting profit
    
    
    1,314
    
    
    
    1,049
    
    
    
    25
    %Net investment income
    
    
    2,069
    
    
    
    2,383
    
    
    
    -13
    %Net realized gains (losses)
    
    
    713
    
    
    
    (3,330
    )
    
    NMIncome before income taxes
    
    
    4,096
    
    
    
    102
    
    
    NMIncome tax expense
    
    
    1,503
    
    
    
    336
    
    
    
    347
    %Net income (loss)
    
    $
    2,593
    
    
    $
    (234
    )
    
    NMLoss and LAE ratio
    
    
    67.0
    %
    
    
    67.4
    %Commission expense ratio
    
    
    20.7
    %
    
    
    16.8
    %Other operating expense ratio (1)
    
    
    9.8
    %
    
    
    13.5
    %Combined ratio
    
    
    97.5
    %
    
    
    97.7
    %
 (1)
    
    Includes Other operating expensesand Other income (expense).  52




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##### Table of Contents



Investments
  Gross
    
    
    Gross
    
    
    
    
    
    
    OTTIUnrealized
    
    
    Unrealized
    
    
    Cost or
    
    
    RecognizedMarch 31, 2010
    
    Fair Value
    
    
    Gains
    
    
    (Losses)
    
    
    Amortized Cost
    
    
    in OCI($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    408,935
    
    
    $
    7,571
    
    
    $
    (355
    )
    
    $
    401,719
    
    
    $
    States, municipalities and political
subdivisions
    
    
    640,783
    
    
    
    22,064
    
    
    
    (1,996
    )
    
    
    620,715
    
    
    
    Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    348,619
    
    
    
    12,289
    
    
    
    (108
    )
    
    
    336,438
    
    
    
    Residential mortgage obligations
    
    
    30,486
    
    
    
    
    
    
    
    (6,050
    )
    
    
    36,536
    
    
    
    (4,685
    )Asset-backed securities
    
    
    11,283
    
    
    
    485
    
    
    
    (34
    )
    
    
    10,832
    
    
    
    (34
    )Commercial mortgage-backed securities
    
    
    105,728
    
    
    
    2,494
    
    
    
    (685
    )
    
    
    103,919
    
    
    
    Subtotal
    
    
    496,116
    
    
    
    15,268
    
    
    
    (6,877
    )
    
    
    487,725
    
    
    
    (4,719
    )Corporate bonds
    
    
    261,514
    
    
    
    10,132
    
    
    
    (682
    )
    
    
    252,064
    
    
    
    Total fixed maturities
    
    
    1,807,348
    
    
    
    55,035
    
    
    
    (9,910
    )
    
    
    1,762,223
    
    
    
    (4,719
    )Equity securities  common stocks
    
    
    72,609
    
    
    
    17,995
    
    
    
    (10
    )
    
    
    54,624
    
    
    
    Cash
    
    
    2,699
    
    
    
    
    
    
    
    
    
    
    
    2,699
    
    
    
    Short-term investments
    
    
    172,342
    
    
    
    
    
    
    
    
    
    
    
    172,342
    
    
    
    Total
    
    $
    2,054,998
    
    
    $
    73,030
    
    
    $
    (9,920
    )
    
    $
    1,991,888
    
    
    $
    (4,719
    )
  53




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##### Table of Contents



Gross
    
    
    Gross
    
    
    
    
    
    
    OTTIUnrealized
    
    
    Unrealized
    
    
    Cost or
    
    
    RecognizedDecember 31, 2009
    
    Fair Value
    
    
    Gains
    
    
    (Losses)
    
    
    Amortized Cost
    
    
    in OCI($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    471,598
    
    
    $
    7,397
    
    
    $
    (597
    )
    
    $
    464,798
    
    
    $
    States, municipalities and political
subdivisions
    
    
    676,699
    
    
    
    25,044
    
    
    
    (2,917
    )
    
    
    654,572
    
    
    
    Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    283,578
    
    
    
    12,607
    
    
    
    (98
    )
    
    
    271,069
    
    
    
    Residential mortgage obligations
    
    
    31,071
    
    
    
    
    
    
    
    (7,246
    )
    
    
    38,317
    
    
    
    (5,723
    )Asset-backed securities
    
    
    16,469
    
    
    
    612
    
    
    
    (34
    )
    
    
    15,891
    
    
    
    (23
    )Commercial mortgage-backed securities
    
    
    100,393
    
    
    
    594
    
    
    
    (5,028
    )
    
    
    104,827
    
    
    
    Subtotal
    
    
    431,511
    
    
    
    13,813
    
    
    
    (12,406
    )
    
    
    430,104
    
    
    
    (5,746
    )Corporate bonds
    
    
    236,861
    
    
    
    9,111
    
    
    
    (759
    )
    
    
    228,509
    
    
    
    Total fixed maturities
    
    
    1,816,669
    
    
    
    55,365
    
    
    
    (16,679
    )
    
    
    1,777,983
    
    
    
    (5,746
    )Equity securities  common stocks
    
    
    62,610
    
    
    
    15,244
    
    
    
    (10
    )
    
    
    47,376
    
    
    
    Cash
    
    
    509
    
    
    
    
    
    
    
    
    
    
    
    509
    
    
    
    Short-term investments
    
    
    176,799
    
    
    
    
    
    
    
    
    
    
    
    176,799
    
    
    
    Total
    
    $
    2,056,587
    
    
    $
    70,609
    
    
    $
    (16,689
    )
    
    $
    2,002,667
    
    
    $
    (5,746
    )
   Fair Value Measurements
   54




---



##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total($ in thousands)U.S. Government Treasury bonds, agency
bonds and foreign government bonds
    
    $
    285,455
    
    
    $
    123,480
    
    
    $
    
    
    
    $
    408,935States, municipalities and political
subdivisions
    
    
    
    
    
    
    640,783
    
    
    
    
    
    
    
    640,783Mortgage- and asset-backed securities:Agency mortgage-backed securities
    
    
    
    
    
    
    348,619
    
    
    
    
    
    
    
    348,619Residential mortgage obligations
    
    
    
    
    
    
    30,486
    
    
    
    
    
    
    
    30,486Asset-backed securities
    
    
    
    
    
    
    11,283
    
    
    
    
    
    
    
    11,283Commercial mortgage-backed
securities
    
    
    
    
    
    
    105,728
    
    
    
    
    
    
    
    105,728Subtotal
    
    
    
    
    
    
    496,116
    
    
    
    
    
    
    
    496,116Corporate bonds
    
    
    
    
    
    
    261,514
    
    
    
    
    
    
    
    261,514Total fixed maturities
    
    
    285,455
    
    
    
    1,521,893
    
    
    
    
    
    
    
    1,807,348Equity securities  common stocks
    
    
    72,609
    
    
    
    
    
    
    
    
    
    
    
    72,609Total
    
    $
    358,064
    
    
    $
    1,521,893
    
    
    $
    
    
    
    $
    1,879,957
   Period fromMarch 31, 2010
    
    Fair
    
    
    Amortizedto Maturity
    
    Value
    
    
    Cost($ in thousands)Due in one year or less
    
    $
    202,918
    
    
    $
    200,767Due after one year through five years
    
    
    413,412
    
    
    
    396,940Due after five years through ten years
    
    
    388,296
    
    
    
    376,251Due after ten years
    
    
    306,606
    
    
    
    300,540Mortgage- and asset-backed (including GNMAs)
    
    
    496,116
    
    
    
    487,725Total
    
    $
    1,807,348
    
    
    $
    1,762,223
  55




---



##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedMarch 31, 2010
    
    Value
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)U.S. Treasury bonds
    
    $
    304,969
    
    
    $
    5,535
    
    
    $
    (274
    )
    
    $
    299,708Agency bonds
    
    
    80,598
    
    
    
    1,712
    
    
    
    
    
    
    
    78,886Foreign government bonds
    
    
    23,368
    
    
    
    324
    
    
    
    (81
    )
    
    
    23,125Total
    
    $
    408,935
    
    
    $
    7,571
    
    
    $
    (355
    )
    
    $
    401,719
 Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedDecember 31, 2009
    
    Value
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)U.S. Treasury bonds
    
    $
    362,614
    
    
    $
    5,549
    
    
    $
    (560
    )
    
    $
    357,625Agency bonds
    
    
    82,739
    
    
    
    1,489
    
    
    
    
    
    
    
    81,250Foreign government bonds
    
    
    26,245
    
    
    
    359
    
    
    
    (37
    )
    
    
    25,923Total
    
    $
    471,598
    
    
    $
    7,397
    
    
    $
    (597
    )
    
    $
    464,798
  56




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##### Table of Contents



Net
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Amortized
    
    
    S&PValue
    
    
    Gains/(Losses)
    
    
    Cost
    
    
    Rating($ in thousands)Issuers:State of Washington
    
    $
    17,332
    
    
    $
    710
    
    
    $
    16,622
    
    
    AATexas State Transportation Commission
    
    
    15,434
    
    
    
    (231
    )
    
    
    15,665
    
    
    AA+University of Pittsburgh
    
    
    14,096
    
    
    
    630
    
    
    
    13,466
    
    
    AACity of San Antonio
    
    
    11,674
    
    
    
    680
    
    
    
    10,994
    
    
    AAVirginia Resources Authority
    
    
    11,266
    
    
    
    721
    
    
    
    10,545
    
    
    AAACounty of Fairfax
    
    
    10,940
    
    
    
    (107
    )
    
    
    11,047
    
    
    AAACity of Chicago
    
    
    10,396
    
    
    
    362
    
    
    
    10,034
    
    
    AA-State of Wisconsin
    
    
    10,001
    
    
    
    533
    
    
    
    9,468
    
    
    A+Salt River Project Agricultural Improvement
    
    
    9,831
    
    
    
    74
    
    
    
    9,757
    
    
    AACommonwealth of Massachusetts
    
    
    8,951
    
    
    
    545
    
    
    
    8,406
    
    
    AANew York City Transitional Finance Authority
    
    
    8,413
    
    
    
    (23
    )
    
    
    8,436
    
    
    AACypress-Fairbanks Independent School Dist
    
    
    8,071
    
    
    
    219
    
    
    
    7,852
    
    
    AA-City of New York
    
    
    8,025
    
    
    
    280
    
    
    
    7,745
    
    
    AA-Illinois Finance Authority
    
    
    8,007
    
    
    
    (146
    )
    
    
    8,153
    
    
    BBB+County of Hamilton
    
    
    7,837
    
    
    
    34
    
    
    
    7,803
    
    
    ASubtotal
    
    
    160,274
    
    
    
    4,281
    
    
    
    155,993All Other
    
    
    480,509
    
    
    
    15,787
    
    
    
    464,722Total
    
    $
    640,783
    
    
    $
    20,068
    
    
    $
    620,715
  57




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##### Table of Contents



Equivalent
    
    Equivalent
    
    
    
    
    
    
    
    
    
    NetS&P
    
    Moodys
    
    
    
    
    
    
    
    
    
    UnrealizedRating
    
    Rating
    
    Fair Value
    
    
    Book Value
    
    
    Gain/(Loss)($ in thousands)AAA/AA/A
    
    Aaa/Aa/A
    
    $
    602,406
    
    
    $
    582,675
    
    
    $
    19,731BBB
    
    Baa
    
    
    29,163
    
    
    
    28,753
    
    
    
    410BB
    
    Ba
    
    
    2,000
    
    
    
    2,011
    
    
    
    (11
    )B
    
    B
    
    
    
    
    
    
    
    
    
    
    CCC or lower
    
    Caa or lower
    
    
    
    
    
    
    
    
    
    
    NR
    
    NR
    
    
    7,214
    
    
    
    7,276
    
    
    
    (62
    )Total
    
    
    
    $
    640,783
    
    
    $
    620,715
    
    
    $
    20,068
     58




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##### Table of Contents



Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Agency
mortgage-backed
securities:GNMA
    
    $
    116,201
    
    
    $
    1,282
    
    
    $
    (72
    )
    
    $
    114,991FNMA
    
    
    162,550
    
    
    
    8,288
    
    
    
    (17
    )
    
    
    154,279FHLMC
    
    
    69,868
    
    
    
    2,719
    
    
    
    (19
    )
    
    
    67,168Total
    
    $
    348,619
    
    
    $
    12,289
    
    
    $
    (108
    )
    
    $
    336,438
 Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Residential mortgage obligations:Prime
    
    $
    29,053
    
    
    $
    
    
    
    $
    (5,644
    )
    
    $
    34,697Alt-A
    
    
    1,433
    
    
    
    
    
    
    
    (406
    )
    
    
    1,839Subprime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    30,486
    
    
    $
    
    
    
    $
    (6,050
    )
    
    $
    36,536
 Gross
    
    
    Gross
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains
    
    
    (Losses)
    
    
    Cost($ in thousands)Asset-backed securities:Prime
    
    $
    11,155
    
    
    $
    485
    
    
    $
    
    
    
    $
    10,670Alt-A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subprime
    
    
    128
    
    
    
    
    
    
    
    (34
    )
    
    
    162Total
    
    $
    11,283
    
    
    $
    485
    
    
    $
    (34
    )
    
    $
    10,832
  59




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##### Table of Contents



NetIssue
    
    
    Fair
    
    
    Book
    
    
    Unrealized
    
    
    S&P
    
    
    MoodysSecurity Description
    
    Date
    
    
    Value
    
    
    Value
    
    
    (Loss)
    
    
    Rating
    
    
    Rating($ in thousands)Gmac Mtg Corp Ln Tr 05 Ar6 2A1
    
    
    2005
    
    
    $
    2,799
    
    
    $
    3,314
    
    
    $
    (515
    )
    
    CCC
    

    B3Merrill Lynch Mtg Inv Inc 05 A9 2A1E
    
    
    2005
    
    
    
    2,731
    
    
    
    3,350
    
    
    
    (619
    )
    
    CCC
    
    NRWells Fargo Mtg Bkd Secs Tr 06 Ar5
2A1
    
    
    2006
    
    
    
    2,366
    
    
    
    2,617
    
    
    
    (251
    )
    
    NR
    
    Caa1Wells Fargo Mtg Bkd Secs Tr 05 Ar4
2A2
    
    
    2005
    
    
    
    909
    
    
    
    1,034
    
    
    
    (125
    )
    
    NR
    

    A2Bear Stearns Adjustable Rate 06 1 A1
    
    
    2006
    
    
    
    702
    
    
    
    776
    
    
    
    (74
    )
    
    NR
    

    B2JP Morgan Mortgage Trust 07-A3 1A1
    
    
    2007
    
    
    
    674
    
    
    
    846
    
    
    
    (172
    )
    
    CCC
    
    NRGSR Mortgage Loan Trust 06 Ar1 2A1
    
    
    2006
    
    
    
    670
    
    
    
    795
    
    
    
    (125
    )
    

    B+
    
    
    NRMerrill Lynch Mtg Inv Inc 05 A9 2A1
    
    
    2005
    
    
    
    647
    
    
    
    671
    
    
    
    (24
    )
    
    BB-
    
    NRWells Fargo Mtg Bkd Secs Tr 06 Ar6 3A
    
    
    2006
    
    
    
    634
    
    
    
    744
    
    
    
    (110
    )
    
    NR
    

    B2Master Adj Rate Mtg Tr 05 6 5A1
    
    
    2005
    
    
    
    608
    
    
    
    791
    
    
    
    (183
    )
    
    CCC
    
    Baa2Citigroup Mtg Ln Tr Inc 04 Hyb3 1A
    
    
    2004
    
    
    
    605
    
    
    
    671
    
    
    
    (66
    )
    
    AA-
    

    A1JP Morgan Mortgage Trust 06 A4 1A1
    
    
    2006
    
    
    
    585
    
    
    
    844
    
    
    
    (259
    )
    
    NR
    

    B3Banc Of America Fdg Corp 05 F 4A1
    
    
    2005
    
    
    
    584
    
    
    
    715
    
    
    
    (131
    )
    
    CCC
    

    B1JP Morgan Mortgage Trust 05 A6 7A1
    
    
    2005
    
    
    
    554
    
    
    
    653
    
    
    
    (99
    )
    
    CCC
    
    NRMortgageit Trust 05 1 2A
    
    
    2005
    
    
    
    553
    
    
    
    639
    
    
    
    (86
    )
    
    AAA
    
    AaaSubtotal
    
    
    
    
    
    
    15,621
    
    
    
    18,460
    
    
    
    (2,839
    )All Other
    
    
    
    
    
    
    14,865
    
    
    
    18,076
    
    
    
    (3,211
    )Total
    
    
    
    
    
    $
    30,486
    
    
    $
    36,536
    
    
    $
    (6,050
    )
  60




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##### Table of Contents



Total
    
    
    NetTotal
    
    
    Amortized
    
    
    UnrealizedAAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    BB
    
    
    CC
    
    
    Fair Value
    
    
    Cost
    
    
    Gain/(Loss)($ in thousands)Auto Loans
    
    $
    4,012
    
    
    $
    2,857
    
    
    
    
    
    
    $
    1,312
    
    
    $
    
    
    
    $
    
    
    
    $
    8,181
    
    
    $
    7,871
    
    
    $
    310Credit Cards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59
    
    
    
    59
    
    
    
    Miscellaneous
    
    
    2,915
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    3,043
    
    
    
    2,902
    
    
    
    141Total
    
    $
    6,927
    
    
    $
    2,859
    
    
    $
    
    
    
    $
    1,312
    
    
    $
    59
    
    
    $
    126
    
    
    $
    11,283
    
    
    $
    10,832
    
    
    $
    451
  AverageIssue
    
    
    Fair
    
    
    Book
    
    
    Underlying
    
    
    Delinq.
    
    
    Subord.
    
    
    S&P
    
    
    MoodysSecurity Description
    
    Date
    
    
    Value
    
    
    Value
    
    
    LTV %
    
    
    Rate
    
    
    Level
    
    
    Rating
    
    
    Rating($ in thousands)Wachovia Bk Comm Mtg Tr 05 C18 A4
    
    
    2005
    
    
    $
    7,231
    
    
    $
    6,865
    
    
    
    71.96
    %
    
    
    10.29
    %
    
    
    33.32
    %
    
    AAA
    
    AaaFour Times Square Tr 06-4Ts A
    
    
    2006
    
    
    
    7,028
    
    
    
    7,028
    
    
    
    39.40
    %
    
    
    0.00
    %
    
    
    8.83
    %
    
    AAA
    
    Aa1GS Mtg Secs Corp II 05 GG4 A4A
    
    
    2005
    
    
    
    6,765
    
    
    
    6,611
    
    
    
    72.22
    %
    
    
    14.19
    %
    
    
    31.96
    %
    
    AAA
    
    AaaLB-UbS Comm Mtg Tr 06 C7 A3
    
    
    2006
    
    
    
    6,323
    
    
    
    6,329
    
    
    
    66.88
    %
    
    
    6.16
    %
    
    
    29.96
    %
    
    AAA
    
    NRCitigroup/Deutsche Bk Comm Mtg 05
CD1 A4
    
    
    2005
    
    
    
    6,062
    
    
    
    5,866
    
    
    
    69.41
    %
    
    
    11.13
    %
    
    
    31.09
    %
    
    AAA
    
    AaaBear Stearns Comm Mtg Secs 06 T22 A4
    
    
    2006
    
    
    
    5,128
    
    
    
    4,883
    
    
    
    57.39
    %
    
    
    0.56
    %
    
    
    28.31
    %
    
    NR
    
    AaaBear Stearns Comm Mtg Secs 07 PW15 A4
    
    
    2007
    
    
    
    4,928
    
    
    
    5,134
    
    
    
    70.86
    %
    
    
    18.66
    %
    
    
    30.39
    %
    
    A+
    
    AaaBanc Of America Comm Mtg Inc 07 1 A4
    
    
    2007
    
    
    
    4,659
    
    
    
    4,778
    
    
    
    75.31
    %
    
    
    18.55
    %
    
    
    30.50
    %
    
    NR
    
    AaaMorgan Stanley Capital I 07 HQ11 A4
    
    
    2007
    
    
    
    4,532
    
    
    
    4,786
    
    
    
    73.12
    %
    
    
    6.14
    %
    
    
    30.25
    %
    
    A
    
    AaaCommercial Mtg Pt Cert 05 C6 A5A
    
    
    2005
    
    
    
    4,187
    
    
    
    4,053
    
    
    
    73.11
    %
    
    
    8.54
    %
    
    
    30.39
    %
    
    AAA
    
    AaaMerrill Lynch Mtg Tr 05 CIP1 A4
    
    
    2005
    
    
    
    4,133
    
    
    
    4,036
    
    
    
    72.54
    %
    
    
    23.63
    %
    
    
    31.39
    %
    
    NR
    
    AaaCitigroup Comm Mtg Tr 06 C5 A4
    
    
    2006
    
    
    
    3,516
    
    
    
    3,510
    
    
    
    73.31
    %
    
    
    5.70
    %
    
    
    30.39
    %
    
    NR
    
    AaaMorgan Stanley Capital I 04 T13 A4
    
    
    2004
    
    
    
    3,425
    
    
    
    3,328
    
    
    
    58.81
    %
    
    
    0.87
    %
    
    
    15.66
    %
    
    NR
    
    AaaGE Capital Comm Mtg Svcs 02 1A A3
    
    
    2002
    
    
    
    2,657
    
    
    
    2,501
    
    
    
    74.50
    %
    
    
    2.70
    %
    
    
    25.10
    %
    
    NR
    
    AaaCSFB Mtg Secs Corp 03 C3 A5
    
    
    2003
    
    
    
    2,648
    
    
    
    2,529
    
    
    
    63.60
    %
    
    
    5.28
    %
    
    
    21.26
    %
    
    AAA
    
    AaaSubtotal
    
    
    
    
    
    
    73,222
    
    
    
    72,237All Other
    
    
    
    
    
    
    32,506
    
    
    
    31,682Total
    
    
    
    
    
    $
    105,728
    
    
    $
    103,919
  61




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##### Table of Contents



PercentRating
    
    
    
    Fair
    
    
    ofDescription
    
    Rating
    
    Value
    
    
    Total($ in thousands)Extremely Strong
    
    AAA
    
    $
    1,116,971
    
    
    
    56
    %Very Strong
    
    AA
    
    
    450,103
    
    
    
    23
    %Strong
    
    A
    
    
    309,610
    
    
    
    16
    %Adequate
    
    BBB
    
    
    71,895
    
    
    
    4
    %Speculative
    
    BB & below
    
    
    23,897
    
    
    
    1
    %Not Rated
    
    NR
    
    
    7,214
    
    
    
    0
    %Total
    
    AA
    
    $
    1,979,690
    
    
    
    100
    %
  62




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##### Table of Contents



Net
    
    
    Cost orFair
    
    
    Unrealized
    
    
    Amortized
    
    
    S&PValue
    
    
    Gains/(Losses)
    
    
    Cost
    
    
    Rating($ in thousands)Issuers:General Electric
    
    $
    20,979
    
    
    $
    1,268
    
    
    $
    19,711
    
    
    AASouthern Co
    
    
    11,825
    
    
    
    17
    
    
    
    11,808
    
    
    AConoco Phillips
    
    
    11,366
    
    
    
    183
    
    
    
    11,183
    
    
    AGoldman Sachs Group
    
    
    10,950
    
    
    
    305
    
    
    
    10,645
    
    
    A-Baker Hughes Inc
    
    
    10,461
    
    
    
    (105
    )
    
    
    10,566
    
    
    ACitigroup Inc
    
    
    8,679
    
    
    
    56
    
    
    
    8,623
    
    
    BBB+Pepsico Inc
    
    
    8,541
    
    
    
    379
    
    
    
    8,162
    
    
    A-Transcanada Corp
    
    
    8,456
    
    
    
    381
    
    
    
    8,075
    
    
    A-Consolidated Edison
    
    
    8,203
    
    
    
    42
    
    
    
    8,161
    
    
    A-J.P. Morgan Chase & Co
    
    
    6,357
    
    
    
    62
    
    
    
    6,295
    
    
    AFPL Group Inc
    
    
    5,890
    
    
    
    (44
    )
    
    
    5,934
    
    
    BBB+Bank of America Corp
    
    
    5,813
    
    
    
    209
    
    
    
    5,604
    
    
    A-Scana Corp
    
    
    5,209
    
    
    
    116
    
    
    
    5,093
    
    
    A-Wells Fargo & Co
    
    
    5,202
    
    
    
    215
    
    
    
    4,987
    
    
    A+Morgan Stanley
    
    
    5,128
    
    
    
    207
    
    
    
    4,921
    
    
    A-Subtotal
    
    
    133,059
    
    
    
    3,291
    
    
    
    129,768All Other
    
    
    128,455
    
    
    
    6,159
    
    
    
    122,296Total
    
    $
    261,514
    
    
    $
    9,450
    
    
    $
    252,064
  63




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##### Table of Contents



Net
    
    
    Cost orFair
    
    
    Unrealized
    
    
    AmortizedValue
    
    
    Gains/(Losses)
    
    
    Cost($ in thousands)Issuers:Vanguard Total Stock Market Index
    
    $
    4,937
    
    
    $
    1,622
    
    
    $
    3,315Vanguard Emerging Market Stock Index
    
    
    4,311
    
    
    
    1,875
    
    
    
    2,436Vanguard Pacific Stock Index
    
    
    4,225
    
    
    
    1,299
    
    
    
    2,926Vanguard European Stock Index
    
    
    3,831
    
    
    
    1,240
    
    
    
    2,591General Electric Co
    
    
    2,361
    
    
    
    546
    
    
    
    1,815Nokia OYJ
    
    
    2,356
    
    
    
    475
    
    
    
    1,881The Boeing Co
    
    
    2,305
    
    
    
    913
    
    
    
    1,392EI Du Pont De Nemours & Co
    
    
    2,253
    
    
    
    612
    
    
    
    1,641Conocophillips
    
    
    2,170
    
    
    
    320
    
    
    
    1,850Intel Corp
    
    
    2,089
    
    
    
    222
    
    
    
    1,867Kraft Foods Inc
    
    
    2,059
    
    
    
    409
    
    
    
    1,650PPG Industries Inc
    
    
    2,031
    
    
    
    839
    
    
    
    1,192Diageo PLC
    
    
    1,956
    
    
    
    472
    
    
    
    1,484Chevron Corp
    
    
    1,865
    
    
    
    356
    
    
    
    1,509Philip Morris International Inc
    
    
    1,852
    
    
    
    493
    
    
    
    1,359Subtotal
    
    
    40,601
    
    
    
    11,693
    
    
    
    28,908All Other
    
    
    32,008
    
    
    
    6,292
    
    
    
    25,716Total
    
    $
    72,609
    
    
    $
    17,985
    
    
    $
    54,624
  64




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##### Table of Contents



March 31, 2010
    
    
    December 31, 2009# of
    
    
    Fair
    
    
    Gross
    
    
    # of
    
    
    Fair
    
    
    GrossSecurities
    
    
    Value
    
    
    Unrealized Loss
    
    
    Securities
    
    
    Value
    
    
    Unrealized Loss($ in thousands except # of securities)Fixed Maturities:U.S. Government Treasury bonds, agency
bonds and foreign government bonds0-6 Months
    
    
    15
    
    
    $
    31,720
    
    
    $
    355
    
    
    
    24
    
    
    $
    116,566
    
    
    $
    5977-12 Months
    
    
    1
    
    
    
    985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    16
    
    
    
    32,705
    
    
    
    355
    
    
    
    24
    
    
    
    116,566
    
    
    
    597States, municipalities and
political subdivisions0-6 Months
    
    
    33
    
    
    
    88,859
    
    
    
    1,408
    
    
    
    47
    
    
    
    108,290
    
    
    
    2,2917-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    3,534
    
    
    
    112> 12 Months
    
    
    22
    
    
    
    19,582
    
    
    
    588
    
    
    
    23
    
    
    
    17,777
    
    
    
    514Subtotal
    
    
    55
    
    
    
    108,441
    
    
    
    1,996
    
    
    
    74
    
    
    
    129,601
    
    
    
    2,917Agency mortgage-backed securities0-6 Months
    
    
    14
    
    
    
    92,247
    
    
    
    108
    
    
    
    5
    
    
    
    18,385
    
    
    
    987-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    14
    
    
    
    92,247
    
    
    
    108
    
    
    
    5
    
    
    
    18,385
    
    
    
    98Residential mortgage obligations0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    64
    
    
    
    30,486
    
    
    
    6,050
    
    
    
    73
    
    
    
    31,071
    
    
    
    7,246Subtotal
    
    
    64
    
    
    
    30,486
    
    
    
    6,050
    
    
    
    73
    
    
    
    31,071
    
    
    
    7,246Asset-backed securities0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    3
    
    
    
    188
    
    
    
    34
    
    
    
    4
    
    
    
    637
    
    
    
    34Subtotal
    
    
    3
    
    
    
    188
    
    
    
    34
    
    
    
    4
    
    
    
    637
    
    
    
    34Commercial mortgage-backed securities0-6 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    28,103
    
    
    
    3247-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    10
    
    
    
    24,775
    
    
    
    685
    
    
    
    21
    
    
    
    45,135
    
    
    
    4,704Subtotal
    
    
    10
    
    
    
    24,775
    
    
    
    685
    
    
    
    32
    
    
    
    73,238
    
    
    
    5,028Corporate bonds0-6 Months
    
    
    16
    
    
    
    59,921
    
    
    
    516
    
    
    
    13
    
    
    
    33,275
    
    
    
    3377-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    3
    
    
    
    2,217
    
    
    
    166
    
    
    
    8
    
    
    
    6,325
    
    
    
    422Subtotal
    
    
    19
    
    
    
    62,138
    
    
    
    682
    
    
    
    21
    
    
    
    39,600
    
    
    
    759Total fixed maturities
    
    
    181
    
    
    $
    350,980
    
    
    $
    9,910
    
    
    
    233
    
    
    $
    409,098
    
    
    $
    16,679Equity securities  common stocks0-6 Months
    
    
    2
    
    
    $
    796
    
    
    $
    10
    
    
    
    
    
    
    $
    
    
    
    $
    7-12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    > 12 Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    872
    
    
    
    10Total equity securities
    
    
    2
    
    
    $
    796
    
    
    $
    10
    
    
    
    1
    
    
    $
    872
    
    
    $
    10
  65




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##### Table of Contents



Critical Accounting Estimates  Impairment of Invested Assets
    Period for Which Fair Value is Less than 80% of Amortized Cost
 6 monthsLonger than 3
    
    
    or longer, lessLess than 3
    
    
    months, less
    
    
    than 12
    
    
    12 monthsmonths
    
    
    than 6 months
    
    
    months
    
    
    or longer
    
    
    Total($ in thousands)Fixed maturities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (2,391
    )
    
    $
    (2,391
    )Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (2,391
    )
    
    $
    (2,391
    )
   66




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##### Table of Contents



GrossEquivalent
    
    Equivalent
    
    Unrealized Loss
    
    
    Fair ValueS&P
    
    Moodys
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentRating
    
    Rating
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total($ in thousands)AAA/AA/A
    
    Aaa/Aa/A
    
    $
    4,455
    
    
    
    45
    %
    
    $
    305,081
    
    
    
    87
    %BBB
    
    Baa
    
    
    713
    
    
    
    7
    %
    
    
    18,894
    
    
    
    5
    %BB
    
    Ba
    
    
    232
    
    
    
    2
    %
    
    
    3,686
    
    
    
    1
    %B
    
    B
    
    
    492
    
    
    
    5
    %
    
    
    2,391
    
    
    
    1
    %CCC or lower
    
    Caa or lower
    
    
    3,923
    
    
    
    40
    %
    
    
    17,403
    
    
    
    5
    %NR
    
    NR
    
    
    95
    
    
    
    1
    %
    
    
    3,525
    
    
    
    1
    %Total
    
    
    
    $
    9,910
    
    
    
    100
    %
    
    $
    350,980
    
    
    
    100
    %
   GrossUnrealized Loss
    
    
    Fair ValuePercent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total($ in thousands)Due in one year or less
    
    $
    16
    
    
    
    0
    %
    
    $
    5,878
    
    
    
    2
    %Due after one year through five years
    
    
    235
    
    
    
    2
    %
    
    
    42,264
    
    
    
    12
    %Due after five years through ten years
    
    
    1,231
    
    
    
    12
    %
    
    
    88,163
    
    
    
    25
    %Due after ten years
    
    
    1,551
    
    
    
    16
    %
    
    
    66,979
    
    
    
    19
    %Mortgage- and asset-backed securities
    
    
    6,877
    
    
    
    70
    %
    
    
    147,696
    
    
    
    42
    %Total fixed maturity securities
    
    $
    9,910
    
    
    
    100
    %
    
    $
    350,980
    
    
    
    100
    %
   67




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##### Table of Contents



Three Months EndedMarch 31,2010
    
    
    2009($ in thousands)
    
    No.
    
    
    Amount
    
    
    No.
    
    
    AmountTotal other-than-temporary impairment
lossesCorporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    2
    
    
    $
    564Residential mortgage-backed securities
    
    
    2
    
    
    
    224
    
    
    
    35
    
    
    
    17,849Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    119Equities
    
    
    1
    
    
    
    27
    
    
    
    54
    
    
    
    8,339Total
    
    
    3
    
    
    $
    251
    
    
    
    92
    
    
    $
    26,871Portion of loss in accumulated other
comprehensive income (loss)Corporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Residential mortgage-backed securities
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    16,102Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Equities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    170
    
    
    
    
    
    
    $
    16,171Impairment losses recognized in earningsCorporate and other bonds
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    564Residential mortgage-backed securities
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    1,747Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Equities
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    8,339Total
    
    
    
    
    
    $
    81
    
    
    
    
    
    
    $
    10,700
      68




---



##### Table of Contents



($ in thousands)Beginning balance of at January 1, 2010
    
    $
    2,523Credit losses on securities not previously impaired as of December 31, 2009
    
    
    54Reductions for securities sold during the period
    
    
    Ending balance at March 31, 2010
    
    $
    2,577
 Liquidity and Capital Resources
        69




---



##### Table of Contents



70




---



##### Table of Contents



th
    March 31,
    
    
    December 31,2010
    
    
    2009($ in thousands)Senior debt
    
    $
    114,041
    
    
    $
    114,010Stockholders equity
    
    
    810,044
    
    
    
    801,519Total capitalization
    
    $
    924,085
    
    
    $
    915,529Ratio of debt to total capitalization
    
    
    12.3
    %
    
    
    12.5
    %
    71




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##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009($ in thousands)Cash and investments
    
    $
    57,336
    
    
    $
    63,676Investments in subsidiaries
    
    
    857,160
    
    
    
    846,295Goodwill and other intangible assets
    
    
    2,534
    
    
    
    2,534Other assets
    
    
    11,032
    
    
    
    5,213Total assets
    
    $
    928,062
    
    
    $
    917,7187% Senior Notes
    
    $
    114,041
    
    
    $
    114,010Accounts payable and other liabilities
    
    
    623
    
    
    
    847Accrued interest payable
    
    
    3,354
    
    
    
    1,342Total liabilities
    
    
    118,018
    
    
    
    116,199Stockholders equity
    
    
    810,044
    
    
    
    801,519Total liabilities and stockholders equity
    
    $
    928,062
    
    
    $
    917,718
  72




---



##### Table of Contents



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
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
   73




---



##### Table of Contents



Item 3.
    
    Defaults Upon Senior Securities
  
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
 Exhibit No.
    
    Description of Exhibit11-1
    
    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.  74




---



##### Table of Contents



The Navigators Group, Inc.(Registrant)Date: May 7, 2010
    
    /s/ Francis W. McDonnellFrancis W. McDonnellSenior Vice Presidentand Chief Financial Officer
  75




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##### Table of Contents



INDEX OF EXHIBITS
 Exhibit No.
    
    Description of Exhibit11-1
    
    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.  76